Electronic Arts 2010 Annual Report Download - page 39

Proxy Statement
Executive Bonus Plan
The Executive Bonus Plan is a cash bonus plan in 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 2010, the Executive Bonus Plan required that the Company achieve at least
75% of a pre-established adjusted non-GAAP earnings per share target to fund a pool from which participating
executive officers were eligible to receive a bonus payment. For fiscal 2010, 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 2010.
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, non-GAAP net income
and non-GAAP profit before tax 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.
Discretionary Bonus Plan
The Discretionary Bonus Plan is a discretionary bonus program in which both executive and non-executive
employees were eligible to participate during fiscal 2010. When no bonuses are funded under the Executive
Bonus Plan, such as in fiscal 2010, the Committee may decide to award discretionary bonus payments to
executive officers under the terms of the Discretionary Bonus Plan. Cash bonus awards under the Discretionary
Bonus Plan are not designed to qualify as “performance-based compensation” within the meaning of
Section 162(m) of the Internal Revenue Code.
The Discretionary Bonus Plan for fiscal 2010 consisted of two performance periods for which executive and
non-executive employees could be awarded cash bonuses.
For the performance period covering the first quarter of fiscal 2010, the Company established a one-time bonus
opportunity using a Company non-GAAP profit before tax objective as the performance measure. All regular
status employees, including executive officers, of the Company (and its subsidiaries and affiliates) were eligible
to participate in the program. The target performance level based on the non-GAAP profit before tax target was
not achieved and no amounts were paid under the Discretionary Bonus Plan for the first quarter of fiscal 2010.
For the performance period covering the second through fourth quarters of fiscal 2010 (the “Q2-Q4 Plan”), bonus
pools for eligible employees were generally determined from the results of Company and individual
performance, and from business unit performance for employees with direct responsibility for the development
or publishing of products. All employees, including our NEOs, had the opportunity to earn their full fiscal year
target bonus opportunity under the Q2-Q4 Plan. Target bonuses for our NEOs were comprised of the following
components: 50% Company performance and 50% individual performance for Mr. Riccitiello, Mr. Brown and
Mr. Schappert; and 30% Company performance, 40% business unit performance and 30% individual
performance for Mr. Gibeau and Mr. Moore.
The performance measures for funding the Company performance component of the Q2-Q4 Plan were the
Company’s external guidance targets for non-GAAP earnings per share and non-GAAP net revenue for the
second quarter of fiscal 2010 through the fourth quarter of fiscal 2010, with 50% of the Company performance
component based on non-GAAP earnings per share and 50% based on non-GAAP net revenue. For fiscal 2010,
the Committee approved overall funding of 78% of the total potential 100% target funding. The Company
partially attained the non-GAAP net revenue target but the adjusted non-GAAP earnings per share target was not
achieved. Funding was also attributable under the plan to attainment of business unit and individual goals.
Additionally, the Committee recognized numerous significant strategic achievements that were not fully reflected
in the Company’s fiscal 2010 financial performance including:
• improvements in game quality, including 20 titles with a Metacritic rating of 80 or above, and innovation
in the Company’s products;
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