Activision Blizzard faces a contentious vote on its chief executive’s $155m pay package on Monday after delaying the showdown in what critics say was an effort to avoid an embarrassing rebuke.
The video games company adjourned the nonbinding “say on pay” vote after its regularly scheduled annual meeting on June 14, delaying for a week shareholders’ verdict on Bobby Kotick’s salary. Proxy adviser Glass Lewis said it knew of no precedent for such a move.
Activision said it wanted to counter “misleading” statements about its pay practices and highlighted changes it had already made to Kotick’s pay in response to shareholder feedback. The company declined to comment further, but its decision has befuddled analysts and angered investors.
“If we’re serious about the shareholder voting franchise, desire for a different outcome cannot drive decisions on whether to adjourn,” said Glenn Davis, deputy director for the Council of Institutional Investors, which represents pension funds.
“I don’t see a good reason for doing this,” said Neil Macker, a Morningstar analyst who covers Activision. Though rare, big companies occasionally fail pay votes “and people move on”, he said. By delaying the vote, “all it does is draw attention to it,” he argued.
Typically, investors approve executive pay plans with at least 90 per cent support, but Activision had looked at risk of losing this year’s vote. Only 56.8 per cent of its shareholders supported its pay for 2019 and proxy advisers Institutional Shareholder Services and Glass Lewis recommended investors vote against its 2020 pay.
Most of Kotick’s $155m package was in awards tied to a 2016 goal of doubling its market capitalisation. Activision’s shares beat that target after jumping 58 per cent in 2020 as cooped up consumers turned to its popular franchises, from World of Warcraft to Crash Bandicoot. Strong share performance typically appeases investors upset about outsized executive pay, but Kotick’s large rewards drew concerns.
Though Activision made substantial changes to address CEO pay concerns, his total pay is 2.55 times the median of the company’s peers, ISS said. It was also 1,560 times that of Activision’s median employee, up from a ratio of 319:1 in 2019.
A meeting adjournment can be appropriate in some cases, such as when a late-breaking development alters facts in a proxy contest or M&A proposal, CII’s Davis said, adding “Activision is not one of those cases.”
The vote delay appears to be “a sign of desperation” and a last-ditch effort to arm twist investors into siding with the company over Kotick’s windfall, said one director unconnected to Activision.
Governance experts said adjournments of votes on other issues were also rare, but pointed to a 2000 case in which Wisconsin’s investment board sued Peerless Systems after the technology company stalled a vote on a stock option plan. That gave it extra time to solicit enough support for the motion to pass.
The parties settled, but not before the Delaware Chancery Court had opined that “adjournments that are specifically aimed at interfering with the results of a valid shareholder vote will bestir deep judicial suspicion”, and stated that boards should have a “compelling justification” for such delays.
After last year’s close pay vote, Activision doubled its outreach to institutional investors concerning executive pay. “But frustratingly and ironically, due to the company’s extraordinary stock performance, the equity awards appear high,” said Betty Huber, an attorney with Davis Polk.
Though the pay vote is nonbinding, Activision appeared to be urging investors to focus on the pay changes the company made and its strong stock performance, she said.
