Summary
This Form 8-K filing from Electronic Arts Inc. (EA) on July 27, 2007, primarily reports the shareholder approval of the Electronic Arts Inc. Executive Bonus Plan at the company's annual stockholders' meeting held on July 26, 2007. This plan is designed to incentivize senior executives with cash bonuses tied to the achievement of specific financial and business performance criteria, aiming to comply with Section 162(m) of the Internal Revenue Code for tax deductibility. The Compensation Committee will administer the plan, setting performance goals and maximum bonus awards for eligible senior executives.
Key Highlights
- 1Shareholders approved the Electronic Arts Inc. Executive Bonus Plan.
- 2The plan is designed to provide incentive compensation to senior executives based on performance criteria.
- 3Bonuses under the plan are intended to qualify as 'performance-based compensation' under Section 162(m) of the Internal Revenue Code, allowing for tax deductibility.
- 4The Compensation Committee will administer the plan, selecting participants, establishing performance goals, and determining bonus awards.
- 5Performance goals can include a wide range of financial metrics such as cash flow, revenue, earnings per share, and stock price.
- 6The maximum bonus for any participant is 300% of their base salary, capped at $5,000,000 annually.
- 7The plan will first apply to fiscal year 2008 and has a term of five years from the 2007 Annual Meeting, unless terminated earlier.
Frequently Asked Questions
The main purpose of the Executive Bonus Plan is to incentivize EA's senior executives by providing cash bonuses tied to the achievement of specific financial and business performance goals. This structure is intended to align executive compensation with company performance and ensure the bonuses are tax-deductible for the company under Section 162(m) of the Internal Revenue Code.
Eligibility is generally limited to senior executives of Electronic Arts or its affiliates, as chosen by the Compensation Committee. This is expected to primarily include the CEO and executives who directly report to the CEO.
The Compensation Committee can set performance goals based on various metrics including, but not limited to, cash flow, revenue, gross margin, operating expenses, earnings (GAAP or non-GAAP), earnings per share, stock price, return on equity, total shareholder return, market share, and strategic objectives. These goals can be measured on an absolute basis or relative to targets and may be adjusted for certain events.
The maximum bonus a participant can receive is 300% of their base salary for the performance period. However, there is an absolute cap of $5,000,000 for any participant's bonus in any fiscal year.