Electronic Arts 2022: Require Approval of Golden Parachutes

Electronic Arts 2022: Require Termination Pay Vote

Electronic Arts 2022 annual meeting is on August 11, 2022, at 2:00 am Pacific. It is virtual, on the Broadridge platform. I (James McRitchie) recommend voting in advance. To enhance corporate governance and long-term value, vote Against Huber, Roche, Simonson, Ubiñas, Ueberroth, and Wilson, pay, auditor, and incentive plan. Vote FOR other Bruce, Gonzalez, lower special meeting threshold, and require a shareholder vote on termination pay.

Electronic Arts Inc. develops, markets, publishes and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. Below, is how I voted and why.

I voted with the Board’s recommendations 31% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).

Read Warnings. My recommendations seek to enhance corporate governance and long-term value.

Electronic Arts 2022: ISS Rating

From the Yahoo Finance profile page: Electronic Arts Inc.’s ISS Governance QualityScore as of July 1, 2022, is 8. The pillar scores are Audit: 5; Board: 6; Shareholder Rights: 3; Compensation: 10.

Egan-JonesCorporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. Tesla’s scores virtually scream governance risk.

Electronic Arts 2022: CorpGov Recommendations

ItemEgan-JonesCorpGov
1A – 1H – Election of DirectorsAGAINST: Huber, Roche, Simonson, and UeberrothAGAINST: Huber, Roche, Simonson, Ubiñas, Ueberroth, and Wilson
2 – Advisory Vote to Approve Executive Compensation (Pay)

Pay not strongly aligned with the long-term interest of its shareholders. At $19.9M, higher than the average S&P 500 CEO.

AGAINSTAGAINST
3 – Ratification of the Appointment of Independent Auditors

After 35 years, it is hard to believe KPMG remains independent.

AGAINSTAGAINST
4 – Approval of an Amendment and Restatement of the Electronic Arts Inc. 2019 Equity Incentive Plan (the “2019 EIP”)

Should be better aligned with performance and lower cost. Are they rewarding performance or volatility? Are incentives too focused at the top? According to PIRC:

They are acting as a complex and opaque hedge against absolute company underperformance and long-term share price falls. They are also a significant factor in reward for failure.

AGAINSTAGAINST
5 – Amend Special Meeting Provisions

My proposal of 2019 asking for a 15% threshold won 57.5%. This would implement.

AGAINST

EJ thinks 15% is too low.

FOR
6 – Require Shareholder Vote on Termination PayFORFOR

Electronic Arts 2022: Directors

Huber and Simonson have both served considerably longer than ten years, so should not be considered independent. Retention awards make up a significant portion of the long-term incentives and therefore the CEO’s compensation scheme does not link pay to performance and was high, so I voted against committee members Roche and Ueberroth. Ubiñas serves on four boards. That’s too many. Wilson should not be both CEO and chairman of the board.

Electronic Arts 2022: Proposal on Termination Pay

My proposal asks the Board to seek shareholder approval of any senior manager’s new or renewed pay package that provides for severance or termination payments with an estimated value exceeding 2.99 times the sum of the executive’s base salary plus target short-term bonus. It is in the best interest of shareholders to be protected from lavish golden parachutes. This proposal is more important at Electronic Arts because of the tendency to overpay management or provide the wrong management pay incentives. Pay was rejected by 58% of shares in 2021 and 74% in 2020, whereas a 5% rejection is more the norm.

According to PIRC:

Ratification of severance agreements or payments is common practice in developed markets overseas (such as France or Italy)… this proposal is considered to be an advance in corporate governance, as it will allow to reduce the gap between shareowners and management.

Other Recommendations

In looking up funds in our Shareowner Action Handbook, I see several have reported their votes.

Electronic Arts 2023: Issues for Future Proposalsinsightia

Looking at insightia for anti-shareholder provisions:

  • No requirement for an independent chair

Electronic Arts 2023: Mark Your Calendar

Proposals to be considered for inclusion in our proxy materials: No later than the close of business (6:00 p.m. Pacific Time) on February 24, 2023. All proposals must comply with Rule 14a-8 under the Exchange Act.

Where should I send proposals and director nominations for the 2023 annual meeting of stockholders? Stockholder proposals and director nominations should be sent in writing to Jacob Schatz, Corporate Secretary at Electronic Arts Inc., 209 Redwood Shores Parkway, Redwood City, CA 94065.

Related Posts

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