November 11, 1995

Microsoft Options Plan Creates Employee Millionaires

NCEO founder and senior staff member

Microsoft is famous for making Bill Gates the richest person in America, but the company has made a lot of other people wealthy as well. At an NCEO workshop on broad stock options, Lisa Yeager, Manager of Employee Stock Services for Microsoft, described how the company's ownership plan works. Over 80% of all employees get stock options, which are granted on a discretionary basis on hiring and at an employee's annual review. Management decides who gets options and how many they receive. The options vest over 4 1/2 years and must be exercised within seven years. Employees can sell their shares they day they exercise their options in a cashless transaction that leaves them with the after tax gain on their options' value. Microsoft stock went public in 1986 at a split adjusted price of $1.16; it now trades around $100. As a result, at least 2,000 of Microsoft's 18,000 employees have become millionaires and many more have six-figure amounts.