Electronic Arts 2009 Annual Report Download - page 46

As with base salaries, the Committee seeks to deliver total cash compensation at levels within the third quartile to
reflect target cash compensation opportunities that it believes are necessary to attract, motivate, reward, and
retain highly-qualified executives while also allowing flexibility to recognize executives such as those who have
additional responsibilities or skills which are critical to the Company’s success.
During fiscal 2009, the annual bonuses for our executive officers were determined by evaluating actual Company
and individual performance relative to certain performance measures under two separate annual incentive plans,
the Electronic Arts Executive Bonus Plan (the “Executive Bonus Plan”) and the Electronic Arts Annual Bonus
Plan (the “Annual Bonus Plan”).
Executive Bonus Plan
The Executive Bonus Plan is a cash bonus plan pursuant to which bonuses awarded to participating executive
officers are intended to qualify as tax deductible “performance-based compensation” within the meaning of
Section 162(m) of the Internal Revenue Code. For fiscal 2009, the Executive Bonus Plan required that the
Company achieve at least 75% of the pre-established non-GAAP earnings per share target in order to fund a pool
from which participating executive officers were eligible to receive a bonus payment. For fiscal 2009, the
Company did not achieve adjusted non-GAAP earnings per share sufficient to meet the minimum funding
requirement under the Executive Bonus Plan. As a result, no bonuses were funded or paid under the Executive
Bonus Plan in fiscal 2009.
The Company uses certain adjusted non-GAAP financial measures when establishing performance-based bonus
and equity award targets, such as non-GAAP earnings per share, non-GAAP net revenue and non-GAAP net
income, to exclude the following items (as applicable, in a given reporting period): amortization of intangibles,
stock-based compensation, acquisition-related expenses, restructuring charges, income tax adjustments, changes
in deferred net revenue, losses on investments, and goodwill impairment, among others. In addition, the
Company makes further adjustment to the publicly disclosed non-GAAP financial measures to add back bonus
expense.
Annual Bonus Plan
The Annual Bonus Plan is a discretionary bonus program in which both executive and non-executive employees
were eligible to participate during fiscal 2009. When no bonuses are funded under the Executive Bonus Plan,
such as in fiscal 2009, the Committee may decide to award discretionary bonus payments to executive officers,
under the terms of the Annual Bonus Plan. Discretionary bonus awards under the Annual Bonus Plan are not
designed to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Internal
Revenue Code.
Under the Annual Bonus Plan, bonus payments for eligible employees for fiscal 2009 were generally determined
by aggregating the results of Company performance and individual performance, and, for those employees with
direct responsibility for the development or publishing of products, business unit performance. With respect to
the Named Executive Officers, target bonuses were comprised of the following components: 50% Company
performance and 50% individual performance for Mr. Riccitiello, Mr. Brown and Mr. Pleasants; 30% Company
performance, 40% business unit performance and 30% individual performance for Mr. Gibeau and Mr. Moore.
For fiscal 2009, the Company did not generate non-GAAP net revenue or adjusted non-GAAP earnings per share
at levels sufficient to meet the minimum funding requirements for the Company component of the Annual Bonus
Plan. Accordingly, bonuses for employees eligible under the Annual Bonus Plan, including our Named Executive
Officers, were funded with reference to individual performance and the attainment of business unit objectives,
where applicable.
In May 2009, the Committee exercised its discretion and decided to award bonuses to our executive officers,
including the Named Executive Officers, under the Annual Bonus Plan. While the Company’s fiscal 2009
financial performance did not meet its publicly stated objectives, the Committee nevertheless recognized
significant strategic achievements that were not reflected in the Company’s disappointing fiscal 2009 financial
performance. In reaching this decision to partially fund the Company’s bonus program, the Committee was
influenced by several factors, including (1) improvements in game quality and innovation of the Company’s
products, (2) the development of critically-acclaimed new intellectual property, (3) the attainment by some
38