Electronic Arts 2006 Annual Report Download - page 51

speciÑed in detail and are contingent on stockholder approval of the compensation arrangement. The
Company and the Compensation Committee have endeavored to structure executive compensation plans to
achieve maximum deductibility under Section 162(m) with minimal sacriÑces of Öexibility and impact on
corporate objectives.
The Compensation Committee has structured the current use of stock option arrangements in a manner
intended to achieve tax deductibility of such amounts. Although the Compensation Committee has the
ability to grant restricted stock units subject to performance factors in order to achieve maximum
deductibility under Section 162(m), it elected not to do so in Ñscal 2006. With respect to non-equity
compensation arrangements, the Compensation Committee has reviewed the terms of those arrangements
most likely to be subject to the deduction limitation of Section 162(m). Cash compensation paid to EA's
Named Executive OÇcers did not exceed the Section 162(m) thresholds in Ñscal 2006.
While the Compensation Committee will continue to consider deductibility under Section 162(m) with
respect to future compensation arrangements with executives, deductibility will not be the only factor used
in ascertaining appropriate levels or modes of compensation. Since corporate objectives may not always be
consistent with the requirements for full deductibility, it is possible that the Committee may, if consistent
with EA's ""pay-for-performance'' philosophy described above, enter into compensation arrangements in the
future under which payments are not fully deductible under Section 162(m).
COMPENSATION COMMITTEE
M. Richard Asher (Chairman)
Robert Pittman
Proxy Statement
Linda J. Srere
The following Report of the Audit Committee shall not be deemed to be ""soliciting material'' or to be
""filed'' with the Securities and Exchange Commission nor shall this information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that EA specifically incorporates it by reference into a filing.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors operates under a written charter, which is reviewed on an
annual basis and was most recently amended in May 2006. The Audit Committee is comprised of three
non-employee directors, each of whom in the opinion of the Board of Directors meets the current
independence requirements and Ñnancial literacy standards of the NASDAQ Marketplace Rules, as well
as the independence requirements of the Securities and Exchange Commission (""SEC''). During Ñscal
2006, the Audit Committee consisted of M. Richard Asher, Gary M. Kusin and Gregory B. MaÅei. In the
opinion of the Board of Directors, Mr. MaÅei meets the criteria for a ""Ñnancial expert'' as set forth in
applicable SEC rules as well as the above-mentioned independence requirements.
EA's management is primarily responsible for the preparation, presentation and integrity of the Company's
Ñnancial statements. EA's independent registered public accounting Ñrm, KPMG LLP (""independent
auditors''), is responsible for performing an independent audit of the Company's (i) Ñnancial statements
and expressing an opinion as to the conformity of the Ñnancial statements with generally accepted
accounting principles, and (ii) internal control over Ñnancial reporting in accordance with the auditing
standards of the Public Company Accounting Oversight Board (United States) and issuing a report
thereon.
The function of the Audit Committee is to assist the Board of Directors in its oversight responsibilities
relating to the integrity of EA's accounting policies, internal controls and Ñnancial reporting. The Audit
Committee reviews EA's quarterly and annual Ñnancial statements prior to public earnings releases and
submission to the SEC; reviews and evaluates the performance of EA's internal audit function; reviews and
39