8-KLeadership ChangesCorporate ChangesExhibits & Filings

ELECTRONIC ARTS INC. 8-K Report, Executive Changes (May 11, 2009)

Filed May 11, 2009For Securities:EA

Summary

This 8-K filing from Electronic Arts Inc. (EA) on May 11, 2009, details two primary events: the appointment of a new independent director and significant updates to the company's bonus compensation plan. Jeff Huber, Senior Vice President of Engineering at Google, has joined EA's Board of Directors, expanding the board to ten members. His appointment includes standard director compensation, stock options, and restricted stock units, all vesting over four years. Additionally, EA adopted the Electronic Arts Discretionary Bonus Plan, replacing the previous annual bonus plan. This new plan is designed to incentivize and retain talent by linking cash bonuses to the achievement of specific performance goals, which can include individual, business unit, and company-wide financial performance. The plan allows for bonuses up to 200% of target, or 300% in exceptional cases with CEO approval. The Compensation Committee will administer the plan, with bonuses for the performance period Q2-Q4 FY2010 to be based on revenue and adjusted non-GAAP earnings, alongside individual and business unit performance. A separate Q1 FY2010 bonus program is also outlined, with payments shared equally if targets are met. Furthermore, the company updated its Bylaws to enhance the advance notice provisions for shareholder proposals and director nominations. These amendments require more detailed disclosures from stockholders regarding their interests, including any hedging or short positions, and ensure clarity on the independence and qualifications of director nominees. These changes aim to improve corporate governance and shareholder engagement processes.

Key Highlights

  • 1Appointment of Jeff Huber, SVP of Engineering at Google, as an independent director to the Board, increasing its size to ten.
  • 2Mr. Huber's compensation includes a $50,000 annual retainer, stock options for 17,500 shares, and 2,500 RSUs, all vesting over four years.
  • 3Adoption of the Electronic Arts Discretionary Bonus Plan, replacing the former annual bonus plan, aimed at motivating and retaining talent.
  • 4The new bonus plan ties cash incentives to the achievement of pre-determined performance goals (company, business unit, and individual).
  • 5Bonuses can reach up to 200% of the target, with a potential of 300% for extraordinary performance subject to CEO approval.
  • 6Amendments to company Bylaws to clarify and strengthen advance notice provisions for stockholder proposals and director nominations.
  • 7Bylaw amendments require enhanced disclosure from stockholders regarding interests, including hedging and short positions.

Frequently Asked Questions

Jeff Huber's appointment brings new independent leadership and expertise to EA's Board of Directors, specifically from the technology sector with his role at Google. This could signal a focus on strategic direction, innovation, or operational efficiency within the company. His compensation package, including stock and RSUs, aligns his interests with those of shareholders.

The Electronic Arts Discretionary Bonus Plan is designed to be more flexible and directly tied to performance. Unlike potentially simpler previous structures, this plan allows for bonuses to be determined by a combination of company financial performance (revenue and adjusted earnings), business unit performance, and individual employee performance. The tiered payout structure, with potential for up to 300% of base salary in exceptional cases, offers significant upside for high performers and incentivizes achievement of specific financial targets.

The Bylaws amendments focus on improving corporate governance by making the process for shareholder proposals and director nominations more transparent and robust. The requirement for stockholders to disclose additional information, such as hedging or short positions, helps the company and other shareholders better understand potential conflicts of interest or strategic intentions. This aims to ensure that director nominations are from qualified individuals and that shareholder actions are aligned with long-term company interests.

For the performance period covering the second through fourth quarters of the fiscal year ending March 31, 2010, bonuses will be calculated based on the company's financial performance (revenue and adjusted non-GAAP earnings) compared to predetermined targets. This will be supplemented by the performance of the participant's business unit and their individual performance during that three-quarter period. A separate, simpler program exists for the first quarter of FY2010, with payments shared equally among participants if targets are met.