Microsoft Board Member Faces Scrutiny

Nov 12, 2013

When Microsoft holds its annual meeting Nov. 19, shareholders will finish voting for the company’s board of directors. Usually it’s a straightforward affair, but this time, the candidacy of John W. Thompson will be closely examined.

Recently, a company that advises major shareholders on corporate governance urged shareholders to vote against Thompson.

The company, Glass Lewis, advises on issues regarding corporate governance. Glass Lewis contends that Thompson’s company, Virtual Instruments, gets too much business from Microsoft to consider Thompson an independent director.

The Securities and Exchange Commission says that if a director’s company gets more than 5 percent in sales from the company being directed, the director is no longer deemed independent.

Microsoft says Thompson’s company gets about 4 percent of its business from Microsoft, and says Glass Lewis is using a tighter standard than the SEC. 

Microsoft also points out that Glass Lewis is at odds with two other major proxy advisors. Both ISS and Egan-Jones have concluded Microsoft's dealings with Virtual Instruments are within SEC guidelines, and have recommended that shareholders vote in favor of Thompson. 

Overturning a candidate for a company’s board is extremely rare, and occurs under far more controversial reasons than this one.

The odds of shareholders rejecting Thompson are nil. 

Still, this provides an interesting twist to Microsoft’s annual get-together. Especially when you consider that Thompson is leading the board's search for a new CEO to replace Steve Ballmer, who plans to retire sometime in the next year.

CORRECTION: This post has been edited to clear up our confusion over the amount of business Virtual Instruments does with Microsoft. As stated in Microsoft's 2013 proxy statement, it amounts to less than 5 percent.