8-KLeadership ChangesExhibits & Filings

ELECTRONIC ARTS INC. 8-K Report, Executive Changes (May 22, 2015)

Filed May 22, 2015For Securities:EA

Summary

Electronic Arts Inc. (EA) filed an 8-K on May 21, 2015, primarily detailing amendments to its bonus plans and the approval of performance-based restricted stock unit (PRSU) awards. The Compensation Committee updated the EA Bonus Plan, with the Fiscal Year 2016 Addendum outlining bonus funding structures. For most employees, 20% of the bonus pool will be based on non-GAAP financial performance (EPS and net revenue), and 80% on business objectives. For CEO Andrew Wilson, 60% of his bonus is tied to specific non-GAAP financial metrics, and 40% to strategic and operational goals, with potential for discretionary adjustments by the Board. Additionally, EA approved new PRSU awards for senior executives, set to be granted on June 16, 2015. A key change is the removal of a value cap limitation previously in place, aiming to better align senior management incentives with shareholder interests. The vesting of these PRSUs will be based on EA's Total Shareholder Return (TSR) relative to the NASDAQ-100 over a three-year performance period (FY16-FY18), with specific vesting triggers and potential for acceleration in the event of a change of control. The filing also disclosed a separation agreement with former EVP Frank Gibeau, outlining severance payments and benefits.

Key Highlights

  • 1Amendments made to the EA Bonus Plan for FY16, with a new addendum outlining bonus criteria for employees and the CEO.
  • 2For most employees, bonus pool funding is split 20% financial performance (non-GAAP EPS, net revenue) and 80% business objectives.
  • 3CEO Andrew Wilson's bonus is weighted 60% on financial performance (net revenue, gross profit, operating expenses, EPS, operating cash flow) and 40% on strategic/operational objectives.
  • 4Performance-Based Restricted Stock Units (PRSUs) approved for senior executives, with grants expected on June 16, 2015.
  • 5A significant change to PRSUs is the removal of a value cap limitation, enhancing alignment between executive compensation and shareholder value.
  • 6PRSU vesting is tied to EA's Total Shareholder Return (TSR) relative to the NASDAQ-100 over a three-year period (FY16-FY18).
  • 7Separation agreement disclosed for former EVP Frank Gibeau, including severance pay and benefits.

Frequently Asked Questions

The primary changes involve the adoption of the Fiscal Year 2016 Addendum, which details how bonus pools will be funded. For most employees, it's a 20/80 split between financial performance (non-GAAP EPS and net revenue) and business objectives. For the CEO, the weighting is 60% financial performance and 40% strategic/operational objectives.

Removing the value cap, which previously limited vesting to five times the award unit's value at grant, is intended to better align the incentives of senior management with those of shareholders. This change allows for potentially higher payouts to executives if EA's performance significantly outpaces the NASDAQ-100, directly linking their compensation to shareholder returns.

Vesting is based on EA's Total Shareholder Return (TSR) relative to the performance of companies in the NASDAQ-100 Index over a three-year period (FY16-FY18). Specific performance thresholds are set, requiring EA's TSR to be at the 60th percentile of the NASDAQ-100 for 100% target vesting. Performance above or below this percentile adjusts the vesting percentage, and provisions exist for partial vesting and potential adjustments in cases of negative TSR or change of control.

Frank Gibeau is receiving separation pay of $390,385 (based on years of service), an additional $816,000 in lieu of his fiscal year 2015 bonus, and continued health benefits through August 31, 2015.