Electronic Arts 2010 Annual Report Download - page 43

Proxy Statement
In September 2009, the Committee considered an equity award for Mr. Riccitiello after consulting with
Compensia, the Committee’s independent compensation consultant, regarding current market practices for CEO
cash and equity compensation. In considering the award for Mr. Riccitiello, the Committee evaluated several
factors including Mr. Riccitiello’s individual performance, current market practices for CEO compensation, the
value of Mr. Riccitiello’s prior equity compensation awards, the relationship of Mr. Riccitiello’s compensation to
the compensation of our other NEOs and Mr. Riccitiello’s exclusion from participation in the Exchange Program
due to his NEO status. The Committee determined that (a) Mr. Riccitiello’s actual delivered compensation was
significantly below the compensation of the chief executive officers in the Peer Group, and (b) Mr. Riccitiello’s
total compensation was not in line with the Company’s overall compensation strategy and philosophy,
particularly the goal of having a significant portion of an executive officer’s compensation be equity based,
because his outstanding equity awards had no actual value. Consequently, Mr. Riccitiello’s total compensation
package lacked any meaningful equity incentives.
As a result of this analysis, the Committee recommended and the Board approved an equity award to
Mr. Riccitiello consisting of 139,000 stock options and 387,000 restricted stock units. The stock option award
will vest as to 24% of the underlying shares on September 1, 2010 and an additional 2% of the shares on the first
day of the next 38 months thereafter. The RSU award will vest ratably on an annual basis over a three-year
period. This award was intended to provide a meaningful retention incentive to ensure Mr. Riccitiello’s
continued performance and leadership while also recognizing his ongoing contributions to the Company in light
of current economic and industry-specific challenges.
In connection with our annual performance review process at the start of fiscal 2011, the Board, based on the
Committee’s recommendation, granted Mr. Riccitiello 200,000 restricted stock units in May 2010. The award
will vest ratably on an annual basis over a three-year period. The Committee recommended this equity award to
the Board after consulting with Compensia regarding current market practices for CEO compensation, and with
the objectives of strengthening the equity component of Mr. Riccitiello’s total compensation package going
forward and aligning Mr. Riccitiello’s award with the timing of NEO equity grant awards made at the start of
fiscal 2011. As illustrated by the chart below, the actual value of Mr. Riccitiello’s equity awards to date is zero;
however, the Committee believes that with the grants made in fiscal 2010 and fiscal 2011, and the future vesting
opportunities available with those grants, the equity component of Mr. Riccitiello’s compensation is now more
closely aligned with that of the chief executive officers in the Peer Group, and is now more consistent with our
compensation philosophy by providing more meaningful forward-looking equity incentives. Based on our stock
price as of May 18, 2010 – the date Mr. Riccitiello’s fiscal 2011 equity award was granted – the Accounting
Value versus the Delivered Value of Mr. Riccitiello’s equity awards to date were:
Award Award Date
Option
Exercise
Price
Closing Price Of
EA Stock On
May 18, 2010
Outstanding
Awards As Of
May 18, 2010
Vested
Awards As Of
May 18, 2010
Accounting
Value(1)
Delivered
Value(2)
Stock Options .......... May2007 $49.90 $17.54 850,000 497,000 $16,002,578 $0
Performance-Based RSUs May 2008 N/A $17.54 200,000 0(3) $ 3,306,633(4) $0
Stock Option ........... September 2009 $18.85 $17.54 139,000 0 $ 1,002,287 $0
Time-Based RSUs ...... September 2009 N/A $17.54 387,000 0 $ 7,294,950 $0
Time Based RSUs ...... May2010 N/A $17.54 200,000 0 $ 3,508,000 $0
(1) Accounting Value is the aggregate grant-date fair value as determined under applicable accounting standards.
Grant-date fair value for restricted stock units (“RSUs”) is determined based on the number of shares granted
multiplied by the quoted market price of our common stock on the grant date. The valuation assumptions used
to calculate the fair value of stock options are discussed in Note 13, “Stock-Based Compensation and
Employee Benefit Plans”, of the Consolidated Financial Statements in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2010.
(2) Delivered Value of the stock options is the difference between the exercise price of the options vested as of
May 18, 2010 and the closing price of our stock on May 18, 2010. Delivered Value of RSUs is the number of
vested shares multiplied by the closing price of our stock on May 18, 2010.
35