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Section 1: PRE 14A (PRE 14A)

fe-pre14a_20190521.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  

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))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

 

FirstEnergy Corp.

(Name of Registrant as Specified In Its Charter)

 

         

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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Preliminary Copy

In accordance with Rule 14a-6(d) under Regulation 14A of the Securities Exchange Act of 1934, please be advised that FirstEnergy Corp. intends to release definitive copies of this Proxy Statement to security holders on [April 1], 2019.

 

 

 

2019 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

ANNUAL MEETING DATE MAY 21, 2019 FIRST ENER

 


 

Our mission we are a forward-thinking electric utility powered by a diverse team of employees committed to making customers’ lives brighter, the environment better and our community stronger. our core values what matters to us: safety customers diversity & Inclusion Innovation Performance Social Responsibility Teamwork Behaviors How employees contribute to our success: Courage Integrity Openness Ownership Trust

 


 

 

 

 

Message to Our
Shareholders

 

[April 1, 2019]

Dear Fellow Shareholders:

On behalf of the FirstEnergy Board of Directors and management, we thank you for your continued investment in FirstEnergy and for the confidence you have in your Board to oversee our shareholders’ interests in our business.

Last year in this letter, we talked about your Board’s composition, our commitment to ongoing shareholder outreach and engagement, and our strong corporate governance practices.  We also talked about the implementation of our regulated strategy, which is designed to transform your Company into a high-performing, fully regulated utility with well-defined growth opportunities.  Your Board and management remain highly engaged in this important work and are optimistic about the future.

In the accompanying proxy statement, we address the recent developments at your Company that demonstrate our ongoing commitment to strong corporate governance, including:

 

Shareholder Outreach and Engagement

Your Board listens to our shareholders and considers their views when making decisions in the boardroom. We accomplish this primarily through a robust, year-round shareholder outreach and engagement program in partnership with your Company’s management. Please refer to page [4] of the accompanying proxy statement for a discussion of this program.

 

Board Oversight of Corporate Social Responsibility

Our approach to environmental, social and governance (“ESG”) and sustainability is rooted in our mission statement, our core values and our behaviors.  Our commitment extends beyond our products and services to include addressing economic, social, and environmental-related initiatives in our service area.

Recently, your Board’s Corporate Governance Committee enhanced its charter to include oversight of sustainability and corporate responsibility.  Pursuant to its charter, the Committee reviews and provides guidance on your Company’s corporate citizenship practices, including sustainability, environmental and corporate social responsibility initiatives. Please refer to page [2] of the accompanying proxy statement for a further discussion of your Board’s focus on this important area.

Further, the Compensation Committee has emphasized social responsibility at your Company, enhancing the safety-related incentive goals, reaffirming the environmental compliance goals, and introducing goals related to diversity and inclusion. As outlined in the executive compensation section of the attached proxy statement, a majority of our operational goals in the short-term incentive compensation program are linked to environmental, social and governance factors.

 

Our Path Forward

Your Company is focused on completing its transformation into a premier, customer-focused, pure-play regulated utility. Your Board provides strategic oversight to help FirstEnergy implement its long-term, sustainable growth platform, fulfill its mission to make customers’ lives brighter, the environment better and communities stronger, and offer a competitive dividend to shareholders. Your Board continues to have strong confidence in our talented management team and the objectives to implement this regulated growth strategy, which is discussed further in our 2018 Annual Report to Shareholders. We encourage you to read more about your Board, our corporate governance practices, and our executive compensation programs in the accompanying proxy statement. We are grateful for your support of your Company and your Board and thank you in advance for voting promptly.

 

Sincerely,

 

Charles E. Jones

President and Chief Executive Officer

Donald T. Misheff

Board Chairman



 Notice of Annual Meeting of Shareholders

 

 

 

Date and Time

 

 

 

 

Location

 

 

 

 

Record Date

 

 

Tuesday, May 21, 2019

8:00 a.m. ET

 

John S. Knight Center

77 E. Mill Street

Akron, OH 44308

 

 

March 22, 2019

Agenda

 

Elect the 11 nominees named in the accompanying proxy statement to the Board of Directors to hold office until the 2020 Annual Meeting of Shareholders and until their successors shall have been elected;

 

Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2019;

 

Approve, on an advisory basis, named executive officer compensation;

 

Approve a management proposal to amend the Company’s Amended Articles of Incorporation, as amended (the “Amended Articles of Incorporation”) and Amended Code of Regulations, as amended (the “Amended Code of Regulations”) to replace existing supermajority voting requirements with a majority voting power threshold;

 

Approve a management proposal to amend the Company’s Amended Articles of Incorporation and Amended Code of Regulations to implement majority voting for uncontested director elections;

 

Approve a management proposal to amend the Company’s Amended Code of Regulations to implement proxy access;

 

Vote on one shareholder proposal, if properly presented at the Annual Meeting; and

 

Take action on other business that may come properly before the Annual Meeting and any adjournment or postponement thereof.

Please carefully review this notice, the Company’s Annual Report to Shareholders for the year ended December 31, 2018 (the “2018 Annual Report”) and the accompanying proxy statement and vote your shares by following the instructions on your proxy card/voting instruction form or Notice of Internet Availability of Proxy Materials to ensure your representation at the Annual Meeting. Only shareholders of record as of the close of business on March 22, 2019, or their proxy holders, may vote at the Annual Meeting. If you plan to attend the Annual Meeting, you must register in advance. See the “Attending the Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register.

 

On behalf of the Board of Directors,

 

Ebony L. Yeboah-Amankwah

Vice President, Deputy General Counsel, Corporate Secretary & Chief Ethics Officer

Akron, Ohio

This notice and accompanying proxy statement are being mailed or made available to shareholders on or about [April 1], 2019.

 

 

 

Important Notice Regarding Availability of Proxy Materials

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 21, 2019. The accompanying proxy statement and the 2018 Annual Report are available at www.ReadMaterial.com/FE.

 

 

 

Important Note Regarding Voter Participation. Please take time to vote your shares!

 

Pursuant to applicable rules, if your shares are held in a broker account, you must provide your broker with voting instructions for all matters to be voted on at the Annual Meeting of Shareholders except for the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm. Your broker does not have the discretion to vote your shares on any other matters without specific instruction from you to do so.

 



 

Table of Contents

 

 

 

 

   Proxy Statement Summary

 

i

 

 

   Environmental, Social & Governance (“ESG”) Overview

 

v

1

Corporate
Governance 
& Board of
Directors

 

 

   Corporate Governance and Board of Directors Information

1

   Audit Committee Report

9

   Matters Relating to the Independent Registered Public Accounting Firm

10

   Director Compensation in Fiscal Year 2018

   Director Qualifications

11

14

 

 

2

  Items to Be
  Voted On

 

   Biographical Information and Qualifications of Nominees for Election as Directors

18

   Items to Be Voted On

24

 

 

3

Executive
Compensation

   Executive Compensation

35

      Compensation Committee Report

35

      Compensation Discussion and Analysis

35

      Executive Summary

37

   Compensation Tables

 

67

4

Security
Ownership &
Other Important
Matters

 

 

 

   Security Ownership of Management

85

   Security Ownership of Certain Beneficial Owners

86

   Compensation Committee Interlocks and Insider Participation

87

   Section 16(a) Beneficial Ownership Reporting Compliance

87

   Certain Relationships and Related Person Transactions

87

 

 

 

5

  Questions and Answers
About the Annual
Meeting

   Questions and Answers about the Annual Meeting

89

      Proxy Materials

89

      Voting Matters

91

      How You Can Vote

93

      Attending the Annual Meeting

94

      Shareholder Proposals for 2020

96

      Obtaining Additional Information

 

96

 

 

 

 

 

  Appendices

 

 

Proposed Amendments to Amended Articles of Incorporation and Amended Code of Regulations Relating to the Replacement of Existing Supermajority Voting Requirements with a Majority Voting Power Threshold as Permitted under Ohio Law

A-1

 

 

Proposed Amendments to Amended Articles of Incorporation and Amended Code of Regulations to Implement Majority Voting for Uncontested Director Elections

B-1

 

 

Proposed Amendment to Amended Code of Regulations to Implement Proxy Access

C-1

 

 


 

 

 

Proxy Statement Summary

 

 

 

2019 Annual Meeting of Shareholders (the “Annual Meeting” or the “Meeting”)

 

 

Time and Date: 8:00 a.m., Eastern time, on Tuesday, May 21, 2019

 

Location: John S. Knight Center, 77 E. Mill Street, Akron, Ohio

 

Record Date: March 22, 2019

 

Voting: Shareholders of record of FirstEnergy Corp. (“FirstEnergy”, the “Company”, “we”, “us” or “our”) common stock as of the Record Date are entitled to receive the Notice of Annual Meeting of Shareholders and they or their proxy holders may vote their shares at the Annual Meeting.

 

Admission: If you plan to attend the Annual Meeting, you must register in advance. For instructions on how to register, see the “Attending the Annual Meeting” section of the “Questions and Answers about the Annual Meeting” below.

Voting Matters

 

 

 Item

1

 

Elect the 11 nominees named in this proxy statement to the Board of Directors. Refer to page [24] for more detail.
    

 Your Board recommends you vote FOR this item.

 

Item

2

 

Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2019. Refer to page [25] for more detail.

 

Your Board recommends you vote FOR this item.

 

 

 

 

 Item

3

 

Approve, on an advisory basis, named executive officer compensation. Refer to page [26] for more detail.

 

Your Board recommends you vote FOR this item.

 

Item

4

 

Approve a management proposal to implement a majority voting power threshold. Refer to page [27] for more detail.

 

Your Board recommends you vote FOR this item.

 

 

 

 

 Item

5

 

Approve a management proposal to implement majority voting for uncontested director elections. Refer to page [29] for more detail.

 

Your Board recommends you vote FOR this item.

 

Item

6

 

Approve a management proposal to implement proxy access. Refer to page [31] for more detail.

 

Your Board recommends you vote FOR this item.

 

 

Item

7

Shareholder Proposal. Refer to page [33] for more detail.

 

X Your Board recommends you vote AGAINST this shareholder proposal.

 

 

i


 

How to Cast Your Vote

 

Your vote is important! Even if you plan to attend our Annual Meeting in person, please cast your vote as soon as possible by:

 

 

Do you hold shares directly with FirstEnergy or in the FirstEnergy Corp. Savings Plan?

Use the internet at
www.cesvote.com

Call toll-free at
1-888-693-8683

Mail by returning your proxy card/
voting instruction form
(1)

Do you hold shares through a bank, broker or other institution (beneficial ownership)? (2)

Use the internet at
www.proxyvote.com

Call toll-free at
1-800-454-8683

Mail by returning your proxy card/
voting instruction form

(1)  If your envelope is misplaced, send your proxy card to Corporate Election Services, Inc., your Company’s independent proxy tabulator and
    Inspector of Election. The address is FirstEnergy Corp., c/o Corporate Election Services, P.O. Box 3230, Pittsburgh, PA 15230.

(2) Not all beneficial owners may be able vote at the web address and phone number provided above. If your control number is not recognized,
    please refer to your voting instruction form for specific voting instructions.

Please follow the instructions provided on your proxy card/voting instruction form (the “proxy card”), Notice of Internet Availability of Proxy Materials, or electronic or other communications included with your proxy materials. Also refer to the “How You Can Vote” section of the “Questions and Answers about the Annual Meeting” on Page [89] for more details. All shareholders of record may vote in person at the annual meeting. Beneficial owners may vote in person at the meeting as described in response to Question [13] on Page [93].

You may have multiple accounts and therefore receive more than one proxy card or voting instruction form and related materials. Please vote each proxy card and voting instruction form that you receive.

Board Nominees

 

The following table provides summary information about each member of your Board of Directors (your “Board”) standing for election to your Board. Each member stands for election annually.

 

 

 

 

 

Committee Memberships

 

Name

Age

Director

Since

Independent

Audit

Compensation

Corporate

Governance,

Sustainability

and Corporate

Responsibility

Finance1

Nuclear

Number

of Other

Public

Company

Boards2

 

 

 

 

 

 

 

 

 

 

Michael J. Anderson

67

2007

Yes

 

 

Chair

 

1

 

 

 

 

 

 

 

 

 

 

Steven J. Demetriou

60

2017

Yes

 

 

 

1

 

 

 

 

 

 

 

 

 

 

Julia L. Johnson

56

20113

Yes

 

 

 

3

 

 

 

 

 

 

 

 

 

 

Charles E. Jones

63

2015

No

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Donald T. Misheff

62

2012

Yes

 

 

 

2

 

 

 

 

 

 

 

 

 

 

Thomas N. Mitchell

63

2016

Yes

 

 

 

Chair

0

 

 

 

 

 

 

 

 

 

 

James F. O’Neil III

60

2017

Yes

Chair

 

 

 

3

 

 

 

 

 

 

 

 

 

 

Christopher D. Pappas

63

20113

Yes

 

Chair

 

 

2

 

 

 

 

 

 

 

 

 

 

Sandra Pianalto

64

2018

Yes

 

 

 

3

 

 

 

 

 

 

 

 

 

 

Luis A. Reyes

67

2013

Yes

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Leslie M. Turner

61

2018

Yes

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

1 

Mr. Paul Addison is the Finance Committee Chair who will retire from your Board as of the 2019 Annual Meeting.  It is anticipated that your Board will appoint a new Finance Committee Chair at its scheduled May Organizational meeting.  

 

2 

As defined under New York Stock Exchange Listed Company Manual Section 303A Corporate Governance Standards Frequently Asked Questions.

 

3 

Ms. Johnson and Mr. Pappas were previously directors of Allegheny Energy Inc. (“Allegheny Energy”), which merged with your Company in 2011.

As previously disclosed, Mr. Paul Addison and Dr. Jerry Sue Thornton will retire from your Board as of the 2019 Annual Meeting in accordance with the mandatory retirement age provisions of our Corporate Governance Policies and were not nominated by your Board for election at the Annual Meeting. The size of your Board, which is currently set at 13, will be reduced to 11 as of the Annual Meeting.  

ii


 

Key Facts About Your Board

 

We seek to maintain a well-rounded and diverse Board representing a wide breadth of experience and perspectives that balances the institutional knowledge of longer-tenured directors with the fresh perspectives brought by newer directors. Below are highlights regarding our 11 director nominees standing for election to your Board and our Board meetings held in 2018.

 

 

 1 Service with your Company does not include service by Ms. Johnson and Mr. Pappas as directors of Allegheny Energy, which merged with your Company in 2011.

 

Corporate Governance Highlights

 

Your Company is committed to strong corporate governance, which we believe is important to the success of our business and in advancing shareholder interests. Highlights include:

 

Independent Oversight

 

 

 

 

Board and Committee Oversight

  Separate Board Chairman and Chief Executive Officer (our “CEO”)

  Independent Board Chairman

  All directors are independent, other than the CEO

  Board committees are comprised entirely of independent directors

  Independent directors regularly hold executive sessions without management at Board and committee meetings

  Enterprise risk oversight by full Board and its committees

  Corporate Governance, Sustainability and Corporate Responsibility Committee oversees corporate citizenship practices including environmental, social and governance (“ESG”) and sustainability initiatives

  Audit Committee oversees risks related to cybersecurity, among other matters including financial statements and compliance

  Compensation Committee ensures alignment between pay and performance

 

 

 

Shareholder Rights and Accountability

 

Board Practices

  Annual election of all directors

  Shareholders of 25 percent or more shares outstanding and entitled to vote may call a special meeting

  Clear, effective process for shareholders to raise concerns to your Board

  Director Resignation Policy requiring any director nominee in an uncontested director election who receives a majority of withheld votes to tender his or her resignation

  Direct investor relations and governance engagement and outreach to shareholders

  Advisory vote on named executive officer compensation is held on an annual basis, consistent with the shareholder advisory vote on frequency

  Consideration of your Board’s ethnic and gender diversity, age, experience and skills and other attributes when evaluating nominees for your Board

  A robust annual evaluation process: full Board evaluation including third-party interviews, Board committee evaluations and individual director evaluations

  Mandatory director retirement age of 72 pursuant to our Corporate Governance Policies

  Policy to consider diversity for director candidates

  Goal to have at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future

  Corporate Governance, Sustainability and Corporate Responsibility Committee and full Board engage in rigorous director succession planning

  Comprehensive director orientation and continuing education

  Robust stock ownership guidelines

  Anti-Hedging and Anti-Pledging Policies

  No poison pill

 

 

 

iii


 

Our corporate governance practices are described in greater detail in the “Corporate Governance and Board of Directors Information” section beginning on page [1].

 

Executive Compensation Highlights

 

Under our compensation design, the percentage of pay that is based on performance increases as executives’ responsibilities increase. As shown in the charts below, of base salary, STIP and LTIP, approximately 87% of the CEO’s total target pay and 74% of our NEO average target pay is variable and could be reduced to zero if performance metrics are not met.

 

CEO 2018 Pay Mix at Target

 

Other NEOs 2018 Pay Mix at Target

 

Mr. Schneider’s 2018 Pay Mix at Target

 

 

We believe what we do and don’t do with respect to executive compensation aligns with the long-term interests of our shareholders and with commonly viewed best practices in the market.

 

What We Do

What We Don’t Do

 

✓    Pay-for-performance

✓    Caps on short-term and long-term incentive awards

✓    Non-overlapping financial performance measures in our short- and long-term incentive plans

✓    Robust stock ownership guidelines

✓    Clawback policy

✓    Mitigate undue risk in compensation programs

✓    Annual Say-on-Pay vote

✓    Double-trigger CIC provisions

✓    Independent compensation consultant for the Compensation Committee with only independent directors

✓    Beginning in 2018, LTIP is capped at 100% if absolute TSR over the LTIP performance period is negative

 

    No executive hedging or pledging allowed

    No employment agreements

    No tax gross-ups for our NEOs

    No repricing of underwater stock options without shareholder approval

    No excessive perquisites

    No payment of dividends on unearned shares

    No new entrants in the Supplemental Executive
Retirement Plan (“SERP”) – SERP closed since 2014

Our executive compensation practices are described in greater detail in the “Executive Compensation” section beginning on page [35].


iv


 

017 outreach focused on the top 100 outreach focused on the top 100 shareholders, representing nearly 54% of our outstanding shares at that time Extensive Fall 2017 outreach efforts included in-person discussions and phone calls with many of our top 25 shareholders, who held almost 45% of our outstanding shares (see page [x]) Based on our shareholder engagement, we have made substantial and proactive changes to our incentive compensation programs to better align pay and performance and address shareholder concerns (see page [x]) We acknowledge the overhang on our stock price as we transition away from commodity exposed generation Given that our executives met rigorous financial and operational goals, the compensation programs ending in 2017 resulted in above-target payouts to NEOs (see page [x])

 

 

  Environmental, Social & Governance (“ESG”) Overview     

 

 

 

 

 

 

Built upon the pillars of your Company’s Mission Statement, our ESG strategy to inform, engage and achieve results is rooted in strong corporate governance practices and policies. In 2018, FirstEnergy reinforced its focus on ESG efforts by enhancing the responsibilities of the Corporate Governance, Sustainability and Corporate Responsibility Committee, as well as forming a Sustainability Group in our Strategy Organization. In 2019, we’re focusing on additional initiatives to inform, engage and achieve our sustainability goals, and to demonstrate our commitment to delivering Energy for a Brighter Future to all of our stakeholders.

 

Inform

 

We recognize it is vitally important to keep our stakeholders informed on sustainability-related issues, including ESG activities and disclosures.  We keep stakeholders informed about your Company’s efforts through key sustainability reports and disclosures, such as:

 

[Climate Report:  Energy for a Brighter Future]

 

CDP (formerly Carbon Disclosure Project) Climate and CDP Water Reports

 

Edison Electric Institute (EEI) ESG/Sustainability Template

 

Corporate Sustainability Report Update Expected in 2019

 

 

Engage

 

It is our responsibility to educate and engage stakeholders on sustainability initiatives and achievements, including ESG.  Through our commitment in these areas, we have opportunities to reinforce the FirstEnergy brand and build our reputation as a good corporate citizen.  This is accomplished through:

 

Internal efforts centered around the pillars of our Mission Statement (employees, customers, communities and the environment), including a program that tracks our employees’ volunteer efforts as well as a waste reduction initiative.  

Further developing our relationships with external ESG/sustainability rating and reporting groups.  

 

Achieve

 

A key component of FirstEnergy’s success is our ability to measure the progress and impact of our efforts and initiatives through the development and tracking of internal and external sustainability goals as well as providing oversight and governance.  Developing goals and tracking our progress toward achieving those goals demonstrates our commitment to sustainability and our mission, including:

 

Continuing to make progress toward our goal of reducing carbon dioxide (CO2) emissions companywide by at least 90 percent below 2005 levels by 2045.  Through 2018, we have achieved 62 percent of that goal, primarily due to plant retirements and asset sales.

Incentivized our workforce to achieve ESG related goals. Many of the operational goals in our short-term incentive compensation programs are linked to ESG factors, for example:

 

Enhanced safety related goals in the short-term incentive program in 2018 by incorporating Days Away Restricted or Transferred (“DART”) Rate and Life Changing Events (“LCEs”), while also maintaining Occupational Safety and Health Administration (“OSHA”) reportable incidents as a metric.

 

Diversity & Inclusion (“D&I”) goals in the short-term incentive program in 2018 focus on diverse succession planning, diverse professional hiring, and improvement on inclusion as measured through a survey score.

 

Our Operations Index in the short-term incentive program continues to focus on quality customer service and reliability, first call resolution and environmental excursions.

 

Ensuring Strong ESG Corporate Governance Practices and Policies

 

A key driver and component of our success is a strong foundation of Corporate Governance practices and policies that promotes transparency, accountability and engagement exemplified by your Board. As further discussed earlier in the Proxy Statement Summary and in the Corporate Governance and Board of Directors Information section your Board has:

Since 2014, elected seven new directors, six of whom are standing for re-election at the Annual Meeting, and continued to increase your Board’s ethnic and gender diversity.

Added responsibilities to the Corporate Governance, Sustainability and Corporate Responsibility Committee to reflect efforts on sustainability and corporate responsibility, specifically including ESG topics.

Ensured risk oversight is conducted by the full Board and its committees.

 

v


 

 

 

 

Note About Forward-Looking Statements

 

Forward-Looking Statements: This proxy statement includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available. Unless the context requires otherwise, as used herein, references to “we,” “us,” “our,” and “FirstEnergy” refer to FirstEnergy Corp. Forward-looking statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management's intents, beliefs and current expectations, and typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” "forecast," "target," "will," "intend," “believe,” "project," “estimate," "plan" and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the ability to successfully execute an exit from commodity-based generation; the risks associated with the Chapter 11 bankruptcy proceedings involving FirstEnergy Solutions Corp. (FES), its subsidiaries, and FirstEnergy Nuclear Operating Company (FENOC) (FES Bankruptcy) that could adversely affect FirstEnergy, FirstEnergy’s liquidity or results of operations, including, without limitation, that conditions to our settlement agreement with respect to the FES Bankruptcy settlement agreement may not be met or that such settlement agreement may not be otherwise consummated, and if so, the potential for litigation and payment demands against us by FES, FENOC or their creditors; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, our strategy to operate and grow as a fully regulated business, to execute our transmission and distribution investment plans, to continue to reduce costs through FE Tomorrow, which is the FirstEnergy initiative launched in late 2016 to identify our optimal organization structure and properly align corporate costs and systems to efficiently support FirstEnergy as a fully regulated company going forward, and other initiatives, and to improve our credit metrics, strengthen our balance sheet and grow earnings; legislative and regulatory developments at the federal and state levels, including, but not limited to, matters related to rates, compliance and enforcement activity; economic and weather conditions affecting future operating results, such as significant weather events and other natural disasters, and associated regulatory events or actions; changes in assumptions regarding economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities; changes in customers' demand for power, including, but not limited to, the impact of state and federal energy efficiency and peak demand reduction mandates; changes in national and regional economic conditions affecting us and/or our major industrial and commercial customers or others with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system that may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; changes to federal and state environmental laws and regulations, including, but not limited to, those related to climate change; changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts and other trust funds, or causing us to make additional contributions sooner, or in amounts that are larger, than currently anticipated; the risks associated with the decommissioning of the retired nuclear facility owned by FirstEnergy subsidiaries; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings; labor disruptions by the unionized workforce of FirstEnergy subsidiaries; changes to significant accounting policies; any changes in tax laws or regulations, including the Tax Cuts and Jobs Act, adopted December 22, 2017, or adverse tax audit results or rulings; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us; actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity; and the risks and other factors discussed from time to time in FirstEnergy’s Securities and Exchange Commission (SEC) filings. Dividends declared from time to time on FirstEnergy’s common stock, and thereby on FirstEnergy’s preferred stock, during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. These forward-looking statements are also qualified by, and should be read together with, the risk factors included in FirstEnergy’s SEC filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, together with any subsequent Current Reports on Form 8-K. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. We expressly disclaim any obligation to update or revise, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.

 

vi


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Corporate Governance and Board of Directors Information

 

Board Leadership Structure

The positions of CEO and Chairman of the Board are separated. Our Amended Code of Regulations and Corporate Governance Policies do not require that your Chairman of the Board and CEO positions be separate, and your Board has not adopted a specific policy or philosophy on whether the role of the CEO and Chairman of the Board should remain separate. However, having a separate Chairman of the Board and CEO has typically allowed your CEO to focus more time on our day-to-day operations and, in your Board’s judgement, is appropriate at this time.

Your Board schedules regular executive sessions for your independent directors to meet without management participation. Because an independent director is required to preside over each such executive session of independent directors, we believe it is more efficient and appropriate to have your independent Chairman of the Board preside over all such meetings.

Board Composition and Refreshment

Your Board is comprised of individuals who are highly-qualified, diverse, and independent (other than Mr. Jones, who is not considered independent because of employment with your Company). Your Board’s succession planning takes into account the importance of Board refreshment and having an appropriate balance of experience and perspectives on your Board. As further discussed in the “Director Qualifications” section of this proxy statement, your Board and the Corporate Governance, Sustainability and Corporate Responsibility Committee recognizes that the racial, ethnic and gender diversity of your Board, as well as diversity of thought, background and experiences, are an important part of its analysis as to whether your Board possesses a variety of complementary skills and experiences. Accordingly, your Board has set a goal that it will be composed of at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future.

We have regularly added directors who we believe infuse diversity, new ideas and fresh perspectives into the boardroom. Since the beginning of 2014, your Board has added seven new Board members, six of which are currently standing for election as director nominees. The result is more than half of your Board’s director nominees have tenure of five years or less. During this time, your Board added three directors, two of which are currently standing for election, that further diversified your Board. Also, in connection with our mandatory retirement age of 72 for outside directors described below, our longest tenured director will retire from your Board as of the Annual Meeting.

Board Oversight

Risk Management

Your Company faces a variety of risks and recognizes that the effective management of those risks contributes to the overall success of your Company. Your Company has implemented a process to identify, prioritize, report, monitor, manage, and mitigate its significant risks. A management Risk Policy Committee, consisting of the Chief Risk Officer and senior executive officers, provides oversight and monitoring to ensure that appropriate risk policies are established and carried out and processes are executed in accordance with selected limits and approval levels. Other management committees exist to address topical risk issues. Timely reports on significant risk issues are provided as appropriate to employees, management, senior executive officers, respective Board committees, and the full Board. The Chief Risk Officer also prepares enterprise-wide risk management reports that are presented to the Audit Committee, the Finance Committee and your Board.

Your Board administers its risk oversight function through the full Board, as well as through the various Board committees. Specifically, your Board considers risks applicable to your Company at each meeting in connection with its consideration of significant business and financial developments of your Company. Also, the Audit Committee Charter requires the Audit Committee to oversee, assess, discuss, and generally review your Company’s policies with respect to the assessment and management of risks, including risks related to the financial statements and financial reporting process of the Company, credit risk, liquidity and commodity market risks, and risks related to cybersecurity. The Audit Committee also reviews and discusses with management the steps taken to monitor, control, and mitigate such exposures. Through this oversight process, your Board obtains an understanding of significant risk issues on a timely basis, including the risks inherent in your Company’s strategy. In addition, while your Company’s Chief Risk Officer administratively reports to your Chief Financial Officer (your “CFO”), he also has full access to the Audit Committee and Finance Committee and is scheduled to attend each of their committee meetings.

 

 

1

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

In addition to the Audit Committee’s role in risk oversight, our other Board committees also play a role in risk oversight within each of their areas of responsibility. Specifically, the Compensation Committee reviews, discusses, and assesses risks related to compensation programs, including incentive compensation and equity-based plans, as well as the relationship between our risk management policies and practices and compensation. See also, “Risk Assessment of Compensation Programs” found in the “Compensation Discussion and Analysis” (the “CD&A”) section in this proxy statement. The Corporate Governance, Sustainability and Corporate Responsibility Committee considers risks related to corporate governance, including Board and committee membership, Board effectiveness, and related person transactions. The Finance Committee evaluates risks relating to financial resources and strategies, including capital structure policies, financial forecasts, budgets and financial transactions, commitments, expenditures, long and short-term debt levels, dividend policy, issuance of securities, exposure to fluctuation in interest rates, share repurchase programs and other financial matters deemed appropriate by your Board. The Nuclear Committee considers the risks associated with the safety, reliability, and quality of certain nuclear operations. Further, day-to-day risk oversight is conducted by our Corporate Risk department and our senior management and is shared with your Board or Board committees, as appropriate. We believe that your Board’s role in risk oversight is consistent with and complemented by your Board’s leadership structure. In addition, the section in this proxy statement entitled “Board Leadership Structure” provides information relating to our separation of the Chairman of the Board and CEO positions.

Cybersecurity

FirstEnergy is committed to protecting its employees, customers, facilities, and the ongoing reliability of its electric system. We work closely with state and federal agencies and our peers in the electric utility industry to identify physical and cyber security risks, exchange information, and put safeguards in place to comply with strict reliability and security standards. From a security standpoint, no other industry – including gas pipelines – is as heavily regulated as the electric utility sector. We have comprehensive cyber and physical security plans in place, but we don’t publicly disclose details about these measures that could aid those who want to harm our customers and our employees.

Your Board has identified cybersecurity as a key enterprise risk. As a result, the Audit Committee reviews our cybersecurity risk management practices and performance, primarily through reports provided by management. The Audit Committee also reviews and discusses with management the steps taken to monitor, control, and mitigate such exposure. Your Board and certain committees receive cybersecurity updates from the Chief Information Officer at least once a year, and more frequently as needed. Among other things, these reports have focused on incident response management and recent cyber risk and cybersecurity developments.

Security enhancements are also a key component of FirstEnergy’s Energizing the Future transmission investment program. Since 2014, your Company has invested heavily in layered security measures that use both technology and hard defenses to protect critical transmission facilities and our digital communications networks.

Corporate Responsibility

Corporate responsibility is a core value of your Company. Your Company is focused on delivering strong financial results and providing top-tier reliability to our customers, but we are also committed to doing so in a way that respects the communities and environments in which we operate.

We continue to reaffirm our focus on corporate responsibility issues as they relate to our business strategy, reputation and key stakeholders. For example, in 2018, the Corporate Governance Committee was renamed the Corporate Governance, Sustainability and Corporate Responsibility Committee and related responsibilities were added to the committee’s charter regarding corporate responsibility.

Public Policy and Engagement

We have a decision-making and oversight processes in place for political contributions and expenditures. Our Corporate Political Activity Policy available on our website describes the criteria for certain political contributions and ballot initiative expenditures and the process for approving such contributions and expenditures. Also, your Board’s Corporate Governance, Sustainability and Corporate Responsibility Committee periodically reviews this policy and related practices as well as dues and/or contributions to industry groups and trade associations.

Based on feedback from our shareholder engagement and outreach, we recently expanded our website disclosure to include reports on federal and state level lobbying, as well as, the lobbying portion of certain trade association dues.

 

 

2

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Evaluating Board Effectiveness

Your Board is committed to a rigorous evaluation process. Through this evaluation, your Board’s performance is reviewed, including areas where your Board feels it functions effectively and areas where your Board believes it can improve. For 2018 your Board had an annual evaluation process, as further described below, that is coordinated by the Corporate Governance, Sustainability and Corporate Responsibility Committee: a full Board evaluation that included third-party interviews; committee evaluations; and individual director evaluations.

 

1

Annual Process
is Initiated

Your Board’s Corporate Governance, Sustainability and Corporate Responsibility Committee initiates the annual Board, committee and individual director evaluation process and presents the proposed approach to your Board for comment.

2

Board & Committee Assessment Surveys

Assessment surveys solicit each independent director’s opinion regarding your Board’s and committees’ effectiveness relating to topics such as Board and committee composition and operations, peer director evaluations, strategic direction, shareholder value and executive management.

3

Third Party
Director
Interviews

Your Board has engaged a third party to conduct interviews with our directors. Interviews include follow-up conversations regarding answers to Board and Committee assessment surveys.

4

Individual Director Evaluations
& Director
Self-Assessments

Your Board Chairman, in consultation with the Chair of the Corporate Governance, Sustainability and Corporate Responsibility Committee, reviews individual performance and qualifications of each director. In addition, prior to accepting a nomination, each director conducts a self-assessment as to whether he or she satisfies the criteria set forth in the Company’s Corporate Governance Policies and the Corporate Governance, Sustainability and Corporate Responsibility Committee Charter.

5

Presentation
of Findings

Your Corporate Governance, Sustainability and Corporate Responsibility Committee presents its findings to your Board, assessing the contributions of your Board and its committees and discussing any areas in which your Board believes improvement is recommended. Input about the findings is sought from your Board.

6

Feedback
Incorporated

Results requiring consideration are addressed at subsequent Board and committee meetings and reported back to the full Board, where appropriate. For example, in 2018, feedback included indications that your Board should stay focused on Board composition and diversity, and remain focused on cybersecurity and your Company’s strategic initiatives.

Your Board and each committee evaluation includes comprehensive questions designed to provide a wholistic evaluation of the performance of your Board and each committee in light of our current needs. In 2018, your Board also engaged an independent third-party to conduct one-on-one interviews with directors to obtain feedback and assessments. Also, individual director performance evaluations are tailored to each member by your Board’s Chairman, in consultation with the Chair of the Corporate Governance, Sustainability and Corporate Responsibility Committee, in order to consider and review the individual director’s performance and continued qualifications. The 2018 evaluations were shared as needed with the applicable directors, committee members, and your full Board, and led to discussions to determine which areas your Board would like to focus on during 2019 to enhance its effectiveness.


 

 

3

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Shareholder Outreach and Engagement Program

We Have a Robust Shareholder Outreach and Engagement Program

We believe it is important for us to engage regularly with our shareholders so we maintain an active shareholder outreach and engagement program. With support from your Board, your Company’s CEO and the management team, including members of the Corporate Secretary’s office and departments of Investor Relations and Human Resources, focus significant efforts on engaging our major shareholders and the broader investment community. Shareholder feedback and suggestions we receive are reported to the Compensation Committee, Corporate Governance, Sustainability and Corporate Responsibility Committee or your entire Board for its consideration. We also conduct ongoing governance reviews (e.g., assessing governance trends). This process ensures that your Board and management understand and consider the topics that matter most to our shareholders so we can address them effectively.

 

Outreach and Engagement Program Shareholder Feedback

As part of our commitment to continue to understand our investors’ perspectives through and as part of our corporate governance shareholder engagement program, during 2018, our engagement efforts primarily focused on discussion of governance-related issues, executive compensation and ESG matters. During these meetings, participants included members from management and your Board, where appropriate. Our outreach gave us an opportunity to discuss our continuing goal of implementing ESG and executive compensation measures that are in the best interest of our shareholders and our commitment to continue to align pay and performance.

Based on the results of our Outreach and Engagement efforts, your Board has taken the following steps:

 

Adopted Changes to our Executive Compensation Program: Incorporating the feedback we received from shareholders, your Compensation Committee implemented several changes to our executive compensation program in 2018. For further insight on our outreach related to executive compensation, see the “Shareholder Engagement and Say-on-Pay Results” section below in the CD&A.

 

Enhanced our Environmental Related Disclosures: We regularly evaluate our risk and related disclosures, recently we have [published a climate report] and anticipate updating our Sustainability Report with a focus on ESG in 2019.

 

Enhanced our Proxy Statement Disclosures: We continue to enhance our disclosures throughout this proxy statement regarding Board composition and director skills. We also expanded the use of charts and illustrations in this proxy statement to help better explain our corporate governance and executive compensation programs and objectives.

 

 

4

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Included Certain Governance-Related Management Proposals in this Proxy Statement: Your Board is once again seeking shareholder approval of the following three management proposals to: replace existing supermajority voting requirements with a majority voting power threshold (Item 4), implement majority voting for uncontested director elections (Item 5) and implement proxy access (Item 6). Despite a significant effort in an attempt to secure the required shareholder support, it has been unsuccessful and this is the fourth time in recent years your Board is attempting to secure shareholder support on the subjects of simple majority vote and proxy access, and the third time in recent years for the proposal related to a majority vote in uncontested director elections. Your Board cannot unilaterally adopt the proposed amendments because a shareholder vote is necessary under our governing documents.

 

Emphasized our focus on ESG issues: Your Board also added responsibilities to the Corporate Governance, Sustainability and Corporate Responsibility Committee to reflect the committee’s focus on environmental and corporate responsibility issues, and similarly re-named it in order to reflect these important additions.

Communications with your Board of Directors

Your Board provides a process for shareholders and interested parties to send communications to your Board and non-management directors, including our Chairman of the Board. As set forth in your Company’s Corporate Governance Policies, shareholders and interested parties may send written communications to your Board or a specified individual director, including our Chairman of the Board, by mailing any such communications to the FirstEnergy Board of Directors at your Company’s principal executive office, c/o Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, OH 44308-1890. Our Corporate Governance Policies can be viewed by visiting our website at www.firstenergycorp.com/charters.

The Corporate Secretary or a member of her staff reviews all such communications promptly and relays them directly to a Board member or a specified individual director, provided that such communications: (i) bear relevance to your Company and the interests of the shareholder, (ii) are capable of being implemented by your Board, (iii) do not contain any obscene or offensive remarks, (iv) are of a reasonable length, and (v) are not from a shareholder who already has sent two such communications to your Board in the last year. Your Board may modify procedures for sorting shareholders’ and interested parties’ communications or adopt any additional procedures, provided they are approved by a majority of the independent directors.

Other Governance Practices and Policies

Attendance at Board Meetings, Committee Meetings and the Annual Meeting of Shareholders

Our Corporate Governance Policies provide that directors are expected to attend all scheduled Board and applicable committee meetings and your Company’s annual meetings of shareholders.  Your Board held 12 meetings during 2018. All directors attended at least 75 percent of the meetings of your Board and of the committees on which they served.  Also, 13 out of 14 of our directors who were directors at the time of the 2018 year's Annual Meeting attended the 2018 annual meeting.   During 2018, Board members also participated in site visits to your Company’s operating locations.

Non-management directors, who are all independent directors, are required to meet as a group in executive sessions without the CEO or any other non-independent director or management at least six times in each calendar year, and our independent Chairman of the Board presided over all executive sessions. During 2018, the non-management directors met 10 times in executive sessions.

Codes of Business Conduct

Your Company’s Code of Business Conduct applies to all employees, including the CEO, CFO and Chief Accounting Officer. In addition, your Board has implemented a separate Director Code of Ethics and Business Conduct. Both codes can be viewed on our website at www.firstenergycorp.com/charters. Any substantive amendments to, or waivers of, the provisions of these documents will be disclosed and made available on our website, as permitted by the SEC and as disclosed in our most recent Annual Report. Both codes are available, without charge, upon written request to the Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890 or may be viewed on our website at www.firstenergycorp.com/charters.

 

 

5

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Corporate Governance Documents

Your Board believes that your Company’s policies and practices should enhance your Board’s ability to represent your interests as shareholders. Your Board established Corporate Governance Policies which, together with Board committee charters, serve as a framework for meeting your Board’s duties and responsibilities with respect to the governance of your Company. Our Corporate Governance Policies and Board committee charters can be viewed by visiting our website at www.firstenergycorp.com/charters. Any amendments to these documents will promptly be made available on our website.

Director Orientation and Continuing Education

Your Board recognizes the importance of its members to keep current on Company, industry and governance issues and their responsibilities as directors. All new directors participate in orientation soon after being elected to your Board. Also, your Board makes available and encourages continuing education programs for Board members, which include internal strategy meetings, third-party presentations and externally offered programs.

Other Public Company Board Membership

Our Corporate Governance Policies provide that directors will not, without your Board’s approval, serve on the board of directors of more than three other public companies. Further, without your Board’s approval, no director who serves as an executive officer of any public company may serve on a total of more than two public company boards of directors.

Committees of your Board

Your Board established the standing committees listed below. All committees are comprised solely of independent directors as determined by your Board in accordance with our Corporate Governance Policies, which incorporate the New York Stock Exchange (“NYSE”) listing standards and applicable Securities and Exchange Commission (“SEC”) rules. All members of the Audit Committee, Compensation Committee and the Corporate Governance, Sustainability and Corporate Responsibility Committee are independent based on the definition applicable to such committee in the NYSE listing standards and SEC rules. Mr. Jones, your only director who is not considered independent because of his employment with your Company, does not serve on any Board committee.

 

 

  Audit Committee

 

8 meetings in fiscal year 2018        

 

 

    James F. O’Neil III (Chair) *

 

    Paul T. Addison *

 

    Donald T. Misheff *

    

    Leslie M. Turner

 

    * Financial Experts

 

 

The Audit Committee is primarily responsible for assisting your Board with oversight of the integrity of the Company’s:

 

     financial statements;

     compliance with legal, risk management and regulatory requirements;

     independent auditor’s qualifications and independence;

     performance of the Company’s internal audit function and independent auditor;

     systems of internal control with respect to the accuracy of financial records, adherence to Company policies and compliance with legal and regulatory requirements; and

     oversee major financial risk exposures, including risks related to cybersecurity.

 

The Audit Committee is also directly responsible for the appointment, compensation and retention of, and the oversight of the work and pre-approval of all services provided by your Company’s independent registered public accounting firm.  For a complete list of responsibilities and other information, please refer to the Audit Committee Charter available on our website at www.firstenergycorp.com/charters.

 

Your Board appoints at least one member of the Audit Committee who, in your Board’s business judgment, is an “Audit Committee Financial Expert,” as such term is defined by the SEC. Your Board determined that Messrs. Addison, Misheff and O’Neil meet this definition. All members of the Audit Committee are financially literate. As required by the applicable NYSE listing standards, to the extent any member of your Company’s Audit Committee simultaneously serves on the audit committee of more than three public companies, your Company will disclose on its website (www.firstenergycorp.com under the tab “Investors”, “Corporate Governance” and “Board of Directors”) your Board’s determination whether such simultaneous service impairs the ability of that individual to serve effectively on your Company’s Audit Committee. See the Audit Committee Report in this proxy statement beginning on page [9] for additional information regarding the Audit Committee.

 

 

 

6

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Mr. O’Neil was appointed as chair of the Audit Committee in May 2018. Ms. Turner was appointed to the Audit Committee in September 2018. Mr. Addison will retire from your Board at the Annual Meeting in May 2019 in accordance with your Board’s mandatory retirement age and therefore will no longer serve on the Audit Committee.

 

 

  Compensation Committee

 

5 meetings in fiscal year 2018        

 

 

 

    Christopher D.

    Pappas (Chair)

 

    Steven J. Demetriou

 

    Sandra Pianalto

 

    Dr. Jerry Sue Thornton

 

    Leslie M. Turner

 

The Compensation Committee is primarily responsible for:

 

     discharging the responsibilities of your Board relating to compensation of certain executive officers of your Company, including our CEO;

     endorsing a compensation philosophy and objectives that support competitive pay for performance and are consistent with our corporate strategy;

     establishing the appropriate incentive compensation and equity-based plans for our senior-level officers;

     producing the Compensation Committee Report to be included in your Company’s Annual Report on Form 10-K and this proxy statement; and

     reviewing and discussing with our management the disclosures in the Compensation Discussion and Analysis below and making a recommend to your Board whether these disclosures should be included in your Company’s Annual Report on Form 10-K and this proxy statement.

 

The Compensation Committee also reviews and, if appropriate, makes recommendations to your Board regarding the compensation and benefits of our non-employee directors. To the extent permitted under NYSE listing standards and applicable law, the Compensation Committee is authorized to delegate to one or more subcommittees. For information regarding the role of executive officers and our independent compensation consultant in determining or recommending the amount or form of executive and director compensation, see the Compensation Discussion and Analysis (“CD&A”) section below. For a complete list of responsibilities and other information, refer to the Compensation Committee Charter available on our website at www.firstenergycorp.com/charters.

 

Mr. Misheff transitioned off the Compensation Committee in May 2018 and Ms. Turner was appointed to the Compensation Committee in September 2018. Dr. Thornton will retire from your Board in May 2019 in accordance with your Board’s mandatory retirement age and therefore will no longer serve on the Compensation Committee.

 

 

 

  Corporate Governance, Sustainability and Corporate Responsibility Committee

5 meetings in fiscal year 2018       

 

 

    Michael J. Anderson

    (Chair)

 

 

    Julia L. Johnson

 

    Donald T. Misheff

 

    Thomas N. Mitchell

 

    Luis A. Reyes

 

 

 

The Corporate Governance, Sustainability and Corporate Responsibility Committee is primarily responsible for:

 

     Board succession, including ensuring the appropriate balance of diversity of attributes, experience, skills, ethnicity and gender of our directors;

     recommending Director nominees (also refer to the “Director Qualifications” section below for more details); and

     developing and periodically reviewing our corporate governance policies.

 

The Committee is also directly responsible for oversight of our (i) political activities and practices and (ii) our corporate citizenship practices, including sustainability, environmental and corporate social responsibility initiatives.  For a complete list of responsibilities and other information, refer to the Corporate Governance, Sustainability and Corporate Responsibility Committee Charter available on our website at www.firstenergycorp.com/charters.

 

Mr. Misheff was appointed to the Corporate Governance, Sustainability and Corporate Responsibility Committee in May 2018.

 

 

 

 

 

7

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

 

  Finance Committee

 

6 meetings in fiscal year 2018        

    Paul T. Addison

    (Chair)

 

    Michael J. Anderson

 

    Steven J. Demetriou

 

    Christopher D. Pappas

 

    Sandra Pianalto

 

    Dr. Jerry Sue Thornton

 

The Finance Committee is primarily responsible for monitoring and overseeing your Company’s financial resources and strategies, with emphasis on those issues that are long-term in nature. For a complete list of responsibilities and other information, refer to the Finance Committee Charter available on website at www.firstenergycorp.com/charters.

 

Dr. Thornton and Mr. Addison will retire from your Board in May 2019 in accordance with your Board’s mandatory retirement age and therefore will no longer serve on the Finance Committee. It is anticipated that your Board will appoint a new Finance Committee Chair at its scheduled May Organizational meeting.  

 

 

  Nuclear Committee

 

5 meetings in fiscal year 2018        

 

   Nuclear Committee

    Thomas N. Mitchell

     (Chair)

 

    Julia L. Johnson

 

    James F. O’Neil III

 

    Luis A. Reyes

 

 

The Nuclear Committee is primarily responsible for monitoring the activities of the nuclear units owned by FirstEnergy Nuclear Generation, LLC, during the period of restructuring through its conclusion as those units progress through their restructuring, decommissioning or sale, and also to monitor and oversee the retired nuclear unit owned by GPU Nuclear, Inc. For a complete list of responsibilities and other information, refer to the Nuclear Committee Charter available on our website at www.firstenergycorp.com/charters.

 

 

 

 

 

8

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 Audit Committee Report

 

The Audit Committee of your Board is charged with assisting your full Board in fulfilling its oversight responsibility with respect to the quality and integrity of the accounting, auditing, and financial reporting practices of your Company. The Audit Committee acts under a written charter that is reviewed annually, revised as necessary, and is approved by your Board. The charter specifies that the Audit Committee is directly responsible for the appointment, compensation and retention of, and the oversight of the work and pre-approval of all services provided by your Company’s independent registered public accounting firm, which was PricewaterhouseCoopers LLP during 2018. In connection with the Audit Committee’s approval of any non-audit services, the Audit Committee considers whether the independent registered public accounting firm’s performance of any non-audit services is compatible with the independent auditor’s independence.

As part of the Audit Committee’s auditor engagement process, the Audit Committee considers whether to rotate the independent registered public accounting firm. The Audit Committee also participates in the selection of and ensures the regular rotation of the lead audit partner and concurring partner of the Company’s independent registered public accounting firm every five years. PricewaterhouseCoopers LLP has been the Company’s independent auditor since 2002. The Audit Committee currently believes that there are benefits to having an independent auditor with an extensive history with the Company. The benefits include: quality audit work and accounting advice due to PricewaterhouseCoopers LLP’s institutional knowledge of our business and operations, accounting policies and financial systems, and internal control framework; knowledge of the utility industry; and operational efficiencies and a resulting lower fee structure because of PricewaterhouseCoopers LLP’s history and familiarity with our business.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in your Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In performing its review, the Audit Committee discussed the propriety of the application of accounting principles by your Company, the reasonableness of significant judgments and estimates used in the preparation of the financial statements, and the clarity of disclosures in the financial statements.

The Audit Committee reviewed and discussed with your Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, their opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States. This discussion covered the matters required by Auditing Standard No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board, including its judgments as to the propriety of the application of accounting principles by your Company.

The Audit Committee received the written disclosures and the letter from the independent registered public accounting firm regarding their independence from your Company as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed with the independent registered public accounting firm such firm’s independence.

The Audit Committee discussed with your Company’s internal auditors and independent registered public accounting firm the overall scope, plans, and results of their respective audits. The Audit Committee met with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of your Company’s internal controls, and the overall quality of your Company’s financial reporting process.

Based on the above reviews and discussions, the Audit Committee recommended to your Board that the audited financial statements be included in your Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the SEC.

Audit Committee Members: James F. O’Neil III (chair), Paul T. Addison, Donald T. Misheff and Leslie M. Turner.


 

 

9

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Matters Relating to the

Independent Registered Public Accounting Firm

 

Audit Fees

The following is a summary of the fees paid by your Company to its independent registered public accounting firm, PricewaterhouseCoopers LLP, for services provided to your Company and its reporting subsidiaries during the years 2018 and 2017.

PricewaterhouseCoopers LLP billed your Company an aggregate of in $7,634,500 in 2018 and $9,001,500 in 2017 in fees for professional services rendered for the audit of your Company’s annual financial statements and the review of the financial statements included in each of your Company’s Quarterly Reports on Form 10-Q, services that are normally provided in connection with statutory and regulatory filings or engagements, audit-related services and non-audit-related services as noted below.

 

 

Fees for Audit Year 2018

Fees for Audit Year 2017

 

 

 

 

Audit Fees(1)

$7,345,000

$8,460,000

 

 

 

 

 

Audit Related Fees(2)

$163,200

$502,000

 

 

 

 

 

Tax Fees(3)

$120,000

- 0 -

 

 

 

 

 

All Other Fees(4)

$6,300

$39,500

 

 

 

 

 

Total

$7,634,500

$9,001,500

 

 

(1)

Professional services rendered for the audits of your Company’s and certain of its subsidiaries’ annual financial statements and reviews of unaudited financial statements included in your Company’s and its SEC reporting subsidiary’s Quarterly Reports on Form 10-Q and for services in connection with statutory and regulatory filings or engagements, including comfort letters, agreed upon procedures and consents for financings and filings made with the SEC. 2017 audit fees include approximately $1.6 million in audit fees for FES’ audit in 2017.

(2)

Professional services rendered in 2018 related to the attestation of the Penn Power Company’s Net Earnings certificate and professional services rendered in 2017 related to SEC Regulation AB.

(3)

Professional services rendered in connection with the Foreign Investment in Real Property Tax Act.

(4)

Non-audit-related software subscription fees to PricewaterhouseCoopers LLP.

The Audit Committee has considered whether any non-audit services rendered by the independent registered public accounting firm are compatible with maintaining its independence. The Audit Committee, in accordance with its charter and in compliance with all applicable legal and regulatory requirements promulgated from time to time by the NYSE and SEC, has a policy under which the independent registered public accounting firm cannot be engaged to perform non-audit services that are prohibited by these requirements. The charter further states that any engagement of the independent registered public accounting firm to perform other audit-related or any non-audit services must have approval in advance by the Chair of the Audit Committee upon the recommendation of the Vice President, Controller and Chief Accounting Officer. Such approved engagement is then presented to the Audit Committee at its next regularly scheduled meeting. All audit and non-audit services provided by PricewaterhouseCoopers LLP in 2018 and 2017 were pre-approved.


 

 

10

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Director Compensation in Fiscal Year 2018

 

 

Name(1)

Fees Earned

or Paid

in Cash ($)(2)

Stock

Awards

($)(3)

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings ($)(4)

All Other

Compensation

($)(5)

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

Paul T. Addison

$110,000

$134,898

$3,569

$0

$248,467

 

 

 

 

 

 

Michael J. Anderson

$110,000

$134,898

$2,303

$7,000

$254,201

 

 

 

 

 

 

William T. Cottle(6)

$35,495

$50,417

$15,284

$0

$101,196

 

 

 

 

 

 

Steven J. Demetriou

$95,000

$134,898

$0

$0

$229,898

 

 

 

 

 

 

Julia L. Johnson

$95,000

$134,898

$0

$0

$229,898

 

 

 

 

 

 

Donald T. Misheff

$196,580

$134,898

$0

$0

$331,478

 

 

 

 

 

 

Thomas N. Mitchell

$112,823

$134,898

$681

$0

$248,402

 

 

 

 

 

 

James F. O’Neil III

$110,582

$134,898

$0

$0

$245,480

 

 

 

 

 

 

Christopher D. Pappas

$110,000

$134,898

$0

$2,500

$247,398

 

 

 

 

 

 

Sandra Pianalto(7)

$81,806

$116,134

$0

$0

$197,940

 

 

 

 

 

 

Luis A. Reyes

$97,979

$134,898

$0

$0

$232,877

 

 

 

 

 

 

George M. Smart(6)

$91,332

$50,417

$17,444

$16,755

$175,948

 

 

 

 

 

 

Dr. Jerry Sue Thornton

$94,928

$134,898

$0

$5,000

$234,826

 

 

 

 

 

 

Leslie M. Turner(8)

$26,848

$38,090

$0

$0

$64,938

 

(1)

Charles E. Jones, President and CEO, is not included in this table because during 2018 he was an employee of your Company and therefore received no compensation for his service as director. The compensation received by Mr. Jones is shown in the 2018 Summary Compensation Table (“SCT”) below.

(2)

The amounts set forth in the Fees Earned or Paid in Cash column consists of fees earned in cash whether paid in cash, deferred into the FirstEnergy Corp. Deferred Compensation Plan for Outside Directors (“DDCP”) or elected to be received in stock.

(3)

The amounts set forth in the Stock Awards column represents the equity retainer received under the FirstEnergy Corp. 2015 Incentive Compensation Plan (“2015 Incentive Plan”) in the form of shares of common stock. Each amount constitutes the aggregate grant date fair value of stock awards for fiscal 2018 calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The equity retainer is typically paid in quarterly installments. The fair value on the grant dates for each director listed in the table was $33,742 on February 26, 2018; $33,725 on April 26, 2018; $33,714 on August 6, 2018; and $33,717 on October 30, 2018. Share amounts are rounded down. There were no option awards or stock awards outstanding as of December 31, 2018.

(4)

The amounts set forth in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column reflect only the above-market earnings on nonqualified deferred compensation. There are no pension values for directors. The formula used to determine the above market earnings equals 2018 total interest multiplied by the difference between 120 percent of the Applicable Federal Rate for long-term rates (AFR) and the plan rate and divided by the plan rate.

(5)

The amounts set forth in the All Other Compensation column include compensation not required to be included in any other column. Charitable matching contributions made on behalf of our directors represent the entire amount in the column, other than for Mr. Smart.  Charitable matching contributions were $7,000 ($2,000 of which was a 2017 match processed in 2018) for Mr. Anderson, $2,500 for Mr. Pappas and $5,000 for Dr. Thornton. Personal use of corporate aircraft was $14,142 for Mr. Smart. Gifts were $2,613 for Mr. Smart. The FirstEnergy Foundation supports the charitable matching contributions under its Matching Gifts Program.

(6)

Messrs. Cottle and Smart retired effective May 15, 2018.

(7)

Ms. Pianalto was elected to your Board effective February 20, 2018. The amounts paid to Ms. Pianalto for 2018 were prorated based on her election date.

(8)

Ms. Turner was elected to your Board effective September 19, 2018. The amounts paid to Ms. Turner for 2018 were prorated based on her election date.


 

 

11

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Compensation of Directors

We use a combination of cash and equity-based incentive compensation in order to attract and retain qualified candidates to serve on your Board. Equity compensation provides incentives to directors linking their personal interests to our long-term financial success and to increases in shareholder value. In setting director compensation, we take into consideration the significant amount of time that directors spend in fulfilling their duties to us as well as the skill level required of members of your Board. Only non-employee directors receive the compensation described below for their service on your Board. Since Mr. Jones was an employee, he was not eligible to receive any additional compensation for his service on your Board in 2018.

Fee Structure

In 2018, each non-employee director received a cash retainer of $95,000 and an equity retainer valued at approximately $135,000 and paid in the form of our common stock. The Chairs of the Corporate Governance, Sustainability and Corporate Responsibility, Compensation, Finance, and Nuclear Committees each received an additional $15,000 cash retainer in 2018 for serving as a committee chairperson, and the Chair of the Audit Committee received an additional $20,000 cash retainer in 2018. The amounts paid to directors for 2018 were prorated accordingly based on the duration of their service. Directors are also paid meeting fees of $1,500, but only for in-person committee meetings and/or site visits held off-cycle. Mr. Misheff, the non-executive Chairman of the Board, received an additional $94,162 cash retainer prorated in 2018 for serving in that capacity beginning in May 2018. Mr. Smart, who retired as non-executive Chairman of the Board received an additional $55,838 cash retainer in 2018 for serving in the capacity until his retirement in May 2018. Ms. Turner currently directs the Company to pay her cash retainer to her wholly owned limited liability company, and as such, her cash retainer is not eligible for deferral as described below. Effective January 1, 2019, the cash and equity retainers were increased to $100,000 and $150,000 respectively; the cash retainer for the Chair of the Audit Committee was increased to $25,000; the cash retainer for the Chair of the Compensation Committee was increased to $20,000; and individual meeting fees were eliminated.

Equity and cash retainers and chairperson retainers were paid in quarterly installments. Any equity compensation and any compensation deferred into equity was granted under the 2015 Incentive Plan. Directors are responsible for paying all taxes associated with cash and equity retainers. We do not gross up equity grants to directors to cover tax obligations.

We believe it is critical that the interests of directors and shareholders be clearly aligned. As such, similar to the NEOs identified in the CD&A, directors are also subject to share ownership guidelines. Within 90 days of their election to your Board, a director must beneficially own a minimum of 100 shares of our common stock. Within five years of joining your Board, each director is required to own shares of our common stock with an aggregate value of at least six times the annual cash retainer (currently $570,000 in common stock). Each director has either attained the required share ownership guideline or is expected to attain the required share ownership guideline within the allotted amount of time. The share ownership guidelines are reviewed by the Compensation Committee for competitiveness on an annual basis and were last reviewed at the Compensation Committee’s July 2018 meeting.

For 2018, the following directly and indirectly held shares were included in determining whether a non-employee director met his/her ownership guidelines:

 

Shares directly or jointly owned in certificate form or in a stock investment plan;

 

Shares held individually or jointly by a broker, or, in certain circumstances, held in trust, or in an individual retirement account (“IRA”), shares held by a spouse, or other beneficially owned shares, to the extent known by the Company; and

 

All units held in the DDCP, discussed below, and units held in the Allegheny Energy, Inc. Non-Employee Director Stock Plan (“AYE Director’s Plan”) or the Allegheny Energy Inc. Amended and Restated Revised Plan for Deferral of Compensation of Directors (“AYE DCD”), which units are payable in shares.

Deferred Compensation Plan for Outside Directors

The DDCP is a nonqualified deferred compensation plan that provides directors the opportunity to defer compensation. Directors may defer up to 100 percent of their cash retainer into cash or stock accounts. Deferrals into the cash account can be invested in one of nine funds, similar to the investment funds available to all of our employees through the FirstEnergy Corp. Savings Plan, or in a Company-paid annually adjusted fixed income account. The Company paid interest at an annual rate of 7.13% on funds deferred into cash accounts prior to 2013 and 5.13% on funds deferred into cash accounts beginning in 2013. The interest rate received by the directors is the same rate received by the NEOs under the FirstEnergy Corp. Amended and Restated Executive Deferred Compensation Plan (“EDCP”). In 2018, the Compensation Committee approved a third amendment to the DDCP in order to comply with Department of Labor (DOL) regulations under the Employment Retirement Income Security Act (ERISA), which amends the claims procedure requirements for disability benefits.

 

 

12

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

For stock accounts, dividend equivalent units are accrued quarterly and applied to the directors’ accounts on each dividend payment date using the closing price of our common stock on that date. Payments made with respect to any dividend equivalent units that accrue after January 21, 2014, will be paid in cash.

 

Other Payments or Benefits Received by Directors

The corporate aircraft is available, when appropriate, for transportation to and from Board and committee meetings and training seminars. Each of Messrs. Misheff and Smart had the use of an office and administrative support with respect to carrying out his duties as non-executive Chairman of the Board during his respective time serving in such role in 2018. We pay all fees associated with director and officer insurance and business travel insurance for our directors. In 2018, our directors were eligible to receive perquisites including limited personal use of the corporate aircraft, matching charitable contributions and gifts, the collective value of which was less than $10,000 for each director other than Mr. Smart. Directors are responsible for paying all taxes associated with perquisites and personal benefits.

It is critically important to us and our shareholders that we be able to attract and retain the most capable persons reasonably available to serve as our directors. As such, all directors have entered into written indemnification agreements, which are intended to secure the protection for our directors contemplated by our Amended Code of Regulations and Ohio law. Your Board adopted an updated form of director and officer indemnification agreement in May 2018, which replaced and superseded any prior indemnification agreement.

Each indemnification agreement provides, among other things, that we will, subject to the agreement terms, indemnify a director if by reason of their corporate status as a director, the person incurs losses, liabilities, judgments, fines, penalties, or amounts paid in settlement in connection with any threatened, pending, or completed proceeding, whether of a civil, criminal, administrative, or investigative nature. In addition, each indemnification agreement provides for the advancement of expenses incurred by a director, subject to certain exceptions, in connection with proceedings covered by the indemnification agreement. As a director and officer, the agreement for Mr. Jones addresses indemnity in both roles.

 


 

 

13

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Director Qualifications

 

The Corporate Governance, Sustainability and Corporate Responsibility Committee recommends Board candidates by identifying qualified individuals in a manner that is consistent with criteria approved by your Board. In consultation with the CEO, the Chairman of the Board and the full Board, the Corporate Governance, Sustainability and Corporate Responsibility Committee searches for, recruits, screens, interviews and recommends prospective directors to provide an appropriate balance of knowledge, experience, diversity attributes and capability on your Board. Suggestions for potential Board candidates come to the Corporate Governance, Sustainability and Corporate Responsibility Committee from a number of sources, including incumbent directors, officers and others. The Corporate Governance, Sustainability and Corporate Responsibility Committee has sole authority to retain and engage a third-party search firm to identify a candidate or candidates.

The Committee has actively engaged in director succession planning and regularly evaluates the addition of a director or directors with particular attributes with an appropriate mix of long-, medium-, and short-term tenured directors in its succession planning. Your Board has been able to attract high quality diverse candidates and did not use a third party to assist with the identification of potential nominees but would consider using a third party in the future, if needed or desired. The Corporate Governance, Sustainability and Corporate Responsibility Committee considers suggestions for candidates for membership on your Board, including candidates recommended by shareholders for your Board. Provided that shareholders suggesting director candidates have complied with the procedural requirements set forth in the Corporate Governance, Sustainability and Corporate Responsibility Committee Charter and Amended Code of Regulations, the Corporate Governance, Sustainability and Corporate Responsibility Committee applies the same criteria and employs substantially similar procedures for evaluating candidates suggested by shareholders for your Board as it would for evaluating any other Board candidate. The Corporate Governance, Sustainability and Corporate Responsibility Committee will give due consideration to all recommended candidates that are submitted in writing to the Corporate Governance, Sustainability and Corporate Responsibility Committee, in care of the Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890, received at least 120 days before the publication of your Company’s annual proxy statement from a shareholder or group of shareholders owning one half of one percent (0.5 percent) or more of your Company’s voting stock for at least one year, and accompanied by a description of the proposed nominee’s qualifications and other relevant biographical information, together with the written consent of the proposed nominee to be named in the proxy statement and to serve on your Board.

Attributes, Experience, Qualifications and Skills of your Board

In recruiting and selecting Board candidates, the Corporate Governance, Sustainability and Corporate Responsibility Committee takes into account the size of your Board and considers a “skills matrix” to determine whether those skills and/or other attributes qualify candidates for service on your Board. The attributes, experiences, qualifications and skills considered in accordance with Corporate Governance Policies and the Corporate Governance, Sustainability and Corporate Responsibility Committee charter for each director nominee led your Board to conclude that the nominee is qualified to serve on your Board.

 

 

14

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

The high-level overview below depicts some of the attributes, experiences, qualifications and skills of our director nominees the committee takes into account. It is not intended to be an exhaustive list of each director nominee’s skills or contributions to your Board. Also, additional biographical information and qualifications for each nominee is provided in the “Biographical Information and Qualifications of Nominees for Election as Directors” section below and contains information regarding the person’s service as a director, principal occupation, business experience along with key attributes, experience and skills.

 

 

Anderson

Demetriou

Johnson

Jones

Misheff

Mitchell

O'Neil

Pappas

Pianalto

Reyes

Turner

CEO or senior leadership

   experience

x

x

x

x

x

x

x

x

x

x

x

Electric utility or nuclear power

   industry

 

 

x

x

 

x

x

 

 

x

 

Regulatory environment

   familiarity

 

 

x

x

x

x

x

x

x

x

x

Engineering, innovation or

   technology

 

x

x

x

 

x

x

x

 

x

 

Accounting or finance

x

x

 

x

x

x

x

x

x

 

x

Risk oversight or risk

   management

x

x

 

x

x

x

x

x

x

 

x

Environmental, Social, or

   Governance (ESG)

x

 

x

x

x

x

 

x

 

x

x

Other Public Company

   Directorship

x

x

x

 

x

 

x

x

x

 

 

Independent

x

x

x

 

x

x

x

x

x

x

x

Diverse (Female)

 

 

x

 

 

 

 

 

x

 

x

Diverse (Race/Ethnicity)

 

 

x

 

 

 

 

 

 

x

x

 

The Corporate Governance, Sustainability and Corporate Responsibility Committee regularly assesses the size and composition of your Board in light of the current operating requirements of your Company and the current needs of your Board. Each of the nominees brings a strong and unique background and skill set to your Board, giving your Board, as a whole, competence and experience in a wide variety of areas necessary to oversee the operations of your Company.

Your Company is committed to a policy of inclusiveness and believes that well assembled boards consist of a diverse group of individuals who possess a variety of complementary skills and experiences.  Your Board and the Corporate Governance, Sustainability and Corporate Responsibility Committee is also committed to actively seeking out highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experience, to include in the pool from which Board nominees are chosen. Accordingly, your Board has set a goal that it will be composed of at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future.  The Corporate Governance, Sustainability and Corporate Responsibility Committee also considers differences in point of view, professional experience, education, and other individual skills, qualities, and attributes that contribute to the optimal functioning of your Board as a whole. Also, our Corporate Governance Policies provide that your Board will not nominate for election a non-employee director following his or her 72nd birthday.

Director Independence

Your Board annually reviews the independence of each of its members to make the affirmative determination of independence that is called for by our Corporate Governance Policies and required by the SEC and NYSE listing standards, including certain independence requirements of Board members serving on the Audit Committee, the Compensation Committee and the Corporate Governance, Sustainability and Corporate Responsibility Committee.

Your Board adheres to the definition of an “independent” director as established by the NYSE and the SEC. The definition used by your Board to determine independence is included in our Corporate Governance Policies and can be viewed by visiting our website at www.firstenergycorp.com/charters.

Each year, our directors complete a questionnaire to assist your Board in assessing whether each director meets the NYSE’s independence standards and the related provisions in your Company’s Corporate Governance Policies. Your Company facilitates this review by examining its financial records to determine if amounts paid to or received from entities in which each non-employee director or immediate family member has a relationship based on responses to the questionnaires. Subject to the categorical standards approved by your Board and described below, a list of the entities and the amounts the Company paid to or received from those entities is provided to the Corporate Governance, Sustainability and Corporate Responsibility Committee. Utilizing this information, the Corporate Governance, Sustainability and Corporate Responsibility Committee presents to your

 

 

15

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Board (i) an evaluation, with regard to each director, whether the director has any material relationship with the Company or any of its subsidiaries; (ii) a recommendation of whether the amount of any payments between the Company and relevant entities could interfere with a director’s ability to exercise independent judgment; and (iii) a review of any other relevant facts and circumstances regarding the nature of these relationships, to determine whether other factors, regardless of the categorical standards your Board has adopted or under the NYSE’s independence standards, might impede a director’s independence. Based on a review of information concerning each of its non-employee directors and the recommendation of the Corporate Governance, Sustainability and Corporate Responsibility Committee, your Board will affirmatively determine whether a director may be considered “independent.”

Additionally, your Board recognizes that in the ordinary course of business, relationships and transactions may occur between your Company and its subsidiaries and entities with which some of our directors are or have been affiliated. Accordingly, our Corporate Governance Policies provide categorical standards to assist your Board in determining what does not constitute a material relationship for purposes of determining a director’s independence. The following commercial and charitable relationships will not be considered to be a material relationship that would impair a director’s independence: (i) if the director, an immediate family member or a person or organization with which the director has an affiliation purchases electricity or related products or services from the Company or its subsidiaries in the ordinary course of business and the rates or charges involved in the transaction are fixed in conformity with law or governmental authority or otherwise meet the requirements of Regulation S-K Item 404(a) Instruction 7, and (ii) the aggregate charitable contributions made by the Company to an organization with which a director, an immediate family member or a person or organization with which the director has an affiliation were less than $100,000 in each of the last three fiscal years. Notwithstanding the foregoing, your Board will not treat a director’s relationship with the Company as categorically immaterial if the relationship otherwise conflicts with the NYSE corporate governance listing standards or is required to be disclosed by the Company pursuant to Item 404 of Regulation S-K.

In making such determinations, your Board considered the fact that certain directors are executive officers of companies with which we conducted business. In addition, many of our directors are or were directors, trustees, or similar advisors of entities with which we conducted business or of non-profit organizations with which we conducted business and/or made contributions. Outside of their service as a Company director, none of your Company’s independent directors currently provide professional or other services to your Company, its affiliates or any officer of your Company and none of your Company’s directors are related to any executive officer of your Company.

 

Specifically, your Board considered the following relationships and transactions, which occurred in the ordinary course of business, between your Company and its subsidiaries and certain entities some of our directors have been affiliated with that existed or occurred during the preceding three years:

 

Regulated electric services and related products and services purchased from your Company (by a university where Ms. Pianalto serves as an executive in residence);

Non-regulated electric services and related non-electric products and services purchased from your Company (by companies where Ms. Pianalto and Messrs. Anderson and Pappas serve as directors, by a company where family members of Mr. Anderson are employed, by a university where Ms. Pianalto serves as an executive in residence, by a community college where Dr. Thornton is a president emeritus, and by a company where Mr. Reyes serves as a chairman of a nuclear safety review board);

Purchases by your Company of electric distribution and power generation related products and services (from companies where Dr. Thornton, Ms. Pianalto, and Messrs. Anderson, O’Neil and Pappas serve as directors, from a company where a family member of Mr. Anderson is employed and from a company where Mr. Reyes serves as a chairman of a nuclear safety review board);

Purchases by your Company of non-audit related services (from an accounting firm that is not our independent accountant where a family member of Mr. Misheff is employed);

Purchases by your Company for information technology related services and office-related products and services (from a company where Ms. Pianalto serves as a director); and

Payments by your Company relating to charitable contributions and sponsorships, membership fees/dues, tuition for employee training and related expenses (to a university where Ms. Pianalto serves as an executive in residence, to an organization where Mr. Reyes serves as a training and accreditation board member and to a community college where Dr. Thornton is a president emeritus).

 

 

16

FirstEnergy Corp. 2019 Proxy Statement

 


1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

In all cases, your Board determined that the nature of the business conducted and any interest of the applicable director in that business were immaterial both to your Company and to the director. Pursuant to your Company’s Corporate Governance Policies, your Board also determined that the amounts paid to or received from the other entity affiliated with the applicable director in connection with the applicable transactions in each of the last three years did not exceed the greater of $1 million or two percent of the consolidated gross revenue of that entity, which is the threshold set forth in the NYSE listing standards and our Corporate Governance Policies. The Corporate Governance, Sustainability and Corporate Responsibility Committee determined that none of the relationships described above constituted a related person transaction requiring disclosure under the heading “Certain Relationships and Related Person Transactions” in this proxy statement. Also, in each case where the director is a current executive officer of another company, any transactions constituted less than one percent of your Company’s and the other company’s consolidated gross revenues in each of the last three completed fiscal years.

Based on the February 2019 independence review, your Board affirmatively determined that all non-employee director nominees – Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Donald T. Misheff, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Sandra Pianalto, Luis A. Reyes and Leslie M. Turner – are independent pursuant to our Corporate Governance Polices, the rules and regulations of the SEC and the listing standards of the NYSE. Additionally, Mr. Paul T. Addison and Dr. Jerry Sue Thornton, who were not nominated for election to your Board at the Meeting pursuant to your Board’s mandatory retirement age policy, were considered independent directors. Mr. Jones is not considered an independent director because of his employment with your Company.


 

 

 

17

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Biographical Information and

Qualifications of Nominees for Election as Directors

 

The following provides information about each director nominee as of the date of this proxy statement. The information presented below includes each nominee’s specific experiences, qualifications, attributes, and skills that led the Corporate Governance, Sustainability and Corporate Responsibility Committee and your Board to the conclusion that he/she should serve as a director of your Company.

 

 

Michael J. Anderson

 

Position, Principal Occupation and Business Experience: Chairman of the board of directors of The Andersons, Inc., a diversified public company with interests in the grain, ethanol and plant nutrient sectors of U.S. agriculture, as well as in railcar leasing and repair and turf products production, since 2016.  He also served as CEO and chairman of the board of directors from 2009 to 2015 and chief executive officer from 1999 to 2015, of The Andersons, Inc.  Director of your Company since 2007.

 

Key Attributes, Experience and Skills: Mr. Anderson received an M.B.A. in Finance and Accounting from the Northwestern University Kellogg Graduate School of Management and was a Certified Public Accountant. He participated in the Harvard Advanced Management Program. Mr. Anderson was an auditor for Arthur Young & Co. In 1996, he became president and chief operating officer of The Andersons, Inc., and he is currently that company’s chairman. Mr. Anderson’s experience in the accounting and executive management areas are invaluable assets for your Board. 

 

 

Age 67

 

Committees:

Corporate

Governance, Sustainability and Corporate Responsibility

(Chair); Finance

 

 

Steven J. Demetriou

 

Position, Principal Occupation and Business Experience: Chairman, chief executive officer and director of Jacobs Engineering Group Inc., a provider of technical professional and construction services, since August 2015. Chairman and chief executive officer (from 2004 to 2015) of Aleris Corporation (“Aleris”), a manufacturer of aluminum rolled products. Mr. Demetriou was chairman and chief executive officer of Aleris when it filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in 2009 and when it successfully emerged from those proceedings in June 2010. He served as a director (from 2008 to 2014) and non-executive chairman (from 2011 to 2014) of Foster-Wheeler AG; director of the OM Group (from 2005 to 2015); and director of Kraton Corporation (from 2009 to 2017). Director of your Company since January 2017.

 

Key Attributes, Experience and Skills: Mr. Demetriou received his Bachelor of Science degree in chemical engineering from Tufts University. His experience extensive leadership and senior management roles, including the role of chief executive officer. In addition, he brings experience in a variety of industries, including engineering, construction and oil and gas. His extensive executive and board experience has equipped him with leadership skills and the knowledge of board processes and functions. This experience qualifies him to serve as a member of your Board.

 

 

 

Age 60

 

Committees: Compensation;

Finance

 

 


 

 

18

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Julia L. Johnson

 

Position, Principal Occupation and Business Experience: President of NetCommunications, LLC, a national regulatory and public affairs firm focusing primarily on energy, telecommunications and broadcast regulation, since 2000. She serves as a director of the following three other public companies: American Water Works Company, Inc., MasTec, Inc., and NorthWestern Corporation. Director of your Company since 2011.

 

Key Attributes, Experience and Skills: Ms. Johnson received her law degree from the University of Florida College of Law after graduating from the University of Florida with a Bachelor of Science in business administration. She is a former chairman and commissioner of the Florida Public Service Commission, which provides her with valuable insight into the electric utility industry. In her current position as president of NetCommunications, LLC, she develops strategies for achieving objectives through advocacy directed at critical decision makers. She previously served as senior vice president of Communications and Marketing at Milcom Technologies and also has additional public company board experience. Ms. Johnson’s extensive regulatory background, legal experience and additional board experience qualify her to serve as a member of your Board.

 

 

 

 

Age 56

 

Committees:

Corporate

Governance, Sustainability and Corporate Responsibility;

   Nuclear

 

Charles E. Jones

 

Position, Principal Occupation and Business Experience: President, CEO and director of your Company since January 1, 2015. He was Executive Vice President and President, FirstEnergy Utilities throughout 2014, Senior Vice President and President, FirstEnergy Utilities from 2010 to 2011, and also served as President of your Company’s utility subsidiaries from 2010 through 2014. He also serves as a director of many other subsidiaries of your Company, and served as a director and executive officer of FirstEnergy Solutions Corp. (“FES”) and certain of its subsidiaries from 2015 to 2016. From 2015 to 2017, Mr. Jones was chief executive officer of FirstEnergy Nuclear Operating Company (“FENOC”). FES, its subsidiaries and FENOC filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in March 2018.

 

Key Attributes, Experience and Skills: Mr. Jones received an undergraduate degree in electrical engineering from The University of Akron. He also attended the United States Naval Academy and was a member of the Institute of Electrical and Electronics Engineers. He completed the Reactor Technology Course for Utility Executives at the Massachusetts Institute of Technology and the Public Utility Executive Program at the University of Michigan. He has had an extensive career, at Ohio Edison Company and later FirstEnergy Corp., and has held various executive leadership positions, most recently Executive Vice President and President of FirstEnergy Utilities, and currently President and CEO. With this vast experience, Mr. Jones brings to your Board an extraordinary understanding of the inner workings of the public utilities industry and FirstEnergy.

 

 

 

Age 63

 


 

 

19

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

 

Donald T. Misheff

 

Position, Principal Occupation and Business Experience: Non-executive Chairman of the Board since May 2018. Retired in 2011 as managing partner (position held since 2003) of the Northeast Ohio offices of Ernst & Young LLP, a public accounting firm. He serves as a director of the following two other public companies: TimkenSteel Corp. and Trinseo S.A. Director of your Company since 2012.

 

Key Attributes, Experience and Skills: Mr. Misheff graduated from The University of Akron with a major in accounting and is a Certified Public Accountant. As the managing partner of the Northeast Ohio offices of Ernst & Young LLP from 2003 until his retirement in 2011, he advised many of the region’s largest companies on financial and corporate governance issues. He began his career with Ernst & Young LLP in 1978 as part of the audit staff and later joined the tax practice, specializing in accounting/financial reporting for income taxes, purchase accounting, and mergers and acquisitions. He has extensive experience performing, reviewing, and overseeing the audits of financial statements of a wide range of public companies. Mr. Misheff’s vast financial and corporate governance experience, together with his extensive experience with a wide range of public companies provides an excellent background for his current position as our non-executive Chairman of the Board.

 

 

 

Age 62

 

Committees:

Audit, Corporate

Governance; Sustainability and Corporate Responsibility

 

Thomas N. Mitchell

 

Position, Principal Occupation and Business Experience: Chairman of the World Association of Nuclear Operators since March 2019. Retired in 2015 as the president, chief executive officer and director (positions held since 2009) of Ontario Power Generation Inc. (“OPG”), an Ontario-based electricity generation company. He is also a former director and member of the leadership and compensation committee of the Electric Power Research Institute. Director of your Company since 2016.

 

Key Attributes, Experience and Skills: Mr. Mitchell received his undergraduate degree in Engineering (Nuclear and Thermal Sciences) from Cornell University, his Master of Science degree in Mechanical Engineering from George Washington University and his LLD (Hon) from University of Ontario Institute of Technology, which is an honorary degree. He has extensive experience in the nuclear industry and as a senior executive. Prior to his most recent executive position at OPG, he held progressively more responsible leadership roles before being named the site vice president at the Peach Bottom Atomic Power Station, where he directed the day-to-day operations of the station. He also served as a vice president for the Institute of Nuclear Power Operations and as a Lieutenant (Naval Reactors) in the US Navy. Mr. Mitchell’s industry experience, along with his broad leadership and business skills, are essential to your Board.

 

 

 

Age 63

 

Committee:

Nuclear (Chair), Corporate

Governance; Sustainability and Corporate Responsibility

 

 

James F. O’Neil III

 

Position, Principal Occupation and Business Experience: Principal owner of Forefront Solutions, LLC, which provides consulting services primarily to the energy infrastructure industry, since October 2017. Former president, chief executive officer and director of Quanta Services, Inc., a provider of specialty contracting services to the electric power and oil and gas industries (from 2011 to 2016). He serves as a director of the following three other public companies: Hennessey Capital Partners IV, NRC Group Holdings and Spark Power Group Inc. Director of your Company since January 2017.

 

Key Attributes, Experience and Skills: Mr. O’Neil received his Bachelor of Science degree in civil engineering from Tulane University. His has extensive leadership and senior management experience, including the role of chief executive officer, chief operating officer and senior vice president of operations integration and audit. His extensive executive and board experience has equipped him with leadership skills and the knowledge of board processes and functions. Additionally, Mr. O’Neil’s audit, general corporate decision-making and engineering experience makes him a valuable member to your Board.

 

 

Age 60

 

Committees:

Audit (chair); Nuclear

 

 

20

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Christopher D. Pappas

 

Position, Principal Occupation and Business Experience: Retired in March 2019 as president and chief executive officer (positions held since 2010) of Trinseo S.A., a producer of plastics, latex and rubber. Mr. Pappas transitioned to the role of special adviser at Trinseo S.A., effective March 4, 2019.  He also serves as a director of two public companies: Trinseo S.A. and Univar Inc., a chemical distributor and provider. Director of your Company since 2011. He was a director of Allegheny Energy from 2008 to 2011, and he became a director of your Company approximately seven months after Allegheny Energy’s merger with your Company.

 

Key Attributes, Experience and Skills: Mr. Pappas received an M.B.A. from the Wharton School, University of Pennsylvania and an undergraduate degree in Civil Engineering from the Georgia Institute of Technology. He served in various leadership capacities at NOVA Chemicals Corporation, Dow Chemical, and DuPont Dow Elastomers. His extensive executive and board experience has equipped him with leadership skills and the knowledge of board processes and functions. Additionally, Mr. Pappas’ general corporate decision-making and senior executive experience with a commodity-based business provides a useful background for understanding the operations of your Company.

 

Other Information: Mr. Pappas serves as a special adviser at Trinseo S.A, as well as a director of Univar Inc. and your Company. He manages the demands on his time effectively in many ways: complementary committee memberships on Univar and your Company have enhanced performance in serving these companies effectively; Mr. Pappas is a seasoned director with almost 11 years’ service on your Company’s and Allegheny Energy’s Board; he also has extensive executive experience, and his specialized knowledge of the industry in which both Trinseo S.A. and Univar Inc. operate creates efficiencies for Mr. Pappas in fulfilling his roles with those companies; and differences in the number and duration of board meetings at the three companies facilitates his attendance and performance as further discussed below.

 

Mr. Pappas is a highly engaged member of your Board that actively participates in Board and committee matters. In 2018, he attended 100% of your Company’s Board and committee meetings. He also has participated in engagement calls with certain investors. Since becoming a director of your Company in 2011, Mr. Pappas has attended approximately 98% of regularly scheduled Board and respective committee meetings. Mr. Pappas is always well prepared for your Board and committee meetings and is widely respected by fellow Board members for making informed and meaningful contributions to the decision-making process at these meetings.

 

 

 

Age 63

 

Committees:

Compensation

(Chair); Finance

 


 

 

21

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

 

Sandra Pianalto

 

Position, Principal Occupation and Business Experience: Ms. Pianalto retired in May 2014 as president and chief executive officer of the Federal Reserve Bank of Cleveland, a position she held since 2003. Prior to retiring, Ms. Pianalto also chaired the Federal Reserve’s Financial Services Policy Committee, which is a committee of senior Federal Reserve Bank officials responsible for overall direction of financial services and related support functions for the Federal Reserve Banks and for leadership in the evolving U.S. payment system. Ms. Pianalto is an executive in residence at the University of Akron. She also serves as a director of the following three other public companies: Eaton Corporation plc, Prudential Financial, Inc. and The J.M. Smucker Company. Director of your Company since February 2018.

 

Key Attributes, Experience and Skills: Ms. Pianalto received a master’s degree in economics from The George Washington University and a bachelor’s degree in economics from the University of Akron.  She is also a graduate of the Advanced Management Program at Duke University’s Fuqua School of Business.  Ms. Pianalto has extensive experience in monetary policy and financial services, and brings wide-ranging leadership and operating skills through her former roles with the Federal Reserve Bank of Cleveland and experience serving as a director of other public companies. Ms. Pianalto joined the Federal Reserve Bank of Cleveland in 1983 as an economist in the research department and held progressively more responsible leadership roles before being named president and chief executive officer. As president and chief executive officer of the Federal Reserve Bank of Cleveland, she developed expertise in economic research, supervision of financial institutions, and payment services to banks and the U.S. Treasury. In this role, Ms. Pianalto also managed approximately 950 employees. Ms. Pianalto’s comprehensive experience qualifies her to provide substantial guidance and oversight to your Board, particularly in overseeing the Company’s finances.

 

 

 

Age 64

 

Committees:

Compensation;

Finance

Luis A. Reyes

 

Position, Principal Occupation and Business Experience: Retired in 2011 as a Regional Administrator (position held since 2008) of the U.S. Nuclear Regulatory Commission (the “NRC”), a federal regulatory agency. Director of your Company since 2013.

 

Key Attributes, Experience and Skills: Mr. Reyes received his undergraduate degree in Electrical Engineering and his Master of Science degree in Nuclear Engineering from the University of Puerto Rico. He has extensive experience in the nuclear field and has held senior leadership positions with the NRC. He joined the NRC in 1978 where he held progressively more responsible leadership roles before being named executive director of operations in 2004, where he managed the day-to-day operations of the agency. He also served as regional administrator for NRC Region II, overseeing all new commercial nuclear power plant construction in the country as well as operating plant inspections in the southeast United States. Mr. Reyes retired from the NRC in 2011 with 33 years of service. Mr. Reyes’ engineering and industry experience is essential to your Board.

 

 

 

Age 67

 

Committees:

Corporate

Governance, Sustainability and Corporate Responsibility;

Nuclear

 

 


 

 

22

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

 

Leslie M. Turner

 

Position, Principal Occupation and Business Experience: Retired in March 2018 as senior vice president, general counsel and corporate secretary (positions held since 2012) of The Hershey Company, a global confectionery company. Director of your Company since September 2018.

 

Key Attributes, Experience and Skills: Ms. Turner received her law degree from the Georgetown University Law Center after graduating from the New York University with a Bachelor of Science degree.  She also received a Master of Laws in Law and Government from the American University, Washington College of Law. Ms. Turner has extensive and wide-ranging leadership, legal, governance and corporate strategy skills through her former roles with The Hershey Company and

The Coca-Cola Company. Ms. Turner served as senior vice president, general counsel, and corporate secretary of The Hershey Company from 2012 until her retirement in March 2018. In this role, Ms. Turner was the leader of Hershey’s legal, government relations, corporate secretary, and corporate security functions. She also advised Hershey on M&A opportunities and other stakeholder considerations facing publicly traded companies. Prior to joining Hershey, Ms. Turner’s career included progressively more responsible leadership roles at Coca-Cola North America, Akin Gump Hauer & Feld, LLP and the senior executive service level of the federal government. Ms. Turner’s legal experience and additional regulatory experience qualify her to serve as a member of your Board.

 

 

Age 61

 

Committees:

Audit; Compensation

 


 

 

23

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Items to Be Voted On

 

 

Item  1

 

Election of Directors

 

Your Board recommends that you vote FOR All Nominees.

You are being asked to vote for the following 11 nominees to serve on your Board for a term expiring at the annual meeting of shareholders in 2019 and until their successors shall have been elected: Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Charles E. Jones, Donald T. Misheff, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Sandra Pianalto, Luis A. Reyes and Leslie M. Turner. Ms. Turner was elected to your Board effective September 19, 2018 and is a nominee for election by shareholders at the Annual Meeting. Ms. Turner was recommended as a director by the members of our Corporate Governance, Sustainability and Corporate Responsibility Committee.

The “Biographical Information and Qualifications of Nominees for Election as Directors” section of this proxy statement provides information for all nominees for election at the Meeting. The “Director Qualifications” section of this proxy statement provides information relating to your Board’s and Corporate Governance, Sustainability and Corporate Responsibility Committee’s review of nominees. Your Board has no reason to believe that the persons nominated will not be available to serve after being elected. If any of these nominees would not be available to serve for any reason, shares represented by the appointed proxies will be voted either for a lesser number of directors or for another person selected by your Board. However, if the inability to serve is believed to be temporary in nature, the shares represented by the appointed proxies will be voted for that person who, if elected, will serve when able to do so.

Pursuant to your Company’s Amended Code of Regulations, at any election of directors, the persons receiving the greatest number of votes are elected to the vacancies to be filled; abstentions and broker non-votes will have no effect. However, our Corporate Governance Policies also provide that in an uncontested election of directors (i.e., an election where the only nominees are those recommended by your Board), any nominee for director who receives a greater number of votes “Withheld” from his or her election than votes “For” his or her election will promptly tender his or her resignation to the Corporate Governance, Sustainability and Corporate Responsibility Committee following certification of the shareholder vote. The Corporate Governance, Sustainability and Corporate Responsibility Committee will promptly consider the tendered resignation and will recommend to your Board whether to accept or reject the tendered resignation no later than 60 days following the date of the shareholders’ meeting at which the election occurred. In considering whether to recommend acceptance or rejection of the tendered resignation, the Corporate Governance, Sustainability and Corporate Responsibility Committee will consider factors deemed relevant by the committee members, including the director’s length of service, the director’s particular qualifications and contributions to your Company, the reasons underlying the majority withheld vote, if known, and whether these reasons can be cured, and compliance with stock exchange listing standards and the Corporate Governance Policies. In considering the Corporate Governance, Sustainability and Corporate Responsibility Committee’s recommendation, your Board will consider the factors considered by the Corporate Governance, Sustainability and Corporate Responsibility Committee and any such additional information and factors your Board believes to be relevant. Your Board will act on the Corporate Governance, Sustainability and Corporate Responsibility Committee’s recommendation no later than at its next regularly scheduled board meeting.

 

Your Board Recommends That You Vote “For” All Nominees in Item 1.

 


 

 

24

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

 

Item  2

 

Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

  Your Board recommends that you vote FOR Item 2.

You are being asked to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as your Company’s independent registered public accounting firm to examine the books and accounts of your Company for the fiscal year ending December 31, 2019. While our Amended Code of Regulations does not require shareholders to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, we are submitting the proposal for ratification as a matter of good corporate governance. However, if shareholders do not ratify the appointment, the Audit Committee will reconsider retaining PricewaterhouseCoopers LLP. Even if the appointment is ratified, the Audit Committee, at its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of your Company and its shareholders. A representative of PricewaterhouseCoopers LLP is expected to attend the Meeting and will be available to respond to appropriate questions and have an opportunity to make a statement if he or she wishes to do so. We refer you to the “Matters Relating to the Independent Registered Public Accounting Firm” section of this proxy statement for information regarding services performed by, and fees paid to, PricewaterhouseCoopers LLP during the years 2017 and 2018. Item 2 requires the affirmative vote of a majority of the votes cast and abstentions will have no effect.  There can be no broker non-votes on Item 2 as it is considered a “routine” matter under applicable NYSE rules.

 

Your Board Recommends That You Vote “For” Item 2.

 

 

25

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Item  3

 

Approve, on an Advisory Basis, Named Executive Officer Compensation

 

Your Board recommends that you vote FOR Item 3.

The following proposal provides shareholders the opportunity to cast an advisory, non-binding vote on compensation for the NEOs, (a “Say-on-Pay” vote) as further described in the CD&A and the related compensation tables and narrative disclosure. This resolution is required pursuant to Section 14A of the Securities Exchange Act of 1934. Currently, the advisory vote is held annually. The next advisory vote on NEO compensation is scheduled to occur at your Company’s 2020 Annual Meeting of Shareholders. Your Board strongly supports your Company’s executive pay practices and asks shareholders to support its executive compensation program by adopting the following resolution:

“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the FirstEnergy Corp. Named Executive Officers, as such compensation is disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables, and the other related narrative executive compensation disclosure contained in the proxy statement.”

The primary objectives of your Company’s executive compensation program are to attract, motivate, retain, and reward the talented executives, including the NEOs, who we believe can provide the performance and leadership to achieve success in the highly complex energy industry. Our executive compensation program is centered on a pay-for-performance philosophy. After robust benchmarking and shareholder outreach, the Compensation Committee and your Board approved a number of key changes effective in 2018 to better align executive pay with shareholder interests. Additionally, in 2017 and 2018, there were no increases in base salary and target opportunity levels as a percent of base salary, in the aggregate, for short-term and long-term incentive compensation for any Section 16 Insiders, including the NEOs (excluding promotions).

In deciding how to vote on this proposal, we encourage you to read the CD&A for a more detailed discussion of our executive compensation programs and practices, beginning on page [35].

Your Board strongly believes that our compensation philosophy, in conjunction with continued shareholder outreach, is in the best interests of shareholders. We will continue to annually review and evaluate all compensation plans and programs with the goal of aligning such plans and programs with market practice and the best interests of our shareholders. Item 3 is an advisory proposal that requires the affirmative vote of a majority of the votes cast; abstentions and broker non-votes will have no effect.

 

 

Although this advisory vote is non-binding, your Board and the Compensation Committee value the views of our shareholders and will consider the voting results when considering future executive compensation practices.

 

Your Board Recommends That You Vote “For” Item 3.

 

 

26

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Item  4

 

Approve a Management Proposal to Amend the Company’s Amended Articles of Incorporation and Amended Code of Regulations to Replace Existing Supermajority Voting Requirements with a Majority Voting Power Threshold as Permitted under Ohio Law

 

Your Board recommends that you vote FOR Item 4.

We are asking shareholders to consider amendments to your Company’s Amended Articles of Incorporation and Amended Code of Regulations to implement a majority voting power threshold for shareholder voting. If the proposal is approved, all shareholder voting requirements in the Company’s Amended Articles of Incorporation and Amended Code of Regulations that are described below would provide for a majority voting power threshold as permitted under Ohio law.

Background and Governance Considerations

This proposal is a result of an ongoing review of corporate governance matters by your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee and input from our shareholders. In connection with this review, your Company continued to conduct shareholder outreach discussions with shareholders owning a significant aggregate ownership interest in your Company to solicit input about possible amendments to its governing documents, including a majority voting power threshold for shareholder voting.

In 2013 and 2016, your Company presented a management proposal to adopt a majority voting power threshold under certain circumstances. In 2017 and 2018, your Company presented a substantially similar management proposal to adopt a majority voting power threshold. However, these proposals did not receive the requisite percentage of the voting power to amend your Company’s Amended Articles of Incorporation and Amended Code of Regulations. Consistent with its strong commitment to monitoring evolutions in governance practices and in light of the benefits of broad shareholder consensus and input from our shareholder engagement efforts, your Board has elected to again submit to a shareholder vote a proposal on this topic as described below. Your Board cannot unilaterally adopt the following proposed amendments because a shareholder vote is necessary under our governing documents.

Proposed Amendments

Your Board is proposing that voting requirements in your Company’s Amended Articles of Incorporation and Amended Code of Regulations that require a supermajority vote to take certain actions be changed to a majority of the voting power of the Company as permitted by Ohio law. Ohio law permits a corporation to elect to use a vote standard of greater or less than two-thirds, but not less than a majority of the voting power.

 

 

Ohio law establishes a default two-thirds voting power requirement for corporations relating to the following provisions: amending the articles of incorporation; reducing or eliminating stated capital; applying capital surplus to dividend payments; authorizing share repurchases; authorizing sales of all or substantially all the Company’s assets; adopting a merger agreement or other merger-related actions; authorizing a combination or majority share acquisition; dissolving the Company; releasing pre-emptive rights; or authorizing a dividend to be paid in shares of another class. Ohio law also permits corporations to elect to be subject to not less than a majority voting power requirement with respect to such provisions. Article IX of the Amended Articles of Incorporation currently authorizes your Board to reduce this voting requirement to a majority of the voting power of the Company in its discretion. Your Board proposes to amend Article IX of the Amended Articles of Incorporation to provide for a majority of the voting power of the Company on these matters.

Article X of the Amended Articles of Incorporation establishes an 80 percent supermajority voting requirement to amend or repeal the following provisions of the Amended Articles of Incorporation: Article V — the fixing or changing of the terms of unissued or treasury shares; Article VI — the absence of cumulative voting rights in the election of directors; Article VII — the absence of preemptive rights to acquire unissued shares; Article VIII — the ability of the company to repurchase its shares and Article X — the supermajority voting requirement. Given the proposed change to Article IX, which already governs amending the Amended Articles of Incorporation, Article X would be eliminated.

 

 

27

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Similarly, Regulation 36 of the Amended Code of Regulations establishes an 80 percent supermajority voting requirement to amend or repeal certain regulations: Regulation 1 — the time and place of shareholder meetings; Regulation 3(a) — the calling of special shareholder meetings; Regulation 9 — the order of business at shareholder meetings; Regulation 11 — the number, election and term of directors; Regulation 12 — the manner of filling vacancies on the board of directors; Regulation 13 — the removal of directors; Regulation 14 — the nomination of directors and elections; Regulation 31 — the indemnification of directors and officers; and Regulation 36 — amendments to the Code of Regulations. Regulation 36 would be amended to lower the vote requirement to a majority of the voting power of the Company.

In addition, your Board proposes to change the 80 percent supermajority voting requirement in Regulations 11 and 13 of the Amended Code of Regulations. Currently, Regulation 11 of the Amended Code of Regulations enables a change in the number of directors of the Company, and Regulation 13 provides that any director or the entire Board of Directors may be removed, in each case only by the affirmative vote of the holders of at least 80 percent of the voting power of the Company, voting together as a single class. Your Board proposes to reduce this 80 percent supermajority voting requirement in both cases to a majority of the voting power.

The proposed amendments to the Amended Articles of Incorporation and Amended Code of Regulations are set forth in Appendix A, with deletions indicated by strike-throughs and additions indicated by underlining. The summary above is qualified in its entirety by reference to the full text of the proposed amendments in Appendix A.

Effectiveness and Vote Required

Your Board has adopted resolutions approving and recommending that shareholders approve the amendments to the Amended Articles of Incorporation and Amended Code of Regulations reflected in Appendix A, which are subject to the approval of the amendments by shareholders at the Annual Meeting, and authorizing the preparation and filing of any document necessary or advisable to implement such amendments. The amendments, if approved, would be expected to become effective prior to the next annual shareholder meeting. Approval of this proposal requires the affirmative vote of at least 80 percent of the voting power of the Company. Abstentions and broker non-votes will be counted and have the same effect as a vote “against” this item.

 

Your Board Recommends That You Vote “For” Item 4.


 

 

28

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Item  5

 

Approve a Management Proposal to Amend the Company’s Amended Articles of Incorporation and Amended Code of Regulations to Implement a Majority Voting Standard for Uncontested Director Elections

 

Your Board recommends that you vote FOR Item 5.

We are asking shareholders to consider amendments to your Company’s Amended Articles of Incorporation and Amended Code of Regulations to implement a majority voting standard in uncontested director elections. Our Amended Code of Regulations currently provides for the election of directors by a plurality of votes cast, and our Corporate Governance Policies include a director resignation policy. The plurality voting standard is also the default voting standard for the election of directors under Ohio law.

Background and Governance Considerations

This proposal is a result of ongoing review of corporate governance matters by your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee and input from our shareholders. Your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee has concluded that the adoption of the proposed majority voting standard in uncontested elections will give shareholders a greater voice in determining the composition of your Board by requiring support of a majority of shareholder votes cast for a candidate to obtain or retain a seat on our Board, and by giving greater effect to shareholder votes “against” a director candidate. Your Board is proposing these amendments in response to shareholder preferences and to reinforce our commitment to accountability and strong corporate governance practices.

In 2017 and 2018, your Company presented a substantially similar management proposal; however, the proposal did not receive the requisite percentage of the voting power to amend your Company’s Amended Articles of Incorporation and Amended Code of Regulations. Consistent with its strong commitment to monitoring evolutions in governance practices and in light of the benefits of broad shareholder consensus and input from our shareholder engagement efforts, your Board has elected to again submit to a shareholder vote a proposal on this topic as described below. Your Board cannot unilaterally adopt the following proposed amendments because a shareholder vote is necessary under our governing documents.

Proposed Amendments

Your Board is proposing to change director election voting requirements in your Company’s Amended Code of Regulations, which currently provide for a plurality voting standard, to provide for a majority voting standard for uncontested director elections and a plurality voting standard in contested elections and to provide for such change in your Company’s Amended Articles of Incorporation.

Under the proposed majority voting standard, for a candidate to be elected to your Board in an uncontested election, the number of votes cast “for” the candidate’s election must exceed the number of votes cast “against” his or her election and abstentions and broker non-votes would not be considered votes “for” or “against” a candidate. An “uncontested election” means an election in which the number of Director candidates does not exceed the number of Directors to be elected. In all other director elections, which we refer to as “contested elections,” a plurality voting standard would apply. If adopted by shareholders at this Annual Meeting of Shareholders, the majority voting standard would apply to all future uncontested director elections.

Your Board believes that a plurality voting standard should still apply in contested director elections. If the plurality voting standard did not apply in contested elections, it is possible that more candidates could be elected than the number of director seats up for election because the proposed majority voting standard simply compares the number of “for” votes with the number of “against” votes for each director candidate without regard to voting for other candidates. Accordingly, the proposed majority voting standard retains plurality voting in contested director elections to avoid such results.


 

 

29

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Under Ohio law and your Company’s Amended Code of Regulations, an incumbent director who is not re-elected remains in office until his or her successor is elected, continuing as a “holdover” director. If this proposal is approved, we will make conforming revisions to the existing director resignation policy (discussed on page [24]) in your Company’s Corporate Governance Policies to reflect that an incumbent director who does not receive more votes “for” than “against” his or her election in an uncontested election will promptly submit a written offer of resignation to the Corporate Governance, Sustainability and Corporate Responsibility Committee, which will make a recommendation to your Board within 60 days following the date of the election as to whether or not it should be accepted. Your Board will consider the recommendation and decide whether to accept the resignation, as described in more detail in our Corporate Governance Policies. Furthermore, if one or more directors standing for election does not receive a majority of the votes cast and his or her resignation is accepted by your Board, your Board may fill the vacancy without any further shareholder vote.

Your Company’s Amended Code of Regulations provides for a plurality voting standard in the election of directors. To implement a majority voting standard, Ohio law requires the Amended Articles of Incorporation to be amended. Additionally, your Company’s Amended Code of Regulations requires a conforming amendment. The actual text of the proposed amendment to your Company’s Amended Articles of Incorporation, including a new Article XII, and amendment to Regulation 11 of your Company’s Amended Code of Regulations, marked with underlining to indicate additions and strike-throughs to indicate deletions, are attached to this Proxy Statement as Appendix B. The amendment to the Amended Articles of Incorporation will become effective upon filing the Amendment to the Amended Articles of Incorporation with the Secretary of State of Ohio.

The above disclosure is qualified in its entirety by reference to the full text of the proposed amendments in Appendix B.

Effectiveness and Vote Required

Your Board has adopted resolutions approving and recommending that shareholders approve the amendments to the Amended Articles of Incorporation and Amended Code of Regulations reflected in Appendix B, which are subject to the approval of the amendments by shareholders at the Annual Meeting, and authorizing the preparation and filing of any document necessary or advisable to implement such amendments. The amendments, if approved, would be expected to become effective prior to the next annual shareholder meeting. Approval of this proposal requires the affirmative vote of at least 80 percent of the voting power of the Company. Abstentions and broker non-votes will be counted and have the same effect as a vote “against” this item.

 

Your Board Recommends That You Vote “For” Item 5.

 

 

30

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Item  6

 

Approve a Management Proposal to Amend the Company’s Amended Code of Regulations to Implement Proxy Access

 

Your Board recommends that you vote FOR Item 6.

We are asking shareholders to consider an amendment to your Company’s Amended Code of Regulations to implement “proxy access.” Proxy access, as further described below, allows eligible shareholders to include their own nominee or nominees for election to your Board in our proxy materials, along with your Board-nominated candidates.

Background and Governance Considerations

This proposal is a result of an ongoing review of corporate governance matters by your Board and its Corporate Governance, Sustainability and Corporate Responsibility Committee and input from our shareholders. Your Board and the Corporate Governance, Sustainability and Corporate Responsibility Committee have considered the advantages and disadvantages of providing proxy access rights to shareholders, including the view expressed by a number of our shareholders during our outreach that proxy access rights would increase the accountability of directors to shareholders and would allow shareholders to express preferences in director nominations more easily. This proxy access proposal addresses our outreach findings and is in line with market practices.

In 2016, 2017 and 2018, your Company presented substantially similar management proposals; however, these proposals did not receive the requisite percentage of the voting power to amend the Amended Code of Regulations. Consistent with its strong commitment to monitoring evolutions in governance practices and in light of the benefits of broad shareholder consensus and input from our shareholder engagement efforts, your Board has elected again to submit to a shareholder vote a proposal on this topic as described below. Your Board cannot unilaterally adopt the following proposed amendment because a shareholder vote is necessary under our governing documents.

Proposed Amendment

Your Board is proposing an amendment to your Company’s Amended Code of Regulations that permit certain shareholders to include a specified number of director nominees in our proxy materials for our annual meeting of shareholders.

The proposed amendment would permit a single shareholder, or group of up to 20 shareholders, holding full voting and investment rights and the full economic interest, that has maintained continuous ownership of at least three percent of the Company’s outstanding common stock for at least the previous three years to include a specified number of director nominees, as described below, for election to your Board in the proxy statement for the Company’s annual meeting of shareholders.

Number of Shareholder-Nominated Candidates

The maximum number of shareholder-nominated candidates would be equal to 20 percent of the directors in office as of the last day a shareholder nomination may be delivered or received or, if the 20 percent calculation does not result in a whole number, the closest whole number below 20 percent and in any event, not less than two shareholder nominated candidates. If your Board decides to reduce the size of your Board after the nomination deadline due to director retirement, resignation or otherwise, the 20 percent calculation will be applied to the reduced size of your Board, with the potential result that a shareholder-nominated candidate may be disqualified. Shareholder-nominated candidates that your Board determines to include in the proxy materials as Board-nominated candidates will be counted against the maximum.

Procedure for Selecting Candidates in the Event the Number of Nominees Exceeds the Maximum

Nominating shareholders are required to provide a list of their proposed nominees in rank order. If the number of shareholder-nominated candidates exceeds the maximum number of permitted shareholder candidates, the highest ranked nominee from the nominating shareholder or group of nominating shareholders, as the case may be, with the largest qualifying ownership will be selected for inclusion in the proxy materials first followed by the highest ranked nominee from the nominating shareholder or group of shareholders, as the case may be, with the next largest qualifying ownership, and continuing on in that manner, until the maximum number of nominees is reached.

 

 

31

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Nominating Procedure

Requests to include shareholder-nominated candidates in your Company’s proxy materials must be received, under most circumstances, no earlier than 150 days and no later than 120 days before the anniversary of the date that your Company issued its proxy statement for the previous year’s annual meeting of shareholders. Each shareholder or shareholder group seeking to include a shareholder nominee in your Company’s proxy materials is required to provide certain information, including, but not limited to, the verification of share ownership, biographical information about the nominee and certain representations, as set forth in the proposed amendment attached hereto as Appendix C.

Independence and Other Qualifications of Shareholder Nominees

A shareholder nominee would not be eligible for inclusion if your Board determines that he or she is not independent under the listing standards of the principal U.S. exchange upon which the common stock of your Company is listed (which is the NYSE), any applicable rules of the SEC, or any publicly disclosed standards used by your Board in determining and disclosing the independence of your Company’s directors.

Furthermore, a shareholder nominee would not be qualified to be a director of your Company if, among other things: (i) his or her election would cause your Company to be in violation of its governing documents, the listing standards of the principal U.S. exchange upon which the common stock of your Company is listed, any applicable federal law, rule or regulation or your Company’s publicly disclosed policies and procedures; (ii) he or she has been an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, within the past three years; (iii) he or she is a named subject of a pending criminal proceeding or has been convicted in a criminal proceeding within the past 10 years (excluding traffic violations and other minor offenses); (iv) he or she is subject to certain enforcement orders related to the regulation of securities; or (v) he or she has provided, or his or her nominating shareholder or group of nominating shareholders has provided, information to us that is not accurate, truthful and complete in all material respects, or that otherwise contravenes certain specified agreements, representations or undertakings.

The proposed amendment to the Amended Code of Regulations is set forth in Appendix C, with deletions indicated by strike-throughs and additions indicated by underlining.

The above disclosure is qualified in its entirety by reference to the full text of the proposed amendment in Appendix C.

Effectiveness and Vote Required

Your Board has adopted a resolution approving and recommending that shareholders approve the amendment to the Amended Code of Regulations reflected in Appendix C, which are subject to the approval of the amendment by shareholders at the Annual Meeting, and authorizing the preparation and filing of any documents necessary or advisable to implement such amendment. The amendment, if approved, would be expected to become effective prior to the next annual shareholder meeting. Approval of this proposal requires the affirmative vote of at least 80 percent of the voting power of the Company. Abstentions and broker non-votes will be counted and have the same effect as a vote “against” this item.

 

 

Your Board Recommends That You Vote “For” Item 6.


 

 

32

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Shareholder Proposal

One shareholder proposal has been submitted for consideration and action by shareholders.

The shareholder resolution and proposal, for which your Company and your Board disclaim responsibility, are set forth below and are reproduced verbatim in accordance with the applicable rules and regulations. The shareholder resolution and proposal may contain assertions that we believe are factually incorrect. We have not attempted to refute all of the inaccuracies. After careful consideration, your Board recommends that you vote “AGAINST” the shareholder proposal in Item 7 for the reasons noted in your Company’s response following the shareholder proposal.

 

Item  7

 

Shareholder Proposal

 

X Your Board recommends that you vote AGAINST Item 7.

John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, plans to introduce the following resolution at the Annual Meeting. We have been notified that Mr. Chevedden is the beneficial owner of no less than 90 shares of your Company’s common stock.

Proposal 7 – Simple Majority Vote

RESOLVED, Shareholders request that our board take each step necessary so that each voting requirement in our charter and bylaws (that is explicit or implicit due to default to state law) that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws.

The Board of Directors, with a fiduciary duty to shareholders, may find it necessary to adjourn the annual meeting to solicit the votes necessary for approval if the votes for approval are lacking during the annual meeting as they have been for a seemingly countless number of years on this same proposal topic at FirstEnergy. To facilitate this - adjourn appears 10-times in the FirstEnergy governing documents.

Shareholders are willing to pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements have been found to be one of 6 entrenching mechanisms that are negatively related to company performance according to "What Matters in Corporate Governance" by Lucien Bebchuk, Alma Cohen and Allen Ferrell of the Harvard Law School. Supermajority requirements are used to block initiatives supported by most shareowners but opposed by a status quo management.

This proposal topic won from 74% to 88% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, McGraw-Hill and Macy's. The proponents of these proposals included Ray T. Chevedden and William Steiner. The votes would have been higher than 74% to 88% if all shareholders had equal access to independent proxy voting advice.

Currently a 1%-minority can frustrate the will of our 79% shareholder majority in an election in which 80% of shares cast ballots. In other words a 1%-minority have the power to prevent 79% of shareholders from taking important action such as eliminating 80%-voting thresholds in our governing documents.

Please vote yes:

Simple Majority Vote-Proposal 7 

 

 

33

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Your Company’s Response — Item 7 — Shareholder Proposal Requesting Steps to Implement Simple Majority Voting

This non-binding shareholder proposal requests that your Board take the steps necessary so that each shareholder voting requirement in your Company’s Amended Articles of Incorporation and Amended Code of Regulations that “calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws.”

We encourage you to refer to your Company’s proposal (Item 4 above), which is a binding proposal that would implement a majority voting power threshold for shareholder voting. As described in Item 4 above, Ohio law provides that certain voting requirements can be changed to a majority of the voting power of your Company, not a majority of votes cast as stated in the shareholder proposal.

Because the Company’s proposal (Item 4 above) is binding, if approved by shareholders, the proposal would be implemented. However, if this non-binding shareholder proposal is approved by shareholders, there is no obligation for the Company to implement it and the approval of both proposals could lead to confusing results. In sum, your Board believes the proposal put forth by your Company in Item 4 above more appropriately and effectively implement the policy at issue and serves the best interests of our shareholders.

 

Your Board recommends that you

vote “AGAINST” this shareholder proposal (Item 7).

X

 

 

 

 

 

34

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

Executive Compensation

Compensation Committee Report

The Compensation Committee reviewed and discussed the CD&A with management and, based on such review and discussions, the Compensation Committee recommended to your Board that the CD&A be included (or incorporated by reference, as applicable) in your Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and 2019 Proxy Statement.

Compensation Committee: Christopher D. Pappas (Chair), Steven J. Demetriou, Sandra Pianalto, Dr. Jerry Sue Thornton, and Leslie M. Turner.

 

Compensation Discussion and Analysis

Introduction

This CD&A provides an overview of your Company’s strategy and performance, shareholder engagement process, and 2018 executive compensation programs and decisions, and plans for the 2019 compensation programs. This CD&A focuses on the compensation of our NEOs for fiscal year 2018 who were as follows:

 

Named Executive Officer

Title

Charles E. Jones

President and CEO

Steven E. Strah

Senior Vice President and Chief Financial Officer (“CFO”)

James F. Pearson

Executive Vice President, Finance (former CFO)

Leila L. Vespoli

Executive Vice President, Corporate Strategy, Regulatory Affairs and Chief Legal Officer

Samuel L. Belcher

Senior Vice President and President, FirstEnergy Utilities

Bennett L. Gaines

Senior Vice President, Corporate Services and Chief Information Officer

Donald R. Schneider

President, FirstEnergy Solutions Corp. (“FES”) (1)

(1)

Effective March 2, 2019, Mr. Schneider will step down as President of FES and will remain the executive chairman of the board of directors of FES. He will retire as an officer effective May 1, 2019 as discussed further in this CD&A.

During 2018, Mr. Pearson, formerly Executive Vice President and Chief Financial Officer, became the Executive Vice President, Finance, Mr. Strah became Senior Vice President and CFO, and Mr. Belcher became Senior Vice President and President, FirstEnergy Utilities and was appointed as an executive officer of your Company. As a former employee and President and Chief Nuclear Officer (“CNO”) of FirstEnergy Nuclear Operating Co (“FENOC”) and due to the strategic review to exit competitive generation, Mr. Belcher did not participate in all of the same compensation programs as the other NEOs. We have outlined where there are differences to the compensation programs for Mr. Belcher in this proxy statement. Unless otherwise noted, however, all information contained in the CD&A applies to Mr. Belcher.

 

Beginning in February 2018, Mr. Schneider was no longer designated an executive officer of your Company due to his role at FES; however, he continued to meet disclosure requirements as a NEO. As an employee of FES, and due to the strategic review to exit competitive generation, Mr. Schneider did not participate in all of the same compensation programs as the other NEOs. The compensation programs for FES participants that applied to Mr. Schneider are described separately in this proxy statement. Unless otherwise noted, all information contained in the CD&A applies to Mr. Schneider.

 

 

 

 

 

35

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

CD&A Quick Reference Guide

 

Key Sections

Core Topics

Page

Executive Summary

•    Our Fully Regulated Business Strategy

•    Strategic Initiatives

•    Shareholder Engagement and Say-on-Pay Results

•    Our Responses in 2018 to Shareholder Feedback

[37]

Governance of Our Compensation Programs

•    Compensation Philosophy

•    What We Do and Don’t Do

•    Role of our Compensation Committee, Management and Compensation Consultant

•    Benchmarking

[41]

Components of Total Direct Compensation Programs

•    Key Elements of 2018 Executive Compensation

•    Compensation Mix

•    Determination of Compensation

-    2018 Target Compensation (Base Salary + Incentive Compensation)

-    2018 FE Short-term Incentive Program (“FE STIP”)

-    Long-term Incentive Compensation (“FE LTIP”) awards (for NEOs other than Mr. Schneider)

-    2018 Performance-Adjusted Restricted Stock Units (“Transition Award”) for Mr. Belcher

-    Key Employee Retention Plan (“KERP”) for Mr. Belcher

-    2018 Annual Incentive Program (“AIP”) for Mr. Schneider

•    Incentive Compensation Payouts for 2018

•    Outstanding Award Cycles (2017-2019 and 2018-2020)

•    Potential Negative Discretion for the 2016-2018 and 2017-2019 FE LTIP Cycles

•    Realized Compensation

•    2019 Incentive Plan Design and NEO Compensation

[45]

Other Compensation Policies and Practices

•    Retirement, Other Benefits and Perquisites

•    Severance and Change in Control (“CIC”) Policies

•    Share Ownership Guidelines and Prohibitions on Hedging and Pledging Shares

•    Clawback Provisions Policy

•    Risk Assessment of Compensation Programs

•    Impact of Tax Requirements on Compensation

[57]

Key Performance Indicator (“KPI”) Results and RSU Index Scores

•    2016-2018 Cycle FE LTIP Details

[62]

CD&A Glossary of Terms

•    Key Terms and Definitions

[64]

 

 

 

 

36

FirstEnergy Corp. 2019 Proxy Statement

 


 

1

Corporate Governance
& Board of Directors

2

Items to Be
Voted On

3

Executive Compensation

4

Security Ownership & Other Important Information

5

Q&A about
the Annual Meeting

 

 

Executive Summary

Our Fully Regulated Business Strategy

FirstEnergy is a forward-thinking electric utility powered by a diverse team of employees committed to making customers’ lives brighter, the environment better and our communities stronger. In 2018, we made significant progress with our strategy to become a fully regulated utility company, focusing on stable and predictable earnings and cash flow from our regulated business units. The Company has made significant strides to grow regulated earnings and improve financial strength in many areas as we successfully position as a fully regulated business:

 

Significant investment in Energizing the Future transmission program

 

Strengthened balance sheet and restructured organization and costs to increase financial flexibility in the regulated businesses

 

Implemented D&I initiatives to help drive financial performance

In 2018, FirstEnergy continued to successfully address these initiatives aggressively, which led the way to several major announcements. Following a $2.5 billion equity investment in your Company from several prominent investors in January, in February we announced an over $11 billion capital plan to be invested in our regulated businesses over the next several years.

Through FirstEnergy’s “FE Tomorrow” initiative, your Company implemented a cost cutting initiative to define the corporate services FirstEnergy would need to support its regulated business once the company exited competitive generation. Through the initiative, FirstEnergy sought to ensure the company has the right talent, organizational and cost structure to efficiently service customers and achieve its earnings growth targets. In support of the FE Tomorrow initiative, more than 80% of eligible employees, totaling nearly 500 people in the shared services, utility services and sustainability organizations accepted a Voluntary Enhanced Retirement Package (“VERP”) that included severance compensation and a temporary pension enhancement, with most employees having already retired. Those that accepted the VERP also included Ms. Vespoli and Mr. Pearson, pursuant to an Executive VERP (“E-VERP”), and Mr. Schneider, pursuant to a Voluntary Early Retirement Option (“FES VERO”), which both contained substantially the same terms as the VERP, and is discussed further in the CD&A.  Management expects