The shareholders have refused to approve bonuses for EA’s executives. This occurs even though EA is currently performing well with record revenues during the pandemic, particularly with FIFA 20.
What was rejected? On August 6, the annual meeting of Electronic Arts’ shareholders took place. Here, the board is elected, and the executives’ bonus plans are approved or not.
The election results are public and are evident from documents. They show that while all 9 board members were elected, the “Compensation Package” was overwhelmingly rejected by shareholder votes.
Normally, this doesn’t happen. Bloomberg reports that of the 3000 largest US companies, only 2.2% fail with their proposals, meaning only about 1 in 45 proposals.
This is the current situation for EA: Like many gaming companies, Electronic Arts has greatly benefited financially from the current COVID-19 pandemic. Since lockdowns or at least curfews are in place in many areas, leisure activities have been limited.
Vacations, cinema visits, or dining out have been off the table for many. The time saved and money not spent has partly gone into video games and microtransactions, which is also a form of social distancing.
EA has profited significantly from this effect. The stock rose by 34% in 2020, with FIFA 20 being a major revenue driver. In “FIFA Ultimate Team” (FUT) mode, players buy coins and thus loot boxes that contain cards of virtual players to use in their teams and compete against others.
Those with a “strong team in FIFA 20” bring in special cards of the greatest football stars of all time.
For EA, this is a billion-dollar business that grows year by year.
Large consulting firm raises “serious concerns”
Why shareholders refuse: The opposition to the plans comes from several groups and advisors. The consulting firm ISS (Institutional Shareholder Services) has raised “serious concerns.” This is the largest consulting firm for shareholders. They say the executives have already received special bonuses. It is unclear why further bonuses are necessary.
Another group, “The CtW Investment Group,” comes from a labor rights direction and is particularly vocal in public. This group has previously accused the CEO of Activision of receiving too much money.
They specifically focus on two managers who have earned too much in recent years:
- EA CFO Blake Jorgensen – he reportedly received a $10 million special bonus in addition to his annual $6.5 million bonus in 2017.
- And Chief Technology Officer Ken Moss received an additional $7 million to his annual $5.5 million bonus in 2017.
A spokesperson for the group says that “special bonuses” are due at EA while other special bonuses are still being paid out. This is considered unusual and “extremely rare.”
The bosses are already well-compensated as EA’s stock has risen significantly. They’ve already had “big payday days” – to pile on more money is excessive.
Additionally, the spokesperson criticized that executives should not cash in on millions of dollars when they had previously laid off many employees. In March 2019, EA had laid off 350 employees.
This is what EA says: They claim to value shareholders’ opinions and will take their feedback into account during the ongoing evaluation of their compensation plans.
EA makes a lot of money through microtransactions. They often rely on a loot box mechanic. Players buy a non-transparent box in hopes that it contains the item they are looking for. This loot box model is now controversial. Critics see it as a form of gambling and want the government to regulate it. However, EA sees it differently:
EA refers to loot boxes as a fairly ethical surprise mechanic.
