The Sims: Electronic Arts’ Executive Exit Edition __»

June 1, 2010

Companies often shower executives with gifts while showing them the door — cash, a year or two of health-care benefits, even a car or cell-phone, plus, of course, accelerated options and restricted stock. But those gifts come with strings.

Most typically, that means a non-compete clause (you can’t take a nice severance package and go work for the other guy), a promise not to recruit the best and brightest from the company that gave you the boot, and even “non-disparagement” clauses to protect the former employer’s fragile reputation.

We always assumed those restrictions were there to protect the company — and by extension shareholders — against the potential of damage from departing executives who might still nurse a grudge even after taking the company’s coin (or just those who might still have ambitions in their field). But after reading a severance agreement with Gerhard Florin, former executive vice-president of Electronic Arts (ERTS), that the video-game company filed with its annual report on Friday, we’re not so sure. Here’s a snippet:

“If there is a —Change of Control of Electronic Arts Inc which results in the Executive management team of Electronic Arts Inc being replaced then the Post Termination Restrictive Covenant will no longer apply. Change of Control means that any person or body corporate which holds over 50% of the voting power of the shares of Electronic Arts Inc ceases to do so or if other persons or corporate body(ies) acquire control of Electronic Arts Inc.”

Florin — whose departure was reported late last year, but without severance details — has nearly a dozen “restrictive covenants” are enumerated in his 2006 employment contract. In return, the 15-year EA veteran is being paid 15,855 Swiss Francs a month (about $13,623) from March 31 through the end of the year on the condition (among others) that he “will not work for any other Company up to the Termination Date—” So he’ll get a little down-time before he has to worry about any of this.

In the case of the clause above, the Post Termination Restrictive Covenant seems to refer to his the promise, for 12 months, “not to be engaged in or concerned in any capacity in any business concern, in any country, which is in competition with the products or services provided by the Company …” In other words, if someone else takes over the company, and your former bosses are given the boot — well, he can give old Nintendo a call to see if they need a hand around the shop.

We realize that some of EA’s best-selling games take place in fantasy worlds of one sort or another. But even there, we’re pretty sure the company’s programming whizzes seek to make them them feel as real as possible.

Here in the real world, of course, it would be nice if post-employment restrictions were written with an eye on the owners, not the managers.

Image source: PetroleumJelliffe via Flickr

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Check out the three posts we did ahead of the long weekend. And if you want to see more of what’s hidden in corporate filings, take a look at FootnotedPro, where we highlight unusual opportunities and potential problems well in advance of the market. For more information or to inquire about a trial subscription, email us at pro@footnoted.com.

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