Shareholders: Kotick’s Millions Are Worth More Than His Performance

It's almost like CEOs make too much money! Weird!

An investment group that manages more than $250 billion worth of pension funds is recommending that other Activision Blizzard stockholders vote against an upcoming raise for longtime CEO Bobby Kotick, on the grounds that Kotick already makes way too much money for someone that is constantly missing targets and laying off hundreds of people annually.

“Over the past four years, Activision Blizzard CEO Robert Kotick has received over $20 million in combined stock/option equity per year,” reads a filing sent by CtW Investment Group to the Securities Exchange Commission, the federal agency in charge of everything relating to stocks. “These equity grants have consistently been larger than the total pay (the sum of base salary, annual bonus, and equity pay) of CEO peers at similar companies. Specifically, over the past four years, Kotick has received $96.5 million cumulatively in combined stock/option awards alone. In just 2019, he received over $28 million in combined equity, primarily consisting of options (over $20 million) that are substantially ‘in the money.'”

(That’s CtW’s emphasis on “per year” and “total,” by the way, preserved from the original SEC filing.)

“While equity grants that exceed the total pay of peer companies would be objectionable in most circumstances,” the filing continues, “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.”

So most of the people who actually make the games that Activision Blizzard sells make “less than 1/3 of 1%” of what Kotick does for not making the video games, but I’m sure that when considered in the proper context of his base salary, the $28 million he earned in 2019 probably isn’t actually all that much, right? Oh hold on, I’m being told that Kotick’s base salary is still $1.75 million a year, which doesn’t include $2.8 million in “Non-Equity Incentive Plan Compensation” and $87,138 in “Other Compensation,” on top of the stock/option awards that CtW Investment Group is complaining about.

CtW goes on to specifically call out several provisions in Kotick’s contract that it claims reward Bobbert multiple times over for performing basic CEO tasks that are core to the job, such as improving stock value or handling mergers in such a way as to protect shareholder value. It also points out that under Kotick’s leadership, Activision Blizzard has missed its projected financial targets and provided very little information to shareholders about why exactly that keeps happening. Eventually CtW concludes 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.”

Is it possible for Bobby Kotick to suck so bad that he puts me, a stern and bitter anti-capitalist, in a position where I have to agree with a statement made by an investment firm? Apparently yes. Call me an crazy, but it seems wrong for someone’s income to include a category listed only as “other” that, by itself, is more than double the annual salary of some other people at the same company.