1
Exhibit 22
HAWAIIAN ELECTRIC INDUSTRIES, INC. o PO BOX 730 o HONOLULU, HI 96808-0730
(LOGO)
Robert F. Clarke
President and
Chief Executive Officer
March 10, 1994
Dear Fellow Stockholder:
On behalf of the Board of Directors, it is my pleasure to invite you to
attend the Annual Meeting of Stockholders of Hawaiian Electric Industries, Inc.
(HEI). The meeting will be held in the Pacific Ballroom of the IIikai Hotel in
Honolulu, Hawaii on April 19, 1994, at 9:30 a.m.
The matters expected to be acted upon at the meeting are described in the
attached Proxy Statement. In addition, we will review significant events of 1993
and their impact on you and your Company. Corporate officers will be available
before and after the meeting to talk with you and answer any questions you may
have.
As a stockholder of HEI, it is important that your views be represented. We
ask that you promptly sign, date and return the enclosed proxy in the postage
prepaid envelope.
I join the management team of HEI in expressing our appreciation for your
confidence and support. I look forward to seeing you at the Annual Meeting in
Honolulu.
Sincerely,
ROBERT F. CLARKE
---------------------
Robert F. Clarke
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HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 RICHARDS STREET [LOGO]
HONOLULU, HAWAII 96813
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 1994
To the Holders of Common Stock
Notice is hereby given that the Annual Meeting of Stockholders of Hawaiian
Electric Industries, Inc. will be held on Tuesday, April 19, 1994, at 9:30 a.m.
in the Pacific Ballroom of the Ilikai Hotel, 1777 Ala Moana Boulevard, Honolulu,
Hawaii 96815, for the following purposes:
1. To elect four Class I directors.
2. To elect the independent auditor of the Company.
3. To transact such other business as may be properly brought before
the meeting.
Only holders of record of Common Stock at the close of business on February
10, 1994, will be entitled to vote at the meeting. The stock transfer books of
the Company will remain open.
All stockholders are urged to attend the meeting in person or by proxy. It
is important that your shares be represented at the meeting, regardless of the
size of your holding. Therefore, we urge you to SIGN, DATE and RETURN AS SOON AS
POSSIBLE the enclosed proxy in the postage prepaid envelope furnished for that
purpose.
Your attention is directed to the Proxy Statement which appears on the
following pages.
Betty Ann M. Splinter, Secretary
Hawaiian Electric Industries, Inc.
Honolulu, Hawaii
March 10, 1994
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TABLE OF CONTENTS
PAGE
-----
Introduction......................................................................... 1
Voting Rights........................................................................ 1
Management Proposal 1.
Election of Class I Directors................................................... 2
Board of Directors
Committees of the Board......................................................... 6
Remuneration of Directors and Attendance at Meetings............................ 6
Nonemployee Director Retirement Plan............................................ 7
Indemnification and Limitation of Liability.......................................... 7
Security Ownership of Directors and Executive Officers............................... 8
Security Ownership of Certain Beneficial Owner....................................... 9
Section 16 Proxy Statement Disclosure................................................ 9
Executive Management Compensation.................................................... 9
Summary Compensation Table...................................................... 10
Option Grants in Last Fiscal Year............................................... 11
Aggregated Option Exercises and Fiscal Year-End Option Values................... 12
Long-Term Incentive Plan ("LTIP") Awards........................................ 13
Pension Plans................................................................... 14
Change-in-Control Agreements.................................................... 15
Compensation Committee Report on Executive Compensation......................... 16
Stockholder Performance Graph................................................... 20
Compensation Committee Interlocks and Insider Participation..................... 21
Indebtedness of Management........................................................... 22
Transactions with Management and Directors........................................... 23
Management Proposal 2.
Election of Auditor............................................................. 23
Stockholder Proposals................................................................ 23
Other Business....................................................................... 24
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HAWAIIAN ELECTRIC INDUSTRIES, INC.
------------------------
PROXY STATEMENT
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INTRODUCTION
This Proxy Statement is furnished to stockholders by Hawaiian Electric
Industries, Inc. (the "Company") in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders of the Company to be held on April
19, 1994, and at all adjournments thereof. The mailing address of the principal
executive offices of the Company is P.O. Box 730, Honolulu, Hawaii 96808. This
Proxy Statement and the accompanying form of proxy, together with the Company's
annual report to stockholders for the fiscal year ended December 31, 1993, are
being sent to stockholders commencing approximately March 10, 1994.
The annual report is not to be regarded as proxy soliciting material or as
a communication by means of which any solicitation is to be made.
All of the expenses of the solicitation of proxies for the Annual Meeting
will be borne by the Company. The Company may request banks, brokerage houses
and other custodians, nominees, and fiduciaries to forward proxies and proxy
material to the beneficial owners of stock of the Company and to request
authority for the execution of proxies. In such a case the Company may reimburse
such banks, brokerage houses, custodians, nominees and fiduciaries for their
expenses. Proxies may be solicited personally, or by telephone, telegram or by
mail by certain directors, officers and regular employees of the Company without
additional compensation for such services. In addition, the Company has retained
D. F. King & Co., Inc., to assist in the solicitation of proxies for an
estimated fee not to exceed $7,000, plus reimbursement of reasonable
out-of-pocket expenses.
VOTING RIGHTS
Only holders of Common Stock of record at the close of business on February
10, 1994, will be entitled to vote. On February 10, 1994, 27,747,718 shares of
Common Stock were outstanding. Each share of Common Stock is entitled to one
vote on each of the matters presented at the Annual Meeting. Under the By-Laws
of the Company, the holders of voting stock of the Company do not have
cumulative voting rights in the election of directors.
If you execute and return the enclosed proxy, you may revoke the proxy
before the Annual Meeting at any time by sending a written revocation to the
Company. The By-Laws of the Company provide, however, that if you attend the
Annual Meeting and wish to vote, your ballot at the meeting will cancel any
proxy that you have previously given. Unless your proxy is mutilated or
otherwise received in such form or at such time as to render it not votable, the
shares represented by your proxy will be voted as directed, and if no direction
is indicated it will be voted for all management proposals, as set forth in this
Proxy Statement. If you wish to give a proxy to someone other than the holders
of the Company's proxies, you may cross out all three names appearing on the
enclosed proxy and insert the name of another person to vote the shares at the
meeting. For your convenience, a self-addressed envelope is enclosed, requiring
no postage if mailed within the United States.
The holders of a majority of the shares of the Company's Common Stock,
present in person or by proxy at the Annual Meeting, constitute a quorum for the
transaction of business. Electing Class I directors and electing the independent
auditor require the affirmative vote of a majority of such quorum. For purposes
of determining whether a proposal has received a majority vote, abstentions will
be included in the vote totals. In the case of all other matters brought before
the meeting other than the election of directors, abstentions will have the
effect of a vote against the proposal.
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The Company has contracted with an affiliate company to act as tabulator
for the proxies of the stockholders of record for the Annual Meeting, while D.
F. King & Co. will act as tabulator for broker and bank proxies. The identity
and vote of any stockholder shall not be disclosed to any third party except as
necessary to meet applicable legal requirements and, in the case of any
contested proxy solicitation, as may be necessary to permit proper parties to
verify the propriety of proxies presented by any person and the results of the
voting.
If you own shares of HEI stock in the Dividend Reinvestment and Stock
Purchase Plan (DRIP) and/or the Hawaiian Electric Industries Retirement Savings
Plan (HEIRS) (including shares held in the Hawaiian Electric Industries Stock
Ownership Plan which was originally adopted as a Tax Reduction Act Stock
Ownership Plan ("TRASOP")), your share ownership is shown on the enclosed proxy.
The respective plan trustee will vote the shares of stock held in the Plans in
accordance with the directions received from shareholders participating in the
Plans. For both DRIP and HEIRS (excluding TRASOP), the trustee will vote all the
shares of Common Stock for which it has received no voting instruction in the
same proportion as it votes shares for which it receives instruction.
MANAGEMENT PROPOSAL 1. ELECTION OF CLASS I DIRECTORS
The persons named in the proxy will vote your stock for the election of
four directors to serve in Class I of the Company's Board of Directors for terms
expiring at the 1997 Annual Meeting and thereafter until their successors are
duly elected and qualified.
Although it is not contemplated that any Board of Directors nominee will
decline or be unable to serve, should such a situation arise prior to the
meeting, the proxy holders may vote in their discretion for a suitable
substitute. Each nominee for director is now serving on the Board.
The Board of Directors currently consists of 15 persons, divided into three
classes of equal size: Class I, Class II, and Class III, with the term of office
of one class expiring each year. Based on the recommendation of the Nominating
Committee, the Board of Directors has voted not to fill, at this time, the
position being vacated by Thurston Twigg-Smith, who has reached the mandatory
retirement age of 72 as specified by Board resolution. Therefore, the size of
the Board will be decreased from 15 to 14 immediately following Mr.
Twigg-Smith's retirement on April 19, 1994, and the size of Class I will be
reduced to four. The four Class I directors are being proposed for election for
new three-year terms (expiring in 1997) at this Annual Meeting. Terms for all
five Class II directors expire in 1995 and for all five Class III directors in
1996.
The following sets forth the name, age, year first elected or appointed as
a director of the Company, positions with the Company or business experience
during the past five years, and a list of directorships of the four nominees for
Class I directors and of the Class II and III directors who will continue to
serve on the Board of Directors pursuant to their prior elections.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF THE NOMINEES TO SERVE AS CLASS I DIRECTORS.
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NOMINEES FOR CLASS I DIRECTORS --
Terms would end at the 1997 Annual Meeting.
(PHOTO) (PHOTO) (PHOTO) (PHOTO)
ROBERT F. CLARKE JOHN D. FIELD A. MAURICE MYERS RUTH M. ONO, PH.D.
AGE 51 AGE 68 AGE 53 AGE 58
DIRECTOR SINCE 1989 DIRECTOR SINCE 1986 DIRECTOR SINCE 1991 DIRECTOR SINCE 1987
President and chief Vice president-- President, chief Vice president of The
executive officer of the regulatory affairs of operating officer, and Queen's Health Systems.
Company. From May 1, GTE Service Corporation director of America West
1988, until December 31, from 1982 until his Airlines, Inc. From June Director of American
1990, he was group vice retirement in October 1985 to December 1993, Savings Bank, F.S.B.,
president--diversified 1985. he was president and Hawaii Visitors Bureau,
companies of the chief executive officer Aloha United Way,
Company. of Aloha Airgroup, Inc. Japanese Cultural Center
of Hawaii, Japan-America
Chairman of the board Director of Air Society of Hawaii, Air
of Hawaiian Electric Transport Association of Force Civilian Advisory
Company, Inc., American America. Council, Plaza Club,
Savings Bank, F.S.B., Keiki Heart Foundation,
Hawaiian Tug & Barge Urasenke Foundation, The
Corp., Young Brothers, Tokushukai Medical
Limited, and Malama Corporation, Leadership
Pacific Corp. President America National
and director of Hawaiian Advisory Board, and
Electric Industries Soroptimist
Charitable Foundation. International of the
Chairman, 1994 Aloha Americas Foundation.
United Way Campaign. Vice chairman of the
Director of Chamber of board of Queen's
Commerce of Hawaii and International
PATH Housing Development Corporation. Honorary
Corporation. Member, Dean and Visiting
Hawaii Business Professor of Toho
Roundtable. Trustee, The University School of
Nature Conservancy of Medicine. Member, Board
Hawaii and Hawaii of Regents, University
Pacific University. of Hawaii and the Spark
M. Matsunaga Peace
Foundation Board of
Governors. Trustee, St.
Andrew's Priory.
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CLASS II DIRECTORS --
Directors continuing in office with terms ending at the 1995 Annual Meeting.
(PHOTO) (PHOTO) (PHOTO) (PHOTO) (PHOTO)
VICTOR HAO LI, S.J.D. DIANE J. PLOTTS KELVIN H. TAKETA JEFFREY N. WATANABE HARWOOD D. WILLIAMSON
AGE 52 AGE 58 AGE 39 AGE 51 AGE 62
DIRECTOR SINCE 1988 DIRECTOR SINCE 1987 DIRECTOR SINCE 1993 DIRECTOR SINCE 1987 DIRECTOR SINCE 1985
Co-chairman, Asia General partner of Vice president and Senior partner in the Group vice
Mideast and China director of the Pacific law firm of Watanabe, president--utility
Pacific Consulting Trading Company, Region, The Nature Ing and Kawashima. companies of the
Group. From 1981 to formerly known as Conservancy and Company. President,
1990, he served as Hemmeter Investment executive director of Director of American chief executive officer,
president of the East- Company. The Nature Conservancy Savings Bank, F.S.B., and director of Hawaiian
West Center. of Hawaii. Hawaiian Electric Electric Company, Inc.
Director of Hawaiian Industries Charitable and chairman of the
Director of Hawaiian Electric Company, Inc., Director of HISCO, Ltd., Foundation, Grace boards of Maui Electric
Electric Industries Malama Pacific Corp. and Sustainable Pacific Corporation and Company, Limited and
Charitable Foundation, its subsidiary Conservation, and PATH affiliates, Suntory Hawaii Electric Light
Grumman Corp., AES China companies, Hawaii Housing Development Resorts, Inc., Hawaiian Company, Inc.
Generating Corporation, Community Foundation, Corporation. Host, Inc., Bishop
The Immigrant Center, Hawaii Theatre Center, Museum, Child and Family Director of American
and Japan-America University of Hawaii Service--Project Savings Bank, F.S.B.,
Society of Hawaii. Foundation Forum/Center Philippines, Hawaiian Tug & Barge
Chairman of the board of for Strategic and Rehabilitation Hospital Corp., Young Brothers,
Queen's International International Studies, of the Pacific, Chamber Limited, Malama Pacific
Corporation. Member, Plaza Club, and Honolulu of Commerce of Hawaii, Corp., Hawaiian Electric
Board of Managers, Country Club. PATH Housing Development Industries Charitable
Mid-Pacific Institute. Corporation, and the Foundation, Aloha United
University of Hawaii Way, First Night
Foundation. Trustee, Honolulu, and Edison
Children's Television Electric Institute. Vice
Workshop, Blood Bank of president and director
Hawaii, Hawaii Maritime of the Western Energy
Center, Rehabilitation and Communication
Hospital of the Pacific Association. Chairman,
Foundation, The Nature Hawaiian Educational
Conservancy of Hawaii, Council. Member, Board
The Queen's Medical of Regents, Chaminade
Center, and the University of Honolulu.
Smithsonian Institution
National Board. Chairman
of the board of Alger
Foundation. Vice
chairman, 1994 Aloha
United Way Campaign.
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CLASS III DIRECTORS --
Directors continuing in office with terms ending at the 1996 Annual Meeting.
(PHOTO) (PHOTO) (PHOTO) (PHOTO) (PHOTO)
EDWIN L. CARTER RICHARD HENDERSON BEN F. KAITO BILL D. MILLS OSWALD K. STENDER
AGE 68 AGE 65 AGE 67 AGE 42 AGE 62
DIRECTOR SINCE 1985 DIRECTOR SINCE 1981 DIRECTOR SINCE 1981 DIRECTOR SINCE 1988 DIRECTOR SINCE 1993
President and director President and director Of counsel in the law Chairman of the board Trustee, Kamehameha
of Bishop Trust of HSC, Inc. and its firm of Kaito & Ishida. and chief executive Schools/Bishop Estate.
Company, Limited from subsidiaries. officer of Bill Mills From 1988 to 1990, he
1984 until his Director of Hawaiian Development and served as Senior Advisor
retirement in May 1993. Director of Hawaiian Electric Company, Inc., Investment Company, Inc. to the Board of Trustees
Electric Company, Inc., Malama Pacific Corp. and From 1986 to 1989, he of Campbell Estate.
Director of HEI Hawaii Electric Light its subsidiary was chairman of the
Investment Corp., Hawaii Company, Inc., Hawaiian companies, American board and chief Director of Affordable
Council on Economic Tug & Barge Corp., Young Savings Bank, F.S.B., executive officer of Housing Coalition,
Education, and Aloha Brothers, Limited, Jones and Hawaiian Electric Oceanic Properties, Inc. Hawaii Community
United Way. Chairman, Spacelink, Ltd., Industries Charitable Reinvestment Corp.,
Board of Regents, InterIsland Petroleum, Foundation. Member, Director of Hawaii Pacific Housing
Chaminade University of Inc., Hawaii Island Committee on Legal and Theatre Center, Historic Assistance Corporation,
Honolulu. Director and Economic Development Government Affairs, Hawaii Foundation, and PATH Housing Development
past president of the Board, Big Island Association for Retarded The Contemporary Museum. Corporation, Friends of
Aloha Council, Boy Substance Abuse Council, Citizens of Hawaii. Trustee, Hawaii Pacific Halawa Xeriscape Garden,
Scouts of America. United Way Statewide University and The Hawaii Nature Center,
National director and Association of Hawaii, Nature Conservancy of and Friends of Iolani
past president of the and Hawaii Island Hawaii. Member, Board of Palace. Director and
Pacific Region of the Chamber of Commerce. Governors, Iolani past president of the
Navy League of the Treasurer and director School. American Right of Way
United States. Honorary of The Island of Hawaii Association. Trustee,
member and past YMCA. President and Cash Assets Trust,
president of the Bishop trustee, Lyman House Hawaiian Tax-Free Trust,
Museum Board of Memorial Museum. Pacific Capital Funds,
Directors. Member, Board Historic Hawaii
of Managers, Mid-Pacific Mr. Henderson was the Foundation, The Nature
Institute. Trustee and chairman of the board of Conservancy of Hawaii,
treasurer, Board of Ocean Farms of Hawaii, and Academy of the
Trustees of the Academy Inc. (OFH), an Pacific. Member, Board
of the Pacific. aquaculture company that of Governors, Iolani
filed a petition in June School and East-West
1992 for voluntary Center.
bankruptcy under Chapter
7 of the U.S. Bankruptcy
Code. The assets of OFH
in the bankruptcy
proceedings were
abandoned to the secured
creditor, and the
Trustee was discharged.
HSC, Inc. owned an
approximate 1% interest
in OFH.
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BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Board of Directors has four standing committees: Audit, Compensation,
Executive and Nominating.
The Audit Committee is comprised of six nonemployee directors: Diane J.
Plotts, Chairman, and John D. Field, Ben F. Kaito, Victor H. Li, Ruth M. Ono,
and Kelvin H. Taketa, members. In 1993, the Audit Committee held five meetings
to review with management, the internal auditor and the Company's independent
auditor the activities of the internal auditor, the results of the annual audit
by the independent auditor and the financial statements which are included in
the Company's annual report to the stockholders. The Audit Committee holds such
meetings as it deems advisable to review the financial operations of the
Company.
The Compensation Committee is comprised of six nonemployee directors: Edwin
L. Carter, Chairman, and Richard Henderson, Bill D. Mills, A. Maurice Myers,
Oswald K. Stender, and Jeffrey N. Watanabe, members. In 1993, the Compensation
Committee held two meetings and reviewed the current salary administration
policies and compensation strategy of the Company. See pages 16 to 19 for the
Compensation Committee Report on Executive Compensation.
The Executive Committee is comprised of six nonemployee directors and one
employee director. The six nonemployee directors are: Thurston Twigg-Smith (who
is not standing for re-election as a director), Chairman, and Edwin L. Carter,
Richard Henderson, Ben F. Kaito, Diane J. Plotts, and Jeffrey N. Watanabe,
members. Robert F. Clarke is the employee director member of the Committee. In
1993, the Executive Committee held four meetings to review and discuss
organizational and other matters. The Executive Committee possesses and
exercises such powers of the Board as are expressly delegated to it by the Board
from time to time and is responsible for considering and making recommendations
to the Board concerning any questions relating to the business and affairs of
the Company.
The Nominating Committee is comprised of three nonemployee directors:
Richard Henderson, Chairman, and Ben F. Kaito and Thurston Twigg-Smith, members.
In 1993, the Nominating Committee held one meeting. The Nominating Committee
recommends to the Board of Directors the slate of directors to be submitted to
the stockholders at the Annual Meeting. The Committee will consider nominees for
director from all sources, including stockholders. Stockholders who wish to
suggest nominees should write to the Company's Nominating Committee, in care of
the Secretary, Hawaiian Electric Industries, Inc., P.O. Box 730, Honolulu,
Hawaii 96808. Such recommendations must be received by December 12, 1994, to be
considered for the 1995 Annual Meeting of Stockholders.
REMUNERATION OF DIRECTORS AND ATTENDANCE AT MEETINGS
In 1993, the nonemployee directors were paid a retainer of $12,000,
one-half of which was distributed in the Common Stock of the Company pursuant to
the Nonemployee Director Stock Plan and one-half of which was distributed in
cash. The number of shares of stock distributed to each director was based on a
price of $38.27 per share, which is equal to the average of the daily high and
low sales prices of HEI Common Stock for all trading days in March 1993, divided
into $6,000, with a cash payment made in lieu of any fractional share. In
addition, a fee of $700 was paid in cash to each director for each Board and
Committee meeting attended by the director. Chairmen of the respective
Committees were paid an additional $100 for each Committee meeting attended.
Effective May 1, 1994, members of the Board of Directors who are employees of
the Company will no longer be compensated for attendance at any meetings of the
Board or Committees of the Board.
In 1993, there were twelve regular monthly meetings and four special
meetings of the Board of Directors. All incumbent directors attended at least
75% of the total number of meetings of the Board and Committees on which they
served, except Bill D. Mills and Oswald K. Stender.
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NONEMPLOYEE DIRECTOR RETIREMENT PLAN
The Nonemployee Director Retirement Plan, which is not funded, was
established in 1989 and provides certain retirement benefits to nonemployee
directors of the Company or any subsidiary of the Company that elects to
participate in the Plan. No director who serves as an officer or employee of the
Company or any of its subsidiaries is entitled to receive benefits under the
Plan. Nonemployee directors who have served for at least five consecutive full
years (including years prior to adoption of the Plan) and who meet the other
requirements of the Plan receive, upon retirement from service as a nonemployee
director or age 65, whichever is later, payments each year in an amount equal to
the annual retainer which was established for the year in which the nonemployee
director retired. The annual payments will continue to be paid for a period
equal to the number of years of active service accumulated by a nonemployee
director as provided in the Plan or terminate in the event of the nonemployee
director's death. No amounts have yet been paid or distributed pursuant to the
Plan to any former nonemployee director.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company has entered into Indemnity Agreements with each of the
Company's directors and executive officers in substantially the form approved by
stockholders at the 1989 Annual Meeting. Each Indemnity Agreement provides for
mandatory indemnification of the director or officer to the fullest extent
authorized or permitted by law, including indemnification against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any action by or in the
right of the Company. The Indemnity Agreement provides for the mandatory payment
of expenses incurred by the director or officer in defending a threatened or
actual proceeding before its final disposition, subject to the obligation to
repay such expenses if it is later determined that the officer or director is
not entitled to indemnification.
Each Indemnity Agreement specifically excludes indemnification (i) with
respect to proceedings initiated by the officer or director unless the Board of
Directors determines indemnification to be appropriate; (ii) with respect to
amounts covered by insurance or payable otherwise than under the Indemnity
Agreement; (iii) on account of profits made from the purchase or sale of stock
by a director or officer which are subject to the "short-swing profits"
liability provisions of federal or state securities laws; (iv) on account of an
action or omission of the officer or director finally adjudicated to be willful
misconduct or to have been knowingly fraudulent or deliberately dishonest; or
(v) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not permitted by law. In addition, the
Securities and Exchange Commission takes the position that indemnification
against liability arising under the Securities Act of 1933 is contrary to public
policy and is unenforceable.
At the 1990 Annual Meeting, the stockholders approved a proposal to amend
the Restated Articles of Incorporation of the Company to add a new Article
Fourteenth eliminating the personal liability of its directors for monetary
damages to the fullest extent permitted by Hawaii law.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the shares of Common Stock beneficially owned by
each nominee and director, named executive officers as listed in the Summary
Compensation Table on page 10, and by directors and executive officers as a
group, as of February 10, 1994, based on information furnished by the respective
individuals.
AMOUNT OF
COMMON STOCK
NAME OF INDIVIDUAL AND NATURE OF
OR GROUP BENEFICIAL OWNERSHIP TOTAL
- ------------------------------------------------------------------------ -------------------- -------
NONEMPLOYEE DIRECTORS
Edwin L. Carter......................................................... 2,171(a) 2,171
----------
John D. Field........................................................... 671(a)
1,001(b)
1,944(d) 3,616
----------
Richard Henderson....................................................... 1,173(a) 1,173
----------
Ben F. Kaito............................................................ 1,549(a) 1,549
----------
Victor Hao Li........................................................... 766(a)
218(c) 984
----------
Bill D. Mills........................................................... 2,732(a)
4(c) 2,736
----------
A. Maurice Myers........................................................ 45(a)
671(b) 716
----------
Ruth M. Ono............................................................. 1,527(a) 1,527
----------
Diane J. Plotts......................................................... 921(a) 921
----------
Oswald K. Stender....................................................... 350(a)
300(b) 650
----------
Kelvin H. Taketa........................................................ 1,044(a) 1,044
----------
Thurston Twigg-Smith.................................................... 2,579(a)
1,254(c) 3,833
----------
Jeffrey N. Watanabe..................................................... 766(a)
407(b)
2(c)
885(e) 2,060
----------
EMPLOYEE DIRECTORS AND EXECUTIVE OFFICERS
Robert F. Clarke........................................................ 5,830(a)
4,966(b)
84,516(f) 95,312
----------
Harwood D. Williamson................................................... 11,735(a)
58,322(f) 70,057
----------
OTHER NAMED EXECUTIVE OFFICERS
Edward J. Blackburn..................................................... 2,800(a)
39,494(f) 42,294
----------
Peter C. Lewis.......................................................... 3,593(a)
227(c)
4,430(f) 8,250
----------
Robert F. Mougeot....................................................... 2,455(a)
15,668(f) 18,123
----------
All directors and executive officers as a group (23 persons)............ 46,277(a)
7,358(b)
2,429(c)
1,944(d)
885(e)
210,536(f) 269,429*
----------
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* The current directors and executive officers of Hawaiian Electric Industries
as a group beneficially owned 0.97% of the Company's Common Stock on
February 10, 1994, and no one director or officer owned more than 0.3% of
such stock.
(a) Sole voting and investment power.
(b) Shared voting and investment power (shares registered in name of respective
individual and spouse).
(c) Shares owned by spouse, children or other relatives sharing the home of the
director or an officer in the group and in which personal interest of the
director or officer is disclaimed.
(d) Mr. Field is co-trustee of the Catharine P. Field Trust and shares voting
and investment powers over the 1,944 shares.
(e) Mr. Watanabe is sub-trustee of the Jeffrey N. Watanabe Profit Sharing Plan
Sub-Trust and has sole voting and investment powers over the 885 shares.
(f) Stock options, including accompanying dividend equivalent shares,
exercisable within 60 days after February 10, 1994, under the 1987 Stock
Option and Incentive Plan, as amended.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER
The following table sets forth information as to the beneficial ownership
of each person known to the Company to own more than 5% of the outstanding
Common Stock as of December 31, 1993.
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) CLASS
- ------------------------------- ------------ ----------
Franklin/Templeton 1,819,180 6.6%
Group of Funds
777 Mariners Island Boulevard
P.O. Box 7777
San Mateo, California 94403
- ---------------
(1) This information is based on a Schedule 13G, dated January 28, 1994, filed
with the Securities and Exchange Commission that discloses that the
Franklin/Templeton Group of Funds has sole voting power over 1,818,180
shares and shared dispositive power over 1,819,180 shares.
SECTION 16 PROXY STATEMENT DISCLOSURE
Section 16 of the Securities Exchange Act of 1934, as amended, requires
that officers, directors, and holders of more than 10% of the Common Stock file
reports of their trading in Company equity securities with the Securities and
Exchange Commission. Based on a review of Section 16 forms filed by its
reporting persons during the last fiscal year, the Company believes that its
reporting persons complied with all applicable Section 16 filing requirements.
EXECUTIVE MANAGEMENT COMPENSATION
The Executive Management Compensation section contains the following tables
and a graph: Summary Compensation Table; Option Grants in Last Fiscal Year;
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values; Long-Term Incentive Plan -- Awards in Last Fiscal Year; and Stockholder
Performance Graph. Also included in this section of the Proxy Statement is a
Pension Plan Table, a report on Change-in-Control agreements, a report on
executive compensation which has been issued by the Compensation Committee of
the Board of Directors, and a discussion of Compensation Committee Interlocks
and Insider Participation.
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SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the annual and
long-term compensation of the chief executive officer and the four other most
highly compensated executive officers of the Company serving at the end of 1993.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION
------------------------------ AWARDS
OTHER ---------- PAYOUTS ALL
ANNUAL SECURITIES ---------- OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY(1) BONUS(2) SATION(3) OPTIONS(4) PAYOUTS(5) SATION(6)
POSITION YEAR ($) ($) ($) (#) ($) ($)
- -------------------------------------- ---- --------- -------- ------- ---------- ---------- -------
Robert F. Clarke...................... 1993 $403,800 $160,578 $ -0- 15,000 $ -- $10,942
President & CEO 1992 374,800 -0- -0- 75,000 -0- -0-
1991 307,859 -0- -- 15,000 64,043 --
Harwood D. Williamson................. 1993 341,333 -0- 68,544 8,000 -- 18,843
Group V.P.--Utility Companies 1992 316,666 37,288 62,750 48,000 -0- -0-
1991 264,669 -0- -- 8,000 55,951 --
Edward J. Blackburn................... 1993 228,567 75,978 -0- 8,000 -- 14,136
Group V.P.--Diversified Companies 1992 212,333 -0- -0- 38,000 -0- -0-
1991 190,000 -0- -- 8,000 22,725 --
Robert F. Mougeot..................... 1993 195,666 41,059 -0- 5,000 -- 5,517
Financial Vice President 1992 182,000 -0- -0- 5,000 -0- -0-
1991 168,000 -0- -- 5,000 34,250 --
Peter C. Lewis........................ 1993 171,333 40,006 -0- 5,000 -- 10,320
V.P.--Administration 1992 162,833 -0- -0- 5,000 -0- -0-
1991 153,166 -0- -- 5,000 25,578 --
- ---------------
(1) Includes directors' fees of $23,800 in 1993 and $24,800 in 1992 for Mr.
Clarke; directors' fees of $28,000 in 1993 and $25,000 in 1992 for Mr.
Williamson; and directors' fees of $4,900 in 1993 and $4,000 in 1992 for Mr.
Blackburn.
(2) The named executive officers are eligible for an incentive award under the
Company's annual Executive Incentive Compensation Plan ("EICP"). A decision
on EICP bonus payouts is made at the beginning of each year for the previous
year's performance period.
(3) Covers interest earned on deferred compensation and includes above-market
earnings in the amount of $57,498 for 1992 and $63,467 for 1993 on deferred
annual and long-term incentive plan payouts for Mr. Williamson.
(4) Includes special one-time, premium-priced grant without dividend equivalents
for Messrs. Clarke, Williamson and Blackburn in 1992. Other options granted
in 1992 and earlier years contained dividend equivalents as further
described in Option Grants in Last Fiscal Year, on page 11.
(5) LTIP payouts are determined in April each year for the 3-year cycle ending
on December 31, of the previous calendar year. In 1993, no LTIP payouts were
received for the 1990-1992 performance cycle because none of the minimum
earnings threshold levels were achieved. The determination of whether there
will be a payout under the 1991-1993 LTIP will not be made until April of
this year.
(6) Represents amounts accrued by the Company in 1993 for certain death benefits
provided to the named executive officers, as more fully covered in the
Compensation Committee Report on page 19 under the heading, "Other
Compensation Plans". In 1991 and 1992, the Company did not accrue for these
benefits.
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OPTION GRANTS IN LAST FISCAL YEAR
Set forth in the following table is information on the stock options which
were granted to the five named executive officers in 1993, all of which were
nonqualified stock options. The practice of granting stock options, which
include dividend equivalent shares, has been followed each year since 1987.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF
SECURITIES PERCENT OF GRANT
UNDERLYING TOTAL OPTIONS DATE
OPTIONS GRANTED TO EXERCISE PRESENT
GRANTED(1) EMPLOYEES IN PRICE VALUE(2)
(#) FISCAL YEAR ($/SHARE) EXPIRATION DATE ($)
---------- ------------- --------- ---------------- ---------
Robert F. Clarke....... 15,000 12% $ 38.27 April 12, 2003 $ 144,900
Harwood D. Williamson.. 8,000 7 38.27 April 12, 2003 77,280
Edward J. Blackburn.... 8,000 7 38.27 April 12, 2003 77,280
Robert F. Mougeot...... 5,000 4 38.27 April 12, 2003 48,300
Peter C. Lewis......... 5,000 4 38.27 April 12, 2003 48,300
- ---------------
(1) For the 41,000 option shares granted with an exercise price of $38.27 per
share, additional dividend equivalent shares are granted at no additional
cost throughout the four-year vesting period (vesting in equal installments)
which begins on the date of grant. Dividend equivalents are computed, as of
each dividend record date, both with respect to the number of shares under
the option and with respect to the number of dividend equivalent shares
previously credited to the participant and not issued during the period
prior to the dividend record date. Accelerated vesting is provided in the
event a Change-in-Control occurs. No stock appreciation rights have been
granted under the Company's current benefit plans.
(2) Based on a Binomial Option Pricing Model which is a variation of the
Black-Scholes Option Pricing Model. For the stock options granted with a
10-year option period, an exercise price of $38.27, and with additional
dividend equivalent shares granted for the first four years of the option,
the Binomial Value is $9.66 per share. The following assumptions were used
in the model: Stock Price: $38.27; Exercise Price: $38.27; Term: 10 years;
Volatility: .55; Interest Rate: 6.0%; and Dividend Rate: 6.4%. The following
were the valuation results: Binomial Option Value: $5.03; Dividend Credit
Value: $4.63; and Total Value: $9.66.
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AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table shows the stock options, including dividend
equivalents, exercised by the named executive officers in 1993. Also shown is
the number and value of unexercised options and dividend equivalents at the end
of 1993. Under the Stock Option and Incentive Plan, dividend equivalents have
been granted to each executive officer as part of the stock option award, except
for the one-time, premium-priced grants to Messrs. Clarke, Williamson and
Blackburn in May 1992.
Dividend equivalents permit a participant who exercises a stock option to
obtain at no additional cost, in addition to the option shares, the amount of
dividends declared on the number of shares of Common Stock with respect to which
the option is exercised during the period between the grant and the exercise of
the option. Dividend equivalents are computed, as of each dividend record date
throughout the four-year vesting period (vesting in equal installments), which
begins on the date of grant, both with respect to the number of shares
underlying the option and with respect to the number of dividend equivalent
shares previously credited to the executive officer and not issued during the
period prior to the dividend record date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (INCLUDING IN THE MONEY OPTIONS
DIVIDEND EQUIVALENTS) (INCLUDING DIVIDEND EQUIVALENTS)
DIVIDEND VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END(1)(2)
SHARES EQUIVALENTS VALUE REALIZED ---------------------- --------------------------------
ACQUIRED ACQUIRED REALIZED ON DIVIDEND EXERCISABLE/ EXERCISABLE/
ON EXERCISE ON EXERCISE ON OPTIONS EQUIVALENTS UNEXERCISABLE UNEXERCISABLE
(#) (#) ($) ($) (#) ($)
------------ ------------ ----------- ------------ ---------------------- --------------------------------
Robert F.
Clarke...... -- -- -- -- 84,204/38,700 $ 151,750/72,955
Harwood D.
Williamson... -- -- -- -- 58,117/21,379 117,711/38,916
Edward J.
Blackburn... -- -- -- -- 39,331/20,587 38,916/38,916
Robert F.
Mougeot.... -- -- -- -- 15,508/13,955 103,114/24,319
Peter C.
Lewis...... 4,750 1,282 $ 6,486 $ 46,357 4,347/13,955 24,319/24,319
- ---------------
(1) All options were in the money (where the option price is less than the
closing price on December 31, 1993) except the 1990 stock option grant with
dividend equivalents at $36.01 per share, the 1992 stock option grant with
dividend equivalents at $35.94 per share, and the 1993 stock option grant
with dividend equivalents at $38.27 per share, and the 1992 premium-priced
grant without dividend equivalents at $41.00 per share.
(2) Value based on closing price of $35.875 per share on the New York Stock
Exchange on December 31, 1993.
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LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS
The table below sets forth a listing of LTIP awards made to the named
executive officers during 1993. The table shows potential payments that are tied
to the achievement of better than average performance over a three-year period
relating to three separate goals.
The three goals are (1) earnings per share (weighted 30%), (2) return on
average common equity (weighted 30%), and (3) total return to shareholders
(weighted 40%). The Company's performance is measured against the Edison
Electric Institute Index of 100 Investor-Owned Electric Companies as of December
31, 1995 ("Peer Group"). This is the same peer group of companies used for the
Stockholder Performance Graph shown on page 20. However, the performance of the
LTIP Peer Group is calculated on a noncapitalized weighted basis whereas the
Stockholder Performance Graph is calculated on a capitalized weighted basis. The
LTIP uses a noncapitalized weighted basis so as not to give a disproportionate
emphasis to the larger companies in the Edison Electric Institute Index.
Threshold minimum awards with respect to each goal will be earned if the
Company's performance equals 100% of the average performance of the Peer Group
with respect to that goal. Maximum awards will be earned on the earnings per
share goal if the Company's performance is 130% of the earnings per share
average of the Peer Group. Maximum awards will be earned on the return on
average common equity and total return to shareholders goals if the Company's
performance is 110% of the average of the return on average common equity and
total return to shareholders of the Peer Group. Earned awards are distributed in
the form of 60% cash and 40% Company Common Stock with the maximum award level
for each executive officer ranging from 75% to 100% of the midpoint of the
officer's salary grade range at the end of the performance cycle.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS
---------------------------
PERFORMANCE CYCLE THRESHOLD(1) MAXIMUM
ENDING DATE ($) ($)
----------------- ------------ --------
Robert F. Clarke..................... 12/31/95 $151,470 $459,000
Harwood D. Williamson................ 12/31/95 79,500 238,500
Edward J. Blackburn.................. 12/31/95 66,000 198,000
Robert F. Mougeot.................... 12/31/95 54,750 164,250
Peter C. Lewis....................... 12/31/95 45,250 135,750
- ---------------
(1) Assumes meeting minimum threshold on all 3 goals; however, if only one goal
(weighted 30%) is met, the minimum threshold estimated future payout would
be: Mr. Clarke -- $45,441; Mr. Williamson -- $23,850; Mr.
Blackburn -- $19,800; Mr. Mougeot -- $16,425; and Mr. Lewis -- $13,575.
There is no LTIP payout unless the minimum threshold is met on at least one
of the three goals.
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PENSION PLANS
The following table shows the estimated annual pension benefits payable
upon retirement to all regular employees (including the named executive
officers) of the Company and its electric utility subsidiaries not represented
by collective bargaining agreements. The table is based on retirement at normal
retirement age under the Company's noncontributory, qualified defined benefit
pension plan ("Retirement Plan"), as well as the Company's noncontributory,
nonqualified excess benefit plan ("Excess Benefit Plan") which provides benefits
that would otherwise be denied employees by reason of certain Internal Revenue
Code limitations on qualified plan benefits, based on remuneration that is
covered under the plans and years of service with the Company and all of its
subsidiaries:
PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------------
REMUNERATION 15 20 25 30 35
---------------------------------- ------- ------- -------- -------- --------
$100,000.......................... $30,600 $40,800 $ 51,000 $ 61,200 $ 67,000
150,000.......................... 45,900 61,200 76,500 91,800 100,500
200,000.......................... 61,200 81,600 102,000 122,400 134,000
250,000.......................... 72,167 96,223 120,278 144,334 158,013
300,000.......................... 72,167 96,223 120,278 144,334 158,013
350,000.......................... 72,167 96,223 120,278 144,334 158,013
400,000.......................... 72,167 96,223 120,278 144,334 158,013
The Retirement Plan provides a monthly retirement pension for life.
Benefits are determined by multiplying the product of years of credited service
and 2.04% (product not to exceed 67%) times the participant's average base
salary for any consecutive 36 months that would produce the highest monthly
average (highest monthly average converted to annualized remuneration in the
Pension Plan Table above).
Internal Revenue Code Sections 401(a) and 415 include limits on a
participant's maximum compensation that can be recognized under the Retirement
Plan and on the maximum amount of benefits a participant can receive from the
Retirement Plan. The limit on the maximum salary for 1993 is $235,840, which is
reflected in the Pension Plan Table above. During the coming year, the Company
intends to adopt a nonqualified excess pay supplemental executive retirement
plan designed to provide benefits that cannot be paid from the qualified
Retirement Plan.
As of December 31, 1993, the named executive officers had the following
number of years of credited service under the Company's Retirement Plan: Mr.
Clarke, 6 years; Mr. Williamson, 37 years; Mr. Blackburn, 6 years; Mr. Mougeot,
5 years; and Mr. Lewis, 25 years.
The limit on the maximum benefit that a participant can receive from the
Retirement Plan under Section 415 for 1993 is $115,641 at retirement age 65. If,
at retirement, the annual retirement benefit should exceed this limit, the
participant's benefit from the Retirement Plan will be reduced accordingly.
However, the amount of this reduction will be paid to each participant from an
existing unfunded Excess Benefit Plan designed for this purpose, or under the
existing Supplemental Executive Retirement Plan, which is described below.
The table above shows the estimated combined annual retirement benefits
payable to regular employees, including the named executive officers, under the
Retirement Plan and Excess Benefit Plan in the form of a straight life annuity
at age 65 at various levels of average base salary and years of service.
Benefits are in addition to amounts payable by Social Security. The estimates
are based on the $235,840 maximum recognizable compensation for 1993. This
results in maximum benefits payable under the Retirement Plan and Excess Benefit
Plan, combined, of $158,013.
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In 1989, the Company adopted a Supplemental Executive Retirement Plan
("SERP") for certain executive officers as approved by the Compensation
Committee of the Board of Directors. Executives who participate in the SERP are
not eligible to participate in the Excess Benefit Plan. Under the SERP at age
60, the executive is eligible to receive a benefit of up to 60% (depending on
years of credited service) of the participant's average compensation (including
amounts received under the annual Executive Incentive Compensation Plan) in the
highest three out of the last five years of service, reduced by the
participant's primary Social Security benefit and the benefit payable from the
Company's Retirement Plan, but in no event less than the benefit that would have
been payable under the Excess Benefit Plan. The SERP provides for reduced early
retirement benefits at age 50 with 15 years of service or age 55 with no service
requirement, and survivor benefits in the form of an annuity in the event of the
participant's death after becoming eligible for early retirement. Mr. Williamson
is currently approved for coverage under the SERP. Annual retirement benefits in
the form of a straight life annuity of approximately $68,000 would be payable to
Mr. Williamson under the SERP at age 65 based on his current compensation level.
Benefits payable under the SERP are in addition to benefits payable from the
Company's Retirement Plan which are limited to $115,641 in 1993 under current
provisions of the Internal Revenue Code.
CHANGE-IN-CONTROL AGREEMENTS
Since 1989, the Company has entered into Change-in-Control Agreements with
certain executives, including the executives named in the Summary Compensation
Table, to encourage and ensure their continued attention and dedication to the
performance of their assigned duties without distraction in the event of
potentially disturbing circumstances arising from the possibility of a
change-in-control of the Company.
Each Agreement provides that benefits, compensation and position
responsibility of these officers will remain at existing levels for a period of
two years following a "Change-in-Control," unless the "Expiration Date" of the
Agreement has earlier occurred. A "Change-in-Control" is defined to include a
change-in-control required to be reported under the proxy rules in effect on the
date of the agreements, the acquisition by a person (as defined under the
Securities Exchange Act of 1934) of 25% or more of the voting securities of the
Company, or specified changes in the composition of the Board of Directors of
the Company following a merger, tender offer or certain other corporate
transactions. "Expiration Date" is defined as the earliest to occur of (a) two
years after a change-in-control, (b) termination of the executive's employment
by the Company for "Cause" (as defined in the Agreement) or by the executive
other than for "Good Reason" (as defined in the Agreement), (c) retirement, or
(d) termination of the Agreement by the Company's Board of Directors, or
termination of the executive's employment, prior to a change-in-control. If the
employment of one of these executives is terminated after a change-in-control
and prior to the Expiration Date by the Company other than for cause or
disability, or by the executive for good reason, the Company is obligated to
provide a lump sum severance equal to 2.99 times the executive's average W-2
earnings for the last five years (or such lesser period that the executive has
been employed by the Company), subject to certain limitations. Based on W-2
earnings for the five most recent years (1989-1993), the lump sum severance
would be as follows: Mr. Clarke -- $1,255,213; Mr. Williamson -- $1,035,551; Mr.
Blackburn -- $662,009; Mr. Mougeot -- $589,453; and Mr. Lewis -- $728,616. In
the event of a change-in-control, all outstanding stock options would become
immediately exercisable.
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COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
INTRODUCTION
Decisions on executive compensation are made by the Compensation Committee
of the Board which is composed of six independent nonemployee directors. All
decisions by the Compensation Committee are reviewed by the full Board except
for decisions about the Company's stock based plans, which must be made solely
by the Committee in order to satisfy Securities Exchange Act Rule 16b-3.
The Committee has retained the services of an independent compensation
consulting firm to assist in executive compensation matters.
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee's philosophy with respect to the Company's
executive officers, including the chief executive officer, is designed to (1)
maintain a compensation program that is equitable in a competitive marketplace,
(2) provide compensation opportunities that integrate pay with the Company's
annual and long-term performance goals which reinforce growth in stockholder
value, (3) recognize and reward individual initiative and achievements, and (4)
allow the Company to attract, retain, and motivate qualified executives who are
critical to the Company's success.
The Committee endorses the position that stock ownership by management is
beneficial in aligning management's and stockholders' interests in the
enhancement of stockholder value. Thus, the Committee has increasingly utilized
stock options and stock payouts in the compensation program for the executive
officers with a goal of increasing stock ownership over time.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program consists of three main
components: (1) base salary, (2) potential for an annual bonus based on overall
Company financial performance as well as individual performance, and (3) the
opportunity to earn long-term cash and stock based incentives which are intended
to encourage the achievement of superior results over time and to align
executive officer and stockholder interests. The second and third elements
constitute the "at-risk" portion of the compensation program and are designed to
link the interests of the executive with those of the stockholders. This means
that total compensation for each executive is variable and may fluctuate
significantly from year to year depending on the short-and long-term financial
performance of the Company.
BASE SALARY
Salaries for executive officers are reviewed by the Committee in April of
each year in consultation with the Committee's independent compensation
consultant. The consultant, at the direction of the Committee, examines the
position responsibilities of each incumbent officer position at HEI and each of
its subsidiaries against similar positions in similar organizations. All
compensation references represent the fiftieth percentile or midpoint of pay
practices found in companies which are similar in size and marketplace
orientation. The specific surveys used are at the consultant's recommendation
based on the consultant's knowledge of appropriate references given the
organization's overall compensation philosophy. For executive officers at the
holding company level, the competitive references are drawn from compensation
surveys of other electric utilities (weighted 75%) and general industry
(weighted 25%); for utility executive officers, the competitive references are
drawn exclusively from compensation surveys of other electric utilities; for
financial institution executive officers, the references are drawn exclusively
from compensation surveys of other financial institutions; for interisland
freight transportation executive officers, compensation references are drawn
from other transportation companies (weighted 50%) and general industry
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(weighted 50%); and for real estate related executive officers, the compensation
surveys encompass companies within the real estate industry. Based on the
information from these surveys, the consultant recommends a salary range for
each executive officer position. The midpoint of the range approximates the
fiftieth percentile of the survey data and the range has a spread of plus and
minus 20% around this midpoint. Actual setting of an executive officer's base
salary (except for Robert F. Clarke, President and Chief Executive Officer of
HEI) within the recommended range is based on Mr. Clarke's recommendation and
the Committee's approval. Mr. Clarke's recommendation is based on an overall
evaluation of each of the other named executive officer's performance during the
preceding year. This evaluation is subjective in nature and takes into account
all aspects of each of the other named executive officer's responsibilities at
the discretion of Mr. Clarke.
Mr. Clarke's base salary is determined through the Committee's overall
evaluation of his performance during the preceding year. This evaluation is
subjective in nature and takes into account all aspects of his responsibilities
at the total discretion of the Committee. The Committee's consultant provides
competitive compensation references from other electric utilities as described
in the preceding paragraph and also recommends a salary range consistent with
the procedure to establish salary ranges for the other named executive officers.
Based on the consultant's recommendation, the Committee has determined that it
is not economically feasible to survey all 100 investor-owned electric utilities
used in the Stockholder Performance Graph. Instead the consultant provides the
Committee with references from two surveys of electric utilities which includes
many, but not all, of the 100 investor-owned electric utility companies. These
surveys include one conducted by the Edison Electric Institute in which the
Company participates and one conducted by Executive Compensation Surveys in
which the Company does not participate. Based on the survey data provided by the
consultant, the resulting salary range recommendation, and the Committee's
overall evaluation of Mr. Clarke's performance during 1992, Mr. Clarke's base
salary was raised from an annual rate of $360,000 to an annual rate of $390,000
effective May 1, 1993. The $30,000 increase reflected a merit increase of
$20,000 and a market adjustment of $10,000 to align Mr. Clarke's base salary
more closely to the midpoint of his salary range. Mr. Clarke's new base salary
was approximately 10% below the consultant's findings with respect to the
fiftieth percentile of comparable electric utility organizations.
ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
Under the annual Executive Incentive Compensation Plan ("EICP"), annual
incentive awards are granted upon the achievement of financial and nonfinancial
performance measures as established by the Committee in the early part of each
calendar year. The financial measures are stated in terms of minimum, target and
maximum goals and are directly linked to financial operating budgets submitted
to the Company's Board of Directors for approval in December of the previous
year. Predominantly, the financial measures are earnings related for all
executive officers and include criteria such as earnings per share for the
holding company and net income for subsidiary operations. Different financial
goals are set for some of the named executive officers based on their
specialized areas of responsibility. Nonfinancial measures are based on
individual objectives established for each executive officer, except for Mr.
Clarke, and are related primarily to each officer's individual area of
responsibility and are approved by the Committee. Mr. Clarke makes a
recommendation to the Committee each year as to whether the other named
executive officers have achieved their nonfinancial individual goals.
The EICP has a minimum financial performance threshold linked to net income
or earnings per share (based on whether measurement is at the subsidiary or
holding company level) which must be achieved before a bonus can be considered.
The maximum awards under the EICP differ for each of the named executive
officers, ranging from a low of 37% to a high of 60% of base salary for Mr.
Clarke. The minimum target and maximum EICP potential award levels for each of
the named executive officers are established by the Committee each year based on
recommendations from the Committee's independent compensation consultant. The
consultant's recommendations are based
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21
on an assessment of competitive practices from a cross-section of all
industries, including some of the electric utility companies included in the
Stockholder Performance Graph.
Under the 1993 EICP, Mr. Clarke received an award of $160,578. This
resulted from achievement of the earnings per share goal (weighted 70%) at a
level between minimum and target and the market to book ratio goal (weighted
30%) where the performance was at a level between target and maximum. The EICP
award for Mr. Clarke was exclusively based on the foregoing measures. No further
adjustment was made by the Committee. Mr. Clarke received no awards under the
1992 EICP and the 1991 EICP as the minimum earnings threshold levels were not
achieved in either year.
LONG-TERM INCENTIVE PLAN
The Company provides a long-term incentive plan ("LTIP") that is linked to
the long-term financial performance of the Company. All awards under the LTIP
are paid 60% in cash and 40% in HEI Common Stock. The LTIP opportunity is
measured against the achievement of financial criteria established by the
Committee for a three-year period. A new performance period of three years
starts each year. In April 1993, the Committee established the financial
measures for the 1993-1995 cycle which included (1) change in earnings per share
(weighted 30%), (2) return on average common equity (weighted 30%), and (3)
total return to stockholders (weighted 40%), comparing the Company's results
against the Edison Electric Institute Peer Group of electric utility companies
included in the Stockholder Performance Graph. The three LTIP financial
performance goals were selected by the Committee because they represented a
meaningful method of reinforcing growth in stockholder value over time. The
achievement of each of the three goals was expressed in terms of minimum and
maximum levels. The minimum and maximum LTIP potential award levels for each of
the named executive officers are established by the Committee each year based on
recommendations from the Committee's independent compensation consultant. The
consultant's recommendations are based on an assessment of competitive practices
from a cross-section of all industries, including some of the electric utility
companies included in the Stockholder Performance Graph. These goals are covered
in more detail in the discussion of the Long-term Incentive Plan ("LTIP") Awards
on page 13. For the three-year cycle ending December 31, 1992, no LTIP award was
paid to the named executive officers.
STOCK OPTIONS
The Committee can grant nonqualified stock options, incentive stock
options, restricted stock, stock appreciation rights, and dividend equivalents
pursuant to the 1987 Stock Option and Incentive Plan of Hawaiian Electric
Industries, Inc. (as amended and restated effective April 21, 1992), which was
previously approved by the stockholders. To date, only nonqualified stock
options and dividend equivalents have been issued under the Plan. Biennially,
the Committee requests its independent compensation consultant to assess
competitive practices with respect to stock option awards from a cross-section
of all industries, including some of the electric utility companies included in
the Stockholder Performance Graph. Based on this assessment, the consultant
recommends a range of stock option awards for each named executive officer. This
range takes into account the fact that a portion of the executive officer's
long-term incentive opportunity is delivered through participation in the LTIP.
In awarding stock options, the Committee takes into consideration the amount and
value of current options outstanding. The awards are intended to retain
executive officers and to motivate executive officers to improve long-term stock
performance. Awards are granted at average fair market value which is based on
the average of the daily high and low sales prices of the Company's Common Stock
on the New York Stock Exchange during the calendar month preceding the date of
grant. Stock options generally vest in equal installments over a four-year
period.
The 1993 stock option award to Mr. Clarke of 15,000 shares of HEI Common
Stock plus dividend equivalents was based on the consultant's recommendation and
the independent evaluation of an appropriate award level by the Committee. In
this evaluation, the Committee took into account prior awards to Mr. Clarke and
an overall subjective evaluation of his job performance. To
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receive the dividend equivalents which accrue only during the first four years
following the stock option award, Mr. Clarke must exercise the stock options.
OTHER COMPENSATION PLANS
At various times in the past the Company has adopted certain broad-based
employee benefit plans and has adopted certain executive retirement and life
insurance plans in which its named executive officers participate. Other than
the Hawaiian Electric Industries Retirement Savings Plan (which qualifies under
Section 401(k) of the Internal Revenue Code), which offers the Company's Common
Stock as one of the investment options to further align employees' and
stockholders' long-term financial interests, benefits under these other plans
are not tied to Company performance.
For the named executive officers and certain other employees, the Company
provides additional retirement benefits which are discussed on pages 14 and 15.
In the event of death during active employment, the Company also provides the
named executive officers and certain other employees $50,000 term life insurance
plus an amount equal to two times the employee's salary at the date of death,
paid by the Company on an after-tax basis to the employee's beneficiary. If the
employee dies after retirement, this benefit is reduced to $20,000 term life
insurance plus an amount equal to one times the employee's salary at retirement,
also on an after-tax basis.
Finally, the Committee has reviewed the provisions of Section 162(m) of the
Internal Revenue Code (IRC), which was enacted in 1993, relating to the $1
million deduction cap for executive salaries and believes that no compensation
for the five highest paid named executives will be governed by this regulation
during 1994. Compensation alternatives to comply with IRC 162(m) are currently
under review by the Committee.
SUBMITTED BY THE
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
EDWIN L. CARTER, CHAIRMAN
RICHARD HENDERSON
BILL D. MILLS
A. MAURICE MYERS
OSWALD K. STENDER
JEFFREY N. WATANABE
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STOCKHOLDER PERFORMANCE GRAPH
Set forth below is a Comparison of Five-Year Cumulative Total Return graph
comparing the cumulative total stockholder return on the Company's Common Stock
against the cumulative total return of companies listed on the Standard & Poor's
500 Stock Index and the Edison Electric Institute ("EEI") Index of 100
Investor-Owned Electric Companies. The 100 companies comprising the EEI Index
serve 99% of the customers of the investor-owned electric utility industry. The
graph is based on the market price of the common stock for all the companies at
December 31 each year and assumes that $100 was invested on December 31, 1988,
in the Company's Common Stock and the common stock of all the companies and that
dividends were reinvested for all companies.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG HAWAIIAN ELECTRIC INDUSTRIES, INC.,
S&P 500 INDEX AND EDISON ELECTRIC INSTITUTE 100 INDEX
Measurement Period S&P 500 EEI 100
(Fiscal Year Covered) HEI Index Index
- --------------------- --- ------- -------
Measurement Pt 12/31/88
FYE 12/31/89 144.54 131.69 129.92
FYE 12/31/90 121.54 127.60 131.52
FYE 12/31/91 150.58 166.47 169.39
FYE 12/31/92 161.70 179.15 182.09
FYE 12/31/93 165.62 197.21 202.82
*Total return assumes $100 invested on December 31, 1988, in HEI's Common Stock
as well as the common stock of the S&P 500 Index and the EEI 100 Index and a
reinvestment of dividends for all companies.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee serving at the end of 1993 were
Edwin L. Carter, Chairman, and Richard Henderson, Bill D. Mills, A. Maurice
Myers, Oswald K. Stender, and Jeffrey N. Watanabe, members. Three members of the
Compensation Committee, Richard Henderson, Bill D. Mills, and Jeffrey N.
Watanabe, are or have been involved in various relationships with the Company.
American Savings Bank, F.S.B. ("ASB"), a subsidiary of the Company,
previously offered preferential loan rates to its directors, including
individuals who are also directors or executive officers of the Company.
However, in August 1989, the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") provided that savings institutions would
henceforth be subject to provisions of the Federal Reserve Act which prohibit
loans to directors and executive officers of the insured institution or its
commonly owned affiliates on terms more favorable than available to the general
public.
The following schedule shows detailed information on a preferential rate
loan made by ASB to Mr. Watanabe, whose aggregate indebtedness to ASB exceeded
$60,000 during 1993. This loan, which was made prior to the enactment of FIRREA,
will not be affected by the new prohibitions against preferential loans unless
it is renegotiated or otherwise significantly modified. The first mortgage loan
rate was based on ASB's policy for employees and directors using a formula of
.50% above the cost of funds or .50% above the AFR (Applicable Federal Rate
established by the Internal Revenue Service), whichever is greater.
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1993 12/31/93 TRANSACTION CHARGED
----------- ----------- -------------- -------
Jeffrey N. Watanabe.................. $ 328,126 $ 323,179 First Mortgage 7.50%
In addition, Mr. Watanabe is a senior partner in the law firm of Watanabe,
Ing and Kawashima that provided legal services to the Company in 1993.
Malama Pacific Corp. ("MPC"), a subsidiary of the Company, is engaged in
real estate development activities. Several of MPC's subsidiaries have been or
are currently involved in partnerships in which Messrs. Henderson and Mills have
or had significant interests. All of the transactions described below were
negotiated on an arm's length basis and were approved by the disinterested
members of the HEI Board.
Ainalani Associates. Malama Mohala Corp. ("Malama Mohala"), a wholly owned
subsidiary of Malama Pacific Corp., and M/D/T BF Limited Partnership ("MDT-BF"),
were general partners in Ainalani Associates ("Ainalani"), a general partnership
which acquired a joint venture interest and certain development rights, options
and/or fee title to land from Blackfield Hawaii, Inc. ("Blackfield"). MDT-BF was
the managing partner of Ainalani.
Mr. Mills owned a majority partnership interest in MDT-BF as one of its
limited partners, and was chairman of the board of directors and majority
stockholder of MDT, Inc., the sole general partner of MDT-BF.
On August 17, 1992, Malama Mohala acquired MDT-BF's partnership interest
pursuant to a buy-out agreement dated June 23, 1992, and Ainalani was dissolved.
The consideration for the transfer of MDT-BF's interest was determined by
arbitration by three independent arbitrators on March 31, 1993. The amount of
consideration for the transfer was not material to the Company's financial
condition and was based primarily on the net present value of MDT-BF's
partnership interest in Ainalani as of June 30, 1992.
Sunrise Estates. Malama Development Corp. ("Malama Development"), a wholly
owned subsidiary of Malama Pacific Corp., and HSC, Inc. ("HSC"), are partners in
a general partnership
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known as Sunrise Estates which is currently developing and selling the remaining
9 lots of a development consisting of 165 one-acre agricultural lots in Hilo,
Hawaii. HSC is the managing partner of the partnership and received $4,000 in
management fees from the venture in 1993. The partnership paid RSM, Inc., an HSC
affiliate, $18,000 in sales commissions for lots sold during 1993. Malama
Development and HSC have each contributed $200,000 to the partnership, and
Malama Development and HSC will share equally in the profits and losses of the
partnership. As of December 31, 1993, 95% of the lots were sold. Mr. Henderson
and members of his family own, directly or indirectly, approximately 76% of the
stock of HSC.
Sunrise Estates II. Malama Elua Corp. ("Malama Elua"), a wholly owned
subsidiary of Malama Pacific Corp., and HSC have entered into a general
partnership known as Sunrise Estates II to develop and market approximately 140
one-acre agricultural lots in Hilo, Hawaii, adjacent to the Sunrise Estates
development. HSC has assigned its right, title and interest in the property to
the partnership at an agreed upon fair market value of $2.7 million, subject to
a bank loan of $2.1 million. The property was purchased by HSC in June 1990 for
$2.1 million and assigned to Sunrise Estates II in March of 1991. HSC is the
managing partner of the partnership. As of December 31, 1993, Malama Elua and
HSC have each contributed $300,000 to the partnership, and will share equally in
the profits and losses of the partnership. The valuation of the property
interest transferred by HSC to the Sunrise Estates II partnership was negotiated
and took into account HSC's incurred acquisition, carrying, and development
costs as well as existing market conditions.
INDEBTEDNESS OF MANAGEMENT
As disclosed in the above section on Compensation Committee Interlocks and
Insider Participation on page 21, ASB previously offered preferential rate loans
to its directors, including individuals who are also directors or executive
officers of the Company prior to the enactment of FIRREA.
In addition to Mr. Watanabe, two other directors and one other executive
officer (who is also a director) of the Company, whose aggregate indebtedness to
ASB exceeded $60,000 at any time during 1993, received these preferential rate
loans. Detailed information on these loans is listed below.
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1993 12/31/93 TRANSACTION(1) CHARGED(2)
------------ ------------ --------------- -----------
Robert F. Clarke............... $ 380,784 $ 375,570 First Mortgage 7.50%
Ruth M. Ono.................... 190,027 187,409 First Mortgage 7.50
Thurston Twigg-Smith........... 1,807,653 1,782,969 First Mortgage 7.50
- ---------------
(1) All loans were made prior to the enactment of FIRREA restrictions.
(2) The first mortgage rate is based on ASB's policy for employees and directors
using a formula of .50% above the cost of funds or .50% above the AFR
(Applicable Federal Rate established by the Internal Revenue Service),
whichever is greater.
ASB has made other loans, established lines of credit and issued credit
cards to directors and executive officers of the Company, including some of the
individuals identified in the above table, and to members of their immediate
families. These loans and extensions of credit have been made in the ordinary
course of business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than the normal risk
of collectibility or present other unfavorable features.
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In addition, ASB has purchased a 25% participation interest in two loans
made by Bank of Hawaii to Finance Realty Company, Ltd. ("Finance Realty") and
Finance Holdings, Ltd. The family of the spouse of Constance H. Lau, the
Treasurer of the Company, owns approximately one-sixth of the common stock of
Finance Enterprises, the parent company of Finance Realty and Finance Holdings,
Ltd. ASB's 25% participation interest in both loans was made in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features.
In addition to the above loans financed by ASB, Robert F. Mougeot,
Financial Vice President of the Company, is indebted to the Company in the
amount of $165,000 by reason of a loan made to him by the Company in 1989 to
finance his purchase of the fee simple interest in his home. The loan is an
interest only loan, with interest at 8.01%, with the entire principal balance of
the loan due on March 1, 2004.
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
The real estate development activities of several of the subsidiaries of
Malama Pacific Corp. ("MPC") which involve directors of the Company are
discussed on pages 21 and 22 in the section on Compensation Committee Interlocks
and Insider Participation.
In addition, one of MPC's subsidiaries is involved in a partnership with a
corporation in which the family of an officer of the Company has a significant
interest. As previously disclosed, the family of Ms. Lau, the Treasurer of the
Company, owns approximately one-sixth of the common stock of Finance
Enterprises, the parent company of Finance Realty, Palailai Holdings, Inc.
("PHI"), and Finance Home Builders, Ltd.
Palailai Associates. The joint venture interest acquired by Ainalani
Associates (see page 21 for a discussion on Ainalani Associates) from Blackfield
also included an interest in a general partnership known as Palailai Associates
("Palailai"). Ainalani and PHI were equal partners of Palailai and agreed to
share profits and losses equally. As a result of Malama Mohala's purchase of
MDT-BF's interest in Ainalani, Malama Mohala succeeded to Ainalani's interest in
Palailai. PHI is the managing partner of Palailai. PHI's parent company, Finance
Realty, received $622,138 in management fees and $582,935 in sales commissions
from the venture during 1993. Finance Home Builders, Ltd., a general contractor
and affiliate of PHI and Finance Realty, received payments of $10,173,481 during
1993 under its contract with Palailai for the construction of homes.
MANAGEMENT PROPOSAL 2. ELECTION OF AUDITOR
The firm of KPMG Peat Marwick, independent certified public accountants,
has been the auditor of the Company since 1981. The Board of Directors
recommends the election of KPMG Peat Marwick as the auditor of the Company for
the fiscal year 1994 and thereafter until its successor is duly elected.
Representatives of KPMG Peat Marwick will be present at the Annual Meeting
and will be given the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next Annual
Meeting must be received by the Company by November 10, 1994, for inclusion in
the Proxy Statement and form of
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proxy for the 1995 Annual Meeting of Stockholders. Proposals should be sent to
the attention of the Secretary.
OTHER BUSINESS
The Company knows of no other business to be presented at the Annual
Meeting, but if further matters do properly come before the meeting, the proxy
holders will vote your stock in accordance with their best judgment.
Under the By-Laws of the Company, if a stockholder of record wishes to
present a matter of business which may be properly brought before the Annual
Meeting, the stockholder must give notice in writing to the Secretary of the
Company no later than March 25, 1994. The notice must state a brief description
of such business, the name and address of the stockholder, the number of shares
of Common Stock owned by the stockholder, and any material interest of the
stockholder in such business.
YOU ARE URGED TO DATE, SIGN AND RETURN YOUR PROXY AS SOON AS POSSIBLE to
make certain that your shares will be voted at the meeting. If you attend the
meeting, as we hope you will, you may vote your shares in person.
By Order of the Board of Directors
Betty Ann M. Splinter
Secretary
March 10, 1994
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