Activision Blizzard, Inc.
Activision Blizzard, Inc. (Form: DEF 14A, Received: 04/22/2016 17:12:32)

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

 

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ACTIVISION BLIZZARD, INC.

 

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

   
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3100 Ocean Park Boulevard

Santa Monica, California 90405

 

 

Dear Fellow Stockholders:

I cordially invite you to join me and the other members of Activision Blizzard, Inc.’s Board of Directors at the company’s 2016 annual meeting of stockholders. This proxy statement contains information about the meeting and will serve as your guide to the matters on which you will be asked to vote.

At Activision Blizzard, we know that feedback from our stockholders is essential to our continued success. Regardless of the number of shares you own, this meeting is a wonderful opportunity for you to learn more about developments at the company and, more importantly, to express your opinions and play a part in Activision Blizzard’s future. If you can’t attend the meeting, please share your thoughts or concerns with us by email at ir@activision.com or in care of our Corporate Secretary at Activision Blizzard, Inc., 3100 Ocean Park Boulevard, Santa Monica, California 90405.

Thank you for your continued support of Activision Blizzard.

Sincerely,

Robert A. Kotick

President and Chief Executive Officer

April 22, 2016

 

 

 

 

 

The proxy statement and our 2015 annual report to stockholders are each available at:
http://www.cstproxy.com/activisionblizzard/2016

ACTIVISION BLIZZARD, INC. - 2016 Proxy Statement       1


 

 

3100 Ocean Park Boulevard

Santa Monica, California 90405

 

Notice of 2016 Annual Meeting of Stockholders

Thursday, June 2, 2016

9:00 a.m.

The Annual Meeting of Stockholders of Activision Blizzard, Inc. will be held at the Equity Office facilities at 3200 Ocean Park Boulevar d, Santa Monica, California 90405, on Thursday, June 2, 2016, at 9:00 a.m., Pacific Daylight Time.

The purposes of this year’s annual meeting are to:

1.

elect nine directors for a one-year term;

2.

request advisory approval of our executive compensation; and

3.

ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2016.

The Activision Blizzard, Inc. Board of Directors has fixed April 7, 2016, as the record date for determining the stockholders entitled to receive notice of, and to vote at, the annual meeting.

Whether or not you plan to attend the meeting, I urge you to promptly vote your shares by proxy by following the instructions beginning on page 14 of the enclosed proxy statement. If you are able to attend the meeting and wish to vote in person, you may withdraw your proxy at that time. If you do plan to attend the meeting, please see page 14 of the enclosed proxy statement for information regarding what you must bring with you to gain admittance.

 

By Order of the Board of Directors

Jeffrey A. Brown

Corporate Secretary

 

April 22, 2016

ACTIVISION BLIZZARD, INC. - 2016 Proxy Statement       2


Table of Contents

PROXY SUMMARY

5

Voting Matters and Board Recommendations

5

Director Nominees

5

Executive Compensation Highlights

6

Corporate Governance Highlights

9

Incorporation of Stockholder Feedback

10

GENERAL

11

PROCEDURAL MATTERS

11

16

CORPORATE GOVERNANCE MATTERS

20

Overview

20

Board of Directors and Committees

20

Compensation Risk Management

26

Political Activities

27

Code of Conduct

27

Additional Corporate Governance Documentation

27

EXECUTIVE OFFICERS

28

EXECUTIVE COMPENSATION

30

Compensation Discussion and Analysis

30

Overview

30

Decision-Making Approach to Compensation for Executive Officers

36

Elements of Our Executive Compensation Program for 2015

38

Stock Ownership Guidelines

47

Impact of Tax and Accounting Considerations

47

Compensation Committee Report

48

Summary Compensation Table

49

Grants of Plan-Based Awards for 2015

52

Outstanding Equity Awards at December 31, 2015

54

Option Exercises and Stock Vested for 2015

56

Employment Agreements

56

Potential Payments upon Termination or Change of Control

63

 


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71

DIRECTOR COMPENSATION

72

General

72

Cash Compensation

72

Equity Compensation

73

Stock Ownership Guidelines

73

Indemnification

73

Compensation for 2015

73

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

75

Policies and Procedures

75

Relationships and Transactions

76

AUDIT-RELATED MATTERS

80

Independent Registered Public Accounting Firm Fees

80

Pre-Approval Policies and Procedures

80

Audit Committee Report

81

82

Required Vote and Board Recommendation

82

BENEFICIAL OWNERSHIP MATTERS

83

Security Ownership of our Officers and Directors

83

Security Ownership of Holders of More Than 5% of Our Common Stock

85

Section 16(a) Beneficial Ownership Reporting Compliance

85

EQUITY COMPENSATION PLAN INFORMATION

86

DIRECTOR NOMINATIONS AND OTHER STOCKHOLDER PROPOSALS FOR 2017 ANNUAL MEETING; COMMUNICATING WITH OUR BOARD

87

AVAILABILITY OF PROXY MATERIALS ON THE INTERNET; DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS; FINANCIAL AND OTHER INFORMATION

89

OTHER MATTERS

90

HELPFUL RESOURCES

91

92

 


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Proxy Summary

This summary highlights information contained elsewhere in this proxy statement for the 2016 annual meeting of the stockholders of Activision Blizzard, Inc., a Delaware corporation (the “Company”). This summary does not contain all of the information that you should consider, and you should read the entire proxy statement before voting. For more complete information regarding the Company’s 2015 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Voting Matters and Board Recommendations

Stockholders are being asked to vote on the following matters at the 2016 Annual Meeting of Stockholders.

Our Board’s Recommendation

Item 1. Election of Directors (page 16 )

FOR each Director Nominee

Our Board and its Nominating and Corporate Governance Committee believe that our nine director nominees possess the qualifications necessary to provide proper oversight of the Company’s business for the benefit of the Company’s stakeholders.

Item 2. Advisory vote to approve executive compensation (page 71 )

FOR

Our Board and its Compensation Committee believe that our compensation policies and practices are effective in enabling us to achieve our financial, operational and strategic goals and that the compensation paid to our named executive officers has allowed, and will continue to allow, us to attract and retain the key executive talent responsible for our recent and long-term success.

Item 3. Ratify the appointment of our independent registered public accounting firm (page 82 )

FOR

Our Board and its Audit Committee believe that continued retention of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm is in the best interests of the Company and its stockholders.

Director Nominees

Set forth below is certain information about the nominees for election to our Board of Directors, each of whom currently serves on our Board:

 

Age

Director

Since

Principal Occupation

Independent

Other Public

Boards

Committee Memberships

Audit

Committee

Compensation

Committee

Nominating

and Corporate

Governance

Committee

Robert J. Corti

66

2003

Retired CFO of Avon Products

 

 

Hendrik Hartong III

49

2015

Chairman and CEO of Brynwood Partners

 

 

Brian G. Kelly

53

1995

Chairman of the Board of Activision Blizzard

 

 

 

Robert A. Kotick

53

1991

President and CEO of Activision Blizzard

1

 

 

 

Barry Meyer

72

2014

Retired Chairman and CEO of Warner Brothers Entertainment

 

 

Robert J. Morgado

73

1997

Retired Chairman and CEO of Warner Music Group

Peter Nolan

57

2013

Senior Advisor to Leonard Green & Partners

 

 

Casey Wasserman

41

2015

Chairman and CEO of Wasserman

 

 

Elaine Wynn

73

2013

Co-founder of Wynn Resorts

 

 

  Chairperson

 

 

 

ACTIVISION BLIZZARD, INC. - 2016 Proxy Statement       5


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Executive Compensation Highlights

Our employees are our most valuable asset. Our industry is intensely competitive and constantly evolving. Our executives and many of our highly skilled employees are often sought after by our competitors, both established and new. As such, it is necessary for us to offer our executives highly competitive total compensation, including equity awards, and to use employment agreements to attract, retain and motivate them.

Our compensation philosophy has allowed us to recruit, retain and motivate the best talent in our industry, as evidenced by our performance. Our executive compensation program, designed to be consistent with that philosophy, has three primary components: (1) base salary; (2) annual cash incentives; and (3) equity awards, including stock options and restricted share units, primarily with performance-based vesting criteria. We aim to incentivize our executives to drive corporate financial performance by basing a significant portion of their compensation on achieving financial and individual strategic targets, thereby linking payment to performance.

 

 

Highlights of our executive compensation program for 2015 with respect to the named executive officers included in the “Summary Compensation Table” are described below.

Salary

Salary increases for our named executive officers ranged from 4.0% to 5.0% during the 2015 annual review of executive base salaries, reflecting individual performance and the Compensation Committee’s assessment of the competitive market. Please see “Executive Compensation—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Salary” below.

Performance-Based Annual Cash Incentives and Other Bonuses

Corporate Annual Incentive Plan

Actual 2015 performance against goals established by our Compensation Committee during the first quarter of the year for our named executive officers under our Corporate Annual Incentive Plan (i.e., our CAIP) ranged from 81% to 108% of target.

 

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For each of our named executive officers, 60% of his target opportunity under the CAIP was weighted based on financial measures (specifically, adjusted non-GAAP operating income, non-GAAP diluted earnings per share and/or adjusted non-GAAP free cash flow), and 40% of his target opportunity was based on specific and measurable individual performance measures that the Compensation Committee believes supported the Company’s overall strategy and the officer’s business objectives for the year.

Had our adjusted 2015 non-GAAP operating income not been 85% or more of the adjusted non-GAAP operating income target for the year as set forth in our 2015 annual operating plan (i.e., our AOP), the Compensation Committee would have reduced or eliminated all bonuses under the CAIP, including those paid to our named executive officers. Our Compensation Committee also established limits on the payments made under the CAIP for “overachievement”—payments in respect of individual performance measures were capped at 120% of the underlying target amount and payments in respect of financial performance measures were capped at 150% to 200% of target, depending on the specific metric. Please see “Executive Compensation—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses for 2015” below.

Also, in recognition of their significant contributions to our transformative acquisition of King Digital Entertainment Limited, $300,000 was included in the 2015 CAIP award to each of Messrs. Durkin and Tippl. Please see “Executive Compensation—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Resulting 2015 Payments under the CAIP” below.

Blizzard Profit Sharing

In accordance with the employment agreement we entered into with him in 2008 in connection with the Vivendi Games Combination (as defined herein), Mr. Morhaime received an award for 2015 under the Morhaime Profit Sharing Plan. Please see “Executive Compensation—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Morhaime Profit Sharing Plan” below.

Additional Discretionary Bonuses

In accordance with the employment agreement we entered into with him in 2008 in connection with the Vivendi Games Combination and consistent with past years, Mr. Morhaime received a payment for 2015 under the Blizzard Bonus Plan.

Emphasis on Performance-Based Equity Awards

In October 2015, we extended the term of employment of Eric Hirshberg, the Chief Executive Officer of Activision Publishing, through March 2018 (or, if we so elect, through March 2019). Mr. Hirshberg, the only named executive officer whose employment agreement was entered into or amended in 2015, received a combination of performance-based vesting restricted share units and stock options. He did not receive any time-based vesting restricted share units. Please see “Executive Compensation—Employment Agreements—Eric Hirshberg” below.

While our named executive officers do not generally receive annual equity awards, Mr. Morhaime’s employment agreement, which was negotiated in connection with the 2008 Vivendi Games Combination, does provide for annual equity awards, consistent with the compensation Mr. Morhaime received at Vivendi Games prior to the consummation of the Vivendi Games Combination. Please see “Executive Compensation—Employment Agreements—Michael Morhaime” below.

No other named executive officer received an equity award during 2015 (although the Summary Compensation Table reflects the portion of a performance-based award made to Mr. Tippl in 2014, the underlying metrics for which were established in 2015).

The following table sets forth certain summarized information with respect to the compensation earned by named executive officers during 2015. For the complete Summary Compensation Table, including the notes that accompany it, along with compensation for prior years, please see page 49 .

Name and Principal Position

Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

All Other

Compensation

($)

Total

($)

Robert A. Kotick

President and Chief Executive Officer

2,294,328

4,844,383

87,223

7,225,934

Dennis Durkin

Chief Financial Officer

752,818

1,105,673

18,187

1,876,678

Thomas Tippl

Chief Operating Officer

1,302,548

5,211,347

2,362,589

43,858

8,920,342

Eric Hirshberg

Chief Executive Officer, Activision Publishing

961,677

4,115,822

967,636

31,857

6,076,992

Michael Morhaime

President and Chief Executive Officer, Blizzard Entertainment

924,411

341,363

2,386,767

1,941,999

3,003,638

90,598

8,688,776

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2015 Financial and Operational Highlights

 

 

 

2015 was another successful year for the Company, as we achieved strong results and introduced new franchises with outstanding gameplay, expanded on exciting new business models and continued investing in some of the world’s most important entertainment franchises. During 2015:

we generated GAAP net revenues of $4.7 billion and non-GAAP net revenues of $4.6 billion (1) ;

our non-GAAP net revenues from digital online channels (2) accounted for a record 57% of our total non-GAAP net revenues, growing over 20% year-over-year;

our 2015 GAAP operating margin was 28% and our non-GAAP operating margin was 32%;

we delivered GAAP and non-GAAP diluted earnings per share of $1.19 and $1.32, respectively;

we generated GAAP operating cash flow of almost $1.2 billion; and

we delivered total shareholder return (i.e., TSR) (through stock price appreciation and dividend payments) of over 93%.

Our financial performance was driven by our operational execution during 2015. During 2015 (3) :

people played our games for over 14 billion hours, up 16% year-over-year;

Activision Publishing’s Call of Duty ® : Black Ops III was the #1 top-selling console game globally for the calendar year, and Call of Duty was the #1 franchise in North America for the seventh year in a row;

Activision Publishing’s Destiny achieved record digital attach rates with 2015’s The Taken King expansion, with over 25 million registered users having spent nearly 3 billion hours playing the game;

Blizzard Entertainment’s World of Warcraft ® remained the #1 subscription-based massively multiplayer online role-playing game (i.e., MMORPG) in the world;

Blizzard Entertainment’s Legacy of the Void ™, the standalone third chapter of StarCraft ® II , sold through over one million copies in the first 24 hours of launch and has received multiple “strategy game of the year” awards;

over nine million people registered to participate in open beta testing of Blizzard Entertainment’s Overwatch ™, a team-based shooter to be released on PC and consoles in 2016; and

Blizzard Entertainment’s Hearthstone ® : Heroes of Warcraft ™, a free-to-play digital strategy card game, reached more than 40 million registered players and ended 2015 with record engagement in multiple categories.

This performance was a direct result of the focused and disciplined approach followed by our top leadership prior to and during 2015, including continued investment in our established franchises, like Call of Duty and World of Warcraft, selectively introducing new concepts, like Destiny , Hearthstone and Overwatch , and managing our costs prudently.

 

 

(1)

For information on the calculation and reconciliation of GAAP measures to non-GAAP measures, please see Appendix A attached to this proxy statement.

(2)

Net revenues from digital online channels represents revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, micro-transactions and products.

(3)

According to The NPD Group, GfK Chart-Track and Activision Blizzard internal estimates, as the case may be.

 

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Corporate Governance Highlights

The Company is committed to adopting and following strong corporate governance practices that benefit all of our stakeholders. We believe that a foundation of good corporate governance creates an environment of accountability for our Board and senior management and otherwise promotes the long-term interests of our stakeholders. Our Board continues to monitor emerging best practices in governance and adopts measures where it determines them to be in the best interests of our stakeholders. Highlights of our corporate governance program include:

 

Accountability

We elect all directors on an annual basis.

Page 16

 

Our common stock is our only outstanding class of voting stock, and our governance documents do not contain any supermajority voting requirements.

 

 

For each share of our stock outstanding and entitled to vote that a stockholder holds, he or she is entitled to one vote on each matter presented for action.

Page 12

 

Our bylaws have a majority voting standard for uncontested elections and a plurality standard for contested ones. Any director failing to receive majority support in an uncontested election must tender his or her resignation.

Page 21

 

We do not have a poison pill or similar anti-takeover provision in place.

 

 

We hold “say-on-pay” votes annually.

 

Board Composition

Seven of our nine director nominees are independent.

Page 21

 

We have a separate Chairman and CEO.

Page 21

 

If our Board were to select our CEO to also serve as Chairman, the independent directors would, in accordance with our Corporate Governance Principles and Policies, consider the appointment of a lead independent director.

Page 21

 

Our independent directors met in executive session three times during 2015.

Page 23

Stock Ownership Guidelines

Our CEO is expected to, within a certain period of time, beneficially own shares of our common stock with a value at least equal to three times his or her then-current annual base salary.

Page 47

 

Each other executive officer is expected to, within a certain period of time, beneficially own shares of our common stock with a value at least equal to his or her then-current annual base salary.

Page 47

 

Each Board member not employed by us or any of our subsidiaries is required to, within four years following his or her election to our Board, beneficially own shares of our common stock with a value at least equal to five times the annual cash retainer we then pay him or her for regular service on our Board.

Page 73

“Clawback” Policy

In the event of an earnings restatement, we may “claw back” performance-based compensation (including both annual and long-term incentive awards) paid to executives.

Page 33

Anti-Hedging Policy

We prohibit hedging of company stock by our employees and directors.

Page 33

Board Oversight of Risk Strategy

Our Board has responsibility for management oversight and providing strategic guidance to the Company.

Page 26

 

Our Board annually reviews the conclusions and recommendations of our management with respect to current and future potential strategic enterprise-level risks and strategies used to mitigate such risks.

Page 26

 

Our Board delegates certain risk management oversight functions to standing committees, each of which regularly reports to our Board.

Page 26

Board Self-Evaluation

Our Board annually reviews its performance, as well as the performance of each of our standing committees.

Page 23

Board Committees

All of the members of each of our three standing Board committees are independent.

Page 23

Succession Planning

Our Board actively participates in CEO succession planning and reviews succession plans for our other senior-most officers annually.

 

 

Our Nominating and Corporate Governance Committee oversees risks associated with overall governance and succession planning.

 

 

 

 

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Incorporation of Stockholder Feedback

Communication with our stockholders is very important. We routinely solicit feedback from our largest stockholders, as we believe their views are generally representative of overall stockholder sentiment.

We also review feedback sent to us from all stockholders, no matter the size of their holdings. If you would like to communicate directly with our full Board, our independent directors, any committee of our Board, any other group of directors or any individual director, you may send written correspondence addressed to such director or directors in care of our Corporate Secretary at Activision Blizzard, Inc., 3100 Ocean Park Boulevard, Santa Monica, California 90405.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PROXY STATEMENT

GENERAL

Purpose of this Proxy Statement

This proxy statement is furnished in connection with the solicitation by our Board of Directors (our “Board”) of proxies from holders of issued and outstanding shares of the Company’s common stock, par value $0.000001 per share (“Common Stock”). The proxies being solicited will be used at the annual meeting of our stockholders to be held on Thursday, June 2, 2016, at the Equity Office facilities at 3200 Ocean Park Boulevard, Santa Monica, California 90405, at 9:00 a.m., Pacific Daylight Time, and at any adjournment or postponement of the meeting (the “Annual Meeting”).

Notice of Internet Availability of Proxy Materials

We will be mailing a notice regarding the internet availability of these proxy materials (containing instructions on how to access the proxy materials and vote shares through the internet) to stockholders on or about April 22, 2016.

Other General Information

All financial metrics used in this proxy statement are presented in accordance with generally accepted accounting principles (“GAAP”), unless explicitly identified as non-GAAP. For information on the calculation and reconciliation of GAAP measures to non-GAAP measures, please see Appendix A attached to this proxy statement. Internally, management uses the financial measures identified herein as non-GAAP in assessing our operating results, as well as in planning and forecasting. In particular, the measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard by excluding certain items that may not be indicative of the Company’s core business, operating results or future outlook. As such, the performance of our executive officers is generally measured by reference to non-GAAP financial measures. Further, management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard’s financial and operating performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for or as more important than the financial information prepared and presented in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the Company’s results of operations as determined in accordance with GAAP. In the future, Activision Blizzard may also consider whether other significant non-recurring items should also be excluded in calculating the non-GAAP financial measures used by the Company.

Our non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net revenues, non-GAAP net income, non-GAAP diluted earnings per share and non-GAAP operating margin do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but exclude different items, which may not provide investors a comparable view of Activision Blizzard’s performance in relation to other companies.

All references in this proxy statement to “the Company”, “we”, “us”, “our”, and “Activision Blizzard” refer to Activision Blizzard, Inc.

 

 

PROCEDURAL MATTERS

Who may vote at the Annual Meeting?

Only stockholders of record at the close of business on April 7, 2016, are entitled to notice of, or to vote at, the Annual Meeting. There were 738,076,590 shares of our Common Stock outstanding and entitled to vote on the record date.

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A list of the stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder, for any purpose germane to the Annual Meeting, at the Annual Meeting and during ordinary business hours at our offices at 3100 Ocean Park Boulevard, Santa Monica, California 90405 for the 10 days prior to the Annual Meeting.

How many votes may I cast?

For each share of our Common Stock outstanding and entitled to vote that a stockholder holds on the record date, he or she is entitled to one vote on each matter presented for action at the Annual Meeting.

What if I hold my shares through a broker? What is the difference between holding shares as a “stockholder of record” and as a “beneficial owner”?

If your shares are held through a broker, bank or any other nominee, you hold your shares in “street name”, and you are considered the “beneficial owner” of those shares. This proxy statement and any accompanying materials have been provided to you by your broker, bank or other holder of record. As a beneficial owner, you are entitled to direct the firm that holds your shares how to vote your shares.

If your shares are registered in your name with our stock transfer agent, Continental Stock Transfer & Trust, you are the “stockholder of record”. This proxy statement and any accompanying materials have been provided to you directly by Activision Blizzard.

Can my broker vote my shares without my instruction? What are “broker non-votes”?

If you are a beneficial owner and you do not provide voting instructions to the broker, bank or other nominee that holds your shares in its name, that firm is only allowed to exercise its discretion to vote your shares on “routine” matters, but will not be allowed to vote your shares with respect to any “non-discretionary” items, resulting in a so-called “broker non-vote” with respect to such items. Proposal 3—the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm—is the only matter for consideration at the Annual Meeting considered to be routine. For all matters other than proposal 3, you must submit voting instructions to the firm that holds your shares if you want your vote to count. A broker non-vote will occur if you do not provide instructions to your broker, bank or other nominee with respect to proposals 1 or 2.

How many votes must be present in order for business to be conducted?

In order for business to be conducted at the Annual Meeting, a quorum must be present. A quorum consists of the presence, in person or by proxy, of a majority of the shares of our Common Stock entitled to vote at the Annual Meeting. Both abstentions and broker non-votes will be included for purposes of determining whether a quorum is present at the Annual Meeting.

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How can I cast my vote with respect to each proposal and how many votes are required to approve each proposal?

Proposal

Voting Options

Vote Required to Adopt

Proposal

Broker

Discretionary

Voting

Allowed

Effect of

Broker

Non-Votes

Effect of

Abstentions

Effect of

Present but

Not Voted

Shares

Election of Directors
—Proposal 1

For, against or abstain with respect to each nominee

The number of votes cast “for” the nominee exceeds the number of votes cast “against” him or her by the holders of shares present in person or by proxy and entitled to vote at the Annual Meeting

No

No Effect

Against

Against

Advisory Vote to Approve Executive Compensation —Proposal 2

For, against or abstain

Affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting

No

No Effect

Against

Against

Ratification of Appointment of Independent Registered Public Accounting Firm
—Proposal 3

For, against or abstain

Affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting

Yes

N/A

Against

Against

What are the ways I can vote?

Stockholders at the close of business on April 7, 2016, can vote at the Annual Meeting in person or via proxy in the manner described herein. Any stockholder who holds shares in street name through a broker, bank or other nominee will receive separate instructions from the firm holding his or her shares describing the procedure for voting those shares.

How do I vote in person at the Annual Meeting?

Stockholders who wish to vote in person at the Annual Meeting must request a ballot at the meeting. Further, any street-name holder who wishes to vote in person at the Annual Meeting will need to obtain a proxy from the broker, bank or other nominee that is the record holder of his or her shares in order to cast a ballot at the meeting.

What does it mean to vote by proxy? Who represents my shares at the Annual Meeting?

A vote via proxy authorizes Robert A. Kotick (our Chief Executive Officer), Thomas Tippl (our Chief Operating Officer) and Dennis Durkin (our Chief Financial Officer), and each of them, with full power of substitution, to vote and otherwise represent all of the shares that you are entitled to vote at the Annual Meeting, in accordance with your instructions, with the same effect as if you were present at the meeting and voting such shares.

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How do I vote by proxy?

Stockholders of record may vote by proxy in three ways:

Vote by Internet. Record holders can vote online prior to 4:00 p.m., Pacific Daylight Time, on June 1, 2016. Go to www.cstproxyvote.com, which is available 24 hours a day until the deadline. You will need your “company ID”, “proxy number” and “account number”, all of which appear on the notice of internet availability of proxy materials or proxy card you received.


 

Vote by Telephone. Record holders can vote by phone prior to 4:00 p.m., Pacific Daylight Time, on June 1, 2016. Call (866) 894-0537, which is available 24 hours a day until the deadline. You will need your “company ID”, “proxy number” and “account number”, all of which appear on the notice of internet availability of proxy materials or proxy card you received.


 

Vote by Mail. Record holders can vote by mail if they received a printed copy of the proxy card. Complete and return that proxy card in the postage-paid envelope provided. If you are a stockholder of record and you choose to vote by mail, your vote will be counted so long as it is received prior to the closing of the polls at the meeting, but we urge you to complete, sign, date and return the proxy card as soon as possible.


 

You need only vote in one way (e.g., if you vote by internet or telephone, you need not return the proxy card).

What if I vote by proxy but do not provide specific instructions for some or all of the items?

The shares of our Common Stock represented by all valid proxies we receive prior to the Annual Meeting that are not properly revoked prior to being voted at the Annual Meeting will be voted at the Annual Meeting as directed. If no directions are specified, those proxies will be voted FOR each of the nine director nominees named in this proxy statement (proposal 1), FOR the advisory approval of the Company’s executive compensation, as disclosed in this proxy statement (proposal 2), and FOR the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2016 (proposal 3).

If I have voted by proxy, can I change my vote?

Any stockholder of record may revoke or change that stockholder’s proxy at any time before the proxy is voted at the Annual Meeting by: (1) sending a written notice of revocation of the proxy to our Corporate Secretary at Activision Blizzard, Inc., 3100 Ocean Park Boulevard, Santa Monica, California 90405; (2) properly delivering a subsequently dated proxy; or (3) voting in person at the Annual Meeting.

What do I need to do if I want to attend the Annual Meeting?

You should be prepared to present a valid form of photo identification, such as a driver’s license, state-issued ID card or passport, to gain admittance to the Annual Meeting. In addition, if you are a stockholder of record, your ownership as of the record date must be verified by reference to our records prior to admittance into the Annual Meeting. If you hold shares in street name through a broker, bank or other nominee, you must provide proof of beneficial ownership as of the record date, such as a brokerage account statement or similar evidence of ownership. If you do not provide valid photo identification and otherwise comply with the procedures outlined above, you may not be admitted to the Annual Meeting. Directions to the Annual Meeting can be obtained by contacting our Investor Relations department via phone at (310) 255-2000 or via email at ir@activision.com.

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Will I have dissenters’ rights in connection with the business being considered?

Stockholders have no dissenters’ rights or rights of appraisal under Delaware law, our Certificate of Incorporation or our Bylaws in connection with the election of directors (proposal 1) or proposals 2 or 3.

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PROPOSAL 1 

ELECTION OF DIRECTORS

General

Stockholders will elect nine directors at the Annual Meeting. Those elected will serve one-year terms and until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation or removal. Except where otherwise instructed, proxies solicited by this proxy statement will be voted for the election of each nominee. However, if any nominee becomes unable to stand for election as a director at the Annual Meeting, the proxy may be voted for a substitute designated in accordance with our Bylaws.

Director Nominees

In order to have a knowledgeable Board comprised of individuals with distinguished records of leadership and success, the Nominating and Corporate Governance Committee has established criteria and assessed each director nominee’s capabilities to identify the contributions he or she can make to our Board. As a company with a global customer base in the interactive entertainment industry, we consider leadership abilities gained from senior roles as executive officers or board members of large, global corporations in the entertainment field to be particularly relevant to the business of the Company. We believe that our directors bring to our Board the practical wisdom and strong professional characteristics, judgment and leadership abilities necessary to keep our Company performing competitively in the market. For the qualifications we require our directors (and director nominees) to have, see “Corporate Governance Matters—Board of Directors and Committees—Identification of Candidates for Election to our Board—Experience, Skills and Other Characteristics of our Director Candidates” below.

The following are biographical summaries of our director nominees, which describe their noteworthy experience. Also described below are certain individual qualifications and skills of each of our directors that we believe contribute to our Board’s effectiveness and success. For information regarding each nominee’s current Board committee membership, if any, see “Corporate Governance Matters—Board of Directors and Committees—Board Committees” below.

Robert J. Corti

 

Retired Chief Financial Officer of Avon Products

Director since 2003

Age 66

Business Experience . Mr. Corti has been a director of Activision Blizzard since December 2003. Mr. Corti has more than 25 years of experience at Avon Products, a global manufacturer and marketer of beauty and related products. Mr. Corti joined Avon Products’ tax department as a tax associate in 1976 and held positions of increasing responsibility in the company’s finance department throughout his tenure there, including serving as an executive vice president and the chief financial officer of Avon Products from 1998 until he retired from the chief financial officer role in November 2005 and as an executive vice president in March 2006. Mr. Corti has served on the board of directors of Bacardi Limited, a wine and spirits group, since June 2006. In addition, Mr. Corti served as a member of the board of directors of the Avon Foundation since 1998 and as its chairman from 2006 to 2015, and has served as a member of the Manhattan Chapter of the Cystic Fibrosis Foundation since January 2012, where he serves as the president of the board. In addition, he was a director of ING Direct, then a U.S. subsidiary of the Dutch insurance conglomerate, the ING Groep, from January 2008 until January 2012. Mr. Corti holds a B.A. degree in accounting from Queens College and an M.B.A. degree in taxation from St. John’s University. Mr. Corti is also a certified public accountant.

Skills and Qualifications . Mr. Corti’s qualifications for election to our Board include his financial expertise, in particular his wealth of accounting and tax experience, gleaned in part from his long tenure in Avon’s finance department. Having served Avon for more than 25 years and worked his way up to increasingly senior roles within that organization, Mr. Corti offers the unique perspective of having helped to guide a large public company with international operations through the changing economic and competitive landscape for over two and a half decades. From his tenure at Avon, Mr. Corti also brings experience in the consumer products industry. Mr. Corti qualifies as an audit committee financial expert (as defined in the applicable rules of the Securities and Exchange Commission (the “SEC”)) and is financially sophisticated within the meaning of the NASDAQ Stock Market Rules (the “NASDAQ Rules”).

Hendrik Hartong III

 

Chairman and Chief Executive Officer of Brynwood Partners

Director since 2015

Age 49

Business Experience . Mr. Hartong has been a director of Activision Blizzard since July 2015. Mr. Hartong is the chairman and chief executive officer, and chairman of the executive committee, of Brynwood Partners, a private equity firm specializing in the consumer products sector. Mr. Hartong joined Brynwood Partners in 2004 as a managing partner, after the firm’s divestiture of one of its portfolio companies, Lincoln Snacks Company, a food products company. Mr. Hartong was the president and chief executive officer of Lincoln Snacks from 1998, at which point the company was publicly traded, until 2004. Prior to joining Lincoln Snacks, Mr. Hartong held various sales and marketing positions of increasing responsibility with Baskin Robbins USA Co. and Nestlé USA, Inc., both of which are food products companies, and, from 1996 to 1998, Activision Publishing,

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Inc. (“Activision Publishing”), then our principal operating unit. Mr. Hartong currently serves as the chairman of the boards of directors of Back to Nature Foods Company, LLC, Harvest Hill Beverage Company, Joseph’s Gourmet Pasta Company and Pearson Candy Company, all of which are private companies in which Brynwood Partners has a controlling interest. Mr. Hartong holds a B.A. degree in history from Lafayette College and an M.B.A. degree from Harvard University.

Skills and Qualifications . Mr. Hartong’s qualifications for election to our Board include his financial expertise, in particular his having served as president and chief executive officer of then-publicly traded Lincoln Snacks for six years. Mr. Hartong currently serves as the chairman and chief executive officer of Brynwood Partners, and also serves as the non-executive chairman to a significant number of its private portfolio companies. From his experience guiding Lincoln Snacks and the portfolio companies of Brynwood Partners, Mr. Hartong has a wealth of experience in the consumer products industry. Mr. Hartong qualifies as an audit committee financial expert (as defined in the applicable rules of the SEC) and is financially sophisticated within the meaning of the NASDAQ Rules.

Brian G. Kelly

 

Chairman of the Board of Activision Blizzard

Director since 1995

Age 53

Business Experience . Mr. Kelly has held various positions of responsibility with Activision Blizzard since 1991, including serving as a director of the Company since July 1995 and as the Co-Chairman of our Board from October 1998 until the October 2013 consummation of the transactions contemplated by the Vivendi Share Purchase Agreement (as defined herein). Mr. Kelly has served as the Chairman of our Board since the consummation of those transactions. Mr. Kelly holds a B.A. degree in accounting from Rutgers University and a J.D. degree from Fordham University School of Law.

Skills and Qualifications . Mr. Kelly’s qualifications for election to our Board include the depth of institutional knowledge and understanding of our organization he possesses by virtue of his service as an executive of the Company from 1991 until the Vivendi Games Combination (as defined herein) and as a director for more than 20 years. During that time, he has demonstrated his superior leadership skills, his devotion to the Company and his commitment to helping to ensure our ongoing success.

Robert A. Kotick

 

President and Chief Executive Officer of Activision Blizzard

Director since 1991

Age 53

Business Experience . Mr. Kotick has been a director of Activision Blizzard since February 1991, following his purchase of a significant interest in the Company, which was then on the verge of insolvency. Mr. Kotick was our Chairman and Chief Executive Officer from February 1991 until July 2008, when he became our President and Chief Executive Officer in connection with the Vivendi Games Combination. Mr. Kotick is also a member of the board of directors of The Coca-Cola Company, a multinational beverage corporation, and the boards of trustees for The Center for Early Education and the Harvard-Westlake School. He is also vice chairman of the board and chairman of the committee of trustees of the Los Angeles County Museum of Art. In addition, Mr. Kotick is the founder and co-chairman of the Call of Duty Endowment, a nonprofit, public benefit corporation that seeks to help organizations that provide job placement and training services for veterans.

Skills and Qualifications . Mr. Kotick’s qualifications for election to our Board include the depth of institutional knowledge and understanding of our organization, as well as the practical experience in a chief executive officer role, that he possesses by virtue of his 25 years of service to the Company, including as our President and Chief Executive Officer and, previously, as the Chairman of our Board. Mr. Kotick also brings to the Company his perspective as a board member at a variety of other organizations and his experience in helping those organizations achieve their diverse goals and overcome a wide range of challenges through changing economic and social times.

Barry Meyer

 

Retired Chairman and CEO of Warner Brothers Entertainment

Director Since 2014

Age 72

Business Experience . Mr. Meyer has been a director of Activision Blizzard since January 2014. At the end of 2013, Mr. Meyer retired as the chairman of Warner Brothers Entertainment Inc., an American producer of film, television and music entertainment. He joined Warner Brothers as a director of business affairs in 1971 and held positions of increasing responsibility throughout his tenure there, eventually serving as Warner Brothers’ chief executive officer and chairman from October 1999 until March 2013 and as chairman through December 2013. Mr. Meyer co-founded the consulting firm North Ten Mile Associates, LLC following his retirement from Warner Brothers, and currently serves as the manager and co-chief executive officer of that firm. Mr. Meyer is a member of the board of councilors of the USC School of Cinematic Arts, a member of the Academy of Motion Picture Arts & Sciences, a member and former governor of the Academy of Television Arts & Sciences, and a member and former director of the Hollywood Radio and Television Society. He also serves on the boards of directors of the Federal Reserve Bank of San Francisco and of Human Rights Watch, on the advisory board of the Smithsonian National Museum of American History, and on the advisory committee on International Economic Policy of the U.S. Department of State. Mr. Meyer holds a B.A. degree in English from the University of Rochester and a J.D. degree from Case Western Reserve University School of Law.

Skills and Qualifications . Mr. Meyer’s qualifications for election to our Board include over 40 years of leadership and managerial experience in one of the largest entertainment production companies in the world, including serving as its chief executive officer. Mr. Meyer possesses in-depth knowledge of both the business and creative aspects of the entertainment industry, both from his years at Warner Brothers and the leadership positions he held in various cultural institutions dedicated to visual and cinematic arts. Mr. Meyer brings with him a wealth of experience in nearly every facet of the entertainment industry, as well as a deep understanding of the unique challenges faced by large, multinational public companies.

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Robert J. Morgado

 

Retired Chairman and CEO of Warner Music Group

Director Since 1997

Age 73

Business Experience . Mr. Morgado has been a director of Activision Blizzard since February 1997. Mr. Morgado is chairman of Maroley Media Group, a media entertainment investment company he established in 1995. He previously served as the chairman and the chief executive officer of Warner Music Group, a music content company comprised of recorded music and music publishing businesses, from 1985 to 1995. Mr. Morgado serves on the board of directors of the Maui Arts & Cultural Center. He is also a member of the board of managers of Nest Top, the controlling shareholder of Nest Family and Nest Learning Systems, a children’s entertainment company, and Kaanapali Kai, a real estate investment company, where he serves as its chairman. Mr. Morgado holds a B.A. degree in history and philosophy from Chaminade University of Honolulu and an M.P.A. degree from The State University of New York.

Skills and Qualifications . Mr. Morgado’s qualifications for election to our Board include his extensive experience as a chief executive officer and a director at a variety of media and entertainment companies and his perspective as the founder and chairman of a media entertainment investment company. Mr. Morgado qualifies as an audit committee financial expert (as defined in the applicable rules of the SEC) and is financially sophisticated within the meaning of the NASDAQ Rules.

Peter Nolan

 

Senior Advisor to Leonard Green & Partners

Director Since 2013

Age 57

Business Experience . Mr. Nolan has been a director of Activision Blizzard since October 2013. Mr. Nolan is a senior advisor to Leonard Green & Partners, L.P., a private equity firm and one of the limited partners of ASAC (as defined herein), and was previously the managing partner of Leonard Green & Partners. Prior to becoming a partner at Leonard Green & Partners in 1997, Mr. Nolan served as a managing director and the co-head of Donaldson, Lufkin and Jenrette’s Los Angeles Investment Banking Division from 1990 to 1997, as a first vice president in corporate finance at Drexel Burnham Lambert from 1986 to 1990, and as a vice president at Prudential Securities, Inc. from 1982 to 1986. Prior to 1982, Mr. Nolan was an associate at Manufacturers Hanover Trust Company. Mr. Nolan currently serves on the boards of directors of AerSale Holdings, Inc., Motorsport Aftermarket Group and The Palms Hotel and Casino, all of which are companies in which Leonard Green & Partners has an ownership interest. Mr. Nolan also served on the Company’s Board from December 2003 until July 2008, when he resigned in connection with the consummation of the Vivendi Games Combination. Mr. Nolan holds a B.S. degree in agricultural economics and finance and an M.B.A. degree, both from Cornell University.

Skills and Qualifications . Mr. Nolan’s qualifications for election to our Board include his extensive experience in corporate finance and investment banking, including leadership roles at large international corporations with worldwide operations. His extensive and wide-ranging experience is demonstrated by his current directorships in five other companies operating in various industries. Mr. Nolan also brings with him a depth of institutional knowledge about the Company from his service on our Board from 2003 to 2008.

Casey Wasserman

 

Chairman and Chief Executive Officer of Wasserman

Director Since 2015

Age 41

Business Experience . Mr. Wasserman has been a director of Activision Blizzard since July 2015. Mr. Wasserman is the chairman and chief executive officer of Wasserman, a sports, entertainment and lifestyle marketing and management agency that he founded in 2002. In 2014, Los Angeles Mayor Eric Garcetti appointed Mr. Wasserman as chairman of LA2024, heading the city’s efforts to host the 2024 Olympic and Paralympic Games. Mr. Wasserman also serves as the president and chief executive officer of the Wasserman Foundation, as a trustee of the Los Angeles County Museum of Art and as a member of the executive committee for the UCLA Centennial Campaign. He also serves on the board of Vox Media, a digital media company. Mr. Wasserman holds a B.A. degree in political science from the University of California at Los Angeles.

Skills and Qualifications . Mr. Wasserman’s qualifications for election to our Board include his extensive management expertise in entertainment, sports and lifestyle marketing gained from his work as chairman and chief executive officer of Wasserman, which represents brands, properties and talent on a global basis.

Elaine Wynn

 

Co-founder of Wynn Resorts

Director Since 2013

Age 73

Business Experience . Ms. Wynn has been a director of Activision Blizzard since October 2013. Ms. Wynn is a co-founder of Wynn Resorts, a developer and operator of high-end hotels and casinos, and served as a director of the company from its inception in 2002 to May 2015. Prior to that, Ms. Wynn served in a similar capacity as a director of Mirage Resorts from 1976 to 2000. Ms. Wynn is the founding chairman of Communities in Schools of Nevada and the chairman of the national board of Communities in Schools. In addition, Ms. Wynn is president of the Nevada State Board of Education. She is also co-chairman of the board of trustees of the Los Angeles County Museum of Art, a member of the board of trustees of the Kennedy Center for the Performing Arts and a member of the board of governors of the Basketball Hall of Fame. Ms. Wynn holds a B.A. in political science from George Washington University.

Skills and Qualifications . Ms. Wynn’s qualifications for election to our Board include her extensive experience in the entertainment field, stemming from her lengthy service as a director of one of the top resort and casino companies in the world. Ms. Wynn also possesses strong leadership skills, illustrated by her numerous chairmanships in state and national-level organizations dedicated to educational reform, where she has received numerous accolades for her service. Ms. Wynn’s strong and practical leadership experience, as well as her in-depth knowledge about the operation of a large, international public company, demonstrates her aptitude for serving as director of the Company.

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Required Vote and Board Recommendation

In accordance with our Bylaws, a director nominee will be elected only if he or she receives a majority of the votes cast with respect to his or her election in an uncontested election (that is, the number of shares voted “for” that nominee exceeds the number of shares voted “against” that nominee that are present and not voted or that abstain from voting). For more information, see “Procedural Matters—How can I cast my vote with respect to each proposal and how many votes are required to approve each proposal” above and “Corporate Governance Matters—Board of Directors and Committees—Offer of Resignation in Connection with Failure to Receive More ‘For’ than ‘Against’ Votes” below.

Mr. Kotick, our Chief Executive Officer, and Mr. Kelly, the Chairman of our Board, may direct the voting of the shares held by ASAC II LP, an exempted limited partnership established under the laws of the Cayman Islands (“ASAC”), and acting by ASAC II LLC, its general partner. Messrs. Kotick and Kelly may also direct the voting of shares they beneficially own at their discretion, except they have agreed to vote any such shares that, when aggregated with ASAC’s shares, represent shares of our Common Stock in excess of 19.9% of our issued and outstanding Common Stock either in a manner proportionally consistent with the vote of the shares of Common Stock not owned by them or ASAC or in accordance with the recommendation, if any, of a majority of the members of our Board not affiliated with ASAC. For more information see “Certain Relationships and Related Transactions—Relationships and Transactions—Relationships and Transactions with ASAC—ASAC Stockholders Agreement” below. As of the record date for the Annual Meeting, ASAC and Messrs. Kotick and Kelly collectively held shares representing approximately 24.2% of our issued and outstanding Common Stock. Messrs. Kotick and Kelly are expected to vote the shares over which they have discretion FOR the election of each of the director nominees.

Your Board unanimously recommends that you vote FOR the election of each nominee for director.

 

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CORPORATE GOVERNANCE MATTERS

Overview

Our Board has long adhered to governance principles designed to assure its continued vitality and excellence in the execution of its duties. Our Board has responsibility for management oversight and providing strategic guidance to the Company. Our Board believes that it must remain well-informed about the issues, risks and opportunities facing the Company so that our Board members can exercise their fiduciary responsibilities to all of our stockholders. Our Board recognizes the importance of constantly improving our corporate governance practices and is committed to regularly reviewing the specific elements of our corporate governance framework and making changes to them when our Board deems them to be in the best interests of the Company and its stakeholders.

Board of Directors and Committees

Identification of Candidates for Election to our Board

 

Nominating and Corporate Governance Committee Process

Pursuant to our Corporate Governance Principles and Policies and the Nominating and Corporate Governance Committee’s charter, copies of both of which can be viewed on our website at http://investor.activision.com/corporate-governance.cfm , the Nominating and Corporate Governance Committee identifies and evaluates potential candidates to serve as members of our Board. The committee may consider candidates suggested by its members, other directors, senior management or stockholders and may, at the Company’s expense, retain search firms, consultants and other advisors to identify, screen and/or evaluate candidates. Candidates may be interviewed in person by directors and management.

The Nominating and Corporate Governance Committee will consider nominating persons who are submitted by stockholders, subject to the limitations described immediately below.

Stockholder Recommendation of Director Candidates

Our stockholders may recommend persons who qualify as independent under the NASDAQ Rules to serve as directors. In accordance with our Corporate Governance Principles and Policies, the Nominating and Corporate Governance Committee will review the qualifications of, and make recommendations to our Board regarding, any such shareholder recommendation that is submitted to us in writing and includes the following information:

the name, address, phone number and email address of the stockholder and evidence of the stockholder’s ownership of our Common Stock, including the number of shares beneficially owned by such person and the length of time of such ownership;

the name of the director candidate, the candidate’s address, phone number and email address, the candidate’s resume or a list of his or her qualifications to be a director of Activision Blizzard and the candidate’s consent to be named a director, if nominated, and to serve as a director, if elected; and

a description of any agreements, arrangements, understandings or relationships between the stockholder and the director candidate and any other persons (including those persons’ names), pursuant to which the recommendation is made.

In addition, stockholders may submit candidates for election as directors in accordance with our Bylaws, as described under “Director Nominations and Other Stockholder Proposals for 2017 Annual Meeting; Communicating with our Board” below.

Experience, Skills and Other Characteristics of Our Director Candidates

In accordance with our Corporate Governance Principles and Policies, all director nominees, whether or not they are incumbent directors, should have the appropriate experience, skills and other characteristics essential to serving as an effective Board member, assessed in the context of the perceived needs of our Board at the time, including:

Experience and Skills

Accounting/finance

Corporate governance

Entertainment industry background

Legal and regulatory knowledge

Strategic planning

International operations

In accordance with the Nominating and Corporate Governance Committee’s charter, the Nominating and Corporate Governance Committee, in its selection of director candidates, considers the following attributes, among others: experience; knowledge; skills; expertise; personal and professional integrity; character; business judgment; time availability in light of other commitments; dedication; and independence. The committee evaluates each director nominee’s experience, skills and other characteristics to ensure that they are consistent with the interests of our stockholders and complementary with the existing Board’s composition and

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needs. In doing so, it considers whether the nominee has experience or skills in the areas of entertainment, international operations, strategic planning, corporate governance, accounting and finance, law or other areas that are relevant to the Company’s activities and our Board’s effectiveness. Although the Company’s nominating procedures and policies do not prescribe specific standards for diversity, the committee also takes diversity into account, seeking to ensure a representation of diverse perspectives and experience.

Additionally, in accordance with its charter, the Nominating and Corporate Governance Committee annually oversees evaluations of our Board, our Board’s committees and individual directors that assess the experience, skills, qualifications, diversity and contributions of each individual director, as well as the performance of each standing committee of our Board and our Board as a whole.

Independence Determinations

 

In making its determination regarding director independence, our Board reviews and discusses all relevant information regarding each director’s relationships, transactions or arrangements, as required by the independence guidelines of the NASDAQ Rules, including current and prior relationships that each director or any of his or her family members has with the Company, our executive management and our independent accounting firm. To assist our Board in making these determinations, each director is required to complete a questionnaire on an annual basis.

Based on the information provided by each director concerning his or her background, employment and affiliations, our Board affirmatively determined that each of Messrs. Corti, Hartong, Meyer, Morgado, Nolan and Wasserman and Ms. Wynn is an independent director within the meaning of the NASDAQ Rules. Our Board also made this affirmative determination with respect to Richard Sarnoff, who resigned from our Board on July 1, 2015. Accordingly, our Board believes there are no such relationships or activities between the Company and any of these directors that require further review by our Board or that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, as none of these directors has a direct or indirect material relationship with the Company.

Board Leadership Structure

 

Our Board is led by the chairman of our Board, and that person does not also serve as our chief executive officer. Our Board feels that the division between the two roles is appropriate because our chief executive officer is responsible for the day-to-day management of the Company, while the responsibility of our Board is to oversee the chief executive officer’s performance of his or her function. Having different individuals serve as the chairman and the chief executive officer allows the chief executive officer to focus on his or her operational responsibilities, while keeping a measure of independence between the oversight function of our Board and those operating decisions. If our Board were to select our chief executive officer to serve as chairman, the independent directors would, in accordance with our Corporate Governance Principles and Policies, consider the appointment of a lead independent director.

Other Directorates

 

Pursuant to our Corporate Governance Principles and Policies, our directors must obtain the approval of the Nominating and Corporate Governance Committee before accepting any board membership at another publicly held company, and in no case can any director serve on the boards of more than four other publicly held companies.

Offer of Resignation in Connection with Failure to Receive More “For” than “Against” Votes

 

Pursuant to our Bylaws, a director nominee will be elected only if he or she receives a majority of the votes cast with respect to his or her election in an uncontested election (that is, the number of shares voted “for” that nominee exceeds the number of shares voted “against” that nominee that are present and not voted or that abstain from voting). If a nominee who currently serves as a director is not re-elected, Delaware law and our Bylaws provide that the director will continue to serve on our Board as a “holdover director” (i.e., until his or her successor has been duly elected and qualified, or until the earlier of his or her death, resignation or removal). Pursuant to our Corporate Governance Principles and Policies, if a director fails to receive the required number of votes for re-election, he or she must offer to resign from our Board.

Our Board or, at our Board’s discretion, the Nominating and Corporate Governance Committee, without, in either case, the participation of the director offering his or her resignation, will consider whether the continued service of any director so offering to resign is appropriate, by considering any factors it deems relevant (e.g., the underlying reasons for the “against” votes, the length of service and qualifications of the director, that director’s contributions to our Company and the skills and characteristics of that director) and, if our Board or the Nominating and Corporate Governance Committee, as the case may be, determines that the director continues to contribute significantly to the Company, his or her membership on our Board may continue.

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Offer of Resignation Upon Change in Professional Role

 

Pursuant to our Corporate Governance Principles and Policies, unless the Nominating and Corporate Governance Committee determines otherwise, if an independent director retires, changes employment or otherwise has a significant change in his or her professional role or responsibilities that may reasonably be seen to affect his or her ability to serve, he or she must offer to resign from our Board. Similarly, unless our Board or the Nominating and Corporate Governance Committee determines otherwise, or he or she has an agreement with us to the contrary, if a director who is employed by us retires, resigns or otherwise has a significant change in his or her professional role or responsibilities, he or she must offer his or her resignation from our Board.

Our Board or, at our Board’s discretion, the Nominating and Corporate Governance Committee, without, in either case, the participation of the director offering his or her resignation will consider whether the continued service of any director so offering to resign is appropriate in light of that change and, if our Board or the Nominating and Corporate Governance Committee, as the case may be, determines that the director continues to contribute significantly to the Company, his or her membership on our Board may continue.

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Board Meetings

 

In accordance with our Corporate Governance Principles and Policies, our Board generally meets at least quarterly, as well as in conjunction with the annual meeting of our stockholders. Our Board met 11 times during 2015, including at least once per quarter and in conjunction with the 2015 annual meeting of our stockholders. Each person who served on our Board during 2015 attended at least 75% of the aggregate of (1) the total number of meetings held by our Board during the period for which he or she was a director and (2) the total number of meetings held by each committee on which he or she served during the period in which he or she so served during the year.

Our Corporate Governance Principles and Policies also require that the independent directors meet in executive session outside of the presence of management at least two times per year. Three such executive sessions took place during 2015.

In accordance with our Corporate Governance Principles and Policies, all directors are expected to attend annual meetings of our stockholders. In 2015, six of the eight persons serving as directors at the time attended the annual meeting.

Annual Board Self-Evaluation

 

The Nominating and Corporate Governance Committee annually evaluates our Board’s overall performance, the overall performance of each of our Board’s standing committees and the performance of each individual director.

Director Orientation and Continuing Education

 

Board Orientation. New directors are provided with a comprehensive director orientation manual upon joining our Board that provides them with important information about the Company, our Board and the general roles and responsibilities of directors of publicly traded companies. Each new director is also invited to attend an “onboarding day”, during which he or she meets with our executives and other key members of our senior management.

Continuing Education. We recognize the benefit of continuing education for our directors. In addition to the education routinely provided to our directors by our executives and other key members of our senior management at meetings of our Board and its committees on topics impacting the Company, including emerging risks, industry trends, technological developments, economic forecasts and competitive challenges, we may engage third parties to provide in-boardroom education. To supplement the education we provide, we encourage our directors to attend external programs and provide financial and administrate support to the directors in connection therewith.

Board Committees

 

Our Board has three standing committees—the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee—each of which operates under a written charter approved by our Board. Further, from time to time, our Board forms special or ad hoc committees to which our Board delegates authority to administer certain of its duties.

The following table shows the current membership of our Board’s standing committees:

Name

Audit Committee

Compensation Committee

Nominating and Corporate

Governance Committee

Robert J. Corti

 

 

Brian G. Kelly

 

 

 

Hendrik Hartong III

 

 

Robert A. Kotick

 

 

 

Barry Meyer

 

 

Robert J. Morgado

Peter Nolan

 

 

Casey Wasserman

 

 

Elaine Wynn

 

 

  Chairperson

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Audit Committee

Our Audit Committee’s charter, which describes the composition and responsibilities of the committee, may be viewed on our website at http://investor.activision.com/corporate-governance.cfm.

With respect to membership on the Audit Committee, the charter currently provides that the committee must have at least three members and that:

all Audit Committee members must be determined by our Board to be independent directors under the NASDAQ Rules and the rules of the SEC and otherwise satisfy the NASDAQ Rules and the rules of the SEC with respect to audit committee membership;

no director may serve as a member of the Audit Committee if that director serves on the audit committees of more than two other public companies, unless our Board determines that the simultaneous service would not impair the ability of that director to effectively serve on the Audit Committee;

all Audit Committee members must understand fundamental financial statements;

at least one Audit Committee member must be designated by the Board as an “audit committee financial expert” as defined in the applicable rules of the SEC; and

no Audit Committee member can have participated in the preparation of the financial statements of Activision Blizzard or any of our current subsidiaries at any time during the three years prior to the proposed appointment of that Audit Committee member.

Further, the NASDAQ Rules require that at least one Audit Committee member meets the financial sophistication requirements set forth in those rules.

The current members of the Audit Committee are Messrs. Corti, Hartong and Morgado. Based upon information provided by each director concerning his background, employment and affiliations, our Board has determined that each member of the Audit Committee is an independent director under the NASDAQ Rules and the rules of the SEC and that each otherwise satisfies the NASDAQ requirements for audit committee membership (including that each meets the independence criteria set forth in Exchange Act Rule 10A-3 and is able to read and understand fundamental financial statements). Our Board has also determined that each Audit Committee member is an “audit committee financial expert” as defined in the applicable rules of the SEC and that each is “financially sophisticated” within the meaning of the NASDAQ Rules.

The purpose of the Audit Committee is to oversee the accounting and financial reporting processes of Activision Blizzard and our subsidiaries, the audits of our financial statements and our internal controls over financial reporting. The Audit Committee’s responsibilities include:

selecting, evaluating and overseeing our independent registered public accounting firm, including determining that firm’s compensation and evaluating that firm’s independence;

overseeing our annual audit and quarterly reviews;

overseeing our financial reporting process and internal controls, including:

reviewing and discussing with the independent auditors the results of the annual audit of our financial statements, including any comments or recommendations of our independent registered public accounting firm, and, based on that review and discussions and other considerations, recommending to our Board whether our financial statements should be included in our Annual Report on Form 10-K; and

discussing with our management the Company’s process for assessing and managing our exposure to risk;

overseeing policies regarding hiring employees from our independent registered public accounting firm and establishing procedures for the receipt and retention of accounting-related complaints and concerns; and

overseeing our policies relating to the ethical handling of conflicts of interest, including related party transactions (see “Certain Relationships and Related Transactions—Policies and Procedures—Review, Approval or Ratification of Transactions with Related Persons”).

Our independent registered public accounting firm reports directly to the Audit Committee.

Before we or any of our subsidiaries engage our independent registered public accounting firm to render audit or non-audit services, the Audit Committee must pre-approve the engagement. See “Audit-Related Matters—Pre-Approval Policies and Procedures” below for further detail. The Audit Committee’s charter authorizes it to engage independent counsel or other consultants or advisors, as it deems appropriate.

In accordance with our Corporate Governance Principles and Policies and the Audit Committee’s charter, the Audit Committee must meet at least quarterly. The Audit Committee met six times during 2015, including at least once each quarter.

Compensation Committee

Our Compensation Committee’s charter, which describes the composition and responsibilities of the committee, may be viewed on our website at http://investor.activision.com/corporate-governance.cfm.

Membership and Responsibilities

With respect to membership on the Compensation Committee, the charter currently provides that the committee must have at least two members, both of whom must be:

“non-employee directors” as defined in Rule 16b-3 under the Exchange Act;

“outside directors” as defined under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code, as amended (the “Internal Revenue Code”); and

determined by our Board to be independent directors under the NASDAQ Rules, including the requirements with respect to compensation committee composition.

The current members of the Compensation Committee are Messrs. Morgado and Wasserman and Ms. Wynn. Based upon information provided by each director concerning his or her

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background, employment and affiliations, our Board has determined that each member of the Compensation Committee is an outside director as defined under Section 162(m), a non-employee director as defined in Rule 16b-3 under the Exchange Act and an independent director under the NASDAQ Rules. Our Board has also determined that none of the members of the Compensation Committee has a relationship to the Company that is material to such director’s ability to be independent from management in connection with the duties of a Compensation Committee member.

The Compensation Committee discharges our Board’s responsibilities relating to compensation paid to our directors and executive officers and oversight of compensation under our equity incentive plans and other compensation policies, programs, agreements and arrangements. Please see “Executive Compensation—Compensation Discussion and Analysis—Decision-Making Approach to Compensation for Executive Officers—Roles of the Key Participants in the Executive Compensation Decision-Making Process” and “—Compensation Risk Management” below for a description of such responsibilities. The Compensation Committee is also responsible for:

reviewing and discussing compensation-related disclosure with our management, including in our proxy statement and Annual Report on Form 10-K; and

overseeing any proposals we submit to our stockholders on matters relating to executive compensation, including advisory votes on compensation and the frequency of such votes and approval of compensatory plans and any amendments to such plans.

As further described in “Executive Compensation—Compensation Discussion and Analysis—Decision-Making Approach to Compensation for Executive Officers—Roles of the Key Participants in the Executive Compensation Decision-Making Process”, the Compensation Committee consults with our management in formulating compensation plans, but ultimately the Compensation Committee exercises independent judgment in approving our compensation of executive officers.

In accordance with our Corporate Governance Principles and Policies, the Compensation Committee must meet at least four times annually. The Compensation Committee met eight times during 2015.

Engagement of Compensation Consultants

The Compensation Committee’s charter authorizes it to engage independent counsel or other consultants or advisors, including compensation consultants, to advise the Compensation Committee with respect to compensation and benefits for our directors and our executive officers and other employees. Since October 2013, the Compensation Committee has engaged Exequity LLP (“Exequity”). In accordance with its charter and the NASDAQ Rules, in connection with the engagement of any compensation consultant, the committee assesses whether any potential conflicts of interest existed with the compensation consultant, using the following factors: other services, if any, the compensation consultant provided to us; the significance of the fees paid by us as a percentage of the compensation consultant’s total revenues; the compensation consultant’s policies and procedures designed to prevent conflicts of interest; any business or personal relationships between the compensation consultant professionals engaged to advise our Compensation Committee and the members of our Compensation Committee; ownership of any Company stock by the compensation consultant professionals engaged to advise the Company; and any business or personal relationships between the compensation consultant professionals engaged to advise our Compensation Committee and our executive officers. Based on the evaluation of these factors, including information received from the compensation consultant addressing these factors, the committee concluded that Exequity’s service to the committee did not raise any conflicts of interest.

For additional information regarding the Compensation Committee, including its use of consultants, see “Executive Compensation—Compensation Discussion and Analysis” below.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee’s charter, which describes the composition and responsibilities of the committee, may be viewed on our website at http://investor.activision.com/corporate-governance.cfm.

The charter currently provides that the Nominating and Corporate Governance Committee must consist of at least two directors.

The current members of the Nominating and Corporate Governance Committee are Messrs. Meyer, Morgado and Nolan. Based upon information provided by each director concerning his background, employment and affiliations, our Board has determined that each member of the Nominating and Corporate Governance Committee is an independent director under the NASDAQ Rules.

The Nominating and Corporate Governance Committee’s responsibilities include:

assisting in identifying and recruiting director nominees;

periodically evaluating the size of our Board and recommending to our Board any appropriate increase or decrease;

making recommendations to our Board regarding the size and composition of each standing committee of our Board;

overseeing the evaluation of our Board and its committees;

overseeing our corporate governance affairs; and

determining the appropriate engagement with shareholder groups and proxy advisory firms on our submissions to our stockholders (which, in the case of matters relating to executive compensation, will be done in conjunction with the Compensation Committee).

In accordance with our Corporate Governance Principles and Policies, our Nominating and Corporate Governance Committee is also responsible for evaluating any stockholder proposals submitted to us for inclusion in any proxy statement for, and for consideration at, any meeting of our stockholders (which, in the case of stockholder proposals relating to the compensation of our directors or employees, will be done in conjunction with the Compensation Committee).

The Nominating and Corporate Governance Committee’s charter authorizes it to engage independent counsel or other consultants or advisors as it deems appropriate, including a search firm to assist in the identification of director candidates.

In accordance with our Corporate Governance Principles and Policies and the Nominating and Corporate Governance Committee’s charter, the Nominating and Corporate Governance Committee must meet at least twice annually. The Nominating and Corporate Governance Committee met six times during 2015.

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Our Board’s Role in Risk Oversight

 

It is the responsibility of our senior management to develop and implement the Company’s financial, operating and strategic plans, and identify, evaluate, manage and mitigate the risks inherent in those plans. It is our Board’s responsibility to understand and oversee those plans, the associated risks and the steps that senior management is taking to manage and mitigate those risks. Our Board and its standing committees exercise this risk oversight function in a variety of ways, including:

Compensation Risk Management

The Compensation Committee, together with legal counsel and members of our human resources team, reviews the Company’s incentive compensation plans annually to determine if they encourage employees to take inappropriate risks that are reasonably likely to have a material adverse effect on the Company. During 2015, and again in 2016, this review consisted of an analysis of each of our incentive compensation programs for our executives and other employees, including eligibility, performance measures, payment targets and maximum payments, payment timing and governance (including the applicable approval process).

The incentive compensation plans in which our employees are eligible to participate are designed to encourage achievement of high levels of performance against challenging targets that are tied to achievement of the overall corporate strategy, while mitigating potential risks. The following factors help mitigate risk:

performance measures are designed to focus executive performance on long-term stockholder value creation and do not encourage taking short-term risks at the expense of long-term results, balancing between financial, operational and qualitative targets and short-and long-term time horizons for achievement;

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although bonuses to our executives and our corporate employees under our Corporate Annual Incentive Plan (the “CAIP”) are based on the achievement of annual target goals: (1) they represent just one element of our employees’ total compensation; (2) the Compensation Committee approves the financial objectives and individual goals used to measure our executive officers’ performance; (3) payments in respect of financial performance measures are capped at 150% to 200% of target, depending on the specific metric, and payments in respect of individual performance measures are capped at 120% of target; and (4) the Compensation Committee has discretion under the plan to reduce or eliminate payments based on individual performance;

although bonuses to our sales employees are based on the achievement of targets relating to the sales of our games: (1) they represent just one element of our employees’ total compensation; (2) payments in respect of financial performance measures are capped at 125% to 200% of target, depending on the specific metric, and payments in respect of individual performance measures are capped at 120% of target; and (3) the Company has discretion under each plan to reduce or eliminate payments;

although bonuses to employees of our development studios are based on the achievement of targets relating to performance of the games being developed: (1) they represent just one element of our employees’ total compensation; (2) aggregate payments in respect of each title are subject to certain caps; and (3) the Company has discretion under each plan to reduce or eliminate payments;

equity awards, which represent a meaningful portion of the compensation paid to our executives, are subject to a multi-year vesting schedule, and any vesting in respect of underlying performance measures is capped at 100%, 125% or 200% of target;

our stockholder-approved incentive plan limits the size and/or value of the short- and long-term incentive awards any individual may receive for any given fiscal year;

our Compensation Committee annually reviews and approves the equity award guidelines for all eligible employees of the Company; and

incentive awards generally require at least two levels of approval (including, in the case of any award to one of our executive officers, Compensation Committee approval and, for any executive other than the chief executive officer, the CEO’s approval) and all equity-based awards to any employee require Compensation Committee approval in addition to any management-level approval.

We also have a number of governance policies in place that may also mitigate compensation-related risk, including:

our “clawback policy”, pursuant to which performance-based compensation may be recovered in the event of an earnings restatement if the amounts paid were in excess of what would have been paid had the restated numbers been used to determine payments;

provisions in our equity award agreements pursuant to which, should an executive officer breach his or her employment agreement with the Company, including his or her post-termination obligations, realized gain in respect of his or her awards may be recovered;

stock ownership guidelines for our executive officers, which require each executive to obtain and maintain equity ownership with a value equal to a specified multiple of his or her base salary (which guidelines are expected to be satisfied within five years of the policy’s 2012 adoption or, if later, the executive officer’s election);

our insider trading policies, which prohibit “shorting” our securities, engaging in “puts”, “calls” or other hedging transactions involving our securities or using margin accounts with our securities; and

our Code of Conduct, compliance with which must be certified by every employee on an annual basis.

Political Activities

Pursuant to our Code of Conduct, Company resources may not be used for employees’ personal political activities, and lobbying activities are permitted only in compliance with applicable law and by individuals designated to represent the Company in such capacity. Trade associations of which the Company is a member may take a stance on legislative matters or engage in lobbying on specific issues.

Code of Conduct

We have a code of ethics, our Code of Conduct, which applies to all of our directors and officers, including our chairman, chief executive officer, chief financial officer and chief accounting officer. We also have a chief compliance officer, who administers our ethics and compliance program. You can access a copy of our Code of Conduct on our website at http://investor.activision.com/corporate-governance.cfm. Furthermore, we will post any amendments to, or waivers of, the Code of Conduct that apply to our chairman, chief executive officer, chief financial officer or chief accounting officer, and any other related information, on that website .

Additional Corporate Governance Documentation

In addition to finding our Corporate Governance Principles and Policies, Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter and Code of Conduct on our website at http://investor.activision.com/corporate-governance.cfm, you can also find many of our other corporate governance documents. Please see “Helpful Resources” below for more information.

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EXECUTIVE OFFICERS

The following are biographical summaries of our executive officers other than Mr. Kotick, for whom a biographical summary is set forth under “Proposal 1—Election of Directors” above.

Dennis Durkin

 

Chief Financial Officer of Activision Blizzard

Age 45

Dennis Durkin became our Chief Financial Officer in March 2012. Prior to joining the Company, Mr. Durkin held a number of positions of increasing responsibility at Microsoft Corporation, a computing hardware and software manufacturer, most recently serving as the corporate vice president and chief operating and financial officer of Microsoft Corporation’s interactive entertainment business, which included the Xbox console business. Prior to joining Microsoft Corporation’s interactive entertainment business in 2006, Mr. Durkin worked on Microsoft Corporation’s corporate development and strategy team, including two years where he was based in London, England, driving pan-European activity. Before joining Microsoft Corporation, Mr. Durkin was a financial analyst at Alex. Brown and Company. Mr. Durkin holds a B.A. degree in government from Dartmouth College and an M.B.A. degree from Harvard University.

Eric Hirshberg

 

Chief Executive Officer of Activision Publishing, Inc.

Age 47

Eric Hirshberg became the Chief Executive Officer of Activision Publishing, a subsidiary of Activision Blizzard and one of our principal operating units, in September 2010. Prior to joining us, Mr. Hirshberg served in positions of increasing responsibility with Deutsch LA, a marketing and advertising agency, most recently serving as its co-chief executive officer and its chief creative officer. Prior to working at Deutsch LA, Mr. Hirshberg worked at Fattal & Collins, a marketing and advertising agency. Mr. Hirshberg holds a B.F.A. degree from the University of California at Los Angeles.

Michael Morhaime

 

President and Chief Executive Officer of Blizzard Entertainment, Inc.

Age 48

Michael Morhaime became Chief Executive Officer of Blizzard Entertainment, Inc. (“Blizzard Entertainment”) and an executive officer of Activision Blizzard in July 2008 in connection with the Vivendi Games Combination. In February 1991, Mr. Morhaime co-founded Blizzard Entertainment, now a subsidiary and one of our principal operating units, and transitioned to the role of Blizzard Entertainment’s President in April 1998. Mr. Morhaime served on the executive committee of Vivendi Games, Inc. (“Vivendi Games”) from January 1999, when Blizzard Entertainment became a subsidiary of Vivendi Games, until the consummation of the Vivendi Games Combination, when Blizzard Entertainment became a subsidiary of the Company. Mr. Morhaime holds a B.S. degree in electrical engineering from the University of California at Los Angeles.

Thomas Tippl

 

Chief Operating Officer of Activision Blizzard

Age 49

Thomas Tippl became our Chief Operating Officer in March 2010. Prior to that, he served as our Chief Corporate Officer from March 2009 until March 2010. In addition, Mr. Tippl served as our Chief Financial Officer from July 2008 until February 2012. Mr. Tippl joined the Company as the Chief Financial Officer of Activision Publishing in October 2005. Prior to joining the Company, Mr. Tippl served as the head of investor relations and shareholder services at The Procter & Gamble Company, a manufacturer of consumer goods products, from 2004 to 2005. Mr. Tippl also served as the finance director of Procter & Gamble’s Baby Care, Europe division, and as a member of the board of directors of the joint venture between Procter & Gamble and Fater in Italy from 2001 to 2003. Mr. Tippl co-founded Procter & Gamble’s Equity Venture Fund in 1999 and also served as the associate director of acquisitions and divestitures for Procter & Gamble from 1999 to 2001. Prior to 1999, Mr. Tippl served in various financial executive positions for Procter & Gamble in Europe, China and Japan. Mr. Tippl holds a master’s degree in economics and social sciences from the Vienna University of Economics and Business Administration.

Chris B. Walther

 

Chief Legal Officer of Activision Blizzard

Age 49

Chris B. Walther became our Chief Legal Officer in November 2009 and served as our Secretary from February 2010 until February 2011. Prior to joining us, Mr. Walther held a number of positions of increasing responsibility within the legal department of The Procter & Gamble Company from 1992 to 2009, including serving as the general counsel for Central and Eastern Europe, Middle East and Africa, general counsel for Northeast Asia and, most recently, as general counsel for Western Europe. Mr. Walther also led Procter & Gamble’s corporate and securities and mergers and acquisitions practices. Before joining Procter & Gamble, Mr. Walther served as a law clerk for Senior Judge Harry W. Wellford of the United States Sixth Circuit Court of Appeals. Since 2012, Mr. Walther has served on the board of directors of the Alliance for Children’s Rights. Mr. Walther has also served as our representative on the board of directors of the Entertainment Software Association since 2013. Mr. Walther holds a B.A. degree in history and Spanish from Centre College and a J.D. degree from the University of Kentucky College of Law.

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Riccardo Zacconi

 

Chief Executive Officer of King Digital Entertainment Limited

Age 48

Riccardo Zacconi serves as the Chief Executive Officer of King Digital Entertainment Limited (“King”) and became an executive officer of Activision Blizzard in February 2016 in connection with our acquisition of King. In March 2003, Mr. Zacconi co-founded King, now a subsidiary and one of our principal operating units, and has served as its chief executive officer since its founding. Prior to founding King, Mr. Zacconi served as vice president of European sales and marketing at uDate.com, an online dating service, from 2002 until that company’s acquisition later that year. From 2001 to 2002, Mr. Zacconi served as entrepreneur in residence at Benchmark Capital Partners, a venture capital firm. Prior to joining Benchmark Capital, he was managing director for Spray Network, an online messaging portal based in Hamburg, Germany, from 1999 until its sale in 2000. Prior to 1999, Mr. Zacconi served in various investment and consulting positions of increasing responsibility with The Boston Consulting Group and LEK Consulting, both of which are management consulting firms. Mr. Zacconi holds a B.A. degree in economics from LUISS University, in Italy.

 

None of our executive officers are related to any other of our executive officers or our directors, and each executive officer holds office at the discretion of our Board and subject to the terms of that executive officer’s employment agreement.

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EXECUTIVE COMPENSATION

The following discussion and tables set forth information with regard to compensation for services rendered by the named executive officers included in the “Summary Compensation Table” below (collectively, our “named executive officers” or “NEOs”) in all capacities to us and our subsidiaries during 2015.

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the material elements of our executive compensation program and the rationale for the program elements and decisions, through:

describing the business environment in which we operate and the resulting requirements for talent;

summarizing our compensation philosophy and objectives;

outlining our decision-making approach related to executive compensation; and

describing the elements and rationale behind our compensation programs and awards for 2015, as well as changes made for 2016.

This CD&A includes:

Overview (page 30 );

Decision-Making Approach to Compensation for Executive Officers (page 36 );

Elements of Our Executive Compensation Program for 2015 (page 38 );

Stock Ownership Guidelines (page 47 ); and

Impact of Tax and Accounting Considerations (page 47 ).

Overview

 

The Compensation Committee oversees Activision Blizzard’s compensation plans and policies, approves compensation for our executive officers and administers our stock compensation plans. This Compensation Discussion and Analysis describes our executive compensation philosophy and programs, as well as compensation-related actions taken during 2015 for our named executive officers. For 2015, our named executive officers are:

Robert A. Kotick, our President and Chief Executive Officer;

Dennis Durkin, our Chief Financial Officer;

Thomas Tippl, our Chief Operating Officer;

Eric Hirshberg, the Chief Executive Officer of Activision Publishing, one of our principal operating units; and

Michael Morhaime, the President and Chief Executive Officer of Blizzard Entertainment, another of our principal operating units.

Please see page 28 for biographical information with respect to our officers.

2015 Financial Highlights

2015 was another successful year for the Company. We achieved strong results and introduced new franchises with outstanding gameplay, expanded on exciting new business models and continued investing in some of the world’s most important entertainment franchises. During 2015:

we generated GAAP net revenues of $4.7 billion and non-GAAP net revenues of $4.6 billion (1) ;

our non-GAAP net revenues from digital online channels (2) accounted for a record 57% of our total non-GAAP net revenues, growing over 20% year-over-year;

our 2015 GAAP operating margin was 28% and our non-GAAP operating margin was 32%;

we delivered GAAP and non-GAAP diluted earnings per share of $1.19 and $1.32, respectively;

we generated GAAP operating cash flow of almost $1.2 billion; and

we delivered total shareholder return (“TSR”) (through stock price appreciation and dividend payments) of over 93%.

 



(1)

For information on the calculation and reconciliation of GAAP measures to non-GAAP measures, please see Appendix A attached to this proxy statement.

(2)

Non-GAAP net revenues from digital online channels represents revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, micro-transactions and products.

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2015 Operational Highlights

Our financial performance was driven by our operational execution during 2015. During 2015: (1)

people played our games for over 14 billion hours, up 16% year-over-year;

Activision Publishing’s Call of Duty: Black Ops III was the #1 top-selling console game globally for the calendar year, and Call of Duty was the #1 franchise in North America for the seventh year in a row;

Activision Publishing’s Destiny achieved record digital attach rates with 2015’s The Taken King expansion, with over 25 million registered users having spent nearly 3 billion hours playing the game;

Blizzard Entertainment’s World of Warcraft remained the #1 subscription-based massively multiplayer online role-playing game (i.e., MMORPG) in the world;

Blizzard Entertainment’s Legacy of the Void , the standalone third chapter of StarCraft II , sold through over one million copies in the first 24 hours of launch and has received multiple “strategy game of the year” awards;

over nine million people registered to participate in open beta testing of Blizzard Entertainment’s Overwatch , a team-based shooter to be released on PC and consoles in 2016; and

Blizzard Entertainment’s Hearthstone: Heroes of Warcraft , a free-to-play digital strategy card game, had more than 40 million registered players and ended 2015 with record engagement in multiple categories.

(1)

According to The NPD Group, GfK Chart-Track and Activision Blizzard internal estimates, as the case may be.

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Three-Year Financial Performance Metrics

Our Compensation Committee believes that a significant portion of our executive compensation should be tied to performance. We have used measures we believe are robust indicators of our overall performance, including profitability and cash flow. The tables below demonstrate our performance over the past three years.

 

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Aligning Pay with Performance

A portion of the potential annual compensation of each of our executive officers is the payment, if any, he may receive under the CAIP. That compensation, in turn, is contingent upon the executive achieving the financial and individual strategic targets set for him at the beginning of the relevant year. The following tables illustrate the relationship between the Company’s 2015 performance, as measured by three of our key financial metrics, and the 2015 CAIP payments awarded to our executive officers, as compared to the range of potential payments:

 

The graphic regarding actual payout ranges under the CAIP for 2015 also highlights the fact that, while the financial targets underlying the payment to each named executive officer were met or exceeded in each case, not every executive officer achieved all of his individual targets. Please see “—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—2015 Incentive Opportunities under the CAIP” below for more information.

Our Compensation Program Best Practices

We continue to implement and maintain best practices in our executive compensation programs and policies. These practices include:

Performance-Based Vesting of Equity Awards —We generally include performance-based vesting conditions for a significant portion of the equity awards made to our senior officers;

Multi-Year Vesting of Equity Awards —We make equity awards to our executive officers that vest over multiple years, which encourages a focus on long-term stockholder value creation;

No Guaranteed Incentive Bonuses —The Compensation Committee exercises discretion in determining final award payments under the CAIP, and no bonuses are paid if a minimum financial objective is not achieved;

Balanced Objectives Underlying Incentive Bonus —The CAIP opportunities for our executive officers include both financial and specific and measurable strategic objectives;

Two-Tier Approval for Incentive Awards —We generally require at least two levels of approval for incentive awards (i.e., management and our Compensation Committee);

Stock Ownership Guidelines —We have meaningful stock ownership guidelines for our executive officers; please see “—Stock Ownership Guidelines”;

Formal Risk Management Programs —We maintain strong internal controls, governance and review structures, as well as formal risk-management programs;

No Hedging of Company Stock —We prohibit our employees from directly or indirectly “shorting” our securities, engaging in “put” or “call” or other “hedging” transactions involving our stock or establishing or using a margin account with a broker-dealer to trade our securities;

Clawback Policy on Variable Pay —In the event of an earnings restatement, we may “claw back” performance-based compensation (including both annual and long-term incentive awards) paid to executives;

No Stock Option Repricing —The Activision Blizzard, Inc. 2014 Incentive Plan (the “2014 Plan”) prohibits the repricing of “underwater” equity awards;

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Independent Consultant Reporting Directly to Compensation Committee —The Compensation Committee engages the services of an independent executive compensation consultant that has no other relationship with the Company or its management and about whom additional information can be found, along with information regarding the Compensation Committee’s engagement of advisors, generally, under “Corporate Governance Matters—Board of Directors and Committees—Board Committees—Compensation Committee—Engagement of Compensation Consultants” above; and

Peer Group Review —The Compensation Committee monitors our peer group to ensure it continues to reflect an appropriate mix of the industry segments in which we compete, or plan to compete, for key talent; please see “—Decision-Making Approach to Compensation for Executive Officers—Compensation Surveys and Peer Company Data Referenced” below for more information about our executive peer group.

Actions in Response to Our Recent Shareholder Advisory Votes on Executive Compensation

Approximately 65% of the votes cast at the 2015 annual meeting of our stockholders were voted to approve our advisory, non-binding “say-on-pay” proposal. Considering these results, and after engaging with key stakeholders, the Compensation Committee performed a thorough review of our compensation practices. Although the Compensation Committee concluded that our general compensation philosophy remains appropriate, the Compensation Committee did identify specific areas for adjustment based on stockholder feedback, the most significant of which are described below. The Compensation Committee also reemphasized our core philosophy of tying pay to performance, so that the compensation our officers ultimately realize is largely contingent upon achieving the goals we establish for them.

As noted, in response to past “say-on-pay” results, members of our management conducted a stockholder outreach effort aimed at soliciting feedback from a number of our largest stockholders. A summary of the feedback received was presented to the Compensation Committee, and the items raised in that feedback have been discussed regularly by the Compensation Committee.

While our use of multi-year employment agreements with our executive officers generally prevents us from making immediate changes to our executive compensation program, the Compensation Committee has incorporated the stockholder feedback into its decision-making process. Since the 2014 annual meeting of our stockholders:

no time-based vesting restricted share units have been awarded to any named executive officer (with the exception of Mr. Morhaime, as his employment agreement, which was last amended in 2010, provides that we will grant him a specified number of time-based restricted share units each year); and

no time- or performance-based equity awards with the right to dividend equivalents have been awarded to any named executive officer.

The Compensation Committee takes the feedback received from stockholders seriously and will continue to incorporate such feedback into its decision-making process.

Highly Competitive Business Environment and Associated Talent Requirements

We operate in the interactive entertainment industry, which sits at the convergence of the gaming, entertainment and leisure, technology and consumer packaged goods sectors. Our industry is intensely competitive and constantly evolving. It features a number of unique characteristics, including:

a dependence on a relatively small number of titles for a disproportionate level of revenues and profits;

rising costs of development, partially due to increasingly complex technological requirements;

an increasing importance on building and growing key franchises with sustained game quality; and

a global consumer base that expects entertainment content delivered through an increasingly varied range of channels, including digital distribution.

We believe that, in order to succeed in this fast-changing business environment, we require executive talent with very specialized qualifications, including the following:

significant global experience managing complex brands and franchises;

in-depth knowledge of sophisticated strategies and operational models in the digital and entertainment segments; and

aptitude for, and experience in, managing entertainment and technology products and talent in a rapidly changing, high-risk environment.

Finding top executives with these characteristics requires recruitment of executives from a variety of industries, including those that are larger and more mature (e.g., gaming, entertainment and leisure, technology and consumer packaged goods companies).

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Compensation Philosophy and Objectives

To respond to these requirements for top executive talent, the Compensation Committee has established the following philosophy and objectives for the compensation of our executive officers:

What We Do

Align Compensation with Stockholder Interests —A substantial portion of the compensation opportunity should be variable, stock-based, and linked to performance metrics that are intended to increase stockholder value, so that executive compensation is aligned with the interests of stockholders.

Focus on Pay for Performance— Annual and long-term incentive awards should be linked to the Company’s financial performance, incentivizing executives to drive corporate performance.

Create Clearly Defined Short- and Long-Term Goals Aligned with Our Strategy— Performance goals, both short- and long-term, should be clearly defined to provide clear alignment between our business strategy, financial results and incentive payments.

Offer Competitive Total Compensation —Compensation should reflect the competitive talent market from which we recruit. “Total direct compensation” (the sum of salary, target bonuses and the annualized value of equity awards) should be targeted to attract, retain and motivate the highest caliber talent, as well as to reward outstanding performance.

Use an Independent Compensation Consultant —Our Compensation Committee should receive advice and analysis regarding executive compensation from a consultant that is independent and performs no other work for the Company.

Strive to Preserve the Tax Deductibility of Compensation —We should generally strive to preserve the tax deductibility of the compensation paid to our executives.

Use Employment Agreements to Attract and Retain Key Executive Talent —Employment agreements should be used to attract and retain executive talent.

Use “Upfront” Equity Awards —Use “upfront” equity awards in connection with an executive’s hire and with any promotion or other change in his role or responsibilities or the extension of his term of employment.

What We Don’t Do

Frequently Replace Our Management Team— Entering into employment agreements with each of our executive officers encourages long-term and invested relationships between them and the Company.

Put Our Executives Before Our Stockholders —Executive compensation that is variably linked to the performance of the Company helps to align the goals and interests of executive officers and stockholders.

Incentivize Excessive Risk Taking —Performance goals linked to our executive compensation do not encourage or incentivize excessive risk taking or risk exposure.

Use Arbitrary Performance Metrics —We do not use arbitrary or unreliable measurements of performance in assessing performance-based executive compensation.

Make Biased Compensation Decisions —Reviewing our executive and director compensation plans with an independent consultant introduces an unbiased and professional perspective on executive compensation.

 

Why Do We Use Employment Agreements?

We believe that having multi-year employment agreements with our named executive officers is critical in enabling us to attract and retain talent in a highly competitive industry and, as such, we have entered into an employment agreement with each of them. These employment agreements specify base salary, any minimum annual salary increase, annual incentive targets and the terms and conditions of equity awards, and include provisions regarding the consequences of termination of employment and restrictive covenants, including non-competition and non-solicitation provisions. The terms of each of these agreements have been approved by the Compensation Committee, which utilized its judgment to determine the appropriate amount and form of compensation and other terms of employment necessary to recruit, retain and motivate the executive, based in part upon the negotiations with the executive. Please see “—Employment Agreements” below for further information about the agreements with our named executive officers.

Why Do We Use “Upfront” Equity Awards?

Each named executive officer receives “upfront” equity awards in connection with his hire and with any promotion or other change in role or responsibilities or the extension of his term of employment. These equity awards generally vest over the contract term, either upon attainment of specified performance objectives or ratably, providing the executive with a significant equity position up front, which we believe enhances retention. With the exception of Mr. Morhaime, whose employment agreement was last amended in 2010 and provides for annual awards of equity, consistent with the compensation to which he was entitled from Vivendi Games prior to the Vivendi Games Combination, our named executive officers have generally not received annual equity awards. Please see “—Employment Agreements” below for further information about these equity awards. Please see “Elements of Our Executive Compensation Program for 2015-Equity Awards-Use of Employment Agreements and Their Impact on Reported Compensation” and “—Employment Agreements” below for further information about these equity awards.

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How Do We Determine the Size of Equity Awards?

In order to remain the leader in our industry, we must attract, retain and motivate the highest caliber of talent, as well as reward outstanding performance. Accordingly, in determining the estimated size of equity awards to any given executive, the Compensation Committee considers a number of reference points, including the executive’s then-current total direct compensation (i.e., the sum of salary, target bonuses and the annualized value of equity awards), the compensation paid to such executive’s peers within the Company and the compensation paid to executives in comparable positions at other companies within our peer group.

 

Decision-Making Approach to Compensation for Executive Officers

 

Roles of the Key Participants in the Executive Compensation Decision-Making Process

Decisions regarding compensation for our executive officers are at the sole discretion of our Compensation Committee. To help inform these decisions, the Compensation Committee regularly reviews materials, advice and analysis provided by our management and external compensation consultants in deciding on executive compensation matters, as described in more detail below.

Compensation Committee

Establishes our executive compensation philosophy.

Reviews and approves all compensation of our executive officers.

Has oversight of the Company’s long-term strategy for employee compensation.

Reviews and approves the corporate goals and objectives relevant to our chief executive officer’s compensation, evaluates his performance in light of those goals and objectives and determines his compensation based on that evaluation.

Selects and monitors the Company’s peer group.

Evaluates compensation-related information and recommendations provided by management and outside advisors.

Annually reviews the compensation payable to our Board.

Administers our equity incentive plans, including:

approving equity award guidelines;

approving all equity awards; and

monitoring our equity usage and resulting potential dilution.

Reviews and approves executive officer employment and severance agreements.

Evaluates broad industry trends and practices.

Engages, retains and, where appropriate, terminates its independent compensation consultants.

For additional information regarding the Compensation Committee, see “Corporate Governance Matters—Board of Directors and Committees—Board Committees—Compensation Committee” above.

Compensation Committee’s Independent Compensation Consultant

Reports directly to the Compensation Committee and regularly attends Compensation Committee meetings.

Consults with the members of the Compensation Committee outside of formal committee meetings and without the participation of management, when requested by the committee.

At the Compensation Committee’s direction, interacts with our management from time to time in order to obtain information it deems necessary to form its recommendations to the committee.

Provides the Compensation Committee advice on the appropriateness and market competitiveness of our executive and director compensation programs.

Presents third-party data and provides advice and expertise on director and executive compensation trends, pay programs and pay levels and other emerging “best practices” relating to such compensation.

Analyzes materials provided by management to the Compensation Committee to ensure that those materials are consistent with the Company’s stated philosophy with respect to director and executive compensation and reasonable vis-à-vis the Company’s peer group.

Assists the Compensation Committee with its determination as to who should be included in the Company’s peer group, and reviews current peer group members.

Since October 2013, the Compensation Committee has retained Exequity as its independent compensation consultant.

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Executive Officers and Management

Our management assists the Compensation Committee in formulating the Company’s compensation programs and plans, including by, among other things:

supporting the development of the materials for each Compensation Committee meeting;

regularly advising the Compensation Committee with respect to our business strategies and operational goals and plans;

regularly making recommendations to the Compensation Committee on the Company’s compensation practices, including with respect to effective types of incentive rewards and the individual performance of our executives; and

monitoring the Company’s peer group and trends in the market.

Our chief executive officer reviews the performance of the Company’s executive officers and provides his recommendations to the Compensation Committee on our officers’ compensation.

No member of our management has a direct role in determining his or her own compensation. Further, decisions pertaining to the compensation of our chief executive officer are reviewed and discussed by the Compensation Committee in executive session, without the presence of the chief executive officer or any other member of our management.

During 2015, the Compensation Committee consulted with our named executive officers, as well as our former Chief Strategy and Talent Officer, Humam Sakhnini, our Chief Legal Officer, Mr. Walther, and our Chief Compliance Officer and Corporate Secretary, Jeffrey Brown.

Factors Influencing Compensation Decisions

In general, the Compensation Committee evaluates a variety of factors when making compensation decisions for our executive officers, including:

the executive’s skill set, experience, historical performance and expected future contributions to the Company;

the potential effect of an executive’s departure if he or she were to leave the Company;

as a reference for internal pay equity, the level of total compensation for our other senior executives; and

to provide a market reference, compensation data from our peer group and published surveys.

Additionally, the terms on which any given executive officer is employed reflect the Compensation Committee’s independent judgment as to the amount and form of compensation necessary to recruit, retain and motivate that individual.

Total Direct Compensation Target

The Compensation Committee generally targets total direct compensation for our executive officers at between the 50th and 75th percentiles of executives in comparable positions at companies in our peer group and relevant survey data, believing that doing so best enables us to attract, retain and motivate the highest caliber talent, given the highly competitive market for executive talent in which we compete. This review is done both at the inception of an executive’s employment and on an annual basis. Other factors considered by the Compensation Committee include the executive’s then-current total direct compensation and performance by the executive.

Compensation Surveys and Peer Company Data Referenced

In reviewing the compensation of our executive officers, the Compensation Committee, with the support of its independent consultant and our management, annually consults third-party surveys prepared by compensation specialists with respect to companies with comparable revenues, market capitalization, industry focus, number of employees and other similar business-related factors in order to discern broader compensation trends in the market. During 2015, the surveys referenced included ones published by Croner and Radford.

In addition, the Compensation Committee utilized compensation data obtained from SEC filings made by companies among our peer group, discussed in more detail below, including compensation elements of the named executive officers of those companies, company-wide equity usage rates and potential dilution from equity awards.

The surveys and peer group data help the Compensation Committee understand the sectors in and with which we compete for talent, including, without limitation, gaming, entertainment and leisure, technology and consumer products.

Benchmarking our executive compensation programs and policies against the unique interactive entertainment industry is challenging given the limited number of direct competitors for which there is publicly-available information regarding their executive compensation programs and policies. Additionally, we frequently compete for executive talent with other industries. Therefore, the Compensation Committee has selected a 17-company peer group from across the four industry segments it believes best represent our business model and potential executive talent pool:

Gaming —Our core business, the video and computer gaming industry is a niche market in which we directly compete for consumer market share and talent;

Entertainment and Leisure —Generally multinational in nature, the entertainment and leisure industry is one with which we compete for talent and increasingly compete for consumer market share through digital content delivery;

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Technology —Generally multinational in nature, the technology industry is one with which we compete for talent; and

Consumer Packaged Goods —Generally multinational in nature, the consumer packaged goods industry is one with which we compete for talent.

Our peer group represents a diversified yet targeted collection of companies that, like us, operate both in the United States and internationally. In general, our peer group consists of companies with similar levels of annual revenues, but it also includes companies whose revenue levels we have surpassed in recent years and companies we strive to surpass in the future. Our 2015 revenues of $4.7 billion approximated the 35th percentile among these peer group companies. Revenues, in billions, as reported by each such company for its most recently ended fiscal year are shown below:

 

Our management and Compensation Committee monitor our peer group as our business model and potential talent pool evolve to ensure the companies to which we reference continue to reflect an appropriate mix of the industry segments in which we compete, or may compete, for key talent.

While the peer group provides the Compensation Committee with an important frame of reference, the Compensation Committee, as it deems appropriate, considers the compensation practices of other companies with which we compete directly for executive talent. Furthermore, we evaluate broader industry trends and practices to determine the appropriate elements of compensation and the effective design of each element.

Elements of Our Executive Compensation Program for 2015

 

An overview of the primary elements of our executive compensation program and their purposes is presented below. Not all of these elements are applicable to all named executive officers. Our compensation philosophy, including our use of equity awards, has allowed us to recruit, retain and motivate the best talent in our industry, as evidenced by our performance. We aim to incentivize our executives to drive corporate financial performance by basing a significant portion of their compensation on achieving financial and individual strategic targets.

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Compensation Element

Purpose

Principal Actions for 2015

Salary

Compensate for day-to-day responsibilities.

NEO salaries increased 4.0% to 5.0% as a result of the annual review process.

Annual bonus (e.g. , Corporate Annual Incentive Plan)*

Drive annual corporate and business unit financial results, as well as individual contributions toward strategic initiatives.

Financial metrics for NEOs included profitability and adjusted non-GAAP free cash flow measures.

NEOs received CAIP-related payouts ranging between 81% and 108% of target, as a result of financial and individual performance.

Equity awards (i.e., restricted share units, primarily with performance-based vesting criteria, and stock options)

Create alignment with stockholders, drive long-term stockholder value and promote employee retention.

None of our NEOs, with the exception of Mr. Morhaime, received an award as part of our annual equity award process. As previously noted, our executives generally receive “upfront” awards in connection with the entry into, or extension of, employment agreements. As such, Mr. Hirshberg received “upfront” awards during 2015 in connection with the extension of his employment agreement.

Health and welfare benefits; perquisites

Provide modest supplemental benefits to provide compensation and benefits that, in the aggregate, are competitive.

NEOs participated in generally the same benefits programs we make available to all of our employees and received limited perquisites.

Limited change of control and termination of employment payments/benefits

Ensure balanced assessment of, and contribution to, merger and acquisition activity and fair treatment in the event of termination.

No change of control or termination payments were triggered for any NEOs.

No NEOs other than Mr. Kotick have change of control protection.

Retirement payments/benefits

Provide modest supplemental retirement benefits to provide compensation and benefits that, in the aggregate, are competitive.

 

NEOs participated in the 401(k) plan we offer to all other employees.

*

In addition to the compensation elements described above, Mr. Morhaime also participates in the Blizzard Bonus Plan, which provides him with an annual discretionary payment, and a Blizzard Entertainment profit-sharing program under the 2014 Plan (the “Morhaime Profit Sharing Plan”), which provides Mr. Morhaime with a portion of Blizzard Entertainment’s operating profit, and each thereby provides him with a meaningful incentive to continue to drive the profitability of the Blizzard Entertainment operating unit.

Salary

As noted above, each of our named executive officers is party to an employment agreement with us that specifies, among other things, such executive’s initial salary and any contractually guaranteed minimum annual salary increases. Aside from any contractually guaranteed minimum requirements, salary increases are generally only provided to an executive officer:

upon his or her hire or entry into a new or revised employment agreement with the Company or one of its subsidiaries; or

in connection with our annual review of executive base salaries, where increases are determined based on performance during the previous fiscal year, with reference to competitive market data and, for internal pay equity purposes, salaries of our other executives.

As it does each year, in March 2015 and, again, in March 2016, the Compensation Committee reviewed a competitive target compensation assessment for each executive officer using our peer group and survey data to evaluate the competitiveness of our executive compensation program and considered potential base salary increases for such year. For information about our peer group, see “—Decision-Making Approach to Compensation for Executive Officers—Compensation Surveys and Peer Company Data Referenced” above. After taking into consideration a number of factors for each year (e.g., each executive’s performance during the prior year and the target total compensation for each of our senior executives vis-à-vis the market data), the Compensation Committee established annual base salary rates for our named executive officers for the year.

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The table below reflects the salaries approved for 2015 and 2016, along with any other adjustments during 2015 and any increases to which the executives were entitled under their contracts:

 

Name

Salary as of

12/31/2014

Increase

per 2015

Annual

Review (1)

 

 

Salary as

Adjusted

During 2015

Annual

Review (1)

 

Increase per

2016 Annual

Review (1)

 

 

Salary

Approved

for 2016 (1)

 

 

Contractual Entitlement

Robert A. Kotick

$

2,188,200

4.0

% (2)

$

2,275,728

(2)

4.0

%

$

2,366,757

(2)

Minimum of avg. increase of executive team (excluding increases in connection with promotions and contract guarantees)

Dennis Durkin

$

716,625

5.0

%

$

752,456

 

5.0

%

$

790,079

 

Not less than 5.0% per year

Thomas Tippl

$

1,250,000

4.0

%

$

1,300,000

 

5.0

%

$

1,365,000

 

Minimum of avg. increase of executive team (excluding increases in connection with promotions and contract guarantees)

Eric Hirshberg (3)

$

897,160

5.0

%

$

942,018

 

(3)  

$

1,000,000

(3)  

Not less than 5.0% per year

Michael Morhaime

$

887,118

4.0

%

$

922,603

 

4.0

%

$

959,507

 

None

(1)

Other than as discussed in footnotes (2) and (3) below, the increases to base salary for 2015 were effective on March 1, 2015, and the increases for 2016 were effective on February 28, 2016.

(2)

Mr. Kotick’s annual base salary for any year is determined in March, in connection with our annual review of executive base salaries, but, in accordance with his employment agreement, the increases to that base salary are retroactively effective to January 1st of the year.

(3)

In accordance with his employment agreement, as amended in October 2015, Mr. Hirshberg’s annual base salary was increased by 6.2% effective September 4, 2015 and was not eligible for further increase during the 2016 annual review of executive base salaries.

The Compensation Committee may, at its discretion, further adjust the salary of any of our named executive officers at any time.

Corporate Annual Incentive Plan and Other Performance-Based Bonuses

2015 Incentive Opportunities under the CAIP

To qualify the payments to our executives under the CAIP for 2015 for tax deductibility, while retaining flexibility to make downward adjustments to reflect each executive’s actual performance, the awards were structured so that there was a single performance objective that, if met or exceeded, would result in the payment of a bonus to each executive of the maximum allowed under the 2014 Plan, subject to the Compensation Committee’s use of negative discretion. That is, if our adjusted 2015 non-GAAP operating income was at least 75% of the adjusted non-GAAP operating income target for the year set forth in the annual operating plan approved by our Board for that year (such plan for any given year, the “AOP”), the bonus to be paid to each executive would be $10,000,000 less the amount of any other “senior executive plan bonus” within the meaning of the 2014 Plan that was paid or to be paid to that person for 2015, and subject to the Compensation Committee’s use of negative discretion to reduce or eliminate that bonus.

In regards to the Compensation Committee’s use of that negative discretion, when approving the 2015 CAIP opportunities, it expressed the intent to reduce or eliminate all such bonuses if our adjusted 2015 non-GAAP operating income was not 85% or more of the adjusted non-GAAP operating income target for the year set forth in the 2015 AOP. The Compensation Committee also expressed the intent to reduce the bonus for each executive officer to the amount for which he was eligible in accordance with the formula described below under “—Resulting 2015 Payments under the CAIP”, which is based, in part, on his target and maximum opportunity.

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In setting the minimum, target and maximum payout opportunities for each of our named executive officers under the CAIP for 2015, the Compensation Committee considered any requirements set forth in the applicable employment agreements, competitive market data, our desired pay mix and the compensation levels of our other senior executives. If a named executive officer satisfied (but did not exceed) all performance goals, the executive officer was eligible to receive a payment equal to his target payment, although the Compensation Committee retained the discretion to reduce this amount. Based upon the established performance goals, payments under the CAIP for 2015 to our named executive officers could have ranged as follows:

Name

2015 Corporate Annual

Performance Goal Payout Opportunity

(% of 2015 Salary)

Minimum

Target

 

Maximum (1)

Robert A. Kotick

0%

200

%

321%

Dennis Durkin

0%

100

%

161%

Thomas Tippl

0%

150

%

241%

Eric Hirshberg

0%

100

%

163%

Michael Morhaime

0%

27

% (2)

44%

(1)

The maximum payments (expressed here as a percentage of salary) vary for each executive based on his actual base salary, his target opportunity, and his individual performance measures, including the relative weighting and maximum payments with respect to each, as set forth in the 2015 CAIP. The 2014 Plan caps maximum payments of “senior executive plan bonuses” to each individual executive at $10,000,000 per year; actual maximum payments under the CAIP (expressed as a percentage of salary) for each measure are shown in the tables below.

(2)

In accordance with his employment agreement, Mr. Morhaime’s target CAIP opportunity is 27% of his salary. In addition to being eligible for a CAIP bonus, Mr. Morhaime is also eligible to participate in the Blizzard Bonus Plan and the Morhaime Profit Sharing Plan, both of which are discussed in more detail below (see respectively “—Other Cash Bonus Programs or Awards for 2015” and “Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Morhaime Profit Sharing Plan”).

Determination of 2015 Performance Goals for the CAIP

Our Compensation Committee established the financial and individual strategic performance goals based on the 2015 AOP.

Financial Objectives. For our named executive officers, 60% of their target opportunity under the CAIP for 2015 was weighted on measures of non-GAAP profitability and adjusted non-GAAP free cash flow. The Compensation Committee believes that non-GAAP profitability and adjusted non-GAAP free cash flow are robust indicators of our overall performance, capturing fluctuations in sales as well as operating costs, and, as such, provide incentives to our executives to achieve goals that contribute to increasing stockholder value. Other measures the committee considered but excluded when initially designing the CAIP included revenues, excluded because it does not capture operating costs, and TSR, excluded because awards under our equity incentive plans already incentivize stock appreciation.

Individual Performance Measures. Forty percent of the target opportunity for each named executive officer under the CAIP for 2015 was based on specific and measurable individual performance measures that supported our overall strategy and the officer’s business objectives for the year, such as successful product launches, controlling costs and strategic hiring decisions. These objectives, established in March 2015, specified an action or event to be achieved during the year (e.g., title xyz must sell # number of units on or before December 31, 2015). Performance was measured against each pre-established objective on an “all-or-nothing” basis during March 2016.

The Compensation Committee believes that the specific goals chosen required significant profitability, demanded superior performance from our management team and drove accountability for Activision Blizzard and/or applicable business units for each executive.

In addition, and as noted above, the Compensation Committee expressed the intent to reduce or eliminate all bonuses under the CAIP if our adjusted 2015 non-GAAP operating income was not 85% or more of the adjusted non-GAAP operating income target for the year set forth in the 2015 AOP.

Our Compensation Committee also established limits on the payments made under the CAIP for “overachievement”. Payments in respect of individual performance measures are capped at 120% of the underlying target amount. The following table illustrates the relationship between the achievement of the financial measures and the resulting payouts to our executive officers:

 

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Achievement of Metrics Underlying 2015 Financial Goals for the CAIP

The 2015 financial performance goals that the Compensation Committee approved for use in connection with the CAIP and other performance-related compensation were based on our 2015 AOP. The number of titles we release fluctuates from year-to-year and, as such, the financial goals underlying our AOP for a year may be lower than the goals—or results—from a prior year. The achievement of the financial performance goals relevant to the bonuses of our named executive officers under the CAIP for 2015 is set forth below:

Non-GAAP Financial Performance Measures (1)

(dollars in millions, except share-based amounts)

Performance Goals and Actual Results

AOP

Goal (2)

 

Actual

Results

Actual

Achievement

 

Resulting CAIP

Achievement

 

Activision Blizzard Adjusted Operating Income (3)

$

1,337.0

$

1,480.1

110.7%

 

110.7%

 

Activision Blizzard Diluted Earnings Per Share (4)

$

1.15

$

1.34

116.5%

 

116.5%

 

Activision Blizzard Adjusted Free Cash Flow (5)

$

685.0

$

1,187.0

173.3%

 

150.0%

 

Blizzard Entertainment Adjusted Operating Income (3)

$

517.0

$

562.3

108.8%

 

108.8%

 

Activision Publishing Adjusted Operating Income

$

835.0

$

898.9

107.6%

 

107.6%

 

(1)

The corporate performance measures used in the CAIP are non-GAAP financial measures. An explanation of how these measures were calculated is provided in the following footnotes. For 2015, financial metrics assume constant foreign exchange rates, which means we convert current period results into U.S. dollars using the average exchange rate from the AOP established at the beginning of the period (i.e., the AOP foreign exchange rates), rather than the actual exchange rate in effect during the relevant period. We estimate that utilizing the AOP foreign exchange rates had $14 million of impact on our adjusted non-GAAP operating income, $0.02 of impact on our non-GAAP diluted earnings per share and $(15) million of impact on our adjusted non-GAAP free cash flow for the year. We also estimate that using utilizing the AOP foreign exchange rates had $31 million of impact on Activision Publishing’s adjusted non-GAAP operating income and $2 million of impact on Blizzard Entertainment’s adjusted non-GAAP operating income for the year. For additional information on the reconciliation of GAAP measures to non-GAAP measures, see Appendix A attached to this proxy statement.

(2)

For purposes of determining CAIP performance, financial goals may, at the discretion of the Compensation Committee, exclude the impact of any extraordinary transaction (i.e., non-recurring corporate transaction or legal expense matter that results in expenses exceeding $10,000,000 for the year). No such adjustments were made for 2015.

(3)

Adjusted non-GAAP operating income measures exclude, as applicable: the impact of the change in deferred net revenues and related cost of sales with respect to certain of our online-enabled games; expenses related to stock-based payments; expenses related to restructuring; the amortization of intangibles and impairment of intangible assets and goodwill from purchase accounting; fees and other expenses related to acquisitions, including the acquisition of King, and the debt financings related thereto; and the tax benefits adjustments associated with any of the aforementioned items.

(4)

Activision Blizzard non-GAAP diluted earnings per share is calculated by dividing non-GAAP net income by weighted average diluted shares.

(5)

Activision Blizzard adjusted non-GAAP free cash flow is an internal measure calculated by subtracting year-over-year cash changes related to working capital (excluding certain one-time items and timing of tax payments) and capital expenditures from the Company’s non-GAAP net income (excluding the after-tax effect of interest and other income/expense as well as depreciation expense).

Resulting 2015 Payments under the CAIP

Since we exceeded the threshold level of 85% of the adjusted non-GAAP operating income target for the year set forth in the 2015 AOP, each of our named executive officers was eligible to receive a bonus of $10,000,000 for 2015, subject to the Compensation Committee’s use of negative discretion to reduce or eliminate that bonus. In recognition of their significant contributions to our transformative acquisition of King, $300,000 was included in the 2015 CAIP award to each of Messrs. Durkin and Tippl. The Compensation Committee used this discretion in order to qualify those incremental awards for tax deductibility.

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To calculate the amount of the bonus that each named executive officer would receive, the following formula, applied using straight-line interpolation, was used:

 

 

The following table shows the weighting, expressed as a percentage, assigned to each of the performance measures underlying each named executive officer’s bonus opportunity under the CAIP for 2015 and the maximum and actual payout as a percentage of the target.

Name/Measure

Weight

 

Maximum

CAIP Achievement

(As % of Target)

 

Resulting CAIP

Performance

(As % of Target)

 

 

Robert A. Kotick

 

 

 

 

 

 

 

Activision Blizzard Diluted Earnings Per Share

30

%

200

%

117

%

 

Activision Blizzard Adjusted Operating Income

15

 

200

 

111

 

 

Activision Blizzard Adjusted Free Cash Flow

15

 

150

 

150

 

 

Focus on Franchises*

25

 

120

 

50

 

 

Corporate Development*

10

 

120

 

120

 

 

Organizational Development*

5

 

120

 

110

 

 

TOTAL

100

%

161

%

107

%

 

Dennis Durkin

 

 

 

 

 

 

 

Activision Blizzard Diluted Earnings Per Share

30

%

200

%

117

%

 

Activision Blizzard Adjusted Operating Income

15

 

200

 

111

 

 

Activision Blizzard Adjusted Free Cash Flow

15

 

150

 

150

 

 

Focus on Franchises*

10

 

120

 

100

 

 

Corporate Development*

10

 

120

 

120

 

 

Cost Savings*

10

 

120

 

120

 

 

Organizational Development*

10

 

120

 

0

 

 

TOTAL

100

%

161

%

108

%

 

Thomas Tippl

 

 

 

 

 

 

 

Activision Blizzard Diluted Earnings Per Share

30

%

200

%

117

%

 

Activision Blizzard Adjusted Operating Income

15

 

200

 

111

 

 

Activision Blizzard Adjusted Free Cash Flow

15

 

150

 

150

 

 

Focus on Franchises*

25

 

120

 

50

 

 

Corporate Development*

10

 

120

 

120

 

 

Organizational Development*

5

 

120

 

110

 

 

TOTAL

100

%

161

%

107

%

 

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Name/Measure

Weight

 

Maximum

CAIP Achievement

(As % of Target)

 

Resulting CAIP

Performance

(As % of Target)

 

 

Eric Hirshberg

 

 

 

 

 

 

 

Activision Publishing Adjusted Operating Income

50

%

200

%

108

%

 

Activision Blizzard Adjusted Free Cash Flow

10

 

150

 

150

 

 

Focus on Franchises*

30

 

120

 

73

 

 

Organizational Development*

10

 

120

 

110

 

 

TOTAL

100

%

163

%

102

%

 

Michael Morhaime

 

 

 

 

 

 

 

Blizzard Entertainment Adjusted Operating Income

50

%

200

%

109

%

 

Activision Blizzard Adjusted Free Cash Flow

10

 

150

 

150

 

 

Focus on Franchises*

30

 

120

 

0

 

 

Organizational Development*

10

 

120

 

120

 

 

TOTAL

100

%

163

%

81

%

 

*

We believe that disclosing specific, non-quantitative corporate objectives for the year could affect us adversely by, for example, providing confidential information on business operations and forward-looking strategic plans to our customers and competitors that could result in substantial competitive harm. Therefore, only a brief description and the weighting of each goal for each of our named executive officers for 2015 are shown.

All CAIP payments were based on actual eligible earnings and the achievement of specified Company and individual performance measures and the weighting thereof.

Name

 

Target Payment

($ value)

Actual Payment*

(as % of target)

 

Actual Payment*

($ value)

Robert A. Kotick

$

4,546,070

107

%

$

4,844,383

Dennis Durkin

$

745,566

108

%

$

805,673

Thomas Tippl

$

1,935,577

107

%

$

2,062,589

Eric Hirshberg

$

950,340

102

%

$

967,636

Michael Morhaime

$

247,260

81

%

$

201,224

*

In recognition of their significant contributions to our transformative acquisition of King, the award to each of Messrs. Durkin and Tippl included, at the discretion of the Compensation Committee and in addition to the formulaic bonus, a $300,000 performance-based bonus for 2015, the amount of which is not reflected in this table. In order to qualify the incremental payments for tax deductibility, the Compensation Committee used its discretion to reduce the bonus payable to each under the 2014 Plan by a lesser degree.

Morhaime Profit Sharing Plan

In addition to the CAIP, discussed above, in accordance with his employment agreement, Mr. Morhaime received a payment for 2015 under the Morhaime Profit Sharing Plan. The Morhaime Profit Sharing Plan is commensurate with the Blizzard Profit Sharing Plan, a program that predates the 2008 Vivendi Games Combination and provides employees of Blizzard Entertainment with the opportunity to share in the earnings generated by Blizzard Entertainment. In order to maximize the deductibility of those payments as performance-based compensation under Section 162(m), rather than participating directly in the Blizzard Profit Sharing Plan, Mr. Morhaime’s opportunity to receive profit sharing payments is under the 2014 Plan (and is, therefore, known as the “Morhaime Profit Sharing Plan”). The Compensation Committee made the decision to retain a profit sharing component in Mr. Morhaime’s compensation following the Vivendi Games Combination due to Mr. Morhaime’s position, as well as our strategic focus on profitability, the prevalent market practice of profit sharing programs in the gaming industry, contractual obligations and our desire to incentivize and reward his contribution to Blizzard Entertainment and Activision Blizzard profits. Under the Morhaime Profit Sharing Plan, Mr. Morhaime is entitled to up to 6% of the “profit sharing pool” established pursuant to the Blizzard Entertainment Profit Sharing Plan. However, the Compensation Committee may exercise negative discretion with respect to his actual annual percentage interest in the pool, subject to a specified minimum percentage. For 2015, Mr. Morhaime received the minimum payment under the Morhaime Profit Sharing Plan to which he was entitled (i.e., $2,802,414).

Other Cash Bonus Programs or Awards for 2015

Blizzard Bonus Plan

In addition to the CAIP and the Morhaime Profit Sharing Plan, discussed above, in accordance with his employment agreement, Mr. Morhaime received a payment for 2015 under the Blizzard Bonus Plan. Under the Blizzard Bonus Plan, a Blizzard Entertainment program that, like the Morhaime Profit Sharing Plan, predates the 2008 Vivendi Games Combination, Mr. Morhaime is eligible to receive an end-of-year bonus, the target amount of which is 37% of his base salary, the minimum of which is 18.5% of his base salary and the actual amount of which is otherwise based on a subjective determination by the Compensation Committee. For 2015, Mr. Morhaime received the target amount (i.e., $341,363).

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Equity Awards

Philosophy

Our equity incentive program is intended to drive long-term value creation, create alignment with stockholders’ interests and encourage retention of key executives. The program consists of restricted share units, primarily with performance-based vesting criteria, and stock options. In awarding equity to executive officers, we generally target delivering a defined value. Specifically, in determining the estimated grant value of “upfront” equity awards to executive officers, we consider a number of reference points, including compensation paid to the executive’s peers within the Company and the executive’s base salary and target annual bonuses such that annualized total direct compensation generally targets between the 50th and 75th percentiles of executives in comparable positions when compared to our peer companies or applicable survey data. We may also provide supplemental equity awards to our executive officers during the term of their employment agreement, if there are particular circumstances that warrant doing so, including outstanding performance.

We utilize a mix of equity awards:

restricted share unit awards, the vast majority of which have performance-based vesting criteria designed to incentivize our executives to achieve specific performance objectives that align with our multi-year business strategy; and

stock options, which directly align an executive’s interests to that of our stockholders, as any financial gain is conditioned upon appreciation of our Common Stock and, as such, directly links executive pay with Company performance.

We believe a combination of restricted share units (primarily with performance-based vesting criteria) and stock options appropriately balances the various objectives of the equity incentive program because it promotes long-term value creation critical to driving TSR, directly aligns executive compensation with stockholder interests through share ownership and encourages our key executives to remain engaged with our organization through the vesting date of the awards.

Use of Employment Agreements and Their Impact on Reported Compensation

As discussed above (see “—Overview—Compensation Philosophy and Objectives”), we believe that entering into employment agreements with our executives is important to attracting and retaining top talent. When we make an equity award to an executive officer, it is typically done in connection with the initial entry into an employment agreement, the renewal of that agreement or an amendment to that agreement in connection with a promotion or other assumption of new responsibilities. By providing “upfront” awards, we align interests of our executives with those of our stockholders over the entire term of the executive’s employment. Additionally, by making equity awards with target values that are based upon the length of the term of the agreement, rather than a single year, we ensure executive support of our multi-year business strategy. Our practice of using “upfront” awards in lieu of annual awards may result in the equity-based compensation, and, as such, the total compensation, reported for each executive to differ significantly from year to year, depending on whether he entered into an employment agreement (or amendment thereof), and therefore received an equity award, in a given year. We view the value of these “upfront” equity awards on an annualized basis over the life of the employment agreement when evaluating an executive’s total compensation.

During 2015, we provided “upfront” equity awards to Mr. Hirshberg in conjunction with the extension of his term of employment. Please see “—Employment Agreements—Eric Hirshberg” below.

Annual and Other Equity Awards

We do not generally make annual equity awards to our executive officers, although Mr. Morhaime’s employment agreement, which was last amended in 2010, provides for annual equity awards, consistent with the compensation to which he was entitled from Vivendi Games prior to the Vivendi Games Combination in 2008. Please see “—Employment Agreements—Michael Morhaime” below. Accordingly, during 2015 we made equity awards to Mr. Morhaime as part of the broader annual grant of equity to our employees.

Use of Performance-Based Equity Awards

The Compensation Committee believes that, in general, equity awards made in connection with a new or amended employment agreement with an executive officer should include an award with performance-based vesting criteria. Consistent with that philosophy, certain restricted share unit awards made to Messrs. Kotick, Durkin, Tippl and Hirshberg during or prior to 2015 have vesting that is contingent on the achievement of specified profitability-focused performance objectives (as well as, in the case of awards to Mr. Kotick, relative total shareholder return). Further, Mr. Hirshberg, the only named executive officer whose employment agreement was entered into, or amended, in 2015, received performance-based vesting restricted share units and stock options and did not receive any time-based vesting restricted share units in connection with the extension of his employment. The Compensation Committee chooses performance objectives that it believes relate to measures of overall Company performance on which our executives have direct impact. For the performance awards to Mr. Kotick, vesting is based on our non-GAAP diluted earnings per share, adjusted non-GAAP free cash flow and relative TSR. For Mr. Durkin, vesting is based on our non-GAAP diluted earnings per share. For Mr. Tippl, vesting is based on our non-GAAP diluted earnings per share, our adjusted non-GAAP free cash flow and Blizzard Entertainment’s adjusted non-GAAP operating income. For Mr. Hirshberg, vesting is based on Activision Publishing’s adjusted non-GAAP operating income. Please see “—Employment Agreements” below for further details about each award.

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2015 Vesting and Cancellation of Performance-Based Equity Awards

Based on Company performance during 2015 and, for Mr. Kotick, over a multi-year period including 2015, performance-based equity awards to our named executive officers vested or were cancelled as follows:

Mr. Kotick : 1,206,641 performance shares vested and 223,338 were cancelled, as performance was above the target, but fell below the maximum, as follows:

349,736 vested and 119,142 were cancelled based on our 2014 and 2015 non-GAAP diluted earnings per share;

233,005 vested and 19,468 were cancelled based on our 2014 and adjusted 2015 non-GAAP free cash flow;

108,198 vested and 39,462 were cancelled based on our relative TSR for the period July 1, 2011 through December 31, 2015;

131,064 vested and 45,266 were cancelled based on our relative TSR for the period January 1, 2012 through December 31, 2015;

75,487 vested based on our relative TSR for the period January 1, 2013 through December 31, 2015; and      

309,151 vested based on our relative TSR for the period January 1, 2014 through December 31, 2015;

Mr. Durkin : 90,000 restricted share units vested based on our 2015 non-GAAP diluted earnings per share;

Mr. Tippl : 280,729 restricted share units vested and 60,181 were cancelled, as performance was above the target, but fell below the maximum, as follows:

120,374 vested and 34,586 were cancelled based on our 2015 non-GAAP diluted earnings per share;

92,975 restricted share units vested based on our adjusted 2015 non-GAAP free cash flow; and

67,380 restricted share units vested and 25,595 were cancelled based on Blizzard Entertainment’s adjusted 2015 non-GAAP operating income; and

Mr. Hirshberg : 60,000 restricted share units vested based on Activision Publishing’s adjusted 2015 non-GAAP operating income.

Dividend Equivalents

The performance-based vesting restricted share units awarded to Mr. Hirshberg in 2015 have no right to dividend equivalents, nor do the restricted share units awarded to Mr. Morhaime in 2014 or 2015—and we do not anticipate making time- or performance-based awards with the right to dividend equivalents in the future. Awards made to our named executive officers prior to August 2014 are entitled to dividend equivalents, however, the performance shares awarded to Mr. Kotick in 2012 and the performance-based vesting restricted share units awarded to Mr. Tippl in 2014 only receive dividend equivalents if and to the extent the underlying performance conditions are met and the awards vest.

Other Award Terms

Stock options have an exercise price equal to the NASDAQ Official Closing Price of our Common Stock as reported on NASADAQ.com on the effective date of the grant.

Equity awards will generally cease to vest upon the termination of the holder’s employment, and stock options will generally remain exercisable for thirty days after the termination date. For the impact of the termination of the employment of each named executive officer on his outstanding equity awards, please see “—Potential Payments upon Termination or Change of Control” below.

Incentive Plan Limitations on Equity Awards

Under the 2014 Plan, we cannot grant anyone, including our executive officers, options to purchase more than four million shares of our Common Stock in a single year. We are further currently restricted from granting anyone restricted share unit awards with respect to more than three million shares in a single year or from granting anyone more than six million performance shares in a single year.

Health and Welfare Benefits

Our named executive officers are eligible to participate in our medical, vision and dental insurance programs. With the exception of Mr. Morhaime, our named executive officers are offered the same terms as the broad employee population. Pursuant to his employment agreement, Mr. Morhaime is entitled to health and welfare benefits that are, in the aggregate, on terms and conditions no less favorable than those made available to him prior to the Vivendi Games Combination. As such, we cover the full cost of Mr. Morhaime’s health/medical insurance, and the plan in which he participates pays for the full amount of covered medical expenses. Please see the “Summary Compensation Table” below for further details.

Our named executive officers may also receive Company-paid life and disability insurance and/or participate in insurance programs only available to our senior employees. In addition, pursuant to the provisions of his employment agreement referenced in the prior paragraph, if Mr. Morhaime were to receive short-term disability insurance benefits, we would provide him with the difference between the amount he receives under the insurance and his base salary.

Retirement Arrangements

We offer a 401(k) plan to all employees in the United States, including our named executive officers, and we match a certain percentage of each employee’s contributions to our 401(k) plan (which, for Mr. Morhaime is, consistent with the benefits to which he was entitled prior to the Vivendi Games Combination, a higher percentage than our other named executive officers). Please see the “Summary Compensation Table” below for further details.

We do not maintain other retirement benefit plans for our employees, including our named executive officers, such as a qualified pension plan or a special non-qualified or supplemental deferred compensation plan. We believe that retirement arrangements are particular to, and should remain the responsibility of, each individual officer. The emphasis on minimal retirement arrangements ensures that a substantial portion of our named executive officers’ long-term wealth accumulation depends on the achievement of Activision Blizzard profitability targets and the appreciation of our Common Stock.

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Employment and Change-of-Control Arrangements

To attract and retain talented executives, we provide severance benefits under certain conditions, which are negotiated with each executive officer in connection with a new or renewed employment agreement. In addition, Mr. Kotick has been provided certain change-of-control protection. The Compensation Committee believes these arrangements will incentivize the relevant individuals to maintain objectivity in the context of, and contribute to, a potential change-of-control transaction. These benefits for each of our named executive officers are described under “—Potential Payments upon Termination or Change of Control” below.

Perquisites

We provide limited perquisites to our named executive officers, although our named executive officers are eligible to participate in a number of broad-based benefits programs that are available to all of our employees (e.g. , they are entitled to relocation assistance). See the “Summary Compensation Table” below for further details.

Stock Ownership Guidelines

 

In order to align the interests of our management with those of our stockholders, we believe that each of our executive officers should maintain a meaningful ownership stake in the Company. Accordingly, in 2012, the Compensation Committee established stock ownership guidelines for our senior officers. After a competitive assessment conducted with the assistance of its independent consultant, the Compensation Committee adopted guidelines providing that our chief executive officer is expected to beneficially own shares of our Common Stock with a value at least equal to three times his or her then-current annual base salary and that each other executive officer is expected to beneficially own shares of our Common Stock with a value at least equal to his or her then-current annual base salary. Our executive officers are expected to accumulate the required stock within five years (so that anyone who is an executive officer of the Company as of the date on which these guidelines were adopted has five years from the adoption date and anyone who subsequently becomes an executive officer of the Company has five years from the date on which he or she becomes an executive). Further, if an executive officer does not satisfy these guidelines within the five year period, then, until he or she satisfies the guidelines, he or she will be required to hold 50% of the net shares received in connection with an award of unrestricted shares, upon exercise of stock options or upon the vesting of restricted share units awards received, provided such shares received are under equity awards made after the adoption of the ownership guidelines and that such awards are specifically subject to the ownership guidelines.

Impact of Tax and Accounting Considerations

 

Section 162(m) of the Internal Revenue Code—Limits on Compensation Deductibility

In structuring compensation programs, setting individual compensation levels and awarding bonuses and incentive plan payments, the Compensation Committee considers the potential impact of Section 162(m). Section 162(m) generally prevents a publicly held corporation from taking a tax deduction when compensation paid to a covered employee (generally, the chief executive officer and any of the corporation’s three other highest paid officers other than the chief financial officer) exceeds $1.0 million in any taxable year unless:

the compensation is payable solely on account of the attainment of pre-established objective performance goals;

a committee of two or more outside directors determines the performance goals;

our stockholders approve the material terms of the performance goals; and

the committee certifies that the employee has met the performance goals.

The tax deductibility of compensation paid to other executives is not subject to these limitations.

We generally attempt to preserve the deductibility of elements of our performance-based incentives. However, we believe it is important that we retain the flexibility to structure compensation arrangements necessary to attract, retain and motivate the best executive talent, even though such elements may not be fully deductible under Section 162(m).

Payments under the CAIP and the Morhaime Profit Sharing Plan, each described above, are structured to be performance-based incentives within the meaning of the 2014 Plan and, therefore, deductible up to the $10 million limit on the payment of such awards to any one person for a single year under the 2014 Plan. For further detail on the CAIP structure, see “—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—2015 Incentive Opportunities under the CAIP”, and for further detail on the Morhaime Profit Sharing Plan structure, see “—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Morhaime Profit Sharing Plan” above.

Section 162(m) prevents us from deducting the incremental amount by which the sum of Mr. Morhaime’s base salary and payment under the Blizzard Bonus Plan for 2015 exceeds $1.0 million. Section 162(m) also prevents us from deducting the amount by which, if any, the base salary for each other covered employee exceeds $1.0 million. As our chief financial officer, the deduction of Mr. Durkin’s compensation is not subject to Section 162(m).

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Section 409A of the Internal Revenue Code—Limits on Deferral of Compensation

To the extent that any compensation paid or committed to any of our named executive officers constitutes a deferral of compensation within the meaning of Section 409A of the Internal Revenue Code, the Compensation Committee intends to cause that compensation to comply with the requirements of Section 409A and to avoid the imposition of penalty taxes and interest upon the person receiving the compensation.

Accounting Considerations

The Compensation Committee also takes accounting considerations, including the impact of Accounting Standards Codification (“ASC”) Topic 718, into account in structuring compensation programs and determining the form and amount of compensation awarded.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included under “Executive Compensation—Compensation Discussion and Analysis” above. Based on that review and discussion, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement and also be incorporated by reference into our Annual Report on Form 10-K for the period ended December 31, 2015.

Members of the Compensation Committee

Robert J. Morgado (Chairperson), Casey Wasserman and Elaine Wynn

 

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Summary Compensation Table

The table below presents information with respect to each of our named executive officers regarding compensation earned during the periods indicated.

As previously discussed, we believe that entering into multi-year employment agreements with our executives is important to attracting and retaining top talent. When we make a long-term equity award to an executive officer, it is typically done in connection with the initial entry into an employment agreement, the renewal of that agreement or an amendment to that agreement in connection with a promotion or other assumption of new responsibilities. The target value of any such equity award is based upon the term of the agreement and such awards have typically been the only equity awards made to our executive officers (other than Mr. Morhaime, who also receives annual awards of equity, consistent with the compensation to which he was entitled from Vivendi Games prior to the 2008 Vivendi Games Combination).

We view the initial target value of these “upfront” equity awards on an annualized basis over the life of the employment agreement when evaluating an executive’s total compensation. Consistent with the way that we view them, the fair value for each tranche of performance-based vesting restricted share units is shown in the Stock Award column in the table below as compensation in the year in which the underlying performance metrics for that tranche are set. However, for time-based vesting restricted share units and stock options, the fair value for the entire award is shown as compensation for the year in which the award was approved. As such, information shown in the Stock Awards and Option Awards columns in the table below will include the entire value of options and time-based vesting awards, as the case may be, made in connection with the entry into, renewal of or amendment of an employment agreement. Ultimately, this may result in the equity-based compensation and, as such, the total compensation shown for each executive differing significantly from year to year, depending on whether he entered into an employment agreement (or amendment thereof), and therefore received an equity award, in any given year. Please see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Equity Awards” above for further information about our equity granting practices.

Name and Principal Position

Year

Salary

($)

Bonus (1)

($)

Stock

Awards (2)

($)

 

Option

Awards (3)

($)

Non-Equity

Incentive Plan

Compensation (4)

($)

All Other

Compensation

($)

 

Total

($)

Robert A. Kotick

President and Chief Executive Officer

2015

2,294,328

 

4,844,383

87,223

(5)

7,225,934

2014

2,196,616

 

4,595,173

87,023

 

6,878,812

2013

2,108,077

 

7,849,190

88,169

 

10,045,436

Dennis Durkin

Chief Financial Officer

2015

752,818

 

1,105,673

18,187

(5)

1,876,678

2014

713,737

 

597,248

17,855

 

1,328,840

 

2013

679,625

627,353

 

765,008

30,540

 

2,102,526

Thomas Tippl

Chief Operating Officer

2015

1,302,548

5,211,347

(6)

2,362,589

43,858

(5)

8,920,342

2014

1,254,807

2,000,000

10,400,018

(6)

1,970,862

33,969

 

15,659,656

 

2013

1,001,258

627,353

 

1,325,400

87,220

 

3,041,231

Eric Hirshberg (7)

Chief Executive Officer, Activision Publishing

2015

961,677

(8)

4,115,822

967,636

31,857

(5)

6,076,992

Michael Morhaime

2015

924,411

341,363

2,386,767

 

1,941,999

3,003,638

90,598

(5)

8,688,776

President and Chief Executive Officer, Blizzard Entertainment

2014

886,603

328,234

1,407,000

 

1,120,000

4,042,955

71,495

 

7,856,287

2013

861,076

319,449

1,240,400

 

1,014,666

2,065,678

61,794

 

5,563,063

(1)

The amount paid to each of Messrs. Durkin and Tippl for 2013 represents a special performance award each of them received in recognition of his significant contributions to the Company in connection with the consummation of the transactions contemplated by the Vivendi Share Purchase Agreement (as defined herein) and its ancillary agreements. The amount paid to Mr. Tippl for 2014 represents two-thirds of a special performance award he received in recognition of his significant contributions to the Company’s financial performance for 2012, which had a time-based vesting provision and was subsequently paid in 2014 pursuant to the December 2013 amendment to Mr. Tippl’s employment agreement with the Company (see “—Employment Agreements—Thomas Tippl” below). The amounts paid to Mr. Morhaime for 2015, 2014 and 2013 consist of bonuses paid to him pursuant to the Blizzard Bonus Plan (see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Other Cash Bonus Programs or Awards for 2015” above).

(2)

The amounts in the Stock Awards column with respect to time-based vesting restricted share units represent the aggregate grant date fair value awarded in the period computed in accordance with ASC Topic 718, as do, beginning in 2014, amounts with respect to performance-based vesting restricted share units.

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Assumptions and key variables used in the calculation of the grant date fair values:

for 2015, are discussed in footnote 14 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016 (our “2015 10-K”);

for 2014, are discussed in footnote 15 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015 (our “2014 10-K”); and

for 2013, are discussed in footnote 15 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 3, 2014 (our “2013 10-K”).

(3)

The amounts in the Option Awards column represent the aggregate grant date fair value of stock option awards made in the period computed in accordance with ASC Topic 718. As such, in the year of grant, the full aggregate grant date fair value appears, rather than the portion being expensed for financial statement reporting purposes in that year.

Assumptions and key variables used in the calculation of the grant date fair values:

for 2015, are discussed in footnote 14 to our audited financial statements included in our 2015 10-K;

for 2014, are discussed in footnote 15 to our audited financial statements included in our 2014 10-K; and

for 2013, are discussed in footnote 15 to our audited financial statements included in our 2013 10-K.

(4)

The amounts in this column for the named executive officers for each year represent cash incentives paid under the CAIP and, for Mr. Morhaime, amounts paid to him pursuant to the Morhaime Profit Sharing Plan. The amount paid to Mr. Kotick under the CAIP for 2013 also represents an additional performance-based bonus of $3,250,000 paid to him under the Activision Blizzard, Inc. 2008 Incentive Plan, as amended and restated (the “2008 Plan”) in recognition of the Company’s strong performance during 2013 and Mr. Kotick’s significant contributions to the Company during the year. The amounts paid to each of Messrs. Durkin and Tippl under the CAIP for 2015 also represents an additional performance-based bonus of $300,000 paid under the 2014 Plan in recognition of his significant contributions in connection with our transformative acquisition of King. For a discussion of non-equity incentive plans, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses” above.

(5)

The “all other compensation” for 2015 consists of the following:

 

Name

Perquisites,

gifts and

awards

 

Taxable income

reimbursement

 

Company 401(k)

plan “matching”

contributions

Life, disability

or medical

insurance

premiums

Total “Other

Compensation”

 

Robert A. Kotick

$

 

$

 

$

4,800

$

82,423

$

87,223

 

Dennis Durkin

$

127

(a)  

$

105

(b)  

$

3,600

$

14,355

$

18,187

 

Thomas Tippl

$

5,048

(c)  

$

4,741

(d)  

$

3,600

$

30,469

$

43,858

 

Eric Hirshberg

$

7,164

(e)  

$

3,444

(f)  

$

3,600

$

17,649

$

31,857

 

Michael Morhaime

$

173

(g)  

$

2,265

(h)  

$

9,540

$

78,620

$

90,598

 

(a)

This amount represents gifts provided by the Company to Mr. Durkin.

(b)

This amount represents a reimbursement for taxes Mr. Durkin incurred on the compensation referenced in footnote (a).

(c)

This amount represents gifts and tickets for a sporting event provided by the Company to Mr. Tippl.

(d)

This amount represents a reimbursement for taxes Mr. Tippl incurred on the compensation referenced in footnote (c).

(e)

This amount represents gifts to Mr. Hirshberg and travel accommodations for Mr. Hirshberg’s spouse provided by the Company.

(f)

This amount represents a reimbursement for taxes Mr. Hirshberg incurred on a portion of the compensation referenced in footnote (e).

(g)

This amount represents gifts provided by the Company to Mr. Morhaime.

(h)

This amount represents both a reimbursement for taxes Mr. Morhaime incurred on the compensation referenced in footnote (g) and a reimbursement for taxes Mr. Morhaime incurred on merchandise he received from Blizzard Entertainment, the value of which is not included, as it was provided as part of a broad-based program for employees of Blizzard Entertainment.

(6)

This amount reflects the value of the following two “upfront” awards made to Mr. Tippl in 2014 in connection with the extension of his term of employment pursuant to the Tippl Employment Agreement (as defined herein) (see “—Employment Agreements—Thomas Tippl” below)—time-based vesting restricted share units with a reported grant date fair value of $5,999,993 for 2014 and performance-based vesting restricted share units tied to the 2014 performance period with a reported grant date fair value of $4,400,025, assuming a target level of performance under the performance conditions established for the 2014 performance period. This grant date fair value of time-based vesting restricted share units awarded in 2014 was computed in accordance with ASC Topic 718. Based upon this same methodology and assuming achievement of the maximum outcome of the performance conditions (as opposed to target level), the reported grant date fair value for performance-based vesting restricted share units tied to the 2014 performance period would have been $6,600,037. On March 4, 2015, the metrics for the 2015 performance period were established and a grant date fair value for the 2015 was established for financial reporting purposes in accordance with ASC Topic 718 in the amount of $5,211,347 (assuming target level of performance under the performance conditions and using the closing market price of our Common Stock on the date the performance metrics were established). Based upon this same methodology and assuming achievement of the maximum outcome of the performance conditions (as opposed to target level), the reported grant date fair value for the 2015 performance period would have been $7,817,043. On March 3, 2016, the metrics for the 2016 performance period were established and a grant date fair value for that tranche of the award (which will be eligible for inclusion in future Summary Compensation Tables) was established for financial reporting purposes in accordance with ASC Topic 718 in the amount of $7,163,582 (assuming target level of performance under the performance conditions and using the closing market price of our Common Stock on the date the performance metrics were established). Based upon this same methodology and assuming achievement of the maximum outcome of the performance conditions (as opposed to target level), the reported grant date fair value for the 2016 performance period would have been $10,745,420.

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(7)

While Mr. Hirshberg was an officer of the Company during 2013 and 2014 he was not a named executive officer for either year.

(8)

In 2015, in connection with the extension of his term of employment pursuant to the Hirshberg Employment Agreement (as defined herein) (see “—Employment Agreements—Eric Hirshberg” below), the Company made an “upfront” award to Mr. Hirshberg. For 2015, there is no value associated with the performance-based vesting restricted share units in accordance with ASC Topic 718, as none of the underlying performance condition were established during the year. On March 3, 2016, the metrics for the 2016 performance period were established and a grant date fair value for that tranche of the award (which will be eligible for inclusion in future Summary Compensation Tables) was established for financial reporting purposes in accordance with ASC Topic 718 in the amount of $1,827,107 (assuming target level of performance under the performance conditions and using the closing market price of our Common Stock on the date the performance metrics were established). Based upon this same methodology and assuming achievement of the maximum outcome of the performance conditions (as opposed to target level), the reported grant date fair value for the 2016 performance period would have been $2,283,877.

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Grants of Plan-Based Awards for 2015

The table below provides information regarding the grants of plan-based awards made to each of our named executive officers during 2015:

Name

Grant Type

 

Grant Date

 

Approval Date (1)

 

Estimated Possible Payouts Under

Non-Equity Incentive Plan Awards

Threshold

($)

Target

($)

Maximum

($)

 

Robert A. Kotick

2014 Plan/CAIP (3)

 

 

 

 

 

0

4,551,456

10,000,000

 

Dennis Durkin (4)

2014 Plan/CAIP (3)

 

 

 

 

 

0

752,456

10,000,000

 

Thomas Tippl

2014 Plan/CAIP (3)

 

 

 

 

 

0

1,950,000

10,000,000

 

 

2008 Plan/PSUs

 

3/4/2015

 

3/4/2015

(5)  

 

 

 

 

Eric Hirshberg (7)

2014 Plan/CAIP (3)

 

 

 

 

 

0

942,018

10,000,000

 

 

2014 Plan/Options

 

11/13/2015

 

10/28/2015

(8)  

 

 

 

 

Michael Morhaime

2014 Plan/CAIP (3)

 

 

 

 

 

0

249,103

7,197,586

(10)  

 

2014 Plan/MPSP (11)

 

 

 

 

 

0

3,778,675

 

 

2014 Plan/Options

 

11/13/2015

 

10/28/2015

(8)  

 

 

 

 

 

2014 Plan/RSUs

 

11/13/2015

 

10/28/2015

(8)  

 

 

 

 

(1)

Reflects the date on which the Compensation Committee approved the grant of an equity award or, if later in the case of a performance-based award, the date that the Compensation Committee established the performance metric underlying such award or a tranche thereof.

(2)

The grant date fair value of the stock and stock option awards is computed in accordance with ASC Topic 718. Please see footnotes (2) and (3) to the Summary Compensation Table for information about the assumptions and key variables used in the calculation of the grant date fair values. All stock options awarded have an exercise price equal to the fair market value of a share of our Common Stock on the date of grant.

(3)

Each of our named executive officers had an opportunity to earn a CAIP bonus for his 2015 performance under the 2014 Plan. None were entitled to a minimum amount thereunder. The target bonus for each named executive officer was based on his base salary rate in effect at the time the opportunity was approved by our Compensation Committee and assumes 100% performance for the relevant financial and individual strategic goals established under the CAIP. For more information about the CAIP and the opportunities for each of our named executive officers thereunder, including the maximum bonus opportunity for each, please see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—2015 Incentive Opportunities under the CAIP” above.

(4)

On March 4, 2015, the Compensation Committee approved the use of the non-GAAP diluted earnings per share objective set forth in our 2015 AOP for the purpose of a tranche of a performance-based vesting restricted share unit award to Mr. Durkin under the 2008 Plan approved by the Compensation Committee on March 6, 2012. As a result, a grant date was established in accordance with ASC Topic 718 with respect to 90,000 of those restricted share units. As these restricted share units were previously disclosed in the “Grants of Plan-Based Awards” table included in the Company’s Notice of 2013 Annual Meeting of Stockholders and Proxy Statement, in accordance with the methodology used by the Company in its disclosure of the grant date fair value of performance-vesting awards prior to 2014, these shares are not reflected in the table above. The grant date fair value for this tranche is greater than the amount of $1,055,700 reported in 2013 by $1,008,000, due to share price appreciation between March 6, 2012 and March 4, 2015.

(5)

In accordance with ASC Topic 718, these performance-based vesting restricted share units were awarded for financial reporting purposes as of the date on which the Compensation Committee established the metric for the relevant performance period. These restricted share units represent three of the six remaining tranches of an equity award approved by the Compensation Committee on January 15, 2014.

(6)

On February 10, 2014, in connection with the extension of his employment with us through April 2017, the Compensation Committee approved an award to Mr. Tippl of performance-based vesting restricted share units, each representing the conditional right to receive one share of our Common Stock. In accordance with ASC Topic 718, only the portion of the award for which the performance metrics were established during 2015 is reflected in this table. These restricted share units vest on March 31, 2016, subject to Mr. Tippl’s continued employment through such date, as follows: (a) approximately 45% (i.e., a maximum of 154,959) vest if the Compensation Committee determines that the non-GAAP diluted earnings per share objective set forth in our 2015 AOP has been met or exceeded; (b) approximately 27% (i.e., a maximum of 92,975) vest if the Compensation Committee determines that the adjusted non-GAAP free cash flow objective set forth in our 2015 AOP has been met or exceeded; and (c) approximately 27% (i.e., a maximum of 92,975) vest if the Compensation Committee determines that the adjusted non-GAAP operating income objective for Blizzard Entertainment set forth in our 2015 AOP has been met or exceeded. In each case: (i) if actual performance is below 75% of target, no shares subject to the performance criteria will be earned; (ii) if actual performance is 100% of target, 100% of the target shares subject to the operating performance criteria will be earned; (iii) if actual performance is 150% of target or above, all of the shares (i.e., 150% of the target shares) subject to the operating performance criteria will be earned; and (iv) if actual performance falls between two thresholds, the number of shares subject to the operating performance criteria that will be earned will be determined using straight-line interpolation. If dividends are declared on our Common Stock, if and when the performance-based vesting restricted share units vest, Mr. Tippl will receive a cash dividend equivalent payment in an amount equal to the dividend to which he would have been entitled had the restricted share units been issued and outstanding Common Stock as of the record date for such dividend. For more information on the remainder of this award, see “—Employment Agreements—Thomas Tippl” below.

 

 

 

 

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Estimated Future Payouts Under

Equity Incentive Plan Awards

All Other Stock Awards:

Number of Shares of

Stock or Units

(#)

 

All Other Option Awards:

Number of Securities

Underlying Options

(#)

 

Exercise or Base Price

of Option Awards

($/Sh)

Grant Date Fair

Value of Stock and

Option Awards (2)

($)

 

Threshold

(#)

Target

(#)

 

Maximum

(#)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

227,272

(6)  

340,909

(6)  

 

 

 

 

 

5,211,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

398,820

(9)  

34.59

4,115,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70,000

(12)  

 

 

 

2,386,767

 

 

 

 

 

 

 

 

200,000

(13)  

34.59

1,941,999

 

(7)

On March 4, 2015, the Compensation Committee approved the use of the adjusted non-GAAP operating income objective for Activision Publishing set forth in our 2015 AOP for the purpose of a tranche of a performance-based vesting restricted share unit award to Mr. Hirshberg under the 2008 Plan approved by the Compensation Committee on November 8, 2010. As a result, a grant date was established in accordance with ASC Topic 718 with respect to 60,000 of those restricted share units. As these restricted share units were previously disclosed in the “Grants of Plan-Based Awards” table included in the Company’s Notice of 2011 Annual Meeting of Stockholders and Proxy Statement, in accordance with the methodology used by the Company to in its disclosure of the grant date fair value of performance-vested awards prior to 2014, these shares are not reflected in the table above. The grant date fair value for this tranche is greater than the amount of $712,800 reported in 2011 by $663,000, due to share price appreciation between November 8, 2010 and March 4, 2015. Additionally, on October 28, 2015, in connection with the extension of his employment with us through March 2018 (or, if we so elect, through March 2019), the Compensation Committee approved an award to Mr. Hirshberg of performance-based vesting restricted share units representing the conditional right to receive a maximum of 221,163 shares of our Common Stock. For more information on this award, see “—Employment Agreements—Eric Hirshberg” below. As more fully described in footnotes (2) and (8) to the Summary Compensation Table, this award is not reflected in this table, as the performance metrics underlying the award were not established during 2015. This award will be eligible for inclusion in future Grants of Plan-Based Awards tables when the underlying performance metrics and, as such, the accounting grant dates, are established.

(8)

These equity awards were approved during a “trading blackout” as described in our insider trading and pre-clearance policies, so, in accordance with our equity awarding procedures, the grant date of the awards was the first trading day after that trading blackout period was no longer in effect. Further, awards with performance-based vesting criteria are not awarded, for these purposes, until the underlying performance metrics have been established.

(9)

These options to purchase our Common Stock were awarded to Mr. Hirshberg pursuant to the Hirshberg Employment Agreement in connection with the extension of his employment with us through March 31, 2018 (or, if we so elect, through March 31, 2019). Two-thirds of these options vest on March 30, 2018 and the remaining one-third vest on March 30, 2019, subject to Mr. Hirshberg’s continued employment through such date.

(10)

As discussed in footnote (11) below, Mr. Morhaime participates in the Morhaime Profit Sharing Plan. As the amount paid to Mr. Morhaime under the Morhaime Profit Sharing Plan is a “senior executive plan bonus” within the meaning of the 2014 Plan, the sum of the amount of bonuses, if any, paid to him for any given year under the Morhaime Profit Sharing Plan and the CAIP may not exceed the limit under the 2014 Plan of $10 million. As such, the maximum bonus Mr. Morhaime was eligible to earn under the CAIP for 2015 was adjusted to reflect the payment he received under the Morhaime Profit Sharing Plan for the year.

(11)

Pursuant to the Morhaime Employment Agreement (as defined herein) (see “—Employment Agreements—Michael Morhaime” below), Mr. Morhaime participates in the Morhaime Profit Sharing Plan (see “—Employment Agreements—Michael Morhaime” below). In accordance therewith, Mr. Morhaime is entitled to share in an annual profit sharing pool, the aggregate amount of which depends upon Blizzard Entertainment’s earnings for that year. While Mr. Morhaime is entitled to an amount equal to up to 6% of the pool, because the amount of the pool cannot be known at the beginning of a year, no target amount is determinable and the target amount shown is a representative amount equal to the amount Mr. Morhaime received under the Morhaime Profit Sharing Plan with respect to 2014. Further, while Mr. Morhaime is entitled to receive an amount equal to a minimum specified percentage of that pool, because there is no certainty there will be a pool, there is no minimum or maximum amount to which he is entitled. For more information about the Morhaime Profit Sharing Plan, see “—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2015—Corporate Annual Incentive Plan and Other Performance-Based Bonuses—Morhaime Profit Sharing Plan” above.

(12)

This represents restricted share units, each representing the conditional right to receive one share of our Common Stock, that were awarded to Mr. Morhaime pursuant to the Morhaime Employment Agreement as part of our annual equity award process. One-third of these restricted share units will vest on each of November 12, 2016, 2017 and 2018, subject to Mr. Morhaime’s continued employment through such date.

(13)

These options to purchase our Common Stock were awarded to Mr. Morhaime pursuant to the Morhaime Employment Agreement as part of our annual equity award process. One-third of these stock options will vest on each of November 12, 2016, 2017 and 2018, subject to Mr. Morhaime’s continued employment through such date.

 

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Outstanding Equity Awards at December 31, 2015

The table below sets forth the outstanding equity awards for each of our named executive officers as of December 31, 2015:

Name

Option Awards

 

Stock Awards

 

Number of

Securities

Underlying

Unexercised

Options

Exercisable (1)

(#)

 

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

 

Option

Exercise

Price

($)

Option

Expiration

Date

Number of

Shares or

Units of Stock

That Have

Not Vested

(#)

 

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested (2)

($)

Equity

Incentive Plan

Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

(#)

 

Equity

Incentive Plan

Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested (2)

($)

 

 

Robert A. Kotick

 

 

 

 

 

 

 

 

 

 

515,250

(3)  

19,945,328

(4)  

 

 

 

 

 

 

 

 

 

 

240,450

(5)  

9,307,820

 

 

262,998

 

 

9.57

6/15/2017

 

 

 

 

 

 

 

 

3,700,000

 

 

13.29

12/5/2017

 

 

 

 

 

 

 

 

Dennis Durkin

 

 

 

 

 

 

 

 

 

 

180,000

(6)  

6,967,800

 

 

 

 

 

 

 

 

175,000

(7)  

6,774,250

 

 

 

 

112,500

 

150,000

(8)  

11.73

3/6/2022

 

 

 

 

 

 

 

 

Thomas Tippl (9)

 

 

 

 

 

 

 

 

 

 

454,543

(10)  

17,595,360

(11)  

 

 

 

 

 

 

 

 

206,611

(12)  

7,997,912

 

 

 

 

 

44,427

 

 

10.89

5/10/2020

 

 

 

 

 

 

 

 

 

Eric Hirshberg

 

 

 

 

 

 

 

 

 

 

60,000

(13)  

2,322,600

 

 

 

 

 

 

 

 

 

 

 

 

176,930

(14)  

6,848,960

(15)  

 

 

398,820

(16)  

34.59

11/13/2025

 

 

 

 

 

 

 

 

 

Michael Morhaime

 

 

 

 

 

 

 

66,666

(17)  

2,580,641

 

 

 

 

 

 

 

 

 

 

 

23,333

(18)  

903,220

 

 

 

 

 

 

 

 

 

 

 

46,666

(19)  

1,806,441