After years of criticism for being one of the "most overpaid" CEOs, Activision-Blizzard CEO Bobby Kotick is taking a pay cut, but it's not as virtuous as it sounds.
After years of criticism for being one of the "most overpaid" CEOs in the United States, Activision-Blizzard CEO Bobby Kotick is taking a pay cut — though it's not as generous a cut as it may initially seem.
In an SEC filing yesterday spotted by GamesIndustry.biz, the company has opted to renew Kotick's contract for a few more years. His current contract, set in 2016, was initially set to expire on December 31 of this year, but his role as CEO has now been extended at least March 31, 2023. It can be extended further beyond that date if the board so chooses.
The renewal document lavished praise upon the CEO, citing significantly increased shareholder returns and improved market value during Kotick's tenure. It does not mention the numerous rounds of layoffs the company has undergone under his leadership, including around 190 employees earlier this year and around 800 back in 2019.
Despite the board's recognition of Kotick's performance, the renewal also includes a contract adjustment, saying the board reached out to investors and pay committee members to reevaluate the CEO's compensation package. As a result, Kotick's salary is being reduced by 50% beginning retroactively January 1, 2021, bringing it from $1.75 million a year to a mere $875,000.
Furthermore, his annual target bonus has also technically been reduced. He's still eligible for up to 200% of his base salary in bonus per year, but with his salary reduced that brings Kotick down from potentially earning $3.5 million in bonuses each year to only $1.75 million in bonuses each year, on top of his existing salary. In total, that means that Kotick still stands to make $2.6 million a year if he keeps meeting all the objectives set by the board. Notably, his objectives have also shifted a bit, effectively focusing more on meeting certain financial metrics and less on meeting other non-money-related milestones.
The pay cut is, on paper, very likely in response to ongoing criticism over how much Kotick is paid. He recently appeared (not for the first time) on a list of the most overpaid CEOs in the US at rank 16, with the report calculating that including stock options, Kotick received a total of over $30 million in compensation in 2019 — most of which stemmed from equity grants rather than his actual set salary.
And Kotick is still eligible for more long-term equity incentive awards in the future, basically meaning that Kotick gets awarded a whole lot more money thanks to stock options if the company continues to do well. The renewal filing stipulates that his max payout be in line with other companies deemed similar to Activision Blizzard at the time that it happens, rather than — as has been pointed out in the past — well above them.
That doesn't even include the additional bonus of up to $200 million that Kotick could still be awarded in June with the approval of a board committee. When asked for comment on whether or not this bonus was impacted by the contract amendment, an Activision Blizzard spokesperson said, "The value and timing of the [bonus] are at the discretion of the Compensation Committee."
So even with his salary slashed in half, Kotick is still set to keep making millions as Activision-Blizzard CEO each year alongside both a potentially massive upcoming bonus payout, and the likely possibility of large payouts in the future.