<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
HAWAIIAN ELECTRIC INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
[HAWAIIAN ELECTRIC INDUSTRIES, INC. LETTERHEAD]
Robert F. Clarke
President and
Chief Executive Officer
March 7, 1997
Dear Fellow Stockholder:
On behalf of the Board of Directors, it is once again my pleasure to invite
you to attend the Annual Meeting of Stockholders of Hawaiian Electric
Industries, Inc. (HEI). The meeting will be held on the Company's premises in
Room 805 on the eighth floor of the Pacific Tower in Honolulu, Hawaii on April
22, 1997, at 9:30 a.m. A map showing the location of the meeting site appears on
the last page of the Proxy Statement.
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement describe the items of business which will be discussed during the
meeting. In addition, we will review significant events of 1996 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.
Please help us obtain the quorum needed to conduct business at the meeting by
promptly signing, dating and returning 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,
/s/ ROBERT F. CLARKE
---------------------
Robert F. Clarke
<PAGE> 3
[HAWAIIAN ELECTRIC INDUSTRIES LETTERHEAD]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1997
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 22, 1997, at 9:30 a.m.
in the Pacific Tower, 8th floor, Room 805, 1001 Bishop Street, Honolulu, Hawaii
96813, for the following purposes:
1. To elect three 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 Common stockholders registered at the close of business on February
12, 1997, will be entitled to vote at the meeting. If your shares are registered
in the name of a brokerage firm (street name) or trustee and you plan to attend
the meeting, please bring a letter from the firm or trustee or other evidence of
your beneficial ownership.
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 the
enclosed proxy in the postage prepaid envelope as soon as possible.
Betty Ann M. Splinter, Secretary
Hawaiian Electric Industries, Inc.
Honolulu, Hawaii
March 7, 1997
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction......................................................................... 1
Voting Rights........................................................................ 1
Shares Held in Street Name........................................................... 2
Election of Directors................................................................ 2
Management Proposal 1. Election of Class I Directors............................ 2
Board of Directors................................................................... 6
Committees of the Board......................................................... 6
Compensation of Directors....................................................... 7
Attendance at Meetings.......................................................... 7
Nonemployee Director Retirement Plan............................................ 7
Indemnification and Limitation of Liability.......................................... 8
Security Ownership of Directors and Executive Officers............................... 9
Security Ownership of Certain Beneficial Owners...................................... 10
Section 16(a) Beneficial Ownership Reporting Compliance.............................. 10
Executive Management Compensation.................................................... 11
Summary Compensation Table...................................................... 11
Option Grants in Last Fiscal Year............................................... 12
Aggregated Option Exercises and Fiscal Year-End Option Values................... 13
Long-Term Incentive Plan ("LTIP") Awards........................................ 14
Pension Plans................................................................... 15
Change-in-Control Agreements.................................................... 16
Compensation Committee Report on Executive Compensation......................... 17
Stockholder Performance Graph................................................... 21
Compensation Committee Interlocks and Insider Participation..................... 22
Indebtedness of Management........................................................... 23
Transactions with Management and Directors........................................... 24
Management Proposal 2. Election of Auditor........................................... 24
Submission of Stockholder Proposals.................................................. 25
Other Business....................................................................... 25
</TABLE>
<PAGE> 5
HAWAIIAN ELECTRIC INDUSTRIES, INC.
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
Hawaiian Electric Industries, Inc. ("HEI" or the "Company") is mailing this
Proxy Statement to its stockholders to solicit proxies for the Annual Meeting of
Stockholders scheduled for April 22, 1997. The mailing address of the principal
executive offices of the Company is P. O. Box 730, Honolulu, Hawaii 96808-0730.
The approximate mailing date for this Proxy Statement, form of proxy and
annual report to stockholders for the fiscal year ended December 31, 1996, is
March 7, 1997. The annual report is not considered proxy soliciting material.
The Company pays for all expenses of the proxy solicitation for the Annual
Meeting. We may ask banks, brokerage houses and other custodians, nominees, and
fiduciaries to forward proxy material to beneficial owners and request authority
to carry out the instructions of these beneficial owners. We will reimburse
these agents for their expenses. Company directors, officers and employees may
solicit proxies personally or by telephone, telegram, facsimile or mail without
additional compensation. D. F. King & Co., Inc. will assist in the proxy
solicitation for a fee of $8,000, plus reasonable out-of-pocket expenses.
VOTING RIGHTS
Only Common stockholders of record registered at the close of business on
February 12, 1997, will be entitled to vote. On February 12, 1997, 30,940,397
shares of Common Stock were outstanding. Each share of Common Stock is entitled
to one vote on each matter 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 return a proxy to the Company, you may revoke it at any time before
it is voted by 1) submitting a later dated proxy in proper form, 2) notifying
the Secretary of the Company in writing of such revocation, or 3) appearing at
the meeting, requesting a return of the proxy and voting the shares in person.
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 listed in
this Proxy Statement. If you wish to give your proxy to someone other than the
holders of the Company's proxies, please 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. In all
matters other than the election of the directors, abstentions will be counted
and have the same effect as a vote against the proposal.
D. F. King & Co. will act as tabulator for broker and bank proxies while
the Company has contracted with an affiliate company to act as tabulator for the
proxies of the other stockholders of record. The identity and vote of any
stockholder will not be disclosed to any persons other than those acting as
tabulators except (i) to meet any legal requirements, (ii) in the case of a
contested proxy solicitation to verify the validity of proxies and the results
of the voting, and (iii) in the event a stockholder has made a written comment
on the proxy form.
<PAGE> 6
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 stockholders
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. The trustee is prohibited from voting the shares in TRASOP
for which it receives no voting instruction.
SHARES HELD IN STREET NAME
Stockholders whose shares are held in the name of a brokerage firm or
trustee or other holder of record are invited to attend the meeting, but may not
vote at the meeting unless they have first obtained a legal proxy from the
brokerage firm or trustee.
If you hold your stock in "street name" and fail to instruct your broker or
nominee how to vote your Common Stock, your broker or nominee may vote your
stock "FOR" the election of the Class I nominees and "FOR" the proposal to elect
KPMG Peat Marwick LLP as the Company's independent auditor for the fiscal year
1997 and thereafter until its successor is duly elected.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of nearly equal size:
Class I, Class II, and Class III, with the term of office of one class expiring
each year. Terms for all current Class II directors expire in 1998 and for all
Class III directors in 1999. Three Class I nominees are being proposed for
election at this Annual Meeting for a new three-year term expiring in 2000. The
number of Class I directors was reduced to three as a result of the retirement
of John D. Field on December 31, 1996 and the upcoming retirement of Ruth M.
Ono, who will not stand for reelection at the Annual Meeting. The Board of
Directors will consist of 13 persons after the Annual Meeting.
The persons named in the proxy will vote your stock for the election of
three directors to serve in Class I of the Company's Board of Directors for
terms expiring at the 2000 Annual Meeting and thereafter until their successors
are duly elected and qualified, unless authority to vote is withheld.
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.
MANAGEMENT PROPOSAL 1. -- ELECTION OF CLASS I DIRECTORS
Three Class I directors are being proposed for election for new three-year
terms (expiring in 2000) at this Annual Meeting.
The following sets forth the name, age as of the record date, 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 three nominees for Class I directors as well as 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.
2
<PAGE> 7
NOMINEES FOR CLASS I DIRECTORS --
Terms would end at the 2000 Annual Meeting.
<TABLE>
<S> <C> <C> <C>
- ------------------- ------------------- -------------------
ROBERT F. CLARKE A. MAURICE MYERS JAMES K. SCOTT, ED.D.
AGE 54 AGE 56 AGE 45
DIRECTOR SINCE 1989 DIRECTOR SINCE 1991 DIRECTOR SINCE 1995
President and chief Chairman, president President of
executive officer and chief executive Punahou School
of the Company. officer of Yellow since August 1994.
Chairman of the Corporation From 1985 to June
board of Hawaiian (Overland Park, 1994, he served as
Electric Company, Kansas) since April Headmaster of The
Inc., American 1, 1996. President, Catlin Gabel School
Savings Bank, chief operating in Portland,
F.S.B., Hawaiian officer, and Oregon. Director,
Tug & Barge Corp., director of America Hawaii Association
Young Brothers, West Airlines, Inc. of Independent
Limited, Malama from January 1994 Schools. Trustee,
Pacific Corp., and until his the College Board.
HEI Power Corp. retirement in Member of Hawaiian
President and December 1995. From Educational Council
director of June 1985 to and Young
Hawaiian Electric December 1993, he Presidents
Industries was president and Organization.
Charitable chief executive
Foundation and officer of Aloha
Hycap Management, Airgroup, Inc.
Inc. Director of Director of
Aloha United Way. Yellow Corp.,
Vice chairman, Pleasant Hawaiian
Hawaii Business Holidays, and
Roundtable. Member, American Trucking
Air Force Civilian Association.
Advisory Council.
Trustee, The Nature
Conservancy of
Hawaii and Hawaii
Pacific University.
</TABLE>
3
<PAGE> 8
CLASS II DIRECTORS --
Directors continuing in office with terms ending at the 1998 Annual Meeting.
<TABLE>
<S> <C> <C> <C> <C>
- ------------------- ------------------- ------------------- ------------------- -------------------
VICTOR HAO LI, T. MICHAEL MAY DIANE J. PLOTTS KELVIN H. TAKETA JEFFREY N. WATANABE
S.J.D. AGE 50 AGE 61 AGE 43 AGE 54
AGE 55 DIRECTOR SINCE 1995 DIRECTOR SINCE 1987 DIRECTOR SINCE 1993 DIRECTOR SINCE 1987
DIRECTOR SINCE 1988 Senior vice General partner of Vice president and Partner in the law
Co-chairman, Asia president of the Mideast and China director of the firm of Watanabe,
Pacific Consulting Company since Trading Company, Asia Pacific Region Ing & Kawashima.
Group. September 1, 1995. formerly known as The Nature
President, chief Hemmeter Investment Conservancy. Director of
Director of executive officer Company. American Savings
Hawaiian and director of Director of HEI Bank, F.S.B.,
Electric Industries Hawaiian Electric Director of Power Corp., Hawaiian Electric
Charitable Company, Inc. and Hawaiian HISCO, Ltd., Industries
Foundation, chairman of the Electric Company, Sustainable Forest Charitable
HEI Power Corp., boards of Maui Inc., American Sav- Resources, LLC, and Foundation, HEI
AES China Electric Company, ings Bank, F.S.B., Sustainable Power Corp., Grace
Generating Limited and Hawaii Malama Pacific Conservation. Pacific Corporation
Corporation, and Electric Light Corp. and its and affiliates,
The Queen's Health Company, Inc. since subsidiary Suntory Resorts,
Systems. Chairman September 1, 1995. companies, Inc., Hawaiian
of the board of From February 1, University of Host, Inc. and
Queen's In- 1992, to August 31, Hawaii Foundation, affiliates,
ternational 1995, he was senior Hawaii Health Sys- Children's
Corporation and vice president of tems Corporation, Television
Pacific States Hawaiian Electric Plaza Club, Oahu Workshop, Child &
University. Member, Company, Inc. He Country Club and Family
Advisory Committee, was a principal in Honolulu Country Service--Phil-
First Amendment the Management Club. ippines, and
Center. Consulting Assets Group from Rehabilitation
Professor of Law, September 1989 to Hospital of the
Stanford January 1992. Pacific and Founda-
University. tion. Trustee,
Director of University of
Hawaiian Electric Hawaii Foundation
Industries and Children and
Charitable Youth Foundation of
Foundation and HEI the Philippines.
Power Corp., Member Chair, The Nature
of Boy Scouts of Conservancy of
America- Aloha Hawaii, The Queen's
Council Executive Health Systems, The
Board and Japanese Queen's Medical
Chamber of Center, The Alger
Commerce. Trustee, Foundation, and the
Academy of the Pa- Smithsonian Insti-
cific. tution National
Board.
</TABLE>
4
<PAGE> 9
CLASS III DIRECTORS --
Directors continuing in office with terms ending at the 1999 Annual Meeting.
<TABLE>
<S> <C> <C> <C> <C>
- ------------------- ------------------- ------------------- ------------------- -------------------
DON E. CARROLL EDWIN L. CARTER RICHARD HENDERSON BILL D. MILLS OSWALD K. STENDER
AGE 55 AGE 71 AGE 68 AGE 45 AGE 65
DIRECTOR SINCE 1996 DIRECTOR SINCE 1985 DIRECTOR SINCE 1981 DIRECTOR SINCE 1988 DIRECTOR SINCE 1993
President, chief President and President and Chairman of the Trustee, Kamehameha
executive director director of HSC, board and chief Schools/Bishop
officer, and di- of Bishop Trust Inc. and its executive officer Estate.
rector of Oceanic Company, Limited subsidiaries. of Bill Mills
Cablevision. Vice from 1984 until his Development and Director of
president of Time retirement in May Director of Investment Company, Hawaiian Electric
Warner Cable. 1993. Hawaiian Electric Inc. Industries
Company, Inc., Charitable
Director of Director of Hawaii Electric Director, Grace Foundation, Malama
Pacific Guardian Hawaiian Electric Light Company, Pacific Pacific Corp. and
Life, Aloha United Company, Inc., HEI Inc., Hawaiian Tug Corporation. its subsidiary
Way, American Red Investment Corp. & Barge Corp., Trustee, Hawaii companies, Grace
Cross-Hawaii and Hawaii Council Young Brothers, Pacific University, Pacific
Chapter, Hawaii on Economic Limited, St. Andrew's Corporation, Hawaii
International Film Education. InterIsland Priory, and The Community
Festival, Hawaii Immediate past Petroleum, Inc., Nature Conservancy Reinvestment Corp.,
Nature Center, and chairman and Hawaii Island of Hawaii. Member, Pacific Housing
University of Ha- member, Board of Economic Board of Governors, Assistance
waii Koa Anuenue. Regents, Chaminade Development Board, Iolani School. Corporation, Hawaii
Secretary-treasurer University of Big Island Real Estate
and director of the Honolulu. Director Substance Abuse Research and
Hawaii Cable and past president Council, and Hawaii Education Center,
Television of the Boy Scouts Island Chamber of Hawaii Nature
Association. of America- Aloha Commerce. President Center, Friends of
Chairman, Oceanic Council. National and trustee, Lyman Iolani Palace, and
Cable Foundation. director and past House Memorial Help, Understanding
President, Boy president of the Museum. and Group Support
Scouts of Pacific Region of (HUGS). Director
America-Aloha the Navy League of Mr. Henderson was and past president
Council and The 200 the United States. the chairman of the of the American
Club Advisory Chairman, Board of board of Ocean Right of Way
Board. Member, Directors, USS Farms of Hawaii, Association.
Hawaii Business Missouri Memorial Inc. (OFH), an President, Mutual
Roundtable, Hawaii Association, Inc. aquaculture company Housing Association
Executives Council, Honorary member and that filed a Wharton Real Estate
Air Force Civilian past chairman of petition in June Center. Trustee,
Advisory Council, the Bishop Museum 1992 for voluntary Cash Assets Trust,
Army Civilian Board of Directors. bankruptcy under Hawaiian Tax-Free
Advisory Council, Member, Board of Chapter 7 of the Trust, Pacific
USS Missouri Management, Armed U.S. Bankruptcy Capital Funds, The
Advisory Committee, Services YMCA. Code. The assets of Peregrine Fund, The
Honolulu Community Trustee, treasurer, OFH in the Nature Conservancy
Media Council, and past chairman, bankruptcy of Hawaii, Kahi
National Cable Board of Trustees proceedings were Mohala (Sutter
Television As- of the Academy of abandoned to the Health Pacific),
sociation, and the Pacific. secured creditor, Academy of the
Cable Television and the Trustee was Pacific, and St.
Administration and discharged. HSC, Andrew's Priory.
Marketing Society, Inc. owned an Member, Board of
Inc. approximate 1% Governors, Iolani
interest in OFH. School.
</TABLE>
5
<PAGE> 10
BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Board of Directors has four standing committees: Audit, Compensation,
Executive and Nominating. The names of the members, number of meetings held in
1996, and the duties and responsibilities of each committee are shown in the
table below.
<TABLE>
<CAPTION>
NUMBER OF
MEETINGS HELD
COMMITTEE MEMBERS DURING 1996 PRINCIPAL DUTIES AND RESPONSIBILITIES
- ------------- -------------------- ------------- ----------------------------------------------
<S> <C> <C> <C>
AUDIT Diane J. Plotts* 6 Reviews with management, the internal auditor
Don E. Carroll and the Company's independent auditor the
Victor H. Li activities of the internal auditor, the
Kelvin H. Taketa results of the annual audit by the independent
auditor and the financial statements which are
included in the Company's annual report to
stockholders. The Audit Committee holds such
meetings as it deems advisable to review the
financial operations of the Company.
COMPENSATION Edwin L. Carter* 3 Reviews the current salary administration
Don E. Carroll policies and compensation strategy of the
Bill D. Mills Company. See pages 17 to 20 for the
A. Maurice Myers Compensation Committee Report on Executive
Oswald K. Stender Compensation.
EXECUTIVE Richard Henderson* 0 Reviews and discusses organizational and other
Edwin L. Carter matters. The Executive Committee possesses and
Robert F. Clarke** exercises such powers of the Board as are
Diane J. Plotts expressly delegated to it by the Board from
Jeffrey N. Watanabe 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.
NOMINATING Jeffrey N. Watanabe* 1 In December 1996, each member of the Board
A. Maurice Myers evaluated the performance of the Board as a
James K. Scott whole, and each director whose term expires at
Oswald K. Stender the 1997 Annual Meeting completed a self-
evaluation of his or her performance as a
member of the Board. The Nominating Committee
reviewed and discussed these evaluation forms
prior to recommending to the Board of
Directors the slate of nominees to be
submitted to the stockholders for election at
the 1997 Annual Meeting. The Committee will
consider recommendations for nominees for
director from all sources, including
stockholders. Stockholders who wish to
recommend 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
8, 1997, to be considered for the 1998 Annual
Meeting of Stockholders.
</TABLE>
- ---------------
*denotes chair
**employee director
6
<PAGE> 11
COMPENSATION OF DIRECTORS
Nonemployee directors of the Company received the following compensation
for their services as directors during 1996 (employee members of the Board of
Directors receive no additional compensation for service as directors).
<TABLE>
<CAPTION>
COMPENSATION AMOUNT
- ---------------------------------------------------------------------------------- -------
<S> <C>
Annual Board Retainer $15,000(1)
Stock component -- 259 shares*
Cash component -- $6,000**
Board Attendance Fee (per meeting) 700
Committee Attendance Fee (per meeting) 700
Committee Attendance Fee for Committee Chair (per meeting) 800
</TABLE>
- ---------------
* Sixty percent of retainer pursuant to the Nonemployee Director Stock Plan.
The number of shares of stock distributed was based on a price of $34.625
per share, which was equal to the average high and low sales prices of HEI
Common Stock on April 26, 1996 (the third business day following the Annual
Meeting in April), with a cash payment made in lieu of any fractional share.
** Paid quarterly in equal installments. In order to receive the fourth quarter
installment, directors are required to have attended at least 75% of the
combined total of all Board meetings and all meetings of Board committees on
which they serve.
(1) On December 17, 1996, the Board voted to terminate the Nonemployee Director
Retirement Plan (as discussed below). The Board also voted to increase the
annual retainer paid to nonemployee directors from $15,000 to $20,000,
effective April 22, 1997, payable 60 percent in HEI Common Stock and 40
percent in cash.
ATTENDANCE AT MEETINGS
In 1996, there were twelve regular monthly meetings and two special
meetings of the Board of Directors. All incumbent directors attended at least
75% of the combined total meetings of the Board and committees on which they
served.
NONEMPLOYEE DIRECTOR RETIREMENT PLAN
Upon retirement from service as a director, the Nonemployee Director
Retirement Plan (which had been approved by the stockholders on April 17, 1990)
provides certain retirement benefits to nonemployee directors of the Company or
any subsidiary of the Company that elects to participate in the Plan. The Plan
provides a payment to each director who serves for at least 5 consecutive years
and meets other requirements of the Plan in an amount equal to the annual
retainer which was in effect in the year that the nonemployee director retired.
The payments are paid for a period equal to the number of years of active
service accumulated and terminate in the event of the director's death.
At the meeting of the Board of Directors on December 17, 1996, the Board
voted to terminate the Nonemployee Director Retirement Plan as described above,
and pay the present value of the accrued retirement benefits to directors age 55
and under (Messrs. Carroll, Li, Mills, Scott, Taketa and Watanabe) or with 5
years of service or less (Mr. Stender) as of April 22, 1997, on the basis of 60
percent HEI Common Stock and 40 percent cash. A discount rate of 6.5 percent was
used in the calculation of the present value and it was assumed that the current
nonemployee directors' accrued benefits would commence at the mandatory
retirement age of 72. The cash portion of the accrued benefits was paid to these
directors on January 30, 1997, and the stock portion will be invested in each of
these director's HEI Dividend Reinvestment and Stock Purchase Plan account on
February 28, 1997.
7
<PAGE> 12
The retirement benefits for all other directors (Messrs. Carter, Henderson
and Myers and Ms. Plotts) were frozen as of December 31, 1996, and will be paid
according to the terms of the Plan based on the $15,000 annual retainer in
effect on December 31, 1996. The right of previously retired directors to
receive benefits continue according to the Plan.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company entered into Indemnity Agreements with each of its directors
and executive officers as approved by stockholders at the 1989 Annual Meeting.
The Indemnity Agreement provides for mandatory indemnification of the director
or officer to the fullest extent permitted by law. This includes indemnification
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred. The Indemnity Agreement
also provides for the mandatory payment of expenses incurred by the director or
officer in defending a proceeding. However, these expenses must be repaid if it
is later determined that the officer or director is not entitled to
indemnification.
The Indemnity Agreement excludes indemnification (i) for proceedings
initiated by the officer or director unless the Board of Directors determines
indemnification to be appropriate; (ii) for amounts covered by insurance; (iii)
for 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) for an action or omission by the officer or
director determined to be willful misconduct or to have been knowingly
fraudulent or deliberately dishonest; or (v) if a proper court determines that
such indemnification is not permitted by law.
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.
8
<PAGE> 13
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the shares of Common Stock beneficially owned by
each director, named executive officers as listed in the Summary Compensation
Table on page 11 and by directors and executive officers as a group, as of
February 12, 1997, based on information furnished by the respective individuals.
AMOUNT OF COMMON STOCK AND BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME OF INDIVIDUAL SOLE VOTING OR SHARED VOTING OR OTHER BENEFICIAL
OR GROUP INVESTMENT POWER INVESTMENT POWER* OWNERSHIP** STOCK OPTIONS*** TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONEMPLOYEE DIRECTORS
Don E. Carroll 1,287 0 0 0 1,287
Edwin L. Carter 2,784 0 0 0 2,784
Richard Henderson 1,786 0 0 0 1,786
Victor Hao Li 0 1,626 268 0 1,894
Bill D. Mills 3,351 0 4 0 3,355
A. Maurice Myers 746 1,070 0 0 1,816
Diane J. Plotts 1,534 0 0 0 1,534
James K. Scott 461 0 0 0 461
Oswald K. Stender 2,114 0 0 0 2,114
Kelvin H. Taketa 1,303 0 0 0 1,303
Jeffrey N. Watanabe 2,617 362 2 0 2,981
EMPLOYEE DIRECTORS
AND EXECUTIVE
OFFICERS
Robert F. Clarke 7,426 10,000 0 123,193 140,619
T. Michael May 1,149 0 0 5,000 6,149
OTHER NAMED EXECUTIVE
OFFICERS
Peter C. Lewis 3,603 0 279 12,573 16,455
Wayne K. Minami 1,610 6,047 0 22,670 30,327
Robert F. Mougeot 549 4,497 0 14,194 19,240
ALL DIRECTORS AND
EXECUTIVE OFFICERS
AS A GROUP (22
PERSONS) 38,936 23,898 2,476 239,257 304,567****
</TABLE>
- ---------------
* Shares registered in name of the individual and spouse.
** Shares owned by spouse, children or other relatives sharing the home of the
director or officer and in which personal interest of the director or
officer is disclaimed.
*** Stock options, including accompanying dividend equivalent shares,
exercisable within 60 days after February 12, 1997, under the 1987 Stock
Option and Incentive Plan, as amended in 1992 and 1996.
**** The directors and executive officers of HEI as a group beneficially owned
0.98% of the Company's Common Stock on February 12, 1997, and no director
or officer owned more than .45% of such stock.
9
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table presents information about the beneficial ownership of
each person known to the Company to own more than 5% of the outstanding Common
Stock as of December 31, 1996.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS
- ------------------------------- ------------- -------------
<S> <C> <C>
Pioneering Management Corp. 3,024,663(1) 9.94%
60 State Street
Boston, Massachusetts 02109
Franklin Resources, Inc. 1,943,480(2) 6.3%
777 Mariners Island Boulevard
P.O. Box 7777
San Mateo, California 94403
</TABLE>
- ---------------
(1) This information is based on a Schedule 13G, dated February 4, 1997, filed
with the Securities and Exchange Commission that discloses that Pioneering
Management Corp. has sole voting and shared dispositive powers over the
3,024,663 shares.
(2) This information is based on a joint filing on Schedule 13G, dated February
12, 1997, with the Securities and Exchange Commission by Franklin Resources,
Inc. ("FRI"), Franklin Advisers, Inc. ("FAI"), Charles B. Johnson, and
Rupert H. Johnson, Jr. As set forth in the Schedule 13G, these securities
are beneficially owned by investment companies or other managed accounts
which are advised by FAI and Franklin Management, Inc., two subsidiaries of
FRI. The named individuals are the principal shareholders of FRI.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 equity securities of the Company 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,
except for Messrs. Carroll and May. Both Mr. Carroll and Mr. May did not file
one of their respective reports in a timely fashion -- Mr. Carroll his Form 3
and Mr. May one transaction on Form 4. Both reports were filed within a month of
their respective due dates.
10
<PAGE> 15
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.
SUMMARY COMPENSATION TABLE
The following summary compensation table shows the annual and long-term
compensation of the chief executive officer and the four other most highly
compensated executive officers of the Company serving during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
<CAPTION>
-----------------------------------------------------------------
AWARDS PAYOUTS
-------------------------
OTHER 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 ($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ROBERT F. CLARKE 1996 $464,000 $196,702 $ -0- 20,000 $ -- $26,609
President & CEO 1995 440,000 108,301 -0- 20,000 321,173 17,852
1994 452,967 199,149 101,033 20,000 -0- 14,195
T. MICHAEL MAY 1996 282,000 98,747 107,412 12,000 -- 13,945
Senior Vice President 1995 226,000 41,987 -0- 4,000 N/A 8,177
1994 199,667 32,995 -0- -0- N/A 8,151
WAYNE K. MINAMI 1996 242,000 41,684 -0- 8,000 -- 98
President & CEO 1995 221,000 -0- -0- 8,000 147,933 77
American Savings Bank, 1994 219,733 39,166 -0- 8,000 85,875 72
F.S.B.
ROBERT F. MOUGEOT 1996 225,000 46,217 -0- 5,000 -- 13,583
Financial Vice President 1995 217,000 25,892 -0- 5,000 115,344 8,598
1994 206,667 58,608 -0- 5,000 -0- 7,147
PETER C. LEWIS 1996 194,000 39,655 -0- 5,000 -- 12,576
V.P. -- Administration 1995 188,000 31,046 -0- 5,000 95,586 11,871
1994 179,667 53,561 -0- 5,000 -0- 10,809
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Includes a one-time lump sum transitional payment in 1994, representing two
years of "normalized" insider directors' fees following a decision by the
Compensation Committee to discontinue all insider directors' fees, effective
May 1, 1994 (lump sum payments of $40,000 for Mr. Clarke and $9,800 for Mr.
Minami). Also includes directors' fees for the period January 1 through
April 30, 1994 of $6,300 for Mr. Clarke and $1,400 for Mr. Minami.
(2) The named executive officers are eligible for an incentive award under the
Company's annual Executive Incentive Compensation Plan ("EICP"). EICP bonus
payouts are reflected as compensation for the year earned.
(3) Covers perquisites of $101,033 for Mr. Clarke for 1994 which he recognized
as imputed income under the Internal Revenue Code, including $91,306 under
the category club membership (representing once in a lifetime reimbursement
of initiation fees of $48,000 grossed up for taxes, plus reimbursement of
monthly dues not grossed up for taxes). Covers perquisites of $107,412 for
Mr. May for 1996 which he recognized as imputed income under the Internal
Revenue Code, including $95,691 under the category club membership
(representing once in a lifetime reimbursement of initiation fees of $50,000
grossed up for taxes, plus reimbursement of monthly dues not grossed up for
taxes).
11
<PAGE> 16
(4) Except for Mr. May's options granted in 1995, options granted for the
three-year period 1994-1996 contained dividend equivalents as further
described below under the heading Option Grants in Last Fiscal Year.
(5) Long-Term Incentive Plan ("LTIP") payouts are determined in April each year
for the three-year cycle ending on December 31 of the previous calendar
year; if there is a payout, the amount is reflected as LTIP compensation in
the table for the previous year for the named executive officers. In April
1995, an LTIP payout was made only to Mr. Minami for the 1992-1994
performance cycle and is reflected as LTIP compensation in the table for
1994. In April 1996, LTIP payouts were made for the 1993-1995 performance
cycle and are reflected as LTIP compensation in the table for 1995. The
determination of whether there will be a payout under the 1994-1996 LTIP
will not be made until later this year.
(6) Represents amounts accrued by the Company for certain death benefits
provided to the named executive officers, as more fully covered in the
Compensation Committee Report on page 20 under the heading, "Other
Compensation Plans".
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents information on the nonqualified stock options
which were granted to the five named executive officers on April 15, 1996. The
practice of granting stock options, which include dividend equivalent shares,
has been followed each year since 1987.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF GRANT
UNDERLYING TOTAL OPTIONS DATE
OPTIONS GRANTED TO EXERCISE PRESENT
GRANTED(1) EMPLOYEES IN PRICE VALUE(2)
NAME (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE ($)
----------------------- ---------- ------------- --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Robert F. Clarke....... 20,000 25% $ 35.83 April 15, 2006 $ 154,600
T. Michael May......... 12,000 15 35.83 April 15, 2006 92,760
Wayne K. Minami........ 8,000 10 35.83 April 15, 2006 61,840
Robert F. Mougeot...... 5,000 6 35.83 April 15, 2006 38,650
Peter C. Lewis......... 5,000 6 35.83 April 15, 2006 38,650
</TABLE>
- ---------------
(1) For the 50,000 option shares granted with an exercise price of $35.83 per
share to the named executive officers, 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 on April
15, 1996, with a 10-year option period, an exercise price of $35.83, and
with additional dividend equivalent shares granted for the first four years
of the option, the Binomial Value adjusted for forfeiture risk is $7.73 per
share. The following assumptions were used in the model: Stock Price:
$35.83; Exercise Price: $35.83; Term: 10 years; Volatility: 0.102; Interest
Rate: 6.93%; and Dividend Yield: 6.76%. The following were the valuation
results: Binomial Option Value: $2.88; Dividend Credit Value: $4.85; and
Total Value: $7.73.
12
<PAGE> 17
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table shows the stock options, including dividend
equivalents, exercised by the named executive officers in 1996. Also shown is
the number of unexercised options and the value of unexercised in the money
options, including dividend equivalents, at the end of 1996. Under the Stock
Option and Incentive Plan, dividend equivalents have been granted to each
executive officer as part of the stock option grant, except for Mr. May's 1993
and 1995 stock option grants and a one-time, premium-priced grant to Mr. Clarke
in May 1992.
Dividend equivalents permit a participant who exercises a stock option to
obtain at no additional cost, in addition to the option shares, the amount of
dividends declared on the number of shares of Common Stock with respect to which
the option is exercised during the period between the grant and the exercise of
the option. Dividend equivalents are computed, as of each dividend record date
throughout the four-year vesting period (vesting in equal installments), which
begins on the date of grant, both with respect to the number of shares
underlying the option and with respect to the number of dividend equivalent
shares previously credited to the executive officer and not issued during the
period prior to the dividend record date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (INCLUDING IN THE MONEY OPTIONS
DIVIDEND EQUIVALENTS) (INCLUDING DIVIDEND EQUIVALENTS)
DIVIDEND VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END(1)(2)
SHARES EQUIVALENTS VALUE REALIZED ---------------------- --------------------------------
ACQUIRED ACQUIRED REALIZED ON DIVIDEND EXERCISABLE/ EXERCISABLE/
ON EXERCISE ON EXERCISE ON OPTIONS EQUIVALENTS UNEXERCISABLE UNEXERCISABLE
NAME (#) (#) ($) ($) (#) ($)
- ------------------------------ ------------ ----------- ------------ ---------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert F.
Clarke........... -- -- $ -- $ -- 111,600/54,776 $421,594/301,464
T. Michael May.... -- -- -- -- 4,000/16,629 3,295/36,148
Wayne K. Minami... -- -- -- -- 18,378/21,588 149,957/117,970
Robert F.
Mougeot......... -- -- -- -- 10,867/14,096 87,939/78,599
Peter C. Lewis.... 1,250 371 (784) 13,101 9,246/14,096 74,306/78,599
</TABLE>
- ---------------
(1) All options were in the money (where the option price is less than the
closing price on December 31, 1996) except the 1993 stock option grant with
dividend equivalents at $38.27 per share and the 1992 premium-priced stock
option grant without dividend equivalents with an exercise price of $41.00
per share.
(2) Value based on closing price of $36.125 per share on the New York Stock
Exchange on December 31, 1996.
13
<PAGE> 18
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS
The table below lists the LTIP awards made to the named executive officers
during 1996. The table shows potential payments that are tied to the achievement
of better than average performance over a three-year period (1996-1998) relating
to two separate goals for all the named executive officers except Mr. Minami,
who has a third goal in addition to the two goals listed immediately below.
The two goals are (1) return on average common equity (weighted 40%), and
(2) total return to shareholders (weighted 60%). The weighting of each goal
applies to all the named executive officers except Mr. Minami. The Company's
performance is measured against the Edison Electric Institute Index of 100
Investor-Owned Electric Companies as of December 31, 1998 ("Peer Group"). This
is the same Peer Group used for the Stockholder Performance Graph shown on page
21. However, the performance of the LTIP Peer Group is calculated on a
noncapitalized weighted basis whereas the Stockholder Performance Graph Peer
Group 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. For Mr. Minami, the
two goals set forth above are weighted (1) return on average common equity
(20%), and (2) total return to shareholders (30%). Mr. Minami's third goal
(weighted 50%) is based on a return on average common equity for American
Savings Bank, F.S.B. ("ASB") for the same three-year LTIP cycle.
Threshold minimum awards with respect to each goal will be earned if the
Company's performance equals the average performance of the Peer Group with
respect to that goal. Mr. Minami's threshold minimum for his third goal, which
must be achieved in at least two out of three years during the LTIP cycle, is a
return on average common equity of ASB of 12%. Maximum awards will be earned on
the return on average common equity goal if the Company's performance is 2 1/2
percentage points above the average of the return on average common equity of
the Peer Group. Maximum awards will be earned on the total return to
shareholders goal if the Company's performance is 5 percentage points above the
average of the total return to shareholders of the Peer Group. For Mr. Minami,
the maximum award on his third goal will be earned if the return on average
common equity of ASB equals or exceeds 16%. 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 three-year performance period.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
THREE-YEAR ---------------------------
PERFORMANCE CYCLE THRESHOLD(1) MAXIMUM
NAME ENDING DATE ($) ($)
------------------------------------- ----------------- ------------ --------
<S> <C> <C> <C>
Robert F. Clarke..................... 12/31/98 $163,020 $494,000
T. Michael May....................... 12/31/98 78,000 234,000
Wayne K. Minami...................... 12/31/98 64,250 192,750
Robert F. Mougeot.................... 12/31/98 59,000 177,000
Peter C. Lewis....................... 12/31/98 48,750 146,250
</TABLE>
- ---------------
(1) Assumes meeting minimum threshold on all goals; however, if only one goal
(weighted 40%) is met, the minimum threshold estimated future payout would
be: Mr. Clarke -- $65,208; Mr. May -- $31,200; Mr. Mougeot -- $23,600; and
Mr. Lewis -- $19,500. For Mr. Minami, if only one goal (weighted 20%) is
met, the minimum threshold estimated future payout would be $12,850. There
is no LTIP payout unless the minimum threshold is met on at least one of the
goals.
14
<PAGE> 19
PENSION PLANS
All regular employees (including the named executive officers) of the
Company are covered by noncontributory, qualified defined benefit pension plans.
The plans provide retirement benefits at normal retirement (age 65), reduced
early retirement benefits and death benefits. The named executive officers
except Mr. Minami participate in the Retirement Plan for Employees of HEI and
Participating Subsidiaries ("HEI Plan"). Mr. Minami is a participant in the
American Savings Bank Retirement Plan ("ASB Plan"). Mr. Clarke and Mr. Minami
also participate respectively in the HEI Supplemental Executive Retirement Plan
and the ASB Supplemental Retirement, Disability, and Death Benefit Plan (see
page 16).
Due to certain Internal Revenue Code limitations on qualified plan
benefits, executives affected by these limits are also covered under the
Hawaiian Electric Industries, Inc. Excess Benefit Plan ("Excess Plan") and the
Hawaiian Electric Industries, Inc. Excess Pay Supplemental Executive Retirement
Plan ("Excess Pay SERP"), which are noncontributory, nonqualified plans.
The following table shows estimated annual pension benefits payable upon
retirement under the HEI Plan, Excess Plan and Excess Pay SERP based on base
salary that is covered under the three plans and years of service with the
Company and all of its subsidiaries.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
-------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$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........................ 76,500 102,000 127,500 153,000 167,500
300,000........................ 91,800 122,400 153,000 183,600 201,000
350,000........................ 107,100 142,800 178,500 214,200 234,500
400,000........................ 122,400 163,200 204,000 244,800 268,000
450,000........................ 137,700 183,600 229,500 275,400 301,500
</TABLE>
The HEI Plan provides a monthly retirement pension for life. Benefits are
determined by multiplying years of credited service and 2.04% (not to exceed
67%) times the participant's Final Average Compensation (average base salary for
any consecutive 36 months that produce the highest monthly average). As of
December 31, 1996, the named executive officers had the following number of
years of credited service under the HEI Plan: Mr. Clarke, 9 years; Mr. May, 4
years; Mr. Mougeot, 8 years; and Mr. Lewis, 28 years.
Benefits under the ASB Plan are determined by multiplying years of credited
service (not to exceed 35 years) and 1.5% times the participant's Final Average
Compensation (average compensation for the highest five of the last ten years of
credited service). As of December 31, 1996, Mr. Minami had ten years of credited
service under the ASB Plan. His estimated annual benefit payable in the form of
a single life annuity projected to age 65 is $53,180, based on his current
compensation level.
Internal Revenue Code Section 415 limits the retirement benefit that a
participant can receive from qualified retirement plans such as the HEI Plan and
ASB Plan. The limit for 1996 is $120,000 per year at age 65. The Company adopted
the Excess Plan to provide benefits that cannot be paid from the qualified plans
due to this maximum limit.
Internal Revenue Code Section 401(a) limits a participant's compensation
that can be recognized under qualified retirement plans. The limit on the
maximum compensation for 1996 under Section 401(a) is $250,000 for the HEI Plan
and $150,000 for the ASB Plan. The Company adopted
15
<PAGE> 20
the Excess Pay SERP to provide benefits that cannot be paid from the qualified
plans due to the maximum compensation limit under Section 401(a).
The Company also maintains two Supplemental Executive Retirement Plans
("HEI SERP" and "ASB SERP") for certain executive officers. Mr. Clarke
participates in the HEI SERP and Mr. Minami participates in the ASB SERP.
Benefits under the HEI SERP and ASB SERP are in addition to qualified retirement
benefits payable from the HEI Plan, the ASB Plan and Social Security.
Under the HEI 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, which includes amounts received under the
annual Executive Incentive Compensation Plan ("EICP") in the highest three out
of the last five years of service. The benefit payable under the HEI SERP is
reduced by the participant's primary Social Security benefit and the benefit
payable from the HEI Plan, but in no event is less than the benefit that would
have been payable under the HEI Plan (before any Internal Revenue Code Section
415 and 401(a) reductions). The HEI SERP provides for reduced early retirement
benefits at age 50 with 15 years of service or age 55 with five years of
service, and survivor benefits in the form of an annuity in the event of the
participant's death after becoming eligible for early retirement. The overall
total retirement benefits payable to Mr. Clarke in the form of a straight life
annuity projected to age 65 is $255,935, based on his current compensation level
($61,690 from the HEI Plan and $194,245 from the HEI SERP). As of December 31,
1996, Mr. Clarke had 9 years of credited service under the HEI SERP.
The ASB SERP provides a benefit at age 65 of up to 60% (depending upon
years of credited service) of the participant's average compensation (including
50% of the amounts received under the EICP) in the highest five consecutive
years out of the last ten years of service, reduced by the participant's primary
Social Security benefit and the benefit payable from the ASB Plan, but in no
event is less than the benefit that would have been payable under the ASB Plan
(before any Internal Revenue Code Section 415 and 401(a) reductions). The ASB
SERP also provides for termination and survivor benefits in certain
circumstances. The overall total retirement benefits payable to Mr. Minami in
the form of a straight life annuity projected to age 65 is $141,873, based on
his current compensation level ($53,180 from the qualified ASB Plan and $88,693
from the ASB SERP). As of December 31, 1996, Mr. Minami had 10 years of credited
service under the ASB SERP.
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 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 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, the Company is obligated to provide a lump sum
severance equal to 2.99 times the
16
<PAGE> 21
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 (1992-1996),
the lump sum severance would be as follows: Mr. Clarke -- $2,138,729; Mr.
May -- $865,829; Mr. Minami -- $1,087,535; Mr. Mougeot -- $1,019,688; and Mr.
Lewis -- $913,175. In the event of a change-in-control, all outstanding stock
options would become immediately exercisable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
Decisions on executive compensation are made by the Compensation Committee
of the Board which is composed of five independent nonemployee directors. All
decisions by the Compensation Committee are approved by the full Board.
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 support 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 supports the position that stock ownership by management is
beneficial in aligning management's and stockholders' interests in improving
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 parts:
(1) base salary, (2) potential for an annual bonus based on overall Company
financial and operational 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 change
significantly from year to year depending on the short- and long-term
performance of the Company as well as the subsidiary companies.
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 officer 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 similar
organizations. The specific surveys used are based on the consultant's
recommendation 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 electric 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
17
<PAGE> 22
financial institutions; for interisland freight transportation executive
officers, compensation references are drawn from other transportation companies
(weighted 50%) and general industry (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. 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. Actual setting of an executive officer's
base salary (except for Mr. Clarke) is based on Mr. Clarke's recommendation and
the committee's approval.
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. 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 1995, Mr. Clarke's base
salary was raised from an annual rate of $452,000 to an annual rate of $470,000
effective May 1, 1996. The $18,000 increase aligned Mr. Clarke's base salary
close to the midpoint of the relevant salary range.
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 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. One of the financial measures is directly linked to financial
operating budgets submitted to the Company's Board of Directors for approval in
December of the previous year. These financial measures are earnings-related for
all named executive officers and include criteria such as earnings per share for
the named executive Company officers and net income for the named executive
officers who are also subsidiary presidents (Mr. May and Mr. Minami). For the
two named executive officers who are also subsidiary presidents, company
specific operational and strategic goals make up the remainder of their EICP
goals. Other financial measures for the named executive officers (except Mr. May
and Mr. Minami) relate to (1) a comparison of the Company's total return to
shareholders in 1996 measured against the Edison Electric Institute Peer Group
of 100 investor-owned electric utility companies included in the Stockholder
Performance Graph for the same period and (2) measurement of individual
officers' actual administrative and general expenses for 1996 against budgeted
expenses established at the beginning of the year. For these named executive
officers (except Mr. Clarke) there is an additional nonfinancial goal relating
to the individual officer's performance. Mr. Clarke evaluates each officer's
performance and makes a recommendation to the committee.
The EICP has a minimum financial performance threshold linked to earnings
per share or net income (based on whether measurement is at the Company or
subsidiary 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 the midpoint
of the salary grade range at the end of the year 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 bases
its recommendations 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.
18
<PAGE> 23
Under the 1996 EICP, Mr. Clarke received a payout of $196,702 in early
1997. This resulted from achievement of (1) the earnings per share goal
(weighted 70%) at a level above target and (2) lower than forecast 1996
administrative and general expenses for the Company (weighted 10%) above the
target level. There was no payout for the total return to shareholders goal
(weighted 20%) since the Company's total return for 1996 was below the minimum
threshold of at least being equal to the average total return of the Edison
Electric Institute Peer Group of 100 investor-owned electric utility companies.
The EICP award for Mr. Clarke was exclusively based on the foregoing measures.
No further adjustment was made by the committee.
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 goals are based on
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 1996, the committee established the financial measures for the 1996-1998
cycle which included (1) return on average common equity (weighted 40%) and (2)
total return to stockholders (weighted 60%), comparing the Company's results
against the Edison Electric Institute Peer Group of 100 investor-owned electric
utility companies included in the Stockholder Performance Graph. The weighting
of each goal applies to all the named executive officers except Mr. Minami who
has a third LTIP goal (weighted 50%) which is discussed in the Long-Term
Incentive Plan ("LTIP") Awards section on page 14. The three LTIP financial
performance goals above were selected by the committee because they represented
a meaningful method of supporting growth in stockholder value over time. The
achievement of each of the three goals is expressed in terms of minimum and
maximum levels. The minimum and maximum LTIP 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 bases its recommendations 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
section on page 14.
For the three-year cycle ending December 31, 1995, Mr. Clarke received a
one-time payout of $321,173 in 1996 for achieving above the minimum level for
all three financial goals: (1) total return to shareholders (weighted 40%), (2)
return on average common equity (weighted 30%), and (3) annual earnings per
share growth rate (weighted 30%). To receive a payout under each goal, the
Company's performance for the three-year period must exceed the average
financial results of the Edison Electric Institute Peer Group of 100
investor-owned utility companies for the respective goal.
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 February 20, 1996), which
was previously approved by the stockholders. To date, only nonqualified stock
options and dividend equivalents have been issued under the Plan. Every other
year, the committee requests its independent compensation consultant to assess
competitive practices with respect to stock option grants 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 grants for each named executive officer. This
range takes into account the fact that a portion of the officer's long-term
incentive opportunity is delivered through participation in the LTIP. In
granting stock options, the committee takes into consideration the amount and
value of current options outstanding. The grants are intended to retain the
officers and to motivate them to
19
<PAGE> 24
improve long-term stock performance. Stock options 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 1996 stock option award to Mr. Clarke of 20,000 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 grants to Mr. Clarke and
an overall subjective evaluation of his job performance. To receive the dividend
equivalents which accrue only during the first four years following a stock
option grant, Mr. Clarke must exercise the stock option after vesting and before
the expiration of the 10-year period from the date the option was granted.
Other Compensation Plans
The Company has adopted certain broad-based employee benefit plans and
executive retirement and life insurance plans in which its named executive
officers participate. Other than the HEI 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 15 and 16.
In the event of death during active employment, the Company also provides all
the named executive officers (except Mr. Minami) and certain other employees
$50,000 term life insurance plus an amount equal to two times the employee's
salary on an after-tax basis at the date of death, paid by the Company 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. For Mr. Minami,
American Savings Bank provides term life insurance equal to one and one-half
times his salary at the date of death in the event of death during active
employment. After retirement, the benefit is reduced to $5,000.
Finally, the committee has reviewed the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended (IRC), 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
1997. Compensation alternatives to comply with IRC 162(m) will be considered by
the committee at the appropriate time.
SUBMITTED BY THE
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
EDWIN L. CARTER, CHAIRMAN
DON E. CARROLL
BILL D. MILLS
A. MAURICE MYERS
OSWALD K. STENDER
RICHARD HENDERSON (JANUARY 1996 -- AUGUST 1996)
JEFFREY N. WATANABE (JANUARY 1996 -- AUGUST 1996)
20
<PAGE> 25
STOCKHOLDER PERFORMANCE GRAPH
The graph below compares 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, 1991 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 INDEX
1991 - 1996
<TABLE>
<CAPTION>
MEASUREMENT PERIOD HAWAIIAN ELECTRIC S&P 500 COM-
(FISCAL YEAR COVERED) INDS POSITE EEI 100 INDEX
<S> <C> <C> <C>
1991 100 100 100
1992 107.38 107.62 107.59
1993 109.98 118.46 119.59
1994 106.63 120.03 105.75
1995 136.31 165.13 138.55
1996 135.86 203.05 140.22
</TABLE>
21
<PAGE> 26
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee serving at the end of 1996 were
Edwin L. Carter, Chairman, and Don E. Carroll, Bill D. Mills, A. Maurice Myers,
and Oswald K. Stender, members.
The membership of the Compensation Committee was changed in August 1996 as
a result of revisions to Rule 16b-3 under the Securities Exchange Act of 1934.
As a result, two members of the Committee, Richard Henderson and Jeffrey N.
Watanabe, resigned their membership on the Compensation Committee.
American Savings Bank, F.S.B. ("ASB"), a subsidiary of the Company,
discontinued offering preferential rate loans to its directors, including
individuals who are also directors or executive officers of HEI in August 1989,
as a result of the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"). FIRREA provided that savings institutions would be subject
to provisions of the Federal Reserve Act which prohibited preferential rate
loans to directors and executive officers of the insured institution or its
commonly owned affiliates. Effective September 30, 1996, the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 amended the Federal Reserve Act to
allow for preferential rate loans and ASB began offering such loans to its
directors, as well as individuals who are also directors or executive officers
of the Company.
The following preferential rate loan was made by ASB prior to the enactment
of FIRREA and was not affected by the prohibitions enacted in 1989 against
preferential loans.
<TABLE>
<CAPTION>
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1996 12/31/96 TRANSACTION CHARGED(1)
----------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Jeffrey N. Watanabe............... $ 312,105 -0- First Mortgage 7.50%
</TABLE>
- ---------------
(1) 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 Applicable
Federal Rate established by the Internal Revenue Service, whichever is
greater.
In addition, Mr. Watanabe is a partner in the law firm of Watanabe Ing &
Kawashima that provided legal services to the Company and two of its
subsidiaries in 1996.
Malama Pacific Corp. ("MPC"), a subsidiary of the Company is engaged in
real estate development activities. Two of MPC's subsidiaries are currently
involved in partnerships with HSC Inc. ("HSC"), a corporation in which director
Richard Henderson and his family own, directly or indirectly, 76% of the stock.
Both of the transactions described below were negotiated on an arm's length
basis and were approved by the disinterested members of the HEI Board.
Sunrise Estates. Malama Development Corp. ("Malama Development"), a wholly
owned subsidiary of MPC, and HSC are partners in a general partnership known as
Sunrise Estates which is completing the sale of the final 8 lots of a project
consisting of 165 one-acre residential agricultural lots in Hilo, Hawaii. HSC is
the managing partner of the partnership. Management fees of $27,350 were paid in
1996, and one sale was made in 1996. Malama Development and HSC have each
contributed $308,200 to the partnership and Malama Development has advanced
$17,413 to the partnership. Each partner has received distributions of
$1,136,639. Malama Development and HSC share equally in the profits and losses
of the partnership. As of December 31, 1996, 157 lots were sold.
Sunrise Estates II. Malama Elua Corp. ("Malama Elua"), a wholly owned
subsidiary of MPC, and HSC are partners in a general partnership known as
Sunrise Estates II which will develop and market approximately 145 one-acre
residential agricultural lots in Hilo, Hawaii, adjacent to the Sunrise Estates
development. The property was purchased by HSC in June 1990 for $2.1 million. In
22
<PAGE> 27
1991, the partnership purchased the development property from HSC at an agreed
upon fair market value of $2.7 million, subject to a bank loan of $2.1 million.
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. HSC is
the managing partner of the partnership. As of December 31, 1996, Malama Elua
and HSC have each contributed $1,129,067 to the partnership, and HSC has
advanced $501,799 to the partnership. The partners will share equally in the
profits and losses of the partnership. On December 4, 1995, MPC extended a loan
to HSC in the amount of $135,000 to be used to reduce the bank debt of Sunrise
Estates II. The loan was secured by HSC's partnership interest and was also
guaranteed by the principals of HSC, Inc. It was repaid in full on June 30,
1996.
INDEBTEDNESS OF MANAGEMENT
As disclosed in the above section on Compensation Committee Interlocks and
Insider Participation on page 22, ASB offers preferential rate loans to its
directors, including individuals who are also directors or executive officers of
the Company.
In addition to Mr. Watanabe, one director (who is also an executive
officer) and one executive officer of the Company, whose aggregate indebtedness
to ASB exceeded $60,000 through February 21, 1997, received preferential rate
loans as shown below.
<TABLE>
<CAPTION>
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
THROUGH 2/21/97 2/21/97 TRANSACTION CHARGED(1)
--------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Robert F. Clarke................ $ 1,000,000 $ 1,000,000 First Mortgage 6.0%
Wayne K. Minami................. 87,000 87,000 First Mortgage 6.0%
</TABLE>
- ---------------
(1) 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 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, 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.
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, two officers of the
Company, T. Michael May (also a director of the Company) and Robert F. Mougeot,
are indebted to the Company or one of its subsidiary companies. Mr. May is
indebted in the amount of $180,000 for an employee relocation loan made to him
by Hawaiian Electric Company, Inc. in 1993. The loan is an interest only loan at
an interest rate of 6.28%, with the unpaid principal and interest due on
December 28, 2008, or sooner if Mr. May ceases to be an employee of the Company.
Mr. Mougeot is indebted in the amount of $165,000 for a loan made to him by the
Company in 1989 to finance his purchase of the fee simple
23
<PAGE> 28
interest in his home. The loan is an interest only loan at an interest rate of
8.01%, with the entire principal balance of the loan due on March 1, 2004.
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
Malama Development and Malama Elua, wholly owned subsidiaries of MPC, are
each in partnership with HSC, a corporation in which director Richard Henderson
and his family own 76% of the stock. The partnerships and their real estate
development activities are discussed on pages 22 and 23 in the section on
Compensation Committee Interlocks and Insider Participation.
In addition, Malama Mohala Corp. ("Malama Mohala"), a wholly owned
subsidiary of MPC, is involved in a partnership with Palailai Holdings, Inc.
("PHI"), a subsidiary of Finance Enterprises in which the family of Ms. Lau, the
Treasurer of the Company, owns approximately one-sixth of the common stock.
Finance Enterprises is the parent company of Finance Realty, Ltd., PHI, Finance
Home Builders, Ltd., and Finance Factors Limited.
Palailai Associates. Malama Mohala and PHI are equal partners in a general
partnership known as Palailai Associates ("Palailai") which is currently
developing homes in Makakilo, Hawaii. PHI's parent company, Finance Realty,
Ltd., received $299,561 in management fees and $78,027 in sales commissions from
the partnership during 1996. Finance Home Builders, Ltd., a general contractor
and affiliate of PHI and Finance Realty, received payments of $363,112 during
1996 under its contract with Palailai for the construction of homes. The
partnership also earned $12,262 of interest income from Finance Factors Limited.
Finally, director Jeffrey Watanabe is a partner in the law firm of Watanabe
Ing & Kawashima that performed legal services for the Company and certain of its
subsidiaries during 1996.
MANAGEMENT PROPOSAL 2. -- ELECTION OF AUDITOR
The firm of KPMG Peat Marwick LLP, independent certified public
accountants, has been the auditor of the Company since 1981. The Board of
Directors recommends the election of KPMG Peat Marwick LLP as the auditor of the
Company for the fiscal year 1997 and thereafter until its successor is duly
elected.
Representatives of KPMG Peat Marwick LLP 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.
24
<PAGE> 29
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next Annual
Meeting must be received by the Company by November 10, 1997, for inclusion in
the Proxy Statement and form of proxy for the 1998 Annual Meeting of
Stockholders. Proposals should be sent to the attention of the Secretary of the
Company.
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 holders
of your proxy 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 24, 1997. 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.
PLEASE 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 7, 1997
25
<PAGE> 30
[MAP]
<PAGE> 31
HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 Richards Street, Honolulu, Hawaii 96813
[HEI LOGO]
P
R
O
X
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 22, 1997, AT 9:30 A.M., IN THE
PACIFIC TOWER, 8TH FLOOR, ROOM 805, 1001 BISHOP STREET, HONOLULU, HAWAII 96813.
The undersigned hereby constitutes and appoints Robert F. Clarke,
Richard Henderson and Edwin L. Carter and each of them the proxy of the
undersigned, with full power of substitution, to vote all the Common Stock of
the Company which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders to be held on April 22, 1997, or at any adjournment thereof.
Said proxies are instructed to vote as indicated below. IF NO
DIRECTION IS INDICATED, SAID PROXIES WILL VOTE FOR ALL NOMINEES IN CLASS I AND
FOR PROPOSAL 2. Said proxies are also authorized to vote in their discretion
with respect to any other matters which may come before the meeting.
The Board of Directors recommends a vote FOR the following proposals:
1. Election of Class I directors (term ending at the 2000 Annual Meeting)
(CHECK ONE BOX ONLY)
Nominees: Robert F. Clarke, A. Maurice Myers, and James K. Scott
[ ] To vote FOR ALL Nominees named above, check this box.
[ ] To WITHHOLD AUTHORITY to vote for all Nominees named above, check
this box.
[ ] To withhold authority for any particular Nominee, write the
Nominee's name in the following space: ____________________________
____________________________
2. Election of KPMG Peat Marwick LLP as auditor (CHECK ONE BOX ONLY)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(PLEASE SIGN YOUR NAME exactly as it appears at the top of this proxy. Joint
owners should each sign personally. Attorney, Executor, Administrator, Trustee
or Guardian should indicate full title. If address is incorrect, please give
us the correct one.)
___________________________________________ Dated ____________________, 1997
Signature (no witness required)
___________________________________________
Signature (if held jointly)
-----------------------------------------
PLEASE COMPLETE AND RETURN ENTIRE PROXY
-----------------------------------------
