| Age: 52
| | | | Independent Director Since: 2019
Principal Occupation: President and
Chief Executive Officer, Hawaii
Community Foundation, Since 2017 |
Age:70Independent Director
Since:2005
Principal Occupation:Chairman,
Huntington Ingalls Industries, Inc. (military
shipbuilder) (NYSE: HII)
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RISK MANAGEMENT |
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EDUCATION
Bachelor of Science, United States Naval Academy
Executive and business training —
Harvard University; Stanford University
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Mr. Kane is a well-respected leader in the State of Hawaii and brings extensive leadership and a deep understanding of Hawaii’s cultural, business and political environment to the Board.
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Table of Contents
DIRECTOR NOMINEES FOR ELECTION
| | | | | His career has been distinguished by his leadership of significant private and public trusts, including his current role as Chief Executive Officer of Hawaii Community Foundation, Hawaii’s largest and oldest Foundation; his service as a Trustee of the largest land trust in the state of Hawaii, Kamehameha Schools, a private school system established under the will of Princess Bernice Pauahi Bishop to create educational opportunities in perpetuity to improve the capability and well-being of people of Hawaiian ancestry; and his prior role as Chairman/Director of the State of Hawaii Department of Hawaiian Homelands.
As an acknowledged Native Hawaiian community leader, Mr. Kane brings invaluable experience in understanding Hawaii’s complex cultural and land use history (nearly 27% of the population self-identifies as Native Hawaiian and other Pacific Islander). Mr. Kane has brought to bear this knowledge and his business acumen to bring the community together to address the most important issues of our day including environmental sustainability, homelessness and affordable housing.
Mr. Kane also has expertise in state/county government affairs including state/county regulation, policy development, public relations, and crisis management.
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Mary G. PowellPROFESSIONAL EXPERIENCE
Director nominee for the 2019
Annual Meeting |
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Ms. Powell brings to HEI considerable strategic and operational management expertise having served as President and Chief Executive Officer of Green Mountain Power, a Vermont-based utility and subsidiary of Northern New England Energy, since 2008. She is a nationally recognized leader and innovator in the utilities space, and currently serves on a number of boards, including the board of Sunrun Inc., a solar financing company.
RELEVANT PROFESSIONAL EXPERIENCE
Independent Director, Sunrun Inc. (since Feb. 2018)
Vice Chair, Vermont Chamber of Commerce (2010-2012)
Chair, Vermont Business Roundtable (2012-2014)
Vice President (Human Resources and Organizational Development), then Vice President (Administration), then Senior Vice President (Customer and Organizational Development), then Senior Vice President and Chief Operating Officer, Green Mountain Power (1998-2008)
President, HR Works (total solutions provider of human resource management and benefits administration services) (1997-1998)
VP Human Resources, VP Retail Banking and SVP of Retail Banking, Key Bank of Vermont (1992-1997)
RELEVANT SKILLS & QUALIFICATIONS
Ms. Powell has significant experience in utilities and renewable energy, having served as President and CEO of Green Mountain Power since 2008. Under her leadership, the company became the world's first utility to become a Certified B Corporation (a business that balances purpose and profit). Ms. Powell led an ambitious energy vision to dramatically ramp up local renewable resources in Vermont.
Ms. Powell has relevant public board experience, serving as a director at Sunrun Inc., where she is a member of the compensation committee.
She also brings to HEI considerable non-profit experience, including serving as Chair of the Board of Directors of The Solar Foundation, a non-profit working to advance solar power as an energy source, and serving as a Board Member of Blue Cross Blue Shield of Vermont.
Ms. Powell's track record of leadership and innovation has received national acclaim; she was named as one of Fast Company's "100 Most Creative People in Business" in 2016 and as one of CEO Connection's "2017 Most Influential Women of the Mid-Market," among other recognitions.
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Age:58Principal Occupation:President and Chief Executive Officer, Green Mountain Power, since 2008Hawaii Community Foundation ($810 million in assets) (since 2017)
Chief Operating Officer, Pacific Links Hawaii LLC (golf course owner, developer and operator) (2011-2016)
Principal, the KANE Group LLC (Hawaii-based company focused on land and financing matters for planned community infrastructure and general business development) (since 2010)
Trustee, Kamehameha Schools ($13.1 billion endowment and Hawaii’s largest private landowner with over 365,000 acres of land on Hawaii island, Maui, Moloka’i, O’ahu and Kaua’i) (since 2009)
OTHER POSITIONS
Director, Na Ku Pa’a O Kuhio, not for profit focused on supporting the beneficiaries of the Hawaiian Homes Commission Act.
Chairman, Menlo College Board of Trustees, Atherton, CA (supporting Hawaii kids to college)
Director, Hawaiian Electric Company, Inc. (HEI Subsidiary) (2012-2019)
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Master of Business Administration, University
of Hawaii at Manoa
Bachelor of Arts, Business Administration,
Menlo College |
TABLE OF CONTENTS EDUCATION
Associate of Science, Keene State College
DIRECTOR NOMINEES FOR ELECTION | | | |
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| | | | | Constance H. Lau
President and CEO, HEI
Executive Committee Member
Chairman, American Savings Bank
(HEI subsidiary) | | | | Age: 69
HEI Director Since: 2001 (except from
2004-2006)
Principal Occupation: President and
Chief Executive Officer, HEI (since 2006) |
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Ms. Lau is a nationally recognized leader in the fields of critical infrastructure, resilience and physical and cyber security, banking, and energy, demonstrated by her appointment by President Obama to chair the National Infrastructure Advisory Council, membership on the federal Electricity Subsector Coordinating Council, prior service on the Federal Reserve Board of San Francisco’s 12th District Community Depository Institutions Advisory Council, and her naming as a C3E Clean Energy Ambassador by the U.S. Department of Energy.
PROFESSIONAL EXPERIENCE
Chair, National Infrastructure Advisory Council (since 2012)
President and Chief Executive Officer, American Savings Bank (2001-2006) Chief Operating Officer, ASB (1999-2001)
Treasurer, HEI (1989-1999)
Treasurer, Hawaiian Electric and Assistant Treasurer, HEI (1987-1989)
Assistant Corporate Counsel, Hawaiian Electric Company (1984-1987)
PUBLIC COMPANY BOARDS
Matson Inc. (since 2012)
PAST PUBLIC COMPANY BOARDS
Alexander & Baldwin (2004-2012)
OTHER POSITIONS
Board Member, Edison Electric Institute
Former Board Member, Electric Power Research Institute
Board Member, Associated Electric & Gas Insurance Services
Board Member, Hawaii Business Roundtable
Board Member, Foundation for Asia-Pacific Center for Security Studies
Board Member, Elemental Excelerator
Member, Federal Electricity Subsector Coordinating Council
Chair, Hawaiian Electric Company, Inc. (HEI Subsidiary) (2006-2019)
Former Member of the Federal Reserve Bank of San Francisco’s Twelfth District
Community Depository Advisory Council (2011-2014)
Chair, Consuelo Foundation
Trustee, Punahou School
Chair, Military Affairs Council, Chamber of Commerce of Hawaii | | | | EDUCATION
Master of Business Administration, Stanford
Graduate School of Business
Juris Doctor, Hastings College of the Law,
University of California
Bachelor of Science in Administrative Sciences,
Yale College |
Table of ContentsTABLE OF CONTENTS
DIRECTOR NOMINEES FOR ELECTION
| | | CONTINUING DIRECTORS | | | |
| | | | | | | Celeste A. Connors
Independent Director
Audit & Risk Committee Member
| | | | Age: 45
Independent Director Since: 2019
Principal Occupation: Executive Director,
Hawaii Green Growth Local2030 Hub (public
private partnership focused on identifying
sustainable growth priorities within an
island context) (since 2015)
| | | | Ms. Connors has considerable experience in environmental sustainability from serving as Executive Director of Hawaii Green Growth Local2030 Hub, which was recognized by the United Nations in 2018 as one of the world’s first hubs for sustainability solutions.
Her deep understanding of the business, government and non-profit communities in the Hawaiian Islands, from serving as Executive Director of Hawaii Green Growth Local2030 Hub and CEO and Co-Founder of c.dots development, contribute significantly to the Board’s understanding of Hawaii’s unique business environment. While leading c.dots, Ms. Connors worked with local, state and federal governments, the private sector, and philanthropic organizations to help build smart sustainable communities, including green and resilient infrastructure systems and services.
Ms. Connors is an expert on climate risk and has significant government, regulatory and policy development experience from serving as Director for Environment and Climate Change at the National Security Council and National Economic Council in the White House, as well as a Foreign Service Officer with the U.S. Department of State. She has advised the President, Vice President, Cabinet members and other government leaders on environment and sustainable development policy.
Ms. Connors has a proven track record of working to achieve Hawaii’s energy and sustainability goals, which adds significant value to HEI’s efforts to accelerate a sustainable future for Hawaii.
PROFESSIONAL EXPERIENCE
Practitioner in Residence (Energy, Resources and Environment Program), Johns Hopkins University School of Advanced International Studies (SAIS) (since 2012)
Chief Executive Officer and Co-Founder, c.dots development (builds partnerships to deliver sustainable and resilient infrastructure in local communities) (since 2012)
Director (Environment and Climate Change), National Security Council and National Economic Council in the White House (2008-2012)
Foreign Service Officer, U.S. Department of State (2000-2012)
Foreign Affairs Advisor (Office of the Mayor), City of New York (1999-2000) | | | | EDUCATION
Master of Science (MSc), Development
Studies, University of London, School of
Oriental and African Studies (SOAS)
Bachelor of Arts, International Relations,
Tufts University |
TABLE OF CONTENTS | | | | |
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| | | | | | | Admiral Thomas B.
Fargo, USN William James
Scilacci, Jr (Retired)
Independent Director
Chairman of the Board
Executive Committee Chair
Compensation Committee Member
Nominating and Corporate Governance
Committee Member
| | | | Age: 72
Independent Director nomineeSince: 2005
Principal Occupation: President,
Fargo Associates, LLC | | | | In addition to extensive leadership expertise, Admiral Fargo brings to the Board deep knowledge of the U.S. military, a major customer of HEI’s electric utility subsidiary and a key driver of Hawaii’s economy. Admiral Fargo served as Commander of the U.S. Pacific Command, and in that post, he was responsible for the 2019security of nearly 52% of the world’s surface.
Annual Meeting He has top level management, strategic planning, and financial and non-financial risk assessment skills developed over 40 years of leading nine diverse organizations ranging in size from 130 to 300,000 people and managing budgets up to $8 billion.
He has extensive corporate governance experience including audit, compensation and governance committees, from service on several private and public company boards, including as chairman of Huntington Ingalls Industries.
PROFESSIONAL EXPERIENCE
Owner, Fargo Associates LLC (since 2005)
(defense and homeland/national security consultancy)
Commander of the U.S. Pacific Command (retired)
PUBLIC COMPANY BOARDS
The Greenbrier Companies (since 2015), Lead Independent Director (since January 2021) (rail manufacturing & licensing services)
Matson Inc. (since 2012) (transportation & logistics)
PAST PUBLIC COMPANY BOARDS
Huntington Ingalls Industries, Chairman (2011-2020) (military
shipbuilder)
Northrop Grumman Corporation (2008-2011)
Hawaiian Holdings, Inc. (2005-2008) (Hawaiian Airlines holding
company)
Alexander & Baldwin (2010-2011)
OTHER POSITIONS
Chairman, United Services Automotive Association
Advisory Board Member, National Bureau of Asian Research
Director, AtHoc (until 2016)
Director, GTA Teleguam (until 2017)
Senior Advisor, SKAI Ventures (2005-2019)
Director, Hawaiian Electric Company, Inc. (HEI Subsidiary) (2005-2017) |
| | | EDUCATION
Bachelor of Science, United States Naval
Academy
Executive and business training — Harvard
University; Stanford University |
Mr. Scilacci brings to HEI extensive financial, leadership and operational management expertise from serving as a finance executive at a major California company, and its utility and competitive generation subsidiaries. His experience spans an impressive career of more than 30 years, and he demonstrated a strong track record of considerable shareholder value creation.
RELEVANT PROFESSIONAL EXPERIENCE6Senior Vice President and Chief Financial Officer, Edison Mission Energy (competitive generation subsidiary of Edison International) (2005-2008)
Vice President and Chief Financial Officer, then Senior Vice President, Chief Financial Officer Southern California Edison Company (subsidiary of Edison International and one of the largest electric utilities in the U.S.) (2000-2005)
Director, QF Resources, Southern California Edison (1996-2000)
Assistant Treasurer, Southern California Edison (1993-1996)
Finance Manager, Supervisor, and Analyst, Southern California Edison (1984-1993)
RELEVANT SKILLS & QUALIFICATIONS
Significant leadership and operational management experience through serving as CFO of Edison International, a publicly-traded company whose market cap increased substantially during Mr. Scilacci's tenure.
Extensive experience communicating with Wall Street analysts, investors, and rating agencies.
Mr. Scilacci's track record of success is highlighted by his recognition as one of the top CFOs in the electric utility sector by a 2017 Institutional Investor survey of investors and sell-side analysts.
TABLE OF CONTENTS | | | | | | | |
| | | | | | | Peggy Y. Fowler
Independent Director
Executive Committee Member
Nominating and Corporate Governance
Committee Chair
Compensation Committee Member
| | | | Independent Director Since: 2011
Principal Occupation: Former Chief
Executive Officer (2000-2009),
Portland General Electric Company (PGE) | | | | With experience as Chief Executive Officer of a NYSE-listed public utility company, and as director for the Portland Branch of the Federal Reserve Bank of San Francisco and Umpqua Holdings Corporation (a publicly traded bank holding company), Ms. Fowler brings a unique combination of utility and banking knowledge to the Board.
Ms. Fowler was recognized as Oregon’s Most Admired CEO in a 2005 Portland Business Journal survey, and as Portland’s First Citizen in 2007 by the Portland Metropolitan Association of Realtors. Ms. Fowler was awarded the Oregon History Makers recognition in 2015, and the 2016 Joan Austin Lifetime Achievement Award recognizing her as one of Portland, Oregon’s most-respected business leaders.
Ms. Fowler has deep environmental and renewable energy expertise. She managed PGE’s environmental department, overseeing initiatives that improved fish passage on multiple Oregon rivers. During Ms. Fowler’s tenure as Chief Executive Officer, PGE made the strategic decision to reduce use of oil and coal and has been ranked #1 on multiple occasions for selling more renewable power to residential customers than any other U.S. utility.
Under Ms. Fowler’s leadership, wind and solar projects were constructed and integrated into the PGE grid. Under her leadership as HEI’s Nominating and Corporate Governance Chair, the company underwent a new director refresh, decreased tenure, provided greater proxy access, eliminated staggered board and implemented majority voting.
PROFESSIONAL EXPERIENCE
38 years of executive leadership, financial oversight and utility operations experience from serving at PGE in senior officer positions (including as President and Chief Executive Officer, Chief Operating Officer, and Board Member) and operating positions.
PUBLIC COMPANY BOARDS
Umpqua Holdings Corp (since 2009) (bank holding company); Chairman (since 2012)
PAST PUBLIC COMPANY BOARDS
Portland General Electric (2006-2012)
OTHER POSITIONS
Director and committee member, Cambia Health Solutions (not-for-profit health insurer) (since 2005)
Director, PGE Foundation (since 1997)
Director, Hawaiian Electric Company, Inc. (HEI Subsidiary) (2009-2016)
Director, Portland Branch of Federal Reserve Bank of San Francisco (2007-2011) | | | |
EDUCATION
Public Utility Executive Program, University of
Idaho and University of Michigan
Bachelor of Science, Chemistry and Bachelor
of Science, Math, George Fox University |
TABLE OF CONTENTS | | | | | | |
| | | | | | | Mary G. Powell
Independent Director
Compensation Committee Member
| | | | Age: 60
Independent Director Since: 2019
Principal Occupation: Former President and
Chief Executive Officer, Green Mountain
Power, 2008-2019
| | | | Ms. Powell has significant experience in utilities and renewable energy, having served as President and CEO of Green Mountain Power since 2008. Under her leadership, the company became the world’s first utility to become a Certified B Corporation (a business that balances purpose and profit).
Ms. Powell led an ambitious energy vision to dramatically ramp up local renewable resources in Vermont. Ms. Powell has relevant public board experience, serving as a director at Sunrun Inc., where she is a member of the compensation committee. Ms. Powell’s track record of leadership and innovation has received national acclaim; she was named as one of Fast Company’s “100 Most Creative People in Business” in 2016 and as one of CEO Connection’s “2017 Most Influential Women of the Mid-Market,” among other recognitions. Most recently, Ms. Powell was named Utility Dive’s 2019 Executive of the Year, recognizing her leadership of Vermont’s investor-owned utility to prioritize and deliver on customer-choice distributed energy solutions.
PROFESSIONAL EXPERIENCE
Vice President (Human Resources and Organizational Development), then Vice President (Administration), then Senior Vice President (Customer and Organizational Development), then Senior Vice President and Chief Operating Officer, Green Mountain Power (1998-2008)
President, HR Works (total solutions provider of human resource management and benefits administration services) (1997-1998)
VP Human Resources, VP Retail Banking and SVP of Retail Banking, Key Bank of Vermont (1992-1997)
PUBLIC COMPANY BOARDS
Sunrun Inc. (since Feb. 2018), Compensation Committee and Audit Committee Member
CGI, Inc. (since June 2020), Corporate Governance Committee and Human Resources Committee
Climate Change Crisis Real Impact I Acquisition Corporation (CLII.U) (since September 2020), Chair
OTHER POSITIONS
Vice Chair, Vermont Chamber of Commerce (2010-2012)
Chair, Vermont Business Roundtable (2012-2014)
Director, American Savings Bank (HEI Subsidiary) (since May 2019)
Director, Vermont Electric Power Company (VELCO) (2008-2019)
Director, Enegir (largest natural gas company in Quebec, Canada) (since November 2019) | | | | EDUCATION
Associate of Science, Keene State College |
TABLE OF CONTENTS | | | | | | |
| | | | | | | Keith P. Russell
Independent Director
Executive Committee Member
Audit & Risk Committee Member
ASB Risk Committee Chair
| | | | Age: 75
Independent Director Since: 2011
Principal Occupation: President,
Russell Financial (since 2001) | | | | Within three major financial institutions, Mr. Russell served as an executive and/or Director and held domestic and international positions in all areas of banking, finance, capital markets and risk management. He has served on numerous panels on corporate governance and strategic direction.
He has broad and deep expertise in risk management including identification, assessment, and monitoring of current and emerging risks through his prior service as Chief Risk Officer of Mellon Financial Corporation and as Chief Operating Officer of Glendale Federal Bank. Mr. Russell has been the chair of the American Savings Bank (an HEI subsidiary) risk committee since 2012, during which time he led the implementation of an extensive enterprise risk management system which included development of robust risk governance, monitoring and management systems.
Mr. Russell has a keen knowledge of the Hawaii real estate market and hospitality industry from his service on the Sunstone Hotel Investors Board which has investments in Hawaii.
Mr. Russell’s years of executive leadership experience in financial service operations, particularly as an executive officer of a major lender to the electric utility industry, contribute invaluable expertise to the Board.
PROFESSIONAL EXPERIENCE
Vice Chair/Chief Risk Officer, Mellon Financial Corporation (1991-2001)
President and Chief Operating Officer, Glendale Federal Bank (1983-1991)
Senior Vice President, Security Pacific Corporation (1974-1983)
PUBLIC COMPANY BOARDS
Sunstone Hotel Investors (since 2003)
PAST PUBLIC COMPANY BOARDS
Nationwide Health Properties (2002-2011)
OTHER POSITIONS
Director, KBS Growth and Income REIT (since 2016)
Director, American Savings Bank (HEI subsidiary)
Director, ASB Hawaii (HEI subsidiary) (2014-2016)
| | | | EDUCATION
Master of Arts, Northwestern University
Bachelor of Arts, University of Washington |
TABLE OF CONTENTS | | | | | | |
| | | | | | | William James
Scilacci, Jr.
Independent Director
Executive Committee Member
Audit & Risk Committee Chair
| | | | Age: 65
Independent Director Since: 2019
Principal Occupation: Former Executive Vice
President and Chief Financial Officer, Edison
International (2008-2016) |
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He has extensive utility experience through his over 20 years in financial management with Southern California Edison, the primary energy supply company for Southern California. Southern California Edison is a leader in development and implementation of grid modernization, electrification of transportation, renewable energy and energy efficiency.
Mr. Scilacci was the CFO of Edison International’s competitive generation subsidiary. During his tenure, Edison International made material investments in wind energy and natural gas-fired generation. He also oversaw the subsidiaries’ energy trading business.
Mr. Scilacci has a keen understanding and extensive knowledge of enterprise risk management from his role as Chief Financial Officer of Edison International. For eight years, Mr. Scilacci managed Edison International’s enterprise risk management program identifying, monitoring and forecasting new risks to the company including ESG related risks such as the impacts of climate change.
Mr. Scilacci’s track record of success is highlighted by his recognition as one of the top CFOs in the electric utility sector by a 2017 Institutional Investor survey of investors and sell-side analysts.
PROFESSIONAL EXPERIENCE
Over 30 years of experience, and 25 years in executive leadership, for Edison International companies (including CFO of Edison International, Edison Mission Energy and Southern California Edison)
OTHER POSITIONS
Director, Chairman of the Finance Committee, Member of Audit Committee, Loyola High School of Los Angeles
President (2019) and Director (2017-2019), Bel-Air Bay Club |
FINANCE AND ACCOUNTING |
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| Master of Business Administration, Santa
STRATEGIC AND OPERATIONAL MANAGEMENTClara University
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Master of Business Administration, Santa Clara University
Bachelor of Arts, University of California, Los Angeles
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Table of ContentsTABLE OF CONTENTS
DIRECTOR NOMINEES FOR ELECTION
Nominee for Class III Director whose term expires at the 2020 Annual Meeting of Shareholders
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| | | | | | | Eva T. Zlotnicka
Jeffrey N.
Watanabe
Independent Director
HEI Chairman of the Board
HEI Executive Committee Chair
Compensation Committee Member
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Independent Director Since: 2020
Principal Occupation: Founder,
Managing Partner & President, Inclusive
Capital Partners (2020-present) | | | | Ms. Zlotnicka’s experience as a sustainable investing professional with a background in utilizing markets, policy, and partnership to motivate the private sector to simultaneously improve sustainability, profitability and competitiveness, brings a highly valuable perspective to the Board. In her prior position as Managing Director for the ValueAct Spring Fund she identified companies whose technology and products are solving environmental and social issues and actively supported them through various industry, governance or other significant transitions. Most recently, Ms. Zlotnicka founded Inclusive Capital Partners, a U.S.-based environmental and social impact investment company where she also serves as its Managing Partner and President.
As director at Unifi, where she serves as chair of the nominating and corporate governance committee and as a member of the audit committee, Ms. Zlotnicka has experience in guiding the implementation of ambitious sustainability strategies in addition to other strategic efforts and financial oversight. Recently she was recognized among Women Inc.’s 2019 Most Influential Corporate Board Directors.
Prior to founding Inclusive Captial Partners, she was Founder and Managing Director of the ValueAct Spring Fund and Head of Stewardship at ValueAct Capital. Prior to joining ValueAct Capital in 2018, Ms. Zlotnicka served as the US lead Sustainability and Environmental, Social and Governance (ESG) equity research analyst at Morgan Stanley. During her tenure, Morgan Stanley’s Global Sustainability Research team ranked #1 in Sustainable and Responsible Investment Research by the 2017 Extel IRRI survey. Ms. Zlotnicka was also individually ranked as #1 for “Best Understanding of Companies” as voted by corporate participants. Additionally, Ms. Zlotnicka has familiarity with the academic, public and non-profit sectors, most notably having worked with the US Environmental Protection Agency on public-private partnerships and the Environmental Defense Fund on corporate investment in energy efficiency.
PROFESSIONAL EXPERIENCE
Over ten years of experience in sell-side research in sustainability, ESG and fixed income, including leading sustainability research teams at Morgan Stanley
Managing Director, ValueAct Spring Fund; Head of Stewardship, ValueAct Capital (2018 to 2020)
PUBLIC COMPANY BOARDS
Unifi, Inc. (since 2018) (innovative textile products)
OTHER POSITIONS
Co-Founder, Women Investing for a Sustainable Economy (“WISE”) (since 2012)
Board Observer, Arcadia Power, Inc. (since 2018)
Investor Advisory Group Member, Sustainability Accounting Standards Board (since 2019)
Advisory Board Member, Institute for Corporate Governance and Finance, New York University School of Law (since March 2020)
| | | | EDUCATION
Master of Business Administration and Master
of Environmental Science, Yale University
Bachelor of Science in Economics, Wharton
School, and
Bachelor of Science in Computer
Science & Engineering, University of
Pennsylvania |
Mr. Watanabe has been one of the most influential figures in Hawaii's business community over the past four decades. His strategic counsel is widely sought by Hawaii's business, political and nonprofit leaders, as well as by global businesses seeking to do business in Hawaii.
Mr. Watanabe has a long personal history in environmental protection and public service. He was instrumental in assisting the National Park Service dramatically expand Volcanoes National Park through the acquisition of over 100,000 acres on the Big Island of Hawaii. He assisted with and facilitated the acquisition of the Palmyra Atoll, currently used as an international research center. Both were accomplished through The Nature Conservancy.
PROFESSIONAL EXPERIENCE
35 years at Watanabe Ing, LLP
PAST PUBLIC COMPANY BOARDS
Matson Inc., Lead Independent Director (2017-2018), Director (2012-2018)
Alexander & Baldwin, Lead Independent Director (2012-2015), Director (2003-2015)
American Classic Voyages (1998-2003)
Cheap Tickets (2001)
OTHER POSITIONS
Director, American Savings Bank (HEI subsidiary)
Board member and Chair, Nature Conservancy of Hawaii (1988-2006)
Board of Governors, Nature Conservancy (1997-2003)
Chair, Child and Family Service (1984-1988); Consuelo Foundation (1991-2016); Blood Bank of Hawaii (1993-1994); Sesame Workshop (2000-2004); University of Hawaii Foundation (1996-1998)
Board member, Rehabilitation Hospital of the Pacific (1982-2000); Queen's Health System and Medical Center (1989-2000); Punahou School (1998-2018); First Insurance of Hawaii Foundation; Child & Family Service-Philippines (1988-2016); Hawaiian Electric Industries Charitable Foundation
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Age:76HEI Independent Director Since:1987
Chairman of the Board Since:2006
Principal Occupation:Former Managing Partner, Watanabe Ing & Komeiji LLP (1972-2007)
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EDUCATION
Juris Doctor, George Washington University
Bachelor of Arts, University of California Berkeley
TABLE OF CONTENTS Table of Contents
CONTINUING DIRECTORS
Continuing Class III Directors whose terms expire at the 2020 Annual Meeting of Shareholders
CORPORATE GOVERNANCEHEI’s governance policies and guidelines
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Peggy Y. Fowler
Independent Director
Nominating and Corporate Governance
Committee Chair
Compensation Committee Member |
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Ms. Fowler's position as Chief Executive Officer of Portland General Electric, a NYSE-listed public utility company imparts significant industry, operations, leadership and management expertise to the Board.
Ms. Fowler has deep environmental and renewable energy expertise. During Ms. Fowler's tenure as CEO, PGE made the strategic decision to reduce use of oil and coal, and has been ranked #1 on multiple occasions for selling more renewable power to residential customers than any other U.S. utility. Under Ms. Fowler's leadership, wind and solar projects were constructed and integrated into the PGE grid.
PROFESSIONAL EXPERIENCE
35 years of executive leadership, senior officer and operating positions, PGE
PUBLIC COMPANY BOARDS
Umpqua Holdings Corp (since 2009, Chairman 2012-present) (bank holding company)
PAST PUBLIC COMPANY BOARDS
Portland General Electric (2006-2012)
OTHER POSITIONS
Director and committee member, Cambia Health Solutions (not-for-profit health insurer)
Director, PGE Foundation
Director, Portland Branch of Federal Reserve Bank of San Francisco (2007-2011)
EDUCATION
Public Utility Executive Program, University of Idaho and University of Michigan
Bachelor of Science, Chemistry and Bachelor of Science, Math, George Fox University
Table of Contents
CONTINUING DIRECTORS
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Keith P. Russell
Independent Director
Audit Committee Member |
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Mr. Russell served as an executive and/or Director within three major financial institutions and held domestic and international positions in all areas of banking, finance, capital markets and risk management. He has served on numerous panels on corporate governance and strategic direction.
Mr. Russell's years of executive leadership experience in financial service operations, including as an executive officer of a major lender to the electric utility industry, contribute invaluable expertise to the Board. His prior service as Chief Risk Officer of a large financial institution strengthens the Board's risk management capabilities.
PROFESSIONAL EXPERIENCE
Vice Chair/Chief Risk Officer, Mellon Financial Corp. (1991-2001)
President and Chief Operating Officer, Glendale Federal Bank (1983-1991)
Senior Vice President, Security Pacific Corporation (1974-1983)
PUBLIC COMPANY BOARDS
Sunstone Hotel Investors (since 2003)
PAST PUBLIC COMPANY BOARDS
Nationwide Health Properties (2002-2011)
OTHER POSITIONS
Director, KBS Growth and Income REIT
Director, American Savings Bank (HEI subsidiary)
EDUCATION
Master of Arts, Northwestern University
Bachelor of Arts, University of Washington
Table of Contents
CONTINUING DIRECTORS
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Barry K. Taniguchi
Independent Director
Audit Committee Chair
Executive Committee Member |
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Mr. Taniguchi brings to the Board considerable experience as a proven business leader in Hawaii, with extensive knowledge of the business climate and significant contacts and relationships within the business community and local governmental agencies. His extensive business and community service have earned him numerous awards for leadership.
Under Mr. Taniguchi's leadership, KTA Super Stores is investing in environmental and social innovations including electric vehicle infrastructure investments, PV system installation, sourcing from locally owned and produced businesses and supporting their marketing and expanded distribution, and philanthropic programs with direct community impact.
PROFESSIONAL EXPERIENCE
President and Director, K. Taniguchi Ltd. (since 1989) (real estate lessor)
OTHER POSITIONS
Trustee, Public Schools of Hawaii Foundation
Director, Hawaii Food Industry Association
Director, American Savings Bank (HEI subsidiary)
EDUCATION
Bachelor in Business Administration, University of Hawaii
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CONTINUING DIRECTORS
Continuing Class I Directors whose terms expire at the 2021 Annual Meeting of Shareholders
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Richard J. Dahl
Independent Director
Audit Committee Member
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Mr. Dahl has significant leadership, strategy, audit and risk-management expertise. He has in-depth experience in corporate transformation and restructuring, and in driving improved corporate governance and shareholder engagement. His experiences working in Hawaii and on the U.S. mainland, and in banking and the electric utility industry, bring valuable perspective to the Board.
Under Mr. Dahl's leadership, Dole Food Company invested in a number of sustainability initiatives that secured external recognition. Dole was named one of the World's Most Ethical Companies by Ethisphere Magazine, and undertook a carbon offset program to secure a carbon neutral operating footprint.
PROFESSIONAL EXPERIENCE
Interim Chief Executive Officer, Dine Brands Global, Inc. (formerly known as DineEquity) (3/1/17 - 9/15/17) (franchisor of over 3000 Applebee's and IHOP restaurants)
President and Chief Operating Officer (2004-2007) and Chief Operating Officer (2002-2004), Dole Food Company
President and Chief Operating Officer, Bank of Hawaii Corporation (1981-2002)
Ernst & Young (1973-1981)
PUBLIC COMPANY BOARDS
Dine Brands Global, Inc. (formerly known as DineEquity) (since 2004); Non-Executive Chairman (since 2017)
IDACORP (since 2008) (currently decommissioning/divesting ownership of its coal plants)
PAST PUBLIC COMPANY BOARDS
Non-Executive Chairman, International Rectifier Corporation (2008-2015) (leading manufacturer and distributor of power management semi-conductors and researcher in battery storage)
OTHER POSITIONS
Non-Executive Chairman, James Campbell Company, LLC (privately held real estate investment and development company), Executive Chair, President and CEO (2010-2016)
Director, Hawaiian Electric Company, Inc. (HEI subsidiary)
EDUCATION
Bachelor of Science, University of Idaho
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CONTINUING DIRECTORS
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Constance H. Lau
President and CEO, HEI
Executive Committee Member
Chairman, Hawaiian Electric
Company (HEI subsidiary)
Chairman, American Savings
Bank (HEI subsidiary)
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Ms. Lau has deep industry and operational expertise having served in leadership capacities spanning several functions across HEI and its subsidiaries. Ms. Lau's expertise and leadership have been recognized nationally, leading her to be named Chair of the National Infrastructure Advisory Council, and to be named as a clean energy ambassador for the U.S. Department of Energy Clean Energy Ministerial C3E Initiative. Ms. Lau is also recognized as a transformational leader, having been identified by the US Banker List of Most Powerful Women in Banking in 2004, 2005, 2006 for transforming ASB into a full-service community bank.
Signing the groundbreaking Hawaii Clean Energy Initiative with the Governor of State of Hawaii also secured Ms. Lau the Women in Clean Energy & the Environment, Woman of the Year award, 2011.
PROFESSIONAL EXPERIENCE
Chair, National Infrastructure Advisory Council (since 2012)
President and Chief Executive Officer, American Savings Bank (2001-2006) Chief Operating Officer, ASB (1999-2001)
Treasurer, HEI (1989-1999)
Treasurer, Hawaiian Electric Company and Assistant Treasurer, HEI (1987-1989)
Assistant Corporate Counsel, Hawaiian Electric Company (1984-1987)
PUBLIC COMPANY BOARD
Matson Inc. (since 2012) and predecessor company, Alexander & Baldwin Inc. (2004-2012)
OTHER POSITIONS
Board Member, Edison Electric Institute
Former Board Member, Electric Power Research Institute
Board Member, Associated Electric & Gas Insurance Services
Board Member, Hawaii Business Roundtable
Board Member, Foundation for Asia-Pacific Center for Security Studies
Board Member, Elemental Excelerator
Member, Federal Electricity Subsector Coordinating Council
Former Member of the Federal Reserve Bank of San Francisco's Twelfth District Community Depository Advisory Council (2011-2014)
Chair, Consuelo Foundation
Trustee, Punahou School
Chair, Military Affairs Council, Chamber of Commerce of Hawaii
EDUCATION
Master of Business Administration,
Stanford Graduate School of Business
Juris Doctor, Hastings College of the Law, University of California
Bachelor of Science in Administrative
Sciences, Yale College
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CONTINUING DIRECTORS
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James K.
Scott, Ed.D.
Independent Director
Nominating and Corporate Governance
Committee Member
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Dr. Scott is a well-respected leader in the State of Hawaii. His extensive knowledge, contacts and relationships within Hawaii's business community, nonprofit community and local governmental agencies contribute significantly to the Board's understanding of Hawaii's unique cultural and business environment.
Dr. Scott has overseen various transformational environmental and social programs at Punahou School. These include implementing a need-blind student admission policy and securing a $300 million endowment to support a need-based financial aid program; making a commitment to become a Net Zero Energy campus by 2025; developing an environmental sustainability curriculum; and becoming a laptop technology campus and securing Apple Distinguished School status.
Under Dr. Scott's leadership, Punahou School has been named the Greenest School in America by the Green Guide.
OTHER POSITIONS
Director, Hawaii Association of Independent Schools
Trustee, Barstow Foundation
Member, Advisory Board of the Klingenstein Center of Teachers College, Columbia University
Trustee, National Association of Independent Schools
Director, American Savings Bank (HEI subsidiary)
EDUCATION
Master's Degree and Doctorate in Education, Harvard University
Master of Arts, University of San Francisco
Bachelor of Arts, Stanford University
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CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
HEI's governance policies and guidelines
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HEI'sHEI’s Board and management review and monitor corporate governance trends and best practices on an ongoing basis, including for purposes of reviewing HEI'smaking necessary and advisable updates to HEI’s corporate governance documents and complying with the corporate governance requirements of the New York Stock Exchange (NYSE), rules and regulations of the Securities and Exchange Commission (SEC) and rules and regulations of the Board
of Governors of the Federal Reserve (Federal Reserve) applicable to HEI as a savings and loan holding company. HEI'sHEI’s corporate governance documents (such as the charters for the Audit & Risk, Compensation, Nominating and Corporate Governance and Executive Committees, Corporate Governance Guidelines and Corporate Code of Conduct, as well as other governance documents) are available on HEI'sHEI’s website at www.hei.com/govdocs.
The Board’s leadership structure
The Board's leadership structure
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Since 2006, Mr. WatanabeMay 5, 2020, Admiral Fargo has served as the nonexecutive ChairmanChairperson of the Board and Ms. LauBoard. Admiral Fargo has served as HEI's President and CEO. Since that time, Ms. Lau has also been the only employee director on the Board.Mr. WatanabeBoard since 2005, and has never been employed by HEI or any HEI subsidiary. The Board has determined that he is independent.independent under applicable standards for director independence, as discussed below under the heading “Board of Directors—Independent Directors”. Among the many skills and qualifications that Mr. WatanabeAdmiral Fargo brings to the Board, the Board considered: (i) his extensive experience in corporate and nonprofit governance from serving on a number of other public company, private company and nonprofit boards; (ii) his reputation fortrack record of effective consensus and relationship building and business and community leadership, including leadershipserving as Commander of his former law firm;the U.S. Pacific Command; (iii) his willingness to spend time advising and mentoring members of HEI'sHEI’s senior management; and (iv) his dedication to committing the hard work and time necessary to successfully lead the Board.
As HEI's Chairman, Mr. Watanabe's key
The responsibilities of HEI’s Chairperson are to: •
lead Board and shareholder meetings and executive sessions of the independent directors, including executive sessions at which the performance of the CEO is evaluated by the Board;
•attend all meetings of the Audit and Nominating and Corporate Governance Committees of the BoardBoard’s committees, either as an observer and the Executive Committee of the Board as its chair. Mr. Watanabe also currently attends meetings of the Compensation Committee as a member;
•member or observer;work closely with the Nominating and Corporate Governance Committee in periodically evaluating board and committee structures, as well as advise with respect to succession planning for the Board;
•serve on and/or advise the boards of HEI'sHEI’s primary operating subsidiaries, Hawaiian Electric and ASB, chair joint executive sessions of the independent directors of HEI and these subsidiary boards and attend meetings of subsidiary board committees;
•work closely with management to develop meeting agendas and materials for the Board and subsidiary boards;
•be available to other Board and subsidiary board members and management for questions and consultation; and
•ensure and facilitate communications among Board members and Board committees and between the Board and management. The Board'sBoard’s Corporate Governance Guidelines provide that if the ChairmanChairperson and CEO positions are held by the same person, or if the Board determines that the ChairmanChairperson is not independent, the independent directors should designate an independent director to serve as "Lead“Lead Director. "” If a Lead Director is designated, the Lead Director'sDirector’s responsibilities are to: (i) preside at Board and shareholder meetings when the ChairmanChairperson is not present,present; (ii) preside at executive sessions of the independent directors,directors; (iii) facilitate communication between the independent directors and the ChairmanChairperson or the Board as a whole,whole; (iv) call meetings of the non-management or independent directors in executive session,session; (v) participate in approving meeting agendas, schedules and materials for the BoardBoard; and (vi) perform other functions described in the Corporate Governance
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CORPORATE GOVERNANCE
Guidelines or as determined by the Board from time to time. The Board believes that its current leadership structure, which provides for an independent nonemployee Chairman,Chairperson, or an independent Lead Director if the ChairmanChairperson is not independent, is appropriate and effective in light of HEI'sbased on HEI’s current operations, strategic plans and overall corporate governance structure. Several reasons support this conclusion. First, the Board believes that having an independent ChairmanChairperson or Lead Director has been important in establishing atone “tone at the toptop” for both the Board and the Company that encourages constructive expression of views that may differ from those of senior management. Second, the Board believes that the presence of an independent ChairmanChairperson or Lead Director demonstrates to the Company'sCompany’s regulators and shareholders that the Board is committed to serving the best interests of the Company and its shareholders and not the best interests of management. Third, the Board recognizes that HEI has an uncommon corporate governance structure in that the boards of its two primary TABLE OF CONTENTS operating subsidiaries are also composed mostly of nonemployee directors and that the HEI ChairmanChairperson plays an important leadership role at these subsidiary boards.for the consolidated company. For instance, in addition to chairing executive sessions of the nonemployee directors, and attending meetings of the committees of these subsidiary boards,Chairperson leads the Chairman leads each subsidiary boardHEI Board in conducting its annual performance self-evaluation and facilitates communications between the Board and each of these boards and management of the respective subsidiary company. We recently created the position of vice-chairman. In the absence of the chairman of the board, the vice-chairman presides at meetings of our shareholders and of our board of directors, and has the additional powers and duties assignedoversight role with respect to the vice-chairman from time to time by the board of directors.
HEI’s subsidiaries.The Board’s role in risk oversight
The Board's role in risk oversight
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HEI is a holding company that operates principally through its Hawaii-based electric public utility (Utility or Hawaiian Electric) and bank (Bank or ASB) subsidiaries. At the holding company and subsidiary levels, the Company faces a variety of risks, including operational risks, regulatory (including environmental regulations) and legal compliance risks, credit and interest rate risks, competitive risks, liquidity risks, capital risks, cybersecurity risks, and strategic, reputational and sustainability related risks.risks, among others. Developing and implementing strategies to manage thesethe Company’s risks is the responsibility of management, and that responsibility is carried out by assignments of responsibility to various officers and other employees of the Company under the direction of HEI'sHEI’s Chief Financial Officer, who also serves as HEI'sthe HEI Chief Risk Officer. The role of the Board is to oversee the management of these risks. The Board'sBoard’s specific risk oversight functions are as follows: •
The Board has approved a consolidated enterprise risk management (ERM) system recommended by management. The system is designed to identify and assess risks across the HEI enterprise so that information regarding the Company'sCompany’s risks can be reported to the Board, along with proposed strategies for mitigating and managing these risks. The structure of the ERM system is decentralized, with separate Chief Risk Officers at each of Hawaiian Electric and ASB in addition to HEI's Chief Risk Officer. TheHEI’s Chief Risk Officer (HEI CRO). The ERM function for “other” operations of HEI, such as Pacific Current, are performed by the HEI CRO or HEI employees under the supervision of the HEI CRO. Hawaiian ElectricElectric’s Chief Financial Officer, who also serves as its Chief Risk Officer, is also responsible for identifying, assessing, managing, monitoring and reporting risks at HEI's other electric utilitythe Utility and its subsidiaries that operate on the neighbor islands of Hawaii, Maui, Molokai and Lanai. Each subsidiary Chief Risk Officer reports directly to the respective subsidiary President and functionally to HEI's Chief Risk Officer,the HEI CRO, who reviews such risks on a consolidated basis. The Board believes that this decentralized risk management structure is appropriate and effective for the Company'sCompany’s diverse operations and holding company structure, because it allows for industry-specific risk identification and management at the subsidiary levels while also ensuring an integrated and consolidated view of risk at the holding company level by HEI's Chief Risk Officer.the HEI CRO. In connection with approving this ERM system, the Board reviewed (and continually assesses) a catalog of risks and management'smanagement’s assessment of those risks. As part of the Board'sBoard’s ongoing risk oversight, HEI's Chief Risk Officerthe HEI CRO is responsible for providing regular reports to the Board and Audit & Risk Committee on the status of those risks, any changes to the risk catalog or management'smanagement’s assessment of those risks, and any other risk management matters that the Board may request from time to time. The Board and Audit & Risk Committee also receive reports from HEI'sHEI’s internal auditor evaluating the effectiveness of management'smanagement’s implementation of the approved ERM system.
•The Board has assigned to the Audit & Risk Committee the responsibility of assisting in the oversight of the overall risk management strategy of the Company. In providing such assistance, the Audit & Risk Committee is specifically required to discuss policies with respect to risk assessment and risk management, including the 14
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CORPORATE GOVERNANCE
guidelines and policies governing the process by which risk assessment and risk management are undertaken at the Company, and to report to the Board the committee'scommittee’s discussion and findings so that the entire Board can consider changes (if any) in the Company'sCompany’s risk profile.
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The Board has also assigned to the Audit & Risk Committee the specific risk oversight responsibilities ofof: (i) reviewing the Company'sCompany’s major financial risk exposures and the steps management has taken to monitor and controlmanage such exposures,exposures; (ii) overseeing HEI'sHEI’s Code of Conduct compliance programprogram; and (iii) establishing procedures for direct reporting of potential accounting and auditing issues to the Audit & Risk Committee. The Audit & Risk Committee reports to the Board each quarter regarding these matters.
•The Board has assigned to the Compensation Committee the specific risk oversight responsibility of reviewing whether the compensation policies or practices of HEI or its subsidiaries encourage employees to take risks that are reasonably likely to have a material adverse effect on such entities and of recommending new or revised policies and practices to address any such identified risks. Included in this oversight responsibility is the Compensation Committee'sCommittee’s review and evaluation of ASB'sASB’s compensation practices for compliance with regulatory guidance on sound incentive compensation plans. The Compensation Committee reports the results of its review and any recommendations to the Board. The results of the review are also communicated to the Audit & Risk Committee through HEI's Chief Risk Officer.the HEI CRO. Both the Audit & Risk and Compensation Committees are composed entirely of independent directors. TABLE OF CONTENTS In addition to overall risk oversight by the HEI Board, the boards of HEI'sHEI’s primary operating subsidiaries, Hawaiian Electric and ASB, are responsible for overseeing risks at their respective companies. The Hawaiian Electric Board has assigned responsibility for ongoing oversight of risk management to its Audit Committee. The& Risk Committee and the ASB Board has assigned such responsibility for financial and reporting risk management to its Audit Committee and for all other risks to its Risk Committee. ASB's Risk Committee was formed in order to monitor financial risks such as credit risk, interest rate risk, liquidity risk and other key risk areas such as information security, business continuity, and strategic and reputational risks because of the potential for risks to escalate quickly in the banking sector. Under the decentralized ERM structure discussed above, risk management activities at the subsidiary level are reported to these committeesthe respective committee and tosubsidiary board through the subsidiary boards through theapplicable subsidiary Chief Risk Officers.Officer. The HEI Board and/or Audit & Risk Committee may also be invited to participate in risk oversight discussions by these subsidiary boards and/or committees. The information from these subsidiary board and committee sessions are reported, on at least a quarterly basis, to the HEI Board by the applicable subsidiary Chief Risk Officers (or their representatives), who functionally report to HEI's Chief Risk Officerthe HEI CRO on risk management matters. These subsidiary boards are composed primarily of nonemployee directors. The subsidiary audit committees are composed primarily of nonemployee directors who meet the independence requirements for audit committee members of companies listed on the NYSE, and with regard to the ASB Audit Committee, comply with FDIC regulations.
•At least annually, the Board conducts a strategic planning and risk review. As part of this review, the Board reviews fundamental financial and business strategies and assesses the major risks facing the Company, including sustainability-related risks, and optionsavailable alternatives to mitigate those risks. As a company with a Hawaii-focused strategy and with all of its operations in the state, the strength and sustainability of Hawaii's economy, communities and environment is essential to our ability to deliver long-term value for our shareholders. For this reason, key sustainability-related risks (e.g., potential implications for our companies and our strategies due to climate change, economic developments, etc.) are included in our strategic planning process and are considered at the full Board level, in addition to being included in our ERM process overseen by the Audit Committee. To facilitate strategic planning through constructive dialogue among management and Board members, members of management who are not directors are invited to participate in the review. The Board also invites external experts and advisors to present on topics relevant to its oversight of company strategy and risks, providing a broader perspective and expertise from outside the company. Based on the review, the Board and senior management, including the HEI Chief Risk Officer,CRO, identify key issues to be addressed during the course of the next calendar year. The Board believes that, for risk oversight, it is especially important to have an independent ChairmanChairperson or Lead Director in order to ensure that differing views from those of management are expressed. Since the HEI ChairmanChairperson attends the meetings of the Board, the subsidiary boards and their respective committees, the HEI ChairmanChairperson is also in a unique position to assist with communications regarding risk oversight and risk management among the Board and its committees, between the subsidiary boards and their respective committees and between directors and management. 15
Table
Selection of ContentsCORPORATE GOVERNANCE
nominees for the Board Selection of nominees for the Board
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A key role of the Board is to ensure that it has the skills, expertise and attributes needed in light of the company's strategy, challenges and opportunities.
The Board believes that there are skill sets, qualities and attributes that should be represented on the Board as a whole but do not necessarily need to be possessed by each director. The Nominating and Corporate Governance Committee and the Board thus consider the qualifications and attributes of incumbent directors and director candidates both individually and in the aggregate in light of the current and future needs of HEI and its subsidiaries. The Nominating and Corporate Governance Committee assists the Board in identifying and evaluating persons for nomination or re-nomination for Board service or to fill a vacancy on the Board. To identify qualified candidates for HEI Board membership, the Committee may consider persons who are serving on its subsidiary boards as well as persons suggested by Board members, management and shareholders or may retain a third-party search firm to help identify qualified candidates. The Committee'sCommittee’s evaluation process does not vary based on whether a candidate is recommended by a shareholder, a Board member, a member of management or through self-nomination. Once a person is identified as a potential director candidate, the committee may review publicly availablepublicly-available information to assess whether the candidate should be further considered. If so, a committee member or designated representative for the committee will contact the person. If the person is willing to be considered for nomination, the person is asked to provide additional information regarding his or her background, his or her specific skills, experience and qualifications for Board service, and any direct or indirect relationships with the Company. In addition, one or more interviews may be conducted with committee and Board members, and committee members may contact one or more references provided by the candidate or others who would have first-handfirsthand knowledge of the candidate'scandidate’s qualifications and attributes. In evaluating the qualifications and attributes of each potential candidate (including incumbent directors) for nomination or re-nomination or appointment to fill a vacancy, the committee considers: •
the candidate'scandidate’s qualifications, consisting of his/her knowledge (including relevant industry knowledge), understanding of the Company'sCompany’s businesses and the environment within which the Company operates, experience, skills, substantive areas of expertise, financial literacy, innovative thinking, business judgment, achievements and other factors required to be considered under applicable laws, rules or regulations;
•the candidate'scandidate’s attributes, comprising independence, personal and professional integrity, character, reputation, ability to represent the interests of all shareholders, time availability in light of other commitments, dedication, absence of conflicts of interest, diversity, appreciation of multiple cultures, TABLE OF CONTENTS commitment to deal responsibly with environmental and social issues and other stakeholder concerns and other factors that the committee considers appropriate in the context of the needs of the Board;
•familiarity with and respect for corporate governance requirements and practices;
•with respect to incumbent directors, the self-evaluation of the individual director, his or her current qualifications and his or her contributions to the Board;
•the current composition of the Board and its committees; and
•intangible qualities of the candidate including the ability to ask difficult questions and, simultaneously, to work constructivelycollegially with members of the Board, as well as to work effectively with management. The Board considers the recommendations of the Nominating and Corporate Governance Committee and then makes the final decision whether to renominatere-nominate incumbent directors and whether to approve and extend an invitation to a candidate to join the Board upon appointment or election, subject to any approvals required by law, rule or regulation. Ms. Connors was recommended Diversity in identifying nominees for consideration to the Nominating and Corporate Governance Committee by an executive officer, Ms. Powell was recommended by a shareholder and Mr. Scilacci was a referral from a former executive officer and the Company's financial advisor.16
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Board Diversity in identifying nominees for the Board
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In assisting the Board in identifying qualified director candidates, the Nominating and Corporate Governance Committee considers whether the candidate would contribute to the expertise, skills and professional experience, as well as to the diversity of the Board in terms of race, ethnicity, gender, age, geography and cultural background. The Board believes it functions most effectively with members who collectively possess a range of substantive expertise, skills and experience in areas that are relevant to leading HEI in accordance with the Board'sBoard’s fiduciary responsibilities. The Board also believes that having a board composed of members who can collectively contribute a range of perspectives, including perspectives that may arise from a person'sperson’s race, ethnicity, gender, or ethnicity,age, geographic location and cultural background, improves the quality of the Board'sBoard’s deliberations and decisions because it enables the Board to view issues from a variety of perspectives and, thus, more thoroughly and completely. As the Company'sCompany’s operations and strategic plans and the Board'sBoard’s composition may evolve over time, the Nominating and Corporate Governance Committee is charged with identifying and assessing the appropriate mix of knowledge areas, qualifications and personal attributes contributed by Board members that will bring the most strategic and decision-making advantage to HEI. With operations almost exclusively in the State of Hawaii,Hawai‘i, it is advantageousimportant that our Board includeincludes members who livecurrently or in the past have lived and workworked in the state and have firsthand knowledge of, and experience with, our customer base and the unique cultural, political and regulatory environment. TheIt is also important that Board benefits frommembers understand and reflect the uniquecultural, racial and gender diversity that exists in Hawaii.Hawai‘i. If the shareholders vote to elect the fivethree director nominees proposed by the Board for election at the 20192021 Annual Meeting, the resulting composition of the Board would be as follows: seveneight directors (or 63.6%80%) who are Caucasian, three directorsone director (or 27.3%10%) who areis Asian American and one director (or 9.1%10%) who is Caucasian, Asian AmericanNative Hawaiian and native Hawaiian. Fourfive directors (or 36.4%50%) of the eleventen directors would be female. The Board also recognizes that, due to Hawaii'sHawaii’s geographic isolation from the continental United States and the comparatively small number of publicly-tradedpublicly traded companies, banks and regulated utilities based in Hawaii, the Board also benefits from having among its members directors who have gained business experience at companies located in other states; those Board members contribute valuable information about experiences they have had working at or serving on the boards of other public companies and companies in similar industries, which also contributes to the breadth of perspectives on the Board.
Director resignation policies
Director resignation policies
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Through its Corporate Governance Guidelines, the Board requires its members to submit a letter of resignation for consideration by the Board in certain circumstances. A director must tender his or her resignation in the event of a significant change in the director'sdirector’s principal employment and at the end of the term during which the director reaches age 75. In addition to the evaluation process, discussed on page 16,under “Corporate Governance — Selection of nominees for the Board,” requiring a director to submit a letter of resignation in these two circumstances ensures that the Board examines whether a director'sdirector’s skills, expertise and attributes continue to provide value over time. The Board has waived the resignation requirement for Mr. Watanabe upon reaching the age of 75 as part of its ongoing governance planning and to assure a smooth transition as the Board makes significant changes in its composition and leadership.A director must also submit his or her resignation for consideration by the Board if the director is elected under the plurality vote standard for contested elections in which the number of nominees or proposed nominees exceeds the number of directors to be elected (described on page 74)under Article Fifth of the Company’s Amended and Restated Articles of Incorporation), but does not receive the support of the majority of votes cast. In such an event, the Board will evaluate the reasons for the voting result and determine how best to address the shareholder concerns underlying that result. In some cases, the Board may decide that the best approach is to accept the director's director’s TABLE OF CONTENTS resignation. In other cases, the Board may discover that a shareholder concern that was the cause of the vote outcome may more appropriately be addressed by taking other action. 17
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The Board’s role in management succession planning
The Board's role in management succession planning
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The Board, led by its Nominating and Corporate Governance Committee, is actively engaged in succession planning and talent development, with a focus on the CEO and senior management of HEI and its operating subsidiaries. The Board and the Nominating and Corporate Governance Committee consider talent development programs and succession candidates through the lens of Company strategy and anticipated future opportunities and challenges. At its meetings throughout the year, the Nominating and Corporate Governance Committee reviews progress of talent development and succession programs and discusses internal and external succession candidates, including their capabilities, accomplishments, goals and development plans. The full Board also reviews and discusses talent strategy and evaluations of potential succession candidates at an annual Board retreat.annually. In addition, potential leaders are given frequent exposure to the Board through formal presentations and informal events. These reviews, presentations and other interactions familiarize the Board with the Company'sCompany’s talent pool to enable the Board to select successors for the senior executive positions when appropriate.
Shareholder communication with the directors
Shareholder communication with the directors
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Interested parties, including shareholders, desiring to communicate with the Board, any individual director or the independent directors as a group regarding matters pertaining to the business or operations of HEI may address their correspondence in care of the Corporate Secretary, Hawaiian Electric Industries, Inc., P.O. Box 730, Honolulu, HI 96808-0730. The HEI Corporate Secretary may review, sort and summarize all such correspondence in order to facilitate communications to the Board. In addition, the HEI Corporate Secretary has the authority and discretion to handle any director communication that is an ordinary course of business matter, including routine questions, complaints, comments and related communications that can appropriately be handled by management. Directors may at any time request copies of all correspondence addressed to them. The charter of the HEI Audit & Risk Committee, which is available for review at www.hei.com/govdocs, sets forth procedures for submitting complaints or concerns regarding financial statement disclosures, accounting, internal accounting controls or auditing matters on a confidential, anonymous basis.18
TABLE OF CONTENTS Under HEI'sHEI’s Corporate Governance Guidelines, a majority of Board members must qualify as independent under the listing standards of the NYSE and any additional requirements as determined by the Board from time to time. •
For a director to be considered independent under NYSE listing standards, the Board must determine that the director does not have any direct or indirect material relationship with HEI or its subsidiaries apart from his or her service as a director. The NYSE listing standards also specify circumstances under which a director may not be considered independent, such as when the director has been an employee of the Company within the last three fiscal years, if the director has had certain relationships with the Company'sCompany’s external or internal auditor within the last three fiscal years or when the Company has made or received payments for goods or services to entities with which the director or an immediate family member of the director has specified affiliations and the aggregate amount of such payments in any year within the last three fiscal years exceeds the greater of $1 million or 2% of such entity'sentity’s consolidated gross revenues for the fiscal year.
•The Board has also adopted Categorical Standards for Director Independence (HEI Categorical Standards), which are available for review on HEI'sHEI’s website atwww.hei.com/govdocs. The HEI Categorical Standards specify circumstances under which a director may not be considered independent. In addition to the circumstances that would preclude independence under the NYSE listing standards, the HEI Categorical Standards provide that a director is not independent if HEI and its subsidiaries have made charitable contributions to a nonprofit organization for which the director serves as an executive officer and the aggregate amount of such contributions in any single fiscal year of the nonprofit organization within the last three fiscal years exceeds the greater of $1 million or 2% of such organization'sorganization’s consolidated gross revenues for the fiscal year. The Nominating and Corporate Governance Committee and the Board considered the relationships described below in assessing the independence of Board members. Based on its consideration of such relationships and the recommendations of the Nominating and Corporate Governance Committee, the Board determined that all of the nonemployee directors and director nominees of HEI (Messrs. Dahl, Fargo, Kane, Russell, Scilacci, Scott, Taniguchi and WatanabeScilacci and Mss. Connors, Fowler, Powell and Powell)Zlotnicka) are independent. The remaining director, Ms. Lau, is an employee director of HEI and, therefore, is not independent.
Relationships considered in determining director independence: With respect to Messrs. Scott, Taniguchi and Watanabe,Mr. Kane, the Board considered amounts paid in the last three fiscal years to purchase electricity from HEI subsidiariessubsidiary Hawaiian Electric or Hawaii Electric Light (the sole public utilitiesutility providing electricity to the islandsisland of Oahu and Hawaii, respectively)O‘ahu) by entitiesthe entity employing these directors or where a family member of the director was an executive officer.Mr. Kane. None of the amounts paid by thesethe entities for electricity (excluding pass-through charges for fuel, purchased power and HawaiiHawai‘i state revenue taxes) exceeded the thresholds in the NYSE listing standards or HEI Categorical Standards that would automatically result in a director not being independent. SinceBecause Hawaiian Electric and Hawaii Electric Light areis the sole sourcessource of electric power on the islandsisland of Oahu and Hawaii, respectively,O‘ahu the rates they chargeHawaiian Electric charges for electricity are fixed by state regulatory authority, and purchasers of electricity from these public utilities have noneither a choice as to supplier and nonor the ability to negotiate rates or other terms, the Board determined that these relationships do not impair the independence of these directors.Withthis director.
Also with respect to Dr. Scott,Mr. Kane, the Board considered charitable contributions in the last three fiscal years from HEI and its subsidiaries to the nonprofit organization where he serves as an executive officer. None of the contributions exceeded the threshold in the HEI Categorical Standards that would automatically result in Dr. ScottMr. Kane not being independent. In determining that these donations did not impair the independence of Dr. Scott,Mr. Kane, the Board also considered the fact that Company policy requires that charitable contributions from HEI or its subsidiaries to entities where an HEI director serves as an executive officer, and where the director has a direct or indirect material interest, and the aggregate amount donated by HEI and its subsidiaries to such organization would exceed $120,000 in any
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BOARD OF DIRECTORS
single fiscal year, be preapproved by the Nominating and Corporate Governance Committee. With respect to Messrs. Fargo Scott, Taniguchi and Watanabe,Kane the Board considered other director or officer positions held by those directors at entities for which an HEI executive officer serves as a director or trustee and determined that none of these relationships affected the independence of these directors. None of these relationships resulted in a compensation committee interlock or would automatically preclude independence under the NYSE listing standards or HEI Categorical Standards.
TABLE OF CONTENTS In 2018,2020, there were seveneight regular meetings and threeone special meetingsmeeting of the Board. All incumbent directors who served on the Board in 20182020 attended at least 89%93% of the combined total number of meetings of the Board and Board committees on which they served during the year.
Executive sessions of the Board
Executive sessions of the Board
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The nonemployee directors meet regularly in executive sessions without management present. In 2018,2020, these sessions were chaired by Mr. Watanabe who isuntil May 5, 2020, and thereafter by Admiral Fargo, in each case while serving as the ChairmanChairperson of the Board and as an independent nonemployee director. Mr. WatanabeThe Chairperson may request from time to time that another independent director chair the executive sessions.
Board attendance at annual meetings
Board attendance at annual meetings
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All of HEI'sHEI’s incumbent directors who served on the Board in 20182020 remotely attended the 2018virtual 2020 Annual Meeting of Shareholders. HEI encourages all directors to attend each year'syear’s Annual Meeting.
The Board conducts annual evaluations to determine whether it and its committees are functioning effectively. As part of the evaluation process, each member of the Audit & Risk, Compensation and Nominating and Corporate Governance Committees annually evaluates the performance of each committee on which he or she serves. Each director up for reelection also evaluates his or her own performance. The nonemployee directors also periodically complete peer evaluations of the other nonemployee directors. The evaluation process is overseen by the Nominating and Corporate Governance Committee, in consultation with the Chairman.20
Chairperson.TABLE OF CONTENTS | | | COMMITTEES OF THE BOARD |
Board committee composition and meetings
Board committee composition and meetings
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The Board has four standing committees: Audit & Risk, Compensation, Executive and Nominating and Corporate Governance. Members of these committees are appointed annually by the Board, taking into consideration the recommendations of the Nominating and Corporate Governance Committee. The table below shows the current members of each such committee and the number of meetings each committee held in 2018. 2020.| | Celeste A. Connors | | | | | | | | | | | | | | | | Richard J. Dahl | | | | | | | | | | | | | | | | Thomas B. Fargo | | | | | | | | | | | | | | | | Peggy Y. Fowler | | | | | | | | | | | | | | | | Micah A. Kane | | | | | | | | | | | | | | | | Constance H. Lau¹ | | | | | | | | | | | | | | | | Mary G. Powell | | | | | | | | | | | | | | | | Keith P. Russell | | | | | | | | | | | | | | | | William James Scilacci, Jr. | | | | | | | | | | | | | | | | Eva T. Zlotnicka | | | | | | | | | | | | | | | | Number of meetings in 2020 | | | 9 | | | 5 | | | 2 | | | 8 | |
 = Chair | | |  = Member |
1
| Ms. Lau is an employee director. All other directors have been determined to be independent. See “Board of Directors - Independent Directors” above. |
Functions of the Board’s standing committees
| | | | | | | | | Name
| | Audit
| | Compensation
| | Executive
| | Nominating
and
Corporate
Governance
|
|---|
| | | | | | | | | | Richard J. Dahl | |  |
| | | | | | Thomas B. Fargo | | | |  | | | | | Peggy Y. Fowler | | | | |
| | | | Constance H. Lau1 | | | | | | | | | Keith P. Russell | | |
| | | | | | James K. Scott | | | | | | | | | Kelvin H. Taketa | | | | | | | | | Barry K. Taniguchi | | | | | | | | | Jeffrey N. Watanabe | | | | |
| |
| | | | | | | | | | | | Number of meetings in 2018 | | 5 | | 4 | | 0 | | 9 | | | | | | | | | | |
1Ms. Lau is an employee director. All other directors have been determined to be independent. See "Board of Directors — Independent Directors" above.
Functions of the Board's standing committees
|
The primary functions of HEI'sHEI’s standing committees are described below. Each committee operates and acts under written charters that areadopted and approved by the Board and available for review on HEI'sHEI’s website at www.hei.com/govdocs. Each of the Audit & Risk, Compensation and Nominating and Corporate Governance Committees may form subcommittees of its members and delegate authority to its subcommittees.
Audit & Risk Committee Effective February 11, 2020, the Audit Committee changed its name to the Audit & Risk Committee. The Audit & Risk Committee is responsible for overseeing (i) HEI'sHEI’s financial reporting processes and internal controls,controls; (ii) the performance of HEI'sHEI’s internal auditor,auditor; (iii) risk assessment and risk management policies set by managementmanagement; and (iv) the Corporate Code of Conduct compliance program for HEI and its subsidiaries. In addition, this committee is directly responsible for the appointment, compensation and oversight of the independent registered public accounting firm that audits HEI'sHEI’s consolidated financial statements. The Audit & Risk Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs. The Audit & Risk Committee also maintains procedures for receiving and reviewing
confidential reports of potential accounting and auditing concerns. See "Audit“Audit & Risk Committee Report"Report” below for additional information about the Audit & Risk Committee. All Audit & Risk Committee members are independent and qualified to serve on the committee pursuant to NYSE and SEC requirements and the Audit & Risk Committee meets the other applicable requirements of the Securities Exchange Act of 1934.Mr.1934, as amended (Exchange Act). Messrs. Dahl, currently serves on the audit committees of Dine Brands Global, Inc. fka DineEquity, Inc. (NYSE: DIN), IDACORP, Inc. (NYSE: IDA), IDACORP's wholly-owned subsidiary, Idaho Power Company,Russell and HEI's wholly-owned subsidiary Hawaiian Electric. The HEI Board hasScilacci have been determined that Mr. Dahl's simultaneous service on the other audit committees would not impair his ability to effectively serve on its Audit Committee. None of the other Audit Committee members serve on the audit committees of more than two other public companies.
Table of Contents
COMMITTEES OF THE BOARD
HEI's primary operating subsidiaries, Hawaiian Electric and ASB, are responsible for overseeing risks at their respective companies. The Hawaiian Electric Board has assigned responsibility for ongoing oversight of risk management to its Audit Committee. The ASB Board has assigned responsibility for financial and reporting risk management to its Audit Committee and for all other risks to its Risk Committee. The HEI Board and/or Audit Committee may also be invited to participate in risk oversight discussions by these subsidiary boards and/or committees. The information from these subsidiary board and committee sessions are reported, on at least a quarterly basis, to the HEI Board by the subsidiary Chief Risk Officers (or their representatives), who functionally reportBoard to HEI's Chief Risk Officer on risk management matters.
be “audit committee financial experts”. The responsibilities of the Compensation Committee includeinclude: (i) overseeing the compensation plans and programs for employees, executives and nonemployee directors of HEI and its subsidiaries, including equity and incentive plans; (ii) reviewing the extent to which risks that may arise from the Company'sCompany’s compensation policies and practices, if any, may have a material adverse effect on the Company and recommending changes to address any such risks; (iii) evaluating the compliance of ASB'sASB’s incentive compensation practices under the principles for sound incentive compensation plans for banking organizationsorganizations; and (iv) assessing the independence of any compensation consultant involved in determining or recommending TABLE OF CONTENTS COMMITTEES OF THE BOARD | | | |
director or executive compensation. See "Compensation“Compensation Discussion and Analysis —- How We Make Compensation Decisions"Decisions” and "Compensation“Compensation Committee Interlocks and Insider Participation"Participation” below for additional information about the Compensation Committee. The Compensation Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs. All Compensation Committee members are independent and qualified to serve on this committee pursuant to NYSE requirements and also qualify as "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code and as "nonemployee directors"“nonemployee directors” as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934.Act. An independent member of the board of directors of each of Hawaiian Electric and ASB attends meetings of the Compensation Committee as a nonvoting representative of such director'sdirector’s subsidiary board.
The Executive Committee may exercise the power and authority of the Board when it appears to its members that action is necessary and a meeting of the full Board is impractical. It may also consider other matters concerning HEI that may arise from time to time between Board meetings. The Executive Committee is currently composed of the ChairmanChairperson of the Board, who chairs the Executive Committee, the Audit & Risk Committee Chair, the Nominating and Corporate Governance Committee Chair, the Compensation Committee Chair, ASB Risk Committee Chair and the HEI President and CEO. The Executive Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs. An independent member of the board of directors of Hawaiian Electric attends meetings of the Executive Committee as a nonvoting representative of such director’s subsidiary board of directors. Nominating and Corporate Governance Committee The functions of the Nominating and Corporate Governance Committee includeinclude: (i) evaluating the background and qualifications of potential nominees for the Board and for the boards of HEI's subsidiaries,HEI’s subsidiaries; (ii) recommending to the Board the director nominees to be submitted to shareholders for election at the next Annual Meeting,Meeting; (iii) assessing the independence of directors and nominees,nominees; (iv) recommending the slate of executive officers to be appointed by the Board and subsidiary boards,boards; (v) advising the Board with respect to matters of Board and committee composition and procedures,procedures; (vi) overseeing the annual evaluation of the Board, its committees and director nominees,nominees; (vii) overseeing human capital management, including talent development and succession planning for senior executive positionspositions; (viii) ensuring all Environmental, Social and (viii)Governance (ESG) risks and opportunities have appropriate Board oversight, and (ix) making recommendations to the Board and the boards of HEI'sHEI’s subsidiaries regarding corporate governance and board succession planning matters. The Nominating and Corporate Governance Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs. See "Corporate Governance"“Corporate Governance” above for additional information regarding the activities of the Nominating and Corporate Governance Committee. 22
An independent member of the board of directors of Hawaiian Electric attends meetings of the Nominating and Corporate Governance Committee as a nonvoting representative of such director’s subsidiary board of directors.TABLE OF CONTENTS How director compensation is determined
How director compensation is determined
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The Board believes that a competitive compensation package is necessary to attract and retain individuals with the experience, skills and qualifications needed to serve as a director of a publicly traded company withoperating in a unique blend of highly regulated industries. Nonemployee director compensation is composed of a mix of cash and HEIshares of HEI’s common stock (HEI Common StockStock) to align the interests of directors with those of HEI shareholders. Only nonemployee directors are compensated for their service as directors. Ms. Lau, the only employee director of HEI, does not receive separate or additional compensation for serving as a director. Although Ms. Lau is a member of the HEI Board, neither she nor any other executive officer participates in the determination of nonemployee director compensation. The Compensation Committee reviews nonemployee director compensation at least once every three years and recommends changes to the Board. In 2018, the HEI Compensation Committee asked its independent compensation consultant, Frederic W. Cook & Co., Inc. (FW Cook), to conduct an evaluation of HEI'sHEI’s nonemployee director compensation practices. FW Cook assessed the structure of HEI'sHEI’s nonemployee director compensation program and its value compared to competitive market practices of utility peer companies, similar to the assessments used in its executive compensation review. The 2018 analysis took into consideration the duties and scope of responsibilities of directors. The HEI Compensation Committee reviewed the analysis in determining its recommendations concerning the appropriate nonemployee director compensation, including cash retainers, stock awards and meeting fees for HEI directors. Based on the 2018 analysis, the Compensation Committee recommended, and the Board approved, certain changes to director compensation for 2019. The Compensation Committee recommended that the Board approve thedid not recommend any changes to director compensation program reflected in the FW Cook analysis and, at its October 31, 2018 meeting, the Board approved an increase in the annual cash retainer for the chairpersons2020. Components of HEI's Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee to $20,000 and an increase in the annual cash retainer for the members of those committees to $10,000 in recognition of the increased workload of such committees. These increases were effective January 1, 2019.
director compensation Components of director compensation
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Cash retainer. HEI nonemployee directors received the cash amounts shown below as retainer for their 2018 HEI2020 Board service and for their 20182020 service on HEI and subsidiary board committees. No separate fees are paid to HEI directors for service on subsidiary company boards, except to the extent that they serve on any committee of a subsidiary board. Cash retainers were paid in quarterly installments. Position*
| | 2018 Annual Retainer
|
|---|
| | | 2020 Annual Retainer | | | HEI Nonexecutive ChairmanChairperson of the Board (until May 5, 2020) | | | $250,000 | | | HEI DirectorNonexecutive Chairperson of the Board (effective May 5, 2020) | | 75,000 | 125,000 | | | HEI Director | | | 75,000 | | | | HEI Audit & Risk Committee Chair | | 15,000 | 20,000 | | | HEI Compensation Committee Chair | | 15,000 | 20,000 | | | HEI Nominating and Corporate Governance Committee Chair | | 10,000 | 20,000 | | | HEI Audit & Risk Committee Member | | 6,000 | 10,000 | | | HEI Compensation Committee Member | | 6,000 | 10,000 | | | HEI Nominating and Corporate Governance Committee Member | | 4,000 | 10,000 | | | Hawaiian Electric Audit & Risk Committee Chair | | 10,000 | 15,000 | | | Hawaiian Electric Audit & Risk Committee Member | | 4,000 | 7,500 | | | ASB Audit Committee Chair | | 10,000 | 15,000 | | | ASB Audit Committee Member | | 4,000 | 7,500 | | | ASB Risk Committee Chair | | 10,000 | 20,000 | | | ASB Risk Committee Member | | 4,000 | | | | 10,000 | |
*
| No additional retainer is paid for service on the HEI Executive Committee. |
TABLE OF CONTENTS *No additional retainer is paid for service on the HEI Executive Committee.
Table of Contents
DIRECTOR COMPENSATION
Extra meeting fees. Nonemployee directors are also entitled to meeting fees for each board or committee meeting (other than the Executive Committee) attended (as member or chair) after the number of meetings specified below. | | | HEI Board
| | | $1,500 per meeting after 8 meetings | HEI Audit & Risk Committee
| | | $1,500 per meeting after 10 meetings | HEI Compensation Committee
| | | $1,500 per meeting after 6 meetings | HEI Nominating and Corporate Governance Committee
| | | $1,500 per meeting after 6 meetings | Hawaiian Electric Audit & Risk Committee
| | | $1,000 per meeting after 6 meetings | ASB Audit Committee
| | | $1,000 per meeting after 10 meetings | ASB Risk Committee
| | | $1,000 per meeting after 6 meetings |
Stock awards. On June 29, 2018,30, 2020, each HEI nonemployee director received shares of HEI Common Stock with a value equal to $100,000 as an annual grant under HEI'sHEI’s 2011 Nonemployee Director Stock Plan (2011 Director Plan), which was approved by HEI shareholders on May 10, 2011 for the purpose of further aligning directors'directors’ and shareholders'shareholders’ interests. The number of shares issued to each HEI nonemployee director was determined based on the closing sales price of HEI Common Stock on the NYSE on June 29, 2018.30, 2020. Stock grants to nonemployee directors under the 2011 Director Plan are made annually on the last business day in June and vest immediately. HEI considers the 2011 Director Plan to be an important vehicle for the appropriate compensation of its nonemployee directors. Proposal No. 3 in this Proxy Statement requests shareholder approval of an extension of the term of the 2011 Director Plan and an increase in the number of shares available for issuance thereunder.Maximum Compensation.compensation. At its October 29, 2018 meeting, the Compensation Committee recommended, and the Board approved, a maximum annual compensation limit of $600,000 for any nonemployee director, to includewhich includes the aggregate grant date fair value of all awards granted to any nonemployee director during any single calendar year plus the aggregate amount of all cash earned and paid or payable to such director for services rendered for the same year.Retirement benefit. HEI’s Nonemployee Director Retirement Plan, which provides retirement benefits to nonemployee directors, was terminated in 1996. Directors who were retired from their primary occupation at that time remained eligible to receive benefits under the plan based on years of service as a director at the time of the plan’s termination. All benefits payable under the plan cease upon the death of the nonemployee director. Deferred compensation. Nonemployee directors may participate in the HEI Deferred Compensation Plan implemented in 2011 (2011 Deferred Compensation Plan) and described under "Compensation“Compensation Discussion and Analysis — Benefits — Deferred Compensation Plans"Plans” below. Under the plan, deferred amounts are credited with gains/losses of deemed investments chosen by the participant from a list of publicly traded mutual funds and other investment offerings. Earnings are not above-market or preferential. Participants may elect the timing upon which distributions are to begin following separation from service (including retirement) and may choose to receive such distributions in a lump sum or in installments over a period of up to fifteen15 years. Lump sum benefits are payable in the event of disability or death. Mr. TaketaNo nonemployee director participated in this plan in 2018, but no other nonemployee director did so.2020. Nonemployee directors are also eligible to participate in the prior HEI Nonemployee Directors'Directors’ Deferred Compensation Plan, as amended January 1, 2009, although no nonemployee director deferred compensation under such plan in 2018.2020.Health benefits. Nonemployee directors may participate, at their election and at their cost, in the group employee medical, vision and dental plans generally made available to HEI, Hawaiian Electric or ASB employees. No nonemployee director participated in such plans in 2018.2020.
TABLE OF CONTENTS 2018 2020 DIRECTOR COMPENSATION TABLE The table below shows the compensation paid to HEI nonemployee directors for 2018.2020. | | Celeste A. Connors | | | 86,500 | | | 100,000 | | | — | | | — | | | 186,500 | | | | Richard J. Dahl | | | 103,066 | | | 100,000 | | | — | | | — | | | 203,066 | | | | Thomas B. Fargo, HEI Chairperson3 | | | 185,008 | | | 100,000 | | | — | | | — | | | 285,008 | | | | Peggy Y. Fowler | | | 109,500 | | | 100,000 | | | — | | | — | | | 209,500 | | | | Micah A. Kane | | | 89,500 | | | 100,000 | | | — | | | — | | | 189,500 | | | | Mary G. Powell | | | 86,500 | | | 100,000 | | | — | | | — | | | 186,500 | | | | Keith P. Russell | | | 118,000 | | | 100,000 | | | — | | | — | | | 218,000 | | | | William James Scilacci, Jr. | | | 96,500 | | | 100,000 | | | — | | | — | | | 196,500 | | | | Jeffrey N. Watanabe, Chairperson4 | | | 112,500 | | | — | | | — | | | — | | | 112,500 | | | | Eva T. Zlotnicka | | | 75,192 | | | 122,740 | | | — | | | — | | | 197,932 | |
1
| Represents cash retainers for Board and committee service (as detailed below). |
2
| For all HEI nonemployee directors other than Ms. Zlotnicka, this amount represents an HEI stock award in the value of $100,000, as described above under “Stock Awards.” Due to Ms. Zlotnicka’s appointment on February 12, 2020, she also received a new director stock grant pro-rated to cover the period from the date of her appointment to the 2020 annual meeting. |
3
| Includes fees Adm. Fargo earned as Chairperson of the Board beginning on May 5, 2020. Adm. Fargo’s responsibilities as HEI Charperson are described above under “Corporate Governance —The Board’s leadership structure.” |
4
| Mr. Watanabe’s fees were for service as director and Chairperson of the Board from January 1 - May 5, 2020. He also served on the HEI Executive Committee during the timeframe noted. Mr. Watanabe’s responsibilities as HEI Chairperson are described above under “Corporate Governance — The Board’s leadership structure.” |
| | | | | | | Name*
| | Fees Earned
or Paid in Cash
($)3
| | Stock Awards
($)4
| | Total
($)
|
|---|
| | | | | | | | | Richard J. Dahl | | 88,000 | | 100,000 | | 188,000 | | Thomas B. Fargo | | 101,500 | | 100,000 | | 201,500 | | Peggy Y. Fowler | | 84,130 | | 100,000 | | 184,130 | | Keith P. Russell | | 98,000 | | 100,000 | | 198,000 | | James K. Scott | | 83,500 | | 100,000 | | 183,500 | | Kelvin H. Taketa1 | | 92,500 | | 100,000 | | 192,500 | | Barry K. Taniguchi | | 103,000 | | 100,000 | | 203,000 | | Jeffrey N. Watanabe, Chairman2 | | 338,000 | | 100,000 | | 438,000 | | | | | | | | |
1In 2018, Mr. Taketa elected to defer $74,000 of his fees under the 2011 Deferred Compensation Plan. Mr. Taketa did not have above-market or preferential earnings on nonqualified deferred compensation in 2018.
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Table of Contents
DIRECTOR COMPENSATION
2Mr. Watanabe's fees were for service as director and Chairman of the HEI Board and as a member of the Compensation Committee. He also served on the HEI Executive Committee and the ASB Board and Executive Committee, as well as the Hawaiian Electric Board and ASB Risk Committee. Mr. Watanabe's HEI Chairman responsibilities are described above under "Corporate Governance — The Board's leadership structure."
3Represents cash retainers for board and committee service (as detailed below).
4For all HEI nonemployee directors, this amount represents an HEI stock award in the value of $100,000, as described above under "Stock awards."
The table below shows the detail of cash retainers paid to HEI nonemployee directors for Board and committee service (including subsidiary committee service) in 2018. 2020.| | Celeste A. Connors | | | 75,000 | | | 10,000 | | | — | | | 1,500 | | | — | | | — | | | | | | 86,500 | | | | Richard J. Dahl | | | 75,000 | | | 26,566 | | | — | | | 1,500 | | | — | | | — | | | | | | 103,066 | | | | Thomas B. Fargo, HEI Chairperson2 | | | 75,000 | | | 23,434 | | | 82,074 | | | 4,500 | | | — | | | — | | | | | | 185,008 | | | | Peggy Y. Fowler | | | 75,000 | | | 30,000 | | | — | | | 4,500 | | | — | | | — | | | | | | 109,500 | | | | Micah A. Kane | | | 75,000 | | | 10,000 | | | — | | | 4,500 | | | — | | | — | | | | | | 89,500 | | | | Mary G. Powell | | | 75,000 | | | 10,000 | | | — | | | 1,500 | | | — | | | — | | | | | | 86,500 | | | | Keith P. Russell | | | 75,000 | | | 10,000 | | | — | | | 1,500 | | | 7,500 | | | 20,000 | | | 4,000 | | | 118,000 | | | | William James Scilacci, Jr. | | | 75,000 | | | 20,000 | | | — | | | 1,500 | | | — | | | — | | | | | | 96,500 | | | | Jeffrey N. Watanabe3 | | | 25,962 | | | — | | | 86,538 | | | — | | | — | | | — | | | | | | 112,500 | | | | Eva T. Zlotnicka | | | 66,346 | | | 8,846 | | | — | | | — | | | — | | | — | | | | | | 75,192 | |
1
| Represents extra meeting fees earned for attending Board and committee meetings in excess of the number of meetings specified in “Director Compensation — Components of director compensation — Extra meeting fees.” |
2
| Adm. Fargo’s fees include fees earned as Chairperson beginning on May 5, 2020. |
3
| Mr. Watanabe’s fees include fees earned as Chairperson of the Board from January 1, 2020 - May 5, 2020. |
| | | | | | | | | | | | | | | | | Name*
| | HEI
Board
Retainer
($)
| | HEI
Committee
Retainer
($)
| | HEI
Chairman
Retainer
($)
| | HEI
Extra
Meeting
Fees1 ($)
| | HECO
Audit
Committee
Retainer
($)
| | ASB
Audit
Committee
Retainer
($)
| | ASB
Risk
Committee
Retainer
($)
| | Total
($)
|
|---|
| | | | | | | | | | | | | | | | | | | Richard J. Dahl | | 75,000 | | 6,000 | | — | | 3,000 | | 4,000 | | — | | — | | 88,000 | | Thomas B. Fargo | | 75,000 | | 19,000 | | — | | 7,500 | | — | | — | | — | | 101,500 | | Peggy Y. Fowler | | 75,000 | | 6,130 | | — | | 3,000 | | — | | — | | — | | 84,130 | | Keith P. Russell | | 75,000 | | 6,000 | | — | | 3,000 | | — | | 4,000 | | 10,000 | | 98,000 | | James K. Scott | | 75,000 | | 4,000 | | — | | 4,500 | | — | | — | | — | | 83,500 | | Kelvin H. Taketa | | 75,000 | | 10,000 | | — | | 7,500 | | — | | — | | — | | 92,500 | | Barry K. Taniguchi | | 75,000 | | 15,000 | | — | | 3,000 | | — | | 10,000 | | — | | 103,000 | | Jeffrey N. Watanabe, HEI Chairman | | 75,000 | | 6,000 | | 250,000 | | 3,000 | | — | | — | | 4,000 | | 338,000 | | | | | | | | | | | | | | | | | | |
1Represents extra meeting fees earned for attending Board and committee meetings in excess of the number of meetings specified on page 24.
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Table of ContentsTABLE OF CONTENTS
DIRECTOR COMPENSATION
Director stock ownership and retention HEI directors are required to own and retain HEI Common Stock throughout their service with the Company. Each director has until his or her compliance date (January 1 of the year following the fifth anniversary of the later of (i) amendment to his or her required level of stock ownership, or (ii) first becoming subject to the requirements) to reach the following ownership levels: Chairman Chairperson of the Board — 2xthe number of shares that are equal in value to two times the Chairperson’s annual cash retainer; otherretainer Other HEI directors — 5xthe number of shares that are equal in value to five times the director’s annual cash retainer. retainer As of January 1, 2018,2021, each director who had reached his or her compliance date had achieved his or her stock ownership target. Until reaching the applicable stock ownership target, directors must retain all shares received under their annual stock retainer. The Compensation Committee has the authority to approve hardship exceptions to these retention requirements. 26
TABLE OF CONTENTS Table of Contents
PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE HEI'S EXECUTIVE COMPENSATION
| | | PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF HEI’S NAMED EXECUTIVE OFFICERS |
PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF HEI'SHEI’S NAMED EXECUTIVE OFFICERS
We are asking for your advisory vote on the compensation of our named executive officers as described in this Proxy Statement. This proposal, which we present to our shareholders on an annual basis and which is commonly known as a "say-on-pay"“say-on-pay” proposal, gives shareholders the opportunity to express their views on the overall compensation of our named executive officers and the policies and practices described in this Proxy Statement. The Compensation Committee and Board believe that HEI'sHEI’s executive compensation program is effective in achieving our goals of promoting long-term value for our shareholders customers and communities and attracting, motivating and retaining the talent necessary to create such value. Accordingly, the Board recommends that you vote FOR the following resolution: Resolved, that the shareholders approve, in ana non-binding advisory vote, the compensation of HEI'sHEI’s named executive officers as disclosed in the Compensation Discussion and Analysis and Executive Compensation Tables sections of the Proxy Statement for the 20192021 Annual Meeting of Shareholders. Please read the Compensation Discussion and Analysis and Executive Compensation Tables portions of this Proxy Statement. These sections describe the Company'sCompany’s executive compensation policies and practices and the compensation of our named executive officers. While the say-on-pay vote is advisory and is, therefore, nonbinding, the Compensation Committee and Board consider the vote results when making future decisions regarding HEI'sHEI’s executive compensation. | | ✓ FOR
The Board recommends that you vote FOR the advisory resolution approving the compensation of HEI’s Named Executive Officers as disclosed in this Proxy Statement. | |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS | | | |
üFOR
Your Board recommends that you vote FOR the advisory resolution approving the compensation of HEI's named executive officers as disclosed in this Proxy Statement.
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS
This section describes our executive compensation program and the compensation decisions made for our 20182020 named executive officers. For 2018,2020, we have fourfive named executive officers,officers: our Chief Executive Officer, our Chief Financial Officer, our General Counsel and our two other executive officers during 2018,2020, the chief executives at each of Hawaiian Electric (our electric utility subsidiary) and ASB (our bank subsidiary) , respectively:: Name
| | Title
| | Entity
|
|---|
| | | Title | | | Entity | | | | Constance H. Lau | | | HEI President & CEO | | | Holding company | | | | Gregory C. Hazelton | | | HEI Executive Vice President and Chief Financial Officer & Treasurer | | | Holding company | | Alan M. Oshima | Kurt K. Murao | | | HEI Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary | | | Holding company | | | | Scott W. H. Seu* | | | Hawaiian Electric President & CEO | | | Electric utility subsidiary | | | | Richard F. Wacker | | | ASB President & CEO | | Bank subsidiary | | | | Bank subsidiary | |
*
| Mr. Seu assumed the role of President and CEO of Hawaiian Electric effective February 15, 2020. For more information please see the applicable Forms 8-K filed with the SEC on December 10, 2019 and February 13, 2020. |
For more information regarding HEI’s executive officers, see the paragraph entitled “Information About Our Executive Officers (HEI)” in Part I of HEI’s annual report on Form 10-K for the fiscal year ending December 31, 2020 (HEI’s 2020 Form 10-K), which is incorporated by reference herein. Our guiding principles shape our program design and pay decisions
In designing HEI'sHEI’s executive compensation program and making pay decisions, the Compensation Committee follows these guiding principles: •pay
Pay should reflect Company performance, particularly over the long-term,
•compensationlong-term;Compensation programs should align executives'executives’ interests with those of our shareholders and other stakeholders,
•programsstakeholders;Programs should be designed to attract, motivate and retain talented executives who can drive the Company's success,Company’s success; and
•theThe cost of programs should be reasonable while maintaining their purpose and benefit.
Straightforward design. The compensation program for our named executive officers comprises four primary elements —elements: base salary, performance-based annual incentives, performance-based long-term incentives earned over three years, and time-based restricted stock units (RSUs) that vest in equal annual installments over four years.
•Emphasis on variable (performance-based)performance-based pay. Through the target compensation mix, we emphasize variableperformance-based pay over fixed pay, with the majority of the target compensation opportunity for eachour named executive officerofficers being linked to the Company'sCompany’s financial, market and operating results.
•Balance between short- and long-term components. The compensation program also balances the importance of achieving long-term strategic priorities and critical short-term goals that support long-term objectives. Table of ContentsTABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
| | | COMPENSATION DISCUSSION AND ANALYSIS |
Our compensation practices demonstrate our commitment to sound governance The tables below summarize our current executive compensation practices — both what we do (to drive performance and manage risk) and what we don'tdon’t do: | | What We Do | | | | | | | | ✓ | | | | | | | | | What We Do | | | | | | | | | | | | ü | | Link pay to performance | | |
|
✓ |
ü |
|
Utilize rigorous performance conditions that encourage long-term value creation |
|
|
|
✓ |
ü |
|
Balance short- and long-term compensation to promote sustained performance over time |
|
|
|
✓ |
ü |
|
Grant majority of long-term incentives in the form of performance-based awards |
|
|
|
✓ |
ü |
|
Use the competitive median as a reference point in setting compensation levels |
|
|
|
✓ |
ü |
|
Review tally sheets when making compensation decisions |
|
|
|
✓ |
ü |
|
Mitigate undue risk in compensation programs |
|
|
|
✓ |
ü |
|
Utilize "double-trigger"“double-trigger” change-in-control agreements |
|
|
|
✓ |
ü |
|
Maintain a clawback policy for performance-based compensation |
|
|
|
✓ |
ü |
|
Require stock ownership and retention by named executive officers; CEO must own five times her base salary and each of the other NEOs must own two times his respective base salary |
|
|
|
✓ |
ü |
|
Prohibit pledging of Company stock and transactions designed to hedge the risk of stock ownership |
|
|
|
✓ |
ü |
|
Utilize an independent compensation consultant to advise the Compensation Committee |
|
| |
What We Don’t Do | | | | | | | | | |
No employment contracts |
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | What We Don't Do | | | | | | | | | | | |  | | No employment contracts | | |
|
|
|
|
No tax gross ups, except under the Executive Death Benefit Plan which was frozen in 2009 |
|
|
|
|
|
|
No compensation programs that are reasonably likely to create material risk to the Company |
|
|
|
|
|
|
No significant perquisites |
|
|
|
|
|
|
No dividends or dividend equivalents on unearned performance shares |
|
| | | | | | | |
|
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|
|
|
2018
2020 say-on-pay results, shareholder outreach and 20192020 program At our 20182020 Annual Meeting of Shareholders, approximately 92%94% of votes cast approved our executive compensation program through the advisory say-on-pay vote. After evaluatingOver the outcomepast year, we reached out to or engaged with shareholders representing more than 50% of the 2018 advisory vote, the Compensation Committee decided not to make any material changes toour institutional shareholder base. These meetings covered our financial and operational performance, our progress toward renewable energy goals, our ESG reporting and Board oversight of ESG matters, executive compensation and Board and management succession planning, and involved our independent directors as appropriate. While we have consistently received strong shareholder support for our executive compensation program. In addition, in 2019, we invited shareholders who collectively held more than 25% of HEI's outstanding shares and key proxy advisory organizations to discuss our executive compensation program. From such outreach, we learned that there was general approval of our program.The executive compensation program, in place in 2015 and 2016 reflected the fact that HEI's proposed merger with NextEra Energy was pending at that time. In early 2015 and 2016, respectively, the Compensation Committee had provided for the 2015-17 and 2016-18 LTIP to be settled in cash rather than in equity as in prior years, and for relative total shareholder return (TSR) to be replaced by earnings per share (EPS) growth as one of the LTIP metrics. These changes were implemented because the Compensation Committee had determined that while the merger was pending the Company's stock price might be affected at least in part by merger considerations that were unrelated to the Company's true operating performance and that, as a result, the compensatory goals of the LTIP would be better served without taking into account such merger impact. Since the merger agreement between HEI and NextEra Energy was terminated in July 2016, and consistent with the feedback we received from stakeholders during our outreach at that time, the Compensation Committee determined that the 2017-19compensation program should be revised starting in 2020 to further strengthen the alignment between HEI and 2018-20 LTIPs would return to being settled in equityUtility executive compensation and include relative TSR as oneachievement of Hawaii’s ambitious renewable energy goals. As a result, for
the 2020 long-term incentive plan period from 2020-22, 20% of HEI and Hawaiian Electric executives’ performance-based pay opportunity is based on achievement of the performance metrics.29
following: | | Hawai‘i renewable portfolio standards (RPS) | | | 32% RPS | | | 40% RPS | | | 50% RPS | |
The State of Hawai‘i RPS law requires Hawaiian Electric to achieve 40% RPS by 2030. By incentivizing executives to achieve 40% - 50% RPS by 2022, this compensation metric incentivizes executives to continue their hard work to achieve higher levels of RPS ahead of state requirements.
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COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS | | | |
How we make compensation decisions
Our roles in determining compensation are well-defined
Our roles in determining compensation are well-defined
|
Role of the Compensation Committee
The Compensation Committee oversees the design and implementation of our executive compensation program. On an annual basis, the Compensation Committee engages in a rigorous process to arrive at compensation decisions regarding the named executive officers. In the course of this process, the Compensation Committee: •
Engages in extensive deliberations in meetings held over several months
•Consults with its independent compensation consultant during and outside of meetings
•Focuses on the Company'sCompany’s long-term strategy and nearer-term goals to achieveeffect such strategy in setting performance metrics and goals
•Reviews tally sheets for each named executive officer to understand how the elements of compensation relate to each other and to the compensation package as a whole (the tally sheets include fixed and variable performance-based compensation, minimal perquisites and change in pension value for current and past periods)
•Examines data and analysis prepared by its independent compensation consultant concerning peer group selection, comparative compensation data and evolving best practices
•Reviews Company performance and discusses assessments of the individual performance of senior members of management
•Analyzes the reasonableness of incentive payouts in light of the long-term benefits to shareholders
•Considers trends in payoutscompensation to determine whether incentive programs are working effectively
•Reviews risk assessments to determine whether compensation programs and practices carry undue risk Early each year, the Compensation Committee determines payoutscompensation earned under incentive plans with respect to performance periods ending in the prior year, establishes performance metrics and goals for incentive plans beginning thatin the current year and recommends to the Board and subsidiary boards the level of compensation and mix of pay elements for each named executive officer.
Role of the independent directors as a whole The independent directors evaluate the CEO'sCEO’s performance, consider Compensation Committee recommendations concerning her pay and determine her compensation. The Board and subsidiary boards also review the performance of, and Compensation Committee recommendations concerning, the other named executive officers and approve their compensation.
Role of executive officers The
Our CEO, who is also an HEI director,a member of the Board, assesses and reports on the performance of the other named executive officers and makes recommendations to the Compensation Committee with respect to their levels of compensation and mix of pay elements. She also participates in Board deliberations regarding the Compensation Committee'sCommittee’s recommendations on the other named executive officers. She does not participate in the deliberations of the Compensation Committee to recommend, or of the Board to determine, her own compensation. Management supports the Compensation Committee in executing its responsibilities by providing data and other materials for Compensation Committee meetings (including tally sheets and recommendations regarding performance metrics, goals and pay mix); by attending portions of Compensation Committee meetings as appropriate to provide perspective and expertise relevant to agenda items; and by supplying such other data and information as may be requested by the Compensation Committee and/or its independent compensation consultant. 30
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| | | COMPENSATION DISCUSSION AND ANALYSIS |
Compensation consultant & consultant independence The Compensation Committee'sCommittee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (FW Cook), is retained by, and reports directly to, the Compensation Committee. FW Cook provides the Compensation Committee with independent expertise on market practices and developments in executive compensation, compensation program design, peer group composition and competitive pay levels, and provides related research, data and analyses. FW Cook also advises the Compensation Committee regarding analyses and proposals presented by management related to executive compensation. A representative of FW Cook generally attends Compensation Committee meetings, participates in Compensation Committee executive sessions and communicates directly with the Compensation Committee. In early 2019,2021, as in prior years, the Compensation Committee evaluated FW Cook'sCook’s independence, taking into account all factors it believed to beconsidered relevant, including the factors specified in the NYSE listing standards and the absence of other relationships between FW Cook and the Company, its directors or executive officers. Based on such factors and FW Cook'sCook’s independence policy, which was shared with the Compensation Committee, the Compensation Committee concluded that FW Cook is independent and that the work of FW Cook has not raised any conflict of interest. We use comparative market data as a reference point for compensation
Compensation benchmarking
Compensation benchmarking
|
The Compensation Committee considers comparative market compensationdata from peer group companies as a reference point in determining pay levels and mix of pay components. While the Compensation Committee seeks to position named executive officerofficers’ pay components and target compensation opportunity (composed of base salary, target performance-based annual incentive, target performance-based long-term incentive and time-vested RSUs) at approximately the comparative market median, the. The Compensation Committee may decide that an executive's payexecutive’s compensation opportunity should be higher or lower in relation to peers based on considerations including internal equity, or the executive'sexecutive’s level of responsibility, experience, expertise and past performance, as well as retention and succession considerations.objectives. Information from public company proxy statements for peer group companies was used to provide comparative market data in setting 20182020 compensation for all named executive officers. Data from the Willis Towers Watson Energy Services Survey was also used in establishing 20182020 compensation. The data was regressed based on HEI'sHEI’s and Hawaiian Electric'sElectric’s revenues for appropriate size comparisons.
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS | | | |
Peer Groups
Compensation peers
The Compensation Committee annually reviews the peer groups used in benchmarking for HEI and subsidiary executive compensation, with analysis and recommendations provided by FW Cook. For 20182020 compensation, the Compensation Committee determined, with input from FW Cook, that the companies in our 20172019 compensation peer groupgroups remained appropriate and that no changes were necessary for 2018.2020. The selection criteria and resulting 20182020 peer groups are set forth below. 31
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COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | | | | | | | | | | | | HEI 20182020 Peer Group (applies to
Ms. Lau, Mr. Hazelton and Mr. Hazelton)Murao) | | | | Utility Subsidiary 20182020 Peer
Group (applies to Mr. Oshima) | | | | Bank Subsidiary 2018 Peer Group
(applies to Mr. Wacker) | | | | | Seu) | | | | Bank Subsidiary 2020 Peer
Group (applies to Mr. Wacker) | | | | Selection Criteria | | | Selection Criteria• Publicly traded, US-based electric
and multi-utility companies
• Revenue balanced in a range of approximately 0.4x to 2.5x HEI’s revenue
• Market cap and location as secondary considerations | | | | ••Electric and multi-utility companies from HEI’s peer group ••Revenue balanced in a range of approximately 0.5x to 2x HEI's Hawaiian Electric’s revenue ••Market cap and location as secondary considerations | | | | ••Subset of electric and multi-utility companies from HEI's peer group
•
Revenue balanced in a range of approximately 0.5x to 2x Hawaiian Electric's revenue
•
Market cap and location as secondary considerations
| | | | •
Regional banks and thrifts
••Revenue balanced in a range of approximately 0.75x to 2x ASB's ASB’s ••Total assets balanced in a range of approximately 0.5x to 2x ASB's ASB’s ••Secondary consideration of 2 of
3 of the following:
••proportion of loan portfolio composed of over 30% residentialsingle family and less than 85% commercial ••located on the west coast or Hawaii •• ratio of noninterest income to operating revenue from 10%-40% | | | | Peer Group for 2020 Compensation | | | | | | ALLETTE, Inc.
Alliant Energy Corp.
Avangrid
Avista Corp.
Black Hills Corp.
Evergy
IDACORP, Inc.
MDU Resources Group Inc.
NiSource Inc.
Northwestern Corp
OGE Energy Corp.
Pinnacle West Capital Corp.
PNM Resources Inc.
Portland General Electric | | | | | | | Peer Group for 2018 Compensation | | | | ALLETTE, Inc.
Alliant Energy Corp.
Ameren Corp.
Avista Corp.
Black Hills Corp.
CenterPoint Energy Inc.
CMS Energy Corp.
Eversource Energy
Great Plains Energy1
IDACORP, Inc.
MDU Resources Group Inc.
NiSource Inc.
Northwestern CorpCorp.
OGE Energy Corp.
Pinnacle West Capital Corp.
PNM Resources Inc.
Portland General Electric
SCANA Corp.
Vectren Corp.
WEC Energy Group Inc.
Westar Energy1 | | | | ALLETTE, Inc.
Alliant Energy Corp.
Avista Corp.
Black Hills Corp.
Great Plains Energy Inc.1
IDACORP Inc.
MDU Resources Group Inc.
NiSource Inc.
Northwestern Corp
OGE Energy Corp.
Pinnacle West Capital Corp.
PNM Resources Inc.
Portland General Electric
SCANA Corp.
Vectren Corp.
Westar Energy Group Inc.1 | | | | Ameris Bancorp
Beneficial Bankcorp
Berkshire Hills Bancorp
Central Pacific Financial
Community Bank System
CVB Financial
First Busey
First Financial Bank
HomeStreet
Independent Bank
Opus Bank
Park National
Republic Bancorp
Renasant Corp
Sandy Spring Bancorp
Seacoast Banking
South State
Tomkins Financial
TriCo Bancshares
United Financial
Westamerica Bancorp | | | | | Ameris Bancorp
Berkshire Hills Bancorp
Central Pacific Financial
Community Bank System
CVB Financial
First Busey
First Financial Bank
Heritage Financial Independent Bank
Opus Bank
Park National
Renasant Corp
Republic Bancorp
Sandy Spring Bancorp
Seacoast Banking
South State
Tompkins Financial
TriCo Bancshares
United Financial
Westamerica Bancorp | |
TABLE OF CONTENTS | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
1. After the peer data was established for 2018 compensation, Great Plains Energy and Westar Energy announced they were merging.
In addition to the peer companies used for benchmarking executive compensation, certain of the performance metrics used in the long-term incentive plans (described below under "Long-term incentives"“What we pay and why: Compensation elements and 2020 pay decisions — Long-term performance-based incentives”) are based on performance relative to performance peers. HEI'sHEI’s Relative TSR performance is based on HEI'sHEI’s performance compared to the utilities in the Edison Electric Institute (EEI) Index. 2018
2020 Edison Electric Institute (EEI) Index Peers for HEI Long-TermLong-Term Incentive Plan Relative TSR Metric
The EEI is an association of U.S. shareholder-owned electric companies that are representative of comparable investment alternatives to HEI. The EEI'sEEI’s members serve virtually all of the ultimate customers in the shareholder-owned segment of the industry. The following companies comprise the 20182020 EEI Index used for HEI'sHEI’s Relative TSR metric: | | | | | | | | | | | | | | | | | | | | | | | | | | ALLETTE, Inc.
Alliant Energy Corp.
Ameren Corp.
American Electric Power Co.
Avangrid
Avista Corp.
Black Hills Corp.
Centerpoint Energy Inc.
CMS Energy Corp.
Consolidated Edison Inc.
| | | Dominion Energy Inc. | | | |
DTE Energy Co.
Duke Energy Corp.
Edison International
El Paso Electric Co.1
Entergy Corp.
Evergy, Inc.
Eversource Energy
Exelon Corp.
FirstEnergy Corp.
Great Plains Energy1
| | | IDACORP Inc. | | | |
MDU Resources Group Inc.
MGE Energy Inc.
NextEra Energy Inc.
NiSource Inc.
Northwestern Corp.
OGE Energy Corp.
Otter Tail Corp.
PG&E Corp.
Pinnacle West Capital Corp.
| | | PNM Resources Inc.
Portland General Electric | | | |
PPL Corp.
Public Service Enterprise Group Inc.
SCANA Corp.
Sempra Energy
Southern Co.
Unitil Corp.
Vectren Corp.
WEC Energy Group Inc.
Westar Energy1
Xcel Energy Inc. | | |
1
| After peer data was established for 2020 compensation, El Paso Electric Co. was acquired and is no longer publicly traded. |
TABLE OF CONTENTS | | COMPENSATION DISCUSSION AND ANALYSIS | | | | | | |
1. After peer data was established for 2018 compensation, Great Plains Energy and Westar Energy announced they were merging. The combined entity remains in the EEI Index as Evergy, Inc.
32
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COMPENSATION DISCUSSION AND ANALYSIS
What we pay and why: Compensation elements and 20182020 pay decisions
Each element of compensation supports important objectives
Each element of compensation supports important objectives
|
The total compensation program for named executive officers is made up of the five standard components summarized below. Each component fulfills important objectives that reflect our focus on pay for performance, competitive programs to attract and retain talented executives and aligning executive decisions with the interests of the Company and our shareholders. These elements are described in further detail in the pages that follow. Compensation Element
| | Summary
| | Objectives
|
|---|
| | | Summary | | | Objectives | | | | Base Salary | | | Fixed level of cash compensation set in reference to peer group median (may vary based on performance, experience, responsibilities, expertise and other factors). | | | Attract and retain talented executives by providing competitive fixed cash compensation. | | | | Annual Performance-Based Incentives | | | Variable cash award based on achievement of pre-set performance goals for the year. Award opportunity is determined as a percentage of base salary. Performance below threshold levels yields no incentive payment. | | | Drive achievement of key business results linked to short-term and long-term strategy and reward executives for their contributions to such results. Balance compensation cost and return by paying awards based on performance. | | | | Long-Term Performance- Based Incentives | | | Variable equity award*award based on meeting pre-set performance objectives over a 3-year period. Award opportunity is determined as a percentage of base salary. Performance below threshold levels yields no incentive payment. | | | Motivate executives and align their interests with those of shareholders by promoting long-term value growth and by paying awards in the form of equity. Balance compensation cost and return by paying awards based on performance. | | | | Annual RSU Grant | | | Annual equity grants in the form of RSUs that vest in equal installments over 4 years. Amount of grant is determined as a percentage of base salary. | | | Promote alignment of executive and shareholder interests by ensuring executives have significant ownership of HEI stock. Retain talented leaders through multi-year vesting. | | Benefits | Benefits | | | Includes defined benefit pension plans and retirement savingsdefined contribution plan (for HEI/utilityUtility employees) and defined contribution plan (for bankBank employees); deferred compensation plans; double-trigger change-in-control agreements; minimal perquisites; and an executive death benefit plan (frozen since 2009). | | | Enhance total compensation with meaningful and competitive benefits that promote retention and peace of mind and contribute to financial security. Double-trigger change-in-control agreements encourage focused attention of executives during major corporate transitions. | | | | | |
*While the proposed merger with NextEra Energy was pending, the Compensation Committee decidedChanges to provide for the LTIP (2015-17 and 2016-18 performance periods) to be settledcompensation elements in cash in lieu of HEI Common Stock. The Committee had determined that during the pendency of the merger process HEI's stock price might be affected at least in part by merger considerations that were unrelated to HEI's true operating performance and that, as a result, the compensatory goals of the LTIP would be better served by a cash settlement. Since the merger did not occur and the merger agreement between NextEra Energy and HEI was terminated in July 2016, the Committee decided that it would return to equity settlement for the 2017-19 LTIP.
2020
Changes to elements in 2018
|
On an annual basis, the Compensation Committee reviews and recommends each named executive officer'sofficer’s target compensation opportunity, which is composed of: base salary, target annual incentive opportunitycash and target
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COMPENSATION DISCUSSION AND ANALYSIS
long-term equity value.opportunities. Target bonusannual cash and long-term equity valuesopportunities are established as a percentage of the named executive officer’s base salary. The Compensation Committee made the changes to base salariescompensation for 2018, as2020 shown in the charttable below. | | Constance H. Lau | | | 926,300 | | | 950,217 | | | 100 | | | same | | | 175 | | | same | | | 75 | | | same | | | | Gregory C. Hazelton | | | 527,917 | | | 543,750 | | | 60 | | | same | | | 80 | | | same | | | 50 | | | same | | | | Kurt K. Murao | | | 306,883 | | | 352,000 | | | 40 | | | 55 | | | 45 | | | 60 | | | 30 | | | 45 | | | | Scott W. H. Seu | | | 274,583 | | | 419,750 | | | 45 | | | 75 | | | 45 | | | 80 | | | 35 | | | 753 | | | | Richard F. Wacker | | | 700,200 | | | 717,700 | | | 80 | | | same | | | 80 | | | same | | | 20 | | | same | |
1
| Base salary increases for 2019 for Ms. Lau and Messrs. Hazelton, Murao and Seu became effective March 1, 2019. Base salary increases for 2020 for Ms. Lau and Mr. Hazelton became effective March 1, 2020. Base salaries that became effective March 1, 2019 and 2020 are prorated amounts to include two months of 2018 and 2019 base salary, respectively, and ten months of 2019 and 2020 base salary, respectively. Mr. Seu’s 2020 base salary increase became effective upon his promotion to President and Chief Executive Officer of the Utility on February 15, 2020. Accordingly his 2020 base salary is prorated to include one month and a half of 2019 and ten and one-half months of 2020. |
2
| The threshold and maximum opportunities are 0.5 times target and 2 times target, respectively. |
3
| Includes special grant of 25% of base salary in 2020 in connection with Mr. Seu’s promotion to President and CEO of Hawaiian Electric. |
TABLE OF CONTENTS | | | COMPENSATION DISCUSSION AND ANALYSIS |
Base salary
| | | | | | | | | | | | | | | | | | | Base Salary
($) | | Performance-based
Annual Incentive
(Target Opportunity1
as % of
Base Salary) | | Performance-based
Long-term Incentive
(Target Opportunity1
as % of
Base Salary) | | RSUs
(Value as % of
Base Salary)
| | | | | | | | | | | | | | | | | | | Name
| | 2017
| | 2018
| | 2017
| | 2018
| | 2017-19
| | 2018-20
| | 2017
| | 2018
|
|---|
| | | | | | | | | | | | | | | | | | Constance H. Lau | | 893,533 | | 921,800 | | 100 | | same | | 160 | | same | | 75 | | same | Gregory C. Hazelton | | 487,500 | | 512,500 | | 60 | | same | | 80 | | same | | 50 | | same | Alan M. Oshima | | 655,583 | | 686,750 | | 75 | | same | | 95 | | same | | 65 | | same | Richard F. Wacker | | 660,000 | | 679,800 | | 80 | | same | | 80 | | same | | 20 | | same | | | | | | | | | | | | | | | | | | |
1.The threshold and maximum opportunities are 0.5 times target and 2 times target, respectively.
Base salaries for our named executive officers are reviewed and determined annually. In establishing base salaries for the year, the Compensation Committee considers competitive market data, internal equity and each executive'sexecutive’s level of responsibility, experience, expertise and performance, andas well as retention and succession considerations. The Compensation Committee considers the competitive median as a reference point in setting base salaries, but may determine that the foregoing factors compeljustify a higher or lower salary. For 2018,2020, in order to recognize their performance and maintain the market competitiveness of their pay, eachMs. Lau received a base salary increase of our named executive officers3.1%, Mr. Hazelton received a base salary increase of 3.0% . The resulting 2018 base salaries are shown in the table above. For all named executive officers other than and Mr. Wacker received a base salary increase of 2.5%. Mr. Murao received a base salary increase of 13% in recognition of Mr. Murao’s promotion to Executive Vice President, General Counsel and Chief Administrative Officer of the Company. Additionally, Mr. Seu received a base salary increase of 58% in recognition of Mr. Seu’s promotion to President and Chief Executive Officer of Hawaiian Electric. The foregoing base salary increases for 2017 became effectivewere calculated as of March 1 2017of each year for Ms. Lau and base salary increases for 2018 became effectiveMessrs Hazelton, Murao and Seu, and as of MarchJanuary 1 2018. Accordingly, unless otherwise indicated, amounts referenced as 2017 and 2018 base salary are prorated amounts to include two months of 2016 and 2017 base salary, respectively, and ten months of 2017 and 2018 base salary, respectively.
for Mr. Wacker. Annual incentive opportunities
HEI named executive officers and other executives are eligible to earn an annual cash incentive award under HEI'sHEI’s Executive Incentive Compensation Plan (EICP) based on the achievement of performance goals for the year. Each year, the Compensation Committee determines the target annual incentive opportunity, for each executive, performance metrics and the applicable goals. 2018goals for each executive.
2020 target annual incentive opportunity
The target annual incentive opportunity is determined as a percentage of base salary, with the threshold and maximum opportunities equal to 0.5 times and 2 times the target opportunity, respectively. In establishing the target percentage for each executive, the Compensation Committee takes into account the mix of pay elements, competitive market data, internal equity, prior performance and other factors described above under "Base“Base salary. "” The 20182020 target annual incentive opportunities for the named executive officers are shown in the table above. For 2018,2020, the Compensation Committee recommended, and the Board approved, keeping the 20182020 target opportunity (as a percentage of base salary) the same as the 20172019 target opportunity for each of our named executive officers.34
TableMs. Lau and Messrs. Hazelton and Wacker. In recognition of Contents
COMPENSATION DISCUSSION AND ANALYSIS
2018Mr. Murao’s promotion to Executive Vice President, General Counsel and Chief Administrative Officer of the Company, the Board approved increasing Mr. Murao’s target opportunity from 40% to 55% of his base salary. In recognition of Mr. Seu’s promotion to President and Chief Executive Officer of Hawaiian Electric, the Board of the Utility approved increasing Mr. Seu’s target opportunity from 45% to 75% of his base salary.
2020 performance metrics, goals, results & payouts The performance metrics for annual incentives are chosen because they connect directly toalign with the Company'sCompany’s strategic priorities and correlate with creating shareholder value. The 20182020 performance metrics for Ms. Lau and Mr.Messrs. Hazelton and Murao related to the holding company and its subsidiaries, while the metrics for Mr. OshimaSeu related to the utilityUtility and the metrics for Mr. Wacker related to the bank.Bank. The rationale for each metric is shown in the chart below. In addition to selecting performance metrics, the Compensation Committee determines the level of achievementperformance required to attain the threshold, target and maximum goal for each metric. The level of difficulty of the goals reflects the Compensation Committee'sCommittee’s belief that incentive pay should be motivational — that is, the goals should be challenging but achievable — and that such pay should be balanced with reinvestment in the Company and return to shareholders. Consistent with this approach, the Compensation Committee believes the threshold should represent solid performance with positive financial/operating results, target should denote challenging but achievable goals that include a stretch factor and maximum should signify truly exceptional performance. The target level for financial goals, such as net income and ROA,return on assets (ROA), is generally set at the level of the Board-approved budget, which represents the level of accomplishmentperformance the Company seeks to achieve for the year. In setting the threshold and maximum levels, the Compensation Committee considers expected industry-specific metrics and whether the risks to accomplishing the budget weigh more heavily toward the downside and how challenging it would be to achieve incremental improvements over the target level. The chart below identifies the 20182020 annual incentive metrics, the objective each measure serves, the level of achievement required to attain the threshold, target and maximum levels for each metric, the results for 20182020 and the percentage of target achieved. Differences in the | | | | | | | | | | | | |
| |
| | Goals | |
| | % of
Target
Achieved
|
|---|
2018 Annual Incentive Performance
Metrics & Why We Use Them
| |
| |
|
|---|
| | Weighting
| | Threshold
| | Target
| | Maximum
| | Result
|
|---|
| | | | | | | | | | | | | | | Lau and Hazelton | | | | | | | | | | | | |
HEI Consolidated Adjusted Net Income1 focuses on fundamental earnings, which correlates to shareholder value |
|
60% |
|
$194.7M |
|
$216.3M |
|
$231.4M |
|
$210.4M |
|
|
Utility Operations2 supports effective utility operations for all stakeholders |
|
25% |
|
See note 2 below |
|
See note 2 below |
|
See note 2 below |
|
See note 2 below |
|
98% |
ASB Return on Assets (ROA)8 measures how efficiently the bank deploys its assets by comparing return to total assets |
|
15% |
|
1.07% |
|
1.15% |
|
1.23% |
|
1.20% |
|
|
Oshima |
|
|
|
|
|
|
|
|
|
|
|
|
Utility Consolidated Adjusted Net Income1 focuses on fundamental earnings, which correlates to shareholder value |
|
30% |
|
$151.0M |
|
$158.9M |
|
$174.8M |
|
$151.3M |
|
|
Utility Consolidated Operation and Maintenance Expense3 measures operational efficiency |
|
15% |
|
$460M |
|
$447M |
|
N/A |
|
$461M |
|
|
Utility Consolidated Customer Satisfaction4 focuses on improving the customer experience through all points of contact with the utility |
|
15% |
|
Consolidated score of 69 in 2 of 4 quarters |
|
Consolidated score of 69 in 3 of 4 quarters |
|
Consolidated score of 69 in 4 of 4 quarters |
|
Consolidated score of 69 in 4 of 4 quarters |
|
|
Utility Consolidated Reliability/System Average Interruption Duration Index (SAIDI)5 promotes system reliability for customers |
|
5% |
|
102 minutes |
|
99 minutes |
|
97 minutes |
|
149 minutes |
|
76% |
Utility Consolidated Safety/Total Cases Incident Rate (TCIR)6 rewards improvements in workplace safety, promoting employee well-being and reducing expense |
|
2% |
|
1.37 TCIR |
|
1.03 TCIR |
|
0.92 TCIR |
|
Below Threshold |
|
|
Utility Consolidated Safety/Severity Rate7 rewards improvements in workplace safety, promoting employee well-being and reducing expense |
|
3% |
|
18.53 |
|
16.00 |
|
13.46 |
|
Below Threshold |
|
|
Transformation Metrics promote achievement of utility transformation initiatives |
|
30% |
|
Threshold |
|
Target |
|
Maximum |
|
Target |
|
|
Wacker |
|
|
|
|
|
|
|
|
|
|
|
|
ASB ROA8 |
|
40% |
|
1.07% |
|
1.15% |
|
1.23% |
|
1.20% |
|
|
ASB Adjusted Net Income1 focuses on fundamental earnings, which correlates to shareholder value |
|
60% |
|
$73.0M |
|
$79.0M |
|
$85.0M |
|
$82.5M |
|
160% | | | | | | | | | | | | | | |
35
Table of ContentsTABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
1HEI Consolidated, Utility Consolidated COMPENSATION DISCUSSION AND ANALYSIS | | | |
metrics and ASB Adjusted Net Income represent HEI consolidated, Utility consolidated and ASB GAAP net incomeweightings applied for 2018, adjusted for the items described further below, respectively. These Adjusted Net Income metrics are non-GAAP measures. For a reconciliationeach of the GAAP and non-GAAP results, see "Reconciliationnamed executive officers leads to differing totals achieved as a percentage of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments" attached as Exhibit B.
2Utility Operations is a composite of six utility operational goals weighted in the same proportion for which they are weighted for utility executives. Utility Operations includes the six operational goals that applied to Mr. Oshima in 2018 (Utility Consolidated Operation and Maintenance Expense, Utility Consolidated Customer Satisfaction, Utility Consolidated SAIDI, Utility Consolidated Safety/TCIR, Utility Consolidated Safety/Severity Rate and Utility Transformation Metrics). Utility Transformation Metrics focuses on achievement of the utility's transformation goals. Mr. Oshima approves the Transformation milestones under this metric and determines the aggregate performance at the end of the performance period. For 2018, the Utility Transformation milestones focused on the areas of PSIP execution, electrification of transportation, new products and services, customer/community engagement, ERP/EAM Project, grid modernization implementation, integrated grid planning proposal, one company initiative, and regulatory/policy. The Utility Transformation goal was achieved at target for 2018, meaning that all milestones were achieved. For HEI executives the weightings of the components of Utility Operations were as follows: Utility Consolidated Operation and Maintenance Expense — 5.36%, Utility Consolidated Customer Satisfaction — 5.36%,Utility Consolidated SAIDI — 1.79%, Utility Consolidated Safety/TCIR — 0.71%, Utility Consolidated Safety/Severity Rate — 1.07% and Utility Transformation Metrics — 10.71%.
3Utility Consolidated Operation and Maintenance Expense represents non-fuel expenses of the consolidated utilities, including retirement defined benefits expense — other than service costs, and excludes expenses covered by surcharges or otherwise neutral to net income and adjustments relating to LNG project costs.
4Utility Consolidated Customer Satisfaction is based on quarterly results of customer surveys conducted by an outside vendor.
5Utility Consolidated Reliability/SAIDI is measured by the average outage duration for each customer served, exclusive of catastrophic events and outages caused by independent power producers, over whose plant maintenance and reliability the utility has limited real-time control.
6opportunity.| | Lau, Hazelton and Murao
| | | | | | | | | | | | | | | | | | | | | | HEI Consolidated Adjusted Net Income1 focuses on fundamental earnings, which correlates to shareholder value | | | 60% | | | $196.1M | | | $217.9M | | | $233.2M | | | $225.2M | | | | | | | Utility Operations2 supports effective utility operations for all stakeholders | | | 25% | | | See note 2
below | | | See note 2
below | | | See note 2
below | | | See note 2
below | | | 127% | | | | ASB Return on Assets (ROA)3 measures how efficiently the Bank deploys its assets by comparing return to total assets | | | 15% | | | 1.06% | | | 1.16% | | | 1.26% | | | 1.09% | | | | | | | Seu
| | | | | | | | | | | | | | | | | | | | | | Utility Consolidated Net Income focuses on fundamental earnings, which correlates to shareholder value | | | 30% | | | $156.6M | | | $164.8M | | | $173.0M | | | $169.3M | | | | | | | Utility Consolidated Operation and Maintenance Expense4 measures operational efficiency | | | 15% | | | $430.4M | | | $422.0M | | | $413.6M | | | $413.9M | | | | | | | Utility Consolidated Customer Satisfaction5 focuses on improving the customer experience through all points of contact with the Utility | | | 15% | | | Consolidated
score of 73 in 2 of
4 quarters | | | Consolidated
score of 73 in 3 of
4 quarters | | | Consolidated
score of 73 in 4 of
4 quarters | | | Consolidated
score of 73 in 4 of
4 quarters | | | | | | | Utility Consolidated Reliability/System Average Interruption Duration Index (SAIDI)6 promotes system reliability for customers | | | 5% | | | 129.20 minutes | | | 112.54 minutes | | | 95.88 minutes | | | 97.89 minutes | | | | | | | Utility Consolidated Safety/Severity Rate and Total Cases Incident Rate (TCIR)7 rewards improvements in workplace safety, promoting employee well-being and reducing expense | | | 5% | | | 18.53 | | | 16.00 | | | 13.46 | | | 26.55 | | | 125% | | | | | | | | | | 1.37 TCIR | | | 1.37 TCIR | | | 1.37 TCIR | | | 1.34 TCIR | | | | | | | Utility Resilience, Reliability and Climate Change8 promotes achievement of Utility transformation initiatives | | | 10% | | | Threshold | | | Target | | | Maximum | | | Below
Threshold | | | | | | | Utility Grid Modernization9 promotes Hawai‘i meeting its energy policy goals by creating a modernized grid that assures a continued safe, reliable and resilient utility network | | | 10% | | | Threshold | | | Target | | | Maximum | | | Threshold | | | | | | | Utility Leadership and Workforce Development10 promotes development of an effective workforce that is aligned with Company objectives and has clear pathways to career development | | | 10% | | | Threshold | | | Target | | | Maximum | | | Threshold | | | | | | | Wacker
| | | | | | | | | | | | | | | | | | | | | | ASB ROA3 | | | 40% | | | 1.06% | | | 1.16% | | | 1.26% | | | 1.09% | | | 94% | | | | ASB Adjusted Net Income1 focuses on fundamental earnings, which correlates to shareholder value | | | 60% | | | $77M | | | $84M | | | $91M | | | $84.9M | |
1
| HEI Consolidated Adjusted Net Income and ASB Adjusted Net Income represent HEI consolidated and ASB GAAP net income for 2020, adjusted for the items described further below, respectively. These Adjusted Net Income metrics are non-GAAP measures. For a reconciliation of the GAAP and non-GAAP results, see “Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments” attached as Exhibit A. |
2
| Utility Operations is a composite of seven utility operational goals weighted in the same proportion for which they are weighted for Utility executives. Utility Operations includes the seven operational goals that applied to Mr. Seu in 2020 (Utility Consolidated Operation and Maintenance Expense, Utility Consolidated Customer Satisfaction, Utility Consolidated Reliability/SAIDI, Utility Consolidated Safety: Severity Rate and TCIR, Utility Resilience, Reliability and Climate Change, Utility Grid Modernization and Utility Leadership and Workforce Development). For Ms. Lau and Messrs. Hazelton and Murao, the weightings of the components of Utility Operations were as follows: Utility Consolidated Operation and Maintenance Expense — 5.36%, Utility Consolidated Customer Satisfaction — 5.36%,Utility Consolidated Reliability/SAIDI — 1.79%, Utility Consolidated Safety: Severity Rate and TCIR — 1.78%, Utility Resilience, Reliability and Climate Change — 3.57%, Utility Grid Modernization — 3.57% and Utility Leadership and Workforce Development — 3.57%. |
3
| ASB ROA is ASB’s Adjusted Net Income divided by its average total assets for the period. Average total assets is calculated by averaging the total assets for each day in the period. |
TABLE OF CONTENTS | | | COMPENSATION DISCUSSION AND ANALYSIS |
4
| Utility Consolidated Operation and Maintenance Expense represents non-fuel expenses of the consolidated utilities and excludes expenses covered by surcharges or otherwise neutral to net income. |
5
| Utility Consolidated Customer Satisfaction is based on quarterly results of customer surveys conducted by an outside vendor. |
6
| Utility Consolidated Reliability/SAIDI is measured by the average outage duration for each customer served, exclusive of catastrophic events and outages caused by independent power producers, over whose plant maintenance and reliability the Utility has limited real-time control. |
7
| Utility Consolidated Safety/Severity Rate is a measure of the significance of the safety incidents a company experienced based on the number of lost workdays incurred. Lost workdays occur when an occupational injury or illness prevents an employee from working a full, assigned work shift. Severity rate is calculated by taking the number of days away from work due to a workplace injury (maximum of 180 days) multiplied by 200,000 and divided by the number of hours worked by all employees. |
Consolidated Safety/TCIR is a standard measure of employee safety. TCIR equals the number of Occupational Safety and Health Administration recordable cases as of 12/31/18 ×20 x 200,000 productive hours divided by productive hours for the year. Lower TCIR scores reflect better safety performance. 8
| Utility Resilience, Reliability and Climate Change is based on reaching defined milestones for specific projects developed to improve system reliability and resilience and/or reduce reliance on fossil fuels. |
9
| Utility Grid Modernization is based on reaching defined milestones in phases 1 and 2 of the Utility’s grid modernization initiative. |
10
| Utility Leadership and Workforce Development is based on the completion of specified projects that advance the development of an effective workforce, including development of workforce plans in targeted operational areas and succession plans, and clear pathways to career advancement. |
35
7Utility Consolidated Safety/Severity Rate is a measure of the significance of the safety incidents a company experienced based on the number of lost work days incurred. Lost work days occur when an occupational injury or illness prevents an employee from working a full, assigned work shift. Severity rate is calculated by taking the number days away from work due to a work place injury (maximum of 180 days) multiplied by 200,000 and divided by number of hours worked by all employees.
8ASB ROA is ASB's adjusted net income divided by its average total assets for the period. Average total assets is calculated by averaging the total assets for each day in the period.36
Table of ContentsTABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS | | | |
Non-GAAP Net Income Metrics — 20182020 Annual Incentive HEI Consolidated's, Utility Consolidated's and ASB's adjusted net income metricsASB. HEI Consolidated Adjusted Net Income and ASB Adjusted Net Income performance for 2018purposes of 2020 annual incentive compensation were calculated on a non-GAAP basis, becauseconsistent with prior years. Pursuant to the EICP, the Compensation Committee determined thatmay exclude items from the impacts associated with recent tax reform legislation, certain unanticipated extraordinary consulting fees and certain other expenses relatedcalculation of net income to the terminationextent they arose from extraordinary or nonrecurring events or from changes to applicable accounting rules or practices. In 2020, the COVID-19 pandemic presented extraordinary and nonrecurring challenges that impacted the Company’s operations and financial performance in a variety of ways, some of which the proposed merger with NextEra Energy, including Hawaiian Electric's liquefied natural gas (LNG) project costs and adjustments to test year revenue requirements for customer benefit adjustments in the Hawaiian Electric and Maui Electric rate case decisions, should not be considered in determining performance under those metrics. The Compensation Committee deemed thisappropriate to take into consideration in determining EICP performance. Specifically, the Compensation Committee determined it to be appropriate since such amounts wereto exclude the items of expense/(gain) set forth in the table below (and explained further in the accompanying footnotes), including an extraordinary provision for extraordinary events unrelatedcredit losses and certain COVID-19 related expenses, as well as a portion of the gain from a nonrecurring sale of securities. As it relates to HEI, Hawaiian Electric or ASB managements' actions regarding ongoing business operations and taking such factors into account thus would be inconsistent with the original intent andprovision for credit losses, the Committee considered the extraordinary nature of the award.The exclusionexpected credit deterioration and the severe accounting effect of such expected deterioration that was beyond the reasonable control of management to manage or offset. As it relates to COVID-19 related expenses, the Committee considered the extraordinary and unforeseeable nature of the amounts described above resulted in adjustments of $8.6 million, $7.6 million, and $(33,000)expense.
| | (in millions) | | | | | | | | | | GAAP net income (as reported) | | | $197.8 | | | $57.6 | | | | Excluding special items (after-tax):
| | | | | | | | | | Provision for credit losses related to the pandemic1,2 | | | 25.2 | | | 25.2 | | | | COVID-19 related expenses1,3 | | | 3.7 | | | 3.7 | | | | Branch lease termination costs1 | | | 0.6 | | | 0.6 | | | | Gain from VISA stock sale, net1 | | | (2.2) | | | (2.2) | | | | Non-GAAP (adjusted) net income for 2020 EICP purposes | | | $225.2 | | | $84.9 | |
Note: Columns may not foot due to the 2018 GAAP net income for HEI, Hawaiian Electric and ASB, respectively, in determining adjusted net income. rounding 2
| Extraordinary provision for credit losses arose primarily from an unforeseen increase in reserves for the commercial, commercial real estate and consumer loan portfolios for expected credit deterioration due to the COVID-19 pandemic. |
3
| Unforeseen and extraordinary COVID-19 related expenses included the purchase of safety protection equipment and cleaning supplies, additional compensation to frontline employees and payment for excess leave employees were not able to use in 2020. |
See "Reconciliation“Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments, "” attached as Exhibit B.A. The following chart shows how %Total Achieved as a percentage of Target AchievedOpportunity from the table above is converted into a dollar value for each named executive officer. The payout amounts are also shown in the "Nonequity“Nonequity Incentive Plan Compensation"Compensation” column of the "2018“2020 Summary Compensation Table" on page 51.Table” in the “Executive Compensation Tables” section below. The range of possible annual incentive payouts for 20182020 is shown in the "2018“2020 Grants of Plan-Based Awards"Awards” table on page 53.in the “Executive Compensation Tables” section below. | | Constance H. Lau | | | 100 | | | × | | | 950,217 | | | = | | | 950,217 | | | × | | | 127 | | | = | | | 1,202,503 | | | | Gregory C. Hazelton | | | 60 | | | × | | | 543,750 | | | = | | | 326,250 | | | × | | | 127 | | | = | | | 412,830 | | | | Kurt K. Murao | | | 55 | | | × | | | 352,000 | | | = | | | 193,600 | | | × | | | 127 | | | = | | | 244,954 | | | | Scott W. H. Seu | | | 75 | | | × | | | 419,750 | | | = | | | 314,813 | | | × | | | 125 | | | = | | | 394,587 | | | | Richard F. Wacker | | | 80 | | | × | | | 717,700 | | | = | | | 574,160 | | | × | | | 94 | | | = | | | 539,854 | |
1
| Figures may not calculate to the amount shown in 2020 Actual Annual Incentive Payout due to rounding of the Total Achieved as a percentage of Target. Total Achieved as a percentage of Target was rounded for ease of presentation. |
TABLE OF CONTENTS | | | COMPENSATION DISCUSSION AND ANALYSIS |
Long-term incentives
| | | | | | | | | | | | | | | | | | | | | | | | | Name
| | Target
Opportunity
(% of base
salary)
| |
| | Base
Salary
($)
| |
| | Target
Opportunity
($)
| |
| | Total
Achieved as a
% of Target
Opportunity
(%)
| |
| | 2018
Actual
Annual
Incentive
Payout
($)1
| |
|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | Constance H. Lau | | | 100 | | × | | | 921,800 | | = | | | 921,800 | | × | | | 98 | | = | | | 899,539 | | Gregory C. Hazelton | | | 60 | | × | | | 512,500 | | = | | | 307,500 | | × | | | 98 | | = | | | 300,135 | | Alan M. Oshima | | | 75 | | × | | | 686,750 | | = | | | 515,063 | | × | | | 76 | | = | | | 389,182 | | Richard F. Wacker | | | 80 | | × | | | 679,800 | | = | | | 543,840 | | × | | | 160 | | = | | | 868,648 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1Figures may not calculate to the amount shown in 2018 Actual Annual Incentive Payout due to rounding of the Total Achieved as a % of Target. Total Achieved as a % of Target was rounded for ease of presentation.
Long-term incentives include performance-based opportunities under HEI'sHEI’s LTIP, which is based on achievement of performance goals over rolling three-year periods, and time-vestedtime-based RSUs, which vest over a four-year period. The performance-based LTIP represents the majority of each named executive officer'sofficer’s total long-term incentive opportunity. These incentives are designed to directly tiealign executive interests with those of shareholders by rewarding executives for long-term value growth.
Long-term performance-based incentives
Long-term performance-based incentives
|
The three-year performance periods foster a long-term perspective and provide balance with the shorter-term focus of the annual incentive program. In addition, the overlapping three-year performance periods encourage sustained high levels of performance because, at any one time, three separate potential awards are affected by current performance.at risk. Similar to the annual incentives, in developing long-term incentives, the Compensation Committee determines the target incentive opportunity for each executive, performance metrics and goals for the three-year period. 37
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
2018-20
2020-22 target long-term incentive opportunity As with the annual incentives, the target long-term incentive opportunity is established as a percentage of base salary, with the threshold and maximum opportunities equal to 0.5 times and 2 times the target opportunity, respectively. In establishing the target percentage for each executive, the Compensation Committee considers the mix of pay elements, competitive market data, internal equity, performance and the other factors described above under "Base“Base salary. "” For the 2018-202020-22 period, the Compensation Committee made no changes torecommended, and the Board approved, keeping the target incentive opportunities as opportunity (as a percentage of base salarysalary) the same as the 2019-21 target opportunity for each of Ms. Lau and Messrs. Hazelton Oshima and Wacker, as it determined that theirWacker. In recognition of Mr. Murao’s promotion to Executive Vice President and Chief Administrative Officer of the Company, the Board approved increasing Mr. Murao’s target long-term incentive opportunitiesopportunity from 45% to 60% of his base salary. In recognition of Mr. Seu’s promotion to President and CEO of Hawaiian Electric, the prior performance period remained appropriate at 160%,Board of the Utility approved increasing Mr. Seu’s target opportunity from 45% to 80% , 95% and 80%, respectively. See table on page 34. 2018-20 of his base salary.
2020-22 performance metrics and goals The performance metrics for long-term incentives are chosen for their direct relation to creatingrelationship with the creation of long-term value for shareholders. In addition to selecting performance metrics, the Compensation Committee determines the level of achievement required to attain the threshold, target and maximum performance for each metric. The same principles that the Compensation Committee applies to annual incentive goals apply to long-term incentive goals. As such, the level of difficulty of the goals reflects the Compensation Committee'sCommittee’s belief that incentive pay should be motivational — that is, the goals should be challenging but achievable — and that such pay should be balanced with reinvestment in the Company and return to shareholders. Consistent with this approach, the Compensation Committee believes threshold should represent solid performance with positive financial/operating results, target should denote challenging but achievable goals that include a stretch factor and maximum should signify truly exceptional performance. The target level for financial goals, such as the total shareholder return relative to the EEI Index (Relative TSR), average annual earnings per share (EPS) growth, average annual net income growth and return on average common equity (ROACE), relate to the levels the Company seeks to achieve over the performance period. In setting the threshold and maximum levels, the Compensation Committee considers whether the risks to accomplishing those levels weigh more heavily toward the downside and how challenging it would be to achieve incremental improvements over the target result. For the 2018-202020-22 period, the Compensation Committee chose the metrics and goals in the following chart to encourage long-term achievement of earnings and growth in shareholder value. 38
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | | | |
| | Goals |
|---|
2018-20 Long-Term Incentive
Performance Metrics & Why We Use Them
|
|---|
| | Weighting
| | Threshold
| | Target
| | Maximum
|
|---|
| | | | | | | | | | | Lau and Hazelton | | | | | | | | | | HEI Average Annual EPS Growth1 promotes shareholder value by focusing on EPS growth based on the last two years of the plan. | | 30% | | 6.0% | | 8.0% | | 10.0% | | HEI ROACE2 measures profitability based on net income returned as a % of average common equity based on the average of the last two years of the plan. | | 50% | | 9.8% | | 10.4% | | 11.0% | | HEI Relative TSR3 compares the value created for HEI shareholders to that created by other investor-owned electric companies (EEI Index). | | 20% | | 30th
percentile | | 50th
percentile | | 70th
percentile | | Oshima | | | | | | | | | | Utility Average Annual EPS Growth4 promotes shareholder value by focusing on EPS growth based on the last two years of the plan. | | 30% | | 6.0% | | 8.0% | | 10.0% | | Utility ROACE as a % of Allowed Return5 measures the performance of the utility and its subsidiaries in attaining the level of ROACE they are permitted to earn by their regulator based on the average of the last two years of the plan. The focus on ROACE encourages improved return compared to the cost of capital. | | 50% | | 84% | | 88% | | 92% | | HEI Relative TSR3 compares the value created for HEI shareholders to that created by the EEI Index. | | 20% | | 30th
percentile | | 50th
percentile | | 70th
percentile | | Wacker | | | | | | | | | | ASB Return on Equity6 measures profitability based on net income returned as a % of average common equity based on the average of the last two years of the plan. | | 40% | | 11.35% | | 12.65% | | 14.00% | | ASB Efficiency Ratio7 promotes expense control based on the average of the last two years of the plan. | | 40% | | 60.7% | | 58.7% | | 56.7% | | HEI Relative TSR3 compares the value created for HEI shareholders to that created by the EEI Index. | | 20% | | 30th
percentile | | 50th
percentile | | 70th
percentile | | | | | | | | | | |
1HEI Average Annual EPS Growth is calculated by taking the sum of each full calendar year's (2019 and 2020, respectively) EPS percentage growth over the EPS of the prior year and dividing that sum by 2.
2HEI ROACE is calculated as the simple average of HEI ROACE calculated on an annual basis (2019 and 2020), with net income adjusted for exclusions the Compensation Committee allows.
3HEI Relative TSR compares HEI's TSR to that of the companies in the EEI Index. For LTIP purposes, TSR is the sum of the growth in price per share of HEI Common Stock as measured at the beginning of the performance period to the end, calculated using the share price on the last trading day of December at the end of the performance period, plus dividends during the period, assuming reinvestment, divided by the share price on the last trading day of December immediately prior to the beginning of the performance period.
4Utility Average Annual EPS Growth is calculated by taking the sum of each full calendar year's (2019 and 2020, respectively) EPS percentage growth over the EPS of the prior year and dividing that sum by two. For purposes of this goal, Utility EPS is calculated using Utility net income divided by weighted average HEI Common Stock outstanding.
5Utility ROACE as a % of Allowed Return is the utility's consolidated average ROACE based on the last two years of the performance period compared to the weighted average of the allowed ROACE for the utility and its subsidiaries as determined by the Hawaii Public Utilities Commission for the same period.
6ASB ROE is calculated as the simple daily average of ASB ROE calculated on an annual basis (2019 and 2020), with net income and common equity adjusted for exclusions the Compensation Committee allows. ASB ROE is calculated as net income divided by average common equity.
7ASB Efficiency Ratio is equal to the simple average of ASB's 2019 and 2020 efficiency ratio. Efficiency ratio is equal to total noninterest expense divided by the sum of net interest income and total noninterest income.
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS | | | |
| | Lau, Hazelton and Murao
| | | | | | | | | | | | | | | | HEI 3-year Average Annual EPS Growth1 promotes shareholder value by focusing on EPS growth over a three-year period. | | | 30% | | | 4.0% | | | 5.0% | | | 6.0% | | | | HEI ROACE2 measures profitability based on net income returned as a % of average common equity. | | | 30% | | | 9.0% | | | 9.5% | | | 10.0% | | | | Utility Renewable Portfolio Standards3 measures the Utility’s progress towards meeting the State of Hawaii’s RPS targets for increased production of energy from renewable sources. | | | 20% | | | 32% | | | 40% | | | 50% | | | | HEI Relative TSR4 compares the value created for HEI shareholders to that created by other investor-owned electric companies (EEI Index). | | | 20% | | | 30th
percentile | | | 50th
percentile | | | 70th
percentile | | | | Seu
| | | | | | | | | | | | | | | | Utility 3-year Average Annual Net Income Growth5 promotes shareholder value by focusing on net income growth based on the years included in the plan. | | | 30% | | | 4.5% | | | 5.5% | | | 7.0% | | | | Utility 3-year ROACE as a % of Allowed Return6 measures the performance of the Utility and its subsidiaries in attaining the level of ROACE they are permitted to earn by their regulator. The focus on ROACE encourages improved return compared to the cost of capital. | | | 30% | | | 83% | | | 85% | | | 88% | | | | Utility Renewable Portfolio Standards3 measures the Utility’s progress towards meeting the State of Hawaii’s RPS targets for increased production of energy from renewable sources. | | | 20% | | | 32% | | | 40% | | | 50% | | | | HEI Relative TSR4 compares the value created for HEI shareholders to that created by the EEI Index. | | | 20% | | | 30th
percentile | | | 50th
percentile | | | 70th
percentile | | | | Wacker
| | | | | | | | | | | | | | | | ASB Return on Equity7 measures profitability based on net income returned as a % of average common equity based on the average of the last two years of the plan. | | | 40% | | | 11.30% | | | 12.60% | | | 13.95% | | | | ASB Efficiency Ratio8 promotes expense control based on the average of the last two years of the plan. | | | 40% | | | 60.5% | | | 58.5% | | | 55.5% | | | | HEI Relative TSR4 compares the value created for HEI shareholders to that created by the EEI Index. | | | 20% | | | 30th
percentile | | | 50th
percentile | | | 70th
percentile | |
1
| HEI 3-year Average Annual EPS Growth is calculated by taking the sum of each full calendar year’s (2020, 2021 and 2022, respectively) EPS percentage growth over the EPS of the prior year and dividing that sum by 3. |
2
| HEI ROACE is calculated as the simple average of HEI ROACE calculated on an annual basis (2020, 2021 and 2022), with net income subject to any adjustments the Compensation Committee may approve in its discretion. |
3
| Utility Renewable Portfolio Standards measures the Utility’s percentage of electric energy sales that is represented by renewable electrical energy created to diversify its energy resource mix. The State of Hawaii’s RPS targets are 30% by 2020, 40% by 2030, 70% by 2040 and 100% by 2045. |
4
| HEI Relative TSR compares HEI’s TSR to that of the companies in the EEI Index. For LTIP purposes, TSR is the sum of the growth in price per share of HEI Common Stock as measured at the beginning of the performance period to the end, calculated using the share price on the last trading day of December at the end of the performance period, plus dividends during the period, assuming reinvestment, divided by the share price on the last trading day of December immediately prior to the beginning of the performance period. |
5
| Utility 3-year Average Annual Net Income Growth is calculated by taking the sum of each full calendar year’s (2020, 2021 and 2022, respectively) net income percentage growth over the net income of the prior year and dividing that sum by 3. |
6
| Utility 3-year ROACE as a percentage of Allowed Return is the Utility’s consolidated average ROACE for the performance period compared to the weighted average of the allowed ROACE for the Utility and its subsidiaries as determined by the Hawai‘i Public Utilities Commission for the same period. |
7
| ASB ROE is calculated as the simple average of ASB ROE calculated on an annual basis (2021 and 2022), with net income subject to any adjustments the Compensation Committee may approve in its discretion. ASB ROE is calculated as net income divided by average common equity. |
8
| ASB Efficiency Ratio is equal to the simple average of ASB’s 2021 and 2022 efficiency ratios adjusted for any exclusions the Compensation Committee may approve in its discretion. Efficiency ratio is equal to total noninterest expense divided by the sum of net interest income and total noninterest income. |
Customers, employees and shareholders all benefit when the above goals are met. Achievement of these goals makes HEI, the utilityUtility and the bankBank stronger financially, enabling HEI to raise capital at favorable rates for reinvestment in the operating companies and supporting dividends to shareholders. From a historical perspective, long-term incentive payouts are not easy to achieve, nor are they guaranteed. HEI and its utilityUtility and bankBank subsidiaries face significant external challenges in the 2018-202020-22 period. ExtraordinaryStrong leadership on the part of the named executive officers will be needed to achieve the long-term objectives required for them to earn the incentive payouts. TABLE OF CONTENTS 2016-18 | | | COMPENSATION DISCUSSION AND ANALYSIS |
2018-20 Long-Term Incentive Plan.Plan The HEI Board and HEI Compensation Committee established the 2016-182018-20 long-term incentive opportunities, performance metrics and goals in February 2016.January 2018. Those decisions were described in the 20172019 HEI Proxy Statement and are summarized again below to provide context for the results and payouts for the 2016-182018-20 period.
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
2016-18
2018-20 target long-term incentive opportunity In February 2016,January 2018 the Compensation Committee established the following 2016-182018-20 target incentive opportunities as a percentage of named executive officer base salary. | | Constance H. Lau | | | 160% | | | 43,239 | | | | Gregory C. Hazelton | | | 80% | | | 12,020 | | | | Kurt K. Murao | | | 45% | | | 3,719 | | | | Scott W. H. Seu | | | 30% | | | 2,254 | | | | Richard F. Wacker | | | 80% | | | 15,944 | |
| | | | | Name1
| | 2016-18 Target Opportunity
(as % of Base Salary)
| | 2016-18 Target Opportunity
(in dollars)
|
|---|
| | | | | | Constance H. Lau | | 160% | | 1,383,520 | Gregory C. Hazelton | | 80% | | 262,440 | Alan M. Oshima | | 95% | | 554,325 | Richard F. Wacker | | 80% | | 512,640 | | | | | | |
1Mr. Hazelton was eligible for a pro-rated award based on 799 days out of 1,096 days of the 2016-18 LTIP.
2016-182018-20 performance metrics, goals, results & payouts
The Compensation Committee established the 2016-182018-20 performance metrics and goals below in February 2016.January 2018. The Compensation Committee selected the metrics for their correlation with long-term shareholder value and alignment with the multi-year strategic plans of HEI and its utilityUtility and bankBank subsidiaries. The chart below identifies the 2016-182018-20 LTIP metrics, the objective each measure serves, the level of achievement required to attain the threshold, target and maximum levels for each metric, the results for 2016-182018-20 and the corresponding payout as a percentage of target. The results shown below incorporate the Compensation Committee'sCommittee’s decision to exclude the impact of the unusual events that affected HEI, Hawaiian Electric and ASB during the 2016-182018-20 period. These adjustments are described below under "Adjustments for unusual events — 2016-18 LTIP." | | | | | | | | | | | | | 2016-18 Long-Term Incentive
Performance Metrics & Why We
Use Them
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Achieved
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| | Weighting
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Lau and Hazelton |
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HEI 3-year Average Annual EPS Growth1 promotes shareholder value by focusing on EPS growth over a three-year period. |
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50% |
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3.0% |
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4.0% |
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6.0% |
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4.7% |
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| | Weighted Composite of Utility (2/3) and ASB (1/3) 3-year ROACE2 measures profitability based on net income returned as a % of average common equity. | | 50% | | 7.6% | | 8.9% | | 9.8% | | 9.0% | | 123% |
Oshima |
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| | HEI 3-year Average Annual EPS Growth1 promotes shareholder value by focusing on EPS growth over a three-year period. | | 50% | | 3.0% | | 4.0% | | 6.0% | | 4.7% | | | | Utility 3-year ROACE as a % of Allowed Return3 measures the performance of the utility and its subsidiaries in attaining the level of ROACE they are permitted to earn by their regulator. The focus on ROACE encourages improved return compared to the cost of capital. | | 50% | | 74% | | 84% | | 94% | | 82% | | 113% |
Wacker |
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ASB 3-year Average Net Income4 focuses on fundamental earnings growth, which correlates to shareholder value. |
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50% |
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$56M |
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$59.8M |
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$62M |
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$65.6M |
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200% | | ASB Efficiency Ratio, for Year-End 20185 promotes expense control. | | 50% | | 64.5% | | 62% | | 59.5% | | 58.3% | | | | | | | | | | | | | | | | |
1HEI 3-year Average Annual EPS Growth is calculated by taking the sum of each full calendar year's (2016, 2017 and 2018, respectively) EPS percentage growth over the EPS of the prior year and dividing that sum by 3. Non-GAAP adjusted net income, upon which EPS used for LTIP purposes is calculated, differs from what is reported under GAAP because it excludes the impact of the unusual events in 2015 through 2018 described below under "Adjustments for unusual events — 2016-18 LTIP." For a reconciliation of the GAAP and non-GAAP results, see "Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments" attached as Exhibit B.
2Weighted Composite of Utility and ASB 3-year ROACE is the weighted composite of the utility's and ASB's ROACE, which calculation is average net income divided by average common equity for the period, with net income and common equity of Hawaiian Electric and ASB adjusted for exclusions the Compensation Committee allows for utility and ASB results. For purposes of this metric, the utility is weighted two-thirds ( 2/3) and ASB is weighted one-third ( 1/3). Non-GAAP adjusted net income used in the computation of ROACE differs from what is reported under GAAP because it excludes the impact of the unusual events in 2016 through 2018 described below under "Adjustments for unusual events — 2016-18
40
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
LTIP." For a reconciliation of the GAAP and non-GAAP results, see "Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments" attached as Exhibit B.
3Utility 3-year ROACE as a % of Allowed Return is the utility's consolidated average ROACE for the performance period compared to the weighted average of the allowed ROACE for the utility and its subsidiaries as determined by the Hawaii Public Utilities Commission for the same period. Non-GAAP adjusted net income used in the computation of ROACE differs from what is reported under GAAP because it excludes the impact of the unusual events in 2016 through 2018 described below under "Adjustments for unusual events — 2016-18 LTIP." For a reconciliation of the GAAP and non-GAAP results, see "Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments" attached as Exhibit B.
4ASB 3-year Average“Non-GAAP Net Income is the average of ASB's adjusted net income for 2016 through 2018. Non-GAAP adjusted net income differs from what is reported under GAAP because it excludes the impact of the unusual events in 2016 through 2018 described below under "Adjustments for unusual events — 2016-18 LTIP." For a reconciliation of the GAAP and non-GAAP results, see "Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments" attached as Exhibit B.Metrics - 2018-20.”
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS | | | |
| | Lau, Hazelton and Murao
| | | | | | | | | | | | | | | | | | | | | | HEI Average Annual EPS Growth1 promotes shareholder value by focusing on EPS growth based on the last two years of the plan. | | | 30% | | | 6.0% | | | 8.0% | | | 10.0% | | | 3.6% | | | 14% | | | | HEI ROACE2 measures profitability based on net income returned as a % of average common equity based on the average of the last two years of the plan. | | | 50% | | | 9.8% | | | 10.4% | | | 11.0% | | | 9.7% | | | | HEI Relative TSR3 compares the value created for HEI shareholders to that created by other investor-owned electric companies (EEI Index). | | | 20% | | | 30th
percentile | | | 50th
percentile | | | 70th
percentile | | | 37th
percentile | | | | Seu
| | | | | | | | | | | | | | | | | | | | | | Utility Average Annual EPS Growth4 promotes shareholder value by focusing on EPS growth based on the last two years of the plan. | | | 30% | | | 6.0% | | | 8.0% | | | 10.0% | | | 5.6% | | | 39% | | | | Utility ROACE as a % of Allowed Return5 measures the performance of the Utility and its subsidiaries in attaining the level of ROACE they are permitted to earn by their regulator based on the average of the last two years of the plan. The focus on ROACE encourages improved return compared to the cost of capital. | | | 50% | | | 84% | | | 88% | | | 92% | | | 84% | | | | HEI Relative TSR3 compares the value created for HEI shareholders to that created by the EEI Index. | | | 20% | | | 30th
percentile | | | 50th
percentile | | | 70th
percentile | | | 37th
percentile | | | | Wacker
| | | | | | | | | | | | | | | | | | | | | | ASB Return on Equity6 measures profitability based on net income returned as a % of average common equity based on the average of the last two years of the plan. | | | 40% | | | 11.35% | | | 12.65% | | | 14.00% | | | 12.31% | | | 83% | | | | ASB Efficiency Ratio7 promotes expense control based on the average of the last two years of the plan. | | | 40% | | | 60.7% | | | 58.7% | | | 56.7% | | | 59.2% | | | | HEI Relative TSR3 compares the value created for HEI shareholders to that created by the EEI Index. | | | 20% | | | 30th
percentile | | | 50th
percentile | | | 70th
percentile | | | 37th
percentile | |
1
| HEI Average Annual EPS Growth is calculated by taking the sum of each full calendar year’s (2019 and 2020, respectively) EPS percentage growth over the EPS of the prior year and dividing that sum by two. Non-GAAP Adjusted Net Income, upon which EPS used for LTIP purposes is calculated, differs from what is reported under GAAP because it excludes the impact of the unusual events in 2018 through 2020 described below under “Non-GAAP Net Income Metrics — 2018-20 LTIP.” For a reconciliation of the GAAP and non-GAAP results, see “Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments” attached as Exhibit A. |
2
| HEI ROACE is calculated as the simple average of HEI ROACE calculated on an annual basis (2019 and 2020), with net income adjusted for exclusions approved by the Compensation Committee in its discretion. Non-GAAP Adjusted Net Income used in the calculation of ROACE differs from what is reported under GAAP because it excludes the impact of the unusual events in 2019 through 2020 described below under “Non-GAAP Net Income Metrics — 2018-20 LTIP.” For a reconciliation of the GAAP and non-GAAP results, see “Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments” attached as Exhibit A. |
3
| HEI Relative TSR compares HEI’s TSR to that of the companies in the EEI Index. For LTIP purposes, TSR is the sum of the growth in price per share of HEI Common Stock as measured at the beginning of the performance period to the end, calculated using the share price on the last trading day of December at the end of the performance period, plus dividends during the period, assuming reinvestment, divided by the share price on the last trading day of December immediately prior to the beginning of the performance period. |
4
| Utility Average Annual EPS Growth is calculated by taking the sum of each full calendar year’s (2019 and 2020, respectively) EPS percentage growth over the EPS of the prior year and dividing that sum by two. For purposes of this goal, Utility EPS is calculated using Utility net income divided by weighted average HEI Common Stock outstanding. |
5
| Utility ROACE as a percentage of Allowed Return is the Utility’s consolidated average ROACE based on the last two years of the performance period compared to the weighted average of the allowed ROACE for the Utility and its subsidiaries as determined by the Hawai‘i Public Utilities Commission for the same period. |
6
| ASB ROE is calculated as the simple daily average of ASB ROE calculated on an annual basis (2019 and 2020), with net income and equity adjusted for exclusions approved by the Compensation Committee in its discretion. ASB ROE is calculated as net income divided by average common equity. Non-GAAP Adjusted Net Income differs from what is reported under GAAP because it excludes the impact of the unusual events in 2019 through 2020 described below under “Non-GAAP Net Income Metrics — 2018-20 LTIP.” For a reconciliation of the GAAP and non-GAAP results, see “Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments” attached as Exhibit A. |
40
5ASB Efficiency Ratio as of year-end 2018 is equal to ASB's noninterest expense divided by the sum of the net interest income and noninterest income at the end of 2018, adjusted for exclusions the Compensation Committee allows. See "Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments" attached as Exhibit B.TABLE OF CONTENTS | | | COMPENSATION DISCUSSION AND ANALYSIS |
7
| ASB Efficiency Ratio is equal to the simple average of ASB’s 2019 and 2020 efficiency ratio. Efficiency ratio is equal to total noninterest expense divided by the sum of net interest income and total noninterest income, adjusted for exclusions approved by the Compensation Committee. See “Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments” attached as Exhibit A. |
The following chart shows how %Total Achieved as a percentage of Target AchievedOpportunity from the charttable above is converted into a dollar valuenumber of shares earned (plus dividend equivalents on earned shares) for each named executive officer. The payout amounts are also shown in the "Nonequity Incentive Plan Compensation"“2020 Option Exercises and Stock Vested” table. | | Constance H. Lau | | | 43,239 | | | × | | | 14 | | | = | | | 5,837 | | | 613 | | | | Gregory C. Hazelton | | | 12,020 | | | × | | | 14 | | | = | | | 1,623 | | | 170 | | | | Kurt K. Murao | | | 3,719 | | | × | | | 14 | | | = | | | 502 | | | 53 | | | | Scott W. H. Seu | | | 2,254 | | | × | | | 39 | | | = | | | 868 | | | 91 | | | | Richard F. Wacker | | | 15,944 | | | × | | | 83 | | | = | | | 13,276 | | | 1,394 | |
1
| Figures may not calculate to the number of shares shown in 2018-20 Incentive Payout column due to rounding of the Total Achieved as a percentage of Target, which was rounded for ease of presentation. |
Non-GAAP Net Income Metrics — 2018-20 LTIP HEI consolidated net income and ASB net income performance for purposes of the "2018 Summary Compensation Table"2018-20 LTIP were calculated on page 51. | | | | | | | | | | | | | | | | | | | | | | | | | Name*
| | Target
Opportunity
(% of 2016
base
salary)
| |
| | 2016
Base
Salary
($)
| |
| | Target
Opportunity
($)
| |
| | Total
Achieved as a
% of Target
(%)
| |
| | 2016-18
Incentive
Payout
($)1
| |
|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | Constance H. Lau | | | 160 | | × | | | 864,700 | | = | | | 1,383,520 | | × | | | 123 | | = | | | 1,702,498 | | Gregory C. Hazelton2 | | | 80 | | × | | | 328,057 | | = | | | 262,440 | | × | | | 123 | | = | | | 322,947 | | Alan M. Oshima | | | 95 | | × | | | 583,500 | | = | | | 554,325 | | × | | | 113 | | = | | | 623,615 | | Richard F. Wacker | | | 80 | | × | | | 640,800 | | = | | | 512,640 | | × | | | 200 | | = | | | 1,025,280 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1Figures may not calculatea non-GAAP basis, consistent with prior years. Pursuant to the amount shown in 2016-18 Incentive Payout column due to rounding ofLTIP, the Total Achieved as a % of Target. Total Achieved as a % of Target was rounded for ease of presentation.
2Mr. Hazelton's base salary shown at 73% as he was eligible for 799 days out of 1,096 days of the 2016-2018 LTIP.
Adjustments for unusual events — 2016-18 LTIP
The Compensation Committee considers adjustmentsmay exclude items from the calculation of net income to the extent they arose from extraordinary or nonrecurring events or from changes in applicable accounting rules or practices. In 2020, the COVID-19 pandemic presented extraordinary and nonrecurring challenges that impacted the Company’s operations and financial performance results with caution and only in circumstances that are unforeseen and/or unique or extraordinary. Thea variety of ways, some of which the Compensation Committee recognizes that the two operating subsidiaries are heavily regulated and external forces can impact incentive plans significantly. The Compensation Committee is mindful of only considering adjustments that are warranted and will also serve the long-term interests of shareholders.
deemed it to be appropriate to take into consideration in determining 2018-20 LTIP performance. HEI. In determining HEI consolidated net income for 2015, 2016, 20172018, 2019 and 2020 for purposes of calculating HEI average annual EPS growth and HEI consolidated net income for 2019 and 2020 for purposes of calculating HEI consolidated ROACE under the 2018-20 LTIP, the Compensation Committee determined that certain items recorded during the performance period should be excluded from the calculation because such adjustments equitably compensate for extraordinary events that were unrelated to management’s actions regarding ongoing business operations and were not contemplated at the time the performance goals were established, and that excluding those items was consistent with the original intent and objectives of the award. Specifically, the Compensation Committee determined it to be appropriate to exclude the items of expense/(gain) set forth in the table below (and explained further in the accompanying footnotes), including an extraordinary provision for credit losses and certain COVID-19 related expenses, as well as a portion of the gain from a nonrecurring sale of securities. As it relates to the provision for credit losses, the Committee considered the extraordinary nature of the expected credit deterioration and the severe accounting effect of such expected deterioration that was beyond the reasonable control of management to manage or offset. As it relates to COVID-19 related expenses, the Committee considered the extraordinary and unforeseeable nature of the expense. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS | | | |
| | ($ in millions, except per share amounts)
| | | | | | | | | | | | | HEI CONSOLIDATED NET INCOME
| | | | | | | | | | | | | GAAP (as reported) | | | $197.8 | | | $217.9 | | | $201.8 | | | | Excluding special items (after-tax) for LTIP purposes: | | | | | | | | | | | | | Provision for credit losses related to the pandemic1, 2 | | | 25.2 | | | | | | | | | | COVID-19 related expenses1, 3, | | | 3.7 | | | | | | | | | | Branch lease termination costs1 | | | 0.6 | | | | | | | | | | Gain from VISA stock sale, net1 | | | (2.2) | | | | | | | | | | Sale of former headquarters, net of campus transition costs1 | | | — | | | (5.6) | | | 0.7 | | | | Ongoing impacts relating to the termination of merger4 | | | — | | | — | | | 12.4 | | | | Federal tax reform and related impacts5 | | | — | | | — | | | (4.7) | | | | Consulting fees6 | | | 1.2 | | | 1.6 | | | 1.0 | | | | Pension defeasement1, 7 | | | 1.0 | | | (0.8) | | | 0.2 | | | | Non-GAAP (adjusted) net income for 2018-20 LTIP purposes | | | $227.4 | | | $213.1 | | | $211.3 | | | | HEI CONSOLIDATED BASIC EARNINGS PER SHARE
| | | | | | | | | | | | | Based on GAAP
| | | $1.81 | | | $2.00 | | | $1.85 | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes | | | 2.08 | | | 1.96 | | | 1.94 | | | | HEI CONSOLIDATED Return on Average Common Equity (%)
| | | | | | | | | | | | | Based on GAAP | | | 8.6 | | | 9.8 | | | | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes | | | 9.8 | | | 9.6 | | | | |
Note: Columns may not foot due to rounding 2
| Extraordinary provision for credit losses arose primarily from an unforeseen increase in reserves for the commercial, commercial real estate and consumer loan portfolios for expected credit deterioration due to the COVID-19 pandemic. |
3
| Unforeseen and extraordinary COVID-19 related expenses included the purchase of safety protection equipment and cleaning supplies, additional compensation to frontline employees and payment for excess leave employees were not able to use in 2020. |
4
| Hawaiian Electric expense. Primarily reflects certain expenses related to the termination of the proposed merger with NextEra Energy, including Hawaiian Electric’s liquid natural gas (LNG) project costs and adjustments to test year revenue requirements for customer benefit adjustments in the Hawaiian Electric and Maui Electric rate case decisions. |
5
| Hawaiian Electric expense. Reflects various tax adjustments for tax reform and related impacts. |
6
| HEI expense. Reflects certain extraordinary and nonrecurring consulting and legal expenses. |
7
| Pension defeasement refers to ASB’s initiative to manage risk associated with the pension liability and volatility of pension expense for its frozen pension plan through a liability-driven investment strategy which is designed to mitigate funding status changes and reduce pension expense volatility caused by interest rate movements. Because the Company calculates net periodic pension cost using a market-related value of plan assets, the impact of a change in the fair value of the pension assets for purposes of computing pension expense is reduced as the change in value is recognized over a period of years, as compared to a more significant impact related to an immediate change in the fair value of the pension liability. The Compensation Committee deemed it appropriate to exclude these pension amounts for purposes of determining net income for the 2018-20 LTIP because the Company’s consolidated market-related value of plan asset valuation method, which smooths changes in asset value in the computation of pension expense, may not be fully reflective, in any given period, of the full economic hedge accomplished with the liability-driven investment strategy. |
See pages 40-42 of HEI’s 2020 Proxy Statement and pages 41-43 of HEI’s 2019 Proxy Statement for a more detailed discussion of the respective 2019 and 2018 adjustments. See the ASB and Hawaiian Electric sections below for additional discussion and for all other items impacting HEI consolidated net income. See also “Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments,” attached as Exhibit A. ASB. In determining ASB’s 2019 and 2020 net income and common equity for purposes of calculating ASB’s ROE under the 2018-20 LTIP (as well as ASB’s 2018, 2019 and 2020 net income for purposes of calculating HEI average annual EPS growth and 2019 and 2020 net income for purposes of calculating HEI consolidated ROACE (in each case noted above)), the Compensation Committee considered the impact of certain items that were unrelated to management’s actions regarding ongoing business operations. The Compensation Committee deemed it to be appropriate to exclude these items for purposes of determining performance under the 2018-20 LTIP because such exclusions equitably compensate for extraordinary and/or nonrecurring events that were unrelated to management’s actions regarding ongoing business operations and were not contemplated at the time the performance goals were established. Specifically, the Compensation Committee determined it to be appropriate to exclude the items of expense/(gain) set forth in the table below (and explained further in the accompanying TABLE OF CONTENTS | | | COMPENSATION DISCUSSION AND ANALYSIS |
footnotes), including an extraordinary provision for credit losses and certain COVID-19 related expenses, as well as a portion of the gain from a nonrecurring sale of securities. As it relates to the provision for credit losses, the Committee considered the extraordinary nature of the expected credit deterioration and the severe accounting effect of such expected deterioration that was beyond the reasonable control of management to manage or offset. | | ($ in millions) | | | | | | | | | | | | | ASB NET INCOME
| | | | | | | | | | | | | GAAP (as reported) | | | $57.6 | | | $89.0 | | | $82.5 | | | | Excluding special items (after-tax) for LTIP purposes:
| | | | | | | | | | | | | Provision for credit losses related to the pandemic1 | | | 25.2 | | | | | | | | | | COVID-19 related expenses2 | | | 3.7 | | | | | | | | | | Branch lease termination costs | | | 0.6 | | | | | | | | | | Gain from VISA stock sale, net | | | (2.2) | | | | | | | | | | Sale of former headquarters, net of campus transition costs | | | — | | | (5.6) | | | 0.7 | | | | Pension defeasement3 | | | 1.0 | | | (0.8) | | | 0.2 | | | | Non-GAAP (adjusted) net income for 2018-20 LTIP purposes | | | $85.9 | | | $82.6 | | | $83.4 | | | | ASB Return on Average Common Equity (%) | | | | | | | | | | | | | Based on GAAP | | | 8.1 | | | 13.5 | | | | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes | | | 12.1 | | | 12.5 | | | | | | | ASB EFFICIENCY RATIO (%) | | | | | | | | | | | | | Based on GAAP | | | 61.5 | | | 57.8 | | | | | | | Adjustment for pre-tax ASB items above | | | (1.8) | | | 0.9 | | | | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes | | | 59.7 | | | 58.7 | | | | |
Note: Columns may not foot due to rounding 1
| See footnote 2 in the table above regarding provision for credit losses. |
2
| See footnote 3 in the table above regarding COVID-19 related expenses. |
3
| See footnote 7 in the table above regarding pension defeasement. |
See pages 41-42 of HEI’s 2020 Proxy Statement and page 42 of HEI’s 2019 Proxy Statement for a more detailed discussion of the respective 2019 and 2018 adjustments. See also “Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments,” attached as Exhibit A. Hawaiian Electric. In determining Hawaiian Electric net income for 2018 for purposes of calculating HEI 3-yearHawaiian Electric average annual EPS growth under the 2016-182018-2020 LTIP, the Compensation Committee considered the impact of certain items that were unrelated to HEI, Hawaiian Electric or ASB managements' actions regarding ongoing business operations, including the effects in 2018 of the 2017 tax reform legislation and certain unanticipated extraordinary consulting expenses. In addition to the 2017 tax reform impacts at ASB and Hawaiian Electric (see below), 2017 tax reform and such consulting expenses had an aggregate $5.7 million negative impact on HEI's 2018 results. The Compensation Committee deemed it appropriate to exclude the impact of the 2017 tax reform legislation and unanticipated consulting expenses on HEI's 2018 results because such impact was for extraordinary events unrelated to management'smanagement’s actions regarding ongoing business operations. The adjustments described on page 41 of HEI's 2018 Proxy Statement with respect to HEI's 2017, 2016 and 2015 results, for purposes of the 2015-17 LTIP, were also applied to the 2016-18 LTIP. The adjustments include: (i) $6.0 million negative impact in 2017 related to tax reform legislation; (ii) $58.2 million positive impact in 2016 related to income from the terminated merger with NextEra Energy and canceled spin-off of ASB Hawaii, Inc.; and (iii) $15.8 million negative impact of merger-related expenses in 2015. These tax reform and merger- and spin-off related income and expenses were not considered in determining performance under the metrics and were for an extraordinary event unrelated to HEI or Hawaiian Electric managements' actions regarding ongoing business operations. See below under ASB and Hawaiian Electric for more discussion and for all other items impacting HEI consolidated net income.41
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ASB. In determining ASB's 2016, 2017 and 2018 net income for purposes of calculating HEI 3-year average annual EPS growth and ASB's 3-year average net income and ASB's 2016, 2017 and 2018 net income and common equity for the ASB portion of the Weighted Composite of Utility (two-thirds) and ASB (one-third) 3-year ROACE (Weighted Composite ROACE) under the 2016-18 LTIP,Specifically, the Compensation Committee considered the impact of certain items that were unrelateddetermined it to managements' actions regarding ongoing business operations, including the effects in 2018 of the 2017 tax reform legislation, one-time expenses related to ASB's new corporate campus, and the effect of ASB's initiative to eliminate risk associated with the pension liability and volatility of pension expense for its frozen pension plan through a process called "defeasement," which is designed to cause material asset and liability movements to offset each other. Because the Company calculates net periodic pension cost using a market-related value of plan assets, the favorable accounting impact of the defeasement is diminished. Pension defeasement combined with the use of market-related value of plan assets had a negative accounting impact on ASB's net income of $0.05 million, $0.3 million and $1.0 million for 2016, 2017 and 2018, respectively. The Compensation Committee deemed it appropriate to exclude defeasement amounts for purposes of determining ASB's net income for the 2016-18 LTIP because the Company's consolidated asset valuation method diminished the positive accounting impacts of the defeasement. Over time, the defeasement is expected to benefit shareholder value by reducing ASB's need to provide additional funds to satisfy its pension obligations. The tax reform and related net positive impact amounting to $11.2 million for 2018 and the one-time expenses related to ASB's new corporate campus negative impact amounting to $0.7 million for 2018 were excluded in the calculation of the 2016-18 HEI 3-year average annual EPS growth, net income and Weighted Composite ROACE. The $1.0 million positive impact in 2017 related to tax reform legislation described on page 50 of HEI's 2018 Proxy Statement was excluded in the calculation of the 2015-17 HEI 3-year average annual EPS growth and ASB's goals. The Compensation Committee deemed itbe appropriate to exclude the 2017 impacts in determining ASB's net income for purposesitems of calculating HEI 3-year average annual EPS growth, ASB's 3-year average net income and Weighted Composite ROACE under the 2016-18 LTIP. ASB's 2018 efficiency ratio includes the pre-tax adjustments relating to pension, tax reform and related impacts and the new corporate campus. ASB's noninterest income and noninterest expense included a reclassification of debit card interchange fees resulting from a new accounting standard that reclassified debit card expenses to noninterest income, but such reclassification did not have an impact on the level of achievement for the ASB efficiency ratio.
Hawaiian Electric. In determining Hawaiian Electric's 2016, 2017 and 2018 net income and common equity for the ROACE as a % of Allowed Return and the utility portion of the Weighted Composite ROACE and Hawaiian Electric's 2016, 2017 and 2018 net income for HEI 3-year average annual EPS growth under the 2016-18 LTIP, the Compensation Committee considered the impacts of certain items that were unrelated to managements' actions regarding ongoing business operations, including the effects in 2018 of the 2017 tax reform legislation and certain expenses related to the termination of the proposed merger with NextEra Energy, including Hawaiian Electric's LNG project costs and adjustments to test year revenue requirements for customer benefit adjustments in the Hawaiian Electric and Maui Electric rate case decisions. The aggregate negative impact on Hawaiian Electric's 2018 net income of these adjustments of a net $7.6 million was included in the calculation of the ROACE as a % of Allowed Return, Weighted Composite ROACE and HEI 3-year average annual EPS growth.expense/(gain) set forth below. The Compensation Committee deemed it appropriatedid not make any adjustments to exclude the impact2020 net income.
| | ($ in millions, except per share amounts)
| | | | | | | | | | | | | UTILITY NET INCOME
| | | | | | | | | | | | | GAAP (as reported) | | | $169.3 | | | $156.8 | | | $143.7 | | | | Excluding special items (after-tax) for LTIP purposes only:
| | | | | | | | | | | | | Ongoing impacts relating to the termination of merger1 | | | — | | | — | | | 12.4 | | | | Federal tax reform and related impacts2 | | | — | | | — | | | (4.7) | | | | Non-GAAP (adjusted) net income for 2018-20 LTIP purposes | | | $169.3 | | | $156.8 | | | $151.3 | | | | UTILITY BASIC EARNINGS PER SHARE
| | | | | | | | | | | | | Based on GAAP Utility net income | | | $1.55 | | | $1.44 | | | $1.32 | | | | Based on non-GAAP Utility net income (adjusted) for 2018-20 LTIP purposes | | | 1.55 | | | 1.44 | | | 1.39 | |
Note: Columns may not foot due to rounding 1
| Primarily reflects certain expenses related to the termination of the proposed merger with NextEra Energy, including Hawaiian Electric’s liquid natural gas (LNG) project costs and adjustments to test year revenue requirements for customer benefit adjustments in the Hawaiian Electric and Maui Electric rate case decisions. |
2
| Reflects various tax adjustments for tax reform and related impacts. |
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See pages 41-42 of these factors because such impacts were for extraordinary events unrelated to management's actions regarding ongoing business operations.42
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The adjustments described on pages 39 of HEI's 2018HEI’s 2019 Proxy Statement with respect to Hawaiian Electric's 2017 results, under the 2015-17 LTIP, were also applied as the tax reform legislation and the effectfor a more detailed discussion of the reversion to the lagged method of recognizing rate adjustment mechanism (RAM) revenues had negative impacts on Hawaiian Electric's 2017 net income of $9.2 million and $13.9 million, respectively, and were excluded under the 2016-18 LTIP ROACE as a % of Allowed Return, Weighted Composite ROACE and HEI 3-year average annual EPS growth. The Compensation Committee deemed it appropriate to exclude the impacts of tax reform and reversion of RAM to the lagged method of revenue recognition amounts because they were unrelated to management's decisions and actions and they were not contemplated at the time the performance goals were established.
The adjustments described on page 44 of HEI's 2017 Proxy Statement with respect to Hawaiian Electric's 2016 results for purposes of the 2014-16 LTIP were applied in calculating the 2016-18 LTIP ROACE as a % of Allowed Return, Weighted Composite ROACE and HEI 3-year average annual EPS growth as the events leading to those adjustments were not contemplated at the time the 2016-18 LTIP goals were established and were unrelated to Hawaiian Electric management's decisions and actions. In addition, $0.5 million in merger integration expenses incurred by Hawaiian Electric in 2015 and $2.2 million of merger-related expenses after-tax incurred by Hawaiian Electric in 2016, including costs related to Hawaiian Electric's terminated LNG contract, which was conditioned on PUC approval of the merger were2018 adjustments. See also not considered as the Compensation Committee deemed the exclusion of these expenses to be appropriate in light of the termination of the merger agreement and the associated cessation of LNG efforts and because such amounts were for extraordinary events unrelated to HEI or Hawaiian Electric managements' actions regarding ongoing business operations.
See "Reconciliation“Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments,"” attached as Exhibit B.
2017-19 Long-TermA.
2019-21 Long-Term Incentive Plan. HEI's 2017-19HEI’s 2019-21 long-term incentive plan was described on pages 41-4537-38 of the 20182020 Proxy Statement.
Restricted stock units
HEI named executive officers are eligible to receive annual equity-based grants in the form of RSUs that vest over a four-year period. RSUs offer executives the opportunity to receive shares of HEI Common Stock when the restrictions lapse, generally subject to continued employment with the Company through vesting. The value of the annual RSU grant is a percentage of the executive'sexecutive’s base salary as shown on page 34.salary. These awards are designed to focus executives on creating long-term value for the Company's Company’s stakeholders. Since they take four years to fully vest, the RSUs also promote retention. The RSUs vest and convert to shares of HEI Common Stock in four equal annual installments beginning one year from the date of grant (plus compounded dividend equivalent shares on the installment that vested in such year). The 20182020 RSU grants are set forth in the "2018“2020 Grants of Plan-Based Awards"Awards” table on page 53.
in the “Executive Compensation Tables” section below.Benefits
Retirement and savings plans
HEI, Hawaiian Electric and ASB provide retirement benefits to the named executive officers to promote financial security in recognition of years of service and to attract and retain high-quality leaders. HEI and Hawaiian Electric employees (including each named executive officer employed by HEI or Hawaiian Electric), but not ASB employees, are eligible to participate in the HEI Retirement Plan, which is a tax-qualified defined benefit pension plan, and to save for retirement on a tax-deferred (or Roth) basis through HEI'sHEI’s Retirement Savings Plan, a tax-qualified defined contribution 401(k) plan, which does not provide non-elective employer contributions for any participants and does not provide matching contributions for participants who joined the Company before May 1, 2011.plan.
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In 2011, HEI amended the HEI Retirement Plan and HEI Retirement Savings Plan to create a new benefit structure for employees hired on or after May 1, 2011. Employees covered by the new benefit structure receive a reduced pension benefit under the HEI Retirement Plan, but are eligible for limited matching contributions under the HEI Retirement Savings Plan. These changes were intended to lower the cost of pension benefits over the long term. Messrs.Mr. Hazelton and Oshima each joined the Company after May 1, 2011 and areis eligible to receive matching contributions under the amended HEI Retirement Savings Plan. Ms. Lau isand Messrs. Murao and Seu are not eligible for and did not receive matching contributions under that plan, since shethey joined the Company prior to May 1, 2011. The HEI Retirement Savings Plan does not provide employer contributions, other than matching contributions, to any participant. Additional retirement benefits that cannot be paid from the HEI Retirement Plan due to Internal Revenue Code limits are provided to named executive officers and other executives employed by HEI and Hawaiian Electric through the nonqualified HEI Excess Pay Plan. Benefits under the HEI Excess Pay Plan are determined using the same formula as the HEI Retirement Plan, but are not subject to the Internal Revenue Code limits on the amount of annual compensation that can be used for calculating benefits under qualified retirement plans and on the amount of annual benefits that can be paid from qualified retirement plans. This allows those participating in the HEI Excess Pay Plan a total retirement benefit at the same general percentage of final average pay afforded to other employees under the HEI Retirement Plan. ASB's
ASB’s employees, including its president and CEO (who is a named executive officer), may participate in the ASB 401(k) Plan, a tax-qualified defined contribution 401(k) plan. After an employee has completed one year of service, ASB matches the employee'semployee’s contributions on a dollar-for-dollar basis up to 4% of eligible compensation deferred. In 2018,2020, eligible compensation was capped at $275,000.$285,000. ASB also provides discretionary, nonelective profit sharingprofit-sharing contributions to the accounts of employees who are employed on the last day of the plan year or terminate employment during the plan year because of retirement, death or disability. Mr. Wacker received matching contributions and a profit sharing contribution under the plan in 2018,2020, in each case limited to the amount permitted based on eligible compensation. Retirement benefits are discussed in further detail in the "2018“2020 Pension Benefits"Benefits” table and related notes on pages 56-57.in the “Executive Compensation Tables” section below. TABLE OF CONTENTS | | | COMPENSATION DISCUSSION AND ANALYSIS |
Deferred compensation plans HEI provides named executive officers and other executives the opportunity to participate in plans that allow them to defer compensation and the resulting tax liability. HEI and Hawaiian Electric named executive officers and directors of HEI, Hawaiian Electric and ASB may participate in the HEI Deferred Compensation Plan, a nonqualified deferred compensation plan implemented in 2011 and amended and restated effective January 1, 2019, that allows the deferral of portions of the participants'participants’ cash compensation, with certain limitations, and provides investment opportunities that are substantially similar to those available under HEI'sHEI’s Retirement Savings Plan. In 2018,2020, there were no matching or other employer contributions under this plan.plan for employees of HEI, Hawaiian Electric or ASB. HEI and Hawaiian Electric named executive officers are also eligible to defer payment of annual and long-term incentive awards and the resulting tax liability under a prior nonqualified deferred compensation plan, although noplan. No named executive officer deferred compensation under that planeither of these plans in 2018.2020. The American Savings Bank Select Deferred Compensation Plan (ASB Deferred Compensation Plan) is a nonqualified deferred compensation plan that allows senior members of ASB management to defer up to 100% of current salary, annual bonus and commissions. Pursuant to a 2009 amendment, the plan provides for employer matching contributions and profit sharingprofit-sharing contributions. These matching and profit sharingprofit-sharing contributions take into account compensation which is excluded from consideration under the ASB 401(k) Plan, including on account of being contributed to the ASB Deferred Compensation Plan or being in excess of limits on eligible compensation imposed by the Internal Revenue Code. Ms. Lau participated in the ASB Deferred Compensation Plan during her employment with ASB. Mr. Wacker did not elect to defer compensation under such plan in 2018, but he did receive a profit sharing contribution to his account under the plan for the amount that could not be contributed to his 401(k) Plan account due to Internal Revenue Code limits on eligible compensation. Such profit sharing contribution is included in the "All Other Compensation" column of the "2018 Summary Compensation Table" on page 51.2020. Deferred compensation benefits are discussed in further detail in the "2018“2020 Nonqualified Deferred Compensation"Compensation” table and related notes on page 58.44
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in the “Executive Compensation Tables” section below. Executive Death Benefit Plan (frozen since 2009) In September 2009, HEI froze the Executive Death Benefit Plan of HEI and Participating Subsidiaries, which provides death benefits to an executive'sexecutive’s beneficiaries following the executive'sexecutive’s death while employed or after retirement. As part of the freeze, HEI closed the plan to new participants and ceased all benefit accruals for current participants (i.e., there will be no increase in death benefits due to salary increases after September 9, 2009). Under contracts with Executive Death Benefit Plan participants in effect before September 2009, the death benefits were grossed up for tax purposes. This treatment was considered appropriate because the executive death benefit is a form of life insurance and, traditionallyhistorically, life insurance proceeds have been excluded from income for federal tax purposes. Ms. Lau isand Mr. Seu are covered under the Executive Death Benefit Plan. Messrs. Hazelton and OshimaMurao are not covered under the plan because they joined the Company after the plan was frozen. Mr. Wacker also joinedis not covered because ASB after the plan was frozen, and ASB wasis not a participating employer in the plan in any event.plan. Death benefits are discussed in further detail in the "2018“2020 Pension Benefits"Benefits” table and related notes on pages 56-57.in the “Executive Compensation Tables” section below. Double-trigger change-in-control agreements The Compensation Committee and Board consider change-in-control agreements to be an appropriate tool to recruit executives as an expected part of their compensation package to encourage the continued attention of key executives to the performance of their duties without distraction in the event of a potential change in control and to assist in retaining key executives. Change-in-control agreements can protect against executive flight during a transaction when key executives might, in the absence of the agreement, leave the Company and accept employment elsewhere. As of December 31, 2018, Ms. Lau and Messrs. Hazelton and Wacker2020, each of the named executive officers had a change-in-control agreement. All of the change-in-control agreements are double trigger, which means that they provide for cash severance and other benefits only upon a qualifying termination of the executives'executives’ employment following a change in control. In determining the amount an executive is eligible to receive in such an event, the Compensation Committee takes into account the executive'sexecutive’s expected role in a potential transaction, value to the organization and internal equity. The agreements approved by the Compensation Committee provide for a cash lump sum payment of three times base salary plus annual incentive for Ms. Lau and two times base salary plus annual incentive for Messrs. Hazelton Murao, Seu and Wacker. The annual incentive pay used in calculating the severance payment is the greater of the current annual incentive target or the largest actual annual incentive payout during the preceding three fiscal years. Aggregate payments under these agreements are limited to the maximum amount deductible under Section 280G of the Internal Revenue Code and there are no tax gross ups with respect to payments under these agreements. Payment of the severance benefits is conditioned on the Company receiving a release of claims by the executive. The change-in-control agreements have initial terms of two years and automatically renew for an additional year on each anniversary unless 90 days'days’ notice of nonrenewal TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS | | | |
is provided by either party, so that the protected period is at least one year upon nonrenewal. The agreements remain in effect for two years following a change in control. The agreements define a change in control generally as a change in ownership of HEI, a substantial change in the voting power of HEI'sHEI’s securities or a change in the majority of the composition of the Board following consummation of a merger, tender offer or similar transaction. The agreement for Mr. Wacker also defines a change in control generally as a change in ownership of ASB. Change-in-control benefits are discussed in further detail in the "Potential“Potential Payments Upon Termination or Change in Control"Control” section and related notes on pages 59-60.45
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in the “Executive Compensation Tables” section below. HEI provides minimal other compensation to the named executive officers in the form of perquisites because such items are commonly provided to business executives in Hawaii, such as club memberships primarily for the purpose of business entertainment, or are necessary to recruit executives, such as relocation expenses or extra weeks of vacation. HEI may, from time to time, reimburse for reasonable business-related expenses. In 2018,2020, each named executive officer had a Company-paid club membership for the primary purpose of business entertainment expected of executives in their positions. Mr. Hazelton received four weeks of vacation in 2018,2020, which was more than other employees with similar length of service typically receive. Mr. Wacker received 28 days of paid time off in 2018, which is more than ASB employees with similar length of service below the senior vice president level receive.
HEI has eliminated nearly all tax gross ups. There are no tax gross ups on club membership initiation fees or membership dues, or in the change-in-control agreements for the named executive officers who have such agreements. As discussed under "Executive“Benefits — Executive Death Benefit Plan,"Plan” above, tax gross ups of death benefits only apply to executives who participated in the Executive Death Benefit Plan before it was frozen in 2009. Additional policies and information
Our programs are designed to guard against excessive risk
Our programs are designed to guard against excessive risk
|
HEI's
HEI’s compensation policies and practices are designed to encourage executives to build value for all stakeholders, including shareholders, customers and employees, and to discourage decisions that introduce inappropriate risks. HEI's
HEI’s Enterprise Risk Management (ERM) function is principally responsible for identifying and monitoring risk at the holding company and its subsidiaries, and for reporting on high risk areas to the Board and designated Board committees. As a result, all HEI directors, including those who serve on the Compensation Committee, are apprised of risks that could reasonably be expected to have a material adverse effect on HEI.
Risk assessment. On an annual basis, the Compensation Committee and its independent compensation consultant review a risk assessment of compensation programs in place at HEI and its subsidiaries for all employees, which is updated annually by the Company'sCompany’s ERM function. Based on its review of the risk assessment of compensation programs in place in 20182020 and consultation with FW Cook, the Compensation Committee believes that the Company'sCompany’s compensation plans do not encourage risk taking that is reasonably likely to have a material adverse effect on the Company.
Risk mitigation features of our programs. Our compensation programs incorporate the following features to promote prudent decision-making and guard against excessive risk:•
Financial performance objectives for the annual incentive program are linked to Board-approved budget guidelines, and nonfinancial measures (such as customer satisfaction, reliability and safety) are aligned with the interests of all HEI stakeholders.
•An executive compensation recovery policy ("clawback policy")(clawback policy) permits recoupment of performance-based compensation paid to executives found personally responsible for fraud, gross negligence or intentional misconduct that causes a significant restatement of HEI'sHEI’s financial statements.
•Annual and long-term incentive awards are capped at maximum performance levels.
•Financial opportunities under long-term incentives are greater than those under annual incentives, emphasizing the importance of long-term outcomes.
•Share ownership and retention guidelines, requiring named executive officers to hold significant amounts of HEI stock, promote a shared interest in HEI'sHEI’s long-term performance.
•In typical circumstances long-termLong-term incentive payouts have beenare 100% equity-based, so executives share in the same upside potential and downside risk as all shareholders. In light of the then-pending merger with NextEra Energy, however, the Compensation46
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Committee decided to provide for the 2016-18 LTIP to be settled in cash in lieu of HEI Common Stock. The Compensation Committee determined that the Company's stock price might be affected at least in part by merger considerations unrelated to the Company's true operating performance and that, as a result, the compensatory goals of the LTIPs would be better served by a cash settlement. Following the termination of the HEI/NextEra Energy merger agreement in July 2016, the Compensation Committee determined in 2017 to return to exclusively equity-based LTIPs.
•
Annual grants of RSUs and long-term incentives vest over a period of years to encourage sustained performance and executive retention.
•Performance-based plans use a variety of financial metrics (e.g., net income, ROACE) and nonfinancial performance metrics that correlate with long-term creation of shareholder value and are impacted by management decisions. TABLE OF CONTENTS | | | COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Committee and Board continuously monitor risks faced by the enterprise, including through management presentations at quarterly meetings and through periodic written reports from management.
Share ownership and retention are required throughout employment with the Company
Share ownership and retention are required throughout employment with the Company
|
HEI named executive officers are required to own and retain HEI stock throughout employment with the Company. Each officer subject to the requirements has until January 1 of the year following the fifth anniversary of the later of (i) an amendment to his or her required level of stock ownership or (ii) first becoming subject to the requirements (compliance date)(Compliance Date) to reach the following ownership levels: Position
| | | | Value of Stock to be Owned
| |
|---|
| | | | HEI President & CEO
| | | 5x base salary | | | Other Named Executive Officers | | 2x base salary | | | | 2x base salary | |
The compliance dates were January 1, 2015 for Ms. Lau, January 1, 2016 for Mr. Wacker, January 1, 2020 for Mr. Oshima and January 1, 2022 for Mr. Hazelton.
Ms. Lau and Mr.Messrs. Hazelton and Wacker each exceeded the specified level of stock ownership for their positions by the time of their respective compliance dates. Messrs. Murao and Seu have not yet reached their respective compliance dates. Until reaching the applicable stock ownership target, officers subject to the requirements must retain 50% of shares received in payout under the LTIP (net of any shares withheld for taxes) and 50% of shares received through the vesting of RSUs (net of any shares withheld for taxes). The Compensation Committee has the authority to approve hardship exceptions to these retention requirements.
Hedging and pledging are prohibited
Hedging and pledging are prohibited
|
The Company'sCompany’s Insider Trading Policy, among other prohibitions, prohibits all directors, officers and employees of HEI and its subsidiaries (as well as the spouses, minor children, adult family members sharing the same household and any other person for whom the director, officer or employee exercises substantial control over such person's securities trading decisions) from trading in options, warrants, puts, calls or similar instruments on Company securities, making short sales in Company securities, holding Company securities in margin accounts or pledging Company securities or engaging (directly or indirectly) in hedging transactions, or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company securities.
Hedging transactions include (but are not limited to) collars, equity swaps, exchange funds and prepaid variable forward sale contracts. Clawback policy applies to performance-based pay
Clawback policy applies to performance-based pay
|
HEI has an executive compensation clawback policy that applies to any performance-based compensation awarded to an executive officer. Under that policy, in the event the financial statements of HEI or any of its subsidiaries are significantly restated, the Compensation Committee and Board will review the circumstances that caused the need for the restatement and determine whether fraud, gross negligence or intentional misconduct werewas involved. If so, the Board may direct the Company to recover all or a portion of 47
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any performance-based award from the executive officer(s) found personally responsible. The SEC has issued proposed rules concerning clawback policies pursuant to the Dodd-Frank Act. HEI will amend its clawback policy to ensure it is consistent with the final rules as and when required.
The Compensation Committee considers tax and accounting impacts on compensation
The Compensation Committee considers tax and accounting impacts on compensation
|
In designing compensation programs, the Compensation Committee considers tax and accounting implications of its decisions, along with other factors described in this Proxy Statement.
Tax matters. Section 162(m) of the Internal Revenue Code generally limits to $1 million, per applicable executive, the annual federal income tax deduction that a publicly held corporation may claim for total taxable compensation payable to certain covered executive officers. The tax reform legislation passed in December 2017 amended Section 162(m), among other changes, to broaden the scope to includeofficers, including both current and former covered executives and to eliminate an exemption to this deduction limitation for certain performance-based compensation.executives.In determining compensation for our executive officers, the Compensation Committee primarily considers factors that provide incentives for the achievement of business objectives, but also considers the extent to which the compensation is deductible. The Compensation Committee continues to evaluaterecognizes the changes toimpact of Section 162(m) and theirits significance to the company'scompany’s compensation programs but retains the flexibility and discretion to structure compensation appropriately, whether or not deductible. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS | | | |
Another tax consideration factored into the design of the Company'sCompany’s compensation programs is compliance with the requirements of Section 409A of the Internal Revenue Code, for which noncompliance can result in additional taxes on participants in deferred compensation arrangements. The new tax reform law did not change the requirements of Section 409A.
Accounting matters. In establishing performance goals for equity compensation, the Compensation Committee considersmay consider the impact of accounting rules, including relevant plan provisions that govern how discretion may be used.rules. Accounting rules also prescribe the way in which compensation is expensed. For example, under GAAP, compensation is generally expensed when earned. Financial Accounting Standards Board Accounting Standards Codification Topic 718 generally requires that equity compensation awards be accounted for based on their grant dategrant-date fair value, andwhich is recognized over the relevant service periods. The Compensation Committee also has discretion in determining the level of achievement for the award and may determine that there should not be any incentive payout that would result solely from the adoption of a new accounting principle that affects a financial measure or vice versa.measure. Table of ContentsTABLE OF CONTENTS
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COMPENSATION COMMITTEE REPORT
The Compensation Committee, which is composed solely of independent directors, has reviewed and discussed with management the foregoing Compensation Discussion and Analysis. Based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into HEI's Annual Report onHEI’s 2020 Form 10-K for the year ended December 31, 2018 (HEI's 2018 Form 10-K).10-K. Compensation Committee
Richard J. Dahl, Chairperson
Thomas B. Fargo Chairperson
Peggy Y. Fowler Jeffrey N. WatanabeMary G. Powell
Eva T. Zlotnicka COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of the threefive independent directors listed above under "Compensation“Compensation Committee Report."” No member of the Compensation Committee during 20182020 was an employee or former employee of HEI. During 2018,2020, no member of the Compensation Committee had a relationship that must be described under SEC rules regarding disclosure of related person transactions. In 2018,2020, none of HEI'sHEI’s executive officers served on the compensation committee (or its equivalent) or board of directors of another entity excluding(excluding tax-exempt organizations,organizations) where an executive officer of such an entity served on HEI'sthe Compensation Committee or Board of Directors.
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EXECUTIVE COMPENSATION TABLES
Summary Compensation Table The table on the following pagebelow shows total compensation for 2016-18years ended December 31, 2018 through 2020 for all of the named executive officers (NEOs) other than Messrs. Murao and Seu, and for 2020 for Messrs. Murao and Seu (who were not NEOs in 2018 and 2019). •
Cash compensation earned for the applicable year is reported in the "Salary," "Nonequity“Salary,” “Nonequity Incentive Plan Compensation"Compensation” and "All“All Other Compensation"Compensation” columns (except see explanation in the following paragraph below regarding the 2015-17 LTIP and 2016-18 LTIP awards). For Mr. Hazelton, additional Due to the disclosure timing differences between cash compensation is shownand equity-based LTIP awards, the amounts in the "Bonus" column, which representsSummary Compensation Table for 2018 are notably higher than, and not comparable to, the replacementreported amount for 2019 and 2020, and are not reflective of amounts he would have earned from his previous employer had he not rejoined HEI2018 NEO target compensation. This is because LTIP awards made in October 2016. The Compensation Committee deemed payment of these amounts2016 (settled in 2018) were denominated in cash rather than in stock due to the NextEra merger that was pending when the applicable award opportunities were established. SEC rules require cash-denominated LTIP awards to be appropriatereported in the year settled, whereas equity-based awards are reported in the year in which they are granted. As a result, the 2018 amounts in the table include both (i) cash settlement of LTIP awards granted in 2016 (with respect to recruit Mr. Hazelton.
•For 2017the 2016-18 LTIP), and (ii) equity-based LTIP grants made in 2018 (with respect to the "Stock Awards"2018-20 LTIP).The “Stock Awards” column reflects: (i) the opportunity to earn shares of HEI Common Stock under the 2017-192018-20 LTIP, 2019-21 LTIP and 2018-202020-22 LTIP, respectively, if performance metrics are achieved;achieved and (ii) RSUs that vest over 2017-202018-21, 2019-22 and 2018-21,2020-23, respectively, and may be forfeited in whole or in part if the executive leaves before the vesting period ends.
•For 2016, the "Stock Awards" column reflects only RSUs granted in 2016 since the 2016-18 LTIP was denominated in cash rather than in stock; this was due to the NextEra merger that was pending when the applicable award opportunities were established. HEI's return to exclusively equity-based long-term incentive compensation in 2017 impacts the amounts in the 2018 Summary Compensation Table. SEC rules require the 2015-17 LTIP and 2016-18 LTIP cash payouts to be included in the table in 2017 and 2018, respectively, the last year of the performance period (not the year in which awards are granted as is the case with equity-based awards). As a result, the 2017 and 2018 amounts in the table includeboth the 2015-17 LTIP and 2016-18 LTIP, respectively, cash payouts and the 2017-19 and 2018-20 equity-based LTIPs, respectively, and RSU awards granted in 2017 and 2018, respectively, which are not reflective of 2017 and 2018 target NEO compensation. By contrast, the 2016 compensation amounts do not include any LTIP amounts because there were no LTIP cash payouts or equity-based LTIP awards granted in 2016. Our LTIP programs and practices have not changed (i.e., one LTIP award covering a 3-year performance period is granted each year), however, due to the disclosure timing differences between cash and equity-based LTIPs, the amounts in the Summary Compensation Table for 2017 and 2018 are notably higher than, and not comparable to, the reported amount for 2016, and are not reflective of 2017 and 2018 NEO target compensation.For the following selected NEOs, the total compensation amounts for 2017 without the 2015-17 "cash" LTIP payout and only including the 2017-19 "equity" LTIP award and 2018 without the 2016-18 "cash" LTIP payout and only including the 2018-20 "equity" LTIP award are as follows:
| | | | | Name
| | 2017 Total
Compensation
Without 2015-17
"cash" LTIP
| | 2018 Total
Compensation
Without 2016-18
"cash" LTIP
|
|---|
| | | | | | Constance H. Lau | | $4,576,365 | | $4,022,933 | Gregory C. Hazelton | | $1,538,175 | | $1,608,651 | Alan M. Oshima | | $2,272,842 | | $2,295,609 | Richard F. Wacker | | $2,447,840 | | $2,288,674 | | | | | | |
•The "Change in Pension Value and Nonqualified Deferred Compensation Earnings" column sets forth the change in value of pension and executive death benefits, which can fluctuate significantly from year-to-year based on changes in discount rates and other actuarial assumptions and do not necessarily reflect the benefit to be received by the executive. "Total Without Change in Pension Value" shows total compensation as determined under SEC rules minus the change in value of pension and executive death benefits.
The following chart shows 2017 "Total Without Change in Pension Value" excluding the 2015-17 "cash" LTIP and only including the 2017-19 "equity" LTIP award and 2018 "Total Without Change in Pension Value" excluding the 2016-18 "cash" LTIP and only including the 2018-20 "equity" LTIP award:
| | | | | Name
| | 2017 "Total
Without Change in
Pension Value"
Without 2015-17
"cash" LTIP
| | 2018 "Total
Without Change in
Pension Value"
Without 2016-18
"cash" LTIP
|
|---|
| | | | | | Constance H. Lau | | $4,044,602 | | $4,022,933 | Gregory C. Hazelton | | $1,451,726 | | $1,521,935 | Alan M. Oshima | | $2,085,336 | | $2,204,031 | Richard F. Wacker | | $2,447,840 | | $2,288,674 | | | | | | |
Table of Contents
EXECUTIVE COMPENSATION
20182020 SUMMARY COMPENSATION TABLE
| | Constance H. Lau
HEI President & CEO
ASB Chairperson | | | 2020 | | | 950,217 | | | 2,378,882 | | | 1,202,503 | | | 576,610 | | | — | | | 4,531,602 | | | 5,108,212 | | | | 2019 | | | 926,300 | | | 2,344,943 | | | 957,886 | | | 660,533 | | | 13,239 | | | 4,242,368 | | | 4,902,901 | | | | 2018 | | | 921,800 | | | 2,201,594 | | | 2,602,037 | | | — | | | — | | | 5,725,431 | | | 5,725,431 | | | | Gregory C. Hazelton
HEI Executive Vice
President and CFO
| | | 2020 | | | 543,750 | | | 707,755 | | | 412,830 | | | 186,825 | | | 26,328 | | | 1,690,663 | | | 1,877,488 | | | | 2019 | | | 527,917 | | | 693,866 | | | 321,724 | | | 184,099 | | | 26,057 | | | 1,569,564 | | | 1,753,663 | | | | 2018 | | | 512,500 | | | 676,069 | | | 623,082 | | | 86,716 | | | 33,231 | | | 1,844,882 | | | 1,931,598 | | | | Kurt K. Murao
HEI Executive Vice
President, General Counsel,
Chief Administrative Officer
and Corporate Secretary | | | 2020 | | | 352,000 | | | 369,992 | | | 244,954 | | | 315,725 | | | — | | | 966,946 | | | 1,282,671 | | | | Scott W. H. Seu
Hawaiian Electric
President & CEO | | | 2020
| | | 419,750 | | | 651,282 | | | 394,587 | | | 999,547 | | | — | | | 1,465,619 | | | 2,465,166 | | | | Richard F. Wacker
ASB President & CEO
| | | 2020 | | | 717,700 | | | 718,864 | | | 539,854 | | | — | | | 16,022 | | | 1,992,440 | | | 1,992,440 | | | | 2019 | | | 700,200 | | | 710,286 | | | 519,548 | | | — | | | 37,857 | | | 1,967,891 | | | 1,967,891 | | | | 2018 | | | 679,800 | | | 692,855 | | | 1,893,928 | | | — | | | 47,371 | | | 3,313,954 | | | 3,313,954 | |
1
| Salary. This column represents cash base salary received for the year. |
2
| Stock Awards. These amounts represent the aggregate grant date fair value of stock awards granted in the years shown computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718). For 2018, 2019 and 2020, these amounts are composed of: (i) the opportunity (based on probable outcome of performance conditions (in this case, target) as of the grant date) to earn shares of HEI Common Stock in the future pursuant to the 2018-20, 2019-21 and 2020-22 LTIPs, respectively, if pre-established performance goals are achieved and (ii) RSUs vesting in installments over a four-year period. Since the 2016-18 LTIP is denominated in cash rather than in stock, in accordance with SEC rules, the cash payouts are reported in the “Nonequity Incentive Plan Compensation” column in this Summary Compensation Table for 2018. See the 2020 Grants of Plan-Based Awards table below for the portion of the amount in the Stock Awards column above that is composed of 2020 |
| | | | | | | | | | | | | | | | | | | | | | | | | | Name and 2018
Principal Positions
| | Year
| | Salary
($)1
| | Bonus
($)2
| | Stock
Awards
($)3
| | Nonequity
Incentive Plan
Compensation
($)4
| | Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)5
| | All Other
Compensation
($)6
| | Total
Without
Change
in Pension
Value
($)7
| | Total
($)
| |
|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | Constance H. Lau | | | 2018 | | | 921,800 | | | — | | | 2,201,594 | | 2,602,037 | | — | | — | | | 5,725,431 | | | 5,725,431 | | HEI President & CEO | | | 2017 | | | 893,533 | | | — | | | 2,151,295 | | 2,337,155 | | 531,763 | | — | | | 5,381,983 | | | 5,913,746 | | ASB Chair | | | 2016 | | | 864,700 | | | — | | | 648,531 | | 1,182,753 | | 364,325 | | — | | | 2,695,984 | | | 3,060,309 | | Hawaiian Electric Chair | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gregory C. Hazelton* | | | 2018 | | | 512,500 | | | — | | | 676,069 | | 623,082 | | 86,716 | | 33,231 | | | 1,844,882 | | | 1,931,598 | | HEI Executive Vice | | | 2017 | | | 487,500 | | | — | | | 597,967 | | 327,163 | | 86,449 | | 39,096 | | | 1,451,726 | | | 1,538,175 | | President, CFO & Treasurer | | | 2016 | | | 84,836 | | | 256,670 | | | 508,320 | | 70,169 | | 16,711 | | 115,210 | | | 1,035,205 | | | 1,051,916 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Alan M. Oshima | | | 2018 | | | 686,750 | | | — | | | 1,114,464 | | 1,012,797 | | 91,578 | | 13,635 | | | 2,827,646 | | | 2,919,224 | | Hawaiian Electric | | | 2017 | | | 655,583 | | | — | | | 1,071,359 | | 847,170 | | 187,506 | | 13,230 | | | 2,587,342 | | | 2,774,848 | | President & CEO | | | 2016 | | | 583,500 | | | — | | | 379,282 | | 445,939 | | 153,231 | | 21,296 | | | 1,430,017 | | | 1,583,248 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Richard F. Wacker | | | 2018 | | | 679,800 | | | — | | | 692,855 | | 1,893,928 | | — | | 47,371 | | | 3,313,954 | | | 3,313,954 | | ASB President & CEO | | | 2017 | | | 660,000 | | | — | | | 679,044 | | 1,699,252 | | — | | 52,796 | | | 3,091,092 | | | 3,091,092 | | | | | 2016 | | | 640,800 | | | — | | | 128,151 | | 693,012 | | — | | 47,281 | | | 1,509,244 | | | 1,509,244 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
*Mr. Hazelton joined HEI as Senior Vice President, Finance on October 24, 2016, was promoted to HEI Executive Vice President & CFO on April 2, 2017 and also assumed the role of Treasurer on March 29, 2018.
1Salary. This column represents cash base salary received for the year. Mr. Hazelton's annualized 2016 salary of $450,000 was pro-rated based on the number of days he worked for HEI in 2016.
2Bonus. This column represents non-salary cash payments that are not awarded under a nonequity incentive plan. In recruiting Mr. Hazelton to return to HEI, the Compensation Committee deemed it appropriate to provide replacement compensation for cash amounts Mr. Hazelton had to forfeit upon leaving his prior employer to rejoin HEI. The amount shown replaced annual incentive pay for 2016 and long-term incentive pay for 2015-17 and 2016-18 that Mr. Hazelton lost when leaving his prior employer.
3Stock Awards. These amounts represent the aggregate grant date fair value of stock awards granted in the years shown computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718). For 2017 and 2018, these amounts are composed of: (i) the opportunity (based on probable outcome of performance conditions (in this case, target) as of the grant date) to earn shares of HEI Common Stock in the future pursuant to the 2017-19 and 2018-20 LTIPs, respectively, if pre-established performance goals are achieved and (ii) RSUs vesting in installments over a four-year period. For 2016, these amounts were composed of RSUs granted in 2016 and vesting in installments over a four-year period (except in the case of Mr. Hazelton's 2016 RSUs). Since the 2015-17 and 2016-18 LTIPs are denominated in cash rather than in stock, in accordance with SEC rules, the cash payouts are reported in the "Nonequity Incentive Plan Compensation" column in this Summary Compensation Table for 2017 and 2018, respectively. See the 2018 Grants of Plan-Based Awards table below for the portion of the amount in the Stock Awards column above that is composed of 2018 TABLE OF CONTENTS grants of RSUs and performanceperformance-based award opportunities under the 2018-202020-22 LTIP. Assuming achievement of the highest level of performance conditions, the maximum value of the performance awards payable in 20212023 under the 2018-202020-22 LTIP would be: Ms. Lau $3,020,505;$3,332,385; Mr. Hazelton $839,670;$871,721; Mr. Oshima $1,336,102Murao $423,223; Mr. Seu $672,941 and Mr. Wacker $1,113,747.
For a discussion of the assumptions underlying the amounts set out for the RSUs and 2018-2020 LTIP, see Note 10 to the Consolidated Financial Statements in HEI's 2018 Form 10-K.
4Nonequity Incentive Plan Compensation. These amounts represent cash payouts to named executive officers under the annual incentive plan, the EICP, earned for the years shown. For 2017 and 2018, the amounts in this column also include the cash payouts from the 2015-17 and 2016-18 LTIPs, respectively. Mr. Hazelton's 2016 EICP payout represents a pro-rata amount for the number of days he worked for HEI in 2016.
5Change in Pension Value and Nonqualified Deferred Compensation Earnings. These amounts represent the change in present value of the accrued pension and executive death benefits from beginning of year to end of year for 2016, 2017 and 2018. These amounts are not current payments; pension and executive death benefits are only paid after retirement or death, as applicable. The amounts in this column depend heavily on changes in actuarial assumptions, such as discount rates, and also are impacted by years of service and age. In accordance with SEC rules, the negative change in value for Ms. Lau is shown as no change in the table above. For a further discussion of the applicable plans, see the 2018 Pension Benefits table and related notes below. No named executive officer had above-market or preferential earnings on nonqualified deferred compensation for the periods covered in the table above.51
Table of Contents
EXECUTIVE COMPENSATION
6All Other Compensation. The following table summarizes the components of "All Other Compensation" with respect to 2018:
| | | | | | | | | Name
| | Contributions
For a discussion of the assumptions underlying the amounts set out for the RSUs and 2020-22 LTIP, see Note 11 to Defined
Contribution
Plans
($)a
| | Other
($)b
| | Total All
Other
Compensation
($)
|
|---|
| | | | | | | | | Constance H. Lau*
| | — | | — | | — | | Gregory C. Hazelton
| | 8,250 | | 24,981 | | 33,231 | | Alan M. Oshima
| | 8,250 | | 5,385 | | 13,635 | | Richard F. Wacker
| | 20,350 | | 27,021 | | 47,371 | | | | | | | | the Consolidated Financial Statements in HEI’s 2020 Form 10-K. |
3
| Nonequity Incentive Plan Compensation. These amounts represent cash payouts to named executive officers under the annual incentive plan, the EICP, earned for the years shown. For 2018, the amounts in this column also include the cash payouts from the 2016-18 LTIP. |
4
| Change in Pension Value and Nonqualified Deferred Compensation Earnings. These amounts represent the change in present value of the accrued pension and executive death benefits from beginning of year to end of year for 2018, 2019 and 2020. These amounts are not current payments; pension and executive death benefits are only paid after retirement or death, as applicable. The amounts in this column depend heavily on changes in actuarial assumptions, such as discount rates, and also are impacted by years of service and age. For 2020 and 2019, the increase in value was primarily due to a decrease in discount rates, which results in an increase in the present value of the accrued benefit. In accordance with SEC rules, the negative change in value in 2018 for Ms. Lau is shown as no change in the table above. For a further discussion of the applicable plans, see the 2020 Pension Benefits table and related notes below. No named executive officer had above-market or preferential earnings on nonqualified deferred compensation for the periods covered in the table above. |
5
| All Other Compensation. The following table summarizes the components of “All Other Compensation” with respect to 2020: |
| | Constance H. Lau | | | — | | | — | | | — | | | | Gregory C. Hazelton | | | 9,750 | | | 16,578 | | | 26,328 | | | | Kurt K. Murao | | | — | | | — | | | — | | | | Scott W. H. Seu | | | — | | | — | | | — | | | | Richard F. Wacker | | | 11,400 | | | 4,622 | | | 16,022 | |
a
| Mr. Wacker received matching contributions to his account in the ASB 401(k) Plan up to the amount permitted based on eligible compensation ($285,000 in 2020). Mr. Hazelton received matching contributions to his account in the HEI Retirement Savings Plan up to the amount permitted based on eligible compensation ($285,000 in 2020). |
b
| Messrs. Hazelton and Wacker received club membership dues. Mr. Hazelton also had one more week of vacation than employees with similar length of service would usually receive. |
6
| Total Without Change in Pension Value. Total Without Change in Pension Value represents total compensation as determined under SEC rules, minus the change in pension value and executive death benefits amount reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column. We include this column because the magnitude of the change in pension value and death benefits in a given year is largely determined by actuarial assumptions, such as discount rates and mortality assumptions set by the Society of Actuaries, and does not reflect decisions made by the Compensation Committee for that year or the actual benefit necessarily to be received by the recipient. The amounts reported in the Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column and are not a substitute for the Total column. |
aMr. Wacker received matching contributions to his account in the ASB 401(k) Plan up to the amount permitted based on eligible compensation ($275,000 in 2018) and the portion of his 2018 profit sharing contribution based on eligible compensation. Messrs. Hazelton and Oshima received matching contributions to their accounts in the HEI Retirement Savings Plan up to the amount permitted based on eligible compensation ($275,000 in 2018).
bMr. Hazelton received club membership dues and had two more weeks of vacation than employees with similar length of service would usually receive. Mr. Oshima received club membership dues. Mr. Wacker received club membership dues, two more days of paid time off than ASB employees with similar length of service below the Senior Vice President level receive, and a profit sharing contribution to his account under the ASB Select Deferred Compensation Plan in the amount of his profit sharing contribution that could not be included in his ASB 401(k) Plan account due to limits on eligible compensation.
*The total value of perquisites and other personal benefits for Ms. Lau was less than $10,000 for 2018 and is therefore not included in the table above.
7Total Without Change in Pension Value. Total Without Change in Pension Value represents total compensation as determined under SEC rules, minus the change in pension value and executive death benefits amount reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column. We include this column because the magnitude of the change in pension value and death benefits in a given year is largely determined by actuarial assumptions, such as discount rates and mortality assumptions set by the Society of Actuaries, and does not reflect decisions made by the Compensation Committee for that year or the actual benefit necessarily to be received by the recipient. The amounts reported in the Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column and are not a substitute for the Total column.
Additional narrative disclosure about salary, bonus, stock awards, nonequity incentive plan compensation, change in pension benefits and nonqualified deferred compensation earnings and all other compensation can be found in the Compensation Discussion and Analysis above. 52
TABLE OF CONTENTS Table of Contents
EXECUTIVE COMPENSATION
Grants of Plan-BasedPlan-Based Awards
The table below shows cash performance award opportunities under the 20182020 EICP, equity-based performance award opportunities granted under the LTIP for performance over the 2018-202020-22 period and payable in 20212023 and RSUs granted in 20182020 and vesting in installments over four years. 2018
2020 GRANTS OF PLAN-BASEDPLAN-BASED AWARDS
| | Constance H. Lau | | | 2/11/20 EICP | | | 475,109 | | | 950,217 | | | 1,900,434 | | | — | | | — | | | — | | | — | | | — | | | | 2/11/20 LTIP | | | — | | | — | | | — | | | 17,271 | | | 34,543 | | | 69,085 | | | — | | | 1,666,217 | | | | 2/11/20 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 14,804 | | | 712,665 | | | | Gregory C. Hazelton | | | 2/11/20 EICP | | | 163,125 | | | 326,250 | | | 652,500 | | | — | | | — | | | — | | | — | | | — | | | | 2/11/20 LTIP | | | — | | | — | | | — | | | 4,518 | | | 9,036 | | | 18,072 | | | — | | | 435,860 | | | | 2/11/20 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,648 | | | 271,895 | | | | Kurt K. Murao | | | 2/11/20 EICP | | | 96,800 | | | 193,600 | | | 387,200 | | | — | | | — | | | — | | | — | | | — | | | | 2/11/20 LTIP | | | — | | | — | | | — | | | 2,194 | | | 4,387 | | | 8,774 | | | — | | | 211,611 | | | | 2/11/20 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,290 | | | 158,381 | | | | Scott W. H. Seu | | | 2/11/20 EICP | | | 157,406 | | | 314,813 | | | 629,625 | | | — | | | — | | | — | | | — | | | — | | | | 2/11/20 LTIP | | | — | | | — | | | — | | | 3,488 | | | 6,975 | | | 13,951 | | | — | | | 336,446 | | | | 2/11/20 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,540 | | | 314,836 | | | | Richard F. Wacker | | | 2/11/20 EICP | | | 287,080 | | | 574,160 | | | 1,148,320 | | | — | | | — | | | — | | | — | | | — | | | | 2/11/20 LTIP | | | — | | | — | | | — | | | 5,963 | | | 11,927 | | | 23,854 | | | — | | | 575,311 | | | | 2/11/20 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,982 | | | 143,553 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
| |
| | All Other
Stock
Awards:
Number of
Shares of
Stock or Units
(#)3
| |
| |
|---|
| |
| | Estimated Future Payouts
Under Nonequity Incentive
Plan Awards1 | | Estimated Future Payouts
Under Equity Incentive Plan
Awards2 | |
| |
|---|
| |
| | Grant Date
Fair Value
of Stock
Awards
($)4
| |
|---|
Name
| | Grant Date
| | Threshold
($)
| | Target
($)
| | Maximum
($)
| | Threshold
(#)
| | Target
(#)
| | Maximum
(#)
| |
|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Constance H. | | 1/31/18 EICP | | | 460,900 | | | 921,800 | | | 1,843,600 | | | — | | | — | | | — | | | — | | | — | | Lau | | 1/31/18 LTIP | | | — | | | — | | | — | | | 21,619 | | | 43,239 | | | 86,478 | | | — | | | 1,510,253 | | | | 1/31/18 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 20,268 | | | 691,341 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gregory C. | | 1/31/18 EICP | | | 153,750 | | | 307,500 | | | 615,000 | | | — | | | — | | | — | | | — | | | — | | Hazelton | | 1/31/18 LTIP | | | — | | | — | | | — | | | 6,010 | | | 12,020 | | | 24,040 | | | — | | | 419,835 | | | | 1/31/18 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,512 | | | 256,234 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Alan M. | | 1/31/18 EICP | | | 257,531 | | | 515,063 | | | 1,030,125 | | | — | | | — | | | — | | | — | | | — | | Oshima | | 1/31/18 LTIP | | | — | | | — | | | — | | | 9,563 | | | 19,127 | | | 38,253 | | | — | | | 668,066 | | | | 1/31/18 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,087 | | | 446,398 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Richard F. | | 1/31/18 EICP | | | 271,920 | | | 543,840 | | | 1,087,680 | | | — | | | — | | | — | | | — | | | — | | Wacker | | 1/31/18 LTIP | | | — | | | — | | | — | | | 7,972 | | | 15,944 | | | 31,887 | | | — | | | 556,893 | | | | 1/31/18 RSU | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,986 | | | 135,962 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EICPEICP: Executive Incentive Compensation Plan (annual incentive)
LTIP Long-Term
LTIP: Long-Term Incentive Plan (2018-20(2020-22 period) RSU
RSU: Restricted stock units1Estimated Future Payouts Under Nonequity Incentive Plan Awards. Shows possible cash payouts under the 2018 EICP based on meeting performance goals set in January 2018 at threshold, target and maximum levels. Actual payouts for the 2018 EICP are reported in the 2018 Summary Compensation Table above.
2Estimated Future Payouts Under Equity Incentive Plan Awards. Represents number of shares of stock that may be issued under the 2018-20 LTIP based upon the achievement of performance goals set in January 2018 at threshold, target and maximum levels and vesting at the end of the three-year performance period. LTIP awards are forfeited for terminations of employment during the vesting period, except for terminations due to death, disability or retirement, which allow for pro-rata participation based upon completed months of service after a minimum number of months of service in the performance period. Dividend equivalent shares, not included in the chart, are compounded over the period at the actual dividend rate and are paid at the end of the performance period based on actual shares earned.
3All Other Stock Awards: Number of Shares of Stock or Units. Represents number of RSUs awarded in 2018 that will vest and be issued as unrestricted stock in four equal annual installments on the grant date anniversaries. Unvested awards are forfeited for terminations of employment during the vesting period, except for terminations due to death, disability or retirement, which allow for pro-rata vesting up to the date of termination. Receipt of RSU awards is generally subject to continued employment and expiration of the applicable vesting period. Dividend equivalent shares, not included in the chart, are compounded over the period at the actual dividend rate and are paid in HEI Common Stock on RSUs vesting in a given year.
4Grant Date Fair Value of Stock Awards. Grant date fair value for shares under the 2018-20 LTIP is estimated in accordance with the fair-value based measurement of accounting, as described in FASB ASC Topic 718 based upon the probable (in this case, target) outcome of the performance conditions as of the grant date. For a discussion of the assumptions and methodologies used to calculate the amounts reported, see the discussion of performance awards contained in Note 10 (Share-based compensation) to the Consolidated Financial Statements in HEI's 2018 Form 10-K. Grant date fair value for RSUs is based on the closing price of HEI Common Stock on the NYSE on the date of the grant of the award.
1
| Estimated Future Payouts Under Nonequity Incentive Plan Awards. Shows possible cash payouts under the 2020 EICP based on meeting performance goals set in February 2020 at threshold, target and maximum levels. Actual payouts for the 2020 EICP are reported in the 2020 Summary Compensation Table above. |
2
| Estimated Future Payouts Under Equity Incentive Plan Awards. Represents the number of shares of stock that may be issued under the 2020-22 LTIP based upon the achievement of performance goals set in February 2020 at threshold, target and maximum levels and vesting at the end of the three-year performance period. LTIP awards are forfeited for terminations of employment during the vesting period, except for terminations due to death, disability or retirement, which allow for pro-rata participation based upon completed months of service after a minimum number of months of service in the performance period. Dividend equivalent shares, not included in the table, are compounded over the period at the actual dividend rate and are paid at the end of the performance period based on actual shares earned. |
3
| All Other Stock Awards: Number of Shares of Stock or Units. Represents the number of RSUs awarded in 2020 that will vest and be issued as unrestricted stock in four equal annual installments on the grant date anniversaries. Unvested awards are forfeited for terminations of employment during the vesting period, except for terminations due to death, disability or retirement, which allow for pro-rata vesting up to the date of termination. Receipt of RSU awards is generally subject to continued employment and expiration of the applicable vesting period. Dividend equivalent shares, not included in the table, are compounded over the period at the actual dividend rate and are paid in HEI Common Stock on RSUs vesting in a given year. |
4
| Grant Date Fair Value of Stock Awards. Grant date fair value for shares under the 2020-22 LTIP is estimated in accordance with the fair-value based measurement of accounting, as described in FASB ASC Topic 718 based upon the probable (in this case, target) outcome of the performance conditions as of the grant date. For a discussion of the assumptions and methodologies used to calculate the amounts reported, see the discussion of performance awards contained in Note 11 (Share-based compensation) to the Consolidated Financial Statements in HEI’s 2020 Form 10-K. Grant date fair value for RSUs is based on the closing price of HEI Common Stock on the NYSE on the date of the grant of the award. |
Table of ContentsTABLE OF CONTENTS
EXECUTIVE COMPENSATION
Outstanding Equity Awards at 20182020 Fiscal Year-End
Year-End | | Constance H. Lau | | | 2017 | | | 5,004 | | | 177,092 | | | — | | | — | | | | | | | 2018 | | | 10,134 | | | 358,642 | | | — | | | — | | | | | | | 2019 | | | 13,828 | | | 489,373 | | | 86,042 | | | 3,045,026 | | | | | | | 2020 | | | 14,804 | | | 523,914 | | | 69,085 | | | 2,444,918 | | | | | | | Total | | | 43,770 | | | 1,549,021 | | | 155,127 | | | 5,489,944 | | | | Gregory C. Hazelton | | | 2017 | | | 1,680 | | | 59,455 | | | — | | | — | | | | | | | 2018 | | | 3,756 | | | 132,925 | | | — | | | — | | | | | | | 2019 | | | 5,254 | | | 185,939 | | | 22,417 | | | 793,338 | | | | | | | 2020 | | | 5,648 | | | 199,883 | | | 18,072 | | | 639,568 | | | | | | | Total | | | 16,338 | | | 578,202 | | | 40,489 | | | 1,432,906 | | | | Kurt K. Murao | | | 2017 | | | 616 | | | 21,800 | | | — | | | — | | | | | | | 2018 | | | 1,239 | | | 43,848 | | | — | | | — | | | | | | | 2019 | | | 1,832 | | | 64,834 | | | 7,330 | | | 259,409 | | | | | | | 2020 | | | 3,290 | | | 116,433 | | | 8,774 | | | 310,512 | | | | | | | Total | | | 6,977 | | | 246,915 | | | 16,104 | | | 569,921 | | | | Scott W. H. Seu | | | 2017 | | | 374 | | | 13,236 | | | — | | | — | | | | | | | 2018 | | | 750 | | | 26,543 | | | — | | | — | | | | | | | 2019 | | | 1,913 | | | 67,701 | | | 6,559 | | | 232,123 | | | | | | | 2020 | | | 6,540 | | | 231,451 | | | 13,951 | | | 493,726 | | | | | | | Total | | | 9,577 | | | 338,931 | | | 20,510 | | | 725,849 | | | | Richard F. Wacker | | | 2017 | | | 985 | | | 34,859 | | | — | | | — | | | | | | | 2018 | | | 1,992 | | | 70,497 | | | — | | | — | | | | | | | 2019 | | | 2,788 | | | 98,667 | | | 29,732 | | | 1,052,215 | | | | | | | 2020 | | | 2,982 | | | 105,533 | | | 23,854 | | | 844,193 | | | | | | | Total | | | 8,747 | | | 309,556 | | | 53,586 | | | 1,896,408 | |
1
| Shares or Units of Stock That Have Not Vested. The remaining installments of the 2017 RSUs vested on January 31, 2021. Of the remaining installments of the 2018 RSUs, one installment vested on January 31, 2021 and the remainder will vest on January 31, 2022. Of the remaining installments of the 2019 RSUs, one installment vested on February 14, 2021 and the remainder will vest in equal annual installments on February 14, 2022 and 2023. For the 2020 RSUs, one installment vested on February 11, 2021 and the remainder will vest in equal annual installments on February 11, 2022, 2023 and 2024. |
2
| Market Value. Market value is based upon the closing per-share trading price of HEI Common Stock on the NYSE of $35.39 as of December 31, 2020. |
3
| Number of Unearned Shares, Units or Other Rights That Have Not Vested. Represents number of shares of HEI Common Stock that would be issued under the 2019-21 and 2020-22 LTIPs if performance goals are met at the maximum level at the end of the respective three-year performance periods. |
| | | | | | | | | | | | | | | | |
| |
| | Stock Awards | |
|---|
| |
| |
| |
| | Equity Incentive Plan Awards | |
|---|
| |
| | Shares or Units of
Stock That Have
Not Vested1 | | Number of
Unearned
Shares,
Units or Other
Rights That
Have Not
Vested (#)3
| | Market or
Payout Value of
Unearned Shares,
Units or Other
Rights That
Have Not
Vested ($)2
| |
|---|
Name
| | Grant
Year
| | Number
(#)
| | Market
Value
($)2
| |
|---|
| | | | | | | | | | | | | | | | | | Constance H. Lau | | | 2015 | | | 4,665 | | | 170,832 | | | — | | | — | | | | | 2016 | | | 10,844 | | | 397,107 | | | — | | | — | | | | | 2017 | | | 15,012 | | | 549,739 | | | 42,702 | | | 1,563,747 | | | | | 2018 | | | 20,268 | | | 742,214 | | | 43,239 | | | 1,583,412 | | | | | Total | | | 50,789 | | | 1,859,892 | | | 85,941 | | | 3,147,159 | | | | | | | | | | | | | | | | | | | | Gregory C. Hazelton | | | 2016 | | | 6,488 | | | 237,591 | | | — | | | — | | | | | 2017 | | | 5,040 | | | 184,565 | | | 10,753 | | | 393,775 | | | | | 2018 | | | 7,512 | | | 275,089 | | | 12,020 | | | 440,172 | | | | | Total | | | 19,040 | | | 697,245 | | | 22,773 | | | 833,947 | | | | | | | | | | | | | | | | | | | | Alan M. Oshima | | | 2015 | | | 2,098 | | | 76,829 | | | — | | | — | | | | | 2016 | | | 6,343 | | | 232,281 | | | — | | | — | | | | | 2017 | | | 9,546 | | | 349,575 | | | 18,602 | | | 681,205 | | | | | 2018 | | | 13,087 | | | 479,246 | | | 19,127 | | | 700,431 | | | | | Total | | | 31,074 | | | 1,137,931 | | | 37,729 | | | 1,381,636 | | | | | | | | | | | | | | | | | | | | Richard F. Wacker | | | 2015 | | | 922 | | | 33,764 | | | — | | | — | | | | | 2016 | | | 2,142 | | | 78,440 | | | — | | | — | | | | | 2017 | | | 2,957 | | | 108,285 | | | 22,080 | | | 808,570 | | | | | 2018 | | | 3,986 | | | 145,967 | | | 15,944 | | | 583,869 | | | | | Total | | | 10,007 | | | 366,456 | | | 38,024 | | | 1,392,439 | | | | | | | | | | | | | | | | | | | |
1Shares or Units of Stock That Have Not Vested. The remaining installments of the 2015 RSUs vested on February 6, 2019. Of the remaining installments of the 2016 RSUs for Ms. Lau and Messrs, Oshima and Wacker, one installment vested on February 5, 2019 and the remainder will vest on February 5, 2020. Of the remaining installments of the 2017 RSUs, one installment vested on January 31, 2019 and the remainder will vest in equal annual installments on January 31, 2020 and 2021. For the 2018 RSUs, one installment vested on January 31, 2019 and the remainder will vest in equal annual installments on January 31, 2020, 2021 and 2022. For Mr. Hazelton's HEI RSUs granted to replace the unvested portion of his prior employer RSUs granted in 2015, the remaining installments vested on February 6, 2019. For Mr. Hazelton's HEI RSUs granted to replace the unvested portion of his prior employer RSUs granted in 2016, one installment vested on February 5, 2019, and the remainder will vest on February 5, 2020.
2Market Value. Market value is based upon the closing per-share trading price of HEI Common Stock on the NYSE of $36.62 as of December 31, 2018.
3Number of Unearned Shares, Units or Other Rights That Have Not Vested. Represents number of shares of HEI Common Stock that would be issued under the 2017-19 and 2018-20 LTIPs if performance goals are met at the target level at the end of the respective three-year performance periods, except for Mr. Wacker's 2017-19 LTIP which represents unearned shares between target and maximum.
54
Table of ContentsTABLE OF CONTENTS
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
20182020 Option Exercises and Stock Vested
| | | | | | | |
| | Stock Awards | |
|---|
Name
| | Number of Shares
Acquired on Vesting
(#)
| | Value Realized
on Vesting
($)
| |
|---|
| | | | | | | | | Constance H. Lau | | | 23,417 | 1 | | 762,927 | | | | | | | | | | | Gregory C. Hazelton | | | 7,973 | 1 | | 259,760 | | | | | | | | | | | Alan M. Oshima | | | 10,818 | 1 | | 352,450 | | | | | | | | | | | Richard F. Wacker | | | 4,625 | 1 | | 150,682 | | | | | | | | | | |
1Represents the number of shares acquired (and dividend equivalents paid in stock based on number of shares vested) upon the 2018 vesting of installments of RSUs granted on February 5, 2014, February 6, 2015, February 5, 2016, October 24, 2016 and January 31, 2017. Value realized on vesting includes dividend equivalents.
| | | | | | | | | Name
| | Number of Shares
Acquired on Vesting
| | Compounded
Dividend
Equivalents
| | Total Shares
Acquired on
Vesting
|
|---|
Stock Awards | Constance H. Lau
| | 21,157 | | 2,260 | | 23,417 | | Gregory C. Hazelton
| | 7,261 | | 712 | | 7,973 | | Alan M. Oshima
| | 9,931 | | 887 | | 10,818 | | Richard F. Wacker
| | 4,179 | | 446 | | 4,625 | | |
Constance H. Lau | | | 21,9221 | | | 1,104,869 | | | | | | | 6,4502 | | | 228,2663 | | | | Gregory C. Hazelton | | | 6,7091 | | | 338,134 | | | | | | | 1,7932 | | | 63,4543 | | | | Kurt K. Murao | | | 2,4901 | | | 125,496 | | | | | | | 5552 | | | 19,6413 | | | | Scott W. H. Seu | | | 1,4711 | | | 74,138 | | | | | | | 9592 | | | 33,9393 | | | | Richard F. Wacker | | | 4,3431 | | | 218,887 | | | | | | | 14,6702 | | | 519,1713 | |
1
| Represents the number of shares acquired (and dividend equivalents paid in stock based on number of shares vested) upon the 2020 vesting of installments of RSUs granted on February 5, 2016, October 24, 2016, January 31, 2017, January 31, 2018 and February 14, 2019. Value realized on vesting includes dividend equivalents. |
| | Constance H. Lau | | | 20,102 | | | 1,820 | | | 21,922 | | | | Gregory C. Hazelton | | | 6,217 | | | 492 | | | 6,709 | | | | Kurt K. Murao | | | 2,297 | | | 193 | | | 2,490 | | | | Scott W. H. Seu | | | 1,387 | | | 84 | | | 1,471 | | | | Richard F. Wacker | | | 3,982 | | | 361 | | | 4,343 | |
2
| Represents the number of shares acquired (and dividend equivalents paid in stock based on earned shares) upon vesting of performance share awards under the 2018-20 LTIP, which were payable in stock at the end of the performance period. Value realized on vesting includes dividend equivalents. The Compensation Committee certified the achievement of the applicable performance measures on February 9, 2021. |
| | Constance H. Lau | | | 5,837 | | | 613 | | | 6,450 | | | | Gregory C. Hazelton | | | 1,623 | | | 170 | | | 1,793 | | | | Kurt K. Murao | | | 502 | | | 53 | | | 555 | | | | Scott W. H. Seu | | | 868 | | | 91 | | | 959 | | | | Richard F. Wacker | | | 13,276 | | | 1,394 | | | 14,670 | |
3
| Represents vested 2018-20 LTIP shares at 2020 year-end closing price of HEI Common Stock on the NYSE of $35.39 per share on December 31, 2020. Actual settlement of the performance share awards under the 2018-20 LTIP occurred on February 19, 2021 (after the February 9, 2021 certification of the applicable performance results) based on the closing price of HEI Common Stock on the NYSE of $35.02 per share. The actual settlement amounts were: Ms. Lau $225,879; Mr. Hazelton $62,791; Mr. Murao $19,436; Mr. Seu $33,584 and Mr. Wacker $513,743. |
TABLE OF CONTENTS 55
The table below shows the present value as of December 31, 20182020 of accumulated benefits for each of the named executive officers and the number of years of service credited to each executive under the applicable pension plan and, for Ms. Lau and Mr. Seu, the executive death benefit plan, determined using the interest rate, mortality table and other assumptions described below, which are consistent with those used in HEI'sHEI’s financial statements (see Note 910 to the Consolidated Financial Statements in HEI's 2018HEI’s 2020 Form 10-K): 2018
2020 PENSION BENEFITS
| | Constance H. Lau | | | HEI Retirement Plan1 | | | 29.8 | | | 2,773,101 | | | — | | | | | | | ASB Retirement Plan2 | | | 6.4 | | | 286,120 | | | — | | | | | | | HEI Supplemental Executive Retirement Plan3 | | | 24.3 | | | 8,007,666 | | | — | | | | | | | HEI Excess Pay Plan4 | | | 8.6 | | | 1,831,044 | | | — | | | | | | | HEI Executive Death Benefit5 | | | — | | | 849,854 | | | — | | | | Gregory C. Hazelton | | | HEI Retirement Plan1 | | | 6.1 | | | 330,230 | | | — | | | | | | | HEI Excess Pay Plan4 | | | 6.1 | | | 292,518 | | | — | | | | Kurt K. Murao | | | HEI Retirement Plan1 | | | 9.8 | | | 930,644 | | | — | | | | | | | HEI Excess Pay Plan4 | | | 9.8 | | | 111,670 | | | — | | | | Scott W. H. Seu | | | HEI Retirement Plan1 | | | 27.3 | | | 2,686,155 | | | — | | | | | | | HEI Excess Pay Plan4 | | | 27.3 | | | 425,879 | | | — | | | | | | | HEI Executive Death Benefit5 | | | — | | | 107,941 | | | — | | | | Richard F. Wacker7 | | | — | | | — | | | — | | | — | |
1
| The HEI Retirement Plan is the standard retirement plan for HEI and Hawaiian Electric employees. Normal retirement benefits under the HEI Retirement Plan for management employees hired before May 1, 2011, including Ms. Lau and Messrs. Murao and Seu, are calculated based on a formula of 2.04% × Credited Service (maximum 67%) × Final Average Compensation (average monthly base salary for highest thirty-six consecutive months out of the last ten years). Credited service is generally the same as the years of service with HEI and other participating companies (Hawaiian Electric and its subsidiaries). Credited service is also provided for limited unused sick leave and for the period a vested participant is on long-term disability. The normal form of benefit is a joint and 50% survivor annuity for married participants and a single life annuity for unmarried participants. Actuarially equivalent optional forms of benefit are also available. Participants who qualify to receive retirement benefits immediately upon termination of employment may also elect a single sum distribution of up to $100,000 with the remaining benefit payable as an annuity. Single sum distributions are not eligible for early retirement subsidies, and so may not be as valuable as an annuity at early retirement. Retirement benefits are increased by an amount equal to approximately 1.4% of the initial benefit every twelve months following retirement. The plan provides benefits at early retirement (prior to age 65), normal retirement (age 65), deferred retirement (over age 65) and death. Subsidized early retirement benefits are available for participants who meet certain age and service requirements at ages 50-64. The accrued normal retirement benefit is reduced by an applicable percentage, which ranges from 30% for early retirement at age 50 with at least 15 years of service to 1% at age 59. Accrued benefits are not reduced for eligible employees who retire at age 60 and above. The early retirement subsidies are not available to employees who terminate employment with vested benefits but prior to satisfying the age and service requirements for the early retirement subsidies. |
| HEI and Hawaiian Electric management employees who commenced employment on or after May 1, 2011, such as Mr. Hazelton, receive reduced benefits under the HEI Retirement Plan (e.g., reduced benefit formula, more stringent requirements for subsidized early retirement benefits, reduced early retirement subsidies and no post-retirement cost-of-living adjustment). Normal retirement benefits for these employees are calculated based on a formula of 1.5% × Credited Service × Final Average Compensation (average monthly base salary for highest thirty-six consecutive months out of the last ten years). These employees are eligible for a limited match under the HEI Retirement Savings Plan (50% match on the first 6% of compensation deferred). |
| Ms. Lau and Messrs. Hazelton, Murao and Seu are vested in retirement benefits under the HEI Retirement Plan. |
2
| Ms. Lau is a participant in the ASB Retirement Plan. She is currently eligible to retire with full normal retirement benefits (limited to her years of credited service) under the plan. No other named executive officer is a participant in the plan or entitled to benefits under the plan. At the time of Ms. Lau’s promotion to HEI President and CEO on May 2, 2006, her credited service under the plan was frozen and she resumed participation in the HEI Retirement Plan. Future benefit accruals for all participants under the ASB Retirement Plan were frozen effective December 31, 2007. As a result, credited service and compensation after December 31, 2007 are not recognized in calculating retirement benefits under the plan. Normal retirement benefits under the frozen plan are calculated based on a formula of 1.5% × Credited Service to December 31, 2007 (maximum 35 years) × Final Average Compensation at December 31, 2007 (averaged over the highest paying five consecutive calendar years out of the last ten calendar years prior to 2008). Compensation is primarily gross earnings but excludes commissions, stock options and other equity compensation, LTIP payments, deferrals to and distributions from the ASB Select Deferred Compensation Plan and other “fringe benefits” as defined in the plan. Early retirement benefits are available for participants who retire after attaining age 55 with a minimum of ten years of service. Beginning at age 60 the benefits are subsidized. The accrued normal retirement benefit is reduced by an applicable percentage which ranges from 59.8% for early retirement at age 55 to 2% at age 64. The early retirement subsidies are not available to employees who terminate employment with vested benefits but prior to satisfying the age and service requirements for the early retirement subsidies. |
| | | | | | | | | | | | | Name
| | Plan Name
| | Number of
Years of
Credited Service
(#)
| | Present Value of
Accumulated
Benefit ($)6
| | Payments
During the
Last
Fiscal
Year ($)
| |
|---|
| | | | | | | | | | | | | | Constance H. Lau | | HEI Retirement Plan1 | | | 27.8 | | | 2,338,274 | | | — | | | | ASB Retirement Plan2 | | | 6.4 | | | 264,133 | | | — | | | | HEI Supplemental Executive Retirement Plan3 | | | 24.3 | | | 7,641,039 | | | — | | | | HEI Excess Pay Plan4 | | | 8.6 | | | 1,641,675 | | | — | | | | HEI Executive Death Benefit5 | | | — | | | 625,521 | | | — | | | | | | | | | | | | | | | | Gregory C. Hazelton | | HEI Retirement Plan1 | | | 4.1 | | | 155,950 | | | — | | | | HEI Excess Pay Plan4 | | | 4.1 | | | 95,874 | | | — | | | | | | | | | | | | | | | | Alan M. Oshima | | HEI Retirement Plan1 | | | 7.2 | | | 329,217 | | | — | | | | HEI Excess Pay Plan4 | | | 7.2 | | | 455,269 | | | — | | | | | | | | | | | | | | | | Richard F. Wacker7 | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | |
1The HEI Retirement Plan is the standard retirement plan for HEI and Hawaiian Electric employees. Normal retirement benefits under the HEI Retirement Plan for management employees hired before May 1, 2011, including Ms. Lau, are calculated based on a formula of 2.04% × Credited Service (maximum 67%) × Final Average Compensation (average monthly base salary for highest thirty-six consecutive months out of the last ten years). Credited service is generally the same as the years of service with HEI and other participating companies (Hawaiian Electric and its subsidiaries). Credited service is also provided for limited unused sick leave and for the period a vested participant is on long-term disability. The normal form of benefit is a joint and 50% survivor annuity for married participants and a single life annuity for unmarried participants. Actuarially equivalent optional forms of benefit are also available. Participants who qualify to receive retirement benefits immediately upon termination of employment may also elect a single sum distribution of up to $100,000 with the remaining benefit payable as an annuity. Single sum distributions are not eligible for early retirement subsidies, and so may not be as valuable as an annuity at early retirement. Retirement benefits are increased by an amount equal to approximately 1.4% of the initial benefit every twelve months following retirement. The plan provides benefits at early retirement (prior to age 65), normal retirement (age 65), deferred retirement (over age 65) and death. Subsidized early retirement benefits are available for participants who meet certain age and service requirements at ages 50-64. The accrued normal retirement benefit is reduced by an applicable percentage, which ranges from 30% for early retirement at age 50 with at least 15 years of service to 1% at age 59. Accrued benefits are not reduced for eligible employees who retire at age 60 and above. The early retirement subsidies are not available to employees who terminate employment with vested benefits but prior to satisfying the age and service requirements for the early retirement subsidies.
HEI and Hawaiian Electric management employees who commenced employment on or after May 1, 2011, including Messrs. Hazelton and Oshima, receive reduced benefits under the HEI Retirement Plan (e.g., reduced benefit formula, more stringent requirements for subsidized early retirement benefits, reduced early retirement subsidies and no post-retirement cost-of-living adjustment). Normal retirement benefits for these employees are calculated based on a formula of 1.5% × Credited Service × Final Average Compensation (average monthly base salary for highest thirty-six consecutive months out of the last ten years). These employees are eligible for a limited match under the HEI Retirement Savings Plan (50% match on the first 6% of compensation deferred).
Ms. Lau and Mr. Oshima are vested in retirement benefits under the HEI Retirement Plan.
2Ms. Lau is a participant in the ASB Retirement Plan. She is currently eligible to retire with full retirement benefits (limited to her years of credited service) under the plan. No other named executive officer is a participant in the plan or entitled to benefits under the plan. At the time of Ms. Lau's promotion to HEI President and CEO on May 2, 2006, her credited service under the plan was frozen and she resumed participation in the HEI Retirement Plan. Future benefit accruals for all participants under the ASB Retirement Plan were frozen effective December 31, 2007. As a result, credited service and compensation after December 31, 2007 are not recognized in calculating retirement benefits under the plan. Normal retirement benefits under the frozen plan are calculated based on a formula of 1.5% × Credited Service to December 31, 2007 (maximum 35 years) × Final Average Compensation at December 31, 2007 (averaged over the highest paying five consecutive calendar years out of the last ten calendar years prior to 2008). Compensation is primarily gross earnings but excludes commissions, stock options and other equity compensation, LTIP payments, deferrals to and distributions from the ASB Select Deferred Compensation Plan and other "fringe benefits" as defined in the plan. Early retirement benefits are available for participants who retire after attaining age 55 with a minimum of ten years of service. Beginning at age 60 the benefits are subsidized. The accrued normal retirement benefit is reduced by an applicable percentage which ranges from 59.8% for early retirement at age 55 to 2% at age 64. The early retirement subsidies are not available to employees who terminate employment with vested benefits but prior to satisfying the age and service requirements for the early retirement subsidies.
Table of ContentsTABLE OF CONTENTS
EXECUTIVE COMPENSATION
3Ms. Lau is a participant in the HEI Supplemental Executive Retirement Plan, which was frozen effective December 31, 2008. She is currently eligible to retire with full retirement benefits (limited to benefits accrued before 2009) under the plan. No other named executive officer is a participant in the plan or entitled to benefits under the plan. Benefits under the plan are determined based on a formula of 2.04% × Credited Service to December 31, 2008 (maximum 60%) × Final Average Compensation at December 31, 2008 (average monthly base salary plus annual incentive awards for the three highest calendar years out of the last sixty months prior to 2009). Credited service is based on actual years of service through December 31, 2008 with any HEI-affiliated company, including ASB and Hawaiian Electric and its subsidiaries. Although Ms. Lau has more than 30 years of actual service with HEI-affiliated companies, she receives only 24.3 years of credited service for purposes of the HEI Supplemental Executive Retirement Plan. Benefits under the plan are reduced by benefits accrued as of December 31, 2008 under the HEI Retirement Plan, ASB Retirement Plan and social security. Early retirement and death benefits similar to those available under the HEI Retirement Plan are available under the plan. Distributions will be delayed for a 6-month period to the extent necessary to comply with Internal Revenue Code Section 409A.
3
| Ms. Lau is a participant in the HEI Supplemental Executive Retirement Plan, which was frozen effective December 31, 2008. She is currently eligible to retire with full normal retirement benefits (limited to benefits accrued before 2009) under the plan. No other named executive officer is a participant in the plan or entitled to benefits under the plan. Benefits under the plan are determined based on a formula of 2.04% × Credited Service to December 31, 2008 (maximum 60%) × Final Average Compensation at December 31, 2008 (average monthly base salary plus annual incentive awards for the three highest calendar years out of the last sixty months prior to 2009). Credited service is based on actual years of service through December 31, 2008 with any HEI-affiliated company, including ASB and Hawaiian Electric and its subsidiaries. Although Ms. Lau has more than 30 years of actual service with HEI-affiliated companies, she receives only 24.3 years of credited service for purposes of the HEI Supplemental Executive Retirement Plan. Benefits under the plan are reduced by benefits accrued as of December 31, 2008 under the HEI Retirement Plan, ASB Retirement Plan and social security. Early retirement and death benefits similar to those available under the HEI Retirement Plan are available under the plan. Distributions will be delayed for a 6-month period to the extent necessary to comply with Internal Revenue Code Section 409A. |
4
| As of December 31, 2020, all of the named executive officers, except for Mr. Wacker, were participants in the HEI Excess Pay Plan. Ms. Lau and Messrs. Hazelton, Murao and Seu are vested in retirement benefits under such plan. Benefits under the HEI Excess Pay Plan are determined using the same formula as the HEI Retirement Plan, but are not subject to the Internal Revenue Code limits on the amount of annual compensation that can be used for calculating benefits under qualified retirement plans ($285,000 in 2020 as indexed for inflation) and on the amount of annual benefits that can be paid from qualified retirement plans (the lesser of $230,000 in 2020 as indexed for inflation, or the participant’s highest average compensation over three consecutive calendar years). Benefits payable under the HEI Excess Pay Plan are reduced by the benefit payable from the HEI Retirement Plan. Early retirement, death benefits and vesting provisions are similar to the HEI Retirement Plan. |
5
| Ms. Lau and Mr. Seu are covered by the Executive Death Benefit Plan of HEI and Participating Subsidiaries. The plan was amended effective September 9, 2009 to close participation to new participants and freeze the benefit for existing participants. Under the amendment, death benefits will be paid based on salaries as of September 9, 2009. The plan provides death benefits equal to two times the executive’s base salary as of September 9, 2009 if the executive dies while actively employed or, if disabled, dies prior to age 65, and one times the executive’s base salary as of September 9, 2009 if the executive dies following retirement. The amounts shown in the table above assume death following retirement. Death benefits are grossed up by the amount necessary to pay income taxes on the grossed-up benefit amount as an equivalent to the tax exclusion for death benefits paid from a life insurance policy. Messrs. Hazelton, Murao and Wacker were not employed by the companies at the time the plan was frozen and therefore are not entitled to any benefits under the plan. |
6
| The present value of accumulated benefits for the named executive officers included in the 2020 Pension Benefits table was determined based on the following: |
| Methodology: The present values are calculated as of December 31, 2020 based on the credited service and pay of the named executive officer as of such date (or the date of benefit freeze, if earlier). |
a.
| Discount Rate — The discount rate is the interest rate used to discount future benefit payments in order to reflect the time value of money. The discount rates used in the present value calculations are 2.92% for HEI retirement benefits, 2.76% for ASB retirement benefits and 2.83% for executive death benefits as of December 31, 2020. |
b.
| Mortality Table — The PRI-2012 Mortality Table (separate male and female rates) with generational projection using scale MP-2020 from base year 2012 is used to discount future pension benefit payments in order to reflect the probability of survival to any given future date. For the calculation of the executive death benefit present values, the mortality table rates are multiplied by the death benefit to capture the death benefit payments assumed to occur at all future dates. Mortality is applied post-retirement only. |
c.
| Retirement Age — A named executive officer included in the table is assumed to remain in active employment until, and assumed to retire at, the later of (a) the earliest age when unreduced pension benefits would be payable or (b) attained age as of December 31, 2020. |
d.
| Pre–Retirement Decrements — Pre-retirement decrements refer to events that could occur between the measurement date and the retirement age (such as withdrawal, early retirement and death) that would impact the present value of benefits. No pre–retirement decrements are assumed in the calculation of pension benefit table present values. Pre–retirement decrements are assumed for financial statement purposes. |
e.
| Unused Sick Leave — Each named executive officer who participates in the HEI Retirement Plan is assumed to have accumulated 1,160 unused sick leave hours at retirement age. |
7
| Mr. Wacker is not eligible to participate in any of the plans in the above 2020 Pension Benefits table because such plans either (i) are not open to employees of ASB or (ii) were frozen to new participants before Mr. Wacker joined ASB. |
564As of December 31, 2018, all of the named executive officers, except for Mr. Wacker, were participants in the HEI Excess Pay Plan. Ms. Lau and Mr. Oshima are vested in retirement benefits under such plan. Benefits under the HEI Excess Pay Plan are determined using the same formula as the HEI Retirement Plan, but are not subject to the Internal Revenue Code limits on the amount of annual compensation that can be used for calculating benefits under qualified retirement plans ($275,000 in 2018 as indexed for inflation) and on the amount of annual benefits that can be paid from qualified retirement plans (the lesser of $220,000 in 2018 as indexed for inflation, or the participant's highest average compensation over three consecutive calendar years). Benefits payable under the HEI Excess Pay Plan are reduced by the benefit payable from the HEI Retirement Plan. Early retirement, death benefits and vesting provisions are similar to the HEI Retirement Plan.
5Ms. Lau is covered by the Executive Death Benefit Plan of HEI and Participating Subsidiaries. The plan was amended effective September 9, 2009 to close participation to new participants and freeze the benefit for existing participants. Under the amendment, death benefits will be paid based on salaries as of September 9, 2009. The plan provides death benefits equal to two times the executive's base salary as of September 9, 2009 if the executive dies while actively employed or, if disabled, dies prior to age 65, and one times the executive's base salary as of September 9, 2009 if the executive dies following retirement. The amounts shown in the table above assume death following retirement. Death benefits are grossed up by the amount necessary to pay income taxes on the grossed up benefit amount as an equivalent to the tax exclusion for death benefits paid from a life insurance policy. Messrs. Hazelton, Oshima and Wacker were not employed by the companies at the time the plan was frozen and therefore are not entitled to any benefits under the plan.
6The present value of accumulated benefits for the named executive officers included in the 2018 Pension Benefits table was determined based on the following:Methodology: The present values are calculated as of December 31, 2018 based on the credited service and pay of the named executive officer as of such date (or the date of benefit freeze, if earlier).
Assumptions:
a.Discount Rate — The discount rate is the interest rate used to discount future benefit payments in order to reflect the time value of money. The discount rates used in the present value calculations are 4.31% for retirement benefits and 4.34% for executive death benefits as of December 31, 2018.
b.Mortality Table — The RP-2018 Mortality Table (separate male and female rates) with generational projection using scale MP-2018 is used to discount future pension benefit payments in order to reflect the probability of survival to any given future date. For the calculation of the executive death benefit present values, the mortality table rates are multiplied by the death benefit to capture the death benefit payments assumed to occur at all future dates. Mortality is applied post-retirement only.
c.Retirement Age — A named executive officer included in the table is assumed to remain in active employment until, and assumed to retire at, the later of (a) the earliest age when unreduced pension benefits would be payable or (b) attained age as of December 31, 2018.
d.Pre-Retirement Decrements — Pre-retirement decrements refer to events that could occur between the measurement date and the retirement age (such as withdrawal, early retirement and death) that would impact the present value of benefits. No pre-retirement decrements are assumed in the calculation of pension benefit table present values. Pre-retirement decrements are assumed for financial statement purposes.
e.Unused Sick Leave — Each named executive officer who participates in the HEI Retirement Plan is assumed to have accumulated 1,160 unused sick leave hours at retirement age.
7Mr. Wacker is not eligible to participate in any of the plans in the above 2018 Pension Benefits table because such plans either (i) are not open to employees of ASB or (ii) were frozen to new participants before Mr. Wacker joined ASB.
57
TABLE OF CONTENTS Table of Contents
EXECUTIVE COMPENSATION
20182020 Nonqualified Deferred Compensation
| | Constance H. Lau1 | | | — | | | — | | | 99,785 | | | — | | | 699,770 | | | | Gregory C. Hazelton | | | — | | | — | | | — | | | — | | | — | | | | Kurt K. Murao | | | — | | | — | | | — | | | — | | | — | | | | Scott W. H. Seu | | | — | | | — | | | — | | | — | | | — | | | | Richard F. Wacker2 | | | — | | | 10,199 | | | 15,500 | | | — | | | 162,013 | |
1
| While employed by ASB, Ms. Lau was eligible to defer compensation under the ASB Select Deferred Compensation Plan, a contributory nonqualified deferred compensation plan. She elected to defer $100,000 each year from bonuses awarded to her in 2004 and 2005. These amounts are reflected in the “Aggregate Balance at Last FYE” column of the table above and were previously reported as compensation to Ms. Lau in the 2004 and 2005 Summary Compensation Tables in the proxy statements for such years. Since 2008, Ms. Lau no longer earns any compensation from ASB that is eligible for deferral under the plan. The ASB Deferred Compensation Plan allows select ASB employees to defer up to 100% of current salary, bonus and commissions. Pursuant to a 2009 amendment, the plan provides for employer matching contributions and profit-sharing contributions for plan years beginning January 1, 2010. These matching and profit-sharing contributions take into account compensation which is excluded from consideration under the ASB 401(k) Plan, including on account of being contributed to the ASB Deferred Compensation Plan or being in excess of limits on eligible compensation imposed by the Internal Revenue Code. The deferred amounts are credited with gains/losses of deemed investments chosen by the participant from a designated list of publicly traded mutual funds and other investment offerings. Earnings are not above-market or preferential and therefore are not included in the 2020 Summary Compensation Table above. Under the plan, a participant may receive an interim distribution while employed, but no earlier than the first day of the fourth plan year following the effective date of the initial election to defer. A participant may also request a withdrawal of a portion of his or her account to satisfy an unforeseeable emergency. The distribution of accounts from the plan is triggered by disability, death or separation from service (including retirement) and will be delayed for a 6-month period to the extent necessary to comply with Internal Revenue Code Section 409A. A participant may elect to receive such distributions in a lump sum or in substantially equal payments spread over a period not to exceed 15 years. |
2
| Mr. Wacker has not deferred any amounts under the ASB Deferred Compensation Plan. In 2020 he received a profit-sharing contribution to his account under such plan for the portion of his profit-sharing contribution that could not be made to his ASB 401(k) Plan account due to Internal Revenue Code limits on eligible compensation for 401(k) plans. The amount of such profit-sharing contribution is included in the “All Other Compensation” column of the 2020 Summary Compensation Table for the year 2019. |
3
| Amounts in this column include contributions reported in the Summary Compensation Table for each year in which each executive listed above was a named executive officer. |
| | | | | | | | | | | | | | | | | Name
| | Executive
Contributions
in Last FY
($)
| | Registrant
Contributions
in Last FY
($)
| | Aggregate
Earnings/(Losses)
in Last FY
($)
| | Aggregate
Withdrawals/
Distributions
($)
| | Aggregate
Balance at
Last FYE
($)4
| |
|---|
| | | | | | | | | | | | | | | | | | Constance H. Lau1 | | | — | | | — | | | (34,767 | ) | | — | | | 464,913 | | | | | | | | | | | | | | | | | | | | Gregory C. Hazelton | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | Alan M. Oshima2 | | | — | | | — | | | (89,141 | ) | | — | | | 683,690 | | | | | | | | | | | | | | | | | | | | Richard F. Wacker3 | | | — | | | 15,585 | | | (12,195 | ) | | — | | | 95,801 | | | | | | | | | | | | | | | | | | | |
1While employed by ASB, Ms. Lau was eligible to defer compensation under the ASB Select Deferred Compensation Plan, a contributory nonqualified deferred compensation plan. She elected to defer $100,000 each year from bonuses awarded to her in 2004 and 2005. These amounts are reflected in the "Aggregate Balance at Last FYE" column of the table above and were previously reported as compensation to Ms. Lau in the 2004 and 2005 Summary Compensation Tables in the proxy statements for such years. Since 2008 she no longer earns any compensation from ASB that could be deferred to the plan. The ASB Deferred Compensation Plan allows select ASB employees to defer up to 100% of current salary, bonus and commissions. Pursuant to a 2009 amendment, the plan provides for employer matching contributions and profit sharing contributions for plan years beginning January 1, 2010. These matching and profit sharing contributions take into account compensation which is excluded from consideration under the ASB 401(k) Plan, including on account of being contributed to the ASB Deferred Compensation Plan or being in excess of limits on eligible compensation imposed by the Internal Revenue Code. The deferred amounts are credited with gains/losses of deemed investments chosen by the participant from a designated list of publicly traded mutual funds and other investment offerings. Earnings are not above-market or preferential and therefore are not included in the 2018 Summary Compensation Table above. Under the plan, a participant may receive an interim distribution while employed, but no earlier than the first day of the fourth plan year following the effective date of the initial election to defer. A participant may also request a withdrawal of a portion of his or her account to satisfy an unforeseeable emergency. The distribution of accounts from the plan is triggered by disability, death or separation from service (including retirement) and will be delayed for a 6-month period to the extent necessary to comply with Internal Revenue Code Section 409A. A participant may elect to receive such distributions in a lump sum or in substantially equal payments spread over a period not to exceed 15 years.
2Represents salary and incentive compensation deferrals under the HEI Deferred Compensation Plan, a contributory nonqualified deferred compensation plan implemented in 2011. The plan allows certain HEI and Hawaiian Electric executives to defer up to 100% of annual base salary in excess of the compensation limit set forth in Internal Revenue Code Section 401(a)(17) ($275,000 in 2018, as indexed for inflation) and up to 80% of any incentive compensation paid in cash. In 2018, there were no matching or other employer contributions under the plan. The deferred amounts are credited with gains/losses of deemed investments chosen by the participant from a designated list of publicly traded mutual funds and other investment offerings. Earnings are not above-market or preferential and therefore are not included in the 2018 Summary Compensation Table above. The distribution of accounts from the plan is triggered by disability, death or separation from service (including retirement) and will be delayed for a 6-month period to the extent necessary to comply with Internal Revenue Code Section 409A. A participant may elect to receive distributions triggered by separation from service in a lump sum or in substantially equal payments spread over a period not to exceed 15 years. Lump sum benefits are payable in the event of disability or death.
3Mr. Wacker has not deferred any amounts under the ASB Deferred Compensation Plan. In 2018 he received a profit sharing contribution to his account under such plan for the portion of his profit sharing contribution that could not be made to his ASB 401(k) Plan account due to Internal Revenue Code limits on eligible compensation for 401(k) plans. The amount of such profit sharing contribution is included in the "All Other Compensation" column of the 2018 Summary Compensation Table for the year 2017.
4Amounts in this column include contributions reported in the Summary Compensation Table for each year in which each executive listed above was a named executive officer.
TABLE OF CONTENTS Table of Contents
EXECUTIVE COMPENSATION
Potential Payments Upon Termination or Change in Control
The table below shows the potential payments to each named executive officer in the event of retirement, death or disability, voluntary termination, termination for cause, termination without cause and termination after change in control, assuming termination occurred on December 31, 2018.2020. The amounts listed below are estimates; actual amounts to be paid would depend on the actual date of termination and circumstances existing at that time. 2018
2020 TERMINATION/CHANGE-IN-CONTROLCHANGE-IN-CONTROL PAYMENT TABLE
| | Constance H. Lau
| | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | | Long-Term Incentive Plan6 | | | 1,503,756 | | | 1,503,756 | | | — | | | — | | | | Restricted Stock Units7 | | | 684,743 | | | 684,743 | | | — | | | — | | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 8,900,523 | | | | TOTAL | | | 2,188,499 | | | 2,188,499 | | | — | | | 8,900,523 | | | | Gregory C. Hazelton
| | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | | Long-Term Incentive Plan6 | | | — | | | 392,227 | | | — | | | — | | | | Restricted Stock Units7 | | | — | | | 249,558 | | | — | | | — | | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 3,127,246 | | | | TOTAL | | | — | | | 641,785 | | | — | | | 3,127,246 | | | | Kurt K. Murao
| | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | | Long-Term Incentive Plan6 | | | — | | | 145,736 | | | — | | | — | | | | Restricted Stock Units7 | | | — | | | 97,920 | | | — | | | — | | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 1,463,638 | | | | TOTAL | | | — | | | 243,656 | | | — | | | 1,463,638 | | | | Scott W. H. Seu
| | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | | Long-Term Incentive Plan6 | | | 167,608 | | | 167,608 | | | — | | | — | | | | Restricted Stock Units7 | | | 106,755 | | | 106,755 | | | — | | | — | | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 1,133,364 | | | | TOTAL | | | 274,363 | | | 274,363 | | | — | | | 1,133,364 | | | | Richard F. Wacker
| | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | | Long-Term Incentive Plan6 | | | 519,489 | | | 519,489 | | | — | | | 0 | | | | Restricted Stock Units7 | | | 136,062 | | | 136,062 | | | — | | | 0 | | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 4,462,142 | | | | TOTAL | | | 655,551 | | | 655,551 | | | — | | | 4,462,142 | |
| | | | | | | | | | | | | | Name/
Benefit Plan or Program
| | Retirement
on 12/31/18
($)1
| | Termination due
to death or
disability
on 12/31/18
($)2
| | Voluntary
termination,
termination for
and without cause
on 12/31/18
($)3
| | Termination
after change
in control
on 12/31/18
($)4
| |
|---|
| | | | | | | | | | | | | | | | Constance H. Lau | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | Long-Term Incentive Plan6 | | | 1,666,429 | | | 1,666,429 | | | — | | | — | | | Restricted Stock Units7 | | | 774,165 | | | 774,165 | | | — | | | — | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 9,985,027 | | | TOTAL | | | 2,440,594 | | | 2,440,594 | | | — | | | 9,985,027 | | | | | | | | | | | | | | | | | | Gregory C. Hazelton | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | Long-Term Incentive Plan6 | | | — | | | 433,911 | | | — | | | — | | | Restricted Stock Units7 | | | — | | | 353,827 | | | — | | | — | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 2,280,865 | | | TOTAL | | | — | | | 787,738 | | | — | | | 2,280,865 | | | | | | | | | | | | | | | | | | Alan M. Oshima* | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | Long-Term Incentive Plan6 | | | 729,654 | | | 729,654 | | | — | | | 1,457,261 | | | Restricted Stock Units7 | | | 449,875 | | | 449,875 | | | — | | | 1,220,581 | | | TOTAL | | | 1,179,529 | | | 1,179,529 | | | — | | | 2,677,842 | | | | | | | | | | | | | | | | | | Richard F. Wacker | | | | | | | | | | | | | | | Executive Incentive Compensation Plan5 | | | — | | | — | | | — | | | — | | | Long-Term Incentive Plan6 | | | 780,592 | | | 780,592 | | | — | | | — | | | Restricted Stock Units7 | | | 152,648 | | | 152,648 | | | — | | | — | | | Change-in-Control Agreement4 | | | — | | | — | | | — | | | 4,495,957 | | | TOTAL | | | 933,240 | | | 933,240 | | | — | | | 4,495,957 | | | | | | | | | | | | | | | | |
*Mr. Oshima did not have a change-in-control agreement as of December 31, 2018.
Note: All stock-basedstock–based award amounts were valued using the 2018 year-end2020 year–end closing price of HEI Common Stock on the NYSE of $36.62$35.39 per share on December 31, 2018.2020. Other benefits that are available to all salaried employees on a nondiscriminatory basis and perquisites aggregating less than $10,000 in value have not been listed. 1Retirement payments & benefits. Only Mr. Hazelton was not eligible for retirement as of December 31, 2018 and accordingly no amounts are shown in this column for him. In addition to the amounts shown in this column, retired executives are entitled to receive their vested retirement plan and deferred compensation benefits under all termination scenarios. See the 2018 Pension Benefits and 2018 Nonqualified Deferred Compensation tables above.
2Termination due to death or disability payments & benefits. All named executive officers were eligible for death or disability payments & benefits as of December 31, 2018.
3Voluntary termination payments & benefits. If the executive voluntarily terminates employment, he or she could lose any annual or long-term incentives based upon the Compensation Committee's right to amend, suspend or terminate any incentive award or any portion of it at any time. Voluntary termination results in the forfeiture of unvested RSUs and participation in incentive plans. The executive's entitlement to rights under his or her change-in-control agreement would also end.
Termination for cause payments & benefits. If the executive is terminated for cause, he or she could lose any annual or long-term incentives based upon the Compensation Committee's right to amend, suspend or terminate any incentive award or any portion of it at any time. "Cause" generally means a violation of the HEI Corporate Code of Conduct or, for purposes of awards under the 2010 Equity and Incentive Plan, as amended (EIP), has the meaning set forth in such plan. Termination for cause results in the forfeiture of all unvested RSUs and participation in incentive plans. The executive's entitlement to rights under his or her change-in-control agreement would also end.
Termination without cause payments & benefits. If the executive is terminated without cause, he or she could lose any annual or long-term incentives based upon the Compensation Committee's right to amend, suspend or terminate any incentive award or any portion of it at any time.
1
| Retirement payments & benefits.In addition to the amounts shown in this column, retired executives are entitled to receive their vested retirement plan and deferred compensation benefits under all termination scenarios. See the 2020 Pension Benefits and 2020 Nonqualified Deferred Compensation tables above. Messrs. Hazelton and Murao have not met the requirements for retirement eligibility under the 2010 Equity and Incentive Plan, as amended (EIP), which includes the Long-Term Incentive Plan and Restricted Stock Units. Accordingly, no amounts are shown in this column for Messrs. Hazelton and Murao. |
2
| Termination due to death or disability payments & benefits. All named executive officers were eligible for death or disability payments & benefits as of December 31, 2020. |
Table of ContentsTABLE OF CONTENTS
EXECUTIVE COMPENSATION
Termination without cause results in the forfeiture of unvested RSUs. As discussed in footnote 4 below, different benefits would be payable to the named executive officers if their termination without cause were to follow a change in control under the terms of their change-in-control agreements.
4Termination after change-in-control payments & benefits. Ms. Lau and Messrs. Hazelton and Wacker had change-in-control agreements as of December 31, 2018.
3
| Voluntary termination payments & benefits. If the executive voluntarily terminates employment, he or she could lose any annual or long–term incentives based upon the Compensation Committee’s right to amend, suspend or terminate any incentive award or any portion of it at any time. Voluntary termination results in the forfeiture of unvested RSUs and participation in incentive plans. The executive’s entitlement to rights under his or her change–in–control agreement would also end. |
| Termination for cause payments & benefits. If the executive is terminated for cause, he or she could lose any annual or long–term incentives based upon the Compensation Committee’s right to amend, suspend or terminate any incentive award or any portion of it at any time. “Cause” generally means a violation of the HEI Corporate Code of Conduct or, for purposes of awards under the EIP, has the meaning set forth in such plan. Termination for cause results in the forfeiture of all unvested RSUs and participation in incentive plans. The executive’s entitlement to rights under his or her change–in–control agreement would also end. |
| Termination without cause payments & benefits. If the executive is terminated without cause, he or she could lose any annual or long–term incentives based upon the Compensation Committee’s right to amend, suspend or terminate any incentive award or any portion of it at any time. Termination without cause results in the forfeiture of unvested RSUs. As discussed in footnote 4 below, different benefits would be payable to the named executive officers if their termination without cause were to follow a change in control under the terms of their change–in–control agreements. |
4
| Termination after change–in–control payments & benefits. All NEOs had change–in–control agreements as of December 31, 2020. |
| “Change in control” generally means a change in ownership of HEI, a substantial change in the voting power of HEI’s securities or a change in the majority of the composition of the Board following the consummation of a merger, tender offer or similar transaction. Mr. Wacker’s change–in–control agreement defines “change in control” to also mean a sale of (or equivalent transaction involving) ASB. The change–in–control agreements are double trigger, which means that they provide for cash severance and other benefits only upon a qualifying termination of the executives’ employment following a change in control. Ms. Lau has a lump sum severance multiplier of three times and Messrs. Hazelton, Murao, Seu and Wacker have a lump sum severance multiplier of two times, in each case applied to the sum of the executive’s base salary and annual incentive compensation (determined to be the greater of the current target or the largest actual annual incentive compensation during the preceding three years). |
| In addition, under the change–in–control agreements executives would receive continued life, disability, dental, accident and health insurance benefits for the severance period (i.e., the number of years equal to the applicable severance multiplier). Executives would receive a lump sum payment equal to the present value of the additional benefit the executives would have earned under their respective retirement and savings plans during the severance period. Executives would also receive the greater of current target or actual projected EICP and cash-based LTIP compensation, pro–rated if termination occurs during the first half of the applicable performance period and the full value if termination occurs in the second half of the applicable performance period. For RSUs not granted under the LTIP, in the event of a change in control as defined by the EIP, either (i) the surviving or acquiring entity will assume all outstanding RSUs not granted under LTIP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested. For the named executive officers who are eligible to participate in the HEI Retirement Plan, additional age and service credit is received for the severance period for purposes of determining retiree welfare benefit eligibility. Executives would receive outplacement services, capped at 15% of annual base salary. Payment would generally be delayed for six months following termination of employment to the extent required to avoid an additional tax under Section 409A of the Internal Revenue Code. Interest would accrue during any six–month delay period at the prevailing six–month certificate of deposit rate and payments would be set aside during that period in a grantor (rabbi) trust. There are no tax gross ups provided for in the agreements and, as provided in the change-in-control agreements, the total severance amount shown is limited to the maximum amount deductible under Section 280G of the Internal Revenue Code with respect to each named executive officer. Payment of the foregoing benefits is subject to a release of claims by the applicable named executive officer. |
5
| Executive Incentive Compensation Plan (EICP). Excludes amounts payable under the 2020 EICP because those amounts would have vested without regard to termination because the applicable performance period ended on December 31, 2020. Upon death, disability or retirement, executives continue to participate in the EICP on a pro–rata basis if the executive has met applicable minimum service requirements, with a lump sum payment to be made by the Company if the applicable performance goals are achieved. The plan documents provide that in the event of a change in control as defined by the EIP, the EICP award would be immediately paid out in cash at target level, pro-rated for completed months of service in the performance period. For the remaining unvested portion of the award, the EIP provides that: (i) the surviving entity or acquiring entity will assume all awards outstanding under the EICP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested (with all performance goals deemed achieved at 100% of target levels). Annual incentive compensation payments for NEOs in the event of a change in control are further described in footnote 4 above. |
6
| Long–Term Incentive Plan (LTIP). Excludes amounts payable under the 2018–20 LTIP because those amounts would have vested without regard to termination because the applicable performance period ended on December 31, 2020. Upon death, disability or retirement, executives continue to participate in each ongoing LTIP cycle on a pro–rata basis if the executive has met applicable minimum service requirements, with a lump sum payment to be made by the Company if performance goals are achieved. The amounts shown are at target for all applicable plan years, pro-rated based upon service through December 31, 2020; actual payouts will depend upon performance achieved at the end of the plan cycle. The plan documents provide that, in the event of a change in control as defined by the EIP, the LTIP award would be immediately paid out in cash at target level, pro-rated for completed months of service in the performance period. For the remaining unvested portion of the award, the EIP provides that: (i) the surviving entity or acquiring entity will assume all awards outstanding under the LTIP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested (with all performance goals deemed achieved at 100% of target levels). Long–term incentive compensation payments for NEOs in the event of a change in control are further described in footnote 4 above and quantified as part of the Change–in–Control Agreement payment in the table above. |
7
| Restricted Stock Units (RSUs) not granted under LTIP. Termination for or without cause results in the forfeiture of unvested RSUs not granted under the LTIP. Termination due to death, disability or retirement results in pro–rata vesting of RSUs not granted under the LTIP. The EIP provides that in the event of a change in control as defined by the EIP, either (i) the surviving or acquiring entity will assume all outstanding RSUs not granted under LTIP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested. The vesting of RSUs in the event of a qualifying termination of employment for NEOs following a change in control is further described in footnote 4 above and quantified as part of the Change–in–Control Agreement payment in the table above. |
59"Change in control" generally means a change in ownership of HEI, a substantial change in the voting power of HEI's securities or a change in the majority of the composition of the Board following the consummation of a merger, tender offer or similar transaction. Mr. Wacker's change-in-control agreement defines "change in control" to also mean a sale of (or equivalent transaction involving) ASB. The change-in-control agreements are double trigger, which means that they provide for cash severance and other benefits only upon a qualifying termination of the executives' employment following a change in control. Ms. Lau has a lump sum severance multiplier of three times and Messrs. Hazelton and Wacker have a lump sum severance multiplier of two times, in each case applied to the sum of the executive's base salary and annual incentive compensation (determined to be the greater of the current target or the largest actual annual incentive compensation during the preceding three years).
In addition, under the change-in-control agreements executives would receive continued life, disability, dental, accident and health insurance benefits for the severance period (i.e., the number of years equal to the applicable severance multiplier). Executives would receive a lump sum payment equal to the present value of the additional benefit the executives would have earned under their respective retirement and savings plans during the severance period. Executives would also receive the greater of current target or actual projected EICP and cash-based LTIP compensation, pro-rated if termination occurs during the first half of the applicable performance period and the full value if termination occurs in the second half of the applicable performance period. For RSUs not granted under the LTIP, in the event of a change in control as defined by the EIP, either (i) the surviving or acquiring entity will assume all outstanding RSUs not granted under LTIP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested. For the named executive officers who are eligible to participate in the HEI Retirement Plan, additional age and service credit is received for the severance period for purposes of determining retiree welfare benefit eligibility. Executives would receive outplacement services, capped at 15% of annual base salary. Payment would generally be delayed for six months following termination of employment to the extent required to avoid an additional tax under Section 409A of the Internal Revenue Code. Interest would accrue during any six-month delay period at the prevailing six-month certificate of deposit rate and payments would be set aside during that period in a grantor (rabbi) trust. There are no tax gross ups provided for in the agreements and, as provided in the change-in-control agreements, the total severance amount shown is limited to the maximum amount deductible under Section 280G of the Internal Revenue Code with respect to each named executive officer. Payment of the foregoing benefits is subject to a release of claims by the applicable named executive officer.
5Executive Incentive Compensation Plan (EICP). Excludes amounts payable under the 2018 EICP because those amounts would have vested without regard to termination because the applicable performance period ended on December 31, 2018. Upon death, disability or retirement, executives continue to participate in the EICP on a pro-rata basis if the executive has met applicable minimum service requirements, with a lump sum payment to be made by the Company if the applicable performance goals are achieved. The plan documents provide that in the event of a change in control as defined by the EIP, the EICP award would be immediately paid out in cash at target level, pro-rated for completed months of service in the performance period. For the remaining unvested portion of the award, if there is no termination following a change in control, the EIP provides that: (i) the surviving entity or acquiring entity will assume all awards outstanding under the EICP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested (with all performance goals deemed achieved at 100% of target levels). Annual incentive compensation payments for Ms. Lau and Messrs. Hazelton and Wacker in the event of a change in control are further described in footnote 4 above.
6Long-Term Incentive Plan (LTIP). Excludes amounts payable under the 2016-18 LTIP because those amounts would have vested without regard to termination because the applicable performance period ended on December 31, 2018. Upon death, disability or retirement, executives continue to participate in each ongoing LTIP cycle on a pro-rata basis if the executive has met applicable minimum service requirements, with a lump sum payment to be made by the Company if performance goals are achieved. The amounts shown are at target for all applicable plan years (except for Mr. Wacker's 2017-19 LTIP which is between target and maximum), pro-rated based upon service through December 31, 2018; actual payouts will depend upon performance achieved at the end of the plan cycle. The plan documents provide that, in the event of a change in control as defined by the EIP, the LTIP award would be immediately paid out in cash at target level, pro-rated for completed months of service in the performance period. For the remaining unvested portion of the award, if there is no termination following a change in control, the EIP provides that: (i) the surviving entity or acquiring entity will assume all awards outstanding under the LTIP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested (with all performance goals deemed achieved at 100% of target levels). Long-term incentive compensation payments for Ms. Lau and Messrs. Hazelton and Wacker in the event of a change in control are further described in footnote 4 above and quantified as part of the Change-in-Control Agreement payment in the table above.
7Restricted Stock Units (RSUs) not granted under LTIP. Termination for or without cause results in the forfeiture of unvested RSUs not granted under the LTIP. Termination due to death, disability or retirement results in pro-rata vesting of RSUs not granted under the LTIP. The EIP provides that in the event of a change in control as defined by the EIP, either (i) the surviving or acquiring entity will assume all outstanding RSUs not granted under LTIP or will substitute similar awards and such awards would vest in full upon a termination within 24 months following the change in control without cause or by the participant with good reason, as each term is defined by the EIP or (ii) to the extent the surviving entity refuses to assume or substitute such awards, such awards shall become fully vested. The vesting of RSUs in the event of a qualifying termination of employment for Ms. Lau and Messrs. Hazelton and Wacker following a change in control is further described in footnote 4 above and quantified as part of the Change-in-Control Agreement payment in the table above. 60
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EXECUTIVE COMPENSATION
As required by SEC rules, we are disclosing the ratio of our median employee'semployee’s annual total compensation to the annual total compensation of our CEO. In accordance with Item 402(u) of Regulation S-K, we are using the same median employee we used to calculate our 2017 CEO pay ratio because there have been no changes in our employee population or employee compensation arrangements that we believe would significantly affect our pay ratio disclosure.
We identified our median employee by evaluating 20162019 Form W-2sW–2s for all individuals, excluding our CEO, who were employed by us on October 1, 2017.2020. We included all employees, whether employed on a full-time, part-time,full–time, part–time, or seasonal basis and assumed no compensation earned in 20162019 for employees hired in 2017.2020. We believe that the use of Form W-2W–2 compensation for all employees is an appropriate compensation measure for this purpose because it reasonably reflects annual compensation for our employees. We
Once we determined the median employee based on W-2 compensation, we calculated annual total compensation for such employee using the same methodology we use for our CEO as set forth in the 20182020 Summary Compensation Table above. The SEC rules allow for varying methodologies for companies to identify their median employee. Other companies may have different employment and compensation practices and may utilize different methodologies, estimates and assumptions in calculating their own pay ratios. Therefore, the pay ratios reported by other companies are unlikely tomay not be relevant for purposes of comparison to our pay ratio. | | | | | | | | CEO to Median Employee Pay Ratio
| |
|---|
| | President &
CEO
| | Median
Employee
| |
|---|
| | | | | | | | | Salary | | $ | 921,800 | | $ | 91,216 | | Stock Awards | | | 2,201,594 | | | — | | Nonequity Incentive Plan Compensation | | | 2,602,037 | | | — | | Change in Pension Value1 | | | — | | | — | | | | | | | | | | | TOTAL | | $ | 5,725,431 | | $ | 91,216 | | | | | | | | | | | CEO Pay to Median Employee Pay Ratio | | | 63:1 | | | | | | | | | | | | | |
1These amounts are attributableCEO to a change in the value of each individual's defined benefit pension account balance and do not represent earned or paid compensation. Despite the fact that these amounts are not paid, they are required to be taken into account for purposes of calculating total annual compensation for SEC reporting purposes. Pension values fluctuate over time — they can rise or fall year-to-year and are dependent on many variables including market conditions, years of service, earnings, and actuarial assumptions such as discount rates. In accordance with SEC rules, the negative change in value for Ms. Lau is shown as no change in the table above.
Median Employee Pay RatioThe following table shows our CEO's total compensation amount for 2018 (including change in pension value) without including the 2016-18 "cash" LTIP payout and only including the 2018-20 "equity "LTIP award and the resulting pay ratio using such adjusted CEO pay.
| | Salary | | | $950,217 | | | $97,967 | | | | Stock Awards | | | 2,378,882 | | | — | | | | Nonequity Incentive Plan Compensation | | | 1,202,503 | | | — | | | | All Other Compensation | | | — | | | 2,937 | | | | Change in Pension Value1
| | | 576,610 | | | 27,676 | | | | TOTAL | | | $5,108,212 | | | $128,580 | | | | CEO Pay to Median Employee Pay Ratio | | | 40:1 | | | | |
1
| These amounts are attributable to a change in the value of each individual’s defined benefit pension account balance and do not represent earned or paid compensation. Despite the fact that these amounts are not paid, they are required to be taken into account for purposes of calculating total annual compensation for SEC reporting purposes. Pension values fluctuate over time — they can rise or fall year–to–year and are dependent on many variables including market conditions, years of service, earnings, and actuarial assumptions such as discount rates. |
| | | | | | | |
| | President &
CEO
| | Median
Employee
| |
|---|
| | | | | | | | | TOTAL without 2016-2018 "cash" LTIP | | $ | 4,022,933 | | $ | 91,216 | | | | | | | | | | | CEO Pay (adjusted) to Median Employee Pay Ratio | | | 44:1 | | | | | | | | | | | | | |
Due to the NextEra Energy merger that was pending at the time the 2015-17 and 2016-18 long-term incentive plans (LTIPs) were established, these two LTIPs were denominated in cash rather than in stock. This is because the Compensation Committee had determined that while the merger was pending, HEI's stock price might be affected at least in part by merger considerations that were unrelated to HEI's true operating performance and that, as a result, the compensatory goals of the LTIP would be better served without such merger impact. Following the termination of the HEI/NextEra Energy merger in July 2016, HEI returned to exclusively equity-based LTIPs in 2017, which impacts the comparative compensation amounts disclosed in the 2018 Summary Compensation Table. Although our LTIP programs and practices have not changed (i.e., one 3-year LTIP is granted each year), due to the disclosure timing differences between cash-based and equity-based LTIPs, the reported compensation amounts in the Summary Compensation Table for 2018 and 2017 are notably higher than, and not comparable to, the reported amounts for 2016 as they contain two LTIPs because of the disclosure differences, and are not reflective of the target compensation provided to our NEOs for 2018 and 2017. Due to SEC disclosure rules, the 2018 and 2017 compensation amounts in the SCT include both the 2016-18 LTIP and 2015-17 LTIP respective cash payouts and the 2018-20 and 2017-19 respective equity-based LTIP. By contrast, the 2016 compensation amounts in the SCT do not include any LTIP amounts. Please see page 50 under "Summary Compensation Table".
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STOCK OWNERSHIP INFORMATION
| | | STOCK OWNERSHIP INFORMATION |
STOCK OWNERSHIP INFORMATION
Security ownership of certain beneficial owners
Security ownership of certain beneficial owners
|
The table below shows the number of shares of HEI Common Stock beneficially owned as of February 14, 201910, 2021 (or such other date as indicated below) by (i)(a) each person known by HEI to own beneficially more than five percent of the outstanding shares of HEI Common Stock, (ii)(b) each director who is a current director or served asis a director during any part of 2018nominee and each named executive officer (as listed in the 2018 Summary Compensation Table above) and (iii)(c) all directors and executive officers as a group, based in part on information furnished by the respective shareholders. No HEI directors, executive officersdirector nominees or named executive officers own any shares of Preferred Stock of HEI's wholly ownedHEI’s wholly-owned subsidiary, Hawaiian Electric. Unless otherwise indicated, the address of each person named in the table below is c/o Hawaiian Electric Industries, Inc., 1001 Bishop Street, Honolulu, Hawai‘i 96813. AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF HEI COMMON STOCK
| | BlackRock, Inc.5 | | | 9,235,105 | | | | | | | | | | | | 9,235,105 | | | 8.46 | | | | The Vanguard Group, Inc.6 | | | 10,924,747 | | | 239,851 | | | | | | | | | 11,164,598 | | | 10.23 | | | | Nonemployee directors
| | | | | | | | | | | | | | | | | | | | | | Celeste A. Connors | | | 5,069 | | | | | | | | | | | | 5,069 | | | * | | | | Richard J. Dahl | | | 14,343 | | | | | | | | | | | | 14,343 | | | * | | | | Thomas B. Fargo | | | | | | 29,272 | | | | | | | | | 29,272 | | | * | | | | Peggy Y. Fowler | | | 4,302 | | | 38,852 | | | | | | | | | 43,154 | | | * | | | | Micah A. Kane | | | 11,912 | | | | | | | | | | | | 11,912 | | | * | | | | Mary G. Powell | | | 5,114 | | | | | | | | | | | | 5,114 | | | * | | | | Keith P. Russell | | | 28,149 | | | | | | | | | | | | 28,149 | | | * | | | | William James Scilacci, Jr. | | | 5,161 | | | | | | | | | | | | 5,161 | | | * | | | | Jeffrey N. Watanabe | | | 25,138 | | | 16,376 | | | 13 | | | | | | 41,527 | | | * | | | | Eva T. Zlotnicka | | | 3,241 | | | | | | 3,246,6687,8 | | | | | | 3,249,909 | | | 2.98 | | | | Employee director and Named
Executive Officer
| | | | | | | | | | | | | | | | | | | | | | Constance H. Lau | | | 588,046 | | | | | | | | | 24,149 | | | 612,195 | | | * | | | | Other Named Executive Officers
| | | | | | | | | | | | | | | | | | | | | | Gregory C. Hazelton | | | 21,642 | | | | | | | | | 7,329 | | | 28,971 | | | * | | | | Kurt K. Murao | | | 10,010 | | | | | | | | | 2,895 | | | 12,905 | | | | | | | Scott W. H. Seu | | | 5,276 | | | | | | 408 | | | 4,229 | | | 9,913 | | | * | | | | Richard F. Wacker | | | | | | 78,841 | | | | | | 4,807 | | | 83,648 | | | * | | | | All directors and executive officers as a group (15 persons) | | | 727,403 | | | 163,341 | | | 3,247,089 | | | 43,409 | | | 4,181,242 | | | 3.83 | |
* Less than 1% 1
| Includes the following shares held as of February 10, 2021 in the Participant’s HEI Retirement Savings Plan: approximately 124 shares for Ms. Lau and 124 shares for all directors and executive officers as a group. |
2
| For individuals, includes (i) shares registered in name of the individual and spouse and/or (ii) shares registered in trust with the individual and spouse serving as co-trustees. |
3
| Shares in which the director or officer disclaims beneficial ownership. |
4
| Includes the number of shares that the individuals named above had a right to acquire as of or within 60 days after February 10, 2021 pursuant to Restricted Stock Units and related dividend equivalent rights thereon, including shares which retirement eligible individuals have a right to acquire upon retirement. These shares are included for purposes of calculating the percentage ownership of each individual named above and all directors and executive officers as a group, but are not deemed to be outstanding as to any other person. |
5
| Based solely on information provided in a Schedule 13G report filed on January 29, 2021 by BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. |
| | | | | | | | | | | | | | | | | | Name of Individual or Group
| | Sole Voting or
Investment
Power1
| | Shared Voting or
Investment
Power2
| | Other Beneficial
Ownership3
| | Restricted
Stock Units4
| | Total
| | Percent
of Class
|
|---|
| | | | | | | | | | | | | | | | | | | | BlackRock, Inc.5 | | | 9,839,684 | | | | | | | | | | | | 9,839,648 | | 9.00 | | | | | | | | | | | | | | | | | | | | | The Vanguard Group, Inc.6 | | | 10,980,835 | | | 81,790 | | | | | | | | | 11,062,625 | | 10.16 | | | | | | | | | | | | | | | | | | | | | Nonemployee directors | | | | | | | | | | | | | | | | | | | Richard J. Dahl | | | 6,774 | | | | | | | | | | | | 6,774 | | * | | Thomas B. Fargo | | | | | | 23,006 | | | | | | | | | 23,006 | | * | | Peggy Y. Fowler | | | 1,447 | | | 34,785 | | | | | | | | | 36,232 | | * | | Keith P. Russell | | | 23,080 | | | | | | | | | | | | 23,080 | | * | | James K. Scott | | | 58,304 | | | | | | | | | | | | 58,304 | | * | | Kelvin H. Taketa | | | 40,402 | | | | | | | | | | | | 40,402 | | * | | Barry K. Taniguchi | | | | | | 40,117 | | | | | | | | | 40,117 | | * | | Jeffrey N. Watanabe | | | 43,031 | | | | | | 5 | | | | | | 43,036 | | * | | Employee director and Named Executive Officer | | | | | | | | | | | | | | | | | | | Constance H. Lau | | | 586,871 | | | | | | | | | 4,470 | | | 591,341 | | * | | Other Named Executive Officers | | | | | | | | | | | | | | | | | | | Gregory C. Hazelton | | | 8,996 | | | | | | | | | | | | 8,996 | | * | | Alan M. Oshima | | | | | | 55,637 | | | | | | 2,824 | | | 58,461 | | * | | Richard F. Wacker | | | | | | 98,858 | | | | | | 883 | | | 99,741 | | * | | All directors and executive officers as a group (11 persons) | | | 768,905 | | | 252,403 | | | 5 | | | 8,177 | | | 1,029,490 | | * | | | | | | | | | | | | | | | | | | | |
1Includes the following shares held as of February 14, 2019 in the form of stock units in the HEI Common Stock fund pursuant to the HEI Retirement Savings Plan: approximately 115 shares for Ms. Lau and 115 shares for all directors and executive officers as a group. The value of a unit is measured by the closing price of HEI Common Stock on the measurement date.
2For individuals, includes (i) shares registered in name of the individual and spouse and/or (ii) shares registered in trust with the individual and spouse serving as co-trustees.
3Shares owned by spouse, children or other relatives sharing the home of the director or officer in which the director or officer disclaims beneficial interest.
4Includes the number of shares that the individuals named above had a right to acquire as of or within 60 days after February 14, 2019 pursuant to Restricted Stock Units and related dividend equivalent rights thereon, including shares which retirement eligible individuals have a right to acquire upon retirement. These shares are included for purposes of calculating the percentage ownership of each individual named above and all directors and executive officers as a group, but are not deemed to be outstanding as to any other person.
5Based solely on information provided in a Schedule 13G report filed on February 4, 2019 by BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
6Based solely on information provided in a Schedule 13G report filed on January 10, 2019 by The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, PA 19355.
*As of February 14, 2019, the directors and executive officers of HEI as a group and each individual named above beneficially owned less than one percent of the record number of outstanding shares of HEI Common Stock as of that date and no shares were pledged as security.
Table of ContentsTABLE OF CONTENTS
STOCK OWNERSHIP INFORMATION
STOCK OWNERSHIP INFORMATION | | | |
6
| Based solely on information provided in a Schedule 13G report filed on February 10, 2021 by The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, PA 19355. |
7
| 1,234,416 shares reported herein are directly beneficially owned by Inclusive Capital Partners Spring Master Fund, L.P. Eva Zlotnicka is a Co-Founder of Inclusive Capital Partners, LP, which is the Investment Manager to Inclusive Capital Partners Spring Master Fund, L.P. Ms. Zlotnicka has no control over Inclusive Capital Partners, L.P. or Inclusive Capital Partners Spring Master Fund, L.P. |
8
| 2,012,252 shares reported herein are directly beneficially owned by Inclusive Capital Partners Spring Master Fund A, L.P. Eva Zlotnicka is a Co-Founder of Inclusive Capital Partners, LP, which is the Investment Manager to Inclusive Capital Partners Spring Master Fund A, L.P. Ms. Zlotnicka has no control over Inclusive Capital Partners, L.P. or Inclusive Capital Partners Spring Master Fund A, L.P. |
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports Section 16(a) of the Securities Exchange Act of 1934 requires HEI'sHEI’s executive officers, directors and persons who own more than ten percent of a registered class of HEI'sHEI’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission (SEC).SEC. Such reporting persons are also required by SEC regulations to furnish HEI with copies of all Section 16(a) forms they file. Based solely on its review of such forms provided to it, HEI believes that each of the persons required to comply with the Section 16(a) reporting requirements with regard to HEI complied with such reporting requirements for 2018.63
2020.
TABLE OF CONTENTS | | | OTHER RELATIONSHIPS AND RELATED PERSON TRANSACTIONS |
Table of ContentsOTHER RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
OTHER RELATIONSHIPS AND RELATED
Related person transaction policyPERSON TRANSACTIONS
Related person transaction policy
|
The Board has adopted a related person transaction policy that is included in HEI'sHEI’s Corporate Code of Conduct, which is available for review at www.hei.com/govdocs. The related person transaction policy is specific to transactions between the Company and related persons such as executive officers and directors, their immediate family members or entities with which they are affiliated in which the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest. Under the policy, the Board, acting through the Nominating and Corporate Governance Committee, may approve a related person transaction involving a director or an officer or other related person if the Board determines in advance that the transaction is not inconsistent with the best interests of HEI and its shareholders and is not in violation of HEI'sHEI’s Corporate Code of Conduct.
Family relationships between any HEI executive officer, director or nominee for director
Family relationships between any HEI executive officer, director and nominee for director
|
There are no family relationships between any HEI executive officer, director or nominee for director.
Arrangements or understandings between any HEI executive, director or director nominee and another person pursuant to which such executive, director or director nominee was selected
Arrangements or understandings between any HEI executive, director or director nominee and another person pursuant to which such executive, director or director nominee was selected
|
Pursuant to that Cooperation Agreement dated February 12, 2020 (Original Cooperation Agreement), as amended by that Joinder to Cooperation Agreement dated July 22, 2020 (Cooperation Agreement) between HEI and Inclusive Capital Partners, L.P. (ICP), HEI’s Board appointed Eva T. Zlotnicka to serve as a Class III member of the Board (with a term expiring at HEI’s 2020 Annual Meeting of shareholders (2020 Annual Meeting), appointed Ms. Zlotnicka as a member of the Compensation Committee and included Ms. Zlotnicka as a nominee for election at the 2020 Annual Meeting as a Class III member of the Board to serve a three-year term expiring at the 2023 annual meeting of shareholders (2023 Annual Meeting). ICP also agreed to certain customary standstill provisions, effective until the first anniversary of the date of the Cooperation Agreement. The Cooperation Agreement will terminate upon the earliest of There
(i) the 2023 Annual Meeting, (ii) the election to terminate the Cooperation Agreement by the non-breaching party, if HEI or ICP materially breaches an obligation under the Cooperation Agreement or (iii) mutual written agreement of HEI and ICP. The foregoing description of the Cooperation Agreement is qualified in its entirety by reference to the full text of the original Cooperation Agreement which was filed as an exhibit to the Form 8-K HEI filed with the SEC on February 14, 2020 and the full text of the Joinder to Cooperation Agreement filed as an exhibit to the Company’s quarterly report on Form 10-Q for the period ending June 30, 2020. Other than the Cooperation Agreement, there are no arrangements or understandings between any executive officer, director or director nominee of HEI and any other person pursuant to which such executive officer, director or director nominee was selected.
Related person transactions with HEI or its subsidiaries
Related person transactions with HEI or its subsidiaries
|
ASB has made loans and extensions of credit to directors and executive officers, members of their immediate families and affiliated entities in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and which did not involve more than the normal risk of collectability or present other unfavorable features.
Table of Contents
PROPOSAL NO. 3: APPROVAL OF EXTENSION OF THE 2011 NONEMPLOYEE DIRECTOR STOCK PLAN
PROPOSAL NO. 3: APPROVAL OF EXTENSION OF THE TERM OF THE HAWAIIAN ELECTRIC INDUSTRIES, INC. 2011 NONEMPLOYEE DIRECTOR STOCK PLAN AND INCREASE IN THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER
HEI's Compensation Committee and Board believe that the use of stock grants as a major part of the compensation to the nonemployee directors of HEI and its operating subsidiaries, whose oversight contributions are essential to the growth and success of HEI's business, best strengthens the commitment of these individuals to HEI and its subsidiaries, motivates such persons to faithfully and diligently perform their oversight responsibilities and attracts and retains competent and experienced persons whose efforts will contribute to the growth and success of HEI. To that end, on February 8, 2011, the Board approved the Hawaiian Electric Industries, Inc. 2011 Nonemployee Director Stock Plan (Plan), subject to the approval of HEI's shareholders, which was obtained in 2011. The purpose of the Plan is to motivate nonemployee directors of HEI and its operating subsidiaries to continue as directors, to align their interests with those of HEI's shareholders, and to increase their efforts to promote HEI's business.
On February 14, 2019, our Board of Directors, upon the recommendation of the Compensation Committee, approved, subject to shareholder approval at the Annual Meeting, an amendment of the Plan that extends the term of the Plan to February 14, 2029, the tenth anniversary of the Board of Directors' approval of the extension of the Plan, and which also increases the authorized number of shares of Company stock that may be issued with respect to awards under the Plan from 300,000 shares to 600,000 shares, an increase of 300,000. As of December 31, 2018 there were 46,607 shares of HEI Common Stock reserved for issuance and unissued under the Plan.
The extension of the term of the Plan and the increase in the number of authorized shares of Company stock that may be issued with respect to awards under the Plan is being submitted to HEI's shareholders in order to ensure compliance with the New York Stock Exchange (NYSE) listing standards concerning shareholder approval of equity compensation plans. Under the NYSE listing standards, this Proposal No. 3 will be approved if a majority of the votes cast are in favor of such approval. Abstentions will be considered votes cast and will have the same effect as voting against the proposal. Broker nonvotes will have no effect on the outcome of the vote on the Plan.
üFOR
The Board recommends that you vote FOR approval of extension of the Term of the Hawaiian Electric Industries, Inc. 2011 Nonemployee Director Stock Plan and Increase in the Number of Shares Available for Issuance Thereunder.
TABLE OF CONTENTS How was the number of additional shares determined?
AUDIT & RISK COMMITTEE REPORT |
In determining the number of additional shares to authorize under the Plan, the Compensation Committee and the Board considered a number of factors, including the following:
•the number of shares remaining available for new awards under the Plan;
•the Company's average burn rate over the past three years, calculated as the number of aggregate equity compensation shares granted as a percent of common shares outstanding, which was 0.12% in 2016, 0.29% in 2017 and 0.30% in 2018; The Company's three-year
Table of Contents
PROPOSAL NO. 3: APPROVAL OF EXTENSION OF THE 2011 NONEMPLOYEE DIRECTOR STOCK PLAN
average burn rate for this period is 0.24%, which is within competitive industry levels;
•the cost of the Plan at December 31, 2018, which was within standard market ranges;
•the Company's desire to have sufficient capacity under the Plan to continue to grant equity-based incentives at competitive industry levels;
•dilution that would result from the increase; and
•the number of outstanding equity-based awards relative to the Company's outstanding shares of common stock.
What are the purposes and terms of the Plan?
|
The following is a summary of the material terms of the Plan and is qualified in its entirety by the full text of the Plan, which as proposed to be amended is attached as Appendix A to this Proxy Statement.
Purposes. The purposes of the Plan are to:
•align the personal interests of nonemployee directors of HEI and its operating subsidiaries with the interests of HEI and its shareholders in enhancing shareholder value;
•provide nonemployee directors of HEI and its operating subsidiaries with incentives to maintain their status as directors and to improve HEI's performance by increasing the level of stock owned by nonemployee directors;
•encourage and assist nonemployee directors to meet HEI's share ownership guidelines; and
•provide an additional means of attracting and retaining nonemployee directors.
Administration of the Plan. The Plan is administered in the discretion of a committee which may be the Compensation Committee, a subcommittee of the Compensation Committee or such other committee as may be appointed as administrator from time to time by the Board.
Eligibility to Participate. The Plan provides benefits only to individuals who, on the applicable Grant Date (as described below), are nonemployee directors of HEI or nonemployee directors of HEI operating subsidiaries approved as participating companies by the Board (presently Hawaiian Electric Company and American Savings Bank). Eight HEI nonemployee directors, five American Savings Bank nonemployee directors (who are not also HEI directors) and four Hawaiian Electric Company nonemployee directors (who are not also HEI directors) are presently eligible to participate in the Plan.
Shares Reserved for Issuance under the Plan. The number of shares of HEI Common Stock originally reserved for issuance under the Plan was 300,000, subject to adjustment for certain changes in capitalization. As of the date hereof, 253,393 shares have been issued under the Plan, and accordingly 46,607 remain available for issuance. If this Proposal No. 3 is approved, the number of shares of HEI Common Stock available for issuance under the Plan would be increased by 300,000 shares. The shares to be issued under the Plan may, in whole or in part, be authorized but unissued shares of HEI Common Stock or shares that may be reacquired by HEI in the open markets in private transactions or otherwise. The closing price per share of HEI Common Stock on March 1, 2019 was $38.43.
Benefits Under the Plan. The Plan provides for the grant of shares of HEI Common Stock (Stock Payments) to eligible nonemployee directors annually on the Grant Date, which will be each June 30 (or on the next preceding business day if June 30 is not a business day) or, in the case of a person who is elected or appointed to serve as a new director after June 30, on the date that such person first becomes a director. The amount of HEI Common Stock to be issued to nonemployee directors under the Plan may be expressed either as a specified number of shares or as a specified dollar value. If the Stock Payment is expressed as a dollar value, then the number of shares to be issued on the Grant Date is determined by dividing the specified dollar value by the Fair Market Value (as defined in the Plan) of a share of HEI Common Stock on the Grant Date, with any resulting fractional share to be paid in cash.
Under current Plan provisions:
•The nonemployee directors of HEI are entitled to an annual Stock Payment valued at $100,000. No additional Stock Payment is payable to an HEI nonemployee director who also serves as a director of a subsidiary.
•Each nonemployee director of Hawaiian Electric Company and each nonemployee director of American Savings Bank who is not also a director of HEI is
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PROPOSAL NO. 3: APPROVAL OF EXTENSION OF THE 2011 NONEMPLOYEE DIRECTOR STOCK PLAN
entitled to an annual Stock Payment valued at $55,000. Only one Stock Payment is payable to any such director even if he or she serves as a director of both Hawaiian Electric Company and American Savings Bank.
•New nonemployee directors receive a grant as of their service commencement date that is prorated for the portion of the year during which they serve.
The amount of the Stock Payment to which participating nonemployee directors may be entitled, and whether the Stock Payment is expressed as a dollar value or in number of shares, may be changed in the discretion of the committee, subject to Board approval and without shareholder approval, but may not be changed more than once between annual meetings of shareholders. As discussed in "Director Compensation — Components of Director Compensation" on page 23 above, the Compensation Committee recommended, and the Board approved, a maximum annual compensation limit of $600,000 for any nonemployee director. Participating nonemployee directors will recognize ordinary income equal to the value of the shares received and HEI (or its operating subsidiaries, as the case may be) will be entitled to a deduction for federal income tax purposes in the same amount.
Shareholder Rights. No participant in the Plan shall have any rights as an HEI shareholder with respect to any shares of HEI Common Stock except if and when such shares are issued. Recipients of Stock Payments shall have all the rights of a shareholder from and after the Grant Date with respect to the issued shares of HEI Common Stock granted. Once issued as a Stock Payment, the shares of HEI Common Stock thus granted are not subject to forfeiture.
Transferability of Rights. No participant in the Plan may assign the right to receive any Stock Payment or any other right or interest under the Plan, contingent or otherwise, or cause or permit any encumbrance, pledge or charge of any nature to be imposed on any such right to receive a Stock Payment. Each participant is responsible for complying with all applicable federal and state securities and other applicable laws relating to participation in the Plan or the shares received as a Stock Payment.
Amendment or Termination of the Plan. The Board in its discretion may amend, suspend or terminate the Plan at any time. However, no such amendment will, without approval of the shareholders of HEI, change the class of persons eligible to receive Stock Payments under the Plan (except for changing the subsidiaries whose nonemployee directors are eligible to participate in the Plan) or otherwise modify the requirements as to eligibility for participation in the Plan, or increase the total number of shares of HEI Common Stock which may be issued under the Plan (except for adjustment in the event of certain changes in capitalization). Moreover, no amendment, suspension or termination of the Plan will impair or adversely affect any right or obligation under any Stock Payment previously granted under the Plan. Notwithstanding the foregoing, the Board may, without further action by the shareholders of HEI, amend the Plan or modify the grants of stock under the Plan as described above under "Benefits Under the Plan" or in response to changes in securities or other laws, or rules, regulations or regulatory interpretations thereof, applicable to the Plan, or to comply with stock exchange rules or requirements.
Duration of the Plan. If the extension of the term of the Plan is approved by shareholders at the Annual Meeting, it will expire February 14, 2029, unless earlier terminated by the Board. If this Proposal No. 3 is not approved by shareholders, the Plan will continue in effect under its existing terms until April 30, 2021, unless earlier terminated by the Board.
The number of shares to be received by nonemployee directors under the Plan cannot be determined since the ultimate value of grants under the Plan depends on several factors, including the market value of HEI Common Stock, whether awards are denominated in dollar value or number of shares, the number of directors and the boards on which they serve and the level of future grants under the Plan. The level of benefits currently provided under the Plan is described above under "Benefits Under the Plan." Pursuant to grants made in 2018, 38,821 shares were granted to nonemployee directors.
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PROPOSAL NO. 3: APPROVAL OF EXTENSION OF THE 2011 NONEMPLOYEE DIRECTOR STOCK PLAN
Equity Compensation Plan Information
|
Information as of December 31, 2018 about HEI Common Stock that may be issued under all of the Company's equity compensation plans was as follows:
| | | | | | | | | | | Plan category
| | (a)
Number of
securities
to be issued upon
exercise of
outstanding
options, warrants
and rights1
| | (b)
Weighted-average
exercise price of
outstanding
options,
warrants and
rights
| | (c)
Number of securities
remaining available for
future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))2
| |
|---|
| | | | | | | | | | | | Equity compensation plans approved by shareholders | | | 555,172 | | $ | — | | | 2,704,852 | | Equity compensation plans not approved by shareholders | | | — | | | — | | | — | | | | | | | | | | | | | | Total | | | 555,172 | | $ | — | | | 2,704,852 | | | | | | | | | | | | | |
| | | | | | | 1 | | This column includes the number of shares of HEI Common Stock which may be issued under the Revised and Amended HEI 2010 Equity Incentive Plan (amended EIP) on account of awards outstanding as of December 31, 2018, including: |
|
|
EIP |
|
| | | | | | | | | | 142,100 | | Restricted stock units plus estimated compounded dividend equivalents (if applicable)* |
|
|
413,072 |
|
Shares to be issued in February 2020 and 2021 under the 2017-2019 and 2018-2020 LTIPs, respectively, plus compounded dividend equivalents | | | | | | | | | | | 555,172 | | | | | | | | | |
|
|
* |
|
Under the amended EIP as of December 31, 2018, RSUs count as one share against shares available for issuance less estimated shares withheld for taxes under net share settlement which again become available for the issuance of new shares on a one-to-one basis. |
2 |
|
This represents the number of shares available as of December 31, 2018 for future awards, including 2,658,245 shares available for future awards under the amended EIP and 46,607 shares available for future awards under the 2011 Nonemployee Director Plan.
|
üFOR
The Board recommends that you vote FOR approval of extension of the Term of the Hawaiian Electric Industries, Inc. 2011 Nonemployee Director Stock Plan and Increase in the Number of Shares Available for Issuance Thereunder.
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AUDIT & RISK COMMITTEE REPORT
AUDIT COMMITTEE REPORT
The Audit & Risk Committee is responsible for providing independent, objective oversight of HEI'sHEI’s accounting functions and internal controls. It operates and acts under a written charter, which was adopted and approved by the Audit Committee and the Board and is available for review at www.hei.com/govdocs. The Board has determined that the threefour directors currently serving on the Audit & Risk Committee (Messrs. Dahl, Russell and Taniguchi)Scilacci and Ms. Connors) meet the independence and other qualification requirements of the NYSE Listed Company Manual and applicable securities laws. Messrs. Dahl, Russell and TaniguchiScilacci have also been determined by the Board to be "audit“audit committee financial experts"experts” on the Audit & Risk Committee. In addition, the Audit & Risk Committee has authority to retain its own independent legal counsel and accounting advisers at HEI'sHEI’s expense. The Audit & Risk Committee assists the Board with its financial and risk oversight responsibilities. As part of its responsibilities for the oversight of the risk management process, the Audit & Risk Committee has reviewed and discussed the Company’s risk assessment and risk management framework, including discussions regarding significant risks and management plans to address these risks. Management has the primary responsibility for HEI'sHEI’s consolidated financial statements and reporting process, including the systems of internal control. The independent registered public accounting firm has the responsibility for expressing opinions on HEI'sHEI’s consolidated financial statements and on the Company'sCompany’s internal control over financial reporting based on its integrated audits.
Independence of registered public accounting firm and recommendation to include financial statements in Form 10-K In connection with its responsibilities, the Audit & Risk Committee held fiveeight regular meetings and noone special meetingsmeeting in 20182020 with management and Deloitte & Touche LLP (Deloitte) ., HEI’s independent registered public accounting firm. In its meetings with management and Deloitte, the Audit Committee's& Risk Committee’s review and discussion included the audited consolidated financial statements, audit plan and quality/the quality and adequacy of internal controls. Discussions with Deloitte included the matters required by Auditing Standard No. 1301, "Communications with Audit Committees,"the applicable requirements of the Public Company Accounting Oversight Board and the SEC, such as the audit strategy and results of the audit. Deloitte provided the Audit & Risk Committee with written disclosures and a letter regarding its independence from management as required by professional standards and other regulatory requirements, including applicable requirements of the Public Company Accounting Oversight Board. Based on its review of the disclosure statements and discussions with Deloitte, including the consideration of whether the independent auditors’ provision of non-audit services to the Company is compatible with maintaining independence, the Audit & Risk Committee satisfied itself as to the independence of the external auditor. Based on its reviews and discussions with management and Deloitte described above and review of Deloitte'sDeloitte’s representations and disclosures, the Audit & Risk Committee recommended to the Board of Directors that HEI'sHEI’s audited consolidated financial statements be included in HEI's 2018HEI’s 2020 Form 10-K. | | | | | | | Audit & Risk Committee
Barry K. Taniguchi, | | | | William James Scilacci, Jr., Chairperson
| | | | Celeste A. Connors | | | | Richard J. Dahl
| | | | Keith P. Russell |
TABLE OF CONTENTS | | | PROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021 |
Table of ContentsPROPOSAL NO. 4:3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019 2021
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019 At the 20192021 Annual Meeting, the shareholders will be asked to ratify the appointment of Deloitte as HEI'sHEI’s independent registered public accounting firm for the year ending December 31, 2019,2021 and thereafter until its successor is appointed. Representatives of Deloitte are expected to be present at the 20192021 Annual Meeting and will have the opportunity to make statements if they desire to do so and to respond to appropriate questions. Auditors'
The following table sets forth the fees paid or payable to Deloitte, the Company'sCompany’s independent registered public accounting firm for 20182019 and 2017:2020: | | Audit fees (principally consisted of fees associated with the audits of HEI, Hawaiian Electric, and ASB consolidated financial statements and internal control over financial reporting (Sarbanes-Oxley Act of 2002, Section 404), quarterly reviews and procedures related to the adoption of the new credit loss standard and the new lease standard in 2019) | | | $3,316,000 | | | 96 | | | $3,034,800 | | | 93 | | | | Audit-related fees (primarily consisted of fees associated with consultation on financial statement and reporting standards and agreed upon procedures) | | | 92,000 | | | 3 | | | 167,200 | | | 5 | | | | Tax fees (consisted of tax return review) | | | 54,000 | | | 1 | | | 52,000 | | | 2 | | | | All other fees | | | — | | | — | | | — | | | — | | | | | | | $3,462,000 | | | 100 | | | $3,254,000 | | | 100 | |
| | | | | | | | | | | | | |
| | 2017 | | 2018 | |
|---|
| | Fees
| | %
| | Fees
| | %
| |
|---|
| | | | | | | | | | | | | | | | Audit fees (principally consisted of fees associated with the audit of HEI, Hawaiian Electric, and ASB consolidated financial statements and internal control over financial reporting (Sarbanes-Oxley Act of 2002, Section 404), quarterly reviews, issuances of letters to underwriters, review of registration statements and issuance of consents) | | $ | 2,742,000 | | | 83 | | $ | 2,405,000 | | | 61 | | | Audit-related fees (primarily consisted of fees associated with the implementation of SAP, audit of internal control over transfer agent and registrar duties and agreed upon procedures in 2017 and 2018, statutory audits, Department of Energy compliance audits, and consultation on financial statement and reporting standards and pre-implementation assessment of controls in 2017 and 2018) | | | 523,000 | | | 16 | | | 1,455,000 | | | 37 | | | Tax fees (consisted of tax return review, tax accounting methods review, cost segregation study, and technical support) | | | 20,000 | | | 1 | | | 108,907 | | | 2 | | | | | | | | | | | | | | | | | | | | $ | 3,285,000 | | | 100 | | $ | 3,968,907 | | | 100 | | | | | | | | | | | | | | | | |
Pursuant to its charter, the Audit & Risk Committee preapproves all audit and permitted nonauditnon-audit services to be performed by the independent registered public accounting firm. The Audit & Risk Committee may delegate this responsibility to one or more of its members, provided that such member or members report any such preapprovals to the full Audit & Risk Committee at its next regularly scheduled meeting. All of the amounts set forth in the table above were preapproved. In addition, the Audit & Risk Committee reviewed the professional fees billed by Deloitte and determined that the provision of nonauditnon-audit services was compatible with the maintenance of the auditor'sauditor’s independence. In the event the appointment of Deloitte is not ratified, the Audit & Risk Committee will reconsider its selection, but may decide to maintain the appointment of Deloitte. Even if the selection is ratified, the Audit & Risk Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit & Risk Committee believes that such a change would be in the best interests of HEI'sHEI’s shareholders. | | ✓ FOR
Your Audit & Risk Committee and Board recommend that you vote FOR the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for 2021. | |
üFOR
Your Audit Committee and Board recommend that you vote FOR the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for 2019.
65
TABLE OF CONTENTS Table of Contents
ABOUT THE 2019 ANNUAL MEETING
ABOUT THE 2021 ANNUAL MEETING | | | |
HEI is soliciting proxies for the 20192021 Annual Meeting of Shareholders scheduled for Tuesday,Friday, May 7, 2019,2021, at 10:00 a.m., Hawaii time, at the American Savings Bank Tower, 1001 Bishop Street, 8th floor, Room 805, Honolulu, Hawaii 96813.Hawai‘i Time. The 2021 Annual Meeting will be conducted, entirely by audio webcast. The mailing address of the principal executive offices of HEI is P.O. Box 730, Honolulu, HawaiiHawai‘i 96808-0730. The approximate mailing date for this Proxy Statement, form of proxy and 20182020 Annual Report to Shareholders is March 25, 2019.26, 2021. The 20182020 Annual Report to Shareholders accompanying this Proxy Statement is not considered part of the proxy soliciting material. ABOUT THE 20192021 ANNUAL MEETING
Attendance
Attendance
To mitigate the health risks posed by COVID-19, the 2021 Annual Meeting will be limited to:•shareholders of record (i.e., shareholders who ownvirtual, conducted entirely via live audio webcast. You will be able to attend the virtual 2021 Annual Meeting by visiting www.virtualshareholdermeeting.com/HE2021. You also will be able to submit questions and vote your shares registered in their own name on the books of HEI) on the record date;
•beneficial owners of HEI Common Stock having evidence of ownership as of the record date and entitlement to voteelectronically at the meeting;
•authorized representatives of absent shareholders; and
•invited guests of HEI management.
If you own shares of HEI Common StockAnnual Meeting.
To participate in the name of a bank, brokerage firm or other holder of record, you must show proof of ownership. This may be in the form of a letter from the holder of record or a recent statement from the bank or broker showing ownership of HEI Common Stock.If you are representing an entity that is a shareholder, you must also present documentation showing your authority to attend and act on behalf of the entity (such as a power of attorney, written proxy to vote, or letter of authorization on the entity's letterhead). Only one authorized representative may attend per absent shareholder.
In order to be admitted to the 2019virtual 2021 Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, your proxy card, or if your shares are held in street name, on the instructions that accompanied your proxy materials. The live audio webcast will begin promptly at 10:00 AM, Hawai‘i Time. We encourage you to present government-issued photo identification (such as a driver's licenseaccess the meeting prior to the start time. Online check in will begin at 9:45 AM, Hawai‘i Time, and you should allow ample time for the check in procedures.
Instructions on how to attend, submit questions and vote via the Internet are posted at www.virtualshareholdermeeting.com. If you encounter any difficulties accessing the virtual meeting during the check-in or passport) at registration.To ensuremeeting time, please call the technical support number that we can accommodatewill be posted on the greatest numberVirtual Shareholder Meeting log in page. A recording of shareholders at our 2019the 2021 Annual Meeting we reserve the right to limit the number of authorized representatives for any shareholder who may attend the meeting and to restrict the admission of guests or other attendees who are not shareholders.
No cameras, recording equipment, large bags or packages will be permitted inavailable at www.virtualshareholdermeeting.com for 12 months following the 2019date of the 2021 Annual Meeting. The use of cell phones, smart phones, tablets and other personal communication devices during the 2019 Annual Meeting is strictly prohibited.
Table of ContentsTABLE OF CONTENTS
VOTING PROCEDURES
VOTING PROCEDURES
Electronic access to proxy materials
Electronic access to proxy materials
|
HEI provides shareholders the option to access its proxy materials via the Internet. In keeping with our efforts to conserve natural resources and reduce carbon emissions, this method of delivery reduces the amount of paper necessary to produce these materials, reduces carbon emissions from transporting and delivery of materials and reduces the costs associated with the printing and mailing of these materials to shareholders. On or about March 25, 2019,26, 2021, a Notice of Internet Availability of Proxy Materials (Notice) will be mailed to certain shareholders and our proxy materials will be posted on the website referenced in the Notice (www.ViewMaterial.com/HEI)(www.proxyvote.com). As more fully described in the Notice, shareholders may choose to access our proxy
materials on the website referred to in the Notice or may request to receive a printed set of our proxy materials. The Notice and website will provide information regarding how to request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis. If you currently receive HEI'sHEI’s proxy materials in printed form and would like to receive them electronically in the future, please so indicate on the enclosed proxy, if voting by mail, or by following the instructions provided when using the telephone or Internet voting options described below.
Only persons who ownowned shares of HEI Common Stock as of the close of business on March 1, 20192021 (the proxy record date) are entitled to vote.
Shares outstanding and entitled to vote
Shares outstanding and entitled to vote
|
On March 1, 2019, 108,936,9022021, 109,281,216 shares of HEI Common Stock were outstanding. Each shareholder is entitled to one vote for each share held on the record date. The Bylaws of HEI do not provide for cumulative voting rights in the election of directors.
A quorum is needed to conduct business at the 20192021 Annual Meeting. A majority of the shares of HEI Common Stock outstanding on March 1, 20192021 and entitled to vote, and present in person or by proxy at the 20192021 Annual Meeting, constitutes a quorum. Shareholders attending the 2021 Annual Meeting via the Internet are deemed to be present in person. Abstentions and broker nonvotes of uninstructed shares on routine matters (such as ratification of the appointment of the independent registered public accounting firm) will be counted in the number of shares present in person or by proxy for purposes of determining a quorum. A quorum established for one purpose will apply for all purposes at the 20192021 Annual Meeting.
Voting shares held directly with the Company
Voting shares held directly with the Company
|
Whether or not you plan to attend the 2021 Annual Meeting, please take the time to vote. You may vote before the 2021 Annual Meeting via the Internet, by touchtone telephone or by mail, beforeor during the 2021 Annual Meeting or in person atvia the Annual Meeting.Internet. The Internet and telephone procedures are designed to authenticate your vote and confirm that your voting instructions are followed. If you vote via the Internet or by telephone, follow the instructions on the Notice or voting instruction card you received by mail. If you vote 72
Table of Contents
VOTING PROCEDURES
by telephone, you will receive additional recorded instructions; and if you vote via the Internet, you will receive additional instructions at the applicable Internet website. You will need to have available the 16-digit control number included on your Notice of Internet Availability of Proxy Materials or your proxy card, as applicable. TABLE OF CONTENTS 1.BY INTERNET: You may vote on-line by following the instructions in the Notice or by accessing the Internet atwww.cesvote.com. Instructions regarding how to record and confirm your vote will be available on the website.
2.BY TELEPHONE: You may vote by touchtone telephone by following the instructions in the Notice or by calling 1-888-693-8683. Once connected, you will be prompted to record and confirm your vote.
3.BEFORE THE MEETING 1.
| BY INTERNET: You may vote online by following the instructions in the Notice or by accessing the Internet at www.proxyvote.com. Instructions regarding how to record and confirm your vote will be available on the website. |
2.
| BY TELEPHONE: You may vote by touchtone telephone by following the instructions in the Notice or by calling 1-800-690-6903. Once connected, you will be prompted to record and confirm your vote. |
3.
| BY MAIL: Please mark your vote and sign, date and promptly return the proxy card in the postage-paid envelope provided. If you return the signed proxy card in the postage-paid envelope provided. If you return the signed proxy card |
but do not mark the boxes showing how you wish to
vote, your votes will be cast following the Board'sBoard’s recommendations on all proposals. If you wish to have someone other than the individuals listed on the enclosed proxy card vote your shares at the meeting, cross out all three names and insert the name of the person you designate as your proxy to vote your shares at the meeting. DURING THE MEETING 1.
| BY INTERNET: You may vote your shares online during the 2021 Annual Meeting by accessing the |
Internet at www.virtualshareholdermeeting.com/
4.IN PERSON: YouHE2021. Instructions will be available on the website. Voting shares held in street name (e.g., through a broker, trustee or your proxy may vote your shares by attending the 2019 Annual Meeting and voting in person.
other holder of record) Voting shares held in street name (e.g., through a broker, trustee or other holder of record)
|
If your shares are held in "street name"“street name” (that is, through a broker, trustee or other holder of record), you will receive a voting instruction card or other information from your broker or other holder of record seeking instruction from you as to how your shares should be voted.If you do not provide such instruction, your broker or nominee may vote your shares at its discretion on your behalf on routine matters, but not on nonroutine matters. The ratification of the appointment of HEI'sHEI’s independent registered public accounting firm is considered a routine matter. The election of directors and the advisory vote on executive compensation are considered nonroutine matters. Please provide instructions to your broker or nominee on how to vote your shares on all four proposals to ensure that your shares will be voted on all proposals in accordance with your wishes.You may not If your shares are held in street name, and you want to vote your shares during the 2021 Annual Meeting, you must have the 16-digit control number from the proxy materials sent to you by your broker or other holder of record and follow the instructions above for voting via the Internet during the meeting.
Voting shares held in "street name" at the 2019 Annual Meeting unless you obtain a legal proxy from your brokerHEI Dividend Reinvestment and Stock Purchase Plan, the HEI Retirement Savings Plan or holder of record.
the American Savings Bank 401(k) Plan Voting shares held in the HEI Dividend Reinvestment and Stock Purchase Plan, the HEI Retirement Savings Plan or the American Savings Bank 401(k) Plan
|
If you own shares held in the HEI Dividend Reinvestment and Stock Purchase Plan, the HEI Retirement Savings Plan (including shares previously received under the Tax Reduction Act Stock Ownership Plan or the HEI Stock Ownership Plan) or the American Savings Bank 401(k) Plan (ASB 401(k) Plan), you will receive instructions explaining how to direct your vote. Your shares will be voted according to your directions. For the HEI Dividend Reinvestment and Stock Purchase Plan, all shares of stock for which no voting instructions are given will be voted by the administrator of such plan as our Board recommends. For the HEI Retirement Savings Plan and the ASB 401(k) Plan, all shares of HEI Common Stock for which no voting instructions are given will be voted in the same proportion as the Plan shares for which voting instructions were given. 73
Table of Contents
VOTING PROCEDURES
If you vote by any of the methods described above, you may revoke your proxy card or vote at any time before the 20192021 Annual Meeting in one of three ways: •
submit a properly signed proxy card with a later date or vote again at a later time by telephone or Internet;
•notify the Corporate Secretary of HEI in writing; or
•vote in person atvia the 2019Internet during the 2021 Annual Meeting (if(you will need the 16-digit control number on your shares are registered inNotice of Internet Availability of Proxy Materials or your name on HEI's booksproxy card or, if yourfor shares are held in "street name" and you have a legalstreet name, from the proxy frommaterials sent by your broker or other holder of record).intermediary) TABLE OF CONTENTS If a quorum is present at the 20192021 Annual Meeting, then: •
Directors will be elected by a plurality ofif the director nominee receives more “FOR” votes cast. Plurality means that the persons receiving the highest number of votes are elected. Your options are to vote either "FOR" or to "WITHHOLD" your vote for a nominee.than “AGAINST” votes. Although the election of directors is considered a nonroutine matter, broker nonvotes (i.e., when your broker or other holder of record does not vote your shares on a nonroutine matter because you have not provided instructions regarding how to vote on that matter) will not affect the outcome of this matter if a quorum is present. In Similarly, abstentions will also not affect the eventoutcome of this matter if a directorquorum is elected under the plurality standard described above but does not receive the support of a majority of the votes cast, such director is requiredpresent. For this proposal, your options are to submit hisvote “FOR,” “AGAINST,” or her resignation to the Board for consideration. The Board would then analyze the shareholder concerns that drove the vote result and determine the most appropriate way to address those concerns, possibly by accepting the director's resignation.
•“ABSTAIN.”Since the vote on executive compensation is advisory only, no minimum number of votes cast is required for that item and the results will not be binding on the Board. However, the Board and its Compensation Committee value input from shareholders and will consider the vote outcome when making future compensation decisions.
| However, the Board and its Compensation Committee value input from shareholders and will consider the vote outcome when making future compensation decisions. |
Brokers may not vote on this proposal without your instruction because the advisory vote on executive compensation is considered a nonroutine matter. For the proposal to adopt a resolution approving the compensation of HEI'sHEI’s named executive officers, your options are to vote "FOR," "AGAINST"“FOR,” “AGAINST” or "ABSTAIN." •The extension of the term of the Plan and the increase in the number of authorized shares of Company stock that may be issued with respect to awards under the Plan is being submitted to HEI's shareholders in order to ensure compliance with the New York Stock Exchange (NYSE) listing standards concerning shareholder approval of equity compensation plans. Under the NYSE listing standards, this Proposal No. 3 will be approved if a majority of the votes cast are in favor of such approval. Abstentions will be considered votes cast and will have the same effect as voting against the proposal. Broker nonvotes will have no effect on the outcome of the vote on the Plan. For this proposal, your options are to vote "FOR," "AGAINST" or "ABSTAIN."
•“ABSTAIN.”The appointment of HEI'sHEI’s independent registered public accounting firm will be ratified if more votes are cast in favor“FOR” than against“AGAINST” such ratification. AbstentionsThis is a routine matter, and your broker nonvotesmay vote your shares at its discretion if no instruction is provided on this proposal. Abstentions will not affect the outcome of this matter if a quorum is present. For this proposal, your options are to vote "FOR," "AGAINST"“FOR,” “AGAINST” or "ABSTAIN."
“ABSTAIN.”Counting the votes and confidentiality
Counting the votes and confidentiality
|
Broadridge Corporate Election ServicesIssuer Solutions, Inc. will act as tabulator for broker and bank proxies as well as for proxies of the other shareholders of record. Your identity and vote will not be disclosed to persons other than those acting as tabulators except: •
as required by law;
•to verify the validity of proxies and vote results in the case of a contested proxy solicitation; or
•Other matters to be decided at the 2021 Annual Meeting
Other matters to be decided at the 2019 Annual Meeting
|
HEI has no business to be presented at the 20192021 Annual Meeting other than the items set forth in this Proxy Statement. If other business is properly brought before the 20192021 Annual Meeting, or any adjournment or postponement thereof, the persons named on the enclosed proxy card will vote your stockshares in accordance with their best judgment, unless authority to do so is withheld by you inon your proxy card.
Postponement or adjournment of Annual Meeting
Postponement or adjournment of Annual Meeting
|
If the 20192021 Annual Meeting is postponed or adjourned, your proxy card will remain valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy card until it is voted at the 20192021 Annual Meeting. 75
TABLE OF CONTENTS Table of Contents
OTHER INFORMATION
OTHER INFORMATION
Proxy solicitation and related cost
|
Proxy solicitation and related cost
HEI will solicit proxies by mail, telephone or other means of communication and will bear the cost of such solicitation. We have engaged D.F. King & Co. to assist in the distribution of proxy materials and solicitation of proxies (including by telephone) from shareholders at a cost of $8,500 $8,500 plus reasonable expenses. We will also reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of ourHEI Common Stock.
Deadline for submitting a proposal to be included in the proxy statement for next year’s Annual Meeting
Deadline for submitting a proposal to be included in the proxy statement for next year's Annual Meeting
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Shareholders who want to have a proposal included in the proxy statement and form of proxy for the 20202022 Annual Meeting of Shareholders (2020(2022 Annual Meeting) must notify submit the proposal to the Corporate Secretary in writing. The proposal must be received by November 25, 2019.
26, 2021. Nominating directors for inclusion in the proxy statement for next year’s Annual Meeting (proxy access)
Eligible Shareholders (as that term is defined in Article IIIA, Section 4 of the Bylaws) who wish to include director nominees in the proxy materials for the 2022 Annual Meeting must deliver such nominations to the Corporate Secretary no later than 120 days, nor earlier than 150 days, prior to the anniversary of the date that the Company first distributed its proxy statement to shareholders for the 2021 Annual Meeting. To be timely for the 2022 Annual Meeting, Eligible Shareholders must deliver the nomination to the Corporate Secretary no later than November 26, 2021, and no earlier than October 27, 2021. Eligible Shareholders may nominate up to two or 20% of the number of directors in office as of November 26, 2021, whichever is greater. For instructions on how to provide a Notice of Proxy Access Nomination (as that term is defined in Article IIIA, Section 2 of the Bylaws) in proper written form, please refer to Article IIIA, Section 6 of the Bylaws. Recommend persons as potential nominees to serve on the Board
Outside of the director nomination process described below, the Nominating and Corporate Governance Committee will also consider informal recommendations by shareholders for director candidates. Shareholders may send such recommendations to the Nominating and Corporate Governance Committee in care of the Corporate Secretary, Hawaiian Electric Industries, Inc., P.O. Box 730, Honolulu, Hawai‘i 96808-0730. Recommendations must be received by November 26, 2021 for consideration by the Nominating and Corporate Governance Committee for the 2022 Annual Meeting. The recommendation must include (a) a résumé and other relevant biographical information regarding the person’s skills and qualifications to serve on the Board, (b) such person’s consent to serve as a director and (c) the number of shares of HEI Common Stock owned by the shareholder. TABLE OF CONTENTS Bringing business matters before the 2020 Annual Meeting
| | | OTHER INFORMATION |
Bringing other business matters or nominations before the 2022 Annual Meeting
Shareholders who wish to present business before the 20202022 Annual Meeting (other than through Rule 14a-8 of the Exchange Act) or nominate a director for the 2022 Annual Meeting (other than through proxy access) must provide a written notice to the Corporate Secretary that is received no later than 90 days, nor earlier than 120 days, prior to the anniversary date of the preceding year's2021 Annual Meeting of Shareholders.Meeting. To be timely for the 20202022 Annual Meeting, shareholders must deliver written notice must be received byto the Corporate Secretary no later than February 7, 20206, 2022, and no earlier than January 8, 2020. The notice7, 2022. Notice for business to be presented must comply with Article II, Section 2 of the Bylaws and include: (i) as to each matter the shareholder proposes to bring before the 20202022 Annual Meeting: (i) a brief description of the business desired to be brought before the 20202022 Annual Meeting (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend the Bylaws, the text of the proposed amendment) and the reasons for conducting such business at the 20202022 Annual Meeting,Meeting; and (ii) as to the shareholder giving notice and the beneficial owner, if any, on whose behalf the proposal is being made: (a) the name and record address of such person, (b) such person’s Ownership Information, (as that term is defined in Article II, Section 2 of the shareholder, (iii) the number of shares of HEI Common Stock owned by the shareholder, (iv)Bylaws), (c) a description of all arrangements or understandings between thesuch shareholder and any other person(s)person or persons (including their name(s))names) in connection with the proposal of such business by thesuch shareholder and any material interest of thesuch shareholder in such business, (d) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies by such person with respect to the proposed business to be brought before the annual meeting pursuant to Section 14 of the Exchange Act, and (v)the rules and regulations promulgated thereunder, and (e) a representation that thesuch shareholder intends to appear in person or by proxy at the 2020 Annual Meetingannual meeting to bring such business before the meeting.
Recommend or propose persons as nominees to serve on the Board
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Shareholders may recommend any person to serve on the Board by writing to the Nominating and Corporate Governance Committee in care
Notice for nominating a director must comply with Article III, Section 2 of the Corporate Secretary, Hawaiian Electric Industries, Inc., P.O. Box 730, Honolulu, Hawaii 96808-0730. Recommendations must be received by November 25, 2019 for consideration by the NominatingBylaws and Corporate Governance Committee for the 2020 Annual Meeting. The recommendation must include (a) a resume and other relevant biographical information regarding the person's skills and qualifications to serve on the Board, (b) the nominee's consent to serve as a director and (c) the number of shares of HEI Common Stock owned by the shareholder.Shareholders may propose persons as nominees to serve on the Board by providing a written notice to the Corporate Secretary that is received no later than February 7, 2020 and no earlier than January 8, 2020. The notice must include:
•- : (i) as to each
proposed nominee: (i)person whom the shareholder proposes to nominate for election as a director: (a) the name, age, business address and residence address of the person,
Table of Contents
OTHER INFORMATION
(ii) (b) the principal occupation or employment of the person, (iii)(c) the number of shares of HEI Common Stock that are owned by the personperson’s Ownership Information, and (iv)(d) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act, of 1934 and the rules and regulations promulgated thereunder; and
•- (ii) as to the
shareholder: (i)shareholder giving the notice, and the beneficial owner, if any, on whose behalf the nomination is being made: (a) the name and record address of such shareholder, (b) the shareholder, (ii) the number of shares of HEI Common Stock that are owned by the shareholder, (iii)Ownership Information, (c) a description of all arrangements or understandings between thesuch shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such shareholder, (d) a description of any material interest of such person or any affiliates of such person in the shareholder, (iv)nomination, including any anticipated benefit therefrom to such person or any affiliates of such person, (e) a representation that thesuch shareholder intends to appear in person or by proxy at the meeting to nominate the proposed nominee(s)persons named in its notice, and (v)(f) any other information relating to thesuch shareholder that would be required to be disclosed in a proxy statement or other filingfilings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.
A written consent of each proposed nominee to being a nominee and to serve as a director if elected and a completed and signed representation agreement (as described in Article III, Section 14 of the Bylaws) must also accompany the notice.
“Householding” and provision of additional copies of proxy materials upon request
"Householding" and provision of additional copies of proxy materials upon request
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As permitted by rules of the Securities and Exchange Commission,SEC, HEI has adopted a procedure referred to as "householding,"“householding,” under which only one annual report to shareholders will be delivered to shareholders sharing the same address, unless contrary instructions are received. Householding reduces the volume of duplicate information received at your household, the cost to HEI of preparing and mailing duplicate materials, and the environmental burden of excess paper usage.usage and carbon emissions associated with transportation and delivery. Certain shareholder accounts at a householded address will continue to receive separate proxy statements and proxy cards, and we will also deliver promptly upon your written or oral request a separate copy of the annual report, proxy statement or Notice of Internet Availability if you are a security holder at a shared address to which a single copy of the requested documents was delivered. Dividend payments and account statements are not affected. Householding will continue until you are TABLE OF CONTENTS notified otherwise or until you notify us that you wish to receive a separate annual report. You will be removed from the householding program within 30 days after receipt of your notice. If you wish to commence or discontinue householding of the annual report to shareholders, you may notify us by calling us at (808) 532-5841 or toll free at (866) 672-5841 between 7:30 a.m. and 3:30 p.m., Hawaii Standard Time.540-7095 (toll free). You may also write to us at the following address: Hawaiian Electric Industries, Inc. Shareholder Services, P.O. Box 730, Honolulu, Hawaii 96808-0730, or e-mail us at invest@hei.com.Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. If you hold your shares in "street“street name, "” please contact your bank, broker or other holder of record to request information about householding. Please vote your proxy as soon as possible to ensure that your shares will be counted at the 20192021 Annual Meeting.| | | | | Kurt K. Murao
Executive Vice President, General Counsel, Chief
Administrative Officer and Corporate Secretary | |
March 25, 201977
26, 2021TABLE OF CONTENTS Table of Contents
EXHIBIT A
Reconciliation of GAAP 1 to Non-GAAP Measures: Reported Core Earnings and Other Financial MeasuresHEI uses certain non-GAAP measures to evaluate the performance of HEI and its subsidiaries. Management believes these non-GAAP measures provide useful information and are a better indicator of HEI's core operating activities. Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies. The accompanying tables provide a reconciliation of reported GAAP earnings to non-GAAP core earnings and the adjusted return on average common equity (ROACE) for HEI consolidated.
The reconciling adjustment from GAAP earnings to core earnings for 2016 includes the merger termination fee received from the termination of the previously proposed merger between HEI and NextEra Energy and spin-off of ASB Hawaii, Inc. (ASB Hawaii) and merger- and spin-off-related expenses (net of reimbursements), including expenses related to Hawaiian Electric's terminated liquefied natural gas (LNG) contract, which required PUC approval of the merger, and all merger- and spin-off-related tax impacts. The 2017 reconciling adjustments from GAAP earnings to core earnings exclude the impact of the federal tax reform act due to the adjustment of the deferred tax balances and the $1,000 employee bonuses paid by the bank related to federal tax reform. Management does not consider these items to be representative of the company's fundamental core earnings.
Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)
Unaudited
($ in millions, except per share amounts)
| | | | | | | | | | |
| | 2018
| | 2017
| | 2016
| |
|---|
| | | | | | | | | | | | HEI CONSOLIDATED NET INCOME | | | | | | | | | | | GAAP (as reported) | | $ | 201.8 | | $ | 165.3 | | $ | 248.3 | | Excluding special items (after-tax): | | | | | | | | | | | Income related to terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii, Inc. | | | — | | | — | | | (60.3 | ) | Costs related to the terminated LNG contract2 | | | — | | | — | | | 2.1 | | Bonus related to enactment of federal tax reform3 | | | — | | | 0.7 | | | — | | Federal tax reform impacts4 | | | — | | | 13.4 | | | — | | | | | | | | | | | | | | Non-GAAP (core) net income | | $ | 201.8 | | $ | 179.5 | | $ | 190.1 | | | | | | | | | | | | | | HEI CONSOLIDATED DILUTED EARNINGS PER SHARE | | | | | | | | | | | GAAP (as reported) | | $ | 1.85 | | $ | 1.52 | | $ | 2.29 | | Excluding special items (after-tax): | | | | | | | | | | | Income related to terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii, Inc. | | | — | | | — | | | (0.56 | ) | Costs related to the terminated LNG contract2 | | | — | | | — | | | 0.02 | | Bonus related to enactment of federal tax reform3 | | | — | | | 0.01 | | | — | | Federal tax reform impacts4 | | | — | | | 0.12 | | | — | | | | | | | | | | | | | | Non-GAAP (core) diluted earnings per share | | $ | 1.85 | | $ | 1.65 | | $ | 1.75 | | | | | | | | | | | | | | HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average) | | | | | | | | | | | Based on GAAP | | | 9.5% | | | 7.9% | | | 12.4% | | Based on non-GAAP (core)5 | | | 9.5% | | | 8.6% | | | 9.5% | | | | | | | | | | | | | |
Note: Columns may not foot due to rounding
1Accounting principles generally accepted in the United States of America
2The liquefied natural gas (LNG) contract was terminated as it was conditioned on the merger with NextEra Energy closing
3Employee bonus paid by American Savings Bank related to enactment of federal tax reform
4Reflects the lower rates enacted by federal tax reform, primarily the adjustments to reduce the unregulated deferred tax balances
5Calculated as core net income divided by average GAAP common equity
Table of Contents
EXHIBIT B
EXHIBIT B
Reconciliation of GAAP1 to Non-GAAP Measures:
Incentive Compensation Adjustments
HEI reports its financial results in accordance with accounting principles generally accepted in the United States of America (GAAP). However, HEI'sHEI’s management may use certain non-GAAP measures to evaluate the performance of HEI and its subsidiaries for compensation purposes. Management believes these EICP and LTIP non-GAAP measures provide useful information and are a better indicator of management'smanagement’s performance regarding ongoing business operations for the level of achievement against the performance objectives underlying the EICP and LTIP programs established at the beginning of the measurement period. Adjusted earnings and other financial measures as presented below may not be comparable to similarly-titled measures used by other companies. The table below provides a reconciliation of GAAP earnings to non-GAAP EICP and LTIP measures for HEI and its subsidiaries.
Table of Contents
EXHIBIT B
Hawaiian Electric Industries, Inc. and Subsidiaries (HEI Consolidated)
Unaudited
($ in millions, except per share amounts) | | HEI CONSOLIDATED NET INCOME
| | | | | | | | | | | | | GAAP (as reported) | | | $197.8 | | | $217.9 | | | $201.8 | | | | Excluding special items (after-tax) for EICP and LTIP purposes:
| | | | | | | | | | | | | Provision for credit losses related to the pandemic | | | 25.2 | | | | | | | | | | COVID-19 related expenses | | | 3.7 | | | | | | | | | | Branch lease termination costs | | | 0.6 | | | | | | | | | | Gain from VISA stock sale, net | | | (2.2) | | | | | | | | | | Non-GAAP (adjusted) net income for 2020 EICP purposes | | | 225.2 | | | | | | | | | | Excluding special items (after-tax) for LTIP purposes only:
| | | | | | | | | | | | | Sale of former headquarters, net of campus transition costs | | | — | | | (5.6) | | | 0.7 | | | | Ongoing impacts relating to the termination of merger2 | | | — | | | — | | | 12.4 | | | | Federal tax reform and related impacts3 | | | — | | | — | | | (4.7) | | | | Consulting fees | | | 1.2 | | | 1.6 | | | 1.0 | | | | Pension defeasement | | | 1.0 | | | (0.8) | | | 0.2 | | | | Non-GAAP (adjusted) net income for 2018-20 LTIP purposes | | | $227.4 | | | $213.1 | | | $211.3 | | | | HEI CONSOLIDATED BASIC EARNINGS PER SHARE
| | | | | | | | | | | | | Based on GAAP | | | $1.81 | | | $2.00 | | | $1.85 | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes | | | 2.08 | | | 1.96 | | | 1.94 | | | | HEI CONSOLIDATED Return on Average Common Equity (%)
| | | | | | | | | | | | | Based on GAAP | | | 8.6 | | | 9.8 | | | | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes4 | | | 9.8 | | | 9.6 | | | | | | | UTILITY NET INCOME
| | | | | | | | | | | | | GAAP (as reported) | | | $169.3 | | | $156.8 | | | $143.7 | | | | Excluding special items (after-tax) for LTIP purposes only:
| | | | | | | | | | | | | Ongoing impacts relating to the termination of merger2 | | | — | | | — | | | 12.4 | | | | Federal tax reform and related impacts3 | | | — | | | — | | | (4.7) | | | | Non-GAAP (adjusted) net income for 2018-20 LTIP purposes | | | $169.3 | | | $156.8 | | | $151.3 | |
| | | | | | | | | | | | | |
| | Years ended December 31 | |
|---|
| | 2018
| | 2017
| | 2016
| | 2015
| |
|---|
| | | | | | | | | | | | | | | HEI CONSOLIDATED NET INCOME | | | | | | | | | | | | | | GAAP (as reported) | | $ | 201.8 | | $ | 165.3 | | $ | 248.3 | | $ | 159.9 | | Excluding special items (after-tax) for EICP and LTIP purposes: | | | | | | | | | | | | | | Ongoing impacts relating to the termination of merger2 | | | 12.4 | | | | | | | | | | | Corporate campus transition costs | | | 0.7 | | | | | | | | | | | Consulting fees | | | 1.0 | | | | | | | | | | | Federal tax reform and related impacts3 | | | (5.5 | ) | | | | | | | | | | | | | | | | | | | | | | | | | Non-GAAP (adjusted) net income for 2018 EICP purposes | | | 210.4 | | | | | | | | | | | | | | | | | | | | | | | | | | Excluding special items (after-tax) for LTIP purposes only: | | | | | | | | | | | | | | Federal tax reform and related impacts3 | | | (5.7 | ) | | 14.2 | | | — | | | — | | Rate adjustment mechanism reversion to lagged method4 | | | — | | | 13.9 | | | — | | | — | | (Income) expenses related to terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii, Inc. | | | — | | | — | | | (60.3 | ) | | 15.8 | | Costs related to the terminated LNG contract | | | — | | | — | | | 2.1 | | | — | | ASB pension defeasement | | | 1.0 | | | 0.3 | | | — | | | — | | | | | | | | | | | | | | | | | Non-GAAP (adjusted) net income for 2016-18 LTIP purposes | | $ | 205.7 | | $ | 193.6 | | $ | 190.1 | | $ | 175.7 | | | | | | | | | | | | | | | | | HEI CONSOLIDATED BASIC EARNINGS PER SHARE | | | | | | | | | | | | | | Based on GAAP | | $ | 1.85 | | $ | 1.52 | | $ | 2.30 | | $ | 1.50 | | Based on non-GAAP (adjusted) for 2016-18 LTIP purposes | | | 1.89 | | | 1.78 | | | 1.76 | | | 1.65 | | | | | | | | | | | | | | | | | UTILITY NET INCOME | | | | | | | | | | | | | | GAAP (as reported) | | $ | 143.7 | | $ | 120.0 | | $ | 142.3 | | | | | Excluding special items (after-tax) for EICP and LTIP purposes: | | | | | | | | | | | | | | Ongoing impacts relating to the termination of merger2 | | | 12.4 | | | | | | | | | | | Federal tax reform and related impacts3 | | | (4.7 | ) | | 9.2 | | | | | | | | | | | | | | | | | | | | | | | Non-GAAP (adjusted) net income for 2018 EICP purposes | | | 151.3 | | | | | | | | | | | | | | | | | | | | | | | | | | Excluding special items (after-tax) for LTIP purposes only: | | | | | | | | | | | | | | Rate adjustment mechanism reversion to lagged method4 | | | — | | | 13.9 | | | — | | | | | Costs related to terminated merger with NextEra Energy | | | — | | | — | | | 0.1 | | | | | Costs related to the terminated LNG contract | | | — | | | — | | | 2.1 | | | | | | | | | | | | | | | | | | | | Non-GAAP (adjusted) net income for 2016-18 LTIP purposes | | $ | 151.3 | | $ | 143.0 | | $ | 144.5 | | | | | | | | | | | | | | | | | | | | UTILITY Return on Average Common Equity (%) | | | | | | | | | | | | | | Based on GAAP | | | 7.6 | | | 6.6 | | | 8.1 | | | | | Based on non-GAAP (adjusted) for 2016-18 LTIP purposes5 | | | 7.9 | | | 7.8 | | | 8.2 | | | | | | | | | | | | | | | | | | | | ASB NET INCOME | | | | | | | | | | | | | | GAAP (as reported) | | $ | 82.5 | | $ | 67.0 | | $ | 57.3 | | | | | Excluding special items (after-tax) for EICP and LTIP purposes | | | | | | | | | | | | | | Corporate campus transition costs | | | 0.7 | | | | | | | | | | | Federal tax reform and related impacts3 | | | (0.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | Non-GAAP (adjusted) net income for 2018 EICP purposes | | | 82.5 | | | | | | | | | | | | | | | | | | | | | | | | | | Excluding special items (after-tax) for LTIP purposes only: | | | | | | | | | | | | | | Federal tax reform and related impacts3 | | | (10.5 | ) | | (1.0 | ) | | — | | | | | Pension defeasement | | | 1.0 | | | 0.3 | | | — | | | | | | | | | | | | | | | | | | | | Non-GAAP (adjusted) net income for 2016-2018 LTIP purposes | | $ | 73.0 | | $ | 66.3 | | $ | 57.3 | | | | | | | | | | | | | | | | | | | | ASB Return on Average Common Equity (%) | | | | | | | | | | | | | | Based on GAAP | | | 13.3 | | | 11.3 | | | 10.1 | | | | | Based on non-GAAP (adjusted) for 2016-18 LTIP purposes5 | | | 11.9 | | | 11.2 | | | 10.1 | | | | | | | | | | | | | | | | | | | | ASB EFFICIENCY RATIO (%) | | | | | | | | | | | | | | Based on GAAP | | | 59.4 | | | | | | | | | | | Adjustment for pre-tax ASB items above | | | (1.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | Based on non-GAAP (adjusted) for 2016-18 LTIP purposes6 | | | 58.3 | | | | | | | | | | | | | | | | | | | | | | | | | |
TABLE OF CONTENTS | | UTILITY BASIC EARNINGS PER SHARE
| | | | | | | | | | | | | Based on GAAP Utility net income5 | | | $1.55 | | | $1.44 | | | $1.32 | | | | Based on non-GAAP Utility net income (adjusted) for 2018-20 LTIP purposes5 | | | 1.55 | | | 1.44 | | | 1.39 | | | | ASB NET INCOME
| | | | | | | | | | | | | GAAP (as reported) | | | $57.6 | | | $89.0 | | | $82.5 | | | | Excluding special items (after-tax) for EICP and LTIP purposes:
| | | | | | | | | | | | | Provision for credit losses related to the pandemic | | | 25.2 | | | | | | | | | | COVID-19 related expenses | | | 3.7 | | | | | | | | | | Branch lease termination costs | | | 0.6 | | | | | | | | | | Gain from VISA stock sale, net | | | (2.2) | | | | | | | | | | Non-GAAP (adjusted) net income for 2020 EICP purposes | | | 84.9 | | | | | | | | | | Excluding special items (after-tax) for LTIP purposes only:
| | | | | | | | | | | | | Sale of former headquarters, net of campus transition costs | | | — | | | (5.6) | | | 0.7 | | | | Pension defeasement | | | 1.0 | | | (0.8) | | | 0.2 | | | | Non-GAAP (adjusted) net income for 2018-20 LTIP purposes | | | $85.9 | | | $82.6 | | | $83.4 | | | | ASB Return on Average Common Equity (%)
| | | | | | | | | | | | | Based on GAAP | | | 8.1 | | | 13.5 | | | | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes4 | | | 12.1 | | | 12.5 | | | | | | | ASB EFFICIENCY RATIO (%)
| | | | | | | | | | | | | Based on GAAP | | | 61.5 | | | 57.8 | | | | | | | Adjustment for pre-tax ASB items above | | | (1.8) | | | 0.9 | | | | | | | Based on non-GAAP (adjusted) for 2018-20 LTIP purposes6 | | | 59.7 | | | 58.7 | | | | |
Note: Columns may not foot due to rounding 1Accounting principles generally accepted in the United States of America
1
| Accounting principles generally accepted in the United States of America. |
2
| Primarily reflects certain expenses related to the termination of the proposed merger with NextEra Energy, including Hawaiian Electric’s liquid natural gas (LNG) project costs and adjustments to test year revenue requirements for customer benefit adjustments in the Hawaiian Electric and Maui Electric rate case decisions. |
3
| For 2018 LTIP purposes, reflects various tax adjustments for tax reform and related impacts. |
4
| Calculated as non-GAAP adjusted net income divided by average adjusted GAAP common equity. For HEI and ASB ROACE goal, average 2019 and 2020 return on average common equity. |
5
| Calculated using Utility net income divided by HEI weighted average common shares. |
6
| Calculated as non-GAAP adjusted noninterest expense divided by the sum of net interest income and noninterest income. |
A-2
2Primarily reflects certain expenses related to the termination of the proposed merger with NextEra Energy, including the Hawaiian Electric's liquefied natural gas (LNG) project costs and adjustments to test year revenue requirements for customer benefit adjustments in the Hawaiian Electric and Maui Electric rate case decisionsB-2
Table of ContentsTABLE OF CONTENTS
EXHIBIT B
3For 2017, primarily reflects the impacts of lower rates enacted by federal tax reform on the deferred tax balances. For 2018 EICP and LTIP purposes, reflects various tax adjustments for tax reform and related impacts
4Reflects reversion of the rate adjustment mechanism (RAM) to the lagged method of revenue recognition
5Calculated as non-GAAP adjusted net income divided by average adjusted GAAP common equity
6Calculated as non-GAAP adjusted noninterest expense divided by the sum of net interest income and noninterest income
B-3
Table of Contents
Appendix A
HAWAIIAN ELECTRIC INDUSTRIES, INC.
2011 NONEMPLOYEE DIRECTOR STOCK PLAN
( As Amended Effective February 14, 2019)1. Purposes of the Plan
The purposes of this Hawaiian Electric Industries, Inc. 2011 Nonemployee Director Stock Plan (the "Plan") are to advance the interests of Hawaiian Electric Industries, Inc. (the "Company") and its shareholders by aligning the personal interests of members of the Board of Directors of the Company and members of the boards of directors of its principal subsidiaries who are not employees with the interests of the Company and its shareholders. Accordingly, the Plan provides participating nonemployee directors with incentives to maintain their status as directors and improve the Company's performance by increasing the level of Common Stock of the Company owned by such nonemployee directors, thereby assisting them in meeting the Company's stock ownership guidelines, through the issuance of Common Stock under the Plan as part of their compensation.
Upon the effective date of the Plan, the Company's 1990 Nonemployee Director Stock Plan, as last amended and restated on May 6, 2008 (the "Prior Plan"), shall terminate and no further shares of Common Stock of the Company shall thereafter be issued under the Prior Plan.
2. Definitions
When used herein, the following terms shall have the respective meanings set forth below:
(a) "Annual Meeting of Shareholders" means the annual meeting of shareholders of the Company at which directors of the Company are elected.
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Compensation Committee of the Board, or subcommittee thereof, or such other committee appointed from time to time by the Board to administer the Plan in accordance with Section 4(a) hereof, which Committee shall consist of two or more "nonemployee directors" as defined under Rule 16b-3(b)(3)(i) promulgated under the Securities Exchange Act of 1934).
(d) "Common Stock" means the common stock, without par value, of the Company.
(e) "Company" means Hawaiian Electric Industries, Inc., a Hawaii corporation, and any successor corporation.
(f) "Employee" means any officer or employee of the Company or any of its direct or indirect subsidiaries or affiliates (whether or not such subsidiary or affiliate participates in the Plan).
(g) "Fair Market Value" means, as of any given date: (i) the closing sale price of a share of Common Stock on such date on the national securities and exchange on which the Company's equity securities are principally listed or traded, or, if on such date no trade was conducted, the most recent preceding date on which there was such a trade; (ii) if the shares of Common Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Common Stock in such over-the-counter market for the last preceding date on which there was a sale of such Common Stock in such market; or (iii) the fair market value of a share of Common Stock as otherwise determined by the Committee in the good faith exercise of its discretion.
(h) "Grant Date" shall be June 30 of each year except that (i) if June 30 falls on a day that is not a business day in Honolulu, Hawaii, then the Grant Date shall be the next preceding business day and (ii) the Grant Date for a person who first becomes a director after June 30 of a year and before the Annual Meeting of Shareholders in the next year shall be the date on which such person's service as a director commences. For the avoidance of doubt, clause (ii) does not apply to a person who serves as a director of the Company or a Participating Company but then also (or instead) is elected or appointed to serve in another director position.
(i) "Nonemployee Company Director" means any person who is elected or appointed to the Board of Directors of the Company and who is not an employee.
(j) "Nonemployee Participating Company Director" means any person who is elected or appointed to the Board of Directors of any one or more Participating Companies and who is not an Employee.
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(k) "Participant" means any Nonemployee Company Director or Nonemployee Participating Company.
(l) "Participating Company" means any direct or indirect subsidiary or affiliate of the Company whose participation in the PlanThis page has been approved by the Board.
(m) "Plan" means this 2011 Nonemployee Director Stock Plan, as it may be amended from time to time.
(n) "Stock Payment" means a grant under the Plan of shares of Common Stock to a Nonemployee Company Director or a Nonemployee Participating Company Director rather than cash as compensation for services rendered as a director of the Company or a Participating Company, as provided in Section 6 hereof.
3. Shares of Common Stock Subject to the Plan
Subject to adjustment as provided in Section 8 below, a total of 346,607 shares of Common Stock shall be reserved and available for issuance pursuant to grants under the Plan on or after the date of the 2019 Annual Meeting of Shareholders, less one (1) share for every one (1) share, if any, granted under the Plan after December 31, 2018 and prior to the date of such Annual Meeting of Shareholders. The Common Stock to be issued under the Plan may, in whole or in part, be authorized but unissued shares of Common Stock of the Company or shares that may be reacquired by the Company in the open market, in private transactions or otherwise.
4. Administration of the Plan
(a) The Plan will be administered by the Committee. The Company shall pay all costs of administration of the Plan.
(b) Subject to the express provisions of the Plan, the Committee has and may exercise such powers and authority of the Board as may be necessary or appropriate for the Committee to carry out its functions under the Plan. Without limiting the generality of the foregoing, the Committee shall have full power and authority (i) to determine all questions of fact that may arise under the Plan, (ii) to interpret the Plan and to make all other determinations necessary or advisable for the administration of the Plan, and (iii) to prescribe, amend, and rescind rules and regulations relating to the Plan, including, without limitation, any rules which the Committee determines are necessary or appropriate to ensure that the Company, each Participating Company and the Plan will be able to comply with all applicable provisions of any federal, state or local law, including securities laws and laws relating to the withholding of tax. All interpretations, determinations, and actions by the Committee will be final, conclusive, and binding upon all parties. Any action of the Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote at a meeting of the Committee (at which members may participate by telephone) or by the unanimous written consent of its members.
(c) Neither the Company, nor any Participating Company, nor any representatives, employees or agents of the Company or any Participating Company, nor any member of the Board or the Committee or any designee thereof will be liable for any damages resulting from any action or determination made by the Board or the Committee with respect to the Plan or any transaction arising under the Plan or any omission in connection with the Plan in the absence of willful misconduct or gross negligence.
5. Participation in the Plan
(a) All Nonemployee Company Directors and Nonemployee Participating Company Directors shall participate in the Plan, subject to the conditions and limitations of the Plan, so long as they shall be a nonemployee director of the Company or a Participating Company on the Grant Date.
(b) Nonemployee Company Directors and Nonemployee Participating Company Directors shall be eligible for Stock Payments pursuant to the terms of Section 6 of the Plan.
6. Determination of Nonemployee Directors' Stock Payments
(a) Each Nonemployee Company Director and each Nonemployee Participating Company Director who serves in that capacity on the Grant Date shall receive, in addition to any annual retainer and other amounts that may be payable to such Nonemployee Company Director or Nonemployee Participating Company Director, a Stock Payment; provided, however, that no Participant shall be entitled to receive more than one Stock Payment even if he or she serves as a director of both the Company and a Participating Company or more than one Participating Company and provided, further, that the Stock Payment for a new director whose Grant Date is determined pursuant to
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Section 2(h)(ii) shall be prorated based on a fraction in which the numerator is the number of days remaining between the date on which such Participant becomes a director and the date of the next Annual Meeting of Shareholders and the denominator is 365 days.
(b) Stock Payments may be designated in either dollar value or in a number of shares of Common Stock. The number of shares to be issued to each Participant as a Stock Payment if the Stock Payment is designated by dollar value shall be determined by dividing the Fair Market Value of the Common Stock on the applicable Grant Date into the applicable dollar value of the Stock Payment, provided that no fractional shares shall be issued (cash shall be paid in lieu thereof).
(c) For Nonemployee Company Directors and Nonemployee Participating Company Directors serving in that capacity on the Grant Date, the Stock Payment shall be designated in dollar value as follows: (i) for Nonemployee Company Directors, $100,000 and (ii) for Nonemployee Participating Company Directors, $55,000. For a Nonemployee Company Director who also serves as a Nonemployee Participating Company Director on the Grant Date, the applicable dollar value of the Stock Payment will be $100,000.
(d) The amount of the Stock Payment, and whether it is expressed as a dollar value or in number of shares, may be changed in the discretion and upon recommendation of the Committee and approval by the Board, but shall not be changed more than once between any two Annual Meetings of Shareholders.
(e) No Nonemployee Company Director or Nonemployee Participating Company Director shall be required to forfeit or otherwise return to the Company any shares of Common Stock issued to him or her as a Stock Payment pursuant to the Plan notwithstanding any change in status of such director which renders him or her ineligible to continue as a participant in the Plan after the Grant Date.
7. Shareholder Rights
(a) Nonemployee Company Directors and Nonemployee Participating Company Directors shall not be deemed for any purpose to be or have rights as shareholders of the Company with respect to any shares of Common Stock except as and when such shares are issued and then in any event not earlier than the Grant Date. No adjustment shall be made for dividends or distributions or other rights for which the record date precedes the Grant Date.
(b) Subject to the provisions of Section 7(a) above, Nonemployee Company Directors and Nonemployee Participating Company Directors will have all rights of a shareholder with respect to Common Stock once issued as a Stock Payment on the Grant Date, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto.
8. Adjustment for Changes in Capitalization
If the outstanding shares of Common Stock of the Company are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, combination of shares, rights offering, distribution of assets or other distribution with respect to such shares of Common Stock or other securities or other change in the corporate structure or shares of Common Stock, the maximum number of shares and/or the kind of shares that may be issued under the Plan may be appropriately adjusted by the Committee. Any determination by the Committee as to any such adjustment will be final, binding, and conclusive. The maximum number of shares issuable under the Plan as a result of any such adjustment shall be rounded up to the nearest whole share.
9. Continuation of Director or Other Status
Nothing in the Plan or in any instrument executed pursuant to the Plan or any action taken pursuant to the Plan shall be construed as creating or constituting evidence of any agreement or understanding, express or implied, that the Company or any other Participating Company, as the case may be, will retain a Nonemployee Company Director or Nonemployee Participating Company Director as a director or in any other capacity for any period of time or at a particular retainer or other rate of compensation, as conferring upon any director any legal or other right to continue as a director or in any other capacity, or as limiting, interfering with or otherwise affecting any right of the Company or a Participating Company or their respective shareholders may have to terminate a director in his or her capacity as
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a director or otherwise at any time for any reason, with or without cause, and without regard to the effect that such termination might have upon him or her as a participant under the Plan.
10. Compliance with Government Regulations
Neither the Plan nor the Company shall be obligated to issue any shares of Common Stock pursuant to the Plan at any time unless and until all applicable requirements imposed by any federal and state securities and other laws, rules, and regulations, by any regulatory agencies or by any stock exchanges upon which the Common Stock may be listed have been fully met. As a condition precedent to any issuance of shares of Common Stock and delivery of notice of share ownership evidencing such shares pursuant to the Plan, the Board or the Committee may require a Nonemployee Company Director or Nonemployee Participating Company Director to take any such action and to make any such covenants, agreements and representations as the Board or the Committee, as the case may be, in its discretion deems necessary or advisable to ensure compliance with such requirements. The Company may elect, but shall in no event be obligated, to register the shares of Common Stock issuable under the Plan pursuant to the Securities Act of 1933, as now or hereafter amended, or to qualify or register such shares under any securities laws of any state upon their issuance under the Plan or at any time thereafter, or to take any other action in order to cause the issuance and delivery of such shares under the Plan or any subsequent offer, sale or other transfer of such shares to comply with any such law, regulation or requirement. Nonemployee Company Directors and Nonemployee Participating Company Directors are responsible for complying with all applicable federal and state securities and other laws, rules and regulations in connection with any offer, sale or other transfer by them of the shares of Common Stock issued under the Plan or any interest therein including, without limitation, compliance with the registration requirements of the Securities Act of 1933, as amended (unless an exemption therefrom is available), or with the provisions of Rule 144 promulgated thereunder, if available, or any successor provisions.
11. Nontransferability of Rights
No Nonemployee Company Director or Nonemployee Participating Company Director shall have the right to assign the right to receive any Stock Payment or any other right or interest under the Plan, contingent or otherwise, or to cause or permit any encumbrance, pledge or charge of any nature to be imposed on any such right to receive any Stock Payment (prior to the issuance of a stock certificate or notice of share ownership evidencing such Stock Payment, which the Company shall endeavor to cause to occur on the Grant Date or as soon as practicable thereafter).
12. Amendment and Termination of Plan
(a) The Board will have the power in its discretion, to amend, suspend or terminate the Plan at any time. No such amendment will, without approval of the shareholders of the Company:
(i) Change the class of persons eligible to receive Stock Payments under the Plan or otherwise modify the requirements as to eligibility for participation in the Plan; or
(ii) Increase the number of shares of Common Stock which may be issued under the Plan (except for adjustments as provided in Section 8 hereof).
(b) No amendment, suspension or termination of the Plan will, without the consent of the Nonemployee Company Director or Nonemployee Participating Company Director, alter, terminate, impair, or adversely affect any right or obligations under any Stock Payment previously granted under the Plan to such Participant, unless such amendment, suspension or termination is required by applicable law.
(c) Notwithstanding the foregoing, the Board may, without further action by the shareholders of the Company, amend the Plan or modify Stock Payments under the Plan (i) in response to changes in securities or other laws, or rules, regulations or regulatory interpretations thereof, applicable to the Plan, or (ii) to comply with stock exchange rules or requirements.
13. Governing Law
The laws of the State of Hawaii shall govern and control the interpretation and application of the terms of the Plan.
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14. Effective Date and Duration of the Plan
The Plan was approved by the Board and became effective upon approval by the Shareholders of the Company at the 2011 Annual Meeting of Shareholders. Unless previously terminated by the Board, the Plan will terminate on February 14, 2029.
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V O T E B Y T E L E P H O N E Have your proxy card available when you call the Toll-Free number 1-888-693-8683 using a touch-tone telephone and follow the simple instructions presented to record your vote. V O T E B Y I N T E R N E T Have your proxy card available when you access the website www.cesvote.com and follow the simple instructions presented to record your vote. V O T E B Y M A I L Please mark, sign and date your proxy card and return it in the postage-paid envelope provided or return it to: Corporate Election Services, PO Box 1150, Pittsburgh, PA 15230. Vote 24 hours a day, 7 days a week until May 6, 2019, 11:59 P.M. EDT. If you vote by telephone or Internet, please do not send your proxy by mail. Please fold and detach card at perforation before mailing. HAWAIIAN ELECTRIC INDUSTRIES, INC. THIS PROXY IS SOLICITED ON BEHALFTABLE OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 7, 2019, AT 10:00 A.M., IN THE AMERICAN SAVINGS BANK TOWER, 8TH FLOOR, ROOM 805, 1001 BISHOP STREET, HONOLULU, HAWAII 96813. The undersigned hereby constitutes and appoints Constance H. Lau, Kurt K. Murao and Jeffrey N. Watanabe and each of them the proxy of the undersigned, with full power of substitution, to vote all the Common Stock of Hawaiian Electric Industries, Inc. which the undersigned may be entitled to vote at the Annual Meeting of Shareholders to be held on May 7, 2019, or at any adjournment or postponement thereof. Date: Signature(s) Signature(s) (Please sign your name exactly as it appears on this proxy. Joint owners should each sign personally. Attorney, Executor, Administrator, Trustee or Guardian should indicate full title. If address is incorrect, please provide the correct one.) Vote by Mail Return your proxy card in the postage-paid envelope provided. Vote by Internet Access the Website and cast your vote: www.cesvote.com Vote by Telephone Call Toll-Free using a touch-tone telephone: 1-888-693-8683CONTENTS
Y O U R V O T E I S I M P O R T A N T If you do not vote by telephone or Internet, please sign and date this proxy card and return it promptly in the enclosed postage-paid envelope, or otherwise to Corporate Election Services, PO Box 1150, Pittsburgh, PA 15230, so your shares may be represented at the Annual Meeting.If you vote by telephone or Internet, it is not necessary to return this proxy card. Please fold and detach card at perforation before mailing. HAWAIIAN ELECTRIC INDUSTRIES, INC. PROXY The proxies named on the reverse side of this card are instructed to vote as indicated below. If no direction is indicated, said proxies will vote FOR all Nominees in proposal 1, and FOR proposals 2, 3 and 4. Said proxies are also authorized to vote in their discretion with respect to any other matters that may come before the Annual Meeting or at any adjournment or postponement thereof. The Board of Directors recommends a vote FOR all of the Nominees in proposal 1, and FOR proposals 2, 3 and 4. 1. Elect four Class II directors for a three-year term expiring at the 2022 Annual Meeting of Shareholders and one Class III director for a one-year term expiring at the 2020 Annual Meeting of Shareholders Class II Nominees: Class III Nominee: (1) Thomas B. Fargo (5) Jeffrey N. W atanabe (2) W illiam J. Scilacci, Jr. (3) Celeste A. Connors (4) Mary G. Powell FOR all nominees listed above (except as marked to the contrary) WITHHOLD authority to vote for all nominees listed above To withhold authority to vote for any individual nominee, strike a line through the nominee’s name above. Advisory vote to approve the compensation of HEI’s named executive officers 2. FOR AGAINST ABSTAIN 3. Approval of extension of the term of the Hawaiian Electric Industries, Inc. 2011 Nonemployee Director Stock Plan and increase in the number of shares available for issuance thereunder FOR AGAINST ABSTAIN 4. Ratify the appointment of Deloitte & Touche LLP as HEI’s independent registered public accounting firm for 2019 FOR AGAINST ABSTAIN Please check this box if you consent to access future Annual Reports and Proxy Statements via the Internet. PROXY TO BE SIGNED AND DATED ON THE REVERSE SIDE
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