On Tuesday, FirstEnergy Corp. will hold its first shareholders meeting outside of its hometown.
At 8 a.m., the electric utility and parent company of Ohio Edison will meet at the Waterfront Place Hotel in Morgantown, W.Va., home of West Virginia University.
Company officials said they wanted to make the meeting available to shareholders and employees of the various parts of FirstEnergy’s operations territory. When the meeting has been in downtown Akron, many workers from the nearby headquarters walk over to the John S. Knight Center.
This year, FirstEnergy’s top executives, the board of directors and a contingent of staffers in support roles will attend. Spokesman Todd Schneider said FE workers from Morgantown will also attend.
FirstEnergy bought Pennsylvania-based Allegheny Energy in 2011 for $4.3 billion in stock, plus assuming $3.8 billion in debt. The company has units in parts of Ohio, West Virginia, Maryland, New Jersey and Pennsylvania. FirstEnergy has more than 500,000 customers in West Virginia, plus 1,700 employees and 1,300 retirees. FirstEnergy employs 16,315 overall, including 852 at its downtown Akron headquarters and 713 at its West Akron campus. In Summit County, the utility employs 2,433.
Last year’s meeting included protests inside and outside by union members, shareholders and others. Visitors had to pass through metal detectors to get inside, with the business portion of the meeting taking about 10 minutes. Chief Executive Officer and President Anthony Alexander did not make any remarks and did not take questions from the 200 people attending.
The decision to meet outside Akron this year is not related to last year’s protests, the company said.
Asked whether Alexander will make remarks this year or whether there will be additional security, Schneider said, “Our objective is to conduct the business portion of the meeting successfully. Certain security measures will be taken based on the experiences of other corporations’ shareowner meetings.”
There are nine items on the proxy statement for FirstEnergy shareholders to vote on, including four company and five shareholder proposals. The company is recommending shareholders approve its proposals and vote against the shareholder proposals, which are nonbinding, meaning the directors do not have to accept them.
• Election of directors: All 14 directors are up for a one-year term.
They are: Paul T. Addison, former managing director in the utilities department of Salomon Smith Barney; CEO Alexander; Michael J. Anderson, chairman and chief executive officer of The Andersons Inc.; Carol A. Cartwright, retired president of Bowling Green State University and Kent State University; William T. Cottle, retired chairman of the board, president, and chief executive officer of STP Nuclear Operating Co.; Robert B. Heisler Jr., retired dean of the College of Business Administration and Graduate School of Management of Kent State and retired chairman of KeyBank; Julia L. Johnson, President of NetCommunications LLC; Ted J. Kleisner, retired chairman of Hershey Entertainment & Resorts Co.; Donald T. Misheff, retired managing partner of the Northeast Ohio offices of Ernst & Young LLP; Ernest J. Novak Jr., retired managing partner of the Cleveland office of Ernst & Young LLP; Christopher D. Pappas, president and chief executive officer of Styron LLC; Catherine A. Rein, retired senior executive vice president and chief administrative officer of MetLife Inc; FirstEnergy Chairman of the Board George M. Smart, retired president of Sonoco-Phoenix Inc.; and Wes M. Taylor, retired president of TXU Generation.
The AFL-CIO and Utility Workers Union of America have recommended shareholders “withhold” their votes for the five members who are on the compensation committee — Heisler, Kleisner, Pappas, Rein and Taylor — and vote for three shareholder proposals recommending reforms in executive pay practices.
• Ratification of the appointment of the independent registered public accounting firm, PricewaterhouseCoopers.
• Advisory vote to approve executive compensation: This is often called the “say-on-pay” vote and is required yearly. The AFL-CIO and Utility Workers Union of America urged shareholders to vote no.
• Approval to change certain voting requirements to allow for a majority voting power threshold. This company proposal is in response to a favorable vote on a shareholder proposal on the topic last year, said spokeswoman Tricia Ingraham. It garnered 68 percent in 2012, was not approved in 2011 (43 percent), was not on the 2010 proxy, won 80 percent in 2009, 79 percent in 2008 and 76 percent in 2007.
Rules require what’s called a “supermajority” or 80 percent of the votes for items that would change the bylaws. The company is proposing to take many items down to a simple majority, or more than 50 percent, though the board would still have discretion on some measures to raise the standard to a two-thirds majority, said Ingraham.
In order to pass, the company proposal must get an 80 percent approval, under current rules.
John Chevedden of Los Angeles, whose family trust has submitted the proposal for a simple majority vote each year, said he believes FirstEnergy put up its own proposal to thwart his shareholder proposal, which was not included.
“The FE proposal 4 is guaranteed to fail and FE knows it,” said Chevedden.
Said Ingraham: “Our management proposal was designed to be responsive to the views of shareholders who support a majority vote standard, while also providing meaningful protections against actions that may not be in their best interest — including the potentially self-interested actions of short-term investors or a small group of investors who have a large holding.”
Shareholder proposals include:
• CEO compensation benchmarking: The utility workers union asks that the FirstEnergy board stop benchmarking the CEO’s total compensation compared to peer companies. The union said it believes “runaway executive compensation remains a significant problem” and that “peer benchmarking is at the core ...” FirstEnergy says it believes benchmarking is an important factor in determining compensation.
• Retirement benefits: The AFL-CIO requests the board seek shareholder approval of certain future retirement benefits for senior executives. The company said it believes retirement benefit programs promote shareholders’ interest and is a way to “recruit and retain key executives ...”
• Equity retention: The International Brotherhood of Electrical Workers’ Pension Benefit Fund requests the board adopt a policy requiring that senior executives retain a significant percentage of shares acquired through equity compensation programs until reaching normal retirement age or terminating employment. The company says a correlation between executive compensation and long-term performance is beneficial, but the company believes its current methodology works.
• Director election majority voting standard: The United Brotherhood of Carpenters and Joiners of America requests directors be elected by majority vote. The company’s current “plurality” standard allows for a board nominee to be elected with as little as a single affirmative vote, even if a substantial majority “withhold” votes, said the proposal. The company says the plurality voting standard is the default under Ohio law.
• Act by written consent: The Ray T. Chevedden and Veronica G. Chevedden Family Trust requests that a written consent policy be allowed in lieu of a meeting. The proposal says hundreds of major companies operate this way. The company says the written consent proposal cannot be implemented under Ohio law.