Former Microsoft executive Steven Sinofsky has reached a retirement agreement with his former employer and will net $14 million in previously issued stock. In return, Sinofsky agreed to “not disparage” Microsoft going forward and not accept employment at a competitor through the end of 2013.
One naturally wonders whether Microsoft has in turn agreed not to disparage Mr. Sinofsky. You might recall that Sinofsky suddenly left the firm in November 2012, just weeks after the release of the widely disparaged Windows 8, the design of which he spearheaded. In recent weeks, speculation about Sinofsky’s exit—which was unexpected and a surprise even to his closest lieutenants—has centered on a pending major Microsoft reorganization. Some now believe—myself included—that Sinofsky learned he wouldn't assume a major leadership role in that reorg, which could happen any day now, and quit as a result.
“Given Steven's 23 years of strong service at Microsoft, which included leading teams that produced six versions of Office and two versions of Windows, the company will continue to provide him with the economic value of the stock awards he earned during his employment, similar to the retirement benefits we provide employees who work at least 15 years and retire at 55 or older,” a Microsoft statement notes. “This agreement provides a number of important considerations for Microsoft, including a commitment that Steven will continue assisting with intellectual property litigation until January 1, 2017.”
Sinofsky’s retirement agreement was originally revealed in a filing with the Securities & Exchange Commission. It that filing, Microsoft notes that it will pay Sinofsky “the value of his outstanding unvested stock awards granted prior to fiscal year 2013 and 50 percent of the shares of stock awarded for his performance during fiscal year 2013.” This amounts to 418,361 shares of Microsoft stock, currently valued at just north of $14.2 million, though the payments will be made over time through August 2016 in accordance with the normal vesting schedule.
Microsoft has also agreed to indemnify Mr. Sinofsky “against claims arising from acts or omissions relating to his employment at Microsoft.”
For his part, Mr. Sinofsky has accepted a fairly standard non-compete agreement. He cannot gain employment at “certain” Microsoft competitors or “encourage certain customers of Microsoft to choose a competing offering to Microsoft products.” He cannot solicit current Microsoft employees to join him in any new or existing venture, cooperate in litigation involving Microsoft, cannot “disparage” Microsoft, and must continue to comply with “certain provisions of the Microsoft Corporation Employee Non-Disclosure Agreement.” Mr. Sinofsky has also agreed to “a release of claims against Microsoft and its related parties,” which could be just a standard part of the retirement settlement process.
Mr. Sinofsky’s payday might seem lucrative, but he certainly earned it from his stewardship of Microsoft’s two most important brands. And a bigger payday could await if he’s interested: As disgraced ex-Xbox head Don Mattrick shows, ex-Microsoft execs can receive big rewards elsewhere in the industry: Struggling game-maker Zynga is giving Mr. Mattrick a reported $50 million, with over $19 million in the first year, to become its CEO.
The thought of the feisty Sinofsky leading the charge at any major Microsoft competitor is surely troubling for Steve Ballmer and his executive staff. That said, the non-compete clause in Sinofsky’s retirement agreement expires at the end of calendar year 2013, which is less than six months away. It will be interesting to see where he ends up.