This email was sent to all Microsoft employees on Friday, April 22, 2005, and approved to be posted publicly by PR.

Over the past two days, there've been a lot of stories about Microsoft and our position on an anti-discrimination bill in Olympia.

I've heard from a number of employees, and I take all of the input on all sides seriously, so I wanted to talk directly with all of you about the company's position and how I view these issues.

First, I want reaffirm my personal commitment -- and the company's commitment -- to keeping Microsoft a company that values diversity. That will never change.

As long as I am CEO, Microsoft is going to be a company that is hard-core about diversity, a company that is absolutely rigorous about having a non-discriminatory environment, and a company that treats every employee fairly.

I'm proud of our track record on diversity issues. We were one of the first companies to provide domestic partner benefits, or to include sexual orientation in our anti-discrimination policies. And just this year, we became one of the few companies to include gender identity or expression in our protection policies.

There have been several news stories that imply that Microsoft changed its position on an anti-discrimination bill, HB 1515, because of pressure from a conservative religious group. I want to make it clear that that is not the case.

When our government affairs team put together its list of its legislative priorities in Olympia before the Legislative Session began in January, we decided to focus on a limited number of issues that are more directly related to our business such as computer privacy, education, and competitiveness. The anti-discrimination bill was not on this list and as a result Microsoft was not actively supporting the bill in the Legislature this year, although last year we did provide a letter of support for similar legislation.

On February 1, two Microsoft employees testified before a House Committee in support of the bill. These employees were speaking as private citizens, not as representatives of the corporate position, but there was considerable confusion about whether they were speaking on behalf of Microsoft.

Following this hearing, a local religious leader named Rev. Ken Hutcherson, who has a number of Microsoft employees in his congregation, approached the company, seeking clarification of whether the two employees were representing Microsoft's official position. He also sought a variety of other things, such as firing of the two employees and a public statement by Microsoft that the bill was not necessary.

After careful review, Brad Smith informed Rev. Hutcherson that there was no basis for firing the two employees over the misunderstanding over their testimony, but did agree that we should clarify the ambiguity over the employee testimony. Brad also made it clear that while the company was not taking a position on HB 1515, the company remains strongly committed to its internal policies supporting anti-discrimination and industry-leading benefits for gay, lesbian, bisexual, and transgender employees.

I understand that many employees may disagree with the company's decision to tighten the focus of our agenda for this year's legislative session in Olympia. But I want every employee to understand that the decision to take a neutral stance on this bill was taken before the Session began based on a desire to focus our legislative efforts, not in reaction to any outside pressure.

I have done a lot of thinking and soul-searching over the past 24 hours on this subject, and I want to share with you my thoughts on how a company like Microsoft should deal with these kinds of issues.

This is a very difficult issue for many people, with strong emotions on all sides. And that makes it a very difficult issue for me, as the CEO of this company.

On this particular matter, both Bill and I actually both personally support this legislation that would outlaw discrimination on the basis of sexual orientation. But that is my personal view, and I also know that many employees and shareholders would not agree with me.

We are thinking hard about what is the right balance to strike -- when should a public company take a position on a broader social issue, and when should it not? What message does the company taking a position send to its employees who have strongly-held beliefs on the opposite side of the issue?

The bottom line is that I am adamant that Microsoft will always be a place that values diversity, that has the strongest possible internal policies for non-discrimination and fairness, and provides the best policies and benefits to all of our employees.

I am also adamant that I want Microsoft to be a place where every employee feels respected, and where every employee feels like they belong. I don't want the company to be in the position of appearing to dismiss the deeply-held beliefs of any employee, by picking sides on social policy issues.

It's appropriate to invoke the company's name on issues of public policy that directly affect our business and our shareholders, but it's much less clear when it's appropriate to invoke the company's name on broader issues that go far beyond the software industry -- and on which our employees and shareholders hold widely divergent opinions. We are a public corporation with a duty first and foremost to a broad group of shareholders. On some issues, it is more appropriate for employees or shareholders to get involved as individual citizens. As CEO, I feel a real sense of responsibility around this question, and I believe there are important distinctions between my personal views on policy issues and when it's appropriate to involve the company.

I know that some employees will still feel frustrated by the position the company has taken, but I wanted you to hear directly from me on this. We will continue to wrestle with how and when the company should engage on these kinds of political issues. And above all, I want you to know that as long as I am CEO, Microsoft will always be committed to diversity and non-discrimination in all of our internal policies.

Thanks.

Steve

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