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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.            )

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Preliminary Proxy Statement

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Definitive Proxy Statement

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Soliciting Material under §240.14a-12

 

Hawaiian Electric Industries, Inc.

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GRAPHIC


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LOGO   PHOTO

March 26, 2020

Dear Fellow Shareholders:

On behalf of the Board of Directors of Hawaiian Electric Industries, Inc. (HEI), it is my pleasure to invite you to attend the 2020 Annual Meeting of Shareholders (2020 Annual Meeting) of HEI. The meeting will be held on Tuesday, May 5, 2020 at 10:00 a.m., Hawaii time in Room 805 on the eighth floor of the American Savings Bank Tower, located at 1001 Bishop Street, Honolulu, Hawaii 96813. A map showing the location of the meeting site appears on the last page of the enclosed Proxy Statement.

The Notice of Annual Meeting of Shareholders and Proxy Statement that accompany this letter describe the business to be conducted during the 2020 Annual Meeting.

Your vote is very important. Whether or not you attend the meeting in person, and no matter how many shares you own, it is important that your views be represented. Please vote by signing and returning your proxy card or by using telephone or internet voting. Instructions on how to vote are detailed in the "Voting Procedures" section of the Proxy Statement.

For further details on HEI's accomplishments in 2019, please see my letter in the accompanying Annual Report, as well as the attached letter from our Board of Directors.

The Board of Directors and management team of HEI would like to express our appreciation to you for your confidence and support. I look forward to seeing you at the 2020 Annual Meeting in Honolulu.

    Sincerely,
 
SIGNATURE
Constance H. Lau
President and Chief Executive Officer

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    PHOTO

A Message from Our Board of Directors

Dear Fellow Shareholders,

On the Board and across the management team at Hawaiian Electric Industries (HEI), we view the success of our companies and the value we provide to our shareholders as inextricably linked to the success and well-being of our communities here in Hawaii. This recognition of our interconnectedness with our stakeholders and our communities drives how we approach our businesses and how we carry out our role as a Board. We value this opportunity to share our priorities for achieving our objective of creating sustainable, long-term value for you, our shareholders, and all of our stakeholders.

Board Oversight of Strategy and Risk Management: Investing in Hawaii's Sustainable Future

Sustainability, or environmental, social and governance (ESG), considerations have long been an integral part of HEI's strategy to be a "catalyst for a better Hawaii." We firmly believe that effective management of ESG risks and opportunities creates a strategic business advantage; improves the sustainability, well-being and resilience of our communities, our state and our environment; and leads to sustained long-term value creation for our investors.

The Board is responsible for the oversight of HEI's enterprise risk management (ERM) programs, which are designed to address all material risks and opportunities, including ESG considerations. The Board has delegated the day-to-day responsibility to execute on these action plans to management.

This past year, our Board prioritized integrating sustainability even further into our governance structures, decision-making processes and reporting. We focused our strategic retreat on climate change and other ESG factors relevant to our companies. Since then, the HEI companies have been further integrating climate change and ESG factors into strategic planning and ERM processes.

While HEI has been reporting on key ESG metrics for some time, particularly with respect to our role in Hawaii's transition to 100% renewable energy, we are working to expand our ESG disclosures to give shareholders and other stakeholders even more visibility to our ESG activities. We look forward to issuing our first Sustainability Accounting Standards Board-aligned report in 2020 and to adding Task Force on Climate-related Financial Disclosures thereafter.

To further align management incentives with our strategic goals, beginning in 2020 we have increased the proportion of HEI and utility executive performance-based compensation that is linked to achieving renewable portfolio standards faster than state-mandated timelines.

Delivering Shareholder Value

Our strategies and financial performance continue to garner strong support in the stock market. HEI outperformed the S&P 500 and broader utility index over a one-and three-year time period, and delivered an 11% 5-year total return (CAGR %) for the period ending December 31, 2019. Our strong investment-grade balance sheet continues to provide efficient access to growth capital and our consolidated enterprise and efficient capital structure limit our need for external equity. As a result, we have been able to continue to invest in modernizing our electric grid, strengthening the reliability and resilience of our system and integrating more renewable energy without issuing dilutive equity for several years.

In each of 2019 and early 2020 we increased our quarterly dividend by 3% given our strong financial performance and the Board's confidence in our future prospects. These recent increases enhance our record of uninterrupted dividends since 1901.


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Continued Board Refreshment

Our Board is committed to ensuring we have the diversity of perspective, skills and expertise to continue to drive value for our stakeholders. We have added six new independent directors since 2017, including four in 2019, who round out our capabilities in utilities, renewable energy, environmental policy, banking, investment and the regulatory environment. We're pleased that at last year's annual meeting, shareholders elected Celeste Connors, Mary Powell and Jim Scilacci to the Board. Since then we have added both Micah Kane, whose extensive leadership experience and in-depth understanding of the communities HEI serves add to the Board's oversight of HEI's Hawaii-focused strategies, and Eva Zlotnicka, whose investment expertise in ESG matters and experience overseeing ambitious strategic initiatives will contribute to our efforts to advance Hawaii's sustainability goals.

We also continue to refresh our board committee leadership and composition. In 2019, Peggy Fowler was appointed Chair of our Nominating & Corporate Governance Committee, Jim Scilacci was appointed Chair of the Audit & Risk Committee and Admiral Thomas Fargo was named Vice Chair of the Board. More recently, Mary Powell and Eva Zlotnicka have joined the Compensation Committee and Celeste Connors has joined the Audit & Risk Committee.

Ongoing Management Succession Planning

We are committed to growing and developing leadership at all levels of our HEI family of companies. That's why as a Board we focus on ensuring strong talent development and succession planning processes are in place — not just at the highest levels, but throughout the organization. For senior executives, the Nominating & Corporate Governance Committee evaluates internal and external succession candidates regularly and the full Board discusses these candidates annually.

As part of our ongoing succession process, in February 2020, Scott Seu succeeded Alan Oshima as President and CEO of our utility. Scott has a deep understanding of our utility and the importance of stakeholder engagement to the company's success. Over the course of his career with our utility he has led several different areas of utility operations, including environmental management, customer programs, renewable energy development and system operations, and has overseen its regulatory, government and community affairs and corporate relations departments. We're confident Scott will continue our utility's leading-edge work in collaborating with our stakeholders to achieve Hawaii's ambitious energy goals.

We would like to thank Alan for his tremendous leadership during a time of great change, as he led our utility through a major transformation initiative.

Shareholder and Stakeholder Engagement

We believe strong corporate governance includes engaging with our shareholders and considering their views as we make decisions. Over the past year, our company reached out to or engaged with shareholders representing more than fifty percent of our institutional shareholder base. Such discussions covered our financial and operational performance, our progress toward renewable energy goals, executive compensation and board and governance policies, and involved independent directors as appropriate.

In part as a result of shareholder feedback, our Board recently approved corporate governance enhancements to be voted upon at this annual meeting of shareholders, including proposals to declassify the Board and adopt a majority voting standard in uncontested director elections. We refer you to the sections of the of the Proxy Statement under the headings "Proposal No. 3" and "Proposal No. 4" for more details on these proposals. Our Board also considered shareholder input when deciding to expand the proportion of HEI and utility executive pay that is tied to achievement of renewable energy goals.

Remembering Barry Taniguchi

Finally, we fondly remember our fellow Board member, Barry Taniguchi, who passed away last September. In addition to being a valued friend and colleague, Barry was a thoughtful leader and integral member of the Board. Barry built a strong legacy in Hawaii and at our companies and we will forever be grateful for his many contributions — both on a professional and personal level.


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Mahalo to Our Shareholders

In conclusion, we value your support, and we encourage you to share your opinions with us. We look forward to the year ahead as we continue our tireless work to create long-term shareholder, customer and community value. We appreciate the opportunity to serve HEI on your behalf.

Aloha,

HEI Board of Directors

SIGNATURE

Jeffrey N. Watanabe, Chairperson of the Board    

Admiral Thomas B. Fargo, Vice Chair of the Board

 

Constance H. Lau
Celeste A. Connors   Mary G. Powell
Richard J. Dahl   Keith P. Russell
Peggy Y. Fowler   William James Scilacci, Jr.
Micah A. Kane   Eva T. Zlotnicka

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NOTICE OF 2020 ANNUAL
MEETING OF SHAREHOLDERS
Hawaiian Electric Industries, Inc.
1001 Bishop Street, Suite 2900
Honolulu, Hawaii 96813

 

LOGO
When:   Tuesday, May 5, at 10:00 a.m., Hawaii Time.
Where:   American Savings Bank Tower, 1001 Bishop Street, 8th Floor, Room 805, Honolulu, Hawaii 96813
Items of Business:   Proposal 1 — Election of three Class III directors to serve for a three-year term expiring at the 2023 Annual Meeting of Shareholders and one Class I director to serve for a one-year term expiring at the 2021 Annual Meeting of Shareholders
    Proposal 2 — Advisory vote to approve the compensation for HEI's named executive officers
    Proposal 3 — Amendment of the HEI Amended and Restated Articles of Incorporation to declassify the Board of Directors
    Proposal 4 — Amendment of the HEI Amended and Restated Articles of Incorporation to adopt a majority voting standard in uncontested director elections
    Proposal 5 — Ratification of the appointment of Deloitte & Touche LLP as HEI's independent registered public accountant for 2020
    To transact such other business as may properly come before the 2020 Annual Meeting
Record Date:   February 28, 2020
Annual
Report:
  The 2019 Annual Report to Shareholders, which is not part of the proxy solicitation materials, has been mailed or made available electronically to shareholders, along with this Notice of 2020 Annual Meeting of Shareholders and accompanying Proxy Statement.
Who Can Attend:   Only shareholders of record as of the close of business on the record date are entitled to receive notice of, attend and vote at the 2020 Annual Meeting. To attend, you must bring government-issued photo identification. If your shares are held in street name, you must also bring evidence of ownership on the record date (such as a brokerage account statement). If you represent an entity that is a shareholder, you will also need proof of authority for representation.
Date of Mailing:   On or about March 26, 2020, these proxy materials and annual report are being mailed or made available to shareholders.

How To Vote Your Shares

Your vote is important. Please vote as soon as possible by one of the methods shown below. Make sure to have your proxy card, voting instruction form, or notice of Internet availability in hand and follow the instructions. Shareholders of record may appoint proxies and vote their shares in one of four ways:

GRAPHIC   By Telephone: You can vote your shares by calling 1-800-690-6903.

GRAPHIC

 

By Internet: You can vote your shares online at www.proxyvote.com.

GRAPHIC

 

By Mail: You can vote by mail by marking, dating, and signing your proxy card or voting instruction form and returning it in the postage-paid envelope.

GRAPHIC

 

In Person: Attend our annual meeting and vote by ballot.

Shareholders whose shares are held by a bank, broker or other financial intermediary (i.e., in "street name") should follow the voting instruction card provided by such intermediary.

Any proxy may be revoked in the manner described in the "Voting Procedures — Changing your vote" section of the accompanying Proxy Statement.

It is important that you vote your shares. To ensure that your shares are voted, please follow the instructions on the proxy card to either complete and return the proxy card or vote by telephone or over the internet. Mailing your proxy card or voting by telephone or over the internet does not preclude you from changing your vote in person at the 2020 Annual Meeting of Shareholders (the 2020 Annual Meeting).

Important Notice Regarding the Internet Availability of Proxy Materials for the 2020 Annual Meeting of Shareholders to be held on May 5, 2020

The accompanying Proxy Statement, 2019 Annual Report to Shareholders and 2019 Annual Report on Form 10-K are available at http://www.hei.com


By Order of the HEI Board of Directors,

Kurt K. Murao
Executive Vice President, General Counsel,
Chief Administrative Officer and Corporate Secretary

March 26, 2020

 

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TABLE OF CONTENTS

    Page        
  i   PROXY SUMMARY    
  1   PROPOSAL NO. 1: ELECTION OF THREE CLASS III DIRECTORS AND ONE CLASS I DIRECTOR    
  2   DIRECTOR NOMINEES FOR ELECTION    
     
  6   CONTINUING DIRECTORS    
     
  12   CORPORATE GOVERNANCE    
     
  18   BOARD OF DIRECTORS    
     
  20   COMMITTEES OF THE BOARD    
     
  22   DIRECTOR COMPENSATION    
  26   PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF HEI'S NAMED EXECUTIVE OFFICERS    
  27   COMPENSATION DISCUSSION AND ANALYSIS    
     
    27   Executive Summary    
  29   How We Make Compensation Decisions    
  30   We Use Comparative Market Data as a Reference Point for Compensation    
  32   What We Pay and Why: Compensation Elements and 2019 Pay Decisions    
  45   Additional Policies and Information    
     
  48   COMPENSATION COMMITTEE REPORT    
     
  48   COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION    
     
  49   EXECUTIVE COMPENSATION TABLES    
     
  49   Summary Compensation Table    
  51   Grants of Plan-Based Awards    
  52   Outstanding Equity Awards at 2019 Fiscal Year-End    
  53   2019 Option Exercises and Stock Vested    
  54   Pension Benefits    
  56   2019 Nonqualified Deferred Compensation    
  57   Potential Payments Upon Termination or Change in Control    

    Page        
  59   CEO Pay Ratio    
  60   STOCK OWNERSHIP INFORMATION    
     
  62   OTHER RELATIONSHIPS AND RELATED PERSON TRANSACTIONS    
  64   PROPOSAL NO.3: AMEND THE HEI AMENDED AND RESTATED ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS    
     
  65   PROPOSAL NO.4: AMEND THE HEI AMENDED AND RESTATED ARTICLES OF INCORPORATION TO ADOPT A MAJORITY VOTING STANDARD IN UNCONTESTED DIRECTOR ELECTIONS    
  66   AUDIT & RISK COMMITTEE REPORT    
  67   PROPOSAL NO.5: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020    
  68   ABOUT THE MEETING    
     
  69   VOTING PROCEDURES    
     
  73   OTHER INFORMATION    
     
  A-1   EXHIBIT A: Reconciliation of GAAP to Non-GAAP Measures: Reported Core Earnings and Other Financial Measures    
     
  B-1   EXHIBIT B: Reconciliation of GAAP to Non-GAAP Measures: Incentive Compensation Adjustments    
     
  C-1   APPENDIX A: Proposed Declassification Amendment to the Amended and Restated Articles of Incorporation    
     
  D-1   APPENDIX B: Proposed Majority Voting Amendment to the Amended and Restated Articles of Incorporation    
     
  E-1   APPENDIX C: Combined Proposed Majority Voting and Declassification Amendments    
    MAP    

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   PROXY SUMMARY   

 

PROXY SUMMARY

This summary contains highlights about our Company and the upcoming 2020 Annual Meeting of Shareholders. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement carefully prior to voting.

VOTING MATTERS

    Management Proposals
  Board Vote Recommendation
  Page
    1. Election of Three Class III Directors and One Class I Director       GRAPHIC FOR Each Nominee       1    
    2. Advisory Vote to Approve the Compensation of HEI's Named Executive Officers     GRAPHIC FOR     26  
    3. Amendment of Amended and Restated Articles of Incorporation to Declassify the Board of Directors       GRAPHIC FOR       64    
    4. Amendment of Amended and Restated Articles of Incorporation to Adopt a Majority Voting Standard in Uncontested Director Elections     GRAPHIC FOR     65  
    5. Ratification of Appointment of Independent Auditor for 2020       GRAPHIC FOR       67    

ELECTION OF DIRECTORS

The following table provides summary information about the nominees for election to the Board of Directors (Board) — three Class III Directors and one Class I Director of Hawaiian Electric Industries, Inc. (HEI or the Company). Additional information about all directors, including the nominees, may be found beginning on page 2.

 

 

Name


  Age     Director
Since

 
  Primary Occupation     Independent     Committee
Membership

 
  Other
Public
Boards


 

 

 

Class III Directors

                                                   

​  

 

Peggy Y. Fowler

    68     2011     Former Chief Executive Officer, Portland General Electric Company     GRAPHIC     CC, NCGC (chair), EC     1  

 

 

Keith P. Russell

      74       2011       President, Russell Financial       GRAPHIC       ARC, EC       1    

​  

 

Eva T. Zlotnicka

    37     2020     Managing Director, ValueAct Spring Fund; Head of Stewardship, ValueAct Capital     GRAPHIC     CC     1  

 

 

Class I Director

                                                   

​  

 

Micah A. Kane

    51     2019     President & Chief Executive Officer, Hawaii Community Foundation     GRAPHIC     NCGC      

ARC - Audit & Risk Committee
CC - Compensation Committee
EC - Executive Committee
NCGC - Nominating and Corporate Governance Committee

GOVERNANCE HIGHLIGHTS

HEI's governance is guided by the principle that shareholder value for our Company is linked to the value we bring to the customers and communities we serve. Highlights of our governance include:

 
   
   
   
   

​  

 

BOARD OF DIRECTORS


   

 

 

Independent Chairperson of the Board

     

YES

   

 

 

Number of independent directors

      10/11    

 

 

Percentage of directors who are women or from diverse ethnic backgrounds

      63%*    

 

 

All Audit & Risk, Compensation and Nominating & Corporate Governance Committee members are independent

      YES    

 

 

All directors attended at least 75% of meetings of the Board and Board committees on which they served in 2019

      YES    

 

 

Policy limitation on membership on other public company boards

      YES    

 

 

Annual Board and committee self-evaluations and periodic director self and peer review

      YES    

 

 

Directors required to submit resignation for Board consideration upon the end of their term after reaching age 75 or in event of a significant change in their employment

      YES    

 

 

Share ownership and retention requirements for directors and executives

      YES    

* see pages 15-16

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   PROXY SUMMARY   

CURRENT DIRECTORS

 

  Experience/Expertise   Tenure
(Years)


  Utility/
Energy
Industry



  Banking
  Local Hawaii Commercial
  Sustainability/ Environmental Leadership
  Renewable Energy Expertise
  Senior Leadership
  Public Company Board Experience
  Entrepreneurship/ Business Transformation
  Government & Regulation
  Financial/ Accounting
  Legal & Risk Management
  Corporate Governance

 

  Jeffrey N. Watanabe   Independent Chair   33                       x       x               x       x       x       x               x       x    

​  

  Constance H. Lau   CEO   17     x     x     x     x     x     x     x     x         x     x     x  

 

  Celeste A. Connors   Independent   <1                       x       x       x       x               x       x                            

​  

  Richard J. Dahl   Independent   3     x     x     x     x         x     x     x         x         x  

 

  Admiral Thomas B. Fargo, USN   Independent   15                       x                       x       x                       x       x       x    

​  

  Peggy Y. Fowler   Independent   9     x     x         x     x     x     x     x     x             x  

 

  Micah A. Kane   Independent   <1                       x                       x                       x                            

​  

  Mary G. Powell   Independent   <1     x     x         x     x     x     x     x         x          

 

  Keith P. Russell   Independent   9               x                               x       x       x               x       x       x    

​  

  William James Scilacci, Jr.   Independent   <1     x     x             x     x                 x     x      

 

  Eva T. Zlotnicka   Independent   <1                               x               x       x       x               x               x    

Serving a 1-Year Term, to retire as of the 2020 Annual Meeting

The lack of a mark for a particular item does not mean that the director does not possess that experience or is unable to contribute to the decision-making process in that area. We look to each director to be knowledgeable in these areas; however, the mark indicates that the item is a particularly prominent area of expertise that the director brings to the Board.

HEI at a Glance

HEI is a family of three complementary companies that provide energy and financial services in the State of Hawaii and invest in infrastructure to advance Hawaii's sustainable future.

Sustainability — of our economy, our environment, our communities and our ability to deliver value to all of our stakeholders — is embedded in the core strategies across our three lines of business:

Hawaiian Electric — Focused on achieving Hawaii's 100% renewable energy and carbon neutral economy goals in a way that is affordable, reliable and resilient for our customers

American Savings Bank — Investing in the economic growth of our state and fostering innovation and entrepreneurship to diversify and expand our economy

Pacific Current — Developed with mission to advance Hawaii's sustainability goals through investment in clean energy, water, wastewater and agriculture

A Catalyst for Hawaii's Vibrant Future

We seek to work collaboratively with our communities to create a path toward a more sustainable future and to deliver value for shareholders and stakeholders alike.

Recent highlights include:

At Hawaiian Electric we:

    Achieved 28% of electricity sales from renewable sources in 2019

    Are on track to meet or exceed Hawaii's near-term milestone of a 30% renewable portfolio by 2020

    Integrated the nation's highest level of rooftop solar penetration in 2019, at 19% of residential customers

    Secured the lowest cost solar-plus-storage prices to date for Hawaii customers

    Last year launched one of the largest renewable energy procurements undertaken by a U.S. utility, seeking 900 megawatts of new renewables, over 500 gigawatt-hours of storage and over 200 megawatts of grid services

    Were named 2019 "Utility of the Year" by Utility Dive, a prominent industry publication, for advancing many initiatives that are transforming the power sector today, including renewable energy, electric vehicles and performance-based regulation

    Completed our "One Company" initiative, restructuring functions across our utilities to improve operational efficiency and better serve our customers

In 2019, American Savings Bank:

    Ensured solid performance and profitability despite a challenging interest rate environment for banks thanks to a combination of prudent expense management, operational efficiency and a strong balance sheet

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   PROXY SUMMARY  

Last year Pacific Current:

    Continued to optimize existing projects and pursue additional sustainable investment opportunities

    Began using locally produced biodiesel for part of the fuel mix at its Hamakua Energy plant, advancing Hawaii Island's energy independence and energy security

    Launched a joint venture with EverCharge to stimulate electric vehicle adoption by facilitating charging stations in high-rise buildings across Oahu

    Advanced the construction of five solar + storage projects at University of Hawaii campuses

Delivering Long-term Shareholder Value

          Net Income1
  Diluted Earnings per Share (EPS)1
  Return on Average Common Equity1
    2019       $218M       $1.99       9.8%    
​     2018     $202M     $1.85     9.5%  
    2017       $165M ($179M)       $1.52 ($1.65)       7.9% (8.6%)    

1 Numbers in parentheses are non-GAAP measures, which exclude tax reform and related adjustments for 2017. See Exhibit A for a reconciliation of GAAP to non-GAAP measures.


               
          Total Shareholder Return (%)
               
          HEI
  S&P 500 Index
  Edison Electric
Institute Index


  KBW Regional Banking Index
    2019       31.9%       31.5%       25.8%       23.8%    
    3-year     57.1%     53.2%     45.7%     3.9%  
    5-year       68.2%       73.9%       64.4%       53.0%    
    10-year     245.5%     256.7%     214.0%     197.7%  

Source: S&P Global Inc. and EEI.

2019 Financial Highlights

Outperformed S&P 500 and broader utility index in total shareholder return over one- and three-year periods

11% five-year total return (CAGR%) for period ending December 31, 2019

Achieved 2019 net income and earnings per share growth of 8%

Strengthened utility and consolidated return on equity

Continued our history of uninterrupted dividends since 1901

Increased quarterly dividend by 3% in 2019 and again in 2020 given continued solid financial performance and confidence in our future prospects

Strong Board, Enhanced Corporate Governance, Continued Shareholder Engagement

Our board maintains the diversity of experience and expertise necessary to oversee the strategic direction of our companies, and understands our unique operating environment in Hawaii:

6 directors from Hawaii, with essential perspectives on serving customers in our local communities

5 directors with energy and utility experience

6 directors with banking experience

63% of directors are women or from diverse ethnic backgrounds, including native Hawaiian

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   PROXY SUMMARY   

Since 2017, we have added six new directors as part of ongoing Board refreshment and decreased our average tenure by 61% to 5.8 years at the time of the Annual Meeting:

Celeste Connors:  Expertise in sustainability, energy and economic policy, and Hawaii business, government and non-profit communities; CEO, Hawaii Green Growth

Richard Dahl:  Expertise and senior leadership experience in banking and utilities; former President & COO, Bank of Hawaii

Micah Kane:  Extensive government and policy experience as leader of Hawaii governmental and non-profit agencies; deep understanding of Hawaii's business and political environment; CEO, Hawaii Community Foundation

Mary Powell:  Significant experience in utilities and renewable energy; retired President and CEO, Green Mountain Power, 2008-2019.

Jim Scilacci:  Track record of value creation and financial leadership in utilities industry; former CFO, Edison International

Eva Zlotnicka:  Significant investment experience in ESG matters and overseeing ambitious sustainability and strategic initiatives; Managing Director, ValueActSpring Fund; Head of Stewardship, ValueAct Capital

Corporate governance enhancements to be voted upon at the 2020 Annual Meeting, include:

Proposal to declassify the Board see Proposal No. 3

Proposal to adopt a majority voting standard in uncontested director elections see Proposal No. 4

In 2019, we engaged with shareholders representing more than 50% of our institutional shareholder base. We greatly value the opinions and feedback received from our shareholders, which is collected and shared with the Board and informs the work of both management and the Board.

Deepening our Sustainability Focus

ESG considerations are embedded in our companies' daily actions and drive how we engage with our employees, communities, and shareholders.

During the summer of 2019, our board spent most of its strategic retreat on climate change as well as other ESG considerations. We are working to further integrate climate change and ESG risks and opportunities into our strategic planning, risk management and disclosures. Our efforts include:

Initial ESG materiality assessments of each HEI company

Further evaluating and formalizing incorporation of relevant ESG factors into strategic planning and risk management processes

Enhancing ESG disclosures, with issuance of first Sustainability Accounting Standards Board-aligned report planned for 2020 followed by Task Force on Climate-related Financial Disclosures aligned reporting

Greater linkage between HEI and utility executive compensation and achievement of renewable energy goals

EXECUTIVE COMPENSATION HIGHLIGHTS — PAYING FOR PERFORMANCE

Incentivizing Value Creation

The compensation program for our named executive officers is designed to focus executives on actions that create value for our customers, employees, communities and shareholders. For HEI and utility executives, safety, reliability, customer satisfaction and advancing our utility's transformation to increase renewable energy have been key goals of annual performance-based compensation for some time. Because of the strategic importance of achieving our state's renewable energy goals, beginning in 2020 the Board has made 20% of HEI and utility executives' long-term performance-based compensation subject to achievement of renewable portfolio goals. See page 28 for further information.

Emphasis on Long-term and Performance-based Compensation

Executive compensation is composed of four primary elements: base salary, performance-based annual and long-term incentives, and restricted stock units vesting in equal annual installments over four years. We emphasize variable pay over fixed pay, with the majority of the total compensation opportunity at target for each named executive officer linked to the Company's financial, market

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   PROXY SUMMARY  

and operational results. The compensation program also balances the importance of achieving long-term strategic priorities and critical short-term goals linked to long-term objectives.

2019 Named Executive Officer (NEO) Pay Opportunity
Variable Over Fixed Pay
Opportunity at Target
  Balance of Short- and Long-Term Pay
Opportunity at Target

GRAPHIC

 

CHART

Pay Aligned with Company Performance

Under our pay-for-performance design, incentive payouts to named executive officers are aligned with results. The following graphs show the performance-based payouts to the HEI Chief Executive Officer (CEO) over the past several years in relation to (i) net income and (ii) total shareholder return (TSR) relative to the Edison Electric Institute (EEI) Index (Relative TSR). HEI CEO annual incentive pay is linked to HEI's adjusted annual net income, as well as subsidiary performance. Long-term performance-based equity compensation over the respective three-year periods tracked our Relative TSR results.

Annual Net Income and CEO Performance-
Based Annual Incentive Payouts
  3-year Relative TSR Results and Performance
Based Long-Term Incentive Payouts

CHART

 

CHART

COMPENSATION COMMITTEE DECISION-MAKING

The Compensation Committee, all of the members of which are independent directors, establishes pay programs and reviews performance results to ensure that executive officer compensation aligns with shareholder interests. In addition, the Compensation Committee is advised by an independent compensation consultant with respect to the design of the plans, performance results and reasonableness of pay decisions and appropriateness or reasonableness of compensation adjustments.

The Compensation Committee believes that the Company's executive officer compensation reflects favorably on the Company's pay-for-performance objective, is aligned with shareholder interests and compares well to the Company's peers.

OUR EXECUTIVE COMPENSATION PROGRAM INCORPORATES BEST PRACTICES:

GRAPHIC   Majority of target compensation opportunity tied to performance
GRAPHIC   Rigorous performance goals are aligned with business strategy
GRAPHIC   Stock ownership and retention requirements apply to named executive officers
GRAPHIC   Clawback policy for performance-based pay
GRAPHIC   "Double trigger" change-in-control agreements
GRAPHIC   No tax gross ups (except for executive death benefit frozen in 2009)
GRAPHIC   No employment contracts
GRAPHIC   Minimal perquisites
GRAPHIC   Prohibition against hedging and pledging of HEI stock
GRAPHIC   No dividends or dividend equivalents paid on unearned performance shares

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   PROPOSAL NO. 1: ELECTION OF THREE CLASS III DIRECTORS AND ONE CLASS I DIRECTOR   


PROPOSAL NO. 1: ELECTION OF THREE CLASS III DIRECTORS AND ONE CLASS I DIRECTOR

In accordance with HEI's Amended and Restated Bylaws (Bylaws), the Board has fixed the size of the Board at 10 directors effective at the 2020 Annual Meeting, divided into three classes with staggered terms. The Board proposes that the following nominees be elected at the 2020 Annual Meeting:

Three Class III directors to serve until the 2023 Annual Meeting, or until his or her respective successor shall be duly elected and qualified:

Peggy Y. Fowler

Keith P. Russell

Eva T. Zlotnicka

One Class I director to serve until the 2021 Annual Meeting, or until his successor shall be duly elected and qualified:

Micah A. Kane

Ms. Fowler, Mr. Kane, Mr. Russell and Ms. Zlotnicka are all incumbent directors of HEI. Effective August 1, 2019, Mr. Kane was appointed by the HEI Board pursuant to Article III, Section 8 of HEI's Bylaws to fill the vacancy created by the July 31, 2019 retirement of Class I director James K. Scott. On February 12, 2020, Ms. Zlotnicka was appointed to the HEI Board as a Class III director. Ms. Zlotnicka was nominated for election at the 2020 Annual Meeting pursuant to a Cooperation Agreement between HEI and ValueAct Spring Master Fund, L.P. and certain of its affiliates described in more detail in the section entitled "Other Relationships and Related Person Transactions".

The Board has determined that Ms. Fowler, Mr. Kane, Mr. Russell and Ms. Zlotnicka are independent under the applicable standards for director independence, as discussed below under "Board of Directors — Independent Directors." Ms. Fowler, Mr. Russell and Ms. Zlotnicka have each consented to serve for the new three-year term expiring at the 2023 Annual Meeting if elected, and Mr. Kane has consented to serve for the remainder of the Class I term expiring at the 2021 Annual Meeting if elected. If a nominee is unable to stand for election at the time of the 2020 Annual Meeting, the proxy holders listed in the proxy card may vote in their discretion for a suitable substitute.

Information regarding the business experience and certain other directorships for each director nominee and continuing directors is provided beginning on page 2 below, together with a description of the experience, qualifications, attributes and skills that led to the Board's conclusion at the time of this Proxy Statement that each of the nominees and directors should serve on the Board in light of HEI's current business and structure.

As described in Proposal No. 3, the Company is submitting a proposal for shareholder approval that, if approved, would phase out the classified structure of the Board. If Proposal No. 3 is approved by shareholders, beginning with our 2021 Annual Meeting, directors who stand for election will be elected to one-year terms, and all directors will stand for election on an annual basis beginning with the 2023 Annual Meeting.

ü FOR

The Board recommends that you vote FOR each nominee listed above to serve as a Class III or Class I Director.

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   DIRECTOR NOMINEES FOR ELECTION   


DIRECTOR NOMINEES FOR ELECTION


Nominees for Class III Directors whose terms expire at the 2023 Annual Meeting of Shareholders


GRAPHIC



Peggy Y. Fowler
Independent Director
Executive Committee Member
Nominating and Corporate Governance
Committee Chair
Compensation Committee Member







 


With experience as Chief Executive Officer of a NYSE-listed public utility company, and as director for the Portland Branch of the Federal Reserve Bank of San Francisco and Umpqua Holdings Corporation (a publicly traded bank holding company), Ms. Fowler brings a unique combination of utility and banking knowledge to the Board.

Ms. Fowler was recognized as Oregon's Most Admired CEO in a 2005 Portland Business Journal survey, and as Portland's First Citizen in 2007 by the Portland Metropolitan Association of Realtors. Ms. Fowler was awarded the Oregon History Makers recognition in 2015, and the 2016 Joan Austin Lifetime Achievement Award recognizing her as one of Portland, Oregon's most-respected business leaders.

Ms. Fowler has deep environmental and renewable energy expertise. She managed PGE's environmental department, overseeing initiatives that improved fish passage on multiple Oregon rivers. During Ms. Fowler's tenure as Chief Executive Officer, PGE made the strategic decision to reduce use of oil and coal and has been ranked #1 on multiple occasions for selling more renewable power to residential customers than any other U.S. utility. Under Ms. Fowler's leadership, wind and solar projects were constructed and integrated into the PGE grid.

Under her leadership as HEI's Nominating and Corporate Governance Chair, the company underwent a new director refresh, de-staggering of the board and decreased tenure and provided greater proxy access.

PROFESSIONAL EXPERIENCE

35 years of executive leadership (including as President and Chief Executive Officer, and Chief Operating Officer), senior officer and operating positions, PGE

PUBLIC COMPANY BOARDS

Umpqua Holdings Corp (since 2009) (bank holding company); Chairman (since 2012)

PAST PUBLIC COMPANY BOARDS

Portland General Electric (2006-2012)

OTHER POSITIONS

Director and committee member, Cambia Health Solutions (not-for-profit health insurer) (since 2005)

Director, PGE Foundation (since 1997)

Director, Portland Branch of Federal Reserve Bank of San Francisco (2007-2011)


Age: 68

Independent Director Since: 2011

Principal Occupation: Former Chief
Executive Officer (2000-2009),
Portland General Electric Company (PGE)




 

 

EXPERTISE

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



ENERGY, UTILITIES

 

 

GRAPHIC



RENEWABLES

 

 

GRAPHIC



ENVIRONMENTAL MANAGEMENT

 

 

GRAPHIC



CORPORATE GOVERNANCE

 

 

GRAPHIC



FINANCIAL OVERSIGHT

 

 

GRAPHIC



REGULATORY COMPLIANCE

 

 

EDUCATION

Public Utility Executive Program, University of Idaho and University of Michigan

Bachelor of Science, Chemistry and Bachelor of Science, Math, George Fox University

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   DIRECTOR NOMINEES FOR ELECTION  






GRAPHIC



Keith P. Russell
Independent Director
Executive Committee Member
Audit & Risk Committee Member
ASB Risk Committee Chair





 


Within three major financial institutions, Mr. Russell served as an executive and/or Director and held domestic and international positions in all areas of banking, finance, capital markets and risk management. He has served on numerous panels on corporate governance and strategic direction.

He has broad and deep expertise in risk management including identification, assessment, and monitoring of current and emerging risks through his prior service as Chief Risk Officer of a large financial institution and as Chief Operating Officer of a major bank. Mr. Russell has been the chair of the American Savings Bank (an HEI subsidiary) risk committee since 2012, during which time he led the implementation of an extensive enterprise risk management system which included development of robust risk governance, monitoring and management systems.

Mr. Russell has a keen knowledge of the Hawaii real estate market and hospitality industry from his service on a lodging real estate investment trust with investments in Hawaii.

Mr. Russell's years of executive leadership experience in financial service operations, particularly as an executive officer of a major lender to the electric utility industry, contribute invaluable expertise to the Board.

PROFESSIONAL EXPERIENCE

Vice Chair/Chief Risk Officer, Mellon Financial Corp (1991-2001)

President and Chief Operating Officer, Glendale Federal Bank (1983-1991)

Senior Vice President, Security Pacific Corporation (1974-1983)

PUBLIC COMPANY BOARDS

Sunstone Hotel Investors (since 2003)

PAST PUBLIC COMPANY BOARDS

Nationwide Health Properties (2002-2011)

OTHER POSITIONS

Director, KBS Growth and Income REIT (since 2016)

Director, American Savings Bank (HEI subsidiary)

Director, ASB Hawaii (HEI subsidiary) (2014-2016)


Age: 74

Independent Director Since: 2011

Principal Occupation: President,
Russell Financial (since 2001)



 

 

EXPERTISE

 

 

GRAPHIC



RISK MANAGEMENT

 

 

GRAPHIC



FINANCE AND ACCOUNTING

 

 

GRAPHIC



BANKING

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



STRATEGIC PLANNING

 

 

GRAPHIC



CORPORATE GOVERNANCE

 

 

EDUCATION

Master of Arts, Northwestern University

Bachelor of Arts, University of Washington

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   DIRECTOR NOMINEES FOR ELECTION   






GRAPHIC



Eva T. Zlotnicka
Independent Director
Compensation Committee Member



 


Ms. Zlotnicka's experience as a sustainable investing professional with a background in utilizing markets, policy, and partnership to motivate the private sector to simultaneously improve sustainability, profitability and competitiveness, brings highly valuable perspective to the Board. In her current position as Managing Director for the ValueAct Spring Fund, an investor in HEI, she identifies companies whose technology and products are solving environmental and social issues and actively supports them through various industry, governance or other significant transitions. As ValueAct Capital's Head of Stewardship, Ms. Zlotnicka also leads the firm's engagement with other shareholders and the broader corporate governance community.

As director at Unifi, where she serves as a member of the audit committee and the corporate governance and nominating committee, Ms. Zlotnicka has experience in guiding the implementation of ambitious sustainability strategies in addition to other strategic efforts and financial oversight. Recently she was recognized among WomenInc.'s 2019 Most Influential Corporate Board Directors.

Prior to joining ValueAct Capital, Ms. Zlotnicka served as the US lead Sustainability and Environmental, Social and Governance (ESG) equity research analyst at Morgan Stanley. During her tenure, Morgan Stanley's Global Sustainability Research team ranked #1 in Sustainable and Responsible Investment Research by the 2017 Extel IRRI survey. Ms. Zlotnicka was also individually ranked as #1 for "Best Understanding of Companies" as voted by corporate participants. Additionally, Ms. Zlotnicka has familiarity with the academic, public and non-profit sectors, most notably having worked with the US Environmental Protection Agency on public-private partnerships and the Environmental Defense Fund on corporate investment in energy efficiency.

PROFESSIONAL EXPERIENCE

Over ten years of experience in sell-side research in sustainability, ESG and fixed income, including leading sustainability research teams at Morgan Stanley

PUBLIC COMPANY BOARDS

Unifi, Inc. (since 2018) (innovative textile products)

OTHER POSITIONS

Women Investing for a Sustainable Economy ("WISE"), Co-Founder (since 2012)

Board Observer, Arcadia Power, Inc. (since 2018)

Investor Advisory Group Member, Sustainability Accounting Standards Board (since 2019)


Age: 37

Independent Director Since: 2020

Principal Occupation: Managing Director, ValueAct Spring Fund; Head of Stewardship, ValueAct Capital (2018 to present)




 

EXPERTISE

 

 

GRAPHIC



ENVIRONMENTAL MANAGEMENT

 

 

GRAPHIC



CORPORATE GOVERNANCE

 

 

GRAPHIC



INVESTMENT MANAGEMENT

 

 

GRAPHIC



FINANCE AND ACCOUNTING

 

 

EDUCATION

Master of Business Administration and Master of Environmental Science, Yale University

Bachelor of Science in Economics, Wharton School, and Bachelor of Science in Computer Science & Engineering, University of Pennsylvania

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   DIRECTOR NOMINEES FOR ELECTION  




Nominee for Class I Director whose term expires at the 2021 Annual Meeting of Shareholders


GRAPHIC



Micah A. Kane
Independent Director
Nominating and Corporate Governance
Committee Member





 


Mr. Kane is a well-respected leader in the State of Hawaii and brings extensive leadership and a deep understanding of Hawaii's cultural, business and political environment to the Board.

His career has been distinguished by his leadership of significant private and public trusts, including; his current role as Chief Executive Officer of Hawaii Community Foundation, Hawaii's largest and oldest Foundation; his service as a Trustee of the largest land trust in the state of Hawaii, Kamehameha Schools, a private school system established under the will of Princess Bernice Pauahi Bishop to create educational opportunities in perpetuity to improve the capability and well-being of people of Hawaiian ancestry; and his prior role as Chairman/Director of the State of Hawaii Department of Hawaiian Homelands.

As an acknowledged Native Hawaiian community leader, Mr. Kane brings invaluable experience in understanding Hawaii's complex cultural and land use history (nearly 27% of the population self-identifies as Native Hawaiian and other Pacific Islander). Mr. Kane has brought to bear this knowledge and his business acumen to bring the community together to address the most important issues of our day including environmental sustainability, homelessness and affordable housing.

Mr. Kane also has expertise in state/county government affairs including state/county regulation, policy development, public relations, and crisis management.

PROFESSIONAL EXPERIENCE

President and Chief Executive Officer, Hawaii Community Foundation ($675 million in assets)

Chief Operating Officer, Pacific Links Hawaii LLC (golf course owner, developer and operator)

Principal, the KANE Group LLC (Hawaii-based company focused on land and financing matters for planned community infrastructure and general business development)

Trustee, Kamehameha Schools ($11.9 billion endowment and Hawaii's largest private landowner with over 365,000 acres of land on Hawaii island, Maui, Moloka'i, O'ahu and Kaua'i)

OTHER POSITIONS

Director, Na Ku Pa'a O Kuhio, not for profit focused on supporting the beneficiaries of the Hawaiian Homes Commission Act.

Chairman, Menlo College Board of Trustees (supporting Hawaii kids to college)

Director, Hawaiian Electric Company, Inc. (HE Subsidiary) (2012-2019)


Age: 51

Independent Director Since: 2019

Principal Occupation: President and Chief Executive Officer, Hawaii Community Foundation, Since 2017


 

 

EXPERTISE

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



COMMUNITY RELATIONS

 

 

GRAPHIC



GOVERNMENT AND RELATIONS

 

 

GRAPHIC



EXECUTIVE MANAGEMENT

 

 

GRAPHIC



STRATEGIC AND OPERATIONAL MANAGEMENT

 

 

GRAPHIC



ORGANIZATIONAL LEADERSHIP

 

 

EDUCATION

Master of Business Administration, University of Hawaii at Manoa

Bachelor of Arts, Business Administration, Menlo College

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   CONTINUING DIRECTORS   




Continuing Class I Directors whose terms expire at the 2021 Annual Meeting of Shareholders


GRAPHIC



Richard J. Dahl
Independent Director
Audit & Risk Committee Member
Compensation Committee Member





 


Mr. Dahl has significant leadership, strategy, audit and risk management expertise. He has in-depth experience in corporate transformation and restructuring and in driving improved corporate governance and shareholder engagement. His experiences working in Hawaii and on the U.S. mainland, and in banking and the electric utility industry, bring valuable perspective to the Board.

He brings with him to the Board in-depth understanding of the two industries in which HEI operates from his senior executive roles at Bank of Hawaii Corporation and his current service as chairman of IDACORP, Inc. and its principal subsidiary, Idaho Power Company.

He is an audit, risk management and financial expert from his former chairmanship of the IDACORP, Inc. audit committee, membership on the Dine audit committee, previous work experience with accounting firm Ernst & Young, and prior licensure as a Certified Public Accountant and Certified Bank Auditor.

Under Mr. Dahl's leadership, Dole Food Company invested in a number of sustainability initiatives that secured external recognition. Dole was named one of the World's Most Ethical Companies by Ethisphere Magazine and undertook a carbon offset program to secure a carbon neutral operating footprint.

PROFESSIONAL EXPERIENCE

Interim Chief Executive Officer, Dine Brands Global, Inc. (formerly known as DineEquity) (3/1/17 — 9/15/17) (franchiser of over 3000 Applebee's and IHOP restaurants)

President and Chief Operating Officer (2004-2007) and Chief Finance Officer (2002-2004), Dole Food Company

President and Chief Operating Officer, Bank of Hawaii Corporation (1981-2002)

Ernst & Young (1973-1981)

PUBLIC COMPANY BOARDS

Dine Brands Global, Inc. (formerly known as DineEquity) (since 2004); Non-Executive Chairman (since 2017)

IDACORP (since 2008) (currently decommissioning/divesting ownership of its coal plants), Chairman (since May 2019)

PAST PUBLIC COMPANY BOARDS

Non-Executive Chairman, International Rectifier Corporation (2008-2015) (leading manufacturer and distributor of power management semi-conductors and researcher in battery storage)

OTHER POSITIONS

Non-Executive Chairman, James Campbell Company, LLC (privately held real estate investment and development company), Executive Chair, President and CEO (2010-2016)

Director, Hawaiian Electric Company, Inc (HEI subsidiary)(2017-2019)


Age: 68

Independent Director Since: 2017

Principal Occupation: Former President and Chief Executive Officer, James Campbell Company LLC (2010-2016)




 

EXPERTISE

 

 

GRAPHIC



STRATEGIC & OPERATIONAL MANAGEMENT

 

 

GRAPHIC



CORPORATE TRANSFORMATION

 

 

GRAPHIC



FINANCE AND ACCOUNTING

 

 

GRAPHIC



CORPORATE GOVERNANCE

 

 

GRAPHIC



BANKING

 

 

GRAPHIC



ENERGY, UTILITIES

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



RISK MANAGEMENT

 

 

GRAPHIC



AUDIT

 

 

EDUCATION

Bachelor of Science, University of Idaho

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   CONTINUING DIRECTORS  






GRAPHIC



Constance H. Lau
President and CEO, HEI
Executive Committee Member
Chairman, American Savings Bank
(HEI subsidiary)








Ms. Lau has deep industry and operational expertise having served in leadership capacities spanning several functions across HEI and its subsidiaries. She is recognized as a transformational leader, having been identified by the US Banker List of Most Powerful Women in Banking in 2004, 2005, 2006 for transforming ASB into a full-service community bank. Signing the groundbreaking Hawaii Clean Energy Initiative with the Governor of State of Hawaii also secured Ms. Lau the Women in Clean Energy & the Environment, Woman of the Year award, 2011.

Ms. Lau is a nationally recognized leader in the fields of critical infrastructure, resilience and physical and cyber security, banking, and energy, demonstrated by her appointment by President Obama to chair the National Infrastructure Advisory Council, membership on the federal Electricity Subsector Coordinating Council, prior service on the Federal Reserve Board of San Francisco's 12th District Community Depository Institutions Advisory Council, and her naming as a C3E Clean Energy Ambassador by the U.S. Department of Energy.

PROFESSIONAL EXPERIENCE

Chair, National Infrastructure Advisory Council (since 2012)

President and Chief Executive Officer, American Savings Bank (2001-2006) Chief Operating Officer, ASB (1999-2001)

Treasurer, HEI (1989-1999)

Treasurer, Hawaiian Electric and Assistant Treasurer, HEI (1987-1989)

Assistant Corporate Counsel, Hawaiian Electric Company (1984-1987)

PUBLIC COMPANY BOARDS

Matson Inc. (since 2012)

PAST PUBLIC COMPANY BOARDS

Alexander & Baldwin (2004-2012)

OTHER POSITIONS

Board Member, Edison Electric Institute

Former Board Member, Electric Power Research Institute

Board Member, Associated Electric & Gas Insurance Services

Board Member, Hawaii Business Roundtable

Board Member, Foundation for Asia-Pacific Center for Security Studies

Board Member, Elemental Excelerator

Member, Federal Electricity Subsector Coordinating Council

Chair, Hawaiian Electric Company (2006-2019)

Former Member of the Federal Reserve Bank of San Francisco's Twelfth District

Community Depository Advisory Council (2011-2014)

Chair, Consuelo Foundation

Trustee, Punahou School

Chair, Military Affairs Council, Chamber of Commerce of Hawaii


Age: 68

HEI Director Since: 2001 (except from 2004-2006)

Principal Occupation: President and Chief Executive Officer, HEI (since 2006)


 

 

EXPERTISE

 

 

GRAPHIC



CLEAN ENERGY, UTILITIES

 

 

GRAPHIC



INFRASTRUCTURE

 

 

GRAPHIC



CYBER SECURITY

 

 

GRAPHIC



FINANCE AND ACCOUNTING

 

 

GRAPHIC



BANKING

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



CORPORATE TRANSFORMATION

 

 

GRAPHIC



STRATEGIC & OPERATIONAL MANAGEMENT

 

 

GRAPHIC



CORPORATE GOVERNANCE

 

 

GRAPHIC



MERGERS AND ACQUISITIONS

 

 

EDUCATION

Master of Business Administration,
Stanford Graduate School of Business

Juris Doctor, Hastings College of the Law, University of California

Bachelor of Science in Administrative
Sciences, Yale College

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   CONTINUING DIRECTORS   




Continuing Class II Directors whose terms expire at the 2022 Annual Meeting of Shareholders


GRAPHIC



Celeste A. Connors
Independent Director
Audit & Risk Committee Member




 


Ms. Connors has considerable experience in environmental sustainability from serving as Executive Director of Hawaii Green Growth Local2030 hub, which was recognized by the United Nations in 2018 as one of the world's first hubs for sustainability solutions.

Her deep understanding of the business, government and non-profit communities in the Hawaiian Islands, from serving as Executive Director of Hawaii Green Growth Local2030 Hub and CEO and Co-Founder of c.dots development, contribute significantly to the Board's understanding of Hawaii's unique business environment. While leading c.dots, Ms. Connors worked with local, state and federal governments, the private sector, and philanthropic organizations to help build smart sustainable communities, including green and resilient infrastructure systems and services.

Ms. Connors is an expert on climate risk and has significant government, regulatory and policy development experience from serving as Director for Environment and Climate Change at the National Security Council and National Economic Council in the White House, as well as a Foreign Service Officer with the U.S. Department of State. She has advised the President, Vice President, Cabinet members and other government leaders on environment and sustainable development policy.

Ms. Connors has a proven track record of working to achieve Hawaii's energy and sustainability goals, which will add significant value to HEI's efforts to accelerate a sustainable future for Hawaii.

PROFESSIONAL EXPERIENCE

Practitioner in Residence (Energy, Resources and Environment Program), Johns Hopkins

University School of Advanced International Studies (SAIS) (since 2012)

Chief Executive Officer and Co-Founder, c.dots development (builds partnerships to deliver sustainable and resilient infrastructure in local communities) (since 2012)

Director (Environment and Climate Change), National Security Council and National Economic Council in the White House (2008-2012)

Foreign Service Officer, U.S. Department of State (2000-2012)

Foreign Affairs Advisor (Office of the Mayor), City of New York (1999-2000)


Age: 44

Independent Director Since: 2019

Principal Occupation: Executive Director, Hawaii Green Growth Local2030 Hub (public private partnership focused on identifying sustainable growth priorities within an island context) (since 2015)


 

 

EXPERTISE

 

 


GRAPHIC




ENERGY, UTILITIES

 

 

GRAPHIC



COMMUNITY RELATIONS

 

 

GRAPHIC



GOVERNMENT AND REGULATION

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



ENTREPRENEURSHIP

 

 

EDUCATION

Master of Science (MSc), Development Studies, University of London, School of Oriental and African Studies (SOAS)

Bachelor of Arts, International Relations, Tufts University

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   CONTINUING DIRECTORS  






GRAPHIC



Admiral Thomas B.
Fargo, USN (Retired)
Independent Director
Executive Committee Member
Compensation Committee Chair
Nominating and Corporate Governance
Committee Member










In addition to extensive leadership expertise, Admiral Fargo brings to the Board deep knowledge of the U.S. military, a major customer of HEI's electric utility subsidiary and a key driver of Hawaii's economy. Admiral Fargo served as Commander of the U.S. Pacific Command, and in that post, he was responsible for the security of nearly 52% of the world's surface.

He has top level management, strategic planning, and financial and non-financial risk assessment skills developed over 40 years of leading nine diverse organizations ranging in size from 130 to 300,000 people and managing budgets up to $8 billion.

He has extensive corporate governance experience including audit, compensation and governance committees, from service on several private and public company boards, including as chairman of Huntington Ingalls Industries.

PROFESSIONAL EXPERIENCE

Owner, Fargo Associates LLC (since 2005) (defense and homeland/national security consultancy)

Commander of the U.S. Pacific Command (retired)

PUBLIC COMPANY BOARDS

The Greenbrier Companies (since 2015) (rail manufacturing & licensing services)

Huntington Ingalls Industries (military shipbuilder); Chairman (2011-April 2020)

Matson Inc. (since 2012) (transportation & logistics)

PAST PUBLIC COMPANY BOARDS

Northrop Grumman Corporation (2008-2011)

Hawaiian Holdings, Inc. (2005-2008) (Hawaiian Airlines holding company)

Alexander & Baldwin (2010-2011)

OTHER POSITIONS

Chairman, United Services Automotive Association

Advisory Board Member, National Bureau of Asian Research

Director, AtHoc (until 2016)

Director, GTA Teleguam (until 2017)

Senior Advisor, SKAI Ventures (2005-2019)


Age: 71

Independent Director Since: 2005

Principal Occupation: Chairman,
Huntington Ingalls Industries (military
shipbuilder) (NYSE: HII)




 

 

EXPERTISE

 

 

GRAPHIC



CRITICAL CUSTOMERS

 

 

GRAPHIC



RISK MANAGEMENT

 

 


GRAPHIC




CORPORATE GOVERNANCE

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



STRATEGIC PLANNING

 

 

GRAPHIC



FINANCE AND ACCOUNTING

 

 

EDUCATION

Bachelor of Science, United States Naval Academy

Executive and business training —
Harvard University; Stanford University

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   CONTINUING DIRECTORS   






GRAPHIC



Mary G. Powell
Independent Director
Compensation Committee Member



 


Ms. Powell has significant experience in utilities and renewable energy, having served as President and CEO of Green Mountain Power since 2008. Under her leadership, the company became the world's first utility to become a Certified B Corporation (a business that balances purpose and profit). Ms. Powell led an ambitious energy vision to dramatically ramp up local renewable resources in Vermont.

Ms. Powell has relevant public board experience, serving as a director at Sunrun Inc., where she is a member of the compensation committee. Ms. Powell's track record of leadership and innovation has received national acclaim; she was named as one of Fast Company's "100 Most Creative People in Business" in 2016 and as one of CEO Connection's "2017 Most Influential Women of the Mid-Market," among other recognitions. Most recently, Ms. Powell was named Utility Dive's 2019 Executive of the Year, recognizing her leadership of Vermont's investor-owned utility to prioritize and deliver on customer-choice distributed energy solutions.

PROFESSIONAL EXPERIENCE

Vice President (Human Resources and Organizational Development), then Vice President (Administration), then Senior Vice President (Customer and Organizational Development), then Senior Vice President and Chief Operating Officer, Green Mountain Power (1998-2008)

President, HR Works (total solutions provider of human resource management and benefits administration services) (1997-1998)

VP Human Resources, VP Retail Banking and SVP of Retail Banking, Key Bank of Vermont (1992-1997)

PUBLIC COMPANY BOARDS

Sunrun Inc. (Since Feb 2018), Compensation Committee and Audit Committee Member

OTHER POSITIONS

Vice Chair, Vermont Chamber of Commerce (2010-2012)

Chair, Vermont Business Roundtable (2012-2014)

Director, American Savings Bank (HEI Subsidiary)

Director, Vermont Electric Power Company (VELCO) (2008-2019)

Director, Enegir (largest natural gas company in Quebec, Canada) (since November 2019)


Age: 59

Independent Director Since: 2019

Principal Occupation: Former President and Chief Executive Officer, Green Mountain Power, 2008-2019


 

 

EXPERTISE

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



STRATEGIC AND OPERATIONAL MANAGEMENT

 

 

GRAPHIC



CORPORATE TRANSFORMATION

 

 

GRAPHIC



FINANCE AND ACCOUNTING

 

 

GRAPHIC



BANKING

 

 

GRAPHIC



ENERGY, UTILITIES

 

 

EDUCATION

Associate of Science, Keene State College

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   CONTINUING DIRECTORS  






GRAPHIC



William James
Scilacci, Jr.
Independent Director
Executive Committee Member
Audit & Risk Committee Chair






 


Mr. Scilacci has significant leadership and operational management experience through serving as CFO of Edison International, a publicly-traded company whose market cap increased substantially during Mr. Scilacci's tenure. He has extensive experience communicating with Wall Street analysts, investors and rating agencies and has demonstrated a strong track record of considerable shareholder value creation.

He has extensive utility experience through his over 20 years in financial management with Southern California Edison, the primary energy supply company for Southern California. Southern California Edison is a leader in development and implementation of grid modernization, electrification of transportation, renewable energy and energy efficiency.

Mr. Scilacci was the CFO of Edison International's competitive generation subsidiary. During his tenure, Edison International made material investments in wind energy and natural gas-fired generation. He also oversaw the subsidiaries energy trading business.

Mr. Scilacci has a keen understanding and extensive knowledge of enterprise risk management from his role as Chief Financial Officer of Edison International. For eight years, Mr. Scilacci managed Edison International's enterprise risk management program identifying, monitoring and forecasting new risks to the company including ESG related risks such as the impacts of climate change.

Mr. Scilacci's track record of success is highlighted by his recognition as one of the top CFOs in the electric utility sector by a 2017 Institutional Investor survey of investors and sell-side analysts.

PROFESSIONAL EXPERIENCE

Over 30 years of experience, and 25 years in executive leadership, for Edison International companies (including CFO of Edison International, Edison Mission Energy and Southern California Edison)

OTHER POSITIONS

Director, Chairman of the Finance Committee, Member of Audit Committee, Loyola High School of Los Angeles

President (2019) and Director (2017-2019), Belair Bay Club


Age: 64

Independent Director Since: 2019

Principal Occupation: Former Executive Vice President and Chief Financial Officer, Edison International (2008-2016)


 

 

EXPERTISE

 

 

GRAPHIC



FINANCE AND ACCOUNTING

 

 

GRAPHIC



STRATEGIC AND OPERATIONAL MANAGEMENT

 

 

GRAPHIC



LEADERSHIP

 

 

GRAPHIC



ENERGY, UTILITIES

 

 

GRAPHIC



RISK MANAGEMENT

 

 

EDUCATION

Master of Business Administration, Santa Clara University

Bachelor of Arts, University of California, Los Angeles

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   CORPORATE GOVERNANCE   


CORPORATE GOVERNANCE

HEI's governance policies and guidelines

HEI's Board and management review and monitor corporate governance trends and best practices on an ongoing basis, including for purposes of reviewing HEI's corporate governance documents and complying with the corporate governance requirements of the New York Stock Exchange (NYSE), rules and regulations of the Securities and Exchange Commission (SEC) and rules and regulations of the Board of Governors of the Federal Reserve applicable to HEI as a savings and loan holding company. As a result of this review, the Board is proposing to declassify the Board (Proposal 3) and to adopt a majority voting standard in uncontested director elections (Proposal 4). HEI's corporate governance documents (such as the charters for the Audit & Risk, Compensation, Nominating and Corporate Governance and Executive Committees, Corporate Governance Guidelines and Corporate Code of Conduct, as well as other governance documents) are available on HEI's website at www.hei.com/govdocs.

The Board's leadership structure

In December 2019, the HEI Board approved the appointment of Admiral Fargo to the position of nonexecutive Chairperson effective May 5, 2020, to succeed our current Chairperson, Jeffrey N. Watanabe.

Admiral Fargo has served on the Board since 2005, and has never been employed by HEI or any HEI subsidiary. The Board has determined that he is independent. Among the many skills and qualifications that Admiral Fargo brings to the Board, the Board considered: (i) his extensive experience in corporate governance from serving on a number of other public company, private company and nonprofit boards; (ii) his reputation for effective consensus and relationship building and business and community leadership, including serving as Commander of the U.S. Pacific Command; (iii) his willingness to spend time advising and mentoring members of HEI's senior management; and (iv) his dedication to committing the hard work and time necessary to successfully lead the Board.

The responsibilities of HEI's Chairperson are to:

lead Board and shareholder meetings and executive sessions of the independent directors, including executive sessions at which the performance of the CEO is evaluated by the Board;

attend meetings of the Board's committees, either as member or observer;

work closely with the Nominating and Corporate Governance Committee in periodically evaluating board and committee structures, as well as advise with respect to succession planning for the Board;

serve on and/or advise the boards of HEI's primary operating subsidiaries, Hawaiian Electric and ASB, chair joint executive sessions of the independent directors of HEI and these subsidiary boards and attend meetings of subsidiary board committees;

be available to other Board and subsidiary board members and management for questions and consultation; and

ensure and facilitate communications among Board members and Board committees and between the Board and management.

The Board's Corporate Governance Guidelines provide that if the Chairperson and CEO positions are held by the same person, or if the Board determines that the Chairperson is not independent, the independent directors should designate an independent director to serve as "Lead Director." If a Lead Director is designated, the Lead Director's responsibilities are to: (i) preside at Board and shareholder meetings when the Chairperson is not present; (ii) preside at executive sessions of the independent directors; (iii) facilitate communication between the independent directors and the Chairperson or the Board as a whole; (iv) call meetings of the non-management or independent directors in executive session; (v) participate in approving meeting agendas, schedules and materials for the Board; and (vi) perform other functions described in the Corporate Governance Guidelines or as determined by the Board from time to time.

The Board believes that its current leadership structure, which provides for an independent nonemployee

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Chairperson, or an independent Lead Director if the Chairperson is not independent, is appropriate and effective in light of HEI's current operations, strategic plans and overall corporate governance structure. Several reasons support this conclusion. First, the Board believes that having an independent Chairperson or Lead Director has been important in establishing a tone at the top for both the Board and the Company that encourages constructive expression of views that may differ from those of senior management. Second, the Board believes that the presence of an independent Chairperson or Lead Director demonstrates to the Company's regulators and shareholders that the Board is committed to serving the best interests of the Company and its shareholders and not the best interests of management. Third, the Board recognizes that HEI has an uncommon corporate governance structure in that the boards of its two primary operating subsidiaries are also composed mostly of nonemployee directors and that the HEI Chairperson plays an important leadership role for the consolidated company. For instance, in addition to chairing executive sessions of the nonemployee directors and attending meetings of the committees of these subsidiary boards, the Chairperson leads the HEI Board in its oversight role with respect to HEI's subsidiaries.

The Board's role in risk oversight

HEI is a holding company that operates principally through its Hawaii-based electric public utility and bank subsidiaries. At the holding company and subsidiary levels, the Company faces a variety of risks, including operational risks, regulatory (including environmental regulations) and legal compliance risks, credit and interest rate risks, competitive risks, liquidity risks, cybersecurity risks and strategic and reputational sustainability related risks. Developing and implementing strategies to manage these risks is the responsibility of management, and that responsibility is carried out by assignments of responsibility to various officers and other employees of the Company under the direction of HEI's Chief Financial Officer, who also serves as HEI's Chief Risk Officer. The role of the Board is to oversee the management of these risks.

The Board's specific risk oversight functions are as follows:

The Board has approved a consolidated enterprise risk management (ERM) system recommended by management. The system is designed to identify and assess risks across the HEI enterprise so that information regarding the Company's risks can be reported to the Board, along with proposed strategies for mitigating these risks. The structure of the ERM system is decentralized, with separate Chief Risk Officers at each of Hawaiian Electric and ASB in addition to HEI's Chief Risk Officer. The Chief Risk Officer of Hawaiian Electric is also responsible for identifying, assessing and reporting risks at HEI's other electric utility subsidiaries that operate on the neighbor islands of Hawaii, Maui, Molokai and Lanai. Each subsidiary Chief Risk Officer reports directly to the respective subsidiary President and functionally to HEI's Chief Risk Officer, who reviews such risks on a consolidated basis. The Board believes that this decentralized risk management structure is appropriate and effective for the Company's diverse operations and holding company structure, because it allows for industry-specific risk identification and management at the subsidiary levels while also ensuring an integrated and consolidated view of risk at the holding company level by HEI's Chief Risk Officer. In connection with approving this ERM system, the Board reviewed (and continually assesses) a catalog of risks and management's assessment of those risks. As part of the Board's ongoing risk oversight, HEI's Chief Risk Officer is responsible for providing regular reports to the Board and Audit & Risk Committee on the status of those risks, any changes to the risk catalog or management's assessment of those risks, and any other risk management matters that the Board may request from time to time. The Board and Audit & Risk Committee also receive reports from HEI's internal auditor evaluating the effectiveness of management's implementation of the approved ERM system.

The Board has assigned to the Audit & Risk Committee the responsibility of assisting in the oversight of the overall risk management strategy of the Company. In providing such assistance, the Audit & Risk Committee is specifically required to discuss policies with respect to risk assessment and risk management, including the guidelines and policies governing the process by which risk assessment and risk management are undertaken at the Company, and to report to the Board the committee's discussion and findings so that the entire Board can consider changes (if any) in the Company's risk profile.

The Board has also assigned to the Audit & Risk Committee the specific risk oversight responsibilities of: (i) reviewing the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures; (ii) overseeing HEI's Code of Conduct compliance program; and

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The Board has assigned to the Compensation Committee the specific risk oversight responsibility of reviewing whether the compensation policies or practices of HEI or its subsidiaries encourage employees to take risks that are reasonably likely to have a material adverse effect on such entities and of recommending new or revised policies and practices to address any such identified risks. Included in this oversight responsibility is the Compensation Committee's review and evaluation of ASB's compensation practices for compliance with regulatory guidance on sound incentive compensation plans. The Compensation Committee reports the results of its review and any recommendations to the Board. The results of the review are also communicated to the Audit & Risk Committee through HEI's Chief Risk Officer. Both the Audit & Risk and Compensation Committees are composed entirely of independent directors.

In addition to overall risk oversight by the HEI Board, the boards of HEI's primary operating subsidiaries, Hawaiian Electric and ASB, are responsible for overseeing risks at their respective companies. The Hawaiian Electric Board has assigned responsibility for ongoing oversight of risk management to its Audit & Risk Committee and the ASB Board has assigned such responsibility to its Risk Committee. Under the decentralized ERM structure discussed above, risk management activities at the subsidiary level are reported to these committees and to the subsidiary boards through the subsidiary Chief Risk Officers. The HEI Board and/or Audit & Risk Committee may also be invited to participate in risk oversight discussions by these subsidiary boards and/or committees. The information from these subsidiary board and committee sessions are reported, on at least a quarterly basis, to the HEI Board by the subsidiary Chief Risk Officers (or their representatives), who functionally report to HEI's Chief Risk Officer on risk management matters. These subsidiary boards are composed primarily of nonemployee directors. The subsidiary audit committees are composed primarily of nonemployee directors who meet the independence requirements for audit committee members of companies listed on the NYSE, and with regard to the ASB Audit Committee, comply with FDIC regulations.

At least annually, the Board conducts a strategic planning, sustainability and risk review. As part of this review, the Board reviews fundamental financial and business strategies and sustainability initiatives and assesses the major risks facing the Company and options to mitigate those risks. To facilitate strategic planning through constructive dialogue among management and Board members, members of management who are not directors are invited to participate in the review. Based on the review, the Board and senior management, including the HEI Chief Risk Officer, identify key issues to be addressed during the course of the next calendar year.

The Board believes that, for risk oversight, it is especially important to have an independent Chairperson or Lead Director in order to ensure that differing views from those of management are expressed. Since the HEI Chairperson attends the meetings of the Board, the subsidiary boards and their respective committees, the HEI Chairperson is also in a unique position to assist with communications regarding risk oversight and risk management among the Board and its committees, between the subsidiary boards and their respective committees and between directors and management.

Selection of nominees for the Board

The Board believes that there are skill sets, qualities and attributes that should be represented on the Board as a whole but do not necessarily need to be possessed by each director. The Nominating and Corporate Governance Committee and the Board thus consider the qualifications and attributes of incumbent directors and director candidates both individually and in the aggregate in light of the current and future needs of HEI and its subsidiaries.

The Nominating and Corporate Governance Committee assists the Board in identifying and evaluating persons for nomination or re-nomination for Board service or to fill a vacancy on the Board. To identify qualified candidates for HEI Board membership, the Committee may consider persons who are serving on its subsidiary boards as well as persons suggested by Board members, management and shareholders or may retain a third-party search firm to help identify qualified candidates. The Committee's evaluation process does not vary based on whether a candidate is recommended by a shareholder, a Board member, a member of management or self-nomination.

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Once a person is identified as a potential director candidate, the committee may review publicly available information to assess whether the candidate should be further considered. If so, a committee member or designated representative for the committee will contact the person. If the person is willing to be considered for nomination, the person is asked to provide additional information regarding his or her background, his or her specific skills, experience and qualifications for Board service, and any direct or indirect relationships with the Company. In addition, one or more interviews may be conducted with committee and Board members, and committee members may contact one or more references provided by the candidate or others who would have firsthand knowledge of the candidate's qualifications and attributes.

In evaluating the qualifications and attributes of each potential candidate (including incumbent directors) for nomination or re-nomination or appointment to fill a vacancy, the committee considers:

the candidate's qualifications, consisting of his/her knowledge (including relevant industry knowledge), understanding of the Company's businesses and the environment within which the Company operates, experience, skills, substantive areas of expertise, financial literacy, innovative thinking, business judgment, achievements and other factors required to be considered under applicable laws, rules or regulations;

the candidate's attributes, comprising independence, personal and professional integrity, character, reputation, ability to represent the interests of all shareholders, time availability in light of other commitments, dedication, absence of conflicts of interest, diversity, appreciation of multiple cultures, commitment to deal responsibly with social issues and other stakeholder concerns and other factors that the committee considers appropriate in the context of the needs of the Board;

familiarity with and respect for corporate governance requirements and practices;

with respect to incumbent directors, the self-evaluation of the individual director, his or her current qualifications and his or her contributions to the Board;

the current composition of the Board and its committees; and

intangible qualities of the candidate including the ability to ask difficult questions and, simultaneously, to work collegially with members of the Board, as well as to work effectively with management.

The Board considers the recommendations of the Nominating and Corporate Governance Committee and then makes the final decision whether to re-nominate incumbent directors and whether to approve and extend an invitation to a candidate to join the Board upon appointment or election, subject to any approvals required by law, rule or regulation.

Diversity in identifying nominees for the Board

In assisting the Board in identifying qualified director candidates, the Nominating and Corporate Governance Committee considers whether the candidate would contribute to the expertise, skills and professional experience, as well as to the diversity of the Board in terms of race, ethnicity, gender, age, geography and cultural background. The Board believes it functions most effectively with members who collectively possess a range of substantive expertise, skills and experience in areas that are relevant to leading HEI in accordance with the Board's fiduciary responsibilities. The Board also believes that having a board composed of members who can collectively contribute a range of perspectives, including perspectives that may arise from a person's gender or ethnicity, improves the quality of the Board's deliberations and decisions because it enables the Board to view issues from a variety of perspectives and, thus, more thoroughly and completely. As the Company's operations and strategic plans and the Board's composition may evolve over time, the Nominating and Corporate Governance Committee is charged with identifying and assessing the appropriate mix of knowledge areas, qualifications and personal attributes contributed by Board members that will bring the most strategic and decision-making advantage to HEI.

With operations almost exclusively in the State of Hawaii, it is advantageous that our Board be composed largely of members who live and work in the state and have knowledge of and experience with our customer base and the political and regulatory environment. As a result, the Board benefits from the racial and gender diversity that exists in this state. If the shareholders vote to elect the four director nominees proposed by the Board for election at the 2020 Annual Meeting, the resulting composition of the Board would be as follows: eight directors (or 80%) who are Caucasian, one

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   CORPORATE GOVERNANCE   

director (or 10%) who is Asian American and one director (or 10%) who is native Hawaiian, five (or 50%) of the ten directors would be female.

The Board also recognizes that, due to Hawaii's geographic isolation from the continental United States and the comparatively small number of publicly traded companies, banks and regulated utilities based in Hawaii, the Board also benefits from having among its members directors who have gained business experience at companies located in other states; those Board members contribute valuable information about experiences they have had working at or serving on the boards of other public companies and companies in similar industries, which also contributes to the breadth of perspectives on the Board.

Director resignation policies

Through its Corporate Governance Guidelines, the Board requires its members to submit a letter of resignation for consideration by the Board in certain circumstances. A director must tender his or her resignation in the event of a significant change in the director's principal employment and at the end of the term during which the director reaches age 75. In addition to the evaluation process discussed under "Corporate Governance — Selection of nominees for the Board," requiring a director to submit a letter of resignation in these two circumstances ensures that the Board examines whether a director's skills, expertise and attributes continue to provide value over time.

A director must also submit his or her resignation for consideration by the Board if the director is elected under the current plurality vote standard (described under "Voting Procedures") but does not receive the support of the majority of votes cast. In such an event, the Board will evaluate the reasons for the voting result and determine how best to address the shareholder concerns underlying that result. In some cases, the Board may decide that the best approach is to accept the director's resignation. In other cases, the Board may discover that a shareholder concern that was the cause of the vote outcome may more appropriately be addressed by taking other action. If Proposal 4 is approved by shareholders, the plurality vote standard will change to a majority voting standard in uncontested director elections, and our director resignation policy will remain in place for directors who fail to receive the support of a majority of the votes cast.

The Board's role in management succession planning

The Board, led by its Nominating and Corporate Governance Committee, is actively engaged in succession planning and talent development, with a focus on the CEO and senior management of HEI and its operating subsidiaries. The Board and the Nominating and Corporate Governance Committee consider talent development programs and succession candidates through the lens of Company strategy and anticipated future opportunities and challenges. At its meetings throughout the year, the Nominating and Corporate Governance Committee reviews progress of talent development and succession programs and discusses internal and external succession candidates, including their capabilities, accomplishments, goals and development plans. The full Board also reviews and discusses talent strategy and evaluations of potential succession candidates annually. In addition, potential leaders are given frequent exposure to the Board through formal presentations and informal events. These reviews, presentations and other interactions familiarize the Board with the Company's talent pool to enable the Board to select successors for the senior executive positions when appropriate.

Shareholder communication with the directors

Interested parties, including shareholders, desiring to communicate with the Board, any individual director or the independent directors as a group regarding matters pertaining to the business or operations of HEI may address their correspondence in care of the Corporate Secretary, Hawaiian Electric Industries, Inc., P.O. Box 730, Honolulu, HI 96808-0730. The HEI Corporate Secretary may review, sort and summarize all

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   CORPORATE GOVERNANCE  

such correspondence in order to facilitate communications to the Board. In addition, the HEI Corporate Secretary has the authority and discretion to handle any director communication that is an ordinary course of business matter, including routine questions, complaints, comments and related communications that can appropriately be handled by management. Directors may at any time request copies of all correspondence addressed to them. The charter of the HEI Audit & Risk Committee, which is available for review at www.hei.com/govdocs, sets forth procedures for submitting complaints or concerns regarding financial statement disclosures, accounting, internal accounting controls or auditing matters on a confidential, anonymous basis.

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   BOARD OF DIRECTORS   


BOARD OF DIRECTORS

Independent directors

Under HEI's Corporate Governance Guidelines, a majority of Board members must qualify as independent under the listing standards of the NYSE and any additional requirements as determined by the Board from time to time.

For a director to be considered independent under NYSE listing standards, the Board must determine that the director does not have any direct or indirect material relationship with HEI or its subsidiaries apart from his or her service as a director. The NYSE listing standards also specify circumstances under which a director may not be considered independent, such as when the director has been an employee of the Company within the last three fiscal years, if the director has had certain relationships with the Company's external or internal auditor within the last three fiscal years or when the Company has made or received payments for goods or services to entities with which the director or an immediate family member of the director has specified affiliations and the aggregate amount of such payments in any year within the last three fiscal years exceeds the greater of $1 million or 2% of such entity's consolidated gross revenues for the fiscal year.

The Board has also adopted Categorical Standards for Director Independence (HEI Categorical Standards), which are available for review on HEI's website at www.hei.com/govdocs. The HEI Categorical Standards specify circumstances under which a director may not be considered independent. In addition to the circumstances that would preclude independence under the NYSE listing standards, the HEI Categorical Standards provide that a director is not independent if HEI and its subsidiaries have made charitable contributions to a nonprofit organization for which the director serves as an executive officer and the aggregate amount of such contributions in any single fiscal year of the nonprofit organization within the last three fiscal years exceeds the greater of $1 million or 2% of such organization's consolidated gross revenues for the fiscal year.

The Nominating and Corporate Governance Committee and the Board considered the relationships described below in assessing the independence of Board members. Based on its consideration of such relationships and the recommendations of the Nominating and Corporate Governance Committee, the Board determined that all of the nonemployee directors of HEI (Messrs. Dahl, Fargo, Kane, Russell, Scilacci and Watanabe (who is retiring as of the 2020 Annual Meeting) and Mss. Connors, Fowler, Powell and Zlotnicka) are independent. The remaining director, Ms. Lau, is an employee director of HEI and, therefore, is not independent.

Relationships considered in determining director independence:

With respect to Mr. Kane and Mr. Watanabe, the Board considered amounts paid in the last three fiscal years to purchase electricity from HEI subsidiary Hawaiian Electric (the sole public utility providing electricity to the island of Oahu) by the entity employing Mr. Kane and where a family member of Mr. Watanabe is an executive officer. None of the amounts paid by the entities for electricity (excluding pass-through charges for fuel, purchased power and Hawaii state revenue taxes) exceeded the thresholds in the NYSE listing standards or HEI Categorical Standards that would automatically result in a director not being independent. Because Hawaiian Electric is the sole source of electric power on the island of Oahu the rates Hawaiian Electric charges for electricity are fixed by state regulatory authority and purchasers of electricity from these public utilities have neither a choice as to supplier nor the ability to negotiate rates or other terms, the Board determined that these relationships do not impair the independence of these directors.

With respect to Mr. Kane, the Board also considered charitable contributions in the last three fiscal years from HEI and its subsidiaries to the nonprofit organization where he serves as an executive officer. None of the contributions exceeded the threshold in the HEI Categorical Standards that would automatically result in Mr. Kane not being independent. In determining that these donations did not impair the independence of Mr. Kane, the Board also considered the fact that Company policy requires that charitable contributions from HEI or its subsidiaries to entities where an HEI director serves as an executive officer, and where the director has a direct or indirect material interest, and the aggregate amount donated by HEI and its subsidiaries to such organization would exceed $120,000 in any single fiscal year, be preapproved by the Nominating and Corporate Governance Committee.

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   BOARD OF DIRECTORS  

With respect to Messrs. Fargo, Kane and Watanabe, the Board considered other director or officer positions held by those directors at entities for which an HEI executive officer serves as a director or trustee and determined that none of these relationships affected the independence of these directors. None of these relationships resulted in a compensation committee interlock or would automatically preclude independence under the NYSE listing standards or HEI Categorical Standards.

Board meetings in 2019

In 2019, there were seven regular meetings and one special meeting of the Board. All directors who served on the Board in 2019 attended at least 75% of the combined total number of meetings of the Board and Board committees on which they served during the year.

Executive sessions of the Board

The nonemployee directors meet regularly in executive sessions without management present. In 2019, these sessions were chaired by Mr. Watanabe, who served as the Chairperson of the Board and an independent nonemployee director. The Chairperson may request from time to time that another independent director chair the executive sessions.

Board attendance at annual meetings

All of HEI's incumbent directors who served on the Board in 2019 attended the 2019 Annual Meeting of Shareholders. HEI encourages all directors to attend each year's Annual Meeting.

Board evaluations

The Board conducts annual evaluations to determine whether it and its committees are functioning effectively. As part of the evaluation process, each member of the Audit & Risk, Compensation and Nominating and Corporate Governance Committees annually evaluates the performance of each committee on which he or she serves.

Each director up for reelection also evaluates his or her own performance. The nonemployee directors also periodically complete peer evaluations of the other nonemployee directors. The evaluation process is overseen by the Nominating and Corporate Governance Committee, in consultation with the Chairperson.

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   COMMITTEES OF THE BOARD   


COMMITTEES OF THE BOARD

Board committee composition and meetings

The Board has four standing committees: Audit & Risk, Compensation, Executive and Nominating and Corporate Governance. Members of these committees are appointed annually by the Board, taking into consideration the recommendations of the Nominating and Corporate Governance Committee. The table below shows the current members of each such committee and the number of meetings each committee held in 2019.

Name
  Audit &
Risk

  Compensation
  Executive
  Nominating
and
Corporate
Governance

Celeste A. Connors

  GRAPHIC
   

Richard J. Dahl

  GRAPHIC   GRAPHIC        

Thomas B. Fargo

    GRAPHIC
GRAPHIC
GRAPHIC

Peggy Y. Fowler

      GRAPHIC   GRAPHIC   GRAPHIC

Micah A. Kane

        GRAPHIC

Constance H. Lau1

          GRAPHIC    

Mary G. Powell

    GRAPHIC
 

Keith P. Russell

  GRAPHIC       GRAPHIC    

William James Scilacci, Jr.

  GRAPHIC
  GRAPHIC

Jeffrey N. Watanabe2

          GRAPHIC    

Eva T. Zlotnicka

    GRAPHIC
 

Number of meetings in 2019

  6   4     10

GRAPHIC

1
Ms. Lau is an employee director. All other directors have been determined to be independent. See "Board of Directors — Independent Directors" above.

2
Admiral Fargo will succeed Mr. Watanabe as Chairperson of the Executive Committee as of May 5, 2020.

Functions of the Board's standing committees

The primary functions of HEI's standing committees are described below. Each committee operates and acts under written charters adopted and approved by the Board and available for review on HEI's website at www.hei.com/govdocs. Each of the Audit & Risk, Compensation and Nominating and Corporate Governance Committees may form subcommittees of its members and delegate authority to its subcommittees.

Audit & Risk Committee

Effective February 11, 2020, the Audit Committee changed its name to the Audit & Risk Committee. The Audit & Risk Committee is responsible for overseeing (i) HEI's financial reporting processes and internal controls; (ii) the performance of HEI's internal auditor; (iii) risk assessment and risk management policies set by management; and (iv) the Corporate Code of Conduct compliance program for HEI and its subsidiaries. In addition, this committee is directly responsible for the appointment, compensation and oversight of the independent registered public accounting firm that audits HEI's consolidated financial statements. The Audit & Risk Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs. The Audit & Risk Committee also maintains procedures for receiving and reviewing confidential reports of potential accounting and auditing concerns. See "Audit & Risk Committee Report" below for additional information about the Audit & Risk Committee.

All Audit & Risk Committee members are independent and qualified to serve on the committee pursuant to NYSE and SEC requirements and the Audit & Risk Committee meets the other applicable requirements of the Securities Exchange Act of 1934, as amended (Exchange Act).

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Compensation Committee

The responsibilities of the Compensation Committee include: (i) overseeing the compensation plans and programs for employees, executives and nonemployee directors of HEI and its subsidiaries, including equity and incentive plans; (ii) reviewing the extent to which risks that may arise from the Company's compensation policies and practices, if any, may have a material adverse effect on the Company and recommending changes to address any such risks; (iii) evaluating the compliance of ASB's incentive compensation practices under the principles for sound incentive compensation plans for banking organizations; and (iv) assessing the independence of any compensation consultant involved in determining or recommending director or executive compensation. See "Compensation Discussion and Analysis — How We Make Compensation Decisions" and "Compensation Committee Interlocks and Insider Participation" below for additional information about the Compensation Committee.

The Compensation Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs. All Compensation Committee members are independent and qualified to serve on this committee pursuant to NYSE requirements and also qualify as "nonemployee directors" as defined in Rule 16b-3 promulgated under the Exchange Act. An independent member of the board of directors of each of Hawaiian Electric and ASB attends meetings of the Compensation Committee as a nonvoting representative of such director's subsidiary board.

Executive Committee

The Executive Committee may exercise the power and authority of the Board when it appears to its members that action is necessary and a meeting of the full Board is impractical. It may also consider other matters concerning HEI that may arise from time to time between Board meetings. The Executive Committee is currently composed of the Chairperson of the Board, who chairs the Executive Committee, the Audit & Risk Committee Chair, the Nominating and Corporate Governance Committee Chair, the Compensation Committee Chair, ASB Risk Committee Chair and the HEI President and CEO. The Executive Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs.

Nominating and Corporate Governance Committee

The functions of the Nominating and Corporate Governance Committee include: (i) evaluating the background and qualifications of potential nominees for the Board and for the boards of HEI's subsidiaries; (ii) recommending to the Board the director nominees to be submitted to shareholders for election at the next Annual Meeting; (iii) assessing the independence of directors and nominees; (iv) recommending the slate of executive officers to be appointed by the Board and subsidiary boards; (v) advising the Board with respect to matters of Board and committee composition and procedures; (vi) overseeing the annual evaluation of the Board, its committees and director nominees; (vii) overseeing talent development and succession planning for senior executive positions; and (viii) making recommendations to the Board and the boards of HEI's subsidiaries regarding corporate governance and board succession planning matters. The Nominating and Corporate Governance Committee operates and acts under a written charter, which was adopted and approved by the Board and is available for review at www.hei.com/govdocs. See "Corporate Governance" above for additional information regarding the activities of the Nominating and Corporate Governance Committee.

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   DIRECTOR COMPENSATION   


DIRECTOR COMPENSATION

How director compensation is determined

The Board believes that a competitive compensation package is necessary to attract and retain individuals with the experience, skills and qualifications needed to serve as a director of a publicly traded company with a unique blend of highly regulated industries. Nonemployee director compensation is composed of a mix of cash and HEI Common Stock to align the interests of directors with those of HEI shareholders. Only nonemployee directors are compensated for their service as directors. Ms. Lau, the only employee director of HEI, does not receive separate or additional compensation for serving as a director. Although Ms. Lau is a member of the HEI Board, neither she nor any other executive officer participates in the determination of nonemployee director compensation.

The Compensation Committee reviews nonemployee director compensation at least once every three years and recommends changes to the Board. In 2018, the HEI Compensation Committee asked its independent compensation consultant, Frederic W. Cook & Co., Inc. (FW Cook), to conduct an evaluation of HEI's nonemployee director compensation practices. FW Cook assessed the structure of HEI's nonemployee director compensation program and its value compared to competitive market practices of utility peer companies, similar to the assessments used in its executive compensation review. The 2018 analysis took into consideration the duties and scope of responsibilities of directors. The HEI Compensation Committee reviewed the analysis in determining its recommendations concerning the appropriate nonemployee director compensation, including cash retainers, stock awards and meeting fees for HEI directors.

The Compensation Committee recommended that the Board approve the compensation program reflected in the FW Cook analysis and, at its October 31, 2018 meeting, the Board approved an increase in the annual cash retainer for the chairpersons of HEI's Audit & Risk Committee, Compensation Committee and Nominating and Corporate Governance Committee to $20,000 and an increase in the annual cash retainer for the members of those committees to $10,000 in recognition of the increased workload of such committees. These increases were effective January 1, 2019.

Components of director compensation

Cash retainer. HEI nonemployee directors received the cash amounts shown below as retainer for their 2019 HEI Board service and for their 2019 service on HEI and subsidiary board committees. No separate fees are paid to HEI directors for service on subsidiary company boards, except to the extent that they serve on any committee of a subsidiary board. Cash retainers were paid in quarterly installments.

Position*
  2019 Annual Retainer

HEI Nonexecutive Chairperson of the Board

  $250,000

HEI Director

  75,000

HEI Audit & Risk Committee Chair

  20,000

HEI Compensation Committee Chair

  20,000

HEI Nominating and Corporate Governance Committee Chair

  20,000

HEI Audit & Risk Committee Member

  10,000

HEI Compensation Committee Member

  10,000

HEI Nominating and Corporate Governance Committee Member

  10,000

Hawaiian Electric Audit & Risk Committee Chair

  15,000

Hawaiian Electric Audit & Risk Committee Member

  7,500

ASB Audit Committee Chair

  15,000

ASB Audit Committee Member

  7,500

ASB Risk Committee Chair

  20,000

ASB Risk Committee Member

  10,000
*
No additional retainer is paid for service on the HEI Executive Committee.

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   DIRECTOR COMPENSATION  

Extra meeting fees. Nonemployee directors are also entitled to meeting fees for each board or committee meeting attended (as member or chair) after the number of meetings specified below.

HEI Board

 

$1,500 per meeting after 8 meetings

HEI Audit & Risk Committee

 

$1,500 per meeting after 10 meetings

HEI Compensation Committee

 

$1,500 per meeting after 6 meetings

HEI Nominating and Corporate Governance Committee

 

$1,500 per meeting after 6 meetings

Hawaiian Electric Audit & Risk Committee

 

$1,000 per meeting after 6 meetings

ASB Audit Committee

 

$1,000 per meeting after 10 meetings

ASB Risk Committee

 

$1,000 per meeting after 6 meetings

Stock awards. On June 28, 2019, each HEI nonemployee director received shares of HEI Common Stock with a value equal to $100,000 as an annual grant under HEI's 2011 Nonemployee Director Stock Plan (2011 Director Plan), which was approved by HEI shareholders on May 10, 2011 for the purpose of further aligning directors' and shareholders' interests, amended on May 7, 2019 to extend the term and increase the number of shares available for issuance, further amended and restated effective October 31, 2019. The number of shares issued to each HEI nonemployee director was determined based on the closing sales price of HEI Common Stock on the NYSE on June 28, 2019. Stock grants to nonemployee directors under the 2011 Director Plan are made annually on the last business day in June and vest immediately. HEI considers the 2011 Director Plan an important vehicle for the appropriate compensation of its nonemployee directors.

Maximum Compensation. At its October 29, 2018 meeting, the Compensation Committee recommended, and the Board approved, a maximum annual compensation limit of $600,000 for any nonemployee director, to include the aggregate grant date fair value of all awards granted to any nonemployee director during any single calendar year plus the aggregate amount of all cash earned and paid or payable to such director for services rendered for the same year.

Retirement benefit. HEI's Nonemployee Director Retirement Plan, which provides retirement benefits to nonemployee directors, was terminated in 1996. Directors who were retired from their primary occupation at that time remained eligible to receive benefits under the plan based on years of service as a director at the time of the plan's termination. All benefits payable under the plan cease upon the death of the nonemployee director.

Deferred compensation. Nonemployee directors may participate in the HEI Deferred Compensation Plan implemented in 2011 (2011 Deferred Compensation Plan) and described under "Compensation Discussion and Analysis — Benefits — Deferred Compensation Plans" below. Under the plan, deferred amounts are credited with gains/losses of deemed investments chosen by the participant from a list of publicly traded mutual funds and other investment offerings. Earnings are not above-market or preferential. Participants may elect the timing upon which distributions are to begin following separation from service (including retirement) and may choose to receive such distributions in a lump sum or in installments over a period of up to 15 years. Lump sum benefits are payable in the event of disability or death. Mr. Taketa participated in this plan in 2019, but no other nonemployee director did so. Nonemployee directors are also eligible to participate in the prior HEI Nonemployee Directors' Deferred Compensation Plan, as amended January 1, 2009, although no nonemployee director deferred compensation under such plan in 2019.

Health benefits. Nonemployee directors may participate, at their election and at their cost, in the group employee medical, vision and dental plans generally made available to HEI, Hawaiian Electric or ASB employees. No nonemployee director participated in such plans in 2019.

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   DIRECTOR COMPENSATION   

2019 DIRECTOR COMPENSATION TABLE

The table below shows the compensation paid to HEI nonemployee directors for 2019.

Name*
  Fees Earned
or Paid in Cash
($)1

  Stock Awards
($)2

  Changes in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)

  All Other
Compensation
($)

  Total
($)

Celeste A. Connors   48,832   100,000       148,832
Richard J. Dahl   94,128   100,000       194,128
Thomas B. Fargo   111,000   100,000       211,000
Peggy Y. Fowler   109,726   100,000       209,726
Micah A. Kane3   39,722   76,561       116,283
Mary G. Powell   48,832   100,000       148,832
Keith P. Russell   112,500   100,000       212,500
William J. Scilacci, Jr.   57,870   100,000       157,870
James K. Scott   49,660   100,000       149,660
Kelvin H. Taketa4   30,828         30,828
Barry K. Taniguchi   76,484   100,000       176,484
Jeffrey N. Watanabe, Chairperson5   331,978   100,000       431,978
1
Represents cash retainers for board and committee service (as detailed below).

2
For all HEI nonemployee directors, this amount represents an HEI stock award in the value of $100,000, as described above under "Stock awards".

3
Mr. Kane was appointed to the HEI Board effective August 1, 2019 and his stock award was pro-rated.

4
In 2019, Mr. Taketa elected to defer $24,662 of his fees under the 2011 Deferred Compensation Plan. Mr. Taketa did not have above-market or preferential earnings on nonqualified deferred compensation in 2019. Mr. Taketa did not stand for election at the 2019 Annual meeting and therefore his term ended on May 7, 2019.

5
Mr. Watanabe's fees were for service as director and Chairperson of the HEI Board and as a member of the Compensation Committee. He also served on the HEI Executive Committee and the ASB Board and Executive Committee from January 1 — May 6, 2019, as well as the Hawaiian Electric Board and ASB Risk Committee from January 1 — May 6, 2019. Mr. Watanabe's HEI Chairperson responsibilities are described above under "Corporate Governance — The Board's leadership structure."

The table below shows the detail of cash retainers paid to HEI nonemployee directors for Board and committee service (including subsidiary committee service) in 2019.

Name*
  HEI
Board
Retainer
($)

  HEI
Committee
Retainer
($)

  HEI
Chairman
Retainer
($)

  HEI
Extra
Meeting
Fees1
($)

  HECO
Audit &
Risk
Committee
Retainer
($)

  HECO
Extra
Meeting
Fees
($)

  ASB
Audit
Committee
Retainer
($)

  ASB
Risk
Committee
Retainer
($)

  Total
($)

Celeste A. Connors   48,832                 48,832
Richard J. Dahl   75,000   16,511       2,617         94,128
Thomas B. Fargo   75,000   30,000     6,000           111,000
Peggy Y. Fowler   75,000   28,726     6,000           109,726
Micah A. Kane2   31,182   4,158       4382         39,722
Mary G. Powell   48,832                 48,832
Keith P. Russell   75,000   10,000           7,500   20,000   112,500
William J. Scilacci, Jr.   48,832   9,038               57,870
James K. Scott   43,818   5,842               49,660
Kelvin H. Taketa   26,168   4,660               30,828
Barry K. Taniguchi   56,250   15,000           5,234     76,484
Jeffrey N. Watanabe, HEI Chairperson   75,000   3,489   250,000           3,489   331,978
1
Represents extra meeting fees earned for attending Board and committee meetings in excess of the number of meetings specified in "Director Compensation — Components of director compensation — Extra meeting fees."

2
Mr. Kane was a director of Hawaiian Electric, a subsidiary of HEI, for part of 2019 and received $26,291 as Hawaiian Electric Board Retainer.

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   DIRECTOR COMPENSATION  

Director stock ownership and retention

HEI directors are required to own and retain HEI Common Stock throughout their service with the Company. Each director has until his or her compliance date (January 1 of the year following the fifth anniversary of the later of (i) amendment to his or her required level of stock ownership or (ii) first becoming subject to the requirements) to reach the following ownership levels: Chairperson of the Board — 2x annual cash retainer; other HEI directors — 5x annual cash retainer. As of January 1, 2019, each director who had reached his or her compliance date had achieved his or her stock ownership target.

Until reaching the applicable stock ownership target, directors must retain all shares received under their annual stock retainer. The Compensation Committee has the authority to approve hardship exceptions to these retention requirements.

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   PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE HEI'S EXECUTIVE COMPENSATION   


PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF HEI'S NAMED EXECUTIVE OFFICERS

We are asking for your advisory vote on the compensation of our named executive officers as described in this Proxy Statement. This proposal, which we present to our shareholders on an annual basis and commonly known as a "say-on-pay" proposal, gives shareholders the opportunity to express their views on the overall compensation of our named executive officers and the policies and practices described in this Proxy Statement.

The Compensation Committee and Board believe that HEI's executive compensation is effective in achieving our goals of promoting long-term value for shareholders and attracting, motivating and retaining the talent necessary to create such value. Accordingly, the Board recommends that you vote FOR the following resolution:

Please read the Compensation Discussion and Analysis and Executive Compensation Tables portions of this Proxy Statement. These sections describe the Company's executive compensation policies and practices and the compensation of our named executive officers.

While the say-on-pay vote is advisory and is, therefore, nonbinding, the Compensation Committee and Board consider the vote results when making future decisions regarding HEI's executive compensation.

ü FOR

The Board recommends that you vote FOR the advisory resolution approving the compensation of HEI's Named Executive Officers as disclosed in this Proxy Statement.

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   COMPENSATION DISCUSSION AND ANALYSIS   


COMPENSATION DISCUSSION AND ANALYSIS

This section describes our executive compensation program and the compensation decisions made for our 2019 named executive officers. For 2019, we have four named executive officers, our Chief Executive Officer, our Chief Financial Officer, and our two other executive officers during 2019, the chief executives at each of Hawaiian Electric (our electric utility subsidiary) and ASB (our bank subsidiary):

Name
  Title
  Entity
Constance H. Lau   HEI President & CEO   Holding company
Gregory C. Hazelton   HEI Executive Vice President and Chief Financial Officer   Holding company
Alan M. Oshima*   Hawaiian Electric President & CEO   Electric utility subsidiary
Richard F. Wacker   ASB President & CEO   Bank subsidiary
*
Mr. Oshima completed the transition from President and CEO to Senior Executive Advisor effective February 15, 2020. For more information regarding this transition please see the applicable Forms 8-K filed with the SEC on December 10, 2019 and February 13, 2020.

For more information regarding HEI's executive officers see the paragraph entitled "Information About Our Executive Officers (HEI)" in Part I of HEI's annual report on Form 10-K for the fiscal year ending December 31, 2019.

2019 Executive summary

Our guiding principles shape our program design and pay decisions

In designing HEI's executive compensation program and making pay decisions, the Compensation Committee follows these guiding principles:

Pay should reflect Company performance, particularly over the long-term;

Compensation programs should align executives' interests with those of our shareholders and other stakeholders;

Programs should be designed to attract, motivate and retain talented executives who can drive the Company's success; and

The cost of programs should be reasonable while maintaining their purpose and benefit.

Key design features

Straightforward design. The compensation program for our named executive officers comprises four primary elements — base salary, performance-based annual incentives, performance-based long-term incentives earned over three years, and time-based restricted stock units (RSUs) that vest in equal annual installments over four years.

Emphasis on performance-based pay. Through the target compensation mix, we emphasize performance-based pay over fixed pay, with the majority of the target compensation opportunity for three of our four named executive officers, and approximately half of the target compensation opportunity for the remaining named executive officer, linked to the Company's financial, market and operating results.

Balance between short- and long-term components. The compensation program also balances the importance of achieving long-term strategic priorities and critical short-term goals that support long-term objectives.

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   COMPENSATION DISCUSSION AND ANALYSIS   

Our compensation practices demonstrate our commitment to sound governance

The tables below summarize our current executive compensation practices — both what we do (to drive performance and manage risk) and what we don't do:

    What We Do    
    ü   Link pay to performance    

 

 

ü

 

Utilize rigorous performance conditions that encourage long-term value creation

 

 

 

 

ü

 

Balance short- and long-term compensation to promote sustained performance over time

 

 

 

 

ü

 

Grant majority of long-term incentives in the form of performance-based awards

 

 

 

 

ü

 

Use the competitive median as a reference point in setting compensation levels

 

 

 

 

ü

 

Review tally sheets when making compensation decisions

 

 

 

 

ü

 

Mitigate undue risk in compensation programs

 

 

 

 

ü

 

Utilize "double-trigger" change-in-control agreements

 

 

 

 

ü

 

Maintain a clawback policy for performance-based compensation

 

 

 

 

ü

 

Require stock ownership and retention by named executive officers; CEO must own five times her base salary

 

 

 

 

ü

 

Prohibit pledging of Company stock and transactions designed to hedge the risk of stock ownership

 

 

 

 

ü

 

Utilize an independent compensation consultant to advise the Compensation Committee

 

 

 

 

 

 

 

 

 

 

    What We Don't Do    
    GRAPHIC   No employment contracts    

 

 

GRAPHIC

 

No tax gross ups, except under the Executive Death Benefit Plan frozen in 2009

 

 

 

 

GRAPHIC

 

No compensation programs that are reasonably likely to create material risk to the Company

 

 

 

 

GRAPHIC

 

No significant perquisites

 

 

 

 

GRAPHIC

 

No dividends or dividend equivalents on unearned performance shares

 

 

 

 

 

 

 

 

 

2019 say-on-pay results, shareholder outreach and 2020 program

At our 2019 Annual Meeting of Shareholders, approximately 90% of votes cast approved our executive compensation program through the advisory say-on-pay vote. While we received strong shareholder support for our executive compensation program, the Compensation Committee determined that the compensation program should be revised starting in 2020 to further strengthen the alignment between HEI and utility executive compensation and achievement of Hawaii's ambitious renewable energy goals. As a result, for the long-term incentive plan period from 2020-22, twenty percent of HEI and Hawaiian Electric executives' performance-based pay opportunity is based on achievement of the following:

 
  Minimum
  Target
  Maximum
Hawaii renewable portfolio standards (RPS)   32% RPS   40% RPS   50% RPS

The State of Hawaii RPS law requires Hawaiian Electric to achieve 40% RPS by 2030. By incentivizing executives to achieve 40%-50% RPS by 2022, this compensation metric incentivizes executives to continue their hard work to achieve higher levels of RPS ahead of state requirements.

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   COMPENSATION DISCUSSION AND ANALYSIS  

How we make compensation decisions

Our roles in determining compensation are well-defined

Role of the Compensation Committee

The Compensation Committee oversees the design and implementation of our executive compensation program. On an annual basis, the Compensation Committee engages in a rigorous process to arrive at compensation decisions regarding the named executive officers. In the course of this process, the Compensation Committee:

Engages in extensive deliberations in meetings held over several months

Consults with its independent compensation consultant during and outside of meetings

Focuses on the Company's long-term strategy and nearer-term goals to effect such strategy in setting performance metrics and goals

Reviews tally sheets for each named executive officer to understand how the elements of compensation relate to each other and to the compensation package as a whole (the tally sheets include fixed and variable performance-based compensation, minimal perquisites and change in pension value for current and past periods)

Examines data and analysis prepared by its independent compensation consultant concerning peer group selection, comparative compensation data and evolving best practices

Reviews Company performance and discusses assessments of the individual performance of senior members of management

Analyzes the reasonableness of incentive payouts in light of the long-term benefits to shareholders

Considers trends in compensation to determine whether incentive programs are working effectively

Reviews risk assessments to determine whether compensation programs and practices carry undue risk

Early each year, the Compensation Committee determines compensation earned under incentive plans with respect to performance periods ending in the prior year, establishes performance metrics and goals for incentive plans beginning in the current year and recommends to the Board and subsidiary boards the level of compensation and mix of pay elements for each named executive officer.

Role of the independent directors as a whole

The independent directors evaluate the CEO's performance, consider Compensation Committee recommendations concerning her pay and determine her compensation. The Board and subsidiary boards also review the performance of, and Compensation Committee recommendations concerning, the other named executive officers and approve their compensation.

Role of executive officers

The CEO, who is also an HEI director, assesses and reports on the performance of the other named executive officers and makes recommendations to the Compensation Committee with respect to their levels of compensation and mix of pay elements. She also participates in Board deliberations regarding the Compensation Committee's recommendations on the other named executive officers. She does not participate in the deliberations of the Compensation Committee to recommend, or of the Board to determine, her own compensation.

Management supports the Compensation Committee in executing its responsibilities by providing data and other materials for Compensation Committee meetings (including tally sheets and recommendations regarding performance metrics, goals and pay mix); by attending portions of Compensation Committee meetings as appropriate to provide perspective and expertise relevant to agenda items; and by supplying such other data and information as may be requested by the Compensation Committee and/or its independent compensation consultant.

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   COMPENSATION DISCUSSION AND ANALYSIS   

Compensation consultant & consultant independence

The Compensation Committee's independent compensation consultant, Frederic W. Cook & Co., Inc. (FW Cook), is retained by, and reports directly to, the Compensation Committee. FW Cook provides the Compensation Committee with independent expertise on market practices and developments in executive compensation, compensation program design, peer group composition and competitive pay levels, and provides related research, data and analyses. FW Cook also advises the Compensation Committee regarding analyses and proposals presented by management related to executive compensation. A representative of FW Cook generally attends Compensation Committee meetings, participates in Compensation Committee executive sessions and communicates directly with the Compensation Committee.

In early 2019, as in prior years, the Compensation Committee evaluated FW Cook's independence, taking into account all factors it considered relevant, including the factors specified in the NYSE listing standards and the absence of other relationships between FW Cook and the Company, its directors or executive officers. Based on such factors and FW Cook's independence policy, which was shared with the Compensation Committee, the Compensation Committee concluded that FW Cook is independent and that the work of FW Cook has not raised any conflict of interest.

We use comparative market data as a reference point for compensation

Compensation benchmarking

The Compensation Committee considers market data from peer group companies as a reference point in determining the named executive officers' pay components and target compensation opportunity (composed of base salary, performance-based annual incentive, performance-based long-term incentive and time-vested RSUs). The Compensation Committee may decide that an executive's compensation opportunity should be higher or lower in relation to peers based on considerations including internal equity, the executive's level of responsibility, experience, expertise and past performance, as well as retention and succession objectives.

Information from public company proxy statements for peer group companies was used to provide comparative market data in setting 2019 compensation for all named executive officers. Data from the Willis Towers Watson Energy Services Survey was also used in establishing 2019 compensation. The data was regressed based on HEI's and Hawaiian Electric's revenues for appropriate size comparisons.

Peer Groups

Compensation peers

The Compensation Committee annually reviews the peer groups used in benchmarking for HEI and subsidiary executive compensation, with analysis and recommendations provided by FW Cook. For 2019 compensation, the Compensation Committee determined, with input from FW Cook, that the companies in our 2018 compensation peer groups remained appropriate and that no changes were necessary for 2019. The selection criteria and resulting 2019 peer groups are set forth below.

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   COMPENSATION DISCUSSION AND ANALYSIS  

        HEI 2019 Peer Group (applies to
Ms. Lau and Mr. Hazelton)
      Utility Subsidiary 2019 Peer
Group (applies to Mr. Oshima)
      Bank Subsidiary 2019 Peer Group
(applies to Mr. Wacker)
Selection Criteria      

Publicly traded, US-based electric and multi-utility companies

Revenue balanced in a range of approximately 0.5x to 2x HEI's revenue

Market cap and location as secondary considerations

     

Electric and multi-utility companies from HEI's peer group

Revenue balanced in a range of approximately 0.5x to 2x Hawaiian Electric's revenue

Market cap and location as secondary considerations

     

Regional banks and thrifts

Revenue balanced in a range of approximately 0.75x to 2x ASB's revenue

Total assets balanced in a range of approximately 0.5x to 2x ASB's total assets

Secondary consideration of 2 of 3 of the following:

proportion of loan portfolio composed of over 30% single family and less than 85% residential

located on the west coast or Hawaii

ratio of noninterest income to operating revenue from 10%-40%

Peer Group for 2019 Compensation       ALLETTE, Inc.
Alliant Energy Corp.
Avista Corp.
Black Hills Corp.
IDACORP, Inc.
MDU Resources Group Inc.
NiSource Inc.
Northwestern Corp
OGE Energy Corp.
Pinnacle West Capital Corp.
PNM Resources Inc.
Portland General Electric
SCANA Corp.
Vectren Corp.
      ALLETTE, Inc.
Alliant Energy Corp.
Avista Corp.
Black Hills Corp.
IDACORP, Inc.
MDU Resources Group Inc.
NiSource Inc.
Northwestern Corp.
OGE Energy Corp.
Pinnacle West Capital Corp.
PNM Resources Inc.
Portland General Electric
SCANA Corp.
Vectren Corp.
      Ameris Bancorp
Berkshire Hills Bancorp
Central Pacific Financial
Community Bank System
CVB Financial
First Busey
First Financial Bank
HomeStreet
Independent Bank
Opus Bank
Park National
Republic Bancorp
Renasant Corp
Sandy Spring Bancorp
Seacoast Banking
South State
Tompkins Financial
TriCo Bancshares
United Financial
Westamerica Bancorp

Performance peers

In addition to the peer companies used for benchmarking executive compensation, certain of the performance metrics used in the long-term incentive plans (described below under "What we pay and why: Compensation elements and 2019 pay decisions — Long-term performance-based incentive") are based on performance relative to performance peers. HEI's Relative TSR performance is based on HEI's performance compared to the utilities in the Edison Electric Institute (EEI) Index.

2019 Edison Electric Institute (EEI) Index Peers for HEI Long-Term Incentive Plan Relative TSR Metric

The EEI is an association of U.S. shareholder-owned electric companies that are representative of comparable investment alternatives to HEI. The EEI's members serve virtually all of the ultimate customers in the shareholder-owned segment of the industry. The following companies comprise the 2019 EEI Index used for HEI's Relative TSR metric:

ALLETTE, Inc.
Alliant Energy Corp.
Ameren Corp.
American Electric Power Co.
Avangrid
Avista Corp.
Black Hills Corp.
Centerpoint Energy Inc.
CMS Energy Corp.
Consolidated Edison Inc.
      Dominion Energy Inc.
DTE Energy Co.
Duke Energy Corp.
Edison International
El Paso Electric Co.
Entergy Corp.
Evergy, Inc.
Eversource Energy
Exelon Corp.
FirstEnergy Corp.
      IDACORP Inc.
MDU Resources Group Inc.
MGE Energy Inc.
NextEra Energy Inc.
NiSource Inc.
Northwestern Corp.
OGE Energy Corp.
Otter Tail Corp.
PG&E Corp.
Pinnacle West Capital Corp.
      PNM Resources Inc.
Portland General Electric
PPL Corp.
Public Service Enterprise    Group Inc.
Sempra Energy
Southern Co.
Unitil Corp.
WEC Energy Group Inc.
Xcel Energy Inc.

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   COMPENSATION DISCUSSION AND ANALYSIS   

What we pay and why: Compensation elements and 2019 pay decisions

Each element of compensation supports important objectives

The total compensation program for named executive officers is made up of the five standard components summarized below. Each component fulfills important objectives that reflect our focus on pay for performance, competitive programs to attract and retain talented executives and aligning executive decisions with the interests of the Company and our shareholders. These elements are described in further detail in the pages that follow.

Compensation Element
  Summary
  Objectives
Base Salary   Fixed level of cash compensation set in reference to peer group median (may vary based on performance, experience, responsibilities, expertise and other factors).   Attract and retain talented executives by providing competitive fixed cash compensation.
Annual Performance-Based Incentives   Variable cash award based on achievement of pre-set performance goals for the year. Award opportunity is determined as a percentage of base salary. Performance below threshold levels yields no incentive payment.   Drive achievement of key business results linked to short-term and long-term strategy and reward executives for their contributions to such results. Balance compensation cost and return by paying awards based on performance.
Long-Term Performance- Based Incentives   Variable equity award based on meeting pre-set performance objectives over a 3-year period. Award opportunity is determined as a percentage of base salary. Performance below threshold levels yields no incentive payment.   Motivate executives and align their interests with those of shareholders by promoting long-term value growth and by paying awards in the form of equity. Balance compensation cost and return by paying awards based on performance.
Annual RSU Grant   Annual equity grants in the form of RSUs that vest in equal installments over 4 years. Amount of grant is determined as a percentage of base salary.   Promote alignment of executive and shareholder interests by ensuring executives have significant ownership of HEI stock. Retain talented leaders through multi-year vesting.
Benefits   Includes defined benefit pension plans and retirement savings plan (for HEI/utility employees) and defined contribution plan (for bank employees); deferred compensation plans; double-trigger change-in-control agreements; minimal perquisites; and an executive death benefit plan (frozen since 2009).   Enhance total compensation with meaningful and competitive benefits that promote retention, and peace of mind and contribute to financial security. Double-trigger change-in-control agreements encourage focused attention of executives during major corporate transitions.

Changes to elements in 2019

On an annual basis, the Compensation Committee reviews and recommends each named executive officer's target compensation opportunity, which is composed of: base salary, target annual cash and target long-term equity opportunities. Target annual cash and long-term equity opportunities are established as a percentage of base salary. The Compensation Committee made the changes to compensation for 2019 shown in the table below.

Base Salary1
($)
Performance-based
Annual Incentive
(Target Opportunity2
as % of
Base Salary)
Performance-based
Long-term Incentive
(Target Opportunity2
as % of
Base Salary)
RSUs
(Value as % of
Base Salary)
Name
2018
2019
2018
2019
2018-20
2019-21
2018
2019

Constance H. Lau

921,800 926,300 100 same 160 175 &