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Activision Blizzard CEO Cuts Salary and Bonus by 50%

Bobby Kotick, CEO of Activision Blizzard, has agreed to cut both his salary and annual bonus by 50%.

Source: extension agreement filed with the SEC

Taking into account the feedback received through this extensive outreach program and the Board’s desire to retain the CEO to continue to successfully lead the Company into the future, the Board determined that it is in the best interest of the Company and its shareholders to extend the Employment Agreement until March 31, 2023 pursuant to the Extension Amendment.

The Board worked with the Company and has established a pay program for the CEO that reflects shareholder feedback, incorporates market best practices, and continues to directly connect pay to performance.

In addition to removing the “Transformation Transaction Award” and, with respect to any equity awards granted on or after the Amendment Date, the “Shareholder Value Creation Incentive,” the Extension Amendment aligns target CEO compensation at or below median peer group compensation targets with respect to expected pay and equity grants made in 2021 and 2022.

The CEO voluntarily agreed to reduce his base salary by 15% in 2020. Under the Extension Amendment, effective January 1, 2021, the Compensation Committee and CEO agreed to reduce his contractually agreed-upon base salary by 50%, to align with targets established at the bottom 25th percentile of the Company’s peer group, despite the Company’s strong relative performance. The Extension Amendment does not provide for any guaranteed annual base salary increases.

The Compensation Committee and CEO also agreed to reduce his target annual bonus by 50% (i.e., a potential reduction of $1,750,000 for each of fiscal years 2021 and 2022), to align with the anticipated bottom quartile of the Company’s peer group. The Extension Amendment provides that the CEO shall be eligible to earn an annual bonus for each of fiscal years 2021 and 2022 of up to a maximum of two hundred percent (200%) of his reduced base salary specified above (the “Annual Bonus”).

The CEO’s potential maximum Annual Bonus during the Employment Period, as defined in the Extension Amendment, was based on the median multiplier for target annual bonuses of chief executive officers within the Company’s peer group. Therefore, the CEO’s target Annual Bonus is less than the median target annual bonus of the Company’s peer group because the CEO’s base salary is in the bottom quartile of the average base salary earned by chief executive officers of peer companies while his maximum bonus payout as a percentage of his salary is at the median.

On April 28, 2021 (the “Amendment Date”), Activision Blizzard, Inc. (the “Company” or “ATVI”) entered into an extension agreement (the “Extension Amendment’) to the executive employment agreement (the “Employment Agreement”), dated November 22, 2016, with Robert A. Kotick, who has successfully served as the Company’s founder and Chief Executive Officer (“CEO”) for over 30 years. The Employment Agreement was set to expire on December 31, 2021 but was extended to March 31, 2023 pursuant to the terms of the Extension Amendment.
When considering and approving the Extension Amendment, our Compensation Committee noted the Company’s remarkable performance under the CEO’s 30+ years of outstanding leadership after having rescued ATVI’s predecessor company from near insolvency. Acting as a founder of what our Company has become today, Mr. Kotick has consistently delivered superior shareholder returns and ATVI has achieved industry-leading performance and fmancial results:

• ATVI’s market capitalization has increased from less than $10 million to over $70 billion dollars under his leadership, including more than doubling during the term of the CEO’s Employment Agreement.

• ATVI’s total shareholder return has significantly outperformed the S&P 500. Over the 20 years between 2000 and 2020, ATVI’s total shareholder return increased over 8,100%, compared to an increase of 322% for the S&P 500.

• ATVI’s market capitalization has increased at a 26% compound annual growth rate over the past 20 years through April 27, 2021, among the very highest in the Company’s peer group and well above the S&P 500 median growth of 9%. • ATVI’s total shareholder return over the last five years through to April 27, 2021, was 175%, 71 percentage points higher than the median of the S&P 500. • Over the five years through to April 27, 2021, ATVI has created over $45 billion in incremental market value for its shareholders. The median S&P 500 company has created $12 billion in incremental market value during the same time period.

• ATVI’s 2020 total shareholder return of 57% is near the top decile of the Company’s peer group and substantially above the S&P 500 median of 10%.

• ATVI’s dilution rate over the last three years was 0.85% on average and ranks among the lowest of any member of our peer group.

The result is that Bobby Kotick’s base salary is being reduced from $1,750,000 to $875,000 per year, while his maximum annual bonus will similarly be halved. How large this eventual bonus will be is determined by a number of company performance factors, but may not exceed 200% of his base salary – now reduced from a maximum potential of $3,500,000 to $1,750,000. The agreement also extends his appointment as CEO of Activision Blizzard until March 2023.