The Advisors' Blog

Late last week, Activision CEO Bobby Kotick sent all employees this email that was also posted as news on the company’s website. After detailing steps the company is taking to improve its working environment, Kotick says he’s asked the board to reduce his total compensation to the lowest level permitted by California law ($62,500) – until the board has determined that the company has achieved the gender-related goals and other commitments described in the message. Those include:

– Adopting a zero-tolerance harassment policy

– Increasing the percentage of women and non-binary people in the workforce by 50% within 5 or less years (to approximately one-third of employees) and investing $250 million over 10 years to accelerate opportunities for under-represented communities

– Waiving required arbitration of employee sexual harassment, unlawful discrimination, or related retaliation claims

– Continued pay equity reviews – to follow the high-level results of the most recent analysis, communicated in mid-October

– Providing quarterly progress updates from business units, franchise teams & functional leaders – along with a dedicated focus on gender hiring, diversity hiring and workplace progress in the annual report to shareholders and the company’s annual ESG report

No Form 8-K has been filed yet. That could be because the report is not yet due. Or, perhaps the company has not yet formalized any material amendments to Kotick’s pay arrangements. The email emphasizes that the reduction is not just to Kotick’s salary – it applies to all bonuses and equity grants as well.

This is a bold step and could be a roadmap for other CEOs who really want to “put their money where their mouth is” when it comes to ESG progress – but there were also unique & compelling circumstances here that may have made people more open to big action. Activision Blizzard has been tangled up with sexual harassment & discrimination claims since this summer – which led to an employee walkout in July, a securities class action lawsuit in August, an $18 million EEOC settlement announced in September (the second-largest the agency has ever negotiated), and ongoing California litigation (the company had attempted to pause that litigation, but a few days prior to this employee announcement, a Los Angeles court denied that request).

As Lynn blogged, the company also faced a very tight say-on-pay vote in June. Its CEO earned nearly $155 million in total compensation last year – largely due to pay-for-performance stock awards.

The email doesn’t get into the nitty gritty of how these gender diversity & related goals will be measured or what will happen if or when they’re achieved, but I would imagine there was outreach around that and the details will emerge through future SEC disclosures. At any rate, it’s a significant ESG & human capital commitment that may also resolve, for now, the pay package that some shareholders found problematic.

– Liz Dunshee