The chief executives of Hawaii’s top publicly traded companies saw the value of their pay packages climb to an average of $2.20 million in 2012, topped by the $5.82 million in salary and other compensation received by Hawaii Electric Industries’ President and CEO Constance Lau.
The average compensation for the state’s top 11 chief executives at publicly traded companies rose 28 percent from $1.73 million in 2011, according to a Star-Advertiser analysis of Securities and Exchange Commission filings.
Lau’s compensation package was up from $5.3 million in 2011. Following Lau was Bank of Hawaii Corp. Chief Executive Peter Ho, who jumped two places on the list with an increase in his compensation to $3.97 million from $2.06 million in 2011. Hawaiian Holdings Inc. President and CEO Mark Dunkerley moved up to third place from fifth based on an increase in his pay package to $2.5 million from $1.61 million.
The SEC requires public companies to report total compensation for their top five executives, including the current value of performance-based stock awards that CEOs usually don’t receive until a later date. Also included are changes in the projected value of pension benefits. The change in pension value can swing widely from year to year based on interest rate assumptions and the executive’s years of service with the company.
In what has become a trend in recent years, about half of the Hawaii CEOs had stock awards and stock options with values that dwarfed their base annual salaries.
Stock awards, which are tied to performance benchmarks such as the company’s return on equity and paid over a multiyear period, were the single largest compensation category in 2012. Stock awards are designed to align the interests of the company’s executives with those of shareholders. Stock awards rose to an average of $649,000 per CEO from $348,000 in 2011. Lau, Ho and Dunkerley all had stock awards in excess of $1.5 million each.
The average salary by contrast, was $587,000 in 2012, up from $569,000 in 2011. Allan Kitagawa, president and CEO of Territorial Bancorp, topped that category with a salary of $842,697.
THE third-largest piece of the compensation pie was "non-equity incentives," which are annual cash payments contingent on meeting certain corporate goals. The average non-equity payment rose to $500,000 in 2012 from $407,000 in 2011.
Lau led the way with non-equity compensation of $1.47 million, thanks to the strong financial performance of HEI. The company’s net income and return on average common equity both reached the top of a predetermined range, resulting in a payment to Lau equal to 185 percent of her base salary.
The SEC also requires listed companies to disclose the value of various perks given to executives, such as club memberships, car allowances, payment of insurance premiums and contributions to 401(k) plans.
The amounts reported in that category ranged from zero in the case of Maui Land & Pineapple CEO Warren Haruki to $273,000 for Territorial Bancorp.’s Kitagawa.
Among the "other compensation" reported for Kitagawa was $151,477 for allocations to a "non-qualified" employee stock ownership program, and $1,799 for cellphone charges.
The $122,908 in other compensation reported for BOH’s Ho included contributions to his 401(k) plan, term life insurance premiums, spouse travel and home security.
HEI reported $13,735 Lau received in the form of a below-market rate on her mortgage from HEI subsidiary American Savings Bank, and $10,241 for a club membership. The value of mortgage benefit was calculated as the difference between the preferential interest rate, 2.625 percent, and the market rate at the time the loan was originated. Lau paid off the mortage in 2012.
The compensation data companies report to the SEC do not take into account the size of the firms or the complexity of the business they conduct.
Barnwell Industries Inc., the state’s smallest listed company in terms of market capitalization, paid its CEO the most as a percentage of market cap. CEO Morton Kinzler’s compensation of $829,000 was 2.8 percent of the company’s 2012 average market capitalization of $30 million. Barnwell’s main business is oil and gas exploration and development in Canada. The company also invests in Hawaii real estate.
The state’s largest companies had the lowest CEO compensation as a percentage of market cap.
At the bottom was Matson Inc., with an average market cap of $1.5 billion in 2012. Matson CEO Matthew Cox’s compensation of $2.06 million amounted to just 0.14 percent of market cap. HEI, the state’s largest listed company with a $2.55 billion average market cap in 2012, paid Lau an amount equal to 0.23 percent of the company’s market cap, the fourth lowest among the 11 companies on the list.
"HEI is the largest public company in Hawaii by most measures. It is also very complex with operating companies in two highly regulated industries (electric utility and banking) and ongoing capital markets needs given the capital-intensive nature of utilities," a company spokeswoman said.
The spokeswoman also noted that of the $1.95 million in stock awards granted to Lau, more than 90 percent has not been paid out yet. "Most of that amount depends on future performance, while the rest is subject to remaining with the company for a specified period," she said.
