May 16, 2019

While the reported compensation of Chairman and CEO Brian Goldner does not look particularly high this year at $8,499,623, there are significant reasons shareholders may wish to vote against the pay package. Goldner realized over $25 million through the exercise of options in 2018, and an addition $8.8 million through the vesting of stock awards. Since 2013, Goldner has realized more than $97 million in options vested, and an addition $83 million in stock awards vested. He owns fewer shares today than he did in 2013.

This is at least the fourth year in a row in which Goldner’s realized pay – cash he actually took home -- has been considerably higher than reported pay. Since the most recent proxy was published media reports note that he sold at least an additional $32.5 million dollars of the stock. The sale in early May 2019 came shortly after the stock price jumped following a higher-than-expected earnings report.  It has fallen since that time.

In August 1, 2018, the company amended and extended Goldner’s employment agreement to go through December 31, 2020, despite the fact that shareholders are increasingly objecting to such agreements. His base salary was increased from $1,500,000 to $1,600,000. Goldner’s target annual long-term equity incentive award to 800% of his base salary, beginning with Hasbro’s 2019 fiscal year. Typically annual incentive awards are targeted at 200% of base salary, so this figure is quite extraordinary.

A large target is a way of awarding large bonuses even if performance is down. The company notes that in 2018, based on performance that “we achieved an aggregate weighted performance payout of only 43% of target under the annual management incentive plan.” If the target had been 800% this year it would have meant that Goldner received a bonus of 300% of his salary despite failure to meet target; that’s the sort of bonus most CEOs get when they achieve above target not below.

In 2014 shareholders objected strongly to a payout provided under Goldner’s employment agreement he’d been given: only 46% of shares supported the advisory vote on pay at Hasbro. As I wrote in 2015, the company took some action to address shareholder concerns and amended the agreement. Changes made included decreasing the potential long term equity grant target level from five times to four times salary and eliminating the altering slightly some elements of performance awards granted to Goldner in 2013 and 2014. The company also added Return on Invested Capital (ROIC) as an additional performance metric under the contingent stock performance awards granted in 2015 to Goldner and other executives.

As I noted earlier in that post, “These changes did not address the primary concern As You Sow had with the agreement. That concern, going beyond the sheer magnitude, was one that other shareholders also reportedly noted with the company: “stock price hurdles for the one-time restricted stock unit grant that could be achieved at a single point in time.” Under the 2012 agreement four stock price thresholds ($45, $52, $56 and $60 per share) when met, resulted in earning a quarter of the special RSU awards. Such vesting can inspire risk taking. An executive is incentivized to do anything one can to raise the price, even if it is not sustainable over the long term.”