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EA caps severance for executives

Monetary rewards for leaving executives has been capped, while stock rewards haven’t been affected
EA caps severance for executives
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EA has introduced a cap on the cash offered to executives as part of their severance packages.

As per the filing, which was first uncovered by Axios, any severance or separation packages with executive offers will be capped at 2.99 times that employees' base salary, plus annual bonus targets. Payouts above this threshold are still possible but subject to shareholder approval.

However, this cap doesn’t involve stock options at this point, despite the fact that such options represent a significant financial gain. Axios notes that should the company’s CEO, Andrew Wilson, resign, he would receive $7.8 million dollars in cash, in line with the new policies. However, he would also receive $27 million in stock.

This move comes as a result of a proposal voted into action by shareholders earlier this year which took aim at the firm’s “tendency to overpay management”, having pushed for executive payouts to be lowered for some time. Last year, EA decided to address their concerns, undertaking a comprehensive review of its executive compensation program.

EA’s previous compensation policies fell in line with many other industry giants, offering what Axios call “large golden parachutes”. However, Shareholders have consistently voted against the company’s annual compensation plans since 2020.

Good for the economy or bad for business?

EA, however, has argued that its existing payment plans are “essential to retain and recruit top leaders”, and in a filing last month stated that shareholders voting on large severance packages “could place us at a severe competitive disadvantage,” as top talent could seek employment at studios offering larger monetary packages should the proposals pass.

The shareholder proposal was written by investors James McRitchie and Myra Young, who have submitted nearly 80 shareholders proposals this year – 31 of which, McRitchie states, were withdrawn as they reached an agreement with the company, while nine were voted into action.

McRitchie and Young have issued proposals to EA before, and have made it their goal to create a positive impact and improve the economic system by redistributing wealth, citing research that found that GDP increases when less wealth is concentrated within the wealthiest in society.”

Last month, we listed EA as one of the top 50 mobile game makers of 2022.