Mattel Alters Severance Policy After Barad Payment Criticism

Mattel Inc. revised its policy on severance awards after shareholder criticism of a $50-million send-off that the toy company gave to former top officer Jill Barad.

Under the new rules, Mattel in most cases won’t grant a departing executive severance benefits that “significantly exceed” the requirements of the officer’s employment contract, according to a proxy statement filed with the Securities and Exchange Commission. In setting severance, the committee also will consider the effect of the exit package on the morale of other employees.

When Barad stepped down in February 2000 as chairwoman and chief executive of the El Segundo-based company, institutional investors were angered by the payments she received.

In addition to $26.4 million in cash required under her employment contract, Barad’s awards included a $1.2-million annual pension for 10 years and forgiveness of a company loan.

These awards came even though Mattel’s stock declined more than 50%--to about $11 from $28--in the three years she ran the company.

Mattel’s financial performance suffered in part from Barad’s decision to acquire the money-losing software business Learning Co., creator of Carmen Sandiego games, for nearly $3.6 billion.

Mattel didn’t give a reason for the changes in the proxy statement and a spokeswoman didn’t return a telephone call seeking comment. One factor might have been the inclusion of director Ralph Whitworth as a member of the compensation committee.

Whitworth is a former president of the United Shareholders Assn., a shareholder rights group that pushed the SEC to change its compensation disclosure rules. Whitworth, who has pushed for change at other companies, did not return a telephone call seeking comment.