A Pre-deal Pay Grab at Take Two?

Investment firm ZelnickMedia Corp., which runs Take-Two Interactive Software, has been drawing attention from analysts and governance experts due to provisions in a recent agreement the firm made with its board, reports the Wall Street Journal.

In the recently-made agreement, the firm sought a substantial pay increase shortly after rival Electronic Arts made an unsolicited bid to acquire the company for close to $2 billion. The size and timing of the pay hike has raised eyebrows due to the agreement’s provisions, which could give it a big payout in an acquisition, like the one EA has been eyeing.

Take-Two, though, rejected EA’s offer to acquire the company for $25 a share on February 6, claiming it too low an offer. The videogames publisher, of such games as Grand Theft Auto, then rejected a $26-a-share offer on similar grounds on February 19.

Among the offers, Take-Two’s board approved an amendment to a previous agreement that more than tripled ZelnickMedia’s cash pay for providing financial and management consulting services to the company, hiking to $2.5 million a year, from $750,000, the annual fee it pays the firm, according to WSJ. In addition, the board boosted the maximum annual bonus the firm is eligible to get from $750,000 to $2.5 million.

Kirk Hanson, executive director for the Markkula Center for Applied Ethics at Santa Clara University, told WSJ that the new agreement could have occured regardless of EA's offer. "The fact that they occured contemporaneously clearly contaminates the public's view of those events," he told the WSJ, saying that it is "ethically problematic" when executives negotiate lucrative pay packages when a potential fight for control of the company is looming.