This excerpt taken from the ATVI DEF 14A filed Jul 29, 2008.
Decision-Making Approach To Executive Compensation
Scope of Authority of the Compensation Committee
The Compensation Committee's responsibilities include:
For additional information regarding the Compensation Committee and its charter, see "Corporate Governance MattersBoard of Directors and CommitteesCompensation Committee."
Role of Executive Officers in Compensation Decisions
The Compensation Committee aims to align the executive compensation program with stockholders' interests and the Company's business strategy. The Compensation Committee believes this alignment can be best achieved by consulting with the Company's senior management because of their familiarity with the day-to-day operations of the Company. Senior management can provide the Compensation Committee with valuable insights into effective rewards and incentives for named executive officers and other employees. In fiscal 2008, the Compensation Committee consulted with Messrs. Kotick, Kelly, Griffith, Tippl and Rose and Ms. Weiser in formulating compensation plans. Members of senior management attended Compensation Committee meetings and made recommendations regarding the compensation of the named executive officers and other employees. Although the Compensation Committee used this information to make better informed decisions, the committee ultimately exercised its independent judgment in developing compensation plans and policies for named executive officers.
Role of Independent Compensation Consultants in Compensation Decisions
Pursuant to the Compensation Committee's charter, the Compensation Committee may engage compensation consultants to help formulate director and executive compensation. The Committee typically engages compensation consultants to advise on specific, non-routine issues. In December 2007, the Compensation Committee engaged Frederic Cook as compensation consultant to assess the compensation paid to Mr. Kotick pursuant to his amended employment agreement. See "Employment AgreementsRobert A. Kotick and Brian G. KellyKotick Employment Agreement" above for a description of this agreement. During fiscal 2008, Frederic Cook also provided benchmarking data with respect to non-employee director compensation. The Company did not otherwise engage a compensation consultant in fiscal 2008. Frederic Cook does not provide any other services to the Company.
Factors Considered in Compensation Decisions, including Competitive Assessment, Benchmarking and Internal Equity
In general, the Company's senior management and the Compensation Committee believe that benchmarking and competitive assessments
comprise only one aspect of a larger decision-making framework to be considered when making compensation decisions. This framework includes:
Company occasionally conducts peer benchmarking activities to determine yearly salary increases, annual incentive awards, long-term incentive or equity arrangements and
terms of employment agreements. In reviewing competitive assessment studies, management believes there exist a limited number of publicly traded, direct peer companies with a similar size and scope in
the video game industry, including:
in connection with the amendment to Mr. Kotick's employment agreement in December 2007, the Compensation Committee reviewed a peer-group analysis
prepared by Frederic Cook with the goal of ensuring that the compensation and benefits provided to Mr. Kotick were in a competitive range for the marketplace for executive talent. The analysis
included peer group companies that would match the Company's size and line of business following the Combination with Vivendi Games to create Activision Blizzard. The peer group consisted of the
following publicly traded technology and software industry companies:
Based on its analysis of the compensation payable under Mr. Kotick's amended employment agreement, the Compensation Committee determined that the Company would compensate Mr. Kotick at approximately the 65th percentile of the peer group. Although the Compensation Committee determined that it was important to review benchmarking data in setting the amount and terms of Mr. Kotick's compensation under his employment agreement, this was not the only information used by the Compensation Committee to determine his compensation.
The Company also annually consults outside industry and non-industry specific surveys prepared by compensation specialists with respect to companies with comparable revenues, market capitalization,
industry focus, number of employees and other similar factors. The surveys include the Croner Entertainment Software Compensation Survey, the Mercer Executive Compensation Survey, the Radford Executive Survey and the Buck Consultants Total Direct Compensation Survey. These surveys help the Company understand the competitive market for the industries in which it competes for talent, including the gaming, media and consumer products sectors.