• Microsoft CEO Satya Nadella asked for a reduction in the cash incentive portion of his pay after a security incident that prompted criticism from the U.S. government.
• Still, Nadella's total pay went up sharply for the most recent fiscal year.
• Microsoft is taking security contributions into consideration when deciding on pay for rank-and-file employees.

Microsoft gave CEO Satya Nadella a pay raise for the 2024 fiscal year of more than $30 million. But his total package would have been $5.5 million higher if not for a series of cyberattacks.

Nadella received $79.1 million for the fiscal year that ended June 30, up from $48.5 million in the prior year, according to a proxy filing Thursday. Most of his pay is in the form of stock. The board's compensation committee said Nadella asked that the cash incentive portion reflect the security issues.

The requested reduction came after the U.S. Department of Homeland Security in April published a report that followed an independent review of China's breach of U.S. government officials' email accounts. Microsoft disclosed that incident in July 2023. 

In January, Microsoft said Russian intelligence had accessed some of the company's top executives' email accounts.

Microsoft said it would revamp its practices to address shortcomings highlighted in the government report, which said "customers would benefit from its CEO and board of directors directly focusing on the company's security culture."

Nadella responded by telling employees in a May memo that Microsoft would prioritize security above all else. In June, Microsoft said it would consider employees' cybersecurity efforts when determining their compensation.

The cash incentive part of Nadella's pay mostly takes into account the software maker's performance in relation to revenue and operating income targets. It was originally supposed to be $10.66 million, but the full board approved a $5.2 million cash incentive instead.

"Mr. Nadella agreed that the Company's performance was extremely strong, but reflecting on his personal commitment to security and his role as the CEO, asked the Board to consider departing from the established performance metrics and reduce his cash incentive to reflect his personal accountability for the focus and speed required for the changes that today's cybersecurity threat landscape showed were necessary," the committee wrote.

Microsoft's security business generated more than $20 billion in revenue in 2022, more than total revenue for many security companies.

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