Microsoft forgives $15 million loan

By Simon Aughton

Posted on 9 Sep 2002 at 09:43

Former Microsoft president Rick Belluzzo will not have to repay a $15 million loan he received from the company.

The money was leant to Belluzzo as an advance on profit that he was expected to make from stock options that he received when he joined Microsoft in 2000.

However when he left the company in April this year, the stock price was such that the options were worthless.

Belluzzo is the lucky one; about half of the 802 million options held by Microsoft employees are also worthless at the current share price. The company raised salaries by an average of 20 per cent or more between August 1999 and August 2001 to compensate for the stock shortfall.

Loans such as Belluzzo received are now illegal in the US. At the time he was hired options were considered an integral part of any senior employees' remuneration package. Caroline Boren, spokeswoman for US financial regulators the SEC, said, 'It's important to note that this compensation package was developed at the time when the market for senior executives was hypercompetitive, and Microsoft believes his compensation was appropriate and necessary to attract an executive of his calibre at the time the company recruited him.'