<PAGE>
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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 Section 240.14a-11(c) or Section 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:
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(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 paid 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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
HAWAIIAN ELECTRIC INDUSTRIES, INC. . PO BOX 730 . HONOLULU, HI 96808-0730
[LOGO OF HEI]
Robert F. Clarke
President and
Chief Executive Officer
March 13, 1998
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 28, 1998, 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 1997 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
[LOGO OF RECYCLED PAPER]
<PAGE>
- -------------------------------------------------------------------------------
HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 RICHARDS STREET
HONOLULU, HAWAII 96813 [LOGO OF HEI]
- -------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1998
To the Holders of Common Stock
The Annual Meeting of Stockholders of Hawaiian Electric Industries, Inc.
will be held on Tuesday, April 28, 1998, 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 five Class II directors.
2.To elect the independent auditor of the Company.
3.To transact any other business properly brought before the meeting.
Only Common stockholders of record at the close of business on February 18,
1998, 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 13, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction .............................................................. 1
Who Can Vote............................................................... 1
How You Can Vote........................................................... 1
Revocation of Proxies...................................................... 1
Required Votes............................................................. 2
Who Will Count the Votes................................................... 2
Shares Held in Street Name................................................. 2
Expenses of Solicitation................................................... 2
Election of Directors...................................................... 2
Management Proposal 1. -- Election of Class II Directors................. 3
Board of Directors ........................................................ 7
Corporate Governance..................................................... 7
Committees of the Board.................................................. 7
Recommendation for Director Nominee...................................... 8
Attendance at Meetings................................................... 8
Compensation of Directors................................................ 9
Nonemployee Director Retirement Plan..................................... 9
Indemnification and Limitation of Liability................................ 10
Security Ownership of Directors and Executive Officers..................... 11
Security Ownership of Certain Beneficial Owners............................ 12
Section 16(a) Beneficial Ownership Reporting Compliance.................... 12
Executive Management Compensation.......................................... 13
Summary Compensation Table............................................... 13
Option Grants in Last Fiscal Year ....................................... 14
Aggregated Option Exercises and Fiscal Year-End Option Values............ 15
Long-Term Incentive Plan ("LTIP") Awards................................. 16
Pension Plans............................................................ 17
Change-in-Control Agreements ............................................ 18
Compensation Committee Report on Executive Compensation.................. 19
Stockholder Performance Graph............................................ 23
Indebtedness of Management................................................. 24
Transactions with Management and Directors................................. 25
Management Proposal 2. -- Election of Auditor.............................. 26
Stockholder Proposals for 1999............................................. 26
Other Business............................................................. 26
</TABLE>
<PAGE>
HAWAIIAN ELECTRIC INDUSTRIES, INC.
----------------
PROXY STATEMENT
----------------
INTRODUCTION
Hawaiian Electric Industries, Inc. ("HEI" or the "Company") is soliciting
proxies for the Annual Meeting of Stockholders scheduled for April 28, 1998.
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, 1997, is
March 13, 1998. The annual report is not considered proxy soliciting material.
WHO CAN VOTE
Only Common stockholders of record at the close of business on February 18,
1998, will be entitled to vote. On February 18, 1998, 31,977,844 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.
HOW YOU CAN VOTE
If you return your signed proxy to us before the Annual Meeting, we will
vote your shares as you direct. You can specify on your proxy whether your
shares should be voted for all, some, or none of the nominees for director.
You can also specify whether you approve, disapprove, or abstain from the
proposal to elect the Company's independent auditor. For your convenience in
returning your proxy, a self-addressed envelope is enclosed, requiring no
postage if mailed within the United States.
If you do not specify on your proxy how you want to vote your shares, we
will vote them "FOR" the election of all nominees for director and "FOR" the
election of the Company's independent auditor.
If you wish to give your proxy to someone other than the individuals listed
on the enclosed proxy, cross out all three names and insert the name of
another person to vote your shares at the Meeting.
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, formerly the 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 your directions. For both DRIP and HEIRS (excluding
TRASOP), the trustee will vote all the shares of Common Stock for which it has
received no voting instructions in the same proportion as it votes shares for
which it receives instructions. The trustee is prohibited from voting the
shares in TRASOP for which it receives no voting instructions.
REVOCATION OF PROXIES
You can revoke your proxy at any time before it is exercised at the Annual
Meeting in one of three ways:
(1)submitting written notice of revocation to the Secretary of the
Company;
(2)submitting another proxy that is properly signed and later dated; or
(3)voting in person at the Meeting.
<PAGE>
REQUIRED VOTES
A majority of the shares of the Company's Common Stock, present in person or
represented by proxy, constitutes a quorum for the transaction of business at
the Annual Meeting. The affirmative vote of a majority of such quorum is
required to elect the Class II directors and the Company's independent
auditor. Abstentions are counted as "shares present" at the Meeting in
determining whether a quorum exists and have the effect of a vote against any
proposal.
WHO WILL COUNT THE VOTES
D. F. King & Co. will act as tabulator for broker and bank proxies and
Continental Stock Transfer & Trust Company will act as tabulator for the
proxies of the other stockholders of record. The identity and vote of any
stockholder will not be disclosed to persons other than those acting as
tabulators except (i) to meet 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.
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 obtain a legal proxy from the brokerage
firm or trustee.
Under New York Stock Exchange rules, a broker may vote shares on routine
proposals if the broker does not receive instructions from a beneficial owner.
A broker does not have discretionary voting power with respect to nonroutine
proposals. If the broker has not received voting instructions for nonroutine
proposals from the beneficial owner, the broker cannot vote on those
proposals. This is referred to as a "broker nonvote" and will not be
considered as "shares present" at the Meeting. As a result, broker nonvotes
have no effect on the outcome of the voting.
EXPENSES OF SOLICITATION
The Company pays all expenses of the proxy solicitation. 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.
ELECTION OF DIRECTORS
The Board of Directors currently consists of 13 individuals who are 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. Based on the
recommendation of the Nominating Committee, the Board of Directors has voted
not to fill, at this time, the position being vacated by Edwin L. Carter, who
has reached the mandatory retirement age of 72 as specified by Board
resolution. Therefore, the size of the Board will decrease from 13 to 12
immediately following Mr. Carter's retirement on April 28, 1998, and the size
of Class III will be reduced to four directors.
The five Class II Nominees are being proposed for election at this Annual
Meeting for a new three-year term expiring in 2001. Terms expire in 1999 for
the Class III directors and in 2000 for the Class I directors.
2
<PAGE>
Should any nominee be unable to stand for election, the proxy holders listed
in the proxy may vote in their discretion for a suitable substitute.
Pages 4 to 6 present information (name, age as of the record date, year
first elected or appointed as a director of the Company, position with the
Company or business experience during the past five years and list of
directorships) about the five nominees for Class II directors as well as the
Class I and Class III directors who will continue to serve on the Board of
Directors until the expiration of their terms or until he or she reaches
mandatory retirement age.
MANAGEMENT PROPOSAL 1. -- ELECTION OF CLASS II DIRECTORS
Class II nominees for election this year are Victor Hao Li, T. Michael May,
Diane J. Plotts, Kelvin H. Taketa, and Jeffrey N. Watanabe. Each of the
nominees for Class II director is currently a member of the Board of Directors
and has consented to serve a three-year term (expiring at the 2001 Annual
Meeting).
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF THE NOMINEES TO SERVE AS CLASS II DIRECTORS.
3
<PAGE>
NOMINEES FOR CLASS II DIRECTORS --
Terms would end at the 2001 Annual Meeting.
[PHOTO [PHOTO [PHOTO [PHOTO [PHOTO
APPEARS APPEARS APPEARS APPEARS APPEARS
HERE] HERE] HERE] HERE] HERE]
VICTOR HAO T. MICHAEL DIANE J. KELVIN H. JEFFREY N.
LI, S.J.D. MAY PLOTTS TAKETA WATANABE
AGE 56 AGE 51 AGE 62 AGE 43 AGE 55
DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR
SINCE 1988 SINCE 1995 SINCE 1987 SINCE 1993 SINCE 1987
Co-chairman, Senior vice General Vice presi- Partner in
Asia Pacific president of partner of dent and the law firm
Consulting the Company Mideast and director of of Watanabe,
Group. Vice since Sep- China Trad- the Asia Pa- Ing &
president, tember 1, ing Company, cific Re- Kawashima.
General Re- 1995. Presi- formerly gion, The Director of
insurance dent, chief known as Nature Con- American
Corporation. executive Hemmeter In- servancy. Savings
Director of officer and vestment Director of Bank,
Hawaiian director of Company. HEI Power F.S.B.,
Electric In- Hawaiian Director of Corp., Hawaiian
dustries Electric Hawaiian HISCO, Ltd., Electric
Charitable Company, Electric Sustainable Industries
Foundation, Inc. and Company, Forest Re- Charitable
HEI Power chairman of Inc., Ameri- sources, Foundation,
Corp., Co- the boards can Savings LLC, and HEI Power
logne Rein- of Maui Bank, Sustainable Corp., First
surance Electric F.S.B., Conservation. Insurance
Corp. Super- Company, Malama Pa- Company of
visory Limited and cific Corp. Hawaii, and
Board, and Hawaii Elec- and its sub- Grace Pa-
The Queen's tric Light sidiary com- cific Corpo-
Health Sys- Company, panies, Uni- ration and
tems. Chair- Inc. since versity of affiliates.
man of the September 1, Hawaii Foun- Member, Ad-
board of 1995. From dation, visory
Queen's In- February 1, Hawaii Board, Oce-
ternational 1992, to Au- Health Sys- anic Cable-
Corporation gust 31, tems Corpo- vision.
and Pacific 1995, senior ration, Trustee,
States Uni- vice presi- Plaza Club, Children's
versity. dent of Ha- Oahu Country Television
Consulting waiian Elec- Club and Workshop,
Professor of tric Compa- Honolulu Children and
Law, Stan- ny, Inc. Country Youth Foun-
ford Univer- Director of Club. dation of
sity. Hawaiian the Philip-
Electric In- pines, The
dustries Queen's
Charitable Health Sys-
Foundation, tems, Uni-
HEI Power versity of
Corp., Amer- Hawaii Foun-
ican Red dation, and
Cross-- the Smithso-
Hawaii Chap- nian Insti-
ter, and the tution Na-
Honolulu tional
Symphony. Board.
Member of Chair, The
Boy Scouts Consuelo
of America- Zobel Alger
Aloha Coun- Foundation
cil Execu- and The Na-
tive Board ture Conser-
and Japanese vancy of
Chamber of Hawaii.
Commerce.
Trustee,
Academy of
the Pacific.
4
<PAGE>
CLASS III DIRECTORS --
Directors continuing in office with terms ending at the 1999 Annual Meeting.
[PHOTO [PHOTO [PHOTO [PHOTO
APPEARS APPEARS APPEARS APPEARS
HERE] HERE] HERE] HERE]
DON E. RICHARD BILL D. OSWALD K.
CARROLL HENDERSON MILLS STENDER
AGE 56 AGE 69 AGE 46 AGE 66
DIRECTOR DIRECTOR DIRECTOR DIRECTOR
SINCE 1996 SINCE 1981 SINCE 1988 SINCE 1993
President, President Chairman of Trustee,
chief execu- and director the board Kamehameha
tive offi- of HSC, Inc. and chief Schools /
cer, and and its executive Bishop Es-
director of subsidiaries. officer of tate.
Oceanic Ca- Director of Bill Mills Director of
blevision. Hawaiian Development Hawaiian
Vice presi- Electric and Invest- Electric In-
dent of Time Company, ment dustries
Warner Ca- Inc., Hawaii Company, Charitable
ble. Electric Inc. Foundation,
Director of Light Director, Malama Pa-
Pacific Company, Grace cific Corp.
Guardian Inc., Pacific Cor- and its sub-
Life. Secre- Hawaiian Tug poration. sidiary com-
tary-trea- & Barge Trustee, panies, Grace
surer and Corp., Young Hawaii Pacific Cor-
director of Brothers, Pacific Uni- poration,
the Hawaii Limited, versity, Hawaii Commu-
Cable Tele- InterIsland St. Andrew's nity Rein-
vision Asso- Petroleum, Priory, and vestment
ciation. Inc., Big The Nature Corp.,
Treasurer Island Conservancy American Red
and director Substance of Hawaii. Cross--Hawaii
of Aloha Abuse Member, Chapter, and
United Way. Council, and Board of March of
Secretary Hawaii Governors, Dimes Birth
and director Island Iolani Defects Foun-
of Hawaii Chamber of School. dation--Chap-
Nature Cen- Commerce. ter of the
ter. Chair- President, Pacific.
man, Oceanic Hawaii Trustee, Cash
Cable Foun- Island Assets Trust,
dation and Economic Hawaiian Tax-
American Red Development Free Trust,
Cross-- Board. Vice Pacific Capi-
Hawaii Chap- president tal Funds,
ter. Past and trustee, Kahi Mohala
president, Lyman House (Sutter
Boy Scouts Memorial Health Pacif-
of America- Museum. ic), Academy
Aloha Coun- of the Pacif-
cil and The ic, ASSETS
200 Club Ad- School and
visory St. Andrew's
Board. Mem- Priory. Mem-
ber, Hawaii ber, Board of
Business Governors,
Roundtable. Iolani
School.
5
<PAGE>
CLASS I DIRECTORS --
Directors continuing in office with terms ending at the 2000 Annual Meeting.
[PHOTO [PHOTO [PHOTO
APPEARS APPEARS APPEARS
HERE] HERE] HERE]
ROBERT F. A. MAURICE JAMES K. SCOTT,
CLARKE MYERS ED.D.
AGE 55 AGE 57 AGE 46
DIRECTOR SINCE DIRECTOR SINCE DIRECTOR SINCE
1989 1991 1995
President and Chairman, President of
chief execu- president and Punahou School
tive officer chief since August
of the Compa- executive 1994. From
ny. officer of 1985 to June
Chairman of Yellow 1994, Headmas-
the board of Corporation ter of The
Hawaiian (Overland Catlin Gabel
Electric Park, Kansas) School in
Company, Inc., since April 1, Portland, Ore-
American 1996. gon.
Savings Bank, President, Director,
F.S.B., chief Hawaii
Hawaiian Tug & operating Association of
Barge Corp., officer, and Independent
Young director of Schools.
Brothers, America West Trustee, the
Limited, Airlines, Inc. College Board.
Malama Pacific from January Member of
Corp. and its 1994 to Hawaiian Edu-
subsidiary December 1995. cational Coun-
companies, and From June 1985 cil and Young
HEI Power to December Presidents Or-
Corp. 1993, ganization.
President and president and
director of chief
Hawaiian executive
Electric officer of
Industries Aloha
Charitable Airgroup, Inc.
Foundation and Director of
Hycap Pleasant
Management, Hawaiian
Inc. Director Holidays and
of Dames & American
Moore and Trucking
Aloha United Association.
Way. Chairman, Trustee,
Hawaii University of
Business Missouri--
Roundtable. Kansas City.
Member, Member of the
Advisory Civic Council
Board, Oceanic of Kansas City
Cablevision and Advisory
and Air Force Council of
Civilian Northwestern
Advisory University
Council. Kellog
Trustee, The Transportation
Nature School.
Conservancy of
Hawaii and
Hawaii Pacific
University.
6
<PAGE>
BOARD OF DIRECTORS
CORPORATE GOVERNANCE
The management of the Company periodically reviews with the Board recent
trends in corporate governance. In 1996, the Board of Directors adopted a new
annual process of evaluating the operations of the Board as a whole. Each
director rated (a) the mechanics of Board meetings (length of meetings, number
of meetings, adequacy of pre-meeting information, quality of presentations,
communications between meetings), (b) meeting content/conduct (topics covered,
amount of detail, climate for open debate, time for discussion), (c) Board
organization/operation (size, mandatory retirement at age 72, committee
structure, exposure and access to management, and skills, diversity and
experience of directors), (d) Board practices (executive compensation,
executive succession planning, selection of committee members, criteria for
the selection and retention of directors, compensation of directors), and (e)
the overall performance of directors (understanding the business and
strategies, doing their homework, asking good questions, sharing insights,
attending meetings and keeping current on issues affecting the business).
The Board also adopted an annual process for evaluating those directors
whose terms expire at the next Annual Meeting. The directors evaluated
themselves on various factors, including meeting preparation, attendance,
participation at meetings, and knowledge of issues and trends affecting the
Company. The evaluation forms for the Board as a whole and individual
directors were then submitted to the Nominating Committee before directors
were nominated for reelection to the Board. After review and discussion of the
comments received, the Nominating Committee made a recommendation to the Board
on any procedures and practices to be adopted to improve the operations of the
Board. The Chairman of the Nominating Committee may meet with individual
directors to discuss their performance.
COMMITTEES OF THE BOARD
The Board of Directors has four standing committees: Audit, Compensation,
Executive and Nominating. The names of the members and the number of meetings
held in 1997 are shown in the table below:
<TABLE>
<CAPTION>
NAME AUDIT COMPENSATION EXECUTIVE NOMINATING
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
DON E. CARROLL X X
----------------------------------------------------------------------
EDWIN L. CARTER* X** X
----------------------------------------------------------------------
ROBERT F. CLARKE*** X
----------------------------------------------------------------------
RICHARD HENDERSON X X**
----------------------------------------------------------------------
VICTOR HAO LI X
----------------------------------------------------------------------
BILL D. MILLS X
----------------------------------------------------------------------
A. MAURICE MYERS X X
----------------------------------------------------------------------
DIANE J. PLOTTS X** X X
----------------------------------------------------------------------
JAMES K. SCOTT X
----------------------------------------------------------------------
OSWALD K. STENDER X X
----------------------------------------------------------------------
KELVIN H. TAKETA X
----------------------------------------------------------------------
JEFFREY N. WATANABE X X**
----------------------------------------------------------------------
NUMBER OF MEETINGS IN 1997 5 2 1 1
</TABLE>
- --------
* Not standing for reelection as a director
** Committee chairman
*** Employee director
7
<PAGE>
The Audit Committee reviews the Company's auditing, accounting, financial
reporting, and internal control functions. All members of the committee are
nonemployee directors.
The Compensation Committee reviews the current salary administration
policies and compensation strategy for the Company. All members of the
committee are nonemployee directors. Since 1991, the Compensation Committee
has annually evaluated the performance of the President. At least once a year,
the Compensation Committee meets in executive session with the other
nonemployee directors of the Board to discuss the President's compensation and
to evaluate the President's performance. See pages 19 to 22 for the
Compensation Committee's Report on Executive Compensation.
The Executive Committee possesses and exercises such powers of the Board as
are expressly delegated to it by the Board from time to time and is
responsible for considering and making recommendations to the Board regarding
any questions concerning the business and affairs of the Company. The
committee is comprised of nonemployee directors and the President.
The Nominating Committee reviews and recommends to the Board of Directors
the slate of nominees to be submitted to the stockholders for election at the
next Annual Meeting. All members of the committee are nonemployee directors.
See page 7 for discussion on Corporate Governance.
RECOMMENDATION FOR DIRECTOR NOMINEE
The Nominating 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 and indicate the nominee's qualifications and other relevant
biographical information and provide confirmation of the nominee's consent to
serve. Such recommendations must be received by December 11, 1998, to be
considered by the Nominating Committee for the 1999 Annual Meeting of
Stockholders.
ATTENDANCE AT MEETINGS
In 1997, there were ten regular monthly meetings and three 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.
8
<PAGE>
COMPENSATION OF DIRECTORS
Nonemployee directors of the Company received the following compensation for
their services as directors during 1997 (employee members of the Board of
Directors receive no additional compensation for service as directors).
<TABLE>
<CAPTION>
COMPENSATION AMOUNT
- ------------ -------
<S> <C>
Annual Board Retainer $20,000
Stock component -- 360 shares*
Cash component -- $8,000**
Board Attendance Fee (per meeting) 700
Committee Attendance Fee (per meeting) 700
Committee Attendance Fee for Committee Chair (per meeting) 800
</TABLE>
- ----------
* To link directors' compensation to performance and to more effectively
align the Board's interests with the interests of stockholders, 60% of the
retainer is paid in stock in accordance with the Nonemployee Director
Stock Plan. The number of shares of stock distributed was based on a price
of $33.3125 per share, which was equal to the average high and low sales
prices of HEI Common Stock on April 25, 1997 (the third business day
following the Annual Meeting in April), with a cash payment made in lieu
of any fractional share.
** Paid quarterly in 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.
NONEMPLOYEE DIRECTOR RETIREMENT PLAN
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 upon
retirement from service as a director. The Plan provides an annual 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
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 20, 1997, and the
stock portion was invested in each of these director's HEI Dividend
Reinvestment and Stock Purchase Plan account on February 28, 1997.
The directors who received payments of the present value of their accrued
retirement benefits and the amount of those benefits are as follows: Don E.
Carroll ($7,746), Victor Hao Li ($25,227), Bill D. Mills ($12,990), James K.
Scott ($4,007), Oswald K. Stender ($28,310), Kelvin H. Taketa ($7,794), and
Jeffrey N. Watanabe ($25,323).
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.
9
<PAGE>
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 attorney's 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.
10
<PAGE>
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 13 and by directors and executive officers as a group, as of
February 18, 1998, based on information furnished by the respective
individuals.
AMOUNT OF COMMON STOCK AND NATURE OF 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 1,892 1,892
Edwin L. Carter 3,144 3,144
Richard Henderson 2,146 2,146
Victor Hao Li 2,568 286 2,854
Bill D. Mills 3,932 5 3,937
A. Maurice Myers 2,970 2,970
Diane J. Plotts 1,894 1,894
James K. Scott 943 943
Oswald K. Stender 3,660 3,660
Kelvin H. Taketa 1,214 1,214
Jeffrey N. Watanabe 3,627 184 2 3,813
EMPLOYEE DIRECTORS AND
EXECUTIVE OFFICERS
Robert F. Clarke 10,536 10,000 121,291 141,827
T. Michael May 1,758 17,068 18,826
OTHER NAMED EXECUTIVE
OFFICERS
Peter C. Lewis 2,936 298 10,406 13,640
Wayne K. Minami 1,715 7,055 24,515 33,285
Robert F. Mougeot 5,550 15,320 20,870
ALL DIRECTORS AND
EXECUTIVE OFFICERS AS A
GROUP
(21 PERSONS) 48,514 25,384 21,141 253,903 348,942****
</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. Also includes 18,135 shares beneficially owned by
a private secondary school over which an executive officer has shared
voting and investment power as a school trustee.
*** Stock options, including accompanying dividend equivalent shares,
exercisable within 60 days after February 18, 1998, 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
1.09% of the Company's Common Stock on February 18, 1998, and no director
or officer owned more than .45% of such stock.
11
<PAGE>
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, 1997.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS
---------------- ------------ ----------
<S> <C> <C>
Pioneering Management Corporation 3,009,063(1) 9.43%
60 State Street
Boston, Massachusetts 02109
Franklin Resources, Inc. 1,944,480(2) 6.1%
777 Mariners Island Boulevard
P.O. Box 7777
San Mateo, California 94403
</TABLE>
- ----------
(1) This information is based on a Schedule 13G, dated January 21, 1998, filed
with the Securities and Exchange Commission that discloses that Pioneering
Management Corp. has sole voting and dispositive powers over the 3,009,063
shares.
(2) This information is based on a joint filing on Schedule 13G, dated January
27, 1998, 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 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 that Constance H. Lau, the Treasurer of the Company, did not file one
reportable item on Form 4 in a timely fashion. She was late in reporting
shares owned by a private secondary school for which she has shared voting and
investment power as a trustee of the school.
12
<PAGE>
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,
and a report on executive compensation issued by the Compensation Committee of
the Board of Directors.
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 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-----------------------------------------------
AWARDS PAYOUTS
--------------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS(1) SATION(2) OPTIONS(3) PAYOUTS(4) SATION(5)
POSITION YEAR ($) ($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ROBERT F. CLARKE 1997 $483,000 $132,842 $ -0- 20,000 $ -- $18,236
President & CEO 1996 464,000 196,702 -0- 20,000 247,708 26,609
1995 440,000 108,301 -0- 20,000 321,173 17,852
- ----------------------------------------------------------------------------------------------
T. MICHAEL MAY 1997 313,000 -0- -0- 12,000 -- 16,423
Senior Vice President 1996 282,000 98,747 107,412 12,000 52,175 13,945
1995 226,000 41,987 -0- 4,000 N / A 8,177
- ----------------------------------------------------------------------------------------------
WAYNE K. MINAMI 1997 257,000 61,905 -0- 8,000 -- 50
President & CEO 1996 242,000 41,684 -0- 8,000 48,315 98
American Savings Bank, 1995 221,000 -0- -0- 8,000 147,933 77
F.S.B.
- ----------------------------------------------------------------------------------------------
ROBERT F. MOUGEOT 1997 235,000 38,274 -0- 5,000 -- 16,189
Financial Vice President 1996 225,000 46,217 -0- 5,000 88,645 13,583
1995 217,000 25,892 -0- 5,000 115,344 8,598
- ----------------------------------------------------------------------------------------------
PETER C. LEWIS 1997 201,000 34,868 -0- 5,000 -- 13,060
Vice President -- 1996 194,000 39,655 -0- 5,000 73,471 12,576
Administration 1995 188,000 31,046 -0- 5,000 95,586 11,871
</TABLE>
- ----------
(1) 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.
(2) 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 $50,000 grossed up for taxes, plus
reimbursement of monthly dues not grossed up for taxes).
(3) Except for Mr. May's options granted in 1995, options granted for the
three-year period 1995-1997 contained dividend equivalents as further
described below under the heading Option Grants in Last Fiscal Year.
13
<PAGE>
(4) Long-Term Incentive Plan ("LTIP") payouts are determined in the second
quarter of each year for the three-year cycle ending on December 31 of the
previous calendar year; if there is a payout, the amount is reflected as
LTIP compensation in the table for the previous year for the named
executive officers. In April 1996, LTIP payouts were made for the 1993-
1995 performance cycle and are reflected as LTIP compensation in the table
for 1995. In May 1997, LTIP payouts were made for the 1994-1996
performance cycle and are reflected as LTIP compensation in the table for
1996. The determination of whether there will be a payout under the 1995-
1997 LTIP will not be made until the second quarter of this year.
(5) Represents amounts accrued by the Company for certain death benefits
provided to the named executive officers, as more fully covered in the
Compensation Committee Report on page 22 under the heading, "Other
Compensation Plans".
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents information on the nonqualified stock options
which were granted to the five named executive officers on April 14, 1997. The
practice of granting stock options, which include dividend equivalent shares,
has been followed each year since 1987.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF GRANT
UNDERLYING TOTAL OPTIONS DATE
OPTIONS GRANTED TO EXERCISE PRESENT
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION VALUE(2)
NAME (#) FISCAL YEAR ($/SHARE) DATE ($)
---- ---------- ------------- --------- -------------- --------
<S> <C> <C> <C> <C> <C>
Robert F. Clarke........ 20,000 14% $34.61 April 14, 2007 $179,200
T. Michael May.......... 12,000 8 34.61 April 14, 2007 107,520
Wayne K. Minami......... 8,000 6 34.61 April 14, 2007 71,680
Robert F. Mougeot....... 5,000 3 34.61 April 14, 2007 44,800
Peter C. Lewis.......... 5,000 3 34.61 April 14, 2007 44,800
</TABLE>
- ----------
(1) For the 50,000 option shares granted with an exercise price of $34.61 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
14, 1997, with a 10-year option period, an exercise price of $34.61, and
with additional dividend equivalent shares granted for the first four
years of the option, the Binomial Value adjusted for forfeiture risk is
$8.96 per share. The following assumptions were used in the model: Stock
Price: $34.61; Exercise Price: $34.61; Term: 10 years; Volatility: 0.098;
Interest Rate: 7.05%; and Dividend Yield: 6.81%. The following were the
valuation results: Binomial Option Value: $2.92; Dividend Credit Value:
$6.04; and Total Value: $8.96.
14
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table shows the stock options, including dividend equivalents,
exercised by the named executive officers in 1997. Also shown is the number of
unexercised options and the value of unexercised in the money options,
including dividend equivalents, at the end of 1997. Under the Stock Option and
Incentive Plan, dividend equivalents have been granted to each executive
officer as part of the stock option grant, except for Mr. May's 1993 and 1995
stock option grants and a one-time, premium-priced grant to Mr. Clarke in May
1992.
Dividend equivalents permit a participant who exercises a stock option to
obtain at no additional cost, in addition to the option shares, the amount of
dividends declared on the number of shares of Common Stock with respect to
which the option is exercised during the period between the grant and the
exercise of the option. Dividend equivalents are computed, as of each dividend
record date throughout the four-year vesting period (vesting in equal
installments), which begins on the date of grant, both with respect to the
number of shares underlying the option and with respect to the number of
dividend equivalent shares previously credited to the executive officer and
not issued during the period prior to the dividend record date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (INCLUDING IN THE MONEY OPTIONS
DIVIDEND EQUIVALENTS) (INCLUDING DIVIDEND EQUIVALENTS)
DIVIDEND VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END(1)(2)
SHARES EQUIVALENTS VALUE REALIZED --------------------- --------------------------------
ACQUIRED ACQUIRED REALIZED ON DIVIDEND EXERCISABLE/ EXERCISABLE/
ON EXERCISE ON EXERCISE ON OPTIONS EQUIVALENTS UNEXERCISABLE UNEXERCISABLE
NAME (#) (#) ($) ($) (#) ($)
- ---- ----------- ----------- ---------- ----------- --------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Clarke..... 15,000 4,443 $ 9,358 $162,453 116,648/56,412 $734,664/581,409
T. Michael May....... -- -- -- -- 9,379/24,767 57,137/208,901
Wayne K. Minami...... 5,000 1,481 5,925 54,982 21,349/22,564 278,590/232,523
Robert F. Mougeot.... 6,250 1,918 (1,706) 71,984 9,251/14,103 126,431/145,291
Peter C. Lewis....... 8,750 2,636 9,162 98,033 4,411/14,103 53,437/145,291
</TABLE>
- ---------
(1) All options were in the money (where the option price is less than the
closing price on December 31, 1997) except 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 $40.875 per share on the New York Stock
Exchange on December 31, 1997.
15
<PAGE>
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS
The table below lists the LTIP awards made to the named executive officers
during 1997. The table shows potential payments that are tied to the
achievement of better than average performance over a three-year period (1997-
1999) 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, 1999 ("Peer Group"). This
is the same Peer Group used for the Stockholder Performance Graph shown on
page 23. 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 named 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 MAXIMUM
NAME ENDING DATE THRESHOLD(1) ($) ($)
- ---- ----------------- -------------- ------------
<S> <C> <C> <C>
Robert F. Clarke................ 12/31/99 $ 167,640 $ 508,000
T. Michael May.................. 12/31/99 87,500 262,500
Wayne K. Minami................. 12/31/99 66,000 198,000
Robert F. Mougeot............... 12/31/99 60,500 181,500
Peter C. Lewis.................. 12/31/99 50,250 150,750
</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 -- $67,056; Mr. May --$35,000; Mr. Mougeot -- $24,200; and
Mr. Lewis -- $20,100. For Mr. Minami, if only one goal (weighted 20%) is
met, the minimum threshold estimated future payout would be $13,200. There
is no LTIP payout unless the minimum threshold is met on at least one of
the goals.
16
<PAGE>
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 18).
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>
$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
500,000........................... 153,000 204,000 255,000 306,000 335,000
550,000........................... 168,300 224,400 280,500 336,600 368,500
600,000........................... 183,600 244,800 306,000 367,200 402,000
</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, 1997, the named executive officers had the following number of
years of credited service under the HEI Plan: Mr. Clarke, 10 years; Mr. May, 5
years; Mr. Mougeot, 9 years; and Mr. Lewis, 29 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, 1997, Mr. Minami had 11
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 $55,180,
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 1997 is $125,000 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, based on the same formula as the
qualified plans.
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 1997 under
17
<PAGE>
Section 401(a) is $160,000. The Company adopted 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), based on the same formula as the
qualified plans.
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 it 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 $237,032, based on his current
compensation level ($84,014 from the HEI Plan and $153,018 from the HEI SERP,
with no amounts owing from the Excess Plan or the Excess Pay SERP). As of
December 31, 1997, Mr. Clarke had 10 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 it 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 $156,512, based on
his current compensation level ($55,180 from the qualified ASB Plan and
$101,332 from the ASB SERP). As of December 31, 1997, Mr. Minami had 11 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
18
<PAGE>
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 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 (1993-1997), the lump sum severance would be as
follows: Mr. Clarke -- $2,487,476; Mr. May -- $1,000,628; Mr. Minami --
$1,158,048; Mr. Mougeot -- $1,123,444; and Mr. Lewis -- $955,830. 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 six 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 utilizes 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
19
<PAGE>
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 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 include 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
1996, Mr. Clarke's base salary was raised from an annual rate of $470,000 to
an annual rate of $490,000 effective May 1, 1997. The $20,000 increase aligned
Mr. Clarke's base salary close to the midpoint of the relevant salary range.
The other named executive officers also received salary increases ranging from
3.6% to 12.1%.
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 1997 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 officer's actual
administrative and general expenses for 1997 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
20
<PAGE>
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.
Under the 1997 EICP, Mr. Clarke received a payout of $132,842 in early 1998.
This resulted from achievement of (1) the earnings per share goal (weighted
70%) at a level above minimum and (2) lower than forecast 1997 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 1997 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. The other named executive
officers, except Mr. May, also received EICP awards under the 1997 EICP.
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 1997, the committee established the financial measures for the 1997-
1999 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 16. 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 16.
For the three-year cycle ending December 31, 1996, Mr. Clarke received a
one-time payout of $247,708 in 1997 for achieving above the minimum level for
two of the three financial goals: (1) total return to shareholders (weighted
40%) and (2) return on average common equity (weighted 30%). To receive a
payout under each goal, the Company's performance for the three-year period
must equal or exceed the average financial results of the Edison Electric
Institute Peer Group of 100 investor-owned utility companies for the
respective goal. The other named executive officers also received LTIP awards
for the three-year cycle ending December 31, 1996.
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
21
<PAGE>
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 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 1997 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 17 and
18. 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
1998. 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
DIANE J. PLOTTS
OSWALD K. STENDER
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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 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 common stock for all
companies at December 31 each year and assumes that $100 was invested on
December 31, 1992 in the Company's Common Stock and the common stock of all
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
1992 - 1997
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period HAWAIIAN S&P EEI 100
(Fiscal Year Covered) ELECTRIC INDS 500 COMPOSITE INDEX
- --------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 1992 $100 $100 $100
FYE 1993 $102.42 $110.08 $111.15
FYE 1994 $ 99.3 $111.53 $ 98.29
FYE 1995 $126.95 $153.45 $128.78
FYE 1996 $126.53 $188.68 $130.32
FYE 1997 $153.08 $251.63 $166
</TABLE>
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<PAGE>
INDEBTEDNESS OF MANAGEMENT
American Savings Bank, F.S.B. ("ASB"), a subsidiary of the Company, offers
preferential rate loans to its directors and executive officers, as allowed by
the amended Federal Reserve Act.
Two ASB directors who are also directors of HEI (Messrs. Clarke and
Watanabe) and one named executive officer of the Company (Mr. Minami), whose
aggregate indebtedness to ASB exceeded $60,000 at any time during 1997,
received preferential rate loans as shown below.
<TABLE>
<CAPTION>
LARGEST
LOAN LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1997 12/31/97 TRANSACTION CHARGED(1)
----------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Robert F. Clarke.............. $1,000,000 $977,104 First Mortgage 6.0 %
Wayne K. Minami............... 87,000 86,114 First Mortgage 6.0 %
Jeffrey N. Watanabe........... 662,000 659,047 First Mortgage 6.25%
</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 had 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. Both loans by ASB
were repaid by Bank of Hawaii.
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 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.
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<PAGE>
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
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. All of the transactions described below were negotiated on an arm's
length basis and were approved by the disinterested members of the HEI Board.
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 4 lots of a
project consisting of 165 one-acre residential agricultural lots in Hilo,
Hawaii. HSC is the managing partner of the partnership. Four sales were made
in 1997. RSM, Inc., a subsidiary of HSC, was paid sales commissions of $14,200
in 1997. Malama Development and HSC have each contributed $371,800 to the
partnership. Each partner has received distributions of $1,161,639. Malama
Development and HSC share equally in the profits and losses of the
partnership. As of December 31, 1997, 161 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 146 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 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, 1997, Malama Elua and HSC have each contributed $1,443,866 to the
partnership, and HSC has advanced $448,000 to the partnership. The partners
will share equally in the profits and losses of the partnership.
Palailai Associates. Malama Mohala Corp. ("Malama Mohala"), a wholly owned
subsidiary of MPC, and Palailai Holdings, Inc. ("PHI"), a subsidiary of
Finance Enterprises, are equal partners in a general partnership known as
Palailai Associates ("Palailai") which is currently developing homes in
Makakilo, Hawaii. 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. Finance Enterprises is also the parent company of Finance Realty,
Ltd., Finance Home Builders, Ltd., Finance Factors Limited and Finance
Insurance Ltd. Finance Realty, Ltd. received $597,538 in management fees and
$10,050 in sales commissions from the partnership during 1997. Finance Home
Builders, Ltd., a general contractor, received payments of $13,436 during 1997
under its contract with Palailai for the construction of homes. The
partnership earned $2,600 of interest income from Finance Factors Limited. In
addition, Finance Insurance Ltd., an insurance agency, received payment of
$34,871 for insurance coverage from the partnership.
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 1997.
25
<PAGE>
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 fiscal year 1998 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.
STOCKHOLDER PROPOSALS FOR 1999
Stockholder proposals intended to be presented at the next Annual Meeting
must be received by the Company by November 13, 1998, for inclusion in the
Proxy Statement and form of proxy for the 1999 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 60 days nor earlier than 90 days prior to April 22,
1998, which is the first anniversary of the preceding year's annual meeting.
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,
and representation that the stockholder shall present such business before the
meeting in person or by proxy.
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 13, 1998
26
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[MAP APPEARS HERE]
<PAGE>
HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 Richards Street, Honolulu, Hawaii 96813
[LOGO OF HAWAIIAN ELECTRIC INDUSTRIES, INC.]
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 28, 1998, 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 Jeffrey N. Watanabe 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 28, 1998, 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 II 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 II directors (term ending at the 2001 Annual Meeting)
(CHECK ONE BOX ONLY)
[_] To vote FOR ALL Nominees named below, check this box.
[_] To WITHHOLD AUTHORITY to vote for ALL Nominees named below, check
this box.
[_] To withhold authority for any particular Nominee, strike a line
through the Nominee's name listed below:
NOMINEES: Victor Hao Li
T. Michael May
Diane J. Plotts
Kelvin H. Taketa
Jeffrey N. Watanabe
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 ________________________, 1998
Signature (no witness required)
__________________________________
Signature (if held jointly)
-----------------------------------------
PLEASE COMPLETE AND RETURN ENTIRE PROXY
-----------------------------------------
