In June, CtW Investment Group, which "works with union-sponsored pension funds to enhance long-term stockholder value," called on Activision shareholders (opens in new tab) to reject a proposed compensation plan for CEO Bobby Kotick, arguing that his extremely generous pay package was grossly out of proportion with the company's performance. More than 43 percent of shareholders voted against the "Say-on-Pay" package, the highest level of opposition to CEO compensation in the company's history, but not enough to actually get the job done.
In July, the investment group made the same complaint about Electronic Arts (opens in new tab), saying that its executives—particularly CFO Blake Jorgensen and CTO Kenneth Moss—are making way too much money while the company underperforms and lays off employees. And this time, it actually worked, as the proposed package was rejected by roughly 74 percent of voting shares late last week.
It's a remarkable accomplishment, because rejection of Say-on-Pay plans is extremely rare. A Semler Brossy report (opens in new tab) cited by CtW Investment Group says that the failure rate was just 2.7 percent in 2019, and 2.6 percent in 2018. The firm noted that shareholders have "taken a more critical approach when voting" on compensation plans, but average support was still over 90 percent last year.
The backlash was no doubt driven at least in part by some rather extreme jumps in compensation for a number of EA executives. An SEC filing (opens in new tab) from June (via Ars Technica (opens in new tab)) indicates that Jorgensen's total proposed pay for the 2020 fiscal year, including salary, stock awards, and other forms of compensation, is $19.5 million, up from $9.4 million last year, while Moss is set to receive $14.3 million in total compensation, up from $7 million in the year before.
CEO Andrew Wilson is to earn $21.4 million for the year, a larger sum but a more modest increase from $18.3 million in 2019, while chief studios officer Laura Miele is in line for $16.1 million (up from $7 million) and chief marketing officer Chris Bruzzo is up for $7.2 million, a relatively slight bump from $6.4 million in 2019.
"Shareholders issued a resounding rebuke of Electronic Arts' deeply flawed executive pay practices that does not incentivize executives to create long-term value," CtW Investment Group executive director Dieter Waizenegger said in a statement. "This vote is a clarion call for the board to stop piling awards on top of awards for top executives and make sure that the company develops a pay philosophy that is focused on talent development and retention throughout all levels of the company."
Despite CtW's complaint about EA's underperformance, its most recent quarterly earnings report (opens in new tab) was strong: It reported net bookings (the net amount of products and services sold, digitally and physically) for the preceding 12 months of $5.98 billion, up 17 percent year-over-year, and total net revenues for the quarter of $1.46 billion, up from $1.2 billion over the same period in 2019.
The "advisory vote" against the proposed compensation packages is resounding, but not binding: It remains up to EA's board of directors to ultimately approve or reject the plan.