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EA Making 'Substantial Changes' to Executive Pay

EA CEO Andrew Wilson.
EA CEO Andrew Wilson. / Christian Petersen/Getty Images

Electronic Arts says it will make "substantial changes" to executive pay after shareholders provided negative feedback about the company's current practices, per a regulatory filing ahead of a say-on-pay vote scheduled for August.

Although the vote will be purely advisory — it wouldn't change compensation directly — EA has decided to incorporate the criticism in its new pay package. In May, the company's board approached a 2022 annual equity award for CEO Andrew Wilson of $18 million, at least 60% of which is performance-based. His pay package for the fiscal year 2021 was set at $30 million, up from $15 million the year before despite discontent among shareholders. The 2021 vote saw shareholders oppose the pay package by a vote of 170.89 million against and just 59.6 million in favor.

One investment group, CtW Investment Group, has criticized EA for its executive pay packages.

"EA appears to be developing a special award grant addiction," the group said before the 2020 vote.

In response to the 2020 say-on-pay vote, EA decided not to award special equity awards in the fiscal year 2021, and no special equity awards will be granted in the fiscal year 2022. EA says it has also employed a "pay-for-performance" approach "designed to reward the achievement of company-wide financial and business objectives, individual performance, and the creation of long-term value for stockholders, while also recognizing the dynamic and highly competitive nature of our business and the market for top executive talent."

Analysis

EA's decision to curtail the payment of its CEO comes amid increased pressure on video game companies generally to rein in the exorbitant pay doled out to its executives. Just yesterday, Activision Blizzard's shareholders narrowly approved a pay package for its CEO, Bobby Kotick, despite a campaign by CtW Investment Group to cut back on executive compensation.

Although Activision Blizzard's case is more severe — the company has laid off more than 1,000 workers in the past few years — the disconnect between what EA executives make and what the company's many developers, marketers, and more take home is shocking.