DEF 14A 1 d482786ddef14a.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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Mattel, Inc.
(Name of Registrant as Specified In Its Charter)
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Table of Contents

 

 

 

 

LOGO

2018 Proxy Statement

and Notice of Annual Meeting

of Stockholders to be Held on May 17, 2018


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  NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS  

 

 

 

Mattel, Inc.

Notice of 2018 Annual Meeting of Stockholders

The 2018 Annual Meeting of Stockholders of Mattel, Inc. (“Mattel” or the “Company”) will be held on May 17, 2018 at 12:15 p.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 “2018 Annual Meeting”).

We will consider and act on the following matters of business at the 2018 Annual Meeting:

 

      Matter    Our Board’s Recommendations

Proposal 1

   Election of the ten director nominees named in the Proxy Statement: R. Todd Bradley, Michael J. Dolan, Trevor A. Edwards, Margaret H. Georgiadis, Ynon Kreiz, Soren T. Laursen, Ann Lewnes, Dominic Ng, Vasant M. Prabhu, and Rosa G. Rios    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, 2018    FOR

Proposal 3

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

Proposal 4

   Approval of a First Amendment to the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan    FOR

Proposal 5

   Stockholder proposal regarding an independent Board Chairman, if properly presented    AGAINST
    

Such other business as may properly come before the 2018 Annual Meeting

 

    

If you were a holder of record of Mattel common stock at the close of business on March 23, 2018, you are entitled to notice of, and to vote at, the 2018 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 2018 Annual Meeting, please submit a proxy to vote as soon as possible so that your shares will be represented and voted at the 2018 Annual Meeting.

By Order of the Board of Directors

 

LOGO

Robert Normile

Secretary

El Segundo, California

April 5, 2018


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  TABLE OF CONTENTS  

 

 

 

Table of Contents

 

         Page  
PROXY SUMMARY      1  
CORPORATE GOVERNANCE AT MATTEL      12  
  CORPORATE GOVERNANCE STANDARDS AND PRACTICES      12  
  BOARD GENERAL INFORMATION      16  
  DIRECTOR COMPENSATION      24  
PROPOSAL 1 – ELECTION OF DIRECTORS      28  
AUDIT AND RELATED PARTY MATTERS      41  
  REPORT OF THE AUDIT COMMITTEE      41  
  FEES INCURRED FOR SERVICES BY PRICEWATERHOUSECOOPERS LLP      43  
  CERTAIN TRANSACTIONS WITH RELATED PERSONS      45  
PROPOSAL 2 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      46  
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION      47  
  EXECUTIVE OFFICERS      47  
  COMPENSATION DISCUSSION AND ANALYSIS      49  
 

Executive Summary

     49  
 

Elements of Compensation

     60  
 

Important Policies and Guidelines

     75  
 

Executive Compensation Process and Governance

     77  
  EXECUTIVE COMPENSATION      81  
 

Summary Compensation Table

     81  
 

Grants of Plan-Based Awards in 2017

     88  
 

Outstanding Equity Awards at 2017 Year-End

     91  
 

Option Exercises and Stock Vested in 2017

     94  
 

2017 Pension Benefits

     94  
 

2017 Nonqualified Deferred Compensation

     96  
 

Potential Payments Upon Termination or Change of Control

     99  
  PAY RATIO OF CEO TO MEDIAN EMPLOYEE      110  
  COMPENSATION RISK REVIEW      112  
  REPORT OF THE COMPENSATION COMMITTEE      113  


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  TABLE OF CONTENTS  

 

 

       

 

         Page  
PROPOSALS RELATING TO COMPENSATION      114  
  PROPOSAL 3 – ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION (“SAY-ON-PAY”)      114  
  PROPOSAL 4 – APPROVAL OF FIRST AMENDMENT TO MATTEL, INC. AMENDED AND RESTATED 2010 EQUITY AND LONG-TERM COMPENSATION PLAN      115  
STOCKHOLDER PROPOSALS      130  
  PROPOSAL 5 – STOCKHOLDER PROPOSAL REGARDING INDEPENDENT BOARD CHAIRMAN      130  
STOCK OWNERSHIP AND REPORTING      134  
  PRINCIPAL STOCKHOLDERS      134  
  SECURITY OWNERSHIP OF MANAGEMENT AND THE BOARD      136  
  SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE      138  
  EQUITY COMPENSATION PLAN INFORMATION      139  
2018 ANNUAL MEETING AND VOTING INFORMATION      140  
  GENERAL MEETING INFORMATION      140  
  DEADLINE FOR 2019 PROPOSALS AND NOMINATIONS      147  
  OTHER MATTERS THAT MAY COME BEFORE THE 2018 ANNUAL MEETING      148  
APPENDIX A – FIRST AMENDMENT TO MATTEL, INC. AMENDED AND RESTATED 2010 EQUITY AND LONG-TERM COMPENSATION PLAN      A-1  
APPENDIX B – CONFORMED COPY OF THE MATTEL, INC. AMENDED AND RESTATED 2010 EQUITY AND LONG-TERM COMPENSATION PLAN      B-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 2017 financial performance, please review our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2018.

Meeting Information and Mailing of Proxy Materials

 

 

    Date:    May 17, 2018
    Time:    12:15 p.m. (Los Angeles time)
    Location:    Mattel Conference and Leadership Center, 1955 East Grand Avenue, El Segundo, California 90245
    Record Date:    March 23, 2018
    Mailing Date:      On or around April 5, 2018, 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 Ten Director Nominees (page 28)

 

  

 

FOR each Director Nominee

 

 

Proposal 2

  

 

Ratification of PricewaterhouseCoopers LLP as our Independent Accounting Firm for 2018 (page 46)

 

  

 

FOR

 

Proposal 3

  

 

Advisory Vote to Approve Named Executive Officer Compensation (“Say-on-Pay”) (page 114)

 

  

 

FOR

 

Proposal 4

  

 

Approval of First Amendment to Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan (page 115)

 

  

 

FOR

 

Proposal 5

  

 

Stockholder Proposal Regarding Independent Board Chairman, if properly presented (page 130)

 

  

 

AGAINST

 

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Director Nominees Reflect Strong Board Refreshment

 

New Directors in 2017

The Board remains focused on aligning our directors’ collective skills and expertise with Mattel’s evolving business strategy. Accordingly, the Board of Directors (the “Board”) added two new directors in 2017:

 

  Ms. Georgiadis, our Chief Executive Officer (“CEO”), joined us from Google Inc. in February 2017.

 

  Ynon Kreiz, the former Chairman of the Board and CEO of Maker Studios, Inc., a global digital media and content network company that was acquired by The Walt Disney Company, and a current director of Warner Music Group Corp., joined us in June 2017. The Board subsequently appointed Mr. Kreiz as Executive Chairman of the Board effective upon his election to the Board at the 2018 Annual Meeting. Please refer to page 13 for additional detail on the Board’s process in determining Mattel’s go-forward Board leadership structure.

New Independent Director Nominees

Additionally, in March 2018, the Board selected three new independent director nominees to stand for election to the Board at the 2018 Annual Meeting:

 

  R. Todd Bradley brings deep technology expertise to the Board, having most recently served as CEO of Mozido, Inc., a digital payment and mobile commerce provider. Prior to that, Mr. Bradley served as President of TIBCO Software, Inc., and held senior leadership positions with the Hewlett-Packard Company, including Executive Vice President of Strategic Growth Initiatives.

 

  Soren T. Laursen provides strong toy industry executive experience, having most recently served as CEO of TOP-TOY, a retailer of toys and children’s products in the Nordic region. Mr. Laursen also has held a variety of senior leadership roles with The LEGO Group, including President of LEGO Systems, Inc.

 

  Rosa G. Rios brings significant expertise in finance, real estate, manufacturing, and community development to Mattel’s Board. As the former Treasurer of the United States, Ms. Rios provides experience implementing efficiencies and innovative concepts while meeting increased production demand and increasing employee morale.

Each additional director and director nominee further strengthens Board expertise in areas that are integral to Mattel’s transformation efforts, including digital content and entertainment, financial management, retail and commercial leadership, technology integration, and toy industry knowledge.

On November 17, 2017, Dirk Van de Put resigned from our Board in order to focus on his new role and increased responsibilities as CEO of Modelez International, Inc. Mr. Sinclair, who currently serves as our Executive Chairman of the Board, intends to retire from the Board at the end of his current term and will not be standing for re-election to the Board at the 2018 Annual Meeting. Dr. Fergusson will have reached Mattel’s mandatory retirement age at the time of the 2018 Annual Meeting and, accordingly, will not stand for re-election to the Board. Mr. Scarborough and Ms. White Loyd also have notified us that they will not be standing for re-election to the Board in order to focus on their other professional and personal commitments.

 

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  PROXY SUMMARY  

 

 

 

Name    Independent   

Principal Occupation/

Key Experience

 

 Director 

Since

  Mattel Committee Memberships

R. Todd Bradley

    Former Chairman of the Board and Chief Executive Officer of Mozido, Inc.   New 
Director
Nominee 
   

Michael J. Dolan(1)

    Former Chief Executive Officer and Director of Bacardi Limited   2004  

 Compensation (Chair)

 Executive (Chair)

 Governance and Social Responsibility

Trevor A. Edwards

    Former President of NIKE Brand of NIKE, Inc.   2012  

 Compensation

 Governance and Social Responsibility

Margaret H. Georgiadis  

      Chief Executive Officer and Director of Mattel, Inc.   2017  

 Equity Grant Allocation

Ynon Kreiz(2)

    Former Chairman of the Board and Chief Executive Officer of Maker Studios, Inc.   2017  

 Finance

Soren T. Laursen

    Former Chief Executive Officer of TOP-TOY   New 
Director
Nominee 
   

Ann Lewnes

    Executive Vice President and Chief Marketing Officer of Adobe Systems Incorporated   2015  

 Governance and Social Responsibility

Dominic Ng(3)

    Chairman of the Board and Chief Executive Officer of East West Bancorp, Inc. and East West Bank   2006  

 Audit

 Finance

Vasant M. Prabhu(3)

    Executive Vice President and Chief Financial Officer of Visa Inc.   2007  

 Audit (Chair)

 Executive

 Finance

Rosa G. Rios

    Chief Executive Officer of Red River Associates, Inc.   New 
Director
Nominee 
   

 

(1) Independent Lead Director

(2) Effective upon his election to the Board at the 2018 Annual Meeting, Mr. Kreiz will be Executive Chairman (and, therefore, no

 longer an independent director) and will no longer serve on the Finance Committee.

(3) Audit Committee Financial Expert

The Board continues to work 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 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.

 

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Corporate Governance Highlights

 

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

 

Corporate Governance Practices

 

 

Board Practices

 

 

  Annual Board elections

 

 

  Routine review of Board leadership structure

 

  Majority voting standard

 

 

  Annual Board and Committee evaluations

 

  Robust Independent Lead Director role with significant responsibilities 

 

 

  Robust director succession and search process

 

  Stockholder right to call special meetings

 

 

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

 

  Stockholder right to proxy access

 

 

  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 10 director nominees are independent*

* Effective upon Mr. Kreiz’s election to the Board at the 2018 Annual Meeting, he will be Executive Chairman and, therefore, no longer an independent director.

Stockholder Engagement

 

Stockholder feedback is an important consideration for our Board, helping to shape our practices.

We have established a robust stockholder engagement program, which includes proactive and responsive dialogue with a broad range of our stockholders. This engagement helps inform the Board’s understanding of stockholder perspectives on a wide range of matters. Stockholder dialogue is a year-round practice for Mattel. During 2017, a year of tremendous leadership and business transformation, our dialogue with stockholders was primarily focused on the progress of our strategic transformation, our leadership changes, the performance of the Company, and how our Board and management team are driving value for our stockholders. The input and perspectives provided by our stockholders are highly valued, particularly at such a critical period for our Company, and we have processes in place to ensure that feedback received from our stockholders is relayed directly to the Board to help inform our practices. As we continue to execute on our transformation, we look forward to ongoing stockholder engagement.

 

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2017 Financial and Business Highlights

 

In 2017, we made tough decisions to reset our business and lay the groundwork for continued progress on our transformation in 2018.

During the year, our new leadership identified a clear go-forward strategy anchored by the following five strategic pillars to reposition Mattel for future revenue improvement and profit growth.

 

 

Mattel’s Five-Pillar Strategy

 

  Build Mattel’s Power Brands (American Girl, Barbie, Fisher-Price, Hot Wheels, and Thomas & Friends) into connected 360-degree play systems and experiences

  Accelerate emerging markets growth with digital-first solutions

  Focus and strengthen Mattel’s innovation pipeline

  Reshape Mattel’s operations to be leaner, faster, and smarter via commercial realignment, supply chain transformation, and IT transformation

  Reignite Mattel’s culture and team

2017 was an extraordinary year for Mattel as we faced multiple, significant dislocations driven by tighter retail inventory management, planning misalignments, mixed brand performance, and the Toys “R” Us bankruptcy. Collectively, these contributed substantially to top-line and bottom-line pressures.

Profitability in the year was primarily impacted by the proliferation of stock keeping units (“SKUs”) and brands, that led to an increase in closeout sales and unfavorable product mix, as well as increased obsolescence expense, and freight and logistics challenges. After examining the business, management announced a structural simplification after the third quarter to right size our cost structure. By structurally simplifying our business, we plan to eliminate at least $650 million in net costs over the next two years, which will unlock substantial resources to invest in our transformation plan.

 

 

Key 2017 Financial Results

 

  Net sales were $4.88 billion, an 11% decrease as compared to 2016

  Gross sales* were $5.51 billion, a 9% decrease as compared to 2016

  Gross margin was 37.3%, a decrease of 950 basis points from 2016

  Operating loss was $342.8 million, as compared to operating income of $519.2 million in 2016

  Diluted net loss per share in 2017 was $3.07, as compared to diluted earnings per share of $0.92 in 2016

* 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 49 to 50 of our Annual Report on Form 10-K filed with the SEC on February 27, 2018.

 

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The following shows our Total Stockholder Return (“TSR”)(1) performance as compared to the median of our peer group for periods ending December 31, 2017, when our closing stock price was $15.38:

 

     

Period

 

 

Mattel

 

 

Peer Group

 

 

1 year

 

 

 

-41.9%

 

 

 

17.5%

 

 

3 year

 

 

 

-16.7%

 

 

 

6.3%

 

 

5 year

 

 

 

-12.0%

 

 

 

13.4%

 

(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.

Despite the challenges, we took action in 2017 to transform our business and reset our economic model for the future. Throughout the year, right sizing retail inventory levels remained a critical priority. We ended 2017 with significantly reduced retail inventories, and with point of sale (“POS”) and shipping more aligned for most of our brands.

We are driving strong progress on our structural simplification cost savings initiative, which is a cornerstone to restoring profitability. We began taking action in the fourth quarter of 2017 by de-layering the organization, eliminating $50 million of payroll expense on an annualized basis exiting 2017; implementing SKU reduction initiatives resulting in a $21 million tooling write-off; and deploying comprehensive zero-based budgeting, where all spending is evaluated as part of our 2018 budgeting process to determine whether it is necessary and consistent with driving our overall business objectives. We expect to achieve approximately 40% of the total savings in 2018 primarily through process simplification and the optimization of selling, general and administrative expenses (“SG&A”), cost of goods sold, and advertising. This estimate represents a greater portion of the overall reduction target than initially anticipated.

As we drive savings through structural simplification, we also remain committed to strategic investments to help Mattel promote top-line growth and improve profitability. In 2017, we spent approximately $30 million on strategic investments including our China strategic partnerships, IT transformation, connected 360-degree play systems and experiences, Hot Wheels connected products, and key external hires.

In 2018, we will be making staged investments across multiple pillars of our strategy as we continue to focus on building out our connected 360-degree play systems and experiences for our Power Brands, unlocking our intellectual property (“IP”) in the form of both content and gaming, and will be accelerating our progress on consumer products and live experiences to provide a truly immersive experience for our consumers. We will also be reshaping our operations through an IT transformation that will help us become a leaner, faster, and smarter organization. We will continue to invest in emerging markets as we lean into our partnerships in China and expand beyond the traditional toy model. Additionally, we will be investing to strengthen our innovation pipeline by leveraging co-productions to create and partner on our new IP as well as supporting our recently formed incubator, which is focused on launching on-trend products.

The implementation of our strategy in conjunction with our structural simplification cost savings initiative should restore profitability, drive revenue growth, and maximize long-term stockholder value over time.

 

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Key progress points in 2017 in connection with our transformation efforts include:

 

Transformation Progress

 

  We are resetting our economic model with a $650 million structural simplification cost savings initiative so that we can deliver improving margins

 

 

  We are starting 2018 in a much better position in terms of retail inventory levels than the prior year

 

 

  We have a new leadership team and a stronger organizational structure

 

 

  We remain committed to our strategic investments, spending approximately $30 million in 2017
and $170 million more planned, with approximately half being spent in 2018 and half in 2019

 

 

  We are rapidly executing against our strategy with new content, new distribution deals, and new partnerships

 

2017 Leadership Transformation and Looking Ahead

 

Throughout 2017, we reshaped our leadership team to help accelerate Mattel’s transformation.

Executive Leadership Team

As part of the Board’s ongoing review of Mattel’s long-term strategy and execution, we implemented a CEO transition in 2017. On February 8, 2017, Ms. Georgiadis became our CEO, and Mr. 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. At Google, she 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.

After joining Mattel as CEO, Ms. Georgiadis worked with the Board to make key strategic hires in 2017 to reshape our leadership team:

 

  Joseph J. Euteneuer was appointed as our Chief Financial Officer (“CFO”) in September 2017. Mr. Euteneuer, who was CFO at Sprint Corporation prior to joining Mattel, has more than four decades of financial leadership experience. He brings a strong record of helping companies implement new strategies to improve long-term growth and profitability, and is a valuable addition to our management team as we execute our transformation.

 

  Amanda J. Thompson was appointed as our Executive Vice President (“EVP”) and Chief People Officer (“CPO”) effective September 2017. Ms. Thompson was previously CPO at TOMS Shoes, where she successfully developed and implemented programs that increased employee engagement and improved organizational design and accountability. At Mattel, Ms. Thompson is focusing on establishing a high-performance culture to support our transformation and building a progressive and world-class human resources organization.

 

 

Sven Gerjets was appointed as our EVP and Chief Technology Officer (“CTO”) effective July 2017. Mr. Gerjets, who had served as Chief Product Officer at software startup n.io Innovation, as well as Chief

 

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Information Officer at Time Warner Cable, brings substantial experience leading technology organizations and improving business results. As CTO, he is focused on creating and executing a plan to transform Mattel into a more nimble, data-driven company.

 

  Nancy Elder was appointed as our EVP and Chief Communication Officer (“CCO”) effective September 2017. Ms. Elder was previously CCO at JetBlue Airways Corporation where she was responsible for developing and executing a comprehensive strategic vision and reputation strategy for the brand as well as managing media relations, internal communications, social media, and crisis communications. At Mattel, Ms. Elder is working closely with our leadership team to define, establish, and promote the Mattel brand as the leading global learning, development, and play company.

Each of the above hires brings a proven track record in driving organizational change and has quickly begun working to achieve our transformation strategy.

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. 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.

In February 2018, the Company announced that the Board had appointed Mr. Kreiz to succeed Mr. Sinclair as Chairman of the Board effective upon Mr. Kreiz’s election to the Board at the 2018 Annual Meeting. In April 2018, the Board further determined that the Company and its stockholders would be best positioned by Mr. Kreiz serving as Executive Chairman of the Board. In evaluating Mattel’s go-forward Board leadership structure, the Board carefully assessed potential courses of action, and determined that this structure best enables Mattel to accelerate progress on our transformation as we navigate a critical period for the Company. Independent leadership still remains an important pillar of our Board leadership structure and, as such, the Company will continue to have an Independent Lead Director with robust, well-defined responsibilities as set forth on page 14 under “Corporate Governance at Mattel – Corporate Governance Standards and Practices – Independent Lead Director Responsibilities.”

Mr. Kreiz, who joined the Company’s Board in June 2017 and previously served as the Chairman of the Board and CEO of Maker Studios, Inc., Endemol Group, and Fox Kids Europe N.V., brings substantial, relevant leadership experience to the Executive Chairman role. Since joining the Board, Mr. Kreiz has been an invaluable resource for our management team and Board in evaluating progress against our transformation efforts and cost savings initiative, and by contributing deep expertise in multimedia, entertainment, and content creation – core areas of our strategy going forward. As Executive Chairman, he will serve as a key thought partner for our management team, lead the Board in its oversight of performance, and facilitate the close communication between management and the Board that is required at this critical period for the Company. Further, the Board believes that the Executive Chairman role will enable Mr. Kreiz to maximize his impact on our transformation.

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.

 

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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.

2017 Pay-For-Performance Results

Pay outcomes for our named executive officers (“NEOs”) in 2017 closely aligned with challenging financial results this past year:

 

   

Compensation Element

 

 

2017 Results for NEOs

 

 

Annual Cash Incentive

 

 

  No payout earned under our annual cash incentive plan, the Mattel Incentive Plan (“MIP”), for 2017

 

 

Equity Long-Term Incentives (“LTIs”)

 

 

  Not on track for any earnout of Performance Units under the 2016-2018 Long-Term Incentive Program (“LTIP”), which bases payout on achievement against a three-year cumulative earnings per share (“EPS”) financial measure, plus a relative TSR modifier

 

   

 

  No earnout for 2017 performance under the 2017-2019 LTIP, which bases payout on achievement against EPS goals that are set on an annual basis with earnouts averaged over the three-year period, plus a relative TSR modifier

 

   

 

 

  All outstanding stock options are currently underwater

 

Base Salary

 

 

  No salary increases in 2017, other than in connection with retention based on criticality of role during leadership transition

 

The strong link between pay and performance is further illustrated by the chart below. Ms. Georgiadis’ realizable total direct compensation (“TDC”) at the end of 2017 was only 48% of her 2017 targeted TDC.

 

 

LOGO

 

  LOGO   Mattel, Inc.    2018 Proxy Statement               9

2017 CEO Targeted vs. Realizable TDC ($ Millions) $40.0 $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 Targeted: $36.6 Realizable: $17.5 = 48% Realizable Compensation 52% lower than Targeted


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  PROXY SUMMARY  

 

       

 

 

 

 

  2017 Targeted TDC  

 

 

2017 Annual Cash

 

    

 

$

 

 

3,359,536

 

 

 

 

- Base Salary(1)

 

    

 

$

 

 

1,343,836

 

 

 

 

- MIP

 

    

 

$

 

 

2,015,700

 

 

(2) 

 

 

2017 LTI

 

    

 

$

 

 

33,250,000

 

 

(3) 

 

 

Annual

 

    

 

- Performance Units

 

    

 

$

 

 

2,750,000

 

 

 

 

- Stock Options

 

    

 

$

 

 

2,750,000

 

 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

2,750,000

 

 

 

 

New Hire

 

    

 

- Stock Options

 

    

 

$

 

 

5,500,000

 

 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

5,500,000

 

 

 

 

Make-Whole RSUs

 

    

 

$

 

 

14,000,000

 

 

 

 

Total 2017 TDC

 

    

 

$

 

 

36,609,536

 

 

 

    

 

 

  2017 Realizable TDC  

 

 

2017 Annual Cash

 

    

 

$

 

 

2,843,836

 

 

 

 

- Base Salary(1)

 

    

 

$

 

 

1,343,836

 

 

 

 

- MIP

 

    

 

$

 

 

1,500,000

 

 

(4) 

 

 

2017 LTI

 

    

 

$

 

 

14,608,630

 

 

 

 

Annual

 

    

 

- Performance Units

 

    

 

$

 

 

263,844

 

 

(5) 

 

 

- Stock Options

 

    

 

$

 

 

0

 

 

(6) 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

2,144,772

 

 

(7) 

 

 

New Hire

 

    

 

- Stock Options

 

    

 

$

 

 

0

 

 

(6) 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

2,984,827

 

 

(7) 

 

 

Make-Whole RSUs

 

    

 

$

 

 

9,215,187

 

 

(8) 

 

 

Total 2017 TDC

 

    

 

$

 

 

17,452,466

 

 

 

 

% of Targeted TDC

 

    

 

 

 

 

48%

 

 

 

 

(1) Reflects annual base salary pro-rated from Ms. Georgiadis’ hire date of February 8, 2017 through December 31, 2017.

(2) Reflects pro-rated target amount payable under the MIP as disclosed in the “Grants of Plan-Based Awards in 2017” table on page 88 for the period Ms. Georgiadis served as CEO.

(3) Reflects amounts disclosed in the “2017 LTI Annual Grant Values” table on page 67 and also Ms. Georgiadis’ make-whole grant ($14 million) and new hire grants (totaling $11 million).

(4) Reflects the one-time guaranteed cash bonus payment per offer letter.

(5) The value shown for the Performance Units for the 2017-2019 LTIP is 16.7% of target earnout, based on our adjusted EPS of $(0.87) for 2017, which was below threshold performance and resulted in 0% earned for the 2017 financial performance goal. Further, we have assumed target EPS performance for each of 2018 and 2019, resulting in a three-year average of 66.7% earned for the financial performance goal. We have further assumed, based on our current stock price, which results in substantially below threshold performance, that the impact of our TSR modifier would result in a reduction of 50 percentage points from the 66.7% earned payout based on our EPS performance, resulting in 16.7% earned payout under the 2017-2019 LTIP.

(6) The stock options granted in 2017 were underwater as of the end of the fiscal year and none were vested. The value shown for the realizable 2017 stock options reflects no intrinsic value for such options as of December 29, 2017, the last trading day of fiscal year 2017, based on our closing stock price of $15.38 and the option exercise price of $25.95 for the February 8, 2017 grant and $19.72 for the August 1, 2017 grant. If instead the Black-Scholes value of the stock options were taken into account as of December 29, 2017, then such options would be valued at approximately $4.4 million, resulting in Total 2017 Realizable TDC of $21.9 million, or 60% of Targeted TDC (for valuation purposes the expected life was based on the original ratio of expected life to original option term, volatility assumption (see Note 7 to Mattel’s Consolidated Financial Statements for 2017 contained in the Annual Report on Form 10-K filed with the SEC on February 27, 2018), no dividends assumed, and December 29, 2017 five-year Government Treasury rate used).

(7) The value shown for the realizable time-vesting restricted stock units (“RSUs”) for 2017 reflects our closing stock price of $15.38 as of December 29, 2017.

(8) For amounts vested in 2017, value shown is disclosed in the “Option Exercises and Stock Vested in 2017” table and for unvested RSUs, value shown reflects our closing stock price of $15.38 as of December 29, 2017.

 

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  PROXY SUMMARY  

 

 

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 Section 16 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 CEO and Executive Chairman, 4x for COO and 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

 

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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Table of Contents

  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 provides our 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

 

 

 Annual Board elections

 

 

 

 Routine review of Board leadership structure

 

 

 Majority voting standard

 

 

 

 Annual Board and Committee evaluations

 

 

 Robust Independent Lead Director role with significant responsibilities

 

 

 

 Robust director succession and search process

 

 

 Stockholder right to call special meetings

 

 

 

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

 

 

 Stockholder right to proxy access

 

 

 

 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 10 director nominees are independent*

 

* Effective upon Mr. Kreiz’s election to the Board at the 2018 Annual Meeting, he will be Executive Chairman and, therefore, no longer an independent director.

Stockholder Engagement

 

Stockholder feedback is an important consideration for our Board, helping shape our practices.

We have established a robust stockholder engagement program, which includes proactive and responsive dialogue with a broad range of our stockholders. This engagement helps inform the Board’s understanding of stockholder perspectives on a wide range of matters. Stockholder dialogue is a year-round practice for Mattel. During 2017, a year of tremendous leadership and business transformation, our dialogue with stockholders was primarily focused on the progress of our strategic transformation, our leadership changes, the performance of the Company, and how our Board and management team are driving value for our stockholders. The input and perspectives provided by our stockholders are highly valued, particularly at such a critical period for our Company, and we have processes in place to ensure that feedback received from our stockholders is relayed directly to the Board to help shape our governance 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 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 previously announced, Mr. Sinclair, our former CEO and current Executive Chairman, is not standing for re-election to the Board at the 2018 Annual Meeting. As a result, the Board conducted a thoughtful evaluation of its leadership structure and determined that having the Chairman and Chief Executive Officer in separate roles continues to be the most appropriate leadership structure for the Company at this time. Thus, in February 2018, the Company announced that the Board had appointed Mr. Kreiz to succeed Mr. Sinclair as Chairman of the Board effective upon Mr. Kreiz’s election to the Board at the 2018 Annual Meeting. In April 2018, the Board further determined that the Company and its stockholders would be best positioned by Mr. Kreiz serving as Executive Chairman of the Board. In evaluating Mattel’s go-forward Board leadership structure, the Board carefully assessed potential courses of action, and determined that this structure best enables Mattel to accelerate progress on our transformation efforts as we navigate a critical period for the Company. Independent leadership still remains an important pillar of our Board leadership structure and, as such, the Company will continue to have an Independent Lead Director with robust, well-defined responsibilities as set forth below under “Independent Lead Director Responsibilities.”

Mr. Kreiz, who joined the Company’s Board in June 2017 and previously served as the Chairman of the Board and CEO of Maker Studios, Inc., Endemol Group, and Fox Kids Europe N.V., brings substantial, relevant leadership experience to the Executive Chairman role. Since joining the Board, Mr. Kreiz has been an invaluable resource for our management team and Board in evaluating progress against our transformation efforts and cost savings initiative, and by contributing deep expertise in multimedia, entertainment, and content creation – core areas of our strategy going forward. As Executive Chairman, he will serve as a key thought partner for our management team, lead the Board in its oversight of performance, and facilitate the close communication between management and the Board that is required at this critical period for the Company. Further, the Board believes that the Executive Chairman role will enable Mr. Kreiz to maximize his impact on our transformation.

 

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  CORPORATE GOVERNANCE STANDARDS AND PRACTICES  

 

       

 

The Board determined that this leadership structure allows our management team and Board to benefit from significant, regular counsel and insight from the Executive Chairman position. The Board also recognizes that the anticipated investment of time associated with these responsibilities will be substantial and aligns with the expectations of an Executive Chairman role. 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 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.

 

In 2017, the independent directors of the Board elected Michael J. Dolan to serve as the Board’s current 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 currently serve as Independent Lead Director of Mattel.

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, Mr. Sinclair, our Executive Chairman and former CEO, and effective upon his election to the Board at the 2018 Annual Meeting, Mr. Kreiz, who will serve as our Executive Chairman) and each new director nominee to the Board 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. In addition, the Board previously determined that Dirk Van de Put (who ceased to be a member of the Board in November 2017) was independent within the meaning of both Mattel’s and Nasdaq’s director

 

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  CORPORATE GOVERNANCE STANDARDS AND PRACTICES  

 

 

independence standards, as then in effect. 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.

Director Board Composition and Director 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 three of the director nominees have been on the Board for over ten years, the Board has also added two new independent directors in the past six years, and has selected three new independent director nominees to stand for election to the Board at the 2018 Annual Meeting. 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 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

Director Nominees Reflect Strong Board Refreshment

 

New Directors in 2017

The Board remains focused on aligning our directors’ collective skills and expertise with Mattel’s evolving business strategy. Accordingly, the Board added two new directors in 2017:

 

  Ms. Georgiadis, our CEO, joined us from Google Inc. in February 2017.

 

  Ynon Kreiz, the former Chairman of the Board and CEO of Maker Studios, Inc., a global digital media and content network company that was acquired by The Walt Disney Company, and a current director of Warner Music Group Corp., joined us in June 2017. The Board subsequently appointed Mr. Kreiz as Executive Chairman of the Board, to be effective upon his election to the Board at the 2018 Annual Meeting. Please refer to page 13 for additional detail on the Board’s process in determining Mattel’s go-forward Board leadership structure.

New Independent Director Nominees

Additionally, in March 2018, the Board selected three new independent director nominees to stand for election to the Board at the 2018 Annual Meeting:

 

  R. Todd Bradley brings deep technology expertise to the Board, having most recently served as CEO of Mozido, Inc., a digital payment and mobile commerce provider. Prior to that, Mr. Bradley served as President of TIBCO Software, Inc., and held senior leadership positions with the Hewlett-Packard Company, including Executive Vice President of Strategic Growth Initiatives.

 

  Soren T. Laursen provides strong toy industry executive experience, having most recently served as CEO of TOP-TOY, a retailer of toys and children’s products in the Nordic region. Mr. Laursen has also held a variety of senior leadership roles with The LEGO Group, including President of LEGO Systems, Inc.

 

  Rosa G. Rios brings significant expertise in finance, real estate, manufacturing, and community development to Mattel’s Board. As the former Treasurer of the United States, Ms. Rios provides experience implementing efficiencies and innovative concepts while meeting increased production demand and increasing employee morale.

Each additional director and director nominee further strengthens Board expertise in areas that are integral to Mattel’s transformation efforts, including digital content and entertainment, financial management, retail and commercial leadership, technology integration, and toy industry knowledge.

On November 17, 2017, Dirk Van de Put resigned from our Board in order to focus on his new role and increased responsibilities as CEO of Modelez International, Inc. Mr. Sinclair, who currently serves as our Executive Chairman, intends to retire from the Board at the end of his current term and will not be standing for re-election to the Board at the 2018 Annual Meeting. Dr. Fergusson will have reached Mattel’s mandatory retirement age at the time of the 2018 Annual Meeting and, accordingly, will not stand for re-election to the Board. Mr. Scarborough and Ms. White Loyd also have notified us that they will not be standing for re-election to the Board in order to focus on their other professional and personal commitments. Effective as of the 2018 Annual Meeting, the authorized number of directors has been set at ten.

 

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  BOARD GENERAL INFORMATION  

 

 

Board Meetings

 

During 2017, the Board held nine 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 eleven directors at the time of the 2017 Annual Meeting of Stockholders and eleven 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 committee’s current charter is available on Mattel’s corporate website at http://corporate.mattel.com/about-us/bios.aspx.

The current chairs and members of these 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(1)    

 

                       

 

 

 

 

C

 

 

 

                                 

 

 

 

 

M

 

 

 

             

 

 

 

 

M

 

 

 

                             
   

 

Ynon Kreiz*

 

                                                                                   

 

 

 

 

M

 

 

 

                             
   

 

Ann Lewnes

 

                       

 

 

 

 

M

 

 

 

                                                                                         
   

 

Dominic Ng

 

   

 

 

 

 

M

 

 

 

                                                                         

 

 

 

 

M

 

 

 

                             
   

 

Vasant M. Prabhu

 

   

 

 

 

 

C

 

 

 

                                                     

 

 

 

 

M

 

 

 

             

 

 

 

 

M

 

 

 

                             
   

 

Dean A. Scarborough(1)

 

                                           

 

 

 

 

M

 

 

 

             

 

 

 

 

M

 

 

 

             

 

 

 

 

C

 

 

 

                             
   

 

Kathy White Loyd(1)

 

   

 

 

 

 

M

 

 

 

                                 

 

 

 

 

M

 

 

 

                                                                     
 

 

Employee Directors

 

                                               
   

 

Margaret H. Georgiadis

 

                                                                                                       

 

 

 

 

M

 

 

 

         
   

 

Christopher A. Sinclair(1)

 

                                                                                                                       

“C” Chair

“M” Member

† Independent Lead Director

* Effective upon his election to the Board at the 2018 Annual Meeting, Mr. Kreiz will no longer serve on the Finance Committee

(1) Not standing for re-election at the 2018 Annual Meeting

 

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  BOARD GENERAL INFORMATION  

 

       

 

The primary responsibilities, membership and meeting information for the committees of our Board during 2017 are summarized below.

 

 

Audit Committee

 

 

 

Primary Responsibilities

 

 

Members in 2017:

Vasant M. Prabhu (Chair)

Dominic Ng

Dirk Van de Put (member until November 2017)

Kathy White Loyd

 

Meetings in 2017: 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 (before his departure) 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

 

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  BOARD GENERAL INFORMATION  

 

 

 

 

Governance and Social

Responsibility Committee

 

 

 

Primary Responsibilities

 

Members in 2017:

Dr. Frances D. Fergusson (Chair)

Michael J. Dolan

Trevor A. Edwards

Ann Lewnes

Dirk Van de Put (member until November 2017)

 

Meetings in 2017: 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 2017:

Michael J. Dolan (Chair)

Trevor A. Edwards

Dean A. Scarborough

Kathy White Loyd

 

Meetings in 2017: 10

 

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 2017, 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, her direct reports, and other Executive Vice Presidents (“EVPs”) as compared to the market and compensation of their counterparts at our comparator peer companies;

 

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    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;

 

  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 2017 Proxy Statement;

 

  Advising on our 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 2017, 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. Effective upon Mr. Kreiz’s election to the Board at the 2018 Annual Meeting, he will no longer serve on the Finance Committee. During 2017, the Finance Committee held six 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 dividends to stockholders, credit facilities and debt securities, capital expenditures, stock repurchase programs, hedging transactions, mergers, acquisitions, dispositions, and other strategic transactions. The Finance Committee also oversees Mattel’s interactions with credit rating agencies and third-party financial risks.

Mattel also has an Equity Grant Allocation Committee with Ms. Georgiadis as the current sole member. 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

 

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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 presented to the Audit Committee and the full Board along with Mattel’s strategy for managing such risks. 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 associated with 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 oversees third-party financial risks, which include risks arising from customers, vendors, suppliers, subcontractors, creditors, debtors, and counterparties in hedging transactions, mergers, acquisitions, dispositions, and other strategic transactions.

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, TWR 15-1

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 2017. 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

      

 

$140,010

      

 

$25,000

      

 

$330,010

       
   

 

Trevor A. Edwards

  

 

$100,000

      

 

$140,010

      

 

$29,000

      

 

$269,010

       
   

 

Dr. Frances D. Fergusson

  

 

$115,000

      

 

$140,010

      

 

$17,500

      

 

$272,510

       
   

 

Ynon Kreiz(5) 

  

 

$  91,667

      

 

$128,335

      

 

$         0

      

 

$220,002

       
   

 

Ann Lewnes

  

 

$100,000

      

 

$140,010

      

 

$30,000

      

 

$270,010

       
   

 

Dominic Ng

  

 

$110,000

      

 

$140,010

      

 

$30,000

      

 

$280,010

       
   

 

Vasant M. Prabhu

  

 

$130,000

      

 

$140,010

      

 

$30,000

      

 

$300,010

       
   

 

Dean A. Scarborough

  

 

$115,000

      

 

$140,010

      

 

$30,000

      

 

$285,010

       
   

 

Dirk Van de Put(6) 

  

 

$110,000

      

 

$140,010

      

 

$         0

      

 

$250,010

       
   

 

Kathy White Loyd

  

 

$110,000

      

 

$140,010

      

 

$25,000

      

 

$275,010

       

(1) During 2017, Ms. Georgiadis, as CEO and a member of the Board, and Mr. Sinclair, as Executive Chairman and member of the Board, did not receive any additional compensation for serving as a director other than the amounts attributed to her/him for her/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 her/his compensation for her/his services to Mattel are shown in the “Summary Compensation Table.”

(2) For Messrs. Edwards, Ng, and Scarborough, some or all amounts shown were deferred under the Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors (“Director DCP”). In connection with his election to the Board in June 2017, Mr. Kreiz received a cash retainer of $91,667, which represents a pro-rata portion of the annual retainer based on the number of months he will have served from his election in June 2017 to the date of the 2018 Annual Meeting.

(3) On May 19, 2017, each of our non-employee directors received an annual equity grant of 6,321 RSUs under our Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan. In connection with his election to the Board in June 2017, Mr. Kreiz also received a grant of 5,666 RSUs, which represents a pro-rata portion of the annual equity grant based on the number of months he will have served from his appointment to the date of the 2018 Annual Meeting. 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 $22.15 on May 19, 2017 and $22.65 on June 13, 2017.

 

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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, 2017. 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, 2017

     

    Aggregate Option Awards    

Outstanding as of

December 31, 2017

   
   

 

Michael J. Dolan

   

 

 

 

15,917

 

       

 

 

 

4,500

 

   
   

 

Trevor A. Edwards

   

 

 

 

15,917

 

       

 

 

 

 

   
   

 

Dr. Frances D. Fergusson

   

 

 

 

15,917

 

       

 

 

 

 

   
   

 

Ynon Kreiz

   

 

 

 

5,666

 

       

 

 

 

 

   
   

 

Ann Lewnes

   

 

 

 

17,528

 

       

 

 

 

 

   
   

 

Dominic Ng

   

 

 

 

40,742

 

       

 

 

 

 

   
   

 

Vasant M. Prabhu

   

 

 

 

15,917

 

       

 

 

 

 

   
   

 

Dean A. Scarborough

   

 

 

 

33,275

 

       

 

 

 

 

   
   

 

Dirk Van de Put

   

 

 

 

4,619

 

       

 

 

 

 

   
   

 

Kathy White Loyd

   

 

 

 

33,700

 

       

 

 

 

 

   

(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.

(5) Mr. Kreiz was elected as a member of the Board on June 13, 2017.

(6) Mr. Van de Put resigned from our Board effective November 17, 2017.

Narrative Disclosure to Director Compensation Table

Retainers

For 2017, 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 and Compensation Committee Chairs, each $20,000; and Executive, Finance, and Governance and Social Responsibility Committees Chairs, 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 Mattel, Inc. 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 2017, 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. The RSUs have

 

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dividend equivalent rights, meaning that for the period before the RSUs are settled in shares, 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 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 (“Foundation) make gifts of up to a total of $15,000 per year to one or more non-profit public charities that help fulfill the Foundation’s mission of serving children in need (“Director Recommendation Program”). The Foundation also will match up to $15,000 for any additional gifts that the director makes on his or her own, subject to certain limitations (“Director Match Program”). 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. In 2018, the programs were changed to provide up to $7,500 for the Director Recommendation Program and up to $7,500 for the Director Match Program.

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, 2017, the following directors had the following aggregate number of Mattel stock equivalents in the Director DCP, including deferred vested RSUs: Mr. Edwards, 3,649; Dr. Fergusson, 6,490; Mr. Ng, 79,048; Mr. Scarborough, 71,719; Mr. Van de Put, 4,995; and Ms. White Loyd, 32,273.

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 2017, 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.

 

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  DIRECTOR COMPENSATION  

 

 

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.

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 and Mr. Kreiz, the newest members of our Board) has met the target minimum stock ownership level. Ms. Lewnes has until February 1, 2020, and Mr. Kreiz has until June 13, 2022 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 who 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;

 

  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

 

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  PROPOSAL 1 – ELECTION OF DIRECTORS  

 

 

 

  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 director 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, TWR 15-1

Mattel, Inc.

333 Continental Boulevard

El Segundo, CA 90245-5012

Director Nominees for Election

 

After receiving input from members of the Governance and Social Responsibility Committee, the Board has nominated ten director nominees for election at the 2018 Annual Meeting. All of the director nominees are currently directors except for Messrs. Bradley and Laursen and Ms. Rios. The director nominees 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:

 

R. Todd Bradley    Ynon Kreiz    Vasant M. Prabhu
Michael J. Dolan    Soren T. Laursen    Rosa G. Rios
Trevor A. Edwards    Ann Lewnes   
Margaret H. Georgiadis    Dominic Ng   

Each director 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 ten director nominees named above. If, before the 2018 Annual Meeting, any director nominee becomes unavailable to serve, the Board may identify a substitute for such director nominee and treat votes “for” the unavailable director nominee as votes “for” the substitute. We presently believe that each of the nominees will be available to serve.

On November 17, 2017, Dirk Van de Put resigned from our Board in order to focus on his new role and increased responsibilities as CEO of Modelez International, Inc. Mr. Sinclair, who currently serves as our Executive Chairman, intends to retire from the Board at the end of his current term and will not stand for re-election to the Board at the 2018 Annual Meeting. In addition, Dr. Fergusson will have reached Mattel’s mandatory retirement age at the time of the 2018 Annual Meeting and, accordingly, will not stand for re-election to the Board. Mr. Scarborough and Ms. White Loyd also have notified us that they will not be standing for re-election to the Board in order to focus on their other professional and personal commitments. The authorized number of directors is currently set at eleven, and the Board currently consists of eleven members. The Board has approved reducing the authorized number of directors to ten effective as of the 2018 Annual Meeting.

The Board, after receiving input from members of the Governance and Social Responsibility Committee, selected director nominees whose experiences, qualifications, attributes, and skills in, among other things, leadership of large corporations, consumer products, international business, marketing and advertising, digital media and entertainment, financial management and operations, information technology, commercial banking, investment banking, including mergers and acquisitions and business development,

 

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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 director nominees with experience gained from past service with Mattel and/or other companies that have encountered comparable situations as Mattel.

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.

 

 

 R. TODD BRADLEY

 

  

Career Highlights

Mozido, LLC, a global provider of digital commerce and payment solutions

 Chief Executive Officer and Director (December 2016 – May 2017)

 

TIBCO Software, Inc., an integration, analytics, and event-processing software company

 President (June 2014 – December 2014)

 

Hewlett-Packard Company, a global provider of products, technologies, software, solutions, and services

 Executive Vice President Strategic Growth Initiatives (June 2013 – June 2014); Executive Vice President of Printing and Personal Systems Group (March 2012 –June 2013); Executive Vice President of Personal Systems Group (June 2005 – March 2012)

 

PalmOne, Inc., a maker of mobile devices and WebOS

 President and Chief Executive Officer (October 2003 – March 2005)

 

Additional Leadership Experience and Service

 Director, Eastman Kodak Company since 2017; also serves on Compensation and Nominating & Governance Committees

 Director, TrueCar, Inc. (2013 – 2016)

 Trustee, Newseum (2014 – 2016)

 

Key Experience/Director Qualifications

Mr. Bradley brings to Mattel’s Board significant leadership, finance, digital, marketing, and technology experience. As a prior Chief Executive Officer of a technology- driven company, he will bring his expertise to Mattel’s evolving business strategy. In addition, Mr. Bradley has proven experience with turnaround companies in driving growth and improving profitably. He also has held various management positions within logistics, production, and quality control.

 

LOGO

 

  

 

 Age: 59

 New Director Nominee

 

  

 

 Other Current Public
 Directorships:

   Eastman Kodak Company        

  
  
  
  
  
  
  
  
  
  

 

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 MICHAEL J. DOLAN

 

  

Career Highlights

Bacardi Limited, a global privately-held spirits company

 Chief Executive Officer (November 2014 – September 2017); Director (2009 – September 2017; 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 former Chief Executive Officer of a large global company, Mr. Dolan brings to Mattel’s Board significant 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. In addition, 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, and financial reporting rules and regulations, and evaluated the financial results and financial reporting processes of large companies.

 

LOGO

 

  

 

 Age: 71

 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 Brand (July 2013 – March 2018); 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 significant marketing and global brand management experience from a large public company. His leadership and strategy skills in overseeing geographic, category, direct-to-consumer 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 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: 55

 Director Since: 2012

 

  

 

 Mattel Committee Memberships: 

  Compensation Committee

  Governance and Social Responsibility Committee

  
  

 

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 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/Finance and Sustainability and Corporate Responsibility Committees

 Amyris, Inc. (2015 – 2017)

 The Jones Group (2009 – 2014)

 

Additional Leadership Experience and Service

 Director, Ad Council since 2012; also served as Chair (2016 – 2017)

 Director, The Economic Club of Chicago since 2013

 Director, World Business Chicago (2014 – 2017)

 

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, 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. 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: 54

 Director Since: 2017

 

  

 

 Mattel Committee Memberships:

  Equity Grant Allocation Committee

 

  

 

Other Current Public Directorships:

  McDonald’s Corporation

 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

 

 

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 YNON KREIZ

 

  

 

Career Highlights

Maker Studios, Inc., a global digital media and content network company that was acquired by The Walt Disney Company

 Chairman of the Board (June 2012 – May 2014); Chief Executive Officer (May 2013 – January 2015)

 

Endemol Group., one of the world’s leading television production companies

 Chairman of the Board and Chief Executive Officer (June 2008 – June 2011)

 

Balderton Capital (formerly Benchmark Capital Europe), a venture capital firm

 General Partner (2005 – 2007)

 

Fox Kids Europe N.V., a children’s entertainment company

 Chairman of the Board, Chief Executive Officer and Co-founder (1996 – 2002)

 

Other Public Company Directorships

 Warner Music Group Corp. since May 2015; also serves on Audit Committee

 

Additional Leadership Experience and Service

 Chairman of the Board, Showmax since March 2017

 Board of Advisors, Anderson Graduate School of Management at UCLA since April 2015

 Chairman of the Board, Cortica Inc. (2012 – 2014)

 Chairman of Board of Trustees, Israeli Olympic Committee, London Games (2012)

 

Key Experience/Director Qualifications

Mr. Kreiz brings to Mattel’s Board of Directors significant leadership, finance, multimedia, and entertainment experience. As a former Chief Executive Officer of a number of global media companies and a board member of Warner Music Group Corp., he brings a valuable perspective on the entertainment, digital, and media industries, including a focus on children’s programming. He was also General Partner at Balderton Capital where he was active in early stage technology and media investments.

 

LOGO

  

 

Age: 53

Director Since: 2017

 

  

 

Mattel Committee Memberships:

  Finance Committee (until 2018 Annual Meeting)

 

  

 

Other Current Public Directorships:

  Warner Music Group Corp.

  
  
  
  
  
  
  
  
  
  

 

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 SOREN T. LAURSEN

 

  

Career Highlights

TOP-TOY, a toy retailer in the Nordic market

 Chief Executive Officer (April 2016 – January 2018)

 

LEGO Systems, Inc., the Americas division of the family-owned and privately-held The LEGO Group, a toy company based in Denmark

 President (January 2004 – March 2016)

 

The LEGO Company

 Senior Vice President, Europe North and Europe East (April 2000 – December 2003);

 Senior Vice President, Special Markets (1999 – 2000)

 VP/GM, LEGO New Zealand, (1995 – 1999)

 

Additional Leadership Experience and Service

 Advisor, American Toy Industry Association since 2014; served as Chairman 2012-2014 and Board Member at large since 2004.

 Director, A.T. Cross, R.I and Varier Furniture A/S Oslo since 2014

 Director, LEGO Children’s Fund (2010 – 2016)

 Director, Connecticut Children’s Medical Center (2008 – 2016; served on Executive and Strategy Task Force Committee)

 

Key Experience/Director Qualifications

Mr. Laursen brings to Mattel’s Board of Directors significant leadership, finance, brand, marketing, retail, global, and toy industry experience. He has experience successfully turning around a company and driving growth. As a former Chief Executive Officer of a toy retail company and former President of a toy manufacturer, he has tested experience and understanding of Mattel’s business.

 

LOGO

 

  

 

Age: 54

New Director Nominee

 

  
  
  
  
  
  
  
  
  

 

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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 significant leadership experience 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: 56

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)

 

Deloitte & Touche LLP, an accounting firm

 CPA (1980 – 1990)

 

Other Public Company Directorships

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

 PacifiCare Health Systems, Inc. (2003 – 2005)

 

Additional Leadership Experience and Service

 Director, STX Entertainment since 2016

 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: Director, California Bankers Association (previously 2002 – 2011, 2016 – 2017); 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); and 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, and 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 relationships in the State of California and the greater metropolitan area of Los Angeles, where Mattel is headquartered.

 

LOGO

 

  

 

Age: 59

Director Since: 2006

 

  

 

Mattel Committee Memberships:

   Audit Committee

   Finance Committee

  

 

Other Current Public

Directorships:

  East West Bancorp, Inc.

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

 

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 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 significant leadership experience dealing with complex accounting principles and judgments, internal controls, and 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: 58

Director Since: 2007

 

  

 

Mattel Committee Memberships:

  Audit Committee (Chair)

  Executive Committee

  Finance Committee

  
  
  
  
  
  
  
  
  

 

 

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 ROSA G. RIOS

  

Career Highlights

Red River Associates, Inc., a real estate/economic development consulting firm

 Chief Executive Officer since July 2016

 

Radcliffe Institute for Advanced Study at Harvard University

 Visiting Scholar since October 2016

 

Unites States Department of the Treasury

 43rd Treasurer of the United States (July 2009 – July 2016). Also served as a member of the Treasury/Federal Reserve Transition Team

 

MacFarlane Partners, a real estate investment management firm

 Managing Director, Investments (November 2006 – July 2009)

 

Cities of Oakland, Fremont, San Francisco, Washington D.C., San Leandro

 Director of Economic Development and/or Redevelopment/Consultant (June 1994 – November 2006)

 

Additional Leadership Experience and Service

 Founder and Chief Executive Officer, EMPOWERMENT 2020 since 2016

 Advisor, Schlesinger Library Council at Harvard University since 2016

 Advisory Committee, Artemis Real Estate Partners since 2017

 Advisor, White House Council on Women and Girls (2009 – 2016)

 Trustee, Alameda County Employees’ Retirement Association (2008 – 2009)

 

Key Experience/Director Qualifications

Ms. Rios brings to Mattel’s Board significant experience in finance, real estate, manufacturing, and community development. As the former Treasurer of the United States, Ms. Rios has deep experience implementing efficiencies and innovative concepts while meeting increased production demand and increasing employee morale at record levels. She delivered over $1 billion in savings in the first five years of her tenure as Treasurer. She is most recently known for initiating and leading the efforts to place a portrait of a woman on the front of U.S. currency for the first time in over a century. In addition, her current work at Harvard and EMPOWERMENT 2020 focuses on increasing the visibility of historical women, supporting efforts to increase female participation in decision-making capacities, and mobilizing stakeholders to inspire the next generation of leadership.

 

LOGO

 

  

 

Age: 52

New Director Nominee

 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

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, 2017 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. Based on this evaluation, management concluded that Mattel’s internal control over financial reporting was effective as of December 31, 2017.

PwC has expressed its opinion that:

 

  Mattel’s consolidated financial statements present fairly, in all material respects, its financial position as of December 31, 2017 and 2016, and its results of operations and cash flows for each of the three years in the period ended December 31, 2017 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, 2017, based on criteria established in Internal Control – Integrated Framework issued by COSO.

 

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  REPORT OF THE AUDIT COMMITTEE  

 

       

 

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.

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, 2017, for filing with the SEC.

AUDIT COMMITTEE

Vasant M. Prabhu (Chair)

Dominic Ng

Kathy White Loyd

March 19, 2018

 

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Table of Contents
       

  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 2017 and 2016:

 

   
 

Fees

 

2017

 

 

2016

 

 
   

Audit fees(1)

 

$

 

7,764,000

 

 

$

 

6,483,000

 

 

   

Audit-related fees(2)

 

$

 

143,000

 

 

$

 

228,000

 

 

   

Tax fees (3)

 

$

 

1,501,000

 

 

$

 

1,951,000

 

 

   

Total

 

$

 

9,408,000

 

 

$

 

8,662,000

 

 

(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 fees related to the audits of employee benefit plans in 2017 and 2016 and the debt offering in 2016.

(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 643,000 for 2017 and $654,000 for 2016, and (ii) other tax advice, tax consultation, and tax planning services of 858,000 for 2017 and $1,297,000 for 2016.

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 2017 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 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, 2018. Representatives of PricewaterhouseCoopers LLP are expected to be present at the 2018 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

 

     
   

Margaret H. Georgiadis(1)

 

  

    54    

 

  

Chief Executive Officer and Director

 

      

    2017    

 

     
   

Christopher A. Sinclair

 

  

67

 

  

Executive Chairman of the Board

 

      

2015

 

     
   

Richard Dickson

 

  

50

 

  

President and Chief Operating Officer

 

      

2014

 

     
   

Michael J. Eilola

 

  

56

 

  

Executive Vice President and Chief Supply Chain Officer

 

      

2018

 

     
   

Joseph J. Euteneuer

 

  

62

 

  

Chief Financial Officer

 

      

2017

 

     
   

Robert Normile

 

  

58

 

  

Executive Vice President, Chief Legal Officer, and Secretary

 

      

1999

 

     
   

Amanda J. Thompson

 

  

42

 

  

Executive Vice President and Chief People Officer

 

      

2017

 

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

Mr. Sinclair has been Executive Chairman of the Board since February 2017. From April 2015 to February 2017, he served as Chief Executive Officer, and from January 2015 to February 2017, he also served as Chairman of the Board of Mattel. He served as Interim Chief Executive Officer from January 2015 to April 2015. Prior to assuming the role of Chairman of the Board and Interim Chief Executive Officer, Mr. Sinclair served as the Independent Lead Director, Chairman of the Audit Committee and Chairman of the Executive Committee since 2011. From May 2002 until his retirement in July 2008, he served as Executive Chairman of Scandent Holdings, an information technology investment company. From August 2005 to January 2009, he also served as Executive Chairman of Cambridge Solutions Corporation Ltd., a leader in providing information technology and business process outsourcing services. He served as a Managing Director of Manticore Partners, LLC, a venture capital advisory firm, from June 2000 to June 2005, as an Operating Partner of Pegasus Capital Advisors, LP, a private equity firm, from February 2000 to August 2002, and as Chairman of the Board and Chief Executive Officer of Caribiner International, Inc. from December 1998 to May 2000. Prior to that, he served as President and Chief Executive Officer of Quality Food, Inc., Chairman and Chief Executive Officer of Pepsi-Cola Company, and President and Chief Executive Officer of PepsiCo Foods & Beverages International and Pepsi-Cola International for more than five years.

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

 

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  EXECUTIVE OFFICERS  

 

       

 

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. Eilola has been Executive Vice President and Chief Supply Chain Officer since January 2018. From August 2017 through December 2017, he served as Senior Vice President, Global Manufacturing. Prior to joining Mattel, Mr. Eilola held executive positions with Honeywell International Inc., where he served as Vice President, Integrated Supply Chain, Americas from January 2012 to August 2017, and as Vice President, Manufacturing in the company’s Chemical and Aerospace segments from June 2005 to January 2012. Prior to that, from 1985 through 2005, Mr. Eilola held a number of management positions with firms including PQ Corporation, Ashland Chemical, BOC Gases, and Olin/Arch Chemicals.

Mr. Euteneuer has been Chief Financial Officer of Mattel since September 2017. From May 2016 to September 2017, he served as Co-Chief Executive Officer and Chief Financial Officer of the Americas of Rivada Networks, LLC., a communications technology business. From April 2011 to August 2015, he served as Chief Financial Officer of Sprint Corporation, a wireless communications company. Mr. Euteneuer was Chief Financial Officer and Executive Vice President of Qwest Communications, a wireline telecom company, from 2008 to 2011. Before joining Qwest Communications, he served as Chief Financial Officer and Executive Vice President of XM Satellite Radio Holdings from 2002 to 2008. From 1988 to 2002, Mr. Euteneuer held several executive roles at Comcast Corporation, including Chief Financial Officer and Executive Vice President at Comcast Corporation’s Business Communications/Broadnet Europe from 2000 to 2002; and earlier, Vice President, Corporate Development, and Corporate Controller from 1988 to 2000. Prior to joining Comcast, he served as Chief Operating Officer of LaCanasta Mexican Foods International. Earlier in his career, Mr. Euteneuer held leadership roles at Deloitte and PricewaterhouseCoopers. He is a Certified Public Accountant.

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.

Ms. Thompson has been Executive Vice President and Chief People Officer since September 2017. From 2012 to 2017, she served as Chief People Officer of TOMS Shoes, a designer, manufacturer, and distributor of shoes, apparel, and accessories. Ms. Thompson held several executive and leadership roles at Starbucks Coffee Company from 2006 to 2012, including Vice President of Human Resources, China and the Asia Pacific Region; Vice President of Human Resources, Strategic Initiatives; and, Vice President of Human Resources, Seattle’s Best Coffee. From 2003 to 2006, Ms. Thompson was Senior Director, Employee and Organization Development, at Ticketmaster Corporation. Previously, she served as Director, Human Resources, at CitySearch.com. Since November 2017, Ms. Thompson has served on the Board of Directors of Feed the Children.

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis is organized as follows:

 

Table of Contents
Section Subject Page

Executive Summary

  2017 Named Executive Officers 49
  2017 Financial and Business Highlights 50
  2017 Leadership Transformation 52

Demonstrated Pay for Performance: Realized Compensation Significantly Below Target Compensation

54
  Stockholder Engagement 58
  Compensation Governance Best Practices 59

Elements of

Compensation

  Guiding Principles, Philosophy and Objectives 60
  Base Salary 61
  Annual Cash Incentive and Bonus Payments 62
  Equity Long-Term Incentives 66
  2018 Incentive Compensation Program Changes 71
  Other Forms of Compensation 72
   Severance and Change-of-Control Benefits 74

Important Policies and

Guidelines

  Stock Ownership Guidelines 75
  Insider Trading Policy 75
  Recoupment of Compensation 75

Executive Compensation

Process and Governance

  Roles and Expert Independent Advice 77
  Reviews and Process 77

 

  Tax and Accounting Considerations

80

EXECUTIVE SUMMARY

2017 Named Executive Officers

 

Our fiscal year 2017 NEOs were:

 

  Name   Position (as of December 31, 2017)
  Margaret H. Georgiadis   Chief Executive Officer (since February 2017)

  Christopher A. Sinclair

  Executive Chairman (former Chairman and Chief Executive Officer)

  Richard Dickson

  President and Chief Operating Officer

  Joseph A. Euteneuer

  Chief Financial Officer (since September 2017)

  Robert Normile

  Executive Vice President, Chief Legal Officer, and Secretary

  Amanda J. Thompson

  Executive Vice President and Chief People Officer (since September 2017)

  Kevin M. Farr

  Former Chief Financial Officer

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

2017 Financial and Business Highlights

 

In 2017, we made tough decisions to reset our business and lay the groundwork for continued progress on our transformation in 2018.

During the year, our new leadership identified a clear go-forward strategy anchored by the following five strategic pillars to reposition Mattel for future revenue improvement and profit growth.

 

 

Mattel’s Five-Pillar Strategy

 

  Build Mattel’s Power Brands (American Girl, Barbie, Fisher-Price, Hot Wheels, and Thomas & Friends) into connected 360-degree play systems and experience

  Accelerate emerging markets growth with digital-first solutions

  Focus and strengthen Mattel’s innovation pipeline

  Reshape Mattel’s operations to be leaner, faster, and smarter via commercial realignment, supply chain transformation, and IT transformation

  Reignite Mattel’s culture and team

2017 was an extraordinary year for Mattel as we faced multiple, significant dislocations driven by tighter retail inventory management, planning misalignments, mixed brand performance, and the Toys “R” Us bankruptcy. Collectively, these contributed substantially to top-line and bottom-line pressures.

Profitability in the year was primarily impacted by the proliferation of SKUs and brands, that led to an increase in closeout sales and unfavorable product mix, as well as increased obsolescence expense, and freight and logistics challenges. After examining the business, management announced a structural simplification after the third quarter to right size our cost structure. By structurally simplifying our business, we plan to eliminate at least $650 million in net costs over the next two years, which will unlock substantial resources to invest in our transformation plan.

 

 

Key 2017 Financial Results

 

  Net sales were $4.88 billion, an 11% decrease as compared to 2016

  Gross sales* were $5.51 billion, a 9% decrease as compared to 2016

  Gross margin was 37.3%, a decrease of 950 basis points from 2016

  Operating loss was $342.8 million, as compared to operating income of $519.2 million in 2016

  Diluted net loss per share in 2017 was $3.07, as compared to diluted earnings per share of $0.92 in 2016

* 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 49 to 50 of our Annual Report on Form 10-K filed with the SEC on February 27, 2018.

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

The following shows our TSR(1) performance as compared to the median of our peer group for periods ending December 31, 2017, when our closing stock price was $15.38:

 

Period   Mattel   Peer Group

 

1 year

 

 

 

-41.9%

 

 

 

17.5%

 

 

3 year

 

 

 

-16.7%

 

 

 

6.3%

 

 

5 year

 

 

 

 

-12.0%

 

 

 

 

13.4%

 

 

(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.

Despite the challenges, we took action in 2017 to transform our business and reset our economic model for the future. Throughout the year, right sizing retail inventory levels remained a critical priority. We ended 2017 with significantly reduced retail inventories, and with POS and shipping more aligned for most of our brands.

We are driving strong progress on our structural simplification cost savings initiative, which is a cornerstone to restoring profitability. We began taking action in the fourth quarter of 2017 by de-layering the organization, eliminating $50 million of payroll expense on an annualized basis exiting 2017; implementing SKU reduction initiatives resulting in a $21 million tooling write-off; and deploying comprehensive zero-based budgeting, where all spending is evaluated as part of our 2018 budgeting process to determine whether it is necessary and consistent with driving our overall business objectives. We expect to achieve approximately 40% of the total savings in 2018 primarily through process simplification and the optimization of SG&A, cost of goods sold, and advertising. This estimate represents a greater portion of the overall reduction target than initially anticipated.

As we drive savings through structural simplification, we also remain committed to strategic investments to help Mattel promote top-line growth and improve profitability. In 2017, we spent approximately $30 million on strategic investments including our China strategic partnerships, IT transformation, connected 360-degree play systems and experiences, Hot Wheels connected products, and key external hires.

In 2018, we will be making staged investments across multiple pillars of our strategy as we continue to focus on building out our connected 360-degree play systems and experiences for our Power Brands, unlocking our IP in the form of both content and gaming, and will be accelerating our progress on consumer products and live experiences to provide a truly immersive experience for our consumers. We will also be reshaping our operations through an IT transformation that will help us become a leaner, faster, and smarter organization. We will continue to invest in emerging markets as we lean into our partnerships in China and expand beyond the traditional toy model. Additionally, we will be investing to strengthen our innovation pipeline by leveraging co-productions to create and partner on our new IP as well as supporting our recently formed incubator, which is focused on launching on-trend products.

The implementation of our strategy in conjunction with our structural simplification cost savings initiative should restore profitability, drive revenue growth, and maximize long-term stockholder value over time.

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

Key progress points in 2017 in connection with our transformation efforts include:

 

Transformation Progress

 

  We are resetting our economic model with a $650 million structural simplification cost savings initiative so that we can deliver improving margins

 

  We are starting 2018 in a much better position in terms of retail inventory levels than the prior year

 

 

  We have a new leadership team and a stronger organizational structure

 

 

  We remain committed to our strategic investments, spending approximately $30 million in 2017 and $170 million more planned, with approximately half being spent in 2018 and half in 2019

 

 

  We are rapidly executing against our strategy with new content, new distribution deals, and new partnerships

 

2017 Leadership Transformation

 

Over the course of 2017, we made key strategic hires to our executive leadership team and each addition brings a proven track record in organizational transformation.

Chief Executive Officer

In February 2017, the Board appointed Ms. Georgiadis, former President, Americas of Google Inc. to become our CEO, based on 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. At Google, Ms. Georgiadis 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.

Chief Financial Officer

Under Ms. Georgiadis’ leadership, in September 2017, Mr. Euteneuer was appointed to serve as our CFO to provide financial and administrative leadership, facilitate better forecasting, and implement strategies for long-term growth and profitability. His extensive experience includes serving as CFO for four decades with a number of major communications companies, such as Sprint Corporation, Quest Communications International, and XM Satellite Radio Holdings, as well as his recent position of co-CEO of the Americas of Rivada Networks LLC. Mr. Euteneuer’s strong record of helping companies through transformations and implementing new strategies to improve long-term growth and profitability make him a key addition to our management team.

Chief People Officer

In September 2017, Ms. Thompson joined our senior management team as our EVP and CPO to champion the Company’s values and mission and ensure optimal collaboration across the global workforce to drive performance. She was previously the CPO at TOMS Shoes, where she successfully developed and implemented programs that increased employee engagement and improved organizational design and accountability. At Mattel, Ms. Thompson is focusing on establishing a high-performance culture to support our transformation and building a progressive and world-class human resources organization.

 

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In addition, Mattel also appointed Sven Gerjets as our EVP and Chief Technology Officer and Nancy Elder as our EVP and Chief Communication Officer in 2017, further strengthening our leadership team.

Compensation Decisions

In order to attract these talented individuals to lead our transformation, the Compensation Committee determined that it was in the best interest of the Company and its stockholders to provide one-time new hire grants of stock options and RSUs to Ms. Georgiadis, Mr. Euteneuer, and Ms. Thompson, which serve as inducements to join Mattel, create immediate alignment with stockholders’ interests, and further incentivize our new leadership team to drive long-term value creation. In addition, the Compensation Committee provided these executives one-time minimum guaranteed cash bonus payments for 2017 to replace compensation opportunities forfeited by the executives at their former employers. The amounts and terms of the new hire compensation arrangements were deemed necessary by the Compensation Committee to recruit the best executives to guide our transformation in a competitive market for talent.

CEO

In determining Ms. Georgiadis’ compensation, the Compensation Committee took into account guidance and competitive market analysis provided by FW Cook, the Compensation Committee’s independent consultant. The Compensation Committee also reviewed the target TDC provided to Ms. Georgiadis by her former employer. In recognition of the value of equity compensation forfeited by Ms. Georgiadis in connection with her resignation from her prior employer, she was awarded a one-time make-whole grant of RSUs valued at $14 million, vesting monthly over the first year following grant, and new hire inducement grants of stock options and RSUs, each valued at $5.5 million, vesting 50% on each of the second and third anniversaries of grant. In converting these values into shares of RSUs, the Compensation Committee applied a trailing 20-day average stock price rather than the closing stock price on the grant date.

Excluding these one-time grants, Ms. Georgiadis’ 2017 annual target TDC package was set at $12 million ($1.5 million salary, 150% annual target bonus opportunity, and $8.25 million annual target LTI), which was determined to be at approximately the 60th percentile for target TDC for CEO’s of our comparator peer companies.

The details of the new hire and annual compensation packages of Ms. Georgiadis, Mr. Euteneuer, and Ms. Thompson are described further below in “Elements of Compensation” and “Summary Compensation Table – Narrative Disclosure to Summary Compensation Table.”

Executive Chairman

In connection with Mr. Sinclair assuming the role of Executive Chairman in support of the CEO transition, Mr. Sinclair’s base salary was set at $1,000,000, his target annual cash incentive opportunity was 100% of his base salary, and his 2017 LTI target grant value was set at $3,000,000. The Board believed it was important to retain Mr. Sinclair through the 2018 Annual Meeting to support the CEO transition and help drive continued, strong Board oversight of our transformation. Accordingly, to incentivize Mr. Sinclair to remain in the Executive Chairman role at least through the 2018 Annual Meeting, the August 1, 2017 annual grant of stock options and RSUs vest 100% on the date of the 2018 Annual Meeting. Mr. Sinclair is not standing for re-election at the 2018 Annual Meeting. For 2018, he is not eligible to participate in the MIP or receive any equity grants (including Performance Units under the LTIP).

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

Demonstrated Pay for Performance: Realized Compensation Significantly Below Targeted Compensation

 

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.

The table below summarizes compensation decisions and payouts for our NEOs over the past four years, and illustrates our pay-for-performance alignment:

 

Compensation 
Element

 

Historical Results for NEOs

 

 

 

2017 Results for NEOs

 

 

 

2014

 

 

2015

 

 

2016

 
Annual Cash Incentive  

Below target payouts under our MIP

 

Below target payouts under our MIP

 

No payout earned under our MIP

 

No payout earned under our MIP

Base Salary  

No salary increases, other than in connection with greater responsibilities assumed

 

No salary increases, other than in connection with promotion or greater responsibilities assumed

 

 

No salary increases, other than in connection with promotion or greater responsibilities assumed

 

No salary increases, other than in connection with retention based on criticality of role during leadership transition

    

 

Historical Results for NEOs

 

 

 

2017 Results for NEOs

Equity LTIs

 

  Last payout under our LTIP was in 2014 for the 2011-2013 LTIP

 

  No payouts under the 2014-2016 LTIP

 

Not on track for any earnout of Performance Units under the 2016-2018 LTIP, which bases payout on achievement against a three-year cumulative EPS financial measure, plus a relative TSR modifier

 

No earnout for 2017 performance under the 2017-2019 LTIP, which bases payout on achievement against EPS goals that are set on an annual basis with earnouts averaged over the three-year period, plus a relative TSR modifier

 

All outstanding stock options are currently underwater

 

 

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Table of Contents
       

  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

Pay outcomes for our NEOs in 2017 closely aligned with our challenging financial results this past year. The strong link between pay and performance is further illustrated by the chart below. Ms. Georgiadis’ realizable TDC at the end of 2017 was only 48% of her 2017 targeted TDC.

 

 

LOGO

 

 

 

 

  2017 Targeted TDC  

 

 

2017 Annual Cash

 

    

 

$

 

 

3,359,536

 

 

 

 

- Base Salary(1)

 

    

 

$

 

 

1,343,836

 

 

 

 

- MIP

 

    

 

$

 

 

2,015,700

 

 

(2) 

 

 

2017 LTI

 

    

 

$

 

 

33,250,000

 

 

(3) 

 

 

Annual

 

    

 

- Performance Units

 

    

 

$

 

 

2,750,000

 

 

 

 

- Stock Options

 

    

 

$

 

 

2,750,000

 

 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

2,750,000

 

 

 

 

New Hire

 

    

 

- Stock Options

 

    

 

$

 

 

5,500,000

 

 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

5,500,000

 

 

 

 

Make-Whole RSUs

 

    

 

$

 

 

14,000,000

 

 

 

 

Total 2017 TDC

 

    

 

$

 

 

36,609,536

 

 

 

    

 

 

  2017 Realizable TDC  

 

 

2017 Annual Cash

 

    

 

$

 

 

2,843,836

 

 

 

 

- Base Salary(1)

 

    

 

$

 

 

1,343,836

 

 

 

 

- MIP

 

    

 

$

 

 

1,500,000

 

 

(4) 

 

 

2017 LTI

 

    

 

$

 

 

14,608,630

 

 

 

 

Annual

 

    

 

- Performance Units

 

    

 

$

 

 

263,844

 

 

(5) 

 

 

- Stock Options

 

    

 

$

 

 

0

 

 

(6) 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

2,144,772

 

 

(7) 

 

 

New Hire

 

    

 

- Stock Options

 

    

 

$

 

 

0

 

 

(6) 

 

 

- Time-Vesting RSUs

 

    

 

$

 

 

2,984,827

 

 

(7) 

 

 

Make-Whole RSUs

 

    

 

$

 

 

9,215,187

 

 

(8) 

 

 

Total 2017 TDC

 

    

 

$

 

 

17,452,466

 

 

 

 

% of Targeted TDC

 

    

 

 

 

 

48%

 

 

 

 

 

(1) Reflects annual base salary pro-rated from Ms. Georgiadis’ hire date of February 8, 2017 through December 31, 2017.

(2) Reflects pro-rated target amount payable under the MIP as disclosed in the “Grants of Plan-Based Awards in 2017” table on page 88 for the period Ms. Georgiadis served as CEO.

 

  LOGO   Mattel, Inc.    2018 Proxy Statement               55

2017 CEO Targeted vs. Realizable TDC ($ Millions) $40.0 $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 Targeted: $36.6 Realizable: $17.5 = 48% Realizable Compensation 52% lower than Targeted


Table of Contents

  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

(3) Reflects amounts disclosed in the “2017 LTI Annual Grant Values” table on page 67 and also Ms. Georgiadis’ make-whole grant ($14 million) and new hire grants (totaling $11 million).

(4) Reflects the one-time guaranteed cash bonus payment per offer letter.

(5) The value shown for the Performance Units for the 2017-2019 LTIP is 16.7% of target earnout, based on our adjusted EPS of $(0.87) for 2017, which was below threshold performance and resulted in 0% earned for the 2017 financial performance goal. Further, we have assumed target EPS performance for each of 2018 and 2019, resulting in a three-year average of 66.7% earned for the financial performance goal. We have further assumed, based on our current stock price, which results in substantially below threshold performance, that the impact of our TSR modifier would result in a reduction of 50 percentage points from the 66.7% earned payout based on our EPS performance, resulting in 16.7% earned payout under the 2017-2019 LTIP.

(6) The stock options granted in 2017 were underwater as of the end of the fiscal year and none were vested. The value shown for the realizable 2017 stock options reflects no intrinsic value for such options as of December 29, 2017, the last trading day of fiscal year 2017, based on our closing stock price of $15.38 and the option exercise price of $25.95 for the February 8, 2017 grant and $19.72 for the August 1, 2017 grant. If instead the Black-Scholes value of the stock options were taken into account as of December 29, 2017, then such options would be valued at approximately $4.4 million, resulting in Total 2017 Realizable TDC of $21.9 million, or 60% of Targeted TDC (for valuation purposes the expected life was based on the original ratio of expected life to original option term, volatility assumption (see Note 7 to Mattel’s Consolidated Financial Statements for 2017 contained in the Annual Report on Form 10-K filed with the SEC on February 27, 2018), no dividends assumed, and December 29, 2017 five-year Government Treasury rate used).

(7) The value shown for the realizable time-vesting restricted stock units (“RSUs”) for 2017 reflects our closing stock price of $15.38 as of December 29, 2017.

(8) For amounts vested in 2017, value shown is disclosed in the “Option Exercises and Stock Vested in 2017” table and for unvested RSUs, value shown reflects our closing stock price of $15.38 as of December 29, 2017.

No MIP Payout Earned for 2017

No 2017 cash incentive payout was earned under the MIP. The payout formula for our NEOs (and other EVPs) for 2017 under our MIP was as follows:

 

  75% of the payout is based on achievement of financial goals

 

    Company Financial Measure  

     Threshold     

(millions)

       Actual     
   

 

Adjusted Operating Profit (75% weighting)

 

   

 

$

 

 

489

 

 

 

   

 

$

 

 

(280

 

 

)

 

   

 

Adjusted Net Sales (25% weighting)

 

 

 

   

 

$

 

 

 

 

5,477

 

 

 

 

 

 

 

   

 

$

 

 

 

 

4,882

 

 

 

 

 

 

 

 

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

 

For 2017, to further motivate a focus on stockholder value creation, the Compensation Committee established a cap on payout for executives in the executive leadership level and above at 100% of target if adjusted operating profit was below 2016 actuals and our 2017 TSR was negative.

As in prior years, no payouts could be made unless we achieved adjusted operating profit threshold performance. For 2017, given that we did not meet any of our financial performance goals, no amounts were earned under the MIP for the NEOs. For 2017, after review of competitive market practices, the offer letters of Ms. Georgiadis, Mr. Euteneuer, and Ms. Thompson provided them with a minimum guaranteed cash bonus payment of $1,500,000, $300,000, and $250,000 respectively. The Compensation Committee determined that these one-time minimum payments were appropriate and necessary in order to recruit high-level executives in a competitive market for their talent and to compensate them for forfeited bonus opportunities with their prior employers.

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

Outstanding LTIP Cycles are Tracking Toward No Payout

Under our LTIP, commencing with the 2016 plan year, we grant three-year long-term performance-based RSUs, or Performance Units, each year, instead of every three years. The Performance Units under the 2016-2018 LTIP are earned based on a pre-determined three-year cumulative EPS, with the resulting earned percentage increased or decreased up to 50 percentage points based on our relative three-year TSR versus the S&P 500. For our 2017-2019 LTIP, the Compensation Committee revised the program to be based on annual EPS performance, set at the commencement of each year, with earned percentages averaged over the three-year performance cycle, and the resulting earned percentage similarly increased or decreased based on our relative three-year TSR versus the S&P 500. When the goals were established in March 2017, the Compensation Committee determined that one-year goal setting would: (i) allow the committee to set challenging targets that better reflect the Board’s expectations for changes at the Company during this stage of our transformation, (ii) better enable the committee to account for shifting industry dynamics, and (iii) avoid the potential risk of either windfall payouts or retention issues that could be associated with setting a less precise three-year EPS goal.

 

For the 2017-2019 LTIP, to further motivate a focus on stockholder value creation, the Compensation Committee established a cap on payout for the executives in the executive leadership level and above at 100% of target if 2017-2019 TSR is negative.

 

2017-2019 LTIP – Our annual 2017 EPS goal for the 2017-2019 LTIP at threshold performance was $0.91, with actual adjusted EPS performance for 2017 at $(0.87), resulting in no earned percentage attained for 2017 EPS financial performance. Further, our relative one year TSR at December 31, 2017, based on our stock price of $15.38, placed us significantly below the 25th percentile, which would have resulted in a reduction by 50 percentage points of any earned percentage under the EPS goal had the performance period ended on December 31, 2017.

 

2016-2018 LTIP – Our cumulative two-year adjusted EPS performance from January 1, 2016 through December 31, 2017, was significantly below threshold level and tracks at no payout under our 2016-2018 LTIP for financial performance. Our relative TSR at December 31, 2017 for the two-year period was also well below the 25th percentile, which would have resulted in a reduction by 50 percentage points of any earned percentage under the EPS goal had the performance period ended on December 31, 2017.

Initiatives to Retain Key Talent During This Critical Time

While the reduced payouts under our short-term and long-term incentive programs clearly demonstrate the Company’s commitment to pay-for-performance philosophy, they also reflect the difficulties of long- and short-term goal setting in the context of the significant changes that are impacting the toy industry and retail environment. In evaluating recent incentive earnouts at zero, as well as the considerable uncertainty at Mattel given recent changes at the senior executive level, the Compensation Committee determined to grant retention-focused compensation to certain longer-serving key members of the management team. The awards are focused on maintaining stability and retaining important institutional knowledge during a critical period in Mattel’s transformation, which is necessary to facilitate our leadership team’s execution of the Company’s strategic priorities.

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

Accordingly, in connection with the hiring of Ms. Georgiadis, the Compensation Committee provided Mr. Dickson, our President and COO, with $100,000 increase in salary; $1 million retention cash award, paid 50% on June 30, 2017 and 50% on January 31, 2018; and $5 million retention equity grants, 50% in RSUs and 50% in stock options, each vesting in one-third annual increments. Mr. Dickson is a key member of our leadership team and a significant contributor to the transformation of Mattel’s Power Brands.

In addition, in recognition of his critical role and experience, Mr. Normile was granted retention RSUs valued at $250,000 on December 29, 2017, which vest 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date.

Choice of Annual Equity LTI Mix

Our annual equity LTI mix is comprised one-third of LTIP Performance Units, one-third of RSUs, and one-third of stock options. For 2017, our Compensation Committee approved a program allowing senior executives, except for the CEO, Executive Chairman, and then CFO, to allocate the grant value of the stock options/RSUs component to a selected mix of stock options and RSUs (“Choice Program”). Our EVPs and above and other Section 16 officers must allocate at least 25% to stock options, and the remaining portion can be allocated to RSUs or stock options in 25% increments. This Choice Program was designed and implemented to strengthen senior executive engagement and retention.

 

LTIP Grant – March

 

       

 

Annual Equity Grant – August

 

         

 

LTI

Annual
Target Value

             

Performance Units

(Three-year cycle)

 

    +     Stock Options  

+

 

Time-Vesting RSUs


    


    

 

  =

   

1/3 of LTI

 

       

Remaining 2/3 of LTI

 

Choice of equity grant mix, with a minimum of 25% options

 

         

Stockholder Engagement

 

We continued to receive strong support for our executive compensation programs and practices in 2017.

We received more than 91% approval from stockholders on our 2017 Say-on-Pay. Over the past three years, we received more than 91% support on average. We have established a robust stockholder engagement program, which includes proactive and responsive dialogue with a broad range of our stockholders. This engagement helps inform the Board’s understanding of stockholder perspectives on a wide range of matters. Stockholder dialogue is a year-round practice for Mattel. During 2017, a year of tremendous leadership and business transformation, our dialogue with stockholders was primarily focused on the progress of our strategic transformation, our leadership changes, the performance of the Company, and how our Board and management team are driving value for our stockholders. The input and perspectives provided by our stockholders is highly valued, particularly at such a critical period for our Company, and we have processes in place to ensure that feedback received from our stockholders is relayed directly to the Board to help inform our practices. As we continue to execute on our transformation, we look forward to ongoing stockholder engagement, including dialogue focused on our executive compensation program and corporate governance practices.

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

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 Section 16 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 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 (CEO and Executive Chairman 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 and her direct reports.

 

 

  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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  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

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, home entertainment software, 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. We intend for Mattel’s revenues, total employees, and market cap value to generally fall 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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  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

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 2017 target annual TDC mix (i.e., target total direct compensation without one-time new hire inducement, make-whole or retention equity awards) for Ms. Georgiadis as our CEO and the other current NEOs:

 

LOGO

* For purposes of the chart above, the target annual TDC is the sum of year-end annual base salary, annual cash incentive plan target and annual equity LTIs grant value (i.e., 2017-2019 LTIP grant value (LTIP three-year awards granted annually), plus annual grant value of stock options and time-vesting RSUs, excluding any one-time special equity grants).

Base Salary

 

Our Compensation Committee reviews the base salaries of our CEO and her direct reports 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 her direct reports. 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.

The 2017 base salaries for Ms. Georgiadis, Mr. Euteneuer, and Ms. Thompson, each of whom were new hires in 2017, were established based on review of competitive market practices. Ms. Georgiadis’ base salary was set at $1,500,000, representing the same amount paid to Mr. Sinclair as our CEO, and Mr. Sinclair’s salary was reduced to $1,000,000 in connection with his transition to the Executive Chairman role. Mr. Euteneuer’s base salary was set at $900,000; while this represents an increase from the $750,000 paid to our former CFO, the Compensation Committee considered it appropriate given Mr. Euteneuer’s substantial experience and competitive market conditions. Ms. Thompson’s base salary was set at $525,000, which was consistent with the base salary of our prior head of Human Resources (“HR”).

 

  LOGO   Mattel, Inc.    2018 Proxy Statement               61

2017 Target Annual TDC* CEO Equity Long-Term Incentives (LTIs) 69% Base Salary 12% Annual Cash Incentive (MIP) 19% Other Current NEOs Equity Long-Term Incentives (LTIs) 58% Base Salary 23% Annual Cash Incentive (MIP) 19%


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  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

With respect to our other NEOs, in January 2017, in light of our challenging performance in 2016 as well as market data, as reviewed in November 2016, our Compensation Committee determined that none of our NEOs (and other CEO direct reports) would receive a merit-based salary increase for 2017. In February 2017, Mr. Dickson’s base salary was increased from $900,000 to $1,000,000 as part of his compensation package in connection with our CEO leadership transition.

For 2018, of our NEOs, only Mr. Normile received a three percent merit salary increase in light of the market level of our peers for his position.

Annual Cash Incentive and Bonus Payments

 

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 target 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.

2017 MIP

In March 2017, the Compensation Committee approved an annual cash incentive design under the MIP that is substantially similar to the design for 2016. Bonus opportunities were based:

 

  75% on financial performance goals (as measured by adjusted operating profit, weighted 75%, and adjusted net sales, weighted 25%) and

 

  25% on individualized strategic priorities for EVPs and above.

Further, no payouts would be made under the MIP to our NEOs unless we achieved adjusted operating profit threshold performance.

Like the 2016 MIP, the 2017 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 and individual strategic goals.

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. The Compensation Committee believed 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 transformation objectives of top-line growth with bottom-line discipline.

 

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Target MIP Opportunity

The following table shows the 2017 target MIP opportunities for our NEOs, expressed as a percentage of base salary. In connection with our leadership transition, Ms. Georgiadis’ target MIP opportunity was set at 150%, which represents the median among our peer group of CEOs, while Mr. Sinclair’s target opportunity was reduced from 150% to 100%. Mr. Euteneuer’s target opportunity was set at 100%, which was an increase from the 70% of our former CFO, as 70% was below the 25th percentile among our comparator peer group. Ms. Thompson’s target opportunity was set at 65% of base salary, consistent with what was paid to our prior head of HR. The target opportunities for Messrs. Dickson, Farr, and Normile were unchanged from 2016.

 

    Name  

 

  2017 Target MIP Opportunity  

as a % of Base Salary

   

 

Margaret H. Georgiadis, CEO

 

 

 

150%

 

   

 

Christopher A. Sinclair, Executive Chairman, former CEO

 

 

 

100%

 

   

 

Richard Dickson, President and COO

 

 

 

100%

 

   

 

Joseph J. Euteneuer, CFO

 

 

 

100%

 

   

 

Robert Normile, EVP, Chief Legal Officer, and Secretary

 

 

 

  65%

 

   

 

Amanda J. Thompson, EVP and Chief People Officer

 

 

 

  65%

 

   

 

Kevin M. Farr, former CFO

 

 

 

  70%

 

Potential 2017 MIP payouts ranged from 0 to 200% of target MIP opportunity, with up to 150% payable based on our performance against measurable financial goals and up to 50% payable based on achievement of individualized strategic priorities related to the executive’s job responsibilities. For individuals who commenced employment in 2017 or had a change in role, their 2017 target MIP opportunity and resulting payout are prorated to reflect the time employed or in the new role in 2017.

Financial Performance Goals and Results

The amount that can be earned under each financial measure ranges from 25% of target for threshold performance to 200% of target for maximum performance. 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. The table below shows the threshold, target, and maximum percentages that can be earned under our financial performance goals, after weighting.

 

   

 

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%

 

 

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  COMPENSATION DISCUSSION AND ANALYSIS  

 

       

 

In March 2017, the Compensation Committee set the target MIP financial performance goals for 2017 as follows:

 

    Company Financial Measure  

Threshold

  (millions)  

 

Target

  (millions)  

 

Maximum

  (millions)  

   

 

Adjusted Operating Profit (75% weighting)

 

   

 

$

 

 

529

 

 

 

   

 

$

 

 

623

 

 

 

   

 

$

 

 

716

 

 

 

   

 

Adjusted Net Sales (25% weighting)

 

   

 

$

 

 

5,445

 

 

 

   

 

$

 

 

5,830

 

 

 

   

 

$

 

 

6,231

 

 

 

The threshold goal for adjusted net sales of $5,445 million was set slightly below actual results for 2016 of $5,457 million, while the threshold operating profit was set above actual results for 2016. The objective was to provide greater alignment with our transformation strategy objectives of top-line growth with bottom-line discipline, while widening the financial performance bands to acknowledge the shifting nature of the current retail environment and Mattel’s ongoing transformation.

Modification of Financial Performance Goals; No Payout

In April 2017, after evaluating a number of considerations, including our CEO’s newly established internal annual financial plan and the importance of providing our broader team with challenging yet achievable targets that align with our five-pillar strategy, the Compensation Committee recognized that it was necessary to revise the threshold, target, and maximum performance goals for 2017. This included reducing the target goals and decreasing the adjusted operating profit bands for threshold and maximum performance from the levels previously established in March 2017. In making this determination, the Compensation Committee sought to set appropriate yet realistic performance targets that aligned with the Company’s transformation strategy and retention goals, as well as demonstrate its continued commitment to pay for performance, all in light of the Company’s recent history of below-target payouts. Each of these revised threshold goals are higher than actual results for 2016.

In connection with the goal changes and in order to ensure that only positive, improved performance could be rewarded, the Compensation Committee also provided that for the executive leadership job level and above the 2017 MIP could not pay out at over 100% unless our adjusted operating profit was higher than actual achievement in 2016 and our 2017 TSR was positive. The table below shows the revised financial goals approved in April 2017 and actual levels achieved in 2017 under the MIP. As illustrated below, we did not meet threshold performance under any of the revised goals and, thus, no amount was earned under the 2017 MIP.

 

    Company Financial Measure  

Threshold

  (millions)  

 

Target

  (millions)  

 

Maximum

  (millions)  

 

2017

Actual

  (millions)  

 

Weighted

  Performance  

Earnout %

   

 

Adjusted Operating Profit (75% weighting)

 

   

 

$

 

 

489

 

 

 

   

 

$

 

 

556

 

 

 

   

 

$

 

 

623

 

 

 

   

 

$

 

 

(280

 

 

)

 

 

 

0%

 

   

 

Adjusted Net Sales (25% weighting)

 

   

 

$

 

 

5,477

 

 

 

   

 

$

 

 

5,786

 

 

 

   

 

$

 

 

6,112

 

 

 

   

 

$

 

 

4,882

 

 

 

 

 

0%

 

   

 

Company Financial Performance Earnout

 

                                         

 

0%

 

The table above reflects 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 2017, actual results for adjusted operating profit reflected adjustments for litigation costs, severance

 

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Table of Contents
       

  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

payments, Venezuelan currency devaluation, and acquisition-related intangible amortization. Without such adjustments, the actual results for the operating profit would have been $(408) million, which was below threshold performance. For 2017, there were no adjustments to net sales.

2017 Strategic Priorities

The Compensation Committee established the 2017 individualized strategic priorities under the MIP for our NEOs based on Mattel’s five-pillar strategy described above. The individualized strategic priorities for each NEO are set forth below. As previously noted, because we did not meet threshold performance for any of our financial goals, no amount could be earned by the NEOs and other EVPs under the individualized strategic priorities component for our 2017 MIP.

 

 Name

  Individualized Strategic Priorities

 Margaret H. Georgiadis