Beleaguered Mattel CEO Resigns as Profit Sinks
Jill E. Barad, the Mattel Inc. marketing whiz who made Barbie the world’s best-selling toy and became an icon for working mothers, resigned under pressure Thursday after the company announced it had lost money during her last year as its chief executive.
El Segundo-based Mattel disclosed that it lost $18.4 million during the fourth quarter’s crucial holiday season, when toy retailers and manufacturers count on as much as half of their revenue. The news pushed the company’s stock to near its all-time low, which it hit earlier this week.
Barad, 48, was one of just four women at the helm of a Fortune 500 company. She has been under intense pressure to resign in recent months after several quarters of disappointing results and huge losses after Mattel’s $3.6-billion acquisition of children’s software developer Learning Co.
In the past, Barad has said she was judged more harshly than her male counterparts because she is a woman.
But Thursday, Wall Street analysts said Barad’s problems at Mattel had less to do with her being a woman than with her background as a marketing expert who rose through the ranks for her tremendous ability to push products. The same qualities that made her a product genius were liabilities as she became the big-league toy industry’s first woman leader. She was faulted for excessive optimism even as the company’s profit repeatedly fell short of expectations.
Mattel attributed its latest quarterly losses to its most expensive acquisition, the same culprit the company said robbed it of profit in the fall. In the fourth quarter, Mattel’s Learning Co. operation lost a staggering $183 million--which contributed to an overall 1999 loss of $82.3 million. The company made $206 million in 1998.
“The board of directors and I view the performance of the Learning Co., and its effects on our results, as unacceptable,” Barad said after the markets closed Thursday, in her final conference call with analysts. “Therefore, the board and I have agreed that I resign effective today.”
Barad said the strength of the company’s core toy business, including Fisher-Price and American Girl, was undermined by losses at Mattel’s software division, which she once said would earn $50 million in the first year alone.
Board members William D. Rollnick, 67, a Mattel director since 1984, was named acting chairman. Ronald M. Loeb, 66, a member of Mattel’s board since 1970, was named acting chief executive. Mattel did not say when it hopes to name permanent executives.
The company would not elaborate on how much Barad will be paid on her way out, although documents filed with the Securities and Exchange Commission detail that if terminated, Barad would receive at least five times her base salary and bonus. Barad earned $4.8 million in 1998, more than double her 1997 pay of $2.4 million excluding a special options grant, SEC documents show.
Barad said Thursday that she had no immediate plans.
Loeb said the board believed the worst was over with Learning Co. last fall, when Barad said the company’s losses totaled $105 million for the fourth quarter. Directors had to act, he said, when holiday results proved that losses would be deeper still for the nation’s second-largest software company, owner of popular series such as “Carmen Sandiego” and “Myst.”
Although many on Wall Street had long called for Barad’s ouster--the stock rose Wednesday on rumors that the board was meeting--investors remained worried about Learning Co.’s ongoing problems.
Mattel shares rose as high as $12.50 on Thursday in heavy trading on the New York Stock Exchange, but ended down 94 cents at $10.88.
Barad’s departure from Mattel--Los Angeles County’s 11th-largest company in terms of revenue--came with far less flourish than her coronation as Mattel’s leader three years ago. Barad joined Mattel in 1981 and was later hailed for reviving Barbie’s sagging sales.
“Jill Barad has had an outstanding 20-year career at Mattel. The positives far outweigh the negatives,” said Erik Gustafson, a senior portfolio manager at Stein Roe & Farnham in Chicago.
In the short term, Rollnick and Loeb said they would serve as leaders and advisors, leaving day-to-day operations in the hands of Mattel’s five division leaders.
But rumors of that group’s difficulties in getting along have been as rampant as discussions of Barad’s demise.
“You could sell tickets to their gathering as a World Wrestling Federation event,” one analyst said.
Barad’s successor will take over during a tumultuous time in the toy industry, with less retail shelf space, children who outgrow toys younger and economic sluggishness overseas, a sector that had once promised Mattel tremendous growth.
Although Barad was not the cause of the industry’s overall problems, she was firmly in charge of Mattel’s response: a push into the hot educational and high-tech game areas through acquisitions.
Barad said her goal was to transform the company into a “global children’s products company.”
“On paper, the strategy always sounded great,” said Jill Krutick, an analyst with Salomon Smith Barney. “The execution has not really worked out, so it’s a question of restoring growth or backpedaling into right-sizing the business.”
In the past, Barad has said she became used to questions about her management style. Critics suggested she didn’t push employees hard enough, instituting flexible hours and half-day Fridays. At the same time, Barad was accused of being controlling and temperamental, especially with male subordinates. A string of top-level executives left the company during her tenure.
As the volume of criticism rose, she sometimes became defensive. “I’m a woman, and I’m going to be a poster child” for the company’s troubles, Barad said in April, when she announced 3,000 layoffs and a corporate restructuring. “I’m clearly going to be taking punches for quite some time.”
Barad was a new mom returning to the work force when she joined Mattel as a product manager in 1981. Her only experience in the toy industry was having played with Barbie as a girl in Brooklyn, N.Y.
She translated that experience well, moving quickly to marketing director for Barbie. Barad made over the middle-aged plastic doll, toning down Barbie’s sexy looks to make her a character ready to move into the work force as a doctor, among other careers.
Under her guidance, Barbie soared from $320 million a year in 1985 sales to more than $2 billion by 1998.
Barad’s fortunes rose with the doll on which, some joked, she patterned her image. The Mattel chief often wore Barbie-bright colors, often with accouterments such as fur collars and cuffs.
By 1990, she had risen through the marketing ranks to become co-president, ascending to president and chief operating officer in 1992, as Mattel’s business soared. She became chief executive in 1997.
After a 1998 conference call with analysts, Barad scoffed at critics who suggested that the company’s thinning management ranks reflected her inability to work with men.
“The fact is that I worked with a man, and that man is no longer here,” she said. “Somehow it then gets said that I don’t get along with men.”
