DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934 (AMENDMENT NO.     )

Filed By The Registrant    

Filed By A Party Other Than The Registrant    

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Under Rule14a-12

HASBRO, INC.

(Name of Registrant as Specified In Its Charter)

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LOGO


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LOGO

Dear Fellow Hasbro Shareholders,

On behalf of Hasbro’s Board of Directors, we invite you to join us on Thursday, May 16, 2019 at 11:00 a.m. Eastern Time for Hasbro’s 2019 Annual Meeting of Shareholders. The meeting will be held at Hasbro’s Corporate headquarters located at 1027 Newport Avenue, Pawtucket, RI 02861. We encourage you to closely review the enclosed Notice of Annual Meeting and Proxy Statement as you vote your shares for this important meeting.

2018 was a disruptive year. Despite the challenges this past year presented, your Company is in a strong financial position. The bankruptcy of Toys“R”Us reset the retail landscape in many markets around the world. It resulted in lost revenues from closed stores, as well as a meaningful near-term impact from large volumes of liquidated products sold into the market at discounted prices. In Europe, the retailer’s bankruptcy added to the challenges of a region already dealing with disintermediation across retail by online and omni-channel retailers as well as political and economic headwinds, notably in the U.K.

Throughout 2018, the team made investments in high-margin growth areas, including gaming and content, lowered the fixed cost base of the Company and returned $559.4 million to shareholders, consisting of $309.3 million in cash dividends and $250.1 million in share repurchases. In February 2019, our Board of Directors voted to increase the quarterly dividend 8% to $0.68 per share. This higher quarterly dividend is first payable on May 15, 2019 to shareholders of record as of May 1, 2019.

Hasbro’s Board supported management and the global teams as they made real time changes to the business last year. We did so with a focus on delivering our long-term targets for the business, including revenue growth, profit expansion and improving return on invested capital. Our goal was to ensure that the near-term actions made Hasbro stronger over the long term.

In support of these efforts, this past summer the Board spent several days in Ireland in meetings with Hasbro’s European commercial teams to review their plans to navigate the changing consumer and retail environment. We also met with the Boulder Media team, our animation studio, as we invest in further establishing industry-leading animation talent and skillsets. In February of 2019 we attended Toy Fair to see first-hand the brands and products that will drive our business this year.

To ensure Hasbro is positioned to deliver on the full potential we see from these teams, the Board is deeply engaged in ensuring we have the right talent on the Board and in management, including succession planning across key management positions. In 2018, we extended the employment agreement of Hasbro’s Chairman and CEO, Brian Goldner, for two additional years through December 31, 2022. We also entered into an employment agreement with John Frascotti, adding him to the Board of Directors and expanding his responsibilities to include Chief Operating Officer along with his role as Company President. Our 13-member Board includes 5 female members and is 85% independent.

We are tremendously proud of the excellence of this Company, including Hasbro being recognized as a “World’s Most Ethical Company” for the eighth consecutive year; ranking #5 on CR Magazine’s Best Corporate Citizens list; and our continued inclusion in the Civic 50 list as one of the most community minded companies in America. Our corporate social responsibility efforts, which are overseen by the Nominating, Governance and Social Responsibility Committee of our Board of Directors, are fundamental to who we are as an organization and are at the core of our recognitions in these important areas.

Over time we have delivered profitable growth while transforming Hasbro and its brands. Following a challenging 2018, the teams are focused on returning to profitable growth this year. We appreciate your support and partnership as we continue building the industry’s leading global play and entertainment company to deliver superior long-term shareholder value.

Sincerely,

 

LOGO  

LOGO

 

Brian D. Goldner

Chairman of the Board and

Chief Executive Officer, Hasbro, Inc.

  LOGO  

LOGO

 

Edward M. Philip

Lead Independent Director

Hasbro’s Board of Directors


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Hasbro, Inc. Notice of 2019

Annual Meeting of Shareholders

 

LOGO    LOGO    LOGO
   

Time

11:00 a.m.

Local Time

  

Date

Thursday

May 16, 2019

  

Place

Hasbro, Inc. Corporate Office

1027 Newport Avenue

Pawtucket, Rl 02861

 

Purpose

 

  LOGO   Elect thirteen directors.  

 

  LOGO   Conduct an advisory vote on the compensation of the Company’s named executive officers.  

 

  LOGO   Ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for the 2019 fiscal year.  

 

  LOGO   Transact such other business as may properly come before the meeting and any adjournment or postponement of the meeting.  

 

 

 

Board Recommendations

The Company’s Board of Directors recommends that you vote your shares “FOR” each of the nominees for director, “FOR” the advisory vote to approve the compensation of the Company’s named executive officers, and “FOR” the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2019.

Record Date

Shareholders of record of the Company’s common stock at the close of business on March 20, 2019 may vote at the meeting.

Voting

You are cordially invited to attend the meeting to vote your shares in person, to hear from our senior management, and to ask questions. If you are not able to attend the meeting in person, you may vote by Internet, telephone or mail. See the Proxy Statement for specific instructions. Please vote your shares.

Important Notice Regarding the Availability

of Proxy Materials

On or about April 2, 2019 we will begin mailing a Notice of Internet Availability of Hasbro’s Proxy Materials to shareholders informing them that this Proxy Statement, our 2018 Annual Report to Shareholders and voting instructions are available online. As is more fully described in that Notice, all shareholders may choose to access our proxy materials on the Internet or may request to receive paper copies of the proxy materials.

 

 

By Order of the Board of Directors

 

 

LOGO

Tarrant Sibley

Senior Vice President, Chief Legal Officer & Corporate Secretary

Dated: April 2, 2019

 


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Table of Contents

 

PROXY STATEMENT HIGHLIGHTS

     i  

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

     1  

ELECTION OF DIRECTORS (Proposal No. 1)

     5  

GOVERNANCE OF THE COMPANY

     17  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     28  

COMPENSATION COMMITTEE REPORT

     29  

COMPENSATION DISCUSSION AND ANALYSIS

     30  

Executive Summary

     31  

Business and Performance Overview

     31  

Shareholder Engagement

     36  

Executive Compensation Program Structure and Alignment with Performance

     36  

Variable Compensation Outcomes

     38  

Extension and Amendment of the Employment Agreement with our Chief Executive Officer

     39  

Employment Agreement with our President and Chief Operating Officer

     39  

Executive Compensation Philosophy and Objectives

     40  

Strong Compensation Governance Practices

     41  

Compensation Process

     41  

Peer Group and Benchmarking to the Market

     41  

Role of the Independent Compensation Consultant

     43  

Executive Compensation Program Elements

     44  

Elements of Compensation Summarized

     44  

Variable and Performance-Based Compensation Elements

     44  

Annual Incentive Compensation

     45  

Long-Term Incentive Compensation

     49  

Performance Contingent Stock

     50  

Restricted Stock Units

     50  

Stock Options

     51  

Fixed Compensation and Benefits

     51  

Base Salary

     51  

Benefits

     51  

Company-Sponsored Retirement Plans

     51  

Nonqualified Deferred Compensation Plan

     52  

Perquisites

     53  

Severance and Change in Control Benefits

     53  

Reported versus Realized Pay Table

     54  

Other Compensation Considerations

     55  

Stock Ownership Guidelines

     55  

Compensation and Risk Management

     55  

Tax Considerations

     56  


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EXECUTIVE COMPENSATION

     57  

Summary Compensation Table

     57  

Grants of Plan-Based Awards

     59  

Outstanding Equity Awards at Fiscal Year-End

     61  

Options Exercised and Stock Vested

     62  

Retirement Plan Annual Benefits and Payments

     63  

Non-Qualified Deferred Compensation and Other Deferred Compensation

     66  

Potential Payments Upon Termination or Change in Control; Employment Agreements

     67  

SHAREHOLDER ADVISORY VOTE ON COMPENSATION FOR NAMED EXECUTIVE OFFICERS
(Proposal No. 2)

     76  

COMPENSATION OF DIRECTORS

     77  

EQUITY COMPENSATION PLANS

     80  

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

     81  

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     84  

PROPOSAL TO RATIFY THE SELECTION OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2019 FISCAL YEAR (Proposal No. 3)

     85  

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     86  

ADDITIONAL INFORMATION REGARDING INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     88  

OTHER BUSINESS

     90  

IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS

     90  

COST AND MANNER OF SOLICITATION

     90  

APPENDICES

  

APPENDIX A – STANDARDS FOR DIRECTOR INDEPENDENCE

     A-1  

APPENDIX B – GAAP TO NON-GAAP RECONCILIATION

     B-1  


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Proxy Statement Highlights

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider and you should read the entire Proxy Statement before voting. For more complete information regarding the Company’s 2018 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 30, 2018.

Annual Meeting of Shareholders

 

LOGO    LOGO    LOGO
   

Date and Time

11:00 a.m. Local Time

Thursday, May 16, 2019

  

Record Date

Wednesday

March 20, 2019

  

Place

Hasbro, Inc. Corporate Office

1027 Newport Avenue

Pawtucket, Rl 02861

Meeting Agenda and Voting Recommendations

 

Agenda Item

 

 

Board Vote
Recommendation

 

   

Page Reference for    
More Information    

 

 

  Proposal 1

  Election of Thirteen Directors

 

 

 

 

 

 

LOGO

FOR each director nominee

 

 

 

 

 

 

 

5    

 

 

  Proposal 2

  Advisory Vote to Approve the Compensation of

  the Company’s Named Executive Officers

 

 

 

 

 

 

LOGO

FOR

 

 

 

 

 

 

 

76    

 

 

  Proposal 3

  Ratification of the Selection of KPMG LLP as the

  Company’s Independent Registered Public

  Accounting Firm for Fiscal 2019

 

 

 

 

 

 

LOGO

FOR

 

 

 

 

 

 

 

85    

 



 

 

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2018 Business Highlights

2018 was a very disruptive year for our business, driven by the bankruptcy and liquidation of Toys“R”Us across most of the world, a rapidly shifting consumer and retail landscape, the need to reduce retail inventories in some markets, particularly in Europe, where we worked to address changing consumer shopping behaviors, and challenging economic conditions in key markets, notably the U.K.

Over the period from 2012 through 2017 we delivered on our medium-term objectives. During that six-year period we delivered:

 

 

5% compound annual growth rate (“CAGR”) for revenues in developed markets

 

 

15% CAGR for revenues in emerging markets

 

 

Improved operating profit margins

 

 

Average operating cash flow of $584 million per year

 

 

Improved return on invested capital

Following our delivery of record revenues in 2016 and again in 2017, revenues for 2018 declined. Despite the challenging environment, during 2018 we managed through these conditions, diversifying our retailer base, meaningfully reducing retail inventories, delivering innovative new offerings to our global consumers and modernizing our global organization, including streamlining and focusing our teams and cutting costs across our business.

We were not, however, able to recapture as much of the lost Toys“R”Us business during 2018 as we had anticipated, as the effect of its liquidation of inventory in the market was more impactful than we and industry experts had expected. In 2018 we continued taking the steps to position our business for the future and our focus remains on the long-term profitable growth of our Company and on achieving our strategic objectives and investment priorities.

2018 Financial Performance and Key Accomplishments

 

 

In 2018 we delivered net revenues of $4.58 billion, a decrease of 12% from 2017. The decline in net revenues included an unfavorable foreign currency translation of $43.0 million.

 

   

Revenues in the Entertainment and Licensing segment increased, but declined in the U.S. and Canada and International segments.

 

   

Retailer inventories declined significantly in the U.S. and Europe, reflecting the loss of Toys“R”Us in addition to our, and our retailers’, continued efforts to reduce retail inventory levels.

 

   

Franchise brand revenues declined 9%.

 

   

Partner brand revenues declined 22%.

 

   

Hasbro Gaming revenues declined 12%.

 

   

Emerging brand revenues increased 1%.

 

 

We acquired the POWER RANGERS brand from Saban Properties.

 

 

Reported net earnings were $220.4 million or $1.74 per diluted share.

 

 

Adjusted net earnings were $488.8 million, or $3.85 per diluted share, excluding aggregate after tax charges detailed below of $268.4 million, or $2.11 per diluted share.

 

 

We generated $646 million in operating cash flow.

 

 

We returned $559.4 million to our shareholders, consisting of $309.3 million in cash dividends and $250.1 million in share repurchases.

 

 

In February 2019, our Board of Directors approved an 8% increase in the quarterly dividend, bringing the quarterly dividend to $0.68 per common share. This is the highest quarterly dividend rate in our history. We have increased the quarterly dividend in 15 of the prior 16 years.

 

 

The after-tax charges excluded from 2018 full-year adjusted net earnings consist of:

 

   

$96.9 million, or $.76 per diluted share, associated with fourth quarter 2018 non-cash impairment charges related to Backflip Studios goodwill and other intangible assets.

 

   

$77.9 million, or $.61 per diluted share, of severance costs associated with organizational actions.

 

   

$52.8 million, or $.42 per diluted share, associated with Toys“R”Us, primarily bad debt expense.

 

   

$40.7 million, or $.32 per diluted share, impact from U.S. tax reform based on remeasurement of current liabilities and additional regulations issued in 2018.



 

 

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Board Nominees

Proposal 1 – Election of Directors

You are being asked to vote on the election of the following thirteen nominees for director. All directors are elected annually by the affirmative vote of a majority of votes cast. Detailed information about each director’s background, skills and areas of expertise can be found beginning on page 5.

 

   Name

 

 

Age

 

   

 

Director
Since

 

   

Principal Occupation

 

 

 

Independent
Director

 

 

 

Committee
Memberships

 

 

Kenneth A. Bronfin

 

 

 

 

59

 

 

 

 

 

 

2008

 

 

 

 

Senior Managing Director of Hearst Ventures

 

 

 

 

•   Compensation

•   Cybersecurity and Data Privacy

•   Finance

 

 

Michael R. Burns

 

 

 

 

60

 

 

 

 

 

 

2014

 

 

 

 

Vice Chairman of Lions Gate Entertainment Corp.

 

 

 

 

•   Finance

•   Nominating, Governance and Social Responsibility

 

 

Hope F. Cochran

 

 

 

 

47

 

 

 

 

 

 

2016

 

 

 

 

Managing Director of Madrona Venture Group

 

 

 

 

•   Audit (Chair)

•   Executive

•   Finance

 

 

Sir Crispin H. Davis

 

 

 

 

70

 

 

 

 

 

 

2016

 

 

 

 

Retired Chief Executive Officer of Reed Elsevier, PLC

 

 

 

 

•   Compensation

•   Nominating, Governance and Social Responsibility

 

 

John A. Frascotti

 

 

 

 

58

 

 

 

 

 

 

2018

 

 

 

 

President and Chief Operating Officer of Hasbro, Inc.

 

   

 

Lisa Gersh

 

 

 

 

60

 

 

 

 

 

 

2010

 

 

 

 

Former Chief Executive Officer of Alexander Wang

 

 

 

 

 

•   Audit

•   Compensation

 

 

Brian D. Goldner

 

 

 

 

55

 

 

 

 

 

 

2008

 

 

 

 

Chairman and Chief Executive Officer of Hasbro, Inc.

 

   

 

•   Executive

 

Alan G. Hassenfeld

 

 

 

 

70

 

 

 

 

 

 

1978

 

 

 

 

Retired Chairman and Chief Executive Officer of Hasbro, Inc.

 

 

 

 

•   Cybersecurity and Data Privacy

•   Executive (Chair)

•   Finance

 

 

Tracy A. Leinbach

 

 

 

 

59

 

 

 

 

 

 

2008

 

 

 

 

Retired Executive Vice President and Chief Financial Officer of Ryder System, Inc.

 

 

 

 

•   Audit

•   Executive

•   Nominating, Governance and Social Responsibility (Chair)

 

 

Edward M. Philip

 

 

 

 

53

 

 

 

 

 

 

2002

 

 

 

 

Retired Chief Operating Officer of Partners in Health

 

 

 

 

•   Compensation (Chair)

•   Executive

•   Nominating, Governance and Social Responsibility

 

 

Richard S. Stoddart

 

 

 

 

56

 

 

 

 

 

 

2014

 

 

 

 

President and Chief Executive Officer of InnerWorkings, Inc.

 

 

 

 

•   Audit

•   Cybersecurity and Data Privacy (Chair)

•   Executive

•   Nominating, Governance and Social Responsibility

 

 

Mary Beth West

 

 

 

 

56

 

 

 

 

 

 

2016

 

 

 

 

Senior Vice President, Chief Growth Officer of The Hershey Company

 

 

 

 

•   Executive

•   Finance (Chair)

•   Nominating, Governance and Social Responsibility

 

 

Linda K. Zecher

 

 

 

 

65

 

 

 

 

 

 

2014

 

 

 

 

Chief Executive Officer and Managing Partner of The Barkley Group

 

 

 

 

•   Audit

•   Compensation

•   Cybersecurity and Data Privacy

 



 

 

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Our Board Profile

Our Board consists of a strong group of proven leaders and executives with experience across a wide range of industries giving us a diverse set of skills, viewpoints and expertise. It is also well balanced by age, gender and tenure. The Board is a collegial group, with each member contributing and having his or her voice heard while supporting and appropriately challenging management. We believe the mix of experience, diversity and perspectives on the Board serves to strengthen management and our Company.

Ongoing Refreshment

Diverse, Independent Board with Relevant Skills

 

 

LOGO

DIVERSE STRONG INDEPENDENT LEADERSHIP BALANCED TENURE EXTENSIVE Relevant Skill Set Governance/Corporate Social Responsibility Digital Gaming, Media and Products Finance and Accounting Global Business Industry Background IT/Technology Sales and Marketing Strategic Planning Talent Development



 

 

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Corporate Governance Matters

Hasbro is committed to strong corporate governance, ethical conduct, sustainability and the accountability of our Board and our senior management team to the Company’s shareholders.

Corporate Governance Highlights

 

 

Board and Board Committee Practices

 

  Entire Board is elected annually

  11 out of 13 directors are independent

  38% of our Board nominees are women

  Balance of experience, gender, tenure and qualifications

  Lead Independent Director role with clearly defined responsibilities

  All required committees consist of independent directors

  Risk oversight by Board and its committees

  Separate Cybersecurity and Data Privacy Committee

  Annual Board and committee self-evaluations

  Director orientation and continuing education

  Policy limiting the number of boards on which our directors may serve

 

 

Shareholder Rights, Accountability and Other Governance Practices

 

  Comprehensive shareholder outreach program

  No shareholder rights plan

  Annual shareholder advisory vote on executive compensation (“Say-on-Pay”)

  Majority vote standard with a plurality carve-out for contested elections

  Proxy access bylaw provision

  Prohibit the pledging or hedging of Company stock

  Strong compensation clawback policy

  Stock ownership and share retention policy for Board members, executive officers and other key employees

  Written code of conduct and corporate governance principles

  Long-standing commitment to corporate sustainability

 

Shareholder Outreach and Responsiveness to Shareholders

Hasbro has engaged with our major shareholders on governance and compensation matters for several years. We do this as part of our commitment to be responsive to shareholders and to ensure that our actions are informed by the viewpoints of you, our investors. Over the past several years, our discussions with shareholders have led to changes to our executive compensation and corporate governance programs, such as amendments to the terms of the employment agreement with our Chief Executive Officer, Brian Goldner, and the adoption of a proxy access bylaw. Our shareholders overwhelmingly supported our Say-on-Pay votes in the last three years, with favorable votes from 97.4%, 98.1% and 96.8% of the shares voted at the 2016, 2017 and 2018 Annual Meetings, respectively.

In 2018, we again spoke with shareholders who expressed an interest in speaking with us. In addition to speaking with any shareholders who reached out to us, we proactively extended an invitation to our top shareholders (who held in aggregate approximately 56% of our outstanding shares) to meet and we had discussions with all of such shareholders who accepted our invitation.

Based upon our continuing dialog with shareholders and our Say-on-Pay vote results, we believe our current compensation program for our executive officers reflects our shareholder’s views and strongly drives our pay for performance objectives.



 

 

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Executive Compensation Matters

Proposal 2 – Advisory Vote on Compensation of Named Executive Officers

Our Board of Directors recommends that shareholders vote, on an advisory basis, to approve the compensation paid to the Company’s named executive officers (“NEOs”) as described in this Proxy Statement. Detailed information about the compensation paid to our NEOs can be found beginning on page 30.

Our compensation programs embody a pay-for-performance philosophy that supports our business strategy and aligns executive interests with those of our shareholders. Highlights of our compensation programs for 2018 and our compensation best practices follow.

 

 

Pay-for-Performance

 

 

•  Executive compensation program is tightly linked to long-term shareholder value creation, incorporating short-term and long-term forms of executive compensation that are structured to incentivize company performance and the achievement of corporate objectives the Committee believes are critical to driving sustained long-term shareholder value.

 

 

•  Program elements are designed to attract and retain top executive talent with the creativity, innovation, relentless drive and diverse skills in storytelling and entertainment, branded-play, consumer products, media and technology that are critical to execution of our strategy and ongoing business transformation.

 

 

•  In 2018, 81.5% of the Chief Executive Officer’s total target compensation was performance based and at risk.

 

 

 

LOGO

 

 

    2018 CEO/NEO Compensation Program Elements

 

 

 

    Type of Annual Cash Compensation

 

    Base Salary

 

 

•   Fixed compensation

 

•   Set at industry competitive level, in light of individual experience and performance

 

    Management

    Incentive

    Awards

 

 

•   Performance-based

•   Tied to company and individual achievement against stated annual financial and strategic goals

•   Aligns management behavior with shareholder interests

•   Performance measures evaluated (weighting)

 Total Net Revenues (40%)

 Operating Margin (40%)

 

 Free Cash Flow (20%)

 

 

    Type of Long-Term Incentive Compensation

 

    Performance

    Contingent     Stock Awards

 

 

•   Represent ~50% of annual target equity award value

•   Earned based on challenging long-term three-year goals requiring sustained strong operating performance

•   Tied to achievement of EPS, Net Revenue and ROIC targets over a 3-year performance period

 

 

    Stock Options

 

 

•   Represent ~50% of annual target equity award value for CEO (25% for the other NEOs)

•   7-year term

•   Vest in three equal annual installments over the first three anniversaries of the grant date

 

 

    Restricted

    Stock Units

 

 

•   Granted to the NEOs other than the CEO (25% of annual target equity award value for NEOs)

•   Vest in three equal annual installments over the first three anniversaries of the grant date

 



 

 

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Compensation Best Practices

 

   

 Robust shareholder engagement process

 

 Program informed by and responsive to shareholder input

 

 Significant portion of compensation is variable and performance based

 

 Significant share ownership and retention requirements

 

  5x base salary for CEO

 

  2x base salary for other NEOs

 

 NEOs must hold 50% of net shares received upon option exercises or award vesting until they achieve the required ownership levels

 

 Maximum payout caps under incentive plans

 

 Do not incentivize excessive risk taking

 

  

 Proxy access mechanisms

 

 Robust anti-hedging and pledging policies prohibiting pledging or hedging of Company stock

 

 Double-trigger change in control provisions for equity grants

 

 Fully independent Compensation Committee

 

 Independent Compensation Consultant

 

 No tax gross-ups

 

 No excessive perquisites

 

 No repricing of equity incentive awards

 

 Strong clawback policy

 

Our Auditors

Proposal 3 – Ratification of Independent Registered Public Accounting Firm

You are being asked to vote to ratify the selection of KPMG LLP as our independent registered public accounting firm for fiscal 2019. Detailed information about this proposal can be found beginning on page 85.



 

 

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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

 

Q:   Why are these materials being made available to me?

 

 

A:   The Board of Directors (the “Board”) of Hasbro, Inc. (the “Company” or “Hasbro”) is making these proxy materials available to you on the Internet, or sending printed proxy materials to you in certain situations, including upon your request, beginning on or about April 2, 2019, in connection with Hasbro’s 2019 Annual Meeting of Shareholders (the “Meeting”), and the Board’s solicitation of proxies in connection with the Meeting. The Meeting will take place at 11:00 a.m. local time on Thursday, May 16, 2019 at Hasbro’s corporate offices, 1027 Newport Avenue, Pawtucket, Rhode Island 02861. The information included in this Proxy Statement relates to the proposals to be voted on at the Meeting, the voting process, the compensation of Hasbro’s named executive officers and Hasbro’s directors, and certain other information. Hasbro’s 2018 Annual Report to Shareholders is also available to shareholders on the Internet and a printed copy will be mailed to shareholders upon their request.

 

Q:   What proposals will be voted on at the Meeting?

 

 

A:   There are three proposals scheduled to be voted on at the Meeting:

 

    Proposal 1 — Election of thirteen directors.

 

    Proposal 2 — An advisory vote to approve the compensation of the Company’s named executive officers.

 

    Proposal 3 — Ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2019.

 

Q:   Why did I receive a Notice of the Internet Availability of Hasbro’s Proxy Materials, instead of a full set of printed proxy materials?

 

 

A:   Rules adopted by the Securities and Exchange Commission allow us to provide access to our proxy materials over the Internet instead of mailing a full set of such materials to every shareholder. We have sent a Notice of Internet Availability of Hasbro’s Proxy Materials (the “Notice”) to our shareholders who have not requested to receive a full set of the printed proxy materials. Because of certain legal
  requirements, shareholders holding their shares through the Hasbro 401(k) Retirement Savings Plan were mailed a full set of proxy materials this year. Our other shareholders may access our proxy materials over the Internet using the directions set forth in the Notice. In addition, by following the instructions in the Notice, a shareholder may request that a full set of printed proxy materials be sent to them.

 

     We have chosen to send the Notice to shareholders, instead of automatically sending a full set of printed materials to all shareholders, to reduce the impact of printing our proxy materials on the environment and to save on the costs of printing and mailing incurred by the Company.

 

Q:   How do I access Hasbro’s proxy materials online?

 

 

A:   The Notice provides instructions for accessing the proxy materials for the Meeting over the Internet, including the Internet address where those materials are available. Hasbro’s Proxy Statement for the Meeting and 2018 Annual Report to Shareholders can be viewed on Hasbro’s website at https://investor.hasbro.com/financial-information/annual-meeting.

 

Q:   How do I request a paper copy of the proxy materials?

 

 

A:   Paper copies of Hasbro’s proxy materials will be made available at no cost to you, but they will only be sent to you upon request. To request a paper copy of the proxy materials follow the instructions on the Notice that you received. You will be able to submit your request for copies of the proxy materials by sending an email to the email address set forth in the Notice, by going to the Internet address set forth in the Notice or by calling the phone number provided in the Notice.

 

Q:   What shares owned by me can be voted?

 

 

A:   All shares of the Company’s common stock, par value $.50 per share (“Common Stock”) owned by you as of the close of business on March 20, 2019, the record date, may be voted by you. These shares include those (1) held directly in your name as the shareholder of record, including shares purchased through the Computershare CIP, a Direct Stock Purchase and Dividend Reinvestment Plan for Hasbro, Inc., and (2) held for you as the beneficial owner through a broker, bank or other nominee.
 

 

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Q:   What is the difference between holding shares as a shareholder of record and as a beneficial owner?

 

 

A:   Most Hasbro shareholders hold their shares through a broker, bank or other nominee rather than directly in their own name as the shareholder of record. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Shareholder of Record

If your shares are registered directly in your name with Hasbro’s Transfer Agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, the shareholder of record. As the shareholder of record, you have the right to grant your voting proxy directly to the individuals named as proxies by Hasbro or to vote in person at the Meeting.

Beneficial Owner

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name and your broker, bank or other nominee is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote and are also invited to attend the Meeting. However, since you are not the shareholder of record, you may not vote these shares in person at the Meeting unless you receive a legal proxy from your broker, bank or other nominee. Your broker, bank or other nominee has provided voting instructions for you to use. If you wish to attend the Meeting and vote in person, please mark the box on the voting instruction card you received and return it to your broker, bank or other nominee or contact your broker, bank or other nominee to obtain a legal proxy or follow the instructions on the Notice or voting instruction card that you received.

Effect of Not Casting Your Vote

Whether you hold your shares in street name as a beneficial owner, or you are a shareholder of record, it is critical that you cast your vote.

If you hold your shares in street name, you must cast a vote if you want it to count in the election of directors (Proposal No. 1) and in the shareholder advisory vote on the compensation of the Company’s named executive officers (Proposal No. 2).

In the past, if you held your shares in street name and you did not indicate how you wanted your shares voted in the election of directors, or on many other matters, your broker was allowed to vote those shares on your behalf as they felt appropriate. However, brokers no longer have the ability to vote

your uninstructed shares in the election of directors on a discretionary basis, and brokers do not have any discretionary ability to vote shares on the advisory vote with respect to the compensation of the Company’s named executive officers. Therefore, if you hold your shares in street name and you do not instruct your broker how to vote in the election of directors (Proposal 1) or on the shareholder advisory vote on the compensation of the Company’s named executive officers (Proposal 2), no vote will be cast on your behalf on the matter for which no instructions have been provided. Your broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2019 (Proposal No. 3).

If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Meeting, including the ratification of the appointment of the independent registered public accounting firm.

 

Q:   How can I attend the Meeting?

 

 

A:   You may attend the Meeting if you are listed as a shareholder of record as of the close of business on March 20, 2019 and bring proof of your identification. If you hold your shares through a broker, bank or other nominee, you will need to provide proof of your share ownership by bringing either a copy of a brokerage or bank statement showing your share ownership as of March 20, 2019, and a legal proxy if you wish to vote your shares in person at the Meeting. In addition to the items mentioned above, you should bring proof of your identification.

 

Q:   How can I vote my shares in person at the Meeting?

 

 

A:   Shares held directly in your name as the shareholder of record may be voted in person at the Meeting. Please bring proof of your identification to the meeting. Shares beneficially owned may be voted by you if you receive and present at the Meeting a legal proxy from your broker, bank or other nominee, together with proof of identification. Even if you plan to attend the Meeting, we recommend that you also vote in one of the ways described below so that your vote will be counted if you later decide not to attend the Meeting or are otherwise unable to attend.

 

Q:   How can I vote my shares without attending the Meeting?

 

 

A:   Whether you hold shares directly as the shareholder of record or beneficially in street name, you may direct your vote without attending the Meeting. You may vote by granting
 

 

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a proxy or, for shares held in street name, by submitting voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail. Please refer to the summary instructions below, the instructions included on the Notice, and if you request printed proxy materials, the instructions included on your proxy card or, for shares held in street name, the voting instruction card provided by your broker, bank or other nominee.

 

       By Internet — If you have Internet access, you may submit your proxy from any location by following the Internet voting instructions on the Notice you received or by following the Internet voting instructions on the proxy card or voting instruction card sent to you.

 

       By Telephone — You may submit your proxy by following the telephone voting instructions on the proxy card or voting instruction card sent to you.

 

       By Mail — You may do this by marking, dating and signing your proxy card or, for shares held in street name, the voting instruction card provided to you by your broker or nominee, and mailing it in the enclosed, self-addressed, postage prepaid envelope. No postage is required if mailed in the United States. Please note that for Hasbro shareholders, other than those shareholders holding their shares through the Hasbro 401(k) Retirement Savings Plan who are all being mailed a printed set of proxy materials, you will only be mailed a printed set of the proxy materials, including a printed proxy card or printed voting instruction card, if you request that such printed materials be sent to you. You may request a printed set of proxy materials by following the instructions in the Notice.

 

       Please note that you cannot vote by marking up the Notice of Internet Availability of the Proxy Materials and mailing that Notice back. Any votes returned in that manner will not be counted.

 

Q:   What is the quorum for the Meeting?

 

 

A:   Holders of record of the Common Stock at the close of business on March 20, 2019 are entitled to vote at the Meeting or any adjournments thereof. As of that date there were 125,996,661 shares of Common Stock outstanding and entitled to vote and a majority of the outstanding shares will constitute a quorum for the transaction of business at the Meeting. Abstentions and broker non-votes are counted as present at the Meeting for purposes of determining whether there is a quorum at the Meeting. A broker non-vote occurs when a broker holding shares for a customer does not vote on a particular proposal because the broker has not received voting instructions on the matter from its customer and is barred by stock exchange rules from exercising discretionary authority to vote on the matter.
Q:   What vote is required to approve each proposal?

 

 

A:   The vote required to approve each proposal is:

 

    Proposal 1 Election of Directors: Under the Company’s majority vote standard in order to be elected a director must receive a number of “For” votes that exceed the number of votes cast “Against” the election of the director.

 

    Proposal 2 Advisory Vote on Compensation: The affirmative vote of a majority of the shares of Common Stock present (in person or by proxy) and entitled to vote at the Meeting on this shareholder advisory vote is required for approval of this proposal.

 

    Proposal 3 Ratification of the Selection of KPMG: The affirmative vote of a majority of the shares of Common Stock present (in person or by proxy) and entitled to vote at the Meeting on the ratification of the selection of KPMG is required for approval of this proposal.

 

Q:   How are votes counted?

 

 

A:   Each share of Common Stock entitles its holder to one vote on all matters to come before the Meeting, including the election of directors. In the election of directors, for each of the nominees you may vote “FOR” such nominee, “AGAINST” such nominee, or you may “ABSTAIN” from voting with respect to such nominee. For proposals 2 and 3, you may vote “FOR”, “AGAINST” or “ABSTAIN”. If you “ABSTAIN”, it has the same effect as a vote “AGAINST” the proposal on proposals 2 and 3.

 

       If you properly sign and return your proxy card or complete your proxy via the Internet or telephone, your shares will be voted as you direct. If you sign and submit your proxy card or voting instruction card with no instructions, your shares will be voted in accordance with the recommendations of the Board.

 

       If you are a shareholder of record and do not vote via the Internet, via telephone, return a signed proxy card or vote in person at the Meeting, your shares will not be voted.

 

       If you are a beneficial shareholder and do not vote via the Internet, telephone, in person at the Meeting or by returning a signed voting instruction card, your shares may only be voted in situations where brokers have discretionary voting authority over the shares. Discretionary voting authority is only permitted on the proposal for the ratification of the selection of KPMG as the Company’s independent registered public accounting firm for 2019.
 

 

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Q:   What is the recommendation of our Board on each of the matters scheduled to be voted on at the Meeting?

 

 

A:   Our Board recommends that you vote:

 

    FOR” each of the nominees for director (Proposal 1);

 

    FOR” the advisory vote to approve the compensation for the Company’s named executive officers (Proposal 2); and

 

    FOR” the ratification of the selection of KPMG as the Company’s independent registered public accounting firm for fiscal 2019 (Proposal 3).

 

Q:   Can I change my vote or revoke my proxy?

 

 

A:   You may change your proxy instructions at any time prior to the vote at the Meeting. For shares held directly in your name, you may accomplish this by granting another proxy that is properly signed and bears a later date, by sending a properly signed written notice to the Secretary of the Company or by attending the Meeting and voting in person. To revoke a proxy previously submitted by telephone or through the Internet, you may simply vote again at a later date, using the same procedures, in which case your later submitted vote will be recorded and your earlier vote revoked. Attendance at the Meeting will not cause your previously granted proxy to be revoked unless you specifically so request. For shares held beneficially by you, you may change your vote by submitting new voting instructions to your broker or nominee.

 

Q:   What does it mean if I receive more than one Notice or more than one proxy or voting instruction card?

 

 

A:   It means your shares are registered differently or are held in more than one account. Please provide voting instructions for all Notices or proxy and voting instruction cards you receive.

 

Q:   Where can I find the voting results of the Meeting?

 

 

A:   We will announce preliminary voting results at the Meeting. We will publish final voting results in a Current Report on Form 8-K within a few days following the Meeting.
Q:   What happens if I have previously consented to electronic delivery of the Proxy Statement and other annual meeting materials?

 

 

A:   If you have previously consented to electronic delivery of the annual meeting materials you will receive an email notice with instructions on how to access the Proxy Statement, notice of meeting and annual report on the Company’s website, and the proxy card for registered shareholders and voting instruction card for beneficial or “street name” shareholders, on the voting website. The notice will also inform you how to vote your proxy over the Internet. You will receive this email notice at approximately the same time paper copies of the Notice, or annual meeting materials are mailed to shareholders who have not consented to receive materials electronically. Your consent to receive the annual meeting materials electronically will remain in effect until you specify otherwise.

 

Q:   If I am a shareholder of record how do I consent to receive my annual meeting materials electronically?

 

 

A:   Shareholders of record who choose to vote their shares via the Internet will be asked to choose a current and future delivery preference prior to voting their shares. After entering the access information requested by the electronic voting site, click “Submit” and then respond as to whether you would like to receive current proxy material electronically or by mail. If you already have access to the materials, choose that option and click the “Next” button. On the following screen, choose whether you would like to receive future proxy materials by e-mail (and enter and verify your e-mail address), by mail or make no change or no preference and click “Next.” During the year, shareholders of record may sign up to receive their future annual meeting materials electronically over the Internet by going to www.computershare.com/investor. Shareholders of record with multiple Hasbro accounts will need to consent to electronic delivery for each account separately.
 

 

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ELECTION OF DIRECTORS (Proposal No. 1)

Thirteen directors are to be elected at the Meeting. All of the directors elected at the Meeting will serve until the 2020 Annual Meeting of Shareholders (the “2020 Meeting”), and until their successors are duly elected and qualified, or until their earlier death, resignation or removal.

The Board has recommended as nominees for election as directors, to serve until the 2020 Meeting, the persons named below. All of the nominees are currently directors of the Company. The proxies cannot be voted for more than thirteen directors at the Meeting.

Unless otherwise specified in your voting instructions, the shares voted pursuant thereto will be cast “FOR” the persons named below as nominees for election as directors. If, for any reason, any of the nominees named below should be unable to serve as a director, it is intended that such proxy will be voted for the election, in his or her place, of a substituted nominee who would be recommended by the Board. The Board, however, has no reason to believe that any nominee named below will be unable to serve as a director.

Selection of Board Nominees

In considering candidates for election to the Board, the Board, the Nominating, Governance and Social Responsibility Committee of the Board, and the Company consider a number of factors, including employment and other experience, qualifications, attributes, skills, expertise and involvement in areas that are of importance to the Company’s business, business ethics and professional reputation, other board service, business, financial and strategic judgment, the Company’s needs, and the desire to have a Board that represents a diverse mix of backgrounds, perspectives and expertise. Each of the nominees for election to the Board at the Meeting has served in senior positions at complex organizations and has demonstrated a successful track record of strategic, business and financial planning, execution and operating skills in these positions. In addition, each of the nominees for election to the Board has proven experience in management and leadership development and an understanding of operating and corporate governance issues for a large multinational company.

The following chart highlights certain skills, experience and characteristics possessed by the nominees for election to the Board. Further information on each nominee’s qualifications is provided below in the individual biographies. In addition to the skills listed below, our directors each have experience with oversight of risk management, as further described below under the heading “Role of the Board in Risk Oversight”.

 

                           
    

Bronfin

 

 

Burns

 

 

Cochran

 

 

Davis

 

 

Frascotti

 

 

Gersh

 

 

Goldner

 

 

Hassenfeld

 

 

Leinbach

 

 

Philip

 

 

Stoddart

 

 

West

 

 

Zecher

 

   

Experience

 

                           
   

Senior Management

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Industry Background

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

   

Sales and Marketing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

   

Strategic Planning

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Global Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Digital Gaming/Media/ Products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

   

 

   

Talent Development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Governance/ Corporate Social Responsibility

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Finance/ Accounting

 

 

 

 

 

 

 

     

 

     

 

 

 

 

 

     
   

IT/Technology

 

 

 

   

 

           

 

 

 

 

 

   

 

   

Gender

 

                           
   

Male

 

 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

     
   

Female

 

         

 

         

 

         

 

         

 

 

 

 

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The following information set forth below as to each director nominee includes: (i) his or her age; (ii) all positions and offices with the Company; (iii) principal occupation or employment during the past five years; (iv) current directorships of publicly-held companies or investment companies; (v) other previous directorships of publicly-held companies or investment companies during the past five years; (vi) period of service as a director of the Company; and (vii) particular experience, qualifications, attributes or skills (beyond those indicated in the preceding chart), which led the Company’s Board to conclude that the nominee should serve as a director of the Company. Except as otherwise indicated, each person has had the same principal occupation or employment during the past five years.

Nominees for Election as Directors

 

LOGO


Kenneth A. Bronfin

Age: 59

Director Since: 2008

Committees:

•   Compensation

•   Cybersecurity and Data Privacy

•   Finance

Experience and Qualifications

Kenneth A. Bronfin is Senior Managing Director of Hearst Ventures (the strategic investment division of diversified media, information and services company Hearst Corporation), serving in this role since 2013. Prior thereto, he was President of Hearst Interactive Media since 2002. Prior thereto, Mr. Bronfin was Deputy Group Head of Hearst Interactive Media since 1996.

The Board has nominated Mr. Bronfin for election as a director because of his extensive expertise and experience in operational and executive roles in the media and digital services sectors, as well as his experience in strategic planning and corporate finance. Mr. Bronfin’s experience includes serving in a number of executive positions where he was in charge of interactive media and digital businesses and where he led new business ventures, strategic investments and acquisitions in the digital content and media industries. Mr. Bronfin has experience serving on private and public company boards of directors. Mr. Bronfin possesses substantial knowledge, expertise and experience, including operations and business planning experience, in the media, digital products and digital services industries, including expertise in international media, advertising, marketing, and analyzing and anticipating consumer trends.

Other Current Public Company Boards

 

   

None

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

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LOGO


Michael R. Burns

Age: 60

Director Since: 2014

Committees:

•   Finance

•   Nominating, Governance and Social Responsibility

Experience and Qualifications

Michael R. Burns is the Vice Chairman and a member of the board of directors of Lions Gate Entertainment Corp. (a global entertainment company with significant motion picture and television operations), serving in this role since 2000. Lions Gate acquired Starz in December 2016. From 1991 to 2000, Mr. Burns was the Managing Director and Head of the Los Angeles Investment Banking Office of Prudential Securities Inc.

The Board has nominated Mr. Burns for election as a director because of his extensive knowledge and experience in content development and brand building, including in the use of creative storytelling and immersive entertainment across platforms to build global entertainment franchises, in the entertainment industry, including operating and financial expertise in motion picture and television development, production, financing, marketing, distribution and monetization, and expertise in strategic planning for, investing in and building content and entertainment-driven multi-platform businesses. Mr. Burns also possesses expertise in investment banking, corporate finance, and international business.

Other Current Public Company Boards

 

   

Lions Gate Entertainment Corp.

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

LOGO


Hope F. Cochran

Age: 47

Director Since: 2016

Committees:

•   Audit (Chair)

•   Executive

•   Finance

Experience and Qualifications

Hope Cochran is a Managing Director at Madrona Venture Group (a technology-focused venture capital group). Prior to joining Madrona in January 2017, Ms. Cochran was the Chief Financial Officer of King Digital Entertainment from 2013 to 2016. From 2005 to 2013, Ms. Cochran was the Chief Financial Officer for Clearwire, Inc.

The Board has nominated Ms. Cochran for election as a director because of her extensive experience spanning more than 20 years as a senior financial executive in the digital gaming and telecom industries, her knowledge of how to develop digital content businesses, her expertise in managing global teams, and her talent in managing, growing and overseeing global businesses. Ms. Cochran also possesses international business expertise, substantial experience as a public company chief financial officer, and expertise in financial and accounting issues for large public companies. The Board has determined that Ms. Cochran qualifies as an Audit Committee Financial Expert due to her prior experience, including as a Chief Financial Officer of public companies.

Other Current Public Company Boards

 

   

MongoDB, Inc.

 

   

New Relic, Inc.

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

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LOGO


Sir Crispin H. Davis

Age: 70

Director Since: 2016

Committees:

•   Compensation

•   Nominating, Governance and Social Responsibility

Experience and Qualifications

Sir Crispin H. Davis served as the Chief Executive Officer of Reed Elsevier, PLC (a leading provider of scientific, legal and business publishing) from 1999 to 2009. From 1994 to 1999 he was the Chief Executive Officer of Aegis Group, PLC (media and digital marketing communications company).

The Board has nominated Sir Davis for election as a director because of his experience and success transforming a print-based publishing company into a leading online information provider, international business expertise, proven leadership in driving the growth of large multinational corporations, expertise in brand building, organizational development and global marketing, background in media and digital marketing, and knowledge of corporate governance and board best practices.

Other Current Public Company Boards

 

   

Vodaphone Group, PLC

 

   

Rentokil Initial PLC

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

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LOGO


John A. Frascotti

Age: 58

Director Since: 2018

Committees:

•   None

Experience and Qualifications

John A. Frascotti has served as President and Chief Operating Officer and a Director of the Board of Hasbro, Inc. since August 2018. Mr. Frascotti is responsible for leading a global organization focused on creating and delivering the world’s best play and entertainment experiences across Hasbro’s Brand Blueprint, including toys and games, immersive entertainment experiences, digital gaming and consumer products. Prior to his current position, Mr. Frascotti held the positions of President, Hasbro, Inc. from 2017 until August 2018, President, Hasbro Brands from 2014 to 2017, and Executive Vice President and Chief Marketing Officer from 2008 to 2014. Before joining Hasbro in 2008, Mr. Frascotti served as a Senior Vice President of Sports Division at Reebok International, Ltd. and in a number of other senior marketing and licensing positions with Reebok. Mr. Frascotti also practiced law in Los Angeles at Mitchell, Silberberg & Knupp and in Boston at Palmer & Dodge. Mr. Frascotti serves as an officer and/or director of a number of Hasbro subsidiaries and joint ventures at the request and convenience of the Company, including as a member of the Board of Discovery Family Channel, a joint venture between Hasbro and Discovery Communications. He also serves as the Chair of Hasbro’s IP Security Committee and is a member of Hasbro’s Global Information Systems Steering Committee.

The Board has nominated Mr. Frascotti for election as a director because of his extensive knowledge, expertise and leadership in marketing, brand management, licensing, acquisitions and other strategic transactions, global operations, and talent development. He has played and continues to play a critical role in the re-imagination and re-invention of key Hasbro brands, including TRANSFORMERS, NERF, MY LITTLE PONY, BABY ALIVE, MONOPOLY, MAGIC: THE GATHERING and PLAY-DOH, in addition to Hasbro’s Gaming Business, and its portfolio of Partner and Emerging Brands. Mr. Frascotti’s experience and strategic insights into brand building, digital marketing, consumer products, and entertainment have greatly contributed to the expanded global reach of Hasbro’s brands. He was recognized by Forbes Magazine as one of top 5 most influential CMO’s among the top 500 companies in Forbes Global 2000 Biggest Public Companies list. In his role as a director of Corus Entertainment Inc., a Canadian public company focused on creating and delivering high quality brands and content for audiences around the world, Mr. Frascotti has gained further experience and insights in media and content delivery. Outside of the play, media and entertainment industry, Mr. Frascotti gives back to the community through this service on the Board of Directors of the Serious Fun Children’s Network, a non-profit global network of camps for seriously ill children, and the advisory board of Newman’s Own, which provides high-level advice and assistance on strategic matters to both Newman’s Own Foundation and the food company, Newman’s Own, Inc.

Other Current Public Company Boards

 

   

Corus Entertainment Inc.

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

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LOGO


Lisa Gersh

Age: 60

Director Since: 2010

Committees:

•   Audit

•   Compensation

Experience and Qualifications

Lisa Gersh served as the Chief Executive Officer of Alexander Wang (a global fashion brand) from October 2017 to October 2018. Ms. Gersh served as the Chief Executive Officer of Goop, Inc. (lifestyle publication curated by Gwyneth Paltrow) from 2014 to 2016. Ms. Gersh served as President and Chief Executive Officer of Martha Stewart Living Omnimedia, Inc. (integrated media and merchandising company) from 2012 to 2013. Prior thereto, she served as President and Chief Operating Officer of Martha Stewart Living Omnimedia, Inc. from 2011 to 2012. Ms. Gersh served as a director of Martha Stewart Living Omnimedia, Inc. from 2011 to 2013.

The Board has nominated Ms. Gersh for election as a director because of her extensive experience in the media, branded products and entertainment industries, including television, digital entertainment and publishing. These roles involved operating and executive positions with multiple leading media and brand-driven companies, including as Chief Executive Officer of Alexander Wang, Chief Executive Officer of Goop, Inc., President and Chief Executive Officer of Martha Stewart Living Omnimedia and President of Oxygen Media. Ms. Gersh possesses expertise in business and strategic planning, expertise in the media, retail, brand-driven and entertainment industries, including the cable television and digital industries, and expertise in marketing and branding, media trends and in building global brand-driven businesses. The Board has determined that Ms. Gersh qualifies as an Audit Committee Financial Expert due to her prior experience, including her service on public company audit committees and experience as the Chief Executive Officer overseeing Chief Financial Officers of a public company.

Other Current Public Company Boards

 

   

None

Former Public Company Boards Held in the Past Five Years

 

   

comScore, Inc.

 

 

 

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LOGO


Brian D. Goldner

Age: 55

Director Since: 2008

Committees:

•   Executive

Experience and Qualifications

Brian D. Goldner has served as the Chief Executive Officer of Hasbro, Inc. since 2008, and additionally has served as the Chairman of the Board since May 2015. In addition to being Chief Executive Officer, from 2008 to 2016 Mr. Goldner was also the President of Hasbro. Prior to 2008, Mr. Goldner served as the Chief Operating Officer of Hasbro from 2006 to 2008 and as President, U.S. Toys Segment from 2003 to 2006. Prior to joining Hasbro in 2000, Mr. Goldner held a number of management positions in the family entertainment and advertising industries, including as Executive Vice President and Chief Operating Officer of Bandai America, Worldwide Director in charge of the Los Angeles Office of J. Walter Thompson and as a Vice President and Account Director of Leo Burnett Advertising.

The Board has nominated Mr. Goldner for election as a director because of the fundamental role he has played and continues to play in the transformation of Hasbro’s business globally and in successfully formulating and executing the Company’s strategy, including its expansion into new geographies and new categories.

Mr. Goldner is the chief architect of the Company’s Brand Blueprint and has led the Company’s transformation from a traditional toy and game manufacturer into a global play and entertainment leader. Under Mr. Goldner’s leadership, Hasbro brands are more pervasive, more global, and more inclusive than ever before. Today, Hasbro brands are activated globally across toy and game, digital gaming, consumer products, esports, omni-channel content, publishing, music, and many more categories. Mr. Goldner has also evolved the Company’s retail strategy, and Hasbro is leading the industry in omni-channel retail activation and eCommerce growth.

Mr. Goldner pioneered Hasbro’s entry into entertainment and oversees the Company’s omni-channel storytelling. Through its film labels, Allspark Pictures and Allspark Entertainment, its animation studio, Boulder Media, its in-house creative agency, Cake Mix Studios, and a co-production and distribution partnership with Paramount Pictures, Hasbro delivers stories across all content platforms. Mr. Goldner has also led the Company’s digital-first approach, engaging consumers in content to commerce solutions across multiple platforms.

Hasbro successfully now manages licenses with some of the most valuable properties in the industry, including Marvel, Star Wars, Disney Princess and Disney Frozen with The Walt Disney Company, Universal Dreamworks Trolls, Sesame Street and Beyblade. Under Mr. Goldner’s leadership, the company has also forged important relationships with trending properties that have a massive global fan base, such as Fortnite and Overwatch. Hasbro’s targeted fan strategy, centered on direct-to-consumer content and commerce solutions, has deepened engagement among global audiences and delivered incremental growth across some of Hasbro’s most beloved brands. Mr. Goldner led the Company’s recent acquisition of Saban Brands, and is driving the Brand Blueprint activation of Power Rangers to maximize the opportunity surrounding that brand.

Mr. Goldner possesses knowledge, expertise and experience regarding strategic and operational planning and execution in global brand and entertainment industries. He has driven immersive play offerings and used storytelling to build global consumer franchises. His expertise in recognizing the industry’s trends and challenges, expertise in the media and entertainment industries, and experience in marketing, product and brand development have been paramount in developing the framework for creating multi-faceted brand experiences for fans, families, kids and audiences around the world.

Mr. Goldner also serves as an officer and/or director of a number of the Company’s subsidiaries at the request and convenience of the Company.

Other Current Public Company Boards

 

   

CBS Corporation

 

   

The Gap, Inc.

Former Public Company Boards Held in the Past Five Years

 

   

Molson Coors Brewing

 

 

 

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LOGO


Alan G. Hassenfeld

Age: 70

Director Since: 1978

Committees:

•   Cybersecurity and Data Privacy

•   Executive (Chair)

•   Finance

Experience and Qualifications

Alan G. Hassenfeld served as Chairman of the Board of Hasbro, Inc. from 1989 to 2008. Prior to May 2003, Mr. Hassenfeld served as Chairman of the Board and Chief Executive Officer of Hasbro since 1999. Prior thereto, he was Chairman of the Board, President and Chief Executive Officer of Hasbro since 1989. Mr. Hassenfeld is co-chairman of the Governing Body of the International Council of Toy Industries CARE Process, Chairman of the Jerusalem Foundation, and Co-Chair of the International Business School at Brandeis University.

The Board has nominated Mr. Hassenfeld for election as a director because of his more than 40 years of experience in the toy, game and family entertainment industry, including his extensive service in senior leadership roles at Hasbro, culminating in his service as the Company’s Chairman of the Board and Chief Executive Officer. Throughout his career at Hasbro, Mr. Hassenfeld held a number of positions of increasing responsibility in marketing and sales for the Company’s domestic and international operations, including responsibilities overseeing global markets. He became Vice President of International Operations in 1972 and later served as Vice President of Marketing and Sales and then as Executive Vice President, prior to being named President of the Company in 1984 and President and Chief Executive Officer in 1989. The Board believes Mr. Hassenfeld possesses particular knowledge, expertise and experience regarding strategic and operational planning and execution in the toy, game and family entertainment industries, expertise in industry trends and challenges, global markets, and international business operations, expertise in issues of corporate social responsibility and sustainability, and experience and expertise in the competitive and financial positioning of the Company and its business.

Other Current Public Company Boards

 

   

Salesforce.com, Inc.

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

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Tracy A. Leinbach

Age: 59

Director Since: 2008

Committees:

•   Audit

•   Executive

•   Nominating, Governance and Social Responsibility (Chair)

Experience and Qualifications

Tracy A. Leinbach served as the Executive Vice President and Chief Financial Officer for Ryder System, Inc. (a global logistics and transportation and supply chain solutions provider) from 2003 until 2006. Prior thereto, Ms. Leinbach served as Executive Vice President, Fleet Management Solutions for Ryder since 2001.

The Board has nominated Ms. Leinbach for election as a director because of her extensive business experience in global operations, strategic and financial planning, auditing and accounting. Ms. Leinbach held a number of positions involving increasing global operating and global financial management, responsibility and oversight, as well as global supply chain management, with Ryder, spanning a career with Ryder of over 21 years. During her career she led the company’s largest business unit in the U.S., as well as units in Europe, Mexico and Canada. In addition to extensive operating experience, her time with Ryder included service as controller and chief financial officer at many of Ryder’s subsidiaries and divisions. Ms. Leinbach’s career with Ryder culminated in her service as Executive Vice President and Chief Financial Officer. Prior to her career with Ryder, Ms. Leinbach worked for PricewaterhouseCoopers in public accounting and was a CPA. The Board believes Ms. Leinbach possesses knowledge, expertise and experience in strategic planning, management, operations, logistics and risk management for a large multinational company, corporate finance, sales, and expertise in issues regarding financial reporting and accounting issues for large public companies. The Board has determined that Ms. Leinbach qualifies as an Audit Committee Financial Expert due to her prior experience, including as the Chief Financial Officer of a public company (Ryder System, Inc.).

Other Current Public Company Boards

 

   

Veritiv Corporation

Former Public Company Boards Held in the Past Five Years

 

   

Forward Air Corporation

 

 

 

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LOGO


Edward M. Philip

Age: 53

Director Since: 2002

Committees:

•   Compensation (Chair)

•   Executive

•   Nominating, Governance and Social Responsibility

Experience and Qualifications

Edward M. Philip served as the Chief Operating Officer of Partners in Health (a non-profit healthcare organization) from January 2013 to March 2017. In addition, Mr. Philip was a Special Partner at Highland Consumer Fund (consumer-oriented private equity fund), serving in this role from 2013 to 2017. He served as Managing General Partner at Highland Consumer Fund from 2006 to 2013. Prior thereto, Mr. Philip served as President and Chief Executive Officer of Decision Matrix Group, Inc. (research and consulting firm) from May 2004 to November 2005, and prior to that he was Senior Vice President of Terra Networks, S.A. (global Internet company) from October 2000 to January 2004. In 1995, Mr. Philip joined Lycos, Inc. (an Internet service provider and search company) as one of its founding members. During his time with Lycos, Mr. Philip held the positions of President, Chief Operating Officer and Chief Financial Officer at different times.

The Board has nominated Mr. Philip for election as a director because of his more than 25 years of business and management experience, including years of experience as both an operating executive and chief financial officer of multinational corporations, and his experience in strategic, business and financial planning in consumer-based and technology-based industries and in overseeing management teams of such companies, as well as in managing teams responding to complex and critical international issues. Mr. Philip possesses expertise regarding internet and technology-based industries, the use of the internet and digital media for building businesses, expertise in strategic planning and execution in complex global organizations, expertise in consumer trends and in the family entertainment industry, corporate finance, financial reporting and accounting matters for large multinational public companies, as well as in the operation and management of large multinational organizations.

Other Current Public Company Boards

 

   

BRP Inc.

 

   

United Continental Holdings, Inc.

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

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Richard S. Stoddart

Age: 56

Director Since: 2014

Committees:

•   Audit

•   Cybersecurity and Data Privacy (Chair)

•   Executive

•   Nominating, Governance and Social Responsibility

Experience and Qualifications

Richard S. Stoddart is the President and Chief Executive Officer of InnerWorkings, Inc. (global marketing execution firm), serving in that role since 2017. Mr. Stoddart was the Chief Executive Officer of Leo Burnett Worldwide from February 2016 to 2017, the Chief Executive Officer of Leo Burnett North America from 2013 to 2016 and the President of Leo Burnett North America from 2005 to 2013.

The Board has nominated Mr. Stoddart for election as a director because of his extensive experience in the advertising, marketing and communications industries, including in television, digital, social media, point-of-sale, packaging and in print, and in building global brands and businesses. As the Chief Executive Officer of InnerWorkings, the largest global marketing execution company, Mr. Stoddart is recognized for his strategic and commercial leadership of the company, investor and analyst communications, and financial stewardship as well as his expertise in all facets of marketing execution and marketing supply chain management. In his prior role as Chief Executive Officer of one of the world’s largest advertising agencies, Mr. Stoddard was recognized for his leadership in the development and integration of shopper, digital, social and mobile capabilities as part of a company’s overall marketing and brand strategy. The Board believes Mr. Stoddart possesses knowledge, expertise and experience regarding branding and brand building, marketing and marketing strategy across media platforms, including in traditional advertising, digital advertising and social media; expertise in media planning, launching branded content and products; expertise in marketing production, logistics and execution; and expertise in media trends and strategic planning for businesses building content-driven brands.

Other Current Public Company Boards

 

   

Innerworkings, Inc.

Former Public Company Boards Held in the Past Five Years

 

   

None

 

 

 

LOGO


Mary Beth West

Age: 56

Director Since: 2016

Committees:

•   Executive

•   Finance (Chair)

•   Nominating, Governance and Social Responsibility

Experience and Qualifications

Mary Beth West is the Senior Vice President, Chief Growth Officer of The Hershey Company, serving in that role since May 2017. Ms. West served as Executive Vice President, Chief Customer & Marketing Officer of J.C. Penney Company from 2015 through March 2017. From 2012 to 2014 she was the Executive Vice President, Chief Category & Marketing Officer for Mondelez International, Inc. Prior thereto, she served as the Chief Marketing Officer for Kraft Foods, Inc. from 1986 to 2012.

The Board has nominated Ms. West for election as a director because of her extensive experience and expertise in marketing, brand building, managing global franchises, understanding and applying consumer insights, and in developing compelling retail and sales experiences. Ms. West also possesses expertise in strategic and operational planning and execution, skill in managing global teams and a proven track record in delivering top tier consumer experiences and in building global brands.

Other Current Public Company Boards

 

   

None

Former Public Company Boards Held in the Past Five Years

 

   

J.C. Penney Company

 

 

 

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Linda K. Zecher

Age: 65

Director Since: 2014

Committees:

•   Audit

•   Compensation

•   Cybersecurity and Data Privacy

Experience and Qualifications

Linda K. Zecher is the Chief Executive Officer and Managing Partner of the Barkley Group (consulting firm focused on effective digital transformation), serving in those roles since January 2017. Prior to that, Ms. Zecher served as the President and Chief Executive Officer, and a member of the Board of Directors, of Houghton Mifflin Harcourt Company, from 2011 to 2016. Prior thereto, she was Corporate Vice President, Worldwide Public Sector of Microsoft Corporation from 2003 to 2011.

The Board has nominated Ms. Zecher for election as a director because of her extensive experience in leading the transformation of businesses in the fields of digital publishing, digital learning, and online sales and marketing, as well as her expertise and skill in driving technological innovation and in leading content development and distribution across channels and platforms. Ms. Zecher possesses expertise and experience in unified analog and digital content development and distribution, in strategic planning and execution for businesses focused on global cross-platform content development and delivery, and expertise in digital brand building, online business development and in driving technological innovation. The Board has determined that Ms. Zecher qualifies as an Audit Committee Financial Expert due to her prior experience, including service on public company audit committees and as the Chief Executive Officer, overseeing the Chief Financial Officer, of a public company.

Other Current Public Company Boards

 

   

None

Former Public Company Boards Held in the Past Five Years

 

   

Houghton Mifflin Harcourt

 

 

Vote Required.    Under the Company’s majority vote standard in order to be elected a director must receive a number of “For” votes that exceed the number of votes cast “Against” the election of the director. As such, an abstention is effectively a vote against a director. The Company’s majority vote standard and mandatory resignation policy are discussed in detail beginning on page 19 of this proxy statement.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION OF EACH OF THE THIRTEEN DIRECTOR NOMINEES NAMED ABOVE.

 

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GOVERNANCE OF THE COMPANY

Hasbro is committed to strong corporate governance, ethical conduct, sustainability and the accountability of our Board and our senior management team to the Company’s shareholders. We review our corporate governance principles and practices on a regular basis. Set forth below is a summary of our key governance principles and practices.

Code of Conduct

 

Hasbro has a Code of Conduct which is applicable to all of the Company’s officers, other employees and directors, including the Company’s Chief Executive Officer, Chief Financial Officer and Controller. The Code of Conduct addresses such issues as conflicts of interest, protection of confidential Company information, financial integrity, compliance with laws, rules and regulations, insider trading and proper public disclosure. Compliance with the Code of Conduct is mandatory for all Company officers, other employees and directors. Any violation of the Code of Conduct can subject the person at issue to a range of sanctions, including dismissal.

The Code of Conduct is available on Hasbro’s website at www.hasbro.com, under “Investors — Corporate Governance — Overview.” Although the Company generally does not intend to provide waivers of, or amendments to, the Code of Conduct for its Chief Executive Officer, Chief Financial Officer, Controller, or any other officers, directors or employees, information concerning any waiver of, or amendment to, the Code of Conduct for the Chief Executive Officer, Chief Financial Officer, Controller, or any other executive officer or director of the Company, will be promptly disclosed on the Company’s website in the location where the Code of Conduct is posted.

Corporate Governance Principles

 

Hasbro has adopted a set of Corporate Governance Principles which address qualifications for members of the Board of Directors, director responsibilities, director access to management and independent advisors, director compensation and many other matters related to the governance of the Company. The Corporate Governance Principles are available on Hasbro’s website at www.hasbro.com, under “Investors — Corporate Governance — Overview.”

Director Independence

 

Hasbro’s Board has adopted Standards for Director Independence (the “Independence Standards”) in accordance with The NASDAQ Stock Market’s (“Nasdaq”) corporate governance listing standards. The Independence Standards specify criteria used by the Board in making determinations with respect to the independence of its members and include strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company or its independent auditor. The Independence Standards are available on Hasbro’s website at www.hasbro.com, under “Investors — Corporate Governance — Overview.” A copy of the Independence Standards is also attached as Appendix A to this Proxy Statement.

The Independence Standards restrict commercial relationships between directors and the Company and include the consideration of other relationships with the Company, including charitable relationships, in making independence determinations. The Board has determined in accordance with our Independence Standards, that each of the following directors are independent and have no relationships which impact an independence determination under the Company’s Independence Standards: Kenneth A. Bronfin, Michael R. Burns, Hope F. Cochran, Sir Crispin H. Davis, Lisa Gersh, Alan G. Hassenfeld, Tracy A. Leinbach, Edward M. Philip, Richard S. Stoddart, Mary Beth West and Linda K. Zecher.

Alan G. Hassenfeld was formerly an employee and Chief Executive Officer of the Company. However, Mr. Hassenfeld’s officer and employee relationship with the Company ended in December 2005. Although Mr. Hassenfeld has a greater than 5% shareholding in the Company, which is detailed in the stock ownership tables in this Proxy Statement, that interest is only a minority interest in the total share ownership of the Company. The Board does not believe that the former employment relationship or equity interest impact Mr. Hassenfeld’s independence.

The only members of the Company’s Board who were determined not to be independent were Brian D. Goldner, the Company’s current Chairman and Chief Executive Officer, and John A. Frascotti, the Company’s President and Chief Operating Officer.

 

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Lead Independent Director

 

At the Company’s 2015 Annual Meeting, the role of Presiding Non-Management Director was replaced with an expanded role of Lead Independent Director. This reflected Hasbro’s continued commitment to good governance and to providing a strong voice for its independent directors. Edward M. Philip serves in the role of Lead Independent Director.

The Lead Independent Director’s primary responsibilities include:

 

 

reviewing and approving all information and materials to be sent to the Board;

 

 

reviewing and approving agendas and meeting schedules for all Board and Committee meetings, including to assure that there is sufficient time for discussion of all agenda items;

 

 

developing the agendas for, and moderating, executive sessions of the Board’s non-management and independent directors;

 

 

advising management on the quality, quantity and timeliness of information provided to the Board;

 

 

presiding at all meetings of the Board at which the Chairman and Chief Executive Officer is not present, including all executive sessions of the non-management and independent directors;

 

 

providing feedback to the Chairman and Chief Executive Officer regarding the matters discussed at such meetings and sessions, as appropriate;

 

 

having the authority to call meetings of the non-management and independent directors whenever the Lead Independent Director deems it appropriate or necessary;

 

 

serving as the principal liaison between the non-management and independent directors and the Chairman and Chief Executive Officer and management;

 

 

serving as the liaison between the non-management and independent directors and other constituents of the Company, such as shareholders, and meeting and consulting with major shareholders as part of the Company’s shareholder outreach programs and when otherwise requested by such shareholders;

 

 

serving as a conduit for third parties to contact the non-management and independent Directors as a group;

 

 

regularly consulting with the Chairman and Chief Executive Officer and other members of the Board on matters related to corporate governance and Board performance;

 

 

facilitating the retention of outside advisors for the independent directors and the Board as needed; and

 

 

performing such other duties as the Board may from time to time delegate or request.

Board Leadership Structure

 

The Chairman of the Company’s Board is elected by the Board on an annual basis. Currently, Mr. Goldner serves as Chairman of the Board, as well as Chief Executive Officer. Mr. Goldner’s appointment as Chairman in May 2015 reflected the integral role he has played and continues to play in the transformation of Hasbro’s business globally and in successfully formulating, reshaping and executing the Company’s strategy, including its expansion into new geographies and new categories, both before and following his appointment as Chief Executive Officer in 2008. The Board believes that combining these roles at this time is best for the Company and its shareholders as it will facilitate the functioning of the Board with senior management in strategic planning for the Company, in determining the Company’s key business opportunities and objectives as well as setting plans for achieving those objectives. Hasbro believes the combination of these roles with a proven leader positions the Company well for future success.

The Chairman of the Board provides leadership to the Board by, among other things, working with the Lead Independent Director and the Chief Legal Officer and Corporate Secretary to set Board calendars, determine agendas for Board meetings, ensure proper flow of information to Board members, facilitate effective operation of the Board and its Committees, help promote Board succession planning and the recruitment and orientation of new directors, oversee director performance, assist in consideration and Board adoption of the Company’s strategic plan and annual operating plans, and help promote senior management succession planning.

The Lead Independent Director, whose responsibilities are described in detail above, works with the Chairman to ensure the proper operation of the Board, and serves as the principal liaison between the non-management, independent directors and the Chairman and other constituents of the Company, such as shareholders.

 

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Majority Vote Standard

 

The Company has a majority vote standard for the election of directors in uncontested director elections (with a plurality vote standard applying to contested director elections), coupled with a director resignation policy for those directors who do not receive a majority vote.

In an election of directors which is not a contested election (as defined below), when a quorum is present, each nominee to be elected by shareholders shall be elected if the votes cast “for” such nominee exceed the votes cast “against” such nominee. In cases where as of the tenth (10th) day preceding the date on which the Company first mails its notice of meeting, for the meeting at which directors are being elected, the number of nominees for director exceeds the number of directors to be elected (referred to as a “contested election”), when a quorum is present, each nominee to be elected by shareholders shall be elected by a plurality of the votes cast.

In order for an incumbent director to become a nominee for re-election to the Board, such person must submit an irrevocable resignation, contingent on both that person not receiving a “for” vote that exceeds the “against” vote cast in an election that is not a contested election and acceptance of that resignation by the Board in accordance with the policies and procedures of the Board adopted for such purpose. In the event an incumbent director fails to receive a “for” vote that exceeds the “against” vote in an election that is not a contested election, the Company’s Nominating, Governance and Social Responsibility Committee shall make a recommendation to the Board as to whether to accept or reject the resignation of such incumbent director.

The Board shall act on the resignation, taking into account the recommendation of the Nominating, Governance and Social Responsibility Committee, and publicly disclose (by filing an appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale for that decision, within sixty (60) days following the final certification of the vote at which the election was held. The Nominating, Governance and Social Responsibility Committee in making its recommendation, and the Board in making its decision, may each consider all factors and information that they consider relevant and appropriate. Both the Nominating, Governance and Social Responsibility Committee, in making their recommendation, and the Board in making its decision, with respect to any given nominee who has not received the requisite vote in an election that is not a contested election, will act without the participation of the nominee in question.

Overboarding Policy

 

The Company has a policy providing that our board members may not serve on the boards of directors of more than a total of four public companies (including the Company’s Board) and/or registered investment fund families. If the director is also a sitting Chief Executive Officer of a public company, the director may not serve on more than one other public company board or registered investment fund family board, in addition to the Company’s board. In connection with Mr. Goldner’s appointment to the board of CBS Corporation, he was provided a transitional period to cease service on the board of The Gap, Inc.

The Board does not have a policy setting rigid limits on the number of audit committees on which a member of the Company’s Audit Committee can serve. Instead, in cases where an Audit Committee member serves on more than three public company audit committees, the Board evaluates whether such simultaneous service would impair the service of such member on the Company’s Audit Committee.

Director Orientation and Continuing Education

 

New directors receive an orientation to assist them in their roles as Board and committee members. Orientation includes subjects such as board governance and operation, Company history, strategic plans, business operations, financial position and legal and regulatory environment. Management also provides information on an ongoing basis to assure that Board members are aware of the business, legal and other developments necessary to fulfill their role. We also make available outside educational opportunities as the Board deems relevant and appropriate.

Annual Self-Evaluation for the Board and Board Committees

 

Every year the entire Board, as well as each of the committees of the Board, conduct a self-evaluation process. This process includes each director and each committee member submitting confidential feedback on the performance of the Board, as well as the performance of each committee on which they serve. The feedback is then collected and reviewed and discussed by the applicable committees, as well as the entire Board of Directors. This feedback informs changes the Board and the committees consider making to their processes and areas of review for the next year.

 

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Board Tenure

 

Although the Company does not have a formal policy with respect to Board tenure, the Board does seek to keep a balance of tenures to provide continuity of understanding of the business, long-term succession planning, and meaningful onboarding of new directors, including educating new directors with respect to the Company’s business, while also providing for new perspectives brought to bear by new Board members. The Board is targeting a mix of tenures in which roughly one-third of the Board members have been on the Board for five years or less, one-third of the members have been on the Board for six to ten years, and one-third of the members have served on the Board for longer than ten years. Although that is a general target, the composition of Board tenures may vary over time for many factors, including the availability of appropriate director candidates.

Proxy Access

 

In response to the affirmative vote of a majority of our shareholders on a proxy access shareholder proposal at our 2015 Annual Meeting, and other feedback received from our shareholders, including as part of our ongoing shareholder outreach, in October 2015 the Board amended the Company’s Amended and Restated By-Laws to implement a “proxy access” procedure. The By-Law amendment allows a shareholder or a group of up to 20 shareholders, who has maintained continuous ownership of at least 3% of the voting power of the Company’s outstanding voting stock for at least 3 years, to include nominees for election to the Board of Directors in the Company’s proxy statement. Subject to compliance with the requirements of the proxy access By-Law provisions, the shareholder or group of shareholders may include director nominees for up to the greater of (i) 20% of the Board, rounded down to the nearest whole number, or (ii) 2 nominees.

Share Retention Requirements

 

The Company has historically had share ownership guidelines which apply to all officers and employees at or above the Senior Vice President level and establish target share ownership levels which executives are expected to achieve over a five-year period and then maintain, absent extenuating circumstances. To further align executives’ interests with the long-term interests of shareholders, effective March 1, 2014, the Company adopted amendments to the share ownership policy, which include a requirement to retain a portion of any net shares realized from stock vesting or option exercises during the five-year period an executive has to achieve their stock ownership requirement until the executive’s ownership requirement level is satisfied. Until the applicable ownership level is achieved, the executive is required to retain an amount equal to at least 50% of the net shares received as a result of the exercise, vesting or payment of any equity awards granted to the executive following such executive becoming subject to the policy. Once the required stock ownership level is achieved, the executive is required to maintain the stock ownership level for as long as the executive is employed by the Company and is subject to the policy.

Equity Awards Granted in 2013 and Beyond Subject to Double Trigger Following a Change in Control

 

At the Company’s 2013 Annual Shareholder Meeting, shareholders approved amendments to the Company’s Restated 2003 Stock Incentive Performance Plan, as amended. This approval by our shareholders provided that all awards granted in 2013 and thereafter will be subject to a double trigger change in control provision. This means that rather than vesting automatically upon a change in control of the Company, such awards will only vest following a change in control if the award recipient’s employment with the Company is terminated under specified circumstances.

Clawback Policy

 

Under our Board approved Clawback Policy, all equity and non-equity incentive plan compensation granted by the Company in 2013 and thereafter is subject to this Clawback Policy. The policy provides that if an accounting restatement is required due to the Company’s material non-compliance with any accounting requirements, then all of the Company’s executive officers, regardless of whether they were at fault or not in the circumstances leading to the restatement, will be subject to forfeiting any excess in the incentive compensation they earned over the prior three years over what they would have earned if there had not been a material non-compliance in the financial statements.

 

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Policy Prohibiting the Pledging or Hedging of Company Stock

 

Under the Company’s Board approved insider trading policy, we prohibit any pledges or hedges of Company stock by directors, officers or other employees on a prospective basis. The Board believes this policy furthers the interest of shareholders by ensuring that directors, officers and employees have the same economic incentives as shareholders and that equity held by directors, officers and employees will not be sold in situations beyond the control of the director, officer or employee.

No Tax Gross-Ups

 

We do not have any existing tax gross-up arrangements with any of our directors, officers or other employees and we have made a commitment to not enter into such arrangements in the future.

Corporate Social Responsibility

 

At Hasbro, we believe that every day is a chance to do better. We strive to always act responsibly, and in doing so we find smarter ways of doing business. Our deep commitment to corporate social responsibility (CSR) reflects our desire to help build a safer, more sustainable world for future generations. It inspires and guides us to play with purpose: To take what we love most about play and entertainment — creativity, innovation, imagination — and make a difference where it matters most. And it makes every part of Hasbro’s business stronger.

While our CSR commitments address many areas, we focus on four key priorities: product safety, human rights and ethical sourcing, environmental sustainability, and diversity and inclusion.

 

 

Product Safety — At Hasbro, product safety is essential to upholding our consumers’ trust and expectations, and we embed quality and safety into every Hasbro product and play experience.

 

 

Human Rights and Ethical Sourcing — Treating people with fairness, dignity and respect and operating ethically in our supply chain are core values at Hasbro. We demonstrate these deep beliefs in the way we treat our employees and in the expectations and requirements we have of those with whom we do business. We work closely with our third-party factories and licensees to ensure all products are manufactured in safe and healthy environments and the human rights of workers in our supply chain are being upheld.

 

 

Environmental Sustainability — We are passionate about protecting our planet and conserving natural resources for future generations, including pursuing innovative ways to reduce our environmental impacts across business. Through Hasbro’s Sustainability Center of Excellence, we drive our strategic environmental blueprint across our global organization with a focus on reducing the environmental impacts of our products and packaging, minimizing the environmental footprint of our operations and supply chain, and encouraging our employees to embrace and promote environmental responsibility.

 

 

Diversity and Inclusion — At Hasbro, we believe that supporting gender equality and promoting inclusion across our business and society makes the world a better place for all. We know that the more inclusive we are as a company, the stronger our business will be. Our commitment also extends to our supply chain where we strive to support the personal and professional growth of female factory workers who make up the majority of the worker base, with a goal of positively impacting their lives and well-being.

Another important element of the Company’s CSR efforts is our tradition of supporting children worldwide through a variety of philanthropic programs. In 2018, our support exceeded $20 million, including both financial contributions and donations of more than 1.4 million toys and games.

Hasbro received several prestigious recognitions for our CSR efforts, including being named one of the 2019 World’s Most Ethical Companies® by the Ethisphere Institute, marking our eighth consecutive year to receive this distinction. Additionally, in 2018, we ranked #5 on the 100 Best Corporate Citizens list by Corporate Responsibility Magazine, marking the seventh consecutive year Hasbro has been ranked at the top of the list. We were also named one of America’s Most Reputable Companies by the Reputation Institute and named one of America’s Most Community Minded Companies by the Civic 50.

Board Meetings and Director Attendance at the Annual Meeting

 

During 2018, the Board held ten meetings. All directors attended at least 75% of the aggregate of (i) the Board meetings held during their tenure as directors during 2018 and (ii) the meetings of any committees held during their tenure as members of such committees during 2018. Although the Company does not have a formal policy requiring attendance of directors at the annual meeting of shareholders, the expectation of the Company and the Board is that all directors will attend the annual meeting of shareholders unless conflicts prevent them from attending. All members of the Board attended the 2018 Annual Meeting of Shareholders.

 

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Board Committees

 

Our Board of Directors has six standing committees: Audit, Compensation, Cybersecurity and Data Privacy, Executive, Finance, and Nominating, Governance and Social Responsibility.

The members of each of our required committees, namely Audit, Compensation and Nominating, Governance and Social Responsibility, are all independent directors, as defined by Nasdaq rules and our Independence Standards. Additionally, all members of our Audit Committee meet the additional SEC and Nasdaq independence and experience requirements applicable specifically to audit committee members, and all members of our Compensation Committee satisfy the additional independence requirements specifically applicable to compensation committee members. The Chair of each committee regularly reports to our Board of Directors on committee deliberations and decisions. Each committee’s charter is posted on our website, www.hasbro.com, under the “Investors — Corporate Governance — Overview” subsection of the website.

The principal functions of each committee, together with the committee composition and number of meetings held in 2018 are set forth in the table below.

 

Committee   Principal Function   Number
of
Meetings
in 2018
  2018 Committee
Members
       
Audit  

•  Directly responsible for the appointment, compensation, retention and oversight of the Company’s independent auditor

 

•  Assists the Board in its oversight of:

 

•  the integrity of the Company’s financial statements, including management’s conduct of the Company’s financial reporting process, the financial reports provided by the Company, the Company’s systems of internal accounting and financial controls, and the quarterly review and annual independent audit of the Company’s financial statements

 

•  the Company’s compliance with legal and regulatory requirements

 

•  the independent auditor’s qualifications and independence

 

•  performance of the Company’s internal audit function and internal auditor

 

  13  

•  Hope F. Cochran (Chair)

 

•  Lisa Gersh

 

•  Tracy A. Leinbach

 

•  Richard S. Stoddart

 

•  Linda K. Zecher

       
Compensation  

•  Responsible for establishing and overseeing the compensation policies, arrangements and plans of the Company with respect to senior management, including all executive officers

 

•  Oversight of the Company’s incentive compensation and equity-based plans, including authorization to make grants and awards under the Company’s employee stock equity plan

 

•  Shares responsibility for evaluation of the Company’s Chief Executive Officer with the Nominating, Governance and Social Responsibility Committee

 

  6  

•  Edward M. Philip (Chair)

 

•  Kenneth A. Bronfin

 

•  Crispin H. Davis

 

•  Lisa Gersh

 

•  Linda K. Zecher

       
Cybersecurity and Data Privacy  

•  Assists the Board in its oversight of the protection of information and assets collected, created, used, processed and/or maintained by or on behalf of the Company, including intellectual property, whether belonging to the Company or the Company’s     customers, consumers, employees or business partners, globally

  4  

•  Richard S. Stoddart (Chair)

 

•  Kenneth A. Bronfin

 

•  Alan G. Hassenfeld

 

•  Linda K. Zecher

 

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Committee   Principal Function   Number
of
Meetings
in 2018
  2018 Committee
Members
   

 

•   Assists the Board in its oversight of the protection of the Company’s customers’, consumers’, and employees’ privacy and personal information

 

•   Assists the Board in its oversight of the Company’s compliance with applicable global data privacy and security regulations and requirements, and the Company’s other cyber risk management activities, including measures to maintain the availability, integrity and functionality of the Company’s information technology systems, networks, and assets

 

       
       
Executive  

•   Acts on such matters as are specifically assigned to it from time to time by the Board and is vested with all of the powers that are held by the Board to the extent permitted by law

   

•  Alan G. Hassenfeld (Chair)

 

•  Hope F. Cochran

 

•  Brian G. Goldner

 

•  Tracy A. Leinbach

 

•  Edward M. Philip

 

•  Richard S. Stoddart

 

•  Mary Beth West

 

       
Finance  

•   Assists the Board in overseeing the Company’s annual and long-term financial plans, capital structure, use of funds, investments, financial and risk management and proposed significant transactions

 

  4  

•  Mary Beth West (Chair)

 

•  Kenneth A. Bronfin

 

•  Michael R. Burns

 

•  Hope F. Cochran

 

•  Alan G. Hassenfeld

 

       

Nominating,

Governance and

Social

Responsibility

 

•   Identifies and evaluates individuals qualified to become Board members and makes recommendations to the full Board for possible additions to the Board and on the director nominees for election at the Company’s annual meeting

 

•   Oversees and makes recommendations regarding the governance of the Board and its committees, including the Company’s governance principles, Board and Board committee evaluations

 

•   Shares with the Compensation Committee responsibility for evaluation of the Chief Executive Officer

 

•   Periodically reviews and makes recommendations to the full Board with respect to, the compensation paid to non-employee directors for their service on the Company’s Board, including the structure and elements of non-employee director compensation

 

•   Oversees the Company’s codes of business conduct and ethics

 

 

•  Analyzes significant issues of corporate social responsibility and related corporate conduct, including product safety, environmental sustainability and climate change, human rights and ethical sourcing, responsible marketing, transparency, public policy matters, community relations and charitable contributions

  5  

•  Tracy A. Leinbach (Chair)

 

•  Michael R. Burns

 

•  Crispin H. Davis

 

•  Edward M. Philip

 

•  Richard S. Stoddart

 

•  Mary Beth West

 

 

The Board has determined that this person qualifies as an Audit Committee Financial Expert under applicable SEC rules.

 

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Role of the Board in Risk Oversight

 

The Board of Directors is actively involved in risk oversight for the Company. Although the Board as a whole has retained oversight over the Company’s risk assessment and risk management efforts, the efforts of the various committees of the Board are instrumental in this process. Each committee, generally through its Chair, then regularly reports back to the full Board on the conduct of the committee’s functions. The Board, as well as the individual Board committees, also regularly speaks directly with key officers and employees of the Company involved in risk assessment and risk management. Set forth below is a description of the role of the various Board committees, and the full Board, in risk oversight for the Company.

The Audit Committee assists the Board in risk oversight for the Company by reviewing and discussing with management, internal auditors and the independent auditors the Company’s significant financial and other exposures, and guidelines and policies relating to enterprise risk assessment and risk management, including the Company’s procedures for monitoring and controlling such risks. In addition to exercising oversight over key financial and business risks, the Audit Committee oversees, on behalf of the Board, financial reporting, tax, and accounting matters, as well as the Company’s internal controls over financial reporting. The Audit Committee also plays a key role in oversight of the Company’s compliance with legal and regulatory requirements.

The Cybersecurity and Data Privacy Committee assists the Board in its oversight of the protection of information and assets collected, created, used, processed and/or maintained by or on behalf of the Company, including intellectual property, whether belonging to the Company or the Company’s customers, consumers, employees or business partners, globally, the Company’s compliance with all applicable global data privacy and security regulations and requirements, and the Company’s other cyber risk management activities.

The Finance Committee of the Board reviews and discusses with management the Company’s financial risk management activities and strategies, including with respect to foreign currency, credit risk, interest rate exposure, and the use of hedging and other techniques to manage these risks. As part of its review of the operating budget and strategic plan the Finance Committee also reviews major business risks to the Company and the Company’s efforts to manage those risks.

The Compensation Committee oversees the compensation programs for the Company’s executive officers. As part of that process the Compensation Committee ensures that the performance goals and metrics being used in the Company’s compensation plans and arrangements align the interests of executives with those of the Company and its shareholders and maximize executive and Company performance, while not creating incentives on the part of executives to take excessive or inappropriate risks.

The Nominating, Governance and Social Responsibility Committee has oversight over the Company’s governance policies and structures, management and director succession planning, corporate social responsibility, and issues related to health, safety and the environment, as well as risks and efforts to manage risks to the Company in those areas.

The full Board then regularly reviews the efforts of each of its committees and discusses, at the level of the full Board, the key strategic, financial, business, legal and other risks facing the Company, as well as the Company’s efforts to manage those risks.

Director Retirement Age

 

The Board has established a target retirement age of 72. Normally, a Director who has reached this age will serve out his or her current term and not stand for re-election at the end of that term. However, the Board recognizes that from time to time there may be unusual circumstances where exceptions need to be made to this general rule to retain needed continuity and expertise, or for other business reasons.

Additional Availability of Corporate Governance Materials

 

In addition to being accessible on the Company’s website, copies of the Company’s Code of Conduct, Corporate Governance Principles and the charters of the six committees of the Board of Directors are all available free of charge to any shareholder upon request to the Company’s Chief Legal Officer and Corporate Secretary, c/o Hasbro, Inc., 1011 Newport Avenue, P.O. Box 1059, Pawtucket, Rhode Island 02861.

 

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Shareholder Proposals

 

General Shareholder Proposals

To Be Considered at the Annual Meeting and Considered for Inclusion in the Proxy Materials.     Any proposal which a shareholder of the Company wishes to have considered for inclusion in the proxy statement and proxy relating to the Company’s 2020 Annual Meeting of Shareholders must be received by the Secretary of the Company at the Company’s executive offices no later than December 4, 2019 (the date that is 120 calendar days before the anniversary of the release date of the proxy statement relating to the 2019 Annual Meeting of Shareholders). The address of the Company’s executive offices is 1011 Newport Avenue, Pawtucket, Rhode Island 02861. Such proposals should be sent to the attention of the Chief Legal Officer and Corporate Secretary and must also comply with the other requirements of the rules of the United States Securities and Exchange Commission relating to shareholder proposals.

To Be Considered at the Annual Meeting But Not Included in the Proxy Materials.    With the exception of the submission of director nominations for consideration by the Nominating, Governance and Social Responsibility Committee, which must be submitted to the Company in the manner described below, any new business proposed by any shareholder to be taken up at the 2020 Annual Meeting, but not included in the proxy statement or proxy relating to that meeting, must be stated in writing and filed with the Secretary of the Company no later than 150 days prior to the date of the 2020 Annual Meeting. Except for shareholder proposals made pursuant to the preceding paragraph, the Company will retain discretion to vote proxies at the 2020 Annual Meeting with respect to proposals received prior to the date that is 150 days before the date of such meeting, provided (i) the Company includes in its 2020 Annual Meeting proxy statement advice on the nature of the proposal and how it intends to exercise its voting discretion and (ii) the proponent does not issue a proxy statement.

Director Nominations

 

Our Nominating, Governance and Social Responsibility Committee is responsible for identifying individuals qualified to be members of our Board of Directors and reviewing candidates recommended by our shareholders. In making its nominations for election to the Board the Nominating, Governance and Social Responsibility Committee seeks candidates who meet the current challenges and needs of the Board. As part of this process the Committee considers a number of factors, including, among others, a candidate’s employment and other professional experience, past expertise and involvement in areas which are relevant to the Company’s business, business ethics and professional reputation, independence, other board experience, and the Company’s desire to have a Board that represents a diverse mix of backgrounds, perspectives and expertise. The Company does not have a formal policy for considering diversity in identifying and recommending nominees for election to the Board, but the Nominating, Governance and Social Responsibility Committee considers diversity of viewpoint, experience, education, skill, background and other qualities in its overall consideration of nominees qualified for election to the Board. The Nominating, Governance and Social Responsibility Committee will consider and evaluate nominees recommended by shareholders for election to the Board on the same basis as candidates from other sources if such nominations are made in accordance with the processes set forth below. The Nominating, Governance and Social Responsibility Committee uses multiple sources for identifying and evaluating nominees for director, including referrals from current directors, recommendations by shareholders and input from third-party executive search firms. The Company is proud that of the thirteen director nominees standing for election to the Board at the 2019 Annual Meeting of Shareholders, five of those candidates are female.

Director Nominations to be made at the Annual Meeting But Not Included in the Proxy Materials.    The Company’s By-laws provide that shareholders may themselves nominate directors for consideration at an annual meeting provided they give timely written notice to the Secretary of the Company. Such notice must be received at the principal executive office of the Company not less than 90 days nor more than 120 days prior to the one-year anniversary date of the immediately preceding annual meeting of shareholders (provided that if the date of the annual meeting is advanced by more than thirty (30) days prior to or delayed by more than thirty (30) days before or after such anniversary date, notice by the shareholder must be delivered not earlier than one hundred twenty (120) days prior to the annual meeting and not later than (i) the ninetieth (90th) day prior to the date of such annual meeting or (ii) the tenth (10th) day following the day on which the notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs). To be in proper form the notice must provide specified information regarding the proposed nominee and each shareholder proposing such nomination, as set forth in the Company’s By-Laws. As such, director nominations to be considered for the Company’s 2020 Annual Meeting of Shareholders must be submitted no earlier than January 17, 2020, and no later than February 16, 2020. Nominations made by

 

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shareholders in this manner are eligible to be presented by the shareholder to the meeting, but such nominees will not have been considered by the Nominating, Governance and Social Responsibility Committee as a nominee to be potentially supported by the Company and will not have been included in the Company’s proxy materials.

Director Nominations to be Considered by the Company’s Nominating, Governance and Social Responsibility Committee.    To be considered by the Nominating, Governance and Social Responsibility Committee, director nominations must be submitted to the Chief Legal Officer and Corporate Secretary of the Company at the Company’s executive offices, 1011 Newport Avenue, Pawtucket, Rhode Island 02861 not less than ninety (90) nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year’s annual meeting. As such, director nominations to be considered for the Company’s 2020 Annual Meeting of Shareholders must be submitted no earlier than January 17, 2020, and no later than February 16, 2020. The Nominating, Governance and Social Responsibility Committee is only required to consider recommendations made by shareholders, or groups of shareholders, that have beneficially owned at least 1% of the Company’s Common Stock for at least one year prior to the date the shareholder(s) submit such candidate to the Nominating, Governance and Social Responsibility Committee and who undertake to continue to hold at least 1% of the Company’s Common Stock through the date of the next annual meeting. In addition, a nominating shareholder(s) may only submit one candidate to the Nominating, Governance and Social Responsibility Committee for consideration.

Submissions to the Nominating, Governance and Social Responsibility Committee should include (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Company that are owned beneficially or of record by the person, (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, and (v) confirmation that the candidate is independent under the Company’s Independence Standards and Nasdaq rules, or if the candidate is not independent under all such criteria, a description of the reasons why the candidate is not independent; and (b) as to the shareholder(s) giving the notice (i) the name and record address of such shareholder(s) and each participant in any group of which such shareholder is a member, (ii) the class or series and number of shares of capital stock of the Company that are owned beneficially or of record by such shareholder(s) and each participant in any group of which such shareholder is a member, (iii) if the nominating shareholder is not a record holder of the shares of capital stock of the Company, evidence of ownership as provided in Rule 14a-8(b)(2) under the Exchange Act, (iv) a description of all arrangements or understandings between such shareholder(s) and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such shareholder(s), and (v) any other information relating to such shareholder(s) that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.

The Nominating, Governance and Social Responsibility Committee may require that any proposed nominee for election to the Board furnish such other information as may reasonably be required by the Nominating, Governance and Social Responsibility Committee to determine the eligibility of such proposed nominee to serve as director of the Company. The written notice from the nominating shareholder specifying a candidate to be considered as a nominee for election as a director must be accompanied by a written consent of each proposed nominee for director. In this written consent the nominee must consent to (i) being named as a nominee for director, (ii) serve as a director and represent all shareholders of the Company in accordance with applicable laws and the Company’s Articles of Incorporation, By-laws and other policies if such nominee is elected, (iii) comply with all rules, policies or requirements generally applicable to non- employee directors of the Company, and (iv) complete and sign customary information requests upon the request of the Company.

Director Nominations Under Proxy Access Bylaw.    In 2015, we adopted an amendment to the Company’s Amended and Restated By-Laws to include a proxy access procedure that permits, under certain circumstances, a stockholder or group of stockholders to include director candidates that they have nominated in the Company’s proxy statement. Shareholders are referred to the By-laws for the full details related to this procedure.

The By-Law amendment allows a shareholder or a group of up to twenty (20) shareholders, who has maintained continuous ownership of at least 3% of the voting power of the Company’s outstanding voting stock for at least 3 years, to include nominees for election to the Board of Directors in the Company’s proxy statement. Subject to

 

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compliance with the requirements of the proxy access By-Law provisions, the shareholder or group of shareholders may include director nominees for up to the greater of (i) 20% of the Board, rounded down to the nearest whole number, or (ii) 2 nominees. The nominating shareholder or group of shareholders must timely deliver notice to the Secretary of the shareholder nominee together with the other information required by our By-Laws, and each nominee must meet the qualifications required by our By-Laws.

To be timely, the notice to include shareholder-nominated candidates in the Company’s proxy materials to the Secretary must be delivered to or mailed and received at the principal executive offices of the Company not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the one-year anniversary date of the immediately preceding annual meeting of shareholders (provided that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the one hundred twentieth (120th) day prior to such annual meeting and not later than the later of (x) the ninetieth (90th) day prior to the date of such annual meeting or (y) the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs). As such, requests to include shareholder-nominated candidates in our proxy materials for the 2020 annual meeting must be received by our Secretary no earlier than January 17, 2020, and no later than February 16, 2020.

 

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

The Company has a policy that any transaction which would require disclosure under Item 404(a) of Regulation S-K of the rules and regulations of the United States Securities and Exchange Commission, with respect to a director or nominee for election as a director, must be reviewed and approved or ratified by the Company’s full Board, excluding any director interested in such transaction. All other related person transactions which would require disclosure under Item 404(a), including, without limitation, those involving executive officers of the Company, must be reviewed and approved or ratified by either the Company’s full Board or a committee of the Board which has been delegated with such duty. Any such related person transactions will only be approved or ratified if the Board, or the applicable committee of the Board, determines that such transaction will not impair the involved person’s service to, and exercise of judgment on behalf of, the Company, or otherwise create a conflict of interest which would be detrimental to the Company. This policy is contained in Section 20, entitled “Code of Conduct; Conflicts of Interest” of the Company’s Corporate Governance Principles.

In 2015 the Company entered into a Rights Agreement with NGC Films, Inc. (“NGC”), an affiliate of Lions Gate Entertainment Corp., pursuant to which NGC Films has the option to acquire rights to produce and release a motion picture based upon the Company’s MONOPOLY property. Pursuant to that agreement NGC paid a $250,000 option fee to the Company in 2015 for an initial two-year option period. NGC has extended the option period for an additional year twice to date (once in 2017 and again in 2018), each time paying the Company an additional $125,000. If NGC ultimately exercises its option it will pay the Company an agreed upfront rights fee for the motion picture rights and a producer fee, as well as future contingent compensation based upon the receipts from the motion picture. The Company will pay NGC a royalty on sales of picture-based merchandise sold by the Company.

The Company entered an agreement in 2017 with Lions Gate Films Inc. (“Lions Gate Films”) pursuant to which Lions Gate Films distributed the Company’s MY LITTLE PONY: THE MOVIE motion picture, which was released in October of 2017. Lions Gate Films made commitments with respect to the distribution of the film, including for promotional and advertising spending on the film. Under the Agreement, Lions Gate Films receives a specified distribution fee for distributing the motion picture and remits the gross receipts from distribution of the movie, after deducting the distribution fee and distribution expenses, to the Company. During 2018, Lions Gate Films had been paid approximately $3.4 million in distribution fees under this Agreement. Since release of the motion picture, Lions Gate Film has been paid an aggregate of $4.7 million in distribution fees under this Agreement.

Any agreement between the Company and Lions Gate, or any of its affiliates, is reviewed with and approved by the Company’s Board of Directors, without the participation of Michael Burns. The Company believes the terms of these agreements are commercially reasonable and appropriate. Mr. Burns, a member of the Company’s Board of Directors, is the Vice Chairman of Lions Gate Entertainment Corp.

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee (the “Compensation Committee” or the “Committee”) of the Company’s Board of Directors (the “Board”) establishes and oversees the compensation programs for the Company’s executive officers, including all of the Company’s Named Executive Officers appearing in the compensation tables following this report, and oversees all equity grants under the Company’s shareholder approved Amended and Restated 2003 Stock Incentive Performance Plan. The Company only uses a shareholder approved equity compensation plan. The Committee operates under a written charter, which has been established by the Company’s full Board and which is reviewed and evaluated by both the Committee and the Board on an annual basis. The Compensation Committee charter is available on the Company’s website at www.hasbro.com, under “Investors — Corporate Governance — Overview.”

The Committee is composed solely of persons who are both “Non-Employee Directors,” as defined in Rule 16b-3 of the rules and regulations of the United States Securities and Exchange Commission, and “outside directors,” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Board has determined that each member of the Committee is independent under the Company’s Independence Standards and the requirements of The NASDAQ Stock Market’s corporate governance listing standards. The exercise of independent judgment in furtherance of the interests of the Company and its shareholders is the guiding principle behind the Committee’s actions.

The following section of this Proxy Statement, entitled “Compensation Discussion and Analysis”, contains a detailed discussion regarding the objectives of the Company’s executive compensation programs, how those programs drive Company performance, and a review of the processes and program elements used by the Committee to attract and retain top executive talent, align the interests of the executive team with those of the Company’s shareholders, create a powerful linkage between pay and performance and maximize the business results of the Company.

The Committee has reviewed and discussed with management the Compensation Discussion and Analysis that follows this report. Based on its review and discussions with management, the Committee recommended to the Company’s full Board, and the full Board has approved, the inclusion of the Compensation Discussion and Analysis in this Proxy Statement for the Meeting and, by incorporation by reference, in the Company’s Annual Report on Form 10-K for the year ended December 30, 2018.

Report issued by the members of the Compensation Committee as of the Company’s 2018 fiscal year end.

Edward M. Philip (Chair)

Kenneth A. Bronfin

Crispin H. Davis

Lisa Gersh

Linda K. Zecher

 

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COMPENSATION DISCUSSION AND ANALYSIS

In the following Compensation Discussion and Analysis, we describe the compensation programs for our Named Executive Officers (NEOs).

Table of Contents

 

Executive Summary

     31  

Business and Performance Overview

     31  

Shareholder Engagement

     36  

Executive Compensation Program Structure and Alignment with Performance

     36  

Variable Compensation Outcomes

     38  

Extension and Amendment of the Employment Agreement with our Chief Executive Officer

     39  

Employment Agreement with our President and Chief Operating Officer

     39  

Executive Compensation Philosophy and Objectives

     40  

Strong Compensation Governance Practices

     41  

Compensation Process

     41  

Peer Group and Benchmarking to the Market

     41  

Role of the Independent Compensation Consultant

     43  

Executive Compensation Program Elements

     44  

Elements of Compensation Summarized

     44  

Variable and Performance-Based Compensation Elements

     44  

Annual Incentive Compensation

     45  

Long-Term Incentive Compensation

     49  

Performance Contingent Stock

     50  

Restricted Stock Units

     50  

Stock Options

     51  

Fixed Compensation and Benefits

     51  

Base Salary

     51  

Benefits

     51  

Company-Sponsored Retirement Plans

     51  

Nonqualified Deferred Compensation Plan

     52  

Perquisites

     53  

Severance and Change in Control Benefits

     53  

Reported versus Realized Pay Table

     54  

Other Compensation Considerations

     55  

Stock Ownership Guidelines

     55  

Compensation and Risk Management

     55  

Tax Considerations

     56  

Executive Compensation

     57  

 

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Executive Summary

2018 Named Executive Officers

 

The Company’s Named Executive Officers (NEOs) for 2018 are listed in the following table.

 

  Name   Title
  Brian D. Goldner   Chairman and Chief Executive Officer
  John A. Frascotti   President and Chief Operating Officer
  Deborah M. Thomas   Executive Vice President and Chief Financial Officer
  Stephen J. Davis   Executive Vice President and Chief Content Officer
  Wiebe Tinga   Executive Vice President and Chief Commercial Officer

Business and Performance Overview

We are a global play and entertainment company committed to Creating the World’s Best Play Experiences and fulfilling the fundamental need for play and connection for children and families around the world. We strive to do this through deep consumer engagement and the application of consumer insights, the use of immersive storytelling to build our brands, world-class product innovation and development of global business reach. We apply these principles to leverage our beloved owned and controlled brands, including our seven Franchise Brands: BABY ALIVE, MAGIC: THE GATHERING, MONOPOLY, MY LITTLE PONY, NERF, PLAY-DOH and TRANSFORMERS, as well as the licensed brands of our strategic partners. Key partner brands in 2018 included BEYBLADE, MARVEL, DISNEY PRINCESS and DISNEY FROZEN, DREAMWORKS’ TROLLS and STAR WARS. Our wholly-owned Hasbro Studios and its film labels, Allspark Pictures and Allspark Animation, create brand-driven storytelling across mediums, including television, film, digital and more.

These elements are executed globally within the construct of our strategic plan, which we refer to as the brand blueprint. Using this blueprint, we create new brands and re-imagine, re-invent and re-ignite our existing owned and controlled brands through toy and game innovation, immersive content offerings, including television programming, motion pictures and digital content, digital gaming and a broad range of consumer products, ranging from traditional to digital, all informed by storytelling and consumer insights.

 

 

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In October 2017 we entered into a relationship with Paramount Pictures Corporation (“Paramount”) to produce and distribute live action and animated films, as well as television programming, based on Hasbro brands over a five-year period. Hasbro’s Allspark Pictures and Allspark Animation will play an active role alongside Paramount in content development and production under this arrangement and we will play a more significant role in financing the films as well.

 

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2018 Overview

2018 was a very disruptive year for our business, driven by the bankruptcy and liquidation of Toys“R”Us across most of the world, a rapidly shifting consumer and retail landscape, the need to reduce retail inventories in some markets, particularly in Europe, where we worked to address changing consumer shopping behaviors, and challenging economic conditions in key markets, notably the U.K.

Over the period from 2012 through 2017 we delivered on our medium-term objectives. During that six-year period we delivered:

 

 

5% compound annual growth rate (“CAGR”) for revenues in developed markets

 

 

15% CAGR for revenues in emerging markets

 

 

Improved operating profit margins

 

 

Average operating cash flow of $584 million per year

 

 

Improved return on invested capital

Following our delivery of record revenues in 2016 and again in 2017, revenues for 2018 declined. Despite the challenging environment, during 2018 we managed through these conditions, diversifying our retailer base, meaningfully reducing retail inventories, delivering innovative new offerings to our global consumers and modernizing our global organization, including streamlining and focusing our teams and cutting costs across our business.

We were not, however, able to recapture as much of the lost Toys“R”Us business during 2018 as we had anticipated, as the effect of its liquidation of inventory in the market was more impactful than we and industry experts had expected. In 2018 we continued taking the steps to position our business for the future and our focus remains on the long-term profitable growth of our Company and on achieving our strategic objectives and investment priorities.

2018 Performance

In 2018:

 

 

We delivered net revenues of $4.58 billion, a decrease of 12% from 2017, including an unfavorable $43 million impact of foreign exchange.

 

 

Revenues grew in the Entertainment and Licensing segment, but declined in the U.S. and Canada and International segments.

 

 

Retailer inventories declined significantly in the U.S. and Europe, reflecting the loss of Toys“R”Us in addition to our, and our retailers’ continued efforts to reduce retail inventory levels.

 

 

Franchise brand revenues declined 9%.

 

 

Partner brand revenues declined 22%.

 

 

Hasbro Gaming revenues declined 12%.

 

 

Emerging Brand revenues increased 1%.

 

 

We acquired the POWER RANGERS brand from Saban Properties.

 

 

Reported net earnings were $220.4 million, or $1.74 per diluted share.

 

 

Adjusted net earnings were $488.8 million, or $3.85 per diluted share, excluding aggregate after tax charges detailed below of $268.4 million, or $2.11 per diluted share.

 

 

We generated $646 million in operating cash flow.

 

 

We returned $559.4 million to our shareholders, consisting of $309.3 million in cash dividends and $250.1 million in share repurchases.

 

 

In February 2019, our Board approved an 8% increase in the quarterly dividend, bringing the quarterly dividend to $0.68 per common share. This is the highest quarterly dividend rate in our history. We have increased the quarterly dividend in 15 of the prior 16 years.

The after-tax charges excluded from 2018 full-year adjusted net earnings consist of:

 

 

$96.9 million, or $.76 per diluted share, associated with fourth quarter 2018 non-cash impairment charges related to Backflip Studios goodwill and other intangible assets.

 

 

$77.9 million, or $.61 per diluted share, of severance costs associated with previously announced organizational actions.

 

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$52.8 million, or $.42 per diluted share, associated with Toys“R”Us, primarily bad debt expense.

 

 

$40.7 million, or $.32 per diluted share, impact from U.S. tax reform based on remeasurement of current liabilities and additional regulations issued in 2018.

Providing value and return to our shareholders is our most fundamental corporate objective. The tables below compare the total return on our shares of common stock over the designated periods to the returns for the S&P 500 Index and Russell 1000 Consumer Discretionary Index, and provide the Company’s annual dividend rate and the year-over-year increases in dividend rates since 2009.

Annualized 1-Year, 3-Year, 5-Year and 10-Year Total

Shareholder Return Ending 12/30/2018

 

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Annualized Dividends 2009-2019

 

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% reflects increase in quarterly dividend rate

 

* 2012 and 2013 annual dividend rates have been adjusted to move accelerated payment paid in 2012 to 2013

 

** 2019 annual dividend rate is projected

 

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The following graph charts the Company’s net revenues (in millions of dollars) for every fiscal year since 2009.

Net Revenues

 

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The following tables provide: (i) the Company’s GAAP diluted earnings per share (and adjusted earnings per share for 2017 excluding the impact of U.S. Tax reform and for 2018 excluding the impact of the adjustments discussed on pages 32-33), (ii) operating cash flow (in millions of dollars), (iii) operating profit margin (which for 2018 excludes the impact of the adjustments discussed on pages 32-33) and (iv) return on invested capital (which for 2017 excludes the impact of U.S. tax reform and for 2018 excludes the impact of the adjustment discussed on pages 32-33) for each of the five most recently completed fiscal years. Return on invested capital (ROIC) is computed as net earnings divided by the sum of long-term debt (less debt issuance costs), short-term borrowings and shareholders’ equity. Reported diluted earnings per share were $3.12 for 2017, and adjusted earnings per share were $5.46 excluding the $2.34 impact of U.S. tax reform. Reported diluted earnings per share for 2018 were $1.74, and adjusted diluted earnings per share were $3.85, excluding the $2.11 impact of the adjustments noted above. Inclusive of the impact of U.S. tax reform the 2017 return on invested capital was 10.8% and inclusive of the adjustments excluded above the return on invested capital was 6.4% for 2018. Reported operating profit margin was 7.2% for 2018 and adjusted operating profit margin was 13.1% for 2018. The operating cash flows for 2015 and 2016 in the table below were restated from amounts previously reported to reflect the adoption of ASU 2016-09.

 

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Diluted Earnings per share operating cash flow operating profit margin return on invested capital

A reconciliation of our GAAP to Non-GAAP financial measures is included in Appendix B to this Proxy Statement.

 

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The following table provides the amounts we have returned to our shareholders since 2014, in the form of both cash dividends and share repurchases.

 

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Cash Returned to Shareholders Dividend and Share Repurchase

Shareholder Engagement

Hasbro has engaged with our major shareholders on governance and compensation matters for many years. We do this as part of our commitment to be responsive to shareholders and to ensure that our actions are informed by the viewpoints of you, our investors.

Our shareholders overwhelmingly supported our Say-on-Pay votes in the last three years, with favorable votes from 97.4%, 98.1% and 96.8% of the shares voted at the 2016, 2017 and 2018 Annual Meetings, respectively.

In 2018 we again spoke with shareholders who expressed an interest in speaking with us. In addition to speaking with any shareholders who reached out to us, we proactively extended an invitation to our top shareholders (who held in aggregate approximately 56% of our outstanding shares) to meet and we had discussions with all of such shareholders who accepted our invitation. Based upon our continuing dialog with shareholders and our 2018 Say-on-Pay vote results, we believe our current compensation program for our executive officers reflects our shareholder’s views and strongly drives our pay for performance objectives.

Executive Compensation Program Structure and Alignment with Performance

The Compensation Committee has implemented a carefully-structured executive compensation program that is tightly linked to long-term shareholder value creation. The program incorporates a combination of short-term and long-term forms of compensation that are structured to incentivize company performance and the achievement of corporate objectives the Committee believes are critical to driving sustained long-term shareholder value. At the same time, the program incorporates elements that ensure the Company is able to attract and retain top executive talent with the creativity, innovation, relentless drive and diverse skills in storytelling and entertainment, branded-play, consumer products, media and technology that are critical to the successful execution of our strategy and ongoing business transformation.

 

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In support of this linkage to long-term shareholder value creation, a significant portion of the total compensation opportunity for our Named Executive Officers is performance-based and at risk. The chart below shows that 81.5% of our CEO’s total target compensation for 2018, was performance based and at risk.

 

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The following chart summarizes the components of our 2018 compensation program for our CEO and our other NEOs.

 

 

2018 CEO/NEO Pay Program Elements

 

Annual Cash Compensation

 

  

Long-Term Equity Incentive Plan

 

     
Base Salary   

•  Fixed compensation

 

•  Set at industry competitive level, in light of individual experience and performance

   Performance Contingent Stock Awards   

•  Represent ~50% of annual target equity award value

 

•  Earned based on challenging long-term three-year goals that require sustained strong operating performance

 

•  Tied to achievement of EPS, Net Revenue and ROIC targets over a 3-year performance period

     
Management Incentive Awards   

•  Performance-based; tied to company and individual achievement against stated annual financial and strategic goals

 

•  Align management behavior with shareholder interests

 

•  Designed to be flexible to enable us to reward for strategic and operating performance not captured by the financial metrics listed below by allowing the Committee to adjust the payouts down to as little as 0, or up by up to 50% based on individual performance

 

•  Performance measures evaluated (weighting)

 

•  Total Net Revenues (40%)

 

•  Operating Margin (40%)

 

•  Free Cash Flow (20%)

  

Stock Options

 

 

Restricted Stock Units

  

•  Represent ~50% of annual target equity award value for CEO (25% for the other NEOs)

 

•  7-year term

 

•  Vest in three equal annual installments over the first three anniversaries of the grant date

 

•  Granted to the NEOs other than the CEO (25% of annual target equity award value for NEOs)

 

•  Vest in equal annual installments on the first three anniversaries of the grant date

 

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Our CEO’s long-term equity compensation is 100% performance-based. While the value of the CEO’s annual equity compensation is divided approximately evenly between performance contingent stock awards and stock options, for the other Named Executive Officers they receive approximately 25% of the value of their long-term incentive target award in time-based restricted stock units, approximately 50% in contingent stock performance awards and approximately 25% in stock options. The CEO’s compensation does not use time-based restricted stock units to further increase the linkage between earned pay and performance for the CEO.

Variable Compensation Outcomes

Annual and long-term incentives are based on clear, measurable and objective performance goals that consider the overall financial performance of the Company and the individual contribution of each NEO to that performance.

Performance goals for the annual management incentive awards and for the performance contingent stock awards were established by the Committee early in fiscal 2018 based on the 2018 operating plan and budget and the 2019 and 2020 strategic plan approved by the Company’s Board of Directors. The Committee gives careful consideration to selecting metrics that will be used to drive business performance and setting performance objectives that are both challenging but achievable.

For the annual management incentive awards for 2018, the Committee selected three financial performance metrics to capture the most important aspects of the top and bottom line performance of the Company, in the form of revenues, profitability (operating margin percentage), and cash generation (free cash flow, defined as cash flow from operations minus capital expenditures).

There is no payout for a given metric if the Company achieves less than 80% of the target performance against that metric. The maximum payout for overachievement against a given metric is set at 200% of target, and that maximum is awarded when actual performance reaches 127% of target performance.

In 2018, with the impact to our business from the bankruptcy and liquidation of Toys“R”Us in most of the world, our efforts to reduce retail inventories, and challenging economic conditions in key markets, notably the U.K., we achieved an aggregate weighted performance payout of only 43% of target under the annual management incentive plan. In addition to the corporate financial objectives that are established under the annual performance plan, the CEO, in consultation with the Committee, sets individual objectives for each NEO at the beginning of the year and assesses the performance of the NEOs in achieving these objectives at the end of the year. Performance against these objectives is the key determinant of the individual modifier in the annual incentive. With respect to the CEO’s individual objectives, the Board and Compensation Committee, working together, set these objectives in the beginning of the year and the Board evaluates the CEO’s performance at the end of the year.

The table below compares our actual 2018 performance against the corporate financial performance targets under the annual management incentive awards. The financial results used to compute the payout under the annual management incentive plan exclude the negative impact of certain items described on page 49, as the Committee specified at the beginning of the performance period that the impact of those items would be excluded.

 

    Goal     Actual     Percentage
Achievement
    2018
Payout
Percentage
    2018
Weighted
Payout
 

  Revenue

    $5,329,612       $4,579,646       86%             63%             25%    

  Operating Margin %

    15.9%       10.6%       67%             0%             0%    

  Free Cash Flow

    $615,737       $585,419       95%             90%             18%    
             

Total weighted payout

      43%    

All numbers are in thousands, except for percentages.

In addition to the annual cash management incentive plan, each year the Committee approves annual long-term incentive awards tied to achievement of specified objectives over a period longer than one year. Target award values are based on a designated percentage of each executive’s base salary. For our CEO, these awards are comprised of performance contingent stock awards and stock options (other NEOs also receive time-based restricted stock units). The metrics for the performance contingent stock awards, stated cumulative diluted earnings per share, average return on invested capital and cumulative net revenues over a three-year period, are taken from the Company’s long-term strategic plan, budget and operating plan that have been approved by the Company’s Board.

 

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Under the 2018 performance contingent stock award program for named executive officers, cumulative earnings per share is weighted 34%, average return on invested capital is weighted 33% and cumulative revenue is weighted 33%. Each metric is measured independently and must achieve a minimum of 90% of target over the performance period or no value is earned with respect to that metric. If a metric does not achieve a minimum of 90% of target over the performance period, but one or more of the other metrics achieve this threshold performance, an award is payable based on the achievement of those metrics that do achieve at least threshold performance.

The three-metric performance contingent stock awards granted to executive officers with a trailing three-year performance period ending at the end of fiscal 2018 achieved 109% of the target performance. Consistent with the intention of the exclusions approved by the Committee during the first 90 days of the performance cycle, the impact of U.S. tax reform and certain accounting changes were excluded from the computation of the achievement of the earnings per share metric.

The 2016-2018 award cycle is the second completed cycle with the addition of average return on invested capital as a third performance metric for executive officers. The prior three performance cycles ending in each of December 2015, 2016 and 2017 achieved performance against target ranging from 127% in 2015 to 193% in 2017. The following table compares the actual results achieved against the targeted goals for each of the three prior three-year performance periods with the performance during the most recently completed contingent stock performance award period.

 

Performance Period

  Revenues*     Percentage
Achieved
    Cumulative
EPS
    Percentage
Achieved
    Average
Return on
Invested
Capital*
    Percentage
Achieved
   

Total
Payout
Percentage
on Award

 
  Target     Results     Target     Results     Target     Results  

  2013-2015

    $12,869       $13,255       103%           $9.23       $10.04       109%           n/a       n/a       n/a           127%  

  2014-2016

    $13,229       $14,833       112%           $9.59       $12.64       132%           n/a       n/a       n/a           192%  

  2015-2017

    $13,442       $15,084       112%           $9.65       $13.54       140%           11.9%       15.18%       128%           193%  

  2016-2018

    $14,654       $14,674       100%           $11.60       $11.88       102%           13.2%       13.84%       105%           109%  
*

Numbers are in millions. All financial performance for revenues and cumulative EPS is calculated based on exchange rates in effect at the beginning of the relevant three-year performance period. In computing EPS and return on invested capital for 2017, the impact of U.S. tax reform and accounting changes were excluded. In computing EPS and return on invested capital for 2018 the items discussed on pages 32-33 were excluded.

Extension and Amendment of the Employment Agreement with our Chief Executive Officer

On August 1, 2018, the Company and Brian Goldner, Chairman of the Board and Chief Executive Officer, entered into an amendment to Mr. Goldner’s employment agreement (the “Amendment”). The Amendment extended the term of Mr. Goldner’s employment until December 31, 2022, from its previous expiration date of December 31, 2020. The Amendment provided for an increase in Mr. Goldner’s annual base salary from $1,500,000 to $1,600,000, effective as of July 1, 2018. The Amendment also increased Mr. Goldner’s target annual long-term equity incentive award to 800% of his base salary, beginning with Hasbro’s 2019 fiscal year.

The changes in Mr. Goldner’s compensation package reflected in the Amendment were developed working closely with the Compensation Committee’s outside compensation consultant, Meridian Compensation Partners. The Compensation Committee and Meridian reviewed current compensation programs at our peer companies, and designed Mr. Goldner’s amended compensation package to provide a highly performance-based total opportunity to Mr. Goldner that recognizes his talent and background, rewards him fairly for delivering strong Company performance, and is market competitive. As amended by the Amendment, Mr. Goldner’s total target compensation opportunity was well aligned with the median of the target compensation for Chief Executive Officers at the companies in the peer group utilized by the Committee and Meridian in reviewing Mr. Goldner’s compensation.

Additional provisions of Mr. Goldner’s employment agreement, as amended by the Amendment, are discussed beginning on page 71 of this Proxy Statement.

Employment Agreement with our President and Chief Operating Officer

On August 1, 2018, the Board promoted John A. Frascotti, President, to the position of President and Chief Operating Officer, and appointed Mr. Frascotti to the Board. Mr. Frascotti continues to report to Mr. Goldner, Chairman and Chief Executive Officer of Hasbro.

 

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In connection with Mr. Frascotti’s promotion to President and Chief Operating Officer, Hasbro and Mr. Frascotti entered into an employment agreement (the “Employment Agreement”). The term of the Employment Agreement runs through March 31, 2021, unless earlier terminated in accordance with the provisions of the Employment Agreement.

Pursuant to the Employment Agreement, Mr. Frascotti will be paid an annual base salary of $1,100,000 and be entitled to an annual management incentive plan bonus, beginning with Hasbro’s 2019 fiscal year, with a target equal to 100% of his base salary. Mr. Frascotti is also eligible to receive awards under Hasbro’s long-term equity incentive program with an annual target equal to 400% of his base salary, beginning with Hasbro’s 2019 fiscal year. Mr. Frascotti is entitled to participate in all benefit programs that Hasbro establishes and makes available to its senior officers, including group life insurance, short and long-term disability insurance, vacation, medical, dental, defined contribution and deferred compensation programs. All incentive compensation to which Mr. Frascotti is entitled is subject to Hasbro’s Clawback Policy.

Additional provisions of Mr. Frascotti’s employment agreement are discussed beginning on page 73 of this Proxy Statement.

Executive Compensation Philosophy and Objectives

The Committee’s fundamental objectives in our executive compensation program are to:

 

 

Attract, develop and retain talented executives who can contribute significantly to the achievement of the Company’s goals and deliver results in keeping with our mission of Creating the World’s Best Play Experiences.

 

 

Align the interests of the Company’s executives with the medium and long-term goals of the Company and its shareholders.

 

 

Instill a pay-for-performance culture; a substantial majority of the compensation opportunity for the CEO and other NEOs is composed of variable, performance-based compensation elements.

 

 

Reward superior performance by the Company and its business units as a whole as well as superior individual performance.

 

 

Accomplish these objectives effectively while managing the total cost of the Company’s executive compensation program, including by managing reasonable levels of equity dilution and annual share usage when granting equity-based compensation.

The Committee believes it is critical to have a robust succession planning and management development process and seasoned talent ready to deploy into key executive positions, and our compensation programs are designed to support these objectives.

The Committee structures the Company’s compensation program in a way it believes appropriately aligns pay with performance without encouraging excessive risk taking or other behavior on the part of executive officers that is not in the Company’s best interests.

Our goal is to position total target compensation for our NEOs within a competitive range around the peer group median that reflects the individual’s performance, criticality to the business, retention risk and future potential. For more information on the peer group used as a market check for the NEOs please see the discussion beginning on page 41 of this Proxy Statement.

In 2012 the Board adopted a Clawback Policy. All equity and non-equity incentive plan compensation granted by the Company in 2013 and thereafter is subject to this Clawback Policy. The policy provides that if an accounting restatement is required due to the Company’s material non-compliance with any accounting requirements, then all of the Company’s executive officers, regardless of whether they were at fault or not in the circumstances leading to the restatement, will be subject to forfeiting any excess in the incentive compensation they earned over the prior three years over what they would have earned if there had not been a material non-compliance in the financial statements.

 

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Strong Compensation Governance Practices

 

 
Compensation Governance Highlights
 
   

 Robust shareholder engagement process

 

 Program informed by and responsive to shareholder input

 

 Significant portion of compensation is variable and performance based

 

 Significant share ownership and retention requirements

 

  5x base salary for CEO

 

  2x base salary for other NEOs

 

 NEOs must hold 50% of net shares received upon option exercises or award vesting until they achieve the required ownership levels

 

 Maximum payout caps under incentive plans

 

 Do not incentivize excessive risk taking

  

 Proxy access mechanism

 

 Robust anti-hedging and pledging policies prohibiting pledging or hedging of Company stock

 

 Double-trigger change in control provisions for equity grants

 

 Fully independent Compensation Committee

 

 Independent Compensation Consultant

 

 No tax gross-ups

 

 No excessive perquisites

 

 No repricing of equity incentive awards

 

 Strong clawback policy

Compensation Process

Hasbro’s executive compensation program is structured with input, analysis, review and/or oversight from a number of sources, including:

 

 

The Compensation Committee;

 

 

The full Board;

 

 

The Company’s Human Resources and Compensation Department;

 

 

The Committee’s and Company’s outside compensation consultants;

 

 

The Company’s Chief Executive Officer; and

 

 

Market studies and other comparative compensation information.

All final decisions regarding the compensation and retention programs for the Company’s executive officers, including the NEOs, are made by the Compensation Committee. The compensation package for the Company’s Chief Executive Officer is also reviewed and approved by the Board of Directors, without Mr. Goldner or Mr. Frascotti being present.

Each of the compensation elements is described in detail in the following pages. In structuring these elements the Company and the Committee review each element on an individual basis, as well as review them in totality as part of an overall target compensation package. This process includes reviewing tally sheets for each of the executive officers which set forth total target compensation for the officer, and within that total summarize the target level for each element and the portion of total target compensation comprised of the various compensation elements.

For the NEOs other than the CEO, the CEO makes recommendations for each individual’s compensation package to the Committee. The Committee discusses these recommendations with the CEO, both with and without the presence of the Company’s Chief Human Resources Officer and outside compensation consultants. The Committee further reviews and discusses these recommendations in executive sessions, and as part of these discussions the Committee discusses the proposed compensation and retention programs with representatives of its outside compensation advisor. In 2018 the Committee’s outside compensation consultant was Meridian Compensation Partners LLC.

Peer Group and Benchmarking to the Market

In designing the fiscal 2018 executive compensation program, the Committee and the Company reviewed certain market data as a market check for the proposed executive officer: (i) base salaries, (ii) total target cash compensation (comprised of base salaries and target management incentive awards) and (iii) total target direct compensation (comprised of base salaries, target management incentive awards and target equity awards,

 

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combined). This market information is one element reviewed by the Committee; the Committee does not simply set compensation levels at a certain benchmark level or within a certain benchmark range with respect to other companies.

As the Company has developed into a global play and entertainment organization, rather than a traditional toy and game manufacturer, the companies with which Hasbro competes for executive talent have broadened considerably and the skills and expertise required of Hasbro’s executives have greatly increased. As a result, the Company now competes with a broad range of companies that focus on immersive storytelling across brands and operate in the entertainment and media industry in the hiring and retention of employees and executives. For 2017 the compensation peer group was updated to better reflect this mix of companies with which Hasbro competes for executive talent, and more closely reflect the importance of storytelling and entertainment to drive consumer engagement with our brands. The 2018 compensation program for the NEOs reflects alignment with this revised peer group, which is discussed below. The revised peer group comprises a diverse set of businesses that leverage storytelling to engage consumers as well as creative content and entertainment businesses with comparable revenues and market capitalization to those of the Company, against whom we compete and recruit for talent, and many of which face economic challenges and opportunities similar to those we experience.

For purposes of establishing a market check for base salaries, total target cash compensation and total target direct compensation for the NEOs, other than Mr. Goldner, in 2017 the Company and the Committee reviewed proxy data for the top five executives across the revised peer group set forth below. For Mr. Goldner, the Committee conducted both a market check and a pay for performance analysis in 2017. The Company’s peer group was used in connection with the market check and the pay for performance analysis.

In the second half of 2017, the Committee approved salary increases for the NEOs as part of its planned review every two years. In addition, the Committee approved annual and long-term incentive target changes effective for 2018. The next market check, absent significant changes in an executive’s role and responsibilities, will be in 2019.

In connection with the extension of Mr. Goldner’s employment agreement in 2018 and the entry into an employment agreement with Mr. Frascotti, the Committee reviewed updated data for the companies in the peer group in 2018.

Recognizing that the Company has few direct competitors, the Committee uses a peer group to provide a market check on NEO compensation that is a mix of direct competitors and companies in related business lines with each having one or more of the following characteristics:

 

 

Storytelling Brands: Companies with brands that use immersive storytelling to create connections with consumers

 

 

Entertainment/Leisure: Companies focused on products used for entertainment or leisure

 

 

Global Business: Companies that operate globally

 

 

Trend Oriented: Companies operating in trend-oriented businesses

 

 

Mom Advertising Demographic: Companies driven by advertising that appeals to mothers

Set forth in the box below is the peer group we used for executive compensation in 2017 and 2018. Subsequent to the establishment of his compensation for 2018, Mr. Goldner joined the Board of Directors of CBS Corporation. As a result, effective for fiscal 2019 and thereafter, the Committee has removed CBS Corporation from the peer group and has added Discovery Communications to the peer group as its replacement.

 

 

 

  Colgate-Palmolive

 

 

 

CBS Corporation

 

 

 

Viacom, Inc.

  The Estee Lauder Cos.   Netflix, Inc.   Live Nation Entertainment, Inc.
  Activision Blizzard, Inc.   Ralph Lauren Corporation   Mattel, Inc.
  Electronic Arts, Inc.   Under Armour, Inc.   Tiffany & Co.
  Skechers USA, Inc.   Lions Gate Entertainment Corp.   Brown-Foreman Corporation

  Lululemon Athletica, Inc.

 

   

The Committee reviews the market data as part of assessing the appropriateness and reasonableness of the compensation levels and mix of compensation elements to ensure that the compensation program:

 

 

is appropriate and effective in furthering the goals of the Company;

 

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provides adequate retention incentive for top performing executives;

 

 

aligns pay with performance; and

 

 

fairly rewards executives for their performance and contribution to the achievement of the Company’s goals, rather than in having compensation packages align to a certain range of market data of the Company’s peers.

According to market data reviewed by the Company the total target direct compensation (target management incentive award opportunities, base salary and target equity award value) for the NEOs for 2018, was within a reasonable range around the 50th percentile of total target direct compensation for comparable positions at companies in the peer group.

Role of the Independent Compensation Consultant

In reviewing and establishing the proposed fiscal 2018 compensation and retention program for the Company’s executive officers, the Committee received input and recommendations from Meridian Compensation Partners LLC (“Meridian”). Meridian was retained by, and reported directly to, the members of the Committee. Meridian advised the Committee with respect to both the Committee’s review of the Company’s 2018 executive compensation programs, including the amendment and extension of Mr. Goldner’s employment agreement and the entry into an employment agreement with Mr. Frascotti, and provided additional information as to whether the Company’s proposed 2018 executive compensation programs were competitive, fair to the Company and the executives, reflected strong alignment between pay and performance, provided appropriate retention to executives, and were effective in promoting the performance of the Company’s executives and achievement of the Company’s business and financial goals.

The Committee reviewed Meridian’s independence, relative to the following factors: (i) their provision of other services to the Company, of which there are none; (ii) the amount of fees they receive from the Company as a percentage of their total revenue; (iii) the policies and procedures they have that are designed to prevent conflicts of interest; (iv) any business or personal relationship between Hasbro officers and directors and the entity or the compensation consultants at the entity working for the Committee, of which there aren’t any; (v) any Hasbro stock owned by the entity or any of its compensation consultants working for the Committee, of which there isn’t any; (vi) any business or personal relationship between our executive officers and the entity or any of its compensation consultants working for the Committee, of which there aren’t any; and (vii) any other factors that would be relevant to the consultant’s independence from management. On the basis of such review, the Committee concluded that Meridian was independent and no conflicts of interest or other relationships exist that may impair their independence during their service to the Committee.

Willis Towers Watson was retained by the Company’s Human Resources and Compensation Department to assist with the preparation of compensation information for management which was presented to the Committee in 2018, including tally sheets showing each NEO’s forward-looking target compensation and actual earned compensation, as well as certain compensation tables contained in this Proxy Statement.

 

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Executive Compensation Program Elements

The NEOs receive a mix of fixed and variable compensation. The following discussion summarizes the various elements of the executive compensation program. Approximately 81.5% of the CEO’s target compensation opportunity for 2018, as well as the substantial majority of the compensation opportunity for each of the other NEOs, was variable and tied to Company performance.

Elements of Compensation Summarized

 

 

Variable and Performance-Based Compensation Elements

 

   

Annual Incentive Compensation/Cash Bonus

 

   

Long-Term Incentive Compensation

 

   

Performance Contingent Stock Awards

 

   

Restricted Stock Units

 

   

Stock Options

 

 

Fixed Compensation and Benefits

 

   

Base Salary

 

   

Reasonable and Limited Benefits and Perquisites

Variable and Performance-Based Compensation Elements

The substantial majority of the total compensation opportunity for our NEOs is performance based, including our entire long-term equity incentive compensation program and annual cash incentive program. Performance targets are derived from the Company’s long-term strategic plan and budget and operating plan that have been approved by the Board.

The Committee and the Board set performance targets that they believe will challenge the Company and its executive team to achieve a threshold payout and require superior performance to achieve a higher than target payout.

 

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When structuring incentive compensation, the Committee identifies the performance metrics it considers most important for driving Company value and return to shareholders, such as net revenues, earnings per share, operating margins, free cash flow, return on invested capital and stock price. The Committee then ties the incentive compensation to performance against those metrics. The Committee has determined that the following forms of compensation and performance metrics are appropriate for aligning executive compensation with performance.

 

Component of Incentive

Compensation

 

Variability Factor /
Performance

Metrics

  Objectives

Annual

Incentives

 

•  Annual cash bonus

 

Total Net Revenues (40%)

 

Measures Company’s annual top line growth

 

Operating Margins

(40%)

 

Measures Company’s ability to maximize profitability and drive shareholder value

 

Free Cash Flow (20%)

 

Measures Company’s ability to convert revenues into cash

 

Individual Performance Adjustment

 

Measures for performance against individual objectives

   

Long-Term

Incentives

 

•  Performance Contingent Stock

 

•  Restricted Stock Units

 

•  Stock Options

 

Cumulative Net Revenues

 

Measures Company’s ability to deliver top line growth over multi-year period

 

Cumulative Diluted Earnings Per Share

 

Measures Company’s profitability over the long-term

 

Return on Invested Capital

 

Measures capital efficiency

 

Continued Service with the Company

 

Provide a time-based retention mechanism

 

Stock Price Appreciation

 

 

Measures how publicly-traded Company stock performs

 

If we do not meet our financial objectives, and if we do not deliver share price appreciation to you, our shareholders, our executives’ realized compensation is reduced dramatically. This reduction is manifested through both reductions in the payouts under our cash management incentive plans and in a reduction in the realized compensation from awards under our equity compensation plans.

Annual Incentive Compensation

All Company employees participate in some form of annual incentive program. Approximately 28% of the Company’s employees, including all NEOs, received management incentive awards with respect to fiscal 2018. The management incentive award is performance based, with payout of awards tied to the Company’s achievement of specific yearly performance measures, as well as individual performance for the year to the extent discussed below.

Structure of the Annual Incentive Plans.    Management incentive awards for the Company’s executive officers for fiscal 2018 were determined under two programs, the 2014 Senior Management Annual Performance Plan (the “Annual Performance Plan”) and the 2018 Performance Rewards Program (the “PRP”). The Annual Performance Plan has been approved by the Company’s shareholders and was intended to allow for the deduction by the Company of the bonuses paid to “covered employees” as defined in Code Section 162(m). Despite certain differences in the two plans, both the Annual Performance Plan and the PRP use the same corporate performance criteria and targets. Under the Annual Performance Plan, awards are structured to provide a range of maximum permissible payouts corresponding to a range of Company performances against the performance targets, with the Committee reserving negative discretion to reduce any such award to any level below the achieved maximum payout as it deems appropriate. The actual achievement against targeted corporate financial performance and attainment of other key financial and non-financial goals are the primary factors used by the Committee in exercising this negative discretion under the Annual Performance Plan, as is discussed in detail below.

 

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The target awards for each of the NEOs for 2018, as well as the threshold, target and maximum awards for the NEO participating in the PRP Plan, are included in the Grants of Plan-Based Awards table that follows this discussion on page 59.

Selecting Annual Incentive Performance Metrics.    The Committee selects performance metrics that will be used to drive short-term (annual) business performance and establishes rigorous yet achievable performance targets for each of those metrics. The Committee established the fiscal 2018 corporate and business unit performance goals in the first quarter of fiscal 2018 based on the Company’s 2018 operating plan and budget approved by the Board. The Committee selected three performance metrics: (i) total net revenues (weighted at 40%), (ii) operating margin (weighted at 40%) and (iii) free cash flow (weighted at 20%). Free cash flow is computed as cash flow from operations, less capital expenditures.

The Committee believes these performance metrics capture the most important aspects of the top and bottom line performance of the Company, in the form of revenues, profitability and cash generation. The relative weighting among the performance metrics aligns with the relative importance of those metrics, in the Committee’s view, to the Company’s performance and the strength of the Company’s business. If the Company achieves less than a threshold performance of 80% of target against any given metric, the payout achieved for that metric is 0%. Once the achievement of the corporate financial goals is computed, providing the base incentive award payout, the Committee modifies that achieved base payout against target based on the executive’s performance against his or her individual strategic goals to arrive at the final incentive payout to the executive. The modifier applied for performance against individual strategic goals is generally between 0% and 150% of the base corporate financial payout, although the committee can assess a modifier in excess of that range where it deems that warranted by particularly strong individual performance.

Calculating the Annual Incentive Payout.    The following process was used in determining the annual incentive payout for our CEO and other NEOs under the Annual Performance Plan in 2018:

 

LOGO

Target Award (Earned base salary) Corporate Financial Achievement (0% - 200%) Individual Strategic Goals Generally (0% -130%) Final Payout

Annual Incentive Plan Targets for 2018.    The target annual incentive award, associated with achieving performance of the designated financial goals for the Company, for our CEO in 2018 was 175% of earned base salary. For our other NEOs, the target annual incentive award ranged between 75% and 90% of earned base salary in 2018.

The table set forth below provides the 2018 corporate total net revenues, operating margin and free cash flow performance targets established by the Committee at the beginning of the year under the annual management incentive plan, as well as the Company’s actual performance against those targets in 2018. The Company’s actual weighted financial performance in fiscal 2018 corresponded to a 43% weighted payout against target for the corporate financial goals.

 

  Performance Measure   Weight     2018 Target     2018 Actual
Performance
    Percentage
Achievement
    2018 Payout
Percentage
    2018 Weighted
Payout
 

  Revenue

    40%         $5,329,612       $4,579,646       86%         63%         25%    

  Operating Margin

    40%         15.9%       10.6%       67%         0%         0%    

  Free Cash Flow

    20%         $  615,737       $  585,419       95%         90%         18%    

Total weighted payout

 

    43%    

Dollar figures are in thousands.

Adjusting for Performance Against Individual Strategic Objectives.    The Company’s financial performance on which all employee bonuses are calculated serves as the starting point for the annual incentive award to each executive officer. The Committee then determines how Mr. Goldner and the other NEOs performed in achieving their individual strategic objectives to determine, what, if any, adjustments should be made to the corporate performance factor (43% of target in 2018) to arrive at the final payout amount for each executive, which can be adjusted down to 0% of the corporate base award or up to +30% of formula based upon performance against individual objectives.

 

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Mr. Goldner Elected to Forego Any Annual Incentive Plan Payout for 2018

Based on a 43% achievement of the corporate financial performance targets, Mr. Goldner would have earned a bonus, prior to any adjustments to reflect performance against his individual objectives, of $1,166,375 (which is 43% of his target bonus) for 2018. In evaluating his performance, the Compensation Committee and the Board felt Mr. Goldner had done well in his management of the Company through a very disruptive business environment in 2018, and that Mr. Goldner played a key role in driving changes during 2018 that positioned the Company for long-term profitable growth in the future. However, Mr. Goldner approached the Committee and the Board and offered that in light of the Company’s 2018 performance, he would like to forego any cash bonus for 2018 and have the Company use the funds that would otherwise have been paid to him to compensate key personnel within the Company who had performed very well during 2018, but for whom the cash incentive awards for 2018 would nonetheless be adversely impacted by the Company’s financial performance. As such, Mr. Goldner was not paid any bonus under the annual incentive plan for 2018.

Additional Objectives for Mr. Goldner in 2018:

Mr. Goldner’s individual objectives for 2018 included the following, which were in addition to achieving the financial performance metrics outlined above:

 

   

Grow U.S. and Canada and International segment revenues by more than a target amount set by the Committee.

 

   

Grow franchise brands, gaming and emerging brand category revenues by specified amounts.

 

   

Deliver growth in total shareholder return relative to identified peer companies.

 

   

Successfully launch MAGIC: THE GATHERING ARENA into beta.

 

   

Implement an evolved business approach to the European business.

 

   

Continue developing the Company’s storytelling capabilities across all screens.

 

   

Continue developing Hasbro’s succession plan.

 

   

Successfully complete the Company’s acquisition of the POWER RANGERS brand.

With respect to NEOs other than the CEO, the Committee considered the recommendations of the CEO as one of the factors in making the final management incentive bonus determinations. The CEO and Committee used the Company’s achievement of 43% of its targets under the management incentive award as a starting point and then adjusted this baseline award for each of the NEOs in accordance with performance against their personal objectives for 2018. The strategic modifier applied to each of the NEOs was based on the individual factors set forth below:

President and Chief Operating Officer (Mr. Frascotti):    The base corporate formula award computed at 43% achievement would have yielded a payout of $386,107. The actual bonus paid to Mr. Frascotti was $350,000 and was modified downwards by the Committee to reflect performance against his objectives, which in addition to the corporate financial performance metrics mentioned above included:

 

   

Grow franchise brands, gaming and emerging brand category revenues by specified amounts.

 

   

Achieve the designated budgets for Wizards of the Coast and Backflip Studios.

 

   

Grow the consumer products business by a specified amount.

 

   

Develop and launch new, incremental revenue opportunities through the Company’s Quick Strike initiative.

 

   

Deliver industry leading product innovation.

 

   

Take on leadership of the Company’s global operations.

 

   

Deliver innovative, effective branded content.

 

   

Continue to invest in and develop industry leading global consumer insights and data analytics capabilities.

Executive Vice President and Chief Content Officer (Mr. Davis):    The base corporate formula award computed at 43% achievement would have yielded a payout of $254,775. The actual bonus paid to Mr. Davis was $232,000 and was modified downwards by the Committee to reflect performance against his objectives, which in addition to the corporate financial performance metrics mentioned above included:

 

   

Deliver the Company’s entertainment budget.

 

   

Continued development and delivery of best in class storytelling and content creation capabilities across platforms.

 

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Successful leadership of Hasbro Studios, Allspark Pictures and Allspark Animation.

 

   

Lead the structure and management of the Company’s relationship with Paramount Pictures.

 

   

Securing and developing a strong leadership team for Allspark Pictures and Allspark Animation.

 

   

Continued expansion of the Company’s West Coast Creative Center of Excellence.

 

   

Successful development of Boulder Media and its storytelling capabilities.

 

   

Providing regional leadership to expand the Company’s business in China.

Executive Vice President and Chief Commercial Officer (Mr. Tinga):    The base corporate formula award computed at 43% achievement would have yielded a payout of $246,861. The actual bonus paid to Mr. Tinga was $200,000, and was modified downwards by the Committee to reflect performance against his objectives, which in addition to the corporate financial performance metrics mentioned above included:

 

   

Grow U.S. and Canada and International segment revenues by more than a target amount set by the Committee.

 

   

Grow franchise brands, gaming and emerging brand category revenues by specified amounts.

 

   

Grow the entertainment and licensing segment by a specified amount.

 

   

Continue to drive and expand ecommerce globally.

 

   

Leadership in strengthening our relationships with our key retail customers and in driving our relationships with online retailers.

 

   

Further development of our retail channel strategy.

 

   

Role in developing strong leadership across the global sales organization.

 

   

Successful partnership with the Global Operations function to manage inventory flows

Executive Vice President and Chief Financial Officer (Ms. Thomas):    Due to the fact that historically the requirements of Code Section 162(m) did not, by their terms, apply to the compensation of Chief Financial Officers, Ms. Thomas participated in the PRP, rather than in the Annual Performance Plan, for 2018. Under the PRP, Ms. Thomas’ fiscal 2018 management incentive award opportunity was set to provide for a payout of 80% of earned salary for target performance. A range of payouts as a percentage of target then corresponded to a range of performances against target both above and below 100%. Threshold performance for each given financial metric under the PRP is set at 80% of target performance for purposes of the achievement of that goal contributing to payout of the management incentive award. An 80% achievement of a performance goal under the PRP equates to a 60% payout against that goal. In addition to taking into account Company performance, the PRP also allows for a multiplier of up to 130% of the formula award in recognition of superior performance against individual performance objectives. With the recent changes to Code Section 162(m), for 2019 Ms. Thomas is now participating in the Annual Performance Plan with the other NEOs.

The 43% weighted payout against the corporate performance goals in 2018 would have corresponded with 43% of the target payout for Ms. Thomas under the management incentive award for 2018, absent the personal performance modifier. The corporate formula award under the PRP, prior to personal performance adjustments, for Ms. Thomas, would have been $275,200. In determining the actual bonus for Ms. Thomas, as with the other executive officers, the Committee reviewed the performance of Ms. Thomas against her individual objectives and also considered the recommendations of Mr. Goldner. Ms. Thomas was paid a bonus of $350,000 for fiscal 2018, modified upward in recognition of her:

 

   

Role in delivering strong operating cash flow.

 

   

Support for the investment in and launch of MAGIC: THE GATHERING ARENA.

 

   

Successful management of the impacts of U.S. tax reform and implementation of tax planning initiatives.

 

   

Role in the profitable expansion of the Company’s business with Paramount Pictures.

 

   

Role in the completion of the acquisition of the POWER RANGERS brand.

 

   

Contributions to the strong ongoing return of capital to shareholders, through both the quarterly cash dividend and share repurchase programs.

 

   

Leadership of the Company’ global business services project to streamline business processes and deliver efficiencies.

 

   

Continued development of a best in class global finance function.

 

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Performance Metric Adjustments and Exclusions to Accurately Measure Management’s Performance. At the time the performance goals were set at the beginning of 2018, the Committee provided that certain events that might occur during the performance period would not be taken into account in determining the Company’s performance against these targets. The Committee adjusts for such one-time events as it deems appropriate. Such exclusions included the impact of any acquisitions or dispositions consummated by the Company during the year that had a total acquisition or sale price, as applicable, of $100 million or more, the impact of any major discrete restructuring activities undertaken by the Company after the performance goals are set which result in aggregate costs or charges to the Company of $10 million or more, changes to the US tax code that would impact cash flow, impact operating profit and/or tax expense by more than $25 million or more, as well as any changes in exchange rates with an impact to revenues of greater than $100 million from the rates in effect at the beginning of the performance period.

Long-Term Incentive Compensation

Long-term incentive compensation is provided in the form of performance contingent stock awards, time-based restricted stock units, and non-qualified stock options, as shown below.

Long-Term Incentive Compensation Allocation

 

LOGO

For 2018, the Committee approved target annual equity award values for each of the Company’s executive officers and other equity eligible employees. Targets are expressed as a percentage of each individual’s base salary which for our NEOs in 2018 were as follows:

 

Equity Grant Target Value as Percentage of Salary

CEO

  

450%

President

  

300%*

Executive Vice Presidents

  

175% – 275%

* See discussion below for one-time increase.

The division across award types, and the targeted total award value, reflect the Committee’s view as to the appropriate total award opportunity for each NEO, the optimal weighting of short and long-term objectives and drivers to retention value, a total long-term compensation program that drives corporate performance and appropriately rewards executives for delivering performance, and a belief that over the performance period the realization of equity award values should be balanced among achievement of the Company’s longer-term internal financial targets and the Company’s stock price appreciation – as well as, for NEOs, the retention of key executive talent. In October of 2017, the Committee approved a change to the NEO annual compensation review process, moving from an annual market check to a review every two years. The Committee felt that this cadence of review better aligned with general changes in the market. The Committee will continue to review annually the compensation for any NEO that has a significant change in role and/or level of responsibility.

The annual equity grant target value as a percentage of base salary in 2018 for Mr. Goldner was 450%, Ms. Thomas was 275% and for each of Mr. Davis and Mr. Tinga was 200%. In 2018, Mr. Frascotti, as a retention mechanism and in recognition of his contributions to the Company and role as a succession candidate, received a one-time increase in his total equity grant target value as a percentage of salary from 300% to 600%.

 

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Performance Contingent Stock

Performance contingent stock awards provide the recipient with the potential to earn shares of the Company’s common stock based on the Company’s achievement of stated cumulative diluted earnings per share (“EPS”), average return on invested capital (“ROIC”), and cumulative net revenue (“Revenue”) targets over a three-year performance period beginning with the start of the Company’s 2018 fiscal year and ending December 2020 (the “Performance Period”). For stock performance awards granted in 2018, the EPS metric was weighted at 34%, the ROIC metric was weighted at 33% and the Revenue metric was weighted at 33%. Unless the Company achieves at least 90% performance against a metric no shares are earned under the award for that particular metric.

The Company considers the specific target performance levels for ongoing performance periods to be confidential information that would harm the Company if disclosed, as they are based on confidential internal plans and forward-looking expectations concerning the Company’s performance over a three-year period. As discussed above, the performance targets set forth in the contingent stock performance awards align with the Company’s Board approved budget, operating plan and strategic plan, and were set at levels the Committee determined will challenge the executive team in working to meet the objectives and drive performance. Solid performance from the Company, and in turn its executives, will be required to achieve a threshold payout, and superior performance in managing the Company’s business will be required to achieve a higher than target payout.

The maximum payout under the contingent stock performance awards granted in 2018 for overachievement of the financial objectives is equal to 200% of the target number of shares.

Assuming at least threshold performance is met for each metric, the actual payout under the performance share award scales between the threshold payout (in 2018 the threshold payout was 50% for net revenues, earnings per share and return on invested capital) to a maximum (200%) with achievement of the target metric equating to a 100% payout for that metric.

The following table compares the targeted goals and actual performance of the Company (adjusted to eliminate the impact of certain factors designated by the Committee at the beginning of the performance period, such as acquisitions or divestitures of more than $100 million in the aggregate) under the contingent stock performance awards for the 2016 — 2018 performance period, which is the second award with the addition of ROIC as a third performance metric for the grants made to executive officers. Revenues are expressed in millions of dollars.

 

   

 

3-Year Target
Performance

 

   

 

3-Year Actual
Performance

 

   

% of Target

 

   

Payout    

 

 

  Cumulative Revenues

 

   

 

$14,654

 

 

 

   

 

$14,674

 

 

 

   

 

100.1%

 

 

 

   

 

100%    

 

 

 

  Cumulative EPS

 

   

 

$ 11.60  

 

 

 

   

 

$ 11.88  

 

 

 

   

 

102.4%

 

 

 

   

 

108%    

 

 

 

  Average ROIC

 

   

 

13.2%

 

 

 

   

 

13.8%

 

 

 

   

 

104.6%

 

 

 

   

 

120%    

 

 

 

       

  Total Payout

 

 

                           

 

 

109%    

 

 

 

 

 

If an officer retires at an early retirement date (at least 55 years old with ten years of credited service with the Company) or a normal retirement date (at least 65 years old with at least five years of credited service with the Company), the contingent stock performance award remains outstanding for its remaining term and at the end of the performance period the retired executive earns a pro-rata portion (based on the amount of the performance period served) of the actual shares earned under the award. If an officer dies or is permanently disabled, they or their estate is paid a pro-rata portion of the target value for the contingent stock performance awards based on the portion of the performance period elapsed as of the date of death or permanent disability.

Restricted Stock Units

Restricted Stock Unit Awards for NEOs other than the CEO.    The Company uses restricted stock units as a reward and retention mechanism. The restricted stock units granted in 2018 to our NEOs (excluding our CEO) represented approximately 25% of their annual targeted equity award value in 2018 and vest in three equal installments on the first three anniversaries of the date of grant provided the recipient remains employed with the Company through the applicable vesting dates. Pro-rata vesting is provided earlier only in the event of the death, disability, early retirement (with at least 10 years of credited service) or retirement at age 65 (with at least 5 years of credited service) of the executive. All other terminations of employment result in termination of the awards.

 

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Stock Options

Stock options represent approximately 25% of the targeted annual equity award value for our NEOs, and 50% for our CEO. The options vest in three equal cumulative annual installments on the first three anniversaries of the date of grant, subject to the optionee’s continued employment with the Company through such vesting dates, and have seven-year terms. Options forward vest upon an executive officer retiring at age 65 or older with at least five years of credited service or upon an officer’s death or permanent disability.

The Company does not manage the timing of equity grants to attempt to give participants the benefit of material non-public information. Annual option grants are made with effective dates in open trading windows following the Company’s release of its financial results. All option grants are made with an exercise price at or above the average of the high and low sales prices of the Company’s common stock on the date of grant.

Fixed Compensation and Benefits

Base Salary

Following a review and update of the Company’s compensation peer group in 2017, the Company’s philosophy has shifted from a review of salaries on an annual basis to a review of salaries every two years. Increases in executive base salaries will continue to be considered in the event of: (i) increases in responsibility, (ii) to maintain competitiveness with market compensation offered to executives with similar responsibilities, expertise and experience in other companies the Company considers to be comparable to and/or competitive with the Company, and (iii) to recognize continued individual performance and contribution.

Increases made to the base salaries for certain of the Named Executive Officers in 2017 were made to remain competitive with companies in the Company’s peer groups for similar positions and are generally effective until the next salary review in 2019. Those increases, effective in October 2017, were as follows: Mr. Frascotti from $900,000 to $925,000; Ms. Thomas from $725,000 to $800,000; Mr. Davis from $760,000 to $790,000 and Mr. Tinga from $650,000 to $700,000. In connection with the extension of his employment agreement with the Company in 2018, Mr. Goldner’s base salary increased from $1,500,000 to $1,600,000 effective on July 1, 2018. In connection with his entry into an employment agreement with the Company in 2018, effective beginning in 2019 Mr.  Frascotti’s base salary will increase from $900,000 to $1,100,000.

Benefits

The Company’s officers also participate in certain employee benefit programs provided by the Company that are offered to the Company’s other full-time employees.

The executive officers of the Company are eligible for life insurance benefits on the terms applicable to the Company’s other employees. The Company’s executive officers participate in the same medical and dental benefit plans as are provided to the Company’s other employees.

Company-Sponsored Retirement Plans

The Company provides retirement benefits to its employees primarily through the Hasbro, Inc. Retirement Savings Plan (the “401(k) Plan”) and the Supplemental Benefit Retirement Plan (the “Supplemental Plan”). The 401(k) Plan and the Supplemental Plan, provide for Company matching contributions, and an annual Company contribution of 3% of aggregate salary and bonus. Executive officers are eligible to participate in the 401(k) Plan and the Supplemental Plan on the same basis as all other U.S. Hasbro employees.

The Supplemental Plan is intended to provide a competitive benefit for employees whose employer-provided retirement contributions would otherwise be limited. However, the Supplemental Plan is designed only to provide the benefit which the executive would have accrued under the Company’s 401(k) Plan if the Code limits had not applied. It does not further enhance those benefits.

The amount of the Company’s contributions to the Named Executive Officers under both the 401(k) Plan and the Supplemental Plan, are included in the “All Other Compensation” column of the Summary Compensation Table that follows this report. Mr. Tinga is not eligible to participate in the 401(k) Plan or the Supplemental Plan.

The Hasbro, Inc. Pension Plan (the “Pension Plan”), a defined benefit pension plan for eligible Company employees in the United States, and the pension portion of the Supplemental Plan were frozen effective December 31, 2007. Executive officers hired prior to December 31, 2007, continue to participate in the Pension Plan and the pension portion of the Supplemental Plan, which are described starting on page 63 of this Proxy Statement, but will not accrue additional benefits thereunder subsequent to the plan freeze on December 31, 2007. Effective on April 16, 2018, the Hasbro Pension Plan was terminated. All regulatory approvals for the termination have been received and the distribution of benefits is anticipated during 2019.

 

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Description of Pension Benefits for Mr. Tinga

Mr. Tinga participates in the Hasbro B.V. Pension Plan in the Netherlands (the “Netherlands Pension Plan”). Upon becoming a member of the Netherlands Pension Plan on January 1, 1997, an additional payment was made to the plan granting Mr. Tinga an additional one year and two months of credited service, changing his credited service date to November 1, 1995. The Netherlands Pension Plan is described in more detail below. Mr. Tinga was hired by Tonka Corporation on October 1, 1987, which was subsequently acquired by the Company in January 1992. The Company does not have any obligation to pay pension benefits to Mr. Tinga from his service with Tonka.

Netherlands Pension Plan

The Netherlands Pension Plan provides benefits to all employees in service of Hasbro B.V. that are at least 21 years of age. Effective January 1, 2006, the plan was amended and became a career average pay plan with an annual accrual rate of 1.3% of Pension Base for each year of service. As of January 1, 2015, the plan was further amended, increasing the annual accrual rate to 1.47% of Pension Base for each year of service from January 1, 2015 to retirement. Accrued benefits were conditionally indexed each year for active employees. Increases of 2% were granted in each year through December 31, 2017, except in 2006 when there were no increases granted. Effective January 1, 2018 the plan was frozen with no future benefit accrual and no further indexation of accrued benefit. Benefits are provided in the form of an annuity with 70% payable to the spouse or partner upon the participant’s death.

Prior to the January 1, 2006 amendment, the plan was a final average pay plan with a formula equal to 1.25% of final average Pension Base per year of service. The final average pay benefits were frozen as of December 31, 2005, with indexation applied from this date as described above.

The Pension Base is defined as Pensionable Salary minus the Offset, where Pensionable Salary is 12 times fixed monthly salary plus holiday allowance plus 13th month salary and the Offset is equal to 100/70 times the state old age pension for a married person. Effective January 1, 2015, as a result of legislative changes in the Netherlands, the annual Pensionable Salary was capped. Prior to this date Mr. Tinga’s Pensionable Salary under the plan was not capped. Effective January 1, 2018 the plan was frozen with no future benefit accrual and no further indexation of accrued benefit.

Credited service in the plan is defined as all years and completed months of service up to the date of retirement, with a maximum of 40 years (for participants who joined the plan prior to January 1, 2008) and 44 years for new participants. Effective January 1, 2015, the maximum credited service was increased to 42 years (for employees who joined the plan prior to January 1, 2008) and 46 years for participants who joined the plan after January 1, 2008. Participants joining the plan after January 1, 2008 with accrued pension benefits at a former employer can transfer their pension benefits into the Netherlands Pension Plan and get additional years of credited service beyond the plan definition.

Effective January 1, 2015, as a result of legislative changes in the Netherlands, the normal retirement age of the plan changed to age 67. Prior to this date, the normal retirement age under the plan was age 65. The pension benefits accrued through December 31, 2014 are guaranteed as unreduced from age 65 and are actuarially increased for retirement after age 65. Plan members are eligible for early retirement from age 55; however, benefits are reduced for early commencement and the participant must officially request early retirement six months before the desired retirement date.

Beginning in 2015, Mr. Tinga is eligible for a certain percentage (21.01% for 2018) of the amount by which his ending base salary is above the government mandated pensionable salary cap (105,075 Euros for 2018) to compensate him for the loss of pension value as a result of legislative changes in the Netherlands which capped pensionable salary at 100,000 Euros in 2015. The percentage applied varies with age and is 17.85% until age 55, 21.01% from ages 55 up to 60 and 24.97% from ages 60 to 65. Mr. Tinga is required to pay all taxes on this annual cash payment. This annual make up payment is payable until the earlier of Mr. Tinga’s termination of employment or age 65.

Nonqualified Deferred Compensation Plan

Executive officers who are employees of the Company’s U.S. operations are also eligible to participate in the Company’s Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”), which is available to all the Company’s employees based in the United States at or above selected management levels and whose annual base salary is equal to or greater than $120,000 in 2018, raised to $125,000 in 2019. The Deferred Compensation Plan allows participants to defer compensation to be recorded into various measurement funds, the performance of which determines the return on compensation deferred under the plan. Potential investment choices include a fixed rate option, a choice that tracks the performance of the Company’s Common Stock, and other equity indices. Earnings recorded on compensation deferred by the executive officers do not exceed the

 

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returns on the relevant investments earned by other non-executive officer employees deferring compensation into the applicable investment vehicles. Mr. Tinga is not eligible to participate in the Deferred Compensation Plan.

Perquisites

The Company offers perquisites that the Committee believes are reasonable yet competitive for attracting, retaining and compensating the Company’s executives. The Company reimburses designated executive officers for the cost of certain tax, legal and financial planning services they obtain from third parties provided that such costs are within the annual limits established by the Company. The 2018 annual limit on these costs for Mr. Goldner was $25,000 and for each of Mr. Frascotti, Mr. Davis and Ms. Thomas was $5,000. Mr. Tinga receives certain tax services due to his secondment from the Netherlands. The cost to the Company for this reimbursement to the Named Executive Officers receiving it is included in the “All Other Compensation” column of the Summary Compensation Table.

Severance and Change in Control Benefits

Beginning on page 67 of this Proxy Statement there is a discussion of the severance and change in control benefits that may be payable to the NEOs in certain situations, as well as the plans under which those benefits are payable.

 

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Reported versus Realized Pay Table

For purposes of helping our shareholders see the strong alignment of pay and performance in our executive compensation program, we are showing a comparison of Mr. Goldner’s reported total compensation to realized pay over the prior three years. All figures in the table are in thousands. The table illustrates that the reported compensation often diverges from the actual, realized compensation for the executive, and this divergence can become greater as the percentage of the executive’s compensation composed of variable performance-based elements increases and as the performance of the Company, and its stock price, increases. Below the reported versus realized compensation chart we have included a line graph showing the increase in the value, from the end of fiscal 2014 to the end of fiscal 2018, in $100 invested in Hasbro’s common stock, assuming the reinvestment of all dividends.

The significant increase in realized compensation for Mr. Goldner in 2017 was driven by the vesting of the restricted stock units which he was granted in 2013 and 2014. To fully earn those units the Company’s stock price needed to reach, and remain at or above, four progressively higher stock price thresholds, and Mr. Goldner needed to remain employed with the Company through December 31, 2017. From the date the Amended and Restated Employment Agreement was signed on October 4, 2012, on which date the Company’s common stock closed at $37.46 per share, to December 29, 2017 (the last trading day of fiscal 2017), when the Company’s common stock closed at $90.89 per share, the Company’s share price increased 143%, adding over $6.4 billion to the total market capitalization of the Company.

Reported vs. Realized Pay (2016-2018)

 

LOGO

Hasbro Total Shareholder Return

 

LOGO

 

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There can be a significant difference between what is reported for a given year in the compensation tables that follow this Compensation Discussion and Analysis as compensation to an executive officer and the value of what the executive actually realizes as compensation in that year or over time. This difference results from the fact that we are required to include in the reported compensation tables the value of equity awards and changes in pension values and nonqualified deferred compensation earnings for our NEOs at values which are impacted by accounting and actuarial assumptions. Realized compensation is not a substitute for reported compensation in evaluating our executive compensation programs, but we believe understanding realized compensation is important in understanding the impact of the performance components and stock price appreciation components of an award on the value of what an executive ultimately realizes or may receive.

Total Realized Compensation is computed by:

Taking the Total Compensation Amount reported in the Summary Compensation Table appearing on page 57 of this Proxy Statement, and making the following adjustments:

 

 

subtract the grant date accounting values of stock awards and option awards made during the year, as such amounts are reflected in the Stock Awards and Option Awards columns in the Summary Compensation Table for the applicable year;

 

 

add the value realized on the date of exercise from any actual option exercises by the executive in such year, as such amounts are reflected in the Option Exercises and Stock Vested table for the proxy statement covering that year;

 

 

add the value of any stock awards which vested or were earned in such year (to the extent the executive has access to such awards and they are not subject to a forced deferral), at the value such stock had on the date of vesting (because contingent stock performance awards are not earned until February of the year following the end of the three-year performance period, any such awards that are earned are reflected in the realized compensation for the year following the end of the applicable performance period); and

 

 

subtract the year over year change in pension value and nonqualified deferred compensation earnings, as such amounts are reflected in the Summary Compensation Table for that year under the heading Change in Pension Value and Non-Qualified Deferred Compensation Earnings.

Other Compensation Considerations

Stock Ownership Guidelines

Our stock ownership and retention guidelines are rigorous.

 

 

 

Stock Ownership Guidelines*

 

   

CEO

 

  

5X Base Salary

 

   

NEOs (other than CEO)

 

  

2X Base Salary

 

  *

Base salary, through termination of employment with the Company

An executive has five years to achieve the stock ownership requirement level. Thereafter, during the executive’s employment with the Company they must maintain the required stock ownership. All NEOs were in compliance with the stock ownership guidelines as of December 31, 2018.

Stock Retention Requirement.    The Hasbro, Inc. Executive Stock Ownership Policy (“Stock Ownership Policy”) includes a requirement that executives retain 50% of any net shares realized from stock vesting or option exercises until the executive’s required ownership level is satisfied.

Anti-Hedging and Pledging Policies.    The Company has had a longstanding policy in place that prohibits all directors, executive officers and other employees from hedging or pledging any Company securities.

Compensation and Risk Management

As part of structuring the Company’s executive compensation programs, the Committee (A) evaluates the connection between such programs and the risk-taking incentives they engender, to ensure that the Company is incenting its executives to take an appropriate level of business risk, but not excessive risk, and (B) considers any changes in the Company’s risk profile and whether those changes should impact the compensation structure. To achieve this appropriate level of risk taking, and avoid excessive risk, the Committee structures the

 

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compensation program to (i) link the performance objectives under all incentive-based compensation to the strategic and operating plans of the Company which are approved by the full Board of Directors, with the Board ensuring that the goals set forth in such plans require significant performance to achieve, but are not so out of reach that they require excessively aggressive behavior to be met, (ii) provide for a balance of shorter-term objectives or exercise periods (such as the annual cash incentive plan objectives) and longer-term objectives or exercise periods (such as the three-year performance period under the contingent stock performance awards and seven-year option terms) to mitigate the risk that short-term performance would be driven at the expense of longer-term performance and shareholder value creation, and (iii) include stock ownership guidelines which require executives to maintain significant equity ownership during their entire career with the Company, thus linking personal financial results for the executives with the investment performance experienced by the Company’s shareholders over a significant period of time. In addition to the analysis performed by the Committee, the Committee also had Meridian perform a risk assessment of the Company’s executive compensation programs for 2018 and advise on the appropriateness of the levels of risk presented by those programs and the effectiveness of their design to mitigate risk. As a result of its analysis and the work performed by Meridian, the Committee believes the Company’s compensation programs promote appropriate, but not excessive, risk taking and are designed to best further the interests of the Company while mitigating risk.

Tax Considerations

Although the Company considers the tax treatment, including the requirements of Code Section 162(m), and the accounting treatment of various forms of compensation in determining the elements of its executive compensation program and, to the extent it is consistent with meeting the objectives of the Company’s executive compensation program, structures such compensation to maximize the ability of the Company to receive a tax deduction for such compensation, the Company feels strongly that maximizing the performance of the Company and its executives is more important than assuring that every element of compensation complies with the requirements for tax deductibility under Section 162(m). The Company selects performance goals under its variable compensation programs that are intended to be objective within the meaning of the Code, such as achieving certain net revenues, operating margin, free cash flow, earnings per share or ROIC goals. However, in certain situations, such as with our targeted retention grants of restricted stock units, the Company may feel a particular goal, such as retaining a key talented individual, is very important to the Company, even though the form of compensation being used is not considered objective within the meaning of the Code or the associated compensation is otherwise not deductible under the requirements of Section 162(m). The Company reserves the right to compensate executives for achievement of such objectives, or to reflect other individual performance measures in an executive’s compensation, even if they do not comply with the requirements of Section 162(m). On December 22, 2017 the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act also established new tax laws that affected 2018, including imposing limitations on the deductibility of certain executive compensation under 162(m). The U.S. Treasury Department, the IRS, and other standard-setting bodies could interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered. As we consider compensation in the future, we will analyze the Tax Act and interpret any additional guidance that may prompt us to make adjustments to our compensation programs.

 

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Executive Compensation

The following table summarizes compensation paid by the Company for services rendered during fiscal 2018, fiscal 2017 and fiscal 2016 by any person serving as the Company’s Chief Executive Officer during any part of fiscal 2018, by any person serving as the Company’s Chief Financial Officer during any part of fiscal 2018, and by the three other most highly compensated executive officers of the Company in fiscal 2018 (to the extent that such person was an executive officer during the year in question).

Summary Compensation Table

 

  Name and Principal
  Position

 

 

Fiscal
Year

 

 

Salary(a)

 

 

Bonus

 

 

Stock
Awards(b)

 

 

Option
Awards(b)

 

 

Non-Equity
Incentive Plan
Compensation
(a)(c)

 

 

 

Change in
Pension Value
and

Non-Qualified
Deferred
Compensation
Earnings(e)

 

 

All Other
Compensation

(f)

 

 

Total

 

 

  Brian Goldner(g)

   

 

 

 

2018

 

 

   

 

$

 

1,550,000

 

 

   

 

$

 

  0

 

 

   

 

$

 

3,026,520

 

 

   

 

$

 

3,400,816

 

 

   

 

$

 

0

 

(d) 

   

 

$

 

89,357

 

 

   

 

$

 

432,930

 

 

   

 

$

 

8,499,623

 

 

  Chairman and Chief       2017       $ 1,500,000       $ 0       $ 3,401,482       $ 3,272,528       $ 3,000,000       $ 175,505       $ 504,874       $ 11,854,389  

  Executive Officer

 

     

 

2016

 

 

 

    $

 

1,300,000

 

 

 

    $

 

0

 

 

 

    $

 

2,600,235

 

 

 

    $

 

2,162,091

 

 

 

    $

 

3,860,000

 

 

 

    $

 

169,229

 

 

 

    $

 

450,687

 

 

 

    $

 

10,542,242

 

 

 

 

  John Frascotti(h)

   

 

 

 

2018

 

 

   

 

$

 

997,693

 

 

   

 

$

 

0

 

 

   

 

$

 

3,876,022

 

 

   

 

$

 

1,398,115

 

 

   

 

$

 

350,000

 

 

   

 

$

 

14,094

 

 

   

 

$

 

174,738

 

 

   

 

$

 

6,810,662

 

 

  President and       2017       $ 896,635       $ 0       $ 1,866,061       $ 599,976       $ 900,000       $ 9,559       $ 179,697       $ 4,451,928  

  Chief Operating Officer

 

     

 

2016

 

 

 

    $

 

772,308

 

 

 

    $

 

0

 

 

 

    $

 

1,170,180

 

 

 

    $

 

357,583

 

 

 

    $

 

1,100,000

 

 

 

    $

 

8,886

 

 

 

    $

 

159,508

 

 

 

    $

 

3,568,465

 

 

 

 

  Deborah Thomas(i)

   

 

 

 

2018

 

 

   

 

$

 

800,000

 

 

   

 

$

 

0

 

 

   

 

$

 

1,536,542

 

 

   

 

$

 

554,212

 

 

   

 

$

 

350,000

 

 

   

 

$

 

15,535

 

 

   

 

$

 

149,925

 

 

   

 

$

 

3,406,214

 

 

  Executive Vice President       2017       $ 750,000       $ 0       $ 956,618       $ 337,867       $ 850,000       $ 59,634       $ 149,700       $ 3,103,819  

  And Chief Financial Officer

 

     

 

2016

 

 

 

    $

 

690,385

 

 

 

    $

 

0

 

 

 

    $

 

909,487

 

 

 

    $

 

283,264

 

 

 

    $

 

900,000

 

 

 

    $

 

48,285

 

 

 

    $

 

130,835

 

 

 

    $

 

2,962,256

 

 

 

 

  Stephen Davis(j)

   

 

 

 

2018

 

 

   

 

$

 

790,000

 

 

   

 

$

 

0

 

 

   

 

$

 

1,103,559

 

 

   

 

$

 

398,029

 

 

   

 

$

 

232,000

 

 

   

 

$

 

14,011

 

 

   

 

$

 

134,600

 

 

   

 

$

 

2,672,199

 

 

  Executive Vice President and       2017       $ 767,500       $ 0       $ 1,002,800       $ 390,289       $ 650,000       $ 9,876       $ 150,075       $ 2,970,540  

  Chief Content Officer

 

                                   

 

  Wiebe Tinga(k)

   

 

 

 

2018

 

 

   

 

$

 

765,463

 

 

   

 

$

 

0

 

 

   

 

$

 

1,086,481

 

 

   

 

$

 

391,881

 

 

   

 

$

 

200,000

 

 

   

 

$

 

0

 

 

   

 

$

 

160,667

 

 

   

 

$

 

 2,604,492

 

 

  Executive Vice President and       2017       $ 692,558       $ 0       $ 980,156       $ 315,144       $ 550,000       $ 63,617       $ 141,776       $ 2,743,251  

  Chief Commercial Officer

 

     

 

2016

 

 

 

    $

 

592,787

 

 

 

    $

 

0

 

 

 

    $

 

850,472

 

 

 

    $

 

332,351

 

 

 

    $

 

925,000

 

 

 

    $

 

384,684

 

 

 

    $

 

118,754

 

 

 

    $

 

3,204,048

 

 

 

(a)

Includes amounts deferred pursuant to the Company’s 401(k) Plan and Non-qualified Deferred Compensation Plan (the “Deferred Compensation Plan”). Mr. Tinga’s 2018 salary has been converted to U.S. dollars using an average exchange rate over the fiscal year of 1 Euro equals U.S. $ 1.181. Mr. Tinga’s 2017 salary has been converted to U.S. dollars using an average exchange rate over the fiscal year of 1 Euro equals U.S. $1.129. Mr. Tinga’s 2016 salary has been converted to U.S. dollars using an average exchange rate over the fiscal year of 1 Euro equals U.S. $1.099.

 

(b)

Reflects the grant date fair value for stock and option awards to the Named Executive Officers. Please see note 14 to the financial statements included in the Company’s Annual Report on Form 10-K, for the year ended December 30, 2018, for a detailed discussion of assumptions used in valuing options and stock awards generally and see footnote (e) to the following Grants of Plan-Based Awards table for a discussion of certain assumptions used in valuing equity awards made to the Named Executive Officers.

 

    

In each of the years shown, these executives were granted non-qualified stock options and contingent stock performance awards. These executives, other than Mr. Goldner, were also granted restricted stock unit awards in each of the years shown.

 

    

The grant date fair values included in the table of the contingent stock performance awards have been calculated based on the probable outcomes under such awards (assumed to be realization of the target values of such awards). If it were assumed that the maximum amount payable under each of the contingent stock performance awards were paid, which maximum is 200% of the target value, then the grant date fair values included under the stock award column for each of the Named Executive Officers for performance shares in 2018, would have been as follows: Mr. Goldner $6,053,040, Mr. Frascotti $4,976,991, Ms. Thomas $1,972,991, Mr. Davis $1,417,021, and Mr. Tinga $1,395,028. This is in addition to the grant date value of restricted stock units.

 

(c)

For Messrs. Goldner, Frascotti, Davis and Tinga these amounts consist entirely of the management incentive awards earned by such executives under the Company’s 2014 Senior Management Annual Performance Plan for the applicable year. For Ms. Thomas these amounts consist entirely of the management incentive awards earned under the Company’s Performance Rewards Plan for the applicable year. Mr. Goldner offered to the Compensation Committee, and the Compensation Committee accepted, that he would receive no management incentive award with respect to 2018.

 

(d)

As is discussed on page 47, based on a 43% achievement of the corporate financial performance targets, Mr. Goldner would have earned a bonus, prior to any adjustments to reflect performance against his individual objectives, of $1,166,375 (which is 43% of his target bonus) for 2018. In evaluating his performance, the Compensation Committee and the Board felt Mr. Goldner had done well in his management of the Company through a very disruptive business environment in 2018, and that Mr. Goldner played a key role in driving changes during 2018 that positioned the Company for long-term profitable growth in the future. However, Mr. Goldner approached the Committee and the Board and offered that in light of the Company’s 2018 performance, he would like to forego any cash bonus for 2018 and have the Company use the funds that would otherwise have been paid to him to compensate key personnel within the Company who had performed very well during 2018, but for whom the cash incentive awards for 2018 would nonetheless be adversely impacted by the Company’s financial performance. As such, Mr. Goldner was not paid any bonus under the annual incentive plan for 2018.

 

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(e)

The amounts reflected in this table primarily consist of the change in pension value during fiscal 2018, fiscal 2017 and fiscal 2016 for each Named Executive Officer. The change in pension value in 2018 was a decrease of $249,022 for Mr. Goldner, a decrease of $7,025 for Ms. Thomas, and a decrease of $38,904 for Mr. Tinga. The change in pension value in 2017 was an increase of $107,105 for Mr. Goldner, an increase of $48,387 for Ms. Thomas, and an increase of $63,617 for Mr. Tinga. The change in pension value in 2016 was an increase of $96,117 for Mr. Goldner, an increase of $36,936 for Ms. Thomas and an increase of $384,684 for Mr. Tinga. For purposes of computing the amounts in the table, negative values were reflected at $0.

 

       The amounts reflected in this table also include the following amounts which were earned on balances under the Supplemental Plan and are considered above market, as the Company paid interest on account balances at a rate of 4.80%, when 120% of the applicable long-term rate was 3.10%:

 

    

2018

 

  Brian Goldner

  

$

89,357

 

  John Frascotti

  

$

14,094

 

  Deborah Thomas

  

$

15,535

 

  Stephen Davis

  

$

14,011

 

  Wiebe Tinga

  

$

 

 

       Does not include the following aggregate amounts, in fiscal 2018, fiscal 2017 and fiscal 2016 respectively, which were earned by the executives on the balance of (i) compensation previously deferred by them under the Deferred Compensation Plan and (ii) amounts previously contributed by the Company to the executive’s account under the Supplemental Plan (401(k)):

 

    

2018

    

2017

    

2016

 

  Brian Goldner

  

$

137,753

 

  

$

  519,960

 

  

$

287,308

 

  John Frascotti

  

$

113,902

 

  

$

81,003

 

  

$

60,816

 

  Deborah Thomas

  

$

8,019

 

  

$

113,372

 

  

$

65,452

 

  Stephen Davis

  

$

38,130

 

  

$

30,438

 

  

 

n/a

 

  Wiebe Tinga

  

$

 

  

$

 

  

$

 

 

    

Earnings on compensation previously deferred by the executive officers and on the Company’s prior contributions to the Supplemental Plan do not exceed the market returns on the relevant investments which are earned by other participants selecting the same investment options.

 

    

For fiscal 2018 the Named Executive Officers participating in the pension plan experienced a decrease in the present value of their pension benefits versus the previous fiscal year. This was primarily due to an increase in the discount rates, the termination of the Pension Plan, and the Supplemental Pension Plan amendment requiring all participants receive the benefit as a lump sum payment. Mr. Tinga experienced a decrease in pension value of $38,904 primarily due to a change in currency conversion rate.

 

    

For fiscal 2017 and 2016, the Named Executive Officers participating in the pension plan experienced an increase in the present value of their pension benefits versus the previous fiscal year. This was primarily due to a decrease in the discount rates.

 

(f)

Includes the following amounts, for fiscal 2018, fiscal 2017 and fiscal 2016 respectively, paid by the Company for each Named Executive Officer in connection with a program whereby certain financial planning, legal and tax preparation services provided to the individual are paid for by the Company:

 

    

2018

    

2017

    

2016

 

  Brian Goldner

  

$

23,430

 

  

$

  17,474

 

  

$

  9,687

 

  John Frascotti

  

$

3,946

 

  

$

 

  

$

 

  Deborah Thomas

  

$

1,425

 

  

$

1,200

 

  

$

1,200

 

  Stephen Davis

  

$

5,000

 

  

$

 

  

 

n/a

 

  Wiebe Tinga

  

$

    25,916

 

  

$

20,777

 

  

$

17,650

 

 

    

Includes matching charitable contributions made in the name of Mr. Goldner of $5,000 in 2017.

 

    

The $25,916 figure for Mr. Tinga in 2018 reflects contributions made in Euros that have been converted to dollars using an average exchange rate over the fiscal year of 1 Euro equals $1.181 USD. The $20,777 figure for Mr. Tinga in 2017 reflects contributions made in Euros that have been converted to dollars using an average exchange rate over the fiscal year of 1 Euro equals $1.129 USD. The $17,650 figure for Mr. Tinga in 2016 includes an unemployment contribution in 2016 of $814.36 (the contribution was made in Euros but has been converted to US dollars using an average exchange rate over the fiscal year of 1 Euro equals $1.099 USD).

 

    

All Other Compensation for Mr. Tinga in 2018 also includes a cash payment equal to $134,751 (converted from Euros using an exchange rate of 1 Euro equals $1.181 USD), reflecting 21.01% of the amount by which his ending base salary is above the new pension cap of 105,075 Euros.

 

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All Other Compensation for Mr. Tinga in 2017 also includes a cash payment equal to $120,999.34 (converted from Euros using an exchange rate of 1 Euro equals $1.129 USD), reflecting 21.01% of the amount by which his ending base salary is above the then pension cap of 103,317 Euros and in 2016 also includes a cash payment equal to $101,104.48 (converted from Euros using an exchange rate of 1 Euro equals $1.099 USD), reflecting 21.01% of the amount by which his ending base salary is above the then pension cap of 101,519 Euros. These cash payments are intended to compensate Mr. Tinga for the loss of pension value as a result of legislative changes in the Netherlands which cap the pensionable salary. Mr. Tinga is required to pay all taxes on these annual cash payments.

 

    

Includes the Company’s matching contribution to each individual’s savings account, the annual company contribution, as well as the annual transition contribution, if applicable, for each individual under the 401(k) Plan and the Supplemental Plan, such amounts as follows:

 

    

2018

    

2017

    

2016

 

  Brian Goldner

  

$

  409,500

 

  

$

  482,400

 

  

$

  441,000

 

  John Frascotti

  

$

170,792

 

  

$

179,697

 

  

$

159,508

 

  Deborah Thomas

  

$

148,500

 

  

$

148,500

 

  

$

129,635

 

  Stephen Davis

  

$

129,600

 

  

$

150,075

 

  

$

n/a

 

  Wiebe Tinga

  

$

—  

 

  

$

—  

 

  

$

—  

 

 

    

These amounts are in part contributed to the individual’s account in the 401(k) Plan and, to the extent in excess of certain Code maximums, deemed allocated to the individual’s account in the Supplemental Plan (401(k)).

 

(g)

Mr. Goldner has served as Chairman and Chief Executive Officer since February 2017 when Mr. Frascotti was promoted to President. Mr. Goldner became President and Chief Executive Officer of the Company on May 22, 2008 and Chairman on May 21, 2015.

 

(h)

Mr. Frascotti became President and Chief Operating Officer in August 2018. Prior to that he served as President since February 2017. Prior thereto Mr. Frascotti was President, Hasbro Brands since 2014. Prior thereto Mr. Frascotti served as Executive Vice President and Chief Marketing Officer since 2013. Prior thereto Mr. Frascotti serviced as Global Chief Marketing Officer since 2008.

 

(i)

Ms. Thomas became Executive Vice President and Chief Financial Officer in March 2013. Prior thereto Ms. Thomas served as Senior Vice President and Chief Financial Officer since May 2009. Prior thereto Ms. Thomas was Senior Vice President and Head of Corporate Finance.

 

(j)

Mr. Davis became Executive Vice President and Chief Content Officer in 2014, Prior thereto Mr. Davis served as President, Hasbro Studios since 2009.

 

(k)

Mr. Tinga became Executive Vice President and Chief Commercial Officer in 2013. Prior thereto Mr. Tinga served as President, North America since 2012. Mr. Tinga’s base salary and certain elements of All Other Compensation are established and paid in Euros.

The following table sets forth certain information regarding grants of plan-based awards for fiscal 2018 to the Named Executive Officers.

Grants of Plan-Based Awards

 

       

 

 

 

 

 

 

Estimated Future Payouts Under

Non-Equity

Incentive Plan Awards(a)

   

Estimated Future Payouts

Under Equity

Incentive Plan Awards

   

 

All
Other
Stock
Awards:

Number
of
Shares
of
Stock
or Units

(#)

   

All Other
Option
Awards:
Number of
Securities

Underlying
Option

(#)

   

Exercise
or Base
Price of
Option

Awards

   

Grant

Date Fair
Value of
Stock and
Option

Awards(e)

 
Name   Grant Date   Threshold
($)
   

Target

($)

   

Maximum

($)

    Threshold
($)
    Target
($)
    Maximum
($)
 

 

  Brian Goldner

 

 

2/6/2018(a)

   

 

$

 

2,712,500

 

 

               
  3/15/2018(b)           17,202       34,404       68,808           $ 3,026,520  
 

2/20/2018(c)

 

                 

 

172,019

 

 

 

  $

 

98.10

 

 

 

  $

 

3,400,816

 

 

 

 

  John Frascotti

 

 

2/6/2018(a)

   

 

$

 

897,923

 

 

               
  3/15/2018(b)           14,144       28,288       56,576           $ 2,488,495  
  2/20/2018(d)                 14,144         $ 1,387,526  
 

2/20/2018(c)

 

                 

 

70,719

 

 

 

  $

 

98.10

 

 

 

  $

 

1,398,115

 

 

 

 

  Deborah Thomas

 

 

2/6/2018(a)

   

 

$

 

640,000

 

 

               
  3/15/2018(b)           5,607       11,214       22,428           $ 986,496  
  2/20/2018(d)                 5,607         $ 550,047  
 

2/20/2018(c)

 

                 

 

28,033

 

 

 

  $

 

98.10

 

 

 

  $

 

554,212

 

 

 

 

  Stephen Davis

 

 

2/6/2018(a)

    $ 592,500                  
  3/15/2018(b)           4,027       8,054       16,108           $ 708,510  
  2/20/2018(d)                 4,027         $ 395,049  
 

2/20/2018(c)

 

                 

 

20,133

 

 

 

  $

 

98.10

 

 

 

  $

 

398,029

 

 

 

 

  Wiebe Tinga

 

 

2/6/2018(a)

    $ 574,097                  
  3/15/2018(b)           3,965       7,929       15,858           $ 697,514  
  2/20/2018(d)                 3,965         $ 388,967  
   

2/20/2018(c)

 

                                                           

 

19,822

 

 

 

  $

 

98.10

 

 

 

  $

 

391,881

 

 

 

 

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(a)

For Messrs. Goldner, Frascotti, Davis and Tinga these management incentive awards were made pursuant to the Company’s 2014 Senior Management Annual Performance Plan. For Ms. Thomas, the management incentive plan awards were made pursuant to the Company’s 2018 Performance Rewards Plan. Mr. Tinga’s Target Estimated Future Payout Under Non-Equity Incentive Plan Awards has been calculated using the computed monthly average exchange rate over 2018 of 1 Euro equals $1.181 USD.

 

(b)

All of these contingent stock performance awards were granted pursuant to the Company’s Restated 2003 Stock Incentive Performance Plan (the “2003 Plan”). These awards provide the recipients with the ability to earn shares of the Company’s Common Stock based on the Company’s achievement of stated cumulative diluted earnings per share (“EPS”), cumulative net revenue (“Revenues”) and average return on invested capital (“ROIC”) targets over a three-year period beginning at the beginning of fiscal 2018 and ending in December 2020 (the “Performance Period”). Each Stock Performance Award has a target number of shares of Common Stock associated with such award which may be earned by the recipient if the Company achieves the stated EPS, Revenues and ROIC targets set for the Performance Period. The grant date fair values for the contingent stock performance awards were based on the average of the high and low trading prices on the date of grant of these awards, which was $87.97 per share on March 15, 2018.

 

(c)

All of these options were granted pursuant to the 2003 Plan. These options are non-qualified, were granted with an exercise price equal to the average of the high and low sales prices of the Company’s common stock on the date of grant, and vest in equal annual installments over the first three anniversaries of the date of grant. Awards may be eligible for accelerated vesting in connection with a change-in-control or certain termination scenarios, as described more fully below under “Potential Payments Upon Termination or Change in Control”.

 

(d)

All of these restricted share units were granted pursuant to the 2003 Plan. These units vest in three equal annual installments on the first three anniversaries of the date of grant, subject to the recipient remaining employed with the Company through the applicable vesting dates. Awards may be eligible for accelerated vesting in connection with a change-in-control or certain termination scenarios, as described more fully below under “Potential Payments Upon Termination or Change in Control”. The grant date fair values for the restricted stock unit awards were based on the average of the high and low trading prices on the date of grant of these awards, which was $98.10 per share on February 20, 2018.

 

(e)

The fair value of option grants for the NEOs were determined using standard application of the Black-Scholes option pricing model using the following weighted average assumptions: volatility 26.94%, dividend yield 2.57% and a risk-free interest rate of 2.65% based on an estimated option life of approximately 4.5 years. The fair value of option grants does not take into account risk factors such as non-transferability and limits on exercisability. In assessing the fair value of option grants indicated in the above table, it should be kept in mind that no matter what theoretical value is placed on an option on the date of grant, the ultimate value of the option is dependent on the market value of the Common Stock at a future date, and the extent if any, by which such market value exceeds the exercise price on the date of exercise.

 

    

Please see note 14 to the financial statements included in the Company’s Annual Report on Form 10-K, for the year ended December 30, 2018, for a detailed discussion of the assumptions used in valuing these options and stock awards.

 

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The following table sets forth information for equity awards held by the named individuals as of the end of the Company’s 2018 fiscal year.

Outstanding Equity Awards at Fiscal Year-End

 

                        Stock Awards
    Option Awards  

Number

of Shares

or Units

of Stock

That

Have Not

Vested

(#)

 

 

    

 

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)

 

 

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares,
Units, or

Other Rights

That Have
Not

Vested

(#)

 

 

Equity

  Incentive Plan  

Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

($)(j)

 

  Name

 

 

Number of

Securities

Underlying

Unexercised

Options

(# Exercisable)

 

 

Number of

Securities

Underlying

Unexercised

Options

(# Unexercisable)

 

 

Equity

Incentive

Plan Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

 

 

Option

Exercise

Price

($)

 

 

Option

Expiration

Date

 

 

 

  Brian Goldner

                                       
                                      38,085 (a)     $ 3,089,836
                                      34,160 (b)     $ 2,771,401
                                      34,404 (c)     $ 2,791,197
      317,306       0           $ 47.21       4/23/2020                    
      302,200       0           $ 52.11       2/11/2021                    
      210,378       0           $ 61.77       2/10/2022                    
      105,353       51,890 (g)           $ 74.42       2/22/2023                    
      56,946       113,854 (h)           $ 98.80       2/20/2024                    
     

 

0

 

 

     

 

172,019

 

(i)

 

     

 

 

 

    $

 

98.10

 

 

     

 

2/19/2025

 

 

                   

 

  John Frascotti

                                       
                                      11,719 (a)     $ 950,762
                                      12,526 (b)     $ 1,016,234
                                      28,288 (c)     $ 2,295,005
                          1,641 (d)         $ 133,134        
                          4,174 (e)         $ 338,637        
                          14,144 (f)         $ 1,147,503        
      21,878       0           $ 61.77       2/10/2022                    
      17,425       8,581 (g)           $ 74.42       2/22/2023                    
      10,442       20,872 (h)           $ 98.80       2/20/2024                    
     

 

0

 

 

     

 

70,719

 

(i)

 

     

 

 

 

    $

 

98.10

 

 

     

 

2/19/2025

 

 

                   

 

 

  Deborah Thomas

                                       
                                      9,155 (a)     $ 742,745
                                      6,421 (b)     $ 520,936
                                      11,214 (c)     $ 909,792
                          1,261 (d)         $ 102,305        
                          2,140 (e)         $ 173,618        
                          5,607 (f)         $ 454,896        
      7,168       0           $ 52.11       2/11/2021                    
      14,000       0           $ 61.77       2/10/2022                    
      0