Activision Blizzard faces controversial vote on CEO decision $ 155 million compensation package Monday after delaying the showdown in what critics say was an effort to avoid an embarrassing reprimand.
The video game company postponed the soft vote on “say on pay” after its annual meeting scheduled for June 14, delaying a shareholder verdict on Bobby Kotick’s salary by a week. Proxy advisor Glass Lewis said he knew of no precedent for such a move.
Activision has said it wants to counter “misleading” statements about its compensation practices and pointed to changes it has already made to Kotick’s compensation in response to shareholder feedback. The company declined to comment further, but its move baffled analysts and angered investors.
“If we are serious about franchise voting for shareholders, the desire for a different outcome cannot lead to adjournment decisions,” said Glenn Davis, deputy director of the Council of Institutional Investors, which represents the pension funds.
“I don’t see a good reason for doing this,” said Neil Macker, a Morningstar analyst who covers Activision. Although rare, large companies sometimes fail to pay the votes “and people move on,” he said. By delaying the vote, “all he does is draw attention to himself,” he argued.
Typically, investors approve executive compensation plans with at least 90% support, but Activision had considered the risk of losing the vote this year. Only 56.8% of his shareholders backed his salary for 2019, and proxy advisers Institutional Shareholder Services and Glass Lewis recommended investors vote against his salary for 2020.
Most of Kotick’s $ 155 million were rewards tied to a 2016 goal of doubling its market cap. Activision’s shares exceeded that target after jumping 58% in 2020 as locked-in consumers turned to its popular franchises, from World of Warcraft to Crash Bandicoot. Strong stock performance generally appeases investors unhappy with outsized executive pay, but Kotick’s sizable rewards have raised concerns.
Although Activision has made substantial changes to address CEO compensation concerns, his total salary is 2.55 times the median of his peers, ISS said. It was also 1,560 times that of the median Activision employee, up from a 319: 1 ratio in 2019.
An adjournment of a meeting may be appropriate in some cases, such as when a last-minute development changes the facts in a proxy contest or a proposed merger and acquisition, CII’s Davis said, adding “Activision is not here. ‘one of these cases “.
The postponement of the vote appears to be “a sign of desperation” and a last ditch effort to arm Twist investors to side with the company over the Kotick windfall, a director unrelated to Activision said.
Governance experts said postponements of votes on other issues were also rare, but pointed to a 2000 case in which the Wisconsin investment board sued Peerless Systems after the tech company blocked a vote on a stock option plan. This gave him more time to solicit enough support for the motion to pass.
The parties came to an agreement, but not before the Delaware Chancery Court voiced the opinion that “adjournments which are specifically intended to interfere with the results of a valid shareholder vote will raise deep legal suspicion,” and said that boards should have a “compelling justification” for such delays.
After the close vote on compensation last year, Activision doubled its focus with institutional investors on executive compensation. “But frustratingly and ironically, due to the extraordinary performance of the company’s stocks, the stock rewards seem high,” said Betty Huber, lawyer at Davis Polk.
While the pay vote is not binding, Activision appeared to urge investors to focus on the pay changes made by the company and the strong performance of its shares, she said.