DEF 14A 1 mat3661601-def14a.htm DEFINITIVE PROXY STATEMENT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

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 Under Rule 14a-12

Mattel Inc.

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Our Mission
To create innovative products
and experiences that inspire,
entertain and develop children
through play.









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Dear Fellow Stockholders,

At the time of writing this letter, the world is facing an unprecedented health and economic crisis with the global impact of Coronavirus (COVID-19).

While there is no playbook for a global pandemic of this nature, at Mattel, we have taken preventative actions to ensure the health and safety of our organization and mitigate the disruption to our business. This includes the successful transition to a remote work structure for our employees working in 35 countries globally, the implementation of stringent health and safety measures to safeguard employees at our plants and distribution centers, and the temporary closure of all our American Girl retail stores.

During these testing times, we are dedicated to supporting parents, caregivers, and children. Recognizing the unique challenges that parents and caregivers are facing, with schools closed and the need to both teach and entertain children at home, we have launched an online resource called the Mattel Playroom featuring activities and content to engage kids and encourage them to keep playing.

In addition, we are dedicated to supporting our broader communities facing the crisis. With healthcare workers on the front lines in need of personal protective equipment (PPE), our Design and Development team is leveraging their capabilities to produce face masks to help meet the significant demand for these supplies. In addition, we have executed grants to Feed the Children and Save the Children globally. The Mattel Children’s Foundation has donated art supplies, games, and other toys to the Los Angeles Unified School District to distribute to families in need and made similar donations to Baby2Baby, LA Family Housing, Partners for Pediatric Vision, Save the Children, and UCLA Mattel Children’s Hospital, among others.

As we continue to navigate through this, we remain focused on the execution of our transformation strategy and the pursuit of our mission to create innovative products and experiences that inspire, entertain, and develop children through play. At no time in our 75-year history has this mission been more vital than now.

Our work over the past two years to develop a proactive and flexible organization has served us well during this time. I am proud of how our team has embraced uncertainty and change, and demonstrated resilience in the face of this challenge. While these times are undoubtedly very testing, the actions we have taken to build a solid financial, organizational, and cultural foundation position us well to weather the storm.

We ended 2019 with our financial results reflecting significant improvement across the business and demonstrable progress on our strategy to transform Mattel into an IP-driven, high-performing toy company.

We continued to advance toward achieving our goals to restore profitability and regain topline growth in the short-to-mid term and are on-track to capture the full value of our intellectual property in the mid-to-long term.

As we navigate the days, weeks, and months ahead, I am confident that innovation and human determination will win out and we will all emerge stronger on the other side.

To our employees, partners, customers, and stockholders – thank you for your continued support and commitment to our success.

Stay healthy.

Sincerely,


Ynon Kreiz
Chairman and Chief Executive Officer

2020 Proxy Statement

         

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Mattel, Inc.
Notice of 2020 Annual Meeting of Stockholders

           
Date and Time
June 10, 2020 at 9:00 a.m.
(Los Angeles time)
Virtual Meeting
You may attend the virtual meeting by visiting: www.virtualshareholdermeeting.com/MAT2020
Record Date
Holder of record of Mattel common stock at the close of business on April 13, 2020

We will consider and act on the following matters of business at our 2020 annual meeting of stockholders (“2020 Annual Meeting”):

Matter              The Board’s Recommendations
Proposal 1 Election of the nine director nominees named in the Proxy Statement: R. Todd Bradley, Adriana Cisneros, Michael Dolan, Ynon Kreiz, Soren Laursen, Ann Lewnes, Roger Lynch, Dominic Ng, and Dr. Judy Olian 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, 2020 FOR
Proposal 3 Advisory vote to approve named executive officer compensation (“Say-on-Pay”) FOR
Proposal 4 Approval of the Fourth Amendment to the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan FOR
Proposal 5 Stockholder proposal regarding an independent Board Chairman, if properly presented Such other business as may properly come before the 2020 Annual Meeting AGAINST       

In light of the rapidly changing developments related to the coronavirus (COVID-19), we made the decision to conduct a virtual annual meeting of stockholders, which will provide access for all stockholders while safeguarding the health and safety of our stockholders, directors, officers, employees, and other stakeholders. You will be able to attend the 2020 Annual Meeting, view the list of our stockholders of record, vote, and submit questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/MAT2020. To participate in the meeting, you must have your 16-digit control number that is shown on your Notice of Internet Availability of Proxy Materials or on your proxy card if you receive the proxy materials by mail. You will not be able to attend the 2020 Annual Meeting in person. Whether or not you expect to attend the 2020 Annual Meeting online, please vote as soon as possible so that your shares will be represented and voted at the 2020 Annual Meeting.

By Order of the Board of Directors

How To Vote

               


ROBERT NORMILE
Secretary
El Segundo, California
April 27, 2020

               
Internet
www.proxyvote.com (prior to June 10, 2020)
www.virtualshareholdermeeting.com/MAT2020 (during the meeting)

Telephone
1-800-690-6903

Mail
Mark, sign, date, and promptly mail the enclosed proxy card in the postage-paid envelope

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 10, 2020. The proxy statement and the annual report are available at http://mattel.gcs-web.com/proxy-statements and http://mattel.gcs-web.com/annual-reports.

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Proxy Summary        5
Voting Matters and Board Recommendations 5
2019 Strategic Overview and Business Highlights 5
Executive Compensation Highlights 8
Board Composition 12
Director Nominees Snapshot 13
Director Nominees Skills, Attributes, and Experience 13
Corporate Governance Highlights 14
Ongoing Stockholder Engagement Program 14
Corporate Governance at Mattel 15
     
  Election of Directors 15
Board Composition and the Director Nomination Process 27
Board Structure 29
Director Compensation 40
Audit Matters 44
     
  Ratification of Selection of Independent Registered Public Accounting Firm 44
Report of the Audit Committee 45
Fees Incurred for Services by PricewaterhouseCoopers LLP 47
Compensation at Mattel 48
     
  Advisory Vote to Approve Named Executive Officer Compensation (“Say-On-Pay”) 48
Executive Officers 49
Compensation Discussion and Analysis 51
Executive Summary 51
Our Pay-For-Performance Philosophy 60
How Compensation is Determined 60
Elements of Compensation 62
2019 Individual Performance Assessments 68
Important Policies, Governance, and Guidelines 76
Executive Compensation Tables 79
Summary Compensation Table 79
Grants of Plan-Based Awards in 2019 84
Outstanding Equity Awards at 2019 Year End 85
Option Exercises and Stock Vested in 2019 88
2019 Pension Benefits 89
2019 Nonqualified Deferred Compensation 90
Potential Payments Upon Termination or Change of Control  92
Estimated Potential Payments 96
Pay Ratio of CEO to Median Employee 99
Report of the Compensation Committee 99
  Approval of the Fourth Amendment to Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan 100
Background and Purpose of the Amended Plan 100
Current Overview of Outstanding Equity Information 101
Summary of the Amended Plan 103
Estimate of Benefits; New Plan Benefits 109
History of Grants Under the 2010 Plan 110
Certain Material U.S. Federal Income Tax Consequences 110
Board Recommendation 112

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Stockholder Proposal       113
     
  Stockholder Proposal Regarding an Independent Board Chairman 113
Board’s Statement AGAINST Stockholder Proposal 114
Stock Ownership and Reporting 116
Principal Stockholders 116
Security Ownership of Management and the Board 117
Equity Compensation Plan Information 118
2020 Annual Meeting and Voting Information 119
General Meeting Information 119
Important Notice Regarding the Availability of Proxy Materials for the 2020 Annual Meeting 119
Deadline for 2021 Proposals and Nominations 125
Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations 127
Other Matters that May Come Before the 2020 Annual Meeting 129
Appendix A – Fourth Amendment to Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan A-1
Appendix B – Conformed Copy of the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan B-1

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Proxy Summary

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 2019 financial performance, please review our Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2020 and February 27, 2020, respectively (together, the “Form 10-K”). We made this Proxy Statement available to stockholders beginning on or around April 27, 2020.

Voting Matters and Board Recommendations

    

Matter

     The Board’s
Recommendations
    

Page

Election of Nine Director Nominees

FOR each
Director Nominee

15

Ratification of PricewaterhouseCoopers LLP as our Independent Accounting Firm for 2020

FOR

44

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

FOR

48

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

FOR

100

Stockholder Proposal Regarding an Independent Board Chairman

AGAINST

113


2019 Strategic Overview and Business Highlights

We remain focused on the execution of our strategy to restore profitability and regain topline growth in the short-to-mid term, and capturing the full value of our intellectual property (“IP”) in the mid-to-long term.

Our 2019 financial results reflected significant improvement across the business and highlight demonstrable progress on our journey to transform Mattel into an IP-driven, high-performing toy company. The last year was an important inflection point in our transformation. We stabilized our topline after five consecutive years of revenue decline, continued to significantly improve profitability, and achieved positive Free Cash Flow for the first time in three years. We are encouraged by the progress we made in 2019 and will look to build on this progress moving forward.

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Proxy Summary

Two-Part Strategy to Transform Mattel into an IP-Driven, High-Performing Toy Company

In the short-to-mid term, our priorities are to continue to restore profitability by reshaping operations 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.

                                                                                                                     

 
1

Significant progress towards restoring profitability

 
In the last two years, we have succeeded in making significant progress towards the first priority of our strategy, restoring profitability. This success has been primarily driven by our Structural Simplification program, which was designed to streamline the organization, rationalize our cost base, and improve efficiency and performance across every part of our enterprise. This two-year program had a financial target of $650 million of run-rate savings exiting 2019. We achieved $875 million of run-rate savings, exceeding the original target by $225 million, or 35%. During the two-year period, we reduced our non-manufacturing workforce by 29%, cut capital expenditures by more than 60%, and made strategic investments of more than $150 million to position the Company for future growth.

To further support our short-to-mid term strategy, we launched our Capital Light program in 2019. This program is a multi-year, comprehensive effort to optimize our manufacturing footprint, increase the productivity of our plant infrastructure, and drive higher performance across the entire supply chain. To achieve these goals, we are rebalancing our global third-party manufacturing network and selling, closing, or consolidating some of our owned and operated plants, while retaining those which deliver competitive advantages in cost, quality, and service. As part of this program, we have closed three owned plants in Mexico, China, and Indonesia, and recently announced the closure of our manufacturing operations in Canada by the end of 2020.

Structural Simplification and Capital Light drove significant improvements in key profitability metrics across our business. Year-over-year financial improvements included a 420-basis point increase in Gross Margin to 44.0%, a $274 million increase in Operating Income to $39 million, and a $208 million increase in Operating Cash Flow to $181 million.


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Proxy Summary

Run-Rate
Cost Savings
     Gross Margin      Operating Income      Operating Cash Flow
 

 
2

Meaningful progress towards regaining topline growth

 
In addition to our significant progress towards restoring profitability in 2019, we also made meaningful progress towards the second priority of our short-to-mid term strategy – regaining topline growth, by stabilizing revenues after five previous years of decline. In 2019:
Net Sales were $4,505 million, flat as reported, including the negative foreign exchange impact of $75 million, and up 1% in constant currency*, versus prior year.
Gross Sales* were $5,065 million, flat as reported, including the negative foreign exchange impact of $92 million, and up 2% in constant currency*, versus prior year.
Gross Sales grew in every geographical region in constant currency, excluding American Girl, and in five of the six categories in which we operate.


 
3

On-track to capture the full value of our IP in the mid-to-long term

 
In the mid-to-long term, we remain focused on capturing the full value of our IP through franchise management and the development of our online retail and e-commerce capabilities. Mattel owns one of the strongest portfolios of children and family entertainment franchises in the world, with the potential to drive additional value through the monetization of our brands and franchises in highly-accretive, large verticals that are directly adjacent to the toy industry. These verticals include film, television, digital gaming, live events, music, consumer products, and merchandise.

In 2019, Mattel Films announced five theatrical films, for a total of eight movies in development in partnership with major studios and highly regarded talent.

Mattel TV ended the year with six series and four specials in production, and more than 30 projects in development.

Additionally, our Franchise Management team launched Mattel’s first self-published Hot Wheels mobile game as well as the UNO mobile game through Mattel163, our mobile gaming joint venture with NetEase.

*

Net Sales in constant currency, Gross Sales, and Gross Sales in constant currency are non-GAAP measures under the SEC’s rules. Please see Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations on page 127.



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Proxy Summary

Executive Compensation Highlights

Continued evolution of our executive compensation programs reflects our commitment to pay-for-performance and compensation governance best practices. In connection with a greater emphasis on at-risk performance-based compensation and long-term stockholder value creation, the Compensation Committee made two important changes to our Chief Executive Officer’s (“CEO”) annual long-term incentive (“LTI”) mix:

Eliminated time-based restricted stock units (“RSUs”), which comprised 25% of the LTI mix in 2018
Increased performance-based restricted stock units (“Performance Units”) to 75%, which comprised 50% of the LTI mix in 2018

This shift increased the overall percentage of our CEO’s annual target total direct compensation (“TDC”)* delivered in the form of performance-based equity. The other named executive officers (“NEOs”) continued to receive an annual LTI mix of 50% Performance Units, 25% time-based stock options (“stock options”), and 25% RSUs. The chart below shows the 2019 target TDC mix for our CEO, Mr. Kreiz, and the average 2019 target TDC for our other NEOs:

A Significant Portion of 2019 Target Total Direct Compensation is At Risk

                  

CEO

Other NEOs

   
     

*

TDC is the sum of 2019 year-end annual base salary, MIP target incentive opportunity, and Annual LTI Value (i.e., grant value of Performance Units granted under the 2019-2021 Long-Term Incentive Program (“LTIP”), stock options, and RSUs).

2019 Pay-For-Performance Results

Pay outcomes for our NEOs in 2019 reflect our pay-for-performance philosophy.

Above target 2019 annual incentive payouts under the Mattel Incentive Plan (“MIP”) reflect significant progress in the execution of our strategy, resulting in increased profitability and the successful stabilization of revenues.
Our 2019 MIP financial measures focused on driving profitability, stabilizing revenues, and improving our working capital position. The 2019 MIP was structured as follows:

Financial measures and weightings:

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Proxy Summary

For each financial measure, 35% of the target could be earned for threshold performance, up to 200% for maximum performance, before weightings. No amounts could be earned for below threshold with performance. Additionally, no amounts could be earned, and no payouts could be made, unless we achieved the threshold level of Adjusted EBITDA performance, calculated to include 2019 incentive compensation expense, which was accomplished.
For each NEO, the amount earned under the financial measures was then multiplied by 0% to 125% (an “Individual Performance Multiplier”), based on a performance assessment of the NEO’s progress against individual goals that tied to the execution of our short-to-mid term strategy.
Payouts were capped at 200% of MIP target opportunity.

Our significant progress in restoring profitability, successful stabilization of revenues, margin improvement, and working capital performance resulted in a Company financial performance earnout of 175.6%, which was adjusted by the Individual Performance Multiplier, with total payouts not to exceed 200% of MIP target opportunity.

2019 MIP Financial Measures and Earnout Results

Financial Measure*      Weighting      Threshold
(35% earned)
     Target
(100% earned)
     Max
(200% earned)
     % Earned
before
weighting
     % Earned
after
weighting
 

Adjusted EBITDA 50% 200% 100%
 
Adjusted Net Sales 20% 106.4% 21.3%
 
Adjusted Gross
Margin
15% 200% 30%
 
Adjusted Inventory
& Accounts
Receivable
15% 162% 24.3%
TOTAL EARNED 175.6%
* Certain financial measures described above are non-GAAP measures under the SEC’s rules. Please see Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations on page 127. All of the performance measures were adjusted in accordance with the MIP parameters, which were approved by the Compensation Committee. Adjustments are intended to ensure that events outside of the control of management do not unduly influence the achievement of the performance measures. The adjustments under the MIP are described on page 66 and each measure is defined under “Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations.”

2020 Proxy Statement        9


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Proxy Summary

Performance Units Earned under 2017-2019 LTIP Reflect Strong Improvement in Adjusted EPS

Our 2017-2019 LTIP, which had a performance period from January 1, 2017 through December 31, 2019, based payout on achievement against annual Adjusted Earnings Per Share (“Adjusted EPS”) goals set on an annual basis with earnouts averaged over the three-year performance period, plus a relative total stockholder return (“TSR”) modifier of +/- 50 percentage points, based on our relative TSR over the three-year performance period versus the companies in the S&P 500.

We achieved a three-year average earnout of 100% under our annual Adjusted EPS financial measure. As of the end of the performance period, December 31, 2019, our relative TSR resulted in a TSR adjustment of negative 50 percentage points. Accordingly, the cumulative total earnout was 50% of target Performance Units granted, plus dividend equivalent shares equal to 4% of the shares earned.

2017-2019 LTIP Financial Measures and Earnout Results

Goal*       Threshold
(50% earned)
      Target
(100% earned)
      Max
(150% earned)
      % Earned
Each Year

2017 Adjusted EPS

0%

2018 Adjusted EPS

150%
2019 Adjusted EPS 150%
Three-Year Average Earnout for
Adjusted EPS
100%
Effect of TSR Modifier Actual at
December 31, 2019
Mattel TSR Relative to S&P 500 ≤25th

     

50th       ≥75th

    

4th

Earnout Percentage Modifier**

-50% No change +50% -50%
TOTAL EARNED 50%
* Adjusted EPS is a non-GAAP measure under the SEC’s rules. Please see Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations on page 127 for a description of the adjustments under the MIP.
** TSR levels achieved between the 25th, 50th, and 75th percentiles are linearly interpolated.

Dividend equivalents were accumulated in shares of stock attributed to each Performance Unit based upon the number of shares earned, assuming each dividend is reinvested in shares as of the closing price on the ex-dividend date, and participates in future dividend distributions, for all dividends during the three-year performance period.

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Proxy Summary

The following table summarizes the 2017-2019 LTIP payout. Messrs. Kreiz and Euteneuer did not receive 2017-2019 Performance Units due to their hire dates, and accordingly are excluded from the table.

2017-2019 LTIP Payout

Name       Target Performance
Units Granted
      Actual Shares
Earned
      Dividend Equivalent
Shares Earned
      Total Shares
Earned
Richard Dickson 37,355 18,678 777 19,455
Roberto Isaias 5,603 2,802 117 2,919
Robert Normile 13,074 6,537 272 6,809

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:

 
What We Do
Compensation Recovery Policy (“Clawback Policy”) applicable to all Section 16 officers and other direct reports to the CEO
Best practices in severance arrangements, including severance benefits at competitive levels not greater than 2x
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 executive compensation comparator peer companies (“peer group”) review
Annual tally sheet review


 
What We Do Not Do                  
No excise tax gross-ups on severance or other payments in connection with a change of control
No poor pay practice of tax gross-ups on perquisites and benefits
No hedging or pledging by Board members, officers, or employees permitted

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Proxy Summary

Board Composition

   Name    Age    Director
Since
   Audit    Compensation    Governance
and Social
Responsibility
   Finance    Executive    Equity
Grant
Allocation
R. Todd Bradley
Independent
61 2018
Adriana Cisneros
Independent
40 2018
Michael Dolan
Independent
Lead Director
73 2004
Ynon Kreiz 55 2017
Soren Laursen(1)
Independent
56 2018
Ann Lewnes
Independent
58 2015
Roger Lynch
Independent
57 2018
Dominic Ng
Independent
61 2006
Dr. Judy Olian
Independent
68 2018
Vasant Prabhu†(2)
Independent
60 2007
= Chair
= Audit Committee Financial Expert
= Member
(1) Mr. Laursen was determined to be independent after his service as interim Executive Director ended on September 30, 2019.
(2) Mr. Prabhu is not standing for re-election at the 2020 Annual Meeting.

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Proxy Summary

Director Nominees Snapshot

Diversity Independence
   
Average Tenure Average Age

Director Nominees Skills, Attributes, and Experience

We believe effective oversight comes from a board of directors that represents a diverse range of experience and perspectives that provide the collective talent, skills, areas of expertise and experience, diversity, and independence necessary for sound governance. The nominees to our board of directors (the “Board”) possess a diverse set of skills, attributes, and experience, which align with our business strategy and contribute to effective oversight. A summary of the attributes of our director nominees is outlined below.

                                            
Industry  
Finance
Diversity
Brand and Marketing
International Operations
Sustainability
Human Capital Management
Senior Leadership

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Proxy Summary

Corporate Governance Highlights

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

Corporate Governance Practices Board Practices
Annual elections for all directors
Majority voting standard
Robust Independent Lead Director role with significant responsibilities
Stockholder right to call special meetings
Stockholder right to proxy access
Stockholder ability to remove directors with or without cause
Stockholder ability to act by written consent
Routine review of Board leadership structure
Annual Board and committee evaluations
Robust director succession and search process
Annual review and evaluation of the CEO performance by independent directors
Quarterly executive sessions held without management present
Comprehensive risk management with Board and committee oversight
Eight of nine director nominees are independent

No Hedging or Pledging Permitted

Our Insider Trading Policy, as implemented, prohibits Board members, officers, and employees from (i) engaging in hedging, monetization or speculative transactions in Mattel common stock (including zero-cost collars, forward sale contracts, short sales, transactions in publicly-traded options, or other derivative securities), and (ii) holding Mattel shares in a margin account, pledging Mattel shares, or using Mattel shares owned as collateral for loans.

Ongoing Stockholder Engagement Program

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.

We believe our regular stockholder engagement is productive and provides an open exchange of ideas and perspectives for both Mattel and our stockholders. Feedback received from our stockholders during these engagements is regularly shared with the full Board, the Governance and Social Responsibility Committee, and the Compensation Committee, who consider this feedback when making decisions.

In the spring of 2019, our Independent Lead Director, Mr. Dolan, and members of senior management had discussions with stockholders representing approximately 71% of our outstanding shares. Similarly, in the beginning of 2020, Mr. Dolan and members of senior management had discussions with stockholders representing approximately 63% of our outstanding shares. These discussions focused on our strategy, corporate governance matters, executive compensation, and long-term commitment to integrating sustainability into our business.

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Corporate Governance at Mattel

  

Proposal
1

      Election of Directors    

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

 

After receiving input from members of the Governance and Social Responsibility Committee, the Board has nominated nine director nominees for election at the 2020 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 death, resignation, disqualification, or removal:

R. Todd Bradley Ynon Kreiz Roger Lynch
     
Adriana Cisneros Soren Laursen Dominic Ng
     
Michael Dolan Ann Lewnes Dr. Judy Olian

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 nine director nominees named above. If, before the 2020 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.

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Corporate Governance at Mattel

Director Nominees Overview

Diversity Independence
 
Average Tenure Average Age


Board Refreshment

78%
of our director nominees joined our Board within the last 5 years

Key skills, attributes, and experience brought to the Board:


Industry
Brand and Marketing
Finance
Human Capital Management
Diversity
Senior Leadership
International Operations
Sustainability


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Corporate Governance at Mattel

Director Nominees Skills, Attributes, and Experience

Our director nominees possess a diverse set of skills, attributes, and experience, which align with our business strategy and contribute to effective oversight. A summary is outlined below.

Industry       Brand and Marketing
 5 out of 9 nominees  6 out of 9 nominees
As a leading global children's entertainment company that specializes in the design and production of quality toys and consumer products, directors with significant experience in the consumer goods and entertainment industries provide valuable perspective on issues specific to the operation of our business. We own a portfolio of global brands with vast IP potential. As we look to capture the full value of our IP in the mid-to-long term, directors with relevant experience in consumer marketing or brand management, especially on a global basis, provide important insights to our Board.
 
Finance Human Capital Management
 6 out of 9 nominees  8 out of 9 nominees
We measure our operating and strategic performance by reference to certain financial metrics. Accurate financial reporting is critical to Mattel’s success. Accordingly, we seek to have a number of directors who qualify as audit committee financial experts (as defined by SEC rules). Our people are among our most important assets and we believe the successful development and retention of our employees is critical to our success. As such, we benefit from having directors with a deep understanding of human capital management obtained from experience as a senior leader in a large organization.
 
Diversity Senior Leadership
 4 out of 9 nominees  9 out of 9 nominees
We understand that a culture rich in diversity is key to our business success, as it allows us to better understand the business opportunities in various markets around the world, and develop products that resonate with consumers in diverse cultures. Diverse directors representing a range of perspectives expands the Board’s understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. Directors with CEO or senior management experience have a demonstrated record of leadership and a practical understanding of organizations, processes, strategy, risk, and risk management, as well as methods to drive change and growth. Through their service as top leaders at other companies, our directors also bring valuable perspectives on common issues affecting large and complex organizations.
 
International Operations Sustainability
 8 out of 9 nominees  5 out of 9 nominees
Our business is worldwide in scope, with operations in over 50 countries and territories, offices and/or warehouse space in 35 countries, and multiple facilities across multiple countries producing our products. As such, we benefit from directors having experience as a senior leader in a large organization with international operations. We recognize our responsibility to be a global, corporate citizen, and positive environmental steward, which is a priority for the entire organization. Our directors are committed to our sustainability initiatives designed to achieve long-term stockholder value through a responsible, sustainable business model.

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Director Nominees for Election

The Board, after receiving input from members of the Governance and Social Responsibility Committee, selected director nominees whose talents, skills, areas of expertise and experience, diversity, and independence, including those highlighted above, led the Board to conclude that these persons should serve as our directors at this time.

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 experience, and other directorships held during the past five years. The specific experiences, qualifications, and attributes that led the Board to conclude that each nominee should serve as a director are described below.

Age: 61

Director Since: 2018

Mattel Committee Memberships:

Audit Committee
Compensation Committee

Other Current Public Directorships:

Eastman Kodak Company
     
R. Todd Bradley

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. In addition, Mr. Bradley has proven experience with turnaround companies in driving growth and improving profitably.

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, 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)

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Age: 40

Director Since: 2018

Mattel Committee Memberships:

Governance and Social Responsibility Committee
     
Adriana Cisneros

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. Ms. Cisneros has experience transforming a company through innovation and digital strategy. She brings a valuable perspective on global consumers and corporate social responsibility. She also has experience serving on the boards of nonprofit entities.

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

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Age: 73

Director Since: 2004

Mattel Committee Memberships:

Compensation Committee (Chair)
Executive Committee (Chair)
Governance and Social Responsibility Committee
Other Current Public Directorships:
Haymaker Acquisition Corp. II
OneSpaWorld Holdings Limited
     
Michael Dolan

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.

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)

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Age: 55

Director Since: 2017

Mattel Committee Memberships:

Equity Grant Allocation Committee

Other Current Public Directorships:

Warner Music Group Corp.
     
Ynon Kreiz

Key Experience/Director Qualifications

Mr. Kreiz brings to Mattel’s Board of Directors significant leadership, finance, multimedia, entertainment, and content experience, and during his tenure as a director of Mattel has gained a deep understanding of Mattel’s business and the toy industry. 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.

Career Highlights

Maker Studios, Inc., a global digital media and content network 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 (March 2017 – August 2018)
Board of Advisors, Anderson Graduate School of Management at UCLA since April 2015
Chairman of Board of Trustees, Israeli Olympic Committee, London Games (2012)

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Age: 56

Director Since: 2018

Mattel Committee Memberships:

Finance Committee
Governance and Social Responsibility Committee
     
Soren Laursen

Key Experience/Director Qualifications

Mr. Laursen brings to Mattel’s Board of Directors significant leadership, finance, brand, marketing, retail, global, and toy industry experience. 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.

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)
Vice President/General Manager, LEGO New Zealand (1995 – 1999)

Additional Leadership Experience and Service

Interim Executive Director, Mattel (October 2018 – September 2019)
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)

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Age: 58

Director Since: 2015

Mattel Committee Memberships:

Executive Committee
Governance and Social Responsibility Committee (Chair)
     
Ann Lewnes

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.

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

Matrix Award (2020)
American Marketing Association Hall of Fame (2019)
Forbes Most Influential CMOs (2017-2020)

Additional Leadership Experience and Service

Director, Advertising Council (2009-2019)
Director, Adobe Foundation since 2009

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Age: 57

Director Since: 2018

Mattel Committee Memberships:

Audit Committee
Finance Committee
     
Roger Lynch

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.

Career Highlights

Condé Nast, a global media company

Chief Executive Officer since April 2019

Pandora Media, Inc., a streaming music service

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)

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Age: 61

Director Since: 2006

Mattel Committee Memberships:

Audit Committee
Executive Committee
Finance Committee (Chair)

Other Current Public Directorships:

East West Bancorp, Inc.
     
Dominic Ng

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.

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

Certified Public Accountant (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)

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Age: 68

Director Since: 2018

Mattel Committee Memberships:

Compensation Committee
Governance and Social Responsibility Committee

Other Current Public Directorships:

Ares Management LLC
United Therapeutics Corp.
     
Dr. Judy Olian

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 leadership record in running large organizations, as well as her professional expertise in human resource management, top management teams, and management strategy. She also has extensive board experience in publicly traded and non-profit boards. Prior to her most recent roles, she serves as Dean of Penn State’s Smeal College of Business, and in various faculty and leadership roles at the University of Maryland. She was also a management consultant, and chairman of AACSB International, the premier accrediting and thought leadership organization for global business schools.

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 Corporation (2014 – 2018)
Board member, Business-Higher Education Forum
Member, CT Governor’s Workforce Commission
Advisory Board Member, Catalyst Inc. since 2011
Board member, AdvanceCT related to economic development, appointed by Governor of Connecticut
Chairman, Loeb Awards for Excellence in Business Journalism (2006-2018)
Member, International Advisory Board, Peking University School of Business (2007-2016)

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Board Composition and the Director Nomination Process

Director Nominees Skills, Attributes, and Experience

                                                     
Industry
Finance
Diversity
Brand and Marketing
International Operations
Sustainability
Human Capital Management
Senior Leadership

Identifying and Evaluating Director Nominees

The Board, acting through the Governance and Social Responsibility Committee, is responsible for identifying and evaluating candidates for membership on the Board. The Board’s Amended and Restated Guidelines on Corporate Governance (the “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.

Under the Guidelines on Corporate Governance and the charter of the Governance and Social Responsibility Committee, 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 any 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 works with a third-party, independent search firm to locate candidates who may meet the needs of the Board. 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.

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Our Director Nominations Policy 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 our Director Nominations 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.

Our 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;
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.

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. In addition, the Guidelines on Corporate Governance are reviewed periodically and may be changed by the Board only if, upon a determination by the independent directors in executive session, the independent directors determine that such change is in the best interests of the Company and its stockholders and recommend such change to be made to the full Board. 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 Amended and Restated Bylaws (the “Bylaws”) or applicable law. For additional information on stockholder recommendations, see our Bylaws and Director Nomination Policy, which are available on Mattel’s corporate website at http://corporate.mattel.com/about-us/relatedlinks.aspx.

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

Governance and Social Responsibility Committee
c/o Secretary, TWR 15-1
Mattel, Inc.
333 Continental Boulevard
El Segundo, CA 90245-5012

Stockholder Proxy Access Right

Our 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. Additional information on the deadlines to submit director nominations pursuant to the proxy access provisions of our Bylaws is set forth on page 125 under “Director Nominations Pursuant to Proxy Access Provisions.”

Board Structure

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 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.

The Board believes that this leadership structure, including our strong Independent Lead Director, best serves Mattel and its stockholders at this time by leveraging executive leadership experience while providing effective independent oversight. Our Independent Lead Director, elected annually by the independent directors of the Board, has specifically-enumerated powers and responsibilities, providing the same leadership, oversight, and benefits to the Company and Board that would be provided by an independent chairman.

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.”

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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.

Michael Dolan   |   Independent Lead Director
Director since 2004; Independent Lead Director since 2015
Chair of the Compensation Committee and Executive Committee; member of Governance and Social Responsibility Committee
Board experience at Mattel in multiple operating environments

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 powers and 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 2019, 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. The Board believes that Mr. Dolan’s extensive business experience across a variety of industries, unique insights in the areas of advertising and brand building, and prior service on several boards of directors make him well qualified to serve as Mattel’s Independent Lead Director.

Board Independence Determinations

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 2019 (except Mr. Kreiz and, prior to October 1, 2019, Mr. 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 CEO. Mr. Laursen ceased being independent as of October 8, 2018 when he became interim Executive Director, but was determined to be independent after his service as interim Executive Director ended on September 30, 2019. 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.

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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, Condé Nast 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.

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.

We believe our regular stockholder engagement is productive and provides an open exchange of ideas and perspectives for both Mattel and our stockholders. Feedback received from our stockholders during these engagements is regularly shared with the full Board, the Governance and Social Responsibility Committee, and the Compensation Committee, who consider this feedback when making decisions.

In the spring of 2019, our Independent Lead Director, Mr. Dolan and members of senior management had discussions with stockholders representing approximately 71% of our outstanding shares. Similarly, in the beginning of 2020, Mr. Dolan and members of senior management had discussions with stockholders representing approximately 63% of our outstanding shares. These discussions focused on our strategy, corporate governance matters, executive compensation, and long-term commitment to integrating sustainability into our business.

Board Meetings

During 2019, the Board held eight 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 ten directors at the time of our 2019 annual meeting of stockholders (“2019 Annual Meeting”) and eight directors attended the meeting.

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Board Committees

The Board has established six principal committees: the Audit Committee, the Governance and Social Responsibility Committee, the Compensation Committee, the Finance Committee, the Executive 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
    Finance     Executive     Equity Grant
Allocation

Non-Employee Directors

 

R. Todd Bradley

Adriana Cisneros

Michael Dolan+

Soren Laursen(1)

Ann Lewnes

Roger Lynch

Dominic Ng

Dr. Judy Olian

Vasant Prabhu(2)

Employee Director

Ynon Kreiz

= Chair
+ = Independent Lead Director
= Audit Committee Financial Expert
= Member
(1) Mr. Laursen was determined to be independent after his service as interim Executive Director ended on September 30, 2019.
(2) Mr. Prabhu is not standing for re-election at the 2020 Annual Meeting.

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The primary responsibilities, membership, and meeting information for the committees of the Board during 2019 are summarized below.

Audit Committee
Members in 2019: Meetings in 2019: 24
Vasant Prabhu (Chair)
R. Todd Bradley
Roger Lynch
Dominic Ng
The Board has determined that each member meets applicable SEC, Nasdaq, and Mattel independence and “financial sophistication” standards and qualifies as an “audit committee 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; directly responsible for the evaluation of the performance and independence of the independent registered public accounting firm, including consideration of the adequacy of quality controls and the provision of permitted non-audit services
Meet with the independent registered public accounting firm and management in connection with each annual audit to discuss the scope of the audit, the staffing 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
Discuss with management and the independent registered public accounting firm key reporting practices (including the use of non-GAAP measures) and new accounting standards
Review periodically with the Chief Legal Officer the implementation and effectiveness of Mattel’s compliance and ethics programs
Discuss periodically with the independent registered public accounting firm and the senior internal auditing officer the adequacy and effectiveness of Mattel’s accounting and financial controls, and consider any recommendations for improvement of such internal control procedures
Pre-approve audit services, internal-control-related services, and permitted non-audit services to be performed for Mattel by its independent registered public accounting firm

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Governance and Social Responsibility Committee
Members in 2019: Meetings in 2019: 6
Ann Lewnes (Chair)
Adriana Cisneros
Michael Dolan
Soren Laursen (member since October 2019)
Dr. Judy Olian
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
Lead the evaluation of the Board’s performance
Evaluate and make recommendations to the Board regarding the independence of the Board members
Recommend director nominees for each committee of the Board
Assist the Board with oversight and review of social responsibility matters such as sustainability, corporate citizenship, community involvement, diversity and equal opportunity matters, responsible supply chain standards, public policy matters, and environmental, health, and safety issues
Oversee and review with management risks relating to governance and social responsibility matters
Oversee the Company’s engagement with institutional stockholders and proxy advisory firms concerning governance and social responsibility matters
Provide oversight with regard to philanthropic activities
Work closely with the CEO and other members of Mattel’s management to ensure that Mattel is governed effectively and efficiently


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Compensation Committee
Members in 2019: Meetings in 2019: 8
Michael Dolan (Chair)
R. Todd Bradley
Dr. Judy Olian

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

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, plans, 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 2019, 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, target and actual annual LTIs, TDC, and all other compensation for our CEO, his direct reports, and other Executive Vice Presidents (“EVPs”) as compared to the market and compensation of their counterparts at our peer group companies;

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Our MIP and LTI designs, provisions, and practices; and
The compensation of the Board as compared to the board compensation at our peer group companies.
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 2019 Proxy Statement;
Providing executive compensation regulatory and legislative updates; and
Advising regarding institutional proxy advisers’ voting policies and market trends.

Finance Committee
Members in 2019: Meetings in 2019: 6
Dominic Ng (Chair)
Soren Laursen
Roger Lynch
Vasant Prabhu

Primary Responsibilities

Advise and make recommendations to the Board regarding allocation and deployment of available capital, including credit facilities and debt securities, capital expenditures, dividends to stockholders, stock repurchase programs, and hedging transactions
Oversee interactions with credit rating agencies
Advise and make recommendations to the Board regarding mergers, acquisitions, dispositions, and other strategic transactions
Oversee third-party financial risks

Other Board Committees

The Executive Committee did not hold any meetings in 2019. The members of the Executive Committee are Ms. Lewnes and Messrs. Dolan, Ng, and Prabhu. Mr. Dolan also chairs the Executive Committee. 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 who are not Section 16 officers.

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Risk Oversight

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.

We have assembled a cross-functional team of Mattel management, which includes our executive officers, responsible for continuously monitoring the impact of the coronavirus (COVID-19) pandemic on our business operations and implementing necessary measures to appropriately manage risk. Management has provided the Board with regular updates regarding developments related to the coronavirus (COVID-19) situation and has involved the Board in strategy decisions related to the impact of the coronavirus (COVID-19) on our business.

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 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 risks impacting the Company’s business and relating to the Company’s financial reporting and accounting. 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 Audit Committee annually reviews and discusses with Company management the steps management has taken to monitor and control these risks.

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

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

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

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Board Evaluations

The Board conducts an annual self-evaluation process to assess effectiveness at both the Board and Board committee levels. 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. 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.

Key Areas of Focus for
the Annual Evaluation
Board operations
Board accountability
Board committee performance


Improvements in Board
Effectiveness due to
Evaluations
Enhanced agenda item selection
Better discussion formats
Greater interaction with Mattel’s CEO and management team
Process
1
Questionnaires
Directors provide feedback regarding board composition and structure, Board interaction with management, meetings and materials, effectiveness of the Board, future agenda items, and director education opportunities.
 
2
Review by Governance and Social Responsibility Committee
The Governance and Social Responsibility Committee reviews the results of the evaluation.

3
Board Review
Results are presented to the full Board.

4
Incorporation of Feedback
Based on the evaluation results, changes in practices or procedures are considered and implemented, as appropriate.

Director Succession Planning

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 director candidates. The Board has worked diligently to ensure the right balance between long-term, institutional knowledge, and fresh perspectives on the Board. The Board believes that the current mix of director tenures provides Mattel with an optimal balance of knowledge, experience, and capability. 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, attributes, and experience to ensure the right balance is achieved for effective, independent Board oversight.

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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.

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.

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.

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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.

Director Compensation

Independent Consultant Review

On an annual basis, the Compensation Committee reviews, with the assistance of FW Cook, our non-employee director compensation program. In November 2019, 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 was slightly less than the median of our peer group (as last revised in November 2018) and that the compensation mix of cash and equity aligns with peer practice. As a result, FW Cook recommended, and our Compensation Committee determined, that there would be no change to our non-employee director compensation program, under which no increases have been made since May 2016. In addition, FW Cook indicated that our non-employee director compensation program structure is aligned with best practices, as set forth below.

Elements of non-employee director compensation program structure:

Retainer-only cash compensation (i.e., no meeting fees);
Annual equity grants delivered as full value awards based on a fixed-value formula;
Immediate vesting that avoids entrenchment;
Robust stock ownership guidelines;
Annual limit on equity and cash compensation in the stockholder approved equity plan; and
No major benefits or perquisites other than modest charitable gift matching

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Cash Retainers

For 2019, non-employee directors received:

Annual cash retainer       $ 100,000
Additional cash retainer for the Independent Lead Director of the Board $ 30,000
Additional cash retainer for the Chair of the Audit or Compensation Committee $ 20,000
Additional cash retainer for the Chair of the Executive, Finance, or Governance and
Social Responsibility Committee
$ 15,000
Additional cash retainer for Audit Committee members, including the 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 Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors (“Director DCP”), as described below under “Narrative Disclosure to Director Compensation Table - Director DCP.” Each of our non-employee directors who were elected at our 2019 Annual Meeting on May 16, 2019, received his or her annual cash retainer shortly thereafter. For non-employee directors commencing service as a non-employee director other than at our annual meeting of stockholders, annual retainers are prorated from the date of commencement of service until the next annual meeting of stockholders. Accordingly, Mr. Laursen, who did not qualify as a non-employee director due to his service to the Company as interim Executive Director from October 8, 2018 through September 30, 2019, received a pro-rated annual retainer in October 2019.

Equity Compensation

For 2019, non-employee directors received:

Annual equity grant of deferred RSUs (intended fixed grant value)       $ 140,000

During 2019, non-employee directors received annual equity grants of deferred vested RSUs, with an intended fixed grant value of $140,000. Each of our non-employee directors elected at our 2019 Annual Meeting received deferred vested RSUs on May 16, 2019 with a value of $140,000. For non-employee directors commencing service on the Board other than at our annual meeting of stockholders, annual equity grants are prorated for service until the next annual meeting of stockholders. Accordingly, Mr. Laursen received deferred vested RSUs with a value of $81,667 on October 1, 2019, upon the conclusion of his service to the Company as interim Executive Director. 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 2019, other than Mr. Kreiz, 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.

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Name(1)       Fees Earned
or Paid in Cash(2)
($)
      Stock
Awards(3)
($)
      All Other
Compensation(4)
($)
      Total
($)
R. Todd Bradley 110,000 139,996 0 249,996
Adriana Cisneros 100,000 139,996 7,500 247,496
Michael Dolan 165,000 139,996 15,000 319,996
Soren Laursen 58,333 81,667 238,486 378,486
Ann Lewnes 115,000 139,996 15,000 269,996
Roger Lynch 110,000 139,996 15,000 264,996
Dominic Ng 125,000 139,996 15,000 279,996
Dr. Judy Olian 100,000 139,996 15,000 254,996
Vasant Prabhu 130,000 139,996 0 269,996
(1) During 2019, Mr. Kreiz, as CEO and Chairman of the Board, did not receive any additional compensation for serving as a director other than the amounts attributed to him under the Board of Directors Recommended Grants and Matching Recommended Grants Program described below. These amounts and all of his compensation for his services to Mattel are shown in the “Summary Compensation Table.” Mr. Prabhu is not standing for re-election at the 2020 Annual Meeting.
(2) Shortly after May 16, 2019, each of our non-employee directors elected at our 2019 Annual Meeting (other than Mr. Laursen) received an annual cash retainer in the amount shown. For Messrs. Lynch and Ng, the amount shown was deferred under the Director DCP. In October 2019, Mr. Laursen received an annual cash retainer in the amount shown, representing the pro rata portion of the non-employee annual cash retainer resulting from the conclusion of his service to the Company as interim Executive Director and his transition back to a non-employee director on October 1, 2019.
(3) On May 16, 2019, each of our non-employee directors elected at our 2019 Annual Meeting (other than Mr. Laursen), received an annual equity grant of 12,567 RSUs under the Amended 2010 Plan. On October 1, 2019 Mr. Laursen received a grant of 7,208 RSUs, representing the pro rata portion of the non-employee director annual equity grant resulting from the conclusion of his service to the Company as interim Executive Director and his transition back to a non-employee director on October 1, 2019. Amounts 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 of $11.14 on May 16, 2019, and $11.33 on October 1, 2019.
The table below shows the aggregate number of stock awards outstanding for each of our directors (other than Mr. Kreiz) as of December 31, 2019. 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, 2019.
      Name       Aggregate Stock Awards
Outstanding as of
December 31, 2019
R. Todd Bradley 21,729
Adriana Cisneros 19,914
Michael Dolan 28,050
Soren Laursen 16,370
Ann Lewnes 28,050
Roger Lynch 19,914
Dominic Ng 62,471
Dr. Judy Olian 19,085
Vasant Prabhu 28,050
(4) The “All Other Compensation” column includes $230,986 paid to Mr. Laursen for his service in 2019 to the Company as interim Executive Director to help accelerate key aspects of our growth strategy in Europe. Mr. Laursen was appointed to serve the Company as interim Executive Director effective October 8, 2018, and he transitioned back to a non-employee director on October 1, 2019. Mr. Laursen’s pay for service as interim Executive Director includes salary that is converted from Danish Krone (“DKK”) using the exchange rate of 0.14991 USD to 1 DKK as of December 31, 2019. All other amounts, including amounts included for Mr. Laursen other than his pay as interim Executive Director, reflect the gifts made by the Mattel Children’s Foundation pursuant to the Board of Directors Recommended Grants and Matching Recommended Grants Program, as described below, for the applicable director.

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Narrative Disclosure to Director Compensation Table

Laursen Interim Executive Director Compensation

To help accelerate key aspects of our growth strategy in Europe, Mr. Laursen was appointed to serve the Company as interim Executive Director effective October 8, 2018, and he transitioned back to a non-employee director on October 1, 2019. For his employment as interim Executive Director at 50% of full-time employment, Mr. Laursen received 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, which vested and was delivered in full in October 2019. During his service to the Company as interim Executive Director, Mr. Laursen was not eligible to participate in our MIP or any employee compensation or benefit programs.

While serving as interim Executive Director, Mr. Laursen continued to serve as a director but did not participate in our non-employee director compensation program. In addition, Mr. Laursen did not serve on our Governance and Social Responsibility Committee while serving as interim Executive Director.

Recommended and Matching Grants Program

Subject to certain limitations, each director may recommend that the Mattel Children’s Foundation (“Foundation”) make grants 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 per year for any personal gifts made by the director, subject to certain limitations. These programs may not be used to satisfy any pre-existing commitments of the director or any member of the director’s family. Under SEC rules, these amounts are reflected in the “All Other Compensation” column in the table above.

Director DCP

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

Distribution of amounts deferred under the Director DCP may be paid in a lump sum or in ten annual installments, with payment made or commencing upon the later of a director ceasing service with the Board or the director achieving a specified age not to exceed 72. As of December 31, 2019, the following directors had the following aggregate number of Mattel stock equivalents in the Director DCP, including deferred vested RSUs: Mr. Lynch: 12,567 and Mr. Ng: 120,179.

Expense Reimbursement Policy

Mattel reimburses directors for expenses incurred while traveling for Board business and permits directors to use Company-selected aircraft when traveling for 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 for 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.

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. As of May 2019, the month of the annual compliance review, each of the Board members who had served on the Board for five years met the target minimum stock ownership level.

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Proposal
2

      Ratification of Selection of Independent Registered Public Accounting Firm    

The Board recommends a vote FOR the ratification of the selection of PricewaterhouseCoopers LLP as Mattel’s 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, 2020. Representatives of PricewaterhouseCoopers LLP are expected to be present at the 2020 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.

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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 principal internal auditor of Mattel, and PwC, the audited financial statements of Mattel as of and for the year ended December 31, 2019 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, 2019.

PwC has expressed its opinion that:

Mattel’s consolidated financial statements present fairly, in all material respects, its financial position as of December 31, 2019 and 2018, and its results of operations and cash flows for each of the three years in the period ended December 31, 2019 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, 2019, 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 principal internal auditor, and PwC. Each of the Chief Financial Officer, the Chief Legal Officer, the principal internal auditor, and PwC has unrestricted access to the Audit Committee. Additionally, as previously disclosed, the Audit Committee, together with independent counsel from O’Melveny & Myers LLP and forensic accountants from FTI Consulting, investigated the allegations contained in an anonymous whistleblower letter that Mattel was made aware of on August 6, 2019, which resulted in a restatement of certain of Mattel’s previously issued financial statements.

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Audit Matters

The Audit Committee has discussed with PwC the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”). In addition, the Audit Committee has received the written disclosures and the letter from PwC required by the PCAOB regarding the firm’s independence from Mattel, and the Audit Committee has also discussed with PwC the firm’s independence from Mattel.

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

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

The integrity of those persons within Mattel and of the professionals and experts (such as PwC) from which the Audit Committee receives information;
The accuracy of the financial and other information provided to the Audit Committee by such persons, professionals, or experts absent actual knowledge to the contrary; and
Representations made by management or PwC as to any information technology services of the type described in Rule 2-01(c)(4)(ii) of Regulation S-X and other non-audit services provided by PwC to Mattel.

Based on the reports and discussions described above, the Audit Committee recommended to the Board that the audited financial statements be included in Mattel’s Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2019, for filing with the SEC.

AUDIT COMMITTEE

Vasant Prabhu (Chair)
R. Todd Bradley
Roger Lynch
Dominic Ng
March 24, 2020

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Fees Incurred for Services by PricewaterhouseCoopers LLP

The following table summarizes the fees accrued by Mattel for audit and non-audit services provided by PwC for fiscal years 2019 and 2018:

Fees       2019
($)
      2018
($)
Audit fees(1) 8,305,000 8,674,000 (4) 
Audit-related fees(2) 197,000 193,000
Tax fees(3) 2,368,000 1,227,000
Total 10,870,000 10,094,000 (4) 
(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 and compliance audits in 2019 and 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 $685,000 for 2019 and $612,000 for 2018, and (ii) other tax advice, tax consultation, and tax planning services of $1,683,000 for 2019 and $615,000 for 2018.
(4) Audit fees for 2018 were adjusted for additional out-of-scope audit fees for 2018 services, which were paid subsequent to the filing of the Company’s 2019 proxy statement.

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 CFO and Corporate Controller or Senior Vice President, Tax (for tax services), and must include a joint statement as to whether, in their view, the request or application is consistent with the rules of the SEC and PCAOB 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 2019 were pre-approved in accordance with the Audit Committee’s Pre-Approval Policy.

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Proposal
3

      Advisory Vote to Approve Named Executive Officer Compensation (“Say-On-Pay”)    

The Board recommends a vote FOR approval of the executive compensation of Mattel’s named executive officers.

 

We are asking our stockholders to approve, on a non-binding, advisory basis, the compensation of our NEOs as described in the “Compensation Discussion and Analysis” and set forth in the executive compensation tables on pages 51 through 99.

The Board believes that the information provided in the “Compensation Discussion and Analysis” and the executive compensation tables demonstrates that our executive compensation programs are designed appropriately, emphasize pay-for-performance, and are working to ensure that management’s interests are aligned with our stockholders’ interests to support long-term stockholder value creation.

The Board has determined to hold a “Say-on-Pay” advisory vote every year. In accordance with this determination and Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking our stockholders to approve the following advisory resolution at the 2020 Annual Meeting:

“RESOLVED, that the stockholders of Mattel approve, on an advisory basis, the compensation of Mattel’s named executive officers, as disclosed in the Compensation Discussion and Analysis, compensation tables, and narrative discussion of this Proxy Statement.”

The Say-on-Pay vote is advisory and, therefore, not binding on Mattel, the Compensation Committee, or the Board. Although non-binding, the Compensation Committee and the Board will review and consider the voting results when making future decisions regarding our executive compensation programs.

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Executive Officers

The current executive officers of Mattel are as follows:

Name       Age       Position       Executive
Officer Since
Ynon Kreiz(1) 55 Chairman of the Board and Chief Executive Officer 2018
Richard Dickson 52 President and Chief Operating Officer 2014
Joseph Euteneuer 64 Chief Financial Officer 2017
Roberto Isaias 52 Executive Vice President and Chief Supply Chain Officer 2019
Robert Normile 60 Executive Vice President, Chief Legal Officer, and Secretary 1999
Amanda Thompson 44 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.(3) 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 of 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. Isaias’ full legal name is Roberto J. Isaias Zanatta.


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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 Mr. Kreiz is provided in the “Proposal 1 – Election of Directors” section of this Proxy Statement.
(2) In connection with his departure from The Jones Group, Inc., 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 alleged 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 did not allege any actions by Mr. Dickson with respect to such payments or records. In October 2019, the case against Mr. Dickson was dismissed and this matter is closed.
(3) On October 29, 2019, we announced that Mr. Euteneuer would leave Mattel after a transition period of up to six months and that we are conducting a search for our next CFO. On April 6, 2020, we announced that, given the unprecedented events surrounding the coronavirus (COVID-19) and the disruption to the global economy, Mr. Euteneuer’s tenure had been extended. Due to the uncertainty of the duration of the disruption, an end date has not yet been established.

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Compensation Discussion and Analysis

Executive Summary

2019 Strategic Overview and Business Highlights

We remain focused on the execution of our strategy to restore profitability and regain topline growth in the short-to-mid term, and capturing the full value of our IP in the mid-to-long term.

Mattel’s 2019 results reflected significant improvement across the business and highlight demonstrable progress on our journey to transform Mattel into an IP-driven, high-performing toy company. The last year was an important inflection point in our transformation. We stabilized our revenues after five consecutive years of decline, continued to significantly improve profitability, and achieved positive Free Cash Flow for the first time in three years. We are encouraged by the progress we made in 2019 and will look to build on this progress moving forward.

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

In the short-to-mid term, our priorities are to continue to restore profitability by reshaping operations 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.

                                                                                                                     

Business Highlights


1Significant progress towards restoring profitability
    

In the last two years, we have succeeded in making significant progress towards the first priority of our strategy, restoring profitability. This success has been primarily driven by our Structural Simplification program, which was designed to streamline the organization, rationalize our cost base, and improve efficiency and performance across every part of our enterprise. This two-year program had a financial target of $650 million of run-rate savings exiting 2019. We achieved $875 million of run-rate savings, exceeding the original target by $225 million, or 35%. During the two-year period, we reduced our non-manufacturing workforce by 29%, cut capital expenditures by more than 60%, and made strategic investments of more than $150 million to position the Company for future growth.


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To further support our short-to-mid term strategy, we launched our Capital Light program in 2019. This program is a multi-year, comprehensive effort to optimize our manufacturing footprint, increase the productivity of our plant infrastructure, and drive higher performance across the entire supply chain. To achieve these goals, we are rebalancing our global third-party manufacturing network and selling, closing, or consolidating some of our owned and operated plants, while retaining those which deliver competitive advantages in cost, quality, and service. As part of this program, we have closed three owned plants in Mexico, China, and Indonesia, and recently announced the closure of our manufacturing operations in Canada by the end of 2020.

Structural Simplification and Capital Light drove significant improvements in key profitability metrics across our business. Year-over-year financial improvements included a 420-basis point increase in Gross Margin to 44.0%, a $274 million increase in Operating Income to $39 million, and a $208 million increase in Operating Cash Flow to $181 million.


Run-Rate
Cost Savings
Gross Margin Operating Income Operating Cash Flow
              


2Meaningful progress towards regaining topline growth
    

In addition to our significant progress towards restoring profitability in 2019, we also made meaningful progress towards the second priority of our short-to-mid term strategy – regaining topline growth, by stabilizing revenues after five previous years of decline. In 2019:

Net Sales were $4,505 million, flat as reported, including the negative foreign exchange impact of $75 million, and up 1% in constant currency*, versus prior year.
Gross Sales* were $5,065 million, flat as reported, including the negative foreign exchange impact of $92 million, and up 2% in constant currency, versus prior year.
Gross Sales grew in every geographical region in constant currency, excluding American Girl, and in five of the six categories in which we operate.


3On-track to capture the full value of our IP in the mid-to-long term
    

In the mid-to-long term, we remain focused on capturing the full value of our IP through franchise management and the development of our online retail and e-commerce capabilities. Mattel owns one of the strongest portfolios of children and family entertainment franchises in the world, with the potential to drive additional value through the monetization of our brands and franchises in highly-accretive, large verticals that are directly adjacent to the toy industry. These verticals include film, television, digital gaming, live events, music, consumer products, and merchandise.

In 2019, Mattel Films announced five theatrical films, for a total of eight movies in development in partnership with major studios and highly regarded talent.


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Mattel TV ended the year with six series and four specials in production, and more than 30 projects in development.

Additionally, our Franchise Management team launched Mattel’s first self-published Hot Wheels mobile game as well as the UNO mobile game through Mattel163, our mobile gaming joint venture with NetEase.

* Net Sales in constant currency, Gross Sales, and Gross Sales in constant currency are non-GAAP measures under the SEC’s rules. Please see Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations on page 127.

2019 Named Executive Officers

Our fiscal year 2019 Named Executive Officers, or NEOs, were:

Ynon Kreiz
Chief Executive Officer
  Richard Dickson
President and Chief Operating Officer
  Joseph Euteneuer
Chief Financial Officer
  Roberto Isaias
Executive Vice President and Chief Supply Chain Officer
  Robert Normile
Executive Vice President, Chief Legal Officer, and Secretary

Continued evolution of our executive compensation programs reflects our commitment to pay-for-performance and compensation governance best practices. In connection with a greater emphasis on at-risk performance-based compensation and long-term stockholder value creation, the Compensation Committee made two important changes to our CEO’s annual long-term incentive (“LTI”) mix:

Eliminated time-based restricted stock units (“RSUs”), which comprised 25% of the LTI mix in 2018; and
Increased performance-based restricted stock units (“Performance Units”) to 75%, which comprised 50% of the LTI mix in 2018.

This shift increased the overall percentage of our CEO’s annual target total direct compensation (TDC)* delivered in the form of performance-based equity. Our other NEOs continued to receive an annual LTI mix of 50% Performance Units, 25% stock options and 25% RSUs. The chart below shows the 2019 target TDC mix for our CEO, Mr. Kreiz, and the average 2019 target TDC mix for our other NEOs:

A Significant Portion of 2019 Target Total Direct Compensation is At Risk
    
    

CEO

    

Other NEOs

    
    

* TDC is the sum of 2019 year-end annual base salary, MIP target incentive opportunity, and Annual LTI Value (i.e., grant value of Performance Units granted under the 2019-2021 Long-Term Incentive Program (“LTIP”), stock options, and RSUs).

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Key Elements of our 2019 Executive Compensation Programs

Compensation       Objective       Structure and Performance Metric
Base Salary Provide fixed cash compensation representative of individual role, skill set, market data, and internal pay equity. Annual base salary effective as of January 1 of each year.
Annual Cash Incentive, or MIP Incentivize and motivate senior executives to achieve our short-term strategic and financial objectives that we believe will drive long-term stockholder value.

The 2019 MIP design was as follows:

Financial measures and weightings were:
50% Adjusted EBITDA;
20% Adjusted Net Sales;
15% Adjusted Gross Margin; and
15% Adjusted Inventory & Accounts Receivable.
Earn 35% for threshold performance to 200% for maximum performance under each financial measure before weightings. No amounts earned for below threshold performance.
For each NEO, an Individual Performance Multiplier of 0% to 125% was applied to the amount earned under the financial measures, based on the NEO’s individual performance assessment, subject to a maximum payout of 200% of MIP target opportunity.
MIP target opportunity was 150% of base salary for our CEO, 100% of base salary for our COO and CFO, and 65% of base salary for our other NEOs.

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Compensation       Objective       Structure and Performance Metric
Equity Long-Term Incentives
Performance Units
(50% of Annual LTI Value, 75% for CEO)
Incentivize and motivate senior executives to achieve key long-term strategic financial objectives and stock price appreciation. Performance Units emphasize long-term cash generation necessary for our successful transformation and improvement of our relative TSR.

Three-year Performance Units are granted under a new LTIP cycle each year. Payouts are subject to a maximum of 200% of target Performance Units granted, and no amounts can be earned for below threshold financial performance.

The 2019-2021 LTIP and the 2018-2020 LTIP design are as follows:

Earn 37% for threshold performance to 150% for maximum performance based on three-year cumulative Adjusted Free Cash Flow goal established at commencement of three-year performance period.
Relative three-year TSR to S&P 500 multiplier of 67% to 133% (of financial earnout).

The 2017-2019 LTIP design was as follows:

Annual Adjusted EPS goals set on an annual basis with earnouts averaged over the three-year performance period.
Relative three-year TSR to S&P 500 modifier of +/- 50 percentage points added or subtracted from financial earnout percentage.
Stock Options
(25% of Annual LTI Value)
Align senior 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; 0% for CEO)
Encourage senior executive stock ownership.
Vest in approximately equal annual installments over three years.

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2019 Pay Outcomes Reflected Our Pay-For-Performance Philosophy

The compensation decisions and outcomes in 2019 reflect our pay-for-performance philosophy, rewarding our improved operating profitability and revenue stabilization, offset by the impact of our stock price performance.

Base salaries for all continuing NEOs were unchanged.

Salaries for all continuing NEOs remained unchanged for 2019. Mr. Isaias’ base salary was increased in connection with his promotion in February 2019 to EVP and Chief Supply Chain Officer.

Above target 2019 payouts under our MIP reflect significant progress in the execution of our strategy, resulting in increased profitability and the successful stabilization of revenues.

Our 2019 MIP financial measures focused on driving profitability, stabilizing revenues, and improving our working capital position. The 2019 MIP was structured as follows:

Financial measures and weightings:

For each financial measure, 35% of the target could be earned for threshold performance, with up to 200% for maximum performance, before weightings. No amounts could be earned for below threshold performance. Additionally, no amounts could be earned, and no payouts could be made, unless we achieved the threshold level of Adjusted EBITDA performance, calculated to include 2019 incentive compensation expense, which was accomplished.
For each NEO, the amount earned under the financial measures was then multiplied by an Individual Performance Multiplier of 0% to 125%, based on the individual’s performance rating of progress against individual goals that tied to the execution of our short-to-mid term strategy.
Payouts were capped at 200% of MIP target opportunity.

In 2019, we made significant progress towards restoring profitability, with Adjusted EBITDA increasing 77% from $245 million to $434 million versus prior year, and Adjusted Gross Margin improving 400 basis points from 40.4% to 44.4% versus prior year. These results were primarily driven by our Structural Simplification program, which resulted in run-rate savings of $875 million exiting 2019, exceeding our target of $650 million by $225 million, or 35%. We also succeeded in stabilizing our revenues, achieving a 1% increase in Net Sales (in constant currency) versus prior year and after five previous years of decline. We also improved our working capital position, with Adjusted Inventory and Accounts Receivable down 7.5% from $1,564 million to $1,446 million versus prior year.

The 2019 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. The adjustments made under the 2019 MIP are discussed on page 66 and the definition of each measure is provided on page 127.

Our 2019 corporate financial results yielded an earnout of 175.6% of target MIP opportunity, based on the following pre-established threshold, target, and maximum performance goals and weightings, compared to actual Company performance:

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2019 MIP Financial Measures and Earnout Results

Financial Measure*      Weighting      Threshold
(35% earned)
     Target
(100% earned)
     Max
(200% earned)
     % Earned
before
weighting
     % Earned
after
weighting
 

Adjusted EBITDA 50% 200% 100%
 
Adjusted Net Sales 20% 106.4% 21.3%
 
Adjusted Gross
Margin
15% 200% 30%
 
Adjusted Inventory
& Accounts
Receivable
15% 162% 24.3%
TOTAL EARNED 175.6%

$ in millions. Linear interpolation from threshold to target performance and from target to maximum performance was applied for each measure. No amount was earned under a financial measure for below threshold performance. No amounts could be earned, and no payouts could be made, unless we achieved the threshold level of Adjusted EBITDA performance, calculated to include 2019 incentive compensation expense, which was accomplished.

* Certain financial measured discussed above are non-GAAP measures under the SEC’s rules. Please see Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations on page 127. All of the performance measures were adjusted in accordance with the MIP parameters, which were approved by the Compensation Committee. Adjustments are intended to ensure that events outside of the control of management do not unduly influence the achievement of the performance measures. The adjustments under the MIP are described on page 66 and the definition of each measure is provided on page 127.

Due to Mr. Isaias’ promotion in February 2019 to EVP and Chief Supply Chain Officer, his 2019 MIP earnout was 176.8%, based 13.2% on his role as Managing Director of the Latin America region (based 50% on Latin America region performance earnout of 193.3% and 50% based on the above Company performance earnout) and 86.8% on the above Company performance earnout.

For our NEOs, the earnout under the MIP for Company financial performance (175.6%, and 176.8% for Mr. Isaias) was then adjusted based on our CEO’s assessment of each executive’s progress, and the Compensation Committee’s assessment of our CEO’s progress, against individual goals that tied to the execution of our short-to-mid term strategy. This performance rating acted as a multiplier of 0% to 125% of the amount earned for financial performance, 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

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The following table summarizes the results under our 2019 MIP.

Name       Financial
Performance Earnout
     Individual
Performance Multiplier
     Final % of MIP
Opportunity Earned
     Incentive
Payout
Ynon Kreiz 175.6% 110% 193.2% $ 4,346,100
Richard Dickson 175.6% 110% 193.2% $ 1,931,600
Joseph Euteneuer 175.6% 100% 175.6% $ 1,580,400
Roberto Isaias 176.8% 125% 200.0% $ 636,800
Robert Normile 175.6% 100% 175.6% $ 684,840
Equity LTI earnouts and year-end valuations of outstanding awards reflect improved financial performance offset by historical stock price underperformance.

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. Despite strong financial and operational performance for the year, based on a year-end stock price of $13.55:

The 2017-2019 LTIP earnout and resulting payout was 50% of target (plus dividend equivalent shares), which was the first payout under any of our LTIP cycles in six years;
All NEOs’ outstanding stock options were underwater; and
Our CEO’s new-hire performance-based stock option granted in April 2018, which vests at the end of a three-year performance period ending on April 26, 2021 conditioned upon achievement of relative TSR over the performance period that is ≥ 65th percentile of companies in the S&P 500, would not be earned based upon relative TSR performance through December 31, 2019.

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Compensation Governance Best Practices

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

 
What We Do
Clawback Policy – Our Clawback Policy that is applicable to all 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 by 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.


 
What We Do Not Do                  
No Excise Tax Gross-Ups – We do not provide any gross-ups of excise taxes on severance or other payments in connection with a change of control.
No Poor Pay Practice of Tax Gross-Ups on Perquisites and Benefits – We do not provide tax gross-up payments to our senior executives other than in limited circumstances for business-related relocations (and related international tax compliance) that are generally available to other employees.
No Hedging or Pledging Permitted – Our policies as implemented do not permit our Board members, officers, or employees to (i) engage in hedging, monetization, or speculative transactions in Mattel common stock (including zero-cost collars, forward sale contracts, short sales, transactions in publicly-traded options, or other derivative securities), or (ii) hold Mattel shares in a margin account, pledge Mattel shares, or use Mattel shares owned as collateral for loans.

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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 senior executives with the financial interests of our stockholders;
Attracting and retaining the best talent; and
Upholding compensation governance best practices.

The Compensation Committee has designed our executive compensation programs so that a significant percentage of annual compensation is performance-based 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.

As part of its annual compensation review process, the Compensation Committee carefully considers both the feedback received from stockholders on our executive compensation programs through our stockholder engagement program and the results of our annual Say-on-Pay vote. In 2019, our Say-on-Pay proposal received the support of over 87% of the votes cast, which reflected a significant increase over the prior year. Based on our engagement with stockholders, we believe the increased support was due primarily to the meaningful changes made to our executive compensation programs in response to the stockholder feedback in 2018. Those changes reflect our commitment to our pay-for-performance philosophy and compensation governance best practices.

How Compensation is Determined

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 plans, 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 2018 and November 2019 in order to take into account the updated comparative data that was then available from SEC filings. See “Corporate Governance at Mattel – Board Structure – Board Committees – Compensation Committee” section of this Proxy Statement for a detailed discussion of the services provided by FW Cook in 2019.

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 target and actual Annual LTI Values. Our CEO also provides an assessment of each of his direct reports’ performance against their individual goals and his performance rating recommendation. Our CEO’s recommendations are one of the factors considered by the Compensation Committee in making its compensation decisions. 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 Section 16 officers.

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Reviews and Process

Market Competitiveness and Peer Group Review

The Compensation Committee annually evaluates the overall competitiveness of our senior executives’ annual TDC, comprised of annual base salary, target annual incentive opportunity, Annual LTI Value, as well as the composition of our benchmarking peer group. The Compensation Committee remains focused on ensuring our senior executives’ annual TDC continues to closely align with our strategy and strategic priorities, and incentivizes actions that drive long-term stockholder value.

Every year, FW Cook evaluates our senior executives’ annual target TDC as compared to the annual target TDCs of similarly-situated senior executives in our peer group, based on information from their most recent SEC filings and, if applicable, custom selections of certain appropriate market surveys. FW Cook’s report includes the base salaries, target annual cash incentives, bonus leverage, LTI grant values, and target TDC at our peer group companies and in the custom surveys, where available. In comparison to the CEOs of our peer group companies, Mr. Kreiz’s 2019 target TDC of $13.3 million ($1.5 million base salary, $2.25 million target MIP opportunity, and $9.55 million Annual LTI Value) was set approximately midway between the median and 75th percentile, primarily reflecting the compensation that was required to attract Mr. Kreiz in April 2018. His 2019 base salary and target MIP opportunity remained unchanged from 2018. His 2019 Annual LTI value increased 15.8% from his 2018 Annual LTI Value, based on the Compensation Committee’s assessment of his strong performance and leadership through the Company’s transformation, with demonstrated successful results. To further emphasize pay-for-performance alignment, the Committee also determined to eliminate RSUs from Mr. Kreiz’s LTI mix, resulting in a mix that was all performance-based and at-risk. His 2019 annual equity grant was delivered 75% in Performance Units (increased from 50% in 2018) and 25% in stock options to emphasize long-term stockholder value creation. The Compensation Committee believes that eliminating RSUs and increasing the amount of Performance Units is more closely aligned with our peer group’s practices and provides greater alignment with stockholder interests. Accordingly, while Mr. Kreiz’s target TDC value has increased, a higher percentage of his compensation is performance-based and at risk, which provides incentive to create long-term stockholder value by attaining the three-year operating goal and relative TSR performance established for the 2019-2021 LTIP. On February 4, 2020, the Compensation Committee determined to hold Mr. Kreiz’s 2020 target TDC unchanged from 2019.

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. Our peer group is used to evaluate the market competitiveness of our compensation but is not used for financial 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.

Peer Group Revised in 2018 to Address Stockholder Feedback

In response to 2018 stockholder feedback on the size of our benchmarking peers, in November 2018, the Compensation Committee, with the guidance of FW Cook, revised our peer group to position us closer to median on key size metrics, eliminate over-representation of certain industries, and recognize the strategic focus on branded content and home entertainment.

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The revised peer group approved in November 2018, which informed 2019 target TDC decisions, was re-designed to include:

Companies generally between approximately 0.4x to 2.5x Mattel’s trailing four quarter revenues and 0.25x to 4.0x the then-current and 2-year average market capitalization;
A reduction of companies in the Apparel & Accessories industry and an increase of companies in the Home Entertainment/Media industry and branded content;
The addition of four companies, three of which were smaller than Mattel in terms of revenue and market capitalization: Lions Gate Entertainment, Spin Master, Tupperware Brands, and Viacom; and
The removal of five companies, three of which had market capitalizations greater than 5x Mattel: Estee Lauder Companies, Inc., Gap, General Mills, L Brands, and V.F. Corporation.

Following our peer group revision, Mattel ranked between the 25th percentile and median in revenue and at the 25th percentile in market capitalization.

Our peer group is comprised of the following 22 companies:

Executive Compensation Benchmarking Peer Group to Inform 2019 Target TDC Decisions

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.
Edgewell Personal Care Company 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 the Compensation Committee and FW Cook, comprehensive tally sheets illustrating the total compensation for the most recent two years of our CEO and his direct reports (including NEOs). 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 senior executives pursuant to the Executive Severance Plans.

Elements of Compensation

Base Salary

The base salary component of our executive compensation programs provides fixed cash compensation representative of individual role, skill set, market data, and internal pay equity.

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

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2019 Pay Decisions

The 2019 base salary for Mr. Kreiz was established based on a review of competitive market practices and remained unchanged from the salary that was established in April 2018.

With respect to our other NEOs, in February 2019, in light of market data reviewed in November 2018, the Compensation Committee determined that none of our NEOs would receive a salary increase for 2019, with the exception of Mr. Isaias, who received a salary increase of $87,207 (converted from Mexican Peso (“MXN”) using the exchange rate of .05302 USD to 1 MXN as of December 31, 2019), or 24.2%, in connection with his promotion in February 2019 to EVP and Chief Supply Chain Officer.

Annual Cash Incentive

Our annual cash incentive plan, or MIP, provides our NEOs and currently approximately 8,200 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 stockholder value. 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 senior executives to achieve our short-term strategic and financial objectives that we believe will drive long-term stockholder value;
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.

2019 MIP Payout Formula

Target
Opportunity $
X Financial
Performance
Earnout %
X Individual
Performance
Multiplier %
= MIP Payout $*
* Capped at 200% of MIP target opportunity and subject to achievement of profitability-based funding requirement set at 10% of target Adjusted EBITDA.

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2019 MIP Performance Metrics & Weightings

To align with our strategy of restoring profitability and regaining topline growth by stabilizing revenues, the Compensation Committee approved an annual cash incentive design under the MIP with the following performance measures and weightings:

Foundational Measures Weighting Why This Measure Was Chosen

Adjusted EBITDA

           

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization, excluding Severance, Restructuring, and Equity Compensation) was selected as the primary financial measure because it is directly linked to our strategy of restoring profitability.

Adjusted Net Sales

Adjusted Net Sales was selected as the other foundational measure because it is directly linked to our strategy of regaining topline growth by stabilizing revenues.

Key Enabler Measures

Adjusted Gross Margin

Adjusted Gross Margin was selected as a key enabler measure to provide a more balanced approach to profitable growth, and to align with our Structural Simplification cost savings program.

Adjusted Inventory &
Accounts Receivable

Adjusted Inventory and Accounts Receivable (key levers of working capital), was selected as a key enabler measure to provide a more balanced approach to profitable growth and disciplined cash management. Prior to 2019, this measure was referred to as Working Capital.

The amount that could be earned under each financial measure ranged from 35% of target for threshold performance to 100% for target performance to 200% of target for maximum performance. Linear interpolation from threshold to target performance and from target to maximum performance was applied for each measure. No amount could be earned under any financial measure for below threshold performance.

In order to differentiate individual performance and to encourage accountability, the Compensation Committee set individual goals for our CEO and his direct reports (including NEOs) that tied to the execution of our short-to-mid term strategy, conducted a performance assessment of each NEO’s progress against these goals, and applied an Individual Performance Multiplier with a range of 0% to 125% to determine the final amount earned by each NEO under the MIP. In no event, however, could a NEO’s payout amount exceed 200% of target MIP opportunity.

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The 2019 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 2019 MIP was 10% of target Adjusted EBITDA, or $358 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 the Company’s actual financial performance compared to the financial measure targets, as well as individual performance assessments.

2019 Target MIP Opportunity

The following table shows the 2019 target MIP opportunities for our NEOs, expressed as a percentage of base salary. There were no changes to 2019 target MIP opportunities for NEOs continuing in the same role. The target MIP opportunity for Mr. Isaias increased from 55% to 65% in 2019 as a result of his promotion in February 2019 to EVP and Chief Supply Chain Officer.

Name and Position       2019 Target MIP
Opportunity as a
% of Base Salary
Ynon Kreiz, CEO 150%
Richard Dickson, President and COO 100%
Joseph Euteneuer, CFO 100%
Roberto Isaias, EVP and Chief Supply Chain Officer 65%
Robert Normile, EVP, Chief Legal Officer, and Secretary 65%

2019 Financial Performance Goals and Results

Our 2019 MIP financial performance goals were based on our annual operating plan, after adjustment in accordance with MIP parameters, and were designed to align with our 2019 emphasis on restoring profitability, primarily through our Structural Simplification cost savings program, while making progress in restoring profitability by stabilizing revenues following five previous years of decline. The Compensation Committee set our 2019 financial measure performance goals as follows:

2019 Adjusted EBITDA target goal was set at $358 million, a 46% increase over 2018 Adjusted EBITDA performance of $245 million.
Consistent with our objective of stabilizing revenue, 2019 Adjusted Net Sales target goal was set at $4,506 million, flat to 2018 Net Sales performance of $4,515 million.
2019 Adjusted Gross Margin target goal was set at 42.2%, a 180 basis points increase over 2018 Adjusted Gross Margin performance of 40.4%.
2019 Adjusted Inventory & Accounts Receivable target goal was set at $1,541, a slight decrease (improvement) to 2018 Working Capital performance of $1,564 million. Tooling was removed as a financial measure, as the Compensation Committee determined that the desired reduction in tooling had been achieved in 2018.

When goals were set, the Compensation Committee believed that each of the financial performance goals established under the MIP would be challenging but achievable.

The largest driver of our 2019 MIP above-target earnout was our Adjusted EBITDA performance, which reflected our significant progress towards restoring profitability. This improved profitability was primarily driven by our Structural Simplification program, which resulted in run-rate savings of $875 million exiting 2019, exceeding our target of $650 million by $225 million, or 35%. Our 2019 MIP earnout reflected performance slightly above target for Adjusted Net Sales given our successful stabilization of revenues, with Adjusted Net Sales up $10 million with the effect of foreign exchange and up $107 million in constant currency. Our 2019 MIP earnout also reflected our 400 basis point improvement in Adjusted Gross Margin from 40.4% to 44.4%, and our 7.5% decrease in Adjusted Inventory and Accounts Receivable from $1,564 million to $1,446 million.

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These financial results yielded an earnout of 175.6% of target MIP opportunity, based on the following pre-established threshold, target, and maximum performance goals and weightings, compared to actual Company performance:

2019 MIP Financial Measures and Earnout Results

Financial Measure       Weighting       Threshold
(35% earned)
Target
(100% earned)
Max
(200% earned)
      % Earned
before
weighting
      % Earned
after
weighting

Adjusted EBITDA

50%

200%

100%

Adjusted Net Sales

20%

106.4%

21.3%

Adjusted Gross
Margin

15%

200%

30%

Adjusted Inventory
& Accounts
Receivable

15%

162%

24.3%

TOTAL EARNED

175.6%

$ in millions.

The table above reflects actual performance as adjusted from GAAP results consistent with the pre-established plan parameters, which were approved by the Compensation Committee. Adjustments are intended to ensure that events outside the control of management do not unduly influence the achievement of the performance measures, while also ensuring that they are aligned with stockholders’ interests. All financial measures for the MIP are based on actual amounts including the effect of foreign exchange, with foreign exchange collars for the CEO and his direct reports. For the 2019 MIP, actual results for EBITDA, Net Sales, and Gross Margin were adjusted for severance and restructuring costs, equity compensation expense, litigation costs, Argentinian currency devaluation, tax disputes, plant closures, retail asset impairments, and foreign exchange, all as set forth in the MIP definitions approved by the Compensation Committee. Without such adjustments, the actual results for EBITDA would have been $287 million, Net Sales would have been $4,505 million, and Gross Margin would have been 44.0%. For 2019, there were no adjustments to the Adjusted Inventory & Accounts Receivable financial measures. These financial measure adjustments are an integral part of the MIP, ensuring employees are not penalized for the impact of unusual items that are unforeseeable or unquantifiable at the time the annual operating plan is set. Each measure is defined under “Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations.”

Due to Mr. Isaias’ promotion in February 2019 to EVP and Chief Supply Chain Officer, his 2019 MIP earnout was 176.8%, based 13.2% on his role as Managing Director of the Latin America region (based 50% on Latin America region performance earnout of 193.3% and 50% based on the above Company performance earnout) and 86.8% on the above Company performance earnout.

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2019 Individual Performance Assessments

For our NEOs, the earnout under the MIP for Company financial performance (175.6%, and 176.8% for Mr. Isaias) was then adjusted based on our CEO’s assessment of each executive’s progress, and the Compensation Committee’s assessment of our CEO’s progress, against individual goals that tied to the execution of our short-to-mid term strategy. This performance rating acted as a multiplier of 0% to 125% of the amount earned for financial performance, 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

In no event, however, could an NEO’s payout exceed 200% of target MIP opportunity.

As in prior years, the Compensation Committee utilized individual goals in order to ensure a comprehensive performance assessment of our NEOs. These individual goals included objectives critical to our transformation, not otherwise rewarded or incentivized in the MIP financial measures.

Our CEO performed an assessment of each NEO’s performance toward individual goals that tied to the execution of our short-to-mid term strategy. He presented his assessments and recommendations regarding performance ratings and associated Individual Performance Multipliers to the Compensation Committee, who concurred with the CEO’s assessments and recommendations. The Compensation Committee separately evaluated the CEO’s performance and determined, with input from FW Cook, in an executive session without the presence of our CEO, his performance rating and associated Individual Performance Multiplier.

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2019 Individual Performance Assessments

Ynon Kreiz
Chief Executive Officer
Led Mattel to achieve a new level of performance, exceeding full year 2019 guidance, and being recognized as the #1 U.S. and global toy company in 2019, per NPD
Drove execution of financial and operating plan that stabilized revenues after five previous years of decline, exceeded Adjusted EBITDA goal, and exceeded Adjusted Gross Margin goal
Led the executive team to over-deliver against the multi-faceted, transformational 2018-2019 Structural Simplification program
Established investments in digital, technology, and product development to fuel innovation through fiscal 2020 and beyond
Richard Dickson
President and Chief
Operating Officer
Led Mattel’s Global Brand teams to achieve or exceed growth targets in five of six categories
Led portfolio expansion through the implementation of Franchise Management
Drove toy innovation pipeline, including the development and launch of new IP
Implemented accelerated Design & Development timelines to increase speed to market
Successfully led the development of Mattel’s content strategy, including the implementation of Mattel’s demand creation platform
Joseph Euteneuer
Chief Financial Officer
Elevated and refined Mattel’s financial planning processes, bringing greater focus and discipline to company-wide resource allocation and margin improvement, achieving positive Free Cash Flow for the first time in three years
Refinanced debt maturities to improve near-to-medium-term liquidity and provide increased financial flexibility
Managed 2018-2019 Structural Simplification program to exceed targets
Roberto Isaias
EVP and Chief Supply
Chain Officer
Accelerated multi-year Capital Light program by managing the closure and transition of underutilized manufacturing plants
Significantly improved operational performance across Global Supply Chain by exceeding fill rate metrics, achieving productivity goals, and reducing costs
Improved Sales and Operational Planning process to optimize product forecasting, planning, SKU base, and rapid response to consumer demand
Robert Normile
EVP, Chief Legal
Officer, and Secretary
Managed worldwide litigation and dispute resolution efforts
Facilitated and supported the planning, negotiation, and execution of critical agreements related to Structural Simplification program, license audits, and outsourcing of key functions
Managed enterprise ethics and compliance programs and initiatives

The following table summarizes the financial performance earnouts, the Individual Performance Multipliers determined by the Compensation Committee, the resulting incentive payouts expressed as a percentage of target MIP opportunity, and the cash incentive payouts under the MIP. Mr. Isaias’ MIP payout was prorated to reflect the increase in his target MIP opportunity from 55% to 65% that occurred on February 18, 2019 in connection with his promotion to EVP and Chief Supply Chain Officer, as well as his role in the Latin America region prior to his promotion.

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Name       Financial
Performance
Earnout
      Individual
Performance
Multiplier
      Final % of MIP
Opportunity
Earned
      Incentive
Payout
Ynon Kreiz 175.6% 110% 193.2% $ 4,346,100
Richard Dickson 175.6% 110% 193.2% $ 1,931,600
Joseph Euteneuer 175.6% 100% 175.6% $ 1,580,400
Roberto Isaias 176.8% 125% 200.0% $ 636,800
Robert Normile 175.6% 100% 175.6% $ 684,840

Equity-Based Long-Term Incentives

Our LTIs are equity-based and aimed at focusing our senior executives on achieving our key long-term financial goals and strategic objectives, while rewarding relative growth in stockholder value that is sustained over several years. We believe our equity-based LTIs align our senior executives’ interests with those of our stockholders, emphasize long-term stockholder value creation, 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 RSUs. Our Performance Units are earned based on the Company’s performance against financial performance measures, modified by our relative TSR over the three-year performance period.

2019 Pay Decisions

Annual LTI Mix for CEO was 100% Performance-Based and at Risk, with 75% Performance Units and no RSUs

The Compensation Committee remains focused on ensuring our LTIs continue to closely align with our strategy and strategic priorities and incentivize actions that drive long-term stockholder value. In March 2019, the Compensation Committee established the 2019 Annual LTI Value for each senior executive (other than Mr. Kreiz), with a continued mix of 50% Performance Units and 25% each in stock options and RSUs. To emphasize even greater focus on pay and performance alignment, in June 2019, the Compensation Committee determined to change Mr. Kreiz’s grant mix by eliminating RSUs (from 25% of Annual LTI Value in 2018), increasing Performance Units to 75% of Annual LTI Value (from 50% in 2018), and keeping stock options at 25% of Annual LTI Value, resulting in 100% of our CEO’s 2019 LTI mix being performance-based and at risk. The Compensation Committee believes that eliminating RSUs and increasing the amount of Performance Units for our CEO is more closely aligned with our peer group’s practices and provides greater alignment with stockholder interests.

Since 2017, we have maintained our Choice Program, which allows senior executives (currently, 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 stock options/RSUs 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 CEO direct reports and other Section 16 officers must allocate at least 25% of such value to the stock option grant. This Choice Program was designed and implemented to strengthen executive engagement, investment, and retention at this critical time in our transformation. The LTI mix for our COO and CFO is fixed at 50% Performance Units, 25% stock options and 25% RSUs, while the mix for our CEO is fixed at 75% Performance Units and 25% stock options.

2019 Annual LTI Values Awarded

In March 2019, the Compensation Committee determined that all annual 2019 equity awards were to be granted on August 1, 2019, to have a single annual grant date that coincides with the historical grant date for our stock options and RSUs, and to proactively manage the Company’s equity plan share reserve. As a result, the 2019-2021 Performance Units were granted on August 1, 2019 (rather than the LTIP approval date in March as in past years) subject to the measures and goals previously approved in March 2019, along with the grants of stock options and RSUs.

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In March 2019, the Compensation Committee also determined that, except with respect to Mr. Kreiz, the 2019 Annual LTI Value for our NEOs would not change from their 2018 Annual LTI Value. Consistent with the Compensation Committee’s focus on pay for performance and operational, financial, and relative TSR results, and based on their assessment of his strong performance and leadership through the Company’s transformation with demonstrated successful results, in June 2019, the Compensation Committee increased Mr. Kreiz’s 2019 Annual LTI Value to $9.55 million from $8.25 million, with a mix of 75% Performance Units and 25% stock options, making all of Mr. Kreiz’s 2019 LTI performance-based and at risk. On February 4, 2020, the Compensation Committee determined to hold Mr. Kreiz’s 2020 target LTI unchanged from 2019.

The following table summarizes the 2019 Annual LTI Values set by the Compensation Committee and reflects the allocation of Performance Units under the 2019-2021 LTIP, as well as stock option and RSU grants for eligible participants under our Choice Program discussed above.

Name       2019-2021
Performance Units
($)
      2019
Stock Options
($)
      2019
RSUs
($)
      2019 Annual
LTI Value
($)
Ynon Kreiz 7,162,500 2,387,500 0 9,550,000
Richard Dickson 2,250,000 1,125,000 1,125,000 4,500,000
Joseph Euteneuer 1,350,000 675,000 675,000 2,700,000
Roberto Isaias 525,000 131,250 393,750 1,050,000
Robert Normile 525,000 393,750 131,250 1,050,000

In connection with his promotion to EVP and Chief Supply Chain Officer, Mr. Isaias received an additional equity grant valued at $250,000 on February 28, 2019, comprised 50% in stock options and 50% in RSUs, subject to our standard vesting terms.

Equity LTI earnouts and year-end valuations of outstanding equity awards reflect improved financial performance offset by historical stock price underperformance.

Despite strong financial and operational performance for the year, and based on a year-end stock price of $13.55:

The 2017-2019 LTIP earnout and resulting payout was 50% of target (plus dividend equivalent shares), which was the first payout under any of our LTIP cycles in six years;
All NEOs’ outstanding stock options were underwater; and
Our CEO’s new-hire performance-based stock option granted in April 2018, which vests at the end of a three-year performance period ending on April 26, 2021 conditioned upon achievement of relative TSR over the performance period that is ≥ 65th percentile of companies in the S&P 500, would not be earned based upon relative TSR performance through December 31, 2019.

2017-2019 LTIP Features and Payout

       
   
Average earnout of
three annual Adjusted
EPS earnouts is
determined
     Relative TSR
performance over the
three-year period is
determined
     Total earnout is computed as
three-year average Adjusted
EPS earnout increased or
decreased by 50 percentage
points for relative TSR
performance

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Compensation at Mattel

Our 2017-2019 LTIP, which had a performance period from January 1, 2017 through December 31, 2019, based payout on achievement against Adjusted EPS goals set on an annual basis with earnouts averaged over the three-year performance period, plus a relative TSR modifier of up to +/- 50 percentage points, based on our relative TSR over the three-year performance period versus the companies in the S&P 500.

For 2019, the Compensation Committee set a rigorous target goal for Adjusted EPS at $(0.82), which represented a significant improvement over our 2018 Adjusted EPS of $(1.30). Primarily due to our successful Structural Simplification costs savings program, 2019 Adjusted EPS was $(0.43), resulting in maximum performance under the 2019 Adjusted EPS goal. Over the three-year performance period, the average earnout for the Adjusted EPS goal was 100% of target. Our relative TSR, measured over the three-year performance period, was below the 25th percentile, resulting in a TSR adjustment of negative 50 percentage points. Accordingly, the cumulative total earnout was 50% of target Performance Units granted.

2017-2019 LTIP Financial Measures and Earnout Results

Goal*        Threshold
(50% earned)
      Target
(100% earned)
      Max
(150% earned)
      % Earned
Each Year
2017 Adjusted EPS 0%
2018 Adjusted EPS 150%
2019 Adjusted EPS 150%
Three-Year Average Earnout for
Adjusted EPS
100%
Effect of TSR Modifier Actual at
December 31, 2019
Mattel TSR Relative to S&P 500 ≤25th 50th ≥75th 4th
Earnout Percentage Modifier** -50% No change +50% -50%
TOTAL EARNED 50%
* Adjusted EPS is a non-GAAP measure under the SEC’s rules. Please see Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations on page 127 for a description of the adjustments under the MIP.
** 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 2019, Adjusted EPS reflected adjustments from Earnings Per Share as set forth in “Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations”. Without adjustment, 2019 EPS was $(0.62).

Dividend equivalents in shares equal to 4% of the shares earned were paid at the end of the three-year performance cycle. Dividend equivalents were accumulated in shares of stock attributed to each Performance Unit based upon the number of shares earned, assuming each dividend is reinvested in shares as of the closing price on the ex-dividend date, and participates in future dividend distributions, for all dividends during the three-year performance period.

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The following table summarizes the 2017-2019 LTIP payout. Messrs. Kreiz and Euteneuer did not receive 2017-2019 Performance Units due to their hire dates and, accordingly, are excluded from the table.

2017-2019 LTIP Payout

Name       Target Performance
Units Granted
      Actual Shares
Earned
      Dividend Equivalent
Shares Earned
      Total Shares
Earned
Richard Dickson 37,355 18,678 777 19,455
Roberto Isaias 5,603 2,802 117 2,919
Robert Normile 13,074 6,537 272 6,809

2018-2020 LTIP and 2019-2021 Features

       
   
Earnout of three-year
cumulative Adjusted
Free Cash Flow is
determined
     Relative TSR
performance over the
three-year period is
determined
     Earnout is computed as
Adjusted Free Cash Flow
earnout multiplied by 67%
to 133% for relative TSR
performance

For our 2018-2020 LTIP and 2019-2021 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 each year); and (ii) we modified the financial measure to Adjusted Free Cash Flow (instead of Adjusted EPS) to better align with our strategy.

Feedback from our stockholders in 2018 included a preference for our incentive measures to have greater alignment with our strategy. The Compensation Committee believes that our LTIP design needs to drive long-term financial performance consistent with our strategy. For 2018 and 2019, Adjusted Free Cash Flow was chosen as a more appropriate measure than our prior goal of Adjusted EPS, because of the link to overall cash generation and our strategic objectives. The earnout percentage resulting from the Adjusted 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 Adjusted 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 relative TSR performance of 25th percentile or below, to 133% for maximum relative 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. Commencing in 2018, the Compensation Committee determined to adjust the effect of our relative TSR from an additive or subtractive modifier of +/- 50 percentage points in past years to a multiplier of +/- 33%. The Compensation Committee believes that this adjustment, which reduces the potential downward adjustment of the financial earnout while maintaining the potential maximum earnout, is appropriate given the volatile stock market and the challenges experienced by our industry as compared to the S&P 500. No amount can be earned above 200% of target Performance Units granted, consistent with all of our incentive programs, and the minimum amount that can be earned based on threshold performance is 25%. Consistent with past LTIP cycles, the three-year performance period for the 2019-2021 LTIP is from January 1, 2019 to December 31, 2021, and for the 2018-2020 LTIP is from January 1, 2018 to December 31, 2020.

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2019-2021 LTIP: Based on our one-year Adjusted Free Cash Flow performance from January 1, 2019 through December 31, 2019, and assuming targeted cumulative Adjusted Free Cash Flow performance for the remaining period in the plan (2020-2021), the cumulative Adjusted Free Cash Flow performance earnout for the three-year cumulative plan would be 141% of target. Our relative TSR at December 31, 2019 for the 2019-2021 LTIP was at the 15th percentile, which would have resulted in a multiplier adjustment of 67% of any earned percentage under the Adjusted Free Cash Flow goal had the performance period ended on December 31, 2019. After applying the TSR multiplier of 67%, the cumulative earnout based on actual 2019 and 2020-2021 Adjusted Free Cash Flow presumed at target would be 95%.
2018-2020 LTIP: Based on our cumulative two-year Adjusted Free Cash Flow performance from January 1, 2018 through December 31, 2019, and assuming targeted Adjusted Free Cash Flow performance earnout for the remaining period in the plan (2020), the cumulative Adjusted Free Cash Flow performance for the three-year cumulative plan would be 150% of target. Our relative TSR at December 31, 2019 for the 2018-2020 LTIP was at the 12th percentile, which would have resulted in an adjustment of 67% of any earned percentage under the Adjusted Free Cash Flow goal had the performance period ended on December 31, 2019. After applying the TSR multiplier of 67%, the cumulative earnout based on actual 2018-2019 and 2020 Adjusted Free Cash Flow presumed at target would be 101%.

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 are accumulated in shares of stock attributed to each Performance Unit based upon the number of shares earned, assuming each dividend is reinvested in shares as of the closing stock price on the ex-dividend date, and participates in future dividend distributions for all dividends during the three-year performance period.

Stock Options and RSUs

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

Time-Based Stock Options – Time-based 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.
Time-Based RSUs – Time-based RSUs assist our senior executives in meeting stock ownership requirements and serve as a stockholder-aligned 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 dividend equivalents on stock options or time-based RSUs for executives.

2020 Target TDC Decisions

On February 4, 2020, the Committee determined to hold each NEO’s target TDC unchanged from 2019, with the exception of Mr. Isaias, whose target TDC increased 4% from $1.88 million to $1.95 million based on internal pay equity, strong performance in his role, and the criticality and impact of his role to the Company’s Capital Light program.

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 a monthly car allowance to allow our senior executives to fulfill their job responsibilities that involve travel to the offices of customers and business partners. The monthly amount of the allowance is a set amount based on the executive’s job level. We provide the use of a Company car instead of a car allowance for our CEO, and in 2019 provided the use of a Company car for Mr. Isaias.

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Financial Counseling Services – We provide certain senior executives the choice of financial counseling and tax return preparation service through a Company-selected third-party financial service or up to an annual $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 them to concentrate on Mattel’s future success.
Executive Physicals – We provide our senior executives with comprehensive executive physical examinations and diagnostic services. We believe that these physical examinations and diagnostic services 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 senior 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 taxable 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 to relocate. They are important tools for us to recruit and retain key management talent and allocate our talent as best fits Mattel’s needs.

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 was 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 one year 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. 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 would have been required to repay the full relocation costs incurred by us for these benefits if he resigned or his employment was terminated with cause within one year following the February 5, 2019 approval date, and will be required to repay 50% of the relocation costs if such resignation or termination occurs during the second year following such approval date.

On February 1, 2020, in connection with his relocation from Mexico to our headquarters in California, we entered into a letter agreement with Mr. Isaias, our EVP and Chief Supply Chain Officer, memorializing his current salary, MIP bonus opportunity, and eligibility to participate in our executive compensation programs, including our commitment to provide relocation assistance and services in accordance with our International Transfer Program, which includes travel, temporary accommodations, and shipment of household goods. Pursuant to Mattel’s International Transfer Program, Mr. Isaias was eligible to receive tax gross-up payments on such relocation benefits. In addition, we provided Mr. Isaias with a transition payment in February 2020 in the amount of $120,000 to facilitate his move. In accordance with our repayment provisions, Mr. Isaias is required to repay the full transition payment and relocation costs incurred by us for these benefits if he resigns or his employment is terminated with cause within one year following the relocation date and/or transition payment date, and repay 50% of the transition payment and relocation costs if such resignation or termination occurs during the second year following such relocation and/or transition payment date.


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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 one senior executive, Mr. Normile. No new participants have been added to the SERP since 2001 nor will any be added and, as a result, Mr. Normile is the only executive currently participating in the SERP.
The DCP, our non-qualified deferred compensation plan, generally provides our U.S.-based executives with a mechanism to defer compensation in excess of the amounts that are permitted to be deferred under our 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 senior executives in connection with perquisites and benefits. In certain limited cases, Mattel does provide to senior 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 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 cash severance and 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. Messrs. Kreiz and Euteneuer participate in the Severance Plan B as modified by the terms of their respective participation letter agreements with us, Mr. Dickson participates in the Severance Plan B, and Mr. Normile participates in the Severance Plan. Mr. Isaias is eligible for benefits under our current executive severance practice. We do not pay any excise tax gross-up payments under our severance arrangements.

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.

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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.”

Important Policies, Governance, and Guidelines

Stock Ownership Guidelines

We have had stock ownership guidelines for our NEOs and other direct reports of the CEO in place since 2001. Under our current stock ownership guidelines, 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 NEO.

Name       Salary
Multiple
      Deadline
Ynon Kreiz 6x 4/30/2023
Richard Dickson 4x 12/31/2019
Joseph Euteneuer 4x 9/30/2022
Roberto Isaias 3x 2/29/2024
Robert Normile 3x 12/31/2018

Generally, executives have five years from the later of the date the new targeted levels were established (January 2014) or the date of promotion or hiring to meet the guidelines. If the targeted ownership levels are not met within the compliance deadline, the executives 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.

All NEOs are in compliance with the guidelines either by having attained the targeted ownership level, retaining 100% of after-tax shares from equity award vestings or exercises until the targeted ownership level is met, or being within their compliance period.

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.

Compensation Risk Review

On behalf of the Compensation Committee, FW Cook annually conducts a detailed risk assessment of our executive compensation plans, policies, and programs to determine whether they encourage excessive risk taking. FW Cook employed a framework to assist the Compensation Committee in ascertaining any potential material adverse risks and how they may link with Mattel’s compensation plans, policies, and programs. The results of FW Cook’s assessment, along with our HR Department’s assessment of our Company-wide compensation plans, policies, and programs were presented to our Compensation Committee in November 2019. FW Cook and our HR Department advised the Compensation Committee that our Company-wide compensation plans, policies, and programs did not present any risks that are reasonably likely to have a material adverse effect on Mattel. As part of its review and assessment, our Compensation Committee also considered the following characteristics of our compensation programs, among others, that discourage excessive or unnecessary risk taking:

Our compensation plans and programs appropriately balance short- and long-term incentives and fixed and variable pay.

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Long-term incentives provide a portfolio approach using Performance Units, stock options, and RSUs.
Under our MIP, we use measures from the income statement and balance sheet. In addition, performance against individualized strategic objectives is taken into account. The performance measures are defined at the beginning of the performance period, with specific exclusions addressed in detail.
Our Compensation Committee may apply negative discretion in determining annual cash incentives earned under our MIP.
Cash and shares earned under our MIP and LTIP, respectively, are capped.
An established performance evaluation approach based on quantitative and qualitative performance is used on a Company-wide basis.
Market competitive stock ownership guidelines for our most senior executives, which are reviewed annually by our Compensation Committee for individual compliance.
We have a Clawback Policy, Insider Trading Policy, and formal equity grant procedures in place.

Based on this assessment, the Compensation Committee believes that our compensation plans, policies, and programs do not present any risk that is reasonably likely to have a material adverse effect on the Company.

No Hedging or Pledging Permitted

Mattel’s Insider Trading Policy, as implemented, prohibits Board members, officers, and employees (i) from engaging in hedging, monetization, or speculative transactions in Mattel common stock (including zero-cost collars, forward sale contracts, short sales, transactions in publicly-traded options and other derivative securities), and (ii) from holding Mattel shares in a margin account, pledging Mattel shares, 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.

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Equity Grant Process

Like other public companies, we seek to implement equity compensation grant procedures that are designed to reflect 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 Terms of LTIP Performance Units – Generally and in 2019, at its March meeting, the Compensation Committee reviews and determines for senior executives the total Annual LTI Value within our compensation structure. For 2019, the Compensation Committee deferred determination of Mr. Kreiz’s Annual LTI Value until June 2019. As in past years, in March 2019, the Compensation Committee reviewed and approved the terms and specific performance measures and goals for the 2019-2021 LTIP cycle. In addition, the LTIP grant date for our annual Performance Units was moved to August 1, 2019 to coincide with the grant date of our annual stock options and RSUs.
Annual Grants of LTIP Performance Units, Stock Options, and RSUs – Performance Unit grants under our LTIP are approved by the Compensation Committee to executives in the business unit leadership job level and above (CEO and his direct reports) and other Section 16 officers, and by the Equity Grant Allocation Committee (“EGAC”) to employees below the business unit leadership job level (SVPs and below), other than Section 16 officers. Generally in May, our Human Resources Department reviews with the Compensation Committee the annual equity program’s objectives, background, grant approach, grant process, and the proposed total 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. Historically, the Compensation Committee approves the annual grant values for stock options and RSUs for the CEO, and his direct reports, and other Section 16 officers 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. In June 2019, the Compensation Committee set our CEO’s Annual LTI Value and determined that our CEO’s Annual LTI Value would be delivered 75% in the form of Performance Units and 25% in the form of stock options, and that his direct reports’ Annual LTI Value would continue to be delivered 50% in the form of Performance Units. In July 2019, the Compensation committee confirmed the annual grant values for the Performance Units, stock options, and restricted stock options for the CEO and his direct reports, for an effective grant date of August 1, 2019.
  If the annual equity grant of August 1 is a Saturday, then the grant date is set for the last preceding business day, and if August 1 is a Sunday, then the grant date is set for the next following business day.
EGAC – For grants of stock options and RSUs to employees below the business unit leadership job level (SVPs and below) that are not Section 16 officers, the Board has delegated the authority to the 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 April 2018.
  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 that are not Section 16 officers.
Off-Cycle Grants – If there are proposed new-hire or other off-cycle equity grants for executives in the business unit leadership job level and above (CEO and his direct reports), 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 (SVPs and below), 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.
Stock Option Exercise Price – 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.

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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.

Executive Compensation Tables

Summary Compensation Table

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

Name, Principal
Position in 2019
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

2019 1,500,000 7,162,507 2,387,499 4,346,100 118,891 15,514,997
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

2019 1,000,000 3,557,773 1,125,002 1,931,600 132,169 7,746,544
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

Joseph Euteneuer
Chief Financial Officer

2019 900,000 200,000 2,025,004 675,000 1,580,400 223,687 5,604,091
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

Roberto Isaias
Executive Vice President and Chief Supply Chain Officer

2019 441,629 1,071,179 256,251 636,800 227,943 2,633,802

Robert Normile
Executive Vice President, Chief Legal Officer and Secretary

2019 600,000 720,234 393,751 684,840 1,181,372 102,016 3,682,213
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
(1) Name, Principal Position in 2019 and Year. The years of compensation for each NEO reflects the years he or she has been an NEO.

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(2)

Base Salary. Represents base salary prorated based on time in role in each applicable year and is not annualized. For Mr. Isaias, represents base salary as Managing Director of Latin America through February 17, 2019 and as EVP and Chief Supply Chain Officer for the remainder of the year (converted from Mexican Peso (“MXN”) using the exchange rate of .05302 USD to 1 MXN as of December 31, 2019).

(3)

Bonus. In 2017, Mr. Euteneuer was provided a $400,000 signing bonus, payable 50% within 30 days of his hire date of September 25, 2017 and 50% on the first payroll date following January 1, 2019, subject to his continued employment in good standing through January 1, 2019. For 2019, amount shown for Mr. Euteneuer represents the second one-half portion of such signing bonus that was paid in January 2019.

(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 2019, see Note 8 to Mattel’s Consolidated Financial Statements for 2019 contained in our Form 10-K.

Amounts shown under the “Stock Awards” column for 2019 include the grant date fair value for our annual RSUs granted on August 1, 2019, the RSU portion of the promotional grant to Mr. Isaias on February 28, 2019, one-third of the Performance Units under the 2017-2019 LTIP which employs annual financial goal setting, and the Performance Units under the 2019-2021 LTIP granted on August 1, 2019, as discussed in more detail below. The RSUs are valued based on our closing stock price of $13.59 on the August 1, 2019 annual grant date, and for Mr. Isaias’ promotional RSU grant of $14.42 on February 28, 2019.

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 was determined as follows:

Each year, the annual Adjusted EPS goals were set by the Compensation Committee;
The earned percentage for each year under the Adjusted EPS goal was then averaged over the three-year period (the performance-related component), which percentage could be up to 150%; and
This average was 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 under the performance-related component 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 Adjusted EPS performance-related component against the goal set for that year. For 2019, the grant date value of one-third of the 2017-2019 LTIP Performance Units, as measured in accordance with FASB ASC Topic 718, was based on our closing stock price of $14.68 on the deemed grant date of March 18, 2019, which is the date the 2019 Adjusted EPS performance goal for the Performance Units was set by the Compensation Committee, and the probable outcome of target performance (100%) of the 2019 annual Adjusted EPS performance-related component for 2019. For 2019, 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. The grant date value of the TSR market-related component of $1.46 was calculated using a Monte Carlo valuation with the following key assumptions: Mattel’s closing stock price of $25.31 on March 20, 2017; the risk-free interest rate of 1.51%; volatilities of the prices of the stocks for Mattel and the components of the Index; and the correlation coefficients of Mattel and the components of the Index. Because the 2017-2019 Performance Units were not granted in 2019, they are not reported in the Grants of Plan-Based Awards in 2019 table that follows, even though a portion of their grant date valuation is required to be reported in the Summary Compensation Table for 2019.

The table below sets forth the original 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 Adjusted EPS performance-related component at the original grant date value for the Adjusted EPS performance-related component of $25.31 as to one-third of the Performance Units granted, and (ii) based upon achieving the maximum level of performance (150%) under the Adjusted EPS performance-related component at the original grant date value of $25.31 as to one-third of the Performance Units granted. Since the modification to the performance-related component that occurred on April 24, 2017 resulted in a decrease in the grant date fair value of $3.71 per Performance Unit, this is not reflected in the table below. Also set forth below is the grant date value for the market-related component, or the relative 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 for a maximum earnout of 200% of target Performance Units, which is not reflected in the table below. Messrs. Kreiz and Euteneuer are not included in the table below, as they did not receive any 2017-2019 Performance Units due to their hire dates.


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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
2019 182,781 274,171
2018 164,864 247,297
2017 315,160 472,728 54,538
Roberto Isaias
2019 27,408 41,112
2018 24,732 37,098
2017 47,279 70,919 8,180
Robert Normile
2019 63,975 95,963
2018 57,700 86,550
2017 110,301 165,451 19,088
(1) Reflects the performance-related component grant date fair value of one-third of the target Performance Units granted (and allocated to 2017, 2018, and 2019, as applicable).
(2) Reflects the market-related component grant date fair value as to all of the target Performance Units granted in 2017, the year granted.

2019-2021 LTIP. The Performance Units under the 2019-2021 LTIP have a three-year performance period from January 1, 2019 through December 31, 2021. The number of Performance Units earned is based on the achievement of a cumulative Adjusted 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 2019, the grant date value of the 2019-2021 Performance Units, as measured in accordance with FASB ASC Topic 718, is based upon our closing stock price of $13.59 on the August 1, 2019 grant date, 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 of $1.30. The grant date value of the TSR market-related component of $1.30 was calculated using a Monte Carlo valuation with the following key assumptions: Mattel’s closing stock price of $13.59 on August 1, 2019; the risk-free interest rate of 1.70%; volatilities of the prices of the stocks for Mattel and the components of the Index; and the correlation coefficients of Mattel and the components of the Index.

The table below sets forth the grant date fair value of the 2019-2021 Performance Units determined in accordance with FASB ASC Topic 718 principles (i) based upon the probable outcome (100%) of the Adjusted Free Cash Flow performance-related component at the grant date, and (ii) based upon achieving the maximum level of performance (150%) under the Adjusted 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 for a maximum earnout of 200% of target Performance Units, which is not reflected in the table below.

2019-2021 LTIP Grant Date Fair Value

Name       Probable (Target) Outcome
of Performance-Related
Component
($)
      Maximum Outcome of
Performance-Related
Component
($)
      Market-Related
Component
($)
Ynon Kreiz 6,537,171 9,805,756 625,336
Richard Dickson 2,053,558 3,080,337 196,440
Joseph Euteneuer 1,232,137 1,848,206 117,865
Roberto Isaias 479,170 718,755 45,837
Robert Normile 479,170 718,755 45,837

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(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.
(6) Change in Pension Value and Nonqualified Deferred Compensation Earnings. Amounts shown represent the increase, in the pension benefits that have accrued under the SERP during the applicable year. Mr. Normile is the only executive currently participating in the SERP. For example, the amount for 2019 is determined by subtracting (i) the present value of the executive’s accrued benefits as of December 31, 2018, which was the measurement date used for financial statement reporting purposes for the prior completed fiscal year, from (ii) the present value of the executive’s accrued benefits as of December 31, 2019, which is the measurement date used for financial statements reporting purposes with respect to the covered fiscal year. The amount is shown in the 2019 Pension Benefits table below, and is computed as explained in “Narrative Disclosure to 2019 Pension Benefits Table” below.
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 2019:

All Other Compensation

All Other Compensation Kreiz
($)
Dickson
($)
Euteneuer
($)
Isaias(1)
($)
Normile
($)
Car Allowance/Company Car(2) 11,136 24,000 24,000 57,754 24,000
Relocation Assistance(3) 65,071 95,885
Relocation Tax Gross-up(4) 30,253
Financial Counseling 10,000 15,165 10,000 15,165
Christmas Bonus(5) 30,091
Vacation Premium(6) 23,170
Other Perquisites(7) 7,755 3,004 4,363 18,926 2,851
Total Perquisites 28,891 42,169 133,687 225,826 42,016
Contributions to 401(k) Plan 16,800 25,200 28,000 28,000
Savings Fund 2,117
Contributions to DCP 73,200 64,800 62,000 32,000
Total “All Other Compensation” 118,891 132,169 223,687 227,943 102,016
(1) Amounts for Mr. Isaias are converted from Mexican Peso (“MXN”) using the exchange rate of .05302 USD to 1 MXN as of December 31, 2019.
(2) Represents the amount of the monthly car allowance or, for Messrs. Kreiz and Isaias, the 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 Messrs. Kreiz’s and Isaias’ personal use of a Company car, the amount represents the lease value, and also the cost of insurance, maintenance, permits, and gasoline.
(3) For Mr. Euteneuer, the amount shown reflects $57,272 for home sale and $7,799 for shipment of household goods under our standard relocation program. For Mr. Isaias, the amount shown reflects a payment to help facilitate his relocation from Mexico to our headquarters in California.
(4) Represents a tax gross-up for Mr. Euteneuer under our standard relocation program related to the relocation assistance benefits provided described above.
(5) Represents the amount for Mr. Isaias, referred to as “Christmas Bonus” in Mexico, paid to every Mattel employee annually in Mexico, equal to 30 days of base pay.
(6) Represents the amount for Mr. Isaias, referred to as “Vacation Premium” in Mexico, paid to every Mattel employee annually in Mexico in addition to vacation days provided.
(7) Amounts include physical examinations provided to our NEOs. For Mr. Kreiz, the amount also includes $5,000 attributable income under the Board of Directors Recommended Grants and Matching Recommended Grants Program fostering charitable contributions, which is more fully described in the “Director Compensation” section of this Proxy Statement. For Mr. Isaias, the amount shown also includes grocery vouchers, food vouchers, and year-end bonus, as provided to all Mattel employees in Mexico, as well as personal use of a country club, all of which were discontinued in connection with his relocation from Mexico to our headquarters in California on February 1, 2020.

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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 2019, are described in more detail below.

Kreiz Offer Letter

In connection with Mr. Kreiz’s appointment as our CEO in April 2018, we entered into an offer letter with him that included the following provisions: (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%; and (iii) 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 April 26, 2018, 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. 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.

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 letter 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 would have been 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 will be required to repay 50% of the relocation costs if such resignation or termination occurs during the second year following such approval date.

Isaias Relocation Letter

On February 1, 2020, in connection with his relocation from Mexico to our headquarters in California, we entered into a letter agreement with Mr. Isaias, our EVP and Chief Supply Chain Officer, memorializing his current salary, MIP bonus opportunity, and eligibility to participate in our executive compensation programs, including our commitment to provide relocation assistance and services in accordance with our International Transfer Program, which includes travel, temporary accommodations, and shipment of household goods. Pursuant to Mattel’s International Transfer Program, Mr. Isaias was eligible to receive tax gross-up payments on such relocation benefits. In addition, we provided Mr. Isaias with a transition payment in February 2020 in the amount of $120,000 to facilitate his move. In accordance with our repayment provision, Mr. Isaias is required to repay the full transition payment and relocation costs incurred by us for these benefits if he resigns or his employment is terminated with cause within one year following the relocation date and/or transition payment date, and repay 50% of the transition payment and relocation costs if such resignation or termination occurs during the second year following such relocation and/or transition payment date.

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Grants of Plan-Based Awards in 2019

The following table shows information about the non-equity incentive awards and equity-based awards granted to our NEOs in 2019.

   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
($)
  Grant Date
Fair Market
Value of
Stock and
Option
Awards(5)
($)
Name and
Grant Date
Committee
Action Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold   Target   Maximum
Ynon Kreiz
787,500 2,250,000 4,500,000
8/1/2019 7/29/2019 467,221 13.59 2,387,499
8/1/2019 7/29/2019 120,257 481,028 962,056 7,162,507
Richard Dickson
350,000 1,000,000 2,000,000
8/1/2019 7/29/2019 220,157 13.59 1,125,002
8/1/2019 7/29/2019 37,777 151,108 302,216 2,249,998
8/1/2019 7/29/2019 82,781 1,124,994
Joseph Euteneuer
315,000 900,000 1,800,000
8/1/2019 7/29/2019 132,094 13.59 675,000
8/1/2019 7/29/2019 22,666 90,665 181,330 1,350,002
8/1/2019 7/29/2019 49,669 675,002
Roberto Isaias
111,440 318,400 636,800
2/28/2019 2/5/2019 22,978 14.42 125,000
2/28/2019 2/5/2019 8,669 125,007
8/1/2019 7/29/2019 25,685 13.59 131,250
8/1/2019 7/29/2019 8,815 35,259 70,518 525,007
8/1/2019 7/29/2019 28,974 393,757
Robert Normile
136,500 390,000 780,000
8/1/2019 7/29/2019 77,055 13.59 393,751
8/1/2019