Special Feature
Part of a ZDNet Special Feature: Steve Ballmer - The Exit Interview

Just how much will Satya Nadella get paid to be Microsoft's new CEO?

The Microsoft board has made sure that how much its new CEO will earn is directly proportional to how the company performs.

Read this

Microsoft goes internal for its next CEO with Satya Nadella

What does this mean for the future of the devices and services company?

Read More

When Microsoft yesterday announced that Satya Nadella had officially been appointed CEO , many wouldn't have envied him his new position. There's a lot of work ahead for the new chief exec: sorting out the company's mobile strategy, trying to claw back cloud ground from Amazon, and more. So how much will Nadella get for his trouble?

According to an SEC filing posted on Tuesday, there's a seven-figure salary in it for him: the filing lists Nadella's annual wages as $1.2m.

That's small beer compared to the stock Nadella can expect: $13.2m worth of shares a year from fiscal 2015 onwards. How much of that figure Nadella takes home — and Microsoft reserves the right to give him nothing — will be determined by the board, based on Nadella's performance.

The new CEO can also earn a bonus of up to 300 percent of his annual salary — potentially another $3.6m — per year for the rest of this financial year and the year after.

Nadella's offer letter also includes another instrument designed to tie the CEO's earning to the health of the company overall: stock options that will grow if the Microsoft's share price does.

Over three periods of five years, starting this financial year, Microsoft will compare the price of the company's stock with the rest of the Standard and Poor's index.

If Microsoft is at the top end of the performance spectrum, in the 90th percentile, he'll get 900,000 shares. If the company does less well, the number of shares Nadella receives will step down accordingly: if Microsoft ends up in the 70th percentile, Nadella gets 750,000, and for 60th percentile — Nadella's target for the company — there are 600,000.

However, there are still shares on offer if the company falls below the target: 450,000 for being in the 50th percentile, 300,000 for the 40th, and 150,000 for the 30th. Anything lower than that, and no shares will be awarded.

And, as an extra sweetener, Nadella can even claim expenses for the bother of negotiating the details of his new role: up to $50,000-worth, according to his offer letter.

More on Microsoft's new CEO