Loan Forgiven for Ex-Exec of Microsoft
Microsoft Corp., the world’s largest software maker, forgave a loan of $15 million plus interest to former President Rick Belluzzo after he quit in May, according to a filing with the Securities and Exchange Commission.
Microsoft lent the money as an advance on the value of 3.5 million stock options that Belluzzo received in 1999 and 2000, the filing shows. Belluzzo hadn’t repaid any of the loan, said Caroline Boren, a Microsoft spokeswoman.
Investors have criticized corporate loans to executives, partly because the debts sometimes aren’t repaid. President Bush, in his July proposal to improve corporate accountability after the collapses at Enron Corp. and WorldCom Inc., said corporate compensation committees must not let officers take loans from their companies.
WorldCom provided more than $400 million in loans to Bernard J. Ebbers when he was CEO. The money will be repaid over five years under an amended agreement reached after Ebbers’ resignation in April.
Forgiven loans to executives “are always something you should dig into,” said David Brady, who manages the $900-million Stein Roe Young Investor Fund, which holds 600,000 Microsoft shares.
Belluzzo, now chief executive of computer data-storage device maker Quantum Corp., couldn’t be reached for comment. A Quantum spokeswoman didn’t return a call for comment.
Shares of Microsoft rose $1.91 to $47.82 on Nasdaq. The stock has declined 28% this year.
In return for the loan forgiveness, Belluzzo agreed to the cancellation of the 3.5 million shares in options grants made in 1999 and 2000. Those options are priced higher than the current market price, and so aren’t exercisable, after a 31% drop in Microsoft stock since the end of 1998.
Belluzzo stepped down May 1 after less than three years at Microsoft and one year as president. He left in a reorganization after he failed to turn around products including software for televisions and wireless phones.
WorldCom filed for Chapter bankruptcy protection July 21. Subsequently, the government sued the company for alleged fraud after it admitted misreporting $7.2 billion in expenses.
