The plan calls for shareholders to vote on executive compensation every three years, and goes into effect for the first time at Microsoft's Nov. 19 annual meeting.
The move comes at a time of public outrage over seven-figure salaries and bonuses doled out to executives in troubled industries like automotive and banking.
"Given the interest in executive pay, we think it makes sense to encourage more dialogue with our shareholders on our compensation approach," Microsoft general counsel Brad Smith said in a statement Friday.
"Our executive compensation program is designed to maximize shareholder value by attracting and retaining world-class leaders and aligning their financial rewards with the growth and success of the company," said Smith.
Ballmer earned about $1.35 million in 2008, a somewhat modest amount compared to some other multinational CEOs. Still, investors might be tempted to scrutinize his compensation closely given Microsoft's shaky performance of late. Windows Vista's unpopularity made it a near-disaster for Microsoft, and the company has failed to make much headway in new markets like search and personal entertainment devices.
Some shareholders welcomed the opportunity to weigh in on executive compensation at Microsoft. "We believe that establishing an advisory vote on compensation is a significant step in providing shareholders a voice on this important issue," said Aditi Mohapatra, an analyst at Calvert Group.
Microsoft said it also consulted on the policy with Walden Asset Management, the United Brotherhood of Carpenters, and other institutional investors.
Also Friday, Microsoft declared a quarterly dividend of 0.13 per share, payable Dec. 10 to shareholders of record Nov. 19.
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