DEF 14A 1 d334127ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.   )

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  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

Mattel, Inc.
(Name of Registrant as Specified In Its Charter)
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Table of Contents

 

 

LOGO

2017 Proxy Statement

and Notice of Annual Meeting

of Stockholders to be Held on May 19, 2017


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          NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS  

 

Mattel, Inc.

Notice of 2017 Annual Meeting of Stockholders

The 2017 Annual Meeting of Stockholders of Mattel, Inc. (“Mattel” or the “Company”) will be held on May 19, 2017 at 9:00 a.m. (Los Angeles time) at the Mattel Conference and Leadership Center, 1955 East Grand Avenue, El Segundo, California 90245 (including any adjournment or postponement thereof, the “Annual Meeting”).

We will consider and act on the following matters of business at the Annual Meeting:

 

     Matter   Our Board’s Recommendations

Proposal 1  

  Election of the eleven director nominees named in the Proxy Statement: Michael J. Dolan, Trevor A. Edwards, Dr. Frances D. Fergusson, Margaret H. Georgiadis, Ann Lewnes, Dominic Ng, Vasant M. Prabhu, Dean A. Scarborough, Christopher A. Sinclair, Dirk Van de Put and Kathy White Loyd   FOR each Director Nominee

Proposal 2  

  Ratification of the selection of PricewaterhouseCoopers LLP as Mattel’s independent registered public accounting firm for the year ending December 31, 2017   FOR

Proposal 3  

  Advisory vote to approve named executive officer compensation (“Say-on-Pay”)   FOR

Proposal 4  

  Advisory vote on the frequency of future Say-on-Pay votes (“Say-When-on-Pay”)   Every ONE YEAR

Proposal 5  

  Approval of the new Mattel Incentive Plan and the material terms of its performance goals   FOR
    Such other business as may properly come before the Annual Meeting    

If you were a holder of record of Mattel common stock at the close of business on March 24, 2017, you are entitled to notice of, and to vote at, the Annual Meeting.

The Mattel Conference and Leadership Center is accessible to those who require special assistance. If you require special assistance, please call 310-252-4500. Whether or not you expect to attend the Annual Meeting, please submit a proxy to vote as soon as possible so that your shares will be represented and voted at the Annual Meeting.

By Order of the Board of Directors

 

 

LOGO

Robert Normile

Secretary

El Segundo, California

April 5, 2017


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          TABLE OF CONTENTS  

 

Table of Contents

 

         Page  
PROXY SUMMARY      1  
CORPORATE GOVERNANCE AT MATTEL      11  
  CORPORATE GOVERNANCE STANDARDS AND PRACTICES      11  
  BOARD GENERAL INFORMATION      16  
  DIRECTOR COMPENSATION      22  
PROPOSAL 1 – ELECTION OF DIRECTORS      26  
AUDIT AND RELATED PARTY MATTERS      38  
  REPORT OF THE AUDIT COMMITTEE      38  
  FEES INCURRED FOR SERVICES BY PRICEWATERHOUSECOOPERS LLP      41  
  CERTAIN TRANSACTIONS WITH RELATED PERSONS      43  
PROPOSAL 2 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      44  
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION      45  
  EXECUTIVE OFFICERS      45  
  COMPENSATION DISCUSSION AND ANALYSIS      47  
 

Executive Summary

     47  
 

Elements of Compensation

     57  
 

Important Policies and Guidelines

     71  
 

Executive Compensation Process and Governance

     73  
  EXECUTIVE COMPENSATION TABLES      77  
 

Summary Compensation Table

     77  
 

Grants of Plan-Based Awards in 2016

     83  
 

Outstanding Equity Awards at 2016 Year-End

     85  
 

Option Exercises and Stock Vested in 2016

     88  
 

2016 Pension Benefits

     89  
 

2016 Nonqualified Deferred Compensation

     91  
 

Potential Payments Upon Termination or Change of Control

     93  
  COMPENSATION RISK REVIEW      103  
  REPORT OF THE COMPENSATION COMMITTEE      104  


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  TABLE OF CONTENTS          

 

         Page  
PROPOSALS RELATING TO COMPENSATION      105  
  PROPOSAL 3 – ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION (“SAY-ON-PAY”)      105  
  PROPOSAL 4 –  ADVISORY VOTE TO APPROVE FREQUENCY OF FUTURE SAY-ON-PAY VOTES (“SAY-WHEN-ON-PAY”)      106  
  PROPOSAL 5 – APPROVAL OF NEW MATTEL INCENTIVE PLAN AND MATERIAL TERMS OF ITS PERFORMANCE GOALS      107  
STOCK OWNERSHIP AND REPORTING      111  
  PRINCIPAL STOCKHOLDERS      111  
  SECURITY OWNERSHIP OF MANAGEMENT AND THE BOARD      112  
  SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE      114  
  EQUITY COMPENSATION PLAN INFORMATION      115  
ANNUAL MEETING AND VOTING INFORMATION      116  
  GENERAL MEETING INFORMATION      116  
  DEADLINE FOR 2018 PROPOSALS AND NOMINATIONS      123  
  OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING      124  
APPENDIX A – MATTEL INCENTIVE PLAN      A-1  


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          PROXY SUMMARY  

 

PROXY SUMMARY

 

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. For more complete information regarding our 2016 financial performance, please review our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”) on February 23, 2017.

Meeting Information and Mailing of Proxy Materials

 

 

    Date:    May 19, 2017
    Time:    9:00 a.m. (Los Angeles time)
    Location:    Mattel Conference and Leadership Center, 1955 East Grand Avenue, El Segundo, California 90245
    Record Date:      March 24, 2017
    Mailing Date:      On or around April 5, 2017, we will mail a Notice of Internet Availability of Proxy Materials to most stockholders and printed copies of our proxy materials to our other stockholders.

Voting Items and Board Recommendations

 

 

      Matter   Our Board’s Recommendations

Proposal 1  

   Election of Eleven Director Nominees (page 26)   FOR each Director Nominee

Proposal 2  

   Ratification of PricewaterhouseCoopers LLP as our Independent Accounting Firm for 2017 (page 44)   FOR

Proposal 3  

   Advisory Vote to Approve Named Executive Officer Compensation (“Say-on-Pay”) (page 105)   FOR

Proposal 4  

   Advisory Vote on the Frequency of Future Say-on-Pay Votes (“Say-When-on-Pay”) (page 106)   Every ONE YEAR

Proposal 5  

   Approval of New Mattel Incentive Plan and Material Terms of its Performance Goals (page 107)   FOR

 

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  PROXY SUMMARY          

 

Director Nominees

 

 

Name    Independent    

Principal Occupation/

Key Experience

 

 Director 

Since

  Mattel Committee Memberships


Michael J. Dolan†

 

 

Chief Executive Officer and Director of Bacardi Limited

 

2004

 

  Compensation (Chair)

  Executive (Chair)

  Governance and Social Responsibility


Trevor A. Edwards

 

 

President, NIKE Brands of NIKE, Inc.

 

2012

 

  Compensation

  Governance and Social Responsibility


Dr. Frances D. Fergusson 

 

 

Former President of Vassar College

 

2006

 

  Executive

  Finance

  Governance and Social Responsibility (Chair)


Margaret H. Georgiadis

     

Chief Executive Officer and Director of Mattel, Inc.

 

2017

 

  Equity Grant Allocation


Ann Lewnes

 

 

Executive Vice President and Chief Marketing Officer of Adobe Systems Incorporated

 

2015

 

  Governance and Social Responsibility


Dominic Ng*

 

 

Chairman of the Board and Chief Executive Officer of East West Bancorp, Inc. and East West Bank

 

2006

 

  Audit

  Finance


Vasant M. Prabhu*

 

 

Executive Vice President and Chief Financial Officer of Visa Inc.

 

2007

 

  Audit (Chair)

  Executive

  Finance


Dean A. Scarborough

 

 

Executive Chairman of the Board of Avery Dennison Corporation

 

2007

 

  Compensation

  Executive

  Finance (Chair)


Christopher A. Sinclair

     

Executive Chairman of the Board of Mattel, Inc.

 

1996

   


Dirk Van de Put*

 

 

President and Chief Executive Officer and Director of McCain Foods Limited

 

2011

 

  Audit

  Governance and Social Responsibility


Kathy White Loyd

 

 

Executive in Residence and Faculty Member at the Bryan School of Business & Economics at the University of North Carolina – Greensboro

  2001  

  Audit

  Compensation

† Independent Lead Director

* Audit Committee Financial Expert

              

 

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          PROXY SUMMARY  

 

The Board has worked diligently to ensure the right balance between long-term, institutional knowledge and fresh perspectives on the Board. The Board believes that the current mix of director tenures provides Mattel with an optimal balance of knowledge, experience and capability. This mix allows the Board to leverage both the deep Company knowledge of, and experience with, Mattel from longer-tenured directors as well as the new viewpoints, experiences and ideas from newer directors in its oversight of management and our continued transformation efforts.

2016 Financial and Business Highlights

 

We continued to make progress on our strategic priorities during 2016, despite a difficult fourth quarter that impacted full-year financial results.

 

Mattel’s Strategic Priorities

 Build powerful brand franchises

 

 Drive continuous cost improvement

 Establish Toy Box as the partner of choice

 

 Rapidly build emerging market leadership

 Develop unmatched commercial excellence

   

In 2016, significant changes were made Company-wide to focus on driving creativity and innovation while executing on our strategic priorities of reinvigorating our core brands, re-establishing the Company as the entertainment licensing partner of choice, developing commercial excellence, driving cost improvement and expanding our presence in emerging and developing markets.

Throughout 2016 management maintained sharp focus on executing against our strategic priorities and continued to drive progress; however, our full-year financial results were meaningfully impacted by evolving market conditions during the critical 2016 holiday period. The holiday period was characterized by industry-wide challenges, including a significant U.S. toy category slowdown, and increased foreign exchange headwinds. And while the U.S. toy category made a strong recovery the last two weeks of the year, the unexpected slowdown resulted in increased promotional activity and decreased shipping, which had a significant impact on our gross margin and negatively impacted our 2016 financial results.

 

Key 2016 Financial Results

 Net sales were $5.46 billion, a 4% decrease as compared to 2015

 Gross sales* were $6.07 billion, a 3% decrease as compared to 2015

 Gross margin was 46.8%, a decrease of 240 basis points from 2015

 Operating income was $519.2 million, a 4% decrease as compared to 2015

 Earnings per share (“EPS”) was $0.92, as compared to $1.08 in 2015

* Gross sales is a non-GAAP financial measure. For a reconciliation of gross sales to net sales, the most directly comparable GAAP financial measure, please see pages 44 to 45 of our Annual Report on Form 10-K filed with the SEC on February 23, 2017.

 

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  PROXY SUMMARY          

 

Despite a difficult fourth quarter that negatively impacted our 2016 financial results, we made continued progress on our turnaround efforts and strategic priorities, which we believe are fundamental to creating long-term value.

 

Turnaround Progress
Encouraging Trends in Underlying Business Despite Currency Headwinds

  We exited 2016 with positive point of sale (“POS”) in key core brands – Barbie, Fisher-Price and Hot Wheels

  We saw significant growth in key emerging markets such as China

  We achieved the high end of our two-year cost savings target of $250 million to $300 million, with total gross savings of $295 million over the two-year period and $142 million for 2016

  We acquired a number of high profile entertainment licenses, including Disney’s Cars 3 and Toy Story 4 and Universal’s Jurassic World and Fast & Furious
Maintained Disciplined Capital Deployment Strategy

  We invested in turnaround efforts as well as growth and technology initiatives

  We maintained a quarterly dividend of $0.38 per share

In addition to our longer-term strategic priorities, we also pursued a key objective in 2016 to overcome the revenue gap created by the loss of the Disney Princess license, revenue declines on our Monster High and American Girl brands and continued unfavorable foreign exchange trends. This revenue gap was estimated to be approximately $600 million, representing about 10% of the Company’s 2015 sales. We achieved this objective as a result of solid execution on key core brands and key entertainment licenses as well as investments in emerging and developing markets, which resulted in flat gross sales* excluding the impact of foreign currency exchange,* all of which was achieved in the midst of an ongoing cultural and organizational transformation, economic uncertainty and a toy category slowdown in the critical holiday period.

* Gross sales and currency exchange rate impact are non-GAAP financial measures. For a reconciliation of gross sales to net sales, the most directly comparable GAAP financial measure, and the currency exchange rate impact on reported results, please see pages 44 to 45 of our Annual Report on Form 10-K filed with the SEC on February 23, 2017.

We also generated positive one-year Total Stockholder Return (“TSR”)(1) in 2016. The following shows our TSR performance as compared to the median of our peers for periods ending December 31, 2016:

 

Period   Mattel   Peer Group
1 year   6.4%   5.7%
3 year   -12.3%   9.4%
5 year   4.4%   12.9%

(1) TSR represents the annualized rate of return reflecting changes in the stock price plus reinvestment and the compounding effect of dividends over such period.

 

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          PROXY SUMMARY  

 

2017 Leadership Transition and Looking Ahead

 

In early 2017, we had a leadership transition, and we believe we are well-positioned for 2017.

As part of the Board’s ongoing review of Mattel’s long-term strategy and execution, we implemented a leadership transition in early 2017. On February 8, 2017, Margaret H. Georgiadis became our Chief Executive Officer (“CEO”), and Christopher A. Sinclair, our former CEO, became Executive Chairman of the Board. Ms. Georgiadis, who was President, Americas at Google Inc. prior to joining Mattel, brings with her significant experience in technology, marketing, consumer insights, e-commerce, finance, leadership, global business, strategy and business development. She has proven ability to foster innovation, experience in building partnerships on a global scale, expertise in leading complex organizations, and experience in engaging consumers and retail partners in a rapidly evolving industry. She has successfully led efforts to deliver above market growth and profitability by creating transformational partnerships across content, media and technology providers and through innovation in product development and customer engagement. The Board believes Mr. Sinclair’s extensive institutional knowledge of Mattel and its industry will serve to ensure a smooth leadership transition and enhance execution going forward in his role as Executive Chairman. Mattel will continue to leverage the unique capabilities and expertise of its senior leadership team, including our President and Chief Operating Officer (“COO”), Richard Dickson.

We continue to believe that our strong leadership team, combined with the solid business foundation we established in 2016, position us well for 2017.

 

Well-Positioned for 2017

   Core brand momentum

   Robust entertainment slate

    Emerging market growth

   Strong leadership team

Stockholder Engagement and Corporate Governance Highlights

 

In 2016, an independent member of our Board, together with our management team, engaged in outreach activities and discussions with stockholders representing more than 40%, in total, of Mattel’s outstanding shares.

We have established a robust stockholder engagement program designed to gain a better understanding of stockholder perspectives on a wide range of matters. We regularly conduct extensive stockholder outreach and believe that proactive and transparent communication with our stockholders is essential to effective corporate governance. During 2016, an independent member of our Board, together with members of our senior management team, engaged in outreach activities and discussions with stockholders representing more than 40%, in total, of Mattel’s outstanding shares to discuss items such as turnaround efforts, corporate governance practices, executive compensation programs and sustainability oversight. We greatly value the views of our stockholders, and the input we receive from them is relayed directly to the Board and helps inform our governance and compensation practices. As we continue to execute on our transformation, we look forward to ongoing stockholder engagement.

 

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  PROXY SUMMARY          

 

We maintain industry-leading corporate governance and Board practices that ensure accountability and enhance effectiveness in the boardroom.

 

Corporate Governance Practices   Board Practices

Stockholder right to proxy access (adopted January 2017)

 

Routine review of Board leadership structure

Annual Board elections

 

Annual Board and Committee evaluations

Majority voting standard

 

Robust director succession and search process

Stockholder right to call special meetings

 

Annual review and evaluation of the CEO’s performance by independent directors

Robust Independent Lead Director role with significant responsibilities

 

Quarterly executive sessions held without management present

Stockholder ability to remove directors with or without cause

 

Comprehensive risk management with Board and Committee oversight

Stockholder ability to act by written consent

 

9 of 11 director nominees are independent

Executive Compensation Highlights

 

Our executive compensation programs are designed to be performance-based and link our executives’ pay to the execution of Mattel’s strategic objectives and to the interests of our stockholders.

2016 Pay-For-Performance Results

Pay outcomes for our named executive officers (“NEOs”) in 2016 closely align to challenging financial results this past year:

 

Compensation Element   2016 Results for NEOs

Annual Cash Incentive

 

   No payout under our annual cash incentive plan, the Mattel Incentive Plan (“MIP”)

Equity Long-Term Incentives (“LTIs”)

 

   No earnout of Performance Units granted under the 2014-2016 Long-Term Incentive Program (“LTIP”) that ended December 31, 2016

Base Salary

 

   No salary increases approved for 2016 or 2017, other than in connection with retention or greater responsibilities assumed

 

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          PROXY SUMMARY  

 

The strong link between pay and performance is further illustrated by the chart below. Mr. Sinclair’s realizable compensation at the end of 2016 was only 32% of his 2016 targeted total direct compensation (“TDC”).

 

 

LOGO

 

2016 Targeted TDC
   

2016 Targeted Annual Cash

   $  3,750,000    
   

- Base Salary(1)

   $  1,500,000    
   

- Target MIP(2)

   $  2,250,000    
   

2016 LTI Grant Values(3)

   $  7,000,000    
   

- Stock Options

   $  2,333,333    
   

- Time-Vesting RSUs

   $  2,333,333    
   

- Performance Units

   $  2,333,333    
   

Total 2016 Targeted TDC

   $10,750,000    
2016 Realizable TDC
   

2016 Actual Annual Cash(1)

   $1,500,000    
   

- Base Salary

   $1,500,000    
   

- Actual MIP Paid

   $              0    
   

2016 LTI Realizable Values

   $1,964,646    
   

- Stock Options(4)

   $              0    
   

- Time-Vesting RSUs(5)

   $1,964,646    
   

- Performance Units(6)

   $              0    
   

Total 2016 Realizable TDC

   $3,464,646    
   

% of Targeted TDC

   32%    
 

 

(1) Reflects amounts disclosed in the “Summary Compensation Table” on page 77.

(2) Reflects amounts disclosed in the “Grants of Plan-Based Awards in 2016” table on page 83.

(3) Reflects amounts disclosed in the “2016 LTI Annual Grant Values” table on page 63.

(4) The stock options granted in 2016 were underwater as of the end of the fiscal year. The value shown for the realizable 2016 stock options reflects the intrinsic value of such options as of December 30, 2016 based on our closing stock price of $27.55 and the option exercise price of $32.72. If instead the Black-Scholes value of the stock options was taken into account as of December 30, 2016, then such options would be valued at $1.9 million, resulting in Total 2016 Realizable TDC of $5.4 million, or 50% of Targeted TDC.

(5) The value shown for the realizable time-vesting restricted stock units (“RSUs”) for 2016 reflects our closing stock price of $27.55 as of December 30, 2016.

 

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  PROXY SUMMARY          

 

(6) The value shown for the performance-based RSUs (“Performance Units”) for the 2016-2018 LTIP is zero, as our EPS of $0.92 for 2016 was below threshold performance (based on an extrapolation of the assumptions used for EPS growth that were employed in determining the cumulative EPS three-year goal), which would have resulted in 0% earned for the financial performance goal. In addition, the impact of our TSR modifier for the first year of the performance period ending December 31, 2016, would have resulted in a reduction of 44% from any amounts earned based on our EPS performance.

2016 Compensation Program Changes

To further promote our turnaround efforts, reinforce our strategic priorities and reflect feedback from stockholders, the Compensation Committee made the following changes to our MIP and LTIP in 2016:

 

Compensation Element    Actions Taken   Objectives

Annual Cash Incentive

 

  Streamlined Financial Performance Measures

  Simplified the financial measures of the MIP by focusing on adjusted operating profit and adjusted net sales, eliminating gross margin and free cash flow

 

  Provide greater alignment with our turnaround strategy objectives of top-line growth with bottom-line discipline

   

  Further Aligned with Strategic Priorities

  Modified the payout formula for our NEOs (and other Executive Vice Presidents (“EVPs”)) as follows:

  75% of the payout is based on achievement of financial goals (previously 100%); and

  25% of the payout is based on achievement of individualized strategic priorities related to each executive’s job responsibilities

 

  Provide a stronger link to operational performance over which the executive has responsibility, driving a culture of accountability

   

  Structured Plan to Support Expense Control

  No payouts occur under the financial performance measures or the individualized strategic priorities unless we achieve the adjusted operating profit threshold performance for 2016

 

  Ensure operational and financial goals are achieved with proper expense control

 

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          PROXY SUMMARY  

 

Compensation Element    Actions Taken   Objectives

Equity LTIs

 

  Annual Performance Cycles Approach

  Changed the approach to granting Performance Units annually with overlapping three-year cycles, starting with the 2016-2018 LTIP performance cycle, from granting every three years with end-to-end cycles

 

  Permit greater responsiveness to changing circumstances, strengthen retention and be consistent with broader market practice

   

  Single Three-Year Financial Performance Measure

  Changed the financial performance measure for Performance Units to EPS measured over three years from net operating profit after tax less capital charge (“NOPAT-CC”) and net sales, with both goals set annually

  Three-year relative TSR modifier was maintained

 

  Simplify LTIP structure, utilize differentiated metrics as compared to the Annual Cash Incentive, and ensure sharp focus on sustainable and profitable growth, which supports our turnaround strategy

Compensation Governance Best Practices

Our Compensation Committee maintains the following compensation governance best practices, which establish strong safeguards for our stockholders and further enhance the alignment of interests between our executives and stockholders:

 

Compensation Governance Practices

Compensation Recovery Policy (“Clawback Policy”) applicable to all executive officers and other direct reports to the CEO

Double-trigger accelerated vesting in the event of a change of control

Annual compensation risk assessment

Robust stock ownership guidelines as a multiple of base salary: 6x for Executive Chairman and CEO, 4x for COO and Chief Financial Officer (“CFO”), 3x for other NEOs

No excise tax gross-ups

No hedging or pledging permitted

Annual comparator peer group review

Independent compensation consultant

No poor pay practice of tax gross-ups on perquisites and benefits

 

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  PROXY SUMMARY          

 

Corporate Information

 

 

 Corporate Headquarters:

333 Continental Boulevard, El Segundo, California 90245-5012

 

 Corporate Website:

www.corporate.mattel.com

 

 Investor Relations Website:

http://investor.shareholder.com/mattel/

 

 State of Incorporation:

Delaware

 

 Stock Symbol:

NASDAQ: MAT

 

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          CORPORATE GOVERNANCE STANDARDS AND PRACTICES  

 

CORPORATE GOVERNANCE AT MATTEL

 

CORPORATE GOVERNANCE STANDARDS AND PRACTICES

Corporate Governance Highlights

 

Mattel utilizes strong and effective corporate governance practices to drive accountability and provide its stockholders with meaningful rights. Maintaining industry-leading governance practices is, and has been, a long-standing priority at Mattel, and we regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices. We conduct a proactive engagement process that encourages feedback from our stockholders. This feedback informs boardroom discussions and helps shape our governance practices.

The following corporate governance and Board practices ensure accountability and enhance effectiveness in the boardroom:

 

Corporate Governance Practices   Board Practices

Stockholder right to proxy access (adopted January 2017)

 

Routine review of Board leadership structure

Annual Board elections

 

Annual Board and Committee evaluations

Majority voting standard

 

Robust director succession and search process

Stockholder right to call special meetings

 

Annual review and evaluation of the CEO’s performance by independent directors

Robust Independent Lead Director role with significant responsibilities

 

Quarterly executive sessions held without management present

Stockholder ability to remove directors with or without cause

 

Comprehensive risk management with Board and Committee oversight

Stockholder ability to act by written consent

 

9 of 11 director nominees are independent

Robust Stockholder Engagement

 

We have established a robust stockholder engagement program designed to gain a better understanding of stockholder perspectives on a wide range of matters. We regularly conduct extensive stockholder outreach and believe that proactive and transparent communication with our stockholders is essential to effective corporate governance. During 2016, an independent member of our Board, together with members of our senior management team, engaged in outreach activities and discussions with stockholders representing more than 40%, in total, of Mattel’s outstanding shares to discuss items such as turnaround efforts, corporate governance practices, executive compensation programs and sustainability oversight. We greatly value the views of our stockholders, and the input we receive from them is relayed directly to the Board and helps inform our governance and compensation practices. As we continue to execute on our transformation, we look forward to ongoing stockholder engagement.

 

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  CORPORATE GOVERNANCE STANDARDS AND PRACTICES          

 

Stockholder Proxy Access Right

After engaging with a number of our stockholders and carefully considering their recent feedback regarding proxy access, on January 24, 2017, the Board adopted amendments to Mattel’s Amended and Restated Bylaws (the “Bylaws”) to implement proxy access. Our proxy access provision permits a stockholder, or group of up to 20 stockholders, owning at least three percent of the Company’s outstanding common stock continuously for at least three years, to nominate and include in the Company’s proxy materials for an annual meeting of stockholders, director nominees constituting up to the greater of two nominees or 20% of the Board, provided that the stockholder(s) and the director nominee(s) satisfy the requirements specified in the Bylaws.

Board Leadership Structure

 

The Board believes that one of its most important responsibilities is to evaluate and determine the most appropriate Board leadership structure for Mattel so that it can provide effective, independent oversight of management and facilitate its engagement in, and understanding of, Mattel’s business. To carry out this responsibility, our Board of Directors Amended and Restated Guidelines on Corporate Governance (“Guidelines on Corporate Governance”) empower the Board to evaluate and determine the optimal leadership structure for the Company in relation to Mattel’s specific characteristics or circumstances at any given time. The Board evaluates its structure periodically, as well as when warranted by specific circumstances, such as the appointment of a new CEO. As part of its evaluation, the Board assesses which structure it believes is in the best interests of Mattel and its stockholders based on the evolving needs of the Company. This governance structure provides the Board appropriate flexibility to determine the leadership structure best suited to support the dynamic demands of our business.

As part of the Board’s ongoing review of Mattel’s long-term strategy and execution, the Company implemented a leadership transition in early 2017. On February 8, 2017, Ms. Georgiadis became our CEO and a member of our Board, and Mr. Sinclair, our former CEO, became our Executive Chairman. Ms. Georgiadis, who was President, Americas at Google Inc. prior to joining Mattel, brings with her significant experience in technology, marketing, consumer insights, e-commerce, finance, leadership, global business, strategy and business development. She also has a deep understanding of how to build and scale brands on a global basis and expertise in effectively engaging consumers and retail partners in a rapidly evolving industry. She has successfully led efforts to deliver above market growth and profitability by creating transformational partnerships across content, media and technology providers and through innovation in product development and customer engagement. The Board believes that Ms. Georgiadis’ leadership experience at Google and elsewhere, coupled with her proven ability to foster innovation and build partnerships on a global scale, makes her ideally suited to accelerate Mattel’s growth in the coming years.

Mr. Sinclair, who served as our CEO since April 2015 and Chairman since January 2015, has been a member of Mattel’s Board for over 20 years. Prior to his appointment as Interim CEO in January 2015, he served as an independent director since 1996 and as Independent Lead Director and Chair of the Audit Committee and Executive Committee since 2011. The Board believes Mr. Sinclair’s extensive institutional knowledge of Mattel and its industry and depth of experience as a director will serve to ensure a smooth leadership transition and enhance execution going forward. As Executive Chairman, Mr. Sinclair will serve as Chair of regular sessions of the Board and work to maximize Board effectiveness in supporting the transition and advising management on our continued transformation efforts.

 

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          CORPORATE GOVERNANCE STANDARDS AND PRACTICES  

 

In connection with the leadership transition, the Board conducted a thoughtful evaluation of its leadership structure and determined that having a separate Chairman and CEO is the optimal structure for the Company at this time. Because Mr. Sinclair will remain a Mattel employee, we will continue to have an Independent Lead Director to ensure effective and independent Board decision-making. As discussed in greater detail below, the independent members of the Board elected an Independent Lead Director with specifically enumerated powers and responsibilities to ensure strong independent leadership in the boardroom.

The Board believes that this new leadership structure, together with our strong Independent Lead Director, best serve Mattel and its stockholders at this time by leveraging executive leadership experience while ensuring effective independent oversight. Going forward, our Board will continue to evaluate its leadership structure in order to ensure it aligns with and supports the evolving needs and circumstances of the Company and its stockholders.

Independent Lead Director Responsibilities

The Board recognizes the importance of strong independent Board leadership. As such, the independent directors of the Board elect annually an Independent Lead Director when the Chairman is not independent. The Board believes that the Independent Lead Director provides the Company and the Board with the same independent leadership, oversight and benefits that would be provided by an independent Chairman.

 

The Independent Lead Director’s duties include the following significant responsibilities:

Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;

Serves as liaison between the Chairman and the independent directors;

Approves information sent to the Board;

Approves meeting agendas for the Board;

Approves schedules of meetings to assure that there is sufficient time for discussion of all agenda items;

Has the authority to call meetings of the independent directors; and

If requested by major stockholders, ensures that he or she is available for consultation and direct communication.

The independent directors of the Board have elected Michael J. Dolan to serve as the Board’s Independent Lead Director, a position he has held since January 2015. Mr. Dolan has significant experience on the Board, serving as an independent director since 2004, as Chair of the Compensation Committee and the Executive Committee, and as a member of the Governance and Social Responsibility Committee. The Board believes that Mr. Dolan’s extensive business experience across a variety of industries, unique insights in the areas of advertising and brand building, and prior service on several boards of directors make him well qualified to serve as Independent Lead Director of Mattel.

The Board believes that the appointment of Ms. Georgiadis as CEO, Mr. Sinclair as Executive Chairman and Mr. Dolan as Independent Lead Director best serve Mattel and its stockholders at this time, as the Company continues to execute on its transformation efforts to drive growth and improved profitability.

 

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  CORPORATE GOVERNANCE STANDARDS AND PRACTICES          

 

Board Independence Determination

 

Mattel’s Board has adopted Guidelines on Corporate Governance consistent with Nasdaq listing standards that include qualifications for determining director independence. These provisions incorporate Nasdaq’s categories of relationships between a director and a listed company that would make a director ineligible to be independent.

The Board has affirmatively determined that each of the current directors of Mattel, except Ms. Georgiadis, our CEO, and Mr. Sinclair, our Executive Chairman and former CEO, is independent within the meaning of both Mattel’s and Nasdaq’s director independence standards, as currently in effect, and has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Furthermore, the Board has determined that each of the members of our Audit Committee, Compensation Committee and Governance and Social Responsibility Committee is independent within the meaning of Nasdaq director independence standards applicable to members of such committees, as currently in effect.

The Compensation Committee members also qualify as “non-employee directors” and “outside directors” within the meaning of Section 16 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and Section 162(m) of the Internal Revenue Code, respectively.

In making these determinations, the Board considered, among other things, ordinary course commercial relationships with companies at which Board members then served as executive officers (including Adobe Systems Incorporated and Avery Dennison Corporation). The aggregate annual amounts involved in these commercial transactions were less than the greater of $200,000 or 5% of the annual consolidated gross revenues of these companies, and our Board members were not deemed to have a direct or indirect material interest in those transactions. The Board has determined that none of these relationships are material and that none of these relationships impair the independence of any non-employee director.

Board Evaluations

 

The Board conducts an annual self-evaluation process to assess effectiveness at both the Board and Board committee levels. The three key areas of focus for the evaluation are Board operations, Board accountability and Board Committee performance. The Chair of the Governance and Social Responsibility Committee is responsible for leading the annual review and makes herself available for private sessions with Board members during the evaluation process. Comments are aggregated, summarized and reviewed with the full Governance and Social Responsibility Committee. The results of the evaluation are then reviewed with each committee and the full Board.

This annual evaluation process has resulted in multiple improvements in Board effectiveness, including enhanced agenda item selection, better discussion formats and greater interaction with Mattel’s CEO and management team. In addition, the Governance and Social Responsibility Committee conducts an annual review of our Board’s composition and skills and makes recommendations to the Board accordingly. This review includes an assessment of the talent base, skills, areas of expertise and experience, diversity and independence of the Board and its members, and consideration of any recent changes in a director’s outside employment or responsibilities.

 

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          CORPORATE GOVERNANCE STANDARDS AND PRACTICES  

 

Director Succession and Search Process

 

The Board has a robust director succession and search process. The Board retains an independent, third-party search firm to assist with the search for new effective directors. The Board has worked diligently to ensure the right balance between long-term, institutional knowledge and fresh perspectives on the Board. While five of the directors have been on the Board for over ten years, the Board has also added three new independent directors in the past six years. The Board believes that the current mix of director tenures provides Mattel with an optimal balance of knowledge, experience and capability. This mix allows the Board to leverage both the deep Company knowledge of, and experience with, Mattel from longer-tenured directors as well as the new viewpoints, experiences and ideas from newer directors in its oversight of management and our continued transformation efforts. The Board continues to be very thoughtful and proactive about this process and will continue to evaluate its composition, with respect to skills, qualifications, tenure and diversity to ensure the right balance is achieved for effective, independent Board oversight.

 

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  BOARD GENERAL INFORMATION          

 

BOARD GENERAL INFORMATION

Board Meetings

 

During 2016, the Board held six meetings. No director attended less than 75% of the aggregate of all Board meetings and all meetings held by any committee of the Board on which such director served.

Policy Regarding Attendance of Directors at the Annual Meeting of Stockholders

 

Each member of Mattel’s Board is expected, but not required, to attend Mattel’s annual meeting of stockholders. There were ten directors at the time of the 2016 annual meeting of stockholders and nine directors attended the meeting.

Board Committees

 

Our Board has established six principal committees: the Audit Committee, the Governance and Social Responsibility Committee, the Compensation Committee, the Executive Committee, the Finance Committee and the Equity Grant Allocation Committee. Each of the Audit Committee, the Governance and Social Responsibility Committee and the Compensation Committee has a written charter that is reviewed annually and revised as appropriate. A copy of each of these committees’ current charter is available on Mattel’s corporate website at http://corporate.mattel.com/about-us/bios.aspx.

The current chairs and members of the committees are identified in the following table:

 

    Director   Audit
Committee
      Governance
and Social
Responsibility
Committee
      Compensation
Committee
      Executive
Committee
      Finance
Committee
      Equity
Grant
Allocation
Committee
   
 

Non-Employee Directors

 

                                               
   

Michael J. Dolan†

 

                         

 

M

 

 

               

 

C

 

 

               

 

C

 

 

                                                 
   

Trevor A. Edwards

 

                         

 

M

 

 

               

 

M

 

 

                                                                     
   

Dr. Frances D. Fergusson

 

                         

 

C

 

 

                                   

 

M

 

 

               

 

M

 

 

                             
   

Ann Lewnes

 

                         

 

M

 

 

                                                                                         
   

Dominic Ng

 

     

 

M

 

 

                                                                           

 

M

 

 

                             
   

Vasant M. Prabhu

 

     

 

C

 

 

                                                       

 

M

 

 

               

 

M

 

 

                             
   

Dean A. Scarborough

 

                                             

 

M

 

 

               

 

M

 

 

               

 

C

 

 

                             
   

Dirk Van de Put

 

     

 

M

 

 

               

 

M

 

 

                                                                                         
   

Kathy White Loyd

 

     

 

M

 

 

                                   

 

M

 

 

                                                                     
 

Employee Directors

 

                                               
   

Christopher A. Sinclair

 

                                                                                                                       
   

Margaret H. Georgiadis

 

                                                                                                         

 

M

 

 

         

“C” Chair

“M” Member

† Independent Lead Director

 

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          BOARD GENERAL INFORMATION  

 

The primary responsibilities, membership and meeting information for the committees of our Board during 2016 are summarized below.

 

Audit Committee   Primary Responsibilities

 

Members in 2016:

Vasant M. Prabhu (Chair)

Dominic Ng

Dirk Van de Put

Kathy White Loyd

 

Meetings in 2016: 12

 

The Board has determined that each member meets applicable SEC, Nasdaq and Mattel independence and “financial sophistication” standards. Messrs. Prabhu, Ng and Van de Put each qualify as a “financial expert” under applicable SEC regulation.

 

 

  Assist the Board in fulfilling the Board’s oversight responsibilities regarding the quality and integrity of Mattel’s financial reports, the independence, qualifications and performance of Mattel’s independent registered public accounting firm, the performance of Mattel’s internal audit function and Mattel’s compliance with legal and regulatory requirements

 

  Sole authority to appoint or replace the independent registered public accounting firm; directly responsible for the compensation and oversight of the work of the independent registered public accounting firm for the purpose of preparing or issuing an audit report or related work

 

  Meet with the independent registered public accounting firm and management in connection with each annual audit to discuss the scope of the audit and the procedures to be followed

 

  Review and discuss Mattel’s quarterly and annual financial statements with management, the independent registered public accounting firm and the internal audit group

 

  Discuss with management and the independent registered public accounting firm Mattel’s practices with respect to risk assessment, risk management and critical accounting policies

 

  Review periodically with the Chief Legal Officer the implementation and effectiveness of Mattel’s compliance and ethics programs

 

  Discuss periodically with the independent registered public accounting firm and the senior internal auditing officer the adequacy and effectiveness of Mattel’s accounting and financial controls, and consider any recommendations for improvement of such internal control procedures

 

  Pre-approve audit services, internal-control-related services and permitted non-audit services to be performed for Mattel by its independent registered public accounting firm

 

 

Governance and Social

Responsibility Committee

  Primary Responsibilities

 

Members in 2016:

Dr. Frances D. Fergusson (Chair)

Michael J. Dolan

Trevor A. Edwards

Ann Lewnes

Dirk Van de Put

 

Meetings in 2016: 4

 

The Board has determined that each member meets applicable Nasdaq and Mattel independence standards.

 

 

  Assist the Board by identifying individuals qualified to become Board members, consistent with the criteria approved by the Board, and to select, or to recommend that the Board select, the director nominees for the next annual meeting of stockholders

 

  Assist the Board in evaluating potential executive candidates in succession planning

 

  Develop and recommend to the Board the Guidelines on Corporate Governance applicable to Mattel

 

  Lead the evaluation of the Board’s performance

 

  Evaluate, and make recommendations to the Board regarding, the independence of the Board members

 

  Recommend director nominees for each committee of the Board

 

  Assist the Board with oversight and review of social responsibility matters such as sustainability, corporate citizenship, community involvement, diversity and equal opportunity matters, Responsible Supply Chain Standards, public policy matters and environmental, health and safety issues

 

  Oversee and review with management risks relating to governance and social responsibility matters

 

  Oversee the Company’s engagement with institutional stockholders and proxy advisory firms concerning governance and social responsibility matters

 

  Provide oversight with regard to philanthropic activities

 

  Work closely with the CEO and other members of Mattel’s management to ensure that Mattel is governed effectively and efficiently

 

 

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  BOARD GENERAL INFORMATION          

 

 

Compensation Committee   Primary Responsibilities

 

Members in 2016:

Michael J. Dolan (Chair)

Trevor A. Edwards

Dean A. Scarborough

Kathy White Loyd

 

Meetings in 2016: 7

 

Meets at least once each year without the CEO present.

 

The Board has determined that each member meets applicable Nasdaq and Mattel independence standards and qualifies as an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code and as a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act.

 

 

  Develop, evaluate and, in certain instances, approve or determine the compensation plans, policies and programs of Mattel

 

  Approve all forms of compensation to be provided to the CEO and all other executives who are subject to Section 16 of the Exchange Act

 

  Annually review and approve corporate goals and objectives relevant to the CEO, and review and evaluate the CEO’s performance

 

  Administer Mattel’s short- and long-term incentive programs and equity compensation plans

 

  Review the form and amount of non-employee directors’ compensation

 

  Assess material risks associated with Mattel’s compensation structure, policies and programs generally

 

  Report and, as appropriate, make recommendations to the Board regarding executive compensation programs and practices

 

  Inform the non-management directors of the Board of its decisions regarding compensation for the CEO and other senior executives

 

  Oversee the Company’s engagement with institutional stockholders and proxy advisory firms concerning executive compensation matters

 

Compensation Committee Use of Independent Compensation Consultant

The Compensation Committee has the authority to retain independent legal or other advisors, to the extent it deems necessary or appropriate, and has retained Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant since August 2007 to provide the committee with advice and guidance on the design of our executive compensation programs and the evaluation of our executive compensation. FW Cook has not performed and does not currently provide any services to management or Mattel. Each year the Compensation Committee reviews the independence of the compensation consultant and other advisors who provide advice to the Compensation Committee, employing the independence factors specified in the Nasdaq listing standards. The Compensation Committee has determined that FW Cook is independent within the meaning of the committee’s charter and the Nasdaq listing standards, and the work of FW Cook for the committee does not raise any conflicts of interest. FW Cook attends Compensation Committee meetings when invited and meets with the Compensation Committee without management. FW Cook provides the Compensation Committee with third-party data and analysis as well as advice and expertise on competitive compensation practices and trends, executive compensation plans and program designs, and proposed executive and director compensation. FW Cook reports directly to the Compensation Committee and, as directed by the Compensation Committee, works with management and the Chair of the Compensation Committee. In 2016, FW Cook assisted the Compensation Committee on the following matters:

 

  Analyzing and advising on:

 

    The base salaries, bonus leverage, target and actual annual cash incentives, long-term incentives, TDC and all other compensation for our CEO, his direct reports and other EVPs as compared to the compensation of their counterparts at our comparator peer companies;

 

    Our MIP and LTI designs, provisions and practices, including our new Mattel Incentive Plan; and

 

    The compensation of our Board as compared to the board compensation at our comparator peer companies;

 

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          BOARD GENERAL INFORMATION  

 

 

  Reviewing and advising regarding our comparator peer companies;

 

  Assessing if our compensation plans, policies and programs present potential material risk to the Company;

 

  Reviewing and advising on our 2016 Proxy Statement;

 

  Advising on our new CEO’s compensation, our Executive Chairman’s compensation and our President and COO’s retention compensation;

 

  Providing executive compensation regulatory and legislative updates; and

 

  Advising regarding institutional proxy advisers’ voting policies and market trends.

Other Board Committees

The Board has determined that each member of the Executive Committee meets applicable Nasdaq and Mattel independence standards. During 2016, the Executive Committee held no meetings. The Executive Committee may exercise all the powers of the Board, subject to limitations of applicable law, between meetings of the Board.

The Board has determined that each member of the Finance Committee meets applicable Nasdaq and Mattel independence standards. During 2016, the Finance Committee held four meetings. The committee’s primary functions are to advise and make recommendations to the Board with regard to Mattel’s allocation and deployment of available capital, including but not limited to dividends to stockholders, credit facilities and debt securities, capital expenditures, stock repurchase programs, hedging transactions, mergers, acquisitions and other strategic transactions.

Mattel also has an Equity Grant Allocation Committee with Ms. Georgiadis as the current sole member. Mr. Sinclair was the sole member of the committee from January 2015 to February 2017. The Equity Grant Allocation Committee’s primary function is to exercise the limited authority delegated to the committee by the Board and the Compensation Committee with regard to making annual and off-cycle equity compensation grants to employees below the executive leadership job level.

Risk Oversight

 

Role of Full Board in Risk Oversight

The full Board is responsible for overseeing Mattel’s ongoing assessment and management of material risks impacting Mattel’s business. The Board relies on Mattel’s management to identify and report on material risks, and relies on each Board committee to oversee management of specific risks related to that committee’s function. The Board engages in risk oversight throughout the year and specifically focuses on risks facing Mattel each year at a regularly scheduled Board meeting.

Role of Management in Risk Oversight

Consistent with their role as active managers of Mattel’s business, our senior executive officers play the most active role in risk management, and the Board looks to such officers to keep the Board apprised on an ongoing basis about risks impacting Mattel’s business and how such risks are being managed. Each year as part of Mattel’s risk evaluation process performed by its internal audit team, Mattel’s most senior executive officers, including the Chief Legal Officer, provide input regarding material risks facing the business group or function that each manages. These risks are reviewed with the Audit Committee and also are presented to the full Board along with a discussion of Mattel’s strategy for managing these risks.

 

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  BOARD GENERAL INFORMATION          

 

Since much of the Board’s risk oversight occurs at the committee level, Mattel believes that this process is important to ensure that all directors are aware of Mattel’s most material risks.

Role of Board Committees in Risk Oversight

The Board’s committees assist the full Board in overseeing many of the risks impacting Mattel’s business.

The Audit Committee oversees the Company’s assessment and management of Mattel’s material financial reporting and accounting risks, including the steps management has taken to monitor and control such risks. The Audit Committee is also responsible for overseeing Mattel’s compliance risk, which includes risk relating to Mattel’s compliance with laws and regulations.

The Compensation Committee oversees and assesses material risks associated with Mattel’s compensation plans, policies and programs generally, including those that may relate to pay mix, selection of performance measures, the goal setting process, and the checks and balances on the payment of compensation. See “Compensation Risk Review” for a more detailed description of the Compensation Committee’s review of potential pay risk.

The Finance Committee oversees and reviews with management risks relating to capital allocation and deployment, including Mattel’s credit facilities and debt securities, capital expenditures, dividend policy, mergers, acquisitions, dispositions and other strategic transactions. The Finance Committee also manages Mattel’s interactions with credit rating agencies and oversees third-party financial risks, which include risks arising from customers, vendors, suppliers, subcontractors, creditors, debtors, and counterparties in hedging transactions, mergers and acquisitions and other strategic relationships.

The Governance and Social Responsibility Committee oversees and reviews with management risks relating to governance and social responsibility matters, including succession planning, environmental and health and safety compliance, sustainability, corporate citizenship, community involvement, global responsible supply chain standards, diversity and equal opportunity, philanthropy and charitable contributions, and public policy and governmental relations.

Code of Conduct

 

Our Board has adopted a Code of Conduct, which is a general statement of Mattel’s standards of ethical business conduct. The Code of Conduct applies to all of our employees, including our CEO and our CFO. Certain provisions of the Code of Conduct also apply to members of the Board in their capacity as Mattel’s directors. The Code of Conduct covers topics including, but not limited to, conflicts of interest, confidentiality of information and compliance with laws and regulations. We intend to disclose any future amendments to certain provisions of our Code of Conduct in accordance with the SEC rules, and any waivers of provisions of the Code of Conduct required to be disclosed under the SEC rules or the Nasdaq listing standards, on Mattel’s corporate website at http://corporate.mattel.com/about-us/ethics.aspx.

 

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          BOARD GENERAL INFORMATION  

 

Communications with the Board

 

The independent directors of Mattel have unanimously approved a process by which stockholders of Mattel and other interested persons may send communications to any of the following: (i) the Board, (ii) any committee of the Board, (iii) the Independent Lead Director or (iv) the independent directors. Such communications should be submitted in writing by mailing them to the relevant addressee at the following address:

[Addressee]

c/o Secretary, Mail Stop M1-1516

Mattel, Inc.

333 Continental Boulevard

El Segundo, CA 90245-5012

Any such communications will be relayed to the Board members who appear as addressees, except that the following categories of communications will not be so relayed, but will be available to Board members upon request:

 

  Communications concerning company products and services;

 

  Solicitations;

 

  Matters that are entirely personal grievances; and

 

  Communications about litigation matters.

Corporate Governance Documentation and How to Obtain Copies

 

Current copies of the following materials related to Mattel’s corporate governance standards and practices are available publicly on Mattel’s corporate website at http://corporate.mattel.com/about-us/corporate-governance.aspx:

 

  Information on Board and Board committee membership and biographies of Board members;

 

  Board of Directors Amended and Restated Guidelines on Corporate Governance;

 

  Audit Committee Charter;

 

  Compensation Committee Charter;

 

  Governance and Social Responsibility Committee Charter;

 

  Code of Conduct;

 

  Restated Certificate of Incorporation;

 

  Amended and Restated Bylaws;

 

  Director Nominations Policy;

 

  Audit Committee Complaint Procedure;

 

  Policy on Adoption of a Shareholder Rights Plan; and

 

  Golden Parachute Policy.

 

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  DIRECTOR COMPENSATION          

 

DIRECTOR COMPENSATION

The following table shows the compensation of the non-employee members of our Board for 2016. See the “Narrative Disclosure to Director Compensation Table” below for additional details regarding our director compensation program.

 

    Name(1)    Fees
Earned or
Paid
in Cash(2)
       Stock
Awards(3)
       All Other
Compensation(4) 
       Total    
   

Michael J. Dolan

     $ 165,000                $ 140,002                $ 25,000                $ 330,002          
   

Trevor A. Edwards

     $ 100,000                $ 140,002                $ 26,000                $ 266,002          
   

Dr. Frances D. Fergusson

     $ 115,000                $ 140,002                $ 20,900                $ 275,902          
   

Ann Lewnes

     $ 100,000                $ 140,002                $ 15,000                $ 255,002          
   

Dominic Ng

     $ 110,000                $ 140,002                $ 30,000                $ 280,002          
   

Vasant M. Prabhu

     $ 130,000                $ 140,002                $ 30,000                $ 300,002          
   

Dean A. Scarborough

     $ 115,000                $ 140,002                $ 7,500                $ 262,502          
   

Dirk Van de Put

     $ 110,000                $ 140,002                $ 0                $ 250,002          
   

Kathy White Loyd

     $ 110,000                $ 140,002                $ 30,000                $ 280,002          

(1) During 2016, Mr. Sinclair, as CEO and a member of the Board, did not receive any additional compensation for serving as a director other than the amounts attributed to him for his recommended grants and our matching charitable contributions under the Board of Directors Recommended Grants Program and the Gift Matching Program described below. These amounts and all of his compensation for his services to Mattel are shown in the “Summary Compensation Table.”

(2) For Dr. Fergusson and Messrs. Edwards, Ng, Scarborough and Van de Put, some or all amounts shown were deferred under the Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors (“Director DCP”).

(3) On May 19, 2016, each of our non-employee directors received an annual equity grant of 4,619 RSUs under our Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan. Amounts shown represent the grant date fair value of such shares, computed in accordance with FASB ASC Topic 718, based on our closing stock price of $30.31 on the grant date.

 

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          DIRECTOR COMPENSATION  

 

The table below shows the aggregate number of stock awards and option awards outstanding for each non-employee director as of December 31, 2016. Stock awards consist of vested but not settled RSUs and any deferrals of vested RSUs under the Director DCP. All outstanding “Option Awards” noted below are fully exercisable.

 

    Name  

  Aggregate Stock Awards  

Outstanding as of
December 31, 2016

          Aggregate Option Awards    
Outstanding as of
December 31, 2016
   
   

Michael J. Dolan

      12,937           9,000    
   

Trevor A. Edwards

      12,937              
   

Dr. Frances D. Fergusson

      12,937              
   

Ann Lewnes

      11,207              
   

Dominic Ng

      34,421              
   

Vasant M. Prabhu

      12,937              
   

Dean A. Scarborough

      26,954           4,500    
   

Dirk Van de Put

      12,937              
   

Kathy White Loyd

      30,720              

(4) The “All Other Compensation” column shows the amount of gifts made by the Mattel Children’s Foundation pursuant to the Board of Directors Recommended Grants Program and the Gift Matching Program, as described below, for the applicable director.

Narrative Disclosure to Director Compensation Table

Retainers

For 2016, non-employee directors received an annual retainer of $100,000, and each non-employee committee chair received an additional annual retainer, the amount of which differed depending upon the committee, as follows: Audit Committee, $20,000; Compensation Committee, $20,000; and Executive, Finance and Governance and Social Responsibility Committees, each $15,000. The Independent Lead Director received an additional annual retainer of $30,000. Further, each member of the Audit Committee received an additional annual retainer of $10,000. Directors had the option to receive all or a portion of their annual retainer in the form of shares of Mattel common stock or to defer receipt under the Director DCP, as described below.

Equity Compensation

The Amended and Restated 2010 Equity and Long-Term Compensation Plan provides for a limit of $500,000 of equity grants to any one non-employee director in a calendar year. During 2016, non-employee directors received annual grants of deferred RSUs, with an intended fixed grant value of $140,000. Each RSU represents a contingent right to receive one share of Mattel common stock. These RSUs vest immediately, but the non-employee director generally will not receive actual shares of Mattel common stock in settlement of the vested RSUs until the earlier of the third anniversary of the grant date or the date he or she ceases to be a director. The Compensation Committee reserves the right to settle the RSUs in cash equal to the fair market value of the stock, but does not anticipate doing so. At its May 2016 meeting, the Compensation Committee determined that director RSUs would resume providing for dividend equivalents. As a result, the RSUs have dividend equivalent rights, meaning that for the period before the RSUs are settled in shares or forfeited, we will pay the director cash equal to the cash dividends that he or she would have received if the RSUs had been an equivalent number of actual shares of Mattel

 

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  DIRECTOR COMPENSATION          

 

common stock. The directors may also elect to defer the receipt of the RSU shares under the Director DCP and, if they do so, dividend equivalents relating to such shares are also deferred under the Director DCP in the form of shares.

Board of Directors Recommended Grants Program and the Gift Matching Program

Subject to certain limitations, each director may recommend that the Mattel Children’s Foundation make gifts of up to a total of $15,000 per year (and up to an additional $10,000 if the director matches the Mattel Children’s Foundation contribution dollar-for-dollar up to such additional amount) to one or more non-profit public charities that help fulfill the Foundation’s mission of serving children in need. The Mattel Children’s Foundation also will match up to $5,000 for any additional gifts that the director makes on his or her own, subject to certain limitations. The programs may not be used to satisfy any pre-existing commitments of the director or any member of the director’s family. Under SEC rules, these amounts are reflected in the “All Other Compensation” column in the table above.

Director DCP

The Director DCP allows directors to defer amounts of their Board retainers and the common stock underlying their annual RSU grants. Retainer amounts deferred in the Director DCP are maintained in account balances that are deemed invested in one or more of a number of externally managed institutional funds that are similarly available under the executive’s Mattel, Inc. Deferred Compensation and PIP Excess Plan (the “DCP”). Mattel common stock deferred in the Director DCP is deemed invested in Mattel stock equivalents.

Distribution of amounts deferred under the Director DCP may be paid in a lump sum or in ten annual installments, with payment made or commencing upon the later of a director ceasing service with the Board or the director achieving a specified age not to exceed 72. As of December 31, 2016, the following directors had the following aggregate number of Mattel stock equivalents in the Director DCP, including deferred vested RSUs: Mr. Edwards, 3,057; Mr. Ng, 64,740; Mr. Scarborough, 57,484; Mr. Van de Put, 4,793; and Ms. White Loyd, 30,972.

Expense Reimbursement Policy

Mattel reimburses directors for their expenses incurred while traveling on Board business and permits directors to use Company-selected aircraft when traveling on Board business, as well as commercial aircraft, charter flights and non-Mattel private aircraft. These expenses are not considered perquisites, as they are limited to business use. In the case of travel by a non-Mattel private aircraft, the amount reimbursed is generally limited to variable costs or direct operating costs relating to travel on Mattel Board business and generally does not include fixed costs such as a portion of the flight crew’s salaries, monthly management fee, capital costs or depreciation.

Independent Consultant Review of Non-Employee Director Compensation

In May 2016, FW Cook conducted an independent review of our non-employee director compensation program and concluded that the total annual compensation for our non-employee directors on average approximated the median of our peer group, and reflects a similar mix of cash and equity at the median. FW Cook further found that our non-employee director compensation program has a stable structure and exhibits many best practices, including retainer-only cash compensation (i.e., no meeting fees), annual grants delivered as full value awards based on a fixed-value formula, immediate equity vesting that avoids entrenchment, and no major perquisites other than charitable gift matching.

 

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Non-Employee Director Stock Ownership

 

The Board has adopted guidelines regarding non-employee director stock ownership. Within five years after joining the Board, non-employee members of the Board must attain stock ownership of five times the annual cash retainer. For this purpose, stock holdings are valued at the greater of actual cost or current market value. Amounts deferred into Mattel stock equivalents in the Director DCP receive credit and are valued at the current market value. Each of our Board members (other than Ms. Lewnes, the newest independent member of our Board) has met the target minimum stock ownership level. Ms. Lewnes has until February 1, 2020, to meet the target minimum level of stock ownership.

 

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  PROPOSAL 1 – ELECTION OF DIRECTORS          

 

PROPOSAL 1 – ELECTION OF DIRECTORS

 

The Board recommends that stockholders vote FOR each of the nominees named herein for election as directors.

Identifying and Evaluating Nominees for Director

 

The Board, acting through the Governance and Social Responsibility Committee, is responsible for identifying and evaluating candidates for membership on the Board. Mattel’s Guidelines on Corporate Governance set forth the process for selecting candidates for director positions and the role of the Governance and Social Responsibility Committee in identifying potential candidates and screening them, with input from the Chairman of the Board, which, under our current structure, is provided by our Executive Chairman.

Under the Guidelines on Corporate Governance, the Governance and Social Responsibility Committee is responsible for reviewing with the Board annually the appropriate skills and characteristics required of Board members given the current make-up of the Board and the perceived needs of the Board at that time. This review includes an assessment of the talents, skills, areas of expertise, experience, diversity and independence of the Board and its members. Any changes that may have occurred in any director’s responsibilities, as well as such other factors as may be determined by the committee to be appropriate for review, are also considered. In addition, under the Guidelines on Corporate Governance, upon attaining age 73, a director shall not stand for re-election to the Board at the subsequent annual meeting of the stockholders.

The charter of the Governance and Social Responsibility Committee also sets forth the process by which the committee actively seeks qualified director candidates for recommendation to the Board. The committee, with input from the Chairman of the Board, screens candidates to fill vacancies on the Board, solicits recommendations from Board members as to such candidates, and considers recommendations for Board membership submitted by stockholders as described further below. The Governance and Social Responsibility Committee has retained a third-party, independent search firm to locate candidates who may meet the needs of the Board. The firm typically provides information on a select number of candidates for review and discussion by the Governance and Social Responsibility Committee. Candidates the committee expresses interest in pursuing must meet in person with at least two members of the Governance and Social Responsibility Committee before being selected. The committee recommends to the Board the director nominees for election at each annual meeting of stockholders.

The Governance and Social Responsibility Committee also has adopted a Director Nominations Policy that describes the methodology for selecting the candidates who are included in the slate of director nominees recommended to the Board and the procedures for stockholders to follow in submitting nominations and recommendations of possible candidates for Board membership. Under this policy, each director nominee should, at a minimum, possess the following:

 

  An outstanding record of professional accomplishment in his or her field of endeavor;

 

  A high degree of professional integrity, consistent with Mattel’s values;

 

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  Willingness and ability to represent the general best interests of all of Mattel’s stockholders and not just one particular stockholder or constituency, including a commitment to enhancing stockholder value; and

 

  Willingness and ability to participate fully in Board activities, including active membership on at least one Board committee and attendance at, and active participation in, meetings of the Board and the committee(s) of which he or she is a member, and no commitments that would, in the judgment of the Governance and Social Responsibility Committee, interfere with or limit his or her ability to do so.

The Director Nominations Policy also lists the following additional skills, experiences and qualities that are desirable in nominees:

 

  Skills and experiences relevant to Mattel’s business, operations or strategy. These skills and experiences might include, among other things, experience in senior management of a large consumer products or multinational company, and/or senior level experience in one or more of the following areas: finance, accounting, law, strategy and business development, operations, sales, marketing, international business, information technology and/or public relations;

 

  Qualities that help the Board achieve a balance of a variety of knowledge, experience and capability on the Board and an ability to contribute positively to the collegial and collaborative culture among Board members; and

 

  Qualities that contribute to the Board’s overall diversity – diversity being broadly construed to mean a variety of opinions, perspectives, professional and personal experiences and backgrounds, as well as other differentiating characteristics.

Lastly, a nominee’s ability to qualify as an independent director of Mattel is considered in terms of both the overall independence of Mattel’s Board as well as the independence of its committees.

In performing its role in the annual nomination process, the Governance and Social Responsibility Committee reviews the composition of the Board in light of the committee’s assessment of the needs of the Board, Mattel’s current business structure, operations and financial condition, challenges facing Mattel, the Board’s performance and input from stockholders and other key constituencies, and evaluates director nominees against the criteria for nominees set forth in the Director Nominations Policy. The committee reviews the Director Nominations Policy periodically and may amend the policy from time to time as necessary or advisable based on changes to applicable legal requirements and listing standards as well as the evolving needs and circumstances of the business. For additional information on the Board’s selection and evaluation process, see our Director Nominations Policy, which is available on Mattel’s corporate website at http://corporate.mattel.com/about-us/relatedlinks.aspx.

Stockholder Recommendations of Director Candidates

 

The Governance and Social Responsibility Committee will consider recommendations for director candidates made by stockholders and evaluate them using the same criteria as for other candidates. Under our Director Nominations Policy, any such recommendation must include a detailed statement explaining why the stockholder is making the recommendation, as well as all information that would be required were the stockholder to nominate such person under our Bylaws or applicable law. For additional information on stockholder recommendations, see our Bylaws and Director Nomination Policy, which are available on Mattel’s corporate website at http://corporate.mattel.com/about-us/relatedlinks.aspx.

 

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Stockholder recommendations for director candidates should comply with our Director Nominations Policy and should be addressed to:

Governance and Social Responsibility Committee

c/o Secretary, Mail Stop M1-1516

Mattel, Inc.

333 Continental Boulevard

El Segundo, CA 90245-5012

Director Nominees for Election

 

Upon recommendations of the Governance and Social Responsibility Committee, the Board has nominated the eleven directors listed below for re-election to the Board at the Annual Meeting. The directors will hold office from election until the next annual meeting of stockholders and until their respective successors have been duly elected and qualified, or until their earlier resignation or removal:

 

Michael J. Dolan    Ann Lewnes    Christopher A. Sinclair
Trevor A. Edwards    Dominic Ng    Dirk Van de Put
Dr. Frances D. Fergusson    Vasant M. Prabhu    Kathy White Loyd
Margaret H. Georgiadis    Dean A. Scarborough   

All of the nominees are currently directors and each nominee has consented to being named in this Proxy Statement as a nominee for election as a director and agreed to serve as a director, if elected.

If your properly submitted proxy does not contain voting instructions, the persons named as proxies will vote your shares “for” the election of each of the eleven nominees named above. If, before the Annual Meeting, any nominee becomes unavailable to serve, the Board may identify a substitute for such nominee and treat votes “for” the unavailable nominee as votes “for” the substitute. We presently believe that each of the nominees will be available to serve.

The authorized number of directors is currently set at eleven, and the Board currently consists of eleven members. The Board, upon recommendations of the Governance and Social Responsibility Committee, selected nominees whose experiences, qualifications, attributes and skills in, among other things, leadership of large corporations, consumer products, international business, marketing and advertising, financial management and operations, information technology, commercial banking, investment banking, including mergers and acquisitions and business development, accounting, community outreach, corporate governance and public policy, led the Board to conclude that these persons should serve as our directors at this time. The Board also selected nominees with experience gained from past service with Mattel and/or other companies that have encountered comparable situations as Mattel.

 

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For each director nominee, set forth below is his or her name, age, tenure as a director of Mattel, and a description of his or her principal occupation, other business experience, public company and other directorships held during the past five years. The specific experiences, qualifications, attributes and skills that led the Board to conclude that each nominee should serve as a director at this time are described below.

 

 

MICHAEL J. DOLAN

 

  

Career Highlights

Bacardi Limited, a global privately-held spirits company

  Chief Executive Officer since November 2014; Director since 2009 (served on Audit Committee until 2014); interim Chief Executive Officer (May 2014 –  November 2014)

 

IMG Worldwide, a global sports, fashion and media entertainment company

  Chairman of the Board and Chief Executive Officer (November 2011 – May 2014); President and Chief Operating Officer (April 2011 – November 2011); Executive Vice President and Chief Financial Officer (April 2010 – April 2011)

 

Viacom, Inc., a global entertainment content company

  Executive Vice President and Chief Financial Officer (May 2004 – December 2006)

 

Kohlberg Kravis Roberts & Co., a global investment firm

  Senior Advisor (October 2004 – May 2005)

 

Young & Rubicam, Inc., a global marketing and communications company

  Chairman of the Board and Chief Executive Officer (2001 – 2003); Vice Chairman and Chief Operating Officer (2000 – 2001); Vice Chairman and Chief Financial Officer (1996 – 2000)

 

Additional Leadership Experience and Service

  Director, March of Dimes since 2013

  Director, Northside Center for Child Development since 2003

  Chairman of the Board, America’s Choice, Inc. (2004 – 2010)

 

Key Experience/Director Qualifications

As a currently-serving Chief Executive Officer of a large global company, Mr. Dolan brings to Mattel’s Board leadership, finance, global consumer products and branding, strategic marketing and operations experience. Mr. Dolan also brings a valuable perspective on the entertainment industry through his experience as the former Chief Executive Officer of IMG, which is important to Mattel since many of our most popular toys are derived from licensed entertainment properties. Also, Mr. Dolan’s long tenure with Young & Rubicam enables him to provide unique insights into brand building and advertising. Mr. Dolan has also gained valuable experience as the Chief Financial Officer of IMG, Viacom and Young & Rubicam, where he dealt with complex accounting principles and judgments, internal controls, financial reporting rules and regulations, and evaluated the financial results and financial reporting processes of large companies.

 

LOGO

 

  

 

Age: 70

Director Since: 2004

 

  

 

Mattel Committee Memberships:

   Compensation Committee
 (Chair)

   Executive Committee (Chair)

   Governance and Social
 Responsibility Committee

 

  
  
  
  
  
  
  
  
  
  
  
  
  

 

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TREVOR A. EDWARDS

 

  

Career Highlights

NIKE, Inc., a global designer, marketer and distributor of athletic footwear, apparel, equipment and accessories

  President, NIKE Brands since July 2013; Vice President, Global Brand & Category Management (August 2006 – June 2013); Vice President, Global Brand Management (2002 – 2006); Vice President, U.S. Brand Marketing (2000 – 2002); Vice President, EMEA Marketing (1999 – 2000); Director of Marketing for Europe (1997 – 1999); Director of Marketing for the Americas (1995 – 1997)

 

Additional Leadership Experience and Service

  Director, NIKE Foundation since 2005

  Director, Management Leadership for Tomorrow since 2008

 

Key Experience/Director Qualifications

Mr. Edwards brings to Mattel’s Board two decades of marketing and global brand management experience from a large public company. His leadership and strategy skills in overseeing category business units globally and all brand management functions, including digital and advertising, sports marketing, brand design, public relations and retail marketing, provide a unique perspective on Mattel’s key goals and strategies for growth. During his career at NIKE, Mr. Edwards has led some of the brand’s most significant break-through innovations, including spearheading the creation of NIKE+. In addition, he helped transform the digital landscape and position NIKE as a leader in the use of social media to connect with consumers globally.

 

 

LOGO

  

 

Age: 54

Director Since: 2012

 

  

 

Mattel Committee Memberships:

   Compensation Committee

   Governance and Social
 Responsibility Committee

 

  
  

 

 

DR. FRANCES D. FERGUSSON

 

  

Career Highlights

Vassar College

  President, Chair of the Executive Committee and Trustee (1986 – 2006)

 

Awards Received

  Harvard Medal for outstanding service to the University (2011)

  Centennial Medal from Harvard’s Graduate School of Arts and Sciences (1999)

 

Other Public Company Directorships

  Pfizer Inc. since 2009; also Chair of Regulatory and Compliance Committee, and serves on Governance and Science & Technology Committees

  Wyeth Pharmaceuticals (2005 – 2009); also Chair of Nominating and Governance Committee, and served on Corporate Issues and Science & Technology Committees

 

Additional Leadership Experience and Service

  Vice Chair and Trustee, Ringling Museum of Art Foundation since 2013

  Director, The Getty Trust since 2007; also Chair of Compensation Committee and serves on Finance Committee

  Director, Second Stage Theatre since 2006; also serves on Executive Committee

  Director, HSBC Bank USA (1990 – 2008); also Chair of Human Resources and Compensation Committee, and served on Executive Committee

  Director of the following non-profit entities: The Mayo Clinic (1988 – 2002, also Chair 1998 – 2002); Harvard University Board of Overseers (2002 – 2008, President 2007 – 2008); National Humanities Center (2006 – 2012); Foundation for Contemporary Arts (2006 – 2012); The Noguchi Foundation (1997 – 2007); and The School of American Ballet (2007 – 2015, also Chair of Strategic Planning Committee)

 

 

LOGO

  

 

Age: 72

Director Since: 2006

 

  

 

Mattel Committee Memberships:

   Executive Committee

   Finance Committee

   Governance and Social
 Responsibility Committee
 (Chair)

 

  

 

Other Current Public Directorships:

   Pfizer Inc.

 

  

 

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Key Experience/Director Qualifications

As the former President of a major educational institution for 20 years, Dr. Fergusson brings to Mattel’s Board her extensive general and financial management, leadership and strategic planning experience. At Vassar College, she headed strategic planning projects and strengthened the College’s financial position. Dr. Fergusson also brings her experience serving on Boards of large, public companies and for-profit entities. Her service and leadership role with many non-profit entities also provide a unique perspective to the Board.

 

 

MARGARET H. GEORGIADIS

  

Career Highlights

Mattel, Inc.

  Chief Executive Officer and Director since February 2017

 

Google Inc., a global technology company

  President, Americas (October 2011 – February 2017); Vice President, Global Sales Operations (September 2009 – April 2011)

 

Groupon, Inc., a global online local marketplace

  Chief Operating Officer (April 2011 – September 2011)

 

Synetro Capital, LLC, a private investment firm

  Principal (January 2009 – September 2009); Director since October 2009

 

Discover Financial Services, a direct banking and payment services company

  Executive Vice President, Card Products and Chief Marketing Officer (2004 – 2008)

 

McKinsey & Company, a global management consulting firm

  Partner (1990 – 2004)

 

Other Public Company Directorships

  McDonald’s Corporation since 2015; also serves on Audit and Finance Committees

  Amyris, Inc. (2015 – 2017)

  The Jones Group (2009 – 2014)

 

Additional Leadership Experience and Service

  Director, Ad Council since 2012; also Chair since 2016

  Director, World Business Chicago since 2014

  Director, Mobile Marketing Association since 2016

  Director, The Economic Club of Chicago since 2013

 

Key Experience/Director Qualifications

Ms. Georgiadis brings to Mattel’s Board significant experience in technology, marketing, consumer insights, e-commerce, finance, leadership, global business, strategy and business development. She has proven ability to foster innovation, experience in building partnerships on a global scale and expertise in leading complex organizations and in engaging consumers and retail partners in a rapidly evolving industry. She has successfully led efforts to deliver above market growth and profitability by creating transformational partnerships across content, media and technology providers and through innovation in product development and customer engagement. At Google, Ms. Georgiadis led their commercial operations and advertising sales in the U.S., Canada and Latin America and was responsible for driving Google’s sales operations and strategies across regions, channels and products. She also has over 15 years of analytical and strategic experience at the global management consulting firm of McKinsey & Company.

 

LOGO

  

 

Age: 53

Director Since: 2017

 

  

 

Mattel Committee Memberships:

   Equity Grant Allocation
 Committee

 

  

 

Other Current Public Directorships:

   McDonald’s Corporation

 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

 

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ANN LEWNES

 

  

Career Highlights

Adobe Systems Incorporated, a multinational computer software company providing digital marketing and media solutions

  Executive Vice President and Chief Marketing Officer since January 2016; Senior Vice President and Chief Marketing Officer (November 2006 – January 2016)

 

Intel Corporation, a multinational semiconductor manufacturing company that designs, manufactures and sells integrated digital technology platforms

  Vice President, Sales & Marketing (2000 – 2006)

 

Awards Received

  Changing The Game Award by the Advertising Women of New York (2010)

  American Advertising Federation’s Hall of Achievement (2000)

 

Additional Leadership Experience and Service

  Director, Advertising Council since 2009; also serves on Executive Committee

  Director, Adobe Foundation since 2009; also serves as Secretary

 

Key Experience/Director Qualifications

As a global media and marketing leader in the technology industry, Ms. Lewnes brings to Mattel’s Board her strong leadership in branding, advertising, technology and financial management marketing. She also brings experience in driving strategic growth and global demand at two public technology companies, as well as her experience serving on the boards of nonprofit entities. At Adobe, Ms. Lewnes is responsible for Adobe’s corporate brand, corporate communications and integrated marketing efforts worldwide and has spearheaded the transformation of the company’s global marketing efforts to be digital-first and data-driven. At Intel, Ms. Lewnes played a key role globally positioning the business and products to consumers, business professionals and key computer channels.

 

LOGO

  

 

Age: 55

Director Since: 2015

 

  

 

Mattel Committee Memberships:

   Governance and Social
 Responsibility Committee

 

  
  
  
  
  
  
  
  

 

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DOMINIC NG

 

  

Career Highlights

East West Bancorp, Inc. and East West Bank, a global bank based in California

  Chief Executive Officer and Chairman of the Board since 1992; President (1992 – 2009)

 

Federal Reserve Bank of San Francisco, Los Angeles Branch

  Director (2005 – 2011)

 

Seyen Investment, Inc., a private family investment business

  President (1990 – 1992)

 

Deloite & Touche LLP, an accounting firm

  CPA (1980 – 1990)

 

Other Public Company Directorships

  East West Bancorp, Inc. since 1992; also Chairman since 1992

 

Additional Leadership Experience and Service

  Director, STX Entertainment since 2016

  Director, California Bankers Association since 2016 (previously 2002 – 2011)

  Trustee, University of Southern California since 2014

  Member, Keck School of Medicine Board of Overseers since 2016

  Director of the following non-profit entities and government organizations: Chairman, Committee of 100 (2011 – 2014); The United Way of Greater Los Angeles (2006 – 2014); Pacific Council on International Policy (2010 – 2013); Federal Reserve Bank of San Francisco – Los Angeles Branch (2005 – 2011); Los Angeles’ Mayor’s Trade Advisory Council as Co-Chair (2009 – 2011)

 

Key Experience/Director Qualifications

As a currently-serving Chief Executive Officer of a large California commercial bank, Mr. Ng brings to Mattel’s Board significant experience in leadership, strategy, business development and global business. He also has valuable experience in dealing with complex accounting principles and judgments, internal controls, financial reporting rules and regulations, and evaluating financial results and financial reporting processes of large companies. Mr. Ng transformed East West Bank from a small savings and loan association based in Los Angeles into a large full service commercial bank with exclusive focus on the United States and Greater China markets. Mr. Ng’s extensive experience conducting business in China is extremely valuable to Mattel because of Mattel’s large manufacturing presence in China and emerging markets initiatives (including China). He also brings to Mattel’s Board extensive business and governmental connections in the State of California and the greater city of Los Angeles, where Mattel is headquartered.

 

LOGO

 

  

 

Age: 58

Director Since: 2006

 

  

 

Mattel Committee Memberships:

   Audit Committee

   Finance Committee

 

  

 

Other Current Public

Directorships:

   East West Bancorp, Inc.

 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

 

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  PROPOSAL 1 – ELECTION OF DIRECTORS          

 

 

 

 VASANT M. PRABHU

 

  

Career Highlights

Visa Inc., a global consumer payments technology company

  Executive Vice President and Chief Financial Officer since 2015

 

NBCUniversal, a media and entertainment company

  Chief Financial Officer (May 2014 – February 2015)

 

Starwood Hotels and Resorts Worldwide, Inc., a hotel and leisure company

  Vice Chairman and Chief Financial Officer (March 2010 – May 2014); Executive Vice President and Chief Financial Officer (2004 – 2010)

 

Safeway, Inc., a supermarket chain

  Executive Vice President and Chief Financial Officer (2000 – 2003)

 

McGraw-Hill, an educational publisher and learning science company

  President, Information and Media Group (1998 – 2000)

 

Pepsi International, a multinational food, beverage and snack company

  Senior Vice President Finance and Chief Financial Officer (1992 – 1998)

 

Additional Leadership Experience and Service

  Director, U.S. India Business Counsel (2013 – 2014)

  Director, Knight Ridder (2003 – 2006); also served on Audit and Compensation Committees

 

Key Experience/Director Qualifications

As Chief Financial Officer of a number of large public companies, Mr. Prabhu brings to Mattel’s Board extensive leadership experience dealing with complex accounting principles and judgments, internal controls, financial reporting rules and regulations, and evaluating financial results and financial reporting processes of large companies. As Senior Vice President Finance & Chief Financial Officer of Pepsi International, Mr. Prabhu was responsible for the company’s franchise and had oversight of operations in more than 100 countries. His global management, retail and finance experience are also important to Mattel, given Mattel’s significant international operations.

 

LOGO

 

  

 

Age: 57

Director Since: 2007

 

  

 

Mattel Committee Memberships:

   Audit Committee (Chair)

   Executive Committee

   Finance Committee

 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

 

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          PROPOSAL 1 – ELECTION OF DIRECTORS  

 

 

 

DEAN A. SCARBOROUGH

 

  

Career Highlights

Avery Dennison Corporation, a global provider of labeling and packaging materials and solutions

  Executive Chairman of the Board of Directors since May 2016; Chairman of the Board (April 2010 – May 2016); Chief Executive Officer (May 2005 – May 2016); President (May 2000 – October 2014); President and Chief Operating Officer of Avery (2000 – 2005)

 

Other Public Company Directorships

  Avery Dennison Corporation since 2000; also Executive Chairman since 2016 and Chairman (2010-2016)

 

Key Experience/Director Qualifications

As a currently-serving Executive Chairman and former Chief Executive Officer of a large public company, Mr. Scarborough brings to Mattel’s Board deep leadership, brand building, strategy, business development, finance, global consumer products and operations experience. He has extensive experience in retail and distribution channels, enabling Mr. Scarborough to provide valuable perspective and insights in these areas.

 

LOGO

  

 

Age: 61

Director Since: 2007

 

  

 

Mattel Committee Memberships:

   Compensation Committee

   Executive Committee

   Finance Committee (Chair)

 

  

 

Other Current Public

Directorships:

   Avery Dennison Corporation

 

  

 

 

CHRISTOPHER A. SINCLAIR

 

  

Career Highlights

Mattel, Inc.

  Executive Chairman of the Board since February 2017; Chairman of the Board (January 2015 – February 2017) and Chief Executive Officer (April 2015 – February 2017); Interim Chief Executive Officer (January 2015 – April 2015)

 

Scandent Holdings, an information technology investment company

  Executive Chairman (2002 – 2008)

 

Cambridge Solutions Corporation, Ltd., an information technology and business process outsourcing services

  Executive Chairman and Director (2005 – 2009); served on Compensation and Audit Committees

 

Manticore Partners, LLC, a venture capital advisory firm

  Managing Director (2000 – 2005)

 

Pegasus Capital Advisors, LP, a private equity firm

  Operating Partner (2000 – 2002)

 

Caribiner International, Inc., a global business-to-business communications company

  Chairman of the Board and Chief Executive Officer (2000 – 2005)

 

Quality Food, Inc., a grocery business company

  President and Chief Executive Officer (1996 – 1998)

 

PepsiCo, a global food, snack and beverage company (1984 – 1996)

  Chairman and Chief Executive Officer, Pepsi-Cola Company

  President and Chief Executive Officer, PepsiCo Foods & Beverages and Pepsi-Cola International

 

LOGO

  

 

Age: 66

Director Since: 1996

 

  

 

Other Current Public

Directorships:

   Reckitt Benckiser Group plc

 

  
  
  
  
  
  
  
  
  
  
  
  

 

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  PROPOSAL 1 – ELECTION OF DIRECTORS          

 

  

 

Other Public Company Directorships

  Reckitt Benckiser Group plc since 2015; serves on Remuneration Committee

  Foot Locker, Inc. (1995 – 2008); served on Finance and Compensation Committees

 

Additional Leadership Experience and Service

  Director, The Water Initiative since 2008

  Director, Biovittoria, Ltd. (2010 – 2014); served on Audit Committee

  Director, Perdue Farms (1992 – 2000)

 

Key Experience/Director Qualifications

Mr. Sinclair brings to Mattel’s Board invaluable leadership, finance and strategic experience across a variety of industries and complex organizations, and, during his tenure as a director and CEO of Mattel, he has gained a deep understanding of Mattel’s business, the toy industry and its cycles. He was responsible for building Pepsi-Cola’s international business, and, as a result, he also brings substantial global business experience to Mattel’s Board. As a former Chief Executive Officer of a large multinational, multibrand consumer products company like Pepsi-Cola, Mr. Sinclair also gained front-line exposure to many of the issues facing a public company like Mattel, particularly on the operational, financial and corporate governance fronts. As noted above, Mr. Sinclair also has extensive board experience, having served on the boards of numerous companies, including a number of emerging market growth ventures such as The Water Initiative and Biovittoria, Ltd.

 

 

DIRK VAN DE PUT

 

  

Career Highlights

McCain Foods Limited, a multinational frozen food provider

  President and Chief Executive Officer since July 2011; Director since May 2010; Chief Operating Officer (May 2010 – July 2011)

 

Novartis AG, a global healthcare company

  President of the Global Over-the-Counter, Consumer Health division from September 2009 to May 2010

 

Groupe Danone, a multinational provider of packaged water, dairy and baby food products

  President of Americas division and Global Dairy division (2007 – 2009); President of Latin America division (1998 – 2007)

 

Coca-Cola Company, a global beverage company

  President of Caribbean division (1998); Vice President of Value Chain Management, Brazil division (1997 – 1998)

 

Additional Leadership Experience and Service

  Director, Consumer Goods Forum since 2013

 

Key Experience/Director Qualifications

As a currently-serving President and Chief Executive Officer of a large, multinational corporation, Mr. Van de Put brings to Mattel’s Board invaluable leadership, finance, international, strategy, business development, global retail and operations experience. Mr. Van de Put contributes extensive and diversified management experience in large public and private companies in the global consumer products and consumer packaged goods industries.

 

 

LOGO

  

 

Age: 56

Director Since: 2011

 

  

 

Mattel Committee Memberships:

   Audit Committee

   Governance and Social
 Responsibility Committee

 

  
  
  
  
  

 

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          PROPOSAL 1 – ELECTION OF DIRECTORS  

 

 

 

KATHY WHITE LOYD

 

  

Career Highlights

University of North Carolina – Greensboro

  Executive in Residence and Faculty Member at the Bryan School of Business & Economics since August 2013; Tenured Professor of Information Technology at Bryan School of Business & Economics (1981 – 1991)

 

Rural Sourcing, Inc., an information technology outsourcing company

  Founder (2003)

 

Cardinal Health, Inc., a global integrated healthcare services and products company

  Executive Vice President, e-business and Chief Information Officer (1999 – 2003)

 

Allegiance Corporation (merged with Cardinal Health in 1999), a manufacturer and distributor of medical, surgical and laboratory products

  Senior Vice President and Chief Information Officer (1996 – 1999)

 

Additional Leadership Experience and Service

  Director, Novell, Inc., a software and service provider (2003 – 2010); served on Compensation and Corporate Governance Committees

  Director, University of North Carolina Educational Foundation (2005 – 2009)

 

Key Experience/Director Qualifications

Given her experience as a professor of information technology, Chief Information Officer and an information management leader, Ms. White Loyd brings to Mattel’s Board unique insights into the strategic use of information technology as a competitive advantage. Such experience as well as her public company director experience with a software provider make Ms. White Loyd an important contributor as information technology is an ever increasing important focus for Mattel.

 

LOGO

 

  

 

Age: 67

Director Since: 2001

 

  

 

Mattel Committee Memberships:

   Audit Committee

   Compensation Committee

 

  
  
  
  
  

Recommendation

THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED HEREIN FOR ELECTION AS DIRECTORS.

 

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  REPORT OF THE AUDIT COMMITTEE          

 

AUDIT AND RELATED PARTY MATTERS

 

REPORT OF THE AUDIT COMMITTEE

The following Report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission (“SEC”) or subject to Regulations 14A or 14C of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or the liabilities of Section 18 of the Exchange Act. The Report of the Audit Committee shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Mattel specifically incorporates it by reference.

The Audit Committee’s responsibility is to assist the Board in its oversight of:

 

  The quality and integrity of Mattel’s financial reports;

 

  The independence, qualifications and performance of PricewaterhouseCoopers LLP (“PwC”), Mattel’s independent registered public accounting firm;

 

  The performance of Mattel’s internal audit function; and

 

  The compliance by Mattel with legal and regulatory requirements.

Management of Mattel is responsible for Mattel’s consolidated financial statements as well as Mattel’s financial reporting process, disclosure controls and procedures, and internal control over financial reporting.

PwC is responsible for performing an integrated audit of Mattel’s annual consolidated financial statements and of its internal control over financial reporting.

In this context, the Audit Committee has reviewed and discussed with management, the senior internal auditing officer of Mattel and PwC, the audited financial statements of Mattel as of and for the year ended December 31, 2016 and Management’s Report on Internal Control Over Financial Reporting. Management has confirmed to the Audit Committee that, as required by Section 404 of the Sarbanes-Oxley Act, management has evaluated the effectiveness of Mattel’s internal control over financial reporting using the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. The scope of management’s evaluation of the effectiveness of internal control over financial reporting does not include any internal controls of Sproutling, Inc. (“Sproutling”) and Fuhu, Inc. (“Fuhu”), which were acquired in January 2016. This exclusion is in accordance with the SEC’s general guidance that a recently acquired business may be omitted from the scope of the assessment in the year of acquisition. Sproutling and Fuhu, excluding acquired intangible assets, represented less than 1% of Mattel’s total assets as of December 31, 2016 and less than 1% of Mattel’s total net sales for the year ended December 31, 2016. Based on this evaluation, management concluded that Mattel’s internal control over financial reporting was effective as of December 31, 2016.

PwC has expressed its opinion that:

 

 

Mattel’s consolidated financial statements present fairly, in all material respects, its financial position as of December 31, 2016 and 2015, and its results of operations and cash flows for each of the three years

 

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          REPORT OF THE AUDIT COMMITTEE  

 

 

in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America; and

 

  Mattel has maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework issued by COSO. The scope of PwC’s audit of internal control over financial reporting excludes certain elements of internal control over financial reporting of Sproutling and Fuhu, which were acquired in January 2016.

In addition, Mattel’s Chief Executive Officer and Chief Financial Officer reviewed with the Audit Committee, prior to filing with the SEC, the certifications that were filed pursuant to the requirements of the Sarbanes-Oxley Act and the disclosure controls and procedures management has adopted to support the certifications. The Audit Committee periodically meets in executive sessions and in separate private sessions with management, the Chief Legal Officer, the senior internal auditing officer and PwC. Each of the Chief Financial Officer, the Chief Legal Officer, the senior internal auditing officer and PwC has unrestricted access to the Audit Committee.

The Audit Committee has discussed with PwC the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees”, as adopted by the Public Company Accounting Oversight Board (the “PCAOB”). In addition, the Audit Committee has received the written disclosures and the letter from PwC required by the PCAOB regarding the firm’s independence from Mattel, and the Audit Committee has also discussed with PwC the firm’s independence from Mattel.

The Audit Committee has also considered whether PwC’s provision of non-audit services to Mattel is compatible with maintaining the firm’s independence from Mattel.

The members of the Audit Committee are not engaged in the accounting or auditing profession and, consequently, are not experts in matters involving accounting or auditing, including the subject of auditor independence. As such, it is not the duty of the Audit Committee to plan or conduct audits or to determine that Mattel’s consolidated financial statements fairly present Mattel’s financial position, results of operations and cash flows and are in conformity with accounting principles generally accepted in the United States of America and applicable laws and regulations. Each member of the Audit Committee is entitled to rely on:

 

  The integrity of those persons within Mattel and of the professionals and experts (such as PwC) from which the Audit Committee receives information;

 

  The accuracy of the financial and other information provided to the Audit Committee by such persons, professionals or experts absent actual knowledge to the contrary; and

 

  Representations made by management or PwC as to any information technology services of the type described in Rule 2-01(c)(4)(ii) of Regulation S-X and other non-audit services provided by PwC to Mattel.

 

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  REPORT OF THE AUDIT COMMITTEE          

 

Based on the reports and discussions described above, the Audit Committee recommended to the Board that the audited financial statements be included in Mattel’s Annual Report on Form 10-K for the year ended December 31, 2016, for filing with the SEC.

AUDIT COMMITTEE

Vasant M. Prabhu (Chair)

Dominic Ng

Dirk Van de Put

Kathy White Loyd

March 20, 2017

 

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          FEES INCURRED FOR SERVICES BY PRICEWATERHOUSECOOPERS LLP  

 

FEES INCURRED FOR SERVICES BY PRICEWATERHOUSECOOPERS LLP

The following table summarizes the fees accrued by Mattel for audit and non-audit services provided by PricewaterhouseCoopers LLP for fiscal years 2016 and 2015:

 

    Fees      2016          2015    
   

 

Audit fees(1)

 

       $

 

  6,483,000

 

 

           $

 

  6,590,000

 

 

   
   

Audit-related fees(2)

 

       $

 

228,000

 

 

           $

 

137,000

 

 

   
   

Tax fees (3)

 

       $

 

1,951,000

 

 

           $

 

1,159,000

 

 

   
   

Total

 

       $

 

8,662,000

 

 

           $

 

7,886,000

 

 

   

(1) Audit fees consisted of fees for professional services provided in connection with the integrated audit of Mattel’s annual consolidated financial statements and the audit of internal control over financial reporting, the performance of interim reviews of Mattel’s quarterly unaudited financial information, comfort letters, consents and statutory audits required internationally.

(2) Audit-related fees consisted primarily of the debt offering in 2016 and audits of employee benefit plans for 2016 and 2015.

(3) Tax fees principally included (i) tax compliance and preparation fees (including fees for preparation of original and amended tax returns, claims for refunds and tax payment-planning services) of $654,000 for 2016 and $577,000 for 2015, and (ii) other tax advice, tax consultation and tax planning services of $1,297,000 for 2016 and $582,000 for 2015.

The Audit Committee charter provides that the Audit Committee pre-approves all audit services and permitted non-audit services to be performed for Mattel by its independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act.

In addition, consistent with SEC rules regarding auditor independence, the Audit Committee has adopted a Pre-Approval Policy, which provides that the Audit Committee is required to pre-approve the audit and non-audit services performed by our independent registered public accounting firm. The Pre-Approval Policy sets forth procedures to be used for pre-approval requests relating to audit services, audit-related services, tax services and all other services and provides that:

 

  The term of the pre-approval is twelve months from the date of pre-approval, unless the Audit Committee specifically provides for a different period or the services are specifically associated with a period in time;

 

  The Audit Committee may consider the amount of estimated or budgeted fees as a factor in connection with the determination of whether a proposed service would impair the independence of the registered public accounting firm;

 

  Requests or applications to provide services that require separate approval by the Audit Committee are submitted to the Audit Committee by both the independent registered public accounting firm and the Chief Financial Officer or Corporate Controller, and must include a joint statement as to whether, in their view, the request or application is consistent with the rules of the SEC on auditor independence;

 

  The Audit Committee may delegate pre-approval authority to one or more of its members, and if the Audit Committee does so, the member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting; and

 

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  FEES INCURRED FOR SERVICES BY PRICEWATERHOUSECOOPERS LLP          

 

 

  The Audit Committee does not delegate to management its responsibilities to pre-approve services performed by the independent registered public accounting firm.

All services provided by our independent registered public accounting firm in 2016 were pre-approved in accordance with the Audit Committee’s Pre-Approval Policy.

 

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          CERTAIN TRANSACTIONS WITH RELATED PERSONS  

 

CERTAIN TRANSACTIONS WITH RELATED PERSONS

Our Board maintains a written Related Party Transactions Policy regarding the review, approval and ratification of any transaction required to be reported under Item 404(a) of the SEC’s Regulation S-K. Under the policy, a related party transaction (as defined below) may be consummated or may continue only if the Audit Committee of our Board approves or ratifies the transaction in accordance with the guidelines set forth in the policy. A transaction entered into without pre-approval of the Audit Committee is not deemed to violate the policy so long as the transaction is brought to the Audit Committee as promptly as reasonably practical after it is entered into. Management shall present to the Audit Committee each new or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction, and the benefits to Mattel and to the relevant related person. For the purposes of our policy, a “related party transaction” is any transaction or relationship directly or indirectly involving one of our directors (which term includes any director nominee) or executive officers (within the meaning of Rule 3b-7 under the Exchange Act), any person known by us to be the beneficial owner of more than 5% of our common stock or any person known by us to be an immediate family member of any of the foregoing that would need to be disclosed under Item 404(a) of the SEC’s Regulation S-K.

Our directors and executive officers complete questionnaires on an annual basis designed to elicit information about any potential related party transactions. They are also instructed and periodically reminded of their obligation to inform our legal department of any potential related party transactions. In addition, we review information about security holders known by us to be beneficial owners of more than 5% of any class of our voting securities (see “Stock Ownership and Reporting – Principal Stockholders”) to determine whether there are any relationships with such security holders that might constitute related party transactions.

We are not aware of any related party transactions with any directors, executive officers, more-than-5% security holders or any person known by us to be an immediate family member of any of the foregoing requiring disclosure under the SEC’s rules or our Related Party Transactions Policy.

 

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  PROPOSAL 2 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           

 

PROPOSAL 2 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee of the Board has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2017. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement if they desire to do so.

Stockholder ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants is not required by our Restated Certificate of Incorporation, our Bylaws, or otherwise. However, the Board is submitting the selection of PricewaterhouseCoopers LLP to the stockholders for ratification because we believe it is a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP, but still may retain them. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in Mattel’s best interests and that of our stockholders.

Recommendation

THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS MATTEL’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

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          EXECUTIVE OFFICERS  

 

EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION

 

EXECUTIVE OFFICERS

The current executive officers of Mattel are as follows:

 

   

 

Name

  

 

Age

  

 

Position

      

 

Executive

Officer

Since

   

Christopher A. Sinclair(1)

 

  

    66    

 

  

Executive Chairman of the Board

 

      

    2015    

 

   

Margaret H. Georgiadis(1)

 

  

53

 

  

Chief Executive Officer and Director

 

      

2017

 

   

Richard Dickson

 

  

49

 

  

President and Chief Operating Officer

 

      

2014

 

   

Kevin M. Farr

 

  

59

 

  

Chief Financial Officer

 

      

1996

 

   

Peter D. Gibbons

 

  

56

 

  

Executive Vice President and Chief Supply Chain Officer

 

      

2013

 

   

Richard R. Gros

 

  

62

 

  

Executive Vice President and Chief Human Resources Officer

 

      

2015

 

   

Robert Normile

 

  

57

 

  

Executive Vice President, Chief Legal Officer and Secretary

 

      

1999

 

   

Geoffrey H. Walker

 

  

51

 

  

Executive Vice President and Chief Strategic Technology Officer

 

      

2013

 

(1) Information regarding Mr. Sinclair and Ms. Georgiadis is provided in the “Proposal 1 – Election of Directors” section of this Proxy Statement.

Mr. Dickson has been President and Chief Operating Officer since April 2015. From January 2015 to April 2015, he served as President, Chief Brands Officer. He served as Chief Brands Officer from May 2014 to January 2015. From February 2010 to May 2014, he served as President and CEO of Branded Businesses at The Jones Group, Inc. From August 2008 to February 2010, he served as General Manager and Senior Vice President of the Barbie Brand at Mattel. From 2000 to 2008, he was Senior Vice President at Mattel overseeing Consumer Products, Marketing, Media, Entertainment and Packaging. Prior to Mattel, he served as Vice President of Brand Management and Merchandising at Estee Lauder Companies, Inc. and was Principal with Gloss.com, an e-commerce beauty website he helped develop and manage until its acquisition by Estee Lauder. Mr. Dickson started his career and spent nearly a decade with Bloomingdale’s, a leading U.S. fashion retailer.

Mr. Farr has been Chief Financial Officer since February 2000. From September 1996 to February 2000, he was Senior Vice President and Corporate Controller. From June 1993 to September 1996, he served as Vice President, Tax. Prior to that, he served as Senior Director, Tax from August 1992 to June 1993.

Mr. Gibbons has been Executive Vice President and Chief Supply Chain Officer since February 2015. From November 2013 to February 2015, he served as Executive Vice President, Global Supply Chain, and from April 2013 to November 2013, he served as Executive Vice President, Global Operations. From July 2008 to

 

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  EXECUTIVE OFFICERS          

 

November 2012, he served as Executive Vice President, Global Supply Chain Operations, at Starbucks Corporation. From February 2007 to July 2008 he served as Senior Vice President, Global Manufacturing Operations, at Starbucks Corporation. From March 1999 to February 2007, he was Executive Vice President, Supply Chain, for the Glidden Company, a subsidiary of ICI Americas, Inc., a global chemical company. Prior to that, he held various roles in operations, finance and engineering with ICI plc in Europe and Latin America and the Scottish Development Agency.

Mr. Gros has been Executive Vice President and Chief Human Resources Officer since September 2015. Prior to joining Mattel, Mr. Gros served as President of Richard Gros & Associates, a strategic human capital consulting firm, from March 2013 to September 2015. From October 2011 to March 2013, Mr. Gros served as Senior Vice President of International Business Development with Sedgwick Claims Management Services, Inc., a leading global provider of claims and productivity management services. From April 2009 to September 2011, Mr. Gros served as Executive Vice President of Human Resources at Xchanging, Inc., a provider of business processing, technology and procurement services. He served as Executive Vice President and Chief Human Resources Officer at Cambridge Solutions Corporation Ltd., a leader in providing information technology and business process outsourcing services from November 2004 to March 2009. Prior to that, he served as Executive Vice President and Chief Human Resources Officer of Caribiner International, Inc. from January 1999 to May 2000. He has also held the positions of Senior Vice President and Chief Human Resources Officer for Frito-Lay International and Vice President of Human Resources for PepsiCo Food & Beverages International and Pepsi-Cola International.

Mr. Normile has been Executive Vice President, Chief Legal Officer and Secretary since February 2011, and from March 1999 to February 2011 he was Senior Vice President, General Counsel and Secretary. He served as Vice President, Associate General Counsel and Assistant Secretary from August 1994 to March 1999. From June 1992 to August 1994, he served as Assistant General Counsel. Prior to that, he was associated with the law firms of Latham & Watkins LLP and Sullivan & Cromwell LLP.

Mr. Walker has been Executive Vice President and Chief Strategic Technology Officer since February 2016. From June 2015 to February 2016, he served as Executive Vice President, Commercial – North America. From April 2013 to June 2015, he served as Executive Vice President, Global Brands Team – Fisher-Price. From November 2012 to April 2013, he served as Senior Vice President and General Manager for Core Europe, and from January 2011 to November 2012, he served as Senior Vice President and General Manager of Mattel’s Northern European business. From October 2010 through December 2010, he served as Senior Vice President Global Core Brands Marketing Strategy, and from August 2008 to October 2010, he served as Senior Vice President Marketing. Mr. Walker held a variety of roles within the Mattel marketing organization from December 2000 to August 2008. Starting with Mattel in July 1995, Mr. Walker has held a variety of brand management positions within the Wheels, Entertainment and Games divisions.

 

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          COMPENSATION DISCUSSION AND ANALYSIS  

 

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

Our fiscal year 2016 NEOs were:

 

    Name   Position (as of December 31, 2016)
   

Christopher A. Sinclair

  Chairman of the Board and Chief Executive Officer (currently Executive Chairman)
   

Richard Dickson

  President and Chief Operating Officer
   

Kevin M. Farr

  Chief Financial Officer
   

Peter D. Gibbons

  Executive Vice President and Chief Supply Chain Officer
   

Robert Normile

  Executive Vice President, Chief Legal Officer and Secretary
   

Juliana L. Chugg*

  Executive Vice President and Chief Brands Officer – Core Brands

* In March 2016, our Board evaluated our list of executive officers and determined that Ms. Chugg’s position was not an executive officer role with the Company. Ms. Chugg is included as an NEO pursuant to SEC rules because she had been previously classified as an executive officer and her compensation as reported in the “Summary Compensation Table” was among the five highest for 2016.

2016 Financial and Business Highlights

 

We continued to make progress on our strategic priorities during 2016, despite a difficult fourth quarter that impacted full-year financial results.

 

Mattel’s Strategic Priorities

 Build powerful brand franchises

 

 Drive continuous cost improvement

 Establish Toy Box as the partner of choice

 

 Rapidly build emerging market leadership

 Develop unmatched commercial excellence

   

In 2016, significant changes were made Company-wide to focus on driving creativity and innovation while executing on our strategic priorities of reinvigorating our core brands, re-establishing the Company as the entertainment licensing partner of choice, developing commercial excellence, driving cost improvement and expanding our presence in emerging and developing markets.

 

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Throughout 2016 management maintained sharp focus on executing against our strategic priorities and continued to drive progress; however, our full-year financial results were meaningfully impacted by evolving market conditions during the critical 2016 holiday period. The holiday period was characterized by industry-wide challenges, including a significant U.S. toy category slowdown, and increased foreign exchange headwinds. And while the U.S. toy category made a strong recovery the last two weeks of the year, the unexpected slowdown resulted in increased promotional activity and decreased shipping, which had a significant impact on our gross margin and negatively impacted our 2016 financial results.

 

Key 2016 Financial Results

 Net sales were $5.46 billion, a 4% decrease as compared to 2015

 Gross sales* were $6.07 billion, a 3% decrease as compared to 2015

 Gross margin was 46.8%, a decrease of 240 basis points from 2015

 Operating income was $519.2 million, a 4% decrease as compared to 2015

 EPS was $0.92, as compared to $1.08 in 2015

* Gross sales is a non-GAAP financial measure. For a reconciliation of gross sales to net sales, the most directly comparable GAAP financial measure, please see pages 44 to 45 of our Annual Report on Form 10-K filed with the SEC on February 23, 2017.

Despite a difficult fourth quarter that negatively impacted our 2016 financial results, we made continued progress on our turnaround efforts and strategic priorities, which we believe are fundamental to creating long-term value.

 

Turnaround Progress

  Encouraging Trends in Underlying Business Despite Currency Headwinds

We exited 2016 with positive POS in key core brands – Barbie, Fisher-Price and Hot Wheels

We saw significant growth in key emerging markets such as China

We achieved the high end of our two-year cost savings target of $250 million to $300 million, with total gross savings of $295 million over the two-year period and $142 million for 2016

We acquired a number of high profile entertainment licenses, including Disney’s Cars 3 and Toy Story 4 and Universal’s Jurassic World and Fast & Furious

  Maintained Disciplined Capital Deployment Strategy

We invested in turnaround efforts as well as growth and technology initiatives

We maintained a quarterly dividend of $0.38 per share

In addition to our longer-term strategic priorities, we also pursued a key objective in 2016 to overcome the revenue gap created by the loss of the Disney Princess license, revenue declines on our Monster High and American Girl brands and continued unfavorable foreign exchange trends. This revenue gap was estimated to be approximately $600 million, representing about 10% of the Company’s 2015 sales. We achieved this objective as a result of solid execution on key core brands and key entertainment licenses as well as investments in emerging and developing markets, which resulted in flat gross sales* excluding the impact of foreign currency exchange,* all of which was achieved in the midst of an ongoing cultural and organizational transformation, economic uncertainty and a toy category slowdown in the critical holiday period.

 

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* Gross sales and currency exchange rate impact are non-GAAP financial measures. For a reconciliation of gross sales to net sales, the most directly comparable GAAP financial measure, and the currency exchange rate impact on reported results, please see pages 44 to 45 of our Annual Report on Form 10-K filed with the SEC on February 23, 2017.

We also generated positive one-year TSR(1) in 2016. The following shows our TSR performance as compared to the median of our peers for periods ending December 31, 2016:

 

Period   Mattel   Peer Group
1 year   6.4%   5.7%
3 year   -12.3%   9.4%
5 year   4.4%   12.9%

(1) TSR represents the annualized rate of return reflecting changes in the stock price plus reinvestment and the compounding effect of dividends over such period.

We continue to believe that our strong leadership team, combined with the solid business foundation we established in 2016, position us well for 2017.

 

Well-Positioned for 2017

   Core brand momentum

   Robust entertainment slate

   Emerging market growth

   Strong leadership team

Robust Stockholder Outreach

 

We continued to receive strong support for the compensation of our NEOs and conducted robust stockholder outreach in 2016.

We received 90% approval from stockholders on our 2016 Say-on-Pay. Over the past three years, we received more than 93% support on average. We have established a robust stockholder engagement program designed to gain a better understanding of stockholder perspectives on a wide range of matters. We regularly conduct extensive stockholder outreach and believe that proactive and transparent communication with our stockholders is essential to effective corporate governance. During 2016, an independent member of our Board, together with members of our senior management team, engaged in outreach activities and discussions with stockholders representing more than 40%, in total, of Mattel’s outstanding shares to discuss items such as turnaround efforts, corporate governance practices, executive compensation programs and sustainability oversight. We greatly value the views of our stockholders, and the input we receive from them is relayed directly to the Board and helps inform our governance and compensation practices. As we continue to execute on our transformation, we look forward to ongoing stockholder engagement.

 

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2016 Pay-for-Performance Results and Compensation Program Changes

 

Our executive compensation programs are designed to be performance-based and link our executives’ pay to the execution of Mattel’s strategic objectives and to the interest of our stockholders.

Pay outcomes for our NEOs in 2016 closely align to challenging financial results this past year:

 

Compensation Element   2016 Results for NEOs

Annual Cash Incentive

 

  No payout under our annual cash incentive plan, the MIP

Equity LTIs

 

  No earnout of Performance Units granted under the 2014-2016 LTIP that ended December 31, 2016

Base Salary

 

  No salary increases approved for 2016 or 2017, other than in connection with retention or greater responsibilities assumed

 

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The strong link between pay and performance is further illustrated by the chart below. Mr. Sinclair’s realizable compensation at the end of 2016 was only 32% of his 2016 targeted TDC.

 

 

LOGO

 

2016 Targeted TDC
   

2016 Targeted Annual Cash

   $  3,750,000    
   

- Base Salary(1)

   $  1,500,000    
   

- Target MIP(2)

   $  2,250,000    
   

2016 LTI Grant Values(3)

   $  7,000,000    
   

- Stock Options

   $  2,333,333    
   

- Time-Vesting RSUs

   $  2,333,333    
   

- Performance Units

   $  2,333,333    
   

Total 2016 Targeted TDC

   $10,750,000    
2016 Realizable TDC
   

2016 Actual Annual Cash(1)

   $1,500,000    
   

- Base Salary

   $1,500,000    
   

- Actual MIP Paid

   $              0    
   

2016 LTI Realizable Values

   $1,964,646    
   

- Stock Options(4)

   $              0    
   

- Time-Vesting RSUs(5)

   $1,964,646    
   

- Performance Units(6)

   $              0    
   

Total 2016 Realizable TDC

   $3,464,646    
   

% of Targeted TDC

   32%    
 

 

(1) Reflects amounts disclosed in the “Summary Compensation Table” on page 77.

(2) Reflects amounts disclosed in the “Grants of Plan-Based Awards in 2016” table on page 83.

(3) Reflects amounts disclosed in the “2016 LTI Annual Grant Values” table on page 63.

(4) The stock options granted in 2016 were underwater as of the end of the fiscal year. The value shown for the realizable 2016 stock options reflects the intrinsic value of such options as of December 30, 2016 based on our closing stock price of $27.55 and the option exercise price of $32.72. If instead the Black-Scholes value of the stock options was taken into account as of December 30, 2016, then such options would be valued at $1.9 million, resulting in Total 2016 Realizable TDC of $5.4 million, or 50% of Targeted TDC.

(5) The value shown for the realizable time-vesting RSUs for 2016 reflects our closing stock price of $27.55 as of December 30, 2016.

(6) The value shown for the Performance Units for the 2016-2018 LTIP is zero, as our EPS of $0.92 for 2016 was below threshold performance (based on an extrapolation of the assumptions used for EPS growth that were employed in determining the

 

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cumulative EPS three-year goal), which would have resulted in 0% earned for the financial performance goal. In addition, the impact of our TSR modifier for the first year of the performance period ending December 31, 2016, would have resulted in a reduction of 44% from any amounts earned based on our EPS performance.

Highlights of 2016 Incentive Compensation Results and Program Changes

No 2016 MIP Payout

No 2016 cash incentive payout was earned under the MIP for our NEOs. For 2016, no payouts could be made unless we achieved an adjusted operating profit threshold performance. Accordingly, the failure to meet this threshold level resulted in no payouts even though performance under other components of the MIP (adjusted net sales and individualized strategic priorities) would have otherwise resulted in some payout.

2016 MIP Changes

 

  Streamlined Financial Performance Measures

  Simplified the financial measures of the MIP by focusing on adjusted operating profit and adjusted net sales, eliminating gross margin and free cash flow

  Objective: Provide greater alignment with our turnaround strategy objectives of top-line growth with bottom-line discipline

  Further Aligned with Strategic Priorities

 Modified the payout formula for our NEOs (and other EVPs) as follows:

  75% of the payout is based on achievement of financial goals (previously 100%); and

  25% of the payout is based on achievement of individualized strategic priorities related to each executive’s job responsibilities

  Objective: Provide a stronger link to operational performance over which the executive has responsibility, driving a culture of accountability

  Structured Plan to Support Expense Control

  No payouts occur under the financial performance measures or the individualized strategic priorities unless we achieve the adjusted operating profit threshold performance for 2016

 Objective: Ensure operational and financial goals are achieved with proper expense control

No 2014-2016 LTIP Earnout

No Performance Units were earned under the completed 2014-2016 LTIP. The results of the 2014-2016 LTIP were based on the three-year average of annual performance measures of NOPAT-CC (75% weighting) and net sales (25% weighting), which was adjusted up or down by up to 50% based on our TSR for the three-year period relative to the TSR of companies in the S&P 500.

 

  For 2016, we did not achieve the threshold level of performance for NOPAT-CC.

 

  Because NOPAT-CC was below threshold performance, the 2016 net sales earnout percentage was zero, resulting in a 2016 earnout percentage of zero under the financial performance goals.

 

  The three-year average earnout percentage for the 2014 (0%), 2015 (41%) and 2016 (0%) financial performance goals was 14%.

 

  Our relative three-year TSR was at the 13th percentile, resulting in a reduction of 50% to the three-year average financial performance earnout of 14%.

 

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  After applying the TSR modifier, the total earnout percentage for the 2014-2016 LTIP was zero, resulting in no payout of Performance Units.

2016-2018 LTIP Changes

 

  Annual Performance Cycles Approach

  Changed the approach to granting Performance Units annually with overlapping three-year cycles, starting with the 2016-2018 LTIP performance cycle, from granting every three years with end-to-end cycles

  Objective: Permit greater responsiveness to changing circumstances, strengthen retention and be consistent with market practice

  Single Three-Year Financial Performance Measure

  Changed the financial performance measure for Performance Units to EPS measured over three years from NOPAT-CC and net sales, with goals set annually

  Three-year relative TSR modifier was maintained

  Objective: Simplify LTIP structure, utilize differentiated metrics as compared to the Annual Cash Incentive, and ensure sharp focus on sustainable and profitable growth, which supports our turnaround strategy

LTI Equity Mix

There were no changes to our LTI equity mix as it continues to be made up of one-third Performance Units, one-third stock options and one-third time-vesting RSUs to ensure that the value of the delivered compensation is directly tied to our stock price performance and the vesting of the awards facilitates retention, which is particularly important in a turnaround period.

2016 Base Salaries

There were no base salary increases for our NEOs in 2016, other than for Ms. Chugg, whose base salary was increased from $550,000 to $615,000 in September 2016 in connection with her assumption of greater responsibilities due to the realignment of the Global Brands Team.

2017 Leadership Transition

 

As part of the Board’s ongoing review of Mattel’s long-term strategy and execution, we implemented a leadership transition in early 2017.

Margaret H. Georgiadis

On February 8, 2017, Ms. Georgiadis became our CEO. Ms. Georgiadis, who was President, Americas at Google Inc. prior to joining Mattel, brings with her significant experience in technology, marketing, consumer insights, e-commerce, finance, leadership, global business, strategy and business development. She has proven ability to foster innovation, experience in building partnerships on a global scale, expertise in leading complex organizations, and experience in engaging consumers and retail partners in a rapidly evolving industry. She has successfully led efforts to deliver above market growth and profitability by creating transformational partnerships across content, media and technology providers and through innovation in product development and customer engagement. Following an extensive, thoughtful CEO

 

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search, which included internal and external candidates, in a highly competitive environment for top leadership, the Board determined that Ms. Georgiadis’ experience makes her ideally suited to drive focused execution and accelerate Mattel’s growth. In connection with Ms. Georgiadis’ appointment as our CEO, the Compensation Committee approved an annual target compensation package that consists of a base salary of $1,500,000, a target MIP bonus opportunity of 150% of her base salary, with a minimum bonus of $1,500,000 for fiscal 2017, and a 2017 LTI annual target grant value of $8,250,000, to be divided equally into three-year Performance Units, RSUs and stock options. The Compensation Committee believed it was important to establish a target annual pay mix heavily weighted toward LTIs, similar to our other NEOs.

On February 8, 2017, in recognition of the value of equity compensation forfeited by Ms. Georgiadis when she resigned from Google, she received a make-whole grant of RSUs, determined by dividing $14,000,000 by the average of the closing trading prices of Mattel common stock over the 20 consecutive trading days immediately prior to the grant date (“Average Price”). These RSUs vest in twelve monthly installments following the grant date. To establish an immediate and meaningful link to Mattel’s long-term stock performance, the Compensation Committee also made new hire grants of RSUs and stock options to Ms. Georgiadis on February 8, 2017. The RSU grant was determined by dividing $5,500,000 by the Average Price, and the stock option grant was determined by dividing $5,500,000 by a Black-Scholes value based on the Average Price. These new-hire grants vest 50% on each of the second anniversary and third anniversary of the grant date. To facilitate an immediate focus on Mattel and allow time for a permanent relocation, Ms. Georgiadis is eligible to receive temporary accommodations and other relocation expenses through September 30, 2017. For full details of Ms. Georgiadis’s compensation and benefits, please see the Form 8-K filed with the SEC on January 17, 2017.

Christopher A. Sinclair

Mr. Sinclair’s extensive institutional knowledge of Mattel and its industry and his depth of experience as a director will serve to ensure a smooth leadership transition and enhance execution going forward. As Mattel’s Executive Chairman, Mr. Sinclair will serve as Chair of regular sessions of the Board and work to maximize Board effectiveness in supporting the leadership transition and advising management on our continued transformation efforts. FW Cook provided market data to inform the Compensation Committee’s recommendation to the Board on Mr. Sinclair’s compensation as Executive Chairman, which included Executive Chairs in Mattel’s peer group plus other large market capitalization companies. Effective February 8, 2017, Mr. Sinclair’s base salary was reduced to $1,000,000 (previously $1,500,000 as CEO), his target annual cash incentive opportunity under the MIP was reduced to 100% of his base salary (previously 150% as CEO), and his 2017 LTI target grant value was reduced to $3,000,000 (previously $7,000,000 as CEO). Effective April 1, 2017, Mr. Sinclair ceased to be provided a monthly allowance of $60,000, limited personal use of a private aircraft and personal use of a Company car.

Richard Dickson

The Board believed it was important to retain Richard Dickson, who is a key member of our leadership team and a significant contributor to the turnaround of Mattel’s core brands. Mr. Dickson plays an important role in the leadership transition by providing organizational and business continuity and his unique skill set to Mattel and Ms. Georgiadis. Thus, on January 31, 2017, the Compensation Committee approved a retention package for Mr. Dickson consisting of an increase in annual base salary from $900,000 to $1,000,000, and a $1,000,000 retention cash payment payable in two equal installments on June 30, 2017 and January 31, 2018, subject to continued employment through each date or an earlier

 

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date if his employment is terminated without cause by the Company. In addition, Mr. Dickson received equity grants valued at $5,000,000, allocated equally between RSUs and stock options. Such equity grants vest one-third on each of the first three anniversaries of the grant date.

Our senior leadership otherwise remains the same. Mattel will continue to leverage their unique capabilities, expertise and leadership to drive our transformation efforts.

 

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Compensation Governance Best Practices

 

We maintain strong governance standards with respect to our executive compensation programs and are mindful of the perspectives of our stockholders.

 

What We Do

Clawback Policy – Our Clawback Policy that is applicable to all executive officers and other direct reports to the CEO permits our Compensation Committee to require forfeiture or reimbursement of certain cash and equity that was paid, granted or vested based upon the achievement of financial results that, when recalculated to include the impact of a material financial restatement, were not achieved, whether or not fraud or misconduct was involved.

Best Practices in Severance Arrangements – We maintain executive severance arrangements that reflect current compensation best practices, which include:

  Double-trigger equity acceleration upon a change of control for all assumed equity awards (i.e., requires both a change of control and a qualifying termination of employment); and

 Severance benefits set at competitive levels

Meaningful Stock Ownership Guidelines – Our guidelines align the long-term interests of our NEOs with those of our stockholders and discourage excessive risk-taking. Our guidelines require stock ownership levels as a value of Mattel shares equal to a multiple of base salary (Executive Chairman and CEO at 6x, COO and CFO at 4x and other NEOs at 3x), consistent with market practices, and include holding requirements if the target level ownerships are not met within the compliance deadline.

Independent Compensation Consultant – Our Compensation Committee engages its own independent compensation consultant, FW Cook, to advise on executive and director compensation matters.

Annual Risk Assessment – Based on our detailed annual risk assessment performed with assistance of our compensation consultant, our Compensation Committee has concluded that our compensation programs do not present any risk that is reasonably likely to have a material adverse effect on the Company.

Annual Comparator Peer Group Review – Our Compensation Committee, in conjunction with FW Cook, reviews the makeup of our comparator peer group annually and makes adjustments to the composition of the group as it deems appropriate.

Annual Tally Sheet Review – Our Compensation Committee annually reviews comprehensive tally sheets, illustrating the total compensation for the most recent two years of our CEO, his direct reports and other potential NEOs.

What We Do Not Do

×  No Excise Tax Gross-Ups – We do not provide any gross-ups of excise taxes on severance or other payments in connection with a change of control.

×  No Poor Pay Practice of Tax Gross-Ups on Perquisites and Benefits – We do not provide tax gross-up payments to our executives other than in limited circumstances for business-related relocations (and related international tax compliance) that are generally available to other employees.

×  No Hedging or Pledging Permitted We generally do not permit our Board members, officers and employees to engage in hedging transactions or to pledge or use Mattel shares as collateral for loans.

 

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ELEMENTS OF COMPENSATION

Guiding Principles, Philosophy and Objectives

 

Our executive compensation programs are designed to be performance-based and link our executives’ pay to the execution of Mattel’s strategic objectives and to the interests of our stockholders.

The guiding principles of our executive compensation programs include:

 

  Pay for performance;

 

  Financial interests of NEOs aligned with the financial interests of our stockholders; and

 

  Governance best practices aligned with views of our stockholders.

We are a global consumer goods company and as such we compete for executive talent with, and our comparator peer group is made up of, a large range of companies that are category leaders in the consumer products, apparel and fashion, food and beverage, entertainment and leisure, and retail industries. Our comparator peer companies are similar to us in their orientation, business model, size (as measured by revenue, net income growth, employees and market capitalization) and global scale and reach. Mattel’s revenues, total employees and market cap value generally are in the median range of our peer group.

The table below lists the key elements of our NEOs’ TDC and how they relate to our compensation philosophy and objectives.

 

    Compensation Element   Philosophy and Objective    
 
   

Base Salary

 

  Provide fixed income for financial certainty and stability

  Reward individual performance

   
 
   

Annual Cash Incentive

 

  Directly link pay to Company performance through achievement of financial performance goals

  Incentivize and motivate executives to achieve our short-term strategic and financial objectives that we believe will drive long-term value creation

  Promote team orientation by encouraging participants in all areas of the Company to work together to achieve common Company goals

   
 
   

Equity Long-Term Incentives

  Performance Units

  Stock Options

  RSUs

 

  Directly link pay to Company and stock price performance through achievement of financial performance goals and TSR (relative to the S&P 500), as well as stock price appreciation

  Incentivize and motivate executives to achieve key long-term strategic and financial objectives

  Align executives’ interests with stockholders’ interests

  Foster a long-term focus on increasing stockholder value

  Encourage executive stock ownership

   

 

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Our Compensation Committee has designed our executive compensation programs so that a significant percentage of annual compensation is performance-based and at risk, with a large portion delivered in the form of equity, rather than cash, which promotes alignment with stockholders’ interests and creates incentives for long-term performance. The chart below shows the 2016 targeted TDC mix for Mr. Sinclair as our CEO and the average 2016 targeted TDC mix for the other NEOs:

 

 

LOGO

* For purposes of the chart above, the Targeted TDC is the sum of annual base salary, annual cash incentive plan target and annual equity LTIs grant value (i.e., 2016-2018 LTIP grant value (LTIP three-year awards granted annually), plus annual grant value of stock options and time-vesting RSUs, including any one-time special RSU grants).

Base Salary

 

Our Compensation Committee reviews the base salaries of our CEO, the CEO’s direct reports and other EVPs at its first meeting each year. Our CEO typically provides our Compensation Committee with recommendations regarding merit increases to the base salary for each of these executives (excluding the CEO). Merit increases to base salaries are driven primarily by our CEO’s evaluation of individual performance, market competitive factors and our corporate merit budget. Our CEO’s base salary is determined by our Compensation Committee in an executive session without the presence of our CEO, with input from FW Cook.

For 2016, given our emphasis on performance-based compensation, our CEO recommended, and our Compensation Committee determined, that none of our NEOs (and other CEO direct reports) would receive a merit-based salary increase. Ms. Chugg’s base salary was increased from $550,000 to $615,000 in September 2016, in connection with Ms. Chugg assuming greater responsibilities due to the realignment of the Global Brands Teams.

For 2017, in light of our performance in 2016 as well as market data, our CEO recommended, and our Compensation Committee determined, that none of our NEOs (and other CEO direct reports) would receive a merit-based salary increase. In February 2017, Mr. Dickson’s base salary was increased from

 

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$900,000 to $1,000,000 as part of his retention package in connection with our leadership transition. Mr. Sinclair’s base salary was reduced from $1.5 million to $1 million in connection with his transition from CEO to Executive Chairman.

Annual Cash Incentive

 

The MIP, our annual cash incentive plan, provides our NEOs and approximately 10,500 other global employees with the opportunity to earn annual cash incentive compensation based on achievement of our short-term strategic and financial objectives that are intended to drive long-term value creation. The objectives of the MIP include:

 

  Link pay to financial performance and put a meaningful portion of compensation at risk based on our financial success;

 

  Incentivize and motivate executives to achieve our short-term strategic and financial objectives that we believe will drive long-term value creation;

 

  Provide a competitive level of targeted annual compensation to attract and retain key talent;

 

  Promote team orientation by encouraging all areas of the Company to work together to achieve common Company goals; and

 

  Provide appropriate reward leverage and risk for threshold to maximum performance.

2016 MIP – Summary of Changes

At its November 2015 and February 2016 meetings, our Compensation Committee approved the following changes to the design under our MIP for 2016 to better drive profitable growth:

 

  75% of the target MIP opportunities was based on the financial performance measures and 25% of target MIP opportunities was based on individualized strategic priorities for EVPs and above. Prior to 2016, 100% of the target bonus opportunities of our NEOs were based on financial performance measures.

 

  The financial measures were streamlined to only include adjusted operating profit (75% weighting) and adjusted net sales (25% weighting), in order to achieve greater alignment with our business objectives and our turnaround strategy to increase top- and bottom-line growth.

 

  25% of the target MIP opportunities was based on the individualized strategic priorities related to each executive’s job responsibilities, to provide a stronger line of sight to operational performance over which the executive has responsibility, driving a culture of accountability.

 

  No payouts would be made under the MIP unless we achieved adjusted operating profit threshold performance. As previously noted, because the adjusted operating profit threshold performance was not achieved in 2016, no payouts to the NEOs and other EVPs were made under the MIP.

 

  In order to ensure tax deductibility of the MIP payments, the MIP was structured as an “umbrella” plan where the MIP would be funded at a maximum for our NEOs and other EVPs if 50% of the target adjusted operating profit goal was achieved, while allowing the Compensation Committee to exercise discretion to adjust the payouts downward in accordance with actual achievement of our financial measures. While this minimum funding requirement was met in 2016, no payouts occurred in accordance with the terms of the MIP since the condition to payout of meeting adjusted operating profit threshold performance was not achieved.

 

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Target MIP Opportunity

The following table shows the 2016 target MIP opportunities for our NEOs, expressed as a percentage of base salary, which were unchanged from 2015.

 

  Name  

        2016 Target MIP Opportunity         

as a % of Base Salary

  Christopher A. Sinclair

      150 %

  Richard Dickson

      100 %

  Kevin M. Farr

      70 %

  Peter D. Gibbons

      65 %

  Robert Normile

      65 %

  Juliana L. Chugg

      70 %

Potential 2016 MIP payouts ranged from 0-200% of target MIP opportunity, with 0-150% payable based on our performance against measurable financial goals and 0-50% payable based on achievement of individualized strategic priorities related to the executive’s job responsibilities.

Financial Performance Goals and Results

The amount that can be earned under each financial measure for threshold performance is 25% of the amount that is payable for target performance and the amount that can be earned for maximum performance is 200% of the target amount. The percentage that could be earned for threshold performance was increased in 2016 from 22.5% to 25% to better align with competitive practice. Linear interpolation from threshold to target performance and from target to maximum performance are applied for each measure. No amounts are earned under a financial measure for below threshold performance, and no amounts can be earned under the MIP if the Company adjusted operating profit threshold performance is not achieved.

Corporate NEOs

 

  Company Financial Measure   Threshold After Weighting     Target After Weighting     Maximum after Weighting  

Adjusted Operating Profit (75% weighting)

      14.06 %       56.25 %       112.50 %

  Adjusted Net Sales (25% weighting)

      4.69 %       18.75 %       37.50 %

  % Earned for Financial Measures

      18.75 %       75.00 %       150.00 %

In setting the target MIP financial performance goals for 2016, the Compensation Committee reduced the net sales goals from the actual 2015 net sales results to factor in the loss of the Disney Princess license for 2016. The table below shows the goals and actual levels achieved in 2016 under the Company-wide financial measures of our MIP.

 

  Company Financial Measure  

Threshold 

(millions) 

 

Target 

(millions) 

 

Maximum 

(millions) 

 

2016 

Actual 

(millions) 

 

Weighted 

Performance 

Earnout % 

  Adjusted Operating Profit (75% weighting)

    $ 527     $ 576     $ 625     $ 485       0 %

  Adjusted Net Sales (25% weighting)

    $ 5,377     $ 5,625     $ 5,888     $ 5,457       0 %(1)

  Company Financial Performance Earnout

                                              0 %

 

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(1) Because we did not achieve the adjusted operating profit threshold performance, the adjusted net sales earnout percentage was reduced to zero. The actual adjusted net sales earnout percentage was 14.8% otherwise.

The table above reflects the goals and actual amounts as adjusted from the GAAP results consistent with the plan parameters and Compensation Committee approvals. As in past years, in order to improve alignment with stockholders’ interests and ensure that events outside the control of management do not unduly influence the achievement of the performance measures, actual results are adjusted for the impact of unusual items. In 2016, actual results for adjusted operating profit reflected adjustments for litigation costs, severance payments, Venezuelan currency devaluation, and acquisition-related intangible amortization. Without such adjustments, the actual results for the operating profit would have been $496 million, which was below threshold performance. For 2016, there were no adjustments to net sales.

Business Unit NEO

Ms. Chugg’s 2016 MIP was based 25% on the Company financial measures, 25% on progress against individualized strategic priorities, 35% on the performance of our Global Brands Team – Core Brands and 15% on the performance of our Global Brands Team. Thus, the first two components or 50% of her target MIP opportunity were achieved at 0% because we did not achieve the adjusted operating profit threshold performance. As with the Company-wide financial measures:

 

  Threshold performance under each of the business group financial measures earns 25%, target performance earns 100% and maximum performance earns 200%;

 

  The Company goals for adjusted operating profit have to achieve threshold performance in order for any amounts to be payable for the business group performance; and

 

  2016 actual results for the business group adjusted operating profit reflected adjustments for litigation costs, severance payments, Venezuelan currency devaluation, and acquisition-related intangible amortization, and no adjustments were made to net sales.

The following table sets forth the 2016 goals and actual results, after permitted adjustments and weighting, for the Global Brands Team and the Global Brands Team – Core Brands:

 

    Financial Measure  

 Threshold 

(millions)

 

Target

 (millions) 

 

 Maximum 

(millions)

 

2016

Actual

 (millions) 

 

Weighted

 Performance 

Earnout %

   

Group Global Brands Team

 

   

WW Adjusted Operating Profit Less Inventory (75% weighting)

    $ 770     $ 852     $ 941     $ 749       0 %
   

Group Adjusted Net Sales (25% weighting)

    $ 4,657     $ 4,871     $ 5,099     $ 4,788       0 %(1)
   

Group Financial Performance Earnout

                                              0 %
   

Group Global Brands Team – Core Brands

 

   

WW Adjusted Operating Profit Less Inventory (75% weighting)

    $ 411     $ 449     $ 488     $ 406       0 %
   

Group Adjusted Net Sales (25% weighting)

    $ 1,832     $ 1,916     $ 2,006     $ 1,925       0 %(1)
   

Group Financial Performance Earnout

                                              0 %

(1) Because we did not achieve the Company adjusted operating profit threshold performance, the group adjusted net sales earnout percentage was reduced to zero. The actual group adjusted net sales earnout percentage was 19.2% otherwise for the Group Global Brands Team and 27.4% otherwise for the Group Global Brands Team – Core Brands.

 

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2016 Strategic Priorities

Set forth below are the five Company-wide strategic priorities that informed the individualized strategic priorities for our NEOs under our 2016 MIP:

 

Mattel’s Strategic Priorities

  Build powerful brand franchises

 

  Drive continuous cost improvement

  Establish Toy Box as the partner of choice

 

  Rapidly build emerging market leadership

  Develop unmatched commercial excellence

 

The Compensation Committee established the individualized strategic priorities for our executive officers, and Ms. Chugg was not an executive officer at such time. The individualized strategic priorities for each NEO, other than Ms. Chugg, are set forth below. As previously noted, because the adjusted operating profit threshold performance was not achieved, no payouts could be earned by the NEOs and other EVPs under the individualized strategic priorities component.

 

  Name   Individualized Strategic Priorities

  Christopher A. Sinclair

 

  Build powerful brand franchises (weighted 20%)

  Establish Toy Box as the partner of choice (weighted 20%)

  Drive continuous cost improvement (weighted 20%)

  Rapidly build emerging market leadership (weighted 25%)

  Build organizational capabilities (weighted 15%)

 

  Richard Dickson

 

  Deliver a robust product portfolio (weighted 30%)

  Speed delivery of products to market (weighted 20%)

  Drive continuous cost improvement (weighted 20%)

  Establish a multi-year strategic planning process (weighted 15%)

  Build organizational capabilities (weighted 15%)

 

  Kevin M. Farr

 

  Build powerful brand franchises (weighted 25%)

  Drive continuous cost improvement (weighted 25%)

  Rapidly build emerging market leadership (weighted 20%)

  Develop unmatched commercial excellence (weighted 15%)

  Build organizational capabilities (weighted 15%)

 

  Peter D. Gibbons

 

  Drive continuous cost improvement (weighted 30%)

  Improve service and quality (weighted 20%)

  Improve compliance (weighted 15%)

  Execute strategy and projects (weighted 20%)

  Build organizational capabilities (weighted 15%)

 

  Robert Normile

 

  Build powerful brand franchises and establish Toy Box as partner of choice (weighted 45%)

  Drive continuous cost improvement (weighted 20%)

  Re-invigorate ethics training program (weighted 20%)

  Build organizational capabilities (weighted 15%)

 

 

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Equity Long-Term Incentives

 

Our LTIs are equity-based and aimed at focusing our executives on achieving our key long-term financial goals and strategic objectives, while rewarding growth in stockholder value that is sustained over several years. We believe our equity-based LTIs align our executives’ interests with those of our stockholders and provide important retention value.

Our current portfolio approach to LTIs continues to be comprised of three equity components: long-term Performance Units, stock options and time-vesting RSUs, each representing one-third of the LTI annual grant values.

2016 LTI – Grant Values

In May 2016, the Compensation Committee considered FW Cook’s 2015 executive compensation competitiveness review as well as the history, terms and proposed total LTI annual target values to be effective as of August 1, 2016, and, with input from FW Cook, approved the total LTI annual target value range for each job level with a set target and maximum amount. In the context of these ranges, the Compensation Committee approved the specific 2016 total LTI annual target and actual annual grant value for each NEO as set forth in the table below. The 2016 LTI annual grant values were substantially similar to the 2015 LTI annual grant values, except for Mr. Sinclair, who was not granted any Performance Units in 2015 when he became our CEO as Performance Units were then granted every three years and the 2014-2016 LTIP performance cycle was nearly half over. In determining Mr. Sinclair’s 2016 LTI annual grant value, the Compensation Committee considered his $5 million LTI annual grant value for 2015, his $1.5 million RSU grant upon his appointment as interim CEO in January 2015 and market data provided by FW Cook indicating Mr. Sinclair’s total 2015 LTI grant value was below the median of our comparator peer group.

The table below shows our NEOs’ 2016 LTI annual grant values, delivered one-third each in stock options, time-vesting RSUs and Performance Units.

2016 LTI Annual Grant Values

 

    Name  

2016

Stock Options(1)

     

2016 Time-

Vesting

RSUs(2)

     

2016 Performance

Units(3)

     

2016 Total

LTI

Annual

Grant Value

   
   

Christopher A. Sinclair

    $ 2,333,333         $ 2,333,333         $ 2,333,333         $ 7,000,000    
   

Richard Dickson

    $ 1,000,000         $ 1,000,000         $ 1,000,000         $ 3,000,000    
   

Kevin M. Farr

    $ 585,000         $ 585,000         $ 585,000         $ 1,755,000    
   

Peter D. Gibbons

    $ 350,000         $ 350,000         $ 350,000         $ 1,050,000    
   

Robert Normile

    $ 350,000         $ 350,000         $ 350,000         $ 1,050,000    
   

Juliana L. Chugg(4)

    $ 400,000         $ 650,000         $ 400,000         $ 1,450,000    

(1) The stock option grant values shown above are reflected in the “Summary Compensation Table.”

(2) It should be noted that the values for the time-vesting RSUs above, and, thus, the total LTI Annual Grant Values, are different than the values reflected in the “Summary Compensation Table” as the accounting rules require the grant date values for the RSUs to be based on our closing stock price on the grant date discounted for the lack of dividend equivalents. In converting the grant values to a number of RSUs, we use the full closing stock price on the grant date.

 

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(3) In accordance with SEC rules and FASB Topic 718, due to the annual setting of financial performance goals under the 2014-2016 LTIP, one-third of the grant value of the Performance Units for the 2014-2016 LTIP is also included in the “Summary Compensation Table” as being granted in 2016 but is not included in the table above. The Performance Units shown above are granted for the performance period beginning January 1, 2016 and ending December 31, 2018.

(4) Included in Ms. Chugg’s LTI annual grant value is a special off-cycle RSU grant valued at $250,000 made on August 31, 2016, in recognition of Ms. Chugg assuming greater responsibilities due to the realignment of the Global Brands Teams.

2016-2018 LTIP – Summary of Changes

The Compensation Committee determined in November 2015 to grant our long-term Performance Units on an annual basis instead of the prior grant practice of every three years with end-to-end cycles. In making this decision, the Compensation Committee noted that this is the predominant market practice (100% of our peer group), permits better year-to-year comparison of grant values, provides flexibility to more timely respond to management and organizational changes, and promotes a better connection to long-term value creation tied to the Company’s evolving turnaround strategy.

With respect to the 2016-2018 LTIP cycle, the Compensation Committee approved a new three-year cumulative EPS financial performance measure to replace the prior NOPAT-CC and net sales financial measures, which were set annually. The three-year EPS goal was set at the commencement of the three-year performance cycle. The Compensation Committee implemented these changes to simplify the LTIP’s structure, utilize differentiated metrics as compared to the Annual Cash Incentive, and ensure sharp focus on sustainable and profitable growth, which supports our turnaround strategy.

Like the 2014-2016 LTIP, the earnout percentage under the 2016-2018 LTIP is modified based on our TSR performance as compared to companies in the S&P 500. The Performance Units are earned 0-150% based on our performance against financial performance goals, which earned percentage is then adjusted up or down by up to 50% based on our TSR performance relative to the TSR performance of companies in the S&P 500 for the three-year performance cycle, as shown below:

 

    Total Stockholder Return Modifier
   

 

Mattel TSR Relative to S&P 500

 

   

 

 

 

 

<25

 

 

th

 

     

 

50th

 

       

 

 

 

 

>75

 

 

th

 

   

Earnout Percentage Adjustment*

      – 50 %       No change           + 50 %

* TSR levels achieved between the 25th, 50th and 75th percentiles are linearly interpolated.

At maximum financial performance and maximum performance of relative TSR, the total earnout would equal 200% of the target Performance Units granted.

The Compensation Committee believes the TSR modifier is an important component in the LTIP, as it provides an additional link between incentive pay and our stockholders’ interests, encourages long-term growth and measures our ability to outperform other companies in the S&P 500.

The target number of Performance Units granted under the 2016-2018 LTIP was determined by dividing the grant value by a conversion price of $37.70, which is based on our closing stock price of $32.60 on March 21, 2016 plus the accounting fair value of the TSR component as of March 21, 2016 of $5.10, using a Monte Carlo simulation.

Similar to the 2014-2016 LTIP Performance Units, the Performance Units granted under the 2016-2018 LTIP have dividend equivalent rights that are converted to shares of Mattel common stock only when and

 

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to the extent the underlying Performance Units are earned and paid. Dividend equivalents accrue and are assumed to be reinvested in shares as of our closing stock price on the ex-dividend date with respect to all dividends during the three-year performance cycle.

2014-2016 LTIP Performance Cycle – Results

Under the 2014-2016 LTIP, 50% to 150% of the target number of the Performance Units could be earned based on the two financial performance measures of annual NOPAT-CC (75% weighting) and annual net sales (25% weighting), with annual earnouts averaged over the three-year performance period. The resulting earnout percentage would then be increased or decreased based on our relative three-year TSR. In March 2016, our Compensation Committee established the annual NOPAT-CC and net sales goals for 2016.

 

  Financial Goals – Achievement of a threshold level of NOPAT-CC performance was required as a condition to any earnout under the financial goals for the applicable year. At the end of the three-year performance cycle, the performance earnout percentages for each of the three years were averaged together. The formula for determining the annual earnout under the financial performance measures of the 2014-2016 LTIP was as follows:

 

                                 NOPAT – CC                            +                                Net Sales                               =  

Total % Earned Before

TSR Adjustment*

% Earned After 75% Weighting

  % Earned After 25% Weighting    

Threshold – 37.5%

  Threshold – 12.5%   50%

Target – 75.0%

  Target – 25.0%   100%

Maximum – 112.5%

  Maximum – 37.5%   150%

* Linear interpolation applies to performance between threshold, target and maximum, with no earnout for performance below threshold.

 

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The following table shows the goals for annual NOPAT-CC (75% weighting) and net sales (25% weighting) set by our Compensation Committee for the 2014-2016 LTIP, and our actual results for these measures and the percentage achieved based on our performance. The 2016 threshold goal for net sales was set at below actual results for 2015 to factor in the loss of the Disney Princess license for 2016.

 

    Year   Measure  

Threshold 

(millions) 

 

Target 

(millions) 

 

Maximum 

(millions) 

 

Actual 

(millions) 

 

Weighted 

Performance 

Achieved 

   

2014  

 

NOPAT-CC

(75% weighting)

    $ 248     $ 305     $ 362     $ (116 )(1)       0 %
       

Net Sales

(25% weighting)

    $ 6,605     $ 6,775     $ 6,934     $ 6,024       0 %
        2014 Earnout                   0 %
   

2015

 

NOPAT-CC

(75% weighting)

    $ (200 )     $ (160 )     $ (120 )     $ (196 )(1)       41 %
       

Net Sales

(25% weighting)

    $ 5,751     $ 5,899     $ 6,038     $ 5,703       0 %
        2015 Earnout                   41 %
   

2016

 

NOPAT-CC

(75% weighting)

    $ (174 )     $ (136 )     $ (97 )     $ (209 )(1)       0 %
       

Net Sales

(25% weighting)

    $ 5,377     $ 5,625     $ 5,888     $ 5,457       0 %(2)
        2016 Earnout                   0 %
        2014-2106 Financial Performance Goals Average Earnout                   14 %

(1) In 2014, 2015 and 2016, actual results for the NOPAT-CC measure were adjusted for litigation costs and resolutions of legal disputes, severance payments, acquisition and integration-related expenses and adjustments, factoring of receivable, anticipation of receivables, cash tax payments and Venezuelan currency devaluation. For 2016, without such adjustments, the actual for NOPAT-CC would have been $(202) million, which is below threshold performance.

(2) Because NOPAT-CC was below the threshold level of performance, the 2016 Net Sales earnout percentage was zero for purposes of determining earnout under the 2016 financial measures. The actual Net Sales earnout percentage was 16.5% otherwise.

 

  TSR Results – The TSR modifier for the 2014-2016 LTIP operated the same as for our 2016-2018 LTIP discussed above. Our three-year relative TSR for the 2014-2016 performance period was at the 13th percentile, resulting in a decrease of 50% to the three-year average financial performance measures earnout of 14%. Thus, the total earnout percentage for the NEOs under the 2014-2016 LTIP was zero.

Stock Options and RSUs

Included in our portfolio approach to equity-based LTIs, are annual grants of stock options and time-vesting RSUs:

 

  Stock Options – Stock options have value only with stock price appreciation and continued service over time, thereby aligning interests with our stockholders. Our stock options typically vest in three approximately equal annual installments on the first through third anniversaries of the grant date, and have a ten-year term.

 

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  Time-Vesting RSUs – Time-vesting RSUs put significant value at risk and are effective as an ownership and retention tool. Our RSUs typically vest in three approximately equal annual installments on the first through third anniversaries of the grant date and do not provide for dividend equivalents for grants made on or after July 31, 2015.

2017 Incentive Compensation Program Changes

 

2017 MIP

In March 2017, the Compensation Committee approved an annual cash incentive design under the MIP that is substantially similar to the design used in 2016; bonus opportunities will be based 75% on financial performance goals (as measured by adjusted operating profit and adjusted net sales) and 25% on individualized strategic priorities for EVPs and above. For 2017, the Compensation Committee also determined to base the financial performance portion of the MIP on only Company financial performance goals for a larger population of our senior leadership: all NEOs and CEO and COO direct reports. As a result, the financial performance portion of the MIP for certain senior executives whose annual cash incentive previously included business unit financial goals will now strictly include Company financial goals. The Compensation Committee believes that the change to eliminate business unit financial goals within the financial performance portion of the MIP standardizes goals for a broader portion of our senior leadership, further encouraging a common focus on our Company-wide turnaround objectives of top-line growth with bottom-line discipline.

In addition, in March 2017, the Compensation Committee and the Board approved a new annual cash incentive plan called the Mattel Incentive Plan (described in greater detail under “Proposal 5 – Approval of New Mattel Incentive Plan and Material Terms of Its Performance Goals”), substantially similar to the MIP. The new Mattel Incentive Plan is subject to stockholder approval. If approved by stockholders, the new Mattel Incentive Plan will replace the MIP for bonus opportunities established after May 19, 2017; however, we expect that the first bonus opportunities under the new Mattel Incentive Plan will be granted in the first quarter of 2018 and will relate to 2018 performance.

2017-2019 LTIP

In March 2017, the Compensation Committee approved the new 2017-2019 LTIP and granted Performance Units thereunder. The 2017-2019 LTIP will continue to use an EPS financial measure and a three-year relative TSR modifier as the performance measures. The Performance Units will be earned based on annual EPS performance averaged over the three-year performance cycle, and the resulting earned percentage will then be increased or decreased based on our relative three-year TSR versus the S&P 500.

The Compensation Committee approved a change from three-year goal setting (in place for the 2016-2018 LTIP) to annual goal setting for the EPS financial measure because it believes annual goal setting is necessary at this time given the shifting nature of the current retail environment and Mattel’s ongoing transformation – factors which limit the committee’s ability to precisely forecast EPS performance over a three-year period. The Compensation Committee is committed to continuing to set rigorous goals, and believes that one-year goal setting will: (i) allow the committee to set challenging targets that better reflect the Board’s expectations for changes at the Company, (ii) better enable the committee to account for shifting industry dynamics, and (iii) avoid the potential risk of either windfall earnouts or retention issues that could be associated with setting a less precise three-year EPS goal. To maintain accountability

 

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for longer-term performance and incentivize sustained profitable growth, annual EPS achievements will be averaged over the three-year period. For the 2017-2019 LTIP, the Compensation Committee is retaining the relative three-year TSR modifier, as it provides an additional link between incentive pay and stockholders’ interests, encourages long-term growth and measures our ability to outperform other companies in the S&P 500.

Other Forms of Compensation

 

Perquisites and Other Personal Benefits

We offer the following perquisites to our NEOs to attract and retain key executive talent:

 

  Car Allowance – We provide our executives with a monthly car allowance to allow our executives to fulfill their job responsibilities that involve extensive regional travel to the offices of clients and business partners. The monthly amount of the allowance is based on the executive’s job level. In 2015, our Compensation Committee approved Mr. Sinclair’s use of a Company car, in lieu of a car allowance, in connection with his appointment to Interim CEO and then CEO. The cost of the Company car has been less than the cost of the monthly allowance provided to our other NEOs. Mr. Sinclair ceased to be eligible for this benefit effective April 1, 2017 in connection with his new role as Executive Chairman.

 

  Financial Counseling Services – We provide our executives the choice of financial counseling and tax return preparation service through a third-party financial service to provide guidance in managing complex investment, tax and legal matters or up to $10,000 reimbursement for financial counseling services through a company of the executive’s choice. We believe that providing this service gives our executives a better understanding of their compensation and benefits and their value, allowing the executives to concentrate on Mattel’s future success.

 

  Executive Physicals – We provide comprehensive executive physical examination and diagnostic service costs. We believe that the executive physicals help ensure the health of our executives and provide a retention tool at a reasonable cost to Mattel.

 

  Relocation Assistance – We provide relocation assistance to newly hired and current executives who would have to relocate to accept our job offer or a new role within Mattel. Such relocation assistance can be pursuant to Mattel’s relocation program, which is designed to cover the costs directly resulting from the Company-requested relocation, which includes travel, shipping household goods, temporary housing and participation in a home sale program (which covers certain costs (but not loss) on the sale of the executive’s home), and/or can be a one-time special relocation payment. The executives are required to repay such relocation program benefits or payments if they resign or their employment is terminated for cause within one year or two years of the transfer date, as applicable. Our relocation program and one-time special relocation payments benefit Mattel, are business-related and are primarily intended to eliminate or lessen the expenses that the executive incurs as a direct result of the Company’s request. They are important tools for us to recruit and retain key management talent and allocate our talent as best fits our Company objectives.

In connection with Mr. Sinclair’s appointment to Interim CEO and then as CEO, our Compensation Committee approved a special allowance in the amount of $60,000 per month, which was in lieu of participation in Mattel’s relocation program or any one-time special relocation payment. This was intended to assist him with his living and commuting expenses while working in California and maintaining his primary residence in Florida. Mr. Sinclair ceased to be eligible for this allowance effective April 1, 2017 in connection with his new role as Executive Chairman.

 

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Pursuant to the terms of Ms. Georgiadis’ letter agreement with Mattel, dated January 11, 2017, Ms. Georgiadis will be provided temporary accommodations, one round-trip airfare per week and reimbursement for incidental relocation expenses through September 30, 2017. In addition, she will be eligible to receive benefits under Mattel’s relocation program for up to two years from her hire date. Ms. Georgiadis will be required to repay the cost of the relocation services incurred by Mattel if she resigns or her employment is terminated with cause within one year of her relocation date.

 

  Limited Aircraft Use – Mr. Sinclair was eligible for periodic personal use of a private aircraft up to a maximum of 25 flight hours per year to facilitate time management and focus on Mattel. In providing this benefit to Mr. Sinclair, the Compensation Committee determined that Mr. Sinclair’s use of a private aircraft for personal use also benefited Mattel as it allowed him to be available quickly and efficiently for our business needs, especially in light of Mr. Sinclair having his primary residence in Florida while working in California. Mr. Sinclair ceased to be eligible for this benefit effective April 1, 2017 in connection with his new role as Executive Chairman. Ms. Georgiadis is not eligible for this benefit.

Retirement Plans

Our NEOs participate in the same broad-based benefit plans as our other U.S. employees. In addition, we provide NEOs certain executive benefits, which are not provided to other employees generally, to promote tax efficiency or to replace benefit opportunities that are not available to executives because of regulatory limits. These include:

 

  The 2005 Supplemental Executive Retirement Plan (“SERP”), our supplemental, non-qualified pension plan provides supplemental retirement income to a selected few senior executives. No new participants have been added to the SERP since 2001, and as a result, Messrs. Farr and Normile are the only executives earning benefits under the SERP.

 

  The DCP, our non-qualified deferred compensation plan, generally provides our U.S.-based executives with a mechanism to defer compensation in excess of the amounts that are permitted to be deferred under our tax-qualified, 401(k) savings plan (“401(k) Plan”). Together, the 401(k) Plan and the DCP allow participants to set aside amounts as tax-deferred savings for their retirement. Similar to the 401(k) Plan, the DCP provides for Company automatic contributions and matching contributions, both of which are at the same levels as the Company contributions in the 401(k) Plan. Our Compensation Committee believes the opportunity to defer compensation is a competitive benefit that enhances our ability to attract and retain talented executives while building plan participants’ long-term commitment to Mattel. The return on the deferred amounts is linked to the performance of market-based investment choices made available in the plan. The terms of Mr. Sinclair’s letter agreement provide that he is not eligible to participate in the DCP.

No Poor Pay Practice of Tax Gross-Ups on Perquisites and Benefits

Mattel generally does not provide tax gross-up payments to our executives in connection with perquisites and benefits. In certain limited cases, Mattel does provide to executives (and generally to other employees) tax gross-up payments for relocation expenses and related international tax compliance and tax equalization costs and payments because we believe such expenses are incurred as a direct result of Mattel’s request.

Severance and Change-of-Control Benefits

 

We have three executive severance arrangements: the Mattel, Inc. Executive Severance Plan (the “Severance Plan”), the Mattel, Inc. Executive Severance Plan B (the “Severance Plan B,” and together with

 

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the Severance Plan, the “Executive Severance Plans”) and an executive severance practice. As of the end of fiscal year 2016, Messrs. Farr and Normile participated in the Severance Plan and Mr. Dickson participated in the Severance Plan B. Mr. Gibbons and Ms. Chugg are eligible for benefits under our current executive severance practice. Mr. Sinclair is not eligible to participate in any severance plan, arrangement or program, including our executive severance practice; however, pursuant to the terms of his letter agreement, in the event he ceases to be employed by Mattel, Mr. Sinclair would be eligible to receive a current-year, prorated MIP payout based on actual performance and paid at the time bonuses are generally paid to employees.

Ms. Georgiadis is eligible to participate in the Severance Plan B, as modified by the terms of her participation letter agreement with the Company. The participation letter agreement provides for a severance benefit multiple of two times base salary plus target annual cash incentive in the event Ms. Georgiadis’ employment is terminated by the Company without cause. In addition, the participation letter agreement provides Ms. Georgiadis with severance protection in the event her employment is terminated without cause or she resigns for good reason within 24 months following a change in control.

At the time of adopting each of the Executive Severance Plans, our Compensation Committee reviewed competitive data of severance benefits prepared by FW Cook. Our Compensation Committee believes that the benefits provided by the Executive Severance Plans are reflective of current compensation market practices and trends.

Our Compensation Committee believes that our executive severance arrangements are key to our ability to recruit, retain and develop key, high-quality management talent in a competitive market because such arrangements provide reasonable protection to the executive in the event he or she is not retained under specific circumstances. In addition, our tiered approach to severance arrangements allows us to tailor our arrangements as appropriate to each job level based on market practice. We do not pay any excise tax gross-up payments under our severance arrangements.

 

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IMPORTANT POLICIES AND GUIDELINES

Stock Ownership Guidelines

 

We have had stock ownership guidelines for our NEOs and certain other senior executives since 2001. Under our current stock ownership guidelines, effective January 1, 2014, the targeted stock ownership is established as shares of Mattel common stock with a value equal to a multiple of base salary, as set forth below.

 

    Name  

Salary Multiple

             as of 12/2016              

                    Deadline               
   

Christopher A. Sinclair

      6x       3/31/2020
   

Richard Dickson

      4x       12/31/2019
   

Kevin M. Farr

      4x       12/31/2018
   

Peter D. Gibbons

      3x       12/31/2018
   

Robert Normile

      3x       12/31/2018
   

Juliana L. Chugg

      3x       9/30/2020

Generally, executive officers have five years from the later of the date the new target levels were established or the date of promotion or hiring to meet the guidelines.

All the NEOs have either met their target levels or are on track to be in compliance by their deadlines. However, if the target level ownerships are not met within the compliance deadline, the executive officers are required to retain 100% of after-tax shares acquired from equity awards until the guidelines are met. Based on input from FW Cook, our Compensation Committee believes that our guidelines align with best practices.

Shares counted toward ownership guidelines include shares of Mattel common stock directly owned, beneficially owned or held in the Mattel Stock Fund of the 401(k) Plan, and phantom shares of Mattel common stock held in the Mattel Stock Equivalent Fund of our DCP.

Ms. Georgiadis, as our new CEO, has a stock ownership requirement of 6x her base salary, which must be met by January 31, 2022.

Insider Trading Policy

 

Mattel’s Insider Trading Policy, as implemented, generally prohibits Board members, officers and employees from engaging in short-term or speculative transactions in Mattel common stock, including short sales, transactions in publicly-traded options and other derivative securities, hedging transactions, holding Mattel shares in a margin account and pledging or using Mattel shares owned as collateral for loans.

 

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Table of Contents
  COMPENSATION DISCUSSION AND ANALYSIS          

 

Recoupment of Compensation

 

Our Clawback Policy provides for forfeitur