Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. We urge you to promptly vote and submit your proxy via the Internet, by phone, or by signing, dating, and returning the enclosed proxy card in the enclosed envelope. If you attend the Annual Meeting, you can vote in person even if you previously submitted your proxy.

This year’s shareholder question and answer session will include both live questions and questions submitted in advance. You may submit a question in advance of the meeting at www.proxyvote.com after logging in with the control number found next to the label “Control Number” for postal mail recipients or next to the field labeled “Control Number” within the body of your email. We will respond to you by email if your online question isn’t answered during the meeting.

For those who can’t attend in person, we again are offering a virtual shareholder meeting in which you can view the meeting, submit questions, and vote online at www.microsoft.onlineshareholdermeeting.com. We will also provide a live webcast of the Annual Meeting from the Microsoft Investor Relations website at www.microsoft.com/investor. A transcript with video and audio of the entire Annual Meeting will be available on the Investor Relations website after the meeting. We hope this will allow those who cannot attend the meeting in person to hear Microsoft executives discuss the past year’s results and our future opportunities. In addition, we make available at our Investor Relations website a variety of information for investors. Our goal is to maintain the Investor Relations website as a portal through which investors can easily find pertinent information about us.

On behalf of the Board of Directors, thank you for your continued investment in Microsoft. We look forward to greeting as many of you as possible.

Sincerely,

2017 PROXY STATEMENT  iii

Notice of 2017 Annual Shareholders Meeting

By order of the Board of Directors

John A. Seethoff

Secretary

Redmond, Washington

October 16, 2017

The use of cameras at the Annual Meeting is prohibited and they will not be allowed into the meeting or any other adjacent areas, except by credentialed media. We realize that many mobile phones have built-in cameras; while these phones may be brought into the venue, the camera function may not be used at any time.

2017 PROXY STATEMENT  v

Proxy Statement table of contents

vi

2017 PROXY STATEMENT  vii

Proxy summary

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all information you should consider. Please read the entire Proxy Statement carefully before voting.

 

Annual Shareholders Meeting								Record date   September 29, 2017   Mailing date   This Proxy Statement was first mailed to shareholders on or about October 16, 2017.		Meeting agenda   The meeting will cover the proposals listed under voting matters and vote recommendations below, and any other business that may properly come before the meeting.   Voting   Shareholders as of the record date are entitled to vote. Each share of common stock of Microsoft Corporation (the “Company”) is entitled to one vote for each director nominee and one vote for each of the proposals.
		Date    November 29, 2017   Time    8:00 a.m. Pacific Time   Place   Meydenbauer Center              11100NE 6th Street              Bellevue,Washington              98004

 

 

Voting matters and vote recommendations

 

Proposal				Board recommends		Reasons for recommendation		See page
1.		Election of 14 directors		FOR		The Board and its Governance and Nominating Committee believe the 14 Board nominees possess the skills, experience, and diversity to effectively monitor performance, provide oversight, and advise management on the Company’s long-term strategy.		13
2.		Advisory vote on executive compensation “say-on-pay”		FOR		Our executive compensation programs demonstrate the evolution of our pay for performance philosophy, and reflect the input of shareholders from our extensive outreach efforts.		31
3.		Advisory vote on the frequency of future advisory votes on executive compensation		FOR EVERY YEAR		We believe there is a broad investor consensus favoring an annual say-on-pay vote, and an annual vote best promotes accountability and transparency for our executive compensation program.		57
4.		Ratification of the selection of Deloitte & Touche LLP as our independent auditor for fiscal year 2018		FOR		Based on the Audit Committee’s assessment of Deloitte & Touche’s qualifications and performance, it believes their retention for fiscal year 2018 is in the best interests of the Company.		58
5.		Approve material terms of the performance goals under the Microsoft Corporation Executive Incentive Plan		FOR		Shareholders must approve these material terms at least every five years so certain pay to executive officers is eligible to be deducted for federal income tax purposes. Being able to award pay that may be deductible is in the best interests of the Company.		62
6.		Approve the Microsoft Corporation 2017 Stock Plan		FOR		Approving the Microsoft Corporation 2017 Stock Plan allows us to continue to award equity compensation, which incentivizes a long-term perspective on the Company’s business and creates strong alignment with shareholders.		66

 

Vote in advance of the meeting						Vote your shares at www.proxyvote.com. Have your Notice of Internet Availability or proxy card in hand for the 12-digit control number needed to vote.     Call toll-free number 1-800-690-6903   Sign, date, and return the enclosed proxy card or voting instruction form.

 

Vote in person at the meeting						See Part 6 – “Information about the meeting” for details on admission requirements to attend the Annual Meeting.

 

2017 PROXY STATEMENT  1

 

Corporate governance highlights

See Part 1 – “Corporate governance at Microsoft” for more information.

 

Our director nominees

 

Independent Board and Board committees
		•  Independent Chairman of the Board; Chairman and CEO positions separate since 2000   •  12 of 14 director nominees are independent   •  We are committed to Board refreshment. To balance between directors with deep knowledge of the Company and those with a fresh perspective, the Board will seek to maintain an average tenure of ten years or less for its independent directors as a group.   •  All committee members are independent   •  Independent directors meet in executive session at least quarterly   •  Regular committee executive sessions of independent directors – At each regularly scheduled meeting, the Audit Committee, Compensation Committee, and Regulatory and Public Policy Committee meet in executive session. Additional sessions of all Board committees are held as needed.   •  We conduct annual board and committee evaluations   •  We have robust director orientation and continuing education programs for directors   •  All Audit Committee members are financially literate and four are audit committee financial experts   •  Our Compensation Committee uses an independent compensation consultant

Progressive shareholder rights
		•  Directors are elected by majority vote in uncontested elections   •  All directors are elected annually   •  Our bylaws provide for proxy access by shareholders     •  15% of outstanding shares can call a special meeting   •  We have a confidential voting policy

 

Strong shareholder support on say-on-pay
		96% say-on-pay support at our 2016 Annual Meeting. Our compensation Committee believes the vote indicates support for our program, including enhancements made over the past three years.

 

Active shareholder  engagement
		During fiscal year 2017, independent members of our Board and members of senior management conducted outreach to a cross-section of shareholders owning almost 45% of our shares.

 

2017 PROXY STATEMENT  3

Strong long-term performance

Our total shareholder return and total cash returned to shareholders for the past three years have been strong.

 

 

 

*

Total shareholder return includes reinvestment of dividends.

 

 

Executive compensation advisory vote

Our Board of Directors recommends that shareholders vote to approve, on an advisory basis, the compensation paid to the Company’s named executive officers as described in this Proxy Statement (the “say-on-pay” vote), for the following reasons.

 

Pay for performance
		We completed the evolution of executive compensation. •We extended the structured framework for the annual cash incentive to all executive officers and adopted pre- established financial metrics to formulaically determine 50% of the annual cash incentive.   •The metrics for our performance stock awards align with our three strategic ambitions, and were revised to reduce overlap with the annual cash incentive and drive long- term growth.   •We also reduced the maximum award levels for performance stock awards.				Fiscal year 2017 executive compensation. At least 70% of target compensation for our named executive officers was equity-based, providing direct alignment with returns to shareholders and incentives to drive long-term business success. The annual cash incentive awards for our named executive officers ranged from 151.66% to 170.00% of target consistent with our strong business performance and returns to shareholders and their effective leadership. Their annual cash incentive was determined 50% under formulaic, pre-established financial metrics and 50% based on performance across three categories as described in greater detail in Part 3 – “Named executive officer compensation.”

 

2017 PROXY STATEMENT  5

1. Corporate governance at Microsoft

Corporate governance principles and practices

Our corporate governance cycle promotes effective shareholder engagement – Microsoft believes effective corporate governance includes regular, constructive conversations with our shareholders. We actively engage with our shareholders as part of our annual corporate governance cycle.

We are transparent – Communicating governance policies and practices to all shareholders and other stakeholders is an important part of our commitment to transparency. With over 4.2 million Microsoft shareholders, we use both direct dialogue and ‘one-to-many’ communications to reach all our shareholders.

We proactively engage with our shareholders – During fiscal year 2017, our independent Chairman, Compensation Committee Chair, and members of senior management engaged with a cross-section of shareholders owning almost 45% of our shares. Our CEO, Satya Nadella, remains committed to investing time with our shareholders to maintain transparency and better understand their perspectives, including by participating in our quarterly earnings calls and other forums.

Our director video series provides all stakeholders insight about our Board – We recently released a new installment of our director video series featuring an interview with Sandra Peterson. The videos provide an informal opportunity for our directors to discuss their own approaches to their role. The complete series can be viewed on our website at https://aka.ms/DirectorVideoSeries.

Microsoft on the Issues blog posts address our views on emerging governance topics – We regularly post policy blogs on Microsoft on the Issues, covering topics ranging from the latest in corporate governance and corporate social responsibility to privacy, cybersecurity, online safety, jobs, and education. We broadcast information posted on the Microsoft on the Issues blog via social media handles, including @MSFTIssues and @MSFTNews.

2017 PROXY STATEMENT  7

Our Investor Relations website delivers extensive content about governance and corporate social responsibility – Our Investor Relations website provides in-depth information about our corporate governance and corporate social responsibility initiatives.

These documents are available on our website at http://aka.ms/policiesandguidelines.

We have an independent Chairman of the Board

The roles of chairman and CEO have been separate since 2000. The independent members of the Board annually appoint our Chairman. John Thompson currently serves as independent Chairman of the Board. Key responsibilities of the Chairman include:

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Our Board believes its leadership structure is appropriate because it effectively allocates authority, responsibility, and oversight between management and the independent members of our Board. Our CEO has primary responsibility for the operational leadership and strategic direction of the Company while the Chairman facilitates our Board’s independent oversight of management, promotes communication between management and our Board, engages with shareholders, and leads our Board’s consideration of key governance matters.

Our Board is independent

We have independent Board committees with appropriate expertise

2017 PROXY STATEMENT  9

Our approach to risk oversight

The Board directly oversees strategic risks to the Company and other risk areas not delegated to one of its committees.

Management periodically reports to the Board or relevant committee, which provide guidance on risk assessment and mitigation. Each committee charged with risk oversight reports to the Board on those matters. This approach to risk oversight does not affect the Board’s leadership structure.

Key policies ensure accountability and alignment with shareholder interests

Directors receive orientation and continuing education

Board and committees annually evaluate their effectiveness

Our approach to corporate social responsibility

At Microsoft, we work to conduct our business in ways that are principled, transparent, and accountable to key stakeholders. We believe doing so generates long-term value for our business, our shareholders, and society. The Regulatory and Public Policy Committee of the Board plays an important role in overseeing these initiatives.

To help focus our efforts, we use a corporate social responsibility (“CSR”) materiality assessment to prioritize the issues where we can have the most impact on our business and society. The assessment helps ensure our CSR priorities reflect feedback from our customers and shareholders; guidance from policymakers and regulators; insights into emerging risks and opportunities from external experts; and other stakeholder input. Three areas of particular importance in 2017 were trust, sustainability, and culture.

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Trust – We seek to engage thoughtfully and responsibly in public policy discussions. Satya Nadella and Brad Smith, our President and Chief Legal Officer, have publicly articulated the business and societal imperative of fostering a culture of accessibility and global diversity and inclusion. In A Cloud for Global Good we outlined a clear vision for the steps that governments and technology companies can take to ensure technology is developed and used in a way that is trusted, responsible, and inclusive.

Trust has emerged as one of the most important issues for our business. People won’t use technology they don’t trust. To ensure our customers can trust the Microsoft products and services they use, we’ve published clear privacy principles and are committed to implementing a strong privacy, security, compliance, and transparency framework across all of our services. The value in these commitments extends beyond thoughtfully managing risk by creating new business opportunities for us. As one example, Microsoft was the first global cloud services provider to publicly offer contractual commitments that allow our customers to meet the European Union’s upcoming General Data Protection Regulation (“GDPR”). Beginning in May 2018, GDPR will require that organizations serving European customers follow new privacy and security requirements. Microsoft’s expertise protecting data, championing privacy, and complying with complex regulations is manifested in our new contractual commitments to ensure our cloud services comply with GDPR – presenting new opportunities to offer value to customers while advancing our corporate values.

Culture – Satya Nadella is intently focused on creating a culture that allows people to do their best work. Microsoft’s senior leaders have promoted a growth mindset culture, encouraging employees throughout the organization to become learners in all things. We then apply that mindset to learning about our customers, being diverse and inclusive, working together as one, and – ultimately – making a difference in the world. We’ve worked to support this learning culture through shifts in how we measure and reward performance, new communications channels to gain employee feedback, and new opportunities like the Microsoft Hackathon for Microsoft employees to work together to make a difference at work and in the world. As just one example, a Hackathon project inspired Microsoft to include built-in eye tracking support as part of Windows 10 that allows people with disabilities to use a compatible eye tracker to operate an on-screen mouse, keyboard and text-to-speech experience using only their eyes.

At http://www.microsoft.com/csr we share a broad array of information on our policies, practices, and performance across these areas and others, ranging from our carbon footprint to how we’ve responded to requests from law enforcement agencies for customer data. Our goal is to meet the high standards we have for ourselves and to consistently earn the trust and confidence of the public and our customers, partners, employees, and shareholders.

2017 PROXY STATEMENT  11

Political contributions transparency

Recognizing the interest of shareholders in establishing greater transparency about corporate political contributions, we disclose our political contributions to support candidates and ballot measures and how certain of our trade association membership dues are used for political activities. As part of our commitment to transparency, we developed Principles and Policies Guiding Microsoft Participation in Public Policy Process in the United States, which focus on ensuring compliance with applicable federal and state laws and go beyond compliance to implement what we consider leading practices in corporate accountability, transparency, integrity, and responsibility. The policy is available at www.microsoft.com/politicalengagement.

How to communicate with our Board

Shareholders may contact the Board about corporate governance or matters related to the Board. Communications about these topics will be received and processed by management before being forwarded to the Board, a committee of the Board, or a director as designated in your message. Communications relating to other topics, including those that are primarily commercial in nature, will not be forwarded.

	@			AskBoard@microsoft.com
				MSC 123/9999 Office of the Corporate Secretary Microsoft Corporation One Microsoft Way Redmond, WA 98052-6399

Concerns about accounting or auditing matters or possible violations of our Standards of Business Conduct should be reported under the procedures outlined in the Microsoft Standards of Business Conduct, which is available on our Microsoft Integrity website at https://www.microsoft.com/en-us/legal/compliance/integrity.

12

2. Board of Directors

Our Board of Directors recommends a vote FOR the election to the Board of each of the nominees listed below.

Director selection and qualifications

We select Board members through a disciplined process

Shareholders elect all Board members annually. The Governance and Nominating Committee recommends to the Board director candidates for nomination and election at the annual shareholders meeting or for appointment to fill vacancies. The Committee annually reviews with the Board the skills and characteristics required of Board nominees, considering current Board composition and Company circumstances. In making its recommendations to our Board, the Committee considers the qualifications of individual director candidates applying the Board membership criteria described below. The Committee retains any search firm involved in identifying potential candidates and approves their fees.

2017 PROXY STATEMENT  13

Board membership criteria

The Governance and Nominating Committee works with our Board to determine the characteristics, skills, and experiences for the Board as a whole and its individual members with the objective of having a Board with diverse backgrounds and experience. Characteristics expected of all directors include

In evaluating the suitability of individual Board members, our Board considers many factors, including general understanding of global business, sales and marketing, finance, and other disciplines relevant to the success of a large, publicly traded company; understanding of our business and technology; educational and professional background; personal accomplishment; and national, gender, age, and ethnic diversity. The Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. The Board’s objective is to recommend a group that can best ensure the continuing success of our business and represent shareholder interests through the exercise of sound judgment using its diversity of experience and perspectives.

The Board does not believe that directors should expect to be re-nominated annually. In determining whether to recommend a director for re-election, the Governance and Nominating Committee considers the director’s participation in and contributions to the activities of the Board, the results of the most recent Board evaluation, and past attendance at meetings.

The Governance and Nominating Committee assesses its efforts to maintain an effective and diverse Board as part of its regular responsibilities, which include annually:

The Governance and Nominating Committee works with the full Board to regularly evaluate Board composition to assess the skills and capabilities that are relevant to the Board’s work and the Company’s strategy, whether directors should be added in view of director departures, and the number of directors needed to fulfill the Board’s responsibilities under the Corporate Governance Guidelines and committee charters.

Shareholders previously elected all current Board members except Messrs. Hoffman and Johnston. Mr. Hoffman was considered by the Governance and Nominating Committee based on his former role as Chairman of LinkedIn Corporation. In recruiting Messrs. Johnston and Sorenson, the Committee retained the search firm Spencer Stuart to help identify director prospects, perform candidate outreach, assist in reference checks, and provide other related services. An independent director and a member of management recommended Ms. Pritzker as a candidate for consideration by the Committee. The recruiting process typically involves either the search firm or a member of the Committee contacting a prospect to assess interest and availability. A candidate will then meet with members of the Board and Mr. Nadella, and then meet with members of management as appropriate. At the same time, the Committee and the search firm will contact references for the prospect. A background check is completed before a final recommendation is made to the Board to appoint a candidate to the Board.

14

Key board qualifications, expertise, and attributes

The table below summarizes the key qualifications, skills, and attributes most relevant to the decision to nominate candidates to serve on the Board. A mark indicates a specific area of focus or expertise on which the Board particularly relies. Not having a mark does not mean the director does not possess that qualification or skill. Director biographies below describe each director’s background and relevant experience in more detail.

Experience, expertise, or attributes Gates Hoffman Johnston List-Stoll Nadella Noski Panke Peterson Pritzker Scharf Sorenson Stanton Thompson Warrior Financial Gender, ethnic, national, or other diversity Global business Leadership Mergers and acquisitions Public company board service and governance Sales and marketing Technology

2017 PROXY STATEMENT  15

Nominees

Shareholder recommendations and nominations of director candidates

Recommendations

The Governance and Nominating Committee considers shareholder recommendations for candidates for the Board of Directors using the same criteria described above. The name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve if elected, and evidence of the nominating shareholder’s ownership of Company stock must be sent to the attention of MSC 123/9999, Office of the Corporate Secretary, Microsoft Corporation, One Microsoft Way, Redmond, WA 98052-6399.

Nominations

As described in Part 1 – “Corporate governance at Microsoft – Shareholder rights,” our Bylaws provide for proxy access shareholder nominations of director candidates by eligible shareholders. A shareholder who wishes to formally nominate a candidate must follow the procedures described in Article 1 of our Bylaws.

16

Our director nominees

				Age: 61        Director since: 1981        Birthplace: United States

		Experience: Microsoft Corporation (1981-present) •   Technical Advisor to Satya Nadella (CEO) (2014-present) •   Co-founder and Chairman (1981-2014) •   Chief Software Architect (2000-2006) •   Chief Executive Officer (1981-2000)   Microsoft committees: •   None   Other public company directorships: •   Berkshire Hathaway Inc.   Former public company directorships held in the past five years: •   None   Other positions: •   Co-Chair and Trustee, Bill & Melinda Gates Foundation

				Age: 50        Director since: 2017        Birthplace: United States        INDEPENDENT

		Experience: Greylock Partners (2009-present) (venture capital firm) •   Partner (2009-present)   LinkedIn Corporation (2003-2016) •   Co-founder and Chairman (2003-2016) •   Executive Chairman (2009) •   Chief Executive Officer (2003-2007 and 2008-2009) •   President, Products (2007-2008)   PayPal Inc. (2000-2002) •   Executive Vice President (2000-2002)   Microsoft committees: •   Regulatory and Public Policy   Other public company directorships: •   None   Former public company directorships held in the past five years: •   LinkedIn Corporation •   Zynga Inc.

2017 PROXY STATEMENT  17

				Age: 50        Director since: 2014        Birthplace: India

		Experience: Microsoft Corporation (1992-present) •   Chief Executive Officer and Director (2014-present) •   Executive Vice President, Cloud and Enterprise (2013-2014) •   President, Server and Tools (2011-2013) •   Senior Vice President, Online Services Division (2009-2011) •   Senior Vice President, Search, Portal, and Advertising (2008-2009) •   Various positions of increasing authority (1992-2008)   Microsoft committees: •   None   Other public company directorships: •   Starbucks Corporation   Former public company directorships held in the past five years: •   Riverbed Technology, Inc.

				Age: 65        Director since: 2003        Birthplace: United States        INDEPENDENT

		Experience: Bank of America Corporation (2010-2012) (banking and financial services company) •   Vice Chairman (2011-2012) •   Executive Vice President and Chief Financial Officer (2010-2011)   Northrop Grumman Corporation (2002-2005) •   Corporate Vice President and Chief Financial Officer (2003-2005) •   Director (2002-2005)   AT&T (1999-2002) •   Vice Chairman of the Board (2002) •   Senior Executive Vice President and Chief Financial Officer (1999-2002)   Hughes Electronics Corporation (1990-1999) •   President, Chief Operating Officer and Director (1997-1999) •   Vice Chairman, Chief Financial Officer and Director (1996-1997)   Microsoft committees: •   Audit (Chair) •   Governance and Nominating   Other public company directorships: •   Avon Products, Inc. •   The Priceline Group Inc.   Former public company directorships held in the past five years: •   Avery Dennison Corporation   Other positions: •   Chairman of the Board of Trustees, Financial Accounting Foundation •   Director, National Association of Corporate Directors •   Past member, Standing Advisory Group of the PCAOB

2017 PROXY STATEMENT  19

				Age: 58       Director since: New       Nominee       Birthplace: United States       INDEPENDENT

		Experience: United States Secretary of Commerce (2013-2017)   PSP Capital Partners, LLC (present) (private investment firm) •   Founder and Chairman (present)   Pritzker Realty Group (present) •   Co-founder and Chairman (present)   Artemis Real Estate Partners (2009-2013) •   Co-founder and Chairman (2009-2013)   The Parking Spot (1998-2011) •   Co-founder and Chairman (1998-2011)   Vi Senior Living (1987-2011) •   Founder and Chairman (1987-2011)   Microsoft committees: •   Appointment will be made after election   Other public company directorships: •   None   Former public company directorships held in the past five years: •   Hyatt Hotels Corporation   Other positions: •   Co-founder, Pritzker Traubert Family Foundation

				Age: 52       Director since: 2014       Birthplace: United States       INDEPENDENT

		Experience: The Bank of New York Mellon Corporation (2017-present) (banking and financial services company) •   Chief Executive Officer and Director (2017-present)   Visa Inc. (2012-2016) •   Chief Executive Officer and Director (2012-2016)   JPMorgan Chase & Co. (2004-2012) •   Managing Director, One Equity Partners, private investment arm (2011-2012) •   Chief Executive Officer of Retail Financial Services (2004-2011)   Bank One Corporation (2000-2004) •   Chief Executive Officer of the Retail Division (2002-2004) •   Chief Financial Officer (2000-2002)   Citigroup, Inc. (1999-2000) •   Chief Financial Officer of the Global Corporate and Investment Bank Division (1999-2000)   Microsoft committees: •   Compensation •   Governance and Nominating   Other public company directorships: •   The Bank of New York Mellon Corporation   Former public company directorships held in the past five years: •   Visa Inc.

2017 PROXY STATEMENT  21

		Age: 68       Director since: 2012       Birthplace: United States       INDEPENDENT

		Experience: Microsoft Corporation (2014 to present) •     Non-executive Chairman of the Board   Virtual Instruments Corporation (2010-2016) (computing infrastructure performance management solutions provider) •     Chief Executive Officer and Director (2010-2016)   Symantec Corp. (1999-2011) •     Chairman of the Board (1999-2011) •     Chief Executive Officer (1999-2009)   IBM Corporation (1971-1999) •     General Manager, IBM Americas (1996-1999) •     Various positions of increasing authority (1971-1996)   Microsoft committees: •     Governance and Nominating (Chair) •     Regulatory and Public Policy   Other public company directorships: •     Illumina, Inc.   Former public company directorships held in the past five years: •     United Parcel Service   Other positions: •     Executive Advisor, Riverwood Capital

		Age: 56       Director since: 2015       Birthplace: India       INDEPENDENT

		Experience: NIO USA, Inc. (2015-present) (electric autonomous automobile manufacturer) •  Chief Executive Officer and Director (2015-present)   Cisco Systems, Inc. (2008-2015) •  Strategic Advisor (2015) •  Chief Technology and Strategy Officer (2012-2015) •  Chief Technology Officer, Senior Vice President, Engineering and General Manager Global Enterprise segment (2010-2012) •  Chief Technology Officer (2008-2010)   Motorola, Inc. (1999-2007) •  Executive Vice President and Chief Technology Officer (1999-2007)   Microsoft committees: •  Compensation   Other public company directorships: •  None   Former public company directorships held in the past five years: •  Box, Inc. •  Gap, Inc.

2017 PROXY STATEMENT  23

Director independence

Having an independent board is a core element of our governance philosophy. Our Corporate Governance Guidelines provide that a substantial majority of our directors will be independent. Our Board has adopted director independence guidelines to assist in determining each director’s independence. These guidelines are available on our website at https://aka.ms/directorindependence. The guidelines either meet or exceed the independence requirements of NASDAQ. The guidelines identify categories of relationships the Board has determined would not affect a director’s independence, and therefore are not considered by the Board in determining director independence.

Following the director independence guidelines, each year and before a new director is appointed, the Board must affirmatively determine a director has no relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. Annually, each director completes a detailed questionnaire that provides information about relationships that might affect the determination of independence. Management provides the Governance and Nominating Committee and Board with relevant known facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the director independence guidelines. The Committee then completes an assessment of each director considering all known relevant facts and circumstances concerning any relationship bearing on the independence of a director or nominee. This process includes evaluating whether any identified relationship otherwise adversely affects a director’s independence, and affirmatively determining that the director has no material relationship with Microsoft, another director, or as a partner, shareholder, or officer of an organization that has a relationship with the Company.

The Governance and Nominating Committee also considers the tenure of a director, and for longer serving directors whether the duration of service impacts the director’s independence from management, as demonstrated by the director’s relationship with management and the director’s participation in Board and Committee deliberations. The Board seeks to maintain an average tenure of ten years or less for its independent directors as a group.

Based on the review and recommendation by the Governance and Nominating Committee, the Board analyzed the independence of each director and determined that Mmes. List-Stoll, Peterson, Pritzker, and Warrior, Messrs. Hoffman, Johnston, Morfit, Noski, Scharf, Sorenson, Stanton, and Thompson, and Dr. Panke meet the standards of independence under our Corporate Governance Guidelines, the director independence guidelines, and applicable NASDAQ listing standards, including that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment.

Director attendance

Our Board of Directors holds regularly scheduled quarterly meetings. Committee meetings occur the day before the Board meeting. Once each year, the committee and Board meetings occur on a single day so the evening and following day can be devoted to the Board’s annual strategy retreat, which includes presentations and discussions with senior management about Microsoft’s long-term strategy. Besides the quarterly meetings, typically there are two other regularly scheduled meetings and several special meetings each year. At each quarterly Board meeting, time is set aside for the independent directors to meet without management present. Our Board met six times during fiscal year 2017.

Each director nominee who is a current director attended at least 75% of the aggregate of all fiscal year 2017 meetings of the Board and each committee on which he or she served.

Directors are expected to attend the annual shareholder meeting, if practicable. All directors attended the 2016 Annual Meeting except Mr. Gates, who was unable to attend.

24

Board committees

Our Board has four standing committees: An Audit Committee, a Compensation Committee, a Governance and Nominating Committee, and a Regulatory and Public Policy Committee. Each committee has a charter, which can be found on our website at http://aka.ms/committees. The table below provides current membership for each Board committee, followed by a description of each committee’s responsibilities.

Committees of the Board of Directors

Each committee has authority to engage legal counsel or other advisors or consultants as it deems appropriate to carry out its responsibilities. Below is a description of each committee’s responsibilities.