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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 Rule 14a-12 |
HASBRO, INC.
(Name of Registrant as Specified In Its Charter)
Payment Of Filing Fee (Check The Appropriate Box):
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| 1) | Amount Previously Paid: |
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Notice of 2020 Annual Meeting of Shareholders and Proxy Statement
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| Letter to our Shareholders |
Dear Fellow Hasbro Shareholders,
2019 was a successful year for Hasbro. The Company returned to profitable growth, increasing revenues 3% to $4.72 billion. Absent an unfavorable $78.5 million impact of foreign exchange, revenues grew 5%. Operating profit increased to $652.1 million. Hasbro generated $653.1 million in operating cash flow and returned $398.0 million to shareholders through dividend and share repurchases.
As we mail this letter and Proxy Statement, our team is proactively managing the impacts of the coronavirus (Covid-19). Our immediate focus is on the health and well-being of our employees and stakeholders as well as their families throughout the world. Management is taking the necessary precautions to safely operate our business globally and work through this unprecedented economic and public health disruption.
While we can’t fully predict the impact to Hasbro’s business, through our diverse portfolio, Hasbro is able to provide families with fun and educational activities. The team is working with online and omni-channel retailers to help Bring Home the Fun — with Hasbro Gaming, PLAY-DOH, PLAYSKOOL and active play with NERF. We are also supporting Save the Children and No Kid Hungry in their efforts to address the most urgent needs of children, including providing nutritious meals and distributing books and learning resources to those children and families most in need.
We have scheduled our 2020 Annual Meeting of Shareholders for Thursday, May 14, 2020 at 11:00 a.m. Eastern Time. At this time, we plan to have an in-person meeting at Hasbro’s Corporate headquarters located at 1027 Newport Avenue, Pawtucket, RI 02861, but we are also including the ability to attend and vote at our meeting virtually via the Internet at www.meetingcenter.io/227440037. If we are unable to have the meeting at our offices, we will announce our decision to hold the meeting virtually only over the Internet.
We encourage you to closely review the enclosed Notice of Annual Meeting and Proxy Statement as you vote your shares for this important meeting. Whether you attend the meeting in person or virtually, you will be able to vote your shares and participate in the meeting. As always, we encourage you to vote your shares in advance of the meeting.
As a Board, we are focused not only on the short-term, but we remain keenly focused on the long-term strategy and execution of the organization.
With a view to the long-term growth of our business, during the past year, Hasbro made meaningful investments in growth initiatives which we believe will expand the revenue and profit drivers of the company. These include the acquisition of eOne, which was financed in 2019 but closed in early 2020, and ongoing investments in digital gaming focused on new opportunities for MAGIC: THE GATHERING and DUNGEONS AND DRAGONS. These initiatives complement the investments made in 2018 to strengthen and modernize our toy and game teams as consumer engagement and the retail landscape shifted following the Toys“R”Us bankruptcy.
The Hasbro team also navigated a global trade disruption. Several years ago, from a risk management position, Hasbro began diversifying its manufacturing footprint. In 2019, these efforts accelerated, and the goal is to have approximately half of global production sourced from outside of China in the next one to two years. This requires incremental investments, but better positions Hasbro for long-term success in Creating the World’s Best Play and Entertainment Experiences.
As our business diversifies, the talent to successfully run Hasbro continues to evolve. Succession planning is among the Board’s top priorities and included in the annual goals for executive management. We worked closely with Hasbro management to ensure retention agreements were in place with the key talent at eOne prior to announcing the acquisition. The diverse experiences of our Board, including in managing acquisitions, in entertainment and in digital gaming, are essential as we advance Hasbro across these dimensions.
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As Hasbro evolves, the purpose of our organization remains intact: Making the World a Better Place for Children and their Families. The Nominating, Governance and Social Responsibility Committee oversees Hasbro’s corporate social responsibility (CSR) activities. Hasbro has a long-standing commitment to CSR and focuses on four key pillars: product safety, environmental sustainability, human rights & ethical sourcing as well as diversity & inclusion, with stated goals across each of the four pillars. We are proud of our leadership in this area. During 2019, Hasbro announced a new goal to eliminate virtually all plastic from its packaging for new products by 2022. As a result of the work we have done in this area Hasbro ranked No. 13 on the 2019 “100 Best Corporate Citizens” list by CR Magazine; named one of the “World’s Most Ethical Companies®” by Ethisphere Institute for the past eight years; #1 in our category for Just Capital “America’s Most Just Companies”; and in the Civic 50 list of the “Most Community Minded Companies in America”, among many others.
Over its history, Hasbro’s management has successfully transformed the company from a toy and game producer, to a global play and entertainment company. Each year presents different challenges and opportunities, but we are confident we are positioned to drive long-term value for our stakeholders. We value your input and support and look forward to sharing our progress. As we all do our part to navigate through this unprecedented time, we hope that Hasbro’s play and entertainment experiences help make an extremely difficult and uncertain time a bit more manageable.
Sincerely,
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Brian D. Goldner Chairman of the Board and Chief Executive Officer, Hasbro, Inc. |
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Edward M. Philip Lead Independent Director Hasbro’s Board of Directors |
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Hasbro, Inc. Notice of 2020
Annual Meeting of Shareholders
| Date: | Thursday, May 14, 2020 | |
| Time: | 11:00 a.m. Local Time | |
| Place: | Hasbro, Inc. Corporate Office 1027 Newport Avenue Pawtucket, RI 02861 | |
| Virtual Meeting: | As part of our precautions regarding the coronavirus or COVID-19, we are also holding our meeting virtually on the Internet at www.meetingcenter.io/227440037. If we are unable to have the meeting at our offices, we will announce our decision to hold the meeting only virtually via the Internet. | |
| Record Date: | Only shareholders of record of the Company’s common stock at the close of business on March 18, 2020 may vote at the meeting. | |
| Purpose
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Elect thirteen directors. | |||||
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Approve advisory vote on the compensation of the Company’s named executive officers. | |||||
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Approve amendments to the Company’s Restated 2003 Stock Incentive Performance Plan, as amended. | |||||
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Ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for the 2020 fiscal year. | |||||
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Transact such other business as may properly come before the meeting and any adjournment or postponement of the meeting.
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Voting
You are cordially invited to attend the meeting to vote your shares in person or virtually over the Internet, to hear from our senior management, and to ask questions. If you are not able to attend the meeting in person or virtually, 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 1, 2020 we will begin mailing a Notice of Internet Availability of Hasbro’s Proxy Materials to shareholders informing them that this Proxy Statement, our 2019 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,
Tarrant Sibley
Executive Vice President, Chief Legal Officer &
Corporate Secretary
April 1, 2020
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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.
| Annual Meeting Information |
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Date and Time 11:00 a.m. Local Time Thursday, May 14, 2020 |
Record Date Wednesday March 18, 2020 |
Place Hasbro, Inc. Corporate Office 1027 Newport Avenue Pawtucket, Rl 02861 and online at www.meetingcenter.io/227440037
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| Meeting Agenda and Recommendation of the Board of Directors |
| Agenda Item |
Board Recommendation |
Page Number | ||
| Proposal 1 Election of Thirteen Directors |
FOR each director nominee |
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| Proposal 2 Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers |
FOR
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82
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| Proposal 3 Approval of Amendments to the Restated 2003 Stock Incentive Performance Plan |
FOR
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83
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| Proposal 4 Ratification of KPMG LLP as the Independent Registered Public Accounting Firm for 2020 |
FOR
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93
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| How to Vote |
| Vote Right Away Through Advance Voting Methods | Voting During the Meeting | |||||
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Vote by Internet Go to the website identified and enter the control number provided on your proxy card or voting instruction form. |
Vote by Phone Call the number on your proxy card or voting instruction form. You will need the control number provided on your proxy card or voting instruction form. |
Vote by Mail Complete, sign and date the proxy card or voting instruction form and mail it in the accompanying pre-addressed envelope. |
Vote at the Meeting See the instructions below regarding how to vote at the meeting. | |||
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| 2019 Business Highlights |
2019 OVERVIEW
2019 was a pivotal year for Hasbro. We achieved our plan to profitably grow revenues, performing well in a dynamic retail and global trade environment. This followed a disruptive year in 2018 due to the bankruptcy of Toys“R”Us and significant challenges and changes in markets in which we operate. We achieved profitable growth in 2019 while taking significant steps to accelerate our Brand Blueprint strategy through our early fiscal 2020 acquisition of eOne, a global independent studio that specializes in the development, acquisition, production, financing, distribution and sales of entertainment content. The acquisition of eOne expands our brand portfolio with eOne’s beloved global children’s brands, including PEPPA PIG, PJ MASKS and RICKY ZOOM; adds proven TV and film expertise; enhances our brand building capabilities through increased storytelling talent in TV, film and other mediums, which we believe will strengthen core Hasbro brands and help activate vault brands; and creates additional opportunities for long-term profitable growth through in-sourcing and cost synergies, as well as future revenue opportunities.
2019 HIGHLIGHTS
| • | Delivered net revenue growth and increased operating profit; |
| • | Grew revenue in each major region, including in the U.S. and Canada and Europe absent foreign exchange impact; |
| • | Drove growth through our channel strategy, including double-digit gains in the value, fan, grocery and drug channels; |
| • | Advanced our retail strategy and execution for online and omni-channel partners; |
| • | Delivered significant growth in our Wizards of the Coast business, including through the successful launch of MAGIC: THE GATHERING ARENA and compelling tabletop and digital game experiences; |
| • | MONOPOLY had a record year with double-digit growth with new themes and entertainment tie-ins; |
| • | NERF made significant progress with new product lines, such as NERF Fortnite and NERF Ultra; |
| • | Advanced our consumer products licensing business, growing revenues and expanding operating profit margin; |
| • | Broadened our licensed brand portfolio and expanded our reach with original live events to drive consumer engagement; |
| • | Executed as an agile, modern and digitally-driven company; |
| • | Navigated challenges in the global trade environment, implementing programs to achieve revenue and margin goals; |
| • | Leveraged and created compelling entertainment to drive creativity across brands; and |
| • | Importantly, on December 30, 2019, we acquired eOne, adding beloved global children’s brands and proven TV and film expertise to our company. |
2019 FINANCIAL PERFORMANCE
| • | Delivered net revenues of $4.72 billion, an increase of 3% compared to 2018; |
| • | Revenues increased 5% excluding an unfavorable $78.5 million impact of foreign exchange; |
| • | Revenues grew 3% in the U.S. and Canada segment, 4% in the International segment absent foreign exchange, and 22% in our Entertainment, Licensing and Digital segment; |
| • | Franchise Brands revenue declined 1%, Partner Brands revenue increased 24%, Hasbro Gaming revenues decreased 10% and Emerging Brands revenue increased 5%; |
| • | Operating profit increased to $652.1 million, or 13.8% of revenues; |
| • | Adjusted operating profit of $669.8 million, or 14.2% of revenue, excluding $17.8 million of costs associated with the eOne acquisition; |
| • | Reported net earnings were $520.5 million, or $4.05 per diluted share; |
| • | Adjusted net earnings were $524.7 million, or $4.08 per diluted share, excluding after-tax net charges of $4.2 million, or $0.03 per diluted share; |
| • | Year-end cash and cash equivalents of $4.58 billion, which included $3.4 billion of eOne acquisition financing, cash received from foreign exchange hedges and other activities; |
| • | Generated $653.1 million in operating cash flow; and |
| • | Returned $398.0 million to shareholders in 2019 including $336.6 million in dividends. |
Adjusted operating profit, adjusted net earnings and adjusted earnings per diluted share are non-GAAP financial measures as defined under SEC rules. A reconciliation of these non-GAAP financial measures to GAAP is provided in Appendix B to this Proxy Statement.
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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 6.
| Current Committee Membership* | ||||||||||||||||||||||||||||||||||||
| Name and Principal Occupation |
Age* | Director Since |
Independent | Audit | Comp | Cyber | Exec | Fin | NGS | |||||||||||||||||||||||||||
| Kenneth A. Bronfin Senior Managing Director of Hearst Ventures |
60 | 2008 | ✓ |
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| Michael R. Burns Vice Chairman of Lions Gate Entertainment Corp. |
61 | 2014 | ✓ |
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| Hope F. Cochran Managing Director of Madrona Venture Group |
48 | 2016 | ✓ |
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| Sir Crispin H. Davis Retired Chief Executive Officer of Reed Elsevier |
71 | 2016 | ✓ |
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| John A. Frascotti President and Chief Operating Officer of Hasbro |
59 | 2018 | ||||||||||||||||||||||||||||||||||
| Lisa Gersh Outside Advisor; Former Chief Executive Officer of Alexander Wang |
61 | 2010 | ✓ |
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| Brian D. Goldner Chairman and Chief Executive Officer of Hasbro |
56 | 2008 | ||||||||||||||||||||||||||||||||||
| Alan G. Hassenfeld Retired Chairman and Chief Executive Officer of Hasbro |
71 | 1978 | ✓ |
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| Tracy A. Leinbach Retired Executive Vice President and Chief Financial Officer of Ryder System, Inc. |
60 | 2008 | ✓ |
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| Edward M. Philip Retired Chief Operating Officer of Partners in Health |
54 | 2002 | ✓ |
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| Richard S. Stoddart President and Chief Executive Officer of InnerWorkings, Inc. |
57 | 2014 | ✓ |
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| Mary Beth West Former Senior Vice President, Chief Growth Officer of The Hershey Company |
57 | 2016 | ✓ |
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| Linda K. Zecher Chief Executive Officer and Managing Partner of The Barkley Group |
66 | 2014 | ✓ |
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| * | Age and Committee memberships are as of April 1, 2020. |
| Chair:
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Member:
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Audit Committee Financial Expert:
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| AC: | AuditCommittee | |
| Comp: |
Compensation Committee | |
| Cyber: |
Cybersecurity and Data Privacy Committee | |
| Exec: |
Executive Committee | |
| Fin: |
Finance Committee | |
| NGS: |
Nominating, Governance and Social Responsibility Committee |
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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 an experienced, well-functioning 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.
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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
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Entire Board is elected annually | |||||
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11 out of 13 directors are independent | |||||
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38% of our Board nominees are women | |||||
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Balance of experience, gender, tenure and qualifications | |||||
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Lead Independent Director role with clearly defined responsibilities | |||||
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All required committees consist of independent directors | |||||
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Risk oversight by Board and its committees | |||||
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Separate Cybersecurity and Data Privacy Committee | |||||
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Annual Board and committee self-evaluations | |||||
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Director orientation and continuing education | |||||
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Policy limiting the number of boards on which our directors may serve | |||||
| Shareholder Rights, Accountability and Other Governance Practices
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Comprehensive shareholder outreach program | |||||
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No shareholder rights plan | |||||
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Annual shareholder advisory vote on executive compensation (“Say-on-Pay”) | |||||
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Majority vote standard with a plurality carve-out for contested elections | |||||
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Proxy access bylaw provision | |||||
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Prohibit the pledging or hedging of Company stock | |||||
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Strong compensation clawback policy | |||||
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Stock ownership and share retention policy for Board members, executive officers and other key employees | |||||
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Written code of conduct and corporate governance principles | |||||
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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 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 97.9%, 96.8% and 96.7% of the shares voted at the 2017, 2018 and 2019 Annual Meetings, respectively. 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 the views of our shareholders and strongly drives our pay for performance objectives.
In 2019 and early 2020, we proactively extended an invitation to our top 25 shareholders (who held in aggregate approximately 50% of our outstanding shares) to meet and we had discussions with all of such shareholders who accepted our invitation. We also spoke with shareholders who reached out to us. This year we covered a variety of topics, including:
| • | our recently completed acquisition of eOne and how we believe it can accelerate our Brand Blueprint strategy; |
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| • | our compensation policies and practices, performance metrics, and how we expect to consider the eOne acquisition for purposes of compensation; |
| • | our corporate governance practices; and |
| • | key focus areas, achievements and goals in the corporate social responsibility space. |
We shared the feedback we received from our shareholders with our Board and its committees. The Board and its committees continue to consider feedback, particularly in relation to the inclusion of performance metrics for compensation programs to account for goals and objectives relating to our acquisition of eOne.
Corporate Social Responsibility (CSR)
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 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. Our CSR focus areas and commitment are outlined below.
For a further discussion of our CSR efforts and goals, please see “—Governance of the Company; Corporate Social Responsibility” on page 25.
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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 our named executive officers (“NEOs”) as described in this Proxy Statement. Detailed information can be found beginning on page 32. 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 2019 and our compensation best practices follow.
| Pay-for-Performance |
| • Our 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 2019, 89.3% of our Chief Executive Officer’s total target compensation was performance-based and at-risk. |
| 2019 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%) | |
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| 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
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| Our Stock Incentive Plan |
Proposal 3 — Approval of Amendments to our Restated 2003 Stock Incentive Performance Plan
You are being asked to approve amendments to our Restated 2003 Stock Incentive Performance Plan, as amended (the “2003 Plan”) to increase the authorized shares available for issuance under the plan, revise the sublimit on the grant of full value shares, and extend the duration of the plan. As we continue to evolve our Brand Blueprint strategy, including through the acquisition of eOne, we need the ability to grant appropriate and competitive incentives intended to attract and retain key personnel and reward those who contribute to the success and performance of our business. We provide variable performance-based compensation that aligns the interests of those persons with shareholders while appropriately rewarding those persons for contributing to our success and the delivery of strong performance.
We are requesting shareholders to approve an increase in the shares available for issuance under the 2003 Plan by 5,350,000 shares, including the sublimit on the grant of full value shares, and to extend the duration of the 2003 Plan to December 31, 2025. Detailed information about this proposal can be found beginning on page 83.
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All provisions that we believe promote best practices and reinforce the alignment between compensation payable to or realizable by participating officers, other key employees and directors, and shareholders’ interests, will continue to be in effect following approval of the amendment to the 2003 Plan. These provisions include, but are not limited to, the following:
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Key Plan Provisions
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| Our Auditors |
Proposal 4 — 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 2020. Detailed information about this proposal can be found beginning on page 93.
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Election of Directors (Proposal 1)
You are being asked to elect thirteen directors at the Meeting. All of the directors elected at the Meeting will serve until the 2021 Annual Meeting of Shareholders (the “2021 Meeting”), and until their successors are duly elected and qualified, or until their earlier death, resignation or removal.
The Board, upon recommendation of the Nominating, Governance and Social Responsibility Committee of the Board, has recommended the persons named below as nominees for election as directors to serve until the 2021 Meeting. 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 Nominating, Governance and Social Responsibility Committee and the Board 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 |
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| Senior Management |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||||
| Industry Background |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||||
| Sales and Marketing |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||||
| Strategic Planning |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||||
| Global Business |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||||
| Digital Gaming/Media/ Products |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||||||
| Talent Development |
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| Governance/ ESG |
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| Finance/ Accounting |
● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||||||||||
| IT/Technology |
● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||||||||||
| GENDER |
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| Female |
● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||||||||||||
| Male |
● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||||||||
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Nominees for Election as Directors
The following sets forth certain biographical information regarding each director nominee as of April 1, 2020, as well as 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.
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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 23 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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Our Board of Directors has six standing committees:
| • | Audit |
| • | Compensation |
| • | Cybersecurity and Data Privacy |
| • | Executive |
| • | Finance |
| • | 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 the rules of The NASDAQ Stock Market (“Nasdaq”) and our Standards for Director Independence (“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 Nasdaq 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 “Corporate — 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 2019, are set forth in the table below.
| Committee | Principal Function | Number of Meetings in 2019 |
2019 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; and
- performance of the Company’s internal audit function and internal auditor. |
12 | • Hope F. Cochran (Chair)†
• Kenneth A. Bronfin
• Lisa Gersh†
• Tracy A. Leinbach†
• Linda K. Zecher†
† The Board has determined that this person qualifies as an Audit Committee Financial Expert under applicable SEC rules. | ||||||
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| Committee | Principal Function | Number of Meetings in 2019 |
2019 Committee Members | ||||||
| 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 | • Lisa Gersh (Chair)
• Kenneth A. Bronfin
• Crispin H. Davis
• Tracy A. Leinbach
• Edward M. Philip | ||||||
| Cybersecurity |
• 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.
• 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. |
5 | • Linda K. Zecher (Chair)
• Kenneth A. Bronfin
• Alan G. Hassenfeld
• Richard S. Stoddart | ||||||
| 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
• Lisa Gersh
• Edward M. Philip
• Richard S. Stoddart
• Mary Beth West
• Linda K. Zecher | ||||||
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| Committee | Principal Function | Number of Meetings in 2019 |
2019 Committee Members | ||||||
| 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.
• Reviews short and long term financing plans, including debt and equity financings and use of securitization facilities.
• Reviews use of funds for investments, dividends and share repurchases and acquisitions. |
4 | • Mary Beth West (Chair)
• Michael R. Burns
• Hope F. Cochran
• Crispin H. Davis
• 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.
• Shares responsibility for evaluation of the CEO.
• 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.
• Oversees the Company’s codes of 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 | • Richard S. Stoddart (Chair)
• Michael R. Burns
• Crispin H. Davis
• Tracy A. Leinbach
• Edward M. Philip
• Mary Beth West | ||||||
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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.
| Committee | Risk Oversight | |
| Audit |
• 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. • Oversees, on behalf of the Board, financial reporting, tax, and accounting matters, as well as the Company’s internal controls over financial reporting. • Key role in oversight of the Company’s compliance with legal and regulatory requirements. | |
| Compensation |
• Assists the Board in oversight of the compensation programs for the Company’s executive officers. • 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. | |
| 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. • 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. | |
| Finance |
• 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 reviews major business risks to the Company and the Company’s efforts to manage those risks. | |
| Nominating, Governance and Social Responsibility |
• Assists the Board in its oversight of 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. | |
| Board |
• The full Board 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. | |
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The following table sets forth information concerning compensation of the Company’s directors for fiscal 2019. Mr. Goldner, the Company’s Chairman and Chief Executive Officer, and Mr. Frascotti, the Company’s President and Chief Operating Officer, served on the Board during fiscal 2019. However, neither Mr. Goldner nor Mr. Frascotti received any compensation for their Board service in fiscal 2019 beyond their compensation as officers of the Company.
| Name | Fees Earned or Paid in Cash(a) |
Stock Awards (b)(c) |
Option Awards (b)(c) |
Change
in Compensation |
All Other Compensation (d) |
Total | ||||||||||||||||||||||||
| Kenneth A. Bronfin |
$ | 154,115 | $ | 160,000 | $ | 0 | N/A | $ | 90,490 | $ | 404,605 | |||||||||||||||||||
| Michael R. Burns |
$ | 112,096 | $ | 160,000 | $ | 0 | N/A | $ | 0 | $ | 272,096 | |||||||||||||||||||
| Hope F. Cochran |
$ | 142,503 | $ | 160,000 | $ | 0 | N/A | $ | 2,500 | $ | 305,003 | |||||||||||||||||||
| Crispin H. Davis |
$ | 0 | $ | 296,732 | $ | 0 | N/A | $ | 31,284 | $ | 328,016 | |||||||||||||||||||
| Lisa Gersh |
$ | 0 | $ | 316,809 | $ | 0 | N/A | $ | 119,567 | $ | 436,376 | |||||||||||||||||||
| Alan G. Hassenfeld |
$ | 110,003 | $ | 160,000 | $ | 0 | N/A | $ | 73,629 | $ | 343,632 | |||||||||||||||||||
| Tracy A. Leinbach |
$ | 138,664 | $ | 160,000 | $ | 0 | N/A | $ | 32,685 | $ | 331,349 | |||||||||||||||||||
| Edward M. Philip |
$ | 162,046 | $ | 160,000 | $ | 0 | N/A | $ | 238,893 | $ | 560,939 | |||||||||||||||||||
| Richard S. Stoddart |
$ | 0 | $ | 302,949 | $ | 0 | N/A | $ | 58,426 | $ | 361,375 | |||||||||||||||||||
| Mary Beth West |
$ | 134,596 | $ | 160,000 | $ | 0 | N/A | $ | 3,337 | $ | 297,933 | |||||||||||||||||||
| Linda K. Zecher |
$ | 135,935 | $ | 160,000 | $ | 0 | N/A | $ | 44,159 | $ | 340,094 | |||||||||||||||||||
| (a) | Includes amounts which are deferred by directors into the interest account under the Deferred Compensation Plan for Non-Employee Directors, as well as interest earned by directors on existing balances in the interest account. Does not include the amount of cash retainer payments deferred by the director into the stock unit account under the Deferred Compensation Plan for Non-Employee Directors, which amounts are reflected in the Stock Awards column. |
| (b) | Please see note 14 to the financial statements included in the Company’s Annual Report on Form 10-K, for the year ended December 29, 2019, for a detailed discussion of the assumptions used in valuing stock and option awards. |
| In addition to reflecting the grant date fair value for stock awards made to the directors (this expense for the director stock award in 2019 was $160,000 per director continuing service on the Board), the stock awards column also includes, to the extent applicable, the (i) amount of cash retainer payments deferred by the director into the stock unit account under the Deferred Compensation Plan for Non-Employee Directors and (ii) a 10% matching contribution which the Company makes to a director’s account under the Deferred Compensation Plan for Non-Employee Directors on all amounts deferred by such director into the Company’s stock unit account under that plan. |
| No options were granted to any of the non-employee directors in 2019. |
| (c) | The non-employee directors who were serving on the Board at that time held the following outstanding stock and option awards as of December 29, 2019. |
| Name | Outstanding Option Awards |
Outstanding Stock Awards | ||||||||
| Kenneth A. Bronfin |
0 | 27,404 | ||||||||
| Michael R. Burns |
0 | 0 | ||||||||
| Hope F. Cochran |
0 | 0 | ||||||||
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| Name | Outstanding Option Awards |
Outstanding Stock Awards | ||||||||
| Crispin H. Davis |
0 | 7,179 | ||||||||
| Lisa Gersh |
0 | 23,115 | ||||||||
| Alan G. Hassenfeld |
0 | 27,962 | ||||||||
| Tracy A. Leinbach |
0 | 10,369 | ||||||||
| Edward M. Philip |
0 | 38,389 | ||||||||
| Richard S. Stoddart |
0 | 11,039 | ||||||||
| Mary Beth West |
0 | 1,636 | ||||||||
| Linda K. Zecher |
0 | 8,563 | ||||||||
| The outstanding stock awards consist of the aggregate number of non-employee director stock grants that the director elected to defer the receipt of any such shares until his or her retirement from the Board. To the extent a director did not defer the stock award, it is not included in the table and the shares have already been issued to the director. Each director was given the option, prior to the beginning of the year of grant, to receive the shares subject to the upcoming annual grant either at the time of grant, or to defer receipt of the shares until he or she retires from the Board. |
| (d) | Comprised of (i) deemed dividends which are paid on outstanding balances in stock unit accounts under the Deferred Plan and (ii) deemed dividends paid on annual stock awards which have been deferred. Balances deferred by directors into the stock unit account track the performance of the Company’s common stock. Also includes the Company’s matching charitable contribution of up to $5,000 per director per fiscal year. An aggregate of $22,500 was paid by the Company in fiscal 2019 in director matching contributions. |
Current Director Compensation Arrangements
In structuring the Company’s director compensation, the Nominating, Governance and Social Responsibility Committee seeks to attract and retain talented directors who will contribute significantly to the Company, fairly compensate directors for their work on behalf of the Company and align the interests of directors with those of stockholders. As part of its review of director compensation, the Nominating, Governance and Social Responsibility Committee reviews external director compensation market studies to assure that director compensation is set at reasonable levels which are commensurate with those prevailing at other similar companies and that the structure of the Company’s non-employee director compensation programs is effective in attracting and retaining highly qualified directors.
All members of the Board who are not otherwise employed by the Company (“non-employee directors”) receive annual cash retainers for service on the Board and its committees. Below is a summary of the cash retainers for service in 2019.
| Annual Retainers | Amount ($) | ||||
| Annual Base Board Retainer |
$ | 95,000 | |||
| Annual Retainers (in addition to Annual Base Board Retainer) |
|||||
| • Lead Independent Director |
$ | 35,000 | |||
| • Chair of Audit Committee |
$ | 40,000 | |||
| • Chair of Compensation Committee |
$ | 35,000 | |||
| • Chair of Finance Committee |
$ | 30,000 | |||
| • Chair of Nominating, Governance and Social Responsibility Committee |
$ | 20,000 | |||
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| Annual Retainers | Amount ($) | ||||
| • Chair of Cybersecurity and Data Privacy Committee |
$ | 20,000 | |||
| • Audit Committee Member (other than Chair) |
$ | 20,000 | |||
| • Compensation Committee Member (other than Chair) |
$ | 15,000 | |||
| • Finance Committee (other than Chair) |
$ | 7,500 | |||
| • Nominating, Governance and Social Responsibility Committee (other than Chair) |
$ | 12,500 | * | ||
| • Cybersecurity and Data Privacy Committee (other than Chair) |
$ | 7,500 | |||
| * | Increased from $7,500 to $12,500 in August 2019. |
No meeting fees were paid for attendance at meetings of the full Board or committees.
In May of every year, the Company anticipates issuing to each non-employee director that number of shares of Common Stock which have a set fair market value (based on the fair market value of the Common Stock on the date of grant). In fiscal 2019, the director stock grants had grant date fair market values of $160,000. These shares are immediately vested, but the Board has adopted stock ownership guidelines which mandate that Board members may not sell any shares of the Company’s Common Stock which they hold, including shares which are obtained as part of this yearly stock grant, until they own shares of Common Stock with an aggregate market value equal to at least $475,000 (which is equivalent to five times the annual Board retainer). Board members are permitted to sell shares of Common Stock they hold with a value in excess of $475,000, as long as they continue to hold at least $475,000 worth of Common Stock. Pursuant to the Deferred Compensation Plan for non-employee directors (the “Deferred Plan”), which is unfunded, non-employee directors may defer some or all of the annual Board retainer and meeting fees into a stock unit account, the value of each unit initially being equal to the fair market value of one share of Common Stock as of the end of the quarter in which the compensation being deferred would otherwise be payable. Stock units increase or decrease in value based on the fair market value of the Common Stock. In addition, an amount equal to the dividends paid on an equivalent number of shares of Common Stock is credited to each non-employee director’s stock unit account as of the end of the quarter in which the dividend was paid. Non-employee directors may also defer any portion of their retainer and/or meeting fees into an interest account under the Deferred Plan, which bears interest at the five-year treasury rate.
The Company makes a deemed matching contribution to a director’s stock unit account under the Deferred Plan equal to 10% of the amount deferred by the director into the stock unit account, with one-half of such Company contribution vesting on December 31st of the calendar year in which the deferred compensation otherwise would have been paid and one-half on the next December 31st, provided that the participant remains a director on such vesting date. Unvested Company contributions will automatically vest on death, total disability or retirement by the director at or after age seventy-two. Compensation deferred under the Deferred Plan, whether in the stock unit account or the interest account, will be paid out in cash after termination of service as a director. Directors may elect that compensation so deferred be paid out in a lump sum or in up to ten annual installments, commencing either in the quarter following, or in the January following, the quarter in which service as a director terminates.
The Company also offers a matching gift program for its Board members pursuant to which the Company will match charitable contributions, up to a maximum yearly Company match of $5,000, made by Board members to qualifying non-profit organizations and academic institutions.
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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, 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 https://hasbro.gcs-web.com/corporate-governance. 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 https://hasbro.gcs-web.com/corporate-governance.
| Director Independence |
Hasbro’s Board has adopted Independence Standards in accordance with 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 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 Independence Standards are available on Hasbro’s website at https://hasbro.gcs-web.com/corporate-governance. A copy of the Independence Standards is also attached as Appendix A to this Proxy Statement.
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, 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.
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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.
| 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 currently 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 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, executing and accelerating the Company’s strategy, 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.
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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.
| 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 SEC) 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.
| Director Outside Board Service |
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.
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.
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| 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.
| 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 |
We have adopted a “proxy access” procedure in our Amended and Restated By-Laws. Our proxy access bylaw 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 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. The Company also requires employees at those levels 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.
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| 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.
| 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 and content safety, environmental sustainability, human rights and ethical sourcing, and diversity and inclusion.
| • | Product & Content 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. This includes embracing our responsibility to create high quality products, entertainment and play experiences and marketing them responsibly. It’s an important part of how we uphold our commitments to children, families, and all our consumers. |
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| • | 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. |
| • | Human Rights & 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. |
| • | Diversity & 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 effort is our tradition of supporting children worldwide through a variety of philanthropic programs. In 2019, our support exceeded $20 million, including both financial contributions and donations of more than 1.4 million toys and games.
Some of our CSR goals are set forth below:
Hasbro received several prestigious recognitions for our CSR efforts, including being named one of the 2020 World’s Most Ethical Companies® by the Ethisphere Institute, marking our ninth consecutive year to receive this distinction. Additionally, in 2019, we ranked in the top 15 on the 100 Best Corporate Citizens list by 3BL Media, marking the eighth consecutive year Hasbro has been ranked at the top of the list. We were also named the top consumer products company in JUST Capital’s America’s Most Just Companies, in the top 20 of Barron’s 100 Most Sustainable Companies, as one of America’s Most Reputable Companies by Reputation Institute, one of the 50 Best ESG Companies by Investor’s Business Daily, and one of America’s Most Community Minded Companies by the Civic 50.
The head of our CSR group reports on a regular basis to the Nominating, Governance, and Social Responsibility Committee of the Board. That committee has oversight of CSR matters.
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| Board Meetings and Director Attendance at the Annual Meeting |
During 2019, the Board held 12 meetings. All directors attended at least 75% of the aggregate of (i) the Board meetings held during their tenure as directors during 2019 and (ii) the meetings of any committees held during their tenure as members of such committees during 2019. 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 in person or virtually via the Internet unless conflicts prevent them from attending. All members of the Board attended the 2019 Annual Meeting of Shareholders.
| 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.
| 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 2021 Annual Meeting of Shareholders must be received by the Secretary of the Company at the Company’s executive offices no later than December 2, 2020 (the date that is 120 calendar days before the anniversary of the release date of the proxy statement relating to the 2020 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 SEC 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 2021 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 2021 Annual Meeting. Except for shareholder proposals made pursuant to the preceding paragraph, the Company will retain discretion to vote proxies at the 2021 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 2021 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.
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| 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:
| • | 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. |
Additionally, while the Company does not have a formal policy for considering diversity in identifying and recommending nominees for election to the Board, the Nominating, Governance and Social Responsibility Committee does value and consider 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 2020 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. 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 30 days prior to or delayed by more than 30 days before or after such anniversary date, notice by the shareholder must be delivered not earlier than 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 2021 Annual Meeting of Shareholders must be submitted no earlier than January 14, 2021, and no later than February 13, 2021. Nominations made by 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) days 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 2021 Annual Meeting of Shareholders must be submitted no earlier than January 14, 2021, and no later than February 13, 2021. The Nominating,
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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:
| • | as to each person whom the shareholder proposes to nominate for election or re-election as a director: |
| ○ | the name, age, business address and residence address of the person; |
| ○ | the principal occupation or employment of the person; |
| ○ | the class or series and number of shares of capital stock of the Company that are owned beneficially or of record by the person; |
| ○ | 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 |
| ○ | 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. |
| • | as to the shareholder(s) giving the notice: |
| ○ | the name and record address of such shareholder(s) and each participant in any group of which such shareholder is a member; |
| ○ | 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; |
| ○ | 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; |
| ○ | 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 |
| ○ | 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. Under our proxy access bylaw, under certain circumstances, a stockholder or group of stockholders may 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 proxy access bylaw 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
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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. 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 2021 annual meeting must be received by our Secretary no earlier than January 14, 2021, and no later than February 13, 2021.
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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 Restated 2003 Stock Incentive Performance Plan, as amended. 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 https://hasbro.gcs-web.com/corporate-governance.
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 SEC, 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 29, 2019.
Report issued by the members of the Compensation Committee as of the Company’s 2019 fiscal year end.
Lisa Gersh (Chair)
Kenneth A. Bronfin
Crispin H. Davis
Tracy A. Leinbach
Edward M. Philip
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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 |
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| 2019 Named Executive Officers |
The Company’s Named Executive Officers (NEOs) for 2019 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 and Entertainment Experiences. From toys, games and other consumer products to television, movies, digital gaming, live performances, and music, Hasbro connects to global audiences by bringing to life great innovations, stories and brands across established and inventive platforms. Hasbro’s iconic brands include MAGIC: THE GATHERING, MY LITTLE PONY, NERF, TRANSFORMERS, PLAY-DOH, MONOPOLY, BABY ALIVE, POWER RANGERS and FURREAL FRIENDS, as well as our premier partner brands. Through our acquisition of Entertainment One Ltd. (“eOne”), we have enhanced our brand portfolio with the addition of other beloved global children’s brands, including PEPPA PIG, PJ MASKS and RICKY ZOOM. Through our global entertainment studios, we are building our brands globally through great storytelling and content on all screens. Hasbro is committed to making the world a better place for children and their families through corporate social responsibility and philanthropy.
Our strategic plan is centered around our Brand Blueprint, which was redesigned following our acquisition of eOne. Under our Brand Blueprint strategy, we re-imagine, re-invent and re-ignite our owned and controlled brands and imagine, invent and ignite new brands, through product innovation, immersive entertainment offerings, including television and motion pictures, digital gaming and a broad range of consumer products. With the addition of eOne, we are also well-positioned to deliver high quality, premium content that can be distributed across media channels.
Hasbro Brand BlueprintBRANDS CONTENTGlobal Customer RelationshipsToys & GamesLocation Based ExperienceDigital GamingEsportsTV & film Digital Shorts Emerging MediaMusic/ArtistsLicensed Consumer ProductsPublishing
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2019 Overview
2019 was a pivotal year for Hasbro. We achieved our plan to profitably grow revenues, performing well in a dynamic retail and global trade environment. This followed a disruptive year in 2018 due to the bankruptcy of Toys“R”Us and significant challenges and changes in markets in which we operate. We achieved profitable growth in 2019 while taking significant steps to accelerate our Brand Blueprint strategy through our early fiscal 2020 acquisition of eOne, a global independent studio that specializes in the development, acquisition, production, financing, distribution and sales of entertainment content. The acquisition of eOne expands our brand portfolio with eOne’s beloved global children’s brands, including PEPPA PIG, PJ MASKS and RICKY ZOOM; adds proven TV and film expertise; enhances our brand building through storytelling capabilities in TV, film and other mediums, which we believe will strengthen core Hasbro brands and help activate vault brands; and creates additional opportunities for long-term profitable growth through in-sourcing and cost synergies, as well as future revenue growth opportunities.
2019 Highlights
| • | Delivered net revenue growth and increased operating profit; |
| • | Grew revenue in each major region, including in the U.S. and Canada, and Europe absent the effect of foreign exchange; |
| • | Drove growth through our channel strategy, including double-digit gains in the value, fan, grocery and drug channels; |
| • | Advanced our retail strategy and execution for online and omni-channel partners; |
| • | Delivered significant growth in our Wizards of the Coast business, including through the successful launch of MAGIC: THE GATHERING ARENA and compelling tabletop and digital game experiences; |
| • | MONOPOLY had a record year with double digit growth with new themes and entertainment tie-ins; |
| • | NERF made significant progress with new product lines, such as NERF Fortnite and NERF Ultra; |
| • | Advanced our consumer products licensing business, growing revenues and expanding operating profit margin; |
| • | Broadened our licensed brand portfolio and expanded our reach with original live events to drive consumer engagement; |
| • | Executed as an agile, modern and digitally-driven company; |
| • | Navigated challenges in the global trade environment, implementing programs to achieve revenue and margin goals; |
| • | Leveraged and created compelling entertainment to drive creativity across brands; and |
| • | Importantly, on December 30, 2019, we acquired eOne, adding beloved global children’s brands and proven TV and film expertise to our company. |
2019 Financial Performance
In 2019, we had a strong financial performance:
| • | Delivered net revenues of $4.72 billion, an increase of 3% compared to 2018; |
| • | Revenues increased 5% excluding an unfavorable $78.5 million impact of foreign exchange; |
| • | Revenues grew 3% in the U.S. and Canada segment, 4% in the International segment absent foreign exchange, and 22% in our Entertainment, Licensing and Digital segment; |
| • | Franchise Brands revenue declined 1%, Partner Brands revenue increased 24%, Hasbro Gaming revenues decreased 10% and Emerging Brands revenue increased 5%; |
| • | Operating profit increased to $652.1 million, or 13.8% of revenues; |
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| • | Adjusted operating profit of $669.8 million, or 14.2% of revenue, excluding $17.8 million of costs associated with the eOne acquisition; |
| • | Reported net earnings were $520.5 million, or $4.05 per diluted share; |
| • | Adjusted net earnings were $524.7 million, or $4.08 per diluted share, excluding after-tax net charges of $4.2 million, or $0.03 per diluted share; |
| • | Year-end cash and cash equivalents of $4.58 billion, which included $3.4 billion of eOne acquisition financing, cash received from foreign exchange hedges and other activities; |
| • | Generated $653.1 million in operating cash flow; and |
| • | Returned $398.0 million to shareholders in 2019 including $336.6 million in dividends. |
Adjusted operating profit, adjusted net earnings and adjusted earnings per diluted share are non-GAAP financial measures as defined under SEC rules. A reconciliation of these non-GAAP financial measures to GAAP is provided in Appendix B to this Proxy Statement.
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 2010.
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The following graph charts the Company’s net revenues (in millions of dollars) for every fiscal year since 2010.
The tables below provide the following for each of the fiscal years 2015-2019: the Company’s GAAP diluted earnings per share (adjusted earnings per share in green); operating cash flow; operating profit margin (adjusted operating profit margin in green); and return on invested capital. 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. A reconciliation of our GAAP to Non-GAAP financial measures is included in Appendix B to this Proxy Statement.
Diluted Earnings Per ShareOperating Cash Flow Operating Profit MarginReturn On Invested Capital
The operating cash flows for 2015 and 2016 in the table above were restated from amounts previously reported to reflect the adoption of ASU 2016-09.
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The following table provides the amounts we have returned to our shareholders since 2015, in the form of both cash dividends and share repurchases.
Cash Returned to Shareholders Dividend and Share Repurchase
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 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 97.9%, 96.8% and 96.7% of the shares voted at the 2017, 2018 and 2019 Annual Meetings, respectively. 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 the views of our shareholders and strongly drives our pay for performance objectives.
In 2019 and early 2020, we proactively extended an invitation to our top 25 shareholders (who held in aggregate approximately 50% of our outstanding shares) to meet and we had discussions with all of such shareholders who accepted our invitation. We also spoke with shareholders who reached out to us. This year we covered a variety of topics, including:
| • | our recently completed acquisition of eOne and how we believe it can accelerate our Brand Blueprint strategy; |
| • | our compensation policies and practices, performance metrics, and how we expect to consider the eOne acquisition for purposes of compensation; |
| • | our corporate governance practices; and |
| • | key focus areas, achievements and goals in the corporate social responsibility (CSR) space. |
We shared the feedback we received from our shareholders with our Board and its committees. The Board and its committees continue to consider feedback, particularly in relation to the inclusion of performance metrics for compensation programs to account for goals and objectives relating to our acquisition of eOne.
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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.
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 89.3% of our CEO’s total target compensation for 2019 was performance based and at-risk.
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The following chart summarizes the components of our 2019 compensation program for our CEO and other NEOs.
| 2019 CEO/NEO Pay Program Elements |
| 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
• 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 35% based on individual performance
• Performance measures evaluated (weighting)
➣ Total Net Revenues (40%)
➣ Operating Margin (40%)
➣ Free Cash Flow (20%) | |
| Long-Term Equity Incentive Plan | ||
| 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 | |
| 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, subject to continued employment | |
| Restricted Stock Units |
• 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, subject to continued employment | |
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 2019 based on the 2019 operating plan and budget and the 2020
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and 2021 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.
Annual Management Incentive Awards
For the annual cash management incentive awards for 2019, 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 the threshold performance for that metric. The threshold performance for revenue was 85% of target and the threshold performance for operating margin and free cash flow was 80% of target. The maximum payout for overachievement against a given metric is set at 200% of target, and that maximum is awarded when actual performance reaches 115% of target performance in the case of revenues, and 125% of target performance in the case of operating margin and free cash flow.
In 2019, we achieved an aggregate weighted performance payout of 101% 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.
In 2018, we achieved an aggregate weighted performance payout of 43% of target under the annual management incentive plan. Based on that achievement, Mr. Goldner would have earned a bonus, prior to any adjustments for performance, of $1,166,375. In light of the Company’s performance, Mr. Goldner offered to the Compensation Committee, and the Compensation Committee accepted, that he would receive no management incentive award with respect to 2018.
The table below compares our actual 2019 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 impact of certain items, which are described on page 51, as the Committee specified at the beginning of the performance period that the impact of those items would be excluded.
| Goal | Actual | Percentage Achievement |
2019 Payout Percentage |
2019 Weighted Payout |
||||||||||||||||
| Revenue |
$ | 4,791,132 | $ | 4,720,227 | 99 | % | 97 | % | 39 | % | ||||||||||
| Operating Margin % |
14.0% | 14.2% | 102 | % | 108 | % | 43 | % | ||||||||||||
| Free Cash Flow |
$ | 534,762 | $ | 519,709 | 97 | % | 94 | % | 19 | % | ||||||||||
| All numbers are in thousands, |
Total weighted payout | 101 | % | |||||||||||||||||
The performance goals for 2019 were set with the objective of returning to profitable growth while giving consideration to the disruptive challenges the Company and the industry faced following the 2018 bankruptcy of Toys“R”Us, the political and economic headwinds in Europe, and the continuing changes in global retail environment.
Annual Long-Term Incentive Awards
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
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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.
Under the 2019 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 2019 achieved 23% 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, costs associated with 2018 restructuring, costs associated with the settlement of the Company’s Pension Plan in 2019, the impact of the POWER RANGERS acquisition and the impact of the transactions relating to the eOne acquisition, were excluded from the computation of the achievement of the earnings per share and average return on invested capital metrics for the 2017-2019 awards.
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. Average return on invested capital was not a performance metric in the 2014-2016 awards.
| 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 | |||||||||||||||||||||||||||||||||||
| 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 | % | ||||||||||||||||||||
| 2017-2019 |
$ | 16,348 | $ | 14,272 | 87.3 | % | $ | 14.34 | $ | 12.30 | 85.8 | % | 14.5 | % | 13.63 | % | 94 | % | 23 | % | ||||||||||||||||||||
| * | Numbers are in millions. 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. |
Election to Forego Any Payment under 2017-2019 Contingent Stock Performance Awards
Based on a 94% achievement of the average ROIC performance metric for the 2017-2019 contingent stock performance award, the Named Executive Officers would have been entitled to receive a 23% payout under those awards. However, in light of the fact that the Company’s employees who had two metric contingent stock performance awards with cumulative revenues and cumulative EPS did not receive any payout, Mr. Goldner, Mr. Frascotti and Ms. Thomas each agreed to waive any rights to payment under their 2017-2019 contingent stock performance awards. Mr. Davis and Mr. Tinga received their payouts under such awards as they began to transition their roles out of senior management.
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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 and Entertainment 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 43 of this Proxy Statement.
All equity and non-equity incentive plan compensation granted by the Company in 2013 and thereafter is subject to our Board approved 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.
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
• Robust anti-hedging and pledging policies prohibiting pledging or hedging of Company stock
• Double-trigger change in control provisions
• Fully independent Compensation Committee
• Independent Compensation Consultant
• No tax gross-ups
• No excessive perquisites
• No repricing of equity incentive awards
• Strong clawback policy | |
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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 Chief Human Resources Officer and 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 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 2019, the Committee’s outside compensation consultant was Meridian Compensation Partners LLC.
Peer Group and Benchmarking to the Market
In designing the fiscal 2019 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, 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 2019, the compensation peer group reflects a mix of companies with which Hasbro competes for executive talent, and most closely reflect the importance of storytelling and entertainment to drive consumer engagement with our brands. The 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. Following the Company’s acquisition of eOne, the Committee has approved a revised peer group for future compensation decisions.
In 2019, 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, the Company and the Committee reviewed proxy
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data for the top five executives across the peer group set forth below. For Mr. Goldner, the Committee conducted both a market check and a pay for performance analysis in 2019. The Company’s peer group was used in connection with the market check and the pay for performance analysis.
In 2019, the Committee approved salary increases and long-term incentive target changes effective for 2020 for Ms. Thomas, Mr. Davis and Mr. Tinga, as described below under the headings “— Long-Term Incentive Compensation” and “— Fixed Compensation and Benefits — Base Salary.”
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 |
| Colgate-Palmolive Company |
Discovery, Inc. | ViacomCBS, Inc. | ||
| The Estee Lauder Companies Inc. |
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; |
| • | 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 2019, was within a reasonable range of 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 2019 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 the Committee’s review of the Company’s 2019 executive compensation programs and provided additional information as to whether the Company’s proposed 2019 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.
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The Committee reviewed Meridian’s independence, relative to the following factors:
| • | their provision of other services to the Company, of which there are none; |
| • | the amount of fees they receive from the Company as a percentage of their total revenue; |
| • | the policies and procedures they have that are designed to prevent conflicts of interest; |
| • | 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; |
| • | any Hasbro stock owned by the entity or any of its compensation consultants working for the Committee, of which there isn’t any; |
| • | 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 |
| • | 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 2019, 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 89.3% of the CEO’s target compensation opportunity for 2019, 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.
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 / 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 | |||||
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| Component of Incentive Compensation |
Variability Factor / Metrics |
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.
All Company employees participate in some form of annual incentive program. Approximately 29% of the Company’s employees, including all NEOs, received management incentive awards with respect to fiscal 2019. 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 Plan. Management incentive awards for the Company’s executive officers for fiscal 2019 were determined under the 2014 Senior Management Annual Performance Plan (the “Annual Performance Plan”).
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.
Selecting Annual Incentive Performance Metrics. The Committee selects performance metrics that will be used to drive annual business performance and establishes rigorous yet achievable performance targets for each of those metrics. The Committee established the fiscal 2019 corporate and business unit performance goals in the first quarter of fiscal 2019 based on the Company’s 2019 operating plan and budget approved by the Board. The Committee selected three performance metrics:
| • | total net revenues (weighted at 40%) |
| • | operating margin (weighted at 40%) |
| • | free cash flow (weighted at 20%) |
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 85% of target for revenues and 80% of target for each of operating margin and free cash flow, the payout achieved for that metric is 0%. Once the achievement of
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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 135% 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 2019:
Target Award (earned base salary)Corporate Financial Achievement (0%-200%)Individual Strategic Goals (generally 0%-135%)Final Payout
Annual Incentive Plan Targets for 2019. The target annual incentive award, associated with achieving performance of the designated financial goals for the Company, for our CEO in 2019 was 175% of earned base salary. For our other NEOs, the target annual incentive award ranged between 75% and 100% of earned base salary in 2019.
The table set forth below provides the 2019 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 2019. The Company’s actual weighted financial performance in fiscal 2019 corresponded to a 101% weighted payout against target for the corporate financial goals.
| Performance Measure | Weight | 2019 Target | 2019 Actual Performance |
Percentage Achievement |
2019 Payout Percentage |
2019 Weighted Payout | ||||||||||||||||||||||||
| Revenue |
40 | % | $ | 4,791,132 | $ | 4,720,227 | 99 | % | 97 | % | 39 | % | ||||||||||||||||||
| Operating Margin |
40 | % | 14.0% | 14.2% | 102 | % | 108 | % | 43 | % | ||||||||||||||||||||
| Free Cash Flow |
20 | % | $ | 534,762 | $ | 519,709 | 97 | % | 94 | % | 19 | % | ||||||||||||||||||
| Dollar figures are in thousands. |
|
Total weighted payout | 101 | % | ||||||||||||||||||||||||||
The performance goals for 2019 were set with the objective of returning to profitable growth while giving consideration to the disruptive challenges the Company and the industry faced following the 2018 bankruptcy of Toys“R”Us, the political and economic headwinds in Europe, and the continuing changes in global retail environment.
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 (101% of target in 2019) 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 +35% of formula based upon performance against individual objectives, although the Committee can assess a modifier in excess of that range where it deems that warranted by particularly strong individual performance, as was the case for Ms. Thomas in 2019.
CHIEF EXECUTIVE OFFICER (MR. GOLDNER):
The base corporate formula award computed at 101% achievement would have yielded a payout of $2,828,000. The actual bonus paid to Mr. Goldner was $3,817,801, modified upwards by the Committee and the Board to reflect performance against his objectives and achievements, which in addition to the corporate financial performance metrics mentioned included:
| • | Returning the Company to profitable revenue growth, including returning the U.S. and Canada to growth and stabilizing the European business. |
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| • | Continuing to build brand capabilities around our Brand Blueprint. |
| • | Innovating within the Company’s franchise brands, including returning NERF to a competitive position through new innovation and product launches. |
| • | Continuing to invest in, and successfully launching, MAGIC: THE GATHERING ARENA, and delivering revenue growth and minimum operating profit margin at target amounts set by the Committee. |
| • | Growing partner brands revenue by amounts set by the Committee. |
| • | Leading the successful renewal of licensing arrangements with The Walt Disney Company for the Marvel and Star Wars properties, which were completed in early 2020. |
| • | Generating a specified return on invested capital set by the Committee, while investing in new capabilities and continuing to eliminate legacy costs. |
| • | Bringing a new Hasbro IP from our vault (or original) into film production within a time period specified by the Committee. |
| • | Leading organizational changes to strengthen the Company, achieve more efficiencies, and adapt to changing markets in which the Company operates. |
| • | Continuing to develop Hasbro’s succession plan and executing on a specified number of executive assignments to enhance leadership experiences as well as adding to the Company’s capabilities. |
| • | Leading all aspects of the Company’s acquisition of eOne, which was completed at the beginning of fiscal 2020. |
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 101% of its targets under the annual incentive plan as a starting point and then adjusted this baseline award for each of the NEOs in accordance with performance against their personal objectives for 2019. 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 101% achievement would have yielded a payout of $1,111,000. The actual bonus paid to Mr. Frascotti was $1,500,000, modified upwards by the Committee to reflect performance against his objectives and achievements, which in addition to the corporate financial performance metrics mentioned included:
| • | Delivering on the achievement of the Company’s budget for 2019. |
| • | Innovating within the Company’s franchise brands, and growing certain product lines. |
| • | Growing partner brands and maintaining strong relationships with key partners. |
| • | Leading the successful renewal of licensing arrangements with The Walt Disney Company for the Marvel and Star Wars properties, which were completed in early 2020. |
| • | Developing a significant new brand from the Company’s vault for introduction within a time period specified by the Committee. |
| • | Growing the consumer products and digital gaming business by specified amounts. |
| • | Achieving the Company’s global operations financial plan and specified global operations benchmarks. |
| • | Delivering industry leading product innovation, including returning NERF to a competitive position through new innovation and product launches. |
| • | Advising on the direction of the Wizards of the Coast business and assisting with the successful launch of MAGIC: THE GATHERING ARENA. |
| • | Fostering a culture of creativity, curiosity, courageousness and crisp decision-making, open communication, fierce competition and teamwork across the organization; providing effective, timely and on-going coaching to the organization; and reinforcing the Company values. |
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| • | Developing and operating the Company’s in-house creative advertising and content agency. |
| • | Successfully launching Hasbro Pulse, the Company’s new fan-focused direct-to-consumer ecommerce site. |
| • | Expanding the Company’s brand publicity initiatives globally, with an emphasis on international expansion of digital/social engagement. |
| • | Continuing to develop the Company’s industry leading global consumer insights and data analytics capabilities. |
| • | Playing a leadership role in the Company’s acquisition of eOne, which was completed at the beginning of fiscal 2020, including with respect to brand portfolio management and integration. |
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (MS. THOMAS):
The base corporate formula award computed at 101% achievement would have yielded a payout of $848,789. The actual bonus paid to Ms. Thomas was $1,300,000, modified upwards by the Committee to reflect exceptional performance against her objectives and achievements, which in addition to the corporate financial performance metrics mentioned included:
| • | Returning the Company to profitable revenue growth, including returning the U.S. and Canada to growth and stabilizing the European business. |
| • | Supporting the business by designing and implementing financial strategies helping to deliver the Company’s 2019 budget across several areas in the organization. |
| • | Assessing and implementing organizational changes to strengthen the Company, achieve more efficiencies, and adapt to changing markets in which the Company operates. |
| • | Designing and implementing appropriate external financial messaging to clearly explain to investors and increase shareholder value for our investments in the Wizards of the Coast gaming business. |
| • | Supporting profitable development of new Hasbro IP from Hasbro’s vault (or original) into film production within a time period specified by the Committee. |
| • | Supporting the evaluation, negotiations and implementation of potential new acquisitions. |
| • | Continuing to implement a global finance structure. |
| • | Determining strategy for internal audit function. |
| • | Supporting HR and the compensation group in developing new short term strategies to focus and align the actions of the entire global workforce against profitably growing our franchise and key partner brands. |
| • | Focusing on the development of a finance succession plan. |
| • | Leading aspects of the Company’s acquisition of eOne, which was completed at the beginning of fiscal 2020, including the debt and equity financings, financial planning and integration of the businesses. |
EXECUTIVE VICE PRESIDENT AND CHIEF CONTENT OFFICER (MR. DAVIS):
The base corporate formula award computed at 101% achievement would have yielded a payout of $610,662. The actual bonus paid to Mr. Davis was $675,000, modified upwards by the Committee to reflect performance against his objectives and achievements, which in addition to the corporate financial performance metrics mentioned above included:
| • | Delivering the Company’s entertainment budget. |
| • | Expanding domestic network distribution relationships. |
| • | Leading the management of the Company’s relationship with Paramount Pictures. |
| • | Bringing a new Hasbro IP from Hasbro’s vault (or original) into film production within a time period specified by the Committee. |
| • | Continuing to oversee development of the Company’s priority film slate. |
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| • | Executing a co-financing deal with respect to TV series content and opportunistically pursue co-financing relationships for Hasbro films. |
| • | Working to further develop talent at Boulder Media and its storytelling capabilities. |
| • | Successfully recruiting a specified number of new creative stewards to oversee My Little Pony and other new story-led brand initiatives. |
| • | Expanding Brand Blueprint opportunities in China, and continuing to provide regional leadership to expand the Company’s business in China. |
| • | In partnership with the Company’s global brand marketing and design teams, executing Brand Blueprint strategy across story-led brands. |
EXECUTIVE VICE PRESIDENT AND CHIEF COMMERCIAL OFFICER (MR. TINGA):
The base corporate formula award computed at 101% achievement would have yielded a payout of $589,459. The actual bonus paid to Mr. Tinga was $589,459, and was not modified by the Committee. Mr. Tinga’s objectives included:
| • | Delivering increased revenue and operating profit margin by target amounts set by the Committee. |
| • | Growing U.S. and Canada and International segment revenues by more than a target amount set by the Committee. |
| • | Developing a plan to generate growth across the Company’s European business, and developing a more modern approach to European business. |
| • | Continuing to drive and expand ecommerce globally, and further evolving the Company’s retail channel strategy. |
| • | Returning franchise brands to growth by specified amounts, and returning specified product lines to growth through new innovation across multiple price points. |
| • | Growing partner brands revenue by amounts set by the Committee, and renewing certain licensing arrangements. |
| • | Implementing a global media structure to drive consistency in execution and meeting modern key performance indicators. |
| • | Developing a successful partnership with the Global Operations function to manage inventory flows. |
| • | Driving an optimal global organization and continuing to drive cost savings and simplify the Company’s go-to-market structure. |
| • | Further developing strong leadership across the global sales organization. |
Performance Metric Adjustments and Exclusions to Accurately Measure Management’s Performance. At the time the performance goals were set at the beginning of 2019, 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 exclusions as well as for which metrics (operating profit/margin (OP), earnings per share (EPS), cash flow (CF) and return on invested capital (ROIC)) the exclusions apply are as follows:
| • | Unusual, one-time, non-operating or other significant unbudgeted costs or expenses related to: |
| ○ | restructuring events having an impact in excess of $10 million [OP, EPS, CF, ROIC] |
| ○ | non-cash asset impairment charges in excess of $25 million [OP, EPS, ROIC] |
| ○ | the termination of the Company’s pension plan [EPS, ROIC] |
| ○ | changes in accounting rules or the U.S. tax code having an impact of $10 million or more [all metrics] |
| ○ | acquisitions greater than $10 million [OP, EPS, CF, ROIC] |
| ○ | dispositions greater than $10 million [OP, EPS, CF, ROIC] |
| ○ | judgments, fines, penalties or expenses associated with litigations, arbitrations, or regulatory matters, or settlements of ongoing or potential disputes or regulatory matters in excess of $25 million [OP, EPS, CF, ROIC] |
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| • | Customer bankruptcy or significant financial issues that have an impact on net sales of $100 million or more, and the related impact on operating profit and cash flow. |
| • | Changes in exchange rates from the budgeted rates in effect at the beginning of the performance period to the actual rates for the period, which generates an impact greater than $100 million on revenues and the related impact on operating profit. |
| • | Significant unanticipated or unbudgeted payments outside the normal course of business related to certain other matters approved by the Committee. |
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.
For 2019, the Committee approved target annual equity award values for each of the Company’s executive officers and other equity eligible employees, which are designed to provide a strong link between pay for performance. Targets are expressed as a percentage of each individual’s base salary which for our NEOs in 2019 were as follows:
| Equity Grant Target Value as Percentage of Salary | ||
| CEO |
800% | |
| President and Chief Operating Officer |
400% | |
| Executive Vice Presidents |
200% – 275% | |
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; |
| • | 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; and |
| • | for NEOs, the retention of key executive talent. |
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The annual equity grant target value as a percentage of base salary in 2019 for Mr. Goldner was 800%, Mr. Frascotti was 400%, Ms. Thomas was 275% and for each of Mr. Davis and Mr. Tinga was 200%. In connection with the amendment to Mr. Goldner’s employment agreement in 2018, commencing in 2019, Mr. Goldner’s target long-term incentive award was increased to 800% reflecting an increased emphasis on pay for performance and further alignment of interests with stockholders. Similarly, in connection with Mr. Frascotti’s employment agreement in 2018, his target long-term incentive award increased to 400% commencing in 2019.
Performance Contingent Stock Awards
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 2019 fiscal year and ending December 2021 (the “Performance Period”). For stock performance awards granted in 2019, 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. Strong 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 2019 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 2019, 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) under the contingent stock performance awards for the 2017 — 2019 performance period. Revenues are expressed in millions of dollars.
| 3-Year Target Performance |
3-Year Actual Performance |
% of Target | Payout | |||||||||||||||||
| Cumulative Revenues |
$ | 16,348 | $ | 14,272 | 87.3 | % | 0 | % | ||||||||||||
| Cumulative EPS |
$ | 14.34 | $ | 12.30 | 85.8 | % | 0 | % | ||||||||||||
| Average ROIC |
14.50% | 13.63% | 94.0 | % | 23 | % | ||||||||||||||
| Total Payout |
23 | % | ||||||||||||||||||
Election to Forego Any Payment under 2017-2019 Contingent Stock Performance Awards
Based on a 94% achievement of the average ROIC performance metric for the 2017-2019 contingent stock performance award, the Named Executive Officers would have been entitled to receive a 23% payout under those awards. However, in light of the fact that the Company’s employees who had two metric contingent stock performance awards with cumulative revenues and cumulative EPS did not receive any payout, Mr. Goldner, Mr. Frascotti and Ms. Thomas each agreed to waive any rights to payment under their 2017-2019 contingent stock performance awards. Mr. Davis and Mr. Tinga received their payouts under such awards as they began to transition their roles out of senior management.
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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 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 2019 to our NEOs (excluding our CEO) represented approximately 25% of their annual targeted equity award value in 2019 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.
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
The Company’s philosophy is to review salaries every two years, or more often if circumstances warrant. Increases in executive base salaries will continue to be considered: (i) in the event of 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.
In 2019, the Committee reviewed base salaries and following its review, increases were made to the base salaries for certain of the Named Executive Officers to remain competitive with companies in the Company’s peer group for similar positions. Those increases, effective in August 2019, were as follows: Ms. Thomas from $800,000 to $900,000; Mr. Davis from $790,000 to $830,000 and Mr. Tinga from $751,852 to $815,000. 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 Mr. Frascotti’s employment agreement entered into in 2018, effective beginning in 2019, Mr. Frascotti’s base salary increased from $900,000 to $1,100,000.
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.
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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, continued to participate in the Pension Plan and the pension portion of the Supplemental Plan, but did not accrue additional benefits thereunder subsequent to the plan freeze on December 31, 2007. During the first quarter of 2018, the Company commenced the Pension Plan termination process and received regulatory approval during the fourth quarter of 2018. During the second quarter of 2019, the Company settled all remaining benefits directly with vested participants electing a lump sum payout, and purchased a group annuity contract from Massachusetts Mutual Life Insurance Company to administer all future payments to remaining U.S. Pension Plan participants.
Mr. Tinga participates in the Hasbro B.V. Pension Plan in the Netherlands (the “Netherlands Pension Plan”). A description of the Pension Plan and the Netherlands Pension Plan is set forth under the heading “Description of Pension Plans” below.
Non-Qualified Deferred Compensation Plan
Executive officers who are employees of the Company’s U.S. operations are also eligible to participate in the Company’s Non-Qualified 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 $125,000 in 2019, raised to $130,000 in 2020. The Deferred Compensation Plan allows participants to defer compensation 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 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.
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 2019 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 70 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 2016 to the end of fiscal 2019, 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.
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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 non-qualified 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 60 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 non-qualified 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.” |
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Other Compensation Considerations
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 29, 2019.
Stock Retention Requirement. The Hasbro, Inc. Executive 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 long-standing 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 (i) 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 (ii) 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 compensation program to:
| • | 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; |
| • | 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 |
| • | 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 2019 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.
For years prior to 2018, Section 162(m) of the Internal Revenue Code (as implemented by IRS guidance) limited companies’ deduction for compensation paid to the CEO and the other three most highly paid executives (excluding the CEO and CFO) to $1 million, but allowed for the deduction for performance-based compensation costs/expenses for amounts even in excess of the $1 million limit. As such, we structured our Restated 2003 Stock
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Incentive Performance Plan, as amended, with the intention of meeting the requirements for performance-based compensation under Section 162(m). Effective January 1, 2018, the Tax Cut and Jobs Act (“TCJA”) repealed this exclusion for performance-based compensation, and expanded the class of affected executives, which means that all compensation paid to persons who in 2017, or any year following, were the CEO, CFO (in 2018 or later) or one of the other three most highly paid executives (excluding our CEO and CFO) will be subject to the per-person annual cap of $1 million. For long term incentive plan awards made on or prior to November 2, 2017, but not yet vested and/or paid out (other than time-based restricted stock units, which are not qualified under Section 162(m) and therefore are not deductible, unless paid after the executive terminates), we expect that the Company will still be able to deduct those amounts, provided that the Company meets the requirements in the TCJA protecting grandfathered performance-based awards and certain other grandfathered compensation paid after termination of service.
The Committee believes that shareholder interests are best served by not restricting the Committee’s discretion and flexibility in crafting compensation programs, even if such programs may result in certain non-deductible compensation expenses. Accordingly, the Committee may provide compensation that is not deductible.
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The following table summarizes compensation paid by the Company for services rendered during fiscal 2019, 2018 and 2017 by any person serving as the Company’s Chief Executive Officer during any part of fiscal 2019, by any person serving as the Company’s Chief Financial Officer during any part of fiscal 2019, and by the three other most highly compensated executive officers of the Company in fiscal 2019 (to the extent that such person was an executive officer during the year in question).
|
Name and Principal Position |
Fiscal Year |
Salary(a) | Bonus | Stock Awards(b) |
Option Awards(b) |
Non-Equity Incentive Plan Compensation (a)(c) |
Change in Non-Qualified |
All Other
(e) |
Total | ||||||||||||||||||||||||||||||||||||
| Brian Goldner |
2019 | $ | 1,600,000 | $ | 0 | $ | 6,417,739 | $ | 5,908,832 | $ | 3,817,801 | $ | 50,136 | $ | 166,370 | $ | 17,960,878 | ||||||||||||||||||||||||||||
| Chairman & Chief |
2018 | $ | 1,550,000 | $ | 0 | $ | 3,026,520 | $ | 3,400,816 | $ | 0 | $ | 89,357 | $ | 432,930 | $ | 8,499,623 | ||||||||||||||||||||||||||||
| Executive Officer |
2017 | $ | 1,500,000 | $ | 0 | $ | 3,401,482 | $ | 3,272,528 | $ | 3,000,000 | $ | 175,505 | $ | 504,874 | $ | 11,854,389 | ||||||||||||||||||||||||||||
| John Frascotti |
2019 | $ | 1,100,000 | $ | 0 | $ | 3,306,192 | $ | 1,015,584 | $ | 1,500,000 | $ | 8,671 | $ | 137,649 | $ | 7,068,096 | ||||||||||||||||||||||||||||
| President & Chief |
2018 | $ | 997,693 | $ | 0 | $ | 3,876,022 | $ | 1,398,115 | $ | 350,000 | $ | 14,094 | $ | 174,738 | $ | 6,810,662 | ||||||||||||||||||||||||||||
| Operating Officer |
2017 | $ | 896,635 | $ | 0 | $ | 1,866,061 | $ | 599,976 | $ | 900,000 | $ | 9,559 | $ | 179,697 | $ | 4,451,928 | ||||||||||||||||||||||||||||
| Deborah Thomas |
2019 | $ | 840,385 | $ | 0 | $ | 1,653,140 | $ | 507,792 | $ | 1,300,000 | $ | 9,204 | $ | |||||||||||||||||||||||||||||||