In June 2020, CtW Investment Group, which “works with union-sponsored pension funds to enhance long-term stockholder value,” called on Activision shareholders to vote against a proposed compensation package for CEO Bobby Kotick. Kotick had received nearly $100 million in combined stock and options rewards alone, executive director Dieter Waizenegger said at the time, an amount that has “consistently been larger than the total pay (the sum of base salary, annual bonus, and equity pay) of CEO peers at similar companies.”
(Not that CtW was especially enamored with Activision’s competitors: It made a similar complaint about Electronic Arts a month later. The Activision bid failed, but shareholders actually rejected the proposed pay packages for EA executives.)
In April of this year, Kotick signed a new employment extension agreement with Activision in which he agreed to cut his base salary and bonuses in half, a move the company said “reflects shareholder feedback, incorporates market best practices, and continues to directly connect pay to performance.” Not that he’ll suffer too greatly as a result: His base salary was still $875,000 after the cut, and bonuses could net him another $1.75 million on top. He’s probably got a little bit saved up from previous bonus payouts, too.
Still, it’s a deep cut, but it doesn’t go far enough for CtW Group. In a statement, it said that the two-year term of his employment extension “is too short to significantly impact his total pay for an extended time.” As a result, it is again calling on shareholders to vote against the “Say On Pay” proposal, and the re-election of Activision’s Compensation Committee chair.
$ATVI still at it…We’ve launched another vote no on their #execpay and also their Compensation Committee Chair. Read more here.👇#corpgov https://t.co/EfY4QKXyaN pic.twitter.com/MzNneXSoNLJune 8, 2021
“The Compensation Committee did not address longstanding shareholder concerns about executive pay practices at Activision by extending CEO Kotick’s contract by less than two years. Given the repeated opposition to CEO Kotick’s pay over the years, shareholders should expect to see a long-term reform of his compensation over a greater period than merely one year,” the statement says. “The CEO’s 2021 equity award will accelerate at maximum payout level leaving most of the compensation reductions to apply to only one full year, 2022, and as such may only cover the equity award for next year.”
The duration of Kotick’s employment extension means that his pay could be renegotiated again—and presumably up—as soon as April 2023, less than two years from now. Furthermore, the period overlaps with Activision’s “Shareholder Value Creation” incentive programs, the terms of which have already been met for the maximum possible payout. That means “the only full year for which Mr. Kotick will see a meaningful equity pay reduction is 2022,” CtW Investment Group said. “In other words, the extension is not long enough to represent an earnest effort by the Compensation Committee to reduce the CEO’s outsized equity pay over a sustained period.”
I would never argue that Kotick’s pay is even remotely close to justified, but even so I wouldn’t bet too heavily on the likelihood of shareholders pushing back against it. Activision’s share price has been moving in the right direction for the past several years, and the company’s recent quarterly results were “well ahead of expectations,” which is all that really matters.