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Mattel CEO's Cash Pay Falls 23% for 2005

April 14, 2006|Kathy M. Kristof | Times Staff Writer

Mattel Inc. cut Chief Executive Robert Eckert's cash pay 23% last year as sales languished and profit plunged at the El Segundo-based maker of Barbie dolls and other toys.

Eckert, who ranks among California's most highly compensated executives, also saw the normally generous flow of other compensation cut to a trickle in 2005, according to a company filing with regulators.

Despite the cuts, shareholder activists said the company's pay-for-performance standards still fell short, largely because Mattel had guaranteed Eckert generous retirement payments having little to do with performance.

"An initial read says they are cutting his pay because he didn't meet performance goals -- but on a closer look you realize that his retirement compensation insulates him from the risk that shareholders bear," said Brandon Rees, assistant director of investment for the AFL-CIO.

"Eckert stands to receive millions of dollars in post-retirement pay for the rest of his life," Rees said. "That guarantee makes him inherently less concerned about his current compensation."

The company, which declined to comment, said in its filing that it boosted executive pensions to retain talented officers.

Mattel's board might be missing the point, some compensation consultants said.

"You want to make sure that you retain the right kind of people, not just everybody," said David Leach, managing principal at Executive Compensation Group in Los Angeles.

Eckert received $1.25 million in salary in 2005 -- the same salary he has earned since he started in 2000. But his bonus of $468,750 was about half of what he received the prior year. His total cash pay in 2005: $1.72 million, down from $2.23 million in 2004.

The company also granted Eckert 375,000 stock options, valued at $1.68 million in 2005. Mattel granted Eckert the same number of options in 2004, which then were worth an estimated $3 million. Eckert's unexercised options now are valued at $13.7 million.

Eckert's other compensation, including additional life insurance coverage, payments to his deferred compensation plan and as many as 60 hours of personal use of the corporate jet amounted to $251,000.

That was down significantly from past years, when Eckert's compensation included $12 million in loans forgiven by Mattel, which also paid his tax obligation on that forgiven debt.

The portion of Eckert's compensation that remains controversial is the 51-year-old executive's pension, which was boosted in 2005 to guarantee him at least $875,000 a year in retirement for the rest of his life.

The formula by which his retirement benefits are computed is based on a higher salary and bonus than Eckert earned in 2005, undermining the concept of paying for performance, Rees said.

Overall, Eckert's total pay for 2005 fell to $3.65 million from $6.61 million the year before. A significant cut makes sense given Mattel's performance, Rees said.

Mattel has been struggling as sales have dropped for Barbie, the company's largest and most profitable line. U.S. sales of the doll were down 18% in the last holiday season. The company's revenue was flat in 2005, while profit fell 27% to $417 million, partly as the result of a $107-million tax-related charge.

Mattel's debt rating was recently slashed and the company announced it would lay off about 200 workers.

While Mattel's stock has risen 35% during Eckert's tenure, it dropped 19% in 2005.

Mattel's pay practices have been criticized since former CEO Jill Barad got a $40-million parting payment.

Corporate Library, a corporate-governance research firm, gave Mattel a "D" for how well it matched executive pay to performance in 2005.

The struggling toy maker, which will host an annual meeting of shareholders May 11, opposes three shareholder proposals, including one that seeks to better tie pay and performance. Another seeks to separate the roles of chairman and chief executive; Eckert currently holds both titles.

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