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Company --Microsoft
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SM Assignment

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9/6/2010

Kuldeep Singh – 930, Lalit Kumar Vimal – 931,

Harsh Nigam – 924, Arpan Jain - 913 , Ashish Sharma - 915

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Contents

Introduction ............................................................................................................................................ 3
Analysis of Microsoft Annual Report – 2009 ........................................................................................... 7
Industry Analysis for Software Industry ................................................................................................ 10
Internal Analysis ................................................................................................................................... 11
Microsoft Corporate Governance: ........................................................................................................ 14
Bibliography………………………………………………………………………………………………………………………………….….17

2
Introduction

Overview

Microsoft Corporation is a public multinational corporation headquartered in Redmond, Washington,

USA that develops, manufactures, licenses, and supports a wide range of products and services
predominantly related to computing through its various product divisions. Established on April 4, 1975
to develop and sell BASIC interpreters for the Altair 8800, Microsoft rose to dominate the home
computer operating system (OS) market with MS-DOS in the mid-1980s, followed by the Microsoft
Windows line of OSs. The ensuing rise of stock in the company's 1986 initial public offering (IPO) made
an estimated four billionaires and 12,000 millionaires from Microsoft employees. Microsoft would come
to dominate other markets as well, notably the office suite market with Microsoft Office.

Primarily in the 1990s, critics contend the company used monopolistic business practices and anti-
competitive strategies including refusal to deal and tying, put unreasonable restrictions in the use of its
software, and used misrepresentative marketing tactics; both the U.S. Department of Justice and
European Commission found the company in violation of antitrust laws. Known for its interviewing
process with obscure questions, various studies and ratings were generally favorable to Microsoft's
diversity within the company as well as its overall environmental impact with the exception of the
electronics portion of the business.

History

Paul Allen and Bill Gates, childhood friends with a passion in computer programming, officially
established Microsoft on April 4, 1975, with Gates as the CEO. In August 1977 the company formed an
agreement with ASCII Magazine in Japan, resulting in its first international office, "ASCII Microsoft". The
company moved to a new home in Bellevue, Washington in January 1979.

Microsoft entered the OS business in 1980 with its own version of Unix, called Xenix. However, it was
DOS (Disk Operating System) that solidified the company's dominance. After negotiations with Digital
Research failed, IBM awarded a contract to Microsoft to provide a version of the CP/M OS, which was
set to be used in the upcoming IBM Personal Computer (IBM PC). For this deal, Microsoft purchased a
CP/M clone called 86-DOS from Seattle Computer Products, branding it as MS-DOS, which IBM
rebranded to PC-DOS. Following the release of the IBM PC in August 1981, Microsoft retained ownership
of MS-DOS. Due to various factors, such as MS-DOS's available software selection, Microsoft eventually
became the leading PC OS vendor. The company expanded into new markets with the release of the
Microsoft Mouse in 1983, as well as a publishing division named Microsoft Press. Paul Allen resigned
from Microsoft in February after developing Hodgkin's disease.

While jointly developing a new OS with IBM in 1985, OS/2, Microsoft released Microsoft Windows, a
graphical extension for MS-DOS, on November 20. Microsoft announced the release of its version of
OS/2 to original equipment manufacturers (OEMs) on April 2, 1987; meanwhile, the company was at
work on a 32-bit OS, Microsoft Windows NT, using ideas from OS/2; it shipped on July 21, 1993 with a
new modular kernel and the Win32 application programming interface (API), making porting from 16-bit

3
(MS-DOS-based) Windows easier. Once Microsoft informed IBM of NT, the OS/2 partnership
deteriorated.

Microsoft introduced its office suite, Microsoft Office, in 1990. The software bundled separate office
productivity applications, such as Microsoft Word and Microsoft Excel. On May 22 Microsoft launched
Windows 3.0 with a streamlined user interface graphics and improved protected mode capability for the
Intel 386 processor. Both Office and Windows became dominant in their respective areas. Novell, a
Word competitor from 1984–1986, filed a lawsuit years later claiming that Microsoft left part of its APIs
undocumented in order to gain a competitive advantage.

Microsoft’s Vision

"Our vision is to create innovative technology that is accessible to everyone and that adapts to each
person's needs. Accessible technology eliminates barriers for people with disabilities and it enables
individuals to take full advantage of their capabilities."

— Bill Gates (Founder of Microsoft)

Microsoft’s Mission

"To enable people and businesses throughout the world to realize their full potential"

Microsoft considers its mission statement a promise to its customers. Microsoft delivers on that
promise by striving to create technology that is accessible to everyone—regardless of age or ability.
Microsoft leads the industry in accessibility innovation and in building products that are safer and easier
to use. Accessible technology is particularly helpful for individuals who experience visual difficulties, pain
in the hands or arms, hearing loss, or cognitive challenges. In USA, among adult computer users; one in
four users has a vision difficulty, one in four has a dexterity difficulty and one in five has a hearing
difficulty.

Values: To fulfill the mission, a company requires a clearly defined set of values. Values that guide
Microsoft's operations are:

 Integrity and honesty

 Passion for customers, for partners, and for technology
 Openness and respectfulness
 Taking on big challenges and seeing them through constructive self-criticism, self-improvement,
and personal excellence
 Accountability to customers, shareholders, partners, and employees for commitments, results
and reality

4
Strategic Approach to Accessibility

Microsoft takes a strategic approach to accessibility by:

Continuing its longstanding commitment and leadership in accessibility research, awareness, and
innovation.
Making the computer easier to see, hear, and use by building accessibility features into Microsoft
products.
Ensuring that Windows is the best platform for accessibility innovation for assistive technology
manufacturers.
Building strong, collaborative relationships with key government agencies and organizations that
advocate on behalf of people with disabilities.

Microsoft’s accessibility efforts are concentrated in four key areas:

 Accessibility in products: Accessibility is a fundamental consideration during product design,

development, and testing. Microsoft builds accessibility options into products that enable
everyone to personalize their PCs to make them more comfortable and easier to see, hear, and
use.

 Leadership and awareness: Microsoft raises awareness of accessible technology by publishing

in-depth information about accessible technology, empowering accessibility trainers and
experts.

 Innovation: Microsoft facilitates the next generation of accessible technology and moves the
industry forward with groundbreaking technologies. Microsoft also strives to lead the industry in
approaching accessibility in new ways.

 Collaboration: Microsoft collaborates with a wide range of organizations to raise awareness of

the importance of accessibility in meeting the technology needs of people with disabilities.
Specifically, it collaborates with Technology Partners, Government agencies and NGOs.

Strategy Implementation for Accessible Technology

Microsoft targeted on accessibility efforts during the period of 1988-1994. They introduced first time full
staff positioning and released first time independent product. Access Pack for Microsoft Windows NT
was the first major accessibility product developed completely by Microsoft. By the time of millennium
they had launched Windows 2000. Microsoft Windows 2000 introduced accessibility features including a
new text-to-speech utility and on-screen keyboard. In the period of 2002 – 2004 Microsoft focused upon
raising awareness and Microsoft Office 2003 was released. Microsoft Office 2003 made the software
accessible to a wider range of users, including those who have limited dexterity, low vision, or other
disabilities.

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In 2005, Microsoft realized the need of technology innovation and it gathered their attention. They had
come up with Microsoft Accessibility Centers and UI innovation, new accessibility model, Microsoft UI
Automation, to promote innovation in the assistive technology industry.

Then they targeted upon enhancing user friendliness of their product and Microsoft Office 2007 was
launched. Internet explorer 8 and windows vista were other products which were launched during the
period of 2008-09. Major accessibility improvements in Windows Vista were the Ease of Access Center
and state-of-the-art speech recognition and magnification capabilities.

Where Internet Explorer 8 was released with numerous accessibility improvements including better
compatibility with assistive technology products and new features: Caret Browsing, Accelerators, and
Zooming to make Internet navigation easier than ever.

Now they have priority of making computer available to everyone and recently they have launched
office 2010 with greater improvements in navigation and accessibility. A compact layout reduces
navigation time for Magnifier users, and SmartArtTMgraphics tools make it possible to create complex
graphics and diagrams without a mouse.

Acquisitions Strategy adopted by Microsoft

The company's initial public offering was held on March 14, 1986. The stock, which eventually closed at
US$27.75 a share, peaked at $29.25 a share shortly after the market opened for trading. At the time,
Gates owned 45% of the company's 24.7 million outstanding shares, and Allen owned roughly 25% of
the shares. After the offering, Gates was worth $233.9 million and Microsoft had a market capitalization
of $519.777 million. Microsoft has acquired 128 companies, purchased stakes in 60 companies, and
made 24 divestments. Of the companies that Microsoft has acquired, 99 were based in the United
States. Microsoft has not released the financial details for most of these mergers and acquisitions.

Microsoft's first acquisition was Forethought on June 29, 1987, which was founded in 1983 and
developed a presentation program that would later be known as Microsoft PowerPoint. On December
31, 1997, Microsoft acquired Hotmail for $500 million, its largest acquisition at the time, and integrated
Hotmail into its MSN group of services. Hotmail, a free webmail service founded in 1996 by Jack Smith
and Sabeer Bhatia, had more than 8.5 million subscribers earlier that month. Microsoft acquired Seattle-
based Visio Corporation on January 7, 2000 for $1.375 billion. Visio, a software company, was founded
in 1990 as Axon Corporation, and had its initial public offering in November 1995. The company
developed the diagramming application software, Visio, which was integrated into Microsoft's product
line as Microsoft Visio after its acquisition. On July 12, 2002, Microsoft purchased Navision for
$1.33 billion. The company, which developed the technology for the Microsoft Dynamics NAV enterprise
resource planning software, was integrated into Microsoft as a new division named Microsoft Business
Solutions, later renamed to Microsoft Dynamics. Microsoft purchased aQuantive, an advertising
company, on August 13, 2007 for $6.333 billion, Microsoft's largest acquisition. Before the acquisition,
aQuantive was ranked 14th in terms of revenue among advertising agencies worldwide. aQuantive had
three subsidiaries at the time of the acquisition: Avenue A/Razorfish, one of the world's largest digital
agencies, Atlas Solutions, and DRIVE Performance Solutions. Microsoft acquired the Norwegian
enterprise search company Fast Search & Transfer on April 25, 2008 for $1.191 billion to boost its search
technology.

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Since Microsoft's first acquisition in 1987, it has purchased an average of six companies a year. The
company has purchased more than ten companies a year since 2005, and acquired 18 firms in 2006, the
most in a single year, including Onfolio, Lionhead Studios, Massive Incorporated, ProClarity, Winternals
Software, and Colloquis. Microsoft has made four acquisitions worth over one billion dollars: aQuantive,
Fast Search & Transfer, Navision, and Visio Corporation. Microsoft has also purchased several stakes
valued more than a billion dollars. It obtained an 11.5% stake in Comcast for $1 billion, a 22.98% stake in
Telewest Communications for $2.263 billion, and a 3% stake in AT&T for $5 billion. Among Microsoft's
divestments, in which parts of the company are sold to another company, only Expedia, Inc. was sold for
more than a billion dollars; USA Networks purchased the company on February 5, 2002 for
$1.372 billion. On August 17, 2006, Microsoft acquired 7.92% of its own common stock for $20 billion.

7
 Analysis of Microsoft Annual Report – 2009

The economic recession made fiscal 2009 a challenging year for every industry but Microsoft Corp.
because of its financial strength and careful approach to investment, a wide variety of products, and a
renewed focus on efficiency responded to the changing economic environment with speed and success.
In the year 2009, Microsoft made important progress in key areas of product development and
technology innovation that position the company for strong growth in the coming years.

Microsoft generates revenue by developing, manufacturing, licensing, and supporting a wide range of
software products and services for many different types of computing devices. The global recession had
a major impact on the financial performance of companies around the world in every industry in 2009,
and Microsoft was no exception. During this time consumer & business spending became less, PC sales
and corporate IT investments fell. As a result, Microsoft‘s annual revenue declined from $60.4 billion in
fiscal 2008 to $58.4 billion in fiscal 2009, a decline of 3 percent. Operating income was $20.4 billion
(reduced by 9 %). Earnings per share (EPS) fell 13 percent to $1.62.

Despite economic recession, the company retained its competitive advantage of technological
leadership by introducing a wide range of innovative new software to the market. During year 2009,
Microsoft successful launched products like Microsoft SQL Server 2008, Microsoft Internet Explorer 8,
and Bing, the newest version of Web search technology with Silver light 2, Microsoft Business
Productivity Online Suite, Microsoft Exchange Online, and Microsoft SharePoint Online. The company
strengthened its position as a leader in software plus services and cloud computing.

The acquisition of the other IT companies has been the part of Microsoft’s corporate strategy. During
2009, the company made a number of strategic acquisitions including BigPark , DATAllegro, Zoomix,
Powerset and Greenfield Online. BigPark is an interactive online gaming company. DATAllegro is a
provider of data warehouse technologies. Zoomix develops software that automates the delivery and
synchronization of enterprise data. Whereas Powerset is a pioneer of the use of natural language
processing in online search and Greenfield Online is a leader in comparison shopping technology.

The global recession created difficult challenges for the IT industry but it also provided significant
opportunities to Microsoft. The company continued to provide innovative, affordable, high-quality
products that enable companies to improve productivity and reduce costs. This strategy helped
Microsoft to well position in the IT industry and gain market share. As the global economy is now started
to recover, Microsoft has high prospect to increase revenue in coming years. The top management &
employees of the company focused on present & future growth opportunities and tried to find out new
ways to cut costs and use resources more effectively. Microsoft succeeded to reduce expenses by more
than $3 billion compared with original fiscal 2009 plan. Microsoft also made important adjustments to
its cost structure through strategic job eliminations. The company eliminated nearly 5,000 jobs so that
resources can be utilized in most efficient way and continued to recruit and hire the best talent from
around the globe.

8
The company’s financial strength was an important factor in Microsoft’s ability to successfully offset the
difficult financial markets. Microsoft announced a $40 billion program to repurchase shares of its stock
and increase the quarterly dividend. The company returned nearly $14 billion to shareholders through
stock buybacks and dividends during the fiscal year 2009.Microsoft also took advantage of favorable
market conditions to authorize a $3.75 billion debt offering. As part of the debt authorization, Microsoft
received an AAA credit rating from Standard & Poor’s, becoming the first U.S. Corporation in a decade to
be assigned S&P’s highest rating.

Technological innovation has always been the foundation of Microsoft’s growth and success. The
company invested more in research and development compared other companies in the IT industry.
During 2009, two new research labs in Cambridge, Massachusetts and one new Search Technology
Center in Europe were opened. Microsoft invested $9 billion in research and development in fiscal 2009
(nearly 10 % increase compared to fiscal 2008 investment in R&D). The long term investment in
innovation turned out with the successful launch of “Project Natal” for Xbox 360.This groundbreaking
technology uses special sensors and software to track body movements, recognize faces, and respond to
spoken directions and even changes in tone of voice. The company also introduced Windows Azure ;new
operating system for cloud computing, and the Azure Services Platform, which is a comprehensive set of
storage, computing, and networking infrastructure services. Microsoft is investing more in technologies
like Cloud computing & software plus services, Natural user interfaces and Natural language processing
etc. that are supposed to offer more value & benefits to its customers & partners and profitable growth
to the company.

Microsoft holds its commitment of using technology to help people to realize their potential. The
company offers programs that support 37,000 technology training centers in 102 countries and partners
in Learning. This program has helped providing access to technology and technology training for more
than 4 million teachers and 90 million students in over 100 countries. In fiscal 2009, Microsoft launched
“BizSpark” which provides startup companies with fast and easy access to Microsoft development tools
and server products with no upfront costs, and offers special technical support and marketing programs
that can help them succeed.

9
INDUSTRY ANALYSIS FOR SOFTWARE INDUSTRY

The software industry can be analyzed by Porter Five Forces Model:

PORTER’S FIVE FORCES MODEL

1. INTENSITY OF RIVALRY AND COMPETTITION

The competition and rivalry has increased in Software sector over a due course of time. Earlier it was
low but at present time it is high. The reason for high growth is given as follows:

 High stability : earlier the growth of sector was very high due to technology boom but now the
growth has stabilized
 Higher fixed cost
 Differentiation is tough
 Numerous players are present with entry to low cost world

2. BARRIERS TO ENTRY
The barrier to new entrants is higher in software industry due to following reasons:

 The product differentiation is higher

 Brands are already established in the market. Earlier in a decade back, the brands were evolving
but now it has taken its position
 Switching cost this industry is higher
 Network effects create significant barriers

3. BARGAINING POWER OF SUPPLIERS

The bargaining power of supplier is low in this industry due to following reasons:

 Availability of large supply of material and man power from across the world.
 More experienced manager available
 Matured education and training freely available

4. BARGAINING POWER OF BUYERS

The bargaining power of buyers is high in this industry due to following reasons:

 Buyers can clearly articulate their needs due to clear specifications for the products available.
 Technology has been commoditized
 Supply has significantly increased
 Numerous players ready to give away at cheapest prices

5. THREAT OF SUBSTITUTES
The threat of substitutes in this industry is lower due to following reasons:

 Product must have efficiency focus

 High level of customization is necessary

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  Switching costs are higher
 The price quoted for project is important

PEST ANALYSIS OF SOFTWARE INDUSTRY IN USA

1. POLITICAL

 US political environment is considered stable leading to positive input for software industry
 US government has declared that US companies which outsource their work to other countries
will not get US tax benefits which are a negative input.
 US is prone to terrorist attacks and wars which leads to decline in stock decline
 US focus on consistent policies and pro-growth incentives motivates industry growth

2. ECONOMICAL

 Global IT spending
 Domestic IT spending increases due to increase in the demand
 Currency fluctuations lead to negative effects
 Real state prices : after subprime crisis the property rates have grown low giving benefit to
software companies in terms of reduced rental prices
 Low attrition : due to recession, layoffs the attrition rate has decreased
 Economic attractiveness: due to cost advantage and other factors it seems as positive for
software industry.

3. SOCIAL

 Language spoken : English is widely spoken all over the world and USA has English speaking
population which adds to its business
 Education : There are large number of institutes and research centres which produce
professional to cater to software industry demand in a positive way
 USA has got working age population.

4. TECHNOLOGICAL

 Evolution of new low cost IT technologies giving fierce compettiton to survive

 US has country wide internet facilities which poses good opportunity for computer and software
industry
 Wide telephone network

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INTERNAL ANALYSIS

The Microsoft Company can be internally analyzed by doing SWOT analysis.

SWOT ANALYSIS

STRENGTHS

1. Applications and operations divisions along with recently created online service network
divisions (MSN)
2. Flexible workforce through contingent workers for seasonal/cyclical projects
3. Loyal, hardworking, and diverse workforce (20% minority, 26% women) who, in addition to good
compensation, have an opportunity to do well financially through stock purchases
4. Multinational corporation operating through regional subsidiaries to minimize cultural
differences in more than 60 countries
5. New product, Neptune , is a Window's interface and is an example of smart software
6. Relatively rapid product development processes that allow for timely updating and release of
new products
7. Revenues and profits rising at 30% a year with merger/acquisition or investment in 92
companies over past five years
8. Software products have high name recognition, broad-based corporate and consumer
acceptance (Word, Excel, PowerPoint, Access), and numerous powerful features that are in use
worldwide, thereby promoting standardization and competitive advantage through their ease of
integration and cost-effectiveness
9. Top rating from Fortune for best company to work at and most admired company
10. Windows 95, 98, 2000 series, and Windows NT are globally known as the PC desktop operating
system with a market share of about 88%
11. World's largest software company with global name recognition and strong reputation for
innovative products

WEAKNESS

1. Between 1990-1995, Microsoft leadership failed to correctly anticipate the growth or popularity
of the Internet
2. Bill Gates has become Microsoft's chief software architect but has not yet developed a
substantially new line of products
3. Dependency on hardware manufacturers to pre-install Microsoft's PC operating system
4. Downside of product launches and deadlines contributes substantially to employee burnout
5. Employee turnover has increased from 6% for a ten year period to 7.4%
6. Falling sales in the operating systems and server software sectors
7. Frequent reorganization, red tape, and autocratic atmosphere dampen employee creativity
leading to a loss of key personnel and chilling of communication and innovation; 5-layers of
management
8. Little or no significant presence in the wireless market and Windows CE has been disappointing
9. Not a key player in the Internet space and few products for Internet applications

12
 10. Perceived by many as a cut-throat competitor that uses its dominant market position to
marginalize competition by stealing/destroying the competition's products, stifling product
innovation, and decreasing the availability of competitor products
11. Products have a single application focus and do not work well with or on-top of other products
12. Reputation has suffered because of entanglement in antitrust and "permatemps" Vizcaino
litigation

OPPORTUNITIES

1. Cheaper global telecommunication costs open new markets as people connect to the Internet
2. Federal trial Judge Thomas P. Jackson's breach of judicial discretion and conduct in the
Microsoft antitrust case clouded the proceedings in Microsoft's favor
3. Mobile phone applications and exploitation of personal digital assistants represent a growth
industry so that strategic alliances could provide Microsoft with opportunity in a market where
it currently has little or no significant presence
4. Popularity among people for Internet access
5. The demand for personal computers in American and global markets remains strong despite the
growth and increasing popularity of personal handheld devices

THREATS

1. Apple and Linux threaten Microsoft's 88% market share of the desktop operating market
2. Between 1993-95, Sun Microsystems, Netscape, Oracle, IBM, AOL, and other companies moved
into the Internet space and defined it while Microsoft failed to anticipate its growth or
popularity
3. Currency exchange rates affect demand for application/operation software and hardware, and
fluctuating currencies can negatively impact revenues in the global marketplace
4. Department of Justice antitrust litigation and current appeal creates uncertainty among
employees since its outcome is not known
5. Hardware manufacturers (Sun Microsystems, Oracle, IBM) have collaborated on new platform
technologies that replicate much of the value of Windows
6. Hardware manufacturers (Sun Microsystems, Oracle, IBM, AOL, and Apple) are issuing their own
pre-bundled programs on their own hardware
7. Linux influence growing from 7% in 1998 to 17% in 1999
8. Personal computers, mobile-phones, personal digit assistants, entertainment-oriented hand-
held computers, and similar wireless products for Internet access do not require Window
operating system products
9. Rapid development of mobile devices that will displace/replace personal computers
10. Recession or economic slowdown in the U.S. or global market impacts personal computer
equipment sales and their need for an operating systems
11. Software piracy of commercial and consumer applications software on a global scale threatens
revenue streams
12. Technology life cycle is shorter and shorter
13. Unix dominates high-end mission-critical applications and its customers do not believe Windows
can handle these operations

13
Microsoft corporate governance:

Corporate Governance Principles and Practices—The Microsoft Board of Directors is committed to

maintaining strong corporate governance principles and practices. The Board periodically reviews
evolving legal, regulatory, and best practice developments to determine those that will best serve the
interests of its shareholders. Examples of changes the Board of Directors has made to strengthen its
corporate governance framework include:

Amending Bylaws to implement a majority vote standard for director elections. In an

uncontested election, directors will be elected by the vote of the majority of votes cast. In a
contested election, directors will be elected by the vote of a plurality of votes cast. A contested
election is one in which the number of nominees exceeds the number of directors to be elected
Implementing a Policy for Compensation Consultant Independence, which provides that the
Compensation Committee will use a consultant who is independent and devoid of other
significant business relationships with management and Microsoft
Adopting formal stock ownership and holding requirements for Company executives, whereby
each executive officer is required to maintain a minimum equity stake in Microsoft to promote a
long-term perspective in managing the enterprise, and to align shareholder and executive
interests
Revising Corporate Governance Guidelines to further strengthen Board’s annual evaluation
process by adding individual director assessments in addition to the existing practice of
performing Board and Committee assessments.

Board of directors:
The Microsoft Board of Directors has five committees: an Antitrust Compliance Committee; an Audit
Committee; a Compensation Committee; Governance and Nominating Committee; and a Finance
Committee. Each committee is led by and composed solely of independent directors, and is responsible
for the review and oversight of company activities in the areas designated in its charter.
Microsoft shareholders elect the Board of Directors to oversee company management and to ensure
shareholders’ long-term interests are served. Through oversight, review, and counsel, the Board of
Directors establishes and promotes Microsoft business and organizational objectives. The Board works
with Microsoft management to determine the company's mission and long-term strategy; helps to
ensure the company follows responsible business practices and operates with integrity and
accountability; and oversees Microsoft business affairs. The internal controls over financial reporting,
and assesses business risks and strategies for risk mitigation.

Structure of Microsoft:
The company is run by a Board of Directors consisting of ten people, made up of mostly company
outsiders (as is customary for publicly traded companies). Current members of the board of directors
are: Steve Ballmer, James Cash, Jr., Dina Dublon, Bill Gates, Raymond Gilmartin, Reed Hastings, David
Marquardt, Charles Noski, Helmut Panke, and Jon Shirley. The ten board members are elected every

14
year at the annual shareholders' meeting, and those who do not get a majority of votes must submit a
resignation to the board, which will subsequently choose whether or not to accept the resignation.
There are five committees within the board which oversee more specific matters. These committees
include the Audit Committee, which handles accounting issues with the company including auditing and
reporting; the Compensation Committee, which approves compensation for the CEO and other
employees of the company; the Finance Committee, which handles financial matters such as proposing
mergers and acquisitions; the Governance and Nominating Committee, which handles various corporate
matters including nomination of the board; and the Antitrust Compliance Committee, which attempts to
prevent company practices from violating antitrust laws.

There are several other aspects to the corporate structure of Microsoft. For worldwide matters there is
the Executive Team, made up of sixteen company officers across the globe, which is charged with
various duties including making sure employees understand Microsoft's culture of business. The sixteen
officers of the Executive Team include the Chairman and Chief Software Architect, the CEO, the General
Counsel and Secretary, the CFO, senior and group vice presidents from the business units, the CEO of
the Europe, the Middle East and Africa regions; and the heads of Worldwide Sales, Marketing and
Services; Human Resources; and Corporate Marketing. In addition to the Executive Team there is also
the Corporate Staff Council, which handles all major staff functions of the company, including approving
corporate policies. The Corporate Staff Council is made up of employees from the Law and Corporate
Affairs, Finance, Human Resources, Corporate Marketing, and Advanced Strategy and Policy groups at
Microsoft. Other Executive Officers include the Presidents and Vice Presidents of the various product
divisions.

Microsoft’s culture:
Microsoft's culture is one that stresses individual responsibility and accountability of development work
and seeks out employees that thrive on the immediacy of generating and providing valuable
information. The extensive research completed by French and Raven (1959) provide a useful framework
by which to analyze the impact Microsoft's culture on the strategic direction of the company. Candor
and directness in communication are also the foundations of the Microsoft culture, where seniority
doesn't matter nearly as much as intelligence. This interlocking of communications style and culture is
critical to the company's long-term viability and future growth as programmers and computer scientists
have often been attracted to working for the company due to this communication approach."

Corporate social responsibility:

Microsoft strongly supports EU and Member States’ efforts to promote further dialogue, greater
activity and good practice sharing on Corporate Social Responsibility, or Corporate Citizenship, as they
have denied it internally.

They recognize that Corporate Citizenship involves the voluntary integration of economic, social and
environmental considerations into a company’s operations. Indeed, as Jean-Philippe Courtois,
Microsoft EMEA CEO, recently pointed out, “We are committed to integrating CSR principles into all
aspects of our business activities and internal working practices”.

In close alignment with its corporate mission, Microsoft’s global Corporate Citizenship initiative is a
commitment to being a responsible corporate citizen and industry partner, working with businesses,

15
communities and governments to help advance social and economic well-being and to enable people
around the world to realize their full potential. As a company at the vanguard of information
technology that recognize his role and responsibility to maximize the opportunities of the information
society for all.

In this spirit they have identified the focus of Corporate Citizenship in the following four areas:

a) Internet safety and Policy Leadership: to partner with governments, industry leaders and
others to address key societal challenges of information and communications technology, such
as spam, security, privacy and children’s online safety.
b) To enable people, communities and nations to gain access to the technology tools, skills and
innovations and need to realize their full potential.
c) Responsible Business Practices: to ensure integrity and transparency in all of its business
practices, and to provide a healthy and safe work environment for employees; and,
d) Economic opportunity: To partner with governments and communities to help strengthen local
economies, growth, competitiveness and innovation.

Microsoft recognizes that high level commitment from management in driving Corporate Citizenship
forward is an essential component of a company’s strategy. Therefore Microsoft have created a team
across the company composed of representatives from various departments and business groups at
local, regional and national level around the world.

16
Bibliography

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