Hawaiian Electric Industries' executive compensation received an F grade in our proprietary pay-for-performance model. The Company paid more compensation to its named executive officers than the median compensation for a group of companies selected.... The CEO was paid more than the median CEO compensation of these peer companies. Overall, the Company paid more than its peers, but performed worse than its peers.
As noted in our pay-for-performance analysis, in fiscal year 2012 the Company was deficient in linking pay with performance. The members of the compensation committee have the responsibility of reviewing all aspects of the compensation program for the Company's executive officers; in our opinion, the committee has not effectively served shareholders in this regard. At this year's annual meeting shareholders are given the opportunity to submit a non-binding advisory vote on the Company's executive compensation policies and procedures.
Given that the Company's pay-for-performance grade dropped from a "C" to an "F" over the prior year, and based on our analysis of the Company's overall executive compensation policies and disclosure in Proposal 2, we refrain from recommending to withhold votes from members of the compensation committee at this time. However, if the Company continues to receive a deficient grade in our pay-for-performance model, indicating an ongoing failure to align pay with performance, we will consider holding the committee responsible.
This proposal seeks shareholder approval of a non-binding, advisory vote on the Company's executive compensation.
Glass Lewis believes firms should fully disclose and explain all aspects of their executives' compensation in such a way that shareholders can comprehend and analyze the company's policies and procedures. In completing our assessment, we consider, among other factors, the appropriateness of performance targets and metrics, how such goals and metrics are used to improve Company performance, the peer group against which the Company believes it is competing, whether incentive schemes encourage prudent risk management and the board's adherence to market best practices.
Furthermore, we also emphasize and evaluate the extent to which the Company links executive pay with performance.
We note the following concerns with the structure of the Company's compensation programs:
Narrow Performance Conditions: The Company's short- and long-term incentive arrangements are based on similar metrics, which allows for a high level of pay-out (or lack thereof) for hitting similar targets. We believe the best compensation policies are based on a variety of performance metrics, which better gauge a Company's overall financial health and performance.
Unchallenging Performance Targets: Under the LTI plan, executives become eligible to receive awards if the Company's relative metrics are below the 50th percentile of the designated peer group over the performance period. As such, NEOs are rewarded even if the Company underperforms the market. We believe incentive plans should at the very least require performance at the benchmark median before rewarding NEOs.
2012 PAY FOR PERFORMANCE : F