Updated from 12:33 p.m. EST

Microsoft

(MSFT) - Get Report

shareholders overwhelmingly approved a plan to adjust employee stock-based compensation, paving the way for the software behemoth to pay the largest special one-time dividend in history.

At the Redmond, Wash.-based company's annual meeting Tuesday morning, shareholders agreed to issue more stock options at lower strike prices and more stock awards to employees. The adjustments, supported by more than 94% of votes cast, are meant to compensate employees for a drop in the value of their stock-based compensation as Microsoft's stock

is expected to decline $3 when Microsoft pays out the special $3 dividend.

The price is expected to fall on the Nov. 15 ex-dividend date. To receive the dividend, investors must own shares of Microsoft on Nov. 17. Microsoft pays out the dividend Dec. 2.

Shareholders also approved a related measure that would permit Microsoft's board to adjust the number of option and stock award grants in the event of any other distribution to shareholders other than a normal cash dividend. That proposal received support from more than 95% of votes cast.

Microsoft announced its plan to pay the $3 dividend, totaling a whopping $32 billion, earlier this year amid mounting pressure from investors calling on the software behemoth to share its enormous cash hoard. That hoard reached a massive $64.4 billion at the end of September.

In addition to the special one-time dividend, Microsoft also announced plans to double its regular dividend annually from 16 cents a share to 32 cents a share and said it will buy back $30 billion in stock over the next four years.

Shares of Microsoft gained 22 cents, or 0.8%, to $29.50 in recent trading.

Microsoft stock has been range-bound, unable to cross the $30 mark since early 2002. That prompted one shareholder to ask management Tuesday why the stock is stuck. CFO John Connors responded that like the rest of tech, Microsoft stock was overvalued when the stock bubble burst. But the company has performed "exceptionally well" since then, he said, which means the stock hasn't dipped as much as other tech names and consequently hasn't rallied either.

CEO Steve Ballmer added that the law of large numbers -- with operating income of $16 billion or $17 billion -- means it's harder to surprise investors. That implies it's consequently also harder for the stock to enjoy a bounce. "We don't surprise anybody numerically very much anymore," Ballmer said. But at the end of the day, Ballmer added, if the company continues innovating, the stock price has to reflect that.

"I truly believe Microsoft continues to be one of the most dynamic companies that anyone can hope to participate in as an investor," Ballmer gushed earlier during the meeting. He added that he feels more confident about the company's prospects and growth opportunities now than at any other time in his 24 years with the company.

Finally, at the meeting's close, Connors noted that two of Microsoft's largest shareholders are sitting at the front of the room -- presumably Ballmer and Chairman and co-founder Bill Gates -- and have the same interest in seeing the company do well as institutional investors.