DEF 14A 1 d702870ddef14a.htm DEF 14A DEF 14A
Table of Contents

 

 

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.   )

Filed by the Registrant                                Filed by a Party other than the Registrant  

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

Mattel, Inc.
(Name of Registrant as Specified In Its Charter)
        
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

   

 

  (2)  

Aggregate number of securities to which transaction applies:

 

   

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

   

 

  (4)  

Proposed maximum aggregate value of transaction:

 

   

 

  (5)   Total fee paid:
        
   

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

   

 

  (2)  

Form, Schedule or Registration Statement No.:

 

   

 

  (3)  

Filing Party:

 

   

 

  (4)  

Date Filed:

 

   

 

 

 

 


Table of Contents
LOGO   

 

LOGO

 

 

 

 

2019

PROXY STATEMENT

 

AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 16, 2019

 


Table of Contents

 

 

LOGO

Our Mission

To create innovative products

and experiences that inspire,

entertain and develop children

through play.


Table of Contents
    

 

Mattel, Inc.

Notice of 2019 Annual Meeting

of Stockholders

 

LOGO    LOGO    LOGO

DATE AND TIME

May 16, 2019 at 9:00 a.m.

(Los Angeles time)

  

LOCATION

Mattel Conference and Leadership Center,

1955 East Grand Avenue,

El Segundo, California 90245

  

RECORD DATE

Holder of record of Mattel

common stock at the close of

business on March 22, 2019

We will consider and act on the following matters of business at our 2019 annual meeting of stockholders (“2019 Annual Meeting”):

 

Matter         

The Board’s

Recommendations

Proposal 1      Election of the 10 director nominees named in the Proxy Statement: R. Todd Bradley, Adriana Cisneros, Michael J. Dolan, Ynon Kreiz, Soren T. Laursen, Ann Lewnes, Roger Lynch, Dominic Ng, Dr. Judy D. Olian, and Vasant M. Prabhu    LOGO  

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, 2019    LOGO   FOR
Proposal 3    Advisory vote to approve named executive officer compensation (“Say-on-Pay”)    LOGO   FOR
Proposal 4    Approval of the Second Amendment to the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan    LOGO   FOR
Proposal 5    Stockholder proposal regarding an amendment to stockholder proxy access provisions, if properly presented    LOGO   AGAINST
     Such other business as may properly come before the 2019 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 2019 Annual Meeting, please submit a proxy to vote as soon as possible so that your shares will be represented and voted at the 2019 Annual Meeting.

By Order of the Board of Directors

 

LOGO

ROBERT NORMILE

Secretary

El Segundo, California

April 4, 2019

 

2019 Proxy Statement      3


Table of Contents
    

 

Table of Contents

 

Proxy Summary

     5  

Corporate Governance at Mattel

     13  

Corporate Governance Highlights

     13  

Board General Information

     16  

Director Compensation

     23  
LOGO  

Election of Directors

     27  

Audit and Related Party Matters

     39  

Report of the Audit Committee

     39  

Fees Incurred for Services by PricewaterhouseCoopers LLP

     41  

Certain Transactions with Related Persons

     42  
LOGO  

Ratification of Selection of Independent

Registered Public Accounting Firm

     42  

Executive Officers and Executive Compensation

     43  

Executive Officers

     43  

Compensation Discussion and Analysis

     44  

Executive Summary

     44  

Elements of Compensation

     55  

Important Policies, Governance, and Guidelines

     67  

Executive Compensation

     71  

Summary Compensation Table

     71  

Grants of Plan-Based Awards in 2018

     76  

Outstanding Equity Awards at 2018 Year End

     78  

Option Exercises and Stock Vested in 2018

     80  

2018 Pension Benefits

     80  

2018 Nonqualified Deferred Compensation

     81  

Potential Payments Upon Termination or Change of Control

     83  

Pay Ratio of CEO to Median Employee

     89  

Compensation Risk Review

     91  

Report of the Compensation Committee

     91  

Proposals Relating to Compensation

     92  
LOGO   Advisory Vote to Approve Named Executive Officer Compensation (“Say-On-Pay”)      92  
LOGO   Approval of the Second Amendment to Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan      93  

Stockholder Proposal

     104  
LOGO   Stockholder Proposal Regarding an Amendment to Stockholder Proxy Access Provisions      104  

Stock Ownership and Reporting

     106  

Principal Stockholders

     106  

Security Ownership of Management and the Board

     108  

Section 16(a) Beneficial Ownership Reporting Compliance

     109  

Equity Compensation Plan Information

     109  
2019 Annual Meeting and Voting Information      111  

General Meeting Information

     111  

Deadline for 2020 Proposals and Nominations

     116  

Other Matters That May Come Before the 2019 Annual Meeting

     118  

Appendix A – Second 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  
 

 

 

4    Mattel, Inc.


Table of Contents
    

 

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 2018 financial performance, please review our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (“SEC”) on February 22, 2019.

Voting Matters and Board Recommendations

 

Matter   

The Board’s

Recommendations

   Page
LOGO    Election of 10 Director Nominees    LOGO    FOR each Director Nominee    27
LOGO    Ratification of PricewaterhouseCoopers LLP as our Independent Accounting Firm for 2019    LOGO    FOR    42
LOGO    Advisory Vote to Approve Named Executive Officer Compensation (“Say-on-Pay”)    LOGO    FOR    92
LOGO    Approval of the Second Amendment to Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan    LOGO    FOR    93
LOGO    Stockholder Proposal Regarding an Amendment to Stockholder Proxy Access Provisions    LOGO    AGAINST    104

2018 Leadership Transition

In April 2018, Ynon Kreiz became our Chief Executive Officer (“CEO”), and Margaret H. Georgiadis, our former CEO, stepped down to pursue a new opportunity. Mr. Kreiz brings with him over 20 years of experience in finance, media, entertainment, and content creation, and a track record of innovation as well as substantial, relevant leadership experience having served as the Chairman and CEO of at Maker Studios, Inc., Endemol Group, and Fox Kids Europe N.V. Since joining the Mattel board of directors (the “Board”) as an independent director in June 2017, Mr. Kreiz has been an invaluable resource to the Board and the management team by helping to advance the Company’s transformation efforts and Structural Simplification cost savings program, and by contributing deep expertise in areas core to our strategy going forward. Given Mr. Kreiz’s background and experience, as well as his existing institutional knowledge of Mattel and its industry, the Board believed that appointing Mr. Kreiz as CEO would serve to ensure a smooth leadership transition and enhance the Company’s execution going forward.

2018 Business Highlights and Strategic Overview

We remain focused on advancing our strategy to restore profitability and regain top-line growth in the short-to-mid term, and are laying the groundwork to capture the full value of our intellectual property (“IP”) in the mid-to-long term.

In 2018, Mattel demonstrated meaningful progress in advancing our transformation strategy, and improving our financial performance over the prior year, despite considerable retail disruption in the global toy industry, which included the liquidation of Toys “R” Us. Our stronger than expected 2018 financial results were primarily driven by the successful execution of our Structural Simplification program, the strength of our brands, in particular Barbie and Hot Wheels, and our execution during the holiday season. While Mattel is in a multi-year turnaround and there is more work to be done, we are encouraged by our progress in 2018.

 

2019 Proxy Statement      5


Table of Contents
    

Proxy Summary

 

To drive our transformation to become an IP-driven, high-performing toy company, in 2018, management developed a two-part strategy:

Transforming Mattel into an IP-driven, high-performing toy company

 

LOGO

 

In the short-to-mid term, our priorities are to continue to restore profitability by reshaping operations through Structural Simplification and to regain topline growth by growing our Power Brands and expanding our brand portfolio.

 

In the mid-to-long term, we are looking to capture the full value of our IP through franchise management and the development of our online retail and e-commerce capabilities.

 

 

LOGO

To drive the execution of our transformation strategy, we established four Company Objectives for the year. These objectives provided the framework for the Strategic Goals that measured individual performance under our annual cash incentive plan, thereby aligning pay delivery with our transformation strategy. These objectives were:

 

LOGO

 

LOGO

In 2017, we established Structural Simplification, a comprehensive cost savings program to simplify and streamline our operations and improve profitability by right sizing our cost structure.

In 2018, this program drove significant improvement in our profitability, helping us achieve:

 

 

$521 million of run-rate cost savings exiting 2018, and we expect to exceed our cumulative $650 million run-rate cost savings target exiting 2019;

 

 

$358 million improvement in fourth quarter operating income compared to 2017, our largest year-over-year fourth quarter improvement since 2009, and $103 million improvement in full year operating income compared to 2017, our largest full year improvement since 2012;

 

 

Gross margin of 46.6% in the fourth quarter and 39.8% for the full year, representing the first gross margin improvement for each of the fourth quarter and full year since 2013; and

 

 

A 22% reduction of our global non-manufacturing workforce.

 

6    Mattel, Inc.


Table of Contents
    

Proxy Summary

 

LOGO

Following the bankruptcy filing in September 2017 by Toys “R” Us, one of our top customers, the global toy industry faced considerable retail disruption going into 2018. Despite this significant headwind, Mattel demonstrated resilience and strong execution, in particular during the holiday season, and finished the year with a stronger than expected fourth quarter and full year.

 

 

Compared to 2017, full year 2018 net sales declined 8%, driven primarily by lower Toys “R” Us sales as a result of its liquidation.

 

 

Barbie and Hot Wheels continued their momentum throughout the year.

 

 

Barbie gross sales* increased 14% in 2018 versus the prior year, and reached the brand’s highest full year gross sales* in the last five years.

 

 

Hot Wheels gross sales* increased 7% in 2018 versus the prior year, and reached the brand’s highest full year gross sales* in its 50-year history.

 

 

Additionally, we executed well in our two largest regions – North America and Europe – and maintained our strength in Latin America and Global Emerging Markets, excluding China.

 

LOGO

With the creation of Mattel Films, Mattel Television, and our Global Franchise Management organization, we are targeting opportunities to develop our IP and extend our iconic franchises across film and television, digital gaming, live events, music, consumer products, and merchandise. We’ve recently made several announcements for the first ever live-action feature films for some of our key franchises including Barbie, Hot Wheels, Masters of the Universe, American Girl, and View-Master. Also, with respect to partner IP, we are focused on continuing to strengthen our relationships with many leading entertainment companies and consumer brands.

 

LOGO

We have recognized that to achieve Mattel’s vision, we need to drive toward a more progressive mindset that is culturally-centered on performance and collaboration, with a focus on empowering decision-makers and driving accountability at all levels. We have instituted new fundamentals to evolve how we work, which include:

 

 

Resetting performance standards to drive accountability, ownership, and execution;

 

 

Modernizing work/life programs to be more progressive and competitive;

 

 

Utilizing Mattel’s values as a foundation for how we hire, develop, promote, and drive accountability for culture-right behavior across all levels of the organization; and

 

 

Redesigning reward and recognition systems to encourage employees to challenge the status quo.

Additionally, we have focused on attracting and retaining the best talent at all levels and making certain all teams are thoroughly aligned with our strategy.

Looking ahead, we will continue to methodically execute our strategy in order to position Mattel for sustainable, profitable growth and drive long-term value for our stockholders.

 

*

Gross sales is a non-GAAP financial measure. For the definition of gross sales and a reconciliation of gross sales to net sales (the most directly comparable GAAP financial measure), please see pages 49 to 51 of our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 22, 2019.

 

2019 Proxy Statement      7


Table of Contents
    

Proxy Summary

 

Board Composition Reflects Significant Refreshment and the Needs of our Business

The Board remains focused on aligning our directors’ collective skills and expertise with Mattel’s strategy.

Given the meaningful changes in the toy industry, retail landscape, and at Mattel over the last several years, the Board has undergone significant refreshment. During 2018, the Board engaged in a comprehensive and deliberate director search process, prioritizing the following attributes:

 

 

Skills and experiences relevant to Mattel’s business, operations, and strategy; and

 

 

Qualities that contribute to the Board’s overall diversity.

The Board’s search process resulted in five new directors who bring a wide range of valuable perspectives and experiences that the Board believes will best support Mattel in executing its transformation strategy. The five directors added in 2018 are:

 

LOGO   R. Todd Bradley, who, as a prior CEO of Mozido, LLC, brings digital, marketing, and technology expertise relevant to our strategy, proven experience with turnaround companies in driving growth and improving profitably, and management experience with logistics, production, and quality control.
LOGO   Adriana Cisneros, who, as the CEO of Cisneros Group of Companies, brings significant experience transforming a company through innovation and digital strategy, and valuable expertise in restructuring, growth strategy, technology, and corporate social responsibility.
LOGO   Soren T. Laursen, who, as a former CEO of Top-Toy and former President of LEGO Systems, Inc., has tested experience in, and an understanding of, our business and the global toy industry, deep expertise in developing strong brand franchises supported by compelling media, digital and technology activations, and leadership experience in successfully turning around a company and driving growth.
LOGO   Roger Lynch, who, as the former President and CEO of Pandora Media, Inc., brings significant media, technology, and internet experience. Mr. Lynch has extensive experience leading, innovating, and scaling consumer media and technology businesses globally and has frequently worked with large content providers to create business models that embrace technological changes in distribution.
LOGO   Dr. Judy D. Olian, who, as the President of Quinnipiac University and former Dean of UCLA Anderson School of Management for over 12 years, brings extensive human resource management, management composition, and management systems expertise.

The Board continues to work diligently to ensure it maintains the right balance between long-term institutional knowledge, and fresh perspectives among its members, as well as alignment with our strategy.

The Board believes that the current mix of director tenures provides Mattel with an optimal balance of knowledge, experience, and capability. In its oversight of management and our continued transformation efforts, this mix allows the Board to leverage the new viewpoints, experiences, and ideas of newer directors as well as the deep Company knowledge of, and experience with, Mattel of longer-tenured directors.

 

8    Mattel, Inc.


Table of Contents
    

Proxy Summary

 

Name    Independent   Director Since    Audit    Compensation    Governance    Executive    Finance

R. Todd Bradley+

   LOGO   2018    LOGO    LOGO               

Adriana Cisneros

   LOGO   2018              LOGO          

Michael J. Dolan

Independent Lead Director

   LOGO   2004         LOGO    LOGO    LOGO     

Ynon Kreiz(1)

       2017                         

Soren T. Laursen

   (2)    2018                        LOGO

Ann Lewnes

   LOGO   2015              LOGO    LOGO     

Roger Lynch+

   LOGO   2018    LOGO                   LOGO

Dominic Ng+

   LOGO   2006    LOGO              LOGO    LOGO

Dr. Judy D. Olian

   LOGO   2018         LOGO    LOGO          

Vasant M. Prabhu+

   LOGO   2007    LOGO              LOGO    LOGO

LOGO = Chair

+ = Audit Committee Financial Expert

LOGO = Member

 

(1)

Sole member of Equity Grant Allocation Committee.

 

(2)

Mr. Laursen is expected to be determined to be independent when his service as interim Executive Director with us is completed, which is expected to occur no later than September 30, 2019.

Corporate Governance Highlights

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

 

LOGO      LOGO
Corporate Governance Practices      Board Practices
LOGO      LOGO
  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         8 of 10 director nominees are independent

Extensive Stockholder Engagement Led to Meaningful Compensation Changes

The Compensation Committee directly incorporated feedback from our stockholders into our 2018 compensation programs.

Mattel has developed and maintains an ongoing and active stockholder engagement program. In spring 2018, leading up to our annual meeting of stockholders (“2018 Annual Meeting”), we spoke with stockholders representing approximately 66% of our outstanding shares. Dean A. Scarborough, then a member of the Compensation Committee, and members of senior management participated in these discussions. The majority of the feedback received during this outreach was focused on our executive compensation, and, in particular, the compensation structure of our former CEO.

 

2019 Proxy Statement      9


Table of Contents
    

Proxy Summary

 

During the fall of 2018, and the beginning of 2019, we had discussions with stockholders representing approximately 81% of our outstanding shares. Our Independent Lead Director, Michael J. Dolan, and members of senior management participated in these discussions, which were focused on sharing the changes the Compensation Committee made to our compensation programs in response to the stockholder feedback we received in the spring after the 2018 Annual Meeting with respect to our 49% Say-on-Pay vote, and providing an update on our transformation progress.

Feedback received from our stockholders during this year-round practice is regularly shared with the full Board, the Governance and Social Responsibility Committee, and the Compensation Committee when related to our compensation programs and practices.

Executive Compensation Highlights

We made meaningful changes to our executive compensation programs in response to stockholder feedback in 2018 and are committed to our pay-for-performance philosophy and compensation governance best practices.

Meaningful Compensation Changes in Direct Response to Stockholder Feedback

The Compensation Committee carefully considered the feedback from our stockholders, our 49% Say-on-Pay vote in 2018, and compensation governance best practices, in implementing the following changes to our executive compensation programs and practices in 2018.

 

Feedback We Heard        How We Responded
CEO compensation structure should have greater alignment with Company performance and stockholder value creation, in particular the guaranteed bonus for our former CEO.          

The compensation of our new CEO, Mr. Kreiz, is substantially performance-based, with:

 

  84% of his 2018 equity awards* subject to Company and stock price performance; and

  No guaranteed or signing bonuses.

Former CEO’s vesting period and performance requirements for new-hire equity awards were insufficient.     

Mr. Kreiz’s new-hire inducement stock option is fully performance-based.

 

  Grant vests if our relative three-year TSR is ³ 65th percentile of companies in the S&P 500.

Weighting of three-year performance-based restricted stock units (“Performance Units” or “PSUs”) in long-term incentive (“LTI”) mix should be increased.      Percentage of our 2018 total target annual equity grant value (“Annual LTI Value”) granted as Performance Units was increased to 50% (from 33%) for Executive Vice Presidents (“EVPs”) and above.
A three-year financial performance measurement should be employed in the Long-Term Incentive Program (“LTIP”).      Our 2018-2020 LTIP employs a single three-year cumulative Free Cash Flow goal, instead of an annual goal set each year and averaged over three years.
Explicit link of incentive measures with transformation and strategic plan should be increased.      Our Mattel Incentive Plan (“MIP”) and LTIP were realigned to emphasize profitability and cash flow.
Size of companies in our executive compensation benchmarking peer group should be reconsidered.     

We realigned our peer group in 2018 by:

 

  Targeting median positioning and utilizing a lower revenue cap of 3x from the previous 4x    revenue cap; and

  Increasing focus on branded content/home entertainment companies.

 

Three of the four new companies in our peer group are smaller than Mattel in terms of revenue and market capitalization. Three of the five companies removed had market capitalizations greater than 5x Mattel.

 

*

2018 equity awards subject to Company and stock price performance include Mr. Kreiz’s 2018-2020 Performance Units, new-hire performance-based stock options, and time-vesting stock options, and exclude his time-vesting Restricted Stock Units (“RSUs”).

 

10    Mattel, Inc.


Table of Contents
    

Proxy Summary

 

2018 Pay-For-Performance Results

Pay outcomes for our named executive officers (“NEOs”) in 2018 reflect our pay-for-performance philosophy.

Above Target Annual Cash Incentive, or MIP, Payouts Were Primarily Driven by Improved EBITDA and Stronger than Expected Sales in 2018.

Our 2018 financial measures focused on driving profitability and cash generation, while stabilizing net sales, with a financial performance goal structure as follows:

 

 

The financial measures and their weightings are:

 

LOGO

 

 

Earn 35% for threshold performance to 200% for maximum performance under each financial measure, before weightings. No amounts earned for below threshold performance

 

 

Multiplier of 0% to 125% of the amount earned under the financial measures, based on performance of individual Strategic Goals

 

 

Payout cap of 200% of MIP target opportunity

Our improved profitability and stronger than expected sales resulted in a Company financial performance earnout of 159%, which was adjusted by up to 110% for individual performance against individual Strategic Goals.

No Performance Units Earned under 2016-2018 LTIP

Our 2016-2018 LTIP, which had a performance period from January 1, 2016 through December 31, 2018, based payout on achievement against a pre-established three-year cumulative earnings per share (“EPS”) goal, plus a relative TSR modifier of +/- 50 percentage points, based on our relative TSR versus the companies in the S&P 500.

We achieved below threshold performance under our EPS financial measure, resulting in no earnout. Our relative TSR was below threshold and the TSR modifier would have resulted in a reduction of 50 percentage points of any amount earned. Zero 2016-2018 LTIP units were earned, and thus no payouts were made.

Outstanding Equity Values Reflect 2018 Stock Price Underperformance

Based on our stock price performance through December 31, 2018, there would be a 25% earnout for the Performance Units under our 2017-2019 LTIP. Earnout under our 2017-2019 LTIP is based on achievement against annual EPS goals that are set on an annual basis with earnouts averaged over the three-year period. Any resulting earned amount is subject to a relative TSR modifier of +/- 50 percentage points, based on our relative TSR versus the companies in the S&P 500. Final earnout, however, will ultimately be based on our relative TSR over the three-year performance period, and will reflect our EPS performance for 2019.

As of December 31, 2018 (stock price of $9.99), all outstanding stock options were underwater and our CEO’s new-hire performance-based option, which vests at the end of a three-year performance period conditioned upon us achieving relative TSR over the performance period that is ³ 65th percentile of companies in the S&P 500, is tracking not to be earned.

 

2019 Proxy Statement      11


Table of Contents
    

Proxy Summary

 

Compensation Governance Best Practices

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

 

LOGO

Compensation Governance Practices

p

  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

 

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

      

  Independent compensation consultant

 

  Annual compensation risk assessment

 

  Annual comparator peer group review

 

  Annual tally sheet review

 

  No excise tax gross-ups

 

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

 

12    Mattel, Inc.


Table of Contents
    

 

Corporate Governance at Mattel

Corporate Governance Highlights

Mattel utilizes strong and effective corporate governance practices to drive accountability and provide 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:

 

LOGO

Corporate Governance Practices

    

LOGO

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         8 of 10 director nominees are independent

Stockholder Engagement

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

We have established and maintain an ongoing and active stockholder engagement program. 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 through our investor relations team, with more concerted and focused efforts by an independent director, with management, once or twice a year.

In spring 2018, leading up to our 2018 Annual Meeting, we spoke with stockholders representing approximately 66% of our outstanding shares. Mr. Scarborough, then a member of the Compensation Committee, and members of senior management, participated in these discussions. The majority of the feedback received during this outreach was focused on our executive compensation, and in particular the compensation structure of our former CEO.

During the fall of 2018, and the beginning of 2019, we had discussions with stockholders representing approximately 81% of our outstanding shares. Our Independent Lead Director, Mr. Dolan, and members of senior management participated in these discussions, which were focused on sharing the changes the Board and Compensation Committee made to our compensation programs in response to the stockholder feedback we received in the spring after the 2018 Annual Meeting with respect to our 49% Say-on-Pay vote the progress of our strategic transformation, our leadership changes, board structure and refreshment, and environmental and social governance. Our stockholders expressed approval of the positive changes we had made with respect to leadership, board composition, executive compensation, and our progress with respect to environmental and social governance matters.

 

2019 Proxy Statement      13


Table of Contents

Corporate Governance at Mattel

 

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, the 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.

In April 2018, in connection with Mr. Kreiz’s appointment as CEO, the Board determined that the Company and its stockholders would be best served by a leadership structure in which Mr. Kreiz serves as Chairman and CEO, counterbalanced by a strong, independent Board led by Mr. Dolan, as Independent Lead Director.

In evaluating Mattel’s go-forward Board leadership structure, the Board determined that this structure would best enable Mattel to accelerate progress on our transformation to becoming an IP-driven, high-performing toy company. The Board believes that the combined Chairman and CEO role permits tight coordination between management and the Board, direct and timely communication, and optimal prioritization of the Board agenda, all as we continue to navigate through a critical period for the Company. Further, Mr. Kreiz, who joined the Board in June 2017, brings substantial, relevant leadership experience to the Company and to the Chairman and CEO position, having previously served in the combined role at Maker Studios, Inc., Endemol Group, and Fox Kids Europe N.V. Since joining the Board, Mr. Kreiz has been an invaluable resource for our Board and management team by helping to advance our progress toward our transformation efforts and Structural Simplification cost savings program, and by contributing deep expertise in multimedia, entertainment, and content creation – core areas of our strategy.

Independent leadership still remains an important pillar of the Board leadership structure and, as such, the Company continues to have an Independent Lead Director with robust, well-defined responsibilities as set forth below under “Independent Lead Director Responsibilities.”

Going forward, the 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 2018, the independent directors of the Board re-elected Mr. 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.

 

14    Mattel, Inc.


Table of Contents

Corporate Governance at 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 directors who served in 2018 (except Messrs. Kreiz and Laursen) 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. Mr. Kreiz ceased being independent as of April 26, 2018 when he became our CEO, and Mr. Laursen ceased being independent as of October 8, 2018 when he became employed as interim Executive Director, as discussed below. 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 TOP-TOY Holding II A/S). 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 the 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.

On October 8, 2018, Mr. Laursen became employed as Executive Director in order to help accelerate key aspects of our growth strategy in Europe, including business planning, product and market development, commercial execution, regional partnerships, and retail collaboration. In connection with his employment as Executive Director, Mr. Laursen stepped down as a member of the Governance and Social Responsibility Committee to ensure its continuing independence. The terms of his employment agreement provide that his service as Executive Director will terminate no later than September 30, 2019. The Board determined that as of October 8, 2018, Mr. Laursen is not independent within the meaning of both Mattel’s and Nasdaq’s director independence standards. The Board expects that Mr. Laursen will once again qualify as independent at the conclusion of his service as Executive 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 and summarized, and the results are reviewed with the Board and Board committees.

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 the 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.

 

2019 Proxy Statement      15


Table of Contents

Corporate Governance at Mattel

 

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 10 years, the Board has added six new directors in the past two years, including four new independent directors. The Board believes that the current mix of director tenures provides Mattel with an optimal balance of knowledge, experience, and capability. In its oversight of management and our continued transformation efforts, this mix allows the Board to leverage the new viewpoints, experiences, and ideas of newer directors as well as the deep Company knowledge of, and experience with, Mattel of longer-tenured directors. 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.

Board General Information

Director Nominees Reflect Strong Board Refreshment

The Board remains focused on aligning our directors’ collective skills and expertise with Mattel’s strategy. Given the meaningful changes in the toy industry, retail landscape, and at Mattel over the last several years, the Board has undergone significant refreshment. During 2018, the Board conducted a comprehensive and deliberate director search process, prioritizing the following attributes:

 

 

Skills and experiences relevant to Mattel’s business, operations, and strategy; and

 

 

Qualities that contribute to the Board’s overall diversity.

The Board’s search process resulted in five new directors who bring a wide range of valuable perspectives and experiences that the Board believes will best support Mattel in executing its transformation strategy. The five directors added in 2018 are:

 

LOGO  

R. Todd Bradley, who, as a prior CEO of Mozido, LLC, brings digital, marketing, and technology expertise relevant to our strategy, proven experience with turnaround companies in driving growth and improving profitably, and management experience with logistics, production, and quality control.

 

LOGO  

Adriana Cisneros, who, as the CEO of Cisneros Group of Companies, brings significant experience transforming a company through innovation and digital strategy, and valuable expertise in restructuring, growth strategy, technology, and corporate social responsibility.

 

LOGO  

Soren T. Laursen, who, as a former CEO of Top-Toy and former President of LEGO Systems, Inc., has tested experience in, and an understanding of, our business and the global toy industry, deep expertise in developing strong brand franchises supported by compelling media, digital and technology activations, and leadership experience in successfully turning around a company and driving growth.

 

LOGO  

Roger Lynch, who, as the former President and CEO of Pandora Media, Inc., brings significant media, technology, and internet experience. Mr. Lynch has extensive experience leading, innovating, and scaling consumer media and technology businesses globally and has frequently worked with large content providers to create business models that embrace technological changes in distribution.

 

LOGO  

Dr. Judy D. Olian, who, as the President of Quinnipiac University and former Dean of UCLA Anderson School of Management for over 12 years, brings extensive human resource management, management composition, and management systems expertise.

 

Christopher A. Sinclair, who previously served as our Executive Chairman of the Board, retired at the end of his term and did not stand for re-election to the Board at the 2018 Annual Meeting. Ms. Georgiadis, our former CEO, stepped down from the Board in April 2018 to pursue a new opportunity. Dr. Fergusson reached Mattel’s mandatory retirement age at the time of the 2018 Annual Meeting and, accordingly, did not stand for re-election to the Board. In addition, Ms. White Loyd and Messrs. Scarborough and Edwards did not stand for re-election at our 2018 Annual Meeting.

 

16    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

Board Meetings

During 2018, the Board held 10 meetings. No incumbent 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 (in each case, held during the period of time such director served on the Board or the applicable committee).

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 11 directors at the time of the 2018 Annual Meeting and 10 directors attended the meeting.

Board Committees

The 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    Compensation   

Governance

and Social

Responsibility

   Executive    Finance   

Equity

Grant

Allocation

  Non-Employee Directors                              
  R. Todd Bradley                          
  Adriana Cisneros                            
  Michael J. Dolan+            LOGO    LOGO          
  Ann Lewnes         LOGO                  
  Roger Lynch                          
  Dominic Ng                    LOGO     
  Dr. Judy D. Olian                          
  Vasant M. Prabhu    LOGO                     
  Employee Directors                              
  Ynon Kreiz                            
  Soren T. Laursen                            

 

LOGO  = Chair    + = Independent Lead Director
   = Member   

 

2019 Proxy Statement      17


Table of Contents

Corporate Governance at Mattel

 

The primary responsibilities, membership, and meeting information for the committees of the Board during 2018 are summarized below.

 

 

Audit Committee

 

 

Members in 2018:

 

Vasant M. Prabhu (Chair)

R. Todd Bradley (member since May 2018)

Roger Lynch (member since August 2018)

Dominic Ng

Kathy White Loyd (member until May 2018)

  

Meetings in 2018: 11

 

The Board has determined that each member meets applicable SEC, Nasdaq and Mattel independence and “financial sophistication” standards and qualifies as a “financial expert” under applicable SEC regulation.

 

Primary Responsibilities

 

  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

      

 

18    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

 

Governance and Social Responsibility Committee

 

 

Members in 2018:

 

Ann Lewnes (Chair) (Chair since May 2018)

Adriana Cisneros (member since August 2018)

Michael J. Dolan

Dr. Judy D. Olian (member since September 2018)

Dr. Frances D. Fergusson (Chair until May 2018)

Trevor A. Edwards (member until May 2018)

Soren T. Laursen (member from May 2018 to

September 2018)

 

  

Meetings in 2018: 7

 

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

 

Primary Responsibilities

 

  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

      

 

2019 Proxy Statement      19


Table of Contents

Corporate Governance at Mattel

 

 

Compensation Committee

 

           

 

Members in 2018:

 

Michael J. Dolan (Chair)

R. Todd Bradley (member since May 2018)

Dr. Judy D. Olian (member since September 2018)

Ann Lewnes (member until September 2018)

Trevor A. Edwards (member until May 2018)

Dean A. Scarborough (member until May 2018)

Kathy White Loyd (member until May 2018)

 

  

 

Meetings in 2018: 9

 

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.

 

Meets at least once each year without the CEO present.

    

 

Primary Responsibilities

 

       

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

 

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 short- and long-term incentive and equity compensation plans and programs

 

Approve all forms of compensation to be provided to the non-employee directors

  

Assess material risks associated with Mattel’s compensation structure, policies, plans, 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 levels, programs and practices. 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 levels. 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 2018, 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, LTIs, Total Direct Compensation (“TDC”), and all other compensation for our CEO, his direct reports, and other EVPs as compared to the market and compensation of their counterparts at our executive compensation comparator peer companies (“peer group”);

 

 

Our MIP and LTI designs, provisions, and practices; and

 

 

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

 

20    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

 

Reviewing and advising regarding our peer group;

 

 

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

 

 

Reviewing and advising on our 2018 Proxy Statement;

 

 

Advising on our new CEO’s compensation;

 

 

Providing executive compensation regulatory and legislative updates; and

 

 

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

Other Board Committees

During 2018, the Finance Committee held five 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.

During 2018, the Executive Committee held one meeting. The Executive Committee may exercise all the powers of the Board, subject to limitations of applicable law, between meetings of the Board.

Mattel also has an Equity Grant Allocation Committee (“EGAC”) with Mr. Kreiz as the current sole member. The EGAC’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 grants to employees below the business unit leadership job level.

Risk Oversight

Role of Full Board in Risk Oversight

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

Role of Management in Risk Oversight

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

 

2019 Proxy Statement      21


Table of Contents

Corporate Governance at Mattel

 

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

The 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 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.

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

In addition to our Committee charters and Code of Conduct, current copies of the following materials related to Mattel’s corporate governance policies and practices are available publicly on Mattel’s corporate website at http://corporate.mattel.com/about-us/corporate-governance.aspx:

 

 

Board of Directors Amended and Restated Guidelines on Corporate Governance;

 

 

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.

 

 

22    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

Director Compensation

Independent Consultant Review of Non-Employee

Director Compensation

In November 2018, 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 re-constituted peer group and the median mix of cash and equity compensation. As a result, FW Cook recommended no change to our non-employee director compensation program, under which no increases have been made since May 2016. FW Cook further found that our non-employee director compensation program structure is aligned with 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 modest charitable gift matching.

Retainers

For 2018, non-employee directors received:

 

Annual cash retainer

   $ 100,000  

Additional cash retainer if serving as the Independent Lead Director of the Board

   $ 30,000  

Additional cash retainer if serving as the Chair of the Audit or Compensation Committee

   $ 20,000  

Additional cash retainer if serving as the Chair of the Executive, Finance, or Governance and Social Responsibility Committee

   $ 15,000  

Additional cash retainer if serving on the Audit Committee, including as Audit Committee Chair

   $ 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 under “Narrative Disclosure to Director Compensation Table - Director DCP.” For directors commencing service on the Board other than at our annual meeting of stockholders, annual retainers are paid in advance and are prorated for service until the next annual meeting. Therefore, our directors who did not stand for re-election at our 2018 Annual Meeting did not receive any retainers in 2018.

Equity Compensation

For 2018, non-employee directors received:

 

Annual equity grant of deferred RSUs (intended fixed grant value)

   $ 140,000  

The Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan (“Amended 2010 Plan”) provides for a limit of $500,000 of equity grants to any one non-employee director in a calendar year. During 2018, 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 dividend equivalent rights, meaning that for the period before the RSUs are settled in shares, we will pay the director cash equal to any 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.

Director Compensation Table

The following table shows the compensation of the members of the Board who served at any time during 2018, other than Mr. Kreiz and Ms. Georgiadis, whose compensation as an executive officer is set forth in the Summary Compensation Table. See the “Narrative Disclosure to Director Compensation Table” below for additional details regarding our director compensation program.

 

2019 Proxy Statement      23


Table of Contents

Corporate Governance at Mattel

 

  Name(1)   

Fees

Earned

or Paid

in Cash(2)

($)

    

Stock

Awards(3)

($)

    

All Other

Compensation(4)

($)

    

Total

($)

 

  R. Todd Bradley(5)

     110,000        139,995        0        249,995  

  Adriana Cisneros(6)

     83,333        116,670        0        200,003  

  Michael J. Dolan

     165,000        139,995        15,000        319,995  

  Trevor A. Edwards(7)

     0        0        33,125        33,125  

  Dr. Frances D. Fergusson(7)

     0        0        25,250        25,250  

  Soren T. Laursen(8)

     100,000        239,997        49,164        389,161  

  Ann Lewnes

     115,000        139,995        15,000        269,995  

  Roger Lynch(6)

     83,333        116,670        15,000        215,003  

  Dominic Ng

     125,000        139,995        15,000        279,995  

  Dr. Judy D. Olian(10)

     75,000        105,005        15,000        195,005  

  Vasant M. Prabhu

     130,000        139,995        15,000        284,995  

  Dean A. Scarborough(7)

     0        0        0        0  

  Christopher A. Sinclair(9)

     0        164,864        400,092        564,956  

  Kathy White Loyd(7)

     0        0        6,250        6,250  

 

(1) 

Mr. Kreiz was appointed our CEO effective April 26, 2018. Prior to such appointment, Mr. Kreiz received compensation for serving as a non-employee director in accordance with our director compensation program, all of which was paid in 2017 as we pay our director fees in advance.

 

(2) 

For Mr. Ng, the amount shown was deferred under the Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors (“Director DCP”).

 

(3) 

On May 17, 2018, each of our non-employee directors elected at our 2018 Annual Meeting received an annual equity grant of 9,162 RSUs under the Amended 2010 Plan. In addition, each of Ms. Cisneros, Mr. Lynch and Dr. Olian received a grant of 7,347, 7,347, and 6,518 RSUs, respectively, representing a pro rata portion of the annual equity award, in connection with their appointments to the Board in August and September 2018. The amount for Mr. Laursen also includes a grant of 6,873 RSUs with a grant date fair value, in accordance with FASB ASC Topic 718, of $100,002 granted in connection with his appointment as Executive Director on October 8, 2018. The amount shown for Mr. Sinclair represents the one-third of his 2017-2019 LTIP grant as required under FASB ASC Topic 718 because the performance goal is set annually for each year of the three-year performance period. For more information on the grant date fair value of the 2017-2019 LTIP, see the footnotes to the Summary Compensation Table. Amounts shown in this column represent the grant date fair value of such shares, computed in accordance with FASB ASC Topic 718, based on our closing stock price on the applicable date of grant.

The table below shows the aggregate number of stock awards outstanding for each of our directors (other than Ms. Georgiadis and Mr. Kreiz) as of December 31, 2018. Stock awards consist of vested but not settled RSUs and any deferrals of vested RSUs under the Director DCP. Our directors held no outstanding option awards as of December 31, 2018.

 

  Name   

Aggregate Stock Awards

Outstanding as of

December 31, 2018

 

  R. Todd Bradley

     9,162  

  Adriana Cisneros

     7,347  

  Michael J. Dolan

     20,102  

  Trevor A. Edwards

     0  

  Dr. Frances D. Fergusson

     6,321  

  Soren T. Laursen

     16,035  

  Ann Lewnes

     20,102  

  Roger Lynch

     7,347  

  Dominic Ng

     49,904  

  Dr. Judy D. Olian

     6,518  

  Vasant M. Prabhu

     20,102  

  Dean A. Scarborough

     33,275  

  Christopher A. Sinclair

     0  

  Kathy White Loyd

     17,783  

 

(4) 

The “All Other Compensation” column includes $400,092 paid to Mr. Sinclair for his service as Executive Chairman and $41,664 paid to Mr. Laursen for his service as Executive Director. Mr. Sinclair served as Executive Chairman until our 2018 Annual Meeting, and Mr. Laursen was appointed Executive Director effective October 8, 2018. The amount paid to Mr. Sinclair includes $375,342 in salary

 

24    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

  and $24,750 in contributions by Mattel under the tax-qualified, 401(k) savings plan (“401(k) Plan”). Mr. Laursen’s salary is converted from Danish Krone (“DKK”) using the exchange rate of 0.15315 USD to 1 DKK as of December 31, 2018. All other amounts, including all amounts included for Mr. Laursen other than his salary as Executive Director, reflect the 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. Bradley was elected as a member of the Board at our 2018 Annual Meeting.

 

(6)

Ms. Cisneros and Mr. Lynch were elected to the Board on August 13, 2018. In connection with their election to the Board, each of Ms. Cisneros and Mr. Lynch received a cash retainer of $83,333 and a grant of RSUs with a grant date fair value of $116,670, representing a pro-rata portion of the annual director compensation based on the number of months they would serve from August 2018 to the date of the 2019 Annual Meeting.

 

(7)

Dr. Fergusson reached Mattel’s mandatory retirement age at the time of the 2018 Annual Meeting and, accordingly, did not stand for re-election to the Board. In addition, Ms. White Loyd, Messrs. Edwards and Scarborough did not stand for re-election at the 2018 Annual Meeting.

 

(8)

Mr. Laursen was elected as a member of the Board at our 2018 Annual Meeting, and subsequently appointed as Executive Director effective October 8, 2018. Following his appointment as Executive Director, Mr. Laursen no longer received any additional compensation under the director compensation program, 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.

 

(9)

Mr. Sinclair served as Executive Chairman and member of the Board until his retirement on May 17, 2018. Mr. Sinclair did not receive any additional compensation for serving as a director.

 

(10)

Dr. Olian was elected to the Board on September 13, 2018. In connection with her election to the Board, Dr. Olian received a cash retainer of $75,000 and a grant of RSUs with a grant date fair value of $105,005, representing a pro-rata portion of the annual director compensation based on the number of months she will serve from September 2018 to the date of the 2019 Annual Meeting.

Narrative Disclosure to Director Compensation Table

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 $7,500 per year to one or more non-profit public charities that help fulfill the Foundation’s mission of serving children in need. The Foundation also will match up to $7,500 for any additional gifts that the director makes on his or her own, subject to certain limitations. The programs may not be used to satisfy any pre-existing commitments of the director or any member of the director’s family. Under SEC rules, these amounts are reflected in the “All Other Compensation” column in the table above. These gift and match amounts were each reduced from $15,000 to $7,500 in March 2018.

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 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 10 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, 2018, the following directors and former directors who served during 2018 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: 96,391; Mr. Scarborough: 71,719; and Ms. White Loyd: 32,373.

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.

 

2019 Proxy Statement      25


Table of Contents

Corporate Governance at Mattel

 

Sinclair Executive Chairman Compensation

Mr. Sinclair served as our Executive Chairman from February 2017 to our 2018 Annual Meeting. For his service as Executive Chairman, his base salary was set at $1,000,000. For 2018, in anticipation of his retirement at our 2018 Annual Meeting, Mr. Sinclair was not eligible to participate in the MIP or receive any equity grants; however, to incentivize Mr. Sinclair to remain in the Executive Chairman role through the 2018 Annual Meeting, his August 1, 2017 annual grant of stock options and RSUs vested 100% on the date of the 2018 Annual Meeting.

Laursen Executive Director Compensation

In connection with his appointment as interim Executive Director effective October 2018, we entered into an employment agreement with Mr. Laursen that will terminate on September 30, 2019, or such earlier date as either party may elect. For his employment as Executive Director at 50% of full-time employment, Mr. Laursen receives a salary of DKK 97,350 per month (or approximately $15,000 per month as of October 2018), and was given a grant of 6,873 RSUs in October 2018 with a grant date fair value of $100,002. Mr. Laursen is not eligible to participate in our MIP or other employee benefit programs. While serving as Executive Director, Mr. Laursen continues to serve as a director but will not participate in our director compensation program.

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. Annual retainers and equity grants deferred into Mattel stock equivalents in the Director DCP receive credit and are valued at the current market value. Each of the Board members who has served on the Board for five years has met the target minimum stock ownership level.

 

26    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

LOGO    Election of Directors

 

LOGO   

 

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 CEO.

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.

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 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 committee. Candidates who the committee expresses interest in pursuing must meet in person with at least two members of the 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

 

 

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;

 

2019 Proxy Statement      27


Table of Contents

Corporate Governance at Mattel

 

 

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.

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

Stockholder Proxy Access Right

Mattel’s Amended and Restated Bylaws (the “Bylaws”) permit 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.

Director Nominees for Election

After receiving input from members of the Governance and Social Responsibility Committee, the Board has nominated 10 director nominees for election at the 2019 Annual Meeting, all of whom are currently directors. 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

  

 

Michael J. Dolan

  

 

Soren T. Laursen

  

 

Roger Lynch

  

 

Dr. Judy D. Olian

    Adriana Cisneros

 

  

Ynon Kreiz

 

  

Ann Lewnes

 

  

Dominic Ng

 

  

Vasant M. Prabhu

 

 

28    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

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 10 director nominees named above. If, before the 2019 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.

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, human resources management, logistics, technology, commercial banking, investment banking, including mergers and acquisitions and business development, accounting, community outreach, and corporate governance and social responsibility, 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       

LOGO

 

 Age: 60

 

 Director Since: 2018

 

 Mattel Committee  Memberships:

 

   Audit Committee

   Compensation Committee

 

 Other Current Public  Directorships:

 

   Eastman Kodak Company

 

    

 

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 brings digital, marketing, and technology expertise relevant to Mattel’s strategy, and management experience with logistics, production, and quality control with previous management positions within logistics, production, and quality control. In addition, Mr. Bradley has proven experience with turnaround companies in driving growth and improving profitably.
        
        

 

2019 Proxy Statement      29


Table of Contents

Corporate Governance at Mattel

 

Adriana Cisneros

       

LOGO

 

 Age: 39

 

 Director Since: 2018

 

 Mattel Committee

 Memberships:

 

   Governance and Social

   Responsibility Committee

 

 

    

 

Career Highlights

Cisneros Group of Companies, a global enterprise focused on media & entertainment, digital advertising solutions, real estate, and social leadership

  Chief Executive Officer since September 2013

  Vice Chairman and Director of Strategy (September 2005 – August 2013)

 

Additional Leadership Experience and Service

  President, Fundación Cisneros since 2009

  Co-chair, Endeavor Miami since 2014

  Director, International Academy of Television Arts & Sciences since 2015; also serves on Executive Committee

  Trustee, Paley Center for Media since 2016

  Director, Museum of Modern Art (“MoMA”) since 2012; also serves on Latin American Acquisition Committee

  Director, MoMA PS1 since 2006

  Director, Parrot Analytics since 2018

  Director, Knight Foundation since 2017; also serves on Program Committee

  Director, University of Miami since 2017

  Director, Citibank Private Bank Latin American Advisory Board since 2018

 

     

 

Key Experience/Director Qualifications

 

   
   

 

Ms. Cisneros brings to Mattel’s Board significant leadership, media, real estate, entertainment, consumer products, and digital experience. As the Chief Executive Officer of a global company, she has valuable expertise in restructuring, growth strategy, and technology. She has experience transforming a company through innovation and digital strategy. She also has experience serving on the boards of nonprofit entities. Ms. Cisneros also brings a valuable perspective on global consumers and corporate social responsibility.

 

30    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

Michael J. Dolan

      

LOGO

 

 Age: 72

 

 Director Since: 2004

 

 Mattel Committee  Memberships:

 

   Compensation Committee

   (Chair)

   Executive Committee

   (Chair)

   Governance and Social

   Responsibility Committee

 

    

 

 

 

 

   

   

   

 

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.

    

 

2019 Proxy Statement      31


Table of Contents

Corporate Governance at Mattel

 

Ynon Kreiz

         

LOGO

 

 Age: 54

 

 Director Since: 2017

 

 Mattel Committee  Memberships:

 

   Equity Grant Allocation

   Committee

 

 Other Current Public  Directorships:

 

   Warner Music Group Corp

 

    

 

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, entertainment, and content 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.

         

 

32    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

Soren T. Laursen

 

LOGO

 

  Age: 55

 

  Director Since: 2018

 

  Mattel Committee

  Memberships:

 

    Finance Committee

 

    

 

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 and the global commercial toy industry, deep expertise in developing strong brand franchises supported by compelling media, digital and technology activations, and leadership experience in successfully turning around a company and driving growth.

 

2019 Proxy Statement      33


Table of Contents

Corporate Governance at Mattel

 

Ann Lewnes

 

LOGO

 

  Age: 57

 

  Director Since: 2015

 

  Mattel Committee

  Memberships:

 

     Executive Committee

     Governance and

        Social Responsibility

        Committee (Chair)

        

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.

      
      
      

 

34    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

Roger Lynch

 

LOGO

 

  Age: 56

 

  Director Since: 2018

 

  Mattel Committee

  Memberships:

 

    Audit Committee

    Finance Committee

        

Career Highlights

Pandora Media, Inc., a streaming music service that was acquired by SiriusXM Holdings Inc.

  Chief Executive Officer, President, and Director (September 2017 – February 2019)

Sling TV Holding LLC, an on-demand internet streaming television service (subsidiary of DISH Network)

  Chief Executive Officer and Director (July 2012 – August 2017)

Dish Network LLC, a pay television operator

  Executive Vice President, Advanced Technologies (November 2009 – July 2012)

Video Networks International, Ltd., an internet protocol television provider

  Chairman and Chief Executive Officer (2002 – 2009)

Chello Broadband N.V., a broadband internet service provider in Europe

  President and Chief Executive Officer (1999 – 2001)

 

Additional Leadership Experience and Service

  Director, USC Dornsife School of Letters, Arts and Sciences since 2018

  Director, Quibi LLC since 2018

  Director, Tuck School of Business at Dartmouth since 2017

  Director, Video Networks International LTD since 2002

  Director, Roku LLC (2012 – 2017)

  Director, Digitalsmiths LLC (2010 – 2015; served as Chair of Compensation Committee)

 

   

Key Experience/Director Qualifications

 

    
   

 

Mr. Lynch brings to Mattel’s Board significant leadership, media, technology, and internet experience. He has a wealth of consumer experience, including experience leveraging changing consumer behaviors that can be applied to help further Mattel’s growth. Additionally, he has extensive experience leading, innovating, and scaling consumer media and technology businesses globally, including having guided a number of companies through critical transformation periods. Through his media industry experience, Mr. Lynch has frequently worked with large content providers to create business models that embrace technological changes in distribution.

 

2019 Proxy Statement      35


Table of Contents

Corporate Governance at Mattel

 

Dominic Ng

 

LOGO

 

  Age: 60

 

  Director Since: 2006

 

  Mattel Committee

  Memberships:

 

    Audit Committee

    Executive Committee

    Finance Committee

       (Chair)

 

  Other Current Public   Directorships:

 

    East West Bancorp, Inc.

   

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)

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

  Trustee, Academy Museum of Motion Pictures since 2018

  Member, Keck School of Medicine Board of Overseers since 2016

  Director of the following non-profit entities and government organizations: Federal Reserve Bank of San Francisco – Los Angeles Branch (2005 – 2011); 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); and Los Angeles’ Mayor’s Trade Advisory Council as Co-Chair (2009 – 2011)

 

         Key Experience/Director Qualifications     
   

 

As the Chief Executive Officer of one of the largest independent banks headquartered in Southern California, 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.

 

36    Mattel, Inc.


Table of Contents

Corporate Governance at Mattel

 

Dr. Judy D. Olian

 

LOGO

 

  Age: 67

 

  Director Since: 2018

 

  Mattel Committee   Memberships:

 

    Compensation

       Committee

    Governance and

       Social Responsibility

       Committee

 

  Other Current Public   Directorships:

 

    Ares Management LLC

    United Therapeutics

       Corp

 

        

Career Highlights

Quinnipiac University

  President since July 2018

UCLA Anderson School of Management

  Dean and John E. Anderson Chair in Management (January 2006 – July 2018)

 

Additional Leadership Experience and Service

  Director, Ares Management LLC since 2015; also serves on Audit Committee

  Director, United Therapeutics Corp. since 2016; also serves on Compensation Committee

  Director, UCLA Technology Development Group (2014 – 2018)

  Advisory Board Member, Catalyst Inc. since 2011

  Chairman, G. and R. Loeb Foundation Inc. since 2006

   

Key Experience/Director Qualifications

 

    
   

 

As the President of Quinnipiac University, and former Dean of the UCLA Anderson School of Management for over 12 years, Dr. Olian brings to Mattel’s Board her extensive human resource management, management composition, and management systems expertise. Under her leadership, the Anderson School hired a record number of faculty, and raised over $450 million for student and faculty support and to create innovative programming. Her tenure as Dean also saw the expansion of the school’s Board of Advisors, attracting many prominent business leaders who represent diverse functional and global perspectives, as well as the creation of the school’s Master of Financial Engineering and Master of Science in Business Analytics programs.

      
      
      
      
      
      
      
      

 

2019 Proxy Statement      37


Table of Contents

Corporate Governance at Mattel

 

Vasant M. Prabhu

 

LOGO

 

  Age: 59

 

  Director Since: 2007

 

  Mattel Committee

  Memberships:

 

  Audit Committee

     (Chair)

  Executive Committee

  Finance Committee

   

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

      FinancialOfficer (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 Council (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

  

 

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

 

 

38    Mattel, Inc.


Table of Contents
    

 

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, 2018 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, 2018.

PwC has expressed its opinion that:

 

 

Mattel’s consolidated financial statements present fairly, in all material respects, its financial position as of December 31, 2018 and 2017, and its results of operations and cash flows for each of the three years in the period ended December 31, 2018 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, 2018, based on criteria established in Internal Control – Integrated Framework issued by COSO.

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.

 

2019 Proxy Statement      39


Table of Contents

Audit and Related Party Matters

 

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, 2018, for filing with the SEC.

AUDIT COMMITTEE

Vasant M. Prabhu (Chair)

R. Todd Bradley

Roger Lynch

Dominic Ng

March 19, 2019

 

40    Mattel, Inc.


Table of Contents

Audit and Related Party Matters

 

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 2018 and 2017:

 

  Fees   

2018

($)

    

2017  

($)  

 

  Audit fees(1)

     7,986,000        7,764,000    

  Audit-related fees(2)

     193,000        143,000    

  Tax fees(3)

     1,227,000        1,501,000    

  Total

     9,406,000        9,408,000    

 

(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 2018 and 2017 and compliance audits in 2018.

 

(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 $612,000 for 2018 and $643,000 for 2017, and (ii) other tax advice, tax consultation, and tax planning services of $615,000 for 2018 and $858,000 for 2017.

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 12 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

 

 

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 2018 were pre-approved in accordance with the Audit Committee’s Pre-Approval Policy.

 

2019 Proxy Statement      41


Table of Contents

Audit and Related Party Matters

 

Certain Transactions with Related Persons

The 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.

 

 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, 2019. Representatives of PricewaterhouseCoopers LLP are expected to be present at the 2019 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.

 

    
 

 

LOGO

  

 

The Board recommends a vote FOR the ratification of the selection of PricewaterhouseCoopers LLP as Mattel’s Independent Registered Public Accounting Firm.

 

 

42    Mattel, Inc.


Table of Contents
    

 

Executive Officers and Executive Compensation

Executive Officers

The current executive officers of Mattel are as follows:

 

  Name    Age    Position   

Executive

Officer Since

  Ynon Kreiz(1)    54    Chairman of the Board and Chief Executive Officer    2018
  Richard Dickson    51    President and Chief Operating Officer    2014
  Joseph J. Euteneuer    63    Chief Financial Officer    2017
  Roberto Isaias    51    Executive Vice President and Chief Supply Chain Officer    2019
  Soren T. Laursen(1)    55    Executive Director    2018
  Robert Normile    59    Executive Vice President, Chief Legal Officer, and Secretary    1999
  Amanda J. Thompson    43    Executive Vice President and Chief People Officer    2017

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.(2) From August 2008 to February 2010, he served as General Manager and Senior Vice President of the Barbie Brand at Mattel. From 2000 to 2008, he was Senior Vice President at Mattel overseeing Consumer Products, Marketing, Media, Entertainment, and Packaging. Prior to Mattel, he served as Vice President of Brand Management and Merchandising at Estee Lauder Companies, Inc. and was Principal with Gloss.com, an e-commerce beauty website he helped develop and manage until its acquisition by Estee Lauder. Mr. Dickson started his career and spent nearly a decade with Bloomingdale’s, a leading U.S. fashion retailer.

Mr. Euteneuer has been Chief Financial Officer 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. Isaias has been Executive Vice President and Chief Supply Chain Officer since February 2019. From April 2014 to February 2019, he served as Senior Vice President and Managing Director – Latin America. From December 2011 to April 2014, he served as Senior Vice President and General Manager – Latin America (except Brazil). From September 2007 to December 2011, he served as Vice President and General Manager – Mexico. From March 2005 to September 2007, he served as General Manager Latin America – South Cone (Chile, Argentina, Peru, Uruguay, Paraguay, and Bolivia). From August 2002 to March 2005, he was Senior Sales & Trade Marketing Director – Mexico. From August 2001 to August 2002, he served as Head of Commercial for Traditional Trade at Procter & Gamble Mexico. Prior to that, he served as Associate Director for the Modern Trade, Drug Distributors, and Key Regions at Procter and Gamble Mexico.

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. Prior to that, 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.

 

(1)

Information regarding Messrs. Kreiz and Laursen is provided in the “Proposal 1 – Election of Directors” section of this Proxy Statement.

(2)

In connection with his departure from Jones, on March 10, 2014, Mr. Dickson resigned as the chairman of the board of an Italian subsidiary of Jones, Atwood Italia S.r.l. Approximately three years after his departure, Atwood filed for bankruptcy. Ten months later, Italian authorities filed a criminal complaint against Mr. Dickson and two other Atwood directors relating to the bankruptcy. The complaint alleges the authorization of certain improper payments, as well as the destruction of certain records of Atwood (which have since been provided to the bankruptcy trustee). The complaint does not allege any actions by Mr. Dickson with respect to such payments or records and we have been advised by Mr. Dickson’s counsel that his potential financial exposure with respect to this matter (estimated at 23,000) is based solely on his service as chairman during the three-month period of January 1, 2014 to March 10, 2014. Mr. Dickson disputes all charges.

 

2019 Proxy Statement      43


Table of Contents

Executive Officers and Executive Compensation

 

Compensation Discussion and Analysis

Executive Summary

2018 Named Executive Officers

Our fiscal year 2018 Named Executive Officers, or NEOs, were:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

 

 

 

 

 

 

 

 

 

 

 

Ynon

Kreiz

Chief Executive

Officer (since

April 26, 2018)

 

Richard

Dickson

President and

Chief Operating

Officer

 

Joseph J.

Euteneuer

Chief Financial

Officer

 

Robert

Normile

Executive

Vice President,

Chief Legal Officer,

and Secretary

 

Amanda J.

Thompson

Executive

Vice President

and Chief

People Officer

 

Margaret H.

Georgiadis

Former Chief

Executive

Officer (until

April 26, 2018)

 

 

 

 

 

 

 

 

 

 

 

2018 Leadership Transition

In April 2018, Ynon Kreiz became our CEO, and Margaret H. Georgiadis, our former CEO, stepped down to pursue a new opportunity. Mr. Kreiz brings with him over 20 years of experience in finance, media, entertainment, and content creation, and a track record of innovation as well as substantial, relevant leadership experience having served as the Chairman and CEO of at Maker Studios, Inc., Endemol Group, and Fox Kids Europe N.V. Since joining the Board as an independent director in June 2017, Mr. Kreiz has been an invaluable resource to the Board and the management team by helping to advance the Company’s transformation efforts and Structural Simplification cost savings program, and by contributing deep expertise in areas core to our strategy going forward. Given Mr. Kreiz’s background and experience, as well as his existing institutional knowledge of Mattel and its industry, the Board believed that appointing Mr. Kreiz as CEO would serve to ensure a smooth leadership transition and enhance the Company’s execution going forward.

2018 Business Highlights and Strategic Overview

We remain focused on advancing our strategy to restore profitability and regain top-line growth in the short-to-mid term, and are laying the groundwork to capture the full value of our IP in the mid-to-long term.

In 2018, Mattel demonstrated meaningful progress in advancing our transformation strategy, and improving our financial performance over the prior year, despite considerable retail disruption in the global toy industry, which included the liquidation of Toys “R” Us. Our stronger than expected 2018 financial results were primarily driven by the successful execution of our Structural Simplification program, the strength of our brands, in particular Barbie and Hot Wheels, and our execution during the holiday season. While Mattel is in a multi-year turnaround and there is more work to be done, we are encouraged by our progress in 2018.

 

44    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

To drive our transformation to become an IP-driven, high-performing toy company, in 2018, management developed a two-part strategy:

Transforming Mattel into an IP-driven, high-performing toy company

 

LOGO

 

In the short-to-mid term, our priorities are to continue to restore profitability by reshaping operations through Structural Simplification and to regain topline growth by growing our Power Brands and expanding our brand portfolio.

 

In the mid-to-long term, we are looking to capture the full value of our IP through franchise management and the development of our online retail and e-commerce capabilities.

 

 

LOGO

We achieved meaningful progress toward our transformation strategy.

To drive the execution of our transformation strategy, we established four Company Objectives for the year. These objectives provided the framework for the Strategic Goals that measured individual performance under our annual cash incentive plan, thereby aligning pay delivery with our transformation strategy. These objectives were:

 

LOGO

 

LOGO

In 2017, we established Structural Simplification, a comprehensive cost savings program to simplify and streamline our operations and improve profitability by right sizing our cost structure.

In 2018, this program drove significant improvement in our profitability, helping us achieve:

 

 

$521 million of run-rate cost savings exiting 2018, and we expect to exceed our cumulative $650 million run-rate cost savings target exiting 2019;

 

 

$358 million improvement in fourth quarter operating income compared to 2017, our largest year-over-year fourth quarter improvement since 2009, and $103 million improvement in full year operating income compared to 2017, our largest full year improvement since 2012;

 

 

Gross margin of 46.6% in the fourth quarter and 39.8% for the full year, representing the first gross margin improvement for each of the fourth quarter and full year since 2013; and

 

 

A 22% reduction of our global non-manufacturing workforce.

 

 

2019 Proxy Statement      45


Table of Contents

Executive Officers and Executive Compensation

 

LOGO

Following the bankruptcy filing in September 2017 by Toys “R” Us, one of our top customers, the global toy industry faced considerable retail disruption going into 2018. Despite this significant headwind, Mattel demonstrated resilience and strong execution, in particular during the holiday season, and finished the year with a stronger than expected fourth quarter and full year.

 

 

Compared to 2017, full year 2018 net sales declined 8%, driven primarily by lower Toys “R” Us sales as a result of its liquidation.

 

 

Barbie and Hot Wheels continued their momentum throughout the year.

 

 

Barbie gross sales* increased 14% in 2018 versus the prior year, and reached the brand’s highest full year gross sales* in the last five years.

 

 

Hot Wheels gross sales* increased 7% in 2018 versus the prior year, and reached the brand’s highest full year gross sales* in its 50-year history.

 

 

Additionally, we executed well in our two largest regions – North America and Europe – and maintained our strength in Latin America and Global Emerging Markets, excluding China.

 

*

Gross sales is a non-GAAP financial measure. For the definition of gross sales and a reconciliation of gross sales to net sales (the most directly comparable GAAP financial measure), please see pages 49 to 51 of our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 22, 2019.

 

LOGO

With the creation of Mattel Films, Mattel Television, and our Global Franchise Management organization, we are targeting opportunities to develop our IP and extend our iconic franchises across film and television, digital gaming, live events, music, consumer products, and merchandise. We’ve recently made several announcements for the first ever live-action feature films for some of our key franchises including Barbie, Hot Wheels, Masters of the Universe, American Girl, and View-Master. Also, with respect to partner IP, we are focused on continuing to strengthen our relationships with many leading entertainment companies and consumer brands.

 

LOGO

We have recognized that to achieve Mattel’s vision, we need to drive toward a more progressive mindset that is culturally-centered on performance and collaboration, with a focus on empowering decision-makers and driving accountability at all levels. We have instituted new fundamentals to evolve how we work, which include:

 

 

Resetting performance standards to drive accountability, ownership, and execution;

 

 

Modernizing work/life programs to be more progressive and competitive;

 

 

Utilizing Mattel’s values as a foundation for how we hire, develop, promote, and drive accountability for culture-right behavior across all levels of the organization; and

 

 

Redesigning reward and recognition systems to encourage employees to challenge the status quo.

Additionally, we have focused on attracting and retaining the best talent at all levels and making certain all teams are thoroughly aligned with our strategy.

Looking ahead, we will continue to methodically execute our strategy in order to position Mattel for sustainable, profitable growth and drive long-term value for our stockholders.

Extensive Stockholder Engagement Led to Meaningful Compensation Changes

The Compensation Committee directly incorporated feedback from our stockholders into our 2018 compensation programs.

Mattel has developed and maintains an ongoing and active stockholder engagement program. In spring 2018, leading up to the 2018 Annual Meeting, we spoke with stockholders representing approximately 66% of our outstanding shares. Mr. Scarborough, then a member of the Compensation Committee, and members of senior management participated in these discussions. The majority of the feedback received during this outreach was focused on our executive compensation, and in particular the compensation structure of our former CEO.

 

 

46    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

During the fall of 2018, and the beginning of 2019, we had discussions with stockholders representing approximately 81% of our outstanding shares. Our Independent Lead Director, Mr. Dolan, and members of senior management participated in these discussions, which were focused on sharing the changes the Compensation Committee made to our compensation programs in response to the feedback we received in the spring after the 2018 Annual Meeting with respect to our 49% Say-on-Pay vote, and providing an update on our transformation progress.

Feedback received from our stockholders during this year-round practice is regularly shared with the full Board, the Governance and Social Responsibility Committee, and the Compensation Committee when related to our compensation programs and practices.

The Compensation Committee carefully considered the feedback from our stockholders, our 49% Say-on-Pay vote in 2018, and compensation governance best practices, in implementing the following changes to our executive compensation programs and practices in 2018.

 

Feedback We Heard       How We Responded
p     p

CEO compensation structure should have greater alignment with Company performance and stockholder value creation, in particular the guaranteed bonus for our former CEO.

 

        

The compensation of our new CEO, Mr. Kreiz, is substantially performance-based, with:

 

  84% of his 2018 equity awards* subject to Company and stock price performance; and

 

  No guaranteed or signing bonuses.

 

Former CEO’s vesting period and performance requirements for new-hire equity awards were insufficient.

 

   

Mr. Kreiz’s new-hire inducement stock option is fully performance-based.

 

  Grant vests if our relative three-year TSR is ³ 65th percentile of companies in

      the S&P 500.

 

Weighting of three-year performance-based restricted stock units (“Performance Units”) in long-term incentive (“LTI”) mix should be increased.    

Percentage of our 2018 total target annual equity grant value (“Annual LTI Value”) granted as Performance Units was increased to 50% (from 33%) for EVPs and above.

 

A three-year financial performance measurement should be employed in the Long-Term Incentive Program (“LTIP”).    

Our 2018-2020 LTIP employs a single three-year cumulative Free Cash Flow goal, instead of an annual goal set each year and averaged over three years.

 

Explicit link of incentive measures with transformation and strategic plan should be increased.    

Our Mattel Incentive Plan (“MIP”) and LTIP were realigned to emphasize profitability and cash flow.

 

Size of companies in our executive compensation benchmarking peer group should be reconsidered.    

We realigned our peer group in 2018 by:

 

  Targeting median positioning and utilizing a lower revenue cap of 3x from the

      previous 4x revenue cap; and

 

  Increasing focus on branded content/home entertainment companies.

 

Three of the four new companies in our peer group are smaller than Mattel in terms of revenue and market capitalization. Three of the five companies removed had market capitalizations greater than 5x Mattel.

 

*

2018 equity awards subject to Company and stock price performance include Mr. Kreiz’s 2018-2020 Performance Units, new-hire performance-based stock options and time-vesting stock options, and exclude his time-vesting RSUs.

The Compensation Committee believes the changes implemented in 2018 are directly responsive to feedback we heard from our stockholders and reflect the right incentive structure for our business during this period. In our most recent outreach, our stockholders expressed approval for the changes we made to our executive compensation programs, management team, refreshed Board, and our ongoing commitment to sustainability.

Our Pay-For-Performance Philosophy

Our executive compensation programs reflect our pay-for-performance philosophy.

The guiding principles of our executive compensation programs include:

 

 

Paying for performance;

 

 

Aligning the financial interests of executives with the financial interests of our stockholders;

 

 

Attracting and retaining the best talent; and

 

 

Upholding compensation governance best practices.

 

2019 Proxy Statement      47


Table of Contents

Executive Officers and Executive Compensation

 

Key Elements of our 2018 Executive Compensation Programs

 

Cash Compensation   Objective and Structure
Base Salary   Fixed cash compensation representative of individual role, performance and skill set, market data, and internal pay equity
Annual Cash Incentive, or MIP  

Incentivize and motivate executives to achieve our short-term strategic and financial objectives that we believe will drive long-term value creation. Realigned in 2018 to drive profitability and cash flow. 2018 MIP design is as follows:

 

  The financial measures and their weightings are:

 

–  50% adjusted EBITDA

 

–  20% adjusted net sales

 

–  15% adjusted gross margin

 

–  10% working capital

 

–  5% tooling

 

  Earn 35% for threshold performance to 200% for maximum performance under each

      financial measure, before weightings

 

  No amounts earned for below threshold performance

 

  Multiplier of 0% to 125% of the amount earned under the financial measures, based on

      performance of individual Strategic Goals

 

  Payout cap of 200% of MIP target opportunity

Equity Long-Term Incentives   Objective and Structure

Performance Units

(50% of Annual LTI Value)

 

Incentivize and motivate executives to achieve key long-term strategic financial objectives and stock price appreciation. Realigned our 2018-2020 LTIP to emphasize long-term cash generation necessary for our successful transformation. 2018-2020 LTIP design is as follows:

 

  Earn 37% for threshold performance to 150% for maximum performance based on

      three-year cumulative Free Cash Flow goal established at commencement of three-year

      performance period

 

  No amounts earned for below threshold performance

 

  Relative three-year TSR to S&P 500 multiplier of 67% (at or below 25th percentile) to

      133% (75th percentile or above) of financial earnout

 

Stock Options

(25% of Annual LTI Value)

 

Align executives’ interests with stockholders’ interests and foster long-term focus on increasing stockholder value.

 

  Vest in approximately equal annual installments over three-years

RSUs

(25% of Annual LTI Value)

 

Encourage executive stock ownership and stockholder-aligned retention.

 

  Vest in approximately equal annual installments over three-years

 

48    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

For 2018, we did not grant any retention equity awards or cash payments to NEOs, and all MIP bonus opportunities, expressed as a percentage of base salary, were unchanged.

The Compensation Committee has designed our executive compensation programs so that a significant percentage of annual compensation is variable and at risk, with earnouts based on Company and stock price performance. A large portion of executive compensation is 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 2018 annual target total direct compensation (“TDC”)* mix for our CEO, Mr. Kreiz, and the other current NEOs:

 

LOGO

 

*

TDC is the sum of year-end annual base salary, MIP target incentive opportunity and Annual LTI Value (i.e., grant date value of 2018-2020 LTIP, and time-vesting stock options and RSUs). Mr. Kreiz’s one-time new-hire performance-based stock option grant is excluded from TDC. Mr. Kreiz’s 2018 annual target TDC of $12 million ($1.5 million base salary, 150% target MIP opportunity, and $8.25 million Annual LTI Value) was slightly above the median of our peer group.

2018 Pay Outcomes Reflected Our Pay-For-Performance Philosophy

The compensation decisions and outcomes in 2018 reflect feedback we heard from stockholders as well as our pay-for-performance philosophy.

 

  u 

Base salaries for our NEOs remained largely unchanged.

Salaries for all NEOs remained largely unchanged for 2018, with the exception of Mr. Normile’s base salary, which was increased by 3.4%, in light of the market level of our peer group for his position. Mr. Kreiz’s base salary for his service as our CEO was set at the same amount as that for our two prior CEOs.

 

  u 

Above target 2018 MIP payouts were primarily driven by improved EBITDA and stronger than expected sales.

In March 2018, the Compensation Committee engaged in initial discussions regarding the terms of the MIP and established the MIP design. In April 2018, after deliberation and review of the expected impact of the Toys “R” Us liquidation, the Compensation Committee established the 2018 MIP financial performance goals for adjusted EBITDA, adjusted net sales, and adjusted gross margin. In May 2018, the Compensation Committee established the 2018 MIP financial performance goals for working capital and tooling.

2018 MIP financial performance goals were based on our annual operating plan and were designed to align with our 2018 emphasis on cost savings and restoring profitability, while stabilizing revenue. A significant factor in 2018 MIP goal setting was the Compensation Committee’s consideration of the considerable disruption in the global toy industry, which included the liquidation of Toys “R” Us. On account of this, the 2018 adjusted net sales goals were set at levels below 2017 actual results. When goals were set, the Compensation Committee believed that each of the financial performance goals established under the MIP would be challenging but achievable.

 

2019 Proxy Statement      49


Table of Contents

Executive Officers and Executive Compensation

 

The primary drivers of our above-target MIP payouts were our improved EBITDA and stronger than expected adjusted net sales.

Our above-plan EBITDA performance, the largest driver of our above-target MIP payouts, reflected our significant progress towards restoring profitability and was largely the result of the $521 million run-rate cost savings exiting 2018 realized from our Structural Simplification program, primarily due to reductions in our selling, general & administrative expenses (“SG&A”) and advertising and promotion expenses (“A&P”). In addition, we experienced lower inventory obsolescence expense in 2018 compared to 2017. Our strong retail execution and the strength of our brands, in particular Barbie and Hot Wheels, during the holiday season enabled us to achieve full-year sales above plan.

Our 2018 financial results yielded an earnout of 159% of target MIP opportunity, based on the following goals, weighting, and performance:

 

Financial Measure    Weight    

Threshold

(35% earned)

        

Target

(100% earned)

        

Max

(200% earned)

  

% Earned

before

weighting

   

% Earned

after

weighting

 

Adjusted EBITDA

     50   LOGO      200     100

Adjusted Net Sales

     20   LOGO      168.8     33.8

Adjusted Gross Margin

     15   LOGO      36.4     5.5

Working Capital

     10   LOGO      97.4     9.7

Tooling

     5   LOGO      200     10

TOTAL EARNED

                          159

$ is in millions. Maximum performance on a measure earns 200% of target for such measure. No amounts were earned, and no payouts could be made unless we achieved the threshold level of EBITDA performance, which was accomplished.

For our NEOs, the 159% earned under the MIP for Company financial performance was then adjusted based on our CEO’s assessment of each executive’s progress, and the Compensation Committee’s assessment of the CEO’s progress, toward individual Strategic Goals that tie to our 2018 Company Objectives. Performance under individual Strategic Goals acts as a multiplier of 0% to 125% of the amount earned for financial performance based on the individual’s Strategic Goals rating, as follows:

 

 

0% earned for Results Below Expectations

 

 

90% earned for Accomplished Results (-)

 

 

100% earned for Accomplished Results

 

 

110% earned for Accomplished Results (+)

 

 

125% earned for Exceeded Results

As in prior years, the use of individual Strategic Goals ensures a comprehensive review of performance. 2018 individual Strategic Goals included objectives critical to our transformation, not otherwise rewarded or incentivized in the MIP financial performance goals.

In no event, however, may the payout amount under the MIP exceed 200% of target MIP opportunity.

 

50    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

The following table summarizes each NEO’s financial performance earnout, the individual Strategic Goals ratings determined by the Compensation Committee after review of the CEO’s assessment and recommendations regarding such NEO (other than the CEO), the resulting incentive payout expressed as a percentage of target MIP opportunity, and the cash incentive payout under the MIP. Our CEO’s performance was assessed and his rating was determined by the Compensation Committee in an executive session without the presence of our CEO, with input from FW Cook.

 

  Name   

Financial

Performance

Earnout

            

Individual

Strategic Goals

Rating

            

Final % of MIP

Opportunity

Earned

            

Incentive

Payout

 

  Ynon Kreiz

     159%                 110%                 175%               $ 2,695,384  

  Richard Dickson

     159%                 110%                 175%               $ 1,749,000  

  Joseph J. Euteneuer

     159%                 100%                 159%               $ 1,431,000  

  Robert Normile

     159%                 100%                 159%               $ 620,100  

  Amanda J. Thompson

     159%                 110%                 175%               $ 596,846  

Ms. Georgiadis, our former CEO, stepped down in April 2018 to pursue a new opportunity, and thus was not eligible for a MIP payout. Mr. Kreiz’s MIP payout was prorated to reflect his April 26, 2018 commencement date as our CEO. All MIP payouts were determined in accordance with the established criteria, without any discretionary increases.

 

  u   Equity

long-term incentive earnouts and valuations reflect stock price underperformance in 2018.

Our LTIP earnouts are directly tied to our relative TSR, and the value of our stock options and RSUs are directly tied to our stock price performance. As a result, LTIP earnouts and equity award values in 2018 were lower at year end than targeted granted values due to 2018 stock price underperformance. Our year-end stock price of $9.99 on December 31, 2018, resulted in:

 

 

2017-2019 LTIP earnouts tracking below target;

 

 

Mr. Kreiz’s 2018 new-hire performance-based stock option tracking not to be earned; and

 

 

All outstanding stock options being underwater.

The following shows our TSR(1) performance as compared to the median of our peer group (as our peer group was realigned in 2018), and our ranking as compared to the companies within the S&P 500, for the one and three-year periods ended December 31, 2018, when our closing stock price was $9.99. Our closing stock price on the record date of March 22, 2019 was $13.21.

 

Period    Mattel TSR              November 2018 Peer Group              Compared to S&P 500(2)  

1 year

     -35.0%                 -22.0%                 17th Percentile  

3 year

     -26.2%                 4.2%                 2nd Percentile  

 

(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.

 

(2) 

Determined in accordance with the definitions and methodology established under our LTIPs.

No Earnout under 2016-2018 LTIP. The 2016-2018 Performance Units could be earned from 50% of target for threshold performance to 150% of target for maximum performance against a three-year cumulative adjusted EPS goal set at the commencement of the three-year performance period, with the resulting earned percentage increased or decreased up to 50 percentage points based on our relative three-year TSR performance versus companies in the S&P 500. A relative TSR ranking of 25th percentile or less would result in a 50 percentage point reduction, while a ranking of the 75th percentile or more would result in a 50 percentage point increase, with linear interpolation between, and a maximum potential earnout of 200% of target. No amount is earned on the EPS measure for below threshold performance, and linear interpolation applies between goals.

Our cumulative three-year adjusted EPS performance from January 1, 2016 through December 31, 2018 was ($1.32), which is significantly below the threshold goal of $4.36 and resulted in no amount earned for financial performance. Our relative TSR at December 31, 2018, the end of three-year performance period, was well below the 25th percentile, which would have resulted in a reduction by 50 percentage points if any amount was earned under the EPS goal. Therefore, no payouts were made.

 

2019 Proxy Statement      51


Table of Contents

Executive Officers and Executive Compensation

 

Tracking Below Target Earnout for 2017-2019 LTIP. The Performance Units granted under our 2017-2019 LTIP are earned based on annual adjusted EPS performance, with EPS goals set at the commencement of each year, and earned percentages averaged over the three-year performance period. Like our 2016-2108 LTIP, the amount earned based on EPS performance can range from 50% of target for threshold performance to 150% of target for maximum performance, which is then increased or decreased by up to 50 percentage points based on our relative three-year TSR performance versus companies in the S&P 500, for a maximum potential earnout of 200% of target. No amount is earned on the EPS measure for below threshold performance, and linear interpolation applies between goals. To further drive focus on stockholder value creation, the Compensation Committee established a cap on payout at 100% of target if 2017-2019 absolute TSR is negative regardless of the relative results.

For 2018, the adjusted EPS threshold goal was set at ($1.98), below 2017 EPS of ($0.87). The 2018 goal took into account the expected impact of the Toys “R” Us liquidation and certain upfront costs to implement our Structural Simplification program. Our stronger than expected sales for the fourth quarter and full year, coupled with profitability improvement from our Structural Simplification program, resulted in 2018 adjusted EPS of ($1.30) and a maximum amount earned under this financial measure for this second year of the 2017-2019 LTIP.

Our annual adjusted EPS goals and actual results for the first two years of the 2017-2019 LTIP are set forth below. As illustrated below, the earnout based on two years of performance through December 31, 2018 (including relative TSR modifier) would be 25% of the number of Performance Units granted under our 2017-2019 LTIP. Final payout, however, will ultimately be based on our relative TSR over the three-year performance period, and will reflect our EPS performance for 2019.

 

  Goal   

Threshold

(50% earned)

            

Target

(100% earned)

            

Max

(150% earned)

    

% Earned

(without 1/3rd

weighting per year)

  2017 adjusted EPS

     LOGO      0%

  2018 adjusted EPS

     LOGO      150%

  2019 adjusted EPS

     LOGO      TBD

  Average Earnout for EPS

  as of 12/31/2018

                                                75%

  Relative TSR Modifier

  as of 12/31/2018

                                                Less 50 percentage points

  Hypothetical Earnout

  as of 12/31/2018

                                                25% of

Performance Units granted

Former CEO Forfeited Unvested Equity. In connection with our former CEO, Ms. Georgiadis, stepping down in April 2018, and in accordance with the terms of our plans and programs, she received no severance and forfeited all unvested equity awards (with a grant date value of approximately $22 million).

Changes Made to 2018-2020 LTIP to Address Stockholder Feedback. Our stockholders expressed a preference for our incentive measures to have greater alignment with our transformation strategy. The Compensation Committee believes that our LTIP design needs to drive long-term financial performance consistent with our strategy. The Compensation Committee further believes that, consistent with compensation governance best practices regarding long-term value creation, goal setting should occur at the commencement of the three-year performance period instead of annually.

 

 

In 2018, for our 2018-2020 LTIP: (i) we implemented a three-year cumulative operating goal, set at the commencement of the three-year performance period (instead of annual goals set annually); and (ii) we modified the financial measure to Free Cash Flow (instead of EPS) to better align with our strategy.

 

Free Cash Flow was chosen as a more appropriate measure than our prior goal of EPS, because of the closer link between Free Cash Flow and overall cash generation. The amount earned for achievement of the Free Cash Flow goal ranges from

 

52    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

37% for threshold performance to 150% for maximum performance, with linear interpolation between such percentages, and no amount earned for below threshold performance. The earnout percentage resulting from the Free Cash Flow performance measure will then be subject to reduction or increase based on our relative three-year TSR versus companies in the S&P 500, with the financial earnout multiplied by 67% for below threshold TSR performance of 25th percentile or below to 133% for maximum TSR performance of 75th percentile or above (with linear interpolation between). The relative TSR component was retained to continue to balance absolute and relative performance measures in the LTIP. No amount can be earned above 200% of the target Performance Units granted, and the minimum amount earned based on threshold performance is 25%.

Our relative one-year TSR at December 31, 2018, based on our stock price of $9.99, placed us below the 25th percentile as compared to the S&P 500, which would have resulted in any amount earned being reduced to equal 67% of the number of 2018-2020 Performance Units earned, if any, based on the Free Cash Flow performance. TSR performance, however, will ultimately be measured against the three-year performance period.

Track Record of Pay and Performance Alignment

The Compensation Committee remains fully committed to its pay-for-performance philosophy. During our multi-year turnaround, this has resulted in pay outcomes consistently below target.

As of the commencement of 2018, the last LTIP earnout and associated payout was for the performance period of 2011-2013. Further, there was no cash incentive payout under our MIP for 2017 and 2016 and there were below target payouts for 2015, 2014 and 2013. This low pay delivery is consistent with our financial performance during this period and is consistent with the Compensation Committee’s practice of setting challenging performance goals and linking pay to performance.

 

 

MIP and LTIP Pay Outcomes 2013 – 2018

Year

   2013    2014    2015    2016    2017    2018

MIP

   LOGO Below Target    LOGO Below Target    LOGO Below Target    LOGO No Payout    LOGO No Payout    LOGO Payout

Cycle(1)

   2011-2013(2)    2014-2016(2)    2014-2016(2)    2014-2016(2)

2016-2018(3)

   2016-2018(3)    2016-2018(3)

LTIP

   LOGO Payout    LOGO No Payout    LOGO No Payout    LOGO No Payout    LOGO No Payout    LOGO No Payout

 

(1)

Includes only completed cycles. Payouts, if any, under the 2017-2019 LTIP and 2018-2020 LTIP will be determined following the conclusion of those cycles.

 

(2)

End-to-end three-year cycle.

 

(3)

Beginning in 2016, the Compensation Committee determined to grant long-term Performance Units on an annual basis instead of every three years with end-to-end cycles.

 

2019 Proxy Statement      53


Table of Contents

Executive Officers and Executive Compensation

 

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.

 

LOGO
What We Do
LOGO

Clawback Policy – Our Clawback Policy that is applicable to all Section 16 officers and other direct reports to the CEO permits the 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 that requires both a change of control and a qualifying termination of employment; and

 

 

Severance benefits set at competitive levels not greater than 2x

 

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

 

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

LOGO
What We Do Not Do
LOGO
x

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.

 

x

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.

 

x

No Hedging or Pledging Permitted – Our policies as implemented do not permit the Board members, officers, and employees to engage in hedging transactions or to pledge or use Mattel shares as collateral for loans.

 

 

        

 

54    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Elements of Compensation

Base Salary

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

The 2018 base salary for Mr. Kreiz, who commenced service as our CEO on April 26, 2018, was established based on a review of competitive market practices and took into consideration the salaries paid to our two prior CEOs. Mr. Kreiz’s base salary for his service as our CEO was set at $1,500,000, the same amount as that for our two prior CEOs.

With respect to our other NEOs, in January 2018, in light of market data, as reviewed in November 2017, the Compensation Committee determined that none of our NEOs would receive a salary increase for 2018, with the exception of Mr. Normile, who received a salary increase of $20,000, or 3.4%, in light of the market level of our peer group for his position.

For 2019, none of our NEOs received a salary increase, other than Ms. Thompson, who received a salary increase of $20,000, or 3.7%, in light of the market level of our peer group for her position.

Annual Cash Incentive

Our annual cash incentive plan, or MIP, provides our NEOs and approximately 8,300 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.

2018 MIP

In response to stockholder feedback that our incentive compensation align more closely with our transformation strategy, the Compensation Committee approved an annual cash incentive design under the MIP with the following performance measures and weightings:

 

Foundational

Measures

   Weighting                         

Key Enabler

Measures

   Weighting

Adjusted EBITDA

   50%           

Adjusted

Gross Margin

   15%

Adjusted Net Sales

   20%           

Working Capital

   10%
                 

Tooling

   5%

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), replaced the 2017 operating profit measure to increase the link to cash flow generation. Adjusted gross margin, working capital and tooling operating measures were added to provide a more balanced approach to profitable growth and disciplined cash management, and to align with our Structural Simplification cost savings program. These financial measures are adjusted in accordance with the definitions of the MIP to remove any variance from the annual operating plan if predefined conditions are met. A description of actual adjustments for 2018 is set forth below.

The amount that can be earned under each financial measure ranges from 35% of target for threshold performance, 100% for target 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 amount is earned under a financial measure for below threshold performance.

 

2019 Proxy Statement      55


Table of Contents

Executive Officers and Executive Compensation

 

In order to differentiate individual performance and to encourage accountability, the Compensation Committee utilizes individual Strategic Goals for our CEO, and his direct reports (including NEOs), as a multiplier with a range of 0% to 125%, to determine the final amount earned under the MIP. Payout under the MIP is capped at 200% of target MIP opportunity.

The 2018 MIP continued the “umbrella” plan structure that was originally established primarily for federal tax deductibility purposes. Under this structure, the MIP would be funded at maximum of 200% of target MIP opportunity for our CEO and his direct reports (including NEOs) if a specified operating goal was achieved. The operating goal for funding of the 2018 MIP was 10% of target EBITDA goal, or $127 million, which was achieved. The umbrella feature of the MIP allowed the Compensation Committee to exercise discretion to adjust the payouts downward in accordance with actual achievement of our financial measures and individual Strategic Goals.

2018 Target MIP Opportunity

The following table shows the 2018 target MIP opportunities for our current NEOs, expressed as a percentage of base salary. In connection with becoming our CEO, Mr. Kreiz’s target MIP opportunity was set at 150% of base salary, which is the same target that was set for our two prior CEOs, and which represents the median among the CEOs of our peer group. The target MIP opportunities for our other NEOs were unchanged in 2018 from 2017.

 

Name and Position   

2018 Target MIP Opportunity

as a % of Base Salary

 

Ynon Kreiz, CEO

     150

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

Margaret H. Georgiadis, former CEO

     150

Potential 2018 MIP payouts ranged from 0% to 200% of target MIP opportunity. For Mr. Kreiz, who commenced employment as our CEO in April 2018, his 2018 MIP payout was prorated to reflect his service as CEO during 2018. Having stepped down as CEO in April 2018, Ms. Georgiadis did not receive a MIP payout.

2018 Financial Performance Goals and Results

Our 2018 MIP financial performance goals were based on our annual operating plan and were designed to align with our 2018 emphasis on cost savings and restoring profitability, while stabilizing revenue. A significant factor in 2018 MIP goal setting was the Compensation Committee’s consideration of the considerable disruption in the global toy industry, which included the liquidation of Toys “R” Us. On account of this, the 2018 adjusted net sales goals were set at levels below 2017 actual results. When goals were set, the Compensation Committee believed that the net sales goals and each of the other financial performance goals established under the MIP would be challenging but achievable.

The primary drivers of our above-target MIP payouts were our improved EBITDA and stronger than expected adjusted net sales. Our above-plan EBITDA performance, the largest driver of our above-target MIP payouts, reflected our significant progress towards restoring profitability and was largely the result of the $521 million run-rate cost savings exiting 2018 realized from our Structural Simplification program, primarily due to reductions in SG&A and A&P. In addition, we experienced lower inventory obsolescence expense in 2018 compared to 2017. Our strong retail execution and the strength of our brands, in particular Barbie and Hot Wheels, during the holiday season allowed us to achieve full-year sales above plan.

 

56    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Our 2018 financial results yielded an earnout of 159% of target MIP opportunity, based on the following goals, weighting, and performance:

 

  Financial Measure    Weighting  

Threshold

(35% earned)

        

Target

(100% earned)

        

Max

(200% earned)

  

% Earned

before

weighting

 

% Earned

after

weighting

  Adjusted EBITDA

   50%   LOGO    200%   100%

  Adjusted Net Sales

   20%   LOGO    168.8%   33.8%

  Adjusted Gross Margin

   15%   LOGO    36.4%   5.5%

  Working Capital

   10%   LOGO    97.4%   9.7%

  Tooling

   5%   LOGO    200%   10%

TOTAL EARNED

                159%

$ is in millions. Maximum performance on a measure earns 200% of target for such measure. No payouts could be made unless we achieved the threshold level of EBITDA performance, which was accomplished.

The table above reflects actual amounts as adjusted from GAAP results consistent with the established 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, pursuant to the MIP plan definitions, for the impact of certain specified unusual items. In 2018, actual results for EBITDA, net sales, and gross margin were adjusted for severance and restructuring costs, equity compensation expense, litigation costs, Argentinian currency devaluation, intangible impairments, adoption of new accounting pronouncements, and foreign exchange as described in the MIP plan definitions. Without such adjustments, the actual results for EBITDA would have been $188 million, net sales would have been $4,511 million, and gross margin would have been 39.8%. For 2018, there were no adjustments to working capital or tooling. These carveout adjustments are an integral part of the MIP, ensuring employees are recognized and compensated for items directly in their control, and not penalized for the impact of unusual items which are unforeseeable or unquantifiable at the time the annual operating plan is set.

2018 Individual Strategic Goals Ratings

For our NEOs, the 159% earned under the MIP for Company financial performance is then adjusted based on our CEO’s assessment of the executive’s progress, and the Compensation Committee’s assessment of the CEO’s progress, toward his or her individual Strategic Goals that tie to our 2018 Company Objectives. Performance under individual Strategic Goals acts as a multiplier of 0% to 125% of the amount earned for financial performance based on the individual’s Strategic Goals rating, as follows:

 

 

0% earned for Results Below Expectations

 

 

90% earned for Accomplished Results (-)

 

 

100% earned for Accomplished Results

 

 

110% earned for Accomplished Results (+)

 

 

125% earned for Exceeded Results

 

2019 Proxy Statement      57


Table of Contents

Executive Officers and Executive Compensation

 

As in prior years, the use of individual Strategic Goals ensures a comprehensive review of performance. 2018 individual Strategic Goals included objectives critical to our transformation, not otherwise rewarded or incentivized in the MIP financial performance goals.

In no event, however, may the payout amount under the MIP exceed 200% of target MIP opportunity.

To drive the execution of our transformation strategy, we established four Company Objectives for 2018. These Company Objectives provided the framework for the individual Strategic Goals that measured individual performance under our MIP, thereby aligning pay delivery with our transformation strategy. These objectives were:

 

LOGO

Our CEO performed an assessment of each NEO’s performance (other than his own) against the 2018 individual Strategic Goals applicable to that executive and his or her area of responsibility, and presented his assessments and recommendations regarding individual Strategic Goals ratings to the Compensation Committee, who concurred with the CEO’s assessments and recommended ratings. The Compensation Committee separately evaluated the CEO’s performance and determined his individual Strategic Goals rating in an executive session without the presence of our CEO, with input from FW Cook.

 

58    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

2018 Individual Strategic Goals Performance Assessments and Ratings

 

  Ynon Kreiz

  Chief Executive Officer

      Defined short-to-mid term and mid-to-long term Company strategy to restore profitability and capture the full value of Mattel’s IP
      Led Mattel’s management team to exceed the 2018 goal for Structural Simplification cost savings program, achieving $521 million in run-rate savings exiting 2018
      Drove the establishment of new divisions aligned to long-term strategies, specifically Mattel Films, Mattel Television and Franchise Management
       

Refreshed the composition of the Board of Directors with diverse candidates whose skills and experiences complement Mattel’s business and growth strategy

 

  Richard Dickson

  President and Chief Operating   Officer

      Led Mattel’s Global Brand teams in driving Hot Wheels to highest revenue in the history of the brand, while continuing to grow Barbie in its 60th anniversary year
  

 

  

 

Led the re-establishment of Mattel in the small dolls category with the relaunch of Polly Pocket

      Drove the launch of Jurassic World, which was the most successful toy launch in the history of the franchise
       

Retained and hired critical talent in line with achieving long-term strategies

 

  Joseph J. Euteneuer

  Chief Financial Officer

      Managed the enterprise operational plan for Structural Simplification cost savings program, exceeding 2018 goal and achieving $521 million in run-rate savings exiting 2018
      Improved cash management by lowering inventory, improving receivables, and reducing capital expenditures
      Made progress toward restoring profitability, with year-over-year improvements in Gross Margin and Operating Loss
       

Made progress toward developing talent and strengthening the Finance organization

 

  Robert Normile

  EVP, Chief Legal Officer and   Secretary

      Managed worldwide litigation and dispute resolution efforts
  

 

  

 

Facilitated and supported the planning, negotiation, and execution of several long-term strategic initiatives

  

 

  

 

Led the implementation of ethics and compliance initiatives

       

Partnered with Global Information Technology group in connection with transition to new European privacy regulations

 

  Amanda J. Thompson

  EVP & Chief People Officer

      Managed the enterprise operational plan to deliver a 22% reduction in non-manufacturing headcount, while effectively managing the impact to the business
      Realigned incentive plans and measures to tie variable pay to strategy and Company Objectives
      Led enterprise-wide culture change with supporting plans to drive behavior change
        Reset Human Resources vision, strategy, and priorities, and drove engagement across global HR team

The following table summarizes the financial earnout, the individual Strategic Goals ratings determined by the Compensation Committee, the resulting incentive payout expressed as a percentage of target MIP opportunity, and the cash incentive payout under the MIP. Ms. Georgiadis, our former CEO, stepped down in April 2018 and thus was not eligible for a payout under the MIP. Mr. Kreiz’s MIP payout was prorated to reflect his April 26, 2018 commencement date as our CEO. All MIP payouts were determined in accordance with the established criteria, without any discretionary increases.

 

  Name   

Financial

Performance

Earnout

    

Individual

Strategic

Goals Rating

    

Final % of MIP

Opportunity

Earned

    

Incentive

Payout

 

  Ynon Kreiz

     159%        110%        175%        $2,695,384  

  Richard Dickson

     159%        110%        175%        $1,749,000  

  Joseph J. Euteneuer

     159%        100%        159%        $1,431,000  

  Robert Normile

     159%        100%        159%        $620,100  

  Amanda J. Thompson

     159%        110%        175%        $596,846  

 

2019 Proxy Statement      59


Table of Contents

Executive Officers and Executive Compensation

 

Given his continued service, Mr. Dickson received the final earned portion of $500,000, or 50%, of the retention bonus awarded to him in January 2017, which portion, pursuant to its terms, was to be paid in January 2018 provided Mr. Dickson served continuously as our Chief Operating Officer through such date.

2019 MIP

In March 2019, the Compensation Committee approved an annual cash incentive design under the 2019 MIP that was substantially similar to the 2018 MIP, with the exception that the 2018 performance measures of working capital (weighted 10%) and tooling (weighted 5%) were replaced by inventory and accounts receivable (weighted 15%) for 2019. The Compensation Committee believes the new measure of inventory and accounts receivable provides a balanced approach to profitable growth and disciplined cash management, and is aligned with our Structural Simplification cost savings program.

Equity LTIs

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

Our portfolio approach to LTIs continues to be comprised of three equity components: three-year Performance Units under our LTIP, stock options and time-vesting RSUs.

Increased Weighting of Performance Units to 50% of Annual LTI Value

In April 2018, the Compensation Committee established the 2018 Annual LTI Value for each executive and the 2018-2020 LTIP measures and goals, and granted the 2018-2020 Performance Units. In June 2018, in response to stockholder feedback and our 49% 2018 Say-on-Pay vote in 2018, the Compensation Committee revised the mix of the already approved 2018 Annual LTI Value for EVPs and above to increase the percentage of three-year Performance Units granted under our LTIP to 50% (previously 33%), with the remaining 50% in the form of time-vesting stock options and RSUs (previously representing the remaining 67%). The Compensation Committee believes this increased emphasis on our three-year Performance Units is the best course as it puts a greater percentage of compensation at risk and in alignment with stockholder interests, provides greater incentive to create long-term value by attaining the three-year operating and TSR goals, and is consistent with compensation best practices. Our initial 2018-2020 LTIP Performance Units were granted in April, while, consistent with past practice, our time-vesting stock options and RSUs were granted in August. As a result of the June 2018 decision to increase the percentage of the already approved 2018 Annual LTI Value in the form of Performance Units to 50%, the Compensation Committee awarded additional 2018-2020 LTIP Performance Units to result in the new 50% allocation. The June grant of 2018-2020 LTIP Performance Units was on the same terms as the previously awarded 2018-2020 LTIP grant.

Since 2017, we have maintained our Choice Program, which allows senior executives (other than our CEO, COO, and CFO) the ability to make an election prior to the grant date to allocate the grant value of the time-vesting stock option/RSU component of their Annual LTI Value to a self-selected mix of stock options and RSUs in 25% increments (representing 12.5% of Annual LTI Value). Under our Choice Program, of the 50% Annual LTI Value allocated to stock options and RSUs, our EVPs and other Section 16 Officers must allocate at least 25% of such value to stock options. This Choice Program was designed and implemented to strengthen executive engagement, investment, and retention at this critical time in our transformation. The equity mix for our CEO, COO, and CFO is fixed at 50% Performance Units, 25% Stock Options and 25% RSUs.

2018 Annual LTI Values Awarded

Given the Compensation Committee’s focus on pay for performance and our operational and financial results, as reviewed in March, April, and July 2018, the Compensation Committee determined that, except with respect to Mr. Dickson, our COO, the 2018 Annual LTI Value for our NEOs would not change from their respective 2017 Annual LTI Value. In July 2018, in connection with awarding the annual stock options and RSU component of the Annual LTI Value, the Compensation Committee determined to increase Mr. Dickson’s 2018 Annual LTI Value to $4.5 million from $3 million in recognition of the critical importance of his role as COO in this time of transformation and the institutional knowledge and leadership he brings. This resulted in additional 2018-2020 Performance Units being granted to Mr. Dickson in August 2018, on the same terms as the earlier awarded 2018-2020 Performance Units, to achieve 50% of his 2018 Annual LTI Value in the form of Performance Units. Mr. Euteneuer’s 2017 annual LTI was valued at $1.8 million, comprised solely of the stock option and RSU allocation (equal to 67% of his Annual LTI Value) given his September 2017 hire date. His 2018 Annual LTI Value of $2.7 million reflects his total Annual LTI Value as determined in connection with his hiring and the terms of his offer letter.

 

60    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Ms. Georgiadis, our former CEO, was granted 2018-2020 Performance Units based on a 2018 Annual LTI Value of $8,250,000, which was unchanged from her 2017 Annual LTI Value. Ms. Georgiadis subsequently forfeited all unvested equity (grant date value of approximately $22 million), including her 2018-2020 Performance Units, in connection with her stepping down as CEO in April 2018.

The 2018 Annual LTI Value for Mr. Kreiz was determined in connection with his appointment as CEO on April 26, 2018, after the Compensation Committee’s review of competitive market data prepared by FW Cook. The Compensation Committee determined that Mr. Kreiz would receive $8,250,000 in Annual LTI Value.

The following table summarizes the 2018 Annual LTI Values determined by the Compensation Committee and reflects the allocation of stock options and RSUs for eligible participants under our Choice Program discussed above.

2018 Annual LTI Values

 

  Name

  

2018-2020

Performance Units

($)

  

2018

Time-Vesting

Stock Options

($)

  

2018

Time-Vesting

RSUs

($)

  

2018

Annual

LTI Value

($)

  Ynon Kreiz

   4,125,000    2,062,500    2,062,500    8,250,000

  Richard Dickson

   2,250,000    1,125,000    1,125,000    4,500,000

  Joseph J. Euteneuer

   1,350,000    675,000    675,000    2,700,000

  Robert Normile

   525,000    131,250    393,750    1,050,000

  Amanda J. Thompson

   525,000    262,500    262,500    1,050,000

  Margaret H. Georgiadis (former CEO)

   2,750,000    N/A    N/A    Forfeited

The 2018 Annual LTI Value for Mr. Kreiz shown above differs from the ASC 718 grant date fair value shown in the Summary Compensation Table and Grants of Plan Based Awards table. This is a result of the valuation methodology employed for a portion of his 2018-2020 Performance Units. The Compensation Committee determined that Mr. Kreiz would receive $8,250,000 in Annual LTI Value. The Compensation Committee further determined that because the 2018-2020 Performance Units were granted on April 5, 2018, just prior to Mr. Kreiz’s commencement date of April 26, 2018, the 2018-2020 Performance Units to be granted to Mr. Kreiz on April 30, 2018 with an intended value of $2,750,000, representing 33% of his Annual LTI Value, should be made on the same terms and the same conversion factor as the 2018-2020 Performance Units granted to the other NEOs on April 5, 2018. This resulted in a grant date fair value of the 2018-2020 Performance Units granted to Mr. Kreiz on April 30, 2018, as determined in accordance with FASB ASC Topic 718, of $3,219,760. In connection with the increase of Performance Units to 50% (from 33%) of Annual LTI Value, in June 2018, Mr. Kreiz was granted an additional $1,375,008 of 2018-2020 Performance Units. Thus, the total grant date fair value of the 2018-2020 Performance Units granted to Mr. Kreiz in 2018 was $4,594,768, as determined in accordance with FASB ASC Topic 718, shown in the Summary Compensation Table and Grants of Plan Based Awards tables.

The foregoing table excludes the performance-based new-hire stock option granted to Mr. Kreiz in connection with his hiring as our CEO in April 2018. See below “Performance-Based Stock Option - New-hire Inducement Equity Grant for our CEO” below for more information.

No Earnout Under 2016-2018 LTIP

Earnout for the Performance Units which three-year performance period commenced January 1, 2016 and ended December 31, 2018 was 0%, and therefore no payouts were made.

The 2016-2018 Performance Units were designed so that 50% to 150% of the target number of Performance Units granted could be earned based on our performance against the cumulative three-year EPS performance goal set by the Compensation Committee at the commencement of the three-year performance period, adjusted pursuant to LTIP definitions. The percentage earned based on this financial measure would then be increased or decreased by up to 50 percentage points based on our relative three-year TSR performance versus companies in the S&P 500. No amount is earned under the EPS measure for below threshold performance. The maximum earnout is capped at 200% of the target Performance Units granted. The following sets forth the goals and actual results under the 2016-2108 LTIP, with the resulting 0% earnout.

 

2019 Proxy Statement      61


Table of Contents

Executive Officers and Executive Compensation

 

Goals and Performance under 2016-2018 LTIP

 

Financial Measure   

Threshold

(50% earned)

  

Target

(100% earned)

  

Max

(150% earned)

  

Financial

Performance Earnout

2016-2018 Cumulative EPS Goal

   LOGO    0%
      Effect of TSR Modifier under 2016-2018 LTIP    Actual at 12/31/2018

  Mattel TSR Relative to S&P 500

   £25th    50th    ³75th    2nd

  Earnout Percentage Modifier*

   –50%    No change    +50%    -50%

 

  *

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

Consistent with the LTIP definitions and 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 measure under the LTIP, actual results are adjusted for the impact of specified unusual items. In the 2016-2018 performance period, actual adjusted EPS reflected adjustments from GAAP as follows: for each year in the performance period, adjusts for litigation costs, severance payments, Argentinian and Venezuelan currency devaluation, intangible impairments and amortization expense, and taxes. In addition, in 2018 there were adjustments for adoption of new accounting pronouncements, foreign exchange, and taxes. Without adjustment, the GAAP cumulative EPS for the 2016-2018 period was ($1.51).

Tracking Below Target Earnout for 2017-2019 LTIP

For our 2017-2019 LTIP, annual adjusted EPS performance goals are set at the commencement of each year, and earned percentages are averaged over the three-year performance period. The amount earned based on EPS performance can range from 50% for threshold performance to 150% for maximum performance. No amount can be earned under the EPS measure for below threshold performance. The percentage earned is then increased or decreased by up to 50 percentage points based on our relative three-year TSR performance versus companies in the S&P 500, in accordance with the same ranking goals under our 2016-2018 LTIP discussed above. The maximum earnout is capped at 200% of the target Performance Units granted. To further motivate a focus on stockholder value creation, the Compensation Committee established a cap on payout for the executives at 100% of target if 2017-2019 absolute TSR is negative regardless of the relative results.

The adjusted annual EPS goals under the 2017-2019 LTIP are established by the Compensation Committee at the commencement of each year. For 2018, the adjusted EPS threshold goal was set at ($1.98), below 2017 EPS of ($0.87). When the goal was set, the Compensation Committee believed it was challenging but achievable. The 2018 target incorporated the expected impact of the Toys “R” Us liquidation and certain upfront costs to implement our Structural Simplification program. Our stronger than expected sales for the fourth quarter and full year, coupled with profitability improvement from our Structural Simplification program, resulted in 2018 adjusted EPS of ($1.30) and a maximum amount earned under this financial measure for this second year of the 2017-2019 LTIP.

Our annual adjusted EPS goals and actual results for the first two years of the 2017-2019 LTIP are set forth below. As illustrated below, the earnout based on two years of performance through December 31, 2018 would be 25% of the target number of Performance Units granted under our 2017-2019 LTIP. Final payout, however, will ultimately be based on our relative TSR over the three-year performance period, and will reflect our EPS performance for 2019.

 

62    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Goal   

Threshold

(50% earned)

  

Target

(100% earned)

  

Max

(150% earned)

  

% Earned

(without 1/3rd

weighting per year)

2017 adjusted EPS

   LOGO    0%

2018 adjusted EPS

   LOGO    150%
2019 adjusted EPS    LOGO    TBD

Average Earnout for EPS

as of 12/31/2018

        75%

Relative TSR Modifier

at of 12/31/2018

        Less 50 percentage points

Hypothetical Earnout

as of 12/31/2018

        

25% of

Performance Units granted

Consistent with the LTIP definitions and 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 measure under the LTIP, actual results are adjusted for the impact of specified unusual items. In 2018, actual adjusted EPS reflected adjustments from GAAP as follows: adjusts for any litigation costs, adoption of new accounting pronouncements, severance payments, Argentinian currency devaluation, intangible impairments, foreign exchange, interest expense associated with early debt refinancing, and taxes. Without adjustment, the 2018 GAAP EPS was $(1.54).

As shown above, based on the first two years of the three-year performance period, the average of our performance against our EPS goal for the two years is 75% of target Performance Units granted. Our relative two-year TSR at December 31, 2018, based on our stock price of $9.99, placed us significantly below the 25th percentile, which would have resulted in a reduction by 50 percentage points from the 75 percentage points that would have been earned under the adjusted EPS goal had the performance period been a two-year period ending on December 31, 2018. Accordingly, the earnout based on two years of performance through December 31, 2018 would be 25% under our 2017-2019 LTIP. Final performance, however, will ultimately be based on our relative TSR over the three-year performance period, and will reflect our EPS performance for 2019.

Changes Made to 2018-2020 LTIP to Address Stockholder Feedback

 

    In 2018, for our 2018-2020 LTIP: (i) we returned to a three-year cumulative financial goal, set at the commencement of the three-year     performance period (instead of annual goals set annually); and (ii) we modified the financial measure to Free Cash Flow (instead of EPS) to     better align with our strategy.

Feedback from our stockholders included a preference for our incentive measures to have greater alignment with our transformation strategy. The Compensation Committee believes that our LTIP design needs to drive long-term financial performance consistent with our strategy. Free Cash Flow was chosen as a more appropriate measure than our prior goal of EPS, because of the closer link between Free Cash Flow and overall cash generation. The earnout percentage resulting from the Free Cash Flow performance measure can range from 37% for threshold performance, 100% for target performance and 150% for maximum performance, with linear interpolation between such goals. No amount can be earned under the Free Cash Flow measure for below threshold performance. The percentage earned from the financial measure will then be subject to reduction or increase based on our relative three-year TSR performance versus companies in the S&P 500, with the financial earnout multiplied by 67% for threshold TSR performance of 25th percentile or below, to 133% for maximum TSR performance of 75th percentile or above (with linear interpolation between). The relative TSR performance measure continues to provide a balance between absolute and relative performance measures in the LTIP. The Compensation Committee determined to modify the effect of our relative TSR from an additive or subtractive impact of +/- 50 percentage points in past years to a multiplier of +/- 33%. The Compensation Committee believes that this change, which reduces the potential downward adjustment of the financial earnout while maintaining the potential maximum

 

2019 Proxy Statement      63


Table of Contents

Executive Officers and Executive Compensation

 

earnout, is appropriate given the volatile stock market and the challenges experienced by our industry as compared to the S&P 500. As with all of our incentive programs, no amount can be earned above 200% of target Performance Units granted, and the minimum amount earned based on threshold performance is 25%.

Our relative one-year TSR at December 31, 2018, based on our stock price of $9.99, placed us significantly below the 25th percentile as compared to the S&P 500, which would have resulted in the amount earned being reduced to equal 67% of the number of Performance Units earned, if any, based on the Free Cash Flow performance under our 2018-2020 LTIP. TSR performance, however, will ultimately be measured against the three-year performance period.

Dividend Equivalents Paid on Performance Units When and to the Extent Performance Units Earned

The outstanding Performance Units have dividend equivalent rights that are converted to shares of Mattel common stock only when and to the extent the underlying Performance Units are earned and paid. Dividend equivalents accrue and are assumed to be reinvested in shares as of our closing stock price on the ex-dividend date with respect to any dividends declared and earned during the three-year performance period.

2019-2021 LTIP

In March 2019, the Compensation Committee approved the design of the 2019-2021 LTIP on substantially the same terms as the 2018-2020 LTIP, employing three-year cumulative adjusted Free Cash Flow as the financial measure and a three-year relative TSR multiplier. The Compensation Committee further determined that for 2019 all annual equity awards (Performance Units, and time-vesting stock options, and time-vesting RSUs) are to be granted effective as of August 1, 2019. As a result, the 2019-2021 Performance Units are being granted effective as of August 1, 2019 (rather than the approval date in March) to align with the annual grant date of August 1, 2019 for our time-vesting stock options and RSUs.

Performance-Based Stock Option - New-Hire Inducement Equity Grant for our CEO

In light of stockholder feedback regarding the amount and terms of the RSUs and stock options granted to our former CEO in connection with her hiring in 2017, and to provide greater pay-for-performance alignment with long-term value creation and stockholder interests, and as an inducement for Mr. Kreiz to become our CEO in April 2018, the Compensation Committee awarded Mr. Kreiz a performance-based stock option with a value of $5 million. The performance-based option cliff vests at the end of a three-year performance period (commencing on his April 26, 2018 hire date) conditioned upon us achieving relative TSR over the three-year performance period that is equal to or greater than the 65th percentile as compared to companies comprising the S&P 500 Index. Vesting of the performance-based option accelerates in the event of the death or permanent disability of Mr. Kreiz, or his termination by us without cause, and in such events, the performance-based option will remain exercisable until the earlier of the fifth anniversary, or third anniversary, respectively, of such event or the expiration of its ten-year term.

Pursuant to the terms of Mr. Kreiz’s offer letter, the number of shares subject to his performance-based stock option was to be determined based on a Black-Scholes value derived by using the average of the closing prices of our common stock over the 20 consecutive trading days ending on the date immediately prior to the grant date, rather than the Black-Scholes value under FASB ASC Topic 718 based on the closing price of our common stock on the grant date. As a result, and in accordance with the terms of his offer letter, the grant date fair value of his performance-based option computed in accordance with FASB ASC Topic 718 is $4,444,444, which is $555,556 less than value set forth in his offer letter.

If the performance period ended on December 31, 2018 when our stock price was $9.99, his performance-based stock option would not vest and would be forfeited. Performance and vesting will ultimately be determined at the end of the three-year performance period.

Stock Options and RSUs

In addition to Performance Units, included in our portfolio approach to equity-based LTIs are annual grants of time-vesting stock options and time-vesting RSUs:

 

 

Time-Vesting Stock Options – Stock options have value only with stock price appreciation and continued service over time, thereby aligning interests with our stockholders. Our stock options typically vest in three approximately equal installments on the first through third anniversaries of the grant date, subject to continued service through such date. Stock options are granted with ten-year terms. We do not provide for dividend equivalents on our stock options.

 

 

Time-Vesting RSUs – Time-vesting RSUs put significant value at risk and are effective as an ownership and retention tool. Our RSUs typically vest in three approximately equal installments on the first through third anniversaries of the grant date, subject to continued service through such date. We do not provide for dividend equivalents to employees for time-vesting RSU grants.

 

64    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Other Forms of Compensation

Perquisites and Other Personal Benefits

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

 

 

Car Allowance – We provide our executives with a monthly car allowance to allow our executives to fulfill their job responsibilities that involve travel to the offices of clients and business partners. The monthly amount of the allowance is a set amount based on the executive’s job level. Commencing in September 2018, the Compensation Committee approved the use of a Company car instead of a car allowance for our CEO.

 

 

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

 

 

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

 

 

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

In connection with his hiring in September 2017, in addition to Mattel’s relocation program benefits, our CFO, Mr. Euteneuer, was provided temporary accommodations, one round-trip airfare per week and reimbursement for incidental relocation expenses through May 31, 2018 (initially for five months and then extended for an additional three months in early 2018 to enable him to remain focused on executing on Mattel’s strategy and allow him time for a permanent relocation). Pursuant to Mattel’s relocation program, Mr. Euteneuer is eligible to receive tax gross-up payments on such relocation costs and is required to repay the full relocation costs incurred by us if he resigns or his employment is terminated with cause within two years of the relocation date. Our standard relocation program also includes home sale assistance, shipment of household goods and home purchase assistance during the first year after the executive’s hire date, with shipment of household goods and home purchase assistance eligible for tax gross-up. Mr. Euteneuer was not in a position to avail himself of these relocation benefits during the first year following his hire date. In February 2019, the Compensation Committee approved providing these specific relocation benefits to Mr. Euteneuer through August 5, 2019. In accordance with our updated repayment provisions, Mr. Euteneuer will be required to repay the full relocation costs incurred by us for these benefits if he resigns or his employment is terminated with cause within one year following the February 5, 2019 approval date, and repay 50% of the relocation costs if such resignation or termination occurs during the second year following such approval date.

Retirement Plans

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

 

 

The 2005 Supplemental Executive Retirement Plan (“SERP”), our supplemental, non-qualified pension plan provides supplemental retirement income to only one executive. No new participants have been added to the SERP since 2001 nor will be added and, as a result, Mr. Normile is the only executive participating in the SERP.

 

2019 Proxy Statement      65


Table of Contents

Executive Officers and Executive Compensation

 

 

The DCP, our non-qualified deferred compensation plan, generally provides our U.S.-based executives with a mechanism to defer compensation in excess of the amounts that are permitted to be deferred under our 401(k) Plan. Together, the 401(k) Plan and the DCP allow participants to set aside amounts as tax-deferred savings for their retirement. Similar to the 401(k) Plan, the DCP provides for Company automatic contributions and matching contributions, both of which are at the same levels as the Company contributions in the 401(k) Plan. The Compensation Committee believes the opportunity to defer compensation is a competitive benefit that enhances our ability to attract and retain talented executives while building plan participants’ long-term commitment to Mattel. The return on the deferred amounts is linked to the performance of market-based investment choices made available in the plan.

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

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

Severance and Change-of-Control Benefits

 

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

  Double-trigger equity acceleration that requires both a change of control and a qualifying termination of employment

  Severance benefits set at competitive levels not greater than 2x

  No excise tax gross-ups

 

We have three executive severance arrangements: (i) the Mattel, Inc. Executive Severance Plan (the “Severance Plan”); (ii) the Mattel, Inc. Executive Severance Plan B (the “Severance Plan B,” and together with the Severance Plan, the “Executive Severance Plans”); and (iii) an executive severance practice. As of the end of fiscal year 2018, Messrs. Kreiz and Euteneuer participated in the Severance Plan B as modified by the terms of their respective participation letter agreements with us, Mr. Dickson participated in the Severance Plan B, and Mr. Normile participated in the Severance Plan. Ms. Thompson is eligible for benefits under our current executive severance practice. We do not pay any excise tax gross-up payments under our severance arrangements.

In accordance with the terms of our Severance Plan B (as modified by her participation letter), Ms. Georgiadis did not receive any severance or other benefits in connection with her stepping down as our CEO on April 26, 2018, and also in accordance with the terms of our award agreements, she forfeited all of her outstanding unvested equity (grant date value of approximately $22 million).

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

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

More details regarding our three executive severance arrangements are provided below under “Potential Payments Upon Termination or Change of Control.”

 

66    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Important Policies, Governance, and Guidelines

Stock Ownership Guidelines

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

 

  Name    Salary Multiple    Deadline

  Ynon Kreiz

   6x      4/30/2023  

  Richard Dickson

   4x      12/31/2019  

  Joseph J. Euteneuer

   4x      9/30/2022  

  Robert Normile

   3x      12/31/2018  

  Amanda J. Thompson

   3x      9/30/2022  

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

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

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

Insider Trading Policy

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

Recoupment of Compensation

Our Clawback Policy provides for forfeiture or reimbursement of certain cash and equity incentive compensation that was paid, granted, or vested based on financial results that, when recalculated to include the impact of a material financial restatement, were not achieved. The Clawback Policy applies to all Section 16 officers and other direct reports to the CEO and covers incentive compensation (cash and equity) paid, granted, or vested, within three years preceding the material financial restatement. If the covered employee did not engage in misconduct in connection with the material financial restatement, the Compensation Committee may recover the excess incentive compensation determined based on the restated financials. If the covered employee engaged in misconduct in connection with the material financial restatement, the Compensation Committee may recover the full amount of incentive compensation paid, granted, or vested based on financial results that were impacted by the restatement. The Compensation Committee believes this policy encourages strong leadership, accountability, and responsible management that benefits the growth of Mattel, and is aligned with best compensation governance practices.

In order to better align executives’ long-term interests with those of Mattel and its subsidiaries and affiliates, our Amended 2010 Plan, and its predecessor, our 2005 Equity Compensation Plan (“2005 Plan”) provide that, subject to certain limitations, Mattel may terminate outstanding grants, rescind exercises, payments, or deliveries of shares pursuant to grants, and/or recapture proceeds of a participant’s sale of shares of Mattel common stock delivered pursuant to grants if the participant violates specified confidentiality and IP requirements or engages in certain activities against the interest of Mattel or any of its subsidiaries and affiliates. These provisions apply only to grants made to participants for services as employees, and they do not apply to participants following any severance that occurs within 24 months after a change of control.

Our SERP provides that, for a period of three years following termination of employment or at any time while receiving benefits, we can recoup benefits from an executive who commences service for one of our competitors or otherwise engages in behavior that is damaging to Mattel.

 

2019 Proxy Statement      67


Table of Contents

Executive Officers and Executive Compensation

 

Roles and Expert Independent Advice

Independent Compensation Committee

Our executive compensation programs are designed and administered under the direction and control of the Compensation Committee. The Compensation Committee is comprised solely of independent directors, who review and approve our overall executive compensation programs and practices, and set the compensation of our senior executives.

Independent Compensation Consultant

FW Cook is the Compensation Committee’s independent compensation consultant. The Compensation Committee has determined that FW Cook is independent and does not have any conflicts of interests with the Company. FW Cook provides a number of services to the Compensation Committee throughout the year. Typically, FW Cook provides a comprehensive market analysis of our compensation programs each year. Our last two reviews occurred in November 2017 and November 2018 in order to take into account the updated comparative data that was then available from SEC filings. See “Corporate Governance at Mattel – Board General Information – Board Committees – Compensation Committee” section of this Proxy Statement for a detailed discussion of the services provided by FW Cook in 2018.

CEO and the HR Department

While the Compensation Committee has overall responsibility for establishing the elements, levels, and administration of our executive compensation programs, our CEO and members of our HR Department routinely participate in this process. Our CEO generally conducts the performance reviews of each of his direct reports and makes recommendations to the Compensation Committee regarding adjustments to base salary, target and actual annual cash incentives, and Annual LTI Values. Our CEO also provides an assessment of each of his direct reports’ performance against their individual Strategic Goals and his recommendation of the individual Strategic Goals ratings. Our CEO’s recommendations are one of the factors considered by the Compensation Committee in making its determinations. When appropriate, the Compensation Committee meets in an executive session without management, including when CEO compensation is being approved. The Compensation Committee also makes recommendations to the Board regarding the executive compensation programs and practices, and informs the Board of its decisions regarding compensation for our CEO, the CEO’s direct reports, and other senior executives.

Reviews and Process

Market Competitiveness and Peer Group Review

The Compensation Committee annually evaluates the overall competitiveness of our executives’ annual TDC, comprised of annual base salary, target annual incentive opportunity and Annual LTI Value, and the composition of our peer group, generally at its November meeting.

Every year, FW Cook evaluates our executives’ annual target TDC as compared to the annual target TDCs of similarly-situated executives in our peer group, based on information from their then most recent SEC filings and, if applicable, custom selections of certain appropriate market surveys. FW Cook’s reports include the base salaries, target and actual annual cash incentives, bonus leverage, target and actual LTIs, target and actual annual TDC, and all other compensation for our NEOs as compared to the compensation of their counterparts at our peer group companies and in the custom surveys, where available. In comparison to the CEOs of our November 2018 peer group companies, Mr. Kreiz’s 2018 annual target TDC of $12 million ($1.5 million base salary, 150% target MIP opportunity, and $8.25 million Annual LTI Value), was slightly above the median.

The Compensation Committee, in conjunction with FW Cook, reviews the makeup of our peer group annually and makes adjustments as it deems appropriate. Our peer group companies are intended to be similar to us in their orientation, business model, cost structure, size (as measured by revenue, net income growth, employees, and market capitalization) and global reach, and are considered to compete with us for executive talent or investor capital. The Compensation Committee believes it is appropriate to have a more diverse peer group beyond toy companies, as there are not enough publicly-reporting toy companies that are comparable to us in size. In addition, the Compensation Committee also considers whether the companies in our peer group had similar pay models and reasonable compensation practices, as well as whether the companies were listed as peers of our other peer group companies and whether they were listed in peer groups used for us by proxy advisory organizations, in their review of our prior year’s proxy statement. Our peer group is used to evaluate the market competitiveness of our compensation but is not used for performance goal comparisons under our incentive plans.

When setting target amounts for CEO compensation, the Compensation Committee takes into consideration the Company’s global compensation framework, which incorporates the pay grades and salary classifications of all Company employees, including our CEO. These pay grades and salary classifications are regularly evaluated for competitiveness holistically, not solely by level, to ensure market changes are applied consistently.

 

68    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Revised 2018 Peer Group to Address Stockholder Feedback

During 2018, our Independent Lead Director and management engaged in extensive outreach with our stockholders and proxy advisory firms. One issue raised in these discussions was that there were too many outsized companies in our executive compensation benchmarking peer group. Given this feedback, and the changes in senior leadership and strategy since 2017, with the guidance of FW Cook, in November 2018 the Compensation Committee realigned our peer group, to position us closer to median on most measures, with preference generally given to companies no greater than 3x Mattel’s revenues, and an increased strategic focus on branded content and home entertainment companies. In determining the revised peer group, the Compensation Committee took into consideration that in November 2018 Mattel was positioned well below the 25th percentile of its 2017 peer group in terms of revenue and market capitalization and was the lowest of the peer group in terms of EBITDA.

The prior peer group, approved in November 2017, which informed the compensation decisions made in 2018, was designed to cover companies between about 0.25 to 4x our revenue and market capitalization (changed from one-third to 3x). In November 2017, given our transformation strategy, the Compensation Committee introduced inclusion of companies in the home entertainment software industry. The comparator group approved in November 2017 was comprised of the following 23 companies:

Executive Compensation Benchmarking Peer Group from November 2017 to November 2018

Activision Blizzard, Inc.

  

General Mills, Inc.

  

PVH Corp

Campbell Soup Company

  

Hanesbrands Inc.

  

Ralph Lauren Corporation

Church & Dwight Co., Inc.

  

Hasbro, Inc.

  

Spectrum Brands, Inc.

The Clorox Company

  

The Hershey Company

  

Take-Two Interactive Software, Inc.

Electronic Arts Inc.

  

The J.M. Smucker Company

  

Tapestry, Inc. (formerly Coach, Inc.)

Energizer Holdings, Inc.

  

Kellogg Company

  

Tiffany & Co.

Estee Lauder Companies, Inc.

  

L Brands, Inc.

  

V.F. Corporation

Gap, Inc.

  

Newell Rubbermaid, Inc.

    

The peer group approved in November 2018 was designed to include companies generally between approximately 0.4 to 3x our revenue and market capitalization (changed from 0.25 to 4x), while reducing companies in the Apparel & Accessories industry and increasing the number of companies in the Home Entertainment/Media industry and branded content. Specifically, the following four new companies were added – Lions Gate Entertainment Corp., Spin Master, Tupperware Brands Corporation and Viacom Inc., while the following five companies were removed – Estee Lauder Companies, Inc., Gap, Inc., General Mills, Inc., L Brands, Inc. and V.F. Corporation.

Of the four companies added, three were smaller than Mattel in terms of revenue and market capitalization. Of the five companies removed, three had market capitalization of greater than 5x Mattel. At November 2018, Mattel ranked between the 25th percentile and median in revenue, at the 25th percentile in market capitalization and the lowest for EBITDA. Our November 2018 peer group is comprised of the following 22 companies:

Executive Compensation Benchmarking Peer Group as of November 2018

Activision Blizzard, Inc.

  

The Hershey Company

  

Spin Master

Campbell Soup Company

  

The J.M. Smucker Company

  

Take-Two Interactive Software, Inc.

Church & Dwight Co., Inc.

  

Kellogg Company

  

Tapestry, Inc. (formerly Coach, Inc.)

The Clorox Company

  

Lions Gate Entertainment Corp.

  

Tupperware Brands Corporation

Electronic Arts Inc.

  

Newell Rubbermaid, Inc.

  

Tiffany & Co.

Energizer Holdings, Inc.

  

PVH Corp

  

Viacom Inc.

Hanesbrands Inc.

  

Ralph Lauren Corporation

  

Hasbro, Inc.

  

Spectrum Brands, Inc.

    

Tally Sheets

As part of the Compensation Committee’s annual compensation review process, our HR Department prepares and reviews with FW Cook and the Compensation Committee, comprehensive tally sheets illustrating the total compensation for the most recent two years of our CEO and his direct reports and other EVPs. The tally sheets also include each executive’s holdings of Mattel common stock and accumulated value and unrealized gains under prior equity grants at various stock prices (realized and realizable pay). In conjunction with the review of tally sheets, the Compensation Committee reviews the potential severance and change-of-control benefits that would be payable to executives in Executive Severance Plans.

 

2019 Proxy Statement      69


Table of Contents

Executive Officers and Executive Compensation

 

Equity Grant Process

Like other public companies, we seek to implement equity compensation grant procedures that are intended to comply with evolving best practices, taking into account accounting, tax, and regulatory requirements. The Compensation Committee has adopted the following equity grant process:

 

 

Annual LTI Values and Annual Grants of LTIP Performance Units – Generally, at its March meeting, the Compensation Committee reviews and determines for senior executives the total Annual LTI Value within our compensation structure. At this time, the Compensation Committee reviews and approves the specific grant value for that year’s LTIP cycle (representing 50% of the total Annual LTI Value for EVPs and above). Performance Unit grants under our LTIP are approved by the Compensation Committee to executives in the business unit leadership job level and above (EVPs and above), and by the EGAC to executives below the business unit leadership job level (SVPs and below). For 2019, the LTIP grant will be made on August 1, and the grant values to specific executives will be approved in July.

 

 

Annual Grants of Time-Vesting Stock Options and RSUs – Generally, in May, our HR Department reviews with the Compensation Committee the annual equity program’s objectives, background, grant approach, grant process, and the proposed total pool of shares and value to be granted that year. Specific recommendations regarding the aggregate equity pool to be allocated to employees, the value and mix of award types to be granted to employees per job level, previously reviewed by FW Cook, are presented to the Compensation Committee for approval. Generally, the Compensation Committee also approves the annual grant values for the CEO and his direct reports and other EVPs at its July meeting, but in all events before the grant date, as well as the methodology for converting the grant values to units or shares.

The annual equity grant of stock options and RSUs for employees (including our NEOs) occurs on August 1 or if August 1 is a Saturday, on the last preceding business day, and if August 1 is a Sunday, on the next following business day.

 

 

Equity Grant Allocation Committee (“EGAC”) – The Compensation Committee approves all equity grants to executives who are in the business unit leadership job level and above (EVPs and above). For grants of stock options and RSUs to employees below the business unit leadership job level (SVPs and below), the Board has delegated the authority to an EGAC to, subject to certain limitations, approve annual and off-cycle equity compensation grants (such as grants to employees who are newly hired or promoted). The Board generally appoints our CEO as the sole member of the EGAC. Accordingly, Mr. Kreiz has been the sole member of the EGAC since his hire date in April 2018, with our former CEO, Ms. Georgiadis, serving on the EGAC prior to such date.

In May, the Compensation Committee sets, subject to approval by the Board, the key parameters of the delegation of authority to the EGAC for the annual grants of stock options, RSUs, and Performance Units to employees below the business unit leadership job level.

 

 

Choice Program – In 2017, the Compensation Committee approved the Choice Program allowing senior executives, including our NEOs other than the CEO and CFO, the choice to make an election to determine the mix of time-vesting stock options and RSUs. For EVPs and above, this makes up 50% of the Annual LTI Value. Under our Choice Program, of the 50% Annual LTI Value allocated to stock options and RSUs, our EVPs and other Section 16 officers must allocate at least 25% of such value to stock options (or 12.5% of Annual LTI Value), and the remaining portion can be allocated to stock options or RSUs in 25% increments (each increment representing 12.5% of Annual LTI Value). In 2018, the Compensation Committee continued the Choice Program, excluding the CEO, COO and CFO.

 

 

Off-Cycle Grants – If there are proposed new-hire or other off-cycle equity grants for consideration for executives in the business unit leadership job level and above, the grant date is generally the last trading day of the month of the later of the (i) hire or promotion date or (ii) the Compensation Committee approval date.

For new-hire or other off-cycle grants to employees below the business unit leadership job level, the grant date is the last trading day of the month of the hire date for executives and the last trading day of the month following the month of hire for below executives, and for other certain off-cycle grants, the grant date is the last trading day of the month in which the EGAC approval occurs.

 

 

All Grants – Our practice is to grant all of our stock options at an exercise price at least equal to our closing stock price on the grant date.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code disallows a tax deduction for compensation in excess of $1 million paid to our CEO and our three other most highly compensated executive officers employed at the end of the year (other than, prior to the 2017 Tax Cuts and Jobs Act (“2017 Tax Reform Act”), our CFO). Prior to the 2017 Tax Reform Act, certain compensation was specifically exempt from the deduction limit to the extent it was “qualified performance-based compensation” as previously defined in Section 162(m) of the Internal Revenue Code. As part of the 2017 Tax Reform Act, the ability to rely on this “qualified performance-based compensation” exception was eliminated. As a result, although we have compensation plans that were intended to permit the award of deductible compensation under Section 162(m) prior to the 2017 Tax Reform Act, subject to the Act’s limited grandfathering rules, we may no longer take a deduction for any compensation paid to our NEOs in excess of $1 million.

Mattel accounts for stock-based compensation in accordance with FASB ASC Topic 718, which requires us to recognize compensation expense for share-based payments (including stock options and other forms of equity compensation). The impact of FASB ASC Topic 718 has been taken into account by the Compensation Committee in determining to use a portfolio approach to equity grants, including Performance Units, stock options, and RSUs.

 

70    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Executive Compensation

Summary Compensation Table

The following table sets forth information concerning total compensation earned or paid to our NEOs.

 

  Name, Principal

  Position in 2018

  and Year(1)

  

Salary(2)

($)

    

Bonus(3)

($)

    

Stock

Awards(4)

($)

    

Option

Awards(4)

($)

    

Non-Equity

Incentive Plan

Compensation(5)

($)

    

Change In

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings(6)

($)

    

All Other

Compensation(7)

($)

    

Total

($)

 

  Ynon Kreiz

  Chief Executive Officer

 

 

                                                     

  2018

     1,027,397               6,657,261        6,506,946        2,695,384               68,672        16,955,660  

  Richard Dickson

  President and Chief Operating Officer

 

 

                                   

  2018

     1,000,000        500,000        3,539,878        1,125,000        1,749,000               126,857        8,040,735  

  2017

     992,055        500,000        2,584,491        4,500,000        0               151,025        8,727,571  

  2016

     900,000               2,274,381        1,000,000        0               113,318        4,287,699  

  Joseph J. Euteneuer

  Chief Financial Officer

 

 

                                                     

  2018

     900,000               2,070,558        674,999        1,431,000               265,020        5,341,577  

  2017

     241,644        500,000        2,586,570        1,900,000        0               48,875        5,277,089  

  Robert Normile

  Executive Vice President, Chief Legal Officer and Secretary

 

 

                          

  2018

     595,397               976,447        131,251        620,100        0        102,098        2,425,293  

  2017

     580,000               379,391        700,001        0        981,386        99,806        2,740,584  

  2016

     580,000               973,146        350,000        0        298,661        100,628        2,302,435  

  Amanda J. Thompson

  Executive Vice President and Chief People Officer

 

 

                                   

  2018

     525,000               787,504        262,497        596,846               63,136        2,234,983  

  2017

     140,959        250,000        1,200,914        350,001        0               10,846        1,952,720  

  Margaret H. Georgiadis

  Former Chief Executive Officer

 

 

                                   

  2018

     534,247               3,203,365        0        0               53,337        3,790,949  

  2017

     1,343,836        1,500,000        20,264,391        7,784,988        0               382,074        31,275,289  

 

(1)

Name, Principal Position in 2018 and Year. The years of compensation for each NEO reflects the years he or she has been an NEO.

 

(2)

Base Salary. Represents base salary prorated based on time in role in 2018 and is not annualized. For Mr. Kreiz, represents base salary prorated from his employment commencement date as CEO of April 26, 2018. For Ms. Georgiadis, represents base salary prorated through May 10, 2018, her last date of employment.

 

(3)

Bonus. In 2017, Mr. Dickson was awarded a $1 million retention cash award, payable 50% on June 30, 2017 and 50% on January 31, 2018. For 2018, amount shown for Mr. Dickson represents the second one-half portion of such retention cash award that was paid on January 31, 2018.

 

(4)

Stock Awards and Option Awards. Amounts shown represent the grant date fair value of RSUs and options granted in the year indicated as computed in accordance with FASB ASC Topic 718. The actual value, if any, that an executive may realize from an award is contingent upon the satisfaction of the conditions to vesting in that award, and for options, upon the excess of the stock price over the exercise price, if any, on the date the award is exercised. Thus, there is no assurance that the value, if any, eventually realized by the executive will correspond to the amount shown.

For a discussion of the assumptions made in the valuation of options granted in 2018, see Note 8 to Mattel’s Consolidated Financial Statements for 2018 contained in the Annual Report on Form 10-K filed with the SEC on February 22, 2019. Pursuant to the terms of Mr. Kreiz’s offer letter, Mr. Kreiz’s new-hire performance-based stock option covers a number of shares of Mattel stock equal to $5,000,000, divided by a Black-Scholes value determined by using the average of the closing prices of our common stock over the 20 consecutive trading days ending on the date immediately prior to the grant date ($4.68), rather than a Black-Scholes value based on the closing price of our common stock on the grant date ($4.16). As a result of the terms of the offer letter, 1,068,376 shares were awarded, and the grant date fair value of this stock option computed in accordance with FASB ASC Topic 718 is $4,444,444. Thus, the grant date fair value shown above and reflected in the Grants of Plan-Based Awards in 2018 table is $555,556 less than the grant value set forth in his offer letter.

Amounts shown under the “Stock Awards” column for 2018 include the grant date fair value for our annual time-vesting RSUs granted on August 1, 2018 one-third of the Performance Units under the 2017-2019 LTIP, and the Performance Units under the 2018-2020 LTIP granted on April 5, 2018, April 30, 2018, May 16, 2018, June 11, 2018, and August 1, 2018, as discussed in more detail below. The time-vesting RSUs are valued based on our closing stock price of $15.78 on August 1, 2018.

 

2019 Proxy Statement      71


Table of Contents

Executive Officers and Executive Compensation

 

2017-2019 LTIP. The Performance Units under the 2017-2019 LTIP have a three-year performance period from January 1, 2017 through December 31, 2019. The number of Performance Units earned is determined as follows:

 

 

Each year, the annual EPS goals are set by the Compensation Committee;

 

 

The earned percentage for each year is then averaged over the three-year period (the performance-related component), which percentage can be up to 150%; and

 

 

This average is then adjusted up or down by up to 50 percentage points based on our TSR relative to the TSR performance of companies in the S&P 500 over the full three-year performance period (the market-related component).

Because the performance-related component of the 2017-2019 LTIP is based on separate measurements of our performance for each year in the three-year performance period, FASB ASC Topic 718 requires the grant date value to be calculated with respect to one-third of the total Performance Units in each year of the three-year performance period, with the value for each year based on the probable outcome of the EPS performance condition against the goal set for that year. For 2018, the grant date value of one-third of the 2017-2019 LTIP Performance Units, as measured in accordance with FASB ASC Topic 718, is based on our closing stock price of $13.24 on the deemed grant date of April 5, 2018, which is the date the 2018 EPS performance goal for the Performance Units was set by the Compensation Committee, and the probable outcome of target performance (100%) of the 2018 annual EPS performance-related component for 2018. For 2018, the grant date value of the 2017-2019 LTIP excludes the original grant date value of the TSR market-related component of $1.46 per Performance Unit determined under a Monte Carlo valuation in accordance with the accounting rules, as this amount was included in the 2017 grant date fair value. Because the 2017-2019 Performance Units were not granted in 2018, they are not reported in the Grants of Plan-Based Awards in 2018 table that follows, even though a portion of their grant date valuation is required to be reported in the Summary Compensation Table for 2018.

The table below sets forth the grant date fair value of the 2017-2019 Performance Units determined in accordance with FASB ASC Topic 718 principles (i) based upon the probable outcome (100%) of the EPS performance-related component at the grant date, and (ii) based upon achieving the maximum level of performance (150%) under the EPS performance-related component. Also set forth below is the grant date value for the market-related component, or the TSR adjustment of $1.46, determined upon the original grant date and applied to the full granted awards, and which is not subject to probable or maximum outcome assumptions. The TSR market-related component could result in an additional 50 percentage points earned, which is not reflected in the table below. Messrs. Kreiz and Euteneuer and Ms. Thompson are not included in the table below, as they did not receive any 2017-2019 Performance Units due to their hire dates. Ms. Georgiadis forfeited her 2017-2019 Performance Units in connection with her stepping down as CEO on April 26, 2018.

2017-2019 LTIP Grant Date Fair Value

 

  Name and Year   

Probable (Target) Outcome

of Performance-Related

Component(1)

($)

    

Maximum Outcome of

Performance-Related

Component(1)

($)

    

Market-Related

Component(2)

($)

 

  Richard Dickson

                          

  2018

     164,864        247,297         

  2017

     315,160        472,728        54,538  

  Robert Normile

                          

  2018

     57,700        86,550         

  2017

     110,301        165,451        19,088  

  Margaret H. Georgiadis (former CEO)

                          

  2018

     453,364        680,046         

  2017

     866,665        1,300,010        149,981  

 

  (1)

Reflects the performance-related component grant date fair value of one-third of the target Performance Units granted (and allocated to 2017 or 2018, as applicable).

 

  (2)

Reflects the market-related component grant date fair value as to all of the target Performance Units granted, in the year granted.

2018-2020 LTIP. The Performance Units under the 2018-2020 LTIP have a three-year performance period from January 1, 2018 through December 31, 2020. The number of Performance Units earned is based on the achievement of a cumulative Free Cash Flow goal target over the three-year performance period (the performance-related component) that can result in up to 150% of the Performance Units earned. The result will then be adjusted by a multiplier ranging from 67% (for at or below threshold TSR performance) to 133% (for maximum TSR performance) based on our TSR relative to the TSR performance of companies in the S&P 500 over the three-year performance period (the market-related component) to determine the number of Performance Units earned. For 2018, the grant date value of the 2018-2020 Performance Units, as measured in accordance with FASB ASC Topic 718, is based upon our closing stock price on the applicable grant date ($13.24 on April 5, 2018, $14.80 on April 30, 2018, $15.48 on May 16, 2018, $17.22 on June 11, 2018, and $15.78 on August 1, 2018), the probable outcome of the performance-related component over the three-year performance period (target performance), and the fair value of the market-related component over the three-year performance period, as determined using a Monte Carlo simulation in accordance with accounting rules ($0.40 on April 5, 2018, $1.17 on April 30, 2018, $0.49 on May 16, 2018, $2.03 on June 11, 2018 and $1.66 on August 1, 2018). The full grant date value for the 2018-2020 Performance Units are included in the Grants of Plan-Based Awards in 2018 table.

 

72    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

The table below sets forth the grant date fair value of the 2018-2020 Performance Units determined in accordance with FASB ASC Topic 718 principles (i) based upon the probable outcome (100%) of the Free Cash Flow performance-related component at the grant date, and (ii) based upon achieving the maximum level of performance (150%) under the Free Cash Flow performance-related component. Also set forth below is the grant date value for the market-related component determined upon the applicable grant date and applied to the full granted awards, and which is not subject to probable or maximum outcome assumptions. The TSR market-related component could result in up to a 133% adjustment, which is not reflected in the table below.

2018-2020 LTIP Grant Date Fair Value

 

  Name and Grant Date   

Probable (Target) Outcome

of Performance-Related

Component

($)

    

Maximum Outcome of

Performance-Related

Component

($)

    

Market-Related

Component

($)

 

  Ynon Kreiz

                          

  April 30, 2018(1)

     2,983,872        4,475,809        235,887  

  June 11, 2018

     1,230,007        1,845,011        145,001  

  Richard Dickson

                          

  April 5, 2018

     970,677        1,456,016        29,326  

  June 11, 2018

     447,272        670,908        52,727  

  August 1, 2018

     678,619        1,017,928        71,388  

  Joseph J. Euteneuer

                          

  April 5, 2018

     614,760        922,140        18,573  

  May 16, 2018(2)

     302,634        453,951        9,580  

  June 11, 2018

     402,552        603,828        47,455  

  Robert Normile

                          

  April 5, 2018

     339,738        509,608        10,264  

  June 11, 2018

     156,547        234,821        18,455  

  Amanda J. Thompson

                          

  April 5, 2018

     339,738        509,608        10,264  

  June 11, 2018

     156,547        234,821        18,455  

  Margaret H. Georgiadis (former CEO)

                          

  April 5, 2018(3)

     2,669,356        4,004,034        80,645  

 

  (1)

Pursuant to the original terms of Mr. Kreiz’s offer letter, his 2018 Annual LTI Value was set at $8,250,000. One-third of that value, or $2,750,000, was to be granted as Performance Units following his commencement of employment as our CEO on April 26, 2018. Because this grant was made on April 30, 2018, which was a short time after the Performance Units under the 2018-2020 LTIP were granted to our other executives on April 5, 2018, the number of his Performance Units was determined based on the conversion value of the Performance Units granted on April 5, 2018 of $13.64, which was the grant date fair value of those Performance Units. As a result, the grant date fair value computed in accordance with FASB ASC Topic 718 (shown above, and reflected in the Grants of Plan-Based Awards in 2018 table) for the Performance Units granted to Mr. Kreiz on April 30, 2018 was $3,219,760, which is $469,760 higher than the targeted grant value.

 

  (2)

Pursuant to the original terms of Mr. Euteneuer’s offer letter, the target grant value for his 2018 Performance Units was established at $900,000. Due to an administrative error, on April 5, 2018 (the original grant date for the 2018-2020 LTIP) Mr. Euteneuer was granted 2018-2020 Performance Units valued at only $633,334. On May 16, 2018, the Compensation Committee approved an additional grant of 2018-2020 Performance Units to Mr. Euteneuer with a targeted value of $266,666. The May 16, 2018 Performance Units were awarded based on the conversion value (and grant date value) of the Performance Units granted on April 5, 2018 of $13.64. The grant date fair value computed in accordance with FASB ASC Topic 718 (shown above, and reflected in the Grants of Plan-Based Awards in 2018 table) for the Performance Units granted to Mr. Euteneuer on May 16, 2018 was $312,214, which is $45,548 higher than the targeted grant value of $266,666.

 

  (3)

Ms. Georgiadis forfeited her 2018-2020 Performance Units in connection with her stepping down as CEO on April 26, 2018.

See the “Compensation Discussion and Analysis – Elements of Compensation – Equity Long-Term Incentives” section of this Proxy Statement for a more complete description of the LTIP.

CEO New-Hire Performance-Based Options. Mr. Kreiz’s new-hire performance-based stock option grant vests in full at the end of a three-year performance period based on our relative TSR, a market condition, and thus is not subject to maximum performance assumptions.

 

(5)

Non-Equity Incentive Plan Compensation. Amounts shown represent the performance-based annual cash compensation earned under the MIP, our annual cash incentive plan. See “Compensation Discussion and Analysis – Elements of Compensation – Annual Cash Incentive” for a more complete description of the MIP.

 

2019 Proxy Statement      73


Table of Contents

Executive Officers and Executive Compensation

 

(6)

Change in Pension Value and Nonqualified Deferred Compensation Earnings. Amounts shown represent the increase, if any, in the pension benefits that have accrued under the SERP during the applicable year. For example, the amount for 2018 is determined by subtracting (i) the present value of the executive’s accrued benefits as of December 31, 2017 from (ii) the present value of the executive’s accrued benefits as of December 31, 2018, which is shown in the 2018 Pension Benefits table below, and is computed as explained in the narrative disclosure to the 2018 Pension Benefits table.

For Mr. Normile, the only NEO who participates in our SERP, in accordance with applicable SEC rules, no amount is included in the table for 2018, since the present value of his accrued benefit as of December 31, 2018 was less than the present value of his accrued benefit as of December 31, 2017.

No amount is included with respect to nonqualified deferred compensation earnings because there were no above-market earnings on nonqualified deferred compensation.

 

(7)

All Other Compensation. The dollar amounts for each perquisite and each other item of compensation shown in the “All Other Compensation” column and in this footnote represent Mattel’s incremental cost of providing the perquisite or other benefit to our NEOs. See the “Compensation Discussion and Analysis – Elements of Compensation – Other Forms of Compensation” section of this Proxy Statement for additional discussions on these benefits. Amounts include the following perquisites and other items of compensation provided to our NEOs in 2018:

All Other Compensation

 

                                                                                                                                         
  All Other Compensation   

Kreiz

($)

    

Georgiadis

($)

    

Dickson

($)

    

Euteneuer

($)

    

Normile

($)

    

Thompson

($)

 

  Car allowance/Company car(1)

     9,762        9,000        24,000        24,000        24,000        24,000  

  Relocation Assistance(2)

                          104,911                

  Relocation Tax Gross-up(3)

                          46,109                

  Other perquisites(4)

                   15,165               18,636        3,525  

  Total Perquisites

     9,762        9,000        39,165        175,020        42,636        27,525  

  Contributions to 401(k) Plan

     17,710        24,750        22,442        27,500        27,500        18,111  

  Contributions to DCP

     41,200        19,587        65,250        62,500        31,962        17,500  

  Total “All Other Compensation”

     68,672        53,337        126,857        265,020        102,098        63,136  

 

  (1)

Represents the amount of the monthly car allowance or, for Mr. Kreiz, use of a Company car. The amount of car allowance is based on the executive’s job level, and is intended to cover all automobile expenses and mileage reimbursement. For Mr. Kreiz’s personal use of a Company car, the amount represents the cost of insurance, maintenance and gasoline.

 

  (2)

For Mr. Euteneuer, the amount shown reflects temporary accommodations, one round-trip airfare per week and reimbursement for incidental relocation expenses through May 2018.

 

  (3)

Represents a tax gross-up for Mr. Euteneuer under our standard relocation program related to the relocation assistance benefits provided in 2018 described above.

 

  (4)

Amounts include financial counseling and physical examinations provided to our NEOs. Incremental costs to Mattel for these items were determined as the actual amounts credited to, paid to or on behalf of the executive or the portion of costs allocated to the executive’s personal use of a perquisite.

 

74    Mattel, Inc.


Table of Contents

Executive Officers and Executive Compensation

 

Narrative Disclosure to Summary Compensation Table

We have entered into offer letters with each of our NEOs in connection with their commencement of employment with us, setting forth their annual base salary, target annual bonus and the terms and conditions of new-hire and other equity grants. Certain of these terms, pursuant to which we had ongoing obligations as of 2018, are described in more detail below.

Kreiz Offer Letter

Effective April 26, 2018, Mr. Kreiz became our CEO. In connection with Mr. Kreiz’s appointment as our CEO, we entered into an offer letter with him that provided (i) an annual base salary of $1,500,000, (ii) a target MIP bonus opportunity of 150% of eligible base salary up to a maximum of 300%; (iii) 2018 Annual LTI Value of $8,250,000, to be divided equally into three-year Performance Units, stock options and RSUs; and (iv) a new-hire grant of performance-based stock options with a value of $5,000,000, which vests in full at the end of a three-year performance period beginning on the date Mr. Kreiz commenced employment as our CEO, subject to continued service and Mattel achieving a relative TSR that is greater or equal to the 65th percentile as compared to companies in the S&P 500 Index. Pursuant to his offer letter, Mr. Kreiz is also eligible to participate in Severance Plan B as modified by the terms of his participation letter agreement. In June 2018, we entered into a letter agreement with Mr. Kreiz, pursuant to which it was agreed that his 2018 Annual LTI Value would be allocated 50% in Performance Units and the remaining 50% would be allocated between time-vesting stock options and RSUs as determined by the Compensation Committee.

Euteneuer Offer Letter

In connection with Mr. Euteneuer’s appointment as our CFO in September 2017, we entered into an offer letter with him that provided for annual base salary, target MIP opportunity, Annual LTI Value, new-hire and special equity grants and participation in Severance Plan B as modified by the terms of his participation agreement. Mr. Euteneuer’s offer letter also provided for a signing bonus in an aggregate amount of $400,000, $200,000 of which was payable within 30 days of his hire date and subject to repayment in the event of Mr. Euteneuer’s voluntary resignation or termination for cause within one year of his hire date, and the remaining $200,000 of which was payable on the first payroll date following January 1, 2019, subject to Mr. Euteneuer’s continued employment in good standing through January 1, 2019. In addition, the offer letter also provided Mr. Euteneuer with temporary accommodations and other relocation expenses through February 28, 2018, which, in January 2018, was extended to cover an additional three months, through May 31, 2018. Pursuant to Mattel’s relocation program, Mr. Euteneuer is eligible to receive tax gross-up payments on such relocation costs and is required to repay the relocation costs incurred by us if he resigns or his employment is terminated with cause within one year of the relocation date. Our standard relocation program includes home sale assistance, shipment of household goods and home purchase assistance during the first year after the executive’s hire date, with shipment of household goods and home purchase assistance eligible for tax gross-up. Because Mr. Euteneuer was not in a position to avail himself of these relocation benefits during the first year following his hire date, in February 2019, the Compensation Committee approved providing these specific relocation benefits to Mr. Euteneuer through August 5, 2019. In accordance with our updated repayment provision, Mr. Euteneuer will be required to repay the full relocation costs incurred by us for these benefits if he resigns or his employment is terminated with cause within one year following the February 5, 2019 approval date, and repay 50% of the relocation costs if such resignation or termination occurs during the second year following such approval date. In June 2018, we entered into a letter agreement with Mr. Euteneuer, pursuant to which it was agreed that his 2018 Annual LTI Value would be allocated 50% in Performance Units and the remaining 50% would be allocated between time-vesting stock options and RSUs as determined by the Compensation Committee.

 

2019 Proxy Statement      75


Table of Contents

Executive Officers and Executive Compensation

 

Grants of Plan-Based Awards in 2018

The following table shows information about the non-equity incentive awards and equity-based awards granted to our NEOs in 2018.

 

Name and

Grant Date

  

Committee

Action Date

     Estimated Possible Payouts  Under
Non-Equity Incentive Plan Awards(1)
     Estimated Future Payouts Under
Equity Incentive Plan Awards(2)
   

All Other

Stock

Awards:

Number

of Shares

of Stock

or Units(3)

    

All Other

Option

Awards:

Number of

Securities

Underlying

Options(4)

    

Exercise

or Base

Price of

Option

Awards

($)

    

Grant Date

Fair Market

Value of

Stock and

Option

Awards(5)

($)