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 childrens 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 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, the value of the total executive compensation packages received by the Companys 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
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.
In light of the Companys 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 Companys 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 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. However, given the significant recent decline in the Companys 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 Companys executive officers will only realize value in those awards to the extent that the Companys stock price rises above the exercise prices for such options. Notwithstanding the recent decline in the Companys stock price though, over the ten-quarter contingent stock performance period which ended at the end of 2008, the Companys 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 Companys 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 Companys best interests.