Robert Kotick, president and chief executive officer of Activision Blizzard Inc. (ATVI:US), increased his compensation almost eightfold to $64.9 million last year, becoming one of the highest-paid CEOs in the U.S.
The bulk of the increase for Kotick came in stock awards valued at $55.9 million, based on regulatory reporting rules, that were tied to a new employment agreement signed in March 2012, according to a filing (ATVI:US) yesterday by the video-game software company. While vesting stretches over five years, the awards are reported in the year of the grant. Kotick, 50, received $8.33 million in total compensation last year, filings show.
The increase would put Kotick at No. 2 among U.S. public- company CEOs for 2012, based on data compiled by Bloomberg. Oracle Corp. (ORCL:US) founder Larry Ellison leads with $96.2 million including options and other extras. Kotick could receive another $16 million if he meets the highest performance targets, according to the filing.
“We don’t like any element of this pay package,” said Nell Minow, a corporate-governance consultant at GMI Ratings and frequent critic of executive pay. “In the past we have expressed concern about this company and its compensation practices.”
Kotick’s base salary and incentive compensation are richer than what’s expected for the video-game sector, Minow said. The company also isn’t clear about how his pay was determined, and stock grants aren’t sufficiently tied to performance, she said.
Maryanne Lataif, a spokeswoman for Santa Monica, California-based Activision, didn’t respond to requests for comment.
The stock grants in Kotick’s new employment contract cover performance retroactive from July 1, 2011, and run through the deal’s end in June 2016, according to a March 19, 2012, regulatory filing. He received no stock awards in 2011 and $1.9 million in 2010, and no stock options in any of the past three years.
In yesterday’s filing, Activision said Kotick exceeded goals on operating income, diluted earnings per share and free cash flow. He fell short on expansion of profit margins. His 2012 pay included a salary of $2.01 million, a $2.5 million bonus and other pay of $4.52 million, along with the stock award.
The company, with a market value of $16.5 billion, posted annual net income of $1.15 billion, or $1.01 a share, on sales of $4.86 billion.
Oracle, based in Redwood City, California, has a market value of $152 billion, and reported net income of $9.98 billion in its latest fiscal year, with revenue of $37.1 billion.
Kotick’s compensation plan was approved by shareholders last year. Activision is majority owned (ATVI:US) by Vivendi SA (VIV), Paris- based parent of Universal Music and Canal Plus. Three of five board members serving on Activision’s compensation committee are senior Vivendi executives.
Simon Gillham, a spokesman for Vivendi, didn’t respond to e-mailed messages after normal business hours in France. Robert Corti, an independent director and member of the compensation committee, couldn’t be reached for comment after hours yesterday at the Avon Foundation for Women in New York, where he is chairman. Robert Morgado, also an independent director and compensation committee member, didn’t return a message seeking comment at his office in New York.
Activision Blizzard said in the filing it seeks to have executive pay in the 75th percentile of its peer group. That includes competitors like Electronic Arts Inc. (EA:US) and a wider group of entertainment, leisure and technology businesses such as CBS Corp., toymaker Mattel Inc. (MAT:US) and Adobe Systems Inc.
Entertainment executives rank among the highest paid in the S&P 500 Index, according to data compiled by Bloomberg.
CBS Corp.’s Leslie Moonves led the group with $62.2 million, David Zaslav of Discovery Communications Inc. earned $49.9 million to place second and Robert Iger of Walt Disney Co. was third among his peers with $40.2 million.
Activision is the largest U.S. video-game publisher and 61- percent owned by Vivendi SA. The stock rose 0.7 percent to $14.82 yesterday in New York and has gained 40 percent this year.
“The lack of information provided by the compensation committee is a red flag,” Minow said. “It’s very difficult to discern how they determined this compensation package from the information that’s been provided.”
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