Activision Blizzard CEO Bobby Kotick is one of the highest-paid executives not only in video games, but across the entire entertainment media industry. He made more than $30 million in 2019. One of the company's shareholders, The CtW Investment Group, is now calling on other stakeholders to vote against a measure that gives the company freedom to pay Kotick high rates. [Update: Activision Blizzard has responded with a statement, which you can see below]

　　In a filing with the United States government, The CtW Investment Groups' director Dieter Waizenegger called on other stakeholders to vote against the "Say-On-Pay" proposal during Activision Blizzard's upcoming annual meeting scheduled for June 11, 2020.

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　　"Despite repeated low approval votes from shareholders, Activision Blizzard maintains multiple, overlapping opportunities for its CEO to earn outsize equity awards, even when performance-related vesting thresholds have not been met," the note says. "Despite failing to disclose pertinent information on performance targets for its Short Term Incentive Plan, Activision Blizzard's proxy statement reveals significant human capital management challenges."

　　Waizenegger said in his statement that Activision Blizzard continually finds "multiple ways to unnecessarily enrich its CEO." The statement mentions that Kotick has received $20 million USD each year over the past four years for stock/option equity alone, before his base salary.

　　Kotick's stock/option pay alone is "consistently" larger than the total pay--combining base salary, bonuses, and equity--of Kotick's CEO counterparts in the games publishing business, Waizenegger said. He added that this level of pay would raise concerns in most circumstances, but it's especially controversial now after Activision Blizzard laid off more than 800 people in 2019 despite record performance for the company.

　　"Specifically, over the past four years, Kotick has received $96.5 million cumulatively in combined stock/option awards alone," he said. "In just 2019, he received over $28 million in combined equity, primarily consisting of options (over $20 million) that are substantially 'in the money.' While equity grants that exceed the total pay of peer companies would be objectionable in most circumstances, it is of special concern in this case because Activision Blizzard employees face job insecurity following layoffs of 800 employees in 2019, and typically earn less than 1/3 of 1% of the CEO's earnings, with some employees, such as Junior Developers, making less than $40,000 a year while living in high-cost areas such as southern California."

　　Kotick also has a remuneration deal with Activision Blizzard--the "Shareholder Value Creation Incentive"--that pays him more more when Activision's stock price does exceptionally well. Increasing stock price is a "laudable goal," but the compensation level is out of whack, Waizenegger said.

　　Also in the statement, Waizenegger said Kotick's "Transformative Transaction" payment scheme is also problematic. This pays Kotick more money when Activision Blizzard's total market capitalization is increased for a sustained period of time.

　　"Such incentives should be unnecessary: executives are already well compensated in the event of a merger or other strategic transaction without additional incentives because they typically hold large amounts of vested equity," Waizenegger said. "Moreover, it is one of the CEO's core responsibilities to pursue transactions that would be favorable and in the best interest of the company. There is no justification for providing an executive with additional incentives to pursue a merger or similar strategic transaction when that executive has already accumulated substantial holdings through equity grants."

　　Waizenegger went on to say that Activision Blizzard's total annual cash incentive plan is "problematic." That's because, he argues, Activision Blizzard has failed to fully disclose the specific strategic objectives that Kotick needs to achieve to claim the bonuses.

　　"Disclosure surrounding the strategic objectives portion is severely lacking and merely cites 'attracting, retaining, and motivating top talent; cultivating new business opportunities and expanding existing ones; delivering production and development milestones; and increasing productivity,'" Waizenegger said. "We note that three of these objectives are clearly related to human capital management, and that Kotick's apparent failure to achieve more than half of the targeted performance strongly suggests that Activision Blizzard's skewed approach to human capital management--lavishing multi-million dollar rewards on the CEO as employees face layoffs--needs to be addressed before it manifests in deeper operational problems."

　　Activision Blizzard's shareholder meeting is scheduled for June 11, 2020. Due to the ongoing COVID-19 pandemic, Activision Blizzard will conduct the meeting virtually.

　　A spokesperson for Activision Blizzard defended Kotick's pay rate, pointing out that Activision Blizzard's total market cap has jumped from less than $10 million to more than $53 billion under Kotick's leadership.

　　"During Mr. Kotick's tenure--which is the longest of any CEO of a public technology company--Activision Blizzard’s market capitalization has increased from less than $10 million to over $53 billion dollars," reads a line from the statement. "In the last five years, Activision Blizzard's share price has outperformed the S&P 500 by more than 120% and over the past 20 years, under Mr. Kotick’s leadership, Activision Blizzard’s share price has outperformed the S&P 500 by over 11,000%."

　　It continues: "Over 90% of Mr. Kotick’s proxy reported compensation is performance-based, and he has delivered exceptional value for Activision Blizzard’s stockholders. Our equity dilution rates remain among the lowest of our peer group."