Activision Blizzard CEO Bobby Kotick came under fire recently when it was discovered that he would receive a $200 million cash bonus (while some of the company’s employees suffered layoffs, too) before taxes. It wasn’t just gamers that complained, even the CtW Investment Group put out a statement suggesting the bonus was unjustified.
In an SEC filing posted yesterday, the current Activision Blizzard CEO got his contract extended to March 31st, 2023 from the previous expiry date of December 31st, 2021. However, he also agreed to cut both his base salary and target annual bonus in half, thus bringing it in line with other peers.
Taking into account the feedback received through this extensive outreach program and the Board’s desire to retain the Activision Blizzard CEO to continue to successfully lead the Company into the future, the Board determined that it is in the best interest of the Company and its shareholders to extend the Employment Agreement until March 31, 2023 pursuant to the Extension Amendment. The Board worked with the Company and has established a pay program for the CEO that reflects shareholder feedback, incorporates market best practices, and continues to directly connect pay to performance. In addition to removing the “Transformation Transaction Award” and, with respect to any equity awards granted on or after the Amendment Date, the “Shareholder Value Creation Incentive,” the Extension Amendment aligns target CEO compensation at or below median peer group compensation targets with respect to expected pay and equity grants made in 2021 and 2022.
The CEO voluntarily agreed to reduce his base salary by 15% in 2020. Under the Extension Amendment, effective January 1, 2021, the Compensation Committee and CEO agreed to reduce his contractually agreed-upon base salary by 50%, to align with targets established at the bottom 25th percentile of the Company’s peer group, despite the Company’s strong relative performance. The Extension Amendment does not provide for any guaranteed annual base salary increases.
The Compensation Committee and CEO also agreed to reduce his target annual bonus by 50% (i.e., a potential reduction of $1,750,000 for each of fiscal years 2021 and 2022), to align with the anticipated bottom quartile of the Company’s peer group. The Extension Amendment provides that the CEO shall be eligible to earn an annual bonus for each of fiscal years 2021 and 2022 of up to a maximum of two hundred percent (200%) of his reduced base salary specified above (the “Annual Bonus”). The CEO’s potential maximum Annual Bonus during the Employment Period, as defined in the Extension Amendment, was based on the median multiplier for target annual bonuses of chief executive officers within the Company’s peer group. Therefore, the CEO’s target Annual Bonus is less than the median target annual bonus of the Company’s peer group because the CEO’s base salary is in the bottom quartile of the average base salary earned by chief executive officers of peer companies while his maximum bonus payout as a percentage of his salary is at the median.
The filing also makes a point to mention that Activision Blizzard CEO Bobby Kotick has now served the company for over thirty years, making him one of the longest-serving Fortune 500 chief executive officers. The company’s market cap has increased massively in this timeframe, too, going from less than $10 million to over $70 billion, while shareholder returns increased by more than 8,100% between 2000 and 2020, whereas the S&P 500 Index registered an average increase of 522%.
The next quarterly report for Activision Blizzard takes place in just a few days, on Tuesday, May 4th. We’ll likely hear some comments from Kotick himself during the conference call.
