EA Investors Shut Down Company’s Multi-Million Dollar Bonuses

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In most cases, investors generally approve a company’s compensation plan for their executives. After all, the executives do what’s best for their shareholders, and that applies for listed video game companies as much as it does, say, a bank or a mining corporation.

So with that in mind, let’s process the news that investors just shot down EA’s proposed payments to their executives.

It’s not like EA has had a bad year — far from it, in fact. The coronavirus has been good to most listed gaming companies and EA in particular. Their stock is trading at $US143.99 at the time of writing, a sizeable jump from the $US91.77 a share this time last year.

EA’s had a solid string of hits lately too. Apex Legends is motoring along nicely, successes with Jedi: Fallen Order, the excellent Command & Conquer: Remastered Collection and even some goodwill from re-releasing their catalogue on Steam, which has seen classics like Titanfall 2 get a new lease of life.

But despite all that, Bloomberg reports that investors cast nearly 171 million votes against the EA executive pay package versus nearly 60 million votes in favour. It’s a surprise given the corporate backdrop of 2020, with only 2.2 percent of companies in the top 3000 US companies having their executive remuneration shot down.

Image: EA Investor Relations

Part of the issue was EA rewarding their executives with secondary stock awards before the first ones had even vested. “While recognising the need to retain top executives, investors may expect special awards to be relatively infrequent and may question executives receiving multiple special awards in a relatively short period of time,” proxy advisers Institutional Shareholder Services, which backed calls to vote down the EA package, said in late July.

CtW Investment Group went even further, saying EA went “too far in terms of executive pay, piling on exorbitant equity awards” while paying “multimillion dollar bonuses following worker layoffs”. Those layoffs in the financial year included sizeable redundancies at EA’s Melbourne studio, FireMonkeys.

To put the investors’ groups complaints into perspective, EA’s chief technology officer Kenneth Moss and chief financial officer Blake Jorgensen get paid $US691,745 and $US850,000 a year each. However, they also receive annual equity grants which are often much more lucrative. In the 2020 financial year, for instance, Jorgensen and Moss got $US7.5 million and $US5.5 million equity grants. That’s after receiving multi-million dollar equity bonuses in the 2018 financial year.

“The proxy does not discuss the company’s rationale for granting these executives an additional special award on top of the one that is already outstanding. One would think one multimillion dollar retention award at a time would be enough,” CtW argued.

Andrew Wilson, for what it’s worth, received just over $US21 million in annual total compensation for the 2020 financial year, while the “annual total compensation of our median employee was $US97,986”.

In a response following the vote, EA told Bloomberg that “the board and compensation committee will take their feedback into account as part of our ongoing evaluation of our compensation programs”.

Comments

  • In Australia, if the boards remuneration package is voted down twice in a row… the whole board is removed from their positions on the spot, and a new CEO and board is elected by the shareholders. (so the board members have to convince the shareholders to be rehired onto the board)

  • I’m almost certainly asking too much, but maybe this is the start of the video game industry being less shitty about the haves and have-nots when it comes to money.

    If only they’d stop being so shitty about workers wanting to unionise.

    • That’s not a thing unique to Video game companies. America, in general, is quite anti-union compared to here in Aus.

      • No it’s not unique, but it’s really prevalent in gaming companies.

        It would be hard to believe America is worse for unions given how anti-union Australia is, but I’ve had long conversations with Americans who think unionism as a concept is genuinely evil without knowing why they think that. Even a 30+ year scare campaign run by our most powerful media company hasn’t been able to get that kind of traction.

    • Not really. Less money for execs doesn’t mean more money going to employees, it means more money going to shareholders.

      • That depends. If shareholders are looking at the long term viability of their investments, they’ll be smart to see where the brain drain is happening and work to fix it. More employees with better, more stable jobs are more able to create products that sell well and drive revenue.

        Of course, all that depends on the shareholders thinking about long term investment rather than profiting from the next quarter and then flipping their shares. After EA’s years of stock buyback pushing up share prices, I’m inclined to think that quite a few of their investors are in it for the long haul. How much they actually own is another question entirely.

  • “unfortunately some studios didn’t earn an excessive profit. We regret to inform that we are laying off the studio”
    “Oh btw is it cool if we give our 5 highest execs a total $50mil in bonuses?”

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