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This excerpt taken from the HAS DEF 14A filed Apr 6, 2009. Executive
Summary of 2008 Policies and Compensation
The Company is a worldwide leader in children’s and family
leisure-time and entertainment products and services, including
the design, manufacture and marketing of games and toys. 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 executive’s overall
compensation opportunity should be at risk and based upon the
performance of the Company. The Company believes that the
primary responsibility of the Company’s executive team is
to drive the performance of the Company and create value for the
Company’s shareholders and other stakeholders. As a result,
if the Company fails to achieve its financial goals,
and/or if
the Company’s share price does not rise, the value of the
total executive compensation packages received by the
Company’s executives is significantly reduced. 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
Company’s 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.
In light of the Company’s strong performance in fiscal
2008, which was achieved against the backdrop of a global
consumer-led recession, the executive officers and employees of
the Company received above target payouts for 2008 under the
management incentive awards. Notwithstanding the difficult
economic conditions, which began in early 2008 and worsened as
the year went on, including the reduction in consumer demand,
particularly during the holiday season, the Company grew net
revenues 5% in 2008 as compared to 2007, and the Company
delivered its eighth consecutive year of growth in earnings per
share. In addition, 2008 ended the performance cycle under the
contingent stock performance awards which the Company granted in
July of 2006. The Company’s above target performance
against its net revenues and EPS targets during the ten-quarter
performance period applicable to these awards also resulted in
an above-target payout under these awards in February of 2009.
The Company’s excellent performance over the last several
years has had a significant impact on the realization of value
from the variable components of the Company’s executive
compensation package. However, given the significant recent
decline in the Company’s stock price, which has been driven
by the overall decline in the stock market generally, the
options granted to executive officers in fiscal 2007 and fiscal
2008 are underwater as of March 26, 2009, and the
Company’s executive officers will only realize value in
those awards to the extent that the Company’s stock price
rises above the exercise prices for such options.
Notwithstanding the recent decline in the Company’s stock
price though, over the ten-quarter contingent stock performance
period which ended at the end of 2008, the Company’s stock
price rose from $18.13 per share on July 3, 2006 to $29.04
per share on December 26, 2008.
The Committee structures the Company’s compensation program
in a way it believes appropriately rewards excellent performance
and maximizes future performance, without encouraging excessive
risk taking or other behavior on the part of executive officers
that is not in the Company’s best interests.
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