CtW Investment Group, which "works with union-sponsored pension funds to enhance long-term stockholder value," has issued a statement criticizing a "Shareholder Value Creation Incentive" bonus payment to Activision CEO Bobby Kotick that it says is worth nearly $200 million.
A provision in Kotick's employment agreement (opens in new tab) (via Gamespot (opens in new tab)) provides for "additional awards and payments ... in the event that certain 'Shareholder Value Creation' metrics are satisfied prior to December 31, 2021." Those metrics are based on the company's compound annual growth rate, and while it's all very complex and mostly over my head, the short version is that the payout will be triggered at the maximum value if, prior to the end of 2021, the company's share price is at least twice the average value it was between October 1 and December 31, 2016, and holds that price for at least 90 consecutive days.
Activision's share price has surged sufficiently in 2021 to trigger the full payout: "On March 1, 2021, the performance conditions for the four-year performance period from 1/1/17 through 12/31/20 underlying these performance stock unit awards were achieved at the maximum level," Activision said in an SEC filing (opens in new tab) made earlier this month.
"While the increase in Activision’s stock price is somewhat commendable, as we stated last year and continue to assert, this achievement alone does not justify such a substantial pay outcome for the CEO," CtW Investment Group Director of Executive Compensation Research Michael Varner said in a statement.
"There are many factors that may contribute to a rise in this particular company’s stock price that may not be directly attributable to Robert Kotick’s leadership. The use of videogames as one of the few entertainment options available amid the Covid-19 pandemic, for example, has been a boon to many companies in the gaming industry irrespective of executive talent or strategic decisions."
This isn't the first time that CtW Investment Group has taken aim at Kotick and Activision: In June 2020 (opens in new tab) it called upon shareholders to vote against executive compensation packages at the company's annual shareholder meeting: Kotick's annual equity grants alone "have consistently been larger than the total pay (the sum of base salary, annual bonus, and equity pay) of CEO peers at similar companies," executive director Dieter Waizenegger said at the time, while Activision employees "typically earn less than 1/3 of 1 percent of the CEO's earnings."
It levelled similar criticism (opens in new tab) at Electronic Arts around the same time, saying it "loaded up its top executives, including two executives with two special awards each, while its workers faced massive layoffs last year." The bid to halt Activision's "Say on Pay" proposal failed, but surprisingly, shareholders rejected the proposed package for EA executives (opens in new tab).
While the two events are not directly related, Kotick's looming payout seems particularly egregious in light of the recent layoffs (opens in new tab) of nearly 190 Activision Blizzard employees, including roughly 50 from the company's esports division.