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Hawaiian Electric Industries investors saw their stock’s value plummet, their dividends disappear and the once-credit worthy company’s bond rating cut to junk status in 2023. But that didn’t stop the investors from supporting raises for the company’s top executives.

In a landslide, shareholders representing approximately 58.8 million shares of HEI stock voted in favor of providing compensation increases to HEI’s chief executive Scott Seu, utility chief executive Shelee Kimura and other top executives. That compared to 5.7 million shares opposing the increases. 

The company’s directors were reelected by even more decisive margins.

Congress gave shareholders the right to weigh in on executive compensation when it passed the . While “say-on-pay” requirements of the statute were meant in part to rein in excessive executive compensation, experience has shown investors rarely have much bad to say about executive pay.

“Shareholders at the overwhelming majority of issuers vote to approve executive compensation, and the average percentage of votes in favor exceeds 90%,” professors ,  and  wrote in the . 

Fisch, Palia and Solomon based their findings on say-on-pay vote data from 2011 to 2016. To the extent shareholders do object to pay packages, the authors found, it tends to be not because they consider pay excessive, but rather because the company performed badly financially.

“Say on pay votes reflect, to a large degree, shareholder dissatisfaction with firm performance and are not based solely on pay,” the authors said. 

By that measure HEI might have been at risk. Long considered a low-risk stock that paid a generous dividend, HEI has changed in 2023. Shares are now trading at about $11 per share. That compares to $40 per share before the catastrophic Aug. 8 wildfires, which may have been started by a Hawaiian Electric Co. downed line. The company faces more than 300 lawsuits related to the fires.

But , even bad performance often isn’t enough to motivate shareholders to question executive pay.

 writes about corporate governance, shareholder voting rights and disclosure as a professor at the College of William and Mary School of Law. 

“The short answer to your question about Say-On-Pay is yes, it is typical for shareholders to vote to approve executive compensation,” she said in an email.

Say-on-pay votes are non-binding, advisory votes, covering compensation already awarded. But boards and compensation committees may consider the vote when making future decisions about compensation policies and practices adopted by the board.

Despite HEI’s poor performance, Seu’s salary rose 9.5% to $958,333 for 2023 from $875,000 the previous year. Kimura’s salary went up 28%, to $575,000 in 2023 from $450,000 in 2022.

The raises were bigger when counting perks like stock awards. Seu’s total compensation jumped to $5.4 million for 2023 from $3.1 million in 2022, the proxy statement says. Kimura earned $2.1 million in 2023 compared to $1.5 million the previous year.

Executives Earned Performance Incentives In 2023

The compensation packages were established by HEI’s board of directors, which didn't consider wildfire mitigation or prevention when setting performance metrics. In fact, the board's compensation policies and practices entitled senior executives to more compensation in 2023 than they ended up taking home.

"For HEI and Utility management, safety, reliability, customer satisfaction and advancing our Utility’s transformation to increased renewable energy have been key goals of annual performance-based compensation for some time," explains.

But Kimura and the other key executives agreed to forego incentives in 2023 in light of the fires. 

Now the board has decided to add "additional performance metrics for the 2024 annual incentive focused on resilience and safety, including wildfire mitigation and generation reliability." For long-term incentives, the board added metrics "focused on system hardening to enhance public safety and on improving the utility’s credit rating," the company said.

While the board's new interest in tying executive compensation to wildfire prevention might be a bit late, Haan said it wasn’t surprising that shareholders overwhelmingly reelected the directors.

“Regarding the board election, it doesn’t look like any other candidates ran to oppose the board’s nominees,” she said. “So this was an uncontested election.”