Most people probably know that Activision
The shift to a formal investigation seems like bad news, even though the company's own investigation cleared many of its senior executives of wrongdoing, including CEO Robert Kotick. Activision has indicated that several executives who've already left the company were responsible.
The SEC has taken a hard line against backdating, with 170 companies involved in investigations. Another video game company, Take-Two Interactive
Issues like these make me wonder about corporate governance in general. Yesterday, I wrote about rival Electronic Arts'
First, Griffith's employment agreement guaranteed $20 million in compensation by 2010; Activision agreed to reimburse him for any shortfall in total compensation by that time. In addition, the agreement implied that the payment stands, even if Griffith no longer works for the company in 2010 -- total compensation may include severance. Anyone else think that smacks of paying for failure?
In another apparently excessive move, I also noticed that Activision agreed to pay Griffith's relocation expenses, cover closing costs related to buying and selling a home, including real estate commissions, shell out for moving costs, and grant $300,000 worth of mortgage assistance. Displaying further generosity, Activision agreed to cover taxes related to the payments and paid for commuting costs prior to Griffith's relocation.
Of course, it's worthwhile to mention that Activision has been a successful stock for investors, having appreciated by 167% since David Gardner recommended it to Motley Fool Stock Advisor subscribers in September 2002. We'll see how Activision's regulatory headaches go, but governance is a good thing for investors to keep an eye on. Many companies do strange things, but that doesn't mean we have to agree with the ways they use shareholders' money.
I've often been quite upbeat on video game publishers, thanks to their large and growing market. But some of the things I've learned about Activision in the last day or two have made me wonder whether the stock presents greater risks for investors beyond Activision's mere ability to compete with its rivals' games.
Activision and EA are both Motley Fool Stock Advisor recommendations. To find out what other companies David and Tom Gardner have recommended to shareholders, click here for a 30-day free trial.