Electronic Arts 2008 Annual Report Download - page 41

Compensia compared each of our executive-level positions to similar positions as reflected in the survey data
and the Peer Group information to establish base salary, target cash and equity incentive awards, and target
total cash compensation ranges. This analysis was reviewed by Ms. Toledano and our Human Resources
Department with Mr. Riccitiello for each executive-level position, and with the Committee for our Chief
Executive Officer and other positions at or above the level of Senior Vice President.
The Committee used the survey data and the Peer Group information to validate the range of competitive pay
for the business sectors in which we compete for executive talent. Based on its assessment of the competitive
marketplace, the Company’s long-term strategic objectives, our need for a strong management team to help us
achieve our operating objectives, and our desire to minimize retention risk, the Committee referenced the
50th to 75th percentile of the combined survey data and Peer Group information as the relevant range for base
salaries, target bonus opportunities, and total cash compensation on average, and the 75th percentile for equity
awards, for our executive officers.
During fiscal 2008, these base salary, target bonus opportunity, and target total cash compensation ranges were
considered by management in formulating individual compensation recommendations for the Committee to
consider. These ranges, together with management’s recommendations, served as a reference point for the
Committee in reviewing and approving compensation determinations. Because these decisions were influenced
by the Company’s actual financial and operational results, as well as each executive officer’s individual
performance, his or her total cash compensation, and any individual compensation component, may be within,
below, or above the market range for his or her position.
The market ranges established by Compensia also helped the Committee in assessing the competitive
placement of our executive officers’ total direct compensation for fiscal 2008. The Committee’s assessment of
the placement of an individual executive officer’s compensation relative to market range took into consider-
ation the scope, complexity, and responsibility of the executive’s position in relation to positions in the data
sources. In each case, the Committee exercised its judgment in interpreting the market ranges. An executive
officer’s actual positioning relative to that market range was a result of the Committee’s assessment of the
Company, business, and individual performance factors described below. In setting actual compensation, the
Committee also considered each executive officer’s responsibility level, individual performance, and the
Company’s actual financial and operational results for the year (as compared to the pre-established objectives
and potential performance targets for the subsequent year). In addition, the Committee also compared the
compensation of the executive officers with each other, as well as the highest-paid employees at the Company,
to monitor internal pay equity. While the Committee does not use fixed ratios when conducting this analysis,
typically it tries to ensure that the total compensation paid to each of our executive officers is reasonable when
compared to our employees generally.
Compensation Elements
Our executive compensation program is comprised of three principal components: base salary; an annual cash
bonus; and equity awards.
Base Salary
We believe that a competitive base salary is the essential foundation to providing an attractive total
compensation package for our executives. Typically, base salaries are initially set to reflect an executive
officer’s position, responsibilities, and experience, with subsequent adjustments based largely on individual
performance and other factors as described below.
The Committee reviews and approves the base salaries for our executive officers, including the Named
Executive Officers, as part of its annual compensation review, considering a number of factors, including the
position’s complexity and level of responsibility, the position’s importance in relation to other executive
positions, and an assessment of the executive’s performance. As previously described, Mr. Riccitiello, assisted
by Ms. Toledano, annually performs an individual performance review for each executive officer, which is then
provided to the Committee. The Nominating and Governance Committee of the Board, with the assistance of
Ms. Toledano, reviews Mr. Riccitiello’s performance, which review is then provided to the Committee. In
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