Apr 26, 2022 - Technology

Activision Blizzard shareholders weigh Microsoft, "dubious windfall"

Photo illustration: Jakub Porzycki/NurPhoto via Getty Images

Activision Blizzard shareholders will vote Thursday about whether their company should sell to Microsoft, but they’re voting on even more than that.

Why it matters: The vote is both a referendum on a massive merger and the next step in an exploration of fairness and consequences at the corporate level.

  • Activision has been mired in misconduct scandals since last summer. Much of the blame has been placed on the leadership of longtime CEO Bobby Kotick, who nonetheless has pledged reform.

The shareholder vote on the merger is, at a glance, the more straightforward of two key choices that will be made.

  • Stock owners will vote for or against selling the company to Microsoft for $69 billion.
  • Activision Blizzard’s board has advocated for the deal, though activist investors have urged a “no.”

The other major vote, which is nonbinding, calls on shareholders to approve or turn down “golden parachute” compensation for several top Activision executives.

  • Those deals would allow the company’s chief financial officer, chief administrative officer and top lawyer to all leave the merged company six months after the deal and collect millions.

The intrigue: Bundled into the merger plan is an eyebrow-raising agreement between Microsoft and Activision to pay Kotick a $22 million bonus in July or later, if a board of directors subcommittee decides the company has sufficiently reformed its workplace.

  • The firm Glass Lewis, which advises stockholders on votes, has urged a “yes” on the merger, but it is holding its nose on the potential payout.
  • Glass Lewis calls it a  “dubious windfall” that is “predicated on the nebulously communicated satisfaction of previously codified structural and cultural objectives, which … likely would not need to exist in their current scale or form had Mr. Kotick earlier proved to be a more effective chief executive.”
  • The subcommittee making the call is composed of three board members, one of whom joined the company this month. Another, Reveta Bowers, is a longtime educator at The Center for Early Education, an elite Los Angeles private elementary school where Kotick had served on the board for years until 2020.
  • Asked about a potential conflict of interest between Kotick and Bowers, an Activision rep said Kotick quit the school’s board to avoid such conflicts and shared a statement from board member Robert Morgado praising Bowers for her “considered judgment and diverse perspectives." Bowers did not return requests for comment.

What’s next: Activision is required to report results of the vote within four business days, which is May 4.

  • Even with shareholder approval, the deal would need to clear regulatory hurdles, which is no sure thing.
  • Beyond that, the window to close the deal is open until June 2023.

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