DEFA14A: Hawaiian Electric Industries Updates Executive Severance Plans Ahead of Annual Meeting

Hawaiian Electric Industries (HEI) has released a supplement to its proxy statement, providing additional details on its executive severance plans and policies ahead of the annual shareholder meeting on May 12, 2025.

Summary

• Hawaiian Electric Industries (HEI) has issued a supplement to its proxy statement concerning the annual shareholder meeting on May 12, 2025.
• The supplement provides additional information about the Hawaiian Electric Industries, Inc. Executive Severance Plan, the Hawaiian Electric Company, Inc. Executive Severance Plan, and the ASB Executive Severance Policy.
• The original proxy statement was filed on March 28, 2025.
• The supplement revises the section on Potential Payments Upon Termination or Change in Control, providing estimated payments for named executive officers (excluding Ms. Teranishi, who terminated employment on December 31, 2024) under various termination scenarios, assuming the termination occurred on December 31, 2024.
• The scenarios include retirement, death or disability, termination after change in control, termination without cause, and voluntary termination.
• The supplement also discusses the rationale behind implementing stronger non-change in control severance benefits due to financial distress, executive turnover, and recruiting challenges following the Maui windstorm and wildfire events.
• The HEI Compensation & Human Capital Management Committee and the boards of HEI, Hawaiian Electric, and ASB approved the HEI Plan, Hawaiian Electric Plan, and ASB Severance Policy after consulting with independent compensation consultant FW Cook.
• The Severance Plans provide for payments and benefits in the event of a termination without cause or by the executive for good reason, subject to confidentiality, non-disparagement obligations, and a general release of claims.
• The ASB Severance Policy provides benefits to eligible ASB executives upon termination without cause or, in the event of a change in control, termination without cause or for good reason.
• Ms. Teranishi did not receive benefits under the ASB Policy upon the ASB Disposition.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the document addresses challenges like financial distress and executive turnover, it also highlights proactive measures taken by the company to address these issues and ensure executive retention. The detailed disclosure provides transparency, which can be viewed positively.

Positives

• The company is proactively addressing executive retention and recruitment challenges by implementing stronger severance benefits.
• The severance plans are designed to provide stability and security to executives during a period of financial distress and uncertainty.
• The company consulted with an independent compensation consultant to ensure the fairness and competitiveness of the severance plans.
• The disclosure provides transparency regarding potential payouts to executives under various termination scenarios.

Negatives

• The need for stronger severance benefits suggests underlying financial distress and executive turnover within the company.
• The potential payouts to executives upon termination or change in control could be substantial, raising concerns about cost management.
• The implementation of new severance plans may be perceived negatively by some stakeholders, particularly in light of the company's financial challenges.

Risks

• The company's financial distress could worsen, leading to further executive turnover and increased severance payouts.
• The severance plans may not be sufficient to retain key executives, particularly if the company's financial situation does not improve.
• The company could face legal challenges or reputational damage if the severance plans are perceived as unfair or excessive.
• The ongoing impact of the Maui windstorm and wildfire events could continue to strain the company's resources and operations.

Future Outlook

The document does not contain explicit forward-looking statements beyond the context of potential payments upon termination or change in control. The focus is on providing additional information about existing severance plans and policies.

Management Comments

• The HEI Compensation & Human Capital Management Committee and the boards of HEI, Hawaiian Electric and ASB determined that stronger non-change in control severance benefits were a crucial and missing component of the companies executive compensation programs.
• It was prudent to replace the existing executive severance plan.

Industry Context

The update to executive severance plans reflects a broader trend in corporate governance to ensure executive retention and attract talent, especially during times of uncertainty or restructuring. Companies often review and adjust their compensation packages, including severance benefits, to remain competitive and align executive interests with shareholder value.

Comparison to Industry Standards

• Executive severance packages typically include a multiple of base salary and bonus, continuation of benefits, and outplacement services.
• The multiples used in HEI's severance plans (two times base salary for CEOs and one and a half times for other NEOs) are within the typical range observed in similar-sized companies.
• Change-in-control agreements are also common, often providing for double-trigger vesting of equity awards and severance payments upon a qualifying termination following a change in control.
• Companies like Edison International, NextEra Energy, and Duke Energy also have detailed executive compensation and severance policies, which are publicly disclosed in their proxy statements.
• These companies often use independent compensation consultants to benchmark their executive pay practices against industry peers.

Stakeholder Impact

• Shareholders: The supplement provides additional information relevant to their voting decisions.
• Executives: The updated severance plans provide clarity and security regarding potential payouts upon termination.
• Employees: The company's efforts to retain executives could contribute to overall stability and morale.
• Customers: The focus on executive retention could indirectly benefit customers by ensuring continuity of leadership and service.

Next Steps

• Shareholders are urged to vote their shares prior to the 2025 Annual Meeting.
• Shareholders can change their vote or revoke their proxy as described in the Proxy Statement.

Key Dates

Keywords

severance plans, executive compensation, proxy statement, Hawaiian Electric Industries, change in control, termination, HEI, ASB, Maui windstorm, wildfire