This excerpt taken from the HAS DEF 14A filed Apr 8, 2008.
Executive Summary of 2007 Policies and Compensation
The Company is a worldwide leader in childrens and family leisure-time and entertainment products and services, including the design, manufacture and marketing of games, toys and childrens consumer electronic products. As a family entertainment company, the Company looks at a broad range of consumer products, entertainment and general industry companies as business competitors, including in the hiring and retention of employees and executives. In the family entertainment and consumer products markets where the Company competes for talent, base compensation, variable incentive cash compensation, equity compensation and employee benefits are all significant components of a competitive and effective overall executive compensation package.
The Company utilizes two overarching principles in structuring its executive compensation program.
First, a significant portion of an executives overall compensation opportunity should be at risk and based upon the performance of the Company. The Company believes that the primary responsibility of the Companys executive team is to drive the performance of the Company and create value for the Companys shareholders and other stakeholders. As a result, if the Company fails to achieve its financial goals, and/or if the Companys share price does not rise, significant portions of the total executive compensation package should not be, and are not, realized. The Company implements this principle by using variable compensation elements, such as management incentive plan awards and equity awards, as a major component of the total executive compensation package.
Second, the Company seeks predominately to reward overall performance by the Company, or its major business units, and only to a lesser extent to reward individual executive performance. The Company believes this is appropriate to foster an environment of team work and to maximize the performance of the Company as a whole, as opposed to individuals within the Company. As a result, the two most significant variable components of the Companys executive compensation, namely management incentive plan awards and equity awards, are most
heavily weighted to achievement of Company goals and Company performance. The incentive plan awards reward achievement of stated Company and business unit financial metrics, with individual performance playing a smaller role. Equity awards also reward achievement of Company goals and Company stock price appreciation.
Consistent with these principles, and in light of the Companys record performance in fiscal 2007, which was the seventh year in a row of strong performance by the Company, the executive officers of the Company received significant value for 2007 from the variable elements of their compensation packages, including the management incentive awards and long-term equity awards.
For fiscal 2007, the Company reported $333 million in net earnings, an increase of over $100 million from the reported net earnings for fiscal 2006. 2007 was the third consecutive year of record net earnings for the Company. In addition, fiscal 2007 represented the seventh consecutive year of growth in the Companys earnings per share before the cumulative effect of accounting changes. In 2007, the Companys worldwide net revenues increased 22% to $3.8 billion and the Company generated $601.8 million in operating cash flow. This performance in 2007 was achieved against a backdrop of difficult economic and retail challenges.
The Companys excellent performance over the last several years has had a significant impact on the realization of value from the variable components of the Companys executive compensation package at the end of a fiscal year. The Committee continues to structure the Companys compensation program in a way it believes appropriately rewards excellent performance and maximizes future performance.