UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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FirstEnergy Corp. | ||||
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On the Cover: As part of our commitment to making the environment better, we’re promoting biodiverse, pollinator-friendly habitats in the transmission rights-of-way across our service area.
Location: Centre County, Pennsylvania (service territory of Penelec, an electric utility operating subsidiary of FirstEnergy)
Our Vegetation Management group participates in ongoing collaborative research with The Pennsylvania State University to monitor plants and pollinators in our transmission corridors. This and other similar research projects help FirstEnergy develop best practices for creating sustainable habitats in our rights-of-way, while also supporting the safe and reliable delivery of electricity to our customers.
Chairman’s Letter |
| March 26, 2021 |
Dear FellowFirstEnergy Shareholders:
Thank you for your continued confidence in FirstEnergy. On behalf of the FirstEnergyyour Board of Directors and management, I cordially invite you to attend our 2021 Annual Meeting of Shareholders on May 18, 2021. The attached Notice of the 2021 Annual Meeting of Shareholders and Proxy Statement contain information about the business to be conducted at the Meeting.
Taking Decisive Actions to Position FirstEnergy for Long-Term Success. Let me begin by underscoring that staying true to our Core Values and Behaviors – and acting at all times and at all levels of the Company with the highest ethical standards – remains at the heart of who we thank youseek to be as a company and starts at the top. As summarized on pages 1-3 of this proxy statement, your Board has taken decisive actions, including announcing significant leadership changes as a result of a Board-led, independent, thorough and robust internal investigation related to the ongoing government investigations beginning last July. Your Board and executive management team are working diligently to enhance our corporate compliance program and processes to foster a culture of ethics, integrity, and accountability at every level of the organization and rebuild trust with our stakeholders. At the same time, we have remained focused on executing the Company’s strategy and implementing initiatives to transform FirstEnergy in a way that provides near-term value while opening new opportunities for longer-term growth. We believe that these actions, together with the strength of the Company’s strategy, mission and 12,000 employees, will position FirstEnergy for long-term success.
A Resilient and Committed Team. On behalf of your continued investment inBoard, I want to express our gratitude to the employees across FirstEnergy andwho help make our communities stronger while delivering results for the confidence you havebusiness. In 2020, the FirstEnergy team came together to work smarter, more creatively and more efficiently. These efforts resulted in solid underlying performance in 2020, even in the context of the disruption and uncertainty caused by the COVID-19 pandemic.
A New Chief Executive Officer with Significant Operational Experience and a Deep Knowledge of the Business. Steven E. Strah, our new CEO of FirstEnergy, is a highly respected executive with a deep understanding of FirstEnergy’s business and significant operational experience, having served in various leadership roles at the Company during his 36-year career. He was appointed President in May 2020 and acting CEO in October 2020. Over the past several months, he has taken meaningful steps to put FirstEnergy on the right path forward, including ensuring a renewed emphasis on compliance and transparency throughout the organization; laying out his strategy, through FE Forward, to transform the Company; and working to reduce regulatory uncertainty affecting the Company’s Ohio utilities. Your Board is confident that his appointment to CEO and a member of the Board in March 2021 was the right step for FirstEnergy.
As CEO, your Board believes Steve will position FirstEnergy to overseemove forward with positive momentum and execute FirstEnergy’s strategic priorities for the benefit of all stakeholders and drive enhanced value for shareholders. We look forward to continuing to work alongside Steve and the rest of the management team to build on the Company’s strong performance.
A Strong Highly Independent Board with the Right Skillset and Enhanced Oversight to Drive Value for Shareholders. Your Board is comprised of highly-qualified individuals who have a diverse set of skills, experiences, backgrounds and perspectives. We have periodically refreshed our shareholders’ interests inBoard with new Board members whom we believe bring new ideas and fresh perspectives into the boardroom – nine of the fourteen nominees will be new Board members added since 2016 (including our business.new director nominee – Melvin Williams). We have also entered into an agreement with Carl C. Icahn to appoint Andrew Teno and Jesse A. Lynn – both of whom are employees of Icahn entities – to your Board as independent directors. We are pleased to have reached this agreement with Mr. Icahn and we welcome the insights and experiences Mr. Teno and Mr. Lynn bring to your Board.
Last year in this letter, we talked about your Board’s composition, our commitment to ongoing shareholder outreachYour Board has also enhanced its oversight, including the formation of a Compliance Oversight Sub-Committee of the Audit Committee – comprised entirely of independent directors – tasked with overseeing the assessment of the Company’s corporate compliance program and engagement, and our strong corporate governance practices. We also talked aboutThis sub-committee, supported by independent counsel and compliance advisors, assists in making recommendations, and overseeing the implementation of and enhancements to the Company’s corporate compliance program, structure and governance
practices, with the goal of building a best-in-class culture of compliance. Additionally, your Board has appointed John Somerhalder, a 40-year energy industry executive, as Vice Chairperson to help lead efforts to rebuild trust with FirstEnergy’s external stakeholders. He also joined the management team as Executive Director in a transitional capacity to support efforts to achieve FirstEnergy’s priorities and strengthen the Company’s governance and compliance functions. Your Board is focused on holding management accountable for implementing our regulated strategy which is designedconsistent with our risk management framework and fulfilling our regulatory obligations. For more information relating to transform your Company into a high-performing, fully regulated utility with well-defined growth opportunities. Board’s enhanced oversight, please refer to the “Board Oversight – Board Response to Government Investigations” section on page 1.
Our Bright Future. Your Board and management remain highly engaged in this importantteam are deeply committed to creating value for you. We are continuing to work quickly, decisively and are optimistic aboutwith a strong sense of urgency to address current challenges and execute key initiatives to enhance shareholder value and reshape FirstEnergy into a more resilient, industry-leading organization of the future.
In the accompanying proxy statement, we address the recent developments at your Company that demonstrate our ongoing commitment to strong corporate governance, including:
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Your Board listens to our shareholders and considers their views when making decisions in the boardroom. We accomplish this primarily through a robust, year-round shareholder outreach and engagement program in partnership with your Company’s management. Please refer to page 4 of the accompanying proxy statement for a discussion of this program.
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Our approach to environmental, social and governance (“ESG”) and sustainability is rooted inremain focused on our mission statement, our core values and our behaviors. Our commitment extends beyond our products and services to include addressing economic, social, and environmental-related initiatives in our service area.
Recently, your Board’s Corporate Governance Committee enhanced its charterbe a forward-thinking electric utility powered by a diverse team of employees committed to include oversight of sustainability and corporate responsibility. Pursuant to its charter, the Committee reviews and provides guidance on your Company’s corporate citizenship practices, including sustainability, environmental and corporate responsibility initiatives. Please refer to page 2 of the accompanying proxy statement for a further discussion of your Board’s focus on this important area.
Further, the Compensation Committee has emphasized social responsibility at your Company, enhancing the safety-related incentive goals, reaffirming the environmental compliance goals, and introducing goals related to diversity and inclusion. As outlined in the executive compensation section of the attached proxy statement, a majority of our operational goals in the short-term incentive compensation program are linked to environmental, social and governance factors.
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Your Company is focused on completing its transformation into a premier, customer-focused, pure-play regulated utility. Your Board provides strategic oversight to help FirstEnergy implement its long-term, sustainable growth platform, fulfill its mission to makemaking customers’ lives brighter, the environment better and our communities stronger,stronger. As part of that mission, we have introduced an ambitious new carbon neutrality goal and offer a competitive dividendcomprehensive climate strategy that are fully aligned with our regulated business strategy and support our commitments to shareholders. Your Board continuesour customers, communities and investors, as well as environmental stewardship.
As always, we will continue to have strong confidence inengage with you regularly to keep you updated on our talented management team and the objectives to implement this regulated growth strategy, which is discussed further in our 2018 Annual Report to Shareholders.
progress. We encourage you to read more about your Board, our corporateenvironmental, social and governance practices, and our executive compensation programs in the accompanying proxy statement. We areWe’re grateful for your support of your Company and your Board and thank you in advance for voting promptly.promptly.
| Sincerely, | ||
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Donald T. Misheff Chairman of the Board |
Notice of Annual Meeting of Shareholders
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Agenda
Elect the 11 nominees named in the accompanying proxy statement to the Board of Directors to hold office until the 2020 Annual Meeting of Shareholders and until their successors shall have been elected;
Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2019;
Approve, on an advisory basis, named executive officer compensation;
Approve a management proposal to amend the Company’s Amended Articles of Incorporation, as amended (the “Amended Articles of Incorporation”) and Amended Code of Regulations, as amended (the “Amended Code of Regulations”) to replace existing supermajority voting requirements with a majority voting power threshold;
Approve a management proposal to amend the Company’s Amended Articles of Incorporation and Amended Code of Regulations to implement majority voting for uncontested director elections;
Approve a management proposal to amend the Company’s Amended Code of Regulations to implement proxy access;
Vote on one shareholder proposal, if properly presented at the Annual Meeting; and
Take action on other business that may come properly before the Annual Meeting and any adjournment or postponement thereof.
Please carefully review this notice,Notice, the Company’s Annual Report to Shareholders for the year ended December 31, 20182020 (the “2018“2020 Annual Report”) and the accompanying proxy statement and vote your shares by following the instructions on your proxy card/voting instruction form or Notice of Internet Availability of Proxy Materials to ensure your representation at the Annual Meeting. Only shareholders of record as of the close of business on March 22, 2019, or their proxy holders, may vote at the Annual Meeting. If you plan to attend the Annual Meeting, you must register in advance. See the “Attending the Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register.
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Date and Time | Tuesday, May 18, 2021 8:00 a.m. EDT | |
Location | To protect the health and safety of the shareholders, employees, and the broader community, during the COVID-19 crisis, your Board has decided that the Annual Meeting will be a virtual meeting of shareholders, conducted via live webcast, and will take place at: www.cesonlineservices.com/fe21_vm. Online access will begin at 7:30 a.m. EDT on May 18, 2021. There will be no physical location for in-person attendance at the Annual Meeting. If you plan to attend the virtual Annual Meeting, you must register in advance. See the “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register. Shareholders may only participate online and must pre-register to vote and ask questions at the virtual Annual Meeting. | |
Agenda | ● Elect the 14 nominees named in the accompanying proxy statement to the Board of Directors to hold office until the 2022 Annual Meeting of Shareholders and until their successors shall have been elected; ● Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021; ● Approve, on an advisory basis, named executive officer compensation; and ● Take action on other business that may come properly before the Annual Meeting and any adjournment or postponement thereof. | |
Record Date | March 19, 2021 Only shareholders of record as of the close of business on March 19, 2021, or their proxy holders, may vote at the Annual Meeting. | |
On behalf of the Board of Directors,
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Corporate Secretary Associate General Counsel
Akron, Ohio |
This noticeNotice and accompanying proxy statementProxy Statement are being mailed or made available to shareholders on or about April 1, 2019.March 29, 2021.
Important Notice Regarding Availability of Proxy Materials
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May |
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1 Corporate Governance & Board of Directors | Corporate Governance and Board of Directors Information | 1 | ||
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2 Items to Be Voted On |
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3 Executive & Director Compensation | Executive Compensation | |||
| Director Compensation in Fiscal Year 2020 | 75 | |||
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| Human Capital Management | 78 | ||
| Corporate Responsibility (including environmental & social initiatives) | 82 | |||
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Appendices
20192021 Annual Meeting of Shareholders(the “Annual Meeting” or the “Meeting”)
| ● | Time and Date: 8:00 a.m. |
| ● | Location: To protect the health and safety of the shareholders, employees, and the broader community, during the COVID-19 crisis, your Board has decided that the Annual Meeting will be a virtual meeting of shareholders, conducted via live webcast, and will take place at: www.cesonlineservices.com/fe21_vm. Online access will begin at 7:30 a.m. EDT on May 18, 2021. |
If you plan to attend the virtual Annual Meeting, you must register in advance. See the “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register. Shareholders may only participate online and must pre-register to vote and ask questions at the virtual Annual Meeting. |
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Voting: Shareholders of record of FirstEnergy Corp. (“FirstEnergy”, the “Company”, “we”, “us” or “our”) common stock as of the Record Date are entitled to receive the Notice of Annual Meeting of Shareholders and they or their proxy holders may vote their shares at the Annual Meeting. |
| ● | Admission: If you plan to attend the Annual Meeting, you must register in advance. |
Voting Matters
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Elect the
✓ Your Board recommends you voteFOR the election of all the nominees listed in this
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Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for
✓ Your Board recommends you voteFOR this item.
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Approve on an advisory basis named executive officer compensation. Refer to page
✓ Your Board recommends you voteFOR this item. |
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How to Cast Your Vote
Your vote is important! Even if you plan to attend our Annual Meeting in person,virtually, please cast your vote as soon as possible by:
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Do you hold shares directly with FirstEnergy or in the FirstEnergy Corp. Savings Plan?
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Use theinternet at
| Call toll-free at | Mail by returning your proxy | ||
Do you hold shares through a bank, broker or other institution (beneficial ownership)?(2)
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Use theinternet at | Call toll-free at | Mail by returning your proxy | ||
(1)If your envelope is misplaced, send your proxy card to Corporate Election Services, Inc., (2)Not all beneficial owners may be able vote at the web address and phone number provided above. If your control number is not recognized, please refer to your voting instruction form for specific voting instructions. | ||||
Please follow the instructions provided on your proxy card/voting instruction form (the “proxy card”), Notice of Internet Availability of Proxy Materials, or electronic or other communications included with your proxy materials. Also referShareholders as of the March 19, 2021 record date may attend the virtual Annual Meeting and vote if registered in advance by following the Advance Registration Instructions below. Refer to the “How You Can Vote” section of the “Questions and Answers about the Annual Meeting” on Page 98section below for more details. All shareholders of record may vote in person atdetails, including the annual meeting. Beneficial owners may vote in person at the meeting as described in response to QuestionAdvance Registration Instructions and questions 2, 13 on page 98.and 15.
You may have multiple accounts and therefore receive more than one proxy card or voting instruction form and related materials. Please vote each proxy card and voting instruction form that you receive.
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Board Nominees
The following table provides summary information about each member ofnominee standing for election to your Board of Directors (your “Board”) standing for election to your Board.. Each member stands for election annually. Sandra Pianalto is not standing for re-election at the Annual Meeting. In addition, the Board has nominated Melvin Williams for election to your Board at the Annual Meeting.
| Committee Memberships | Number of Other Public Company Boards(2)
| Standing Committee Memberships (1) | Number of Other Public Company Boards(2)
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Michael J. Anderson | 67 | 2007 | Yes | Chair | ● | 1 | 69 | 2007 | Yes | Chair | ● | 1 | ||||||||||||||||||||||||||||
Steven J. Demetriou | 60 | 2017 | Yes | ● | ● | 1 | 62 | 2017 | Yes | Chair | ● | 1 | ||||||||||||||||||||||||||||
Julia L. Johnson | 56 | 2011 | (3) | Yes | ● | ● | 3 | 58 | 2011 | Yes | Chair | ● | 3 | |||||||||||||||||||||||||||
Charles E. Jones | 63 | 2015 | No | 0 | ||||||||||||||||||||||||||||||||||||
Jesse A. Lynn (3) | 50 | 2021 | Yes | ● | 2 | |||||||||||||||||||||||||||||||||||
Donald T. Misheff | 62 | 2012 | Yes | ● | ● | 2 | 64 | 2012 | Yes | ● | ● | 2 | ||||||||||||||||||||||||||||
Thomas N. Mitchell | 63 | 2016 | Yes | ● | Chair | 0 | 65 | 2016 | Yes | ● | Chair | 0 | ||||||||||||||||||||||||||||
James F. O’Neil III | 60 | 2017 | Yes | Chair | ● | 3 | 62 | 2017 | Yes | Chair | ● | 1 | ||||||||||||||||||||||||||||
Christopher D. Pappas | 63 | 2011 | (3) | Yes | Chair | ● | 2 | 65 | 2011 | Yes | ● | ● | 1 | |||||||||||||||||||||||||||
Sandra Pianalto | 64 | 2018 | Yes | ● | ● | 3 | ||||||||||||||||||||||||||||||||||
Luis A. Reyes | 67 | 2013 | Yes | ● | ● | 0 | 69 | 2013 | Yes | ● | ● | 0 | ||||||||||||||||||||||||||||
John W. Somerhalder II | 65 | 2021 | No | 1 | ||||||||||||||||||||||||||||||||||||
Steven E. Strah | 57 | 2021 | No | 0 | ||||||||||||||||||||||||||||||||||||
Andrew Teno(5) | 36 | 2021 | Yes | ● | ● | 2 | ||||||||||||||||||||||||||||||||||
Leslie M. Turner | 61 | 2018 | Yes | ● | ● | 0 | 63 | 2018 | Yes | ● | ● | 0 | ||||||||||||||||||||||||||||
Melvin Williams(6) | 57 | N/A | Yes | 0 | ||||||||||||||||||||||||||||||||||||
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| (2) | As defined under New York Stock Exchange Listed Company Manual Section 303A Corporate Governance Standards Frequently Asked Questions. |
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As previously disclosed, Mr. Paul Addison and Dr. Jerry Sue Thornton will retire from your Board as of the 2019 Annual Meeting in accordance with the mandatory retirement age provisions of our Corporate Governance Policies and were not nominated by your Board for election at the Annual Meeting. The size of your Board, which is currently set at 13, will be reduced to 11 as of the Annual Meeting.
| (4) | Mr. Pappas’ committee memberships are effective April 1, 2021. |
| (5) | Mr. Teno’s Audit Committee and Finance Committee memberships were effective March 18, 2021 and March 23, 2021, respectively. |
| (6) | Mr. Williams is a new director nominee. |
Key Facts About Your Board
We seek to maintain a well-rounded and diverse Board representing a wide breadth of experience and perspectives that balances the institutional knowledge of longer-tenured directors with the fresh perspectives brought by newer directors. Below are highlights regarding our 1114 director nominees standing for election to your Board and our Board meetings held in 2018.Board.
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Corporate Governance Highlights
Your Company is committed to strong corporate governance, which we believe is important to the success of our business and in advancing shareholder interests. Highlights include:
| Independent Oversight | Board & Committee Oversight | |||
● Separate
● Please also refer to the “Board Oversight” section on page 1 for additional information. |
● Compliance Oversight Sub-Committee of the Audit Committee, comprised of all independent directors and supported by independent counsel, oversight of review and recommendations for implementation of compliance program enhancements
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| Shareholder Rights & Accountability | Board Practices | |||
● General majority
● Shareholders may nominate directors through proxy access ● Shareholders of 25 percent or more shares outstanding and entitled to vote may call a special meeting |
● Actively seek highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and
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Our corporate governance practices are described in greater detail in the “Corporate Governance and Board of Directors Information” section beginning on page 1.
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Executive Compensation Highlights
Under our compensation design, the percentage of pay that is based on performance increases as executives’the responsibilities of a Named Executive Officer (“NEO”) increase. As shown in theThe charts below ofillustrate the annual base salary STIPrate, 2020 short-term incentive program (“FE STIP”) and LTIP,long-term incentive program (“FE LTIP”) awards, of which approximately 87% of the Former CEO’s total target pay, 79% of the then Acting CEO’s total target pay and 75%72% of our NEOother NEOs’ average target pay other than Mr. Schneider, is variable and could be reduced to zero if performance metrics are not met.met at a minimum threshold level. For the continuing NEOs, the values shown are effective as of December 31, 2020 (“FYE”).
Former CEO 2020 Pay Mix at Target | Acting CEO (as of FYE) 2020 Pay Mix at Target | Other NEOs 2020 Pay Mix at Target | ||
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We believe what we do and don’t do with respect to executive compensation aligns with the long-term interests of our shareholders and with commonly viewed best practices in the market.
What We Do | What We Don’t Do | |
✓Pay-for-performance • FE LTIP is 100% at risk, with no solely time-based vesting requirements • FE STIP is 100% at risk
✓ • Threshold financial performance hurdle for Operating Earnings must be achieved before any FE STIP award is paid • Individual FE STIP awards capped at 200% (consistent with our peer companies) • Individual FE LTIP awards capped at 200% (consistent with our peer companies) and
✓ Non-overlappingfinancial performance measures in our
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✓
✓
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Our executive compensation practices are described in greater detail in the “Executive Compensation” section beginning on page 36.26.
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Human Capital Management (HCM) Highlights
FirstEnergy’s workforce is essential in our ability to execute on our strategy, deliver on our business priorities and move FirstEnergy forward. While 2020 presented unprecedented challenges, our commitment to our employees and their health and safety has not wavered. Our focus on keeping our Core Values and Behaviors at the center of everything we do, our desire to help our employees do their best each day, and further details on FirstEnergy’s COVID-19 response, is included in the “Human Capital Management” section beginning on page 78. | ||
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CDP (formerly Carbon Disclosure Project) Climate and CDP Water Reports
Edison Electric Institute (EEI) ESG/Sustainability Template
Corporate Responsibility Report Update ExpectedHighlights
Our environmental and sustainability initiatives are described in 2019
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Internal efforts centered around the pillars of our Mission Statement (employees, customers, communities and the environment), including a program that tracks our employees’ volunteer efforts as well as a waste reduction initiative.
Further developing our relationships with external ESG/sustainability rating and reporting groups.
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Continuing to make progress toward our goal of reducing carbon dioxide (CO2) emissions companywide by at least 90 percent below 2005 levels by 2045. Through 2018, we have achieved 62 percent of that goal, primarily due to plant retirements and asset sales.
Incentivized our workforce to achieve ESG related goals. Many of the operational goals in our short-term incentive compensation programs are linked to ESG factors, for example:
Enhanced safety related goalsgreater detail in the short-term incentive program in 2018 by incorporating Days Away Restricted or Transferred (“DART”) Rate and Life Changing Events (“LCEs”), while also maintaining Occupational Safety and Health Administration (“OSHA”) reportable incidents as a metric.
Diversity & Inclusion (“D&I”) goals in the short-term incentive program in 2018 focus“Corporate Responsibility” section beginning on diverse succession planning, diverse professional hiring, and improvement on inclusion as measured through a survey score.page 82.
Our Operations Index in the short-term incentive program continues to focus on quality customer service and reliability, first call resolution and environmental excursions.
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Since 2014, elected seven new directors, six of whom are standing forre-election at the Annual Meeting, and continued to increase your Board’s ethnic and gender diversity.
Added responsibilities to the Corporate Governance, Sustainability and Corporate Responsibility Committee to reflect efforts on sustainability and corporate responsibility, specifically including ESG topics.
Ensured risk oversight is conducted by the full Board and its committees.
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Note About Forward-Looking Statements
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Forward-Looking Statements: This proxy statement includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently |
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Corporate Governance and Board of Directors InformationInformation
Board Leadership Structure
The three positions of CEO, and Chairman of the Board, and Vice Chairperson of the Board and Executive Director are separated. Our Amended and Restated Code of Regulations and Corporate Governance Policies do not require that your Chairman of the Board and CEOthese positions be separate, and your Board has not adopted a specific policy or philosophy on whether the role of the CEO and Chairman of the Boardsuch roles should remain separate. However, having a separate Chairman of the Board and CEOroles has typically allowed your CEO to focus more time on ourday-to-day operations and, in your Board’s judgement,judgment, is appropriate at this time.
Mr. Steven E. Strah was appointed as our new CEO (in addition to his then-existing President role) and elected as a director of your Board effective as of March 8, 2021. Independent members of your Board previously appointed Mr. Strah to the position of Acting CEO (in addition to his then-existing President role) and Mr. Christopher D. Pappas, a current member of the Board, to the temporary non-employee position of Executive Director, each effective as of October 29, 2020. Effective March 1, 2021, Mr. John W. Somerhalder II was appointed Vice Chairperson of your Board and Executive Director servings as a member of your Company’s executive leadership team in a transitional capacity while we focus on advancing our immediate key strategic priorities. As Vice Chairperson, Mr. Somerhalder will help lead efforts to rebuild trust with our external stakeholders, including regulators and the financial community. In his role as Executive Director, Mr. Somerhalder will also support the senior leadership team’s efforts to achieve its priorities and strengthen your Company’s governance and compliance functions during this time of unprecedented change. Mr. Somerhalder will report to your Board, working closely with Mr. Donald T. Misheff, as the independent non-executive Chairman of your Board. Mr. Pappas will continue to serve on your Board as an independent director.
Your Board schedules regular executive sessions for your independent directors to meet without management participation. Because an independent director is required to preside over each such executive session of independent directors, we believe it is more efficient and appropriate to have your independent Chairman of the Board preside over all such meetings.
Board Composition and Refreshment
Your Board is comprised of individuals who are highly-qualified, diverse, and independent (other than Mr. Jones,Messrs. Somerhalder and Strah, who isare not considered independent because of their employment with yourthe Company). Your Board’s succession planning takes into account the importance of Board refreshment and having an appropriate balance of experience and perspectives on your Board. As further discussed in the “Director“Board Qualifications” section of this proxy statement, your Board and the Corporate Governance Sustainability and Corporate Responsibility Committee recognizes that the racial, ethnic and gender diversity of your Board, as well as diversity of thought, background and experiences, are an important part of its analysis as to whether your Board possesses a variety of complementary skills and experiences. Accordingly, your Board has set a goal that it will be composed oftargeting at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future.
WeThe Corporate Governance and Corporate Responsibility Committee focuses on Board refreshment planning on an ongoing basis. In performing this function, the Committee recruits and recommends nominees for election as directors to your Board. Accordingly, we have regularly added directors who we believe infuse diversity, new ideas and fresh perspectives into the boardroom. Since the beginning of 2014, your Board has added seven2016, nine of the fourteen nominees, if elected, will be new Board members, six of which are currently standing for election as director nominees.members. The result is more than halfover 64% of your Board’s director nominees have tenure of five years or less. During this time, your Board added three directors two of which are currently standing for election, that further diversified your Board. Also, in connection with our mandatory retirement age of 72 for outside directors described below, our longest tenured director will retire from your Board as of the Annual Meeting.increased its diversity profile.
Board Oversight
Risk ManagementBoard Response to Government Investigations
Your Company faceshas been cooperating fully with requests related to ongoing government investigations. We’ve pledged full and continuing cooperation with the ongoing government investigations.
Your Board has formed various special Board oversight committees, including an Independent Review Committee primarily responsible for directing an independent, and what we believe to be a varietythorough and
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robust internal investigation related to the ongoing government investigations. The Independent Review Committee has met regularly since July 2020, and together with the advice of risksits own independent external legal advisors, has provided valuable counsel to your Board. In addition, your Audit Committee formed the Compliance Oversight Sub-Committee, supported by its own independent external advisors and leading compliance advisors, to oversee the assessment of the Company’s corporate compliance program and governance practices, as well as to oversee the implementation of recommendations to enhance the program, which such work remains ongoing. These special Board oversight committees are described in greater detail in the “Board Committees – Special Board Oversight Committees” section below.
While your Board cannot predict the outcome of the ongoing government investigations and related matters, as your stewards, we are fully committed to providing thorough and complete oversight and will, as a Board, take any necessary actions to address these matters. Your Board will not tolerate any actions or behaviors demonstrating anything less than a commitment to high standards of ethics and compliance for your Company and is committed to improving the compliance policy and culture at FirstEnergy.
In partnership with the Company’s management team, your Board has taken a number of additional decisive actions to respond to the ongoing government investigations, rebuild trust with Company stakeholders, and put FirstEnergy on the right path forward. These include:
| ● | Launching a robust and ongoing internal investigation overseen by the Board’s Independent Review Committee, with oversight from independent counsel. |
| ● | Terminating three senior executives after the Board’s Independent Review Committee determined that those executives violated certain FirstEnergy policies and its code of conduct, and that certain former members of senior management did not reasonably ensure that relevant information was communicated within our organization and not withheld from our independent directors, our Audit Committee, and our independent auditor. |
| ● | Separating two additional members of senior management due to inaction and conduct that the Board determined was influenced by the improper tone at the top. |
| ● | Naming Steven E. Strah as Acting CEO in October 2020 and then CEO in March 2021, and electing Mr. Strah as a director of the Board. |
| ● | Naming Hyun Park as Senior Vice President and Chief Legal Officer in January 2021. |
| ● | Establishing an Executive Director role to oversee the management team’s execution of FirstEnergy’s strategic initiatives, engage with the Company’s external stakeholders, and support the development of enhanced controls and governance policies and procedures. |
| ● | Naming John W. Somerhalder as Vice Chairperson of the Board and Executive Director in February 2021. |
| ● | Expanding the Board Chair role to help navigate the challenges the Company is facing. |
| ● | Naming Antonio Fernandez as Chief Ethics and Compliance Officer in March 2021, reporting to the Chief Legal Officer, with a direct line to the Audit Committee and its Compliance Oversight Sub-Committee, helping to further drive a culture of compliance. |
| ● | Supporting the management team’s enhanced oversight over all the Company’s political and legislative engagement advocacy and limiting participation in the political process. This also includes ensuring that the disclosures around the Company’s political and legislative engagement advocacy are more robust going forward so that it is clear what efforts the Company appropriately supports. |
| ● | Supporting the Company’s partial settlement with the Ohio Attorney General and the cities of Columbus and Cincinnati regarding decoupling, which resulted in the Ohio Companies requesting Public Utilities Commission of Ohio approval to set the rates under Rider CSR to zero as of February 9, 2021. |
| ● | Supporting the Company’s decision to not seek to recover lost distribution revenue that it was authorized to collect from residential and commercial customers under its current Electric Security Plan through May 31, 2024. |
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| ● | Initiating FE Forward, a Company-wide transformational program expected to build upon FirstEnergy’s strong operations and business fundamentals; deliver immediate value and resilience; and enable FirstEnergy to become a more nimble organization. |
Driving a Culture of Compliance and Integrity
Your Board has enhanced its oversight, including the formation of a Compliance Oversight Sub-committee of the Audit Committee – comprised entirely of independent directors – tasked with overseeing the assessment of the Company’s corporate compliance program and governance practices. This sub-committee, supported by independent counsel and compliance advisors, assists in making recommendations, and overseeing the implementation of and enhancements to the Company’s corporate compliance program, structure and governance practices, with the goal of building a best-in-class culture of compliance. Key initial actions planned to enhance our compliance program include:
People: centralizing the compliance function with dedicated personnel
| ● | Hiring Antonio Fernandez as Chief Ethics and Compliance Officer, reporting to the Chief Legal Officer, with a direct line to the Audit Committee and its Compliance Oversight Sub-Committee. |
| ● | Implementing a dedicated corporate ethics and compliance office, with appropriate resources. |
| ● | Establishing an ethics and compliance steering committee. |
Processes: enhance compliance standards, policies, and procedures, focusing on:
| ● | Remediating tone at the top material weakness. |
| ● | Political and charitable donations. |
| ● | Third-party management. |
| ● | Financial controls and approval authorities. |
Reporting: augment reporting mechanisms from employees to the Board and back.
| ● | Multiple channels of reporting and transparency in process. |
| ● | Communicate compliance updates through regular cadence of newsletters, updates on the Company Intranet, townhalls, etc. |
Benchmarking: metrics to measure program:
| ● | Data analytics and trend or issue spotting. |
| ● | Continuous improvement and sustainability through regular assessments. |
Risk Management
The Company recognizes that the effective management of thosethe risks it must take in the ordinary course of business contributes to the overall success of yourthe Company. YourThe Company has implemented a process to identify, prioritize, report, monitor, manage, and mitigate its significant risks. A management Risk Policy Committee, consisting of the ChiefVice President, Risk Officer& Internal Audit and other senior executive officers, provides oversight and monitoring to ensure that appropriate risk policies are established and carried out and processes are executed in accordance with selected limits and approval levels. OtherIn addition, other management committees exist to addressare focused on addressing topical risk issues. Timely reports on significant risk issues are provided as appropriate to employees, management, senior executive officers, respective Board committees, and the full Board. The ChiefVice President, Risk Officer& Internal Audit also prepares enterprise-wide risk management reports that are presented to the Audit Committee, the Finance Committee and your Board.
Your Board administers its risk oversight function through the full Board, as well as through the various Board committees. Specifically, your Board considers risks applicable to yourthe Company at each meeting in connection with its consideration of significant business and financial developments of yourthe Company. Also, the Audit Committee Chartercharter requires the Audit Committee to oversee, assess, discuss, and generally review yourthe Company’s policies with respect to the assessment and management of risks, including risks related to the financial statements and financial reporting process of the Company, credit risk, liquidity and commodity market risks, and risks related to cybersecurity. The Audit Committee also reviews and discusses with
3 | FirstEnergy Corp. 2021 Proxy Statement
management the steps taken to monitor, control, and mitigate such exposures. Through this oversight process, your Board obtains an understanding of significant risk issues on a timely basis, including the risks inherent in yourthe Company’s strategy. In addition, while yourthe Company’s ChiefVice President, Risk Officer
1 | FirstEnergy Corp.2019 Proxy Statement
& Internal Audit administratively reports to your Senior Vice President and Chief FinancialLegal Officer, (your “CFO”), he also has full access to the Audit Committee and Finance Committee and is scheduled to attend each of their committee meetings.
In addition to the Audit Committee’s role in risk oversight, our other Board committees also play a role in risk oversight within each of their areas of responsibility. Specifically, the Compensation Committee reviews, discusses, and assesses risks related to compensation programs, including incentive compensation and equity-based plans, as well as the relationship between our risk management policies and practices and compensation. See also, “Risk Assessment of Compensation Programs” found in the “Compensation Discussion and Analysis” (the “CD&A”)CD&A section in this proxy statement. The Corporate Governance Sustainability and Corporate Responsibility Committee considers risks related to corporate governance, including Board and committee membership, Board effectiveness, and related person transactions.transactions, and the Company’s ESG strategies and corporate citizenship practices. The Finance Committee evaluates risks relating to financial resources and strategies, including capital structure policies, financial forecasts, budgets and financial transactions, commitments, expenditures, long and short-term debt levels, dividend policy, issuance of securities, exposure to fluctuation in interest rates, share repurchase programs and other financial matters deemed appropriate by your Board. The NuclearOperations and Safety Oversight Committee considers the risks associated with the safety, reliability, and quality of certainrelating to the Company’s electric distribution, transmission, and generation facilities and, prior to December 18, 2020, a retired nuclear operations.unit. Further,day-to-day risk oversight is conducted by our Corporate Risk department and our senior management and is shared with your Board or Board committees, as appropriate. We believe that your Board’s role in risk oversight is consistent with and complemented by your Board’s leadership structure. In addition, the section in this proxy statement entitled “Board Leadership Structure” provides information relating to our separation of the Chairman of the Board and CEO positions.
Cybersecurity
FirstEnergy is committed to protecting its employees, customers, facilities, and the ongoing reliability of its electric system. We work closely with state and federal agencies and our peers in the electric utility industry to identify physical and cyber security risks, exchange information, and put safeguards in place to comply with strict reliability and security standards. From a security standpoint, no other industry – including gas pipelines – is as heavily regulated as the electric utility sector. We have comprehensive cyber and physical security plans in place, but we don’t publicly disclose details about these measures that could aid those who want to harm our customers and our employees.
Your Board has identified cybersecurity as a key enterprise risk and prioritizes the mitigation of this risk. As a result,Your Board receives cybersecurity updates from the Chief Information Officer at each of its regularly scheduled meetings. The Audit Committee reviews our cybersecurity risk management practices and performance, primarily through reports provided by management. The Audit Committee also reviews and discusses with management the steps taken to monitor, control, and mitigate such exposure. Your Board and certain committees receive cybersecurity updates from the Chief Information Officer at least once a year, and more frequently as needed. Among other things, these reports have focused on incident response management and recent cyber risk and cybersecurity developments.
Security enhancements are also a key component of FirstEnergy’s Energizing the Future transmission investment program. Since 2014, yourThe Company has investedinvests heavily in sophisticated and layered security measures that use both technology and hard defenses to protect critical transmission facilities and our digital communications networks.
Corporate Responsibility
Corporate responsibility is a core value of your Company. Your Company is focused on delivering strong financial results and providingtop-tier reliability to our customers, but we are also committed to doing so in a way that respects the communities and environments in which we operate.
We continue to reaffirm our focus on corporate responsibility issues as they relate to our business strategy, reputation and key stakeholders. For example, in 2018, the Corporate Governance Committee was renamed the Corporate Governance, Sustainability and Corporate Responsibility Committee and related responsibilities were added to the committee’s charter regarding corporate responsibility.
Public Policy and Engagement
We have a decision-makingare making significant changes in our approach to political and legislative engagement and advocacy. Our activity in this space will be much more limited than it was in the past, with additional oversight processes in place for political contributions and expenditures. significantly more robust disclosure around lobbying activities. With this additional transparency, our goal is to make it clear exactly what efforts FirstEnergy supports, appropriately, going forward.
Our Corporate Political Activity Policy available on our website describes the criteria for certain political contributions and ballot initiative expenditures and the process for approving such contributions and expenditures. Also, your Board’s Corporate Governance Sustainability and Corporate Responsibility Committee periodically reviews this policy and related practices as well as dues and/or contributions to industry groups and trade associations.
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Based on feedback from our shareholder engagement and outreach, we recently expanded our website disclosure to include reports on federal and state level lobbying, as well as, the lobbying portion of certain trade association dues.
Evaluating Board Effectiveness
Your Board is committed to a rigorous evaluation process. Through this evaluation, your Board’s performance is reviewed, including areas where your Board feels it functions effectively and areas where your Board believes it can improve. For 2018 your Board had an annual evaluation process as further described below, that isbelow. Annually, Board, committee and individual director evaluations are performed and coordinated by the Corporate Governance Sustainability and Corporate Responsibility Committee: a full Committee.
Board evaluation that included third-party interviews; committee evaluations; and individual director evaluations.Evaluations: A Multi-Step Process
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Your Board and each committee evaluation includes comprehensive questions designed to provide a wholistic evaluation of the performance of your Board and each committee in light of our current needs. In 2018, your Board also engaged an independent third-party to conductone-on-one interviews with directors to obtain feedback and assessments. Also, individual director performance evaluations are tailored to each member by your Board’s Chairman, in consultation with the Chair of the Corporate Governance, Sustainability and Corporate Responsibility Committee, in order to consider and review the individual director’s performance and continued qualifications. The 2018 evaluations were shared as needed with the applicable directors, committee members, and your full Board, and led to discussions to determine which areas your Board would like to focus on during 2019 to enhance its effectiveness.
Shareholder Outreach and Engagement Program
We Have a Robust Shareholder Outreach and Engagement Program
We believe it is important forincumbent upon us to engage regularly with our shareholders so weshareholders. We maintain an activea robust shareholder outreach and engagement program.program to understand our investors’ perspectives on certain topics, including, among others, ESG policies and executive compensation. With support from your Board, yourthe Company’s CEO and the management team, including members of the Corporate Secretary’s office and departments of Corporate Responsibility, Investor Relations, Legal, Human Resources, and Sustainability,Finance focus significant efforts on engaging with our major shareholders and the broader investment community. Shareholder feedback and suggestions we receive are reported to the Compensation Committee, Corporate Governance Sustainability and Corporate Responsibility Committee and, as needed, your Board or various committees of your entire Board for its consideration. We also conduct ongoing governance reviews (e.g.,(for example, assessing governance trends). This process ensures thatenables your Board and management to understand and consider the topics that matter most to our shareholders so we can most effectively address them effectively.them.
Outreach and Engagement Program Shareholder Feedback
As part of our commitment to continue to understand our investors’ perspectives through and as part of our corporate governance shareholder engagement program, during 2018,we appreciate the opportunity to engage with our engagement efforts primarily focused on discussion of governance-related issues, executive compensationshareholders, and ESG matters.we continue to find our meetings to be enlightening and productive. Shareholders we meet with often express appreciation for our proactive interest in their views, and we certainly appreciate the time they took to share their thoughts with us. During these meetings, participants included members from management and your Board, where appropriate. Our outreach gave us an opportunity to discuss our continuing goal of implementing ESGBoard.
Other Governance Practices and executive compensation measures that are in the best interest of our shareholders and our commitment to continue to align pay and performance.
4 | FirstEnergy Corp.2019 Proxy StatementPolicies
Based on the results of our Outreach and Engagement efforts, your Board has taken the following steps:
Adopted Changes to our Executive Compensation Program:Incorporating the feedback we received from shareholders, your Compensation Committee implemented several changes to our executive compensation program in 2018. For further insight on our outreach related to executive compensation, see the “Shareholder Engagement andSay-on-Pay Results” section below in the CD&A.
Enhanced our Environmental Related Disclosures:We regularly evaluate our risk and related disclosures, recently we have published a climate report and anticipate updating our Corporate Responsibility Report in 2019.
Enhanced our Proxy Statement Disclosures:We continue to enhance our disclosures throughout this proxy statement regarding Board composition and director skills. We also expanded the use of charts and illustrations in this proxy statement to help better explain our corporate governance and executive compensation programs and objectives.
Included Certain Governance-Related Management Proposals in this Proxy Statement: Your Board is once again seeking shareholder approval of the following three management proposals to: replace existing supermajority voting requirements with a majority voting power threshold (Item 4), implement majority voting for uncontested director elections (Item 5) and implement proxy access (Item 6). Despite a significant effort in an attempt to secure the required shareholder support, it has been unsuccessful and this is the fourth time in recent years your Board is attempting to secure shareholder support on the subjects of simple majority vote and proxy access, and the third time in recent years for the proposal related to a majority vote in uncontested director elections. Your Board cannot unilaterally adopt the proposed amendments because a shareholder vote is necessary under our governing documents.
Emphasized our focus on corporate responsibility: Your Board also added responsibilities to the Corporate Governance, Sustainability and Corporate Responsibility Committee to reflect the committee’s focus on environmental and corporate responsibility issues, and similarlyre-named it in order to reflect these important additions.
Communications with your Board of Directors
Your Board provides a process for shareholders and interested parties to send communications to your Board andnon-management directors, including our Chairman of the Board. As set forth in yourthe Company’s Corporate Governance Policies, shareholders and interested parties may send written communications to your Board or a specified individual director, including our Chairman of the Board, by mailing any such communications to the FirstEnergy Board of Directors at yourthe Company’s principal executive office, c/o Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, OH 44308-1890. Our Corporate Governance Policies can be viewed by visiting our website atwww.firstenergycorp.com/charters.
The Corporate Secretary or a member of her staff reviews all such communications promptly and relays them directly to a Board member, or a specified individual director, provided that such communications: (i) bear relevance to yourthe Company and the interests of the shareholder, (ii) are capable of being implemented by your Board, (iii) do not contain any obscene or offensive remarks, (iv) are of a reasonable length, and (v) are not from a shareholder who
6 | FirstEnergy Corp. 2021 Proxy Statement
already has sent two such communications to your Board in the last year. Your Board may modify procedures for sorting shareholders’ and interested parties’ communications or adopt any additional procedures, provided they are approved by a majority of the independent directors.
Other Governance PracticesYour Audit Committee also receives, reviews, and Policiesacts on complaints and concerns regarding accounting, internal accounting controls or auditing matters, including complaints regarding material ethical or criminal misconduct on the part of the Board of Directors, the Chief Executive Officer, any officer reporting directly to the Chief Executive Officer, the Controller & Chief Accounting Officer or the Chief Audit Officer, and complaints regarding matters that could lead to significant reputational damage to the Company. Complaints or concerns specifically related to such matters may be made directly to your Audit Committee. Correspondence with the Audit Committee should be addressed to the attention of the Audit Committee Chair (c/o Corporate Secretary), FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890.
Attendance at Board Meetings, Committee Meetings and the Annual Meeting of Shareholders
Our Corporate Governance Policies provide that directors are expected to attend all scheduled Board and applicable committee meetings and yourthe Company’s annual meetings of shareholders. Your Board held 1216 meetings during 2018. All2020. During their tenure in 2020, all directors attended at least 75 percent of the meetings of your Board and of the committees on which they served.served during 2020. Also, 13 out of 14all of our directors who were directors at the time of the 2018 year’s Annual Meeting2020 annual meeting attended the 20182020 annual meeting. During 2018, Board members also participated in site visits to your Company’s operating locations.
5 | FirstEnergy Corp.2019 Proxy Statement
Non-management directors, who are all independent directors, are required to meet as a group in executive sessions without the CEO or any othernon-independent director or management at least six times in each calendar year, and our independent Chairman of the Board presided over all executive sessions. During 2018, thenon-management directors met 10 times in executive sessions.
Codes of Business Conduct
YourThe Company’s Code of Business Conduct applies to all employees,Company personnel, including theour Executive Director, CEO, CFO and Chief Accounting Officer. In addition, your Board has implemented a separate DirectorBoard of Directors Code of Ethics and Business Conduct. Both codes can be viewed on our website atwww.firstenergycorp.com/charters. Any substantive amendments to, or waivers of, the provisions of these documents will be disclosed and made available on our website, as permitted by the SEC and as disclosed in our most recent Annual Report. Both codes are available, without charge, upon written request to the Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890 or may be viewed on our website athttps://www.firstenergycorp.com/chartersinvestor/corporate_governance/responsibility.html.
Corporate Governance Documents
Your Board believes that yourthe Company’s policies and practices should enhance your Board’s ability to represent your interests as shareholders. Your Board established Corporate Governance Policies which, together with Board committee charters, serve as a framework for meeting your Board’s duties and responsibilities with respect to the governance of yourthe Company. Our Corporate Governance Policies and Board committee charters can be viewed by visiting our website atwww.firstenergycorp.com/charters. Any amendments to these documents will promptly be made available on our website.
Director Orientation and Continuing Education
Your Board recognizes the importance of its members to keep current on Company, industry and governance issues and their responsibilities as directors. All new directors participate in orientation soon after being elected to your Board. Also, your Board makes available and encourages continuing education programs for Board members, which include internal strategy meetings, internally developed materials such as on-line presentations, third-party presentations and externally offeredexternal programs.
Other Public Company Board Membership
Our Corporate Governance Policies provide that directors will not, without your Board’s approval, serve on the board of directorsa total of more than three otherfour public companies.company board of directors. Further, without your Board’s approval, no director who serves as an executive officer of any public company may serve on a total of more than two public company boards of directors.
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Committees of your Board
Your Board established the standing committees listed below. All committees are comprised solely of independent directors as determined by your Board in accordance with our Corporate Governance Policies, which incorporate the New York Stock Exchange (“NYSE”) listing standards and applicable Securities and Exchange Commission (“SEC”) rules. All members of the Audit Committee, Compensation Committee and the Corporate Governance, Sustainability and Corporate Responsibility Committee are independent based on the definition applicable to such committee in the NYSE listing standards and SEC rules. Mr. Jones, your only director who is not considered independent because of his employment with your Company, does not serve on any Board committee.
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Your Board appoints at least one member of the Audit Committee who, in your Board’s business judgment, is an “Audit Committee Financial Expert,” as such term is defined by the SEC. Your Board determined that Messrs. Addison, Misheff and O’Neil meet this definition. All members of the Audit Committee are financially literate. As required by the applicable NYSE listing standards, to the extent any member of your Company’s Audit Committee simultaneously serves on the audit committee of more than three public companies, your Company will disclose on its website (www.firstenergycorp.com under the tab “Investors”, “Corporate Governance” and “Board of Directors”) your Board’s determination whether such simultaneous service impairs the ability of that individual to serve effectively on your Company’s Audit Committee. See the Audit Committee Report in this proxy statement beginning on page 10 for additional information regarding the Audit Committee.
Mr. O’Neil was appointed as chair of the Audit Committee in May 2018. Ms. Turner was appointed to the Audit Committee in September 2018. Mr. Addison will retire from your Board at the Annual Meeting in May 2019 in accordance with your Board’s mandatory retirement age and therefore will no longer serve on the Audit Committee.
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Mr. Misheff transitioned off the Compensation Committee in May 2018 and Ms. Turner was appointed to the Compensation Committee in September 2018. Dr. Thornton will retire from your Board in May 2019 in accordance with your Board’s mandatory retirement age and therefore will no longer serve on the Compensation Committee.
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Mr. Misheff was appointed to the Corporate Governance, Sustainability and Corporate Responsibility Committee in May 2018.
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The Audit Committee of your Board is charged with assisting your full Board in fulfilling its oversight responsibility with respect to the quality and integrity of the accounting, auditing, and financial reporting practices of your Company. The Audit Committee acts under a written charter that is reviewed annually, revised as necessary, and is approved by your Board. The charter specifies that the Audit Committee is directly responsible for the appointment, compensation and retention of, and the oversight of the work andpre-approval of all services provided by your Company’s independent registered public accounting firm, which was PricewaterhouseCoopers LLP during 2018. In connection with the Audit Committee’s approval of anynon-audit services, the Audit Committee considers whether the independent registered public accounting firm’s performance of anynon-audit services is compatible with the independent auditor’s independence.
As part of the Audit Committee’s auditor engagement process, the Audit Committee considers whether to rotate the independent registered public accounting firm. The Audit Committee also participates in the selection of and ensures the regular rotation of the lead audit partner and concurring partner of the Company’s independent registered public accounting firm every five years. PricewaterhouseCoopers LLP has been the Company’s independent auditor since 2002. The Audit Committee currently believes that there are benefits to having an independent auditor with an extensive history with the Company. The benefits include: quality audit work and accounting advice due to PricewaterhouseCoopers LLP’s institutional knowledge of our business and operations, accounting policies and financial systems, and internal control framework; knowledge of the utility industry; and operational efficiencies and a resulting lower fee structure because of PricewaterhouseCoopers LLP’s history and familiarity with our business.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in your Company’s Annual Report onForm 10-K for the year ended December 31, 2018. In performing its review, the Audit Committee discussed the propriety of the application of accounting principles by your Company, the reasonableness of significant judgments and estimates used in the preparation of the financial statements, and the clarity of disclosures in the financial statements.
The Audit Committee reviewed and discussed with your Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, their opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States. This discussion covered the matters required by Auditing Standard No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board, including its judgments as to the propriety of the application of accounting principles by your Company.
The Audit Committee received the written disclosures and the letter from the independent registered public accounting firm regarding their independence from your Company as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed with the independent registered public accounting firm such firm’s independence.
The Audit Committee discussed with your Company’s internal auditors and independent registered public accounting firm the overall scope, plans, and results of their respective audits. The Audit Committee met with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of your Company’s internal controls, and the overall quality of your Company’s financial reporting process.
Based on the above reviews and discussions, the Audit Committee recommended to your Board that the audited financial statements be included in your Company’s Annual Report onForm 10-K for the year ended December 31, 2018, for filing with the SEC.
Audit Committee Members: James F. O’Neil III (chair), Paul T. Addison, Donald T. Misheff and Leslie M. Turner.
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Independent Registered Public Accounting Firm
Audit Fees
The following is a summary of the fees paid by your Company to its independent registered public accounting firm, PricewaterhouseCoopers LLP, for services provided to your Company and its reporting subsidiaries during the years 2018 and 2017.
PricewaterhouseCoopers LLP billed your Company an aggregate of $7,634,500 in 2018 and $9,001,500 in 2017 in fees for professional services rendered for the audit of your Company’s annual financial statements and the review of the financial statements included in each of your Company’s Quarterly Reports onForm 10-Q, services that are normally provided in connection with statutory and regulatory filings or engagements, audit-related services andnon-audit-related services as noted below.
| Fees for Audit Year 2018 | Fees for Audit Year 2017 | |||||||||
Audit Fees(1) | $7,345,000 | $8,460,000 | ||||||||
Audit Related Fees(2) | $163,200 | $502,000 | ||||||||
Tax Fees(3) | $120,000 | - 0 - | ||||||||
All Other Fees(4) | $6,300 | $39,500 | ||||||||
Total | $7,634,500 | $9,001,500 | ||||||||
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The Audit Committee has considered whether anynon-audit services rendered by the independent registered public accounting firm are compatible with maintaining its independence. The Audit Committee, in accordance with its charter and in compliance with all applicable legal and regulatory requirements promulgated from time to time by the NYSE and SEC, has a policy under which the independent registered public accounting firm cannot be engaged to performnon-audit services that are prohibited by these requirements. The charter further states that any engagement of the independent registered public accounting firm to perform other audit-related or anynon-audit services must have approval in advance by the Chair of the Audit Committee upon the recommendation of the Vice President, Controller and Chief Accounting Officer. Such approved engagement is then presented to the Audit Committee at its next regularly scheduled meeting. All audit andnon-audit services provided by PricewaterhouseCoopers LLP in 2018 and 2017 werepre-approved.
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Director Compensationin Fiscal Year 2018
Name(1)
| Fees Earned or Paid in Cash ($)(2)
| Stock
| Change in
| All Other
| Total ($)
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Paul T. Addison | $110,000 | $134,898 | $3,569 | $0 | $248,467 | |||||
Michael J. Anderson | $110,000 | $134,898 | $2,303 | $7,000 | $254,201 | |||||
William T. Cottle(6) | $35,495 | $50,417 | $15,284 | $0 | $101,196 | |||||
Steven J. Demetriou | $95,000 | $134,898 | $0 | $0 | $229,898 | |||||
Julia L. Johnson | $95,000 | $134,898 | $0 | $0 | $229,898 | |||||
Donald T. Misheff | $196,580 | $134,898 | $0 | $0 | $331,478 | |||||
Thomas N. Mitchell | $112,823 | $134,898 | $681 | $0 | $248,402 | |||||
James F. O’Neil III | $110,582 | $134,898 | $0 | $0 | $245,480 | |||||
Christopher D. Pappas | $110,000 | $134,898 | $0 | $2,500 | $247,398 | |||||
Sandra Pianalto(7) | $81,806 | $116,134 | $0 | $0 | $197,940 | |||||
Luis A. Reyes | $97,979 | $134,898 | $0 | $0 | $232,877 | |||||
George M. Smart(6) | $91,332 | $50,417 | $17,444 | $16,755 | $175,948 | |||||
Dr. Jerry Sue Thornton | $94,928 | $134,898 | $0 | $5,000 | $234,826 | |||||
Leslie M. Turner(8) | $26,848 | $38,090 | $0 | $0 | $64,938 | |||||
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Compensation of Directors
We use a combination of cash and equity-based incentive compensation in order to attract and retain qualified candidates to serve on your Board. Equity compensation provides incentives to directors linking their personal interests to our long-term financial success and to increases in shareholder value. In setting director compensation, we take into consideration the significant amount of time that directors spend in fulfilling their duties to us as well as the skill level required of members of your Board. Onlynon-employee directors receive the compensation described below for their service on your Board. Since Mr. Jones was an employee, he was not eligible to receive compensation for his service on your Board in 2018.
Fee Structure
In 2018, eachnon-employee director received a cash retainer of $95,000 and an equity retainer valued at approximately $135,000 and paid in the form of our common stock. The Chairs of the Corporate Governance, Sustainability and Corporate Responsibility, Compensation, Finance, and Nuclear Committees each received an additional $15,000 cash retainer in 2018 for serving as a committee chairperson, and the Chair of the Audit Committee received an additional $20,000 cash retainer in 2018. The amounts paid to directors for 2018 were prorated accordingly based on the duration of their service. Directors are also paid meeting fees of $1,500, but only forin-person committee meetings and/or site visits heldoff-cycle. Mr. Misheff, thenon-executive Chairman of the Board, received an additional $94,162 cash retainer prorated in 2018 for serving in that capacity beginning in May 2018. Mr. Smart, who retired asnon-executive Chairman of the Board received an additional $55,838 cash retainer in 2018 for serving in the capacity until his retirement in May 2018. Ms. Turner currently directs the Company to pay her cash retainer to her wholly owned limited liability company, and as such, her cash retainer is not eligible for deferral as described below. Effective January 1, 2019, the cash and equity retainers were increased to $100,000 and $150,000 respectively; the cash retainer for the Chair of the Audit Committee was increased to $25,000; the cash retainer for the Chair of the Compensation Committee was increased to $20,000; and individual meeting fees were eliminated.
Equity and cash retainers and chairperson retainers were paid in quarterly installments. Any equity compensation and any compensation deferred into equity was granted under the 2015 Incentive Plan. Directors are responsible for paying all taxes associated with cash and equity retainers. We do not gross up equity grants to directors to cover tax obligations.
We believe it is critical that the interests of directors and shareholders be clearly aligned. As such, similar to the NEOs identified in the CD&A, directors are also subject to share ownership guidelines. Within 90 days of their election to your Board, a director must beneficially own a minimum of 100 shares of our common stock. Within five years of joining your Board, each director is required to own shares of our common stock with an aggregate value of at least six times the annual cash retainer (currently $570,000 in common stock). Each director has either attained the required share ownership guideline or is expected to attain the required share ownership guideline within the allotted amount of time. The share ownership guidelines are reviewed by the Compensation Committee for competitiveness on an annual basis and were last reviewed at the Compensation Committee’s July 2018 meeting.
For 2018, the following directly and indirectly held shares were included in determining whether anon-employee director met his/her ownership guidelines:
Shares directly or jointly owned in certificate form or in a stock investment plan;
Shares held individually or jointly by a broker, or, in certain circumstances, held in trust, or in an individual retirement account (“IRA”), shares held by a spouse, or other beneficially owned shares, to the extent known by the Company; and
All units held in the DDCP, discussed below, and units held in the Allegheny Energy, Inc.Non-Employee Director Stock Plan (“AYE Director’s Plan”) or the Allegheny Energy Inc. Amended and Restated Revised Plan for Deferral of Compensation of Directors (“AYE DCD”), which units are payable in shares.
13 | FirstEnergy Corp.2019 Proxy Statement
Deferred Compensation Plan for Outside Directors
The DDCP is a nonqualified deferred compensation plan that provides directors the opportunity to defer compensation. Directors may defer up to 100 percent of their cash retainer into cash or stock accounts. Deferrals into the cash account can be invested in one of nine funds, similar to the investment funds available to all of our employees through the FirstEnergy Corp. Savings Plan, or in a Company-paid annually adjusted fixed income account. The Company paid interest at an annual rate of 7.13% on funds deferred into cash accounts prior to 2013 and 5.13% on funds deferred into cash accounts beginning in 2013. The interest rate received by the directors is the same rate received by the NEOs under the FirstEnergy Corp. Amended and Restated Executive Deferred Compensation Plan (“EDCP”). In 2018, the Compensation Committee approved a third amendment to the DDCP in order to comply with Department of Labor (DOL) regulations under the Employment Retirement Income Security Act (ERISA), which amends the claims procedure requirements for disability benefits.
For stock accounts, dividend equivalent units are accrued quarterly and applied to the directors’ accounts on each dividend payment date using the closing price of our common stock on that date. Payments made with respect to any dividend equivalent units that accrue after January 21, 2014, will be paid in cash.
Other Payments or Benefits Received by Directors
The corporate aircraft is available, when appropriate, for transportation to and from Board and committee meetings and training seminars. Each of Messrs. Misheff and Smart had the use of an office and administrative support with respect to carrying out his duties asnon-executive Chairman of the Board during his respective time serving in such role in 2018. We pay all fees associated with director and officer insurance and business travel insurance for our directors. In 2018, our directors were eligible to receive perquisites including limited personal use of the corporate aircraft, matching charitable contributions and gifts, the collective value of which was less than $10,000 for each director other than Mr. Smart. Directors are responsible for paying all taxes associated with perquisites and personal benefits.
It is critically important to us and our shareholders that we be able to attract and retain the most capable persons reasonably available to serve as our directors. As such, all directors have entered into written indemnification agreements, which are intended to secure the protection for our directors contemplated by our Amended Code of Regulations and Ohio law. Your Board adopted an updated form of director and officer indemnification agreement in May 2018, which replaced and superseded any prior indemnification agreement.
Each indemnification agreement provides, among other things, that we will, subject to the agreement terms, indemnify a director if by reason of their corporate status as a director, the person incurs losses, liabilities, judgments, fines, penalties, or amounts paid in settlement in connection with any threatened, pending, or completed proceeding, whether of a civil, criminal, administrative, or investigative nature. In addition, each indemnification agreement provides for the advancement of expenses incurred by a director, subject to certain exceptions, in connection with proceedings covered by the indemnification agreement. As a director and officer, the agreement for Mr. Jones addresses indemnity in both roles.
14 | FirstEnergy Corp.2019 Proxy Statement
The Corporate Governance Sustainability and Corporate Responsibility Committee recommends Board candidates by identifying qualified individuals in a manner that is consistent with criteria approved by your Board. In consultation with the CEO, the Chairman of the Board and the full Board, the Corporate Governance Sustainability and Corporate Responsibility Committee searches for, recruits, screens, interviews and recommends prospective directors to provide an appropriate balance of knowledge, experience, diversity attributes and capability on your Board. Suggestions for potential Board candidates come to the Corporate Governance Sustainability and Corporate Responsibility Committee from a number of sources, including a third-party search firm, incumbent directors, officers and others. The Corporate Governance Sustainability and Corporate Responsibility Committee has sole authority to retain and engage a third-party search firm to identify a candidate or candidates.
The Committee has actively engaged in director succession planning and regularly evaluates the addition of a director or directors with particular attributes with an appropriate mix of long-, medium-, and short-term tenured directors in its succession planning. Your Board has been able to attract high quality diverse candidates and did not use a third party to assist with the identification of potential nominees but would consider using a third party in the future, if needed or desired.
The Corporate Governance Sustainability and Corporate Responsibility Committee considers suggestions for candidates for membership on your Board, including candidates recommended by shareholders for your Board. Provided that shareholders suggesting director candidates have complied with the procedural requirements set forth in the Corporate Governance Sustainability and Corporate Responsibility Committee Charter and Amended and Restated Code of Regulations, the Corporate Governance Sustainability and Corporate Responsibility Committee applies the same criteria and employs substantially similar procedures for evaluating candidates suggested by shareholders for your Board as it would for evaluating any other Board candidate. The Corporate Governance Sustainability and Corporate Responsibility Committee will give due consideration to all recommended candidates that are submitted in writing to the Corporate Governance Sustainability and Corporate Responsibility Committee, in care of the Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890, received at least 120 days before the publication of yourthe Company’s annual proxy statement from a shareholder or group of shareholders owning one half of one percent (0.5 percent) or more of yourthe Company’s voting stock for at least one year, and accompanied by a description of the proposed nominee’s qualifications and other relevant biographical information, together with the written consent of the proposed nominee to be named in the proxy statement and to serve on your Board.
Also refer to the “Proposals and Business by Shareholders” section of the “Questions and Answers about the Annual Meeting” below for information regarding nominations under the Company’s Amended and Restated Code of Regulations.
Director Nomination Agreement
On March 16, 2021, your Company entered into a Director Appointment and Nomination Agreement (the “Director Nomination Agreement”) with Carl C. Icahn, Andrew Teno, Jesse A. Lynn, Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Enterprises G.P. Inc., Icahn Enterprises Holdings L.P., IPH GP LLC, Icahn Capital LP, Icahn Onshore LP, Icahn Offshore LP and Beckton Corp. (collectively, the “Icahn Group”). Pursuant to the Director Nomination Agreement, effective as of March 18, 2021, your Board, among other matters agreed to: (i) increase the size of the Board from 12 to 14 directors, resulting in a total of two vacancies; and (ii) appoint Andrew Teno and Jesse A. Lynn (the “Icahn Designees”) to serve as directors of the Company to fill such vacancies, each with a term expiring at the Annual Meeting. A summary of the terms of the Director Nomination Agreement is provided in the “Certain Relationships and Related Person Transactions” section below.
Attributes, Experience, Qualifications and Skills of your Board
In recruiting and selecting Board candidates, the Corporate Governance Sustainability and Corporate Responsibility Committee takes into account the size of your Board and considers a “skills matrix” to determine whether those skills and/or other attributes qualify candidates for service on your Board. The attributes, experiences, qualifications and skills considered in accordance with Corporate Governance Policies and the Corporate Governance Sustainability and Corporate Responsibility Committee charter for each director nominee led your Board to conclude that the nominee is qualified to serve on your Board.
158 | FirstEnergy Corp.20192021 Proxy Statement
The high-level overview below depicts some of the attributes, experiences, qualifications and skills of our director nominees the committee takes into account. It is not intended to be an exhaustive list of each director nominee’s skills or contributions to your Board. Also, additional biographical information and qualifications for each nominee is provided in the “Biographical Information and Qualifications of NomineesforNomineesfor Election as Directors” sectionbelowsectionbelow and contains information regarding the person’s service as a director, principal occupation, business experience along with key attributes, experience and skills.
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The Corporate Governance, Sustainability and Corporate Responsibility Committee regularly assesses the size and composition of your Board in light of the current operating requirements of your Company and the current needs of your Board. Each of the nominees brings a strong and unique background and skill set to your Board, giving your Board, as a whole, competence and experience in a wide variety of areas necessary to oversee the operations of yourthe Company.
Your
The above takes into account a level of knowledge that could include direct experience, subject matter expertise, directly managing one or more members of management engaged in such activities or exposure as a board or board committee member, including on your Board and Board committees.
Board’s Focus on Diversity
The Company is committed to a policy of inclusiveness and believes that well assembled boards consist of a diverse group of individuals who possess a variety of complementary skills and experiences. Your Board and theThe Corporate Governance Sustainability and Corporate Responsibility Committee regularly assesses the size and composition of your Board in light of the current operating requirements of the Company and the current needs of your Board, and is also committed to actively seeking out highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experience, to include in the pool from which Board nominees are chosen. Accordingly, your Board has set a goal that it will be composed oftargeting at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future. The Corporate Governance Sustainability and Corporate Responsibility Committee also considers differences in point of view, professional experience, education, and other individual skills, qualities, and attributes that contribute to the optimal functioning of your Board as a whole. Also, our Corporate Governance Policies provide that your Board will not nominate for election anon-employee director following his or her 72nd birthday.
9 | FirstEnergy Corp. 2021 Proxy Statement
Director Independence
Your Board annually reviews the independence of each of its members to make the affirmative determination of independence that is called for by our Corporate Governance Policies and required by the SEC and NYSE listing standards, including certain independence requirements of Board members serving on the Audit Committee, the Compensation Committee and the Corporate Governance Sustainability and Corporate Responsibility Committee.
Your Board adheres to the definition of an “independent” director as established by the NYSE and the SEC. The definition used by your Board to determine independence is included in our Corporate Governance Policies and can be viewed by visiting our website atwww.firstenergycorp.com/charters.
All 16 | FirstEnergy Corp.2019 Proxy Statementnon-employee
directors who served during any part of 2020 were independent under applicable standards.
Each year, our directors complete a questionnaire to assist your Board in assessing whether each director meets the NYSE’sapplicable independence standards and the related provisions in yourthe Company’s Corporate Governance Policies. YourThe Company facilitates this review by examining its financial records to determine if amounts paid to or received from entities in which eachnon-employee director or immediate family member has a relationship based on responses to the questionnaires. Subject to the categorical standards approved by your Board and described below, a list of the relevant entities and the amounts the Company paid to or received from those entities is provided to your Board for the Corporate Governance, Sustainability and Corporate Responsibility Committee.non-employee directors. Utilizing this information, the Corporate Governance Sustainability and Corporate Responsibility Committee presents to your Board (i) an evaluation, with regard to each director, whether the director has any material relationship with the Company or any of its subsidiaries; (ii) a recommendation of whether the amount of any payments between the Company and relevant entities could interfere with a director’s ability to exercise independent judgment; and (iii) a review of any other relevant facts and circumstances regarding the nature of these relationships, to determine whether other factors, regardless of the categorical standards your Board has adopted or under the NYSE’s independence standards, might impede a director’s independence. Based on a review of information concerning each of itsnon-employee directors and the recommendation of the Corporate Governance Sustainability and Corporate Responsibility Committee, your Board will affirmatively determine whether a director may be considered “independent.”
Additionally, yourYour Board recognizes that in the ordinary course of business, relationships and transactions may occur between yourthe Company and its subsidiaries and entities with which some of our directors are or have been affiliated. Accordingly, ourOur Corporate Governance Policies provide categorical standards to assist your Board in determining what does not constitute a material relationship for purposes of determining a director’s independence. TheAccordingly, the following commercial and charitable relationships will not be considered to be a material relationship that would impair a director’s independence: (i) if the director, an immediate family member or a person or organization with which the director has an affiliation purchases electricity or related products or services from the Company or its subsidiaries in the ordinary course of business and the rates or charges involved in the transaction are fixed in conformity with law or governmental authority or otherwise meet the requirements of RegulationS-K Item 404(a) Instruction 7, and (ii) the aggregate charitable contributions made by the Company to an organization with which a director, an immediate family member or a person or organization with which the director has an affiliation were less than $100,000 in each of the last three fiscal years, or (iii) the aggregate of other payments made by the Company to another entity or organization with which the director, an immediate family member or a person with which the director has an affiliation, or received by the Company from that other entity or organization, were less than the greater of $1 million or 2% of the affiliated company’s revenues in each of the last three fiscal years. Your Board does not typically consider such immaterial relationships in making independence determinations. Notwithstanding the foregoing, your Board will not treat a director’s relationship with the Company as categorically immaterial if the relationship otherwise conflicts with the NYSE corporate governance listing standards or is required to be disclosed by the Company pursuant to Item 404 of RegulationS-K.
In making such determinations,Based on the March 2021 independence review, your Board consideredaffirmatively determined that Melvin Williams (our new director nominee), all other non-employee director nominees — Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Jesse A. Lynn, Donald T. Misheff, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Luis A. Reyes, Andrew Teno and Leslie M. Turner — and Sandra Pianalto are independent pursuant to our Corporate Governance Polices, the fact that certain directors are executive officersrules and regulations of companies with which we conducted business. In addition, manythe SEC and the listing standards of our directors are or were directors, trustees, or similar advisors of entities with which we conducted business or ofnon-profit organizations with which we conducted business and/or made contributions. Outside of their service as a Company director, none of your Company’s independent directors currently provide professional or other services to your Company, its affiliates or any officer of your Company and none of your Company’s directors are related to any executive officer of your Company.
Specifically, your Board considered the following relationships and transactions, which occurred in the ordinary course of business, between your Company and its subsidiaries and certain entities some of our directors have been affiliated with that existed or occurred during the preceding three years:
Regulated electric services and related products and services purchased from your Company (by a university where Ms. Pianalto serves as an executive in residence);
Non-regulated electric services and relatednon-electric products and services purchased from your Company (by companies where Ms. Pianalto and Messrs. Anderson and Pappas serve as directors, by a company where family members of Mr. Anderson are employed, by a university where Ms. Pianalto serves as an executive in residence, by a community college where Dr. Thornton is a president emeritus, and by a company where Mr. Reyes serves as a chairman of a nuclear safety review board);
Purchases by your Company of electric distribution and power generation related products and services (from companies where Dr. Thornton, Ms. Pianalto, and Messrs. Anderson, O’Neil and Pappas serve as directors, from a company where a family member of Mr. Anderson is employed and from a company where Mr. Reyes serves as a chairman of a nuclear safety review board);
Purchases by your Company ofnon-audit related services (from an accounting firm that is not our independent accountant where a family member of Mr. Misheff is employed);
17 | FirstEnergy Corp.2019 Proxy Statement
Purchases by your Company for information technology related services and office-related products and services (from a company where Ms. Pianalto serves as a director); and
Payments by your Company relating to charitable contributions and sponsorships, membership fees/dues, tuition for employee training and related expenses (to a university where Ms. Pianalto serves as an executive in residence, to an organization where Mr. Reyes serves as a training and accreditation board member and to a community college where Dr. Thornton is a president emeritus).
NYSE. In all cases, your Board determined that the nature of the business conducted and any interest of the applicable director in that business were immaterial both to yourthe Company and to the director. PursuantOutside of their service as a Company director, none of the Company’s independent directors currently provide professional or other services to the Company, its affiliates or any officer of the
10 | FirstEnergy Corp. 2021 Proxy Statement
Company and none of the Company’s directors are related to any executive officer of the Company. Messrs. Somerhalder and Strah are not considered independent directors because of their employment with your Company’s Corporate Governance Policies,Company. Additionally, your Board alsopreviously determined that the amounts paidour former CEO and director Charles E. Jones, who resigned from your Board effective October 29, 2020, was not independent due to or received from the other entity affiliatedhis prior employment with the applicable director in connection with the applicable transactions in each of the last three years did not exceed the greater of $1 million or two percent of the consolidated gross revenue of that entity, which is the threshold set forth in the NYSE listing standards and our Corporate Governance Policies. your Company.
The Corporate Governance Sustainability and Corporate Responsibility Committee also determined that none of the relationships described above constituted a related person transaction requiring disclosure under the heading “Certain Relationships and Related Person Transactions” in this proxy statement. Also, in each case where the director is a current executive officer of another company, any transactions constituted less than one percent of yourthe Company’s and the other company’s consolidated gross revenues in each of the last three completed fiscal years.
Based on the February 2019 independence review, your Board affirmatively determined that allnon-employee director nominees – Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Donald T. Misheff, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Sandra Pianalto, Luis A. Reyes and Leslie M. Turner – are independent pursuant to our Corporate Governance Polices, the rules and regulations of the SEC and the listing standards of the NYSE. Additionally, Mr. Paul T. Addison and Dr. Jerry Sue Thornton, who were not nominated for election to your Board at the Meeting pursuant to your Board’s mandatory retirement age policy, were considered independent directors. Mr. Jones is not considered an independent director because of his employment with your Company.
1811 | FirstEnergy Corp.20192021 Proxy Statement
Qualifications of Nomineesfor Election as Directors
The following provides information about each director nominee as of the date of this proxy statement. The information presented below includes each nominee’s specific experiences, qualifications, attributes, and skills that ledcontributed to the conclusion by the Corporate Governance Sustainability and Corporate Responsibility Committee and your Board to the conclusion that he/she should serve as a director of yourthe Company.
Michael J. Anderson
Position, Principal Occupation and Business Experience: Chairman of the board
Key Attributes, Experience and Skills: Mr. Anderson received an M.B.A. in Finance |
Age
FirstEnergy Director since 2007 Standing Committees:
(Chair); Finance
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Steven J. Demetriou
Position, Principal Occupation and Business Experience:
Key Attributes, Experience and Skills: Mr. Demetriou received his Bachelor of |
Age FirstEnergy Director since 2017
Standing Committees: Finance (Chair); | |
1912 | FirstEnergy Corp.20192021 Proxy Statement
Julia L. Johnson
Position, Principal Occupation and Business Experience: President of
Key Attributes, Experience and Skills: Ms. Johnson received her law degree from |
Age 58 FirstEnergy Director since 2011 Standing Committees: Corporate Governance and Finance | |
Jesse A. Lynn Position, Principal Occupation and Business Experience: General Counsel of Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment, energy, automotive, food packaging, metals, real estate, home fashion and pharma, since 2014. Mr. Lynn also serves as a director of the following two other public companies: Cloudera, Inc., and Conduent Incorporated. Mr. Lynn was previously a director of Herbalife Nutrition Ltd (from 2014 to January 2021) and The Manitowoc Company, Inc. (from April 2015 to February 2018). Key Attributes, Experience and Skills: Mr. Lynn received a B.A. from the University of Michigan and a J.D. from the Boston University School of Law. He has extensive experience in a variety of businesses, including investment, energy, automotive, food packaging, metals, real estate, home fashion and pharma. Prior to his current position, Mr. Lynn, was Assistant General Counsel of Icahn Enterprises L.P. (from 2004 to 2014). Prior to joining Icahn Enterprises L.P., Mr. Lynn worked as an associate in the New York office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in its business and finance department and as an associate in the corporate group at Gordon Altman Butowsky Weitzen Shalov & Wein. Mr. Lynn’s legal experience and his experience in a variety of industries along with his broad business skills make him a valuable member of your Board.
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Age
Director since March 2021 Standing Committee: Corporate Governance
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2013 | FirstEnergy Corp.20192021 Proxy Statement
Donald T. Misheff
Position, Principal Occupation and Business Experience:Non-executive
Key Attributes, Experience and Skills: Mr. Misheff graduated from The University of
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Age
FirstEnergy Director since 2012 Standing Committees:
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Thomas N. Mitchell
Position, Principal Occupation and Business Experience: Chairman of the World
Key Attributes, Experience and Skills: Mr. Mitchell received his undergraduate |
Age
Standing Committees: Operations and Safety Oversight (Chair)
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2114 | FirstEnergy Corp.20192021 Proxy Statement
James F. O’Neil III
Position, Principal Occupation and Business Experience: Chief executive officer and vice chairman of Orbital Energy Group (formerly known as CUI Global Inc.), a company focused on acquisition and development of innovative companies to create a diversified energy services platform. Principal owner of
Key Attributes, Experience and Skills: Mr. O’Neil received his Bachelor of Science
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Age 62 FirstEnergy Director since 2017 Standing Committees:
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Christopher D. Pappas
Position, Principal Occupation and Business Experience: Executive Director of your Board (from October 2020 to April 1, 2021). Retired in
Key Attributes, Experience and Skills: Mr. Pappas received an M.B.A. from the
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Age 65 FirstEnergy Director since 2011 Standing Committees:
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2215 | FirstEnergy Corp.20192021 Proxy Statement
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Luis A. Reyes
Position, Principal Occupation and Business Experience: Retired in 2011 as a
Key Attributes, Experience and Skills: |
Age
FirstEnergy Director since 2013 Standing Committees: Corporate Governance
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John W. Somerhalder II Position, Principal Occupation and Business Experience: Vice Chairperson and Executive Director of your Board and a member of management since March 2021. Mr. Somerhalder recently served as Interim President and Chief Executive Officer of CenterPoint Energy, Inc., an electric and natural gas utility serving several U.S. markets (from February 2020 to July 2020), and served as a member of the CenterPoint Energy’s board of directors (from 2016 through July 2020). Mr. Somerhalder serves as a director of Gulfport Energy Corp. He served as a director and board chairman of Enable Midstream Partners, LP (from February 2020 to July 2020), as a Director of SunCoke Energy Partners GP LLC (from August 2017 to July 2019), and as director at Crestwood Equity GP LLC, the general partner of Crestwood Equity Partners LP (from October 2013 to February 2020). Key Attributes, Experience and Skills: Mr. Somerhalder holds a Bachelor of Science degree in chemical engineering from the University of Arizona. He served as Interim President and Chief Executive Officer of Colonial Pipeline Company, a U.S. refined products pipeline company (from February 2017 to October 2017). Prior to that, he was president and chief executive officer of AGL Resources Inc., a former publicly traded energy services holding company (from March 2006 to his retirement in December 2015), and chairman of AGL Resources board of directors (from November 2007 to December 2015). Prior to joining AGL Resources, Mr. Somerhalder served in a number of roles with El Paso Corporation, a publicly traded natural gas and related energy products provider, where he spent almost 30 years, starting his career as an engineer and progressing through leadership roles before being named president of El Paso Pipeline Group and executive vice president of El Paso Corporation. He has extensive leadership and senior management experience, including the roles of chief executive officer and board chairman. His extensive energy industry, executive and board experience have equipped him with leadership skills and knowledge of the industry, and board processes and functions. Mr. Somerhalder’s extensive experience qualifies him to serve on your Board and lead efforts to rebuild trust with our external stakeholders, and support our senior leadership team’s efforts to achieve its priorities and strengthen your Company’s governance and compliance functions. |
Age 65 FirstEnergy Director since March 2021 |
2316 | FirstEnergy Corp.20192021 Proxy Statement
Steven E. Strah Position, Principal Occupation and Business Experience: President, CEO and director of your Company since March 2021. He was President and Acting CEO (from October 2020 to March 2021), and President (since May 2020). He also served as Senior Vice President and Chief Financial Officer of your Company (from 2018 to 2020), and Senior Vice President and President of FirstEnergy Utilities (from 2015 to 2018). He also serves as a director of many other subsidiaries of the Company. Key Attributes, Experience and Skills: Mr. Strah received his Bachelor of Science degree in business administration from Baldwin Wallace University. His extensive career began in 1984 at The Illuminating Company, now a subsidiary of your Company, and continued at FirstEnergy Corp. He has held numerous executive leadership positions at your Company including President at various FirstEnergy subsidiaries. Mr. Strah’s vast experience brings to your Board an extraordinary understanding of the inner workings of the public utilities industry and FirstEnergy. |
Age 57 FirstEnergy Director since March 2021 | |
Andrew Teno Position, Principal Occupation and Business Experience: Portfolio Manager of Icahn Capital LP., a diversified holding company engaged in a variety of businesses including investment, energy, automotive, food packaging, metals, real estate, home fashion and pharma, since October 2020. Mr. Teno serves as a director of the following two public companies: Herc Holdings Inc. and Cheniere Energy, Inc. He served as a director of Eco-Stim Energy Solutions (from March 2017 to December 2018). Key Attributes, Experience and Skills: Mr. Teno received an undergraduate business degree from the Wharton School at the University of Pennsylvania in 2007. Prior to his position at Icahn Capital, Mr. Teno worked at Fir Tree Partners, a NY based private investment firm that invests worldwide in public and private companies, real estate and sovereign debt. Prior to Fir Tree, he worked at Crestview Partners from July 2009 to July 2011 as an associate in their private equity business and at Gleacher Partners, a boutique mergers and acquisitions firm. Mr. Teno’s investment expertise and experience in a variety of industries, along with his business skills make him a valuable member of your Board. |
Age 36 FirstEnergy Director since March 2021 Standing Committees: Audit, Finance |
17 | FirstEnergy Corp. 2021 Proxy Statement
Leslie M. Turner
Position, Principal Occupation and Business Experience: Retired in March 2018
Key Attributes, Experience and Skills: Ms. Turner received her law degree from |
Age
FirstEnergy Director since 2018 Standing Committees: Audit; | |
Melvin Williams Position, Principal Occupation and Business Experience: Retired in 2020 as president of Nicor Gas, a natural gas distribution company and subsidiary of the Southern Company, and senior vice president of Southern Company Gas (positions held since 2015). Key Attributes, Experience and Skills: Mr. Williams received his Bachelor of Science degree in business administration from the Savannah State University. Prior to his most recent positions, he held progressively more responsible leadership roles including senior vice president, planning and business services at Nicor Gas and vice president and general manager at Atlanta Gas Light Company and Florida City Gas Company. He is a champion for leadership development and diversity and inclusion-related matters. Over 32 years of utility experience that includes customer engagement, safety, sales, marketing and new business development, regulatory affairs, financial planning and utility operations will enable Mr. Williams to provide valuable insight and qualifies him to serve as a member of your Board. |
Age 57 FirstEnergy Director nominee Standing Committees: N/A |
2418 | FirstEnergy Corp.20192021 Proxy Statement
Your Board established five standing committees listed below. Also provided below is information relating to certain other special oversight committees your Board created in 2020, including the Compliance Oversight Sub-Committee of the Audit Committee to assess and implement potential changes as appropriate in your Company’s compliance program. All standing committees are comprised solely of independent directors as determined by your Board in accordance with our Corporate Governance Policies, which incorporate the New York Stock Exchange (“NYSE”) listing standards and applicable Securities and Exchange Commission (“SEC”) rules, including the members of the Audit Committee, Compensation Committee and the Corporate Governance and Corporate Responsibility Committee. Messrs. Somerhalder and Strah, your only directors who are not considered independent because of their employment with your Company, do not serve on any standing Board committee.
Audit Committee | 12 meetings in fiscal year 2020 | |||
Michael J. Anderson (Chair) * Donald T. Misheff * Sandra Pianalto * Andrew Teno Leslie M. Turner * Financial Experts | The Audit Committee is primarily responsible for assisting your Board with oversight of: ● the integrity of the Company’s financial statements; ● compliance with legal, risk management and regulatory requirements; ● independent auditor’s qualifications and independence; ● performance of the Company’s internal audit function and independent auditor; ● systems of internal control with respect to the accuracy of financial records, adherence to Company policies and compliance with legal and regulatory requirements; and ● major financial risk exposures, including risks related to cybersecurity. The purpose of the Audit Committee’s new Compliance Oversight Sub-Committee discussed further below is to assess and implement potential changes as appropriate in your Company’s compliance program. The Audit Committee is also directly responsible for the appointment, compensation and retention of, and the oversight of the work and pre-approval of all services provided by the Company’s independent registered public accounting firm. For a complete list of responsibilities and other information, please refer to the Audit Committee Charter available on our website at www.firstenergycorp.com/charters. | |||
Your Board appoints at least one member of the Audit Committee who, in your Board’s business judgment, is an “Audit Committee Financial Expert,” as such term is defined by the SEC. Your Board determined that Messrs. Anderson, Misheff and Ms. Pianalto meet this definition. All members of the Audit Committee are financially literate. As required by the applicable NYSE listing standards, to the extent any member of the Company’s Audit Committee simultaneously serves on the audit committee of more than three public companies, the Company will disclose on its website (www.firstenergycorp.com under the tab “Investors”, “Governance” and “Board of Directors”) your Board’s determination whether such simultaneous service impairs the ability of that individual to serve effectively on the Company’s Audit Committee. See the Audit Committee Report in this proxy statement for additional information regarding the Audit Committee.
Mr. Teno was appointed to the Audit Committee effective March 18, 2021.
19 | FirstEnergy Corp. 2021 Proxy Statement
Compensation Committee | 5 meetings in fiscal year 2020 | |||||||
James F. O’Neil III (Chair) Sandra Pianalto Leslie M. Turner | The Compensation Committee is primarily responsible for: ● discharging the responsibilities of your Board relating to compensation of certain executive officers of the Company, including our CEO; ● endorsing a compensation philosophy and objectives that support competitive pay for performance and are consistent with our corporate strategy; ● establishing the appropriate incentive compensation and equity-based plans for our senior-level officers; ● reviewing and discussing with our management the disclosures in the CD&A below and making a recommendation to your Board whether these disclosures should be included in the Company’s Annual Report on Form 10-K and this proxy statement; and ● producing the Compensation Committee Report to be included in the Company’s Annual Report on Form 10-K and this proxy statement. | |||||||
| The Compensation Committee also reviews and, if appropriate, makes recommendations to your Board regarding the compensation and benefits of our non-employee directors. To the extent permitted under NYSE listing standards and applicable law, the Compensation Committee is authorized to delegate to one or more sub-committees. For information regarding the role of executive officers and our independent compensation consultant in determining or recommending the amount or form of executive and director compensation, see the CD&A section below. For a complete list of responsibilities and other information, refer to the Compensation Committee Charter available on our website at www.firstenergycorp.com/charters. | ||||||||
Mr. Pappas transitioned off of the Compensation Committee in October 2020.
Corporate Governance and Corporate Responsibility Committee | 5 meetings in fiscal year 2020 | |||||||
Julia L. Johnson (Chair) Donald T. Misheff Thomas N. Mitchell Luis A. Reyes | The Corporate Governance and Corporate Responsibility Committee is primarily responsible for: ● Board succession, including ensuring the appropriate balance of diversity of attributes, experience, skills, ethnicity and gender of our directors; ● recommending Director nominees (also refer to the “Board Qualifications” section below for more details); and ● developing and periodically reviewing our corporate governance policies. | |||||||
| The Committee is also directly responsible for oversight of our (i) political activities and practices and (ii) our corporate citizenship practices, including sustainability, environmental and corporate social responsibility initiatives. For a complete list of responsibilities and other information, refer to the Corporate Governance and Corporate Responsibility Committee Charter available on our website at www.firstenergycorp.com/charters. | ||||||||
Mr. Lynn and Mr. Pappas were appointed to the Corporate Governance and Corporate Responsibility Committee effective March 23, 2021 and April 1, 2021, respectively.
20 | FirstEnergy Corp. 2021 Proxy Statement
Finance Committee | 7 meetings in fiscal year 2020 | |
Steven J. Demetriou (Chair) Michael J. Anderson Julia L. Johnson | The Finance Committee is primarily responsible for monitoring and overseeing the Company’s financial resources and strategies, with emphasis on those issues that are long-term in nature. For a complete list of responsibilities and other information, refer to the Finance Committee Charter available on website at www.firstenergycorp.com/charters. Mr. Demetriou was appointed Chair of the Finance Committee and Mr. Pappas transitioned off of the Finance Committee in October 2020. Mr. Pappas has been appointed to transition back onto the Finance Committee effective April 1, 2021, and Mr. Teno was appointed to the Finance Committee effective March 23, 2021. | |
Operations and Safety Oversight Committee | 5 meetings in fiscal year 2020 | |
Thomas N. Mitchell (Chair) Steven J. Demetriou James F. O’Neil III Luis A. Reyes | The Operations and Safety Oversight Committee is primarily responsible for monitoring and overseeing the Company’s significant operating matters relating to the Company’s distribution and transmission facilities, and electric power generation together with the safety matters relating to such operations. For a complete list of responsibilities and other information, refer to the Operations and Safety Oversight Committee Charter available on our website at www.firstenergycorp.com/charters. | |
21 | FirstEnergy Corp. 2021 Proxy Statement
Special Board Oversight Committees | ||
| Since July 2020, your Board has directed an internal investigation related to ongoing government investigations, including implementing potential changes as appropriate in your Company’s compliance program. To assist with its oversight, your Board formed the special committees discussed below. | ||
Leslie M. Turner (Chair) | Compliance Oversight Sub-Committee of the Audit Committee is primarily responsible for assessing your Company’s corporate compliance program and overseeing the implementation of recommended enhancements, as appropriate. ●Members:Leslie M. Turner (Chair),Julia L. Johnson, Thomas N. Mitchell, Sandra Pianalto, Luis A. Reyes and Andrew Teno ● Two meetings in fiscal year 2020 Mr. Teno was appointed to the Compliance Oversight Sub-Committee of the Audit Committee effective March 18, 2021. | |
Demand Review Committee is primarily responsible for oversight of certain litigation related to the ongoing government investigations. ●Members:Leslie M. Turner (Chair),Julia L. Johnson, Jesse A. Lynn, Sandra Pianalto and John W. Somerhalder II Two meetings in fiscal year 2020 ● One meeting in fiscal year 2020 Mr. Lynn was appointed to the Demand Review Committee effective March 18, 2021. | ||
Donald T. Misheff (Chair) | Independent Review Committee is primarily responsible for directing an internal investigation related to ongoing government investigations. ●Members:Donald T. Misheff (Chair),Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Jesse A. Lynn, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Sandra Pianalto, Luis A. Reyes, John W. Somerhalder II and Leslie M. Turner ● 20 meetings in fiscal year 2020 Mr. Lynn was appointed to the Independent Review Committee effective March 18, 2021. | |
22 | FirstEnergy Corp. 2021 Proxy Statement
| Item 1
| Election of Directors
✓Your Board recommends that you vote FOR All Nominees. |
You are being asked to vote for the following 1114 nominees (13 current directors and one new director nominee) to serve on your Board for a term expiring at the annual meeting of shareholders in 20192022 and until their successors shall have been elected: Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Charles E. Jones,Jesse A. Lynn, Donald T. Misheff, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Sandra Pianalto, Luis A. Reyes, andJohn W. Somerhalder II, Steven E. Strah, Andrew Teno, Leslie M. Turner and Melvin Williams. Ms. Turner wasMessrs. Somerhalderand Strahwere elected to your Board effective September 19, 2018March 1, 2021 and is a nomineeMarch 8, 2021, respectively, and are nominees for election by shareholders at the Annual Meeting. Ms. Turner wasMessrs. Lynnand Tenowere appointed to your Board effective March 18, 2021, pursuant to the Director Nomination Agreement and are nominees for election by shareholders at the Annual Meeting. Mr. Somerhalderand Mr. Williams were identified by a third-party search firm as potential candidates and recommended as a directordirectors by the members of our Corporate Governance Sustainability and Corporate Responsibility Committee. In addition, Sandra Pianalto has not been nominated for re-election at the Annual Meeting, and her term on your Board will expire at the conclusion of the Annual Meeting.
The “Biographical Information and Qualifications of Nominees for Election as Directors” section of this proxy statement provides information for all nominees for election at the Annual Meeting. The “Director“Board Qualifications” section of this proxy statement provides information relating to your Board’s and Corporate Governance Sustainability and Corporate Responsibility Committee’s review of nominees. Your Board has no reason to believe that the persons nominated will not be available to serve after being elected. If any of these nominees would not be available to serve for any reason, shares represented by the appointed proxies will be voted either for a lesser number of directors or for another person selected by your Board. However, if the inability to serve is believed to be temporary in nature, the shares represented by the appointed proxies will be voted for that person who, if elected, will serve when able to do so.
Pursuant to yourthe Company’s Amended and Restated Code of Regulations, at any election of directors, the persons receiving the greatest number of votes area nominee shall be elected to your Board only if the vacancies to be filled;vote “For” the candidate exceed the votes “Against” the nominee; abstentions and brokernon-votes will have no effect. However, ourOur Corporate Governance Policies also provide that in an uncontested election of directors (i.e., an election where the only nominees are those recommended by your Board), any nominee for director who receives a greater number of votes “Withheld” from“Against” his or her election than votes “For” his or her election will promptly tender his or her resignation to the Corporate Governance Sustainability and Corporate Responsibility Committee following certification of the shareholder vote. The Corporate Governance Sustainability and Corporate Responsibility Committee will promptly consider the tendered resignation and will recommend to your Board whether to accept or reject the tendered resignation no later than 60 days following the date of the shareholders’ meeting at which the election occurred. In considering whether to recommend acceptance or rejection of the tendered resignation, the Corporate Governance Sustainability and Corporate Responsibility Committee will consider factors deemed relevant by the committee members, including the director’s length of service, the director’s particular qualifications and contributions to yourthe Company, the reasons underlying the majority withheld vote, if known, and whether these reasons can be cured, and compliance with stock exchange listing standards and the Corporate Governance Policies. In considering the Corporate Governance Sustainability and Corporate Responsibility Committee’s recommendation, your Board will consider the factors considered by the Corporate Governance Sustainability and Corporate Responsibility Committee and any such additional information and factors your Board believes to be relevant. Your Board will act on the Corporate Governance Sustainability and Corporate Responsibility Committee’s recommendation no later than at its next regularly scheduled boardBoard meeting.
| Your Board Recommends That You Vote“For” All Nominees in Item 1.✓ |
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| Item 2
| Ratification of the Appointment of the Independent Registered Public Accounting Firm For
✓Your Board recommends that you vote FOR Item 2. |
You are being asked to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as yourthe Company’s independent registered public accounting firm to examine the books and accounts of yourthe Company for the fiscal year ending December 31, 2019.2021. While our Amended and Restated Code of Regulations does not require shareholders to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, we are submitting the proposal for ratification as a matter of good corporate governance. However, if shareholders do not ratify the appointment, the Audit Committee will reconsider retaining PricewaterhouseCoopers LLP. Even if the appointment is ratified, the Audit Committee, at its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of yourthe Company and its shareholders. A representative of PricewaterhouseCoopers LLP is expected to attend the Annual Meeting and will be available to respond to appropriate questions and have an opportunity to make a statement if he or she wishes to do so. We refer you to the “Matters Relating to the Independent Registered Public Accounting Firm” section of this proxy statement for information regarding services performed by, and fees paid to, PricewaterhouseCoopers LLP during the years 20172019 and 2018.2020. Item 2 requires the affirmative vote of a majority of the votes cast and abstentions will have no effect. There can be no brokernon-votes on Item 2 as it is considered a “routine” matter under applicable NYSE rules.
| Your Board Recommends That You Vote“For” Item 2.✓ |
2624 | FirstEnergy Corp.20192021 Proxy Statement
| Item 3
| Approve, on an Advisory Basis, Named Executive Officer Compensation
✓Your Board recommends that you vote FOR Item 3. |
The following proposal provides shareholders the opportunity to cast an advisory,non-binding vote onto approve the compensation forof the NEOs (a“Say-on-Pay” “Say-on-Pay” vote) as further described in the CD&A and the related compensation tables and narrative disclosure. This resolution is required pursuant to Section 14A of the Securities Exchange Act of 1934. Currently, the advisory vote is held annually. The next advisory vote on NEO compensation is scheduled to occur at yourthe Company’s 20202022 Annual Meeting of Shareholders. Your Board strongly supports yourthe Company’s executive pay practices and asks shareholders to support its executive compensation program by adopting the following resolution:
“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the FirstEnergy Corp. Named Executive Officers, as such compensation is disclosed pursuant to the compensation disclosure rules of the SEC,Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables, and the other related narrative executive compensation disclosure contained in the proxy statement.”
The primary objectives of yourthe Company’s executive compensation program are to attract, motivate, retain, and reward the talented executives, including the NEOs, who we believe can provide the performance and leadership to achieve success in the highly complex energy industry. Our executive compensation program is centered on apay-for-performance philosophy. After robust benchmarking and shareholder outreach, the Compensation Committee and your Board approved a number of key changes effective in 2018 and generally maintained the executive compensation program for 2019 and 2020, to better align executive pay with shareholder interests. Additionally, in 2017 and 2018, there were no increases in base salary and target opportunity levels as a percent of base salary, in the aggregate, for short-term and long-term incentive compensation for any Section 16 Insiders, including the NEOs (excluding promotions).
In deciding how to vote on this proposal, we encourage you to read the CD&A for a more detailed discussion of our executive compensation programs and practices applicable to the NEOs, beginning on page 36.26.
Your Board strongly believes that our compensation philosophy, in conjunction with continued shareholder outreach, is in the best interests of shareholders. We will continue to annually review and evaluate all compensation plans and programs with the goal of aligning such plans and programs with market practice and the best interests of our shareholders. Item 3 is an advisory proposal that requires the affirmative vote of a majority of the votes cast; abstentions and brokernon-votes will have no effect.
Although this advisory vote isnon-binding, your Board and the Compensation Committee value the views of our shareholders and willexpect to consider the voting results when considering future executive compensation practices.practices for the NEOs.
| Your Board Recommends That You Vote“For” Item 3.✓ |
2725 | FirstEnergy Corp.20192021 Proxy Statement
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We are asking shareholders to consider amendments to your Company’s Amended Articles of Incorporation and Amended Code of Regulations to implement a majority voting power threshold for shareholder voting. If the proposal is approved, all shareholder voting requirements in the Company’s Amended Articles of Incorporation and Amended Code of Regulations that are described below would provide for a majority voting power threshold as permitted under Ohio law.
Background and Governance Considerations
This proposal is a result of an ongoing review of corporate governance matters by your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee and input from our shareholders. In connection with this review, your Company continued to conduct shareholder outreach discussions with shareholders owning a significant aggregate ownership interest in your Company to solicit input about possible amendments to its governing documents, including a majority voting power threshold for shareholder voting.
In 2013 and 2016, your Company presented a management proposal to adopt a majority voting power threshold under certain circumstances. In 2017 and 2018, your Company presented a substantially similar management proposal to adopt a majority voting power threshold. However, these proposals did not receive the requisite percentage of the voting power to amend your Company’s Amended Articles of Incorporation and Amended Code of Regulations. Consistent with its strong commitment to monitoring evolutions in governance practices and in light of the benefits of broad shareholder consensus and input from our shareholder engagement efforts, your Board has elected to again submit to a shareholder vote a proposal on this topic as described below. Your Board cannot unilaterally adopt the following proposed amendments because a shareholder vote is necessary under our governing documents.
Proposed Amendments
Your Board is proposing that voting requirements in your Company’s Amended Articles of Incorporation and Amended Code of Regulations that require a supermajority vote to take certain actions be changed to a majority of the voting power of the Company as permitted by Ohio law. Ohio law permits a corporation to elect to use a vote standard of greater or less thantwo-thirds, but not less than a majority of the voting power.
Ohio law establishes a defaulttwo-thirds voting power requirement for corporations relating to the following provisions: amending the articles of incorporation; reducing or eliminating stated capital; applying capital surplus to dividend payments; authorizing share repurchases; authorizing sales of all or substantially all the Company’s assets; adopting a merger agreement or other merger-related actions; authorizing a combination or majority share acquisition; dissolving the Company; releasingpre-emptive rights; or authorizing a dividend to be paid in shares of another class. Ohio law also permits corporations to elect to be subject to not less than a majority voting power requirement with respect to such provisions. Article IX of the Amended Articles of Incorporation currently authorizes your Board to reduce this voting requirement to a majority of the voting power of the Company in its discretion. Your Board proposes to amend Article IX of the Amended Articles of Incorporation to provide for a majority of the voting power of the Company on these matters.
Article X of the Amended Articles of Incorporation establishes an 80 percent supermajority voting requirement to amend or repeal the following provisions of the Amended Articles of Incorporation: Article V — the fixing or changing of the terms of unissued or treasury shares; Article VI — the absence of cumulative voting rights in the election of directors; Article VII — the absence of preemptive rights to acquire unissued shares; Article VIII — the ability of the company to repurchase its shares and Article X — the supermajority voting requirement. Given the proposed change to Article IX, which already governs amending the Amended Articles of Incorporation, Article X would be eliminated.
28 | FirstEnergy Corp.2019 Proxy Statement
Similarly, Regulation 36 of the Amended Code of Regulations establishes an 80 percent supermajority voting requirement to amend or repeal certain regulations: Regulation 1 — the time and place of shareholder meetings; Regulation 3(a) — the calling of special shareholder meetings; Regulation 9 — the order of business at shareholder meetings; Regulation 11 — the number, election and term of directors; Regulation 12 — the manner of filling vacancies on the board of directors; Regulation 13 — the removal of directors; Regulation 14 — the nomination of directors and elections; Regulation 31 — the indemnification of directors and officers; and Regulation 36 — amendments to the Code of Regulations. Regulation 36 would be amended to lower the vote requirement to a majority of the voting power of the Company.
In addition, your Board proposes to change the 80 percent supermajority voting requirement in Regulations 11 and 13 of the Amended Code of Regulations. Currently, Regulation 11 of the Amended Code of Regulations enables a change in the number of directors of the Company, and Regulation 13 provides that any director or the entire Board of Directors may be removed, in each case only by the affirmative vote of the holders of at least 80 percent of the voting power of the Company, voting together as a single class. Your Board proposes to reduce this 80 percent supermajority voting requirement in both cases to a majority of the voting power.
The proposed amendments to the Amended Articles of Incorporation and Amended Code of Regulations are set forth in Appendix A, with deletions indicated by strike-throughs and additions indicated by underlining. The summary above is qualified in its entirety by reference to the full text of the proposed amendments in Appendix A.
Effectiveness and Vote Required
Your Board has adopted resolutions approving and recommending that shareholders approve the amendments to the Amended Articles of Incorporation and Amended Code of Regulations reflected in Appendix A, which are subject to the approval of the amendments by shareholders at the Annual Meeting, and authorizing the preparation and filing of any document necessary or advisable to implement such amendments. The amendments, if approved, would be expected to become effective prior to the next annual shareholder meeting. Approval of this proposal requires the affirmative vote of at least 80 percent of the voting power of the Company. Abstentions and brokernon-votes will be counted and have the same effect as a vote “against” this item.
29 | FirstEnergy Corp.2019 Proxy Statement
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We are asking shareholders to consider amendments to your Company’s Amended Articles of Incorporation and Amended Code of Regulations to implement a majority voting standard in uncontested director elections. Our Amended Code of Regulations currently provides for the election of directors by a plurality of votes cast, and our Corporate Governance Policies include a director resignation policy. The plurality voting standard is also the default voting standard for the election of directors under Ohio law.
Background and Governance Considerations
This proposal is a result of ongoing review of corporate governance matters by your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee and input from our shareholders. Your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee has concluded that the adoption of the proposed majority voting standard in uncontested elections will give shareholders a greater voice in determining the composition of your Board by requiring support of a majority of shareholder votes cast for a candidate to obtain or retain a seat on our Board, and by giving greater effect to shareholder votes “against” a director candidate. Your Board is proposing these amendments in response to shareholder preferences and to reinforce our commitment to accountability and strong corporate governance practices.
In 2017 and 2018, your Company presented a substantially similar management proposal; however, the proposal did not receive the requisite percentage of the voting power to amend your Company’s Amended Articles of Incorporation and Amended Code of Regulations. Consistent with its strong commitment to monitoring evolutions in governance practices and in light of the benefits of broad shareholder consensus and input from our shareholder engagement efforts, your Board has elected to again submit to a shareholder vote a proposal on this topic as described below. Your Board cannot unilaterally adopt the following proposed amendments because a shareholder vote is necessary under our governing documents.
Proposed Amendments
Your Board is proposing to change director election voting requirements in your Company’s Amended Code of Regulations, which currently provide for a plurality voting standard, to provide for a majority voting standard for uncontested director elections and a plurality voting standard in contested elections and to provide for such change in your Company’s Amended Articles of Incorporation.
Under the proposed majority voting standard, for a candidate to be elected to your Board in an uncontested election, the number of votes cast “for” the candidate’s election must exceed the number of votes cast “against” his or her election and abstentions and brokernon-votes would not be considered votes “for” or “against” a candidate. An “uncontested election” means an election in which the number of Director candidates does not exceed the number of Directors to be elected. In all other director elections, which we refer to as “contested elections,” a plurality voting standard would apply. If adopted by shareholders at this Annual Meeting of Shareholders, the majority voting standard would apply to all future uncontested director elections.
Your Board believes that a plurality voting standard should still apply in contested director elections. If the plurality voting standard did not apply in contested elections, it is possible that more candidates could be elected than the number of director seats up for election because the proposed majority voting standard simply compares the number of “for” votes with the number of “against” votes for each director candidate without regard to voting for other candidates. Accordingly, the proposed majority voting standard retains plurality voting in contested director elections to avoid such results.
Under Ohio law and your Company’s Amended Code of Regulations, an incumbent director who is notre-elected remains in office until his or her successor is elected, continuing as a “holdover” director. If this
30 | FirstEnergy Corp.2019 Proxy Statement
proposal is approved, we will make conforming revisions to the existing director resignation policy (discussed on page 25) in your Company’s Corporate Governance Policies to reflect that an incumbent director who does not receive more votes “for” than “against” his or her election in an uncontested election will promptly submit a written offer of resignation to the Corporate Governance, Sustainability and Corporate Responsibility Committee, which will make a recommendation to your Board within 60 days following the date of the election as to whether or not it should be accepted. Your Board will consider the recommendation and decide whether to accept the resignation, as described in more detail in our Corporate Governance Policies. Furthermore, if one or more directors standing for election does not receive a majority of the votes cast and his or her resignation is accepted by your Board, your Board may fill the vacancy without any further shareholder vote.
Your Company’s Amended Code of Regulations provides for a plurality voting standard in the election of directors. To implement a majority voting standard, Ohio law requires the Amended Articles of Incorporation to be amended. Additionally, your Company’s Amended Code of Regulations requires a conforming amendment. The actual text of the proposed amendment to your Company’s Amended Articles of Incorporation, including a new Article XII, and amendment to Regulation 11 of your Company’s Amended Code of Regulations, marked with underlining to indicate additions and strike-throughs to indicate deletions, are attached to this Proxy Statement as Appendix B. The amendment to the Amended Articles of Incorporation will become effective upon filing the Amendment to the Amended Articles of Incorporation with the Secretary of State of Ohio.
The above disclosure is qualified in its entirety by reference to the full text of the proposed amendments in Appendix B.
Effectiveness and Vote Required
Your Board has adopted resolutions approving and recommending that shareholders approve the amendments to the Amended Articles of Incorporation and Amended Code of Regulations reflected in Appendix B, which are subject to the approval of the amendments by shareholders at the Annual Meeting, and authorizing the preparation and filing of any document necessary or advisable to implement such amendments. The amendments, if approved, would be expected to become effective prior to the next annual shareholder meeting. Approval of this proposal requires the affirmative vote of at least 80 percent of the voting power of the Company. Abstentions and brokernon-votes will be counted and have the same effect as a vote “against” this item.
31 | FirstEnergy Corp.2019 Proxy Statement
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We are asking shareholders to consider an amendment to your Company’s Amended Code of Regulations to implement “proxy access.” Proxy access, as further described below, allows eligible shareholders to include their own nominee or nominees for election to your Board in our proxy materials, along with your Board-nominated candidates.
Background and Governance Considerations
This proposal is a result of an ongoing review of corporate governance matters by your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee and input from our shareholders. Your Board and the Corporate Governance, Sustainability and Corporate Responsibility Committee have considered the advantages and disadvantages of providing proxy access rights to shareholders, including the view expressed by a number of our shareholders during our outreach that proxy access rights would increase the accountability of directors to shareholders and would allow shareholders to express preferences in director nominations more easily. This proxy access proposal addresses our outreach findings and is in line with market practices.
In 2016, 2017 and 2018, your Company presented substantially similar management proposals; however, these proposals did not receive the requisite percentage of the voting power to amend the Amended Code of Regulations. Consistent with its strong commitment to monitoring evolutions in governance practices and in light of the benefits of broad shareholder consensus and input from our shareholder engagement efforts, your Board has elected again to submit to a shareholder vote a proposal on this topic as described below. Your Board cannot unilaterally adopt the following proposed amendment because a shareholder vote is necessary under our governing documents.
Proposed Amendment
Your Board is proposing an amendment to your Company’s Amended Code of Regulations that permit certain shareholders to include a specified number of director nominees in our proxy materials for our annual meeting of shareholders.
The proposed amendment would permit a single shareholder, or group of up to 20 shareholders, holding full voting and investment rights and the full economic interest, that has maintained continuous ownership of at least three percent of the Company’s outstanding common stock for at least the previous three years to include a specified number of director nominees, as described below, for election to your Board in the proxy statement for the Company’s annual meeting of shareholders.
Number of Shareholder-Nominated Candidates
The maximum number of shareholder-nominated candidates would be equal to 20 percent of the directors in office as of the last day a shareholder nomination may be delivered or received or, if the 20 percent calculation does not result in a whole number, the closest whole number below 20 percent and in any event, not less than two shareholder nominated candidates. If your Board decides to reduce the size of your Board after the nomination deadline due to director retirement, resignation or otherwise, the 20 percent calculation will be applied to the reduced size of your Board, with the potential result that a shareholder-nominated candidate may be disqualified. Shareholder-nominated candidates that your Board determines to include in the proxy materials as Board-nominated candidates will be counted against the maximum.
Procedure for Selecting Candidates in the Event the Number of Nominees Exceeds the Maximum
Nominating shareholders are required to provide a list of their proposed nominees in rank order. If the number of shareholder-nominated candidates exceeds the maximum number of permitted shareholder candidates, the highest ranked nominee from the nominating shareholder or group of nominating shareholders, as the case may be, with the largest qualifying ownership will be selected for inclusion in the
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proxy materials first followed by the highest ranked nominee from the nominating shareholder or group of shareholders, as the case may be, with the next largest qualifying ownership, and continuing on in that manner, until the maximum number of nominees is reached.
Nominating Procedure
Requests to include shareholder-nominated candidates in your Company’s proxy materials must be received, under most circumstances, no earlier than 150 days and no later than 120 days before the anniversary of the date that your Company issued its proxy statement for the previous year’s annual meeting of shareholders. Each shareholder or shareholder group seeking to include a shareholder nominee in your Company’s proxy materials is required to provide certain information, including, but not limited to, the verification of share ownership, biographical information about the nominee and certain representations, as set forth in the proposed amendment attached hereto as Appendix C.
Independence and Other Qualifications of Shareholder Nominees
A shareholder nominee would not be eligible for inclusion if your Board determines that he or she is not independent under the listing standards of the principal U.S. exchange upon which the common stock of your Company is listed (which is the NYSE), any applicable rules of the SEC, or any publicly disclosed standards used by your Board in determining and disclosing the independence of your Company’s directors.
Furthermore, a shareholder nominee would not be qualified to be a director of your Company if, among other things: (i) his or her election would cause your Company to be in violation of its governing documents, the listing standards of the principal U.S. exchange upon which the common stock of your Company is listed, any applicable federal law, rule or regulation or your Company’s publicly disclosed policies and procedures; (ii) he or she has been an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, within the past three years; (iii) he or she is a named subject of a pending criminal proceeding or has been convicted in a criminal proceeding within the past 10 years (excluding traffic violations and other minor offenses); (iv) he or she is subject to certain enforcement orders related to the regulation of securities; or (v) he or she has provided, or his or her nominating shareholder or group of nominating shareholders has provided, information to us that is not accurate, truthful and complete in all material respects, or that otherwise contravenes certain specified agreements, representations or undertakings.
The proposed amendment to the Amended Code of Regulations is set forth in Appendix C, with deletions indicated by strike-throughs and additions indicated by underlining.
The above disclosure is qualified in its entirety by reference to the full text of the proposed amendment in Appendix C.
Effectiveness and Vote Required
Your Board has adopted a resolution approving and recommending that shareholders approve the amendment to the Amended Code of Regulations reflected in Appendix C, which are subject to the approval of the amendment by shareholders at the Annual Meeting, and authorizing the preparation and filing of any documents necessary or advisable to implement such amendment. The amendment, if approved, would be expected to become effective prior to the next annual shareholder meeting. Approval of this proposal requires the affirmative vote of at least 80 percent of the voting power of the Company. Abstentions and brokernon-votes will be counted and have the same effect as a vote “against” this item.
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Shareholder Proposal
One shareholder proposal has been submitted for consideration and action by shareholders.
The shareholder resolution and proposal, for which your Company and your Board disclaim responsibility, are set forth below and are reproduced verbatim in accordance with the applicable rules and regulations. The shareholder resolution and proposal may contain assertions that we believe are factually incorrect. We have not attempted to refute all of the inaccuracies.After careful consideration, your Board recommends that you vote “AGAINST” the shareholder proposal in Item 7 for the reasons noted in your Company’s response following the shareholder proposal.
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John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, plans to introduce the following resolution at the Annual Meeting. We have been notified that Mr. Chevedden is the beneficial owner of no less than 90 shares of your Company’s common stock.
Proposal 7 – Simple Majority Vote
RESOLVED, Shareholders request that our board take each step necessary so that each voting requirement in our charter and bylaws (that is explicit or implicit due to default to state law) that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws.
The Board of Directors, with a fiduciary duty to shareholders, may find it necessary to adjourn the annual meeting to solicit the votes necessary for approval if the votes for approval are lacking during the annual meeting as they have been for a seemingly countless number of years on this same proposal topic at FirstEnergy. To facilitate this - adjourn appears10-times in the FirstEnergy governing documents.
Shareholders are willing to pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements have been found to be one of 6 entrenching mechanisms that are negatively related to company performance according to “What Matters in Corporate Governance” by Lucien Bebchuk, Alma Cohen and Allen Ferrell of the Harvard Law School. Supermajority requirements are used to block initiatives supported by most shareowners but opposed by a status quo management.
This proposal topic won from 74% to 88% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, McGraw-Hill and Macy’s. The proponents of these proposals included Ray T. Chevedden and William Steiner. The votes would have been higher than 74% to 88% if all shareholders had equal access to independent proxy voting advice.
Currently a 1%-minority can frustrate the will of our 79% shareholder majority in an election in which 80% of shares cast ballots. In other words a 1%-minority have the power to prevent 79% of shareholders from taking important action such as eliminating 80%-voting thresholds in our governing documents.
Please vote yes:
Simple Majority Vote-Proposal 7
34 | FirstEnergy Corp.2019 Proxy Statement
Your Company’s Response — Item 7 — Shareholder Proposal Requesting Steps to Implement Simple Majority Voting
Thisnon-binding shareholder proposal requests that your Board take the steps necessary so that each shareholder voting requirement in your Company’s Amended Articles of Incorporation and Amended Code of Regulations that “calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws.”
We encourage you to refer to your Company’s proposal (Item 4 above), which is a binding proposal that would implement a majority voting power threshold for shareholder voting. As described in Item 4 above, Ohio law provides that certain voting requirements can be changed to a majority of the voting power of your Company, not a majority of votes cast as stated in the shareholder proposal.
Because the Company’s proposal (Item 4 above) is binding, if approved by shareholders, the proposal would be implemented. However, if thisnon-binding shareholder proposal is approved by shareholders, there is no obligation for the Company to implement it and the approval of both proposals could lead to confusing results. In sum, your Board believes the proposal put forth by your Company in Item 4 above more appropriately and effectively implement the policy at issue and serves the best interests of our shareholders.
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35 | FirstEnergy Corp.2019 Proxy Statement
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (“CD&A&A”) with management and, based on such review and discussions, the Compensation Committee recommended to your Board that the CD&A be included (or incorporated by reference, as applicable) in yourthe Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2018,2020, and 2019this 2021 Proxy Statement.
Compensation Committee: Christopher D. PappasJames F. O’Neil III (Chair), Steven J. Demetriou, Sandra Pianalto, Dr. Jerry Sue Thornton, and Leslie M. Turner.
Compensation Discussion and Analysis
Introduction
This CD&A provides an overview of yourthe Company’s strategy and performance, shareholder engagement process, and 20182020 executive compensation programs and decisions, and initial plans for the 20192021 executive compensation programs. This CD&A focuses on the compensation of our NEOs, who are as follows, for fiscal year 2018 who were as follows:2020:
| Named Executive Officer | Current Title | |
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Steven E. Strah | President and Chief Executive Officer (“CEO”) | |
K. Jon Taylor | Senior Vice President and Chief Financial Officer (“CFO”) | |
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Samuel L. Belcher | Senior Vice President and President, FirstEnergy Utilities | |
| Senior Vice President, | |
Christine L. Walker | Senior Vice President and Chief | |
| Former Chief Executive Officer | |
Robert P. Reffner | Former Senior Vice President | |
Key Executive Officer Transitions
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During 2018,On October 29, 2020, Mr. Pearson, formerly ExecutiveStrah became Acting CEO in addition to serving as the President of the Company, a position to which he was promoted in May 2020 after previously serving as Senior Vice President and CFO of the Company since March 2018. Mr. Strah’s appointment to Acting CEO followed the determination by the Independent Review Committee of the Board of Directors (“Independent Review Committee”) to terminate Mr. Jones as the Company’s Chief FinancialExecutive Officer becameeffective October 29, 2020. These actions by the Executive Vice President, Finance,Independent Review Committee follow the Company’s internal review related to the ongoing government investigations, the existence of which was previously disclosed in the Company’s Form 10-Q for the period ended June 30, 2020. As a result of Mr. Jones’ termination, and due to the determination that Mr. Jones violated certain Company policies and its code of conduct, all grants, awards and compensation under the Company’s short-term incentive compensation program and long-term incentive compensation program with respect to Mr. Jones that were outstanding on the date of termination have been forfeited. On March 7, 2021, the Board appointed Mr. Strah to the position of CEO of FirstEnergy, effective as of March 8, 2021. The Board also elected Mr. Strah as a Director of the Company, effective as of March 8, 2021.
In May 2020, Mr. Taylor became Senior Vice President and CFO andafter previously serving as Vice President, Utility Operations since April 2019. Mr. Belcher becameReffner was appointed to the position of Senior Vice President and President, FirstEnergy Utilities and was appointedChief Legal Officer in May 2020 after serving as an executive officer of your Company. As a former employee andSenior Vice President and Chief Nuclear Officer (“CNO”)General Counsel since September 2018. On November 8, 2020, Mr. Reffner was separated from the Company.
Additional Information
This CD&A uses certain capitalized terms, which are defined in the Glossary of FirstEnergy Nuclear Operating Co (“FENOC”) and dueTerms, beginning on page 53. In general, we use the term “CEO” in this CD&A to refer, generally speaking, to the strategic reviewindividual serving as our Chief Executive Officer from time to exit competitive generation,time, including Mr. Belcher did not participateStrah in allhis role as Acting CEO beginning October 29, 2020. In addition, certain of the same compensation programs as the other NEOs. We have outlined where there are differences to the compensation programs for Mr. Belcherperformance incentive metrics discussed and utilized in this proxy statement. Unless otherwise noted, however, all information contained in the CD&A applies to Mr. Belcher.
Beginning in February 2018, Mr. Schneider was no longer designated an executive officer of your Company due to his role at FES; however, he continued to meet disclosure requirements as a NEO. As an employee of FES, and due to the strategic review to exit competitive generation, Mr. Schneider did not participate in all of the same compensation programs as the other NEOs. The compensation programs for FES participants that applied to Mr. Schneider are described separately in this proxy statement. Unless otherwise noted, all information contained in the CD&A applies to Mr. Schneider.
3626 | FirstEnergy Corp.20192021 Proxy Statement
measuring pay-for-performance are based on non-GAAP figures, and the definitions for those metrics in the Glossary of Terms explain the calculation methodology to the closest GAAP measure. The Compensation Committee believes that using such non-GAAP metrics best aligns NEO incentive opportunity with Company performance, which directly supports long-term shareholder value. Use of such non-GAAP metrics are helpful to understand and evaluate performance trends when assessing pay-for-performance and are aligned with key aspects of the Company’s financial performance disclosures.
CD&A Quick Reference Guide
Key Sections
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• Looking to the Future • Shareholder Engagement andSay-on-Pay Results
• Our Responses
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Governance of Our Compensation Programs | • Compensation Philosophy
• What We Do and Don’t Do
• Role of our Compensation Committee, Management and Compensation Consultant
• Benchmarking
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Components of Total Direct Compensation Programs | • Key Elements of
• Compensation Mix
• Determination of Compensation for 2020
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• Incentive Compensation Payouts for - FE STIP Payout - FE LTIP Payouts
• Outstanding Award Cycles
• Realized Compensation
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Other Compensation Policies and Practices | • Retirement
• Severance and Change in Control (“CIC”) Policies
• Share Ownership Guidelines • Hedging
• Clawback
• Risk Assessment of Compensation Programs
• Impact of Tax Requirements on Compensation
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CD&A Glossary of Terms | • Key Terms and Definitions
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3727 | FirstEnergy Corp.20192021 Proxy Statement
Our Fully Regulated Business StrategyMoving Forward
Your Board and the management team have acted with a sense of urgency to move your Company forward by taking the steps necessary to address current challenges, improve our compliance culture, and position FirstEnergy for long-term stability and success. As part of this, we are committed to strengthening every part of FirstEnergy’s business and taking the necessary steps to enhance credibility with our shareholders and other stakeholders, including our regulators and the ratings agencies.
When inappropriate conduct was discovered during the course of the internal investigation, which was led by the Independent Review Committee of the Board and outside counsel, your Board took swift and deliberate action by terminating certain members of senior management, including the chief executive officer, and, shortly thereafter, separating with the chief legal and chief ethics officers. To improve the tone at the top, the Board appointed a new acting chief executive officer, named an independent Board member as executive director and enhanced the role of Board Chair. Furthermore, in 2021, your Company externally hired an SVP and chief legal officer, a vice chairperson and executive director, and recently announced that a chief ethics and compliance officer will join your Company in mid-April. These hires will help embed a stronger culture of compliance, ethics, integrity and accountability at FirstEnergy.
In addition to strengthening the leadership team, a new Compliance Oversight Sub-Committee of our Audit Committee was formed to spearhead the Board’s assessment of FirstEnergy’s compliance program and oversee implementation of potential changes, as appropriate. This effort, led by independent director Leslie Turner, engages with outside expertise for help and best practices. To support engagement with all employees, new compliance ambassadors will be designated throughout the Company, and all non-bargaining employees have been assigned a cascading priority from President and CEO Steven E. Strah that supports our objectives around a culture of integrity, accountability, ethics and compliance. Additionally, in March 2021, the Board approved an ethics and compliance component to the 2021 FE STIP which will serve as a negative modifier at the individual level, with downward adjustment only, to reinforce that acting with ethics and integrity is at the core of how your Company operates. This addition to the incentive compensation program supports the desire for a meaningful culture change and a focus on continuing to evolve our ethics and compliance program.
With the Board’s oversight, senior management has made significant changes to your Company’s approach to governmental affairs engagement and is limiting participation in the political process. This also includes ensuring that the disclosures around your Company’s political advocacy are more robust going forward so that it is clear what efforts your Company supports and why they are supported. In March 2021, your Board voted to suspend employee contributions to the FirstEnergy Political Action Committee (FEPAC) made through automatic payroll deduction while the next steps for the FEPAC are evaluated.
We have also taken proactive steps to resolve a range of regulatory proceedings affecting our Ohio utilities. We believe resolving these matters in a comprehensive manner is a critical step to demonstrate our commitment to transparency and integrity in every aspect of our business, while also enabling FirstEnergy to remove uncertainty relating to current Ohio regulatory matters.
Continued Execution on the Business Plan
In 2020, FirstEnergy displayed strong operational performance, and we successfully executed our regulated growth strategies. Key achievements during the year include:
| ● | Safely and successfully managing our operations during the global pandemic while nearly 7,000 of our 12,000 employees worked from home, and others adopted new health and safety protocols. For more information about your Company’s COVID-19 response, refer to the “Human Capital Management” section beginning on page 78; |
| ● | Driving quantifiable reliability enhancements through our customer-focused investments; |
| ● | Advancing a regulatory framework in several service territories to support continued investments to benefit our customers, including the following: |
| o | Jersey Central Power & Light (“JCP&L”) implementation of forward-looking transmission rates, subject to refund; |
28 | FirstEnergy Corp. 2021 Proxy Statement
| o | New Jersey Board of Public Utilities approval of our JCP&L distribution base rate case settlement agreement, which includes a $94 million increase in annual base distribution revenues for recovery of storm costs and to provide safe and reliable electric service to customers; |
| o | FERC approval to convert the existing stated transmission rates of Mon Power, Penelec and West Penn Power to a forward-looking formula transmission rate, effective January 1, 2021; and |
| o | Pennsylvania Public Utility Commission approval for Distribution System Improvement Charge waiver for Penn Power, which increased the cap from 5% to 7.5%; and |
| ● | Completing our strategy to exit the competitive generation business with our former subsidiary’s emergence from bankruptcy on February 27, 2020. |
We continue to strengthen our transmission and distribution systems through significant investments designed to improve reliability and support our customers’ evolving energy needs. We remain excited about the significant investment opportunities that will help us drive solid earnings and growth in the years ahead.
Looking to the Future
FE Forward
Your Board and executive management team are also implementing key initiatives to enhance shareholder value and reshape FirstEnergy into a more resilient, industry-leading organization of the future. This includes the company-wide FE Forward program that is expected to transform FirstEnergy in a way that provides near-term value while opening new opportunities for longer-term growth.
FE Forward was launched in the fourth quarter of 2020, to support your Company’s future growth trajectory for the benefit of shareholders and all stakeholders. In partnership with McKinsey & Company, employees across our organization are challenging organization traditions, conventional wisdom, and cultural norms. At the same time, we are focused on modernizing our business policies, management practices, processes and technology platforms. This project is expected to deliver substantial operating and capital efficiencies and improve our credit profile, while enabling your Company to reinvest in a truly modern and distinctive experience that improves customer service and satisfaction.
Key opportunities of FE Forward include:
| ● | Optimizing operations by expanding capabilities in areas such as strategic sourcing, inventory optimization, and commercial contract terms, and by standardizing best-in-class work management policies across the enterprise; |
| ● | Accelerating your Company’s digital transformation by revamping customers’ online experience, automating sourcing data collection and management, and deploying advanced analytics in asset health decisions as well as vegetation management programs; and |
| ● | Productivity improvements through system integration that puts advanced technology tools, such as mobile dashboards and remote access to asset management information, in the hands of frontline employees. |
By 2024, FE Forward is projected to generate approximately $300 million in annualized capital expenditure efficiencies while continuing to hold operating expenses flat by absorbing approximately $100 million in projected increases. In addition, your Company expects to generate approximately $250 million in working capital improvements by 2022. This program includes an estimated $150 million of costs to achieve through 2023, which are expected to be self-funded through these efficiencies.
FE Forward is not a downsizing effort and there will not be any involuntary employee reductions in connection with this program. It is expected to be a significant catalyst to augment your Company’s growth potential by taking a more strategic approach to operating expenditures and reinvesting in a more diversified capital program that over the long term continues to support a smarter and cleaner electric grid.
Strategic Goals
We have established new goals for key areas of our business that support our mission to be a forward-thinking electric utility powered by a diverse team of employees committed to making customers’ lives brighter, the environment better and our communities stronger. In 2018, we made significant progress with our strategy to become a fully regulated utility company, focusing on stable and predictable earnings and cash flow from our regulated business units. The Company has made significant strides to grow regulated earnings and improve financial strength in many areas as we successfully position as a fully regulated business:
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In 2018, FirstEnergy continued to successfully address these initiatives aggressively, which led the way to several major announcements. Following a $2.5 billion equity investment in your Company from several prominent investors in January, in February we announced an over $11 billion capital plan to be invested in our regulated businesses over the next several years.
Through FirstEnergy’s “FE Tomorrow” initiative, your Company implemented a cost cutting initiative to define the corporate services FirstEnergy would need to support its regulated business once the company exited competitive generation. Through the initiative, FirstEnergy sought to ensure the company has the right talent, organizational and cost structure to efficiently service customers and achieve its earnings growth targets. In support of the FE Tomorrow initiative, more than 80% of eligible employees, totaling nearly 500 people in the shared services, utility services and sustainability organizations accepted a Voluntary Enhanced Retirement Package (“VERP”) that included severance compensation and a temporary pension enhancement, with most employees having already retired. Those that accepted the VERP also included Ms. Vespoli and Mr. Pearson, pursuant to an Executive VERP(“E-VERP”), and Mr. Schneider, pursuant to a Voluntary Early Retirement Option (“FES VERO”), which both contained substantially the same terms as the VERP, and is discussed further in the CD&A. Management expects the cost savings resulting from the FE Tomorrow initiative to support the company’s growth targets.
With respect to the voluntary petitions for relief filed under Chapter 11 of the United States Bankruptcy Code by our competitive subsidiary FES and all of its subsidiaries, as well as FENOC in March 2018 (the “FES Bankruptcy”), the U. S. Bankruptcy Court for the Northern District of Ohio (“Bankruptcy Court”), on September 26, 2018, approved the Company’s definitive settlement with the FES debtor parties. Among other terms, the settlement agreement granted a full release of all claims against FirstEnergy by the FES debtors and their creditors. However, the FES Bankruptcy settlement agreement and the releases granted therein are subject to material conditions, which primarily consist of the issuance of a final order by the Bankruptcy Court approving the plan or plans of reorganization for the FES debtor parties which are acceptable to the Company.
These developments serve as significant milestones in our transition to becoming a high-performing, fully regulated utility company as well as better position us to deliver stable, long-term value for our shareholders and customers. Your Board is pleased with the progress that has been made and management’s execution during this pivotal company transition.
Strategic Initiatives
Achievement of our strategic initiatives has strengthened our balance sheet and provided the financial flexibility necessary to transition to a high-performing fully regulated Company. Your Company has transformed into an organization focused on more stable and predictable earnings and cash flow from its fully regulated business units. These units are Regulated Distribution and Regulated Transmission - which focus on delivering enhanced customer service and reliability. Together, the Regulated Distribution/Regulated Transmission businesses are expected to provide stable, predictable earnings and cash flows that support FE’s dividend. To further reflect on the Company’s confidence in its long-term, sustainable growth plan, in November 2018, the Board approved a new dividend policy targeting a payout ratio of 55% to 65% of the Company’snon-GAAP earnings. As a result, your Company announced a dividend payable
3829 | FirstEnergy Corp.20192021 Proxy Statement
on March 1, 2019 of $0.38 per share, representingFor example, in November 2020, we published our Climate Strategy, which includes a new comprehensive and ambitious greenhouse gas emission goal. We pledged to achieve carbon neutrality by 2050 and set an increase of $0.02 per share. The growthinterim goal for a 30% reduction in dividend rate will enable enhanced shareholder returns while continuing with substantial regulated investments.
The scale and diversity of our ten utility operating companies that comprise the Regulated Distribution business uniquely position this business for growth through opportunities for additional investment. Since 2015, Regulated Distribution has experienced significant growth through investments that have improved reliability and added operating flexibility to the distribution infrastructure, which provide benefits to the customers and communities those Utilities serve. The Regulated Distribution business has $6.2 - $6.7 billion in planned capital investment from 2018 through 2021.
With approximately 24,500 miles in operations, the Regulated Transmission business is the centerpiece of FirstEnergy’s regulated investment strategy with approximately 80% of its capital investments recovered under forward-looking formula rates. Regulated Transmission has also experienced significant growth as part of its Energizing the Future transmission plan with plans to invest up to $4.8 billion from 2018 through 2021. These investments are expected to strengthen grid and cyber-security and make the transmission system more reliable, with improved operational flexibility.
A critical component ofgreenhouse gases within your Company’s success centersdirect operational control by 2030, based on delivering on2019 levels. In addition, we set a fleet electrification goal beginning in 2021 as we plan 100% of new purchases for our roadmaplight duty and aerial truck fleet to movebe electric or hybrid vehicles, creating a path to electrify 30% of a 3,500-vehicle fleet by 2030 with a goal of complete electrification of the D&I culture forward. Companies that are more diverse are better ablevehicle fleet by 2050. Also, the Company’s West Virginia utility, Monongahela Power, will seek approval to attract top talentconstruct at least 50 MWs) of solar generation.
To offer additional clarity into our future opportunities and strategies in a rapidly changing industry, we updated our Strategic Plan in January 2021. The plan reinforces our Core Values and Behaviors, which serve as well as improve decision making, innovation, employee engagement and their understanding of customer needs. There is a consistent correlation between diversity and financial performance. Over the last three years, we have laid the foundation for how we strive to do business. The Strategic Plan, available online at www.firstenergycorp.com/FEstrategicplan, articulates numerous goals that support our D&I initiatives by addressing the drivers of employee engagementobjectives and branding:values, including our carbon neutrality pledge and specific targets related to:
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Embracing innovation across the organization; |
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| ● | Developing a diverse and |
| ● | Building collaborative relationships, marked by trust and respect, with all our stakeholders; |
| ● | Strengthening your Company’s safety-first culture; and |
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FirstEnergy has developed an ESG/Sustainability strategy that provides opportunities to increase the diversity of our employees, make customer lives brighter, our environment better, and our communities stronger. D&I has become one of our advancing core values and is woven into the fabric of our operation and practices. Our focus now is to build and sustain a high-performing, innovative and diverse team culture through:
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While we are proud of our strategic and operational results, we are also encouraged by the gains in our stock price over the past year following the uncertainty associated with transitioning away from commodity exposed generation. Based on publicly available guidelines on Institutional Shareholder Services methodology, FirstEnergy generated a Total Shareholder Return (“TSR”), or stock price change plus the value of reinvested dividends, over the last three years of 10.8% and over the last year of 25.2%. Given that our executives met rigorous financial and operational goals, the compensation programs ending in 2018 resulted in above-target payouts to NEOs. The Compensation Committee determined that it would be in the best interests of the Company to pay out the incentive plans in 2018 as designed. The Board further determined that this decision was important to demonstrate its strong confidence in the executive team, while serving as a retention mechanism for our very capable executives during a critical period in your Company’s evolution.
39 | FirstEnergy Corp.2019 Proxy Statement
Shareholder Engagement andSay-on-Pay Results
BasedOur Board and Compensation Committee recognize the seriousness of the events that occurred in part on shareholder engagement, we made substantial changes to2020 and have taken actions in our compensation plans and2020 incentive pay programs for 2018 which aremembers of our senior leadership team, including the continuing NEOs, as further described in the proxy statement.As we prepared for 2018,CD&A. Our Board and Compensation Committee are continuing to review the Committeeincentive programs in 2021 to appropriately reflect the Company’s needs and management recognized pay and performance alignment concerns with our incentive programs. In 2017, the CEO voluntarily reduced his incentive compensation opportunitiescontinue to levels consistent with 2015 and the Board approved an increase in his share ownership guidelines. The CEO compensation and share ownership levels were maintained for 2017, 2018 and 2019. For the second consecutive year (e.g., 2017 and 2018), there were no base salary increases and no increase in target opportunity levelsdrive shareholder value as a percentresult of base salary,the experiences in the aggregate, for short-term and long-term incentive compensation, for the Section 16 Insiders (excluding promotions).2020.
Our Board and management are committed to engaging our shareholders and soliciting their perspectives on key performance, compensation and governance issues. SelectConsistent with prior years, select board members and management representatives conducted extensive outreach during 2018, focused on the top 100 shareholders, who accounted for nearly 68% of the outstanding shares at that time. 2020.
Our 20182020 Say-On-Pay vote successfully passed with over 95%about 98% support, which we believe wasis consistent with the vote in 2019 and an earlyincrease over the 2018 Say-On-Pay vote of confidence and a direct result95%. Accordingly, in 2020, we continued with the design of the substantial changes that we made to our compensation plans and programs for 2018.
We continue to engage with shareholders and gather feedback on our compensation programs to use in our annual review of our incentive programs. Our outreach efforts includedid not make any substantial changes following the 2020 in-personSay-On-Pay discussions and phone calls with many of our top 20 shareholders (holding about 52% of our outstanding shares). Although not all shareholders accept our invitation, we held meetings with shareholders representing more than 16% of our outstanding shares.
voting results. In an effort to align our compensation programs with the interests of shareholders, improve the relationship between pay and performance, better tie our executive compensation programs to our business strategies, and drive the right executive behaviors, the following summary of incentive design changes were proactively made to FirstEnergy’s incentive programs beginning with awards granted in 2018.2018 and continuing for awards in 2019 and 2020.
4030 | FirstEnergy Corp.20192021 Proxy Statement
Our Responses in 2018 to Shareholder Feedback
| Shareholder Feedback | ||
| Shareholders want | • | |
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• Maintained current | ||
| Shareholders prefer performance-based vs. time-based awards | • | |
41 | FirstEnergy Corp.2019 Proxy Statement
Shareholders prefer3-year cumulative vs. successive annual performance periods for the long-term incentive plans | •
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| Goals need to be set rigorously and the process needs to be transparent | �� | • Maintained additional stretch-level performance measure through goal setting process. As an example, in the
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| FE STIP and FE LTIP metrics should be relevant to the business and not overlapping | • FE STIP incorporates a financial Operating Earnings goal, operational goals, safety goals, and Diversity and Inclusion (“D
• FE LTIP incorporates
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31 | FirstEnergy Corp. 2021 Proxy Statement
Governance of our Executive Compensation Programs
Compensation Philosophy
The primary objectives of our executive compensation programs are to:
Attract, retain, focus and reward talented executives who drive our success in the highly complex utility industry by offering competitive total compensation for our executives overall;
Promote the long-term financial health of the business, and the creation of value for the sustained benefit of shareholders, by emphasizing long-term incentives in the pay mix;
| • | Seek to calibrate pay |
Tie executive awards to corporate results as well as to overall business unit performance to hold executives accountable for their areas of responsibility;
Recognize individual contributions, including individual performance, experience, and future potential in determining actual pay levels to help ensure that yourthe Company retains our most critical talent; and
Conduct ourselves in a way that comports with standards of good governance, consistent with creating long-term value for shareholders.
4232 | FirstEnergy Corp.20192021 Proxy Statement
What We Do and Don’t Do
We continually strive to make improvements to our executive compensation plans and programs. Below is a summary of what we do and don’t do with respect to executive compensation, the totality of which we believe aligns with the long-term interests of our shareholders and with commonly viewed best practices in the market:
| What We Do | What We Don’t Do | |
✓Pay-for-performance • FE LTIP is 100% at risk, with no solely time-based vesting requirements • FE STIP is 100% at risk ✓
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• Individual
• Individual FE LTIP awards capped at 200% (consistent with our peer companies) and capped at 100% if absolute TSR over the
✓ Non-overlappingfinancial performance measures in our
✓ Combination of absolute and relative performance goals
✓ Robust stock ownership guidelines
✓ Clawback policy applicable to financial and reputational harm, and other detrimental activity
✓ Mitigate undue risk through compensation design, corporate policies, and effective governance
✓ AnnualSay-on-Pay vote
✓ Double-trigger CIC provisions
✓
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Role of our Compensation Committee, Management and Compensation Consultant
The Compensation Committee is responsible for overseeing executive compensation and making recommendations to the Board for establishing appropriate salary and incentive compensation for our executive officers, including our NEOs, in accordance with our compensation philosophy, while also aligning our executives’ interests with Company and business unit performance, business strategies and corporate objectives, including ESG-related goals, and drivers for growth in shareholder value. The Compensation Committee is further responsible for administering our compensation plans in a manner consistent with these objectives. In this process, the Compensation Committee evaluates information provided by its independent compensation consultant and our CEO, as discussed below. During 2018,Since December 2017, the Compensation Committee has engaged the services of Farient Advisors (“Farient”) as the Compensation Committee’s independent compensation consultant. The Compensation Committee reviews the mix and level of compensation by each component individually and in the aggregate. The Compensation Committee, using tally sheets and accumulated wealth summaries, also reviews current and previously awarded but unvested compensation.
4333 | FirstEnergy Corp.20192021 Proxy Statement
Management identifies high-potential executive successors, including a focus to identify high-performing, diverse leaders. YourThe Company’s talent philosophy is that all leaders, regardless of level, must demonstrate the ability to motivate future performance, be accountable for their behaviors and results, and enable employees to do their best every day. Executive succession topics areis reviewed periodically by the CEO, the Senior Vice President Human Resources and Chief Human ResourceResources Officer, and the Compensation Committee. Executive succession plans are previewed by the Compensation Committee, as applicable, and with the full Board at its annual strategy retreat. Consistent with the D&I initiative, the Compensation Committee has emphasized social responsibility at your Company, introducing goals related to diversity and inclusion beginning in 2018.
With respect to our CEO’s compensation, the Compensation Committee also annually:
Reviews, determines, and recommends to the Board the Company’s goals and objectives with respect to CEO compensation; and
| ● | Reviews, determines, and recommends to the Board the Company’s goals and objectives; and |
Makes compensation recommendations to the Board for its approval or ratification based upon the CEO’s performance, competitive compensation benchmarking survey data and the utility peer group proxy data.
| ● | Makes compensation recommendations to the Board for its approval or ratification based upon the CEO’s performance, competitive compensation benchmarking survey data and the utility peer group proxy data. |
The Compensation Committee and Board are responsible for establishing the compensation of the NEOs. Neither the CEO nor any other NEO makes recommendations for setting his or her own compensation. The recommendation of the CEO’s compensation is determined in Compensation Committee meetings during an executive session and is presented to the independent members of your Board for review and approval. Annually, the Compensation Committee also reviews the goals and targets of the incentive compensation programs with a focus on setting challenging, but realistic, targets to drive performance and to improve shareholder value over the long term.
The CEO, with guidance from Human Resources, typically makes recommendations to the Compensation Committee with respect to the compensation of the other NEOs and the other Section 16 Insiders.NEOs. The CEO possesses insight regarding individual performance, experience, future promotion potential, and intentions in retaining particular senior executives. The CEO presents his recommendations to the Compensation Committee for review. However, the Compensation Committee may modify or disregard the CEO’s recommendations. Farient, as discussed below, regularly provides market-level commentary and observations regarding compensation adjustments to the Compensation Committee.
The Compensation Committee also engagedengages Farient to provide independent advice with respect to executive and director compensation and corporate governance matters related to executive compensation. The Compensation Committee reliedrelies on Farient’s expertise in benchmarking and familiarity with competitive compensation practices in the utility and general industry sectors. In addition, the Compensation Committee regularly requestedrequests advice from Farient concerning the design, communication, and implementation of our incentive compensation plans and other programs. In 2018, the Compensation Committee elected to meet with Farient without management (including the CEO) present, in an executive session after most of the regularly scheduled Compensation Committee meetings.
The services provided by Farient to the Compensation Committee in 2018 include:2020 included:
Review of our compensation philosophy, including the alignment of our executive compensation practices with our compensation philosophy and assessing potential changes to address trends in market practice and shareholder expectations;
Review of our peer groups used for compensation benchmarking purposes for executives and directors;
Independent assessment and review of the rigor of incentive compensation performance goals and the goal setting process, including:
Review of our compensation philosophy, including the alignment of our executive compensation practices with our compensation philosophy and assessing potential changes to address trends in market practice and shareholder expectations; |
| ● | Review of our peer groups used for compensation benchmarking purposes for executives and directors; |
| ● | Independent review and assessment of the rigor of incentive compensation performance goals and the goal setting process, including: |
| o | Evaluating historical |
| o | Reviewing analyst estimates to understand external expectations; |
| o | Analyzing historical and projected peer data; and |
| o | Calculating the probability of achievement of targets to assess the competitiveness of goals. |
| ● | Analysis of competitive compensation practices for executives and directors within our peer groups; |
Analysis of competitive compensation practices for executives and directors within our peer groups;
| ● | Review of the description of our executive compensation practices in our annual proxy statement and apprising the Compensation Committee of Farient’s recommendations and necessary changes; |
| ● | Review of share ownership guidelines; |
4434 | FirstEnergy Corp.20192021 Proxy Statement
| ● | Review of all aspects of FE STIP and FE LTIP plan designs, including measures, weightings, leverage, and cash versus equity mix; |
| ● | Review of our current clawback policy and alignment with competitive practice; |
Review of the description of our executive compensation practices
| ● | Review of CIC benefits to ensure alignment with our compensation philosophy and competitive practice; |
| ● | Regularly informing the Compensation Committee of legislative and regulatory changes, market trends and current issues with respect to executive compensation and educating members on our processes, plans and programs; |
| ● | Preparation for and attendance at all Compensation Committee meetings, including executive sessions, if applicable and as needed; and |
| ● | Ad hoc analysis and research for the Compensation Committee as requested and when necessary. |
Also, in our annual proxy statement and apprisingNovember 2020, the Compensation Committee, of its recommendations and necessary changes;
Review of share ownership guidelines;
Review of all aspects of our STIP and LTIP plan designs, including measures, weightings, leverage, and equity mix;
Review of CIC benefits to help ensure alignmentin conjunction with our compensation philosophy and competitive practice;
Regularly informing the Compensation Committee of legislative and regulatory changes, market trends and current issues with respect to executiveFarient, reviewed Mr. Strah’s compensation and educating members on our processes, plansrecommended to the Board for its approval a base salary increase and programs; and
Preparationincrease in the FE STIP award opportunity for and attendance at all Compensation Committee meetings, including executive sessions, if applicable andMr. Strah in his role as needed.then Acting CEO.
The Compensation Committee obtained and considered representations from Farient that they were an independent consultant and that there were no conflicts of interest. The Compensation Committee has consideredassessed the independence of Farient, as required by SEC and NYSE rules and requirements. The Compensation Committee also considered and assessed relevant factors that could give rise to a potential conflict of interest with respect to Farient and their work. Based on this review, the Compensation Committee is not aware of any conflict of interest that has been raised by the work performed by Farient.
Benchmarking
The Compensation Committee uses competitive benchmarking data to evaluate compensation practices and develop compensation recommendations for each of the Section 16 Insiders, including the NEOs. The Company uses a combination of a utility peer group and a general industry peer group to providedetermine an overall competitive total rewards package.Employee and executive compensation, executive benefits and perquisites, broad-based benefits (retirement benefits, death benefits, long-term disability and health care) and director compensation are all benchmarked against the same peer groups.groups. The Compensation Committee uses competitive “blended” market data (i.e.,(in other words, the average of the revenue-regressed 50th percentile of our utility peer group and general industry peer group, referred to as the “Blended Median”) to set compensation levels, and to determine any adjustment and to assess the competitiveness of the base salary, short- and long-term target incentive opportunities and total target compensation, andcompensation. The Compensation Committee considers a range of 80% to 120% of the Blended Median for each component of pay to be competitive.
In 2017,2019, the Compensation Committee, in consultation with Farient, performed a comprehensive peer group review was performed inafter which the peer groups for 2020 were selected andselected. The 2020 peer groups were comprised of a utility peer group of 2223 companies and a general industry peer group of 4532 companies. Compared to the 2019 peer groups, WEC Energy Group was added to the utility peer group, and the general industry peer group was reviewed and reduced from 44 peers including industries whose compensation and/or business models are relatively similar to utility companies. With respect to the exception of periodicgeneral industry peer group, we removed 29 peers (3M Company; Baxter International; Bristol Myers Squibb; Colgate-Palmolive; Cummins; CSX Corp.; Ecolab; Eli Lilly & Co.; Emerson Electric; General Mills; Genuine Parts; Halliburton; Illinois Tool Works; International Paper; Jabril Circuit; Kimberly Clark; Navistar International; Norfolk Southern; Northrop Grumman; Owens Corning; Paccar; Qualcomm; Raytheon; Stryker; The Mosaic Company; Union Pacific; Waste Management; Whirlpool and Xerox) and added 17 peers (Arconic; Ball Corporation; Borgwarner; Campbell Soup Company; Eastman Chemical; Fortune Brands Home Security; Hanesbrands; Harley-Davidson; Hormel Foods; Masco; PVH; Rockwell Automation; Stanley Black & Decker; Clorox; Estee Lauder; Hershey and V.F. Corporation). In addition, due to merger and acquisition activity, our utilityArconic Inc. was removed from the general industry peer group has remained consistentin 2020 and generally unchanged over the last 10 years. The Compensation Committee selected the 2018 peer groups based on the following criteria, and the peer groups remained unchanged from the group identified for 2017:
Included companiesreplaced with revenues between $8 and $30 billion (a range of approximately 0.5 to 2.0 times our revenue) with whom we compete for talent;Howmet Aerospace, Inc.
Excluded companies and industries whose compensation or business models significantly differ from utilities, such as financial services, health care, retail, franchise, media and companies that are internationally headquartered; and
Included a few select companies outside of the revenue scope based on their close geographic proximity to your Company.
4535 | FirstEnergy Corp.20192021 Proxy Statement
Due to merger and acquisition activity, EMC Corp has been removed fromFor 2020, the general industry peer group for 2018. is comprised of companies that are both larger and smaller than FirstEnergy by revenue size. The median revenue of the utility and general industry peer groups are aligned with FirstEnergy’s revenue of approximately $11 billion in 2020. The 2020 peer groups were based on the following criteria:
| ● | Included companies with revenues between $5.5 and $28 billion (a range of approximately 0.5 to 2.5 times our revenue) with whom we compete for talent, and which are members of the S&P 500, and participate in compensation surveys; |
| ● | Included companies within a close geographic proximity to the Company; and |
| ● | Excluded companies and industries whose compensation or business models significantly differ from utilities, such as financial services, health care, retail, franchise, media, and companies that are internationally headquartered. |
As a result, the peer groups for 20182020 included the following 2223 utility peer companies and 4332 general industry peer companies:
| ||||
AES CORPORATION AMEREN AMERICAN ELECTRIC POWER CO INC CENTERPOINT ENERGY INC CMS ENERGY CONSOLIDATED EDISON, INC DOMINION RESOURCES, INC DTE ENERGY | DUKE ENERGY EDISON INTERNATIONAL ENTERGY EVERSOURCE ENERGY EXELON NEXTERA ENERGY, INC NISOURCE INC NRG ENERGY, INC. |
PG&E PPL PUBLIC SERVICE ENTERPRISE GROUP SEMPRA ENERGY SOUTHERN WEC ENERGY GROUP XCEL ENERGY INC | ||
| ||||||
AIR PRODUCTS & CHEMICALS INC ALCOA AUTOMATIC DATA PROCESSING INC
BORGWARNER INC. CAMPBELL SOUP COMPANY CONAGRA BRANDS, INC
EATON
|
HONEYWELL INTERNATIONAL INC
L 3 HARRIS TECHNOLOGIES, INC
ONEOK |
PARKER HANNIFIN CORP PPG INDUSTRIES INC
|
TEXTRON INC THE CLOROX COMPANY THE ESTEE LAUDER COMPANIES INC. THE GOODYEAR TIRE & RUBBER CO THE HERSHEY COMPANY THE PROGRESSIVE CORPORATION THE SHERWIN WILLIAMS
| |||
In February 2018,2020, at the Compensation Committee’s request, Farient accumulatedcollected benchmark compensation data for our peer companies based on Willis Towers Watson executive surveys and AonHewitt’s Total Compensation Measurement database, and determined that our executives’ total direct compensation, in the aggregate, continues to be positioned at approximately the 50th percentile of the market. The total compensation for our NEOs (excluding Mr. Strah since he was promoted into an Acting CEO role in October 2020), in the aggregate, is 94%was 96% of the Blended Median, which is within the competitive range of 80% to 120%.
4636 | FirstEnergy Corp.20192021 Proxy Statement
Components of Total Direct Compensation Programs
Key Elements of 2018 Executive2020 NEO Compensation
The key elements of our executiveNEO compensation program to attract, retain and motivate key executive leaders are described below:
Element
| Description
| Key Characteristics and Considerations
| ||
| Base Salary | Bi-weekly,fixed cash compensation designed to reward |
| ||
| FE Short-Term Incentive Program (FE STIP) | Variable cash compensation designed to reward the achievement of near-term corporate and |
○
○
○
○ D
• Weighted
| ||
| FE Long-Term Incentive Program (FE LTIP) | Variable cash |
• The
○ Operating EPS Growth (cumulative)
○ Average Capital Effectiveness
○ Includes a payout cap (100% target) if absolute TSR is negative over the three-year performance period
| ||
| ||||
4737 | FirstEnergy Corp.20192021 Proxy Statement
Compensation Mix
We review our compensation philosophy, pay mix and pay vehicles for our NEOs annually to ensure that they support our strategy and align with shareholder interests. The Compensation Committee sets ourNEO overall compensation levels consistent with the Blended Median, but provides a greater portion of target pay in the form of performance-based FE LTIP awards compared to our peer groups. Under our compensation design, the percentage of pay that is based on performance increases as the executives’a NEO’s responsibilities increase. As shown in theThe charts below ofillustrate the annual base salary rate, FE STIP and FE LTIP, of which approximately 87% of the Former CEO’s total target pay, 79% of the then Acting CEO’s total target pay and 75%72% of our NEOother NEOs’ average target pay other than Mr. Schneider, was performance-based, and approximately 72% of the Former CEO’s total target pay, 58% of the then Acting CEO’s total target pay and 55%53% of our other NEOs’ average target pay other than Mr. Schneider, was predicated on long-term performance, based on each NEO’s final 2020 total target pay levels as described in 2018. A separate chart for Mr. Schneider is also provided below to reflect the different compensation programs for him in 2018.“2020 Target Compensation (Base Salary + Incentive Compensation)” section below. For the continuing NEOs, the values shown are effective as of December 31, 2020 (“FYE”).
Former CEO |
| Acting CEO (as of FYE) 2020 Pay Mix | ||
| Other NEOs
| |||
|
| | ||
Determination of Compensation for 20182020
2018 Target Compensation (Base Salary + Incentive Compensation)
In January 2018,December 2019, the Compensation Committee reviewed a competitive benchmarking analysis prepared by Farient. This report assessed each NEO’s compensation levels and mix against the Blended Median. TheIn February 2020, the Committee determined thatdecided, with input from management, to approve increases in compensation for certain NEOs and other executive officers to continue to align with the NEOs,Blended Median, in the aggregate were well-positioned against the competitive Blended Median (within the 80% to 120% competitive range) and the Board approved and ratified for the second consecutive year, no increase in base salary and target opportunity levels as a percent of 2018 base salary, in the aggregate, for short-term and long-term incentive compensation in 2018, other than for promotions..
For 2018,2020, target opportunities continued to be set at or near the Blended Median of our peer groups. 2018As of December 31, 2020, target compensation levels for the continuing NEOs were as follows:
| Executive | 2018 Base Salary | 2018 Target Opportunity STIP | 2018 Target Opportunity LTIP Awards (% of Salary)(3) | 2018 Target Opportunity AIP | 2018 Target Total Compensation | |||||
Mr. Jones | $1,133,000 | 115% | 545% | N/A | $8,610,800 | |||||
Mr. Strah(1) | $600,000 | 75% | 235% | N/A | $2,460,000 | |||||
Mr. Pearson | $660,400 | 90% | 320% | N/A | $3,368,040 | |||||
Ms. Vespoli | $759,200 | 85% | 255% | N/A | $3,340,480 | |||||
Mr. Belcher(1) | $565,000 | 70% | 180% | N/A | $1,977,500 | |||||
Mr. Gaines | $440,840 | 65% | 125% | N/A | $1,278,436 | |||||
Mr. Schneider(2) | $535,000 | N/A | N/A | 193.333% | $1,569,333 | |||||
48 | FirstEnergy Corp.2019 Proxy Statement
| Executive | 2020 Base Salary | 2020 Target Opportunity FE STIP (% of Salary) | 2020 Target Opportunity FE LTIP Awards (% of Salary)(6) | 2020 Target Total Compensation | ||||
Steven E. Strah(1) | $950,000 | 100% | 275% | $4,512,500 | ||||
K. Jon Taylor(2) | $600,000 | 75% | 225% | $2,400,000 | ||||
Samuel L. Belcher(3) | $650,000 | 75% | 235% | $2,665,000 | ||||
Gary D. Benz(3) | $410,000 | 65% | 165% | $1,353,000 | ||||
Christine L. Walker(3) | $410,000 | 60% | 130% | $1,189,000 | ||||
Charles E. Jones (4) | — | — | — | — | ||||
Robert P. Reffner(5) | — | — | — | — | ||||
| (1) | Reflects annualized |
38 | FirstEnergy Corp. 2021 Proxy Statement
| President, FE Corp. in May 2020, Mr. |
| (2) | Reflects annualized base salary rate and target opportunity levels as a percent of base salary in effect following Mr. |
| (3) |
|
| (4) | Mr. Jones’ annualized base salary rate and FE STIP and FE LTIP target opportunity levels as a percent of base salary as in effect prior to his termination on October 29, 2020 were $1,133,000, 115% and 545%, respectively. |
| (5) | Mr. Reffner’s annualized base salary rate and FE STIP and FE LTIP target opportunity levels as a percent of base salary in effect prior to his separation on November 8, 2020 and following his promotion from SVP and General Counsel to SVP and Chief Legal Officer in May 2020 were $625,000, 75% and 225%, respectively. In February 2020, while Mr. Reffner served as SVP and General Counsel, he received an increase from $550,000 to $580,000 in annualized base salary rate, and 175% to 200% in FE LTIP target opportunity level. |
| (6) | All FE LTIP awards, if earned, are paid 1/3 in cash and 2/3 |
The maximum payout under both the FE STIP is 150% of an individual’s target opportunity, which is below our Utility peer group. The maximum payout under theand FE LTIP is 200% of an individual’s target opportunity, which is consistent with our Utility peer group.opportunity. However, unlike market practices, the FE LTIP is 100% performance-based.performance-based and does not contain any time-based components. The NEOs may earn nothing or may receive payments that are below their target opportunities, for the incentive awards if the Company falls short of itspre-established goals andor may earn above their target opportunities if the Company performs above itspre-established goals. Except in limited circumstances as described in the plan documents, the Compensation Committee may use negative discretion to make downward adjustments to awards based on a formula or on a discretionary basis but may not make upward adjustments.basis.
2018 Incentive Compensation Programs
Shareholders previously approved the 2007 Incentive Plan and 2015 Incentive Compensation Plan, (theand in May 2020, shareholders approved the new 2020 Incentive Compensation Plan (together, the “Incentive Compensation Plans”). The purpose of the Incentive Compensation Plans is to promote the success of FirstEnergy by providing incentives to certain employees and directors that link their personal interests to both short-term performance on key metrics and the long-term financial success of theyour Company and to help increase shareholder value, providing for various types of awards including equity and equity-based awards and cash-based awards.
2018The Compensation Committee, with support from Farient, conducted its annual goal rigor analysis to establish the goal ranges for the 2020 FE Short-Term Incentive Program (FE STIP)STIP and FE LTIP awards. In setting the goals, the Compensation Committee considers prior year results, company performance, and strategic accomplishments for the year and over the long-term, on both a relative and absolute basis. The Compensation Committee expects goals that are realistic but challenging and that drive differentiating performance year-over-year.
FE STIP
The FE STIP provides annual cash awards to executives whose contributions support the achievement of theyour Company’s identified financial and operational KPI goals, which are linked to the Company’s business strategy and objectives.corporate objectives, including ESG-related goals. The Compensation Committee annually reviews the goals and targets with a focus on setting challenging but realistic targets that are intended to align with shareholder value.
The Compensation Committee annually establishes the KPIs under the FE STIP that must be satisfied for a NEO to receive an award for such performance period and recommends that the Board approve the relative weightings for each KPI with respect to each participating NEO.
In February 2018, the The Compensation Committee recommended, and the Board approved, the following changesdesign elements for the 20182020 FE STIP:
Refocused the FE STIP on an Operating Earnings KPI (shifting the Operating EPS goal to the FE LTIP);
| ● | Increase the stretch (maximum) payout opportunity level from 150% to 200% of target to be consistent with market practices and further align the incentive program with that of your Company’s peers; |
Increased the weighting of safety metrics to 15% in FE STIP to promote a Company focus on safety, while eliminating safety in the FE LTIP to better align with market practice and so as not to duplicate measures;
| ● | Preserve focus on an Operating Earnings KPI, as compared to the Operating EPS goal maintained in the FE LTIP; |
39 | FirstEnergy Corp. 2021 Proxy Statement
Enhanced the safety KPI by incorporating DART Rate and LCEs, while also maintaining OSHA Recordable Incidents as a metric;
Added KPI goals tied to a D&I metric, weighted at 10%, for all managers and above (including the NEOs); and
| ● | Maintain weighting of safety metrics at 15% in FE STIP to promote a Company-wide safety Core Value; |
| o | Increased the weightings of DART Rate and LCEs from 5% to 7.5% each while eliminating Occupational Safety and Health Administration (“OSHA”) Recordable Incidents as a metric in 2020; and |
Replaced the previous Pool of Funds approach with a simpler financial performance threshold for the 2018 FE STIP requiring that financial performance as measured by Operating Earnings is met before operational performance is rewarded.
| o | While OSHA recordable incidents remain an important measure of the safety culture, it was removed as a KPI since it is not fully aligned with your Company’s proactive focus on reducing exposure and eliminating serious, life-changing events and injuries; |
Beginning in 2018, due to the Tax Cuts and Jobs Act, the Executive STIP was no longer necessary to align with IRC Section 162(m) and was eliminated. As a result, the NEOs participated directly in the FE STIP, which is a broad-based incentive compensation program.
| ● | Continue use of a financial performance threshold for the FE STIP requiring that financial performance as measured by Operating Earnings is met before operational performance is rewarded; and |
| ● | Maintain weighting of D&I KPI goals at 15%; |
| o | The Compensation Committee increased the weighting from 10% to 15% in 2019. The same goals have been maintained since 2018. |
FE STIP payouts are driven by financial, operating, safety, and D&I metrics, with 70% of the then Acting CEO’s opportunity and 60%50-60% of the other NEOs’ opportunities tied to corporate and business unit financial performance and the remaining opportunities tied to operating, safety and D&I metrics. TheFor 2020, the Operating Earnings threshold of $1,071$1,301 million, including the cost of the STIP payments, must be achieved before a payout is made.
4940 | FirstEnergy Corp.20192021 Proxy Statement
Based on the 2018year-end Operating Earnings result of $1,264 million, the FE STIP payout was $143.7 million. Because the threshold of Operating Earnings was achieved, at $1,071 million, the 2018 FE STIP payout was paid as earned in accordance with the financial performance, and operational, safety, and D&I performance against KPIs.
2018 KPIs and Weightings for FE STIP (Excluding Mr. Schneider)
The Compensation Committee reviewed, and the Board approved, the FE STIP performance metrics and weightings for each of the NEOs at a February 2018 meeting.in December 2019. For 2018,2020, the NEOs had the following metrics and weightings (excluding Mr. Schneider who participated in the 2018 AIP).weightings.
| KPI Measures(1) | Rationale | CEO | All Other NEOs | |||
Financial | ||||||
Operating Earnings | • Drives shareholder value while providing greater focus on driving the regulated distribution and transmission businesses • Increases in Operating Earnings indicate growth and efficiency of the business • Provides a consistent and comparable measure of performance to help shareholders understand performance trends
| 70% | 60% | |||
Operational | ||||||
| FE Shared Service O&M | • Monitors spending and focuses on overall cash flow and liquidity within FE Shared Services | N/A |
10%
| |||
Controllable Regulated Distribution / Regulated Transmission and Regulated Fossil Generation O&M
| • Monitors spending and focuses on overall cash flow and liquidity within the regulated distribution, transmission and fossil generation businesses | 10% (Belcher only) | ||||
| Operations Index | • Based on six key operating metrics equally weighted • Focused on customer service, reliability and environmental metrics that drive the Company’s long-term success
| 5% | ||||
Safety (2) | ||||||
| Systemwide OSHA | • A core value of the Company • Measured for the Company and each business unit and is a KPI for all employees • Based on three key metrics that are equally weighted: OSHA reportable incidents, systemwide LCEs and DART Rate • Expanded safety metrics to include LCEs and DART Rate to consider severity of injuries and drive better conversations with employees | 10% |
10%
| |||
Systemwide DART
| ||||||
Regulated Distribution / Regulated Transmission OSHA
| N/A | 10% (Belcher only) | ||||
Regulated Distribution / Regulated Transmission DART
| ||||||
Systemwide LCEs
|
5%
| |||||
Diversity & Inclusion | ||||||
| Diversity and Inclusion Index | • Integral part of a successful revenue generating business and innovation • Based on three key metrics that are equally weighted • Measures diverse succession planning, diverse hiring, and improvement on inclusion survey scoring
| 10% | ||||
| KPI Measures | Rationale |
CEO (As of | All Other NEOs | |||
Financial | ||||||
Operating Earnings | • Drives shareholder value while providing greater focus on driving the Regulated Distribution and Regulated Transmission businesses • Increases in Operating Earnings indicate growth and efficiency of the business • Provides a consistent and comparable measure of performance to | 70% | 60% (50% for Belcher only)3 | |||
Operational | ||||||
| Systemwide O&M |
| N/A | 10% (Belcher only)3 | |||
Operations Index | • Based on five key operating metrics equally weighted • Focused on customer service, reliability and environmental metrics that drive the Company’s long-term success | 10% | ||||
Safety | ||||||
Systemwide DART | • A Core Value of the Company • Measured for the Company and each business unit • Based on two key metrics that are equally weighted: systemwide LCEs and DART Rate • Safety metrics include LCEs and DART Rate to consider severity of injuries and drive better conversations with employees • Fatality Reduction | 15% | ||||
Systemwide LCEs | ||||||
Diversity & Inclusion | ||||||
| Diversity and Inclusion Index | • Integral part of a successful revenue generating business and innovation • Based on three key metrics that are equally weighted • Measures diverse succession planning, diverse hiring, and improvement on inclusion survey scoring | 15% | ||||
| (1) | Prior to his promotion to President and Acting CEO, Mr. Strah’s weighting for the Operating Earnings and Operations Index KPIs were 60% and 15%, respectively while serving as Senior Vice President and CFO. Final STIP payout |
| (2) | Represent Mr. Jones’ weightings while serving as CEO. |
5041 | FirstEnergy Corp.20192021 Proxy Statement
| (3) | Prior to his promotion to Senior Vice President and CFO, Mr. Taylor’s weightings for the Operating Earnings and Systemwide O&M KPIs were 50% and 10%, respectively while serving as Vice President, Utility Operations. Final STIP payout is prorated to reflect the number of days served in each role throughout the year. |
“Threshold,” “Target,” target, and “Stretch”stretch levels are established for the KPIs based on Operating Earnings and achieving continuous improvement in safety and operational performance. All threshold, target and stretch goals were set at equal or more rigorous levels in 2020 compared to 2019. In 2018,2020, the Threshold, Target, Stretchthreshold, target, and actual KPI resultsstretch levels under the FE STIP for the NEOs were:were (dollars in millions):
| 2018 STIP Goal Ranges(1) | ||||||||||||||||||||||||||
| 2018 KPI Measures(2) | Threshold | Target | Stretch | Actual Result | Result | |||||||||||||||||||||
| 2020 FE STIP Goal Ranges(1) | 2020 FE STIP Goal Ranges(1) | |||||||||||||||||||||||||
| 2020 KPI Measures | Threshold | Target | Stretch | |||||||||||||||||||||||
Financial | ||||||||||||||||||||||||||
Operating Earnings | $1,071 | $1,151 | $1,261 | $1,264 | Meets Stretch | $1,301 | $1,356 | $1,431 | ||||||||||||||||||
Operational | ||||||||||||||||||||||||||
FE Shared Service O&M (participating NEOs other than Jones and Belcher) | $537 | $532 | $521 | $458 | Meets Stretch | |||||||||||||||||||||
Controllable Regulated Distribution/Regulated Transmission and Regulated Fossil Generation O&M (only Belcher) | $1,226 | $1,214 | $1,190 | $1,195 | Meets Target | |||||||||||||||||||||
Systemwide O&M (Taylor and Belcher only) | $1,427 | $1,413 | $1,385 | |||||||||||||||||||||||
Operations Index | 3.00 | 6.00 | 9.00 | 6.55 | Meets Target | 2.50 | 5.00 | 7.50 | ||||||||||||||||||
Safety | ||||||||||||||||||||||||||
Systemwide OSHA Recordable Incidents | 1.22 | 0.82 | 0.55 | 0.80 | Meets Target | |||||||||||||||||||||
Regulated Distribution/Regulated Transmission OSHA Recordable Incidents | 1.46 | 0.98 | 0.64 | 0.88 | Meets Target | |||||||||||||||||||||
Systemwide LCE | 2 | 1 | 0 | 0 | Meets Stretch | 2 | 1 | 0 | ||||||||||||||||||
Systemwide DART Rate | 0.67 | 0.39 | 0.25 | 0.45 | Meets Threshold | 0.67 | 0.36 | 0.22 | ||||||||||||||||||
Diversity and Inclusion | ||||||||||||||||||||||||||
Diversity & Inclusion Index | 1.50 | 3.00 | 4.50 | 1.20 | Below Threshold | 1.50 | 3.00 | 4.50 | ||||||||||||||||||
| (1) | Interpolated for performance between discrete points. Refer to page |
|
FE LTIP Awards in 2018 (for NEOs other than Mr. Schneider)
In February 2018, the Compensation Committee recommended, and the Board approved substantial changes to theThe 2020 FE LTIP design was maintained to better align this program to shareholder value creation. The changes included modifyinginclude financial goals to focus on the regulated businesses, moving toincluding a cumulative three-year performance period for measuring goals, and addingmaintaining a relative shareholder performance measure. See the chart below on page 52,43, which identifies the KPI measures under the 20182020 FE LTIP for more information.
The FE LTIP is comprised entirely of performance-adjusted RSUs with 2/3 of the earned award payable in Company stock and 1/3 of the earned award payable in cash. Both the stock-settled and cash-settled portions of the performance-adjusted RSU awards have a minimum payout of 0% and a maximum payout of 200% based on a formulaic structure where actual performance results are evaluated against the threshold, target and stretch performance goals over a three-year performance period. Performance results are interpolated on a straight-line basis between the minimum payout and maximum payout. The RTSR modifier is applied to the formulaic result for the payout percentage to determine the final payout amount.
The Compensation Committee and Board approved the FE LTIP grants at their regularly scheduled meeting in February 2018.2020. For 2018,2020, the grant date for performance-adjusted RSUs for both the stock-settled and cash-settled portions of the awards was March 5, 2018.1, 2020. We use the target FE LTIP award by individual divided by the average of the high and low prices of our common stock as of the date of grant to determine the number of units comprising each NEO’s award of performance-adjusted RSUs. Any equity grants awarded in proximity toor vesting near an earnings announcement or other market event are coincidental.
The “Grants of Plan-Based Awards in Fiscal Year 2018”2020” table provides the target number of performance-adjusted RSUs granted to each NEO in 20182020 based on the percentage of base salary providedas described earlier in the CD&A. Additional details regarding the 2018-20202020-2022 LTIP grants are provided in the narrative following the “Grants of Plan-Based Awards in Fiscal Year 2018”2020” table.
51 | FirstEnergy Corp.2019 Proxy Statement
The 20182020 FE LTIP uses two performance measures, weighted equally: Cumulative Operating EPS and Average Capital Effectiveness. These performance measures support continued financial improvement and increase focus on earnings across the Company’s regulatedRegulated Distribution and Regulated Transmission businesses. This creates a direct line of sight for executives to balance the value of our investments with the earnings they produce and drives shareholder value. In addition, Average Capital Effectiveness measures the financial effectiveness of investment in operational assets over the performance period. A high ratio
42 | FirstEnergy Corp. 2021 Proxy Statement
indicates the business generates larger returns on its investment in operational assets and vice versa. The KPIs used for performance-adjusted RSUs under the FE LTIP in 20182020 were based on:
Program
|
KPI Measures
|
Rationale
| ||
| FE LTIP | Cumulative Operating EPS | Anon-GAAP measure of the financial performance of business units’ contribution to Operating Earnings growth over the | ||
| Average Capital Effectiveness | Anon-GAAP measure of the financial return effectiveness on our capital investment in operational assets of the business units’ over the | |||
|
The performance goals for the 2020-2022 performance period are based on:
| 2018 LTIP Goal Ranges | ||||||||||||
| 2020 FE LTIP Goal Ranges | 2020 FE LTIP Goal Ranges | |||||||||||
| 2018 Financial KPIs | Threshold | Target | Stretch | |||||||||
| 2020 Financial KPIs | Threshold | Target | Stretch | |||||||||
Cumulative Operating EPS | $6.47 | $7.00 | $7.59 | $7.57 | $7.84 | $8.15 | ||||||
Average Capital Effectiveness | 3.87% | 4.19% | 4.54% | 4.00% | 4.15% | 4.31% | ||||||
The RTSR modifier is calculated over the three-year performance period as compared against the S&P 500 Utility Index. The modifier operates as follows:
| ● | Plus 25%, up to the maximum of 200%, will be earned if upper quartile RTSR performance is achieved; |
| ● | Minus 25%, if lower quartile RTSR performance is achieved; and |
| ● | Between the lower and upper quartile RTSR performance, a |
If the Company’s absolute TSR is negative for the three-year cumulative performance period of 2018-2020,2020-2022, the LTIP awards arewill be capped at a target opportunity level of payout (100%).
Performance-Adjusted Restricted Stock Unit Award (“Transition Award”) including Mr. Belcher
A 2018-2019 Transition Award was approved by the Compensation Committee and the Board at the February 2018 meeting and was provided to certain executives, including Mr. Belcher, who were previously participants in the FES/FENOC 2017 FES Replacement Long-Term Incentive Plan (“FESR-LTIP”) and were appointed to positions within FE Service Company effective March 5, 2018. The previous FES 2017R-LTIP was an annual cash-based program in effect for fiscal 2017 with a target opportunity percentage equal toone-third (1/3) of what otherwise would have been granted under the FE LTIP for 2017-2019 cycle. The 2018-2019 Transition Award was provided to replace the value of the 2018-2019 portion of the FE LTIP and make the participants whole on the FE LTIP grant for the 2017-2019 cycle.
The KPIs and results for the Transition Award are based on the 2018-2019 performance under KPIs used for the 2017-2019 FE LTIP grant. As the FESR-LTIP was provided as a cash payment in 2017, the Transition Award will be settled entirely in stock to more closely align with the FE LTIP grant for the 2017-2019 cycle, in which awards are settledtwo-thirds in stock andone-third in cash. The grant date used for the Transition Award was March 5, 2018 with the grant value equalingtwo-thirds of the target opportunity percentage and base salary in effect as of March 1, 2017, as reflected in the “Grants of Plan Based Awards in Fiscal Year 2018” table on page 72.
Key Employee Retention Plan (“KERP”) including Mr. Belcher
On January 26, 2017, Mr. Belcher received aone-time retention-based award to incentivize him to remain employed with FENOC and to maintain business continuity to ensure the achievement of strategic business
52 | FirstEnergy Corp.2019 Proxy Statement
initiatives related to the exit of commodity-exposed generation. The KERP award provides a cash payment in the event Mr. Belcher transfers to another position within FirstEnergy and had a scheduled vest date of November 30, 2018. On February 19, 2018, the FES and FENOC Boards approved the transfer of Mr. Belcher from FENOC President & CNO to his current position as Senior Vice President and President, FirstEnergy Utilities.
As recommended by the Compensation Committee, and approved by your Board and by the FES and FENOC Boards, Mr. Belcher received a cash payment, based on the vesting criteria of the KERP of $434,700 on November 30, 2018 under the KERP award.
2018 Annual Incentive Program (AIP) including Mr. Schneider
In 2018, for the second consecutive year, the board of directors of FES approved an annual incentive compensation program for eligible FES participants, including Mr. Schneider. Mr. Schneider’s total target AIP opportunity was 193.333% of base salary of $535,000, which equates to $1,034,333. All NEOs and Section 16 Insiders, except for Mr. Schneider, participated in the FE STIP and FE LTIP in 2018. Because the 2018 AIP was based on aone-year performance period, for the second consecutive year (versus three years like the FE LTIP), the incentive target opportunity percentage for 2018 was set equal totwo-thirds of what would otherwise be granted under the FE LTIP target opportunity and what would otherwise be granted under the FE STIP opportunity. This results in a relatively equivalentone-year incentive target had he remained in the FE LTIP and STIP programs. Between threshold and stretch performance, payouts range from 0% to 200% of the target opportunity amount, interpolated based on actual achievement against the FES KPIs listed below.
The FES Board set performance goals for FES to reflect the challenging business environment facing FES and were designed to incentivize and retain FES participants to preserve value during the FES Bankruptcy proceedings. The FES measures were designed to monitor spending, drive earnings, reduce FENOC outage time, and continue to focus on safety. All five measures in the AIP were individually weighted and tracked quarterly over the performance period.
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53 | FirstEnergy Corp.2019 Proxy Statement
On May 14, 2018, the Bankruptcy Court overseeing the FES Bankruptcy issued an order requiring changes to the KPI metrics for FES, Competitive Fossil and Nuclear O&M and Capital Spend for May through December 2018 based off a revised 2018 FES budget for its operations. The KPI targets for the same metrics applicable for January through April 2018 remained in place as approved under the original 2018 FES budget. The changes included more rigorous goals for FES, Competitive Fossil and Nuclear O&M and Capital Spend performance tracked on ayear-to-date basis as well as revised annual goals.
Below is a chart showing the goals before and after the adjustment:
| FES Fossil and Nuclear O&M and Capital Spend ($M) | ||||||||||||
| Before Adjustment | After Adjustment | |||||||||||
Period | Threshold | Target | Stretch | Threshold | Target | Stretch | ||||||
Q1 | $240 | $238 | $226 | $240 | $238 | $226 | ||||||
Q2 YTD | $531 | $526 | $500 | $507 | $502 | $477 | ||||||
Q3 YTD | $755 | $748 | $710 | $695 | $688 | $653 | ||||||
Annual | $1,066 | $1,055 | $1,022 | $1,003 | $993 | $944 | ||||||
The KPIs shown below reflect the annual goals inclusive of the changes to FES, Competitive Fossil and Nuclear O&M and Capital Spend as required by the Bankruptcy Court:
| 2018 AIP Goal Ranges(1) | ||||||||||||
| 2018 AIP Goals(2) | Weighting | Threshold | Target | Stretch | Actual Result | Result | ||||||
FES, Competitive Fossil and Nuclear O&M and Capital Spend ($ millions) | 60% | $1,003 | $993 | $944 | $877 | Meets Stretch | ||||||
Nuclear UCF | 15% | 91.6% | 92.1% | 92.6% | 94.6% | Meets Stretch | ||||||
Safety — FES, Competitive Fossil and FENOC OSHA Reportable Incidents | 7.5% | 0.49 | 0.29 | 0.14 | 0.32 | Meets Threshold | ||||||
Safety — FES, Competitive Fossil DART Rate | 7.5% | 0.17 | 0.09 | 0.00 | 0.11 | Meets Threshold | ||||||
Competitive Generation Environmental Excursions | 10% | 8 | 6 | 4 | 6 | Meets Target | ||||||
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Based on the results of the KPIs, the 2018 AIP payout is 173.5%. The 2018 AIP award paid in cash as follows:
Full year performance projections were estimated at the beginning of the performance period and evaluated each quarter based on such performance that quarter.
75% of the estimated award earned for results for the first quarter of 2018 were calculated and paid out in cash on June 1, 2018;
75% of the estimated award earned for results for the second quarter of 2018 were calculated and paid out in cash on July 27, 2018; and
75% of the estimated award earned for results for the third quarter of 2018 were calculated and paid out in cash on October 19, 2018.
In February 2019, the actual results were recalculated for the entire performance period and the participant was paid the difference in what was paid in the quarterly payments during 2018 and the award amount recalculated in February 2019.
54 | FirstEnergy Corp.2019 Proxy Statement
Incentive Compensation Payouts for 20182020
FE STIP & AIP PayoutsPayout
In February 2019,2021, based on actual 20182020 KPI results, the Compensation Committee recommended, and the independent members of the Board (and the FES Board for Mr. Schneider) approved, or ratified, the following 20182020 short-term incentive KPI results for our NEOs:
| 2020 FE STIP Results | ||||||||||||||||
| 2020 KPI Measures | Threshold | Target | Stretch | Actual Results | Payout Results | |||||||||||
Financial | ||||||||||||||||
Operating Earnings | $1,301 | $1,356 | $1,431 | $1,381 | Between Target and Stretch | |||||||||||
Operational | ||||||||||||||||
Systemwide O&M (Taylor and Belcher only) | $1,427 | $1,413 | $1,385 | $1,447 | Below Threshold | |||||||||||
Operations Index | 2.50 | 5.00 | 7.50 | 5.86 | Between Target and Stretch | |||||||||||
Safety | ||||||||||||||||
Systemwide LCE | 2 | 1 | 0 | 0 | Meets Stretch | |||||||||||
Systemwide DART Rate | 0.67 | 0.36 | 0.22 | 0.36 | Meets Target | |||||||||||
Diversity and Inclusion | ||||||||||||||||
Diversity & Inclusion Index | 1.50 | 3.00 | 4.50 | 3.72 | Between Target and Stretch | |||||||||||
43 | FirstEnergy Corp. 2021 Proxy Statement
On February 5, 2021, the Board exercised negative discretion to cap the FE STIP payout for 2020 at 100% of target opportunity for the senior leadership team, which includes our continuing NEOs, instead of paying for actual performance results at 138.1% of target opportunity for each NEO (other than Mr. Taylor and Mr. Belcher for whom payout for actual performance results would have been at 133.6% and 124.8% of target opportunity, respectively). While the Board continues to show strong support for our leadership team, the Board’s decision to cap payouts resulted from the current situation facing the Company, including the cultural and tone at the top issues the senior leadership team continues to address.
Additionally, with respect to FE STIP compensation, the FE STIP Policy states that, “The Compensation Committee retains the discretion to adjust the STIP payouts downward/upward without the participant’s consent regardless of the Company’s actual performance against the Corporate Financial and Operational Key Performance Indicators, either on a formula or discretionary basis or a combination of the two, as the Compensation Committee determines in its sole discretion.” On February 4, 2021, the Compensation Committee considered whether to pay the FE STIP to Mr. Reffner and resolved to exercise its negative discretion to reduce final payouts to zero as a result of the events leading to his separation. These decisions resulted in the following 2020 short-term incentive award payouts for our NEOs:
| Executive | 2018 Base Salary | 2018 Actual STIP Award Payout ($) | 2018 Actual AIP Award Payout ($) | Payout as a % of Base Salary | |||||||||||||
Charles E. Jones | $1,133,000 | $1,662,674 | n/a | 147% | |||||||||||||
Steven E. Strah | $600,000 | $574,240 | n/a | 96% | |||||||||||||
James F. Pearson | $660,400 | $758,454 | n/a | 115% | |||||||||||||
Leila L. Vespoli | $759,200 | $823,483 | n/a | 108% | |||||||||||||
Samuel L. Belcher | $565,000 | $506,951 | n/a | 90% | |||||||||||||
Bennett L. Gaines | $440,840 | $365,657 | n/a | 83% | |||||||||||||
Donald R. Schneider(1) | $535,000 | n/a | $1,794,568 | 335% | |||||||||||||
| Executive | 2020 Base Salary | 2020 STIP Payout-Based | 2020 STIP Actual | Payout Impact as a Result of Negative Discretion ($) | Actual Payout of Base Salary | |||||
Steven E. Strah | $950,000 | $1,176,969 | $852,146 | ($324,823) | 90% | |||||
K. Jon Taylor | $600,000 | $553,822 | $414,591 | ($139,231) | 69% | |||||
Samuel L. Belcher | $650,000 | $608,425 | $487,501 | ($120,924) | 75% | |||||
Gary D. Benz | $410,000 | $368,139 | $266,501 | ($101,638) | 65% | |||||
Christine L. Walker | $410,000 | $339,819 | $246,000 | ($93,819) | 60% | |||||
Charles E. Jones(1) | $1,133,000 | $0 | $0 | $0 | 0% | |||||
Robert P. Reffner(2) | $625,000 | $0 | $0 | $0 | 0% | |||||
| (1) | Mr. |
| (2) | The Compensation Committee considered whether to pay the |
FE LTIP Payouts in 2018 (for NEOs other than Mr. Belcher and Mr. Schneider)
The FE LTIP for the 2016-20182018-2020 cycle was underused a differentsimilar design thanas the current FE2019-2021 and 2020-2022 cycles (see “Outstanding Award Cycles (2019-2021 and 2020-2022)” below). Beginning with the 2018-2020 LTIP cycle. At the beginning of each year in the award cycle, the KPICommittee approved an incentive structure that measures actual performance against threshold, target and stretch goals were set for that yearbased on 3-year cumulative and were scored by points awarded for attaining a specified level of performance for each of the three components. Threshold, Target, and Stretch performanceaverage goals were established each year for each KPI. Each component was scored annually against that year’s established goals for a total of nine independent values over the three-yearperformance period. Points were accumulated for each annual period in the cycle, with a range from 0 to 4.50 points possible per year. “Target performance” across all three KPIs was set at 3.00 points for the year or 9.00 points in the aggregate for the three-year cycle. Threshold opportunity payout was earned at 5.40 points for the three-year performance period; Target opportunity payout was earned at 6.75 points; 150% of Target opportunity payout was earned at 8.10 points; and maximum opportunity payout (200% of Target) was earned at 12.15 points or above. A KPI achieving above Target performance in one year of the cycle may offset a KPI achieving below Target performance in another year of the cycle.
RSU Index Performance Measures
The RSU Index in our 2016-20182018-2020 FE LTIP was comprised of the following threetwo performance measures, weighted equally: Cumulative Operating EPS and Average Capital Effectiveness.
Additionally, FirstEnergy’s three-year annualized RTSR ranked at the 28th percentile relative to the S&P 500 Utility Index during the 2018-2020 performance cycle, which triggered the RTSR modifier and resulted in equal thirds: Capital Effectiveness Index, FFO to Adjusted Debt Index and Safety Index.
The details onan interpolated result that reduced the KPIs, metrics and resultsfinal LTIP payout by 22% for the 2016 – 2018 cycle of the FE LTIP are illustrated on page 65. Below is a summary of the RSU Index Score for the 2016-2018 performance period:
| 2016-2018 RSU Index Score (FE LTIP) | ||||||||||||||||||
| KPI Measures(1) | Annual Target | 2016 | 2017 | 2018 | Total Points | |||||||||||||
Capital Effectiveness Index | 1.00 | 1.42 | 1.09 | 1.50 | 4.01 | |||||||||||||
FFO to Adjusted Debt Index | 1.00 | 1.38 | 1.28 | 1.50 | 4.16 | |||||||||||||
Safety Index | 1.00 | 1.50 | 0.84 | 1.04 | 3.38 | |||||||||||||
Totals | 4.30 | 3.21 | 4.04 | 11.55 | ||||||||||||||
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Given that the points were cumulative over each three-year cycle, the performance-adjusted RSUs for the 2016-2018 cycle earned a total of 11.55 points.all plan participants. Based on the total points,average of FirstEnergy stock prices for December 2020, the payoutaverage stock price with reinvested dividends of $33.31 was 193%greater than the average stock price in December 2017 of target$31.82 needed to pay the 2018-2020 LTIP cycle as earned (capped at 200%). As a result, the absolute TSR modifier did not apply to the 2018-2020 cycle payout.
5544 | FirstEnergy Corp.20192021 Proxy Statement
Below is a summary of the results for the 2018-2020 cumulative performance period:
| 2018-2020 FE LTIP Results | ||||||||||
| KPI Measures | Threshold | Target | Stretch | Actual Results | Payout Results | |||||
Cumulative Operating EPS | $6.47 | $7.00 | $7.59 | $7.44 | Between Target and Stretch | |||||
| Average Capital Effectiveness | 3.87% | 4.19% | 4.54% | 4.40% | Between Target and Stretch | |||||
Based on the results of the two performance measures and the RTSR modifier for the 2018-2020 cycle described above, the Board approved the payout opportunity.at 146% of target payout opportunity, plus dividend equivalents, for our continuing NEOs. The Board did not permit any KPI exceptions for the senior leadership team, including the NEOs, related to the Company’s partial settlement with the Ohio Attorney General and the cities of Columbus and Cincinnati regarding decoupling. In March 2019,2021, the performance-adjusted RSUs granted in 20162018 were paid in shares of our common stock and cash respectively as follows: Mr. Jones: 296,605Strah: 47,916 shares and $6,040,333;$802,805; Mr. Strah: 47,646Taylor: 14,650 shares and $970,292;$247,017; Mr. Pearson: 92,063Belcher: 34,488 shares and $1,883,613; Ms. Vespoli: 84,470$581,519; Mr. Benz: 20,758 shares and $1,720,189; and Mr. Gaines: 23,948$350,026; Ms. Walker: 8,043 shares and $493,551. Any fractional shares for the stock-based performance-adjusted RSUs were paid in cash.
FE LTIP Payout in 2018 for Mr. Belcher$132,943.
For Mr. Belcher, KPIs and the results for the 2016 year of the outstanding 2016-2018 cycle were based on the corporate performance results under the 2016-2018 FE LTIP, with total points of 4.30 for 2016 (same as above). However, for the 2017 year of the outstanding 2016-2018 cycle under the FE LTIP, the KPIs are the same as those used in the 2017 FESR-LTIP for FES/FENOC participants outlined on page 66, with total points of 4.31. For the 2018 year of the outstanding 2016-2018 cycle, the KPIs and results are based again on corporate performance results under the FE LTIP, with total points of 4.04 (same as above). Mr. Belcher moved back to the FE LTIP KPIs for 2018 due to his promotion to Senior Vice President and President, FirstEnergy Utilities.
The results for the 2016-2018 FE LTIP KPIs for Mr. Belcher were as follows:
| 2016-2018 RSU Index Score (Belcher) | ||||||||||||
| KPI Measures(1) | Annual Target | 2016 | 2017 | 2018 | Total Points | |||||||
Capital Effectiveness | 1.00 | 1.42 | n/a | 1.50 | 2.92 | |||||||
FFO to Adjusted Debt | 1.00 | 1.38 | n/a | 1.50 | 2.88 | |||||||
Safety | 1.00 | 1.50 | n/a | 1.04 | 2.54 | |||||||
FES, Competitive Fossil and Nuclear O&M and Capital Spend | 1.00 | n/a | 1.50 | n/a | 1.50 | |||||||
FES, Fossil & FENOC Safety | 1.00 | n/a | 1.31 | n/a | 1.31 | |||||||
Nuclear UCF | 1.00 | n/a | 1.50 | n/a | 1.50 | |||||||
Totals | 4.30 | 4.31 | 4.04 | 12.65 | ||||||||
Given that the points were cumulative over each three-year cycle,Jones, the performance-adjusted RSUs for the 2016-20182018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles were forfeited due to his termination from the Company effective October 29, 2020. Additionally, the Performance-Adjusted Restricted Stock Unit (RSU) award agreements for the LTIP awards for Mr. Belcher achieved stretchReffner state that, “Notwithstanding any provision in this Agreement or the Plan to the contrary, the Committee shall retain the discretion to adjust the number of RSUs that vest under this Agreement without the Grantee’s consent, notwithstanding the Company’s actual performance earningagainst the Performance Goals, either on a totalformula or discretionary basis or a combination of 12.65 points. Based on the points,two, as the payout for Mr. Belcher was at 200% of target payout opportunity. Payouts underCommittee determines in its sole discretion.” On February 4, 2021, the Compensation Committee considered whether to pay the FE LTIP forto Mr. Belcher were made entirely in cash, rather than partially in cashReffner and partially in shares, because of the strategic review of our competitive operations, including FES and FENOC. Although the form of payment of the outstanding stock-based restricted stock units was modifiedresolved to settle in cash, the awards continuedexercise its negative discretion to track the value of the Company’s stock until vesting and payout. As a result, Mr. Belcher received an LTIP payment of $1,320,882 in March 2019reduce final payouts with respect to settle his 2016-2018 FE LTIP award.
FES LTIP in 2018 for Mr. Schneider
As noted earlier, Mr. Schneider also had an outstanding award under the FE LTIP for the 2016-2018 cycle. However, with the use of separate incentive compensation programs for FES participants in both 2017 and 2018, the KPIs and results for both years in the outstanding 2016-2018 cycle under the FE LTIP for FES participants were based on different KPIs. We refer to this outstanding cycle of the FE LTIP for FES participants as the “FES LTIP.”
Considering the strategic review of our competitive operations, including FES and FENOC, the FES LTIP payment for the 2016-2018 cycle to FES participants (including Mr. Schneider) was modified to settle in cash, rather than stock. Any points earned in the FES LTIP for fiscal years prior to January 1, 2017, were carried forward. Points earned in 2016 were based on FE corporate goals under the 2016-2018 FE LTIP, with total points of 4.30 for 2016 (same as above). Points earned in 2017 were based on the 2017 FESR-LTIP KPI goals outlined on page 66 and points earned in 2018 were based on the original 2018 AIP KPI goals outlined on page 54. Total points earned for 2017 were 4.31 and the total points earned for 2018 were 3.93 as illustrated below. The payments for the 2016-2018 cycle are based on the total points earned over the respective three-year periods. Although the form of payment of the outstanding stock-settled restricted stock units was modified to settle in cash, the awards continued to track the value of the Company’s common stock until vesting and payout.
56 | FirstEnergy Corp.2019 Proxy Statement
The results for the 2018 FES LTIP KPIs for Mr. Schneider are as follows:
| FES LTIP KPI Measures(1) | 2018 Threshold | 2018 Target | 2018 Stretch | 2018 Results | 2018 FES LTIP Points | ||||||||||||||||||||
FES, Competitive Fossil and Nuclear O&M and Capital Spend ($ millions) | $1,066 | $1,055 | $1,002 | $877 | 1.50 | ||||||||||||||||||||
FES, Competitive FES Fossil & FENOC OSHA Recordable Incidents | 0.49 | 0.29 | 0.14 | 0.32 | 0.93 | ||||||||||||||||||||
Nuclear UCF | 91.6% | 92.1% | 92.6% | 94.6% | 1.50 | ||||||||||||||||||||
Total | 3.93 | ||||||||||||||||||||||||
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| 2016-2018 RSU Index Score (Schneider) | ||||||||||
| KPI Measures(1) | Annual Target | 2016 | 2017 | 2018 | Total Points | |||||
Capital Effectiveness | 1.00 | 1.42 | n/a | n/a | 1.42 | |||||
FFO/Adjusted Debt Index | 1.00 | 1.38 | n/a | n/a | 1.38 | |||||
Safety | 1.00 | 1.50 | n/a | n/a | 1.50 | |||||
FES, Competitive Fossil and Nuclear O&M and Capital Spend | 1.00 | n/a | 1.50 | 1.50 | 3.00 | |||||
FES, Competitive FES Fossil & FENOC OSHA Recordable Incidents | 1.00 | n/a | 1.31 | 0.93 | 2.24 | |||||
Nuclear UCF | 1.00 | n/a | 1.50 | 1.50 | 3.00 | |||||
Totals | 4.30 | 4.31 | 3.93 | 12.54 | ||||||
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Given that the points were cumulative over each three-year cycle, the performance-adjusted RSUs for the FES LTIP achieved stretch performance, earning2018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles to zero as a totalresult of 12.54 points. Based on the points, the payoutevents leading to his separation.
Restricted Stock Award Vesting for Mr. SchneiderBelcher
On September 15, 2015, Mr. Belcher was at 200% of target payout opportunity. Payoutsawarded a restricted stock award under the FES LTIP are made entirely in cash, rather than partially in cash and partially in shares. AsFirstEnergy Corp. 2015 Incentive Compensation Plan upon his promotion to President & Chief Nuclear Officer, FirstEnergy Nuclear Operating Co (“FENOC”). This award vested 50% on March 8, 2020 with respect to 12,279 shares at a result, Mr. Schneider received a FES LTIP paymentvalue of $2,734,031 in$561,289. The remaining 50% of this award will vest on March 2019.8, 2025.
Outstanding Award Cycles (2017-2019(2019-2021 and 2018-2020)2020-2022)
The NEOs were granted the following number of target RSUs (rounded) in 20172019 and 20182020 for each three-year FE LTIP cycle, respectively. Although dividend equivalents accrue and are reinvested throughout the performance period, subject to the same restrictions and performance conditions of the underlying awards, they are excluded in the tables below.
| Executive | Number of Cash-Settled RSUs granted for the 2017-2019 Cycle | Number of Stock-Settled RSUs granted for the 2017-2019 Cycle | Total RSUs granted for the 2017-2019 Cycle | Number of Cycle | Number of Stock-Based RSUs granted for the 2018-2020 Cycle | Total RSUs granted for the 2018-2020 Cycle | ||||||
Charles E. Jones | 64,661 | 131,118 | 195,779 | 62,906 | 127,559 | 190,465 | ||||||
Steven E. Strah | 11,541 | 23,082 | 34,623 | 14,436 | 29,057 | 43,493 | ||||||
James F. Pearson | 22,404 | 44,599 | 67,003 | 21,796 | 43,389 | 65,185 | ||||||
Leila L. Vespoli | 20,460 | 40,921 | 61,381 | 19,905 | 39,810 | 59,715 | ||||||
Samuel L. Belcher(1) | N/A | 10,710(1) | 10,710 | 10,457 | 20,914 | 31,371 | ||||||
Bennett L. Gaines | 5,870 | 11,602 | 17,472 | 5,711 | 11,287 | 16,998 | ||||||
Donald R. Schneider(2) | N/A | N/A | N/A | N/A | N/A | N/A | ||||||
| Number of Performance-Based RSUs Granted At Target | ||||||||||||
| Executive | Number of Cash-Settled RSUs granted for the 2019-2021 Cycle | Number of Stock-Settled RSUs granted for the 2019-2021 Cycle | Total RSUs granted for the 2019-2021 Cycle | Number of Cash-Settled RSUs granted for the 2020-2022 Cycle | Number of Stock-Based RSUs granted for the 2020-2022 Cycle | Total RSUs granted for the 2020-2022 Cycle | ||||||
Steven E. Strah | 12,448 | 25,056 | 37,504 | 12,466 | 24,781 | 37,247 | ||||||
K. Jon Taylor | 3,712 | 7,425 | 11,137 | 5,291 | 10,673 | 15,964 | ||||||
Samuel L. Belcher | 10,783 | 21,417 | 32,200 | 11,419 | 22,985 | 34,404 | ||||||
Gary D. Benz | 5,415 | 10,830 | 16,245 | 5,079 | 10,158 | 15,237 | ||||||
Christine L. Walker | 3,316 | 6,542 | 9,858 | 3,971 | 8,034 | 12,005 | ||||||
5745 | FirstEnergy Corp.20192021 Proxy Statement
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Given that the 2018-2020 cycle2019-2021 and 2020-2022 cycles of performance-adjusted RSUs isare based on three-year cumulative metrics, the performance and actual payout is unknown at this time. As outlined above on page 55,For Mr. Jones and Mr. Reffner, the total points to date in the 2017-2019 cycle are currently 7.25 points.
Potential Negative Discretionoriginal number of RSUs granted for the 2016-2018 and 2017-2019each FE LTIP Cycles
To further align paycycle in 2019 and performance2020 are as follows: Mr. Jones: 151,605 and 139,073; and Mr. Reffner: 23,632 and 26,126. As a result of Mr. Jones’ termination from the Company effective October 29, 2020, the RSUs for both the 2019-2021 and 2020-2022 cycles have been forfeited. As a result of the 2016-2018 and 2017-2019 FE LTIP cycles with long-term shareholder value, in February 2018events leading to Mr. Reffner’s separation from the Company effective November 8, 2020, the Compensation Committee recommended, andresolved to exercise its negative discretion to reduce final payouts with respect to the Board approved, the addition of an absolute TSR cap for Mr. Jones, Mr. Strah, Mr. Pearson, Ms. Vespoli, and Mr. Belcher. The absolute TSR cap will limit the FE LTIP maximum possible payouts to 100% if the absolute TSR is negative over the respective three-year performance periods, based on a continuous function for absolute TSR growth between 0% and 8%performance-adjusted RSUs outstanding for the 2016-2018 cycle2019-2021 and 0% and 10% for the 2017-2019 cycle, and will be paid as earned (up2020-2022 cycles to the max of 200%) if the absolute TSR growth is greater than 8% and 10%, respectively.
The calculation uses the average stock price for the month of December (i.e., December 2015 and December 2018 for the 2016-2018 cycle and December 2016 and December 2019 for the 2017-2019 cycle) and assumes dividends are reinvested. Based on the average of FirstEnergy stock prices for December 2018, the average stock price of $38.09 is greater than the goal of $35.53 needed to pay the 2016-2018 LTIP cycle as earned (capped at 200%). Thus, the 2016-2018 FE LTIP cycle was paid as earned.
The Compensation Committee believes this formulaic approach demonstrates your Company’s commitment to our shareholders. The Compensation Committee retains the right to apply negative discretion based on future conditions or unexpected conditions. However, the addition of the absolute TSR cap to the 2016-2018 and 2017-2019 FE LTIP cycles aligns our legacy long-term incentive program design for these executive officers to the new incentive compensation design approved in 2018 and for subsequent years.zero.
Realized Compensation
We provide this alternative view of compensation paid to the continuing NEOs as a supplement to, but not as a substitute for, the Summary Compensation Table (“SCT”), because this realized compensation table below illustrates the way our Compensation Committee views the actual compensation earned or received by our continuing NEOs in 2018 under the FE STIP, the 2016-2018 cycle of the FE LTIP and, in the case of Mr. Schneider, the 2018 AIP.
In 2018, our NEOs (other than Mr. Schneider and Mr. Belcher) were paid at 127.6% of target opportunity2020 under the FE STIP, and at 193% of target opportunity for the 2016-20182018-2020 cycle of the FE LTIP. Mr. Belcher was paid
Based on the Board’s decision to exercise negative discretion, all continuing NEOs FE STIP payments were capped at 128.1%100% of target opportunity under the FE STIP and at 200% of target opportunity for the 2016-2018 cycle of the FE LTIP because his performance cycle included FENOC KPIs for 2017. Mr. Schneider was paid at 173.5% of target opportunity under the 2018 AIP and at 200% of target opportunity for the 2016-2018 cycle of the FE LTIP because his performance cycle included FES KPIs for 2017 and 2018.opportunity.
The table below summarizes realized compensation in 20182020 for our continuing NEOs:
| Executive | 2018 Earned Salary | 2018 Annual Incentive (Paid in 2019)(1) | Performance- Adjusted RSUs (Earned in three- year period ending in 2018, Paid in 2019) | Other Compensation | Total 2018 | |||||
Charles E. Jones | $1,136,113 | $1,662,674 | $18,121,058 | n/a | $20,919,845 | |||||
Steven E. Strah | $594,835 | $574,240 | $2,910,923 | n/a | $4,079,998 | |||||
James F. Pearson | $662,214 | $758,454 | $5,633,355 | n/a | $7,054,023 | |||||
Leila L. Vespoli | $761,286 | $823,483 | $5,160,670 | n/a | $6,745,439 | |||||
Samuel L. Belcher | $548,060 | $506,951 | $1,320,882 | $434,700 (2) | $2,810,593 | |||||
Bennett L. Gaines | $442,051 | $365,657 | $1,468,984 | n/a | $2,276,692 | |||||
Donald R. Schneider | $536,470 | $1,794,568 | $2,734,031 | n/a | $5,065,069 | |||||
58 | FirstEnergy Corp.2019 Proxy Statement
| Executive | 2020 Earned Salary | 2020 FE STIP (Paid in 2021) | Performance- Adjusted RSUs (Earned in three- year period ended in 2020, Paid in 2021) | Restricted Stock Award (Vested in 2020) | Total 2020 Realized Compensation | |||||
Steven E. Strah | $776,058 | $852,146 | $2,418,772 | N/A | $4,046,976 | |||||
K. Jon Taylor | $521,807 | $414,591 | $741,088 | N/A | $1,677,486 | |||||
Samuel L. Belcher | $647,132 | $487,501 | $1,744,627 | $561,289(1) | $3,440,549 | |||||
Gary D. Benz | $410,804 | $266,501 | $1,050,090 | N/A | $1,727,395 | |||||
Christine L. Walker | $407,423 | $246,000 | $404,193 | N/A | $1,057,616 | |||||
| (1) |
|
|
20192021 Incentive Plan Design and Continuing NEO Compensation
Following substantial changes to our short-term and long-term incentive compensation programs in 2018 and aas well as strongSay-on-Pay vote in 2018, your voting results, the Company has maintained the same general structure and design for both of our incentive compensation programs through 2020, for 2019.the NEOs listed below. The 2021 design and goals of our incentive compensation programs have a similar structure to that of prior years with a few key modifications to support a meaningful culture change and attention to compliance and ethics, place additional emphasis on the Company’s cash flow performance and reinforce our continued focus on ensuring pay-for-performance alignment. In March 2021, your Board approved an ethics and compliance modifier as well as a new financial KPI centered around FirstEnergy’s cash flow for the 2021 FE STIP. The ethics and compliance modifier will serve as a negative modifier at the individual level, with downward adjustments only, that can range from 0% and 100%. The FirstEnergy Cash Flow KPI is intended to drive additional organizational focus on the cash generated from our business as well as optimizing working capital and reinforces the importance of conserving and managing cash. While still an important measure of the Company’s financial discipline, an O&M KPI will not be included in the 2021 FE STIP following the addition of the new financial KPI.
An additional adjustment for the 2021 FE STIP consists of revisions to the D&I Index. Since its inclusion as a KPI in 2018, the D&I Index has maintained the same goals and the Company has continued to improve its performance against the metric through 2019 and 2020. For 2021, the D&I Index has evolved to drive accelerated improvement in achieving our workforce aspirations and advancement for diverse groups with an enhanced focus on racial/ethnic diversity. The 2021 FE STIP includes racially/ethnically diverse
| Executive | 2019 Base Salary | 2019 STIP (as a % of Base Salary) | 2019 LTIP (as a % of Base Salary) | 2019 AIP (as a % of Base Salary) | ||||
Charles E. Jones | $1,133,000 | 115% | 545% | N/A | ||||
Steven E. Strah | $650,000 | 80% | 235% | N/A | ||||
James F. Pearson | $660,400 | 90% | 320% | N/A | ||||
Leila L. Vespoli | $759,200 | 85% | 255% | N/A | ||||
Samuel L. Belcher | $610,000 | 75% | 215% | N/A | ||||
Bennett L. Gaines | $465,000 | 65% | 125% | N/A | ||||
Donald R. Schneider (1) | $535,000 | N/A | N/A | 255% | ||||
46 | FirstEnergy Corp. 2021 Proxy Statement
|
In 2017performance gates for the succession planning and 2018,hiring components of the Committee decided,D&I Index to ensure continued progress in these two areas.
The FE LTIP generally maintains the current incentive compensation program structure for the 2021-2023 cycle. However, the threshold payout will decrease from 50% to 25% of target with input from management,the maximum payout remaining at 200%. This change is consistent with market practices and more closely aligns our LTIP with that there wouldof our peers. While the 2021-2023 FE LTIP cycle will continue to use cumulative Operating EPS and Average Capital Effectiveness as two equally weighted KPIs, the RTSR modifier for this cycle will adjust final LTIP payouts by up to 25%, plus or minus, based on the performance of our stock compared to our utility peers between the 25th and 85th percentiles. The 85th percentile level is a higher hurdle to achieve than the level applicable in previous cycles (which was the 75th percentile) and again, more closely aligns with the performance required by our peers. The 2021 FE LTIP payout will continue to be no increases in salarycapped at 100% of target if our absolute TSR is negative over the three-year performance period.
For 2021, target opportunities continue to be set at or near the Blended Median of our peer groups. 2021 target bonus and long-term incentive opportunitiescompensation levels for the continuing NEOs are as a percent of salary for all executive officers designated as Section 16 Insiders (excluding promotions).follows:
| Executive | 2021 Base Salary Rate | 2021 STIP (as a % of Base Salary) | 2021 LTIP (as a % of Base Salary) | |||
Steven E. Strah | $1,100,000 | 115% | 450% | |||
K. Jon Taylor | $675,000 | 85% | 250% | |||
Samuel L. Belcher | $700,000 | 75% | 250% | |||
Gary D. Benz | $410,000 | 65% | 165% | |||
Christine L. Walker | $440,000 | 60% | 130% |
In February 2019, the Committee decided, with input from management, to approve2021, your Board approved increases in compensation for certain NEOs and other Section 16 Insiders. The Committee determined that these increases were appropriate based on your Company’s continued progress toward becoming a fully regulated utility,executive officers given the successful achievement of several strategic initiatives in 2018,2020 and changes in market data provided by our independent consultant. The Committee, at Mr. Jones’ request, also recommended to the Board and the Board approved, that there be no changes to Mr. Jones’ salary and target incentive compensation levels. The Board agreed with this determination, despite Mr. Jones’ exceptional performance and leadership during a pivotal period of transition given Mr. Jones’ pay positioning and pastSay-on-Pay feedback.
The Board iswas supportive of pay increases for Messrs. Strah and Taylor following their promotions to President and Acting CEO in October 2020 and SVP and CFO in May 2020, respectively. The Board was also supportive of pay increases for Mr. Belcher and Ms. Walker, given that they continue to perform well in their respective new positions, and such increases will continue to move them toward the Blended Median. The Committee, with input from management, chose not to make any changes to compensationDespite demonstrating strong performance in 2020, no pay increases were recommended for Mr. Pearson and Ms. Vespoli dueBenz as his total target compensation is currently well positioned above the Blended Median. In March 2021, following Mr. Strah’s promotion to their upcoming retirements. The FES Board chose not to make any changes to compensation for Mr. Schneider due to his upcoming retirement. Effective March 2, 2019, Mr. Schneider stepped down as FES President and remainsCEO, the executive chairmanBoard approved base pay and incentive target increases that position Mr. Strah below the Blended Median and appropriately as a new CEO. The Board also elected Mr. Strah as a Director of the boardCompany, effective as of directors of FES.March 8, 2021.
Other Compensation Policies and Practices
Retirement Benefits
We offer retirement benefits to all of our NEOs through our qualified and nonqualified supplemental plans under the FirstEnergy Corp. Pension Plan and the Executive Deferred Compensation Plan (“EDCP”),EDCP, respectively. The qualified plan benefit historically has been based on earnings, length of service, and age at retirement and is considered a defined benefit plan under the IRC. The qualified plan benefit is subject to applicable federal and plan limits. The nonqualified supplemental planEDCP is designed to provide a benefit to executives that is competitive and comparable to that for our general employee population; this plan also allows for RSU deferrals.population.
Additionally, Mr. Jones and Ms. Vespoli participatewas a participant in the Supplemental Executive Retirement Plan (“SERP”). Messrs. Strah, Pearson, Belcher, Gaines and SchneiderNo other NEOs are not participants in the SERP. In
59 | FirstEnergy Corp.2019 Proxy Statement
January 2014, the SERP was formally closed to new entrants to better align our executive retirement benefits with current market practices. Historically, participation in the SERP was provided to certain key executives as part of the integrated compensation program intended to attract, focus, motivate, and retain top executives who are in positions to make significant contributions to our business. As of December 31, 2020, there are no active employees who are participants in the SERP. Pursuant to a historical arrangement upon their hire, Mr. Belcher is (and Mr. Reffner was) eligible to be credited with five years of additional service for purposes of calculating the nonqualified supplemental pension benefit. For more information, refer to the “Pension Benefits as of December 31, 2020” table on page 62. Retirement benefits for the NEOs are further discussed in the narrative section following the Pension Benefits table later in this proxy statement.
In July 2018, the Compensation Committee recommended, and the Board approved the Executive Voluntary Enhanced Retirement Program(“E-VERP”) for executive officers other than the CEO, including certain NEOs. Of those executives eligible, Ms. Vespoli and Mr. Pearson notified your Company that they were electing to participate in theE-VERP. The effective date of Ms. Vespoli’s and Mr. Pearson’s retirement will be April 1, 2019.
Active executive officers, other than the CEO, who are age 58 or older with at least 10 years of service as of December 31, 2018, were eligible to participate. TheE-VERP47 includes the following benefits: | FirstEnergy Corp. 2021 Proxy Statement
alump-sum payment equivalent to what the employee would have received under the FirstEnergy Severance Benefits Plan;
a continuation of health care benefits for the equivalent severance period;
a temporary pension enhancement of $1,500 monthly up to age 65, with a minimum of 24 monthly payments; and
payment of unused Paid Time Off (PTO).
In November 2018, the board of directors of FES approved the FES VERO for certain FES employees designated as “insiders” in applicable bankruptcy filings, which was accepted by Mr. Schneider. The terms of the FES VERO are substantially similar to that of theE-VERP that was implemented in July 2018. Retirements under the FES VERO began on January 2, 2019 and continue until the earlier of December 31, 2019 or the effective date of a court-approved plan of reorganization for FES. Mr. Schneider’s retirement date will be May 1, 2019.
EDCP (Elective Deferrals)
Executives, including the NEOs may elect to defer a portion of their compensation into the EDCP. ExecutivesThey may defer from 1% to 50% of base salary to a cash retirement account; from 1% to 100% of FE LTIP awards to a stock account; and from 1% to 100%85% of FE STIP awards to either a cash or stock account; and from 1% to 85% of FE LTIP awards to a stock account. The EDCP offers executives the opportunity to accumulate assets denominated both in cash and in Company common stock, on atax-favored basis. Beginning in 2017, any deferral elections to a cash or stock account made by a participant will ultimately be paid only in cash based upon his/herthe participant’s distribution elections.
Earnings on deferrals in the EDCP stock accounts of executivesNEOs track FirstEnergy shares. Earnings on deferrals into the cash retirement accounts of executivesNEOs were credited at the Moody’s Corporate Long-term Bond Yield Index rate plus 3% for funds deferred prior to 2013 and the Moody’s Corporate Long-term Bond Yield Index rate plus 1% for funds deferred in 2013 and later. Any above-market interest earnings for 2020 are included in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the SCT.
Personal Benefits and Perquisites
The Company does not provide excessive perquisites to our NEOs.
In 2018,2020, our NEOs could use the corporate aircraft for limited personal use. At Mr. Jones’ request and with Board concurrence, Mr. Jones is authorized to use either a commercial carrier or our corporate aircraft for any business or personal travel at his discretion. With CEO approval, other executives, including the NEOs, may from time to time use our corporate aircraft for personal travel, which may include family travel. We have a written policy that sets forth guidelines regarding the personal use of the corporate aircraft by executive officers and other employees in accordance with the IRS regulations and customary compensation practices.
The Compensation Committee believes the foregoing perquisite is reasonable, competitive, and consistent with our overall compensation philosophy.
60 | FirstEnergy Corp.2019 Proxy Statement
Severance Benefits upon an Involuntary Separation
In the event of an involuntary separation without cause, the CEO’s severance benefits, if any, wouldare to be determined by the Compensation Committee, in its discretion, and approved by the Board. In the case of Mr. Jones’ termination from the Company effective October 29, 2020, no severance benefits were provided to him by the Compensation Committee. The NEOs, other than the CEO,NEOs are covered in the event of an involuntary separation under the FirstEnergy Corp. Amended and Restated Executive Severance Benefits Plan (the “Severance Plan”). Upon Mr. Strah’s appointment to CEO in March 2021, he is no longer eligible to be covered under the Severance Plan in the event of an involuntary separation without cause.
The Severance Plan provides severance benefits to executives who are involuntarily separated due to the sale or closing of a facility, merger, acquisition, corporate restructuring, reduction in the workforce or job elimination. Benefits under the Severance Plan are also offered if an executive rejects a job assignment that would result in the occurrence of any one or more of the following events: (1) a 15% or greater reduction in the executives’executive’s then current base salary; (2) a requirement that the executive make a 50 mile or greater relocation from his or her current residence for reasons related to the new job; or (3) a requirement that the executive to make a 50 mile or greater change in his or her daily commute from their residence to a new reporting location. Mr. Jones and Mr. Reffner did not receive any benefits under the Severance Plan in connection with their departures from the Company.
The Severance Plan provides for three weeks’weeks of base pay for each full year of service with a minimum benefit of 52 weeks of base salary and a maximum benefit of 104 weeks of base salary. Additionally, executives who elect continuation of health care for the severance period will be provided this benefit at active employee rates.rates, not to exceed 18 months. Executives must pay taxes on any continuation of health care value in excess of what employees with the same level of service would receive under the FirstEnergy Employee Severance Benefits Plan.
CIC Plan
The Compensation Committee believes that the your Company’s Change in Control Severance Plan (“CIC PlanPlan”) is aligned with the market practices of our peer groups and it is available to all NEOs. Of the NEOs, the CIC Executives (as defined below)Mr. Strah, Mr. Taylor, Mr. Belcher, Mr. Benz, Ms. Walker and Mr. Reffner participated in the CIC Plan in 2018.2020. The initial term of the CIC Plan commenced on January 1, 2017. TheAnnually, the Committee determines if any changes need to be recommended to the Board for approval. If no changes are needed, then the CIC
48 | FirstEnergy Corp. 2021 Proxy Statement
Plan is subject to annual review bywill automatically renew for an additional year. In September 2020, the Compensation Committee determined that no changes were needed and Board, at which time the Board will determine whether to renew the term of the plan for an additional year or to affirmatively vote not to extend the term. In September 2018, the Compensation Committee recommended, and the Board approved, extending the term of the CIC Plan automatically extended to December 31, 2020.2022 by its terms. All CIC Executives, as well as allnon-NEO participants,participating NEOs are eligible for the same level of benefits, which include:
A 2X base salary plus target bonus multiplier for cash severance;
| ● | A two-times base salary plus target bonus multiplier for cash severance; |
The annual STIP paid at target, prorated for the number of days worked in the year;
| ● | The annual FE STIP paid at target, prorated for the number of days worked in the year; |
Beginning with the 2017-2019 LTIP cycle, if the LTIP is not replaced by the buyer, LTIP awards will be paid at target, prorated for the number of full months worked in the cycle;
| ● | If the FE LTIP is not replaced by the buyer, FE LTIP awards will be paid at target, prorated for the number of full months worked in the cycle; |
Outplacement services for one year following the CIC, capped at a value of $30,000; and
| ● | Outplacement services for one year following the CIC, capped at a value of $30,000; and |
Non-competition andnon-disparagement obligations that protect the Company.
| ● | Non-competition and non-disparagement obligations that protect the Company. |
There are no excise taxgross-up“gross-up” provisions. Payments are “cut back” in the event that an excise tax would otherwise apply to the safe harbor amount minus one dollar, ($1.00) unless the participant would receive greaterafter-tax proceeds absent such cutback. In such a case, the CIC Executiveparticipating NEOs will receive payment of all CIC benefits and will be responsible for paying any excise tax imposed on the payment.
Share Ownership Guidelines and Prohibitions on Hedging and Pledging Shares
We believe it is critical that the interests of executives, directors and shareholders are clearly aligned. Therefore, the Compensation Committee has continued to refinemaintains share ownership guidelines to promote meaningful stock ownership by our executives, including our continuing NEOs and directors. TheYour Company not only wants executives to meet their required share ownership levels in a timely manner, but also to build an ownership mentality and demonstrate commitment to aligning their interests with shareholders.
These guidelines specify the value of Company shares that our executives must accumulate within five years of becoming an executive officer. Additionally, effective beginning January 1, 2018, executives who are not on track to meet their required share ownership levels or have failed to achieve required share ownership levels within the five-year compliance period may be subject to the following consequences imposed at the discretion of the Compensation Committee, subject to approval by the Board:
Reduce or eliminate the annual STIP award opportunity (as necessary) and consider replacement with a discretionary stock award; and/or
| ● | Reduce or eliminate the annual FE STIP award opportunity (as necessary) and consider replacement with a discretionary stock award; and/or |
| ● | Require executives to purchase sufficient shares to meet their required share ownership levels.
|
Each executive is required to retain all Company shares earned under equity grants or purchased or accumulated until the executive meets his or her share ownership guidelines. Additionally, executives are prohibited from selling shares held in excess of the share ownership guidelines without permission from the CEO. The specific share ownership guidelines are based on a multiple of an executive officer’s base salary, with the higher multiples applicable to the executives having the highest levels of responsibility.
The share ownership multiples for the continuing NEOs in 20182020 were as follows:
| NEO | Share Ownership | |
| ||
| 4X base salary | |
| 4X base salary | |
| ||
| 3X base salary | |
| 3X base salary | |
| ||
| (1) |
|
49 | FirstEnergy Corp. 2021 Proxy Statement
To be consistent with an entirely performance-based LTIPlong-term incentive plan design, the Compensation Committee approved excluding unvested performance-adjusted RSUs are not counted as eligible shares for executives to meet their share ownership requirements.
The following types of holdings will count toward the share ownership guidelines:
Shares directly or jointly owned in certificate form or in a stock investment plan, including 60% of any unvested restricted stock;
| ● | Shares directly or jointly owned in certificate form or in a stock investment plan, including 60% of any unvested restricted stock; |
Shares owned through the FirstEnergy Corp. Savings Plan;
| ● | Shares owned through the FirstEnergy Corp. Savings Plan; |
Shares held individually or jointly by a broker, or, in certain circumstances, held in trust, or in an IRA, shares held by a spouse, or other beneficially owned shares, to the extent known by the Company; and
| ● | Shares held individually or jointly by a broker, or, in certain circumstances, held in trust, or in an IRA, shares held by a spouse, or other beneficially owned shares, to the extent known by the Company; and |
| ● | Units deferred pursuant to the EDCP. |
Units deferred pursuant to the EDCP.
As of December 31, 2018, Ms. Vespoli and Messrs. Jones, Pearson, and Gaines hadAll continuing NEOs have met their share ownership requirements. AsMr. Jones and Mr. Reffner are no longer executive officers of March 1, 2019, Mr. Strah had met his share ownership requirement but had not met his share ownership requirements by December 31, 2018. Mr. Belcher has not yet met his share ownership requirements duethe Company and are no longer subject to the increased requirements associated with his promotion in 2018. Mr. Belcher has until March 5, 2023 to meet his sharestock ownership requirements and he is well-positioned to do so within the established timeframe.guidelines. Although the Compensation Committee established share ownership guidelines for executives, such equity ownership typically does not impact the establishment of compensation levels. The Compensation Committee does review previously granted awards, both vested and unvested, that are still outstanding on a regular basis.
Hedging Policies
As described more in this section, we prohibit our employees (including officers) and directors from engaging in hedging or monetizing transactions that would allow them to own Company securities without the full risks and rewards of ownership, including economic exposure to potential decreases in the market value of Company securities.
Your Company has adopted formal policies as part of its Insider Trading Policy regarding hedging practices. The following categories of “Covered Persons” are covered by our Insider Trading Policy:
| ● | all of the Company’s directors; |
| ● | all officers (including NEOs) and employees of the Company and its affiliates and subsidiaries; and |
| ● | any other persons that the Company determines should be covered, such as contractors, consultants and professional advisors who have access to material nonpublic information. |
In addition to the Insider Trading Policy applying to Covered Persons, the following are also covered by our Insider Trading Policy:
| ● | the portfolio manager and other individuals who can trade in (or make changes in investments in) Company Securities for the Covered Persons; and |
| ● | the Covered Persons’ Related Persons (except family members who do not reside with a Covered Person — unless such family member confers with the Covered Person when making investment decisions in Company Securities or is directed, influenced or controlled by the Covered Person with respect to transactions in Company Securities); and |
| ● | any entities that the Covered Persons influence or control. |
For these purposes, we consider “Related Persons” of a Covered Person to be her family members and others who reside with her, and any family members who do not live with her but whose transactions in Company Securities are directed, influenced or controlled by her. In addition, “Company Securities” broadly includes all securities of the Company and of its direct and indirect subsidiaries, including but not limited to common stock, options, preferred stock, convertible debentures or other debt securities, and warrants (as well as derivative securities not issued by the Company or its subsidiaries, such as exchange-traded put or call options or swaps relating to any of the foregoing securities).
The Insider Trading Policy generally prohibits our directors and Section 16 Insiders, includinga Covered Person from engaging in certain transactions regarding Company Securities owned by her or that she beneficially owns, but the NEOs from pledging shares and hedging their economic exposure arising from their ownership of our common stock.Insider Trading Policy does not apply to transactions in Company Securities where such transactions are not initiated by the Covered Person or approved by her, or are not subject to her influence or control (such as mutual fund
50 | FirstEnergy Corp. 2021 Proxy Statement
transactions in Company Securities). More specifically, the prohibition on pledging, hedging or other monetization transactions for Covered Persons explicitly covers a number of possible transactions:
| ● | Company directors and Company “officers” (under Exchange Act Rule 16a-1(f)) are prohibited from engaging in short-term opposite-way trading within a six-month period; and |
| ● | Covered Persons are prohibited from engaging in short sales, trading in market-based put and call options or other non-compensatory derivative securities, or engaging in specific hedging and monetization transactions, such as prepaid variable forward contracts, equity swaps, collars and exchange funds. |
In addition, under the Insider Trading Policy, certain “Designated Insiders” (Company directors, Company “Executive Officers” under Exchange Act Rule 3b-7, Company “officers” under Exchange Act Rule 16a-1(f), members of the Company’s executive council, members of its disclosure committee and certain other employees with regular access to financial information or otherwise as identified from time to time by the Company), are prohibited from holding Company Securities in a margin account, pledging Company Securities as collateral for a loan, or placing standing or limit orders on Company Securities that remain effective after the day on which they are placed (apart from Company-authorized Rule 10b5-1 trading plans). Other Covered Persons may place standing or limit orders on Company Securities that remain effective after the day on which they are placed, but only for short durations and in a manner that complies with Company restrictions and procedures set forth in the Insider Trading Policy (such as pre-clearance procedures).
Clawback Policy
Your Company has a clawback policy (its “Recoupment Policy”) that covers all current or former employees who are deemed to beExecutive Officers, Section 16 Insiders.Officers and other selected executives. In 2019, the Compensation Committee approved enhancements to the Recoupment Policy to continue the previously existing clawback provisions in the event of a financial restatement of the Company, and to include clawback provisions in the event of certain other detrimental activity, as defined in the Recoupment Policy, resulting in significant operational, financial or reputational harm to the Company as determined in good faith by the Compensation Committee. In the event that yourthe Company is required to file a financial restatement due to material noncompliance with financial reporting requirements under U.S. securities laws, regardless of misconduct or contribution to the restatement requirement, the clawback policy allows for recoupment of all incentive-based compensation granted, vested or earnedaccrued after January 1, 2014, and during the three-year period preceding the filing of the accounting restatement, to the extent such compensation received exceeded what would have been received based on the corrected data relating to the restatement. In addition, the policy grants authority toevent of significant or material operational, financial or reputational harm resulting from an executive’s detrimental activity, the Board and/or Compensation Committee may direct the Company to seek repaymentrecoup from executives, reducesuch executive incentive-based compensation granted, vested or accrued in an amount as reasonably determined by the amount otherwise payable under another Company benefit plan as allowed by law, withhold future incentive compensation, or a combination of these actions.
62 | FirstEnergy Corp.2019 Proxy Statement
Compensation Committee in good faith.
Risk Assessment of Compensation Programs
At the request of the Compensation Committee, completed on an annual basis, management assessed the risks associated with our compensation policies, practices, and programs for employees. In addition, management paid particular attention to those programs that allow for variable payouts where an employee may potentially be able to influence payout factors in those programs. The Compensation Committee reviewed management’s assessment and concurred with its conclusions. Based on this assessment, the Compensation Committee concluded that the risks associated with our compensation policies and practices are not reasonably likely to have a material adverse effect on your Company.
The Compensation Committee and management designed our compensation programs to align our executives’ interests with the long-term interests of our shareholders without encouraging excessive risk taking. In this regard, our compensation structure contains various features intended to mitigate excessive risk taking. These features include, among others:
The mix of compensation among base salary, and short- and long-term incentive programs is not overly weighted toward short-term incentives, and thus, does not encourage excessive risk taking;
| ● | The mix of compensation among base salary, and short- and long-term incentive programs is not overly weighted toward short-term incentives, and thus, does not encourage excessive risk taking; |
Our annual incentive compensation is based on multiple, diversified performance metrics, including financial, safety/operational, and business unit measures that are consistent with our long-term goals;
| ● | Our annual incentive compensation is based on multiple, diversified performance metrics, including financial, safety/operational, diversity, and business unit measures that are consistent with our long-term goals; |
51 | FirstEnergy Corp. 2021 Proxy Statement
Other than for Mr. Schneider and Mr. Belcher, our long-term incentive compensation in 2018 consisted entirely of performance-adjusted RSUs that vest over a three-year period, emphasizing the achievement of performance over a longer time horizon;
The Compensation Committee oversees our compensation policies and practices and is responsible for reviewing, approving and/or recommending for approval by the Board, where necessary, executive compensation, including annual incentive compensation plans applicable to senior management employees and other compensation plans, as appropriate; and
| ● | Our long-term incentive compensation in 2020 consisted entirely of performance-adjusted RSUs that vest over a three-year period, emphasizing the achievement of performance over a longer time horizon; |
| ● | The Compensation Committee oversees our compensation policies and practices and is responsible for reviewing, approving and/or recommending for approval by the Board, where necessary, executive compensation, including annual incentive compensation plans applicable to senior management employees and other compensation plans, as appropriate; and |
Certain of our executives are required to own a specified level of shares to comply with share ownership guidelines, encouraging a long-term focus on enhancing shareholder value.
| ● | Certain of our executives are required to own a specified level of shares to comply with share ownership guidelines, encouraging a long-term focus on enhancing shareholder value. |
Additionally, our ChiefVice President, Risk Officerand Internal Auditing participated in the discussion with senior management regarding the establishment of goals and their weightings and measurements for our short- and long-term incentive compensation programs and the 20182020 performance results. The ChiefVice President, Risk Officerand Internal Auditing provided his view to the Compensation Committee that:
The measurement of 2018 performance results was conducted in accordance with prescribed methodologies and precluded any beneficiary from controlling the calculation;
| ● | The measurement of 2020 performance results were conducted in accordance with prescribed methodologies and precluded any beneficiary from controlling the calculation; |
Proposed goals would not create inappropriate incentives or inadvertently encourage willingness to embrace risk exposures other than those we encounter in the normal course of our business;
| ● | Proposed goals would not create inappropriate incentives or inadvertently encourage willingness to embrace risk exposures other than those we encounter in the normal course of our business; |
By avoiding individually based goals or goals applicable only to a small group of employees, the risk of encouraging inappropriate behavior is greatly mitigated; and
| ● | By avoiding individually based goals or goals applicable only to a small group of employees, the risk of encouraging inappropriate behavior is greatly mitigated; and |
There are adequate controls in place so that the beneficiary of any incentive payout cannot unilaterally control the measurement methodology.
| ● | There are adequate controls in place so that the beneficiary of any incentive payout cannot unilaterally control the measurement methodology. |
For additional information regarding your Company’s risk management process and your Board’s role in risk oversight, see the related discussion in the “Corporate Governance and Board of Directors Information” section of this proxy statement.
Impact of Tax Requirements on Compensation
The Compensation Committee is responsible for addressing pay issues associated with Section 162(m) of the IRC which section generally limits the tax deduction to $1 million for certain compensation paid to certain of our executive officers (and, beginning in 2018, certain former executive officers). Historically, compensation that qualified as “performance-based compensation” could be excluded from this $1 million limit. This exception has now beenwas repealed, effective for taxable years beginning after December 31, 2017, except for certain compensation arrangements in place as of November 2, 2017 for which transition relief is available. The Compensation Committee and your Board sought from time to time to potentially qualify certain executive compensation as tax deductible under Section 162(m) as in effect prior to 2018, where we believed it was in
63 | FirstEnergy Corp.2019 Proxy Statement
our best interest and in the best interest of our shareholders. However, we have not permitted this tax provision to distort the effective development and execution of our compensation program in the past, nor will we in the future.
We continue to evaluate the impact of the recent revisions to Section 162(m) of the IRC for their potential impact on your Company. Regardless of that impact, however, we will continue to design and maintain executive compensation arrangements that we believe will attract, retain, focus, and reward the executive talent that we need to compete successfully, even if in certain cases such compensation is not deductible for federal income tax purposes. In addition, because of the continued development of the application and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m), as in effect prior to 2018, will in fact be deductible.
6452 | FirstEnergy Corp.20192021 Proxy Statement
KPI Results and RSU Index Scores
2016 – 2018 Cycle FE LTIP Details
| 2016 | 2017 (except Mr. Belcher and Mr. Schneider) | 2018 (except Mr. Schneider) | Totals | |||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold | Target | Stretch | Result | Threshold | Target | Stretch | Result | Threshold | Target | Stretch | Result | |||||||||||||||||||||||||||||||||||||||||
Capital Effectiveness Index(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
FE Consolidated | 11.16% | 11.43% | 11.69% | 11.79% | 14.55% | 14.94% | 15.47% | 15.05% | 3.64% | 3.91% | 4.29% | 4.29% | ||||||||||||||||||||||||||||||||||||||||
CES | 7.58% | 7.81% | 8.10% | 8.27% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Distribution | 14.63% | 14.89% | 15.17% | 15.67% | 16.85% | 17.14% | 17.60% | 17.25% | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Transmission | 10.88% | 11.26% | 11.45% | 11.33% | 11.28% | 11.51% | 11.87% | 11.54% | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Total Points | 5.68 | 3.26 | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||
RSU Index Score (A) | 1.42 | 1.09 | 1.50 | 4.01 | ||||||||||||||||||||||||||||||||||||||||||||||||
| FFO/Adjusted Debt Index(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
FE Consolidated | 14.62% | 15.12% | 15.62% | 15.91% | 18.37% | 19.09% | 20.11% | 19.21% | 16.08% | 16.83% | 17.91% | 18.83% | ||||||||||||||||||||||||||||||||||||||||
CES | 20.44% | 21.10% | 21.80% | 21.83% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Distribution | 21.89% | 22.47% | 23.07% | 24.94% | 34.74% | 35.71% | 37.27% | 38.02% | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Transmission | 15.63% | 16.79% | 17.98% | 16.84% | 20.00% | 20.66% | 21.70% | 21.26% | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Total Points | 5.52 | 3.85 | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||
RSU Index Score (B) | 1.38 | 1.28 | 1.50 | 4.16 | ||||||||||||||||||||||||||||||||||||||||||||||||
Safety Total Points(1) | 1.26 | 0.88 | 0.71 | 0.59 | 1.21 | 0.89 | 0.45 | 0.99 | 1.22 | 0.82 | 0.55 | 0.80 | ||||||||||||||||||||||||||||||||||||||||
RSU Index Score (C) | 1.50 | 0.84 | 1.04 | 3.38 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total RSU Index Score (A+B+C) | 4.30 | 3.21 | 4.04 | 11.55 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
For Mr. Belcher, the 2016 and 2018 KPIs under the FE LTIP and results are as shown on the tables above, with total points of 4.30 for 2016 and 4.04 for 2018. For the 2017 year of the outstanding 2016-2018 cycle under the FE LTIP, the KPIs are the same as those used in the 2017 FESR-LTIP with total points of 4.31 as shown in the table below.
65 | FirstEnergy Corp.2019 Proxy Statement
2016 – 2018 Cycle FES LTIP Details for Mr. Schneider (and 2017 results for Mr. Belcher)
| 2016 | 2017 | 2018 | Totals | |||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold | Target | Stretch | Result | Threshold | Target | Stretch | Result | Threshold | Target | Stretch | Result | |||||||||||||||||||||||||||||||||||||||||
Capital Effectiveness Index(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
FE Consolidated | 11.16% | 11.43% | 11.69% | 11.79% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
CES | 7.58% | 7.81% | 8.10% | 8.27% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Distribution | 14.63% | 14.89% | 15.17% | 15.67% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Transmission | 10.88% | 11.26% | 11.45% | 11.33% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Total Points | 5.68 | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||
RSU Index Score (A) | 1.42 | n/a | n/a | 1.42 | ||||||||||||||||||||||||||||||||||||||||||||||||
| FFO/Adjusted Debt Index(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
FE Consolidated | 14.62% | 15.12% | 15.62% | 15.91% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
CES | 20.44% | 21.10% | 21.80% | 21.83% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Distribution | 21.89% | 22.47% | 23.07% | 24.94% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Regulated Transmission | 15.63% | 16.79% | 17.98% | 16.84% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
Total Points | 5.52 | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||
RSU Index Score (B) | 1.38 | n/a | n/a | 1.38 | ||||||||||||||||||||||||||||||||||||||||||||||||
Safety Total Points(1) | 1.26 | 0.88 | 0.71 | 0.59 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||
RSU Index Score (C) | 1.50 | n/a | n/a | 1.50 | ||||||||||||||||||||||||||||||||||||||||||||||||
FES, Fossil and Nuclear O&M and Capital Spend ($ mil)(1) | n/a | n/a | n/a | n/a | $1,124 | $1,071 | $1,017 | $972 | $1,066 | $1,055 | $1,002 | $877 | ||||||||||||||||||||||||||||||||||||||||
RSU Index Score (D) | n/a | 1.50 | 1.50 | 3.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
FES, Fossil & FENOC Safety | n/a | n/a | n/a | n/a | 0.44 | 0.31 | 0.13 | 0.20 | 0.49 | 0.29 | 0.14 | 0.32 | ||||||||||||||||||||||||||||||||||||||||
RSU Index Score (E) | n/a | 1.31 | 0.93 | 2.24 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nuclear UCF(1) | n/a | n/a | n/a | n/a | 89.3% | 89.8% | 90.3% | 92.3% | 91.6% | 92.1% | 92.6% | 94.6% | ||||||||||||||||||||||||||||||||||||||||
RSU Index Score (F) | n/a | 1.50 | 1.50 | 3.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total RSU Index Score (A+B+C+D+E+F) | 4.30 | 4.31 | 3.93 | 12.54 | ||||||||||||||||||||||||||||||||||||||||||||||||
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For Mr. Schneider, the 2016 KPIs under the FE LTIP and results are as shown on the table above, with total points of 4.30 for 2016. For the 2017 year of the FES LTIP, the KPIs are the same as those used in the 2017 FESR-LTIP for FES participants with total points of 4.31. For the 2018 year of the FES LTIP, the KPIs are the same as those originally used in the 2018 AIP for FES participants with total points of 3.93.
66 | FirstEnergy Corp.2019 Proxy Statement
Average Capital Effectiveness: Regulated Distribution/Regulated Transmission and Corporate/Other average capital effectiveness measuresMeasures the financial effectiveness of investment in operational assets over the 2018-2020 cycle.time. Creates a direct line of sight for executives to balance the value of our investments with the earnings they produce and create value for shareholders. It is a ratio of Operating Earnings over Net PlanPlant in Service (NPIS)(“NPIS”) plus Construction Work in Progress (CWIP)(“CWIP”). Operating Earnings are an important measure of profitability. The NPIS plus CWIP is the value of the assets being used to generate revenues and profits. A high ratio indicates the business generates larger returns on its investment in operational assets and vice versa.
Corporate/Other: The index is based on the ratio for Regulated Distribution/Regulated Transmissionand Corporate/Other business segments. External segment reporting is consistent with the internal financial reports to regularly assess performance of the business and allocate resources.
Capital Effectiveness Index:Measures the financial effectiveness of the Company’s investment in operational assets. The Capital Effectiveness Index is anon-GAAP financial measure representing a ratio of Adjusted EBITDA over NPIS less nuclear fuel plus CWIP. The index is based on the ratios for FE Consolidated (excluding CES) and the RegulatedDistribution/Regulated Transmissionbusiness segments. Adjusted EBITDA is also anon-GAAP financial measure and consists of Operating Earnings before interest, investment income, taxes, depreciation and amortization. NPIS less nuclear fuel plus CWIP is the value of the assets the Company is using to generate revenues and profits.
For purposes of calculating the Capital Effectiveness Index (1) anyyear-end adjustments to capital from pension/other postemployment benefitsmark-to-market and any reclassifications of items from Property, Plant and Equipment to the balance sheet are excluded from NPIS, and (2) excluded from KPI Operating Earnings is the summation of all major storm costs over $93.95 million (for 2016), over $91.7 million (for 2017), and over $105.5 (for 2018). For 2018, in the event of an impairment of an asset or assets that impact NPIS or CWIP, and which was not assumed in the original assumptions, the impairment charge will be excluded from the calculation.
CES:The Competitive Energy Services business segment. Refers collectively to FES, AE Supply, FirstEnergy Nuclear Operating Company, Bay Shore Power Company, Warrenton River Terminal, Ltd., Allegheny Pittsburgh Coal Company, Green Valley Hydro, LLC, and GPU Nuclear, Inc.
CIC Executives: Mr. Strah, Mr. Pearson, Ms. Vespoli, Mr. Belcher, Mr. Gaines and Mr. Schneider.
Controllable Regulated Distribution/Regulated Transmission, and Regulated Fossil Generation O&M: Measures Regulated Distribution, Regulated Transmission, and Regulated Fossil controllable costs of Labor and Other-than-Labor cost based upon the 2018 Budget.
CWIP:Construction Work in Progress.
DART Rate:OSHA-Recordable IncidentsOSHA-recordable incidents that involve days away from work, days of restricted work activity, and/or days of job transfer in the period per 100 employees. DART cases are work-related injuries or illnesses that result in at least one day of lost time, transfer or restriction excluding the day of injury.
Detrimental Activity: Refers to an executive officer’s: (i) use for profit or disclosure to unauthorized persons of confidential information or trade secrets of the Company or any of its subsidiaries; (ii) breach of any contract with or violation of any fiduciary obligation to the Company or any of its subsidiaries, that results in (or was reasonably likely to result in) significant operational, financial or reputational harm (generally meaning behaviors resulting in financial harm or reputational damage to the Company or any of its subsidiaries) to the Company or any of its subsidiaries, such breach or violation may include, but is not limited to, engagement in any unethical conduct, fraud, dishonesty, violations of Company policy or the law, recklessness, gross negligence, failure to act, or other misconduct including but not limited to sexual harassment or misconduct, data security violations, or criminal activities; or (iii) engagement in conduct described in (ii) above that, even absent a breach of contract or violation of any fiduciary duty, is (or was reasonably likely to be) materially detrimental to the Company or any of its subsidiaries; in each case as determined by the Compensation Committee reasonably and in good faith.
Diversity and Inclusion Index: Measures diverse succession planning, diverse hiring, and improvement on inclusion survey scoring. Measures earn points based on the level of performance, andperformance; all components within the index are weighted equally. For the purposes of this KPI, diverse“diverse” is defined as female, and historically under-represented racial and ethnic demographic groups (Black and African American, Alaskan Native, Asian American, Native Hawaiian and other Pacific Islander, people of two or more races;races, Hispanic and Latino ethnicity), LGBTQIA (Lesbian, Gay, Bisexual, Transgender, Queer/Questioning, Intersex, and Asexual), and/or Disabled.
Environmental Excursions:Excursions and Notices of Violation (‘NOVs’): Measures issues related to air emissions, water discharges andor other unauthorized releases from facilities, that exceed the allowable limitations, conditions or deadlines established in the facilities’ environmental permits.
FE Consolidated:Refers collectively to Regulated Distribution, Regulated Transmission permits and Corporate/other, excluding CES.
FE Products Customer Acquisition Growth:As applicable NOVs issued by a lean startup, FE Products,Federal, State or Local Regulatory Agency for the Marketing & Product Development department, needs to prioritize our systems for successful operations and start to demonstrate increased customer acceptanceviolation of our product catalog. Building customer relationships is critical to the success of the business, thus FE Products will benchmark success by measuring net customer acquisition against defined targets developed from year-over-year analysis. This measure demonstrates the effectiveness of our marketing efforts, products development, and operational efficiency.
67 | FirstEnergy Corp.2019 Proxy Statement
FE Shared Service O&M: Measures Share Service controllable costs of Labor and Other-than-Labor costs based on the 2018 Budget.
FES, Competitive Fossil and Nuclear O&M and Capital Spend:A financial metric that monitors spending and focuses on overall cash flow and liquidity. It is measured using the Cost Owner O&M and Capital reports. FES O&M labor adders exclude AIP and special items adjusted in the FE Corp.an environmental law or FESnon-GAAP Operating Earnings, cost associated with restructuring the business (Operating Earnings), gains or losses on fuel or fuel-related contracts, litigation costs and impacts, andnon-cash items not reflected in the plan. Excludes items that are a reclassification between Commodity Margin to O&M, including, but not limited to, items such as a station power recall.
FFO/Adjusted Debt Index:Measures annual cash flow generated by the business in comparison to its outstanding debt and is used by credit rating agencies to evaluate the creditworthiness of the Company. Focuses on improving cash position and balance sheet, since cash flows and current debt levels have been an area of focus by our investors.
The index is anon-GAAP financial measure and is based on the ratios for FE Consolidated (excluding CES unless otherwise noted) and the Regulated Distribution/Regulated Transmission business segments. FFO is also anon-GAAP financial measure and consists of net income adjusted for depreciation and amortization, investment impairment, pension and OPEBmark-to-market adjustment, deferred taxes, asset removal costs charged to income, and certain othernon-cash items. Adjusted Debt is also anon-GAAP financial measure and consists of short-term borrowings (net of pension contribution), long-term debt (excluding securitized debt), and operating lease obligations.
The FFO/Adjusted Debt Index excludes the following in 2018: (i) The impact of all Special Items that are excluded from Operating Earnings shall be excluded from FFO and Adjusted Debt, (ii) The impact of refunds provided to customers associated with tax reform, (iii) Major storm costs that exceed the budgeted amounts of $105 million per year ($51 million from Capital and $54 million from O&M), (iv) Preferred dividends (v) The impact of strategic decisions (e.g. divestitures, acquisitions) including associated tax impacts, (vi) All costs associated with the early redemption, or repurchase, or remarketing of debt, (vii) Contributions to the pension plan, (viii) Unfunded pension/OPEB liability and securitized debt, (ix) Impact on taxes due to asset sales and corporate reorganizations/restructurings, and (x) Impact of tax payments and receipts under the intercompany tax sharing arrangement.regulation.
First Call Resolution:MeasuresTransactional voice of customer survey that measures the percent of customer inquiriesissues resolved within one callon a single interaction with a contact center transaction, based on customer feedback from a transactional survey of residential and small commercial customers who have interacted with FirstEnergy’s Contact Center.representative.
KPI (Key Performance Indicators): Financial or operational metrics used to measure Company performance and aligned to our key business objectives. KPIs are used in setting threshold, target and stretch performance goals for our incentive compensation programs.
LCEs:Life Changing Events include life-threatening work-related injuries or illnesses that actually required immediate life-preserving rescue action, and if not applied immediately would likely have resulted in the death of that person; life-altering work-related injuries or illnesses that actually resulted in a permanent and significant loss of a major body part or organ, or function thereof, that permanently changes or disables that person’s normal life activity; and work-related fatalities.
NPIS:Net Plant in Service.
Nuclear UCF:Ratio of the nuclear energy generation produced over a given period of time compared to the reference energy generation (potential energy generation) over the same time.
Reference energy generation is the energy that could be produced if the unit were operated continuously at full power under reference ambient conditions. Monitors progress in attaining high unit and industry energy production reliability and reflective effectiveness of plan programs and practices in maximizing available electrical generation and provides an overall indication of how well plants are operated and maintained.
Operating Earnings: Regulated Distribution/Regulated Transmission and Corporate/Other Operating Earnings is based on the 2018 Budget. It(non-GAAP) is calculated using the aggregate GAAP earnings of our Regulated Distribution/Regulated Transmission and Corporate/Other reporting segments, adjusted for special items.items that are consistent with the Company’s external operating earnings (non-GAAP) reporting. Results for 2020 will exclude coststhe following: (i) the impacts associated with restructuring the
53 | FirstEnergy Corp. 2021 Proxy Statement
business or other strategic decisions including the impactassociated tax impacts, (ii) non-deferred major storm O&M expenses above or below the budgeted amount of tax reform$38 million, and any refunds provided to customers associated with tax reform.(iii) the impacts of legal reserves or related expenses. External segment reporting is consistent with the internal financial reports to regularly assess performance of the business and allocate resources.
68 | FirstEnergy Corp.2019 Proxy Statement
Beginning in 2018, Regulated Operating(non-GAAP) Earnings (loss), which is anon-GAAP financial measure used in the guidance provided in February 2018, is referred to as Operating Earnings (loss).
Operating EPS: Regulated Distribution/Regulated Transmission and Corporate/Other Operating EPS is measuredMeasured on the performance of the business units’ contribution to Operating Earningsoperating earnings growth over the course of 2018-2020.2020-2022, including RD, RT, and Corporate/Other segments. Results for 2020 will exclude the following: (i) the impact of all Special Items that are excluded from non-GAAP Operating Earnings, (ii) the impacts associated with restructuring the business or other strategic decisions including the associated tax impacts, (iii) non-deferred major storm O&M expenses above or below the budgeted amount of $38 million, and (iv) the impacts of legal reserves or related expenses. External segment reporting is consistent with the internal financial reports to regularly assess performance of the business and allocate resources.
Beginning in 2018, Regulated Operating Earnings (loss) per share, which is anon-GAAP financial measure used in the guidance provided in February 2018, is referred to as Operating Earnings (loss) per share.
Operations Index:Metric made up of the follow sixfollowing five components, weighted equally. Referequally (refer to each component for a separate definition.definition):
| 1. |
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| 2. |
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| 3. | First Call |
| 4. |
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| 5. |
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OSHA Recordable Incidents:Reg Gen EFOR:Measures The percentage of generation that was not available versus the OSHA-recordable incidents in the period per 100 employees. OSHA- recordable incidents are accidents that result in medical treatment, or at least one dayamount of lost time or restricted duty excluding the day of injury, or an employee fatality. Includes all incidents that were resolved and reported on the 2018 OSHA log by January 2, 2019. The calculation is defined as:
= (# of incidents x 200,000 Hours) ÷ Number of Actual Productive Hours Worked
The 200,000 hours is a constant that represents the equivalent of 100 employees working 40 hours per week, 50 weeks per year, and provides the standard base for the incidence rates, as per the Bureau of Labor Statistics. Target is based ontop-quartile, Stretch is based ontop-decile, and Threshold is based on the industry average OSHA rates for all EEI Companies participating in the survey (relevantunit was requested to each business unit) as reported in the 2016 EEI Health and Safety Survey.be online.
Regulated Distribution (formerly FEU):or RD: The Regulated Distribution business segment. Refers collectively to The Cleveland Electric Illuminating Company, Jersey Central Power & Light Company, Metropolitan Edison Company, Monongahela Power Company, Ohio Edison Company, The Potomac Edison Company, Pennsylvania Power Company, Pennsylvania Electric Company, The Toledo Edison Company, and West Penn Power Company.
RSUs (Restricted Stock Units): An equity vehicle commonly used in long-term incentive programs to reward employees and promote ownership within the company.Company. RSUs represent the right to receive future delivery of actual stock or cash subject to vesting restrictions (service-based and/or performance-based).
Regulated Transmission (formerly FET):or RT: The Regulated Transmission business segment. Refers collectively to FirstEnergy Transmission, LLC, and its subsidiaries, American Transmission Systems, Incorporated, Potomac-Appalachian Transmission Highline, LLC, Trans-Allegheny Interstate Line Company, andMid-Atlantic Interstate Transmission.
RTSR (Relative Total Shareholder Return Modifier)Return): The total return of a stock to a shareholder for our Company measured against the total return of stock for other companies within a selected peer group. The calculation is based on a set period (e.g., three years) and assumes that dividends are reinvested over this period. RTSR is a common performance measure used within long-term incentive plans and helps to align executive payouts to shareholder value creation.
SAIDI:Distribution System Average Interruption Duration Index is the average total duration of outage minutes in a year for each customer served adjusted for major storms.
Systemwide O&M: Measures RD, RT, and Corporate/Other non-deferred labor and other-than-labor costs.
TOF:Transmission Outage Frequency measures the transmission line frequency of outages (total number of transmission circuit outages divided by average number of circuits) on 100kV to 500kV circuits after adjustment for major events (Six Sigma)). Transmission circuit outages are defined as any loss of flow, momentary or sustained, that is a result of an automatic switching operation. Scheduled outages, emergency forced outages, and operational outages are excluded from the calculation.
TSR (Total Shareholder Return): A measure of stock price appreciation and dividend payments over a period of time.
6954 | FirstEnergy Corp.20192021 Proxy Statement
20182020 Summary Compensation Table
The following table summarizes the total compensation paid to or earned by each of our NEOs for the fiscal years ended December 31, 2018, 2017,2020, 2019, and 2016,2018, as applicable:
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | SEC Total Without Change In Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | |||||||||||||||||||||||||||||
Charles E. Jones President & CEO | 2018 | $ | 1,136,113 | $ | 0 | $ | 7,018,621 | $ | 1,662,674 | $ | 1,265,019 | $ | 40,701 | $ | 11,123,128 | $ | 9,858,109 | |||||||||||||||||||||
| 2017 | $ | 1,136,113 | $ | 0 | $ | 6,208,144 | $ | 1,383,655 | $ | 6,530,282 | $ | 23,691 | $ | 15,281,885 | $ | 8,751,603 | ||||||||||||||||||||||
| 2016 | $ | 1,133,840 | $ | 0 | $ | 6,650,012 | $ | 2,017,755 | $ | 4,280,377 | $ | 35,766 | $ | 14,117,750 | $ | 9,837,373 | ||||||||||||||||||||||
Steven E. Strah SVP & CFO | 2018 | $ | 594,835 | $ | 0 | $ | 1,602,699 | $ | 574,240 | $ | 696,989 | $ | 26,749 | $ | 3,495,512 | $ | 2,798,523 | |||||||||||||||||||||
| 2017 | $ | 561,539 | $ | 0 | $ | 1,097,892 | $ | 425,641 | $ | 1,875,015 | $ | 16,888 | $ | 3,976,975 | $ | 2,101,960 | ||||||||||||||||||||||
| 2016 | $ | 553,286 | $ | 0 | $ | 1,068,229 | $ | 572,845 | $ | 1,130,263 | $ | 17,736 | $ | 3,342,359 | $ | 2,212,096 | ||||||||||||||||||||||
James F. Pearson EVP, Finance | 2018 | $ | 662,214 | $ | 0 | $ | 2,402,070 | $ | 758,454 | $ | 55,023 | $ | 17,838 | $ | 3,895,599 | $ | 3,840,576 | |||||||||||||||||||||
| 2017 | $ | 662,214 | $ | 0 | $ | 2,124,671 | $ | 662,943 | $ | 2,512,687 | $ | 15,451 | $ | 5,977,966 | $ | 3,465,279 | ||||||||||||||||||||||
| 2016 | $ | 659,884 | $ | 0 | $ | 2,067,302 | $ | 872,616 | $ | 2,057,418 | $ | 13,725 | $ | 5,670,945 | $ | 3,613,527 | ||||||||||||||||||||||
Leila L. Vespoli | 2018 | $ | 761,286 | $ | 0 | $ | 2,200,498 | $ | 823,483 | $ | 322,011 | $ | 16,372 | $ | 4,123,650 | $ | 3,801,639 | |||||||||||||||||||||
EVP, Corporate Strategy, | 2017 | $ | 761,286 | $ | 0 | $ | 1,946,403 | $ | 719,783 | $ | 1,681,039 | $ | 9,100 | $ | 5,117,611 | $ | 3,436,572 | |||||||||||||||||||||
Regulatory Affairs & Chief Legal Officer | 2016 | $ | 758,606 | $ | 0 | $ | 1,893,841 | $ | 957,707 | $ | 1,249,581 | $ | 9,050 | $ | 4,868,785 | $ | 3,619,204 | |||||||||||||||||||||
Samuel L. Belcher SVP & President, FE Utilities | 2018 | $ | 548,060 | $ | 434,700 | $ | 1,503,221 | $ | 506,951 | $ | 101,296 | $ | 11,087 | $ | 3,105,315 | $ | 3,004,019 | |||||||||||||||||||||
Bennett L. Gaines SVP, Corporate Services & Chief Information Officer | 2018 | $ | 442,051 | $ | 0 | $ | 626,379 | $ | 365,657 | $ | 0 | $ | 8,062 | $ | 1,442,149 | $ | 1,442,149 | |||||||||||||||||||||
Donald R. Schneider President, FE Solutions | 2018 | $ | 536,470 | $ | 0 | $ | 0 | $ | 1,794,568 | $ | 599,377 | $ | 12,194 | $ | 2,942,609 | $ | 2,343,232 | |||||||||||||||||||||
| 2017 | $ | 536,470 | $ | 0 | $ | 0 | $ | 1,214,304 | $ | 1,081,398 | $ | 9,650 | $ | 2,841,822 | $ | 1,760,424 | ||||||||||||||||||||||
| 2016 | $ | 537,940 | $ | 0 | $ | 968,211 | $ | 561,750 | $ | 951,841 | $ | 11,550 | $ | 3,031,292 | $ | 2,079,451 | ||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | SEC Total Without Change In Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | |||||||||||||||||||||||||||||
Steven E. Strah | 2020 | $ | 776,058 | $ | 0 | $ | 1,614,667 | $ | 852,146 | $ | 2,527,603 | $ | 21,758 | $ | 5,792,232 | $ | 3,264,629 | |||||||||||||||||||||
President & CEO | 2019 | $ | 643,599 | $ | 0 | $ | 1,545,570 | $ | 626,590 | $ | 3,189,722 | $ | 28,647 | $ | 6,034,128 | $ | 2,844,406 | |||||||||||||||||||||
| 2018 | $ | 594,835 | $ | 0 | $ | 1,602,699 | $ | 574,240 | $ | 696,989 | $ | 26,749 | $ | 3,495,512 | $ | 2,798,523 | ||||||||||||||||||||||
K. Jon Taylor | 2020 | $ | 521,807 | $ | 0 | $ | 692,019 | $ | 414,591 | $ | 329,051 | $ | 24,759 | $ | 1,982,227 | $ | 1,653,176 | |||||||||||||||||||||
SVP & CFO | ||||||||||||||||||||||||||||||||||||||
Samuel L. Belcher | 2020 | $ | 647,132 | $ | 0 | $ | 1,491,410 | $ | 487,501 | $ | 671,168 | $ | 12,228 | $ | 3,309,439 | $ | 2,638,271 | |||||||||||||||||||||
SVP & President, FE | 2019 | $ | 604,308 | $ | 0 | $ | 1,327,003 | $ | 540,575 | $ | 667,407 | $ | 13,650 | $ | 3,152,943 | $ | 2,485,536 | |||||||||||||||||||||
Utilities | 2018 | $ | 548,060 | $ | 434,700 | $ | 1,503,221 | $ | 506,951 | $ | 120,352 | $ | 11,087 | $ | 3,124,371 | $ | 3,004,019 | |||||||||||||||||||||
Gary D. Benz | 2020 | $ | 410,804 | $ | 0 | $ | 660,517 | $ | 266,501 | $ | 636,996 | $ | 50,093 | $ | 2,024,911 | $ | 1,387,915 | |||||||||||||||||||||
SVP, Strategy | ||||||||||||||||||||||||||||||||||||||
Christine L. Walker | 2020 | $ | 407,423 | $ | 0 | $ | 520,405 | $ | 246,000 | $ | 1,226,402 | $ | 11,865 | $ | 2,412,095 | $ | 1,185,693 | |||||||||||||||||||||
SVP & Chief Human Resources Officer | ||||||||||||||||||||||||||||||||||||||
Charles E. Jones(1) | 2020 | $ | 944,997 | $ | 0 | $ | 6,028,833 | $ | 0 | $ | 2,988,951 | $ | 104,175 | $ | 10,066,956 | $ | 7,078,005 | |||||||||||||||||||||
Former President & CEO | 2019 | $ | 1,136,113 | $ | 0 | $ | 6,247,802 | $ | 1,615,111 | $ | 5,611,583 | $ | 74,050 | $ | 14,684,659 | $ | 9,073,076 | |||||||||||||||||||||
| 2018 | $ | 1,136,113 | $ | 0 | $ | 7,018,621 | $ | 1,662,674 | $ | 1,265,019 | $ | 40,701 | $ | 11,123,128 | $ | 9,858,109 | ||||||||||||||||||||||
Robert P. Reffner(1) | 2020 | $ | 513,083 | $ | 0 | $ | 1,132,573 | $ | 0 | $ | 622,090 | $ | 42,011 | $ | 2,309,757 | $ | 1,687,667 | |||||||||||||||||||||
Former SVP & Chief Legal Officer | 2019 | $ | 537,594 | $ | 0 | $ | 973,901 | $ | 463,918 | $ | 479,043 | $ | 13,435 | $ | 2,467,891 | $ | 1,988,848 | |||||||||||||||||||||
| (1) | Mr. |
| (2) | The amounts set forth in the |
| (3) | The amounts set forth in the |
| (4) | The amounts set forth in the |
55 | FirstEnergy Corp. 2021 Proxy Statement
| (5) | The following table sets forth detail about the amounts |
| Name | 401(k) Employer Contributions ($) (a) | Health Care Employer Contributions ($) (b) | Wellness Program ($) (c) | Charitable Matching ($) (d) | Group Personal Excess Liability ($) (e) | Life Insurance ($) (f) | Personal Aircraft Usage ($) (g) | Payments Upon Termination/ Separation ($) (h) | Total ($) | |||||||||||||||||||||||||||
Steven E. Strah | $ | 8,550 | $ | 1,000 | - | - | $ | 1,130 | $ | 1,357 | $ | 9,721 | - | $ | 21,758 | |||||||||||||||||||||
K. Jon Taylor | $ | 8,382 | $ | 1,000 | - | - | $ | 1,130 | $ | 857 | $ | 13,390 | - | $ | 24,759 | |||||||||||||||||||||
Samuel L. Belcher | $ | 8,550 | $ | 1,000 | - | $ | 620 | $ | 1,130 | $ | 928 | - | - | $ | 12,228 | |||||||||||||||||||||
Gary D. Benz | $ | 8,550 | $ | 1,000 | $ | 600 | $ | 5,000 | $ | 1,130 | $ | 585 | $ | 33,228 | - | $ | 50,093 | |||||||||||||||||||
Christine L. Walker | $ | 8,550 | $ | 1,000 | $ | 600 | - | $ | 1,130 | $ | 585 | - | - | $ | 11,865 | |||||||||||||||||||||
Charles E. Jones | $ | 8,550 | $ | 1,000 | - | $ | 2,000 | $ | 1,130 | $ | 1,052 | $ | 62,203 | $ | 28,240 | $ | 104,175 | |||||||||||||||||||
Robert P. Reffner | $ | 8,550 | $ | 1,000 | $ | 429 | $ | 2,500 | $ | 1,130 | $ | 402 | - | $ | 28,000 | $ | 42,011 | |||||||||||||||||||
| a) | The value of matching Company |
70 | FirstEnergy Corp.2019 Proxy Statement
The value of |
| c) | The value of Company credits under the broad-based wellness program, |
| d) |
|
| e) | Premiums for all NEOs covered under the group personal excess liability |
| f) | Employer cost for basic life insurance premiums in 2020. Coverage for |
| g) | The value of the personal use of |
| h) | Upon termination of employment, Mr. Jones received $28,240 for 132 hours and Mr. Reffner received $28,000 for 160 hours of banked and frozen vacation, in each case earned prior to 2008 and based on the effective pay rate as of December 31, 2008, when FirstEnergy’s vacation policies were revised, and employees and executives could no longer accumulate banked vacation. |
| (6) | The amounts set forth in the |
7156 | FirstEnergy Corp.20192021 Proxy Statement
Grants of Plan-Based Awards in Fiscal Year 20182020
The following table summarizes the stock awards granted to our NEOs during 20182020 as well as threshold, target, and maximum amounts payable under the applicable short-term and long-term compensation plans.
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(3) | Estimated Future Payouts Under Equity Incentive Plan Awards(4) | All Other Stock Awards: Number of Shares of Units (#) | Grant Date Fair Value of Stock and Option ($)(5) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(3) | Estimated Future Payouts Under Equity Incentive Plan Awards(4) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant/Payout Type | Grant Date(1) | Committee Date(2) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant/Payout Type | Grant Date(1) | Board Date(2) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles E. Jones | FE STIP | $ | 651,476 | $ | 1,302,952 | $ | 1,954,423 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/5/2018 | 2/20/2018 | - | - | - | 63,780 | 127,559 | 255,118 | - | $ | 4,700,549 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/5/2018 | 2/20/2018 | - | - | - | 31,453 | 62,906 | 125,811 | - | $ | 2,318,072 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven E. Strah | FE STIP | $ | 225,000 | $ | 450,000 | $ | 675,000 | FE STIP | - | - | $ | 426,073 | $ | 852,146 | $ | 1,704,291 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/5/2018 | 2/20/2018 | - | - | - | 14,529 | 29,057 | 58,114 | - | $ | 1,070,750 | Performance-Adjusted RSUs – Stock-Based | 3/1/2020 | 2/7/2020 | - | - | - | 12,391 | 24,781 | 49,562 | - | $ | 1,074,257 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/5/2018 | 2/20/2018 | - | - | - | 7,218 | 14,436 | 28,871 | - | $ | 531,949 | Performance-Adjusted RSUs – Cash-Based | 3/1/2020 | 2/7/2020 | - | - | - | 6,233 | 12,466 | 24,932 | - | $ | 540,410 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James F. Pearson | FE STIP | $ | 297,180 | $ | 594,360 | $ | 891,540 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/5/2018 | 2/20/2018 | - | - | - | 21,695 | 43,389 | 86,778 | - | $ | 1,598,885 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/5/2018 | 2/20/2018 | - | - | - | 10,898 | 21,796 | 43,592 | - | $ | 803,185 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leila L. Vespoli | FE STIP | $ | 322,660 | $ | 645,320 | $ | 967,980 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
K. Jon Taylor | FE STIP | - | - | $ | 207,295 | $ | 414,591 | $ | 829,181 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/5/2018 | 2/20/2018 | - | - | - | 19,905 | 39,810 | 79,620 | - | $ | 1,466,999 | Performance-Adjusted RSUs – Stock-Based | 3/1/2020 | 2/7/2020 | - | - | - | 5,337 | 10,673 | 21,346 | - | $ | 462,674 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/5/2018 | 2/20/2018 | - | - | - | 9,952 | 19,905 | 39,810 | - | $ | 733,499 | Performance-Adjusted RSUs – Cash-Based | 3/1/2020 | 2/7/2020 | - | - | - | 2,645 | 5,291 | 10,581 | - | $ | 229,345 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Samuel L. Belcher | FE STIP | $ | 197,752 | $ | 395,500 | $ | 593,252 | FE STIP | - | - | $ | 243,750 | $ | 487,501 | $ | 975,000 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/5/2018 | 2/20/2018 | - | - | - | 10,457 | 20,914 | 41,828 | - | $ | 770,681 | Performance-Adjusted RSUs – Stock-Based | 3/1/2020 | 2/7/2020 | - | - | - | 11,493 | 22,985 | 45,970 | - | $ | 996,400 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/5/2018 | 2/20/2018 | - | - | - | 5,228 | 10,457 | 20,913 | - | $ | 385,322 | Performance-Adjusted RSUs – Cash-Based | 3/1/2020 | 2/7/2020 | - | - | - | 5,709 | 11,419 | 22,838 | - | $ | 495,010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transition Award RSUs – Stock-Based(6) | 3/5/2018 | 2/20/2018 | - | - | - | 5,355 | 10,710 | 21,420 | - | $ | 347,218 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bennett L. Gaines | FE STIP | $ | 143,274 | $ | 286,546 | $ | 429,819 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gary D. Benz | FE STIP | - | - | $ | 133,251 | $ | 266,501 | $ | 533,000 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/5/2018 | 2/20/2018 | - | - | - | 5,644 | 11,287 | 22,574 | - | $ | 415,926 | Performance-Adjusted RSUs – Stock-Based | 3/1/2020 | 2/7/2020 | - | - | - | 5,079 | 10,158 | 20,316 | - | $ | 440,349 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/5/2018 | 2/20/2018 | - | - | - | 2,856 | 5,711 | 11,422 | - | $ | 210,453 | Performance-Adjusted RSUs – Cash-Based | 3/1/2020 | 2/7/2020 | - | - | - | 2,539 | 5,079 | 10,158 | - | $ | 220,168 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Donald R. Schneider | AIP(7) | $ | 517,167 | $ | 1,034,333 | $ | 2,068,666 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Christine L. Walker | FE STIP | - | - | $ | 123,000 | $ | 246,000 | $ | 492,000 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/1/2020 | 2/7/2020 | - | - | - | 4,017 | 8,034 | 16,068 | - | $ | 348,274 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/1/2020 | 2/7/2020 | - | - | - | 1,985 | 3,971 | 7,941 | - | $ | 172,131 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles E. Jones | FE STIP | - | - | $ | 651,475 | $ | 1,302,949 | $ | 2,605,899 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/1/2020 | 2/7/2020 | - | - | - | 46,571 | 93,141 | 186,282 | - | $ | 4,037,662 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/1/2020 | 2/7/2020 | - | - | - | 22,966 | 45,932 | 91,864 | - | $ | 1,991,171 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert P. Reffner | FE STIP | - | - | $ | 228,227 | $ | 456,455 | $ | 912,911 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Stock-Based | 3/1/2020 | 2/7/2020 | - | - | - | 8,687 | 17,374 | 34,748 | - | $ | 753,163 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Adjusted RSUs – Cash-Based | 3/1/2020 | 2/7/2020 | - | - | - | 4,376 | 8,752 | 17,505 | - | $ | 379,410 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The effective grant date for the Performance-Adjusted RSUs is March |
| (2) | The dates set forth in the |
| (3) | The amounts set forth in the |
57 | FirstEnergy Corp. 2021 Proxy Statement
| (4) | The amounts set forth in the |
| (5) | The grant date fair |
|
|
72 | FirstEnergy Corp.2019 Proxy Statement
The following chart summarizes the details of the FE LTIP grants for the 2018-2020 cycle (other than for Mr. Schneider) and the 2018-2019 Transition Award (for Mr. Belcher):2020-2022 cycle:
Performance-Adjusted RSUs | ||||||||
Weighting | 2/3rd stock-based and 1/3rd cash-based | |||||||
Granted | Annually | |||||||
Grant Date | In | |||||||
| Grant Price | ||||||||
| Average high and low stock price on the grant date (to convert the target LTIP opportunity for each eligible NEO into units); Monte Carlo simulation is used to determine the grant date fair | |||||||
Performance Period | 3 years, cliff vest on March 1 | |||||||
Performance Measures |
RTSR modifier overlay |
| ||||||
Threshold Opportunity Payout | 50% | |||||||
| Target Opportunity Payout |
| |||||||
| 100% (capped at a target level of payout if the Company’s absolute TSR is negative for the three-year performance period) | |||||||
Maximum Opportunity Payout | 200% | |||||||
| Stock or cash, as applicable | |||||||
| Dividend Equivalent Units | ||||||||
| Reinvested based on the average high and low stock price on the payable date, subject to same restrictions as initial grant | |||||||
| Payout | ||||||||
| Based on the average high and low stock price on the vesting date | |||||||
The following chart summarizes the details of the 2018 AIP award for eligible FES participants, including Mr. Schneider:
| ||
| ||
|
| |
| ||
| ||
| ||
73 | FirstEnergy Corp.2019 Proxy Statement
Performance-Adjusted RSUs
Performance-adjusted RSUs are described in the CD&A and are a component of our FE LTIP. On March 1, 2019,2021, the performance-adjusted RSUs granted in 20162018 became vested. As previously stated, the total points earnedtwo performance measures in the FE LTIP 2016-20182018-2020 cycle, were 11.55 points, resultingalong with the 22% reduction based on performance of the relative TSR modifier resulted in a payout at 193%146% of target opportunity for this grant. The vesting period for Mr. Belcher’s 2018-2019 Transition Awardperformance-adjusted RSUs granted in 2019 and 2020 will end on March 1, 2020 and is treated as performance-adjusted RSUs. The vesting period for performance-adjusted RSUs granted in 2017 and 2018 will end on March 1, 2020,2022, and March 1, 2021,2023, respectively, although performance is measured through December 31 of the year prior to vesting. Performance-adjusted RSUs settled in stock are treated as a fixed expense and performance adjusted RSUs settled in cash are treated as amark-to-market expense for accounting purposes and are valued in accordance with FASB ASC Topic 718. Mr. Jones’ outstanding performance-adjusted RSUs were forfeited on October 29, 2020 due to his termination. The Compensation Committee resolved to exercise negative discretion in the case of Mr. Reffner to reduce final payouts with respect to the performance-adjusted RSUs outstanding for the 2019-2021 and 2020-2022 cycles to zero.
Other Information
For more information regarding certain compensation arrangements with our NEOs, please refer to the “Potential Post-Employment Payments” section on page 68. For more information regarding the amount of various compensation elements in proportion to total compensation, see the NEO pay mix charts in the “Compensation Mix” section on page 38.
58 | FirstEnergy Corp. 2021 Proxy Statement
Outstanding Equity Awards at FiscalYear-End 2018 2020
The following table summarizes the outstanding equity award holdings of our NEOs as of December 31, 2018:2020:
Option Awards | Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#)(1) | Grant Type | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Number of Unearned Shares, Units or Other That Have Not Yet Vested (#)(1)(5) | Grant Type(6) | Equity Incentive Plan Awards: Market or Payout Value Shares, Units or Other Rights That Have Not Yet Vested ($)(4) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1)(6) | Grant Type(7) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Number of Unearned Shares, Units or Other That Vested (#)(1) | Grant Type(7) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other That Vested ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles E. Jones | 80,257 | $ | 37.75 | 2/25/2021 | 293,863 | 2016 Performance- Adjusted RSUs – Stock-Based | $ | 11,034,556 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven E. Strah | 47,368 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 1,449,934 | 26,910 | 2019 Performance- Adjusted RSUs – Stock-Based | $ | 823,715 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23,533 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 720,345 | 13,369 | 2019 Performance- Adjusted RSUs – Cash-Based | $ | 409,225 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25,723 | 2020 Performance- Adjusted RSUs – Stock-Based | $ | 787,381 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12,941 | 2020 Performance- Adjusted RSUs – Cash-Based | $ | 396,124 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
K. Jon Taylor | 8,609 | RS (2) | $ | 263,521 | 7,975 | 2019 Performance- Adjusted RSUs – Stock-Based | $ | 244,115 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 146,931 | 2016 Performance- Adjusted RSUs – Cash-Based | $ | 5,517,259 | 14,483 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 443,325 | 3,987 | 2019 Performance- Adjusted RSUs – Cash-Based | $ | 122,042 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 282,501 | 2017 Performance- Adjusted RSUs – Stock-Based | $ | 10,607,913 | 7,241 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 221,647 | 11,079 | 2020 Performance- Adjusted RSUs – Stock-Based | $ | 339,128 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 139,315 | 2017 Performance- Adjusted RSUs – Cash-Based | $ | 5,231,278 | 5,492 | 2020 Performance- Adjusted RSUs – Cash-Based | $ | 168,110 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 262,779 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 9,867,351 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 129,589 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 4,866,067 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven E. Strah | 47,205 | 2016 Performance- Adjusted RSUs – Stock-Based | $ | 1,772,548 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Samuel L. Belcher | 12,745 | RS (3) | $ | 390,124 | 23,002 | 2019 Performance- Adjusted RSUs – Stock-Based | $ | 704,091 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23,603 | 2016 Performance- Adjusted RSUs – Cash-Based | $ | 886,293 | 34,094 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 1,043,617 | 11,581 | 2019 Performance- Adjusted RSUs – Cash-Based | $ | 354,494 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 49,732 | 2017 Performance- Adjusted RSUs – Stock-Based | $ | 1,867,437 | 17,046 | 2018 Performance- Adjusted RSUs – Cash-Based | 521,778 | 23,859 | 2020 Performance- Adjusted RSUs – Stock-Based | $ | 730,324 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 24,866 | 2017 Performance- Adjusted RSUs – Cash-Based | $ | 933,718 | 11,853 | 2020 Performance- Adjusted RSUs – Cash-Based | $ | 362,820 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gary D. Benz | 20,521 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 628,148 | 11,632 | 2019 Performance- Adjusted RSUs – Stock-Based | $ | 356,056 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 59,859 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 2,247,705 | 10,261 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 314,089 | 5,816 | 2019 Performance- Adjusted RSUs – Cash-Based | $ | 178,028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 29,738 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 1,116,662 | 10,545 | 2020 Performance- Adjusted RSUs – Stock-Based | $ | 322,782 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5,272 | 2020 Performance- Adjusted RSUs – Cash-Based | $ | 161,376 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James F. Pearson | 34,529 | RS | (2) | $ | 1,296,563 | 91,212 | 2016 Performance- Adjusted RSUs – Stock-Based | $ | 3,425,011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45,819 | 2016 Performance- Adjusted RSUs – Cash-Based | $ | 1,720,503 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 96,091 | 2017 Performance- Adjusted RSUs – Stock-Based | $ | 3,608,217 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 48,271 | 2017 Performance- Adjusted RSUs – Cash-Based | $ | 1,812,576 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 89,384 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 3,356,369 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 44,902 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 1,686,070 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7459 | FirstEnergy Corp.20192021 Proxy Statement
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#)(1) | Grant Type | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Number of Unearned Shares, Units or Other That Have Not Yet Vested (#)(1)(5) | Grant Type(6) | Equity Incentive Plan Awards: Market or Payout Value Shares, Units or Other Rights That Have Not Yet Vested ($)(4) | ||||||||||||||||||||||||||||
Leila L. Vespoli | 120,386 | $ | 37.75 | 2/25/2021 | 83,690 | 2016 Performance- Adjusted RSUs – Stock-Based | $ | 3,142,560 | ||||||||||||||||||||||||||||||
| 41,844 | 2016 Performance- Adjusted RSUs – Cash-Based | $ | 1,571,242 | |||||||||||||||||||||||||||||||||||
| 88,167 | 2017 Performance- Adjusted RSUs – Stock-Based | $ | 3,310,671 | |||||||||||||||||||||||||||||||||||
| 44,083 | 2017 Performance- Adjusted RSUs – Cash-Based | $ | 1,655,317 | |||||||||||||||||||||||||||||||||||
| 82,011 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 3,079,513 | |||||||||||||||||||||||||||||||||||
| 41,006 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 1,539,775 | |||||||||||||||||||||||||||||||||||
Samuel L. Belcher | 23,519 | RS | (3) | $ | 883,132 | 21,616 | 2016 Performance- Adjusted RSUs – Stock-Based (amended to settle in cash) | $ | 811,681 | |||||||||||||||||||||||||||||
| 10,516 | 2016 Performance- Adjusted RSUs – Cash-Based | $ | 394,876 | |||||||||||||||||||||||||||||||||||
| 22,064 | Transition Award RSUs– Stock-Based | $ | 828,503 | |||||||||||||||||||||||||||||||||||
| 43,084 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 1,617,804 | |||||||||||||||||||||||||||||||||||
| 21,541 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 808,865 | |||||||||||||||||||||||||||||||||||
Bennett L. Gaines | 23,727 | 2016 Performance- Adjusted RSUs – Stock-Based | $ | 890,949 | ||||||||||||||||||||||||||||||||||
| 12,006 | 2016 Performance- Adjusted RSUs – Cash-Based | $ | 450,825 | |||||||||||||||||||||||||||||||||||
| 24,998 | 2017 Performance- Adjusted RSUs – Stock-Based | $ | 938,675 | |||||||||||||||||||||||||||||||||||
| 12,649 | 2017 Performance- Adjusted RSUs – Cash-Base | $ | 474,970 | |||||||||||||||||||||||||||||||||||
| 23,252 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 873,113 | |||||||||||||||||||||||||||||||||||
| 11,766 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 441,813 | |||||||||||||||||||||||||||||||||||
Donald R. Schneider | 80,257 | $ | 37.75 | 2/25/2021 | 44,218 | 2016 Performance- Adjusted RSUs – Stock-Based (amended to settle in cash) | $ | 1,660,386 | ||||||||||||||||||||||||||||||
| 22,289 | 2016 Performance- Adjusted RSUs – Cash-Based | $ | 836,952 | |||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1)(6) | Grant Type(7) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Number of Unearned Shares, Units or Other That Vested (#)(1) | Grant Type(7) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other That Vested ($)(5) | ||||||||||||||||||||||||||
Christine L. Walker | 12,475 | RS (4) | $ | 381,860 | 7,026 | 2019 Performance- Adjusted RSUs – Stock-Based | $ | 215,066 | ||||||||||||||||||||||||||||
| 7,951 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 243,380 | 3,562 | 2019 Performance- Adjusted RSUs – Cash-Based | $ | 109,033 | |||||||||||||||||||||||||||||
| 3,897 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 119,287 | 8,340 | 2020 Performance- Adjusted RSUs – Stock-Based | $ | 255,287 | |||||||||||||||||||||||||||||
| 4,122 | 2020 Performance- Adjusted RSUs – Cash-Based | $ | 126,174 | |||||||||||||||||||||||||||||||||
Charles E. Jones(8) | ||||||||||||||||||||||||||||||||||||
Robert P. Reffner(9) | 14,245 | 2018 Performance- Adjusted RSUs – Stock-Based | $ | 436,039 | 16,969 | 2019 Performance- Adjusted RSUs – Stock-Based | $ | 519,421 | ||||||||||||||||||||||||||||
| 7,016 | 2018 Performance- Adjusted RSUs – Cash-Based | $ | 214,760 | 8,412 | 2019 Performance- Adjusted RSUs – Cash-Based | $ | 257,491 | |||||||||||||||||||||||||||||
| 18,035 | 2020 Performance- Adjusted RSUs – Stock-Based | $ | 552,051 | |||||||||||||||||||||||||||||||||
| 9,085 | 2020 Performance- Adjusted RSUs – Cash-Based | $ | 278,092 | |||||||||||||||||||||||||||||||||
| (1) | The number of shares set forth in both the |
| (2) |
|
75 | FirstEnergy Corp.2019 Proxy Statement
| (3) | Mr. Belcher’s restricted stock award is graded vesting. |
| (4) | Ms. Walker’s restricted stock award cliff vests on September 15, 2022. |
| (5) | The values set forth in both the |
The number of shares or units set forth in the |
The awards set forth in the |
| (8) | Mr. |
| (9) | The values shown for Mr. Reffner reflect the awards as of December 31, 2020. On February 4, 2021, the Compensation Committee considered whether to pay the FE LTIP to Mr. Reffner and resolved to exercise its negative discretion to reduce final payouts with respect to the performance-adjusted RSUs for the 2018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles to zero as a result of the events leading to his separation. |
60 | FirstEnergy Corp. 2021 Proxy Statement
Option Exercises and Stock Vested in 20182020
The following table summarizes the vesting of stock awards held by our NEOs during 2018. No options were exercised by our NEOs in 2018.2020.
| Option Awards | Stock Awards | |||||||||||||||||||
| Name | Number of Shares Acquired on Vesting (#)(1)(2) | Award Type | Value Realized on Vesting ($)(3) | Award Type | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(1)(2) | Value Realized on Vesting ($)(3) | ||||||||||||
Charles E. Jones | 235,314 | 2015 Performance-Adjusted RSUs(stock-based) | $ | 7,643,607 | ||||||||||||||||
| - | 2015 Performance-Adjusted RSUs(cash-based) | $ | 3,769,420 | |||||||||||||||||
Steven E. Strah | 36,044 | 2015 Performance-Adjusted RSUs(stock-based) | $ | 1,170,812 | 2017 Performance-Adjusted RSUs (stock-based) | - | - | 48,040 | $ | 2,132,978 | ||||||||||
| - | 2015 Performance-Adjusted RSUs (cash-based) | $ | 590,162 | 2017 Performance-Adjusted RSUs (cash-based) | - | - | - | $ | 1,066,472 | |||||||||||
James F. Pearson | 79,272 | 2015 Performance-Adjusted RSUs(stock-based) | $ | 2,574,962 | ||||||||||||||||
| - | 2015 Performance-Adjusted RSUs(cash-based) | $ | 1,293,501 | |||||||||||||||||
Leila L. Vespoli | 72,734 | 2015 Performance-Adjusted RSUs (stock-based) | $ | 2,362,583 | ||||||||||||||||
K. Jon Taylor | 2017 Performance-Adjusted RSUs (stock-based) | - | - | 18,177 | $ | 807,097 | ||||||||||||||
| - | 2015 Performance-Adjusted RSUs(cash-based) | $ | 1,181,275 | 2017 Performance-Adjusted RSUs (cash-based) | - | - | - | $ | 403,534 | |||||||||||
Samuel L. Belcher(4) | - | 2015 Performance-Adjusted RSUs (stock-based converted to cash) | $ | 519,540 | 2018 Transition Award RSU | - | - | 22,235 | $ | 987,237 | ||||||||||
| - | 2015 Performance-Adjusted RSUs (cash-based) | $ | 255,876 | 2015 Restricted Stock Award (stock-based) | - | - | 12,279 | $ | 561,289 | |||||||||||
Bennett L. Gaines | 20,823 | 2015 Performance-Adjusted RSUs (stock-based) | $ | 676,386 | ||||||||||||||||
Gary D. Benz | 2017 Performance-Adjusted RSUs (stock-based) | - | - | 21,545 | $ | 956,608 | ||||||||||||||
| - | 2015 Performance-Adjusted RSUs (cash-based) | $ | 342,218 | 2017 Performance-Adjusted RSUs (cash-based) | - | - | - | $ | 597,840 | |||||||||||
Donald R. Schneider(4) | - | 2015 Performance-Adjusted RSUs (stock-based converted to cash) | $ | 1,342,792 | ||||||||||||||||
Christine L. Walker | 2017 Performance-Adjusted RSUs (stock-based) | - | - | 9,864 | $ | 437,964 | ||||||||||||||
| - | 2015 Performance-Adjusted RSUs (cash-based) | $ | 676,828 | 2017 Performance-Adjusted RSUs (cash-based) | - | - | - | $ | 214,636 | |||||||||||
Charles E. Jones | 2017 Performance-Adjusted RSUs (stock-based) | - | - | 272,891 | $ | 12,116,394 | ||||||||||||||
2017 Performance-Adjusted RSUs (cash-based) | - | - | - | $ | 5,975,174 | |||||||||||||||
Robert P. Reffner | 2017 Performance-Adjusted RSUs (stock-based) | - | - | 18,694 | $ | 830,024 | ||||||||||||||
2017 Performance-Adjusted RSUs (cash-based) | - | - | - | $ | 408,799 | |||||||||||||||
| (1) |
|
76 | FirstEnergy Corp.2019 Proxy Statement
| (2) | The number of units from the |
| (3) | The amounts set forth in the |
61 | FirstEnergy Corp. 2021 Proxy Statement
| (4) |
|
Post-Employment Compensation
Pension Benefits as of December 31, 20182020
The following table provides information regarding the pension benefits of our NEOs as of December 31, 2018:2020:
| Name(1) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | |||||||||
Charles E. Jones | Qualified Plan | 40 | $ | 2,116,548 | ||||||||
| Nonqualified (Supplemental) Plan | $ | 19,410,540 | ||||||||||
Supplemental Executive Retirement Plan | $ | 1,267,537 | ||||||||||
|
| |||||||||||
Total | $ | 22,794,625 | ||||||||||
Steven E. Strah | Qualified Plan | 34 | $ | 1,632,108 | ||||||||
| Nonqualified (Supplemental) Plan | $ | 4,529,893 | ||||||||||
| Supplemental Executive Retirement Plan | N/A | |||||||||||
|
| |||||||||||
| Total | $ | 6,162,001 | ||||||||||
James F. Pearson | Qualified Plan | 42 | $ | 2,144,764 | ||||||||
| Nonqualified (Supplemental) Plan | $ | 9,220,572 | ||||||||||
Supplemental Executive Retirement Plan | N/A | |||||||||||
|
| |||||||||||
Total | $ | 11,365,336 | ||||||||||
Leila L. Vespoli | Qualified Plan | 34 | $ | 2,053,109 | ||||||||
| Nonqualified (Supplemental) Plan | $ | 10,660,253 | ||||||||||
| Supplemental Executive Retirement Plan | $ | 590,048 | ||||||||||
|
| |||||||||||
| Total | $ | 13,303,410 | ||||||||||
Samuel L. Belcher | Qualified Plan | 6 | $ | 163,038 | ||||||||
| Nonqualified (Supplemental) Plan | $ | 310,214 | ||||||||||
Supplemental Executive Retirement Plan | N/A | |||||||||||
|
| |||||||||||
Total | $ | 473,252 | ||||||||||
Bennett L. Gaines | Qualified Plan | 12 | $ | 535,283 | ||||||||
| Nonqualified (Supplemental) Plan | $ | 1,008,716 | ||||||||||
| Supplemental Executive Retirement Plan | N/A | |||||||||||
|
| |||||||||||
| Total | $ | 1,543,999 | ||||||||||
Donald R. Schneider | Qualified Plan | 36 | $ | 1,910,162 | ||||||||
| Nonqualified (Supplemental) Plan | $ | 6,474,251 | ||||||||||
Supplemental Executive Retirement Plan | N/A | |||||||||||
|
| |||||||||||
Total | $ | 8,384,413 | ||||||||||
77 | FirstEnergy Corp.2019 Proxy Statement
| Name | Plan Name | Number of Years Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | |||||
Steven E. Strah | Qualified Plan | 36 | $ | 2,439,310 | ||||
Nonqualified (Supplemental) Plan | 36 | $ | 9,409,966 | |||||
Supplemental Executive Retirement Plan | N/A | |||||||
|
| |||||||
Total | $ 11,849,276 | |||||||
K. Jon Taylor | Qualified Plan | 11 | $ | 429,939 | ||||
Nonqualified (Supplemental) Plan | 11 | $ | 643,177 | |||||
Supplemental Executive Retirement Plan | N/A | |||||||
|
| |||||||
Total | $ | 1,073,116 | ||||||
Samuel L. Belcher | Qualified Plan | 8 | $ | 345,465 | ||||
Nonqualified (Supplemental) Plan | 13 | $ | 1,851,847 | |||||
Supplemental Executive Retirement Plan | N/A | |||||||
|
| |||||||
Total | $ | 2,197,312 | ||||||
| Gary D. Benz | Qualified Plan | 31 | $ | 2,333,659 | ||||
Nonqualified (Supplemental) Plan | 31 | $ | 4,167,859 | |||||
Supplemental Executive Retirement Plan | N/A | |||||||
|
| |||||||
Total | $ | 6,501,518 | ||||||
Christine L. Walker | Qualified Plan | 35 | $ | 2,411,951 | ||||
Nonqualified (Supplemental) Plan | 35 | $ | 2,668,888 | |||||
Supplemental Executive Retirement Plan | N/A | |||||||
|
| |||||||
Total | $ | 5,080,839 | ||||||
Charles E. Jones(3) | Qualified Plan | 41 | $ | 2,687,157 | ||||
Nonqualified (Supplemental) Plan | 41 | $ | 28,697,147 | |||||
Supplemental Executive Retirement Plan | $ | 0 | ||||||
|
| |||||||
Total | $ | 31,384,304 | ||||||
Robert P. Reffner(3) | Qualified Plan | 13 | $ | 631,729 | ||||
Nonqualified (Supplemental) Plan | 18 | $ | 2,113,436 | |||||
Supplemental Executive Retirement Plan | N/A | |||||||
|
| |||||||
Total | $ | 2,745,165 | ||||||
| (1) |
|
| (2) | The amounts set forth in the “Present Value of Accumulated Benefit” column are determined as of December 31, |
| (3) | Mr. Jones employment with the Company terminated effective October 29, 2020, and Mr. Reffner separated from the Company effective November 8, 2020. |
62 | FirstEnergy Corp. 2021 Proxy Statement
Pension Benefits
Qualified and Nonqualified Plans
We offer a qualified and nonqualified (supplemental) pension plan to provide retirement benefits to all of our NEOs. We pay the entire cost of these plans. Retirement benefits from the qualified plan provided under the FirstEnergy Corp. Master Pension Plan (“Master Pension Plan”) are calculated using pensionable earnings up to the applicable federal and plan limits. As described in the CD&A, theThe Master Pension Plan was amended to provide a cash-balance formula for all employees hired or rehired on or after January 1, 2014. In conjunction with the new cash-balance formula, yourthe Company adopted a new nonqualified supplemental plan, which will provide a benefit, based upon the cash-balance formula, to eligible executives hired or rehired on or after January 1, 2014, but without the restriction of federal and plan limits that apply under the qualified pension plan. All of the NEOs were hired prior to January 1, 2014 and are subject to the formulas discussed below.
The supplemental plan provided under the EDCP provides a benefit based upon the formula used in the qualified plan but is calculated using all pensionable earnings without the restrictions of federal and certain plan limits. Based on the applicable formula of the plan under which the NEO is a participant, the retirement benefit from the qualified and nonqualified plans will be the benefit determined using one or more of the following three formulas:
| 1. | Career Earnings Benefit Formula: A fixed (2.125%) factor is applied to the executive’s total career earnings to determine the accrued (age 65) career earnings benefit. Pensionable earnings under the career earnings formula generally include base salary, annual incentive awards, and other similar compensation. |
| 2. | Adjusted Highest Average Monthly Base Earnings Benefit Formula: The benefit is equal to the sum of A and B where A is the highest average monthly base earnings (“HAMBE”) times the sum of: |
1.58% times the first 20 years of benefit service;
1.18% times the next 10 years of benefit service;
0.78% times the next 5 years of benefit service; and
1.10% times each year of benefit service in excess of 35 years.
and B is an amount equal to 0.32% times number of years of service (up to 35 years) times the difference between the HAMBE and the lesser of 150% of covered compensation or the Social Security Wage Base, except that B cannot be less than zero.
The HAMBE for the qualified plan are the highest 48 consecutive months of base earnings the executive had in the 120 months immediately preceding retirement or other termination of employment. Pensionable earnings under the qualified plan HAMBE formula generally include base salary and deferred compensation of base salary after 2004. The pensionable earnings under the nonqualified plan HAMBE formula are the same as the qualified plan described above except that deferred compensation of base salary excluded under the qualified plan and annual incentive awards that are paid or deferred are included. Covered compensation represents the average (without indexing) Social Security Taxable Wage Base in effect for each calendar year during the35-year period that ends when the executive reaches the Social Security normal retirement age.
| 3. | Final Average Total Pay (“FATP”) Formula: The pension benefit under FATP is calculated by determining the HAMBE, multiplying this amount by a fixed factor (1.2%) and then multiplying it by the number of years of Benefit Service at the time of separation or retirement. This amount is then divided by 12 to determine the accrued & vested monthly pension benefit amount. |
78 | FirstEnergy Corp.2019 Proxy Statement
Under the Master Pension Plan, normal retirement is at age 65 and the completion of five years of eligibility service. The earliest retirement is at age 55 if the employee has at least 10 years of eligibility service. Messrs. Jones, Pearson and Gaines areMr. Benz is currently eligible for an unreduced pension benefit.benefit, as were Messrs. Jones and Reffner at the time of termination and separation, respectively. Mr. Strah and Ms. Vespoli and Mr. SchneiderWalker are currently eligible for a reduced pension benefit based on the Early Retirement Reduction Table below and Messrs. StrahTaylor and Belcher will become eligible when they turn 55 in 20192028 and 2023, respectively. The earliest retirement age without reduction for the qualified plan is age 60 with the exception of those covered under the FATP plan. The earliest retirement age without reduction for FATP is age 62.
63 | FirstEnergy Corp. 2021 Proxy Statement
Early Retirement Reduction Table
| If payment begins at age | The benefit is multiplied by | The benefit is multiplied by | ||
| 60 and up | 100% | 100% | ||
| 59 | 88% | 88% | ||
| 58 | 84% | 84% | ||
| 57 | 80% | 80% | ||
| 56 | 75% | 75% | ||
| 55 | 70% | 70% |
FATP Early Retirement Reduction Table
| If payment begins at age | The benefit is multiplied by | The benefit is multiplied by | ||
| 62 and up | 100% | 100% | ||
| 61 | 96% | 96% | ||
| 60 | 92% | 92% | ||
| 59 | 88% | 88% | ||
| 58 | 84% | 84% | ||
| 57 | 80% | 80% | ||
| 56 | 76% | 76% | ||
| 55 | 72% | 72% |
The accrued benefits vest upon the completion of five years of service. The benefits generally are payable in the case of a married employee in the form of a qualified spouse 50% joint and survivor annuity or in the case of an unmarried employee in the form of a single life annuity. Unmarried employees can designate anon-spouse beneficiary to receive up to a 100% joint and survivor annuity depending upon thenon-spousal beneficiary’s age. For the married employee, there also is an option to receive the benefit as a joint and survivor annuity with or without apop-up provision or a period certain annuity. The annuity provides a reduced monthly benefit, payable to the employee until death. If a joint and survivor annuity is chosen, the employee’s named beneficiary will receive 25%, 50%, 75%, or 100% of the employee’s benefit based on the employee’s and the beneficiary’s ages and the elected percentage to be continued after the employee’s death. Under thepop-up provisions, the monthly payment to the employee“pops-up” “pops-up” to the single life annuity amount if the beneficiary predeceases the employee. The period certain annuity provides a reduced benefit for the life of the employee and continues the benefit to the named beneficiary for a guaranteed period if the employee’s death occurs before the end of the 5, 10 or15-year period, as elected. No further payments are made if the employee’s death occurs after the end of the elected period.
As noted in the CD&A, in July 2018, the Compensation Committee recommended, and the Board approved theE-VERP for executive officers other than the CEO, including certain NEOs. Of those executivespursuant to a historical arrangement, Mr. Belcher is (and Mr. Reffner was) eligible Ms. Vespoli and Mr. Pearson notified your Company that they were electing to participate in theE-VERP. The effective date of Ms. Vespoli’s and Mr. Pearson’s retirement will be April 1, 2019.
Active executive officers, other than the CEO, who are age 58 or oldercredited with at least 10five years of additional service for purposes of calculating the supplemental pension benefit. For more information, refer to the “Pension Benefits as of December 31, 2018, were eligible to participate. TheE-VERP includes the following benefits:
alump-sum payment equivalent to what the employee would have received under the FirstEnergy Severance Benefits Plan;
79 | FirstEnergy Corp.2019 Proxy Statement
a continuation of health care benefits for the equivalent severance period;
a temporary pension enhancement of $1,500 monthly up to age 65, with a minimum of 24 monthly payments; and
payment of unused PTO.
In November 2018, the board of directors of FES approved the FES VERO for certain FES employees designated as “insiders” in applicable bankruptcy filings, including Mr. Schneider. The terms of the FES VERO are substantially similar to that of theE-VERP that was implemented in July 2018. Retirements under the FES VERO began2020” table on January 2, 2019 and continue until the earlier of December 31, 2019 or the effective date of a court-approved plan of reorganization for FES. Mr. Schneider’s retirement date will be May 1, 2019.page 62.
Supplemental Executive Retirement Plan (“SERP”)
In addition to the qualified and nonqualified plans, certain NEOs may receive additional nonqualified benefits from the SERP. Currently, only threeAs of December 31, 2020, there are no longer any active employees are eligible for a SERP calculation upon retirement, and no new participants have been provided eligibility since 2001.in the SERP. In 2014, the Committee formally closed the SERP to new entrants.
64 | FirstEnergy Corp. 2021 Proxy Statement
Of the NEOs, only Mr. Jones and Ms. Vespoli are participantswas a participant in the SERP. The NEOs who are participants in the SERP, or the NEO’s surviving spouse, are eligible to receive a supplemental benefit after the NEO’s termination of employment due to retirement, death, disability, or involuntary separation. Whether or not a supplemental benefit under the SERP will be paid is determined in accordance with, and shall benon-forfeitable,upon the date the NEO terminates employment under the conditions described in the following sections:
Retirement Benefit
An eligible NEO who retires on or after age 55 and who has completed 10 years of service will be entitled to receive, commencing at retirement, a monthly supplemental retirement benefit under the SERP equal to (a) 65% of the average of the highest 12 consecutive full months of base salary earnings paid to the NEO in the 120 consecutive full months prior to termination of employment, including any salary deferred into the EDCP or the FirstEnergy Corp. Savings Plan, but excluding any incentive payments, or (b) 55% of the average of the highest 36 consecutive full months of base salary earnings and annual incentive awards paid to the NEO in the 120 consecutive full months prior to termination of employment, including any salary deferred into the EDCP and FirstEnergy Corp. Savings Plan, whichever is greater, multiplied by the number of months of service the executive has completed after having completed 10 years of service, up to a maximum of 60 months, divided by 60, less:
| 1. | The monthly primary Social Security benefit to which the executive may be entitled upon retirement (or the projected age 62 benefit if retirement occurs prior to age 62), irrespective of whether the executive actually receives such benefit at the time of retirement; and |
| 2. | The monthly retirement income benefit to which the executive may be entitled upon retirement under the Master Pension Plan and nonqualified supplemental pension, calculated based on the NEO’s marital status at the time of such retirement as follows: |
In the case of a married NEO in the form of a 50% joint and survivor annuity.
In the case of an unmarried NEO, in the form of a single life annuity.
For an NEO who retires prior to attaining age 65, the net dollar amount above shall be reduced further byone-fourth of 1% for each month the commencement of benefits under the SERP precedes the month the executive attains age 65.
Death Benefit
If a married NEO that participates in the SERP dies, 50% of the NEO’s SERP benefit actuarially adjusted for the NEO’s and spouse’s ages will be paid to the NEO’s surviving spouse. In general, payment will begin the first of the month following the later of the date the NEO would have attained age 55 or death and continue for the remainder of the surviving spouse’s life. If the NEO had at least 10 years of eligibility service before January 1, 2009, the payment will begin on the first day of the month following the NEO’s death. For an NEO who dies prior to attaining age 65, the benefit shall be reduced further byone-fourth of 1% for each month the commencement precedes the NEO’s attainment of age 65, with a maximum reduction of 30%.
80 | FirstEnergy Corp.2019 Proxy Statement
Disability Benefit
If an NEO participant in the SERP terminates employment due to a disability, he/she may be entitled to receive a monthly supplemental retirement benefit under the SERP. If applicable, SERP payments will commence on the first of the month following the NEO’s attaining age 60 if the disability termination occurs before age 55. If the disability termination occurs on or after the NEO attains age 55, applicable SERP payments will begin the first of the month following termination. The retirement benefit will equal the greater of 65% of the NEO’s base salary earnings as set forth in (a) of the Retirement Benefit section above, or 55% of the NEO’s base salary earnings plus their annual incentive awards as set forth in (b) of theRetirement Benefit section above. That amount will be reduced by disability benefits the NEO receivesis projected to receive from Social Security, the Master Pension Plan and the FirstEnergy Corp. Long Term Disability Plan. The disability benefit continues until the NEO attains age 65, is no longer disabled or dies, whichever occurs first. Upon attaining age 65, benefits are calculated as described in the Retirement Benefit section above. In the event of death, benefits are calculated as described in the Death Benefit section above.
In 2018, the Compensation Committee approved a second amendment to the SERP in order to comply with Department of Labor (DOL) regulations under the Employment Retirement Income Security Act (ERISA), which amends the claims procedure requirements for disability benefits.
65 | FirstEnergy Corp. 2021 Proxy Statement
Nonqualified Deferred Compensation as of December 31, 20182020
The following table summarizes nonqualified deferred compensation earned or contributed by or on behalf of our NEOs during 2018.2020.
Name
| Executive Contributions in Last FY ($)(1)
| Registrant Contributions in Last FY ($)
| Aggregate Earnings in Last FY ($)(2)
| Aggregate Withdrawals/ Distributions ($)
| Aggregate Balance at FYE ($)(3)
| ||||||||||||||||||||
Charles E. Jones | $ | 0 | $ | 0 | $ | 134,105 | $ | 0 | $ | 1,032,705 | |||||||||||||||
Steven E. Strah(4) | $ | 47,407 | $ | 0 | $ | 138,854 | $ | 0 | $ | 1,457,599 | |||||||||||||||
James F. Pearson(4) | $ | 321,694 | $ | 0 | $ | 312,101 | $ | 0 | $ | 4,406,946 | |||||||||||||||
Leila L. Vespoli | $ | 0 | $ | 0 | $ | 549,519 | $ | 0 | $ | 5,970,983 | |||||||||||||||
Samuel L. Belcher | $ | 466,395 | $ | 0 | $ | 32,060 | $ | 0 | $ | 312,485 | |||||||||||||||
Bennett L. Gaines | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||
Donald R. Schneider | $ | 0 | $ | 0 | $ | 873,701 | $ | 0 | $ | 8,640,647 | |||||||||||||||
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at FYE ($)(3) | |||||||||||||||
Steven E. Strah | $ | 1,607,714 | $ | 0 | $ | (731,967 | ) | $ | 0 | $ | 3,167,133 | |||||||||
K. Jon Taylor | $ | 595,459 | $ | 0 | $ | (856,924 | ) | $ | 0 | $ | 2,184,271 | |||||||||
Samuel L. Belcher | $ | 0 | $ | 0 | $ | (455,804 | ) | $ | 0 | $ | 1,293,096 | |||||||||
Gary D. Benz | $ | 175,642 | $ | 0 | $ | (75,991 | ) | $ | 0 | $ | 739,958 | |||||||||
Christine L. Walker | $ | 113,396 | $ | 0 | $ | 7,398 | $ | 0 | $ | 1,501,164 | ||||||||||
Charles E. Jones | $ | 0 | $ | 0 | $ | (139,646 | ) | $ | 0 | $ | 1,083,973 | |||||||||
Robert P. Reffner | $ | 56,595 | $ | 0 | $ | (13,561 | ) | $ | 0 | $ | 327,313 | |||||||||
| (1) | The amount set forth in the |
| (2) | The compounded annual rate of return on pre-2013 retirement accounts was 7.02%, and 5.02% on the retirement accounts in 2013 and thereafter. The compounded annual rate of return on stock accounts was -34.13%, which includes dividends. The amounts set forth in the Aggregate Earnings in Last FY column include above-market earnings which have been reported in the |
| (3) | The amounts set forth in the |
|
EDCP
The EDCP is a nonqualified defined contributiondeferred compensation plan which provides for the voluntary deferral of compensation. Our NEOs may defer up to 50% of base salary, up to 100%85% of STIP awards and up to 100%85% of LTIP awards.
81 | FirstEnergy Corp.2019 Proxy Statement
Two investment options are available under the EDCP. NEOs may direct deferrals of base salary and STIP awards to an annual cash retirement account, which accrues interest. The interest rate changes annually and is based upon the Moody’s Corporate Long-Term Bond Yield Index rate (later referred to as Moody’s). In 2018,2020, the interest rate was based on the Moody’s rate plus one percentage point (5.11%(5.02%) for amounts credited to accounts in 2013 or later and Moody’s plus three percentage points (7.11%(7.02%) for amounts credited to accounts prior to 2013. NEOs may direct deferrals of STIP awards and performance-adjusted RSU LTIP awards to an annual stock account. The stock accounts are tracked in stock units and accrue additional stock units based upon the payment of dividends. The stock accounts are valued at the fair market value of our common stock. Payments made with respect to any dividend equivalent units that accrue after January 21,May 17, 2014 will be paid in cash.
In 2015, the Compensation Committee approved two amendments to the EDCP. The first amendment provides that payments
66 | FirstEnergy Corp. 2021 Proxy Statement
Payments made with respect to performance shares that are deferred into a participant’s stock account on or after February 23, 2015 will be paid in cash instead of shares of common stock. In addition, the amendment provides that, with respect to future deferrals, if a participant has elected to receive a distribution of his or her stock account following a three-year deferral period and the participant terminates employment prior to the end of the three-year period, then the stock account distribution will be paid in cash in accordance with the payment terms of the participant’s retirement account.
The second amendment provides for, among other things, two primary revisions that are effectiveEffective for deferral elections made on or after November 1, 2015:
| ● | Participants may elect to defer RSUs only to the stock account, rather than to a separate RSU account; and |
Participants may elect to defer RSUs only to the stock account, rather than to a separate RSU account; and
| ● | Participants may no longer elect to receive a distribution after three years (or any later date specified by the participant, in the case of RSUs), as all amounts deferred to the stock account, including deferred RSUs, will be held in that account until separation from service, death, or disability, at which point it will be transferred to a participant’s retirement account and paid only in cash based on his/her distribution elections for the retirement account.
|
NEOs may elect to receive distributions from the cash retirement accounts in any combination of lump sum payment and/or monthly installment payments for up to 25 years. Differing distribution elections may be made for retirement, disability, andpre-retirement death. In the event of involuntary separation prior to retirement eligibility, the accounts accrued prior to January 1, 2005,and vested as of December 31, 2004, may be paid in a single lump sum payment or in three annual installments. AccountsIn the event of a participant’s separation from service for reasons other than retirement, death or disability, accounts accrued after January 1, 2005, are paid in a single lump sum payment. Payments may not commence until separation from service. Amounts that were vested as of December 31, 2004, are available for anin-service withdrawal of the full account, subject to a 10% penalty. There is noin-service withdrawal option for retirement accounts accrued after January 1, 2005.2005, other than as permitted for hardships under the EDCP.
For deferrals to the stock account prior to November 1, 2015, generally, stock account distributions were made in a lump sum payment in the form of our common stock at the end of the three-year period following the initial deferral, unless further deferred. If further deferred until termination or retirement (or for future deferrals, if termination occurred prior to the end of the initial three-year period, regardless of age at termination), the account was converted to cash, based upon the fair market value of the account at termination, and the balance was rolled over to the corresponding annual retirement account for distribution in lump sum or monthly installments as elected under the retirement account.
8267 | FirstEnergy Corp.20192021 Proxy Statement
Potential Post-Employment Payments
20182020 Post-Termination Compensation and Benefits
The following table summarizes the compensation and benefits that would be payable to our continuing NEOs in the event of a termination or following a CIC absent a termination as of December 31, 2018,2020, which is the last business day of the year:
| Retirement(1) | Involuntary Separation (Other Than For Cause) | Termination Without Cause Following a CIC | Following a CIC Absent a Termination | Voluntary Termination (Pre-retirement Eligible)(1) | Involuntary Termination (For | Death(1) | Disability(1) | |||||||||||||||||
Base Salary | Accrued through date of retirement | Accrued through date of termination | Accrued through date of change in control termination | Accrued through date of change in control | Accrued through date of termination | Accrued through date of termination | Accrued through date of qualifying event | Accrued through date of qualifying event | ||||||||||||||||
Severance Pay(2) | 3 weeks of pay for every full year of service (capped at a maximum of 104 weeks), including the current year, calculated using base salary at the time of severance | 2 times the sum of base salary plus target annual STIP of which a portion is payable in consideration for the non- competition clause | N/A | |||||||||||||||||||||
Banked Vacation | Paid in a lump sum and valued based on 12/31/2008 base salary | Paid in a lump sum and valued based on 12/31/2008 base salary | Paid in a lump sum and valued based on 12/31/2008 base salary | Eligible for a lump sum payment at termination based on 12/31/2008 base salary | Paid in a lump sum and valued based on 12/31/2008 base salary | Paid in a lump sum and valued based on 12/31/2008 base salary | Paid in a lump sum and valued based on 12/31/2008 base salary | Paid in a lump sum and valued based on 12/31/2008 base salary | ||||||||||||||||
Health and Wellness Benefits | May continue either through unsubsidized COBRA or in the FE Access Plan | Provided at active employee rates for severance period(3) | Based on the terms of the CIC Plan(4) | Provided at active employee rates for the length of employment | Forfeited | Forfeited | Survivor health and wellness provided as eligible | Health and wellness provided as eligible | ||||||||||||||||
FE STIP Award | Issued a prorated award based on elapsed days of service and based on actual performance | Issued a prorated award based on elapsed days of service and based on actual performance | Issued a prorated award at target based on elapsed days of service | Eligible for a full or prorated award based on elapsed days of service | Forfeited | Forfeited | Issued a prorated award based on elapsed days of service and based on actual performance | Issued a prorated award based on elapsed days of service and based on actual performance | ||||||||||||||||
| Issued a prorated award based on service and based on actual | Issued a and based on actual performance | Issued prorated award based on full months of service at 100% of target opportunity and all dividends earned | Eligible for an award based on future employment through the vesting date | Forfeited | Forfeited | Issued a prorated award based on | of | Issued a prorated award based on full months of service and based on actual |
8368 | FirstEnergy Corp.20192021 Proxy Statement
| Retirement(1) | Involuntary Separation (Other Than For Cause) | Termination Without Cause Following a CIC | Following a CIC Absent a Termination | Voluntary Termination (Pre-retirement Eligible)(1) | Involuntary Termination (For | Death(1) | Disability(1) | |||||||||
Restricted Stock | Issued 100% of all dividends earned | Eligible for an award based on future employment through the vesting date | Forfeited | |||||||||||||
| Forfeited | Issued 100% of shares and all dividends earned | Issued 100% of shares and all dividends earned | |||||||||||||
Cash Retention Award | Forfeited | Prorated | Issued 100% of cash award | Eligible for an award based on future employment through the vesting date | Forfeited | Forfeited | Issued 100% of cash award | Issued 100% of cash award | ||||||||
EDCP (Elective Deferrals) | Payable as elected | Payable as elected if retirement eligible; otherwise payable in a lump sum upon termination | Payable as elected if retirement eligible; otherwise payable in a lump sum termination | Payable as elected upon termination if retirement eligible; otherwise payable in a lump sum upon termination | Payable in a lump upon termination | Payable as elected upon termination if retirement eligible; otherwise payable in a lump sum upon termination | Payable to survivor as elected | Payable as elected | ||||||||
Excise Tax Gross Up under Section 280G | No | No | No | No | No | No | No | No |
| (1) | Benefits provided in these scenarios are provided to all employees on the same terms, if applicable. |
| (2) |
|
| (3) | Active employee health and wellness benefits are provided under the Severance Plan for the severance period, which is equal to three weeks for every year of service, including the current year (52 week minimum and 104 week maximum). |
| (4) | All continuing NEOs, except |
| (5) |
|
The potential post-employment payments discussed below disclose the estimated payments and benefits payable to the continuing NEOs upon certain triggering events representing the enhanced or accelerated value of payments and benefits and do not include previously-earned and vested amounts payable to such continuing NEOs regardless of the applicable triggering event that have been accrued but not yet paid. The post-termination benefit calculations are based on the following assumptions:
The amounts disclosed are estimates of the amounts which would be paid out to the NEOs based on the triggering event. The actual amounts can be determined only at the time of payment.
| ● | The amounts disclosed are estimates of the amounts which would be paid out to the continuing NEOs based on the triggering event. The actual amounts can be determined only at the time of payment. |
The amounts disclosed do not include benefits provided under the qualified plan, nonqualified supplemental plan and SERP as described in the Pension Benefits section and shown in the Pension Benefits table (at the earliest commencement date without reduction) earlier in this proxy statement, unless expressly noted.
| ● | The amounts disclosed do not include benefits provided under the qualified plan, nonqualified supplemental plan and SERP as described in the Pension Benefits section and shown in the Pension Benefits table (at the earliest commencement date without reduction) earlier in this proxy statement, unless expressly noted. |
The amounts disclosed do not include compensation previously earned and deferred into the EDCP. Theyear-end account balances of the NEOs in the EDCP are set forth in the Nonqualified Deferred Compensation table earlier in this proxy statement. These amounts are payable to the NEO based on the distribution elections made by the NEO at the time the deferral was elected.
| ● | The amounts disclosed do not include compensation previously earned and deferred into the EDCP. The year-end account balances of the continuing NEOs in the EDCP are set forth in the Nonqualified Deferred Compensation table earlier in this proxy statement. These amounts are payable to the continuing NEO based on the distribution elections made by the continuing NEO at the time the deferral was elected. |
8469 | FirstEnergy Corp.20192021 Proxy Statement
| ● | December 31, 2020 is the last day of employment. |
December 31, 2018 is the last day of employment.
| ● | All employees, including the continuing NEOs, are eligible for a full year payout based on actual performance under the FE STIP if they are employed on December 31, 2020. The 2020 STIP amounts are provided in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
All employees, including the NEOs, are eligible for a full year payout based on actual performance under the FE STIP if they are employed on December 31, 2018. The 2018 STIP amounts are provided in theNon-Equity Incentive Plan Compensation column of the SCT.
| ● | The LTIP and Other Equity Awards table below includes stock options, performance-adjusted RSUs and restricted stock. |
The LTIP and Other Equity Awards table below includes stock options, performance-adjusted RSUs and restricted stock.
| ● | The closing common stock price on December 31, 2020, the last trading day of the year ($30.61), is applied to value stock options, performance-adjusted RSUs and restricted stock. |
The closing common stock price on December 31, 2018, the last trading day of the year $37.55, is applied to value stock options, performance-adjusted RSUs and restricted stock.
| ● | Actual performance is utilized for the 2018-2020 performance-adjusted RSUs. Target payout is assumed for the 2019-2021 and 2020-2022 performance-adjusted RSUs. |
Actual performance is utilized for the 2016-2018 performance-adjusted RSUs. Target payout is assumed for the 2017-2019 and 2018-2020 performance-adjusted RSUs.
| ● | Health care amounts are not provided in most cases since they are available to all employees under the same circumstances. |
Health care amounts are not provided in most cases since they are available to all employees under the same circumstances.
| ● | Since Mr. Jones was terminated effective October 29, 2020 and Mr. Reffner was separated effective November 8, 2020, they have generally been excluded from these calculations, and the amounts actually received by Mr. Jones and Mr. Reffner in connection with their termination of employment are provided in the “Departed NEOs” section below. |
Retirement/Voluntary Termination
In the event of ana continuing NEO’s retirement or voluntary termination, other than Messrs. StrahTaylor and Belcher who are not yet retirement eligible, as of December 31, 2018,2020, the NEOscontinuing NEO’s outstanding equity awards would be prorated and vest based on actual performance as described in the 20182020 Post-Termination Compensation and Benefits table above and quantified in the LTIP and Other Equity Awards table below.
The present value of the Qualified Plan, Nonqualified Supplemental Plan, and SERP benefits as shown in the Pension Benefits table reflects commencement of retirement benefits at the NEOs’ earliest age necessary to receive pension benefits without reduction. Messrs. Jones, Pearson, and Gaines haveMr. Benz has reached the age and service requirements needed to receive pension benefits without reduction. If Mr. Jones commenced hisStrah and Ms. Walker are currently eligible to commence pension benefits immediately, then his SERP would bein a reduced amount, as described on page 80. Ms. Vespoli63. Messrs. Taylor and Messrs. Strah, Belcher and Schneider do not meet the age requirement needed to receive Qualified Plan and Nonqualified Supplemental Plan pension benefits without reduction; however, they are entitled to accrued and vested Qualified Plan and Nonqualified Supplemental Plan and SERP benefits (for Ms. Vespoli) as shown in the Pension Benefits table. If Ms. Vespoli commenced the reduced pension benefit immediately upon termination, the present value of the pension benefits reflected in the Pension Benefits table would increase by $270,415. Messrs. StrahTaylor and Belcher were not yet retirement eligible as of December 31, 2018.2020.
Involuntary Separation
In the event of an involuntary separation, the CEO’s severance benefits, if any, would be determined by the Compensation Committee and approved by your Board. The other continuing NEOs are covered under the Severance Plan. Under the Severance Plan, executives are offered severance benefits if involuntarily separated when business conditions require the closing or sale of a facility, corporate restructuring, merger, acquisition, a reduction in workforce, or job elimination. Severance is also offered if an executive turns down a job assignment that would result in a reduction of at least 15% in current base salary; contains a requirement that the executive must relocate from his or her current residence for reasons related to the new job; or would result in the distance from the executive’s current residence to his or her new reporting location being at least 50 miles farther than his or her current residence to his or her previous reporting location. The Severance Plan provides three weeks of base pay for each full year of service with a minimum of 52 weeks and a maximum severance benefit of 104 weeks of base pay. In the event of a December 31, 20182020 involuntary separation, severance pay would be provided as follows: Mr. JonesStrah — $2,266,000$1,900,000 (assuming the Board approves the same level of benefits as the other NEOs)continuing NEOs would receive); Mr. Strah – $1,176,923; Mr. PearsonTaylor — $1,320,800; Ms. Vespoli — $1,489,200;$600,000; Mr. Belcher — $565,000;$650,000; Mr. Gaines – $440,840;Benz — $756,923; and Mr. Schneider – $1,070,000. If Ms. Vespoli commenced the reduced pension benefit immediately upon termination, the present valueWalker — $820,000. Each of the pension benefits reflected in the Pension Benefits table would increase by $270,415. Each of thecontinuing NEOs would also be provided prorated vesting for certain outstanding equity and, in the case of Mr. Taylor, prorated payment of an outstanding cash retention award, as described in the 20182020 Post-Termination Compensation and Benefits table and quantified in the LTIP and Other Equity Awards table.
8570 | FirstEnergy Corp.20192021 Proxy Statement
Termination Following a CIC
As described above, the CIC Executivescontinuing NEOs were participants in the CIC Plan in 2018.2020. Under the CIC Plan, certain enhanced benefits would be provided in the event of a termination without cause or for good reason within two years following a CIC. Under the Incentive Compensation Plans, it is our customary practice to require a qualifying termination of employment for acceleration of the vesting of equity awards in the event of a change ofin control rather than providing for accelerated vesting solely upon a change ofin control. In the event a CIC Executivecontinuing NEO accepts benefits under the CIC Plan, (and with respect to Mr. Jones, pursuant to hisNon-Competition andNon-Disparagement Agreement, dated September 15, 2015), the continuing NEO would be prohibited for two years from working for or with competing entities after receiving severance benefits pursuant to the CIC Plan, and would be prohibited from disclosing trade secrets or other confidential information indefinitely. Mr. Jones entered into a separateNon-Competition andNon-Disparagement Agreement, dated September 15, 2015, providing comparable benefits to the Company.
Generally, pursuant to the CIC Plan and the Incentive Compensation Plans, a CIC is deemed to occur:
| (1) | If any person acquires 25% or more of our voting securities (excluding acquisitions |
| (2) | If a majority of our directors as of the date of the agreement are replaced (other than in specified circumstances); or |
| (3) | The consummation of a major corporate event (defined to include reorganizations and certain asset sales) unless, following such transaction: |
| (a) | The same person or persons who owned our voting securities prior to the transaction own more than 60% of our voting securities prior to the transaction; |
| (b) | No person or entity (with certain exceptions) owns 25% or more of our voting securities; and |
| (c) | At least a majority of the directors resulting from the transaction were directors at the time of the execution of the agreement providing for such transaction; or |
| (4) | If our shareholders approve a complete liquidation or dissolution. |
For a complete CIC definition explanation, see the CIC Plan, and the Incentive Compensation Plans, and Mr. Jones’Non-Competition andNon-Disparagement Agreement.Plans. The CIC severance benefits are triggered only if the CIC Executivecontinuing NEO is terminated without cause or resigns for good reason within two years following a CIC. Good reason is generally defined as a material change, following a CIC, inconsistent with the individual’s previous job duties or compensation. The Incentive Compensation Plans only provide a termination without cause provision and do not have a good reason definition for the accelerated vesting of the equity awards. We do not gross up equity or cash awards to cover the tax obligations for executives.
In the event of a December 31, 20182020 qualifying termination following a CIC, compensation in an amount equal to two times the sum of the amount of annual base salary plus the target annual FE STIP amount as applicable, in the year during which the date of termination occurs, whether or not fully paid, will be provided as follows: Mr. Strah –— $3,800,000; Mr. Taylor — $2,100,000; Mr. Pearson — $2,509,520; Ms. Vespoli — $2,809,040; Mr. Belcher — $1,921,000;$2,275,000; Mr. GainesBenz — $1,454,772; Mr. Schneider$1,353,000; and Ms. Walker — $1,819,000; and Mr. Jones — none.$1,312,000. Each of the continuing NEOs would also be provided additional accelerated vesting following a termination for certain outstanding equity and, in the case of Mr. Taylor, accelerated payment of an outstanding cash retention award, as described in the 20182020 Post-Termination Compensation and Benefits table above and quantified in the LTIP and Other Equity Awards table below. Excise tax andgross-up provisions are not provided under the CIC Plan. Finally, outplacement services are also offered for a one–year period, capped at $30,000.
Death & Disability
In the event of ana continuing NEO’s death or Disability (as defined in the applicable plan documents) as of December 31, 2018,2020, each of the NEOs would also be provided additional accelerated vesting for certain outstanding equity and, in the case of Mr. Taylor, accelerated payment of an outstanding cash retention award, as described in the 20182020 Post-Termination Compensation and Benefits table above and quantified in the LTIP and Other Equity Awards table below.
8671 | FirstEnergy Corp.20192021 Proxy Statement
LTIP and Other Awards
In the event of ana continuing NEO’s retirement or voluntary termination as of December 31, 2018,2020, the continuing NEOs would be provided vested outstanding equity or performance cash awards as quantified in the Retirement/Voluntary Termination column of the LTIP and Other Awards table below. In the event of involuntary separation, termination without cause following a CIC, death, or Disability, the continuing NEOs would be provided additional accelerated vesting for certain outstanding equity or performance cash awards based specifically on the triggering event as quantified in the respective columns of the LTIP and Other Awards table below. Since 2010, awards of performance-adjusted RSUs and performance shares require a termination without cause following a CIC for accelerated vesting. For purposes of the calculations in the table below, we have assumed the equity awards would be replaced by the successor prior to a termination without cause.
LTIP and Other Awards
| Additional Payments Due to the Termination Scenario | ||||||||||||||||
Retirement/ Termination(1) | Involuntary Separation (Additive to the Retirement/ Termination Column)(2) | Death & (Additive to the Retirement/ Termination Column)(3) | Termination Without Cause Following a CIC (Additive to the Retirement/Voluntary Termination Column)(4) | |||||||||||||
Charles E. Jones | $ | 14,985,710 | $ | 0 | $ | 0 | $ | 476,449 | ||||||||
Steven E. Strah(5) | n/a | $ | 2,624,286 | $ | 2,624,286 | $ | 2,700,822 | |||||||||
James F. Pearson | $ | 4,874,646 | $ | 1,063,181 | $ | 1,296,563 | $ | 1,444,677 | ||||||||
Leila L. Vespoli | $ | 4,465,664 | $ | 0 | $ | 0 | $ | 135,688 | ||||||||
Samuel L. Belcher(5) | n/a | $ | 2,043,072 | $ | 2,043,072 | $ | 2,076,586 | |||||||||
Bennett L. Gaines | $ | 1,271,158 | $ | 0 | $ | 0 | $ | 38,623 | ||||||||
Donald R. Schneider | $ | 1,179,281 | $ | 0 | $ | 0 | $ | 69,369 | ||||||||
| Additional Payments Due to the Termination Scenario | ||||||||||||||||||||
Retirement/ Voluntary Termination(1) | Involuntary Separation (Additive to the Retirement/ Voluntary Termination Column)(2) | Death (Additive to the Retirement/ Voluntary Termination Column)(3) | Disability (Additive to the Retirement/ Voluntary Termination Column)(4) | Termination (Additive to the Retirement/ Termination Column)(5) | ||||||||||||||||
Steven E. Strah | $ | 2,486,088 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
K. Jon Taylor(6) | N/A | $ | 1,723,828 | $ | 1,808,287 | $ | 1,808,287 | $ | 1,808,287 | |||||||||||
Samuel L. Belcher(6) | N/A | $ | 2,346,150 | $ | 2,346,150 | $ | 2,346,150 | $ | 2,346,150 | |||||||||||
Gary D. Benz | $ | 1,070,330 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Christine L. Walker | $ | 538,583 | $ | 381,830 | $ | 381,830 | $ | 381,830 | $ | 381,830 | ||||||||||
| (1) | The amounts set forth in the |
| (2) | The amounts set forth in the |
| (3) | The amounts set forth in the |
| (4) | The amounts set forth in the “Disability” column represent the estimated additional amounts that would be payable to the continuing NEO as a result of termination due to Disability |
The amounts set forth in the |
Since |
8772 | FirstEnergy Corp.20192021 Proxy Statement
E-VERPDeparted NEOs and VERO Benefits
The effective date of Ms. Vespoli’s retirement will be April 1, 2019. Under theE-VERP, Ms. Vespoli will receive the following separation pay and benefits:
a lump sum payment of approximately $1,518,400, less applicable withholdings, equivalent to her severance benefit under the Company’s Executive Severance Benefits Plan plus an amount equivalent to unused and deferred paid time off at the time of her retirement;
continuation of health care benefits for a period of up to 18 months; and
a temporary monthly pension enhancement of $1,500 up to age 65.
The effective date of Mr. Pearson’s retirement will be April 1, 2019. UnderJones’ termination of employment was October 29, 2020. Mr. Jones received $28,240 for 132 hours of banked and frozen vacation earned prior to 2008 and based on theE-VERP, Mr. Pearson, will effective base pay rate as of December 31, 2008. His outstanding incentive awards were forfeited, and he did not receive the following separation pay and benefits:
severance benefits or accelerated vesting of any incentive awards, or any additional compensation as a lump sum payment of approximately $1,320,800, less applicable withholdings, equivalent to his severance benefit under the Company’s Executive Severance Benefits Plan plus an amount equivalent to unused and deferred paid time off at the timeresult of his retirement;termination.
continuation of health care benefits for a period of up to 18 months; and
a temporary monthly pension enhancement of $1,500 for 24 months following retirement.
The effective date of Mr. Schneider’s retirement will be May 1, 2019. UnderReffner’s separation from the VERO,Company was November 8, 2020. Mr. Schneider will receiveReffner received $28,000 for 160 hours of banked and frozen vacation earned prior to 2008 and based on the following separationeffective base pay and benefits:
rate as of December 31, 2008. As a lump sum payment currently estimated at $1,009,934, less applicable withholdings, equivalent to his severance benefit as calculated pursuant to the termsresult of the VERO as an insider and in accordance with 11 U.S.C. § 503(c)(2), plus an amount equivalentevents leading to unused and deferred paid time off atMr. Reffner’s separation from the time of his retirement;
continuation of health care benefits for a period of upCompany, the Compensation Committee resolved to 18 months; and
a temporary monthly pension enhancement of $1,500 upexercise its negative discretion to age 65.
Additionally, as is the case for executive officers who retire, Ms. Vespoli, Mr. Pearson and Mr. Schneider are also eligible to receive retirement benefits described above, including benefits under the Master Pension Plan, EDCP, prorated awards under the STIP and LTIP or AIP (for only Mr. Schneider), and,reduce final payouts with respect to Ms. Vespoli, the SERP. Upon retirement, Ms. Vespolipayments of incentive compensation to zero, and he did not receive severance benefits or accelerated vesting of any incentive awards, or any additional compensation as a result of his separation.
For more information on the treatment of Mr. Jones’ and Mr. Schneider’s outstanding stock options will continueReffner’s incentive awards, refer to be exercisable in accordance with the retirement provisions of her awards. Mr. Pearson’s outstanding performance adjusted restricted stock award which would otherwise vest in October 2019 will be forfeited upon his retirement prior thereto in accordance with its terms.CD&A.
CEO Pay Ratio
We believe our executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance shareholder value. We are committed to internal pay equity and our Compensation Committee annually reviews the internal pay ratio between Mr. Jones’our CEO’s total compensation and that for other NEOs and allnon-executive employees. We had multiple CEOs in 2020 as a result of Mr. Jones’ termination of employment effective October 29, 2020. For 2018,purposes of this pay ratio disclosure, we have calculated the CEO compensation based on the compensation of Mr. Jones, who served as CEO for the majority of 2020 and who was serving as CEO on the date used to identify the median employee (and on the corresponding date in 2020). Additionally for 2020, the Compensation Committee compared Mr. Jones’ annual totalelected to use the same “median employee” that was originally identified in 2018 to calculate our 2020 pay ratio calculation, as there has been no change to our employee population or employee compensation (the “CEO Compensation”)arrangements in the last fiscal year that we believe would have a significant impact on our pay ratio disclosure. This same median employee has now been used for three consecutive years in calculating our pay ratio. In 2021, we will identify a new median employee.
The process that we used to the median of the annual total compensation of all employees (excluding Mr. Jones) (the “Median Annual Compensation”). Wedetermine our “median employee” in 2018 is summarized below:
For 2018, we identified the “median employee” by calculating the annual compensation of approximately 12,500 full-time, part-time, seasonal and temporary employees employed by us on October 1, 2018, other than Mr. Jones. As a result of the deconsolidation of FES, all of its subsidiaries, and FENOC in 2018, the identification and analysis of our median employee excluded all employees within CES as of October 1, 2018.
As permitted by SEC rules, to determine the “annual compensation” of our employees, we did not use the same compensation definition as required for purposes of determining total compensation in the 2018 SCT on page 70.Summary Compensation Table. Instead, we used, for the period from January 1, 2018 to September 30, 2018 the sum of:
| ● | 2018 base pay, which we |
88 | FirstEnergy Corp.2019 Proxy Statement
| ● | 2018 target short-term incentive compensation awards (99% of our employees are eligible for these awards). |
Using the above methodology, we identified a small group of employees who had the identical amount of estimated annual compensation; we determined this group represented our “median employee” annual compensation. We selected an employee from that group and identified this person as our median employee.
73 | FirstEnergy Corp. 2021 Proxy Statement
We then calculated the median employee’s Median Annual Compensationannual total compensation for 2020 using the same calculation method as in the SCT,Summary Compensation Table, which was $96,805.resulted in median employee annual compensation of $156,509. As shown on the SCTSummary Compensation Table on page 70,55, in 2018,2020, Mr. Jones’ CEO Compensation was $11,123,128.$10,066,956. When annualized to assume base salary earned through December 31, 2020, the total CEO compensation is $10,261,184. As a result, we estimate that the ratio of CEO Compensationannualized compensation to Median Annual Compensationmedian employee annual compensation for 20182020 is approximately 115:66:1. We note that, due to our permitted use of reasonable estimates and assumptions in preparing this pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus this pay ratio disclosure is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K using the data and assumptions described above. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
8974 | FirstEnergy Corp.20192021 Proxy Statement
Security Ownership ofDirector Compensation in Fiscal Year 2020 Management
| Name(1) | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||
Michael J. Anderson | $125,000 | $149,970 | $2,361 | $2,000 | $279,331 | ||||||||||||||||||||
Steven J. Demetriou | $102,500 | $149,970 | $0 | $0 | $252,470 | ||||||||||||||||||||
Julia L. Johnson | $115,000 | $149,970 | $0 | $0 | $264,970 | ||||||||||||||||||||
Donald T. Misheff | $562,500 | $149,970 | $0 | $0 | $712,470 | ||||||||||||||||||||
Thomas N. Mitchell | $114,838 | $149,970 | $724 | $0 | $265,532 | ||||||||||||||||||||
James F. O’Neil III | $119,881 | $149,970 | $0 | $0 | $269,851 | ||||||||||||||||||||
Christopher D. Pappas | $337,500 | $149,970 | $0 | $0 | $487,470 | ||||||||||||||||||||
Sandra Pianalto | $100,000 | $149,970 | $0 | $5,000 | $254,970 | ||||||||||||||||||||
Luis A. Reyes | $100,000 | $149,970 | $0 | $0 | $249,970 | ||||||||||||||||||||
Leslie M. Turner | $102,500 | $149,970 | $0 | $0 | $252,470 | ||||||||||||||||||||
| (1) | Charles E. Jones, former President and CEO, is not included in this table for 2020 because he was an employee of the Company and therefore received no additional compensation for his service as director. The compensation received by Mr. Jones for 2020 is shown in the 2020 Summary Compensation Table (“SCT”) above. Mr. Jones resigned from the Board effective October 29, 2020. John W. Somerhalder II, Vice Chairperson and Executive Director, was elected to your Board effective March 1, 2021, and Steven E. Strah, President and CEO, was elected to your Board effective March 8, 2021. Messrs. Somerhalder and Strah are excluded from this table. Messrs. Lynn and Teno were elected to your Board effective March 18, 2021 and are excluded from this table. |
| (2) | The amounts set forth in the Fees Earned or Paid in Cash column consist of fees earned in cash whether paid in cash, deferred into the FirstEnergy Corp. Deferred Compensation Plan for Outside Directors (“DDCP”) or elected to be received in stock in lieu of cash. In addition, Messrs. Misheff and Pappas’ amounts include special cash stipends, which are further described in the narrative following this table. |
| (3) | The amounts set forth in the Stock Awards column represent the equity retainer received under the FirstEnergy Corp. 2015 Incentive Compensation Plan, as amended, (“2015 Incentive Plan”) and under the FirstEnergy Corp. 2020 Incentive Compensation Plan (“2020 Incentive Plan”) in the form of shares of common stock. Each amount constitutes the aggregate grant date fair value of stock awards for fiscal 2020 calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The equity retainer is typically paid in quarterly installments. The fair value per share on the grant dates for each director listed in the table was $38.73 on April 1, 2020; $39.33 on July 1, 2020; $28.74 on October 1, 2020; and $30.26 on December 31, 2020. Share amounts are rounded down to the nearest whole share. There were no option awards or stock awards outstanding as of December 31, 2020. |
| (4) | The amounts set forth in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect only the above-market earnings on nonqualified deferred compensation. There are no pension values for directors. The formula used to determine the above market earnings equals 2020 total interest multiplied by the difference between 120 percent of the Applicable Federal Rate for long-term rates (AFR) and the plan rate and divided by the plan rate. |
| (5) | The amounts set forth in the All Other Compensation column include compensation not required to be included in any other column. Charitable matching contributions made on behalf of our directors represent all amounts included in the column. Charitable matching contributions were $2,000 for Mr. Anderson and $5,000 for Ms. Pianalto. The FirstEnergy Foundation supports the charitable matching contributions under its Matching Gifts Program. |
Compensation of Directors
We use a combination of cash and equity-based incentive compensation in order to attract and retain qualified candidates to serve on your Board. Equity compensation provides incentives to directors linking their personal interests to our long-term financial success and to increases in shareholder value. In setting director compensation, we take into consideration the significant amount of time that directors spend in fulfilling their duties to us as well as the skill level required of members of your Board. A review is performed every other year to ensure competitiveness of non-employee director compensation. Only non-employee directors receive the compensation described below for their service on your Board. Since Mr. Jones was an employee, he was not eligible to receive additional compensation for his service on your Board in 2020.
75 | FirstEnergy Corp. 2021 Proxy Statement
Fee Structure
For 2020, each non-employee director received a cash retainer of $100,000 and an equity retainer valued at approximately $150,000 and paid in the form of our common stock. The Chairs of the Corporate Governance and Corporate Responsibility, Finance, and Operations and Safety Oversight Committees each received an additional $15,000 cash retainer in 2020 for serving as a committee chairperson. The Chair of the Audit Committee received an additional $25,000 cash retainer in 2020, and the Chair of the Compensation Committee received an additional $20,000. The amounts paid to directors for 2020 were prorated accordingly, if applicable, based on the duration of their service. Mr. Misheff, the non-executive Chairman of the Board, received an additional $150,000 cash retainer in 2020. Ms. Turner currently directs the Company to pay her cash retainers to her wholly owned limited liability company, therefore, her cash retainers are not eligible for deferral as described below. The total annual compensation of each non-employee director shall not exceed the value of $750,000 in the aggregate of all cash compensation and the value of the applicable equity retainer.
Equity and cash retainers and chairperson retainers were paid in quarterly installments. Any equity compensation and any compensation deferred into equity was granted under the 2015 Incentive Plan. Directors are responsible for paying all taxes associated with cash and equity retainers. We do not gross up equity grants to directors to cover tax obligations.
Special Cash Stipends and Temporary Fee Structures
Following Mr. Jones’ resignation from the Board effective October 29, 2020, Mr. Pappas was appointed to the temporary position of Executive Director of the Board, and Mr. Misheff continued as non-executive Chairman of the Board. On November 8, 2020, the Board approved non-employee director cash compensation increases for Mr. Pappas in connection with his new position, and for Mr. Misheff in connection with his expanded role as non-executive Chairman of the Board. The approved special cash stipend for Mr. Pappas is $75,000 per month ending April 1, 2021, with advanced payment for a minimum term of three months, subject to the Company’s annual non-employee director pay limit. The special cash stipend for Mr. Misheff is $62,500 per month, with advanced payment for a minimum term of three months, plus retroactive payment at this rate for his expanded role for September and October 2020, subject again to the Company’s annual non-employee director pay limit. Beginning in November 2020, Ms. Turner received an additional cash fee of $3,750 per quarter for her expanded role as chairperson of each of the Compliance Oversight Sub-Committee of the Audit Committee and the Demand Review Committee.
Share Ownership Guidelines
We believe it is critical that the interests of directors and shareholders be clearly aligned. As such, similar to the NEOs identified in the CD&A, directors are also subject to share ownership guidelines. Within 90 days of their election to your Board, a director must beneficially own a minimum of 100 shares of our common stock. Within five years of joining your Board, each director is required to own shares of our common stock with an aggregate value of at least six times the annual cash retainer (currently $600,000 in common stock). Each director has either attained the required share ownership guideline or is expected to attain the required share ownership guideline within the allotted amount of time. The share ownership guidelines are reviewed by the Compensation Committee for competitiveness on an annual basis and were last reviewed at the Compensation Committee’s July 2020 meeting.
For 2020, the following directly and indirectly held shares were included in determining whether a non-employee director met his/her ownership guidelines:
| ● | Shares directly or jointly owned in certificate form or in a stock investment plan; |
| ● | Shares held individually or jointly by a broker, or, in certain circumstances, held in trust, or in an individual retirement account (“IRA”), shares held by a spouse, or other beneficially owned shares, to the extent known by the Company; and |
| ● | All units held in the DDCP, discussed below, and units held in the Allegheny Energy, Inc. Non-Employee Director Stock Plan (“AYE Director’s Plan”) or the Allegheny Energy Inc. Amended and Restated Revised Plan for Deferral of Compensation of Directors (“AYE DCD”), which units are payable in shares. |
76 | FirstEnergy Corp. 2021 Proxy Statement
Deferred Compensation Plan for Outside Directors
The DDCP is a nonqualified deferred compensation plan that provides directors the opportunity to defer compensation. Directors may defer up to 100 percent of their cash retainer into cash or stock accounts. Deferrals into the cash account can be invested in one of nine funds, similar to the investment funds available to all of our employees through the FirstEnergy Corp. Savings Plan, or in a Company-paid annually adjusted fixed income account. The Company paid interest at an annual rate of 5.02% on funds deferred into cash accounts beginning in 2013 and 7.02% on funds deferred into cash accounts prior to 2013. The interest rate received by the directors is the same rate received by all participants under the FirstEnergy Corp. Amended and Restated Executive Deferred Compensation Plan (“EDCP”), as discussed further in the CD&A below.
For stock accounts, dividend equivalent units are accrued quarterly and applied to the directors’ accounts on each dividend payment date using the closing price of our common stock on that date. Payments made with respect to any dividend equivalent units that accrue after January 21, 2014, will be paid in cash.
Other Payments or Benefits Received by Directors
The corporate aircraft is available, when appropriate, for transportation to and from Board and committee meetings and training seminars. Mr. Misheff had the use of an office and administrative support with respect to carrying out his duties as non-executive Chairman of the Board during his time serving in such role in 2020. We pay all fees associated with director and officer insurance and business travel insurance for our directors. In 2020, our directors were eligible to receive perquisites including limited personal use of the corporate aircraft and matching charitable contributions, the collective value of which was less than $10,000 for each director. Directors are responsible for paying all taxes associated with perquisites and personal benefits.
All directors have entered into written indemnification agreements, which are intended to secure the protection for our directors contemplated by our Amended and Restated Code of Regulations and Ohio law. Each indemnification agreement provides, among other things, that we will, subject to the agreement terms, indemnify a director if by reason of their corporate status as a director, the person incurs losses, liabilities, judgments, fines, penalties, or amounts paid in settlement in connection with any threatened, pending, or completed proceeding, whether of a civil, criminal, administrative, or investigative nature. In addition, each indemnification agreement provides for the advancement of expenses incurred by a director, subject to certain exceptions, in connection with proceedings covered by the indemnification agreement. As directors and officers, the agreements for Messrs. Somerhalder and Strah address indemnity in both roles, and as a former director and officer, the agreement for Mr. Jones addresses indemnity in both roles.
77 | FirstEnergy Corp. 2021 Proxy Statement
FirstEnergy strives to be the employer of choice in our operating areas, known for our diverse team, our culture of inclusion and our dedication to assisting our approximately 12,000 employees in reaching their full potential. We believe our culture empowers employees to support our mission, build satisfying careers at FirstEnergy and drive our success.
Built upon our Core Values and Behaviors, our talent management and total rewards processes are designed to attract, retain, reward and develop a diverse and skilled workforce of high-performing employees and teams. All employees, no matter how senior the level, are responsible for demonstrating our Core Values and Behaviors and adhering to the FirstEnergy Code of Conduct; and there are consequences for any employee who does not adhere.
FirstEnergy’s performance is a combination of our employees’ results and behaviors. We foster an environment where integrity and ethical behaviors are expected from all levels within the organization. By focusing not only on what we achieve but, how we achieve it, we build upon and support the Company’s mission to be a forward-thinking electric utility that is powered by a diverse team of employees committed to doing the right thing to ensure ethics and integrity in everything we do. Behaviors such as courage, ownership, openness and teamwork are encouraged so employees can be accountable for making the right decisions and speaking-up when something does not seem consistent with our Core Values and Behaviors or that violates the FirstEnergy Code of Conduct. It is imperative that our Core Values and Behaviors act as the foundation that will propel us forward to successfully grow and achieve our commitment to our stakeholders.
Safety
Safety as a core value is as simple as doing the right thing at the right time, every time, so all workers return home safely every day. Having the power to keep each other safe means accepting the responsibility to look out for ourselves and each other. It is critical that we care for the well-being of all individuals, take personal accountability for controlling exposure to hazards, and continuously improve safety behaviors, systems and controls. Zero life-changing events (LCEs) is our shared mission.
2021 provides an opportunity to embed our “Leading with Safety” learnings and experiences obtained during our 2019 and 2020 Safety Transformation. We are shifting from initial leader and employee safety training and exposure control concepts to a Safety Management System that cultivates job site exposure identification and mitigation to prevent LCEs.
COVID-19 Response
Throughout the coronavirus pandemic our employee’s safety, well-being and physical and mental health remained our top priority.
Below are some measures taken for the safety and well-being of our employees:
We required any employees who can work remotely to do so (approximately half of our workforce), with a workplace return date currently established as no sooner than June 2021.
With regards to compensation and benefits, our philosophy throughout the pandemic has been “no financial harm” to our employees. We provided employees with COVID-19 time off to maximize employee health and safety, enhanced vacation rollover, waivers for in-network telehealth providers, and refunded certain monthly premiums due to COVID-19 state lockdowns.
We implemented additional safety protocols, increased cleaning protocols of our offices, established social distancing procedures, provided masks and other cleaning supplies and upgraded HVAC systems of our FE-owned buildings to ensure the offices are safe for the employees who needed to be on site and in anticipation of our remote employees returning to their offices.
We developed COVID-19 protocols that became FirstEnergy’s COVID-19 Medical Screening Process or “Hotline.” A medical staff consisting of 14 nurses and doctors and many non-medical intake teams were assembled to manage COVID-19 related illnesses, perform contact tracing and safely return employees to work.
We implemented a COVID-19 medical illness and return-from-travel intake application (Safe Workplace). We formed a Chronic Condition Return team (CCRT) which developed protocols for
78 | FirstEnergy Corp. 2021 Proxy Statement
| employees with chronic conditions to manage their return to work or approval to use paid time off hours during the health emergency. |
We created a Return to Work team, that developed, implemented and continues to update FirstEnergy’s Workplace Return Guide covering all policies and protocols for onsite employees to follow and remote employees to adopt once employees return to the workplace following the current public health crisis.
Additionally, we strengthened our commitment to helping people in need throughout our communities that were hit hard by COVID-19 both in monetary or food donations to food banks and pantries, or safely helping at local nonprofit organizations; our employees showed eagerness to help others affected by the global pandemic.
We believe by taking extra measures to care for our employees during these unprecedented times, we allow for our employees to better serve our communities and customers who rely on us to continually provide their energy needs.
Diversity and Inclusion
We believe a diverse and inclusive work environment delivers better service to customers, strong operational performance, innovation and a safe and rewarding work experience for employees. For these reasons, Diversity and Inclusion (“D&I”) is a Core Value, as well as a corporate objective. We are focused on expanding the diversity of our workforce and creating an inclusive workplace where employees feel valued, motivated and empowered to drive FirstEnergy’s success.
During 2020, the focus on racial inequality and social injustice challenged our core value of D&I and prompted actions to denounce racism, violence and discrimination. Below are some of the key actions taken:
We issued a public statement condemning acts of racism, violence and discrimination and challenged employees to use their voices to engage in meaningful, candid conversations and use peaceful actions to enact positive change.
We offered speak-up dialogue sessions where employees participated in a safe-space forum that encouraged open, honest dialogue about racial inequality and social injustice and to listen, learn and support one another. Because of the success of these sessions, we are expanding them to include additional topics on a regular basis.
Our MOSaic Employee Business Resource Group (EBRG) for people of color and their allies hosted forums where members have a safe space to discuss their feelings about racial inequality and identify actions for improvement at FirstEnergy.
We partnered with an independent consulting firm (that specializes in development and diversity, equity and inclusion) to host training and dialogue forums to support our leaders in having uncomfortable conversations with employees such as addressing race and racism in the workplace and how to have inclusive discussions.
We expanded our D&I Council membership to diversify representation by race/ethnicity, geography and leader level. Currently, we have a 17-member Executive D&I Council – sponsored by our President & CEO – that aims to enhance workforce diversity, create an inclusive work environment and provide oversight and guidance for FirstEnergy’s integrated D&I strategy.
We believe that these and other actions taken will help us further promote an atmosphere of inclusiveness where our employees feel empowered to speak-up and our leaders are equipped to hold tough conversations. The actions taken in 2020 will continue to expand and evolve in order to better serve our employees and drive our D&I initiatives.
With a commitment from top leadership over the last several years, we moved our D&I efforts forward by building within our culture:
A D&I Working Group to develop action plans and oversee D&I activities across the organization
D&I Implementation Teams in each business unit to effectively implement actions tailored to each group’s unique needs
EBRG consisting of more than 2,100 members to help celebrate our differences and support our common goals
79 | FirstEnergy Corp. 2021 Proxy Statement
Regularly surveying employees about inclusion at FirstEnergy, soliciting their ideas and engaging them in actions to improve it
Ongoing training and education on a variety of D&I topics for employees and leaders
The FirstEnergy Ambassador Network, a structured employee volunteer-based program, to enhance near and long-term recruiting to build a diverse talent pool
Job recruiting processes to increase the number of diverse candidates considered for open positions and expand the diversity of teams interviewing those candidates
Partnerships to open new doors for candidates from local organizations and schools
To drive leadership accountability for efforts to enhance our culture and expand the diversity of our team, we introduced a compensable D&I Index KPI in our 2018 short-term incentive compensation program for managers and above. In 2019, we increased the weight of this KPI to further advance this business imperative. In 2020, we maintained the 15% weighting for managers and above. For more information, refer to the CD&A.
Our D&I initiatives begin with our Board of Directors. We believe it is in our shareholders’ best interest to have a diverse Board representing a wide breadth of experiences and perspectives. Accordingly, your Board has set a goal targeting at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future.
We are also focused on building our diverse supplier pipeline through our Supplier Diversity Program. Supplier diversity is intended to provide value to our customers and strengthen the economic health of communities across our service area. Maintaining an inclusive supplier diversity strategy is important when sourcing products and services, selecting suppliers, and managing supplier and contractor relationships.
For more than a century, FirstEnergy and its predecessor companies have worked to improve the quality of life in the places where our customers and employees live and work. As part of our D&I initiatives, one of the FirstEnergy Foundation’s goals is to support of community organizations that have a D&I focus.
Diversity & Inclusion Recognition | ||||||||||||||||
DiversityInc Top Utilities List and Top Board of Directors | Bloomberg Gender Equality Index | GI Jobs Military Friendly Employer Silver designation | National Organization on Disability Leading Disability Employer Award | Forbes Best Employer for Diversity Award | ||||||||||||
Workforce Pay Equity and Compensation
As part of our commitment to D&I, we employed an independent third party to provide an analysis of our employees’ pay and our pay practices. Our goal was to ensure there were no pay gaps for female or racially or ethnically diverse employees when compared to all employees. The results validated that goal and confirmed that our internal policies and processes support pay equity and are applied consistently. We take pride in the fact that our employees are treated equitably and provided with wages that are competitive and consistent with positions, skill levels, experience and knowledge.
Employee Growth and Development
We are committed to preparing our high-performing workforce for the future and helping employees reach their full potential. We provide employees with opportunities to develop their skills and competencies and prepare our emerging leaders for expanded responsibilities. We believe understanding our rapidly changing industry and our Company strategy is key to our employees’ abilities to support our mission and meet our customers’ evolving needs. Toward that end, we are actively engaged in the following initiatives:
Talent Management –We have robust processes to support recruiting, career management, succession planning, and employee and leadership development. We strengthened our recruiting processes to ensure transparency, consistency and inclusivity and better ensure unbiased selection
80 | FirstEnergy Corp. 2021 Proxy Statement
of the best candidates. Additionally, we trained over 200 hiring champions and experts across FirstEnergy to participate in diverse interviewing panels. In 2020, we continued to provide greater transparency into our talent management processes. This transparency fosters a more robust exchange of information and feedback between employees and leaders and promotes a clearer understanding of career management and development opportunities. Meaningful conversations between leaders and their employees empower employees to take ownership of their careers, build trust, and lead to a more inclusive workplace. Additionally, 2020 required agility in our approach to talent management. We successfully converted all our leadership training programs, talent reviews, recruiting, co-op/intern program and onboarding processes to virtual formats.
Mentoring Program –We expanded our mentoring program in 2020 to include all non-physical workers. This program provides the ability for employees to select a mentor from across the organization. It enhances learning, teamwork and collaboration throughout FirstEnergy, cultivates an environment for professional growth and encourages leaders to guide and prepare colleagues. Our mentoring program supports the development and retention of employees, increases job satisfaction for mentees and mentors, and facilitates skill and knowledge-sharing across the Company. Since its inception, over 500 people have participated in the formal program and it continues to grow.
Experienced Leader Program –This new program bridges the development between new supervisors and managers and senior executives. By providing a development path for experienced directors and managers, we equip our leadership with the right tools to coach and support their teams and ultimately drive FirstEnergy’s long-term success. A group of 26 managers and directors participated in the successful pilot program in 2020.
Power Systems Institute –We are focused on increasing the number of candidates in our Power Systems Institute (“PSI”), an award-winning program for recruiting and developing the next generation of highly trained, dedicated and motivated line and substation workers. Upon completion of the 21-month program, students receive an associate degree and are eligible to be hired by FirstEnergy. Since the PSI program’s inception, we have hired more than 2,000 graduates across our service territory. Over the next five years, we plan to enhance our PSI recruitment efforts by building and expanding partnerships with community organizations in each of our service areas. These community organizations will enable us to identify and engage individuals and populations that have been traditionally under-represented in the PSI program. As these partnerships mature both the organizations and FirstEnergy will be able to meet mutually beneficial objectives that serve the greater community. In addition, in 2021, FirstEnergy has initiated an Equal Access scholarship for the PSI program. The objective of this scholarship is to mitigate some of the financial barriers currently associated with the program. The scholarship is designed to assist students with living expenses during the program and is another resource to strengthen our recruiting efforts.
81 | FirstEnergy Corp. 2021 Proxy Statement
FirstEnergy’s commitment to Corporate Responsibility is embedded in the pillars of our mission statement and includes our efforts for transparency and accountability of environmental, social, and governance relating to these topics (E&S). This includes a focus on identifying and mitigating associated risks and acting upon opportunities that ensure we are a resilient and sustainable company into the future. A key component of our E&S approach is to educate and engage our employees by integrating our core value of corporate responsibility into their business units.
Oversight of our corporate responsibility initiatives and strategy, including environmental and social, is provided by the Corporate Governance and Corporate Responsibility Committee of the Board of Directors and a cross-functional executive-level steering committee. This Board Committee solely comprises independent directors and typically meets five times per year to discuss updates on a broad range of issues related to E&S initiatives. In addition, our cross-functional, executive-level steering committee reviews our corporate responsibility strategy and initiatives and includes senior leadership from the Community Involvement, Corporate Governance, Environmental, Human Resources, Investor Relations, Risk and Strategy departments.
In 2020, FirstEnergy conducted its first materiality assessment of potential E&S topics as part of our ongoing commitment to corporate responsibility. Our process was guided by the foundational principles outlined in the Global Reporting Initiative (GRI) Framework as well as the Sustainability Accounting Standards Board (SASB). We partnered with a third-party consultant to complete the assessment that included the following approach:
| ● | Identified our list of potential topics through research and benchmarking |
| ● | Refined our list of topics through an in-person workshop conducted with members of FirstEnergy’s executive leadership team |
| ● | Prioritized the topics in our list through surveys of FirstEnergy employees (internal stakeholders) and key external stakeholder groups (customers, non-governmental organizations, suppliers, and investors) |
| ● | Validated our topic list through interviews with external stakeholders from each of the identified stakeholder groups |
Engaging stakeholders is a critical component of the materiality assessment process, and their insights helped us determine our most important E&S topics to focus on in order to drive change and create value. Our materiality assessment also provided opportunities for educating our internal stakeholders about evolving expectations around E&S management, reporting and disclosure. The process reinforced the need to regularly engage with our stakeholders to validate our material E&S priorities.
The results of our assessment affirmed several topics that are integral to our business, such as Safety & Health, Financial Performance, Energy Reliability & Resiliency, and Cyber & Physical Security. Additionally, our materiality assessment validated topics that are central to FirstEnergy’s E&S strategy and provide a strong foundation for continued forward-thinking initiatives: Greenhouse Gas Emissions & Climate Change, Innovation, Community Vitality, and Diversity & Inclusion. These topics align with our company’s mission and core values, and we expect them to be influential to our company strategy into the foreseeable future.
82 | FirstEnergy Corp. 2021 Proxy Statement
The findings from our materiality assessment will also help inform and drive our E&S strategy, priorities and initiatives. The results will be used to continue to educate and inform our stakeholders, enhance our reporting disclosures, and evaluate opportunities for goal setting.
83 | FirstEnergy Corp. 2021 Proxy Statement
Security Ownership of Management
The following table shows shares of common stock beneficially owned (as beneficial ownership is defined in Rule13d-3 under the Exchange Act) as of March 8, 2019,17, 2021, by each director, the director nominee, the NEOs, and all directors, the director nominee, and executive officers as a group.
| Name | Class of Stock | Shares Beneficially Owned(1)(2) | Percent of Class(3) | |||
| ||||||
Michael J. Anderson | Common | 1,000 | * | |||
Samuel L. Belcher | Common | 56,271 | * | |||
Gary D. Benz | Common | 56,532 | * | |||
Steven J. Demetriou | Common | |||||
| 4,130 | * | ||||
Julia L. Johnson | Common | 34,642 | * | |||
Charles E. Jones | Common | 603,847 | * | |||
Jesse A. Lynn | Common | 100 | * | |||
Donald T. Misheff | Common | 100 | * | |||
Thomas N. Mitchell | Common | 7,955 | * | |||
James F. O’Neil III | Common | 4,778 | * | |||
Christopher D. Pappas | Common | |||||
| 16,489 | * | ||||
Sandra Pianalto | Common | 3,262 | * | |||
Robert P. Reffner | Common | 85,377 | * | |||
Luis A. Reyes | Common | 343 | * | |||
| Common | 37,139 | * | |||
Steven E. Strah | Common | 74,704 | * | |||
| Common | 28,065 | * | |||
Andrew Teno | Common | 100 | * | |||
Leslie M. Turner | Common | 4,497 | * | |||
| Common | 51,211 | * | |||
Melvin Williams | Common | -0- | * | |||
All Directors and Executive Officers as a Group | Common | 1,077,238 | *(3) |
| (1) | The amounts set forth in this column include any shares with respect to which the executive officer, NEO or director may directly or indirectly have sole or shared voting or investment power. The amounts also include stock options and/or shares that have been deferred as equivalent units under the AYE Director’s Plan and the AYE DCD of which the NEO or director has the right to acquire beneficial ownership within 60 days of March |
84 | FirstEnergy Corp. 2021 Proxy Statement
| (2) | Deferred shares and other amounts payable in stock under the DDCP are held as stock units and are not beneficially owned (as defined in Rule13d-3 under the Exchange Act) and are therefore not included in the table above. However, such stock units are counted for purposes ofnon-employee director share ownership guidelines. The stock unit holdings of the directors under the DDCP are as follows. |
| Name | Director Deferred Stock Units Payable in Stock | |
| ||
Michael J. Anderson | 51,125 | |
Steven J. Demetriou | 11,760 | |
Julia L. Johnson | 42,983 | |
Donald T. Misheff | 34,152 | |
Thomas N. Mitchell | 22,047 | |
James F. O’Neil III | 18,157 | |
Christopher D. Pappas | 41,044 | |
Sandra Pianalto | 7,943 | |
Luis A. Reyes | ||
| ||
Leslie M. Turner | 4,465 |
| (3) | The percentage of shares beneficially owned by each director or executive officer, or by all directors and executive officers as a group, does not exceed one percent of the class. |
9085 | FirstEnergy Corp.20192021 Proxy Statement
Security OwnershipofOwnershipof Certain Beneficial Owners
The following table shows all persons who are known by yourthe Company to be the beneficial owner (as beneficial ownership is defined in Rule13d-3 under the Exchange Act) of more than five percent of the outstanding shares of common stock of yourthe Company as of March 8, 2019.17, 2021.
Voting Power Number of Shares | Investment Power Number of Shares | |||||||||||
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Common Shares Outstanding(5) | Sole | Shared | Sole | Shared | ||||||
The Vanguard Group(1) 100 Vanguard Blvd. Malvern, PA 19355 | 61,934,118 | 12.1% | 653,201 | 224,723 | 61,162,850 | 771,268 | ||||||
BlackRock Inc.(2) 55 East 52nd Street, New York, NY 10055 | 59,070,063 | 11.5% | 54,156,395 | 0 | 59,070,063 | 0 | ||||||
State Street Corporation(3) One Lincoln Street Boston, MA 02111 | 34,898,819 | 6.8% | 0 | 32,412,969 | 0 | 34,893,966 | ||||||
Zimmer Partners, L.P.(4) Nine W. 57th St., 33rd Fl., New York, NY 10019 | 29,476,741 | 5.8% | 0 | 29,476,741 | 0 | 29,476,741 | ||||||
Voting Power Number of Shares | Dispositive Power Number of Shares | |||||||||||
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Common Shares Outstanding(4) | Sole | Shared | Sole | Shared | ||||||
The Vanguard Group (1) 100 Vanguard Blvd. Malvern, PA 19355 | 63,728,391 | 11.75% | 0 | 1,193,249 | 61,041,561 | 2,686,830 | ||||||
Entities affiliated with State Street Corporation (2) One Lincoln Street Boston, MA 02111 | 38,283,899 | 7.06% | 0 | 34,050,118 | 0 | 38,255,486 | ||||||
BlackRock Inc. (3) 55 East 52nd Street, New York, NY 10055 | 37,624,376 | 6.9% | 33,886,460 | 0 | 37,624,376 | 0 | ||||||
| (1) | Based solely on the most recently available Schedule 13G/A filed with the SEC on February |
| (2) | Based solely on the most recently available Schedule 13G filed with the SEC on February 12, 2021. |
| (3) | Based solely on the most recently available Schedule 13G/A filed with the SEC on January |
|
| (4) |
|
Percentages of shares beneficially owned are as of December 31, |
9186 | FirstEnergy Corp.20192021 Proxy Statement
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during 2020 were James F. O’Neil III, Christopher D. Pappas, Sandra Pianalto, and Leslie M. Turner. No members of the Compensation Committee during 20182020 meet the criteria to be considered to have an interlock or insider participation relationship.
Section 16(a) Beneficial OwnershipReporting Compliance
Section 16(a) of the Exchange Act requires your Company’s executive officers and directors and beneficial owners of more than 10 percent of your Company’s common stock to file initial reports of ownership and reports of changes in ownership of your Company’s common stock with the SEC and the NYSE. To your Company’s knowledge, for the fiscal year ended December 31, 2018, all Section 16(a) filing requirements applicable to its executive officers and directors and beneficial owners of more than 10 percent of your Company’s common stock were satisfied except that Jason J. Lisowski’s Form 3 was amended to include a holding that was inadvertently omitted from the original filing.
Certain RelationshipsandRelationshipsand Related Person Transactions
Based on our size and varied business operations, we may engage in transactions with companies and other organizations in which a member of your Board, executive officer, or such person’s immediate family member also may be a board member, executive officer, or significant investor. In some of these cases, such person may have a direct or indirect material interest in the transaction with yourthe Company. We recognize that related person transactions have the potential to create perceived or actual conflicts of interest and could create the appearance that decisions are based on considerations other than the best interests of yourthe Company and its shareholders. Accordingly, as a general matter, it is our preference to avoid related person transactions. However, there are situations where related person transactions may be in, or may not be inconsistent with, the best interests of yourthe Company and its shareholders. Your Board has determined that it is appropriate and necessary to have a process in place to identify and provide proper review of any related person transactions.
Based on the foregoing, your Board established a written Related Person Transactions Policy (the “Policy”) that has been implemented by the Corporate Governance Sustainability and Corporate Responsibility Committee in order to effectuate the review, approval, and ratification process surrounding related person transactions. This Policy supplements yourthe Company’s otherconflict-of-interest policies set forth in the FirstEnergyConflicts-of-Interest Policy, Code of Business Conduct, and the Board of Directors Code of Ethics and Business Conduct. Related person transactions may be entered into or continued only if a majority of the disinterested members of the Corporate Governance Sustainability and Corporate Responsibility Committee or your Board approves or ratifies the transaction in accordance with the Policy. The Chair of the Corporate Governance Sustainability and Corporate Responsibility Committee also has the delegated authority between meetings to review and determine whether a transaction should be approved or ratified in accordance with the Policy. In making its decisions, the Corporate Governance Sustainability and Corporate Responsibility Committee, Chair of the Corporate Governance Sustainability and Corporate Responsibility Committee or your Board will review current and proposed transactions by taking into consideration the Policy, which includes the definitions and terms set forth in Item 404 ofRegulation S-K.
As part of the Policy, our management established review procedures for any transaction, proposed transaction or any material amendment to a transaction, in which we are currently, or in which we may be, a participant in which the amount exceeds $120,000, and in which the related person, as defined in Item 404 ofRegulation S-K, had or will have a direct or indirect material interest. We also established proceduresIn early 2021, our directors, our new director nominee and current executive officers completed a questionnaire to allow us to identify suchassist your Company in identifying and assessing any potential related person transactions. For the three former executive officers, this review was based on their most recent questionnaire completed in early 2020. Your Company facilitates the review by examining its financial records based on responses to the questionnaires. Any known related entities of the related persons are identified as such in the applicable computer systemssystem so that necessary business units are made aware of a potential related person transaction or proposed transaction involving yourthe Company and a related entity. As applicable, management brings transactions to the attention of the Corporate Governance Sustainability and Corporate Responsibility Committee, Chair of the Corporate Governance Sustainability and Corporate Responsibility Committee or your Board for its review, approval or ratification.
92 | FirstEnergy Corp.2019 Proxy Statement
When reviewing a transaction, the Corporate Governance Sustainability and Corporate Responsibility Committee, Chair of the Corporate Governance Sustainability and Corporate Responsibility Committee or your Board reviews the material facts of the related person’s relationship to yourthe Company, and his or her interest in the transaction, as well as the aggregate value of such transaction to the Company. Since January 1, 2018,2020, we participated in the transactions described below, in which the amount involved exceeded $120,000 and in which any Board member, Board member nominee, executive officer, beneficial owner of more than five percent of our common stock, or a member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. Pursuant to the terms of the Policy, your Board’s Corporate Governance Sustainability
87 | FirstEnergy Corp. 2021 Proxy Statement
and Corporate Responsibility Committee and/or the Chair of the Corporate Governance Sustainability and Corporate Responsibility Committee ratified and approved the transactions described below.
Mr. Gary A. Chack serves your Company as a Staff Environmental Coordinator. Mr. Gary A. Chack has been employed by the Company since 2005. Mr. Gary A. Chack is the brother of Mr. Dennis M. Chack who has been an executive officer of your Company since June 2015. From January 1, 2018 through March 8, 2019, Mr. Gary A. Chack was paid compensation in the aggregate amount of approximately $142,300, which consisted of base salary and the STIP paid in 2019 for 2018 performance. Mr. Gary A. Chack’s compensation is consistent with the terms of your Company’s compensation programs. No direct reporting relationship exists between Mr. Gary A. Chack and Mr. Dennis M. Chack.
Mr. James A. Jones serves yourthe Company as a Distribution Technician. Mr. James A. Jones has been employed by yourthe Company since 2005. Mr. James A. Jones is the brother of Mr. Charles E. Jones who is yourthe Company’s former CEO. From January 1, 20182020 through March 8, 2019,19, 2021, Mr. James A. Jones was paid compensation in the aggregate amount of approximately $127,400,$153,700, which consisted of base salary, overtime and the FE STIP paid in 20192021 for 20182020 performance. Mr. James A. Jones’ compensation is consistent with the terms of yourthe Company’s compensation programs. No direct reporting relationship existsexisted between Mr. James A. Jones and Mr. Charles E. Jones.
Mr. Jonathan J. Kulick serves the Company as a Supervisor of Regulated Meter Reading. Mr. Jonathan J. Kulick has been employed by the Company since 2014. Mr. Jonathan J. Kulick is the son-in-law of Mr. Charles E. Jones who is the Company’s former CEO. From January 1, 2020 through March 19, 2021, Mr. Jonathan J. Kulick was paid compensation in the aggregate amount of approximately $125,400, which consisted of base salary, overtime and the FE STIP paid in 2021 for 2020 performance. Mr. Jonathan J. Kulick’s compensation is consistent with the terms of the Company’s compensation programs. No direct reporting relationship existed between Mr. Jonathan J. Kulick and Mr. Charles E. Jones.
Ms. Carly M. Lange serves yourthe Company as a Supervisor of Workforce Development Process and Systems Training. Ms. Carly M. Lange has been employed by yourthe Company since 2014. Ms. Carly M. Lange is the daughter of Mr. Charles E. Jones who is yourthe Company’s former CEO. From January 1, 20182020 through March 8, 2019,19, 2021, Ms. Carly M. Lange was paid compensation in the aggregate amount of approximately $134,600,$162,400, which consisted of base salary, overtime and the FE STIP paid in 20192021 for 20182020 performance. Ms. Carly M. Lange’s compensation is consistent with the terms of yourthe Company’s compensation programs. No direct reporting relationship existsexisted between Ms. Carly M. Lange and Mr. Charles E. Jones.
Mr. Kyle C. Lange serves the Company as a Heavy Equipment Operator. Mr. Kyle C. Lange has been employed by the Company since 2009. Mr. Kyle C. Lange is the son-in-law of Mr. Charles E. Jones who is the Company’s former CEO. From January 1, 2020 through March 19, 2021, Mr. Kyle C. Lange was paid compensation in the aggregate amount of approximately $133,090, which consisted of base salary, overtime and the FE STIP paid in 2021 for 2020 performance. Mr. Kyle C. Lange’s compensation is consistent with the terms of the Company’s compensation programs. No direct reporting relationship existed between Mr. Kyle C. Lange and Mr. Charles E. Jones.
Mr. Kenneth A. Strah serves yourthe Company as a Director of Customer Contact Centers. Mr. Kenneth A. Strah has been employed by yourthe Company since 1980. Mr. Kenneth A. Strah is the brother of Mr. Steven E. Strah who has been an executive officer of your Company since February 2015.is the Company’s President and CEO. From January 1, 20182020 through March 8, 2019,19, 2021, Mr. Kenneth A. Strah received compensation in the aggregate amount of approximately $301,700,$391,400, which consisted of base salary, the FE STIP paid in 20192021 for 20182020 performance and the grant date value of performance-adjusted RSUs granted in 20182020 under your Company’sthe FE LTIP. Mr. Kenneth A. Strah’s compensation is consistent with the terms of yourthe Company’s compensation programs. No direct reporting relationship exists between Mr. Kenneth A. Strah and Mr. Steven E. Strah.
During 2018,2020, two providers of services to yourthe Company were also beneficial owners of at least 5% of our common stock: BlackRock, Inc. (“BlackRock”) and State Street Corporation (“State Street”). Their fees are unrelated to their common stock ownership, resulted fromarm’s-length negotiations, and are reasonable in amount and reflect market terms and conditions. YourThe Company does not believe BlackRock or State Street have any direct or indirect material interest in the transactions as a result of such services. The nature and value of services provided by these 5% shareholders and their affiliates are described below.
Affiliates of BlackRock provided asset management services for certain assets under our FirstEnergy Corp. Pension Plan and a trust associated with certain Company employee benefit plans and received approximately $637,000$555,000 in fees from yourthe Company from January 1, 20182020 through March 8, 201919, 2021 for such services.
Affiliates of State Street provided asset management and trustee services relating to the FirstEnergy Corp. Amended and Restated Executive Deferred Compensation Plan and a trust associated with certain Company employee benefit plans and received approximately $125,000$480,000 in fees from January 1, 20182020 through March 8, 201919, 2021 for such services.
9388 | FirstEnergy Corp.20192021 Proxy Statement
Related Person Transactions involving the Icahn Group
On March 16, 2021, the Company entered into the Director Nomination Agreement with the Icahn Group.
Pursuant to the Agreement, the Board agreed to, effective as of March 18, 2021: (i) increase the size of the Board from 12 to 14 directors, resulting in a total of two vacancies; and (ii) appoint the Icahn Designees to serve as directors of the Company to fill such vacancies, each with a term expiring at the Annual Meeting. The Company agreed to appoint (i) Mr. Teno to serve as a member of the Board’s Audit Committee and its sub-committee overseeing the assessment and implementation of potential changes in FirstEnergy’s compliance program, and (ii) Mr. Lynn to serve as a member of the Board’s Independent Review Committee and the Demand Review Committee. Subsequently, effective March 23, 2021, Mr. Lynn was also appointed to the Corporate Governance and Corporate Responsibility Committee and Mr. Teno was also appointed to the Finance Committee. The Company also agreed to nominate each of the Icahn Designees for election as directors of the Company at the Annual Meeting, and to use its reasonable best efforts (including the solicitation of proxies) to obtain the election of each of the Icahn Designees at the Annual Meeting.
In addition, until March 1, 2022, the Company and the Icahn Group will each use all reasonable efforts (including the exhaustion of all available appeals processes) to, among other matters, obtain all Regulatory Approvals (as defined in the Director Nomination Agreement) necessary to permit the Icahn Designees (and any replacement designees) to remain a director of the Company (or to rejoin the Board, as applicable), to vote at meetings of the Board or any Board committee and to take the other actions contemplated by the Director Nomination Agreement. Until such time as all Regulatory Approvals are obtained, no Icahn Designee (or replacement designee) serving as a member of the Board will have the right to vote at any meeting of the Board or any Board committee.
In connection with their appointment to the Board, the Board determined that each of Mr. Teno and Mr. Lynn qualifies as an independent director under the listing rules of the New York Stock Exchange. The Icahn Designees will receive the same compensation as the Company’s other non-employee directors. The Company has also entered into a Director and Officer Indemnification Agreement with each of Mr. Teno and Mr. Lynn.
In the event the Icahn Designees are unable or otherwise cease to serve on the Board, the Director Nomination Agreement provides a mechanism for the Icahn group to designate a substitute director acceptable to the Board to be appointed to the Board for the remainder of the term of such Icahn Designee.
If at any time the Icahn Group ceases to hold a “net long” position (as defined in the Director Nomination Agreement) in at least: (i) three percent (3%) of the total outstanding common shares of the Company, the Icahn Group will cause one Icahn Designee to promptly resign from the Board and any committee of the Board on which he or she then sits; and (ii) one and one-half percent (1.5%) of the total outstanding common shares of the Company, the Icahn Group will cause each Icahn Designee to promptly resign from the Board and any committee of the Board on which he or she then sits.
Further, during the applicable term of the Director Nomination Agreement, the Company has generally agreed (i) not to create a separate executive committee of the Board or any other committee with functions similar to those customarily granted to an executive committee, (ii) not to form any new committee without offering at least one Icahn Designee the opportunity to be a member of such committee, and (iii) that, with respect to any Board consideration of appointment and employment of named executive officers, specified transactions, and certain other matters such voting with respect thereto shall take place only at the full Board level or in committees of which one of the Icahn Designees is a member.
From the date of the Director Nomination Agreement until the later of (i) 30 days before the last day of the nomination deadline for shareholders to nominate candidates for the annual meeting following the Annual Meeting and (ii) 30 days after such date as no Icahn Designee is on the Board and the Icahn Group has no right to designate a replacement designee (such period, the “Standstill Period”), the Icahn Group has agreed to vote all common shares of the Company that it or its affiliates have the right to vote in favor of the election of directors nominated and recommended by the Board for election and otherwise in accordance with the recommendations of the Board, subject to certain exceptions and early termination upon certain specified events. The Icahn Group has also agreed to certain customary standstill and mutual non-disparagement restrictions during the Standstill Period, subject to certain exceptions and early termination upon certain specified events. In addition, as long as the Icahn Group has a “net long” position, as defined in the Director Nomination Agreement, in at least one and one-half percent (1.5%) of the total outstanding common shares
89 | FirstEnergy Corp. 2021 Proxy Statement
of the Company, the Company will not adopt a rights plan designed to increase the cost to a potential acquirer which includes a triggering threshold below 10.0% of the then-outstanding common stock through the issuance of new rights, common stock or preferred shares, unless such rights plan exempts the Icahn Group up to a beneficial ownership of 9.99%. The Director Nomination Agreement will terminate and be of no further force or effect at such time, if any, following the 2021 Annual Meeting that (i) no Icahn Designee serves on the Board and (ii) the Icahn Group is no longer entitled to designate a replacement designee for any Icahn Designee; except that the customary standstill and mutual non-disparagement restrictions will terminate at the end of the Standstill Period.
Pursuant to the Director Nomination Agreement, the Company and the Icahn Group have also entered into a confidentiality agreement and agreed to negotiate in good faith and enter into a customary registration rights agreement by no later than July 1, 2021, with respect to the common shares of the Company beneficially owned by the Icahn Group.
90 | FirstEnergy Corp. 2021 Proxy Statement
The Audit Committee of your Board is charged with assisting your full Board in fulfilling its oversight responsibility with respect to the quality and integrity of the accounting, auditing, and financial reporting practices of the Company. The Audit Committee acts under a written charter that is reviewed annually, revised as necessary, and is approved by your Board. The charter specifies that the Audit Committee is directly responsible for the appointment, compensation and retention of, and the oversight of the work and pre-approval of all services provided by the Company’s independent registered public accounting firm, which was PricewaterhouseCoopers LLP during 2020. In connection with the Audit Committee’s approval of any non-audit services, the Audit Committee considers whether the independent registered public accounting firm’s performance of any non-audit services is compatible with the independent auditor’s independence.
As part of the Audit Committee’s annual auditor engagement process, the Audit Committee considers whether to rotate the independent registered public accounting firm. The Audit Committee also participates in the selection of and ensures the regular rotation of the lead audit partner and concurring partner of the Company’s independent registered public accounting firm every five years. PricewaterhouseCoopers LLP has been the Company’s independent auditor since 2002. The Audit Committee currently believes that there are benefits to having an independent auditor with an extensive history with the Company. In connection with its auditor engagement process, the Audit Committee considers the continued independence of PricewaterhouseCoopers LLP and considers the benefits including: quality audit work and accounting advice due to PricewaterhouseCoopers LLP’s institutional knowledge of our business and operations, accounting policies and financial systems, and internal control framework; knowledge of the utility industry; and operational efficiencies and a resulting lower fee structure because of PricewaterhouseCoopers LLP’s history and familiarity with our business. Using a framework developed by management, the Audit Committee also assesses the appropriateness and reasonableness of PricewaterhouseCoopers LLP’s fees relative to the Company’s business needs and as compared to fees incurred by peer companies of comparable financial statement risk, size and complexity of business and related internal control environment.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. In performing its review, the Audit Committee discussed the propriety of the application of accounting principles by the Company, the reasonableness of significant judgments and estimates used in the preparation of the financial statements, and the clarity of disclosures in the financial statements.
The Audit Committee reviewed and discussed with the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, their opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States. This discussion covered the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC.
The Audit Committee received the written disclosures and the letter from the independent registered public accounting firm regarding their independence from the Company as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed with the independent registered public accounting firm such firm’s independence.
The Audit Committee discussed with the Company’s internal auditors and independent registered public accounting firm the overall scope, plans, and results of their respective audits. The Audit Committee met with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting process.
Based on the above reviews and discussions, the Audit Committee recommended to your Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the SEC.
Audit Committee Members: Michael J. Anderson (chair), Donald T. Misheff, Sandra Pianalto and Leslie M. Turner.
91 | FirstEnergy Corp. 2021 Proxy Statement
Matters Relating to the Independent Registered Public Accounting Firm
Audit Fees
The following is a summary of the fees paid by the Company to its independent registered public accounting firm, PricewaterhouseCoopers LLP, for services provided to the Company and its reporting subsidiaries during the years 2020 and 2019.
PricewaterhouseCoopers LLP billed the Company an aggregate of $8,107,172 in 2020 and $6,958,580 in 2019 in fees for professional services rendered for the audit of the Company’s annual financial statements and the review of the financial statements included in each of the Company’s Quarterly Reports on Form 10-Q, services that are normally provided in connection with statutory and regulatory filings or engagements, audit-related services and non-audit-related services as noted below.
| Fees for Audit Year 2020 | Fees for Audit Year 2019 | |||||||||
Audit Fees(1) | $7,882,000 |
| $6,951,855 |
| ||||||
Audit Related Fees | $0 |
| $0 | |||||||
Tax Fees | $0 |
| $0 | |||||||
All Other Fees(2) | $225,172 |
| $6,725 | |||||||
Total | $8,107,172 |
| $6,958,580 | |||||||
| (1) | Professional services rendered for the audits of the Company’s and certain of its subsidiaries’ annual financial statements and reviews of unaudited financial statements included in the Company’s Quarterly Reports on Form 10-Q and for services in connection with statutory and regulatory filings or engagements, including comfort letters, agreed upon procedures and consents for financings and filings made with the SEC. |
| (2) | All other fees primarily reflect system implementation quality assurance services, certain costs incurred as a result of the ongoing SEC investigation, software subscription fees and accounting research software license costs in 2020. Fees in 2019 represent software subscription fees to PricewaterhouseCoopers LLP. |
The Audit Committee has considered whether any non-audit services rendered by the independent registered public accounting firm are compatible with maintaining its independence. The Audit Committee, in accordance with its charter and in compliance with all applicable legal and regulatory requirements promulgated from time to time by the NYSE and SEC, has a policy under which the independent registered public accounting firm cannot be engaged to perform non-audit services that are prohibited by these requirements. The charter further states that any engagement of the independent registered public accounting firm to perform other audit-related or any non-audit services must have approval in advance by the Chair of the Audit Committee upon the recommendation of the Vice President, Controller and Chief Accounting Officer. Such approved engagement is then presented to the Audit Committee at its next regularly scheduled meeting. All audit and non-audit services provided by PricewaterhouseCoopers LLP in 2020 and 2019 were pre-approved.
92 | FirstEnergy Corp. 2021 Proxy Statement
Questions and Answersabout the Annual Meeting
1 | Q: | Why did I receive these proxy materials? | ||
| A: | You received these proxy materials because you were a shareholder of record or beneficial owner (as defined below) of shares of common stock of FirstEnergy Corp. as of the close of business on March
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2 | Q: | What is the difference between holding shares as a “shareholder of record” and holding shares in “street name” or as a “beneficial owner”? | ||
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A: | Shareholder of Record: If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you are a shareholder of record of the shares. As the shareholder of record, you have the right to vote your shares directly or to grant a proxy to vote your shares to a representative of | |||
Beneficial Owner: If your shares are held for you in a brokerage, bank or other institutional account, it is likely that you are the beneficial owner of shares, meaning that you hold shares in “street name.” You are also a beneficial owner if you own shares through the FirstEnergy Corp. Savings Plan (the “Savings Plan”). | ||||
As a beneficial owner of shares, you have the right to direct the registered holder to vote your shares, and you may attend the Annual Meeting (please see the “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” below for instructions on how to register in advance). Your bank, broker or other institution has provided a voting instruction form for you to use in directing how your shares are to be voted. However, since a beneficial owner is not the shareholder of record, you may not vote your shares
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3 | Q: | Can I view future FirstEnergy proxy materials and annual reports on the Internet instead of receiving paper copies? | ||
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A: | Yes. If you received paper copies of this proxy statement and the annual report and you are a shareholder of record, you can elect to view future proxy statements and annual reports on the Internet by marking the designated box on your proxy card or by following the instructions when voting by Internet or by telephone. If you choose this option, prior to the next annual meeting, you will be mailed a paper copy of the proxy card along with instructions on how to access the proxy statement and annual report using the Internet unless applicable regulations require delivery of printed proxy materials. Your choice will remain in effect until you notify us that you wish to resume mail delivery of these documents. | |||
If you previously elected to access your proxy materials over the Internet, you will not receive the Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) or paper copies of proxy materials in the mail unless required by law. Instead, you will receive a paper copy of the proxy card along with instructions on how to access the proxy statement and annual report using the Internet. | ||||
9493 | FirstEnergy Corp.20192021 Proxy Statement
| If you received a Notice of Internet Availability, you may not receive printed copies of proxy statements and annual reports in the future unless required by law. However, you may elect to be mailed a paper proxy card with instructions on how to access proxy statements and annual reports using the Internet for future meetings by following the instructions when voting. The Notice of Internet Availability also contains instructions on how you may request delivery of proxy materials in printed form for the Annual Meeting or on an ongoing basis, if desired. | ||||
If you are a beneficial owner, refer to the information provided by your broker, bank or other nominee for instructions on how to elect to view future FirstEnergy proxy statements and annual reports on the Internet instead of receiving paper copies.
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4 | Q: | Why did I receive aone-page notice in the mail regarding the Internet availability of proxy materials instead of receiving a full set of printed proxy materials? | ||
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| A: | To reduce the environmental impact and related costs of the Annual Meeting, we are pleased to again furnish the proxy materials over the Internet. As a result, we are sending a number of our shareholders a Notice of Internet Availability instead of a printed copy of the proxy materials. All shareholders receiving the Notice of Internet Availability will have the ability to access the proxy materials and vote via the Internet and to request a printed copy of the proxy materials by mail, if desired. Instructions on how to access the proxy materials over the Internet, to vote online, and to request a printed copy may be found in the Notice of Internet Availability. The Notice of Internet Availability identifies the items to be voted on at the Annual Meeting, but shares cannot be voted by marking, writing on and/or returning the Notice of Internet Availability. Any Notice of Internet Availability that is returned will not be counted as votes. In addition, the Notice of Internet Availability contains instructions on how you may request delivery of proxy materials in printed form for this Meeting or on an ongoing basis, if desired.
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5 | Q: | Why did we receive just one copy of the proxy statement and annual report when we have more than one stock account in our household? | ||
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| A: | Where possible, we follow the SEC rule that permits us to send one copy each of this proxy statement and the annual report to a household if shareholders provide written or implied consent. We previously mailed a notice to eligible registered shareholders stating our intent to use this rule unless a shareholder provided an objection. Using this rule reduces unnecessary publication and mailing costs. Shareholders continue to receive a separate proxy card or opportunity to vote via the Internet, as applicable, for each stock account. If you are a registered shareholder and received only one copy each of the proxy statement and the annual report in your household, you can request additional copies for some or all accounts for this year or in the future, either by calling Shareholder Services at1-800-736-3402 or by writing to FirstEnergy Corp., c/o American Stock Transfer & Trust Company, LLC, P.O. Box 2016, New York, NY 10272-2016, and we will promptly deliver the requested copies. You also may contact us in the same manner if you are receiving multiple copies of this proxy statement and/or the annual report in your household and desire to receive one copy. If you are not a registered shareholder and your shares are held by a bank, broker, or other institution you will need to contact such bank, broker, or other institution to revoke your election and receive multiple copies of these documents.
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6 | Q: | Who is soliciting my vote, how are proxy cards being solicited, and what is the cost? | ||
A: | Your Board is soliciting your vote. We have arranged for the services of Morrow Sodali LLC to solicit votes personally or by telephone, mail, or other electronic means for a fee not expected to exceed $19,250, plus reimbursement of reasonable expenses. Votes also may be solicited in a similar manner by officers and employees of | |||
9594 | FirstEnergy Corp.20192021 Proxy Statement
7 | Q: | What items of business will be voted on at the Annual Meeting and how does the Board recommend that I vote? | ||
A: |
| Item | Brief Description | Board’s Recommendation | ||
1 | ||||
Elect the | ✓ “FOR” each director nominee | |||
| 2 | Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for | ✓ “FOR” | ||
| 3 | Approve, on an advisory basis, named executive officer compensation | ✓ “FOR” | ||
8 | Q: | What is a quorum and what other voting information should I be aware of? | ||
A: |
As of the Record Date, A brokernon-vote occurs when an entity holding shares in street name, such as a bank or broker, submits a proxy for your shares but does not indicate a vote for a particular“non-routine” proposal (such as Items 1 and | |||
If you are a beneficial owner, we encourage you to provide instructions to your bank, broker, or other institution by executing the voting form supplied to you by that entity. Pursuant to applicable rules, if your shares are held in a broker account, you must provide your broker with voting instructions for all matters to be voted on at the Annual Meeting except on Item 2. A broker will be permitted to vote your shares on Item 2 without your instructions because Item 2 is considered a “routine” matter under applicable NYSE rules; however, your broker cannot vote your shares on any other items unless you provide instructions because | ||||
96 | FirstEnergy Corp.2019 Proxy Statement
An item to be voted on may require a percentage of votes cast, rather than a percentage of shares outstanding, to determine passage or failure. Votes cast is defined to include both “For” and “Against” votes and excludes abstentions and brokernon-votes. If you properly sign and return your proxy card but your proxy card is not completed properly, such as marking more than one box for an item, your vote for that particular item will be treated as an abstention. | ||||||
95 | FirstEnergy Corp. 2021 Proxy Statement
9 | Q: | What is the vote required for each item to be voted on at the Annual Meeting? | ||
A: |
| Item | Brief Description | Vote Required | Treatment of Broker | |||
| 1 | Elect the | Nominees receiving
As further described in Item 1 above, any nominee for director who receives a greater number of votes | No effect. | |||
| 2 | Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for | Requires the affirmative vote of a majority of votes cast. | Abstentions – No effect.
BrokerNon-votes – Not applicable. | |||
| 3 | Approve, on an advisory basis, named executive officer compensation | This advisory proposal requires the affirmative vote of a majority of the votes cast. | No effect. | |||
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97 | FirstEnergy Corp.2019 Proxy Statement
10 | Q: | Will any other matters be voted on other than those described in this proxy statement? | ||
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| A: | We do not know of any business that will be considered at the Annual Meeting other than the matters described in this proxy statement. However, if other matters are presented properly, your executed appointment of a proxy will give authority to the appointed proxies to vote on those matters at their discretion, unless you indicate otherwise in writing.
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11 | Q: | Where can I find the voting results of the Annual Meeting? | ||
A: | We will announce preliminary voting results at the Annual Meeting. Final voting results will be reported in a Current Report onForm 8-K, which is required to be filed with the SEC within four business days after the date of the Annual Meeting and will be posted on our website at | |||
12 | Q: | Who is entitled to vote at the Annual Meeting? | ||
A: | Shareholders of record of FirstEnergy common stock as of the Record Date are entitled to receive notice of the Annual Meeting and vote their shares. If you plan to attend the Annual Meeting, please see the “Attending the Virtual Annual Meeting” section below of these “Questions and Answers about the Annual Meeting” for instructions on how to register in advance.
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96 | FirstEnergy Corp. 2021 Proxy Statement
13 | Q: | How do I vote? | ||
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A: | As further described below, if you are voting by Internet, telephone or mail, your vote must be received by | |||
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Do you hold shares directly with FirstEnergy Corp. Savings Plan?
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Use theinternet at
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Call toll-free at
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Do you hold shares through a bank, broker or other institution (beneficial ownership)?(2)
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Use theinternet at
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Call toll-free at
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Mail by returning your proxy card/
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(1)If your envelope is misplaced, send your proxy card to Corporate Election Services, Inc., (2)Not all beneficial owners may be able to vote at the web address and phone number provided above. If your control number is not recognized, please refer to your voting instruction form for specific voting instructions. | ||||
If you received a Notice of Internet Availability and would like to vote by telephone or mail, please follow the instructions on your notice to request a paper copy of the proxy materials and proxy card.
If you are a participant in the FirstEnergy Corp. Savings Plan, your proxy card will include the shares of common stock held for your account in the FirstEnergy Corp. Savings Plan and any other shares registered with our transfer agent, AST, as of the Record Date. Subject to the Employee Retirement Income Security Act of 1974, as amended, and pursuant to the Savings Plan provisions, the Savings Plan’s Trustee will vote all shares as directed by Savings Plan participants, and shares for which the Savings Plan’s Trustee does not receive timely voting directions will be voted in the same proportion as the shares held under the Savings Plan for which the Savings Plan’s Trustee receives timely voting directions. Because the Savings Plan Trustee is the only one who can vote your FirstEnergy Corp. Savings Plan shares, you may not vote such shares at the Annual Meeting.
98Beneficial owners (other than participants in the FirstEnergy Corp. Savings Plan) will receive instructions from the holder of record (the bank, broker, institution or other nominee that holds your shares) that you must follow for your shares to be voted. Also, please note that if you wish to vote virtually at the Annual Meeting, you must request a legal proxy from your bank, broker, or other nominee that holds your shares and present that legal proxy identifying you as the beneficial owner of your shares of FirstEnergy common stock and authorizing you to vote those shares at the Meeting.
97 | FirstEnergy Corp.20192021 Proxy Statement
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14 | Q: | How may I revoke my proxy? | ||
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| A: | You may revoke your appointment of a proxy or change your related voting instructions one or more times by timely: | |||
• Mailing a proxy card that revises your previous appointment and voting instructions; | ||||
• Voting by Internet or telephone after the date of your previous appointment and voting instructions; | ||||
• Voting | ||||
• Notifying the Corporate Secretary of | ||||
The proxy tabulator will treat the last instructions it receives from you as final. For example, if a proxy card is received by the proxy tabulator after the date that a telephone or Internet appointment is made, the tabulator will treat the proxy card as your final instruction. For that reason, it is important to allow sufficient time for your voting instructions on a mailed proxy card to reach the proxy tabulator before changing them by telephone or Internet. Please note that unless you are voting | ||||
| If you are a beneficial owner of shares, you must follow the directions you receive from your bank, broker, or other institution to change your vote. | ||||
Attending the Virtual Annual Meeting
15 | Q: | Do I need to register in advance to attend the virtual Annual Meeting? | ||
A: | Yes. This year’s Annual Meeting will be held in a virtual format through a live webcast at www.cesonlineservices.com/fe21_vm. In accordance with our security procedures, if you plan to attend the virtual Annual Meeting, you will need to register in advance by following the | |||
Shareholders as of the | ||||
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99 | FirstEnergy Corp.2019 Proxy Statement
Advance Registration Instructions
If you are a shareholder of record, participant in the FirstEnergy Corp. Savings Plan or an employee who holds unvested restricted stock and you are voting by Internet, telephone or by mail: ToYou may register to attend the virtual Annual Meeting please indicate that you will attendby visiting the Meeting when voting by Internet or telephone, or check the appropriate registration box onwebsite www.cesonlineservices.com/fe21_vm. Please have your proxy card if voting by mail.or Notice of Internet Availability containing your 11-digit control number available and follow the instructions to complete your registration request. After registering, shareholders will receive a confirmation email with a link and instructions for accessing the virtual Annual Meeting.
All other shareholders: ToShareholders whose shares are held through a bank, broker or other institution as of the record date may register to attend the Meeting and, as applicable, have an admission card mailed to you, please send a request containing all of the following information by mail to: FirstEnergy Corp.virtual Annual Meeting RegistrationA-GO-15, 76 South Main Street, Akron, OH 44308-1890;by visiting the website www.cesonlineservices.com/fe21_vm. Please have your voting instruction form, Notice of Internet Availability, or byother communication containing your control number available and follow the instructions to complete your registration request, including uploading a copy of one of these documents. After registering, shareholders will receive a confirmation email to: Registration@FirstEnergyCorp.com or by fax:330-777-6519:
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Admission Card
If you plan to attendwith a link and instructions for accessing the Meeting, you must bring your admission card with you to thevirtual Annual Meeting. If you are a beneficial shareholder of record, participant inand you wish to vote your shares online during the virtual Annual Meeting rather than submitting your voting instructions before the Annual Meeting, you will need to contact your bank, broker or other institution to obtain a legal proxy form that you must submit electronically with your ballot during the online virtual Annual Meeting using a PDF, JPEG, GIF or PNG file format.
98 | FirstEnergy Corp. Savings Plan or an employee who holds unvested restricted stock, the admission card portion of your proxy card orone-page2021 Proxy Statement Notice of Internet Availability that was included with your proxy material mailing will serve as your admission card. All other shareholders must follow the advance registration instructions above to receive an admission card.
Other Related Matters
We encourage you to access the virtual Annual Meeting at least 15 to 30 minutes before it begins. Online check-in will start at approximately 7:30 a.m. EDT on May 18, 2021. We ask that participants follow its meeting Rules of Conduct, which will be available on the event website.
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in the Meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the Meeting. If you desire to have one representative attendencounter technical difficulties accessing the Meeting on your behalf or one representative designated to present a shareholder proposal properly brought before theAnnual Meeting, please follow the process under “Advance Registration Instructions – All other shareholders” above and include the name, mailing address and telephone number of that representative.
Cameras, recording equipment, computers, large bags and items such as briefcases, backpacks and packages will not be permittedinstructions contained in the Meeting room and may be subject to inspection. No individual may use communication devices, take photographs, or use audio or video recording equipment inreminder email you will receive the Meeting facilities withoutevening before the express written permission of your Company. No firearms or weaponsmeeting. Technical support will be allowed inavailable during the Meeting facilities. Signage and other inappropriate items are likewise prohibited.virtual Annual Meeting.
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Questions pertinent to the | |||
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100 | FirstEnergy Corp.2019 Proxy Statement
Shareholder Proposals For 2020and Business by Shareholders
17 | Q: | When are shareholder proposals and nominations due for the | ||
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| A: | Shareholder Proposals under the Rules of the SEC
Under the rules of the SEC, a shareholder who wishes to offer a proposal for inclusion in | |||
Shareholder Proposals and Nominations under the Company’s Amended and Restated Code of Regulations
Under our Amended and Restated Code of Regulations, a shareholder who wishes to properly introduce an item of business before an annual meeting of shareholders must follow the applicable The | ||||
99 | FirstEnergy Corp. 2021 Proxy Statement
must receive any notice of intention to introduce an item of business at that meeting no earlier than March In addition, we have adopted a proxy access right to permit, under certain circumstances, a shareholder or a group of shareholders to include in our annual meeting proxy statement director candidates whom they have nominated. These proxy access provisions in our Amended and Restated Code of Regulations provide, among other things, that a shareholder or group of up to 20 shareholders seeking to include director candidates in our annual meeting proxy statement must own, in the aggregate, 3% or more of the Company’s issued and outstanding Common Stock continuously for at least three years. The number of shareholder-nominated candidates appearing in any annual meeting proxy statement cannot exceed 20% of the number of directors in office as of the last day on which the applicable notice may be delivered or received or, if such amount is not a whole number, the closest whole number below 20%, and in any event, not less than two shareholder-nominated candidates. Such nomination must conform to the applicable requirements in our Amended and Restated Code of Regulations and must be received by our Corporate Secretary no earlier than October 30, 2021 and no later than November 29, 2021, assuming the 2022 annual meeting of shareholders is not advanced more than 30 calendar days and not delayed by more than 60 calendar days of the date of the anniversary of the 2021 annual meeting of shareholders. Please refer to our Amended and Restated Code of Regulations for the complete requirements and procedures. Our Amended and Restated Code of Regulations is available on the SEC website and upon written request to the Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron,OH 44308-1890. |
Obtaining Additional Information
18 | Q: | |||
A: | If you received a paper copy of this proxy statement, you can learn more about our operations by reviewing the annual report to shareholders for the year ended December 31, | |||
| A copy of our latest Annual Report on Form 10-K for the year ended December 31, | ||||
101100 | FirstEnergy Corp.20192021 Proxy Statement
76 South Main Street
Akron, Ohio 44308
Proposed Amendments to Amended Articles of Incorporation and Amended Code of Regulations Relating to the Replacement of Existing Supermajority Voting Requirements with a Majority Voting Power Threshold as Permitted under Ohio Law
Proposed Amendments to the Articles
AMENDED ARTICLES OF INCORPORATION OF FIRSTENERGY CORP.
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ARTICLE IX
Subject to any Preferred Stock Designation, to the extent applicable law permits these Amended Articles of Incorporation expressly to provide or permit a lesser vote than atwo-thirds vote otherwise provided by law for any action or authorization for which a vote of shareholders is required, including, without limitation, adoption of an amendment to these Amended Articles of Incorporation, adoption of a plan of merger, authorization of a sale or other disposition of all or substantially all of the assets of the Corporation not made in the usual and regular course of its business or adoption of a resolution of dissolution of the Corporation, such action or authorization shall be bysuchtwo-thirds votea majority of the voting power of the Corporation and a majority of the voting power of any class entitled to vote as a class on such proposal;unless the Board of Directors of the Corporation shall provide otherwise by resolution, then such action or authorization shall be by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation on such proposal and a majority of the voting power of any class entitled to vote as a class on such proposal provided, however, this Article IX (and any resolution adopted pursuant hereto) shall not alter in any case any greater vote otherwise expressly provided by any provision of these Articles of Incorporation or the Code of Regulations. For purposes of these Articles of Incorporation, “voting power of the Corporation” means the aggregate voting power of (1) all the outstanding shares of Common Stock of the Corporation and (2) all the outstanding shares of any class or series of capital stock of the Corporation that has (i) rights to distributions senior to those of the Common Stock including, without limitation, any relative, participating, optional, or other special rights and privileges of, and any qualifications, limitations or restrictions on, such shares and (ii) voting rights entitling such shares to vote generally in the election of directors.
ARTICLE X
[Reserved]
Notwithstanding anything to the contrary contained in these Articles of Incorporation, the affirmative vote of the holders of at least 80% of the voting power of the Corporation, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, Article V, Article VI, Article VII, Article VIII or this Article X; provided, however, that Article X shall not alter the voting entitlement of shares that, by virtue of any Preferred Stock Designation, are expressly entitled to vote on any amendment to these Articles of Incorporation.
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A-1
Proposed Amendments to the Regulations
AMENDED CODE OF REGULATIONS OF FIRSTENERGY CORP.
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DIRECTORS
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11. Number, Election and Terms of Directors. Except as may be otherwise provided in any Preferred Stock Designation, the number of the directors of the Corporation will not be less than nine nor more than 16 as may be determined from time to time only (i) by a vote of a majority of the Whole Board, or (ii) by the affirmative vote of the holders ofat least 80% a majority of the voting power of the Corporation, voting together as a single class. Except as may be otherwise provided in any Preferred Stock Designation, at each annual meeting of the shareholders of the Corporation, the directors shall be elected by plurality vote of all votes cast at such meeting and shall hold office for a term expiring at the following annual meeting of shareholders and until their successors shall have been elected; provided, that any director elected for a longer term before the annual meeting of shareholders to be held in 2005 shall hold office for the entire term for which he or she was originally elected. Except as may be otherwise provided in any Preferred Stock Designation, directors may be elected by the shareholders only at an annual meeting of shareholders. No decrease in the number of directors constituting the Board of Directors may shorten the term of any incumbent director. Election of directors of the Corporation need not be by written ballot unless requested by the presiding officer or by the holders of a majority of the voting power of the Corporation present in person or represented by proxy at a meeting of the shareholders at which directors are to be elected.
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13. Removal. Except as may be otherwise provided in any Preferred Stock Designation, any director or the entire Board of Directors may be removed only upon the affirmative vote of the holders ofat least 80% a majority of the voting power of the Corporation, voting together as a single class.
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GENERAL
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36. Amendments. Except as otherwise provided by law or by the Articles of Incorporation or this Code of Regulations, these Regulations or any of them may be amended in any respect or repealed at any time at any meeting of shareholdersor otherwise by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation voting together as a single class, provided that any amendment or supplement proposed to be acted upon at any such meeting has been described or referred to in the notice of such meeting.Notwithstanding the foregoing sentence or anything to the contrary contained in the Articles of Incorporation or this Code of Regulations, Regulations 1, 3(a), 9, 11, 12, 13, 14, 31 and 36 may not be amended or repealed by the shareholders, and no provision inconsistent therewith may be adopted by the shareholders, without the affirmative vote of the holders of at least 80% of the voting power of the Corporation, voting together as a single class. Notwithstanding the foregoing provisions of this Regulation 36, no amendment to Regulations 31, 32, or 33 will be effective to eliminate or diminish the rights of persons specified in those Regulations existing at the time immediately preceding such amendment.
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Proposed Amendments to Amended Articles of Incorporation and Amended Code of Regulations to Implement Majority Voting for Uncontested Director Elections
AMENDMENTS TO AMENDED
ARTICLES OF INCORPORATION
OF
FirstEnergy Corp.
ARTICLE XII
Except as may be provided in any Preferred Stock Designation, at each meeting of shareholders at which directors are to be elected, a candidate for director shall be elected only if the votes “for” the candidate exceed the votes “against” the candidate. Abstentions and brokernon-votes shall not be counted as votes “for” or “against” a candidate. Notwithstanding the foregoing, if the Board of Directors determines that the number of candidates exceeds the number of directors to be elected, then in that election the candidates receiving the greatest number of votes shall be elected.
AMENDMENTS TO AMENDED
CODE OF REGULATIONS
11. Number, Election and Terms of Directors. Except as may be otherwise provided in any Preferred Stock Designation, the number of the directors of the Corporation will not be less than nine nor more than 16 as may be determined from time to time only (i) by a vote of a majority of the Whole Board, or (ii) by the affirmative vote of the holders of at least 80% of the voting power of the Corporation, voting together as a single class.Except as may be otherwise provided in any Preferred Stock Designation, at each annual meeting of the shareholders of the Corporation, the directors shall be elected by plurality vote of all votes cast at such meeting andDirectorsshall hold office for a term expiring at the following annual meeting of shareholders and until their successors shall have been elected; provided, that any director elected for a longer term before the annual meeting of shareholders to be held in 2005 shall hold office for the entire term for which he or she was originally elected. Except as may be otherwise provided in any Preferred Stock Designation, directors may be elected by the shareholders only at an annual meeting of shareholders. No decrease in the number of directors constituting the Board of Directors may shorten the term of any incumbent director. Election of directors of the Corporation need not be by written ballot unless requested by the presiding officer or by the holders of a majority of the voting power of the Corporation present in person or represented by proxy at a meeting of the shareholders at which directors are to be elected.
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Proposed Amendment to Amended Code of Regulations to Implement Proxy Access
14. Nominations of Directors; Election. (a) Except as may be otherwise provided in any Preferred Stock Designation, only persons who are nominated in accordance with this Regulation 14 will be eligible for election at a meeting of shareholders to be members of the Board of Directors of the Corporation.
(b) Nominations of persons for election as directors of the Corporation may be made onlyfor elections to be held at an annual meeting of shareholdersand only (i) by or at the direction of the Board of Directors or a committee thereof or, (ii) by any shareholder who is a shareholder of record at the time of giving of notice provided for in this Regulation 14, who is entitled to vote for the election of directors at such meeting, and who complies with the procedures set forth in this Regulation 14or (iii) by one or more Eligible Shareholders (as defined below) pursuant to and in accordance with Regulation 14(d). All nominations by shareholders must be made pursuant to timely notice in proper written form to the Secretary.
(c) To be timely, a shareholder’s noticeFor nominations of persons for election as directors of the Corporation (other than a nomination for director pursuant to Regulation 14(d)) to be timely, notice delivered by a shareholder who intends to appear in person or by proxy and nominate a person for election as a director of the Corporation at an annual meeting of shareholders (such notice, the “Nomination Notice”) containing the Required Information (as defined below) must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 nor more than 60 calendar days prior to the annual meeting of shareholders; provided, however, that in the event that public announcement of the date of the annual meeting is not made at least 70 calendar days prior to the date of the annual meeting, notice by the shareholder to be timely must be so received not later than the close of business on the 10th calendar day following the day on which public announcement is first made of the date of the annual meeting. To be in proper written form, such shareholder’s noticeby the Corporation. In no event shall any adjournment or postponement of a shareholders’ meeting, or the public announcement thereof, commence a new time period for the giving of a Nomination Notice as described above, except as required by law.
(d) The Corporation shall include in its proxy statement and proxy for any annual meeting of shareholders (collectively, the “Proxy Materials”), together with any information required to be included in a proxy statement filed pursuant to the rules and regulations of the Securities and Exchange Commission and, if the Eligible Shareholder so elects, a Statement (as defined below), the name of any person nominated for election to the Board of Directors (the “Shareholder Nominee”) by a shareholder, or a group of no more than 20 shareholders, who satisfies the requirements of this Regulation 14(d) (an “Eligible Shareholder”) and who expressly elects at the time of providing the written notice required by this Regulation 14(d) to have its nominee included in the Proxy Materials pursuant to this Regulation 14(d). For purposes of any representation, agreement or other undertaking required by this Regulation 14(d), the term “Eligible Shareholder” shall include each member of any group forming an Eligible Shareholder. Such written notice shall consist of a copy of Schedule 14N filed with the Securities and Exchange Commission in accordance with Rule14a-18 of the Securities Exchange Act of 1934, as amended, or any successor schedule or form filed with the Securities and Exchange Commission in accordance with Rule14a-18 of the Securities Exchange Act of 1934, as amended, or any successor provision, the Required Information and the other information required by this Regulation 14(d) (all such information collectively referred to as the “Proxy Notice”), and such Proxy Notice shall be delivered to the Corporation in accordance with the procedures and at the times set forth in this Regulation 14(d).
(i) To be timely, the Proxy Notice must be delivered to or mailed and received at the principal executive offices of the Corporation no earlier than 150 calendar days and no later than 120 calendar days prior to the first anniversary of the date that the Corporation issued its Proxy Materials for the previous year’s annual meeting of shareholders; provided, however, that in the event that the date of the annual meeting is more than 30 calendar days before or more than 60 calendar days after the first anniversary of the previous year’s annual meeting of shareholders, the Proxy Notice, to be timely, must be delivered to or mailed and received at the principal executive offices of the Corporation not later than (A) 150 calendar days prior to the date of such annual meeting or (B) if the first public announcement of the date of such annual meeting is less than 150 calendar days prior to the date of such annual meeting, 10 calendar days following the day on which public announcement is first made by the Corporation of the date of such meeting.
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(ii) The Corporation shall not be required to include, pursuant to this Regulation 14(d), any Shareholder Nominee in the Proxy Materials (A) for which the Secretary of the Corporation receives aNomination Notice (whether or not subsequently withdrawn) pursuant to which the nominating shareholder has nominated a person for election to the Board of Directors pursuant to the advance notice requirements for shareholder nominees for director set forth in Regulation 14(c), (B) whose election as a member of the Board of Directors would cause the Corporation to be in violation of these Regulations, the Articles of Incorporation of the Corporation, the rules and listing standards of the principal U.S. exchange upon which the Common Stock of the Corporation is listed, any applicable state or federal law, rule or regulation, or the Corporation’s publicly disclosed policies and procedures, (C) who is or has been within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, (D) who is a named subject of a pending criminal proceeding or has been convicted in such a criminal proceeding within the past 10 years (excluding traffic violations and other minor offenses) or (E) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended, or any successor provision.
(iii) The maximum number of Shareholder Nominees appearing in the Proxy Materials with respect to an annual meeting of shareholders shall not exceed 20% of the number of directors in office as of the last day on which the Proxy Notice may be delivered or received or, if such amount is not a whole number, the closest whole number below 20%, and in any event, not less than two Shareholder Nominees. In the event that one or more vacancies for any reason occurs on the Board of Directors after the last day on which the Proxy Notice may be delivered or received but before or as of the annual meeting of shareholders and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the maximum number of Shareholder Nominees included in the Proxy Materials shall be calculated based on the number of directors in office as so reduced. Shareholder Nominees that were submitted by an Eligible Shareholder for inclusion in Proxy Materials pursuant to this Regulation 14(d) but either are subsequently withdrawn after the last day on which the Proxy Notice may be delivered or received or whom the Board of Directors itself determines to nominate for election shall, for the purposes of this Regulation 14(d)(iii), count as Shareholder Nominees appearing in the Proxy Materials. Each Eligible Shareholder shall rank each Shareholder Nominee it submitted for inclusion in the Proxy Materials and in the event that the number of Shareholder Nominees submitted by Eligible Shareholders pursuant to this Regulation 14(d) exceeds this maximum number, the highest ranked Shareholder Nominee from the Eligible Shareholder owning the greatest number of shares of stock of the Corporation will be selected for inclusion in the Proxy Materials first, followed by the highest ranked Shareholder Nominee of the Eligible Shareholder holding the next greatest number of shares of stock of the Corporation, and continuing on in that manner until the maximum number of Shareholder Nominees is reached.
(iv) For purposes of this Regulation 14(d), an Eligible Shareholder shall be deemed to own only those outstanding shares of Common Stock of the Corporation as to which the shareholder possesses both (A) the full voting and investment rights pertaining to the shares and (B) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (A) and (B) shall not include any shares (1) sold by such shareholder or any of its affiliates in any transaction that has not been settled or closed, (2) borrowed by such shareholder or any of its affiliates for any purposes or purchased by such shareholder or any of its affiliates pursuant to an agreement to resell, or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such shareholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding Common Stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, or if exercised would have, the purpose or effect of (x) reducing in any manner, to any extent or at any time in the future, such shareholder’s or its affiliates’ full right to vote or direct the voting of any such shares, or (y) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such shares by such shareholder or affiliate. Further, for purposes of this Regulation 14(d), an Eligible Shareholder shall be deemed to own shares held in the name of a nominee or other intermediary so long as the shareholder retains the right to recall the shares for voting purposes on no less than five business days’ notice, represents that they will vote such shares at the applicable shareholder meeting and possesses the full economic interest in the shares. An Eligible Shareholder’s ownership of shares shall be deemed to continue during any period in which the shareholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangementthat is revocable at any time by the shareholder. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the Common Stock of the Corporation are owned for
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purposes of this Regulation 14(d) shall be determined by the Board of Directors or a committee thereof, in its reasonable discretion. For the purposes of this Regulation 14(d)(iv), the term“affiliate” or “affiliates” shall have the meaning ascribed thereto under the rules and regulations of the Securities Exchange Act of 1934, as amended. No shares of stock of the Corporation may be attributed to more than one group constituting an Eligible Shareholder and no shareholder or beneficial owner, alone or together with any of its affiliates, may be a member of more than one group constituting an Eligible Shareholder. Furthermore, two or more funds that are (A) under common management and investment control, (B) under common management and funded primarily by the same employer or (C) a “group of investment companies,” as such term is defined in the Investment Company Act of 1940, as amended, shall be treated as one shareholder for purposes of determining Eligible Shareholder status.
(v) An Eligible Shareholder must have owned 3% or more of the Corporation’s issued and outstanding Common Stock continuously for at least three years (the “Required Shares”) as of each of the date the Proxy Notice is delivered to or received by the Corporation, the date the Proxy Notice is required to be delivered to or received by the Corporation in accordance with this Regulation 14(d) and the record datefor determining shareholders entitled to vote at the annual meeting, and must continue to hold the Required Shares through the date of the annual meeting. Within the time period specified in this Regulation 14(d) for delivery of the Proxy Notice, an Eligible Shareholder must provide the following information in writing to the Secretary of the Corporation: (A) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three-year holding period) verifying that, as of a date within three calendar days prior to the date the Proxy Notice is delivered to or received by the Corporation, the Eligible Shareholder owns, and has owned continuously for the preceding three years, the Required Shares, and the Eligible Shareholder’s agreement to provide, within five business days after each of the date the Proxy Notice is required to be delivered to or received by the Corporation and the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Shareholder’s continuous ownership of the Required Shares through each of the date the Proxy Notice is required to be delivered to or received by the Corporation and the record date, along with a written statement that the Eligible Shareholder will continue to hold the Required Shares through the date of the annual meeting; (B) the Required Information, together with the written consent of each Shareholder Nominee to being named in the Proxy Statement as a nominee; (C) a representation that (1) the Eligible Shareholder acquired the Required Shares in the ordinary course of business and did not acquire any of the Required Shares with the intent to change or influence control of the Corporation, and does not presently have such intent, (2) the Eligible Shareholder has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Shareholder Nominee(s) being nominated pursuant to this Regulation 14(d), (3) the Eligible Shareholder has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Securities Exchange Act of 1934, as amended, or any successor provision, in support of the election of any individual as a director at the annual meeting other than its Shareholder Nominee or a nominee of the Board of Directors, (4) that the Shareholder Nominee(s) is or are eligible for inclusion in the Proxy Materials under Regulation 14(d)(ii) and (5) the Eligible Shareholder will not distribute to any shareholder any proxy for the annual meeting other than the form distributed by the Corporation, (D) an undertaking that the Eligible Shareholder agrees to (1) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Shareholder’s communications with the shareholders of the Corporation or out of the information that the Eligible Shareholder provided to the Corporation, (2) comply with all other laws and regulations applicable to any solicitation in connection with the annual meeting, and (3) provide to the Corporation prior to the election of directors such additional information as requested with respect thereto, including any other certifications, representations or undertakings as the Corporation may reasonably request, (E) in the case of a nomination by a group of shareholders that together is an Eligible Shareholder, the designation by all group members of one group member that is authorized to act on behalf of all such members with respect to the nomination, (F) an undertaking that the Eligible Shareholder agrees to immediately notify the Corporation if the Eligible Shareholder ceases to own any of the Required Shares prior to the date of the applicable annual meeting and (G) in the case of a nomination by an Eligible Shareholder that includes a group of funds whose shares are aggregated for purposes of constituting an Eligible Shareholder, an undertaking that the Eligible Shareholder agrees to provide all documentation and other information reasonably requested by the Corporation to demonstrate that the funds satisfy Regulation 14(d)(iv). If the Eligible Shareholder does not comply with each of the applicable representation, agreements and undertakings set forth in this Regulation 14(d)(v), or the Eligible Shareholder provides information to the Corporation regarding a nomination that is untrue in any material respect or omitted to state a material fact necessary in order to make a statement
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made, in light of the circumstances under which it was made, not misleading, the Shareholder Nominee(s)nominated by such Eligible Shareholder shall be deemed to have been withdrawn and will not be included in the Proxy Materials.
(vi) The Eligible Shareholder may provide to the Secretary of the Corporation, at the time the information required by this Regulation 14(d) is first provided, a written statement (the “Statement”) for inclusion in the Proxy Materials, not to exceed 500 words, in support of the Shareholder Nominee’s candidacy. Notwithstanding anything to the contrary contained in this Regulation 14(d), the Corporation may omit from the Proxy Materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact or would violate any applicable law or regulation. If multiple members of a shareholder group submit a statement for inclusion, the statement received by the Eligible Shareholder owning the greatest number of shares will be selected.
(vii) On or prior to the date the Proxy Notice is required to be delivered or received by the Corporation as specified in this Regulation 14(d), a Shareholder Nominee must deliver to the Secretary of the Corporation the written questionnaire required of directors and officers. The Shareholder Nominee must also deliver to the Corporation such additional information as the Corporation may request to permit the Board of Directors to determine if the Shareholder Nominee is independent under the rules and listing standards of the principal U.S. exchange upon which the Corporation’s Common Stock is listed, any applicable rules of the Securities and Exchange Commission, any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of its directors. If the Board of Directors determines in good faith that the Shareholder Nominee is not independent under any of these standards,the Shareholder Nominee will be deemed to have been withdrawn and will not be included in the Proxy Materials. If a Shareholder Nominee or an Eligible Shareholder fails to continue to meet the requirements of this Regulation 14(d) or if the Eligible Shareholder fails to meet the all of the requirements of the notice provisions set forth in Regulation 14(d)(v) or if a Shareholder Nominee dies, becomes disabled or is otherwise disqualified from being nominated for election or serving as a director prior to the annual meeting of shareholders: (A) the Corporation may, to the extent feasible, remove the name of the Shareholder Nominee and the Statement from its proxy statement, remove the name of the Shareholder Nominee from its form of proxy and/or otherwise communicate to its shareholders that the Shareholder Nominee will not be eligible for nomination at the annual meeting of Shareholders; and (B) the Eligible Shareholder may not name another Shareholder Nominee or, subsequent to the date on which the Proxy Notice is required to be delivered to or received by the Corporation, otherwise cure in any way any defect preventing the nomination of the Shareholder Nominee at the annual meeting of Shareholders. On or prior to the date the Proxy Notice is required to be delivered to or received by the Corporation as specified in this Regulation 14(d), a Shareholder Nominee must deliver to the Secretary of the Corporation a written representation and agreement that such person (i) is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question that has not been disclosed to the Corporation, (ii) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation, and (iii) will comply with all the Corporation corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines, and any other the Corporation policies and guidelines applicable to directors. If the Shareholder Nominee fails to comply with any of the requirements included in this paragraph or this Regulation 14(d), the Shareholder Nominee will be deemed to have withdrawn and will not be included in the Proxy Materials.
(viii) Notwithstanding the provisions of this Regulation 14(d), unless otherwise required by law or otherwise determined by the Board of Directors, if (A) the Eligible Shareholder or (B) a qualified representative of the Eligible Shareholder does not appear at the applicable annual meeting to present its Shareholder Nominee or Shareholder Nominees, such nomination or nominations shall be disregarded, and no vote on such Shareholder Nominee or Shareholder Nominees will occur, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Regulation 14(d)(viii),to be considered a qualified representative of an Eligible Shareholder, a person must be authorized by a writing executed by such Eligible Shareholder or an electronic transmission delivered by such Eligible Shareholder to act for such Eligible Shareholder as proxy at the applicable annual meeting and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the applicable annual meeting.
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(ix) Notwithstanding anything in this Regulation 14(d) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased by the Board of Directors, and thereis no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 130 calendar days prior to the first anniversary of the precedingyear’s annual meeting, a Proxy Notice shall also be considered timely, but only with respect to nominees for any new positions created by such increase and only to the extent the increase in the size of the board increases the number of nominees permitted under Regulation 14(d)(v), if it shall be delivered to or received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth calendar day following the day on which such public announcement is first made by the Corporation.
(x) This Regulation 14(d) shall be the exclusive method for shareholders to include nominees for director in the Corporation’s proxy materials.
(e) In addition to other information required to be provided pursuant to this Regulation 14, to be in proper written form, each Nomination Notice and Proxy Notice must set forth or include (the following, collectively referred to as the “Required Information”): (i) the name and address, as they appear on the Corporation’s books, of the shareholderor group of shareholders givingthesuch notice and of the beneficial owner, if any, on whose behalf the nomination is made; (ii) a representation that the shareholderor group of shareholders givingthesuch notice is a holder of record of stock of the Corporation entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to nominate the person or persons specified inthesuch notice; (iii) the class and number of shares of stock of the Corporation owned beneficially and of record by the shareholderor group of shareholders givingthesuch notice and by the beneficial owner, if any, on whose behalf the nomination is made; (iv) a description of all arrangements or understandings between or among any of (A) the shareholderor group of shareholders givingthesuch notice, (B) the beneficial owner on whose behalfthesuch notice is given, (C) each nominee, and (D) any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholderor group of shareholders givingthesuch notice; (v) such other information regarding each nominee proposed by the shareholderor group of shareholders givingthesuch notice as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board of Directors;and(vi) the signed consent of each nominee to serve as a director of the Corporation if so elected.and (vii) in the case of a Proxy Notice, if the Eligible Shareholder so elects, a Statement.
(f) The presiding officer of any annual meetingmay, if the facts warrant,shall have the power to determine and declare to the meeting whether a nomination was made in accordance with the procedures prescribed by the Code of Regulations, and if the presiding officer should so determine thatasuch nomination was not made inaccordancecompliance withthisthe Code of Regulations 14,and if he or she should so determine, he or she will sodeclare to the meeting, and thethat no action shall be taken on such nomination and such defective nominationwillshall be disregarded. Notwithstanding the foregoing provisions of this Regulation 14, a shareholder must also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Regulation 14.
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Ebony L. Yeboah-AmankwahMary M. Swann
Vice President, DeputyCorporate Secretary and Associate General Counsel Corporate Secretary & Chief Ethics Officer
April 1, 2019March 26, 2021
Dear Shareholder:
You are cordially invited to attend the 2019virtual 2021 FirstEnergy Corp. Annual Meeting of Shareholders on Tuesday, May 21, 2019,18, 2021, at 8:00 a.m., Eastern time, at the John S. Knight Center, 77 E. Mill Street, Akron, Ohio. EDT. If you plan to attend this virtual meeting, you must register in advance. For information on how to register, see “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” of the proxy statement.
As you may recall, you previously consented to accessing FirstEnergy’s annual reports and proxy statements on the Internet instead of receiving paper copies.The annual report, proxy statement and all other proxy material related to the 20192021 FirstEnergy Corp. Annual Meeting of Shareholders may be accessed and viewed atwww.ViewMaterial.com/FEwww.FirstEnergyCorp.com/AnnualMeeting.
The Notice of Annual Meeting of Shareholders is printed on the back of this letter. The notice and proxy statement contain important information about proxy voting and the business to be conducted at the meeting.Annual Meeting. We encourage you to read it carefully before voting.Your Board of Directors recommends that you vote “FOR” the election of all of the nominees in Item 1, “FOR” Items 2 through 6 and “AGAINST” the shareholder proposal, which is Item 7.3.
Enclosed is your proxy card, which provides instructions to appoint your proxy and vote your shares. We encourage you to take advantage of the Internet or telephone voting options. Instructions regarding Internet and telephone voting are provided on the enclosed proxy card and are available at www.ViewMaterial.com/FE.www.FirstEnergyCorp.com/AnnualMeeting. Please note that since you already have consented to accessing FirstEnergy’s annual reports and proxy statements on the Internet, it is not necessary when voting your shares to again provide consent.consent again.
If you wish to receive a paper copy of the annual report and proxy statement with your proxy card in the future, or if you would like a paper copy of this year’s materials, please call Shareholder Services at (800)736-3402, or call Corporate Election Services at (800)516-1564 or access the website www.SendMaterial.com and follow the instructions provided, or send an email to papercopy@SendMaterial.com with your11-digit control number in the email’s subject line.
This notice is being mailed to shareholders on or about April 1, 2019.March 29, 2021.
Your vote and support are important to us.Thank you in advance for voting promptly.
Sincerely,
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Notice of Annual Meeting of Shareholders
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Agenda
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Please carefully review this notice,Notice, the Company’s Annual Report to Shareholders for the year ended December 31, 20182020 (the “2018“2020 Annual Report”) and the proxy statement and vote your shares by following the instructions on your proxy card/voting instruction form or Notice of Internet Availability of Proxy Materials to ensure your representation at the Annual Meeting. Only shareholders of record as of the close of business on March 22, 2019, or their proxy holders, may vote at the Annual Meeting. If you plan to attend the Annual Meeting, you must register in advance. See the “Attending the Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the proxy statement for instructions on how to register.
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Date and Time | Tuesday, May 18, 2021 8:00 a.m. EDT | |
Location | To protect the health and safety of the shareholders, employees, and the broader community, during the COVID-19 crisis, your Board has decided that the Annual Meeting will be a virtual meeting of shareholders, conducted via live webcast, and will take place at: www.cesonlineservices.com/fe21_vm. Online access will begin at 7:30 a.m. EDT on May 18, 2021. There will be no physical location for in-person attendance at the Annual Meeting. If you plan to attend the virtual Annual Meeting, you must register in advance. See the “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register. Shareholders may only participate online and must pre-register to vote and ask questions at the virtual Annual Meeting. | |
Agenda | • Elect the 14 nominees named in the proxy statement to the Board of Directors to hold office until the 2022 Annual Meeting of Shareholders and until their successors shall have been elected; • Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021; • Approve, on an advisory basis, named executive officer compensation; and • Take action on other business that may come properly before the Annual Meeting and any adjournment or postponement thereof | |
Record Date | March 19, 2021 Only shareholders of record as of the close of business on March 19, 2021, or their proxy holders, may vote at the Annual Meeting. | |
On behalf of the Board of Directors,
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Mary M. Swann
Associate General Counsel
Akron, Ohio |
This noticeNotice and the proxy statementProxy Statement are being mailed or made available to shareholders on or about April 1, 2019.March 29, 2021.
Important Notice Regarding Availability of Proxy Materials
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May
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ELECTRONIC ACCESS OF FUTURE PROXY MATERIALS
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  | c/o Corporate Election Services P.O. Box 3230 Pittsburgh, PA 15230 |
To assist us in reducing the cost of mailing proxy materials, you can consent to access all future proxy statements, annual reports and other related materials via the Internet (no paper copies will be mailed unless applicable regulations require delivery of printed proxy materials). To consent, please follow the instructions provided when you vote by Internet or telephone. Or, if voting by mail, check the box at the bottom Yourvotemustbereceivedby6:00 a.m.,EDT, on Tuesday,May18,2021, tobecountedinthefinal tabulation, except for participants in the FirstEnergy Corp.SavingsPlan.Ifyou are aparticipantin the FirstEnergyCorp. SavingsPlan, your votemust be receivedby6:00a.m.,EDT,onMonday,May17,2021,to becountedinthefinaltabulation. |
Your vote must be received by 7:00 a.m., Eastern time, on Tuesday, May 21, 2019, to be counted in the final tabulation, except for participants in the FirstEnergy Corp. Savings Plan. If you are a participant in the FirstEnergy Corp. Savings Plan, your vote must be received by 6:00 a.m., Eastern time, on Monday, May 20, 2019, to be counted in the final tabulation.
Your vote is important! Even if you plan to attend our virtual annual meeting, in person, please cast your vote as soon as possible by:
Internet
Access the Internet site and cast your vote: www.cesvote.com
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QR Code
Scan with a mobile device
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Call Toll-Free: 1-888-693-8683
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Return your proxy card/voting instruction form in the postage-paid envelope provided
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If you vote by Internet or telephone, please do not return your proxy card/voting instruction form.
ê Please sign and date the proxy card/voting instruction form below and fold and detach at the perforation before mailing. ê
If you vote by Internet or telephone, please do not return
When properly executed, your proxy card/voting instruction form.form will be voted in the manner you direct. If you do not specify your choices, your shares will be voted FOR all the nominees listed in Item 1 and FOR Items 2 and 3.
Your Board of Directors recommends a vote FOR all the nomineeslisted inItem1.
1. Election of Directors: | FOR | AGAINST | ABSTAIN | |||||
(1) | Michael J. Anderson | ☐ | ☐ | ☐ | ||||
(2) | Steven J. Demetriou | ☐ | ☐ | ☐ | ||||
(3) | Julia L. Johnson | ☐ | ☐ | ☐ | ||||
(4) | Jesse A. Lynn | ☐ | ☐ | ☐ | ||||
(5) | Donald T. Misheff | ☐ | ☐ | ☐ | ||||
(6) | Thomas N. Mitchell | ☐ | ☐ | ☐ | ||||
(7) | James F. O’Neil III | ☐ | ☐ | ☐ | ||||
(8) | Christopher D. Pappas | ☐ | ☐ | ☐ | ||||
(9) | Luis A. Reyes | ☐ | ☐ | ☐ | ||||
(10) | John W. Somerhalder II | ☐ | ☐ | ☐ | ||||
(11) | Steven E. Strah | ☐ | ☐ | ☐ | ||||
(12) | Andrew Teno | ☐ | ☐ | ☐ | ||||
(13) | Leslie M. Turner | ☐ | ☐ | ☐ | ||||
(14) | Melvin Williams | ☐ | ☐ | ☐ | ||||
Your Board of Directors recommends a vote FOR Items 2 and 3.
2. Ratify the Appointment of the Independent Registered Public Accounting Firm for 2021 | ||||||||
| ☐ FOR | ☐ AGAINST | ☐ ABSTAIN | ||||||
3. Approve, on an Advisory Basis, Named Executive Officer Compensation | ||||||||
| ☐ FOR | ☐ AGAINST | ☐ ABSTAIN | ||||||
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Sign above as name(s) appear on this proxy card/voting instruction form. If signing for a corporation or partnership or as an agent, attorney or fiduciary, indicate the capacity in which you are signing | ||||||||||
| ☐ | Check this box if you consent to accessing, in the future, the annual report, proxy statement and any other related material via the Internet (no paper copies will be mailed unless applicable regulations require delivery of printed proxy materials). |
FirstEnergy Corp.
Notice of Annual Meeting of Shareholders
Tuesday, May 18, 2021, at 8:00 a.m. EDT
www.cesonlineservices.com/fe21_vm
Duetothepublic healthimpactofthenovelcoronaviruspandemic(COVID-19) andtoprotectthe healthandsafetyofourshareholders,employeesandotherstakeholders,theAnnualMeeting willbeheldinavirtualmeetingformatonly,viawebcast. Youwillnotbeabletoattendthe Annual Meeting physically inperson. Ifyouplan toattendthevirtualAnnual Meeting,youmust registeratwww.cesonlineservices.com/fe21_vmnolaterthan9:00a.m.EDTonMay17,2021.
YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Annual Meeting of Shareholders, please ensure your shares are represented at the meeting by promptly voting by telephone or Internet or by returning your proxy card/voting instruction form in the enclosed envelope.
ImportantNoticeRegardingtheAvailabilityofProxyMaterials fortheAnnualMeetingof ShareholderstobeheldonMay18,2021. FirstEnergyCorp.’sproxystatementand2020Annual Report areavailableatwww.FirstEnergyCorp.com/AnnualMeeting.
ê Please sign and date the proxy card/voting instruction form below and fold and detach at the perforation before mailing. ê
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This proxy card/voting instruction form is solicited by the Board of Directors
for the Annual Meeting of Shareholders on May 18, 2021
The undersigned appoints Ebony L. Yeboah-Amankwah and Daniel M. Dunlap and Mary M. Swann as proxies with the power to appoint their substitutes; authorizes them to represent and to vote, as directed on the reverse side, all the shares of common stock of FirstEnergy Corp. which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders to be held on May 21, 2019, at the John S. Knight Center, 77 E. Mill Street, Akron, Ohio18, 2021, at 8:00 a.m., Eastern time,EDT, or at any adjournment or postponement thereof;and authorizes them to vote, at their discretion, on other business that properly may come before the meeting.and authorizes them to vote, at their discretion, on other business that properlymaycomebeforethemeeting.
If applicable, as a participant and “named fiduciary” in the FirstEnergy Corp. Savings Plan, this form also serves as voting instructions to State Street Bank andFidelity Management Trust Company, as Trustee for shares held in the Plan. The Trustee will vote all shares as instructed by Plan participants, and the shares for which the Trustee does not receive timely voting instructions will be voted by the Trustee in the same proportion as the shares held under the Plan for which the Trustee receives voting instructions.
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Please date, sign and mail promptly if you are not voting by telephone or Internet.
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YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Annual Meeting of Shareholders, please ensure your shares are represented at the meeting by promptly voting by telephone or Internet or by returning your proxy card/voting instruction form in the enclosed envelope.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 21, 2019. FirstEnergy Corp.’s proxy statement and 2018 Annual Report are available at www.ReadMaterial.com/FE.
ê Please sign and date the proxy card/voting instruction form below and fold and detach at the perforation before mailing. ê
When properly executed, your proxy card/voting instruction form will be voted in the manner you direct. If you do not specify your choices, your shares will be voted FOR all the nominees listed in Item 1, FOR Items2-6 and AGAINST Item 7.
Your Board of Directors recommends a vote FOR all the nominees listed in Item 1 and FOR Items2-6.
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SIGN ON THE REVERSE SIDE.
No executive hedging or pledging 
