Electronic Arts 2006 Annual Report Download - page 46

except for gross misconduct, at any time up to 24 months following his transfer to Switzerland, EA will
pay the costs of relocating him and his family back to the United Kingdom.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the Report of the Compensation Committee describing the compensation policies
applicable to EA's executive oÇcers (including all Section 16 executive oÇcers as well as all other
employees at the level of vice president or above). This information shall not be deemed to be ""soliciting
material'' or to be ""Ñled'' with the Securities and Exchange Commission nor shall this information be
incorporated by reference into any future Ñling under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that EA speciÑcally incorporates it by
reference into a Ñling.
Responsibilities and Composition of the Compensation Committee
The Compensation Committee's charter, which was most recently amended in July 2005, reÖects the
Committee's responsibilities and provides that all members must be ""independent'', as deÑned in
applicable regulations and listing standards. M. Richard Asher and Robert W. Pittman served on the
Committee throughout Ñscal 2006; William J. Byron served on the Committee until his retirement in July
2005, at which time he was replaced on the Committee by Linda J. Srere. None of these members is a
current or past employee of EA or any of its subsidiaries, nor are any of them eligible to participate in any
of the executive compensation programs of the Company except through automatic formulaic and other
grants pursuant to either the 2000 Equity Incentive Plan or Directors' Plan. In addition, each meets (and,
in the case of Mr. Byron during his tenure on the Committee, met) the deÑnition of ""Outside Director''
for the purposes of administering the compensation programs to meet the tax deductibility criteria under
Section 162(m) of the Internal Revenue Code, and the deÑnition of ""independent director'' under
applicable NASDAQ Marketplace Rules.
The Compensation Committee reviews and approves the compensation philosophy and programs for EA's
executives. In Ñscal 2006, the Compensation Committee reviewed and approved the salaries, bonuses and
equity compensation of each of EA's executive oÇcers, other than the Chief Executive OÇcer whose
salary, bonus and equity compensation were reviewed by the Compensation Committee and approved by
the independent members of the Board of Directors after discussing the Compensation Committee's
recommendation. The Compensation Committee also administers the Company's equity compensation
plans and the bonus plan for executive oÇcers and all signiÑcant or non-standard equity grants for other
employees. During Ñscal 2006, the Compensation Committee engaged in extensive reviews of long-term
incentive compensation strategies in light of stock option expensing, responsible dilution management, and
a desire to continue to eÅectively attract, motivate and retain key talent. During the course of these
reviews, the Compensation Committee evaluated the merits of several alternatives for delivering long-term
incentives.
The Compensation Committee meets at scheduled times throughout the year and also takes action by
written consent, often after informal telephone discussions amongst the members of the Committee. The
Compensation Committee met six times in Ñscal 2006. The Company's Human Resources and Legal
departments support the Committee in its work. In addition, the Compensation Committee has the
authority to engage the services of outside advisors. During Ñscal 2006, the Compensation Committee
engaged an independent compensation consulting Ñrm as an advisor and resource to assist the Committee
in its review of the compensation for executive oÇcers and other elements of the Company's total
compensation strategy.
Compensation Philosophy and Challenges
EA's compensation philosophy to attract, motivate and retain the best executive talent relies on two basic
principles. First, a signiÑcant portion of each executive's compensation should be in the form of equity to
align the executive's interests with those of EA's stockholders. Second, a signiÑcant portion of each
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