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Activision Blizzard faces controversy over vote for its CEO $155 million compensation package After the showdown was postponed on Monday, critics said it was to avoid embarrassing condemnation.
The video game company postponed a non-binding “salary voice” vote after its regular annual meeting on June 14 and postponed the shareholder ruling on Bobby Kotick’s salary for a week. Acting consultant Glass Lewis said it did not know that there was no precedent for such a move.
Activision stated that it wanted to refute “misleading” statements about its compensation practices and emphasized that it had made changes to Kotick’s compensation based on shareholder feedback. The company declined to comment further, but its decision confused analysts and angered investors.
Glenn Davis, deputy director of the Institutional Investor Committee, which represents pension funds, said: “If we take shareholder voting rights seriously, the desire for different results cannot drive the decision to adjourn the meeting.”
“I don’t think there is a good reason for this,” said Morningstar analyst Neil Mack, who is in charge of Activision. He said that although rare, large companies occasionally fail to pass votes “while people move on.” By postponing the vote, “all it did was get people’s attention,” he argued.
Under normal circumstances, investors will approve executive compensation plans with at least 90% support, but Activision has considered the risk of losing votes this year. Only 56.8% of shareholders support its remuneration in 2019, and the proxy advisory agency Shareholder Services and Glass Lewis recommends that investors vote against its remuneration in 2020.
Most of Kotick’s $155 million package is related to the goal of doubling market value in 2016. Activision’s stock price surpassed this goal after rising 58% in 2020, as restricted consumers switched to its popular franchises, from World of Warcraft to Crash Bandicoot. Strong stock performance usually makes investors uneasy about high executive compensation, but Kotick’s huge returns have caused concern.
ISS stated that although the company has made significant changes to solve the CEO compensation problem, his total compensation is 2.55 times the median of the company’s peers. This is also 1,560 times the median number of Activision employees, which is higher than the 319:1 in 2019.
CII’s Davis stated that in some cases, it may be appropriate to adjourn the meeting, such as when the latest development changes the facts in agency competition or merger proposals, adding that “Activision is not one of these situations.”
A director who has nothing to do with Activision said that the delay in voting appeared to be a “sign of despair” to persuade investors to support the company’s final efforts on Kotick’s windfall.
Governance experts said that adjournment on other issues is also rare, but pointed to a case in 2000 in which the Wisconsin Investment Commission sued Peerless Systems after Peerless Systems stopped voting on stock option plans. This gave it extra time to solicit enough support to pass the motion.
The two parties reached a settlement, but before the Delaware Chancery Court considered that “a recess specifically designed to interfere with the results of effective shareholder voting raises serious judicial suspicions,” it stated that the board should have “convincing reasons” for the delay.
Activision doubled its relationship with institutional investors regarding executive compensation after last year’s close to salary vote. “But it is frustrating and ironic that due to the outstanding performance of the company’s stock, the equity award seems to be high,” said Davis Polk’s lawyer Betty Huber.
She said that although salary voting is not binding, Activision seems to urge investors to pay attention to the company’s salary changes and its strong stock performance.
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