ACTIVISION BLIZZARD, INC. - DEF 14A

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. )

 

   Filed by the Registrant    Filed by a Party other than the Registrant
   
Check the appropriate box:
Preliminary Proxy Statement
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to §240.14a-12

 

ACTIVISION BLIZZARD, INC.

 

 

(Name of Registrant as Specified In Its Charter)

 

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

   
Payment of Filing Fee (Check the appropriate box):
  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1) Title of each class of securities to which transaction applies:
  (2) Aggregate number of securities to which transaction applies:
 

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
     (set forth the amount on which the filing fee is calculated and state how it was determined):

  (4) Proposed maximum aggregate value of transaction:
  (5) Total fee paid:
 
 


 

 

DEAR FELLOW STOCKHOLDERS:

 

Robert A. Kotick

Chief Executive Officer

April 24, 2020

 

I warmly invite you to join me and the other members of Activision Blizzard, Inc.’s Board of Directors at the company’s 2020 annual meeting of stockholders on Thursday, June 11, 2020. 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. As always, I am excited about our stockholders coming along on our journey and welcome your participation.

 

We intend to hold our annual meeting in person, however we are actively monitoring the COVID-19 pandemic and are sensitive to public health and travel concerns as well as federal, state and local government mandates. As the date of the meeting approaches, we will continue evaluating how best to conduct the meeting safely. Please monitor our annual meeting website at https://materials.proxyvote.com/00507V for updated information. If you are planning to attend our meeting, please check the website in the days leading up to the meeting date for any updates or the possibility that the meeting has become virtual.

 

2019 was a year of transition and investment for the company. We increased investment and focus on our biggest franchises and opportunities, in the service of delivering more high-quality content faster, to meet the expectations of our large and growing communities. We demonstrated meaningful progress in our growth initiatives for some of our most important franchises, and we exited the year with momentum throughout the company.

 

We want to thank Elaine Wynn for over six years of service as a member or our Board of Directors. She provided wisdom, sound advice and valued business judgment during her tenure. We are delighted Spotify’s Chief Content and Advertising Business Officer, Dawn Ostroff, is being nominated to join our Board of Directors. Dawn has over thirty years of experience in executive leadership roles in both entertainment and technology and we are looking forward to her contributions.

 

During these challenging and unprecedented times, our mission to connect and engage the world through epic entertainment has never been more meaningful. And, I’m proud of the critical role our company is playing by bringing joy to our hundreds of millions of players and fans around the world. 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 our 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,

 

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   1

 

3100 Ocean Park Boulevard
Santa Monica, California 90405

MEETING INFORMATION

 

When:

Thursday, June 11, 2020
9:00 a.m. (Pacific Time)

Where:*

Boston Properties Offices
3200 Ocean Park Boulevard
Santa Monica, CA 90405

Agenda:

1.

Elect ten directors for a one-year term

2.

Provide advisory approval of our executive compensation

3.

Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020

4.

Stockholder proposal for political disclosures

 

WAYS TO VOTE:

By Internet

www.proxyvote.com

By telephone

Call (800) 690-6903 or the number on your proxy card.

By mail

Sign, date, and return your proxy card.

NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS

 

 

The Annual Meeting of Stockholders of Activision Blizzard, Inc. will be held at the Boston Properties Offices at 3200 Ocean Park Boulevard, Santa Monica, California 90405, on Thursday, June 11, 2020, at 9:00 a.m., Pacific Time.*

The Activision Blizzard, Inc. Board of Directors has fixed April 15, 2020, as the record date for determining the stockholders entitled to receive notice of, and to vote at, the annual meeting.

Your vote is important. Whether or not you plan to attend the meeting, I urge you to promptly submit a proxy to vote your shares by following the instructions on page 16 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 in person, please see page 16 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 24, 2020


 

 

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on June 11, 2020
The proxy statement and our 2019 annual report to stockholders are each available at:
https://materials.proxyvote.com/00507V

 

*

We intend to hold our annual meeting in person; however, we are actively monitoring the COVID-19 pandemic and are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting by means of remote communication. Please monitor our annual meeting website at https://materials.proxyvote.com/00507V for updated information. If you are planning to attend our meeting, please check the website in the days leading up to the meeting date.

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   3

TABLE OF CONTENTS

PROXY SUMMARY

5

Voting Matters and Board Recommendations

5

Director Nominees

6

Executive Compensation Highlights

7

Corporate Governance Highlights

10

PROXY STATEMENT

12

GENERAL

12

Purpose of this Proxy Statement

12

Notice of Internet Availability of Proxy Materials

12

Financial Measures Used in this Proxy Statement

12

PROCEDURAL MATTERS

14

17

General

17

Our Director Nominees

17

Required Vote and Board Recommendation

22

CORPORATE GOVERNANCE MATTERS

23

Overview

23

Board of Directors and Committees

23

Stockholder Engagement Process

33

Communications With Our Board

33

Our Executive Officers

33

Executive Succession Planning

34

Stock Ownership Guidelines

34

Political Activities

34

Corporate Governance Principles and Policies

34

Code of Conduct

34

Additional Corporate Governance Documentation

35

Diversity and Inclusion Initiatives

35

Environmental, Social and Governance Matters

36

EXECUTIVE COMPENSATION

37

Compensation Discussion and Analysis

37

Overview

37

Compensation Principles and Objectives

45

Decision-Making Approach to Executive Compensation

46

Elements of Our Executive Compensation Program for 2019

49

Compensation Committee Report

55

Summary Compensation Table

56

Grants of Plan-Based Awards for 2019

58

Outstanding Equity Awards at December 31, 2019

62

Option Exercises and Stock Vested for 2019

65

Employment Agreements

65

Potential Payments upon Termination or Change of Control

75

CEO Pay Ratio

83

84

General

84

Required Vote and Board Recommendation

84

DIRECTOR COMPENSATION

85

General

85

Cash Compensation

85

Equity Compensation

85

Stock Ownership Guidelines

86

Indemnification

86

Reimbursement of Expenses and Limited Benefits

86

Compensation for 2019

87

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

88

Policies and Procedures Regarding Transactions with Related Parties

88

Relationships and Transactions

89

AUDIT-RELATED MATTERS

90

Independent Registered Public Accounting Firm Fees

90

Pre-Approval Policies and Procedures

90

Audit Committee Report

90

92

Required Vote and Board Recommendation

93

94

General

94

Proposal and Supporting Statement

94

Opposing Statement

95

Required Vote and Board Recommendation

95

BENEFICIAL OWNERSHIP MATTERS

96

Security Ownership of our Officers and Directors

96

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

97

EQUITY COMPENSATION PLAN INFORMATION

98

DIRECTOR NOMINATIONS AND OTHER STOCKHOLDER PROPOSALS FOR OUR 2021 ANNUAL MEETING

99

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

101

OTHER MATTERS

102

Costs of the Annual Meeting and Proxy Solicitation

102

Other Matters Coming Before the Annual Meeting

102

HELPFUL RESOURCES

103

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement  

Back to Contents

PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement for the 2020 annual meeting of the stockholders of Activision Blizzard, Inc., a Delaware corporation (the “Company”). This summary does not contain all the information that you should consider, and you should read the entire proxy statement before voting. For more complete information regarding the Company’s 2019 performance, please review our annual report to stockholders for the period ended December 31, 2019, which is being provided to our stockholders at the same time as this proxy statement. Capitalized terms used in this summary are defined elsewhere in the proxy statement.

Voting Matters and Board Recommendations

Stockholders are being asked to vote on the following matters at the 2020 annual meeting of stockholders.

 

Our Board’s Recommendation

Proposal 1. Election of Directors (page 17)

FOR each Director Nominee

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

Proposal 2. Advisory vote to approve our executive compensation (page 84)

FOR

Our Board and its Compensation Committee believe that our compensation policies and practices are effective in enabling us to achieve our financial and strategic objectives and that the compensation paid to our named executive officers allows us to attract, retain, and motivate the key executive talent necessary for our long-term success.

Proposal 3. Ratification of the appointment of our independent registered public accounting firm (page92)

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.

Proposal 4. Stockholder proposal for political disclosures (page 94)

AGAINST

Our Board unanimously recommends that you vote AGAINST the stockholder proposal regarding political disclosures.

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   5

Back to Contents

Director Nominees

Set forth below is certain information about the nominees for election to our Board of Directors. Each currently serves on our Board, with the exception of Dawn Ostroff.

Name

Age

Director

Since

Principal Occupation

Independent

Other

Public

Boards

Committee Memberships

Audit

Committee

Compensation

Committee

Nominating

and Corporate

Governance

Committee

Reveta Bowers

71

2018

Independent Governance and Organizational Consultant

 

 

Robert Corti

70

2003

Retired CFO of Avon
Products

 

 

Hendrik Hartong III

53

2015

Chairman and CEO of
Brynwood Partners

 

 

Brian Kelly

(Chairman)

57

1995

Chairman of the Board of Activision Blizzard

 

 

 

Robert Kotick

57

1991

CEO of Activision
Blizzard

1

 

 

Barry Meyer

76

2014

Retired Chairman and CEO of Warner Bros. Entertainment

 

 

Robert Morgado

(Lead Independent Director)

77

1997

Retired Chairman and CEO of Warner Music Group

 

Peter Nolan

61

2013

Senior Advisor to Leonard
Green & Partners

 

 

Dawn Ostroff

(New Director Nominee)

60

Chief Content and Advertising Business Officer of

Spotify Technology S.A.

 

 

Casey Wasserman

45

2015

Chairman and CEO of
Wasserman

1

 

 

  Member

 

 

 

 

 

 

 Chairperson

 

 

 

 

 

 

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   6

Back to Contents

Executive Compensation Highlights

Our Compensation Practices Are Designed to Align Pay with Performance

Our industry is intensely competitive and constantly evolving. Our executives and many of our other 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 competitive total compensation to attract, retain, and motivate them.

Our executive compensation program has three primary elements: (1) base salary; (2) short-term incentives, in the form of annual cash bonuses; and (3) long-term incentives, in the form of equity awards, including performance-based vesting restricted share units (i.e., PSUs) and stock options.

 

 

The program is designed to align the interests of our executive officers with those of our stockholders by providing a significant portion of compensation in the form of performance-based bonuses and performance-aligned equity awards. For 2019, 94% of our CEO’s total compensation was performance-based.

Primary Elements of Our Executive Compensation Program for 2019

An overview of the primary elements of our 2019 executive compensation program and the purpose of each is presented below. Not all of these elements are applicable to all named executive officers (i.e., NEOs). We aim to incentivize our executives to drive corporate financial performance by basing a significant portion of their compensation on achieving financial and strategic objectives.

Compensation Element*

Purpose

Principal Actions for 2019

Base Salary

Compensate for day-to-day responsibilities.

Mr. Kotick's base salary has remained unchanged since January 2017. In addition, the base salaries of the other NEOs have remained unchanged since February 2019.

Annual Cash Bonus—
Corporate Annual Incentive Plan (i.e., CAIP)

Drive annual overall financial results, as well as individual contributions toward operational and other
strategic initiatives.

Financial metrics for all NEOs included profitability and free cash flow measures. As a result of performance vis-à-vis the underlying financial and strategic objectives, Mr. Kotick received a CAIP-related payout equal to 82% of his target bonus, and our other NEOs each received CAIP-related payouts ranging between 82% and 104% of his or her target bonus. For 2019, CAIP bonus payouts directly reflected performance against the specific objectives established by the Compensation Committee at the beginning of the year (or, for Ms. Naughton, promptly after her employment began).

Equity Awards (i.e., PSUs, RSUs and stock options)

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

Each of our NEOs who received an equity award during 2019 received a performance-based equity award with multi-year vesting. In addition, Mr. Walther received restricted share units with time-based vesting.

*

In addition, Mr. Durkin received an inducement to enter into his current employment agreement with the Company, which was paid in 2019, Ms. Naughton received an inducement to enter into her employment agreement with the Company, a portion of which was paid in 2019, and the final portion of a special performance bonus awarded to Mr. Walther in 2017 was paid in 2019. For more information on these awards, please see “Executive Compensation—Compensation Discussion and Analysis—Elements of Our Executive Compensation Program for 2019—Other Cash Programs or Awards” below.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   7

Back to Contents

Summary of Compensation Paid to Our Named Executive Officers for 2019

The following table sets forth certain summarized information with respect to the compensation earned by our NEOs during 2019. For the complete Summary Compensation Table, including the notes that accompany it, along with compensation for prior years, please see page 56.

Name and Principal Position

Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

All Other

Compensation

($)

Total

($)

Robert Kotick

Chief Executive Officer

1,756,731

6,269,752

19,137,241

2,870,966

88,206

30,122,896

Dennis Durkin

Chief Financial Officer and President of Emerging Businesses

901,731

3,750,000

3,716,989

1,081,818

61,215

9,511,753

Collister Johnson

Special Advisor to the Chief Executive Officer; Former President and Chief Operating Officer

1,351,784

2,751,283

1,103,886

25,427

5,232,380

Claudine Naughton

Chief People Officer

250,000

425,000

1,140,834

2,303,429

170,986

98,605

4,388,854

Chris B. Walther

Chief Legal Officer

836,381

500,000

3,131,722

628,083

64,805

5,160,991

Our Conservative Equity Granting Practices

While we believe that equity awards are an important part of our compensation program, we continue to be very judicious in the granting of equity awards to our employees. Our average equity usage for the past three years is among the bottom one-third of our comparator group.

2019 Financial and Operational Performance

(1) We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user. In certain instances, we rely on third parties to publish our games. In these instances, MAU data is based on information provided to us by those third parties, or, if final data is not available, reasonable estimates of MAUs for these third-party published games.
   
(2) Net bookings is an operating metric that is defined as the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others. Net bookings is equal to net revenues excluding the impact from deferrals. In-game net bookings primarily includes the net amount of downloadable content and microtransactions sold during the period and is equal to in-game net revenues excluding the impact from deferrals.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   8

Back to Contents

 

In 2019, we increased investment and focus on our biggest franchises and opportunities, in the service of delivering more high-quality content faster, to meet the expectations of our large and growing communities. We also began removing complexity, bureaucracy and duplication of effort across our business units, and we adjusted our commercial operations to better reflect the industry shift to digital sales.

2019 was a year of transition and investment for the Company, and we made significant progress in positioning our key franchises, and the Company, for growth. In 2019:

Net revenues were $6.5 billion.

Net revenues from digital channels were $4.9 billion and were 76% of overall net revenues.

Earnings per diluted share were $1.95.

Operating income was $1.6 billion.

Operating cash flow was $1.83 billion.

Net bookings(1)  were $6.39 billion, including in-game net bookings(1) of $3.37 billion.

In the fourth quarter, we had 409 million monthly active users (i.e., MAUs),(2) 128 million of which were at Activision, 32 million of which were at Blizzard, and 249 million of which were at King.

Call of Duty®: Modern Warfare® unit sell-through increased by a double-digit percentage versus Call of Duty®: Black Ops 4, with growth across both PC and console. PC sell-through on Battle.net grew 50% year-over-year. Modern Warfare saw strong growth in full-game downloads with console digital mix at nearly 50%. In-game net bookings(1) grew by a double-digit percentage versus Black Ops 4.

Call of Duty® Mobile installs exceeded 150 million during the year, and the game reached the top of the download charts in more than 150 countries and regions, ending the year in the top-15 grossing games in U.S. app stores.(3)

World of Warcraft® exited the year with an active player community(4) more than twice the size of its ending level at June 30, 2019.

Hearthstone® launched the Descent of DragonsTM expansion and rolled out the new Battlegrounds game mode in the fourth quarter of the year.

Candy Crush SagaTM mobile reach grew year-over-year, and it was the top-grossing title in the U.S. app stores.(5)

King’s advertising net bookings(1) exceeded $150 million.

However, we did not achieve all the goals we set for ourselves. As a result, consistent with our pay-for-performance approach, overall CAIP bonus payments to our NEOs ranged between 82% and 104% of target for the year and, for the portion of the outstanding equity awards granted to our NEOs that had the potential to vest based on 2019 financial performance objectives, achievement, as a percentage of target, ranged from 0% to 107%.

 

 

 

(1)

Net bookings is an operating metric that is defined as the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others. Net bookings is equal to net revenues excluding the impact from deferrals. In-game net bookings primarily includes the net amount of downloadable content and microtransactions sold during the period and is equal to in-game net revenues excluding the impact from deferrals.

(2)

We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user. In certain instances, we rely on third parties to publish our games. In these instances, MAU data is based on information provided to us by those third parties, or, if final data is not available, reasonable estimates of MAUs for these third-party published games.

(3)

Based on App Annie Intelligence and internal estimates for respective regions, app stores, and periods.

(4)

Community is defined as players with monthly or longer-term subscriptions.

(5)

Based on App Annie Intelligence.

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   9

Back to Contents

Corporate Governance Highlights

The Company is committed to adopting and following strong corporate governance practices that benefit all of our stockholders. 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 corporate governance and adopts measures when it determines them to be in the best interests of our stakeholders. As such: in 2018, we appointed a lead independent director; in 2020, we amended our Corporate Governance Principles and Policies to provide that the initial list from which any new independent director nominee is chosen will include qualified female and racially/ethnically diverse candidates and, similarly, if we conduct an external search for a new CEO, that the initial list of external candidates will include qualified female and racially/ethnically diverse candidates; two of the last five individuals added to our Board have been women; and our most recent nominee, Dawn Ostroff, is a woman.

 

 

Highlights of our corporate governance program include:

 

 

Accountability to Our Stockholders

We elect our directors on an annual basis.

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.

Our Bylaws contain a stockholder proxy access provision, which permits certain stockholders to include director nominees in
our proxy statements.

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

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

We hold “say-on-pay” votes annually.

Board Independence

Eight of our ten director nominees are independent, including our new director nominee.

We have a separate chairman and chief executive officer.

We have a lead independent director.

Our independent directors meet in executive session (i.e., without the presence of management).

Independent Board Committees

All the members of each of our three standing Board committees—our Audit Committee, our Compensation Committee, and our Nominating and Corporate Governance Committee—are independent.

Board Diversity

Two of our ten directors are women.

We have committed that the initial list from which any new independent director nominee will be chosen will include qualified female and racially/ethnically diverse candidates.

Stock Ownership Guidelines

Our chief executive officer is expected to, within five years after he or she becomes our chief executive officer, beneficially own shares of our common stock with a value at least equal to ten times his or her then-current annual base salary. Mr. Kotick currently holds shares with a value equal to approximately 111 times his current annual base salary.

Our other executive officers (as well as the president of each of Activision, Blizzard, and King) are each expected to, within five years after becoming subject to the guidelines, beneficially own shares of our common stock with a value at least equal to his or her then-current annual base salary.

Each director 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.

“Clawback” Policy

In the event of an earnings restatement, we may “claw back” performance-based compensation (including both short-term and long-term incentives) paid or awarded to the executives responsible.

Anti-Hedging Policy

We prohibit our employees (including our executives) and directors from “shorting” Company stock, engaging in “puts,” “calls,” or other hedging transactions involving Company stock, or using margin accounts with Company stock.

No Company Stock Pledged

None of our executive officers or directors have any shares of Company stock pledged.

Active Board Oversight of Risk Strategy

Our Board takes an active role in overseeing risk management and providing strategic guidance to the Company.

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

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

Annual Board Self-Evaluation

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

Active Stockholder Engagement

We actively engage with investors to increase our understanding of their perspectives on our executive compensation and governance practices, as well as any other matters important to them.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   10

Back to Contents

 

 

Active Succession Planning

Our Board actively engages in chief executive officer succession planning.

Our Board reviews succession plans for our other our executives annually.

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

Incorporation of Stockholder Feedback

The Company regularly engages with key stockholders to solicit feedback as part of an effort to remain aware of our stockholders’ perspectives with respect to our executive compensation, corporate governance practices, and human capital management, as well as any other matters of importance to them. In advance of last year’s annual meeting, members of our management reached out to stockholders who collectively held approximately 66% of our common stock and spoke with each such holder who was willing to speak with us. Again, in the fall of 2019, in an effort to gain additional perspective, members of our management reached out to stockholders who collectively held approximately 66% of our common stock and spoke with each such holder who was willing to speak with us, including with respect to recent “say-on-pay” votes. We shared the feedback we received with our Board and its committees, and that feedback has been instrumental in shaping decisions in a manner that we believe is simultaneously responsive to that feedback and appropriate for the Company.

 

 

The Company reviews feedback sent to us from any of our 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 contact us using any one of these methods:

 

By Mail

Email

Phone

mail to Activision Blizzard, Inc.

c/o Corporate Secretary

3100 Ocean Park Boulevard

Santa Monica, California 90405

send email to

ir@activision.com

Investor Relations

(310) 255-2000

 

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   11

Back to Contents

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 11, 2020, at the Boston Properties Offices at 3200 Ocean Park Boulevard, Santa Monica, California 90405, at 9:00 a.m., Pacific Time, and at any adjournment or postponement of the meeting (the “Annual Meeting”). All references in this proxy statement to “the Company,” “we,” “us,” “our,” and “Activision Blizzard” refer to Activision Blizzard, Inc.

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 24, 2020.

Financial Measures Used in this Proxy Statement

Use of Non-GAAP Financial Measures

All financial measures used in this proxy statement are presented in accordance with generally accepted accounting principles (“GAAP”), unless explicitly identified as non-GAAP. Internally, as a supplement to our GAAP financial measures, our management uses certain non-GAAP financial measures in assessing our operating results, as well as in planning and forecasting. In particular, our management believes these measures facilitate comparison of operating performance between periods and facilitate an understanding of 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. Further, our management believes that the presentation of these non-GAAP measures provides useful information to measure Activision Blizzard’s financial and operating performance. These non-GAAP 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, 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 measures used by the Company.

Our non-GAAP measures are not based on a comprehensive set of accounting rules or principles, and such measures do not have a standardized meaning across companies. 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.

Financial Metrics Used to Measure 2019 Compensation-Related Performance

Consistent with past years, the financial objectives used by our management and our Compensation Committee to assess our employees’ 2019 performance were based on measures we refer to internally as “non-GAAP (excluding deferrals),” rather than the non-GAAP measures we use when reporting our financial results. These non-GAAP measures only differ from each other with respect to the inclusion (in the non-GAAP measures we use when reporting our financial results) or exclusion (in “non-GAAP (excluding deferrals)” measures) of the impact of deferrals from our revenue accounting treatment on certain of our online-enabled products. Internally, our management uses non-GAAP (excluding deferrals) measures in assessing our operating results, as well as in planning and forecasting. Our management believes this is appropriate because doing so enables an analysis of performance based on the timing of actual transactions with our customers and provides a more timely indication of trends in our operating results. Further, as our management and our Compensation Committee continue to believe that non-GAAP (excluding deferrals) measures are an effective way to internally assess our operating performance, the Company currently expects to continue utilizing non-GAAP (excluding deferrals) measures for purposes of compensation-related performance objectives in the future.

Specifically, the Compensation Committee used the following non-GAAP (excluding deferrals) measures to assess the 2019 performance of one or more of our named executive officers.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   12

Back to Contents

AB Adjusted Operating Income. “AB Adjusted Operating Income” means Activision Blizzard’s GAAP operating income, excluding the impacts from share-based compensation, amortization of intangibles from purchase price accounting, restructuring and related charges, other unusual or unique tax-related items and activities, and the deferral of revenues and recognition of deferred revenues, along with related cost of revenues, on certain of our online enabled products.

AB Adjusted EPS. “AB Adjusted EPS” is calculated by dividing the AB Adjusted Net Income by the weighted average diluted shares outstanding, where “AB Adjusted Net Income” means Activision Blizzard’s GAAP net income, excluding the impacts from the items noted above under “AB Adjusted Operating Income,” along with the associated tax impacts of those items, losses incurred on extinguishment of debt from redemption activities and the associated tax impact, and significant discrete tax-related items (including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities).

AB Adjusted Free Cash Flow. “AB Adjusted Free Cash Flow” means Activision Blizzard’s GAAP cash flows from operating activities, less capital expenditures, and excluding certain unplanned one-time items or other adjustments related to impacts identified as being excluded from AB Adjusted Operating Income.

Consistent with past years, at the time it established the measures to be used to assess 2019 financial performance for compensation purposes, the Compensation Committee reserved the discretion, when measuring performance, to exclude the impact of any extraordinary transaction (i.e., a non-recurring corporate transaction or legal expense matter that results in expenses exceeding $10 million for the year). No such adjustments were made for 2019.

Further, when a financial measure is used to assess performance underlying a bonus opportunity under our Corporate Annual Incentive Plan (the “CAIP”) or an equity award the performance of which is determined by reference to an annual operating plan approved by our Board (such plan for any given year, the “AOP”) or long-range strategic plan, constant foreign exchange rates are assumed, which means we convert current period results into United States (“U.S.”) dollars using the average exchange rate at the time we established the targets (e.g., at the time the relevant AOP was established), rather than the actual exchange rates during the relevant period.

References to U.S. Dollars

All dollar amounts referred to in or contemplated by this proxy statement refer to U.S. dollars.

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   13

Back to Contents

PROCEDURAL MATTERS

Q:

Who may vote at the Annual Meeting?

A:

Only stockholders of record at the close of business on April 15, 2020 (the “record date”), are entitled to notice of, or to vote at, the Annual Meeting. There were 770,369,191 shares of our Common Stock outstanding and entitled to vote on the record date.

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 ten days prior to the Annual Meeting.

Q:

How many votes may I cast?

A:

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.

Q:

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

A:

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, unless you obtain a “legal proxy” from the broker, bank, or other nominee that holds your shares, giving you the right to vote the shares at the meeting yourself.

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

Q:

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

A:

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 (“PwC”) 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, 2 or 4.

Q:

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

A:

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.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   14

Back to Contents

Q:

What are my voting options with respect to each proposal and how many votes are required to approve each proposal?

A:

 

 

Proposal

Voting

Options

Vote Required to

Adopt Proposal

 

Broker Discretionary

Voting Allowed

Effect of

Broker

Non-Votes

Effect of

Abstentions

 

Proposal 1 — Election of Directors

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 at the Annual Meeting and entitled to vote on the election of directors

 

No

No Effect

No Effect

 

Proposal 2 — Advisory Vote to Approve Our Executive Compensation

For, against,
or abstain

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

 

No

No Effect

Against

 

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

For, against,
or abstain

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

 

Yes

N/A

Against

 

Proposal 4 — Stockholder proposal for political disclosures

For, against,
or abstain

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

 

No

No Effect

Against

 

Q:

What are the ways I can vote?

A:

Stockholders at the close of business on April 15, 2020, 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 procedures for instructing the voting of those shares.

Q:

How do I vote in person at the Annual Meeting?

A:

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.

Q:

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

A:

A vote via proxy authorizes Robert Kotick (our Chief Executive Officer), Chris B. Walther (our Chief Legal Officer), and Jeffrey Brown (our Corporate Secretary), 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.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   15

Back to Contents

Q:

How do I vote by proxy?

A:

Stockholders of record may vote by proxy in three ways:

Vote by Internet. Record holders can vote online prior to 11:59 p.m., Eastern Time, on June 10, 2020. Go to www.proxyvote.com, which is available 24 hours a day until the deadline. You will need your 16-digit control number which appears on the notice of Internet availability of proxy materials or proxy card you received.

By Internet

www.proxyvote.com

Vote by Telephone. Record holders can vote by phone prior to 11:59 p.m., Eastern Time, on June 10, 2020. Call (800) 690-6903, which is available 24 hours a day until the deadline. You will need your 16-digit control number which appears on the notice of Internet availability of proxy materials or proxy card you received.

By telephone

Call (800) 690-6903 or the number on your proxy card.

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).


By mail

Sign, date and return your proxy card.

Q:

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

A:

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 ten 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), FOR the ratification of PwC as the Company’s independent registered public accounting firm for 2020 (proposal 3), and AGAINST the stockholder proposal for political disclosures (proposal 4).

Q:

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

A:

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

Q:

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

A:

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.

Q:

Could the COVID-19 pandemic impact the Annual Meeting?

A:

While we intend to hold the Annual Meeting as indicated in the “Notice of 2020 Annual Meeting of Stockholders,” we are actively monitoring the emerging public health impact of the COVID-19 pandemic, which may prevent us from holding the Annual Meeting in person as planned. The health and well-being of our stockholders, employees, and directors is paramount, and if public health developments warrant, we may need to hold the meeting by means of remote communication. If we decide to use that format, we will announce alternative arrangements for the meeting as promptly as practicable via press release and the filing of additional proxy materials with the U.S. Securities and Exchange Commission (the “SEC”). Please monitor our annual meeting website at https://materials.proxyvote.com/00507V for updated information. If you are planning to attend our meeting, please check the website in the days leading up to the meeting date.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   16

Back to Contents

PROPOSAL 1

ELECTION OF DIRECTORS

General

Stockholders will elect ten 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.

Our 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 it desires in a member of 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 and/or board members of large, global corporations in the media, entertainment and/or technology fields to be particularly relevant to the business of the Company. We believe that all of our director nominees (including our new nominee, Dawn Ostroff) bring, or will 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 more information about 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 biographies of our director nominees describe their noteworthy experience. Also described below are certain individual qualifications and skills of each of our director nominees that we believe contribute, or will 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.

 

Reveta Bowers

Independent
Governance and Organizational Consultant

Director
since: 2018

Activision Blizzard Committee Membership(s):

Compensation Committee

Ms. Bowers, age 71, has served as an independent governance and organizational consultant for non-profit organizations since 2016. From 1972 to 2016, she served as a teacher and administrator at The Center for Early Education, an independent school for children. From 1993 to 2003, she served on the board of directors of The Walt Disney Company, a global entertainment company.

Involvement with Other Organization(s):

Key Experience/Qualifications:

California Teacher Development Collaborative (CATDC) (seminar faculty member)

Common Sense Media (Chair of National Board of Directors)

Dream Fund for Scholars (member of Advisory Board)

Edward E. Ford Foundation (member of Board of Advisors)

FEDCO Charitable Foundation

L.A. Philharmonic

Rossier School of Education, University of Southern California (Chair of Board of Councilors)

Teachers College, Columbia University

Extensive public board experience, having served as an outside director of The Walt Disney Company from 1993 to 2003, and as a member of four committees of Disney’s board, including its compensation committee

Serves as Chair of Common Sense Media, a non-profit organization dedicated to helping children use technology responsibly, safely and effectively

At the Center for Early Education, served as an advocate for the use of gaming and technology to enhance childhood education

B.A. in humanities from the University of Southern California and M.A. in developmental psychology from the College of Developmental Studies

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   17

Back to Contents

Robert Corti

Retired
Chief Financial Officer of Avon Products

Director
since: 2003

Activision Blizzard Committee Membership(s):

Audit Committee (Chair)

Mr. Corti, age 70, worked at Avon Products, a global manufacturer and marketer of beauty and related products, for more than 25 years. He 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 from the Executive Vice President role in March 2006.

Private Company Directorship(s):

Key Experience/Qualifications:

Bacardi Limited

Involvement with Other Organization(s):

Manhattan Chapter of the Cystic Fibrosis Foundation

Financial expertise, particularly accounting and tax experience, gleaned in part from his long tenure in Avon’s finance department

Unique perspective of having helped to guide a large public company with international operations through the changing economic and competitive landscape, gained from having served Avon for more than 25 years and working his way up to increasingly senior roles within that organization

Consumer products industry experience from his tenure at Avon

Certified public accountant

Qualifies as an “audit committee financial expert” and is “financially sophisticated”

B.A. in accounting from Queens College and M.B.A. in taxation from St. John’s University

 

Hendrik Hartong III

Chairman and Chief Executive Officer of Brynwood Partners

Director
since: 2015

Activision Blizzard Board Committee Membership(s):

Audit Committee

Mr. Hartong, age 53, serves as the Chairman and Chief Executive Officer of Brynwood Partners, a private equity firm specializing in the consumer products sector, which he joined in 2004 as a managing partner. Mr. Hartong was the President and Chief Executive Officer of Lincoln Snacks Company, a food products company, from 1998, at which point the company was publicly traded, until 2004, when Brynwood Partners divested its ownership in Lincoln Snacks. 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, with Activision Publishing, Inc. (“Activision”), then our sole operating unit.

Private Company Directorship(s):

Key Experience/Qualifications:

Brynwood Partners (Chairman and Chairman of Executive Committee)

Harvest Hill Beverage Company (Chairman) (a company in which Brynwood Partners has a controlling ownership interest)

Hometown Food Company (Chairman) (a company in which Brynwood Partners has a controlling ownership interest)

Financial expertise, in particular, from having served as President and Chief Executive Officer of then-publicly traded Lincoln Snacks for six years

Wealth of experience in the consumer products industry from his experience guiding Lincoln Snacks and the portfolio companies of Brynwood Partners

Qualifies as “audit committee financial expert” and is “financially sophisticated”

B.A. in history from Lafayette College and M.B.A. from Harvard University

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   18

Back to Contents

Brian Kelly

Chairman of the Board of Activision Blizzard

Director
since: 1995

 

Mr. Kelly, age 57, has held various positions of responsibility with Activision Blizzard since 1991, including serving as a director of the Company since July 1995, the Co-Chairman of our Board of Directors from October 1998 until 2013 and as Chairman of our Board of Directors since 2013.

Involvement with Other Organization(s):

Key Experience/Qualifications:

Call of Duty Endowment (co-founder)

NewYork-Presbyterian Hospital (trustee)

Juvenile Diabetes Cure Alliance (founder and Chairman)

Depth of institutional knowledge and understanding of our organization, which he possesses by virtue of his service as a senior executive of the Company from 1991 until 2008 and as a director of the Company for almost 25 years

Superior leadership skills, devotion to the Company, and commitment to helping to ensure our ongoing success

B.A. in accounting from Rutgers University and J.D. from Fordham University School of Law

 

Robert Kotick

Chief Executive Officer of Activision Blizzard

Director
since: 1991

 

Mr. Kotick, age 57, our Chief Executive Officer, 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. He served as our President from July 2008 until June 2017, when Mr. Johnson began serving as our President and Chief Operating Officer.

Other Public Company Directorship(s):

Key Experience/Qualifications:

The Coca-Cola Company (since 2012)

Involvement with Other Organization(s):

Call of Duty Endowment (co-founder and Co-Chairman)

The Center for Early Education (member of Board of Trustees)

Los Angeles County Museum of Art (Vice Chairman of Board and Chairman of Committee of Trustees)

Harvard-Westlake School (member of Board of Trustees)

Depth of institutional knowledge and understanding of our organization, as well as practical experience in a chief executive officer role, that he possesses by virtue of his almost 30 years of service to the Company, including as our Chief Executive Officer and, previously, as our President and the Chairman of our Board

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

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   19

Back to Contents

Barry Meyer

Retired
Chairman and Chief Executive Officer of Warner Bros. Entertainment

Director
since: 2014

Activision Blizzard Board Committee Membership(s):

Nominating and Corporate Governance Committee

Mr. Meyer, age 76, retired as the Chairman of Warner Bros. Entertainment Inc., an American producer of film, television, and music, at the end of 2013. He joined Warner Bros. as a Director of Business Affairs in 1971 and held positions of increasing responsibility throughout his tenure there, eventually serving as Warner Bros.’ Chief Executive Officer and Chairman from October 1999 until March 2013 and as Chairman through December 2013. Mr. Meyer founded the consulting firm North Ten Mile Associates following his retirement from Warner Bros., and currently serves as the Manager and Co-Chief Executive Officer of that firm.

Involvement with Other Organization(s):

Key Experience/Qualifications:

Federal Reserve Bank of San Francisco (Chairman)

Academy of Motion Picture Arts & Sciences (member)

Academy of Television Arts & Sciences (member and former Governor)

Hollywood Radio and Television Society (member)

Human Rights Watch (Director Emeritus)

Smithsonian National Museum of American History (Vice Chairman of Advisory Board)

USC School of Cinematic Arts (member of Board of Councilors)

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

In-depth knowledge of both the business and creative aspects of the entertainment industry, both from his years at Warner Bros. and the leadership positions he held in various cultural institutions dedicated to visual and cinematic arts

Wealth of experience in nearly every facet of the entertainment industry

Deep understanding of the unique challenges faced by large, multinational public companies

B.A. in English from the University of Rochester and J.D. from Case Western Reserve University School of Law

 

Robert Morgado

Retired
Chairman and Chief Executive Officer of Warner Music Group

Director
since: 1997

Activision Blizzard Board Committee Membership(s):

Compensation Committee (Chair)

Nominating and Corporate Governance Committee (Chair)

Mr. Morgado, age 77, our lead independent director, 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.

Private Company Directorship(s):

Key Experience/Qualifications:

Kaanapali Kai (Chairman)

Nest Top (controlling shareholder of Nest Family and Nest Learning Systems)

Involvement with Other Organization(s):

Maui Arts & Cultural Center

Extensive experience as a chief executive officer and a director at a variety of media and entertainment companies

Perspective as the founder and chairman of a media entertainment investment company

B.A. in history and philosophy from Chaminade University of Honolulu and M.P.A. from The State University of New York





     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   20

Back to Contents

Peter Nolan

Senior Advisor to Leonard Green & Partners

Director
since: 2013 (and from 2003 to 2008)

Activision Blizzard Board Committee Membership(s):

Audit Committee

Mr. Nolan, age 61, is the Chairman of Nolan Capital, a private investment company, and is also a senior advisor to Leonard Green & Partners, L.P., a private equity firm, 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 served on the Company’s Board from December 2003 until July 2008, when he resigned in connection with the 2008 business combination of Activision, Inc. and Vivendi Games, Inc. (the “Vivendi Games Combination”).

Private Company Directorship(s):

Key Experience/Qualifications:

AerSale Holdings, Inc. (a company in which Leonard Green & Partners has an ownership interest)

Diamond Wipes International, Inc. (a company in which Nolan Capital has an ownership interest)

Golden Road Food Services, LLC (a company in which Nolan Capital has an ownership interest)

Extensive experience in corporate finance and investment banking, including leadership roles at large international corporations with worldwide operations

Extensive and wide-ranging experience is demonstrated by his current directorships in other companies operating in various industries

Depth of institutional knowledge about the Company from his service on our Board from 2003 to 2008

Qualifies as an “audit committee financial expert” and is “financially sophisticated”

B.S. in agricultural economics and finance and M.B.A., both from Cornell University

 

Dawn Ostroff

Chief Content and Advertising Business Officer of Spotify

New Director Nominee

 

Ms. Ostroff, age 60, is the Chief Content and Advertising Business Officer of Spotify Technology S.A., an international media services provider. She has held the role of Chief Content Officer since 2018 and, in January 2020, became the Chief Content and Advertising Business Officer. Prior to joining Spotify, Ms. Ostroff co-founded Condé Nast Entertainment, a studio and distribution network for film, television, premium digital video, social media and virtual reality, where she served as the President from 2011 to 2018. Ms. Ostroff held a number of positions in the media and entertainment industry before founding Condé Nast Entertainment, including serving as the President of Entertainment for The CW Television Network from 2006 to 2011, the President of United Paramount Network from 2002 to 2006, the Executive Vice President of Entertainment at Lifetime Television from 1999 to 2002, the Senior Vice President of Programming and Production at Lifetime Television from 1996 to 1999, the Division Senior Vice President, Creative Affairs of Twentieth Century Fox Film from 1993 to 1996, the President of Michael Jacobs Productions at The Walt Disney Company from 1989 to 1993, and the Vice President of Business Development at The Kushner-Locke Company from 1984 to 1989.

Other Public Company Directorship(s):

Key Experience/Qualifications:

Westfield Corporation (from 2016 to 2018)

Private Company Directorship(s):

Anonymous Content

Involvement in Other Organization(s):

New York University Faculty of Arts and Science (member of the Board of Overseers)

Wealth of experience in media, entertainment and advertising, stemming from her over 35 years of experience at a variety of media and entertainment companies

Strong leadership skills, illustrated by her numerous positions of responsibility throughout her career, including as an executive of an international media services provider and a founder of a studio and distribution network

B.S. in journalism from Florida International University

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   21

Back to Contents

Casey Wasserman

Chairman and Chief Executive Officer of Wasserman

Director
since: 2015

Activision Blizzard Board Committee Membership(s):

Nominating and Corporate Governance Committee

Mr. Wasserman, age 45, is the Chairman and Chief Executive Officer of Wasserman, a sports, entertainment, and lifestyle marketing and management agency that he founded in 2002. Mr. Wasserman also serves as the President and Chief Executive Officer of the Wasserman Foundation.

Other Public Company Directorship(s):

Key Experience/Qualifications:

Saban Capital Acquisition Corp. (since 2017)

Private Company Directorship(s):

Vox Media

Involvement in Other Organization(s):

LA 2028 Organizing Committee for the Olympic and Paralympic Games 2028 (Chairman)

Los Angeles County Museum of Art (member of Board of Trustees)

UCLA Centennial Campaign (member of Executive Committee)

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

B.A. in political science from the University of California at Los Angeles

Required Vote and Board Recommendation

In accordance with our Bylaws, a director nominee will be elected in an uncontested election only if the number of shares voted “for” that nominee exceeds the number of shares that are voted “against” that nominee. For more information, see “Procedural Matters—What are my voting options 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.

YOUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE FOR DIRECTOR.
     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   22

Back to Contents

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 stockholders.

Board of Directors and Committees

Our Director Nominees

We believe that our director nominees bring, or will bring, to our Board the practical wisdom and strong personal and professional characteristics, judgment, and leadership abilities necessary to keep our Company performing competitively in the market. For a biography of each of our director nominees, including our new director nominee, Dawn Ostroff, please see “Proposal 1—Election of Directors” above.

 

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, 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, and senior management 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. In addition, the Nominating and Corporate Governance Committee will consider nominating persons who are submitted by stockholders, as described immediately below.

Our Board of Directors has nominated Dawn Ostroff to stand for election to our Board at the Annual Meeting. Ms. Ostroff is a new nominee for election to the Board and, if she is elected, she will fill the spot currently held by Elaine Wynn, who is not standing for re-election. Potential candidates for this nomination were recommended by a third-party search firm, as well as members of the

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   23

Back to Contents

Board. Members of the Nominating and Corporate Governance Committee considered multiple candidates so recommended, including Ms. Ostroff, who was recommended by a third-party search firm. Each such candidate was evaluated based on the established criteria for persons to be nominated, including the perceived needs of the Board at the time, as described below. The Nominating and Corporate Governance Committee determined that Ms. Ostroff met these criteria and, further, that she was the best qualified of the new candidates considered for nomination to join our Board. Her nomination was recommended by the Nominating and Corporate Governance Committee and approved by the Board.

Stockholder Recommendation of Director Candidates

Our stockholders may recommend independent director nominees directly to the Nominating and Corporate Governance Committee. 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 stockholder 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 nominees directly to our stockholders for election as directors in accordance with our Bylaws, including pursuant to the “proxy access” provisions, pursuant to which eligible stockholders may include nominees in our proxy materials. For more information, please see “Director Nominations and Other Stockholder Proposals for our 2021 Annual Meeting” 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, are expected to 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, which may include:

 

Experience and Skills

 

Accounting/finance

 

Corporate governance

 

Media, entertainment and/or technology 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 needs. In doing so, it considers whether the nominee has experience or skills in the areas of media, entertainment, digital technology, international operations, strategic planning, corporate governance, accounting and finance, law, or other areas that are relevant to our activities and our Board’s effectiveness. The Nominating and Corporate Governance Committee also takes diversity into account and, to that end, as set forth in our Corporate Governance Principles and Policies, the Company has committed that the initial list from which new independent director nominees are chosen will include qualified female and racially/ethnically diverse candidates.

The Nominating and Corporate Governance Committee evaluates candidates recommended by stockholders using the same criteria as for other candidates recommended by its members or other members of the Board.

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 rules for companies listed on The Nasdaq Stock Market (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 and/or director nominee is required to complete a questionnaire on an annual basis.

Based on the information provided by each director and/or director nominee concerning his or her background, employment, and affiliations, our Board affirmatively determined that each of Messrs. Corti, Hartong, Meyer, Morgado, Nolan, and Wasserman and Mses. Bowers, Ostroff and Wynn is or will be, as the case may be, an independent director within the meaning of the Nasdaq Rules.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   24

Back to Contents

Accordingly, our Board determined there are no relationships or activities between the Company and any of these directors and/or director nominees 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 and/or director nominees has a direct or indirect material relationship with the Company.

Board Leadership Structure

Our Board believes that the division between the role of the chief executive officer and the chairman of the Board 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. As such, our chief executive officer does not serve as the chairman of our Board. Having different individuals serve as the chief executive officer and the chairman 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.

Our Board has also appointed a lead independent director, whose duties include coordinating the activities of the independent directors, monitoring the flow of information from the Board committees to the full Board, serving as a liaison between our chairman and our senior management, on the one hand, and the independent directors, on the other, and presiding at executive sessions of the independent directors.

Other Directorships

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

In accordance with our Bylaws, a director nominee will be elected in an uncontested election only if the number of shares voted “for” that nominee exceeds the number of shares that are voted “against” that nominee by the holders of shares present in person or by proxy at the meeting and entitled to vote on the election of directors. 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 its discretion, the Nominating and Corporate Governance Committee, without 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.

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 the director 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.

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   25

Back to Contents

Continuing Focus on Board Effectiveness

Our Board and its standing committees are focused on effectively overseeing our business for the benefit of our stockholders.

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 ten times during 2019, including at least once per quarter and in conjunction with the 2019 annual meeting of our stockholders. Each person who served on our Board during 2019 attended over 90% 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 our management at least two times per year. Three such executive sessions took place during 2019.

In accordance with our Corporate Governance Principles and Policies, all directors are expected to attend annual meetings of our stockholders. Eight of the ten directors who were then serving on the Board attended the 2019 annual meeting.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   26

Back to Contents

Annual Board, Committee, and Director Self-Evaluations

We recognize the critical role that Board and committee evaluations play in ensuring the effective functioning of our Board. To this end, the Nominating and Corporate Governance Committee annually leads an evaluation of our Board’s overall performance and the overall performance of each of our Board’s standing committees, which seeks to identify specific opportunities, if any, for improvement.

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 also encourage our directors to attend external programs and provide financial and administrative support to the directors in connection therewith.

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   27

Back to Contents

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.

Set forth below is the current membership of each of our Board’s standing committees. Each current committee member served in the role shown below through 2019 and continues to serve in that role.

Also set forth below is a summary of the purpose and key responsibilities of each of the three standing Board committees.

 

 

AUDIT COMMITTEE

Members: Robert Corti (Chair), Hendrik Hartong III, Peter Nolan   Meetings Held in 2019: Six, including at least once per quarter

Purposes & Key Responsibilities

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

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)

Overseeing the annual audits and quarterly reviews of our financial statements and our internal control over financial reporting by our independent registered public accounting firm

Overseeing our financial reporting process and internal control, including:

reviewing and evaluating the adequacy and effectiveness of our internal control over financial reporting and our management’s assessment of the same

reviewing, and discussing with the independent registered public accounting firm, 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 those financial statements should be included in our Annual Report on Form 10-K

reviewing, and discussing with our management, our internal audit projects and the performance of our internal audit function

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

meeting periodically with our management, including our Chief Financial Officer, our Chief Accounting Officer, our chief internal audit executive, and our independent registered public accounting firm in separate executive sessions, to discuss any matters that the Audit Committee or any of the above persons or firms believe warrants Audit Committee attention

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

Overseeing our policies relating to the ethical handling of conflicts of interest, including related party transactions (see “Certain Relationships and Related Person Transactions—Policies and Procedures Regarding Transactions with Related Parties” below)

Membership

Must have at least three members

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 our 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 our 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

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

Based upon information provided by each member of the Audit Committee concerning his background, employment, and affiliations, our Board has determined that each 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 Rule 10A-3 of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) 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

Meetings

Must meet at least quarterly

Committee Charter

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

Engagement of Outside Consultants

The Audit Committee’s charter authorizes it to engage independent counsel or other consultants or advisors, as it deems appropriate

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   28

Back to Contents

COMPENSATION COMMITTEE
Members: Robert Morgado (Chair), Reveta Bowers, Elaine Wynn Meetings Held in 2019: Six, including at least once per quarter

Purposes & Key Responsibilities

 

Discharging our Board’s responsibilities relating to compensation paid to our directors and executive officers and overseeing compensation under our equity incentive plans and other compensation policies, programs, agreements, and arrangements

 

– The Compensation Committee consults with our management in formulating compensation plans, but ultimately the Compensation Committee exercises independent judgment in approving the compensation of our executive officers

 

– Please see “Executive Compensation—Compensation Discussion and Analysis—Decision-Making Approach to Executive Compensation—Roles of the Key Participants in the Executive Compensation Decision-Making Process” and “—Our Board’s Role in Risk Oversight—Compensation Risk
Management” below for a further description of such responsibilities

 

Reviewing, and discussing with our management, the compensation-related disclosure included in our proxy statement and Annual Report on
Form 10-K

 

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

 

Engagement of Outside Consultants

 

Our 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”) to act as its independent compensation consultant and to advise on issues related to executive compensation and benefits

 

Exequity reports directly to the Compensation Committee and does not provide any services to us other than the services provided to the Compensation Committee

 

In accordance with its charter and the Nasdaq Rules, each year in connection with the engagement of any compensation consultant or any other external advisor, the Compensation Committee assesses the independence of the compensation consultant or advisor who advises the Compensation Committee, using the following factors:

 

– the provision of other services, if any, the compensation consultant provided to the Company;

 

– the significance of the fees paid by the Company 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

 

Our Compensation Committee assessed the independence of Exequity based on the evaluation of these factors, including information received from the compensation consultant addressing these factors, and believes that Exequity’s service to the Compensation Committee does 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

 

Membership

 

Must have at least two members

 

All Compensation Committee members must be:

– determined by our Board to be independent directors under the Nasdaq Rules, including the requirements with respect to compensation committee
composition;

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

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

 

Based upon information provided by each member of the Compensation Committee concerning his or her background, employment, and affiliations, our Board has determined that each 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 of management in connection with the duties of a Compensation Committee member

 

Meetings

 

Must meet at least four times annually

 

Committee Charter

 

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

 

Compensation Committee Interlocks and Insider Participation

 

No member of our Compensation Committee is or has been an executive officer or other employee of the Company. Additionally, in 2019, none of our executive officers served on the board of directors of any entity that had an executive officer serving on our Board

 

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   29

Back to Contents

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Members: Robert Morgado (Chair), Barry Meyer, Casey Wasserman Meetings Held in 2019: Three

Purposes & Key Responsibilities

 

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

 

Providing oversight of our corporate governance affairs and those of our Board

 

Determining the appropriate engagement with stockholder 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)

 

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)

 

Membership

 

Must have at least two members

 

Based upon information provided by each member of the Nominating and Corporate Governance Committee concerning his background, employment, and affiliations, our Board has determined that each is an independent director under the Nasdaq Rules

 

Meetings

 

Must meet at least two times annually

 

Committee Charter

 

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

 

Engagement of Outside Consultants

 

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

 

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   30

Back to Contents

Our Board’s Role in Risk Oversight

General Risk Oversight

It is the responsibility of our senior management to develop and implement the Company’s financial 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, its standing committees, and our senior management exercise this risk oversight function in a variety of ways, including:

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   31

Back to Contents

Cybersecurity Risk Oversight

In order to defend against, and respond to, the threat of security breaches and cyberattacks, we have developed a comprehensive program that is designed to protect and preserve the confidentiality, integrity, and continued availability of all information owned by, or in the care of, the Company and our partners. This program includes a cyber-incident response plan. Our Audit Committee oversees the identification and mitigation of potential cybersecurity risk, with the goals of protecting our intellectual property, maintaining consumer confidence, preserving employee data confidentiality, and minimizing information security threats to the Company and the users of our products and services. As part of this oversight, the Audit Committee receives regular updates with respect to the threats we face, and our risk mitigation plans to address those threats, from members of management with information security responsibilities. These updates include results of information security maturity assessments and recommendations which are informed, in part, by third-party independent reviews of our information security control environment and operating effectiveness.

Compensation Risk Management

The Compensation Committee, together with its independent compensation consultant, legal counsel, and members of our human resources team, reviews the Company’s incentive compensation plans and practices annually to determine if they encourage employees to take risks that are reasonably likely to have a material adverse effect on the Company. In 2019, as in previous years, 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). We concluded our compensation programs do not incentivize employees to take such risks.

The incentive compensation plans in which our employees are eligible to participate are designed to encourage achievement of challenging targets aligned with our overall corporate strategy with upside opportunity for higher levels of performance, while mitigating potential risks. The following factors help mitigate risk:

performance objectives underlying awards are designed to focus executive performance on long-term stockholder value creation and balance between financial and strategic targets and short-and long-term time horizons for achievement;

cash bonuses to our executives and other employees represent just one element of our employees’ total compensation;

cash bonuses to our executives and other employees are only paid if established performance metrics are achieved and/or the underlying business unit is profitable;

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

equity awards, which represent a meaningful portion of the compensation paid to our executives, are generally subject to multi-year vesting schedules, and any vesting in respect of underlying performance measures is capped; and

incentive awards for our executive officers are tied to an array of performance metrics, motivating a balanced focus on multiple measures of our health.

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

cash-based incentive awards generally require at least two levels of approval (including, in the case of any award to an executive officer, Compensation Committee approval and, for any executive other than himself, the chief executive officer’s approval);

all equity-based awards to any employee require Compensation Committee approval, in addition to any management-level approval (e.g., for any executive other than himself, the chief executive officer’s approval);

written documentation underlying all of our cash-based incentive programs for our principal business units;

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

our “clawback policy,” which can be viewed on our website at http://investor.activision.com/corporate-governance.cfm, pursuant to which performance-based compensation to an executive may be recovered in the event of an earnings restatement due to his or her misconduct to the extent to which 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, certain realized gain in respect of his or her awards may be recovered;

stock ownership guidelines for our executive officers and the President of each of Activision, Blizzard Entertainment, Inc. (“Blizzard”), and King Digital Entertainment Limited (“King”), which require each person subject to those guidelines to obtain and maintain equity ownership with a value equal to a specified multiple of his or her then-current base salary (which guidelines are expected to be satisfied within five years of the date on which he or she became subject to them (e.g., upon an 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.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   32

Back to Contents

Stockholder Engagement Process

The Company regularly engages with key stockholders to solicit feedback as part of an effort to remain aware of our stockholders’ perspectives with respect to any matters of importance to them. These efforts enhance the ongoing communications we have with our stockholders regarding our financial and operational performance.

In advance of last year’s annual meeting, members of our management reached out to stockholders who collectively held approximately 66% of our Common Stock and spoke with each such holder who was willing to speak with us. Again, in the fall of 2019, in an effort to gain additional perspective, members of our management reached out to stockholders who collectively held approximately 66% of our Common Stock and spoke with each such holder who was willing to speak with us. During engagements, all of which were telephonic, we responded to any questions our investors had for us with respect to our executive compensation program, our corporate governance practices, our human capital management, and anything else about which they desired to understand. We also sought input from our investors as to any areas about which they would like to see change and/or increased disclosure. Please see “Executive Compensation—Compensation Discussion and Analysis—Overview—Stockholder Engagement and Our 2019 Stockholder Advisory Vote on Executive Compensation” below for feedback we received on our executive compensation program.

We shared the feedback we received with our Board and its committees, and that feedback has been instrumental in shaping decisions relating to our executive compensation, corporate governance, and human capital management disclosure and programs in a manner that we believe is simultaneously responsive to that feedback and appropriate for the Company. We will continue to incorporate such feedback into our decision-making processes.

Communications With Our Board

We believe that communication with our stockholders is very important, and the Company reviews feedback sent to us from any of our stockholders, no matter the size of their holdings. In accordance with our Corporate Governance Principles and Policies, our Corporate Secretary reviews all communications addressed to our Board, any of its committees, or one or more of our individual directors. Generally, communications that are advertising materials, promotions of a product or service, or patently offensive communications will not be forwarded. Communications that relate to our accounting practices, internal accounting controls, or auditing matters will be promptly forwarded to the chairperson of the Audit Committee. Communications that relate to any other matter our Corporate Secretary, in his reasonable judgment, considers to be appropriate will be forwarded promptly to the addressee(s).

You may contact us using any one of the methods below:

By Mail

Email

Phone

mail to Activision Blizzard, Inc.

c/o Corporate Secretary

3100 Ocean Park Boulevard

Santa Monica, California 90405

send email to

ir@activision.com

Investor Relations

(310) 255-2000

 

Our Executive Officers

Biographical summaries for our executive officers (including for Mr. Kotick, for whom a biographical summary is also set forth under “Proposal 1—Election of Directors” above) can be found in Item 1 of our Annual Report on Form 10-K for the year ended December31, 2019, filed with the SEC on February 27, 2020 (our “2019 10-K”).

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   33

Back to Contents

Executive Succession Planning

As a part of various sessions during the year, our Board focuses on human capital, including by engaging in succession planning for our chief executive officer and other senior-most officers. Our Board’s goals are to have a process for effective executive development and succession and to be prepared for both the unexpected loss of a key leader and planned changes to our management team. In these sessions, among other things, our Board:

reviews the assumptions, processes, and strategy for expected and unexpected events which may result in changes to our executive team;

evaluates the Company’s organizational and operational needs and the overall composition of the qualifications, tenure and experience of our executive team;

considers the experience, performance and skills of, and development opportunities for, possible internal successors to our chief executive officer and other executives; and

discusses potential external successors to our chief executive officer and other executives.

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, the Compensation Committee has 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 ten times (i.e., 10x) his or her then-current annual base salary and that each other executive officer, as well as the President of each of Activision, Blizzard, and King, 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.

The individuals subject to these guidelines are expected to accumulate the required stock within five years (so that any person who has been subject to the guidelines since the date on which these guidelines were adopted in 2012 should be in compliance, and any person who subsequently became subject to them (e.g., upon his or her election as an executive officer) has five years from the date on which he or she became subject to them to be in compliance). Further, if such a person 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 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, per their terms, explicitly subject to them.

As of April 1, 2020, each person who, as of that date, had been subject to the guidelines for five or more years satisfied them.

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. Trade associations are independent organizations representing a variety of members and may take political or policy positions we do not share.

Corporate Governance Principles and Policies

Our Corporate Governance Principles and Policies establish a framework for the Board’s exercise of its duties and responsibilities in service of the best interests of the Company and our stockholders. They address, among other things, the role of our Board, the composition of our Board and that of its standing committees, meetings of the Board and its committees, and director stock ownership requirements. You can access our Corporate Governance Principles and Policies on our website at http://investor.activision.com/corporate-governance.cfm.

Code of Conduct

We have a code of ethics—our Code of Conduct—which applies to all our directors and employees worldwide, including our chairman, chief executive officer, president, chief operating 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 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 chief executive officer, chief financial officer, chief accounting officer, or any person performing similar functions, and any other related information, on that website.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   34

Back to Contents

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, Code of Conduct, and Policy on Recoupment of Performance-Based Compensation Related to Certain Financial Restatements 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.

Diversity and Inclusion Initiatives

Diversity and inclusion remain a strategic priority for Activision Blizzard. We are committed to building and sustaining a culture of belonging, where everyone thrives and diversity drives business value and growth. We believe this is one of the reasons why Activision Blizzard has been recognized for our efforts to create a great workplace for all, including receiving the distinction for two consecutive years as a “Best Place to Work for LGBTQ Equality” by the Human Rights Campaign Foundation’s Corporate Equality Index. We are proud of these accolades because we know that the most innovative work comes from a culture in which all employees can be, and bring, their authentic and best selves.

Our efforts around diversity and inclusion focus on five strategic areas:

Our People—We believe that in order to create products that attract a growing global audience, it is important that our employees reflect that diversity, and that they have the opportunities and resources to unlock their potential. While we define diversity in its broadest sense to include characteristics both seen and unseen, we know representation at all levels of the organization matters. To that end, we partner with organizations like the Grace Hopper Celebration and Women in Games International, and continue to focus on connecting with underrepresented groups through our University Relations programs, where we have continued to increase our representation of women and underrepresented minorities. We are reviewing and updating our recruiting and interviewing processes and tools to help mitigate the potential for bias. We have also invested in unconscious bias awareness workshops for all employees to support inclusive, high-performing teams across Activision Blizzard. By embedding D&I practices and programs in the full employee lifecycle, we work to recruit, attract, retain and grow world-class talent that represents our player communities.

Our Leaders—In 2020, we amended our Corporate Governance Principles and Policies to provide that the initial list from which any new independent director nominee is chosen will include qualified female and racially/ethnically diverse candidates and, similarly, if we conduct an external search for a new CEO, that the initial list of external candidates will include qualified female and racially/ethnically diverse candidates. In addition to ensuring diversity at the senior most levels, we also believe in developing leaders for whom diversity and inclusion is a priority. As such, in 2019, all people managers were required to attend an “Inclusive Leadership Experience” workshop in order to further develop this capability with the knowledge and tools needed to create the conditions for their teams to flourish. To further reinforce D&I as a strategic business priority, some of our most senior leaders serve as executive sponsors of our Employee Networks (our employee resource groups).

Our Culture—Across our entire organization, fostering an inclusive culture where employees feel valued and heard, and a sense of belonging is mission critical. One way we are doing this is through expanding our Employee Networks community at Activision, Blizzard, King, and our corporate headquarters. These groups support our employees, our culture and our business by driving cultural awareness, professional development, networking, community involvement, and support for recruiting efforts. In 2019, we celebrated various heritage moments, including: our 6th annual Veterans Day of Service, in which employees at 30 sites in multiple countries partnered with local organizations to support veterans; an International Women’s Day celebration at every one of the Company’s offices, which included a development-oriented Women’s Summit for our all of our employees; and Pride Month celebrations, which saw thousands of employees participating in office events and marching in three Pride parades around the world. During last year’s Game Developers Conference, we hosted our 3rd annual D&I Mixer for employees from across the enterprise to engage in dialogue and activities focused on diversity and inclusion in our Company, as well as our games.

Our Content—We believe that inclusive game design is an opportunity for us to lead the industry and influence more open and inclusive gaming communities. Part of the effort means creating content that reflects and attracts a global and diverse player base. In 2019, a character from Overwatch®, Soldier: 76, was identified as gay, making him the franchise’s second openly LGBTQ character. Also, Call of Duty: Modern Warfare engaged players in breathtaking combat operations with a diverse cast of international special forces. Our Employee Networks groups are leveraged to provide feedback to development teams on content ranging from narratives to worlds/levels and character skins and names. Creating more diverse characters and worlds is only part of what it means to be more inclusive in game design. We are also looking at ways to make our games more accessible to gamers with varying physical, visual, auditory, or cognitive processing abilities, and have a growing community of accessibility champions in our game development and studio teams.

     
     
  ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   35

Back to Contents

Our External Communities—We see the opportunity to drive positive impact outside our walls through external communities and partners. As such, across the Company, we focus on the next generation of talent through programs that provide girls, women and/or young people in underserved communities with exposure to education and career opportunities in science, technology, engineering, and mathematics (STEM). In 2018, Activision Blizzard established a fellowship through Minds Matter of Los Angeles, a non-profit organization that offers college prepatory programs for students in under-resourced communities, which we continue to support today. In 2019, King became the first U.K.-based gaming company to sign onto the “Tech Talent Charter,” a commitment by signatories to work together to increase the diversity of the technology workforce in the U.K. For the second year in a row, Blizzard partnered with “Girls Who Code,” an organization focused on closing the gender gap in technology, to sponsor two major initiatives, including a seven-week program hosted at Blizzard headquarters for girls to learn to code and gain exposure to technology jobs. For the fifth year in a row, King partnered with Diversi, a non-profit organization working for greater diversity in gaming, to award 15 female students full scholarships to the Game Developers Conference, with a tailored development program and special access to industry champions. For the second year in a row, our University Relations team worked with STEM Advantage, an organization that mentors and prepares women and underserved communities to pursue careers in STEM, in selecting participants for our intern program. Further, Blizzard hosted an “Inclusion Nexus” for the nearly 40,000 people who visit its annual BlizzCon event to share with them how we value diversity and inclusion at Blizzard, in the gaming industry, and in games themselves.

While we have made great strides in our diversity and inclusion efforts, we understand and embrace that there is work still to be done, and it remains our priority. Our growth is driven by our ability to innovate. Our ability to innovate is enhanced by diverse teams working in an inclusive environment. By firmly anchoring diversity and inclusion in our growth strategy, we focus our efforts to drive meaningful change for all the communities in which our employees and customers live, work, and play.

Environmental, Social and Governance Matters

Our Board appreciates that reporting on environmental, social and governance (“ESG”) matters is of increasing importance to many of the Company’s stakeholders, especially as embedded ESG initiatives, policies, strategies and goals can help mitigate risk, reduce costs, protect brand value and identify market opportunities. Therefore, we have (1) established a cross-functional ESG working group, which includes members of our management, to identify, gather and analyze ESG information in order to both report on and advance our existing enterprise-wide commitment to ESG matters; and (2) engaged an external consultant to help support and counsel this working group. A variety of corporate social responsibility and sustainability subjects—some of which are discussed in this proxy statement—will be covered by the Company’s ESG team in this process, including, without limitation, our: corporate governance practices; business ethics and compliance; data privacy and data security measures; energy usage and waste reduction efforts; human capital management practices; diversity and inclusion initiatives; and community engagement and philanthropy. The Company intends to provide further information on its ESG initiatives in the upcoming months and years. We currently intend to finalize and publish a detailed outline of our ESG reporting efforts in 2020, and release our first annual ESG report in 2021.

     
     
www.activisionblizzard.com ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   36

Back to Contents

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 2019.

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 principles and objectives;

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

describing the elements and rationale behind our compensation programs and awards for 2019, as well as any changes made to date for 2020.

 

This CD&A includes:

Compensation Discussion and Analysis   37
Overview   37
Changes to our Executive Compensation Program During 2019   37
Newly Hired Executive Officers   38
2019 Business Performance   38
Our Relative Total Shareholder Return   39
Our Corporate Strategy   40
Aligning Pay with Performance   40
Best Practices of Our Compensation Programs   42
Stockholder Engagement and Our 2019 Stockholder Advisory Vote on Executive Compensation   43
Compensation Principles and Objectives   45
Decision-Making Approach to Executive Compensation   46
Factors Influencing Compensation Decisions   46
Highly Competitive Business Environment and Associated Talent Requirements   46
Use of Employment Agreements   46
Comparator Company Data and Compensation Surveys Referenced   47
Roles of the Key Participants in the Executive Compensation Decision-Making Process   47
Equity Award Granting Policy   48
Impact of Tax and Accounting Considerations   48
Elements of Our Executive Compensation Program for 2019   49
Corporate Annual Incentive Plan Bonuses   49
Other Cash Programs or Awards   53
Equity Awards   53
Limited Double-Trigger Change-of-Control Arrangements   54
Limited Retirement Benefits   54
Standard Health and Welfare Benefits   55
Compensation Committee Report   55

 

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 principles and programs, as well as compensation-related actions taken during 2019 for our named executive officers.

For 2019, our named executive officers were:

Robert Kotick, our Chief Executive Officer;

Dennis Durkin, our Chief Financial Officer and President of Emerging Businesses;

Collister Johnson, our then-President and Chief Operating Officer, who is currently employed by the Company as a Special Advisor to our CEO;

Claudine Naughton, our Chief People Officer; and

Chris B. Walther, our Chief Legal Officer.

Changes to our Executive Compensation Program During 2019

Changes and Improvements to our Annual Cash Bonus Plan, the CAIP

Changes to the CAIP Following the TCJA

Cash bonuses under our CAIP were historically structured to simultaneously achieve tax deductibility under Section 162(m) and allow the Compensation Committee flexibility in awarding pay that matched each executive’s actual performance. To achieve these goals, there was a single performance objective that, if met or exceeded, would allow for the payment of a bonus to each executive to the maximum permitted under the Activision Blizzard, Inc. 2014 Incentive Plan (the “2014 Plan”). Then, the Compensation Committee, using the negative discretion permitted by the tax rules and accompanying plan design, would reduce the payment to him or her so that his or her actual bonus would match his or her actual performance. Following the enactment of the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017 (the “TCJA”), the

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   37

Back to Contents

performance-based compensation exception to Section 162(m) that we utilized to achieve deductibility for the bonuses is no longer available. For 2019, while the Compensation Committee preserved the approach of requiring that a threshold level of performance be met before any executive would receive any payment under the CAIP, we did not establish a single objective for which achievement would “fund” the bonuses at the maximum permitted for the year.

Improvements to the CAIP Design

To increase the effectiveness of incentivizing and assessing performance, the Compensation Committee introduced the following enhancements for the CAIP opportunities for our executives for 2019:

1.

The threshold required to be met before any executive would receive any payment under the CAIP, regardless of his or her performance, was increased to 90% of the AB Adjusted OI target set forth in the AOP, from 75%.

2.

The threshold required to be met before any executive would receive any payment under the CAIP with regard to any financial metric (e.g., operating income, earnings per share or cash flow) was increased to 90% from 75% or 85%, as the case may be, of the target for that metric set forth in the AOP.

3.

Payments associated with below-target performance related to any financial metric were reduced so that: (a) performance at 90% of the target for that metric set forth in the AOP would result in a payment of 50% of the target payment; (b) performance between 90% and 95% of the target for that metric set forth in the AOP would result in a payment of between 50% and 85% of the target payment (with straight-line interpolation for points in between); and (c) performance between 95% and 100% of the target for that metric set forth in the AOP would result in a payment of between 85% and 100% of the target payment (with straight-line interpolation for points in between). For 2018, performance between the threshold and maximum performance level would have resulted in a payment at that same level (e.g., 85% performance as a percentage of target would have resulted in a payment equal to 85% of the target).

4.

The assessment of strategic objectives was improved to introduce an assessment of performance across a set of annual and long-term strategic priorities identified by our Compensation Committee at the beginning of the year. These priorities generally fell into the following categories: (a) attracting, retaining and motivating top talent; (b) cultivating new business opportunities and expanding existing ones; (c) delivering production and development milestones; and (d) increasing productivity.

Reduction in Target Award Grant Date Values

Pursuant to our employment agreement with Collister Johnson, dated as of May 10, 2017 (the “Johnson Employment Agreement”), and our employment agreement with Chris B. Walther, dated as of November 1, 2016 (the "Walther Employment Agreement"), each of Mr. Johnson and Mr. Walther is eligible to receive annual grants of performance-based vesting restricted share units, each representing the conditional right to receive one share of our Common Stock upon the achievement of one or more specified performance objectives and subject to continued employment through the stated vesting date (“PSUs”). These PSUs vest based on the achievement of financial objectives set forth in the Company’s long-range strategic plan, with a target value of $1 million and $625,000, respectively. For awards made during 2019, in the case of each executive, the Compensation Committee elected to utilize its discretion and reduce the target value upon grant to 80% of his target.

Newly Hired Executive Officers

During 2019, Claudine Naughton joined us as Chief People Officer. Consistent with the feedback we have received from our stockholders and our commitment to aligning the interests of our executive officers with those of our stockholders by providing a significant portion of compensation in the form of performance-based bonuses and equity awards:

84% of the total compensation received by Ms. Naughton for 2019 was performance-based.

She is not entitled to any guaranteed base salary increases.

She does not have any “change of control” protection.

She is eligible for an annual bonus under the CAIP for which payment, if any, will depend on achievement of the financial and strategic objectives established.

Her equity awards are contingent on the achievement of specified performance objectives, or in the case of stock options, directly dependent upon the appreciation in the value of our Common Stock.

During 2020, Daniel Alegre joined us as President and Chief Operating Officer, succeeding Collister Johnson, who is currently employed by the Company as a Special Advisor to our CEO. For more information regarding Mr. Alegre’s performance-based bonus and equity award opportunities, please see the Company’s Form 8-K, filed with the SEC on March 11, 2020.

2019 Business Performance

2019 was a year of transition and investment for the Company, and we made significant progress in positioning our key franchises, and the Company, for growth. In 2019:

Net revenues were $6.5 billion.

Net revenues from digital channels were $4.9 billion and were 76% of overall net revenues.

Earnings per diluted share were $1.95.

Operating income was $1.6 billion.

Operating cash flow was $1.83 billion.

Net bookings(1) were $6.39 billion, including in-game net bookings(1) of $3.37 billion.

(1)

Net bookings is an operating metric that is defined as the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others. Net bookings is equal to net revenues excluding the impact from deferrals. In-game net bookings primarily includes the net amount of downloadable content and microtransactions sold during the period and is equal to in-game net revenues excluding the impact from deferrals.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   38

Back to Contents

In the fourth quarter, we had 409 million monthly active users (i.e., MAUs),(1) 128 million of which were at Activision, 32 million of which were at Blizzard, and 249 million of which were at King.

Call of Duty®: Modern Warfare® unit sell-through increased by a double-digit percentage versus Call of Duty®: Black Ops 4, with growth across both PC and console. PC sell-through on Battle.net grew 50% year-over-year. Modern Warfare saw strong growth in full-game downloads with console digital mix at nearly 50%.

Call of Duty® Mobile installs exceeded 150 million during the year, and the game reached the top of the download charts in more than 150 countries and regions, ending the year in the top-15 grossing games in U.S. app stores.(2)

World of Warcraft® exited the year with an active player community(3) more than twice the size of its ending level at June 30, 2019.

Hearthstone® launched the Descent of DragonsTM expansion and rolled out the new Battlegrounds game mode in the fourth quarter of the year.

Candy Crush SagaTM mobile reach grew year-over-year, and it was the top-grossing title in the U.S. app stores.(4)

King’s advertising net bookings(5) exceeded $150 million.

 

However, we did not achieve all the goals we set for ourselves. As a result, consistent with our pay-for-performance approach, overall CAIP bonus payments to our NEOs ranged between 82% and 104% of target for the year and, for the portion of the outstanding equity awards granted to our NEOs that had the potential to vest based on 2019 financial performance objectives, achievement, as a percentage of target, ranged from 0% to 107%.

Our Relative Total Shareholder Return

The following graph compares the cumulative total shareholder return (“TSR”) on our Common Stock, the Nasdaq Composite Index, the S&P 500 Index, and the RDG Technology Composite Index. The graph assumes that $100 was invested on December 31, 2014, and that dividends were reinvested daily. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

 

 

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Activision Blizzard, Inc. under the Exchange Act or the Securities Act of 1933.

(1)

We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user. In certain instances, we rely on third parties to publish our games. In these instances, MAU data is based on information provided to us by those third parties, or, if final data is not available, reasonable estimates of MAUs for these third-party published games.

(2)

Based on App Annie Intelligence and internal estimates for respective regions, app stores, and periods.

(3)

Community is defined as players with monthly or longer-term subscriptions.

(4)

Based on App Annie Intelligence.

(5)

Net bookings is an operating metric that is defined as the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others. Net bookings is equal to net revenues excluding the impact from deferrals. In-game net bookings primarily includes the net amount of downloadable content and microtransactions sold during the period and is equal to in-game net revenues excluding the impact from deferrals.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   39

Back to Contents

Our Corporate Strategy

Our executive compensation program plays a key role in our financial and operational success. We place great importance on our ability to attract, retain, and motivate talented executives who can continue to grow our business by putting focus on the four key strategic drivers of our business:

Strong cadence of major content releases: Our expanded franchise development teams are accelerating the cadence of major content releases across our portfolio of fully-owned franchises to invigorate our communities and attract new audiences.

Growing stream of live operations: We continue to grow our “live operations” capabilities, delivering content, services, features, and events, to drive engagement and recurring revenues.

Expansion of our franchises to mobile: We are building on our mobile leadership by extending our console and PC franchises to the largest and fastest-growing gaming platform.

New franchise engagement models: We are investing in esports and advertising to enable new opportunities for our fans to engage with our intellectual property, further enhancing the durability of our franchises.

Our executive compensation program is designed to reward the achievement of specific financial objectives and the creation of long-term stockholder value, and the strategic drivers above are the underpinnings of the individual strategic objectives established for our executives.

Aligning Pay with Performance

A significant portion of the compensation our executive officers receive is in the form of performance-based bonuses and performance-aligned equity awards. Executive officers are rewarded according to the financial performance of the Company, as well as the level at which they achieve the strategic objectives our Compensation Committee sets for each of them. This approach is designed to hold our executive officers accountable for our performance and thereby align their interests with those of our stockholders. The following table illustrates certain elements of our executive compensation program, with a focus on our use of performance-based incentives.*

 

Name

Program

Performance

Period

Service

Period

Performance

Linkage

Pay-For-Performance Linkage

Annual
incentive

CAIP

1 year

~1.2 years from beginning of performance year

AB Adjusted OI,
EPS, FCF, key annual and long-term strategic priorities

Annual assessment of performance versus objectives established at beginning of year

Long-term
incentive

PSUs (OI)

1 year

Varies, generally up to 3.25 years from grant

AB Adjusted OI,
stock price

Assessment of performance versus objectives established for relevant performance period

PSUs (Long-Range Strategic Plan)

3-year cumulative

Varies, generally 3.5years from grant

Assessment of financial objectives set forth in the Company’s long-range strategic plan

Stock Options

10-year life (contingent on employment)

Varies, generally up to 3years from grant

Stock price

Direct alignment with shareholder interests, as any value appreciation is contingent on stock price performance

*

This table is not intended to be exhaustive. For example, long-term incentives granted to certain of our NEOs also assessed 2019 performance by reference to AB Adjusted EPS. 

Our 2019 Financial Performance

The Compensation Committee believes that financial objectives aligned with our AOP for a given year are a robust and meaningful measure of the performance of our executives. The process for creating our AOP is rigorous and includes a detailed review of market trends, a “bottoms-up” build of financial objectives based on each franchise’s content plans, and the creation of a detailed budget with respect to all anticipated operating costs. In some instances, our financial objectives for a year may be lower than the prior year’s objectives or results as underlying variables (e.g., market trends, the volume of titles or other content we plan to release, or our level of planned investment in growth initiatives) change.

Set forth below are certain of the Activision Blizzard-level financial metrics used to assess our named executive officers’ 2019 performance:

Financial Performance Measures(1)
(dollars in millions, except share-based amounts)

Performance Objectives and Actual Results

AOP

Objective

Actual

Results

Actual

Achievement

AB Adjusted Operating Income

$

2,015

$

2,080

103%

AB Adjusted EPS

$

2.10

$

2.25

107%

AB Adjusted Free Cash Flow

$

1,560

$

1,769

113%

(1)

The corporate performance measures underlying 2019 performance-related compensation are non-GAAP measures. For more information on these non-GAAP measures, including how these measures are calculated and why our Compensation Committee believes they are an appropriate way to assess our executives’ performance, see “General—Financial Measures Used in this Proxy Statement—Financial Metrics Used to Measure 2019 Compensation-Related Performance” above.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   40

Back to Contents

Performance Alignment via our CAIP

For 2019, each of our executive officers was eligible for a bonus under the CAIP, contingent upon the executive’s achievement of the financial and strategic objectives set for him or her by the Compensation Committee at the beginning of the year (or, for an executive joining during the year, promptly after his or her employment starts). For 2019, financial metrics for all NEOs participating in the CAIP included profitability and free cash flow measures. For purposes of these financial metrics, our performance ranged from 103% to 113% of target. Performance against the strategic objectives set for our executives ranged from 46% to 100% of target. CAIP bonus payouts for 2019 directly reflect performance against those specific objectives. As such, for 2019, Mr. Kotick received a CAIP-related payout equal to 82% of his target bonus, and our other NEOs received CAIP-related payouts ranging from 82% to 104% of their target bonuses.

 

The following tables illustrate the relationship between the Company’s 2019 financial performance, as measured by the Activision Blizzard-level financial objectives underlying the opportunities for our participating NEOs, and the payments awarded them based on both financial and strategic performance, as compared to the range of potential payments:

(1)

Maximum payout potential as a percentage of target as shown above represents the maximum bonus a participating NEO was eligible to receive under the CAIP with regard to the relevant metric. For further detail on the 2019 bonus opportunities under the CAIP for our participating NEOs, please see “—Elements of Our Executive Compensation Program for 2019—Corporate Annual Incentive Plan Bonuses” below. As discussed under “General—Financial Measures Used in this Proxy Statement” above, performance is measured by reference to non-GAAP measures.

(2)

The actual payout as a percentage of target shown above for each participating NEO represents the bonus amount specifically related to performance measured against his or her 2019 CAIP opportunity.

 

Please see “—Elements of Our Executive Compensation Program for 2019—Corporate Annual Incentive Plan Bonuses—Incentive Opportunities under the CAIP” below for more information.

Performance Alignment via our Equity Awards

The equity incentives granted to our NEOs in 2019 generally consisted of PSUs and stock options. As such, these equity awards were aligned with performance, as the PSUs will not vest unless one or more specified performance objectives are achieved and stock options are inherently performance-based, since any financial gain is directly dependent upon the appreciation in the value of our Common Stock and, as such, squarely link executive pay with Company performance. In addition, all of the PSUs include a threshold level of performance (e.g., 85% of the objective) which, if not satisfied, will result in the cancellation of the award and a maximum level of performance (e.g., 125% of the objective) which, if exceeded, will not result in any additional vesting of the award. Further, each named executive officer had equity awards which had the potential to vest based on 2019 financial performance objectives. Please see “—Elements of Our Executive Compensation Program for 2019—Equity Awards” below for more information. The sole exception was a grant of restricted share units with time-based vesting, each representing the conditional right to receive one share of our Common Stock, to Mr. Walther following our annual review of the total compensation opportunities of each our executives.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   41

Back to Contents

Overall Pay-For-Performance Alignment

For 2019, 94% of the CEO’s total compensation, and 66% of the average total compensation of the remaining named executive officers, was performance-based, as illustrated below:

 

 

As a result of this strong pay-for-performance alignment, overall CAIP bonus payments to our NEOs ranged between 82% and 104% of target for the year and, for the portion of the outstanding equity awards granted to our NEOs that had the potential to vest based on 2019 financial performance objectives, achievement, as a percentage of target, ranged from 0% to 107%.

Best Practices of Our Compensation Programs

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

Performance-Aligned Equity Awards—We award performance-based vesting restricted share units (i.e., PSUs) with vesting contingent on the achievement of specified performance objectives and stock options, for which any financial gain is directly dependent upon the appreciation in the value of our Common Stock and, as such, squarely link executive pay with Company performance;

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

Conservative Granting of Equity—In an effort to limit potential stockholder dilution, our Compensation Committee grants equity incentives judiciously and reviews our share usage (i.e., our so-called “burn rate”) quarterly;

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

Stock Ownership Guidelines—We have meaningful stock ownership guidelines for our executive officers and directors;

Limited Perquisites and Retirement Benefits—We provide limited perquisites to our executive officers and the only retirement plans in which they participate are our 401(k)/qualified defined contribution retirement plans;

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 (including our executives and any entity over which any employee or immediate family member sharing the same household of any employee has or shares voting or investment control) 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 Incentive Awards—In the event of an earnings restatement, we may “claw back” certain performance-based compensation (including both short-term and long-term incentives) paid or awarded to the executives responsible;

Independent Consultant Reporting Directly to Compensation Committee—The Compensation Committee engages the services of an independent compensation consultant that has no other relationship with the Company or its management; and

Comparator Group Review—The Compensation Committee monitors our comparator group annually to ensure it continues to reflect an appropriate mix of the industry segments in which we compete, or plan to compete, for key talent.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   42

Back to Contents

Stockholder Engagement and Our 2019 Stockholder Advisory Vote on Executive Compensation

The Company regularly engages with key stockholders to solicit feedback as part of an effort to remain aware of our stockholders’ perspectives with respect to our executive compensation and any other matters of importance to them. We seek to establish sustained, long-term, and robust stockholder engagement on these topics to ensure our practices align with our stockholders’ interests. Our direct engagement with stockholders, during 2019 as well as in previous years, has influenced several important actions taken by our Compensation Committee with respect to compensation for our executive officers.

 

 

In conducting our engagement in advance of the 2019 annual meeting, members of our management team reached out to stockholders who collectively held approximately 66% of our Common Stock and spoke with each such holder who was willing to speak with us. Eighty-one percent of the votes cast at the 2019 annual meeting of our stockholders were voted in favor of our advisory “say-on-pay” proposal.

Following the 2019 annual meeting, we continued engagement during the fall of 2019, again reaching out to stockholders who collectively held approximately 66% of our Common Stock to gain additional perspective from them.

A summary of recurring themes we heard from our stockholders throughout the year with respect to our executive compensation, which was presented to the Compensation Committee, is set forth below, along with key elements of our existing programs.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   43

Back to Contents

Themes We Heard from Our Stockholders

 

Highlights of Our Executive Compensation Program

Appreciation of our Compensation Committee’s responsiveness and actions to improve our compensation programs

Endorsement of continued focus on pay-for-performance alignment with our strategic objectives and growth

Calls for reduced complexity within certain contract provisions

Calls for limitation of overlapping pay opportunities

Calls for greater differentiation of performance metrics between annual- and long-term incentive opportunities

Calls for increased transparency with respect to the strategic objectives underlying our long-term incentive opportunities

 

No increase in the base salary for any NEO since our February 2019 annual salary review

No increase in our Chief Executive Officer’s base salary since 2017

Strong pay-for-performance alignment

94% of total compensation for our Chief Executive Officer for 2019 was performance-based

The annual bonus paid to our Chief Executive Officer under the CAIP for 2019 was 82% of target, reflecting strategic performance falling short of expectations

We utilize performance-based vesting restricted share units (i.e., PSUs), with award values determined based on prior performance and/or vesting contingent on the achievement of specified performance objectives

We utilize stock options, for which any financial gain is directly dependent upon the appreciation in the value of our Common Stock

Strong emphasis on growth, as demonstrated by the grant of a performance-based equity award contingent on AB Adjusted EPS growth to our Chief Operating Officer, the incremental bonus opportunity for our Chief Operating Officer contingent on AB Adjusted EPS growth, and the grant of performance-based equity awards contingent on cumulative three-year performance to certain executives

Use of equity awards to our Chief Executive Officer during 2019 and our President and Chief Operating Officer during 2020 contingent on our stock price performance relative to the S&P 500

Mix of compensation that incentivizes both our short-term strategic objectives (e.g., through cash bonus programs) and long-term strategic objectives (e.g., via equity incentives)

Use of clearly-defined performance objectives, both short- and long-term, which provide a direct alignment between our business strategy, financial results, and incentive payments

Utilize numerous financial metrics in our incentive plans to measure performance including AB Adjusted EPS, AB Adjusted Operating Income, AB Adjusted Free Cash Flow, and TSR

Utilize certain equity awards that provide for vesting beyond any applicable contract end dates (e.g., 2019 awards to our Chief Executive Officer)

Fiscally responsible and judicious approach to equity usage, with three-year average equity usage among the bottom one-third of our comparator group

 

Actions Taken in Response to 2019 Shareholder Engagement

We continue to monitor recurring themes we hear from our shareholders, including that we “ensure an appropriate mix of performance metrics.” When determining performance metrics relevant to each executive officer’s compensation, the Compensation Committee assesses the executive’s role and desired outcomes for our business. As such, the CAIP award for each named executive officer was contingent on a mix of financial and strategic objectives, including ones related to production and development milestones, growth of our franchises and expanding our capabilities. The equity awards to named executive officers in 2019 included performance metrics contingent on profitability, growth, relative stock price performance, and cumulative profitability over a multiple year period. Further, the 2019 equity awards granted to Mr. Kotick and the awards vesting by reference to our 2019 long-range strategic plan granted to other executives are all eligible to vest on a date after the end of the contractual term of employment of the relevant executive.

We are committed to continuing our active engagement with stockholders, in a manner that is simultaneously responsive to the input we received and appropriate for the Company, as well as preserving our emphasis on pay-for-performance.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   44

Back to Contents

Compensation Principles and Objectives

Our Compensation Principles

Align Compensation with Stockholder Interests—A substantial portion of our executives' compensation opportunity is 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.

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

Pay Competitively—We offer competitive total compensation in order to attract, retain, and motivate top executives with the characteristics needed to operate in our industry.

The Compensation Committee regularly reviews and refines our executive compensation program to ensure it supports our compensation principles. The following are the current objectives underlying the compensation of our executive officers:

What We Do

 

We Balance Near-Term and Long-Term Strategic Objectives—We provide a mix of compensation to incentivize both our short-term strategic objectives (e.g., through cash bonus programs) and long-term strategic objectives (e.g., via equity incentives).

 

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

 

We Balance the Objectives Underlying Incentive Bonuses—The CAIP opportunities for our participating executive officers include both financial and strategic objectives.

 

We Use Employment Agreements to Attract and Retain Key Executive Talent—We use employment agreements to attract and retain executive talent.

 

We Can Claw Back Improperly Earned Compensation—In the event of an earnings restatement, we may “claw back” performance-based compensation (including both annual and long-term incentive awards) paid or awarded to the executives responsible.

 

We Use 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).

 

We Have Stock Ownership Guidelines—We expect our executive officers and directors to beneficially own a specified, meaningful amount of our Common Stock.

 

We Use an Independent Compensation Consultant—Our Compensation Committee receives advice and analysis regarding executive compensation from a consultant that is independent and provides no other services to the Company.

 

We Provide Limited Benefits—We provide modest supplemental health and welfare benefits, retirement benefits, and perquisites.

 

What We Don’t Do

 

We Don’t Put Our Executives Before Our Stockholders—Executive compensation that is variably linked to the performance of the Company helps to align the priorities and interests of executive officers and stockholders.

 

We Don’t Incentivize Excessive Risk Taking—Performance objectives linked to our executive compensation do not encourage or incentivize excessive risk taking or risk exposure.

 

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

 

We Don’t Make Biased Compensation Decisions—Reviewing our executive and director compensation plans with an independent consultant introduces an unbiased and professional perspective on executive compensation.

 

We Don’t Generally Provide Change-of-Control Protection—Our Chief Executive Officer is the only named executive officer entitled to any change-of-control protection and would only receive it if terminated after a change of control (i.e., requiring a “double trigger”).

 

We Don’t Gross Up Section 280G Excise Taxes—Mr. Kotick—our only named executive officer entitled to a payment upon a change of control (and then, only upon a subsequent termination of his employment)—is not entitled to a gross-up in respect of any excise taxes imposed under Section 280G of the Internal Revenue Code on those payments.

 

We Don’t Reprice Stock Options—The 2014 Plan, under which all of our equity incentive awards are now granted, prohibits the repricing of “underwater” equity awards without stockholder approval.

 

We Don’t Pay Dividends on Unearned Awards—None of our equity awards are entitled to receive dividend equivalents, and we do not intend to grant such awards in the future.

 

We Don’t Guarantee Salary Increases—None of our named executive officers is entitled to a guaranteed salary increase.

 

We Don't Allow Hedging of Our Stock—We prohibit our employees (including our executives) and directors from “shorting” Company stock, engaging in “puts,” “calls,” or other hedging transactions involving Company stock, or using margin accounts with Company stock.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   45

Back to Contents

Decision-Making Approach to Executive Compensation

Factors Influencing Compensation Decisions

Our Compensation Committee believes that executive pay should be determined using a holistic approach, involving an evaluation of a wide variety of factors, rather than targeting a specific percentile of the compensation of the executives at companies against which we compete, or may compete, for key talent. These factors include, but are not limited to:

Labor Market Conditions—An assessment of the competitive market to provide compensation packages that allow us to attract, retain, and motivate the key executive talent necessary for our long-term success, which may include a review of current executive compensation trends and best practices, as well as compensation data from our comparator group and/or published surveys.

Individual Considerations—An evaluation of the executive’s individual skill set and experience, his or her historical performance and expected future contributions to the Company, and the potential impact of an executive’s departure if he or she were to leave the Company.

Company Performance—A review of our recent and historical financial and operating performance, as well as future strategic initiatives, and the executive’s role in helping drive that performance.

Internal Pay Equity—A review to determine if compensation levels are internally fair and equitable relative to his or her role, responsibilities, and working and/or reporting relationships.

Stockholder Feedback—The feedback the Compensation Committee has received from stockholders with respect to our executive compensation practices.

The Compensation Committee does not use a predefined framework to weigh the importance of each of these factors, and the emphasis placed on specific factors may vary from executive to executive. Ultimately, 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 attract, retain, and motivate that individual.

Highly Competitive Business Environment and Associated Talent Requirements

We operate in the interactive entertainment industry, which exists at the nexus of the gaming, media, entertainment, and technology 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;

an increasing importance on building and growing franchises with sustained game quality and ongoing content releases;

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

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

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

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 (e.g., gaming, entertainment, and technology), including some that are larger and more mature than ours, and, therefore, the Compensation Committee takes into consideration a wide variety of factors, including compensation provided to executives at companies against which we compete, or may compete, for such talent.

Use of Employment Agreements

Our employment agreements with our executives specify base salary, incentive opportunities, and the terms and conditions of the equity awards which may be granted thereunder, as well as provisions regarding the consequences of termination of employment and restrictive covenants, such as 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 specific negotiations with the executive. Please see “—Employment Agreements” below for further information about the agreements with our named executive officers.

Employment agreements are common in the broader entertainment industry, from which we recruit talent, and we believe that having multi-year employment agreements with our executives is critical in enabling us to attract and retain them. Using multi-year contracts also allows us to design compensation arrangements with a mix of incentive opportunities designed to reward executives for achievement of the Company's short- and long-term goals, which we view in totality when assessing the executive’s compensation and performance during the term. For example, pursuant to his current employment agreement with us, dated as of October 1, 2016 (the “Kotick Employment Agreement”), our Chief Executive Officer, Mr. Kotick, has received, or is eligible to receive, incentive awards based on financial metrics such as operating income and earnings per share, and shareholder returns, both absolute and relative, in each case, over a variety of performance and service periods, both within and beyond the term of his agreement. For more information on the Kotick Employment Agreement, see “—Employment Agreements—Robert Kotick” below.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   46

Back to Contents

Comparator Company Data and Compensation Surveys Referenced

Our 2019 executive compensation was benchmarked against the following 16 comparator companies:

Adobe Inc.

Electronic Arts Inc.

salesforce.com, inc.

Booking Holdings Inc.

Expedia Group, Inc.

Sirius XM Holdings Inc.

CBS Corporation

Intuit Inc.

Symantec Corporation

Discovery, Inc.

Netflix, Inc.

Twenty-First Century Fox, Inc.

eBay Inc.

PayPal Holdings, Inc.

Viacom Inc.

 

 

The Walt Disney Company

 

The Compensation Committee, in evaluating our executive compensation program, utilizes compensation data obtained from SEC filings made by companies in our comparator group, including compensation elements of the named executive officers of those companies, company-wide equity usage rates, and potential dilution from equity plans.

In selecting this comparator group, the Compensation Committee considered: companies with whom we have historically directly competed for talent; participants within our industry sectors, as well as companies in adjacent industries; companies with comparable business models and organizational complexity; companies with comparable geographic footprints; and companies with comparable annual revenues and/or market capitalization. Among these comparator companies, our 2018 revenues of $7.5 billion approximated the 34th percentile, while our market capitalization approximated the 53rd percentile (in each case, as of March 2019).

Both our management and Compensation Committee regularly monitor our comparator group, as the nature and scope of our business 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. As such, during 2019—but after the data analysis used in connection with our 2019 compensation decisions was done: Twenty-First Century Fox, Inc. was removed following the acquisition of a majority of its assets by The Walt Disney Company, and Fox Corporation, which received the remainder of Twenty-First Century Fox’s assets, was added; and ViacomCBS Inc. replaced both Viacom and CBS in the comparator group, following the merger of Viacom, Inc. and CBS Corporation.

In reviewing the compensation of our executive officers, the Compensation Committee, with the support of its independent compensation consultant and our management, also 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 2019, we referenced surveys published by Radford as an additional source of data to supplement pay information that is not publicly available.

This compensation data from our comparator group and published surveys help the Compensation Committee understand the sectors in and with which we compete for talent, providing it with an important frame of reference. The Compensation Committee, as it deems appropriate, considers the compensation practices of any other companies with which we compete for executive talent. Furthermore, the Compensation Committee evaluates broader industry trends and practices to determine the appropriate elements of compensation and the effective design of each element. As noted above, our Compensation Committee does not target a specific percentile of the compensation paid to the executives at companies against which we compete, or may compete, for key talent but, rather, believes that pay levels should be determined using a holistic approach, involving an evaluation of a wide variety of factors.

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

Decisions regarding compensation for our executive officers are at the 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 principles.

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 objectives relevant to our chief executive officer’s compensation, evaluates his or her performance in light of those objectives, and determines his or her compensation based on that evaluation.

Selects and monitors the Company’s comparator group.

Evaluates compensation-related information and recommendations provided by our 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 engagement with its independent compensation consultants.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   47

Back to Contents

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 the 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 our management to the Compensation Committee to ensure that those materials are consistent with the Company’s principles with respect to director and executive compensation and reasonable vis-à-vis the Company’s comparator group.

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

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

Executive Officers and Management

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

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

monitoring the Company’s comparator group and trends in the market; and

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

Our chief executive officer reviews the performance of the Company’s executive officers and provides his or her recommendations to the Compensation Committee with respect to our executive 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 2019, our Compensation Committee interacted directly with members of our management, as appropriate.

Equity Award Granting Policy

All equity awards are approved by our Compensation Committee with the exception of grants to our non-employee directors, which are approved by the full Board. Pursuant to a policy approved by our Compensation Committee, awards are generally effective on the third trading day following approval unless the Company is in a “trading blackout,” as described in our insider trading and pre-clearance policies, in which case the effective date of the awards is instead one trading day after the blackout period is no longer in effect.

Impact of Tax and Accounting Considerations

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

Section 162(m) generally prevents a publicly held corporation from taking a U.S. tax deduction when compensation paid to a “covered employee” exceeds $1.0 million in any taxable year. Prior to the enactment of the TCJA, a corporation’s covered employees generally consisted of any person who was the chief executive officer at any time during the tax year and the next three most highly paid NEOs as of the last day of the taxable year, other than the chief financial officer, who was excluded. Further, before the TCJA was enacted, “performance-based” compensation was not subject to this limit on deductibility, provided such compensation met specified requirements. Deductibility of performance-based compensation under Section 162(m) was eliminated by the TCJA, effective January 1, 2018, subject to limited transition rules. In addition, the definition of “covered employees” under Section 162(m) was expanded as of January 1, 2018, to include any person who was the chief financial officer at any time during the relevant tax year and to provide that any person who was a covered employee as of January 1, 2017, or becomes a covered employee thereafter, will remain a covered employee in perpetuity.

As a result, for taxable years beginning after December 31, 2017, other than any compensation “grandfathered” under the TCJA transition rules, we will not be able to deduct any compensation in excess of $1 million paid to any of the executives described above. We have considered, and will continue to consider, the applicability of the transition rules to our executive compensation.

We continue to believe it is important that we retain the flexibility to structure compensation arrangements necessary to attract, retain, and motivate the best executive talent, even if such arrangements may result in non-deductible compensation expenses. We have not currently made any changes to our executive compensation program in response to the TCJA’s impact on Section 162(m), except for the changes to the CAIP described above under “—Overview—Changes to our Executive Compensation Program During 2019—Changes and Improvements to our Annual Cash Bonus Plan, the CAIP.”

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   48

Back to Contents

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.

Elements of Our Executive Compensation Program for 2019

An overview of the primary elements of our executive compensation program and their purposes is presented below. Not all elements are applicable to all named executive officers. We aim to incentivize our executives to drive corporate financial performance by basing a significant portion of their compensation on achieving financial and strategic objectives. Our compensation principles allow us to attract, retain, and motivate the best talent in our industry, as evidenced by our performance.

Base Salary

In establishing the annual base salary rate for an executive officer, the Compensation Committee considers his or her role, his or her performance, his or her annualized total compensation opportunities, salaries paid to the executive's peers within the Company, and the total compensation opportunities of executives in comparable positions and with similar responsibilities at other companies by reference to data from our comparator group and published surveys. For information about our comparator group, see “—Decision-Making Approach to Executive Compensation—Comparator Company Data and Compensation Surveys Referenced” above.

None of our named executive officers have contractual entitlements to salary increases (see “—Employment Agreements” below). Salary increases are generally only provided to an executive officer:

upon his or her 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.

The table below reflects the salaries approved for 2019 during our annual review process, along with any other adjustments since that time:

 

Name

Salary at beginning

of 2019

($)

 

Changes during

2019

(%)

(1) 

Salary at end of

2019

($)

(1) 

Changes during 2020

as of date hereof

(%)

 

Salary as of

date hereof

($)

 

Robert Kotick

1,750,000

 

0

(2)

1,750,000

(2)

0

(2)

1,750,000

(2)

Dennis Durkin

900,000

(3) 

0

 

900,000

 

0

 

900,000

 

Collister Johnson

1,329,640

 

+1.5

 

1,349,585

 

0

 

1,349,585

 

Claudine Naughton

(4) 

(4) 

650,000

 

0

 

650,000

 

Chris B. Walther

761,889

 

+11.0

 

845,700

 

0

 

845,700

 

(1)

The changes to base salary were effective in February 2019, following our annual salary review during that year.

(2)

Mr. Kotick’s annual base salary has not changed since January 1, 2017.

(3)

Mr. Durkin became our Chief Financial Officer and our President of Emerging Businesses on January 2, 2019, at which point his annual base salary became $900,000.

(4)

Ms. Naughton’s employment with us began on August 14, 2019.

As noted above, as of the date hereof, the base salary of Mr. Kotick has not changed since 2017, and the base salary of each of our other named executive officers has not changed since February 2019.

Corporate Annual Incentive Plan Bonuses

Incentive Opportunities under the CAIP

CAIP Plan Design: Driving Financial Results and Strategic Initiatives

Cash bonuses under our CAIP are designed to drive our financial results and to incentivize individual contributions toward operational and strategic initiatives. To that end, for 2019, the Compensation Committee established a threshold objective based on operating income which, if not met, would have resulted in the elimination of all bonuses to our named executive officers under the CAIP. The Compensation Committee then established objectives for each named executive officer, 60% of which were based on financial objectives and the remaining 40% of which were based on key annual and long-term strategic priorities.

Setting Threshold, Target and Maximum Payout Opportunities under the CAIP

Threshold Opportunities

As a primary matter, if AB Adjusted Operating Income for the year was less than 90% of the AB Adjusted Operating Income objective set forth in the AOP for the year, none of our executive officers would have been eligible to receive a bonus under the CAIP for the year, regardless of the level at which his or her individual financial or strategic objectives was achieved.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   49

Back to Contents

Assuming the overall threshold objective was satisfied, before any named executive officer would receive any payment under the CAIP with regard to any financial objective established for him or her, the threshold required to be met was 90% of the target for that measure set forth in the 2019 AOP. Further, below-target performance would result in a payout decreased by a greater extent than the upside opportunity for above-target performance: (a) performance at 90% of the target for any financial metric set forth in the AOP would result in a payment of 50% of the target payment; (b) performance between 90% and 95% of the target for that metric set forth in the AOP would result in a payment of between 50% and 85% of the target payment (with straight-line interpolation for points in between); and (c) performance between 95% and 100% of the target for that metric set forth in the AOP would result in a payment of between 85% and 100% of the target payment (with straight-line interpolation for points in between). For 2018, performance between the threshold and maximum performance level would have resulted in a payment at that same level (e.g., 85% performance as a percentage of target would have resulted in a payment equal to 85% of the target).

Assuming the overall threshold objective was satisfied, there was no threshold level of performance required, per se, for the strategic objectives established for the executives, however the failure of an executive to meet one or more of such objectives would result in the reduction of the bonus he or she ultimately received.

Target Opportunities

In establishing the target payout opportunities for an executive officer under the CAIP for 2019, the Compensation Committee considers the bonus target set forth in his or her employment agreement, his or her annualized total compensation opportunities, our desired pay mix, and the total compensation opportunities of the executive's peers within the Company and in comparable positions and with similar responsibilities at other companies by reference to data from our comparator group and published surveys. Assuming the overall threshold objective was satisfied, if a named executive officer satisfied (but did not exceed) all performance objectives, the executive officer was eligible to receive a payment equal to his or her target payment. Based upon the established performance objectives, target opportunities under the CAIP for 2019 to our named executive officers were as follows:

 

2019 CAIP Targets

(as % of 2019 Salary)

 

Robert Kotick

200

 

Dennis Durkin

150

 

Collister Johnson

100

(1)

Claudine Naughton

75

 

Chris B. Walther

75

 

(1)

Mr. Johnson also has an opportunity to receive an additional bonus ranging from 10% to 100% of his base salary for each year in which AB Adjusted EPS is at least 15% greater than the higher of (x) the AB Adjusted EPS AOP objective for the prior year and (y) the prior year’s actual AB Adjusted EPS (the higher of (x) and (y), the "EPS Objective"). For more information on Mr. Johnson’s bonus opportunity under the CAIP, see “—Employment Agreements—Collister Johnson—Annual Bonus” below.

Maximum Opportunities

The maximum payout potential as a percentage of target related to the financial objectives underlying the bonus opportunities for each of our named executive officers under the CAIP for 2019 was:

200% for AB Adjusted Operating Income;

200% for AB Adjusted EPS; and

150% for AB Adjusted Free Cash Flow.

In all cases, payments in respect of above-target performance related to a financial objective would be linear, up to the maximum for that metric (e.g., 115% performance as a percentage of the target for that metric would result in a payment equal to 115% of the target payout opportunity).

The maximum payout potential as a percentage of target relating to the strategic objectives underlying the 2019 bonus opportunities for each NEO was 120%.

Establishing Challenging Objectives for the CAIP Opportunities

In March 2019, our Compensation Committee established the financial and strategic objectives underlying 2019 CAIP opportunities. The Compensation Committee believes that the specific objectives chosen—including the overall threshold objective of AB Adjusted Operating Income for 2019 being at least 90% of the AB Adjusted Operating Income objective set forth in our 2019 AOP—required significant profitability, demanded superior performance from our management team, and drove accountability for each participating executive.

Financial Objectives

For each named executive officer, 60% of his or her target opportunity under the CAIP for 2019 was based on operating income, earnings per share, and/or free cash flow. The Compensation Committee believes that the financial measures used 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 objectives 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. In some instances, our financial objectives for a year may be lower than the prior year’s objectives or results as underlying variables (e.g., market trends, the volume of titles or other content we plan to release, or our level of planned investment in growth initiatives) change.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   50

Back to Contents

Strategic Objectives

The remaining 40% of the target opportunity for each named executive officer under the CAIP for 2019 was based on strategic priorities established by the Compensation Committee for the year that were tailored to the executive officer’s role with the Company. The Compensation Committee believes that the use of strategic objectives, in addition to financial objectives, allows us to incent the specific behaviors the Compensation Committee thinks are most critical to the Company’s success, thus best aligning the interests of our executive officers with the Company's strategic priorities.

These objectives generally fell into the following categories:

attracting, retaining and motivating top talent;

cultivating new business opportunities and expanding existing ones;

delivering production and development milestones; and

increasing productivity.

Mr. Johnson also had an opportunity to receive an additional bonus under the CAIP based on AB Adjusted EPS growth. For more information on this opportunity, see “—Employment Agreements—Collister Johnson—Annual Bonus” below.

Evaluating and Rewarding Performance: Resulting 2019 Payments under the CAIP

Since we exceeded the overall threshold of 90% of the AB Adjusted Operating Income objective set forth in our 2019 AOP, each of our named executive officers was eligible to receive a CAIP bonus for 2019. For 2019, the CAIP bonus payouts directly reflected the Compensation Committee’s assessment of the performance against the financial and strategic objectives, using the formula established at the beginning of the year for each named executive officer, as described above.

To calculate the amount of bonus that each participating named executive officer would receive for 2019, the following formula, applied using straight-line interpolation, was used:

 

 

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   51

Back to Contents

The following table shows the weighting, expressed as a percentage, assigned to each of the performance measures underlying the 2019 bonus opportunity, along with the maximum and actual payout as a percentage of the target, for each named executive officer. As achievement of strategic objectives underlying the bonus opportunities for our named executive officers fell short of expectations, consistent with our pay-for-performance approach, overall 2019 CAIP bonus payments to our named executive officers ranged between 82% and 104% of target for the year.

Name/Measure

Weight

(as a % of Target Opportunity)

Maximum

CAIP Achievement

(as % of Target)

Resulting CAIP

Performance

(as % of Target)

Robert Kotick

 

 

 

AB Adjusted Operating Income

36

200

103

AB Adjusted EPS

12

200

107

AB Adjusted Free Cash Flow

12

150

114

Strategic objectives(1)

40

120

46

TOTAL

100

162

82

Dennis Durkin

 

 

 

AB Adjusted Operating Income

36

200

103

AB Adjusted EPS

12

200

107

AB Adjusted Free Cash Flow

12

150

114

Strategic objectives(1)

40

120

46

TOTAL

100

162

82

Collister Johnson

 

 

 

AB Adjusted Operating Income

36

200

103

AB Adjusted EPS

12

200

107

AB Adjusted Free Cash Flow

12

150

114

Strategic objectives(1)

40

120

46

TOTAL

100

162

82

Claudine Naughton

 

 

 

AB Adjusted Operating Income

36

200

103

AB Adjusted EPS

12

200

107

AB Adjusted Free Cash Flow

12

150

114

Strategic objectives(1)

40

120

100

TOTAL

100

162

104

Chris B. Walther

 

 

 

AB Adjusted Operating Income

36

200

103

AB Adjusted EPS

12

200

107

AB Adjusted Free Cash Flow

12

150

114

Strategic objectives(1)

40

120

93

TOTAL

100

162

101

(1)

We believe that disclosing the strategic objectives underlying 40% of the 2019 target bonus opportunities for our NEOs could affect us adversely by, for example, providing confidential information on business operations and forward-looking strategic plans to our customers and competitors which could result in substantial competitive harm. Therefore, only a brief description and the aggregate weighting of those objectives for each of our participating NEOs for 2019 are shown. In each case, actual performance at the end of the year was assessed against the objectives established by our Compensation Committee at the beginning of 2019, audited by our internal auditors, and presented for review and approval to our Compensation Committee.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   52

Back to Contents

Actual payments under the CAIP are at the Compensation Committee’s discretion and vary for each executive based on his or her actual eligible earnings, his or her target opportunity, his or her financial and strategic objectives, including the relative weighting with respect to each, and his or her and/or the Company’s performance measured against those objectives. For 2019, as noted above, CAIP bonus payouts directly reflected performance against the objectives and formula established at the beginning of the year for each named executive officer, as described above.

Name

Target Payment

($)

 

Actual Payment

(as % of target)

Actual Payment

($)

 

Robert Kotick

3,500,000

 

82

2,870,966

 

Dennis Durkin

1,318,846

 

82

1,081,818

 

Collister Johnson(1)

1,345,749

 

82

1,103,886

 

Claudine Naughton

165,000

(2)

104

170,986

(2)

Chris B. Walther

622,187

 

101

628,083

 

(1)

In addition to Mr. Johnson’s target bonus opportunity of 100% of his base salary, which is reflected in this table, he also has an opportunity to receive an additional bonus ranging from 10% to 100% of his base salary for each year in which AB Adjusted EPS is at least 15% greater than the higher of (x) the AB Adjusted EPS AOP objective for the prior year and (y) the prior year’s actual AB Adjusted EPS. The objective was not met for 2019. For more information on Mr. Johnson’s bonus opportunity under the CAIP, see “—Employment Agreements—Collister Johnson—Annual Bonus” below.

(2)

Ms. Naughton’s employment with us began on August 14, 2019, and her target and actual payment under the CAIP for 2019 were each based, in part, on the portion of time for which she was our employee during the year.

Other Cash Programs or Awards

Contract Inducements 

Mr. Durkin and Ms. Naughton each received a contract inducement in connection with his or her entering into an employment agreement with the Company during 2019, some or all of which was paid during the year. For more information, please see “—Employment Agreements—Dennis Durkin—Contract Inducement” and “—Employment Agreements—Claudine Naughton—Contract Inducement” below.

Special Performance Bonus 

In 2017, the Compensation Committee awarded a special performance bonus to Mr. Walther in recognition of his significant contributions to the Company, one-half of which was paid in each of 2018 and 2019.

Equity Awards

Equity Granting Philosophy: Driving Shareholder Value Creation

Our equity incentive awards are intended to drive long-term shareholder value creation, create alignment with stockholders’ interests and encourage retention of key executives. During 2019, with one exception, equity awards to our NEOs consisted of PSUs and stock options. In determining the estimated grant value of equity awards to an executive officer, the Compensation Committee considers a number of factors, including his or her role, his or her performance, his or her annualized total compensation opportunities, and the total compensation opportunities of the executive's peers within the Company and in comparable positions and with similar responsibilities at other companies by reference to data from our comparator group and published surveys.

Generally, we utilize a mix of equity awards:

PSUs, which are 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 those of our stockholders, since any financial gain is directly dependent upon appreciation in the value of our Common Stock and, as such, squarely link executive pay with Company performance.

We believe a combination of PSUs 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. From time-to-time, but infrequently, we use time-based vesting restricted stock units as a component of an executive's compensation as a way to adjust his or her total compensation opportunity while simultaneously incenting retention or otherwise if such executive is a retention risk and/or the impact of his or her departure would be material. For example, during 2019, the sole exception to our use of performance-vesting awards was a grant of restricted share units with time-based vesting, each representing the conditional right to receive one share of our Common Stock, to Mr. Walther following our annual review of the total compensation opportunities of our executives.

Conservative Equity Granting Practices

While we believe that equity awards are an important part of our compensation program, we continue to be very judicious in the granting of equity awards to our employees. Our average “burn rate” over the last three years was 1.8% and ranks among the bottom third of our comparator group. Our burn rate is calculated as the total number of shares subject to awards we granted in a year, adjusting full-value awards based on a stock price volatility premium, divided by our basic weighted average common shares outstanding for that year. The average burn rate of the companies comprising our comparator group for that similar period ranges from 0.5% to 5.6%, with a median of 2.8%.

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   53

Back to Contents

Use of Equity Awards to Reward Performance

As discussed above (see “—Compensation Principles and Objectives”), the Compensation Committee believes that, in general, equity awards made to an executive officer should include an award with performance-based vesting criteria. Consistent with that philosophy, during 2019, with the exception of Mr. Walther (who received a grant of restricted stock units with time-based vesting following our annual review of the total compensation opportunities of each our executives), no named executive officers received restricted share unit awards with only time-based vesting. Further, a portion of all equity awards granted to our named executive officers during 2019 had vesting that is contingent on the achievement of specified performance objectives. In addition, each named executive officer had equity awards that had the potential to vest based on 2019 financial performance (whether with respect to the year or a period that included the year).

Beginning in 2016, we introduced annual grants with vesting contingent on the achievement of a financial objective in our long-range strategic plans. Each of Messrs. Johnson and Walther received an award in 2019 that may vest by reference to a cumulative AB Adjusted Operating Income objective for 2020, 2021, and 2022 established by the Compensation Committee for that three-year period.

Evaluating and Rewarding Performance: 2019 Vesting and Cancellation of Performance-Based Equity Awards

The following table shows whether the portion of the equity awards granted to each of our named executive officers that had the potential to vest based on our 2019 performance (or, in the case of awards vesting by reference to our 2016 long-range strategic plan, cumulative performance for the period from 2017 through 2019) vested (or will vest, subject to his or her continued employment through the vesting date) or did not vest. As we did not achieve all the goals we set for ourselves, equity award achievement ranged from 0% to 107% of target, consistent with our pay-for-performance approach.

 

Executive

Grant

Type

Performance Metric

Award

Achievement

(% of Target)

 

Aggregate Shares

Vesting Date

Target

 

Maximum

 

Achieved

 

Dennis Durkin

PSUs

2019 AB Adjusted Operating Income

103

 

89,222

 

111,528

 

92,113

 

March 30, 2020

Collister Johnson

PSUs

2019 AB Adjusted EPS

107

 

15,997

 

19,996

 

17,140

 

June 29, 2020

PSUs

2019 AB Adjusted Operating Income

103

 

31,995

39,994

 

33,032

 

June 29, 2020

PSUs

2019 AB Adjusted EPS Growth

0

 

63,721

127,442

 

0

 

Did Not Vest

Claudine Naughton

PSUs

2019 AB Adjusted Operating Income

103

 

21,897

 

27,371

 

22,606

 

July 31, 2020

Chris B. Walther

PSUs

2019 AB Adjusted Operating Income

103

 

28,596

 

35,745

 

29,523

 

March 14, 2020

PSUs

Cumulative 2017, 2018, and 2019 AB Adjusted Operating Income

0

 

15,211

 

19,014

 

0

 

Did Not Vest

 

Determinations as to Achievement of Performance Metrics

All determinations as to the level of achievement of a performance metric underlying an equity award are made by our Compensation Committee by reference to auditable financial measures.

No Dividend Equivalents

None of the outstanding equity awards made to our named executive officers are entitled to receive dividend equivalents, and we do not anticipate making time- or performance-based vesting awards with the right to receive dividend equivalents in the future.

Other Award Terms

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

Equity awards will generally cease to vest upon the termination of the holder’s employment, and vested stock options will generally remain exercisable for a limited period of time (90 days or less) after the termination date. For the impact of the termination of the employment of each named executive officer on his or her outstanding equity awards, please see “—Potential Payments upon Termination or Change of Control” below.

Incentive Plan Limitations on Equity Awards

Under the 2014 Plan, the plan under which all of our equity incentive awards are now granted, there are limits on the number of stock options we can grant to anyone, including our executive officers, in a single year. There are similar restrictions on the number of restricted share unit awards and performance shares we can grant to any participant in a single year.

Limited Double-Trigger Change-of-Control Arrangements

Aside from our Chief Executive Officer, Mr. Kotick, none of our executives have been provided with any change-of-control protection. Mr. Kotick has been provided with certain protection in the event he is terminated following a change of control (known as a “double trigger”). These benefits are described under “—Potential Payments upon Termination or Change of Control” below. The Compensation Committee believes these arrangements will incentivize our CEO to maintain objectivity in the context of, and contribute to, a potential change-of-control transaction.

Limited Retirement Benefits

We offer a 401(k) plan to all employees in the United States, including our eligible named executive officers, and we match a certain percentage of each employee’s contributions to our 401(k)

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   54

Back to Contents

plan. Please see the “Summary Compensation Table” below for further details. We do not provide any other retirement benefits to our employees, including our named executive officers. 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 objectives and the appreciation in the value of our Common Stock.

Standard Health and Welfare Benefits

Our named executive officers are eligible to participate in our medical, vision, and dental insurance program, on the same terms as the broad employee population. Please see the “Summary Compensation Table” below for further details.

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, 2019.

Members of the Compensation Committee

Robert Morgado (Chairperson), Reveta Bowers, and Elaine Wynn

     
     
ACTIVISION BLIZZARD, INC.     2020 Proxy Statement    |   55

Back to Contents

Summary Compensation Table

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

Name and Principal

Position

Year

Salary

($)

Bonus(1)

($)

Stock

Awards(2)

($)

 

Option

Awards(2)

($)

Non-Equity

Incentive Plan

Compensation(3)

($)

All Other

Compensation

($)

 

Total

($)

Robert Kotick

Chief Executive Officer

2019

1,756,731

6,269,752

 

19,137,241

2,870,966

88,206

(4)

30,122,896

2018

1,756,731

7,495,745

 

19,037,673

2,461,848

89,007

 

30,841,004

2017

1,750,000

19,553,653

 

4,498,896

2,808,688

87,138

 

28,698,375

Dennis Durkin(5)

Chief Financial Officer and President of Emerging Businesses

2019

901,731

3,750,000

3,716,989

 

1,081,818

61,215

(4)

9,511,753

2018

624,808

 

273,914

29,303

 

928,025

2017

870,902

3,287,840

 

699,706

916,485

27,212

 

5,802,145

Collister Johnson(6)

Special Advisor to the Chief Executive Officer; Former President and Chief Operating Officer

2019

1,351,784

2,751,283

(8) 

1,103,886

25,427

(4)

5,232,380

2018

1,330,194

1,200,000

4,695,612

 

931,240

14,075

 

8,171,121

2017

675,000

1,000,000

2,984,205

 

5,990,128

494,844

55,263

 

11,199,440

Claudine Naughton(7)

Chief People Officer

2019

250,000

425,000

1,140,834

 

2,303,429

170,986

98,605

(4)

4,388,854

Chris B. Walther

Chief Legal Officer

2019

836,381

500,000

3,131,722

 

628,083

64,805

(4)

5,160,991

2018

759,238

500,000

2,837,227

 

583,161

83,532

 

4,763,158

2017

722,886

1,936,099

 

461,354

39,002

 

3,159,340

(1)

The amount paid to Mr. Durkin in 2019 consists of an inducement to enter into his current employment agreement with us, dated as of January 2, 2019 (the “Durkin Employment Agreement”), which was paid in cash in January 2019 (see “—Employment Agreements—Dennis Durkin—Contract Inducement” below). The amounts paid to Mr. Johnson in 2018 and 2017 consist of an inducement to enter into his current employment agreement with us, dated as of May 10, 2017 (the “Johnson Employment Agreement”), $1 million of which was paid in cash in July 2017, and the remaining $1.2 million of which was paid in cash in January 2018 (see “—Employment Agreements—Collister Johnson—Contract Inducement” below). The amount paid to Ms. Naughton in 2019 consists of part of an inducement to enter into her current employment agreement with us, dated as of August 14, 2019 (the “Naughton Employment Agreement”), which was paid in cash in August 2019, the remaining $425,000 of which will be paid in cash in August 2020, subject to her continued employment through the relevant date (see “—Employment Agreements—Claudine Naughton—Contract Inducement” below). The amounts paid to Mr. Walther for 2019 and 2018 represent a special performance award he received in 2017 in recognition of his significant contributions to the Company, one-half of which was paid in cash in each of June 2018 and June 2019.

(2)

The amounts in the Stock Awards column represent the aggregate grant date fair value of restricted share units (which have time- and/or performance-based vesting conditions) awarded in the period, computed in accordance with ASC Topic 718. 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 2019, are discussed in footnote 16 to our audited financial statements included in our 2019 10-K;

for 2018, are discussed in footnote 16 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019; and

for 2017, 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, 2017, filed with the SEC on February 27, 2018.

Stock awards for each fiscal year include awards subject to performance conditions that were valued based on the probability that performance targets will be achieved. Assuming the highest level of performance conditions are achieved, the grant date stock award values would have been as follows:

 

 

Robert Kotick

($)

Dennis Durkin

($)

Collister Johnson

($)

 

Claudine Naughton

($)