Last year Alan Hassenfeld relinquished the title of chairman to become an active non-employee director of Hasbro, the second largest toy company in the world, with products ranging from such iconic games as Monopoly, Clue, and Scrabble, to childhood favorites including Tonka trucks, Mr. Potato Head, and Transformers. Hassenfeld began his career 38 year ago at the company, founded in 1923 by his grandfather, and rose to the chairman and CEO role in 1989. He helped engineer his replacement as CEO and then as chairman. He also sits on the board of Salesforce.com and on the board of trustees at Bryant University and the University of Pennsylvania.
Succession planning is hard in most organizations; in your case was it especially difficult?
When I was 49 years old, I had a heart attack. I realized at that point in time that there really wasn’t a member of the fourth generation of my family who was going to take over the business. We were going to have to take all this talk about succession planning very seriously. At Hasbro, we decided early on to split the roles of the CEO and chairman of the board. But at first when we were talking about succession planning, the one person that everyone else thought was “untouchable” was me. I went to the board and said, “I’m the one person who should be touchable” in the succession-planning process. I felt that we would never get great people to join Hasbro as executives if they couldn’t go for the brass ring.
We agreed on a two-step succession process. In the first stage, I would step down as CEO but remain chair, while the president of the company, Al Verrecchia, would become CEO. We would at the same time bring in someone to replace Al as president of Hasbro. The plan was that a few years later, Al would become chair, the new person would move into the CEO position, and I would move on to greener pastures. It pretty much played out that way.
What does the board look for in new directors?
We seek board members whose expertise is relevant to all the disciplines we deal with as a company. I think right now we have a good group of directors. I do believe in term and age limits for directors, and at Hasbro we do have an age limit of 72. Sometimes that’s good; sometimes that’s bad.
When we go out and look for a new board member, we really are doing it strategically. Before individuals become part of the Hasbro board, we want to understand them and have them understand us. We want to convey the culture—a family culture—at Hasbro. This is a culture where the belief is that the most important resource any company has, at all levels of the organization, is its human capital. The Hasbro culture also includes a commitment to giving back to the communities in which we operate, which are worldwide. If you do the right thing as a company, people will be there for you. Of course, once you go public, you’re no longer a “family business” in terms of corporate governance. However, you can still have sensitivity to a strong family ethic in the workplace, and Hasbro has that sensitivity.
Hasbro has operations in more than 20 countries and is expanding its investment in emerging markets. What has been the board’s input on global strategy?
The board has been very active in this area. We do about 30 percent of our business internationally, and we’d like to strive for at least 50 percent international business down the road. The board has encouraged Hasbro to move into the BRIC (Brazil, Russia, India and China) countries. The directors constantly want to know what we are doing to increase the percentage of our sales that come from outside the United States. This year, we have set up offices in China, Brazil, and Russia. In India, we are trying to invigorate our partnership.
Hasbro also has successfully grown through mergers and acquisitions. What is the role of the board in these activities?
The Hasbro board has been instrumental in working with management on assessing these situations. A good board member has to listen, but also has to know when to ask key questions. It’s very important that the board knows the moment there’s some meat on the bone, in terms of any possible offer or potential target.
When we turned down an acquisition offer from Mattel in 1996, I got a call from my mother, who is the largest shareholder of the company. She said she heard we were going to turn down about $600 million for the family. She wasn’t too happy. The economics of the Mattel deal were the kind you usually don’t say no to—but money is only one aspect of any offer. Another question was: Was it doable? Mattel and Hasbro were first and second in the toy market, which needless to say raises antitrust issues. Could Pepsi and Coke get married? We had three law firms look at the transaction from an antitrust perspective, and even with divesture, they believed that it would take at least a year, and that there was only a 10 percent chance of success. That is not a good risk/reward scenario. How do you attract good people to your business during a period like that? After lengthy discussions, we decided not to go forward with the acquisition. But for the most part we have had success in the M&A area. We bought Kenner Parker in 1991—that was truly a marriage made in heaven. We put together Monopoly and Clue with brands like Battleship and Candyland. When you buy something, the most important question is what you can do with it. Who would have thought, for example, that G.I. Joe could be a major studio movie?
The Hasbro board has been engaged in issues of corporate social responsibility and environmental sustainability in recent years. Are there lessons you have learned in these areas that you can share?
Corporate social responsibility can only be successful if the people involved mean what they say. Too often leaders mouth the words, but it is not in their heart. People can see through this. At Hasbro, we are so fortunate that our chairman, Al Verrecchia, has a passion to do what is right, and he, in turn, is collaborating with our CEO, Brian Goldner, in Hasbro’s social responsibility initiatives.
How do you ensure that the products are not being made in factories that have unsafe or exploitative conditions?
I am co-chair of an effort to set up one global code for toy manufacturers. We work with the nongovernmental organizations, and now we’re calling for a global standard for safety. In reality, we have taken brands, retailers, and manufacturers from around the world and we have agreed on a code and an implementation in order to ensure that workers are treated and paid properly and that toys are made in a safe environment. Also, we are now trying to create one safety code globally, since children— whether they be Sudanese, Indian, Chinese, or American—are all the same. There should be one code for one world.
We’re going through a difficult economic time. If there are fewer jobs, people will have more time to play, but will have fewer resources to pay. Is the toy and game business recession-proof?
No business is recession-proof. However, we do know that in difficult times, parents and grandparents have a tendency to skimp on themselves and try to take care of the children. Also, in times of recession, people tend to stay closer to family and home, and many times that means more board game playing and more time spent doing things together—that benefits us. People, even in difficult times, seek out innovation as long as it piques their imagination. Lastly, 80 percent of what we produce is sold for under $20. So, even though we are not recessionproof, we are in a much stronger position than most.
One last question: Do you have a favorite toy?
Many people ask me if I have a favorite toy. Having been in the business for about four decades, I now consider most of our toys like my children. How can you favor one toy over another? But I know that Mr. Potato Head will probably be upset with this answer.
This interview was conducted for NACD New England’s Executive Speaker Series by Patricia M. Flynn, professor of economics and management at Bentley University, and edited by Martha E. Mangelsdorf, a business writer and editor.