================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
First Hawaiian, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
[LETTERHEAD OF FIRST HAWAIIAN, INC. APPEARS HERE]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF FIRST HAWAIIAN, INC.
The Annual Meeting of the Stockholders of First Hawaiian, Inc. (the
"Corporation") will be held on April 17, 1997 at 9:30 o'clock A.M. in the 30th
floor Board Room of First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii,
for the following purposes:
1. To elect 5 directors for a term of 3 years until the Annual Meeting of
Stockholders in 2000, or until their successors are elected and
qualified.
2. To fix the total number of Directors at 15.
3. To elect the Auditor of the Corporation.
4. To transact such other business as may properly be brought before the
meeting and any adjournments thereof.
Only stockholders of record at the close of business on February 21, 1997,
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS:
Herbert E. Wolff
Senior Vice President and Secretary
Dated: March 3, 1997
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. PLEASE MARK,
DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING POSTAGE-
PAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE
IN PERSON IF YOU WISH TO DO SO.
[LETTERHEAD OF FIRST HAWAIIAN APPEARS HERE]
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of First Hawaiian, Inc. (the "Corporation") of proxies to
be used in the voting at the Annual Meeting of Stockholders of the Corporation
to be held on April 17, 1997, and any adjournments thereof.
The annual report of the Corporation, containing consolidated financial
statements as at and for the year ended December 31, 1996, is being mailed to
all stockholders simultaneously with the mailing of this proxy statement. This
proxy statement and the form of proxy are first being distributed to
stockholders on or about March 3, 1997.
First Hawaiian, Inc. is a holding company for First Hawaiian Bank (the
"Bank"), First Hawaiian Creditcorp, Inc., FHL Lease Holding Company, Inc., FHI
International, Inc., Pacific One Bank, ANB Financial Corporation, and Pioneer
Federal Savings Bank.
OUTSTANDING SHARES; VOTING RIGHTS
At the close of business on February 21, 1997 (the "record date") there
were 31,752,707 shares of common stock (the "Common Stock") of the Corporation
outstanding. Each outstanding share is entitled to one vote on each matter
submitted to a vote of stockholders; there is no cumulative voting.
The following table sets forth information as of the record date for each
person known by the Corporation to be the beneficial owner of more than 5% of
the Common Stock:
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Owner Ownership Class
---------- ---------------- -------
David M. Haig, Fred C. Weyand, Paul Mullin Ganley and 8,000,000 shares 25.19
Walter A. Dods, Jr., as Trustees under the Will and of
the Estate of S.M. Damon, 999 Bishop Street, Honolulu,
Hawaii 96813/(1)/
Trust and Investments Division, First Hawaiian Bank, 3,061,487 shares/(2)/ 9.64
P.O. Box 3200, Honolulu, Hawaii 96847
Alexander & Baldwin, Inc., 822 Bishop Street 1,692,894 shares 5.33
Honolulu, Hawaii 96813/(3)/
- -----------------
/(1)/Messrs. Haig, Weyand, Ganley and Dods are Directors of the Corporation.
Mr. Dods is the Chairman and Chief Executive Officer of the Corporation.
The Trustees have shared voting and investment power as to shares owned by
the Damon Estate.
/(2)/The shares held by the Trust and Investments Division in fiduciary accounts
include: 1,418,477 shares as to which it has sole voting power and
1,407,227 shares as to which it has sole investment power; 1,271,121 shares
as to which it has shared voting power and 1,282,321 shares as to which it
has shared investment power; 371,889 shares as to which sole voting power
is retained by the settlors of the trusts; and 371,939 shares as to which
sole investment power is held by outside investment advisers.
/(3)/Mr. John C. Couch, a Director of the Corporation, is the Chairman of the
Board of Directors of Alexander & Baldwin, Inc. Alexander & Baldwin, Inc.
has sole voting and investment power as to shares shown in the above table.
2
PROXY VOTING
Proxies in the accompanying form duly executed and received by the
Corporation at any time before the Annual Meeting, and not revoked or superseded
before being voted, will be voted at the Annual Meeting. Where a specification
is indicated in the proxy, it will be voted in accordance with the
specification. Where no specification is indicated, the proxy will be voted in
accordance with the recommendations set forth in this Proxy Statement and in the
discretion of the proxies named therein on all other matters properly to come
before the meeting or any adjournment thereof.
Proxies in the accompanying form may be revoked or superseded at any time
before they are voted by a proxy of a later date, or by written notification
received by the Secretary of the Corporation prior to the Annual Meeting.
Attendance in person at the Annual Meeting does not of itself revoke a proxy
previously given, but any stockholder who attends the Annual Meeting in person
is free to revoke any proxy previously given and vote his or her shares in
person.
The Corporation will pay the cost of solicitation of proxies for the Annual
Meeting. In addition to solicitation by use of the mails, proxies may be
solicited personally or by telephone, facsimile or telegraph by certain officers
and regular employees of the Corporation, who will not receive any added
compensation for so doing. The Corporation may reimburse brokers and others
holding shares in their names as nominees for their expenses in sending proxy
material to beneficial owners.
ELECTION OF DIRECTORS
The Bylaws of the Corporation provide that the Board of Directors is
divided into 3 equal classes of Directors. Each class of Directors is elected to
serve a 3 year staggered term, with the term of one class expiring at each
Annual Meeting. The total number of Directors on the current Board is fixed at
15. The Board of Directors recommends that the stockholders again fix the total
number of Directors at 15.
Directors are elected by a plurality of the votes cast by the holders of
the Corporation's Common Stock at the Annual Meeting at which a quorum is
present. Under the Corporation's Certificate of Incorporation and Bylaws and
under Delaware law, abstentions and broker non-votes will not have the effect of
votes in opposition to election of a Director.
Proxies in the accompanying form will (unless a contrary direction is
indicated on the proxy) be voted to elect the nominees named below (who have
been nominated by the present Board of Directors) as Directors to serve subject
to the Certificate of Incorporation and Bylaws of the Corporation. If elected,
each will serve for a term of 3 years or until a successor is duly elected and
qualified.
If any of the nominees listed are not available for election at the Annual
Meeting (a contingency which the Board of Directors of the Corporation does not
now foresee), the Board of Directors intends to recommend the election of such
other persons as the Board may select in order to fill the vacancies. Proxies in
the accompanying form will be voted for the election of such other persons
unless authority to vote the proxies in the election of Directors has been
withheld.
The nominees designated by the Board of Directors are named below, with
brief statements setting forth their present principal occupations and other
information, including directorships in public companies:
Shares of Common
Stock of the Corporation Percent
Nominees for a Term of Three Years Beneficially Owned of
Until the Annual Meeting of Stockholders in 2000 at February 21, 1997 Class
------------------------------------------------ -------------------- -----
John W. A. Buyers, 69, has been a Director of the Corporation since 2,012 *
1994 and a Director of the Bank since 1976. He has been Chairman of
the Board and Chief Executive Officer of C. Brewer and Company,
Limited, a diversified agribusiness and specialty food company, since
1982. From 1975 to 1982, he was President and Chief Executive Officer
of C. Brewer and Company, Limited, Hawaii's oldest company. From 1971
to 1975, Mr. Buyers was President
3
Shares of Common
Stock of the Corporation Percent
Nominees for a Term of Three Years Beneficially Owned of
Until the Annual Meeting of Stockholders in 2000 at February 21, 1997 Class
------------------------------------------------ -------------------- -----
and Chief Executive Officer of General Waterworks Company in
Philadelphia, Pennsylvania. Since 1986, he has been Chairman of
Mauna Loa Resources, the managing general partner of Mauna Loa
Partners, a master limited partnership trading on the New York
Stock Exchange. The partnership is engaged in agribusiness. In
1993, he was elected Chairman of C. Brewer Homes, Inc., a new
publicly-traded real estate development company. He is also a
Director of John B. Sanfilippo & Sons, Inc. located in Elk
Grove Village, Illinois, and Vice Chairman and a Director of
Pacific International Center for High Technology Research in
Honolulu, Hawaii.
John C. Couch, 57, has been a Director of the Corporation since 1991 9,529 *
and a Director of the Bank since 1985. He has been Chairman of the
Board of Alexander & Baldwin, Inc. ("A&B") since April 1, 1995 and
has been President and Chief Executive Officer of that company since
April, 1992. He was President and Chief Operating Officer of A&B from
October, 1985 until April, 1989 and from April, 1991 to March, 1992.
From April, 1989 to December, 1996, he was Chief Executive Officer of
A&B-Hawaii, Inc., a wholly-owned subsidiary of A&B. He was President
from April, 1989 until April, 1995, when he became Chairman. He has
been a Director of A&B since 1985. He was President and Chief Operating
Officer of Matson Navigation Company, Inc., a wholly owned subsidiary
of A&B, from January, 1985 to September, 1985 and Executive Vice
President and Chief Operating Officer from January, 1984 to December,
1984. From April, 1992 to April, 1995, he had been Vice Chairman and
since April, 1995 he has been Chairman of Matson Navigation Company,
Inc. A&B, which is engaged in ocean transportation, agribusiness,
property development and property management, holds 1,692,894 shares
of Common Stock, as to which Mr. Couch disclaims beneficial ownership.
David M. Haig, 45, has been a Director of the Corporation since 1989 8,012,005 25.23
and a Director of the Bank since 1983. Mr. Haig is a beneficiary and,
since 1982, a Trustee, under the Will and of the Estate of S. M. Damon.
His reported beneficial ownership of the Common Stock includes 8,000,000
shares owned by the Estate of S. M. Damon as to which Mr. Haig shares
voting and investment powers. He is beneficiary of an HR-10 plan which
holds 5,435 shares of the Common Stock as to which he has sole voting
and investment powers.
Dr. Roderick F. McPhee, 68, has been a Director of the Corporation 12,978 *
or the Bank since 1972. From 1968 through 1994, he was President of
Punahou School, a kindergarten through 12th grade college preparatory
school. Dr. McPhee was President and ex-officio non-voting member of
the Board of Trustees of Punahou School, which owns 210,256 shares of
the Common Stock. He has no voting or investment powers with respect
to such shares and disclaims beneficial ownership thereof.
4
Shares of Common
Stock of the Corporation Percent
Nominees for a Term of Three Years Beneficially Owned of
Until the Annual Meeting of Stockholders in 2000 at February 21, 1997 Class
------------------------------------------------ -------------------- -----
John K. Tsui, 58, was elected as a Director of the Corporation to fill 26,116 *
the unexpired term of Mr. Robert J. Pfeiffer on July 20, 1995 (Mr. Pfeiffer
retired as a Director of the Corporation on June 30, 1995). He has been a
Director of the Bank since July 1994. He was Executive Vice President of
Bancorp Hawaii, Inc. from 1986 to June 1994 and Vice Chairman at Bank of
Hawaii from 1984 to 1994. He became President and Chief Operating Officer
of First Hawaiian Bank on July 1, 1994. He has been President of the
Corporation since April 20, 1995. His reported beneficial ownership of the
Common Stock includes 13,800 shares that Mr. Tsui has the right to acquire
within 60 days through the exercise of stock options.
*The percentage of shares beneficially owned does not exceed 1% of the shares
currently outstanding, including shares that can be acquired within 60 days
through the exercise of stock options.
Each of the foregoing nominees attended 75% or more of the combined total
number of meetings held during 1996 of the Board and Committees on which he
sits. The Board of Directors met 12 times in 1996.
The Board of Directors recommends a vote to fix the total number of
Directors at 15 and a vote FOR the above nominees.
DIRECTORS CONTINUING IN OFFICE AND EXECUTIVE OFFICERS
The Directors continuing to serve on the Board of Directors, pursuant to
their prior elections, and the named executive officers listed in the Summary
Compensation Table below, are listed here. The Directors will serve subject to
the Certificate of Incorporation and the Bylaws of the Corporation until the
annual meeting of stockholders in the year shown parenthetically after each name
and until their respective successors have been duly elected and qualified.
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Serve at February 21, 1997 Class
----------------------------- -------------------- -----
Walter A. Dods, Jr., 55, (1999) has been Chairman of the Board and 8,340,017 26.27
Chief Executive Officer of the Corporation and the Bank since
September, 1989. He was President of the Corporation from March,
1989 to March, 1991. He was President of the Bank from November,
1984 to October, 1989 and has been a Director of the Bank since
1979. He was an Executive Vice President of the Corporation from
1982 to 1989 and has been a Director of the Corporation since
1983. He has been with the Bank since 1968. His reported beneficial
ownership of the Common Stock includes 924 shares held in his wife's
individual retirement account as to which Mr. Dods disclaims
beneficial ownership, and 69,300 shares that Mr. Dods has the right
to acquire within 60 days through the exercise of stock options. He
is a Trustee under the Will and of the Estate of S. M. Damon and
his reported beneficial ownership of the Common Stock includes
8,000,000 shares owned by the Estate of S. M. Damon as to which
Mr. Dods shares voting and investment powers. He is a Director of
Alexander & Baldwin, Inc., which holds 1,692,894 shares of the
Common Stock, as to which
5
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Serve at February 21, 1997 Class
----------------------------- -------------------- -----
Mr. Dods disclaims beneficial ownership. He is a Trustee of Punahou
School, which owns 210,256 shares of the Common Stock; he has shared
voting and investment powers with respect to such shares and disclaims
beneficial ownership thereof.
Dr. Julia Ann Frohlich, 56, (1998) has been a Director of the Corporation 1,200 *
since 1992 and a Director of the Bank since August, 1991. She has been a
Director of First Hawaiian Creditcorp, Inc. and First Hawaiian Leasing,
Inc. since 1990. She has been President of the Blood Bank of Hawaii since
1985.
Paul Mullin Ganley, 57, (1999) has been a Director of the Corporation 8,037,114 25.31
since 1991 and a Director of the Bank since 1986. He is a Trustee under
the Will and of the Estate of S.M. Damon and a partner in the Carlsmith
Ball Wichman Case & Ichiki law firm. His reported beneficial ownership
of the Common Stock includes 8,000,000 shares owned by the Estate of
S.M. Damon as to which Mr. Ganley shares voting and investment powers;
19,434 shares in his revocable living trust as to which he has sole
voting and investment powers; 12,336 shares in a money purchase pension
plan as to which he has sole voting and investment powers; 5,159 shares
in one individual retirement account as to which he has sole voting and
investment powers; and 185 shares for which he has shared voting and
investment powers, as successor trustee.
John A. Hoag, 64, (1998) was an Executive Vice President of the 71,093 *
Corporation from 1982 to 1991 and was President of the Corporation from
1991 until April 20, 1995. He has been a Director of the Corporation
since 1991. He has been a Director of the Bank since October, 1989. From
1989 until June 30, 1994, Mr. Hoag was President of the Bank; from that
date until his date of retirement, June 1, 1995, he was Vice Chairman
of the Bank. He has been with the Bank since 1960. His reported beneficial
ownership of the Common Stock includes 19,020 shares in his wife's revocable
living trust as to which Mr. Hoag disclaims beneficial ownership and 33,935
shares that Mr. Hoag has the right to acquire within 60 days through the
exercise of stock options. Mr. Hoag is Chairman of the Board of Hawaii
Reserves, Inc., a land management corporation, and he is on the Board of
Castle Medical Center.
Bert T. Kobayashi, Jr., 56, (1998) has been a Director of the Corporation 5,575 *
since 1991 and a Director of the Bank since 1974. He is a principal of the law
firm of Kobayashi, Sugita & Goda. He is a Director of Schuler Homes, Inc., a
land development company. His reported beneficial ownership of common stock
includes 570 shares held in his wife's individual retirement account as to
which Mr. Kobayashi disclaims ownership.
6
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Service at February 21, 1997 Class
------------------------------- -------------------- -----
Dr. Richard T. Mamiya, 72, (1999) has been a Director of the 4,476 *
Corporation since 1994 and a Director of the Bank since 1980.
He is Senior Vice President of Queen's International Corp.
and on the active staff of Queen's Medical Center for thoracic,
cardiovascular, and general surgery; he is on the courtesy staff
of Straub, Kuakini, and Kapiolani Children's hospitals.
Dr. Fujio Matsuda, 72, (1999) has been a Director of the Corporation 3,014 *
since 1987 and a Director of the Bank since 1985. Since July 1996,
he has been Chairman, Pacific International Center for High Technology
Research. He was President of the Japan-America Institute of Management
Science from September 1994 to June 1996. He was Executive Director of
the Research Corporation of the University of Hawaii from 1984 until
1994; he was the President of the University of Hawaii from 1974 to 1984.
George P. Shea, Jr., 58, (1999) has been a Director of the Corporation 2,897 *
since March, 1993 and the Bank since March, 1989. He was Chairman,
President and Chief Executive Officer of First Insurance Company of
Hawaii, Ltd. ("First Insurance") from 1988 until his retirement on
March 1, 1995. He was a Certified Public Accountant with the public
accounting firm, Peat Marwick Mitchell & Company, from 1965 to 1971
when he joined First Insurance and was promoted to Treasurer. He was
Vice President, Secretary and Treasurer of First Insurance from 1978
to 1982 and President and Chief Executive Officer from 1982 to 1988.
Fred C. Weyand, 80, (1998) has been a Director of the Corporation 8,021,521 25.26
since 1986 and a Director of the Bank since 1981. He was Vice President
of the Corporation from 1976 to 1982; Senior Vice President of the Bank
from 1980 to 1982 and Corporate Secretary from 1978 to 1981. He served
as a commissioned officer in the United States Army from 1940 to 1976
and held the office of Chief of Staff from 1974 to 1976. He is a Trustee
under the Will and of the Estate of S.M. Damon. His reported beneficial
ownership of the Common Stock includes 8,000,000 shares owned by the
Estate of S.M. Damon as to which he shares voting and investment powers
and 11,521 shares in his wife's revocable living trust as to which he
shares voting and investment powers.
Robert C. Wo, 71, (1998) was a Director of the Corporation from 1974 15,116 *
to 1989 and again since 1992 and has been a Director of the Bank since
1963. He has been President and Secretary of BJ Management Corp., a
management consulting company, since 1979. He has been Chairman of C.S.
Wo & Sons, Ltd., a manufacturer and retailer of home furnishings, since
1973. His reported beneficial ownership of the Common Stock includes
8,000 shares in the Betty and Bob Wo Foundation as to which he shares
voting and investment powers, and 300 shares held jointly with his wife.
7
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Executive Officers at February 21, 1997 Class
------------------ -------------------- -----
Donald G. Horner--His reported beneficial ownership of the 36,158 *
Common Stock includes 14,254 shares that Mr. Horner has the
right to acquire within 60 days through the exercise of stock
options.
Howard H. Karr--His reported beneficial ownership of the Common 41,759 *
Stock includes 2,500 shares held in a custodial account for a
child for which he has sole voting and investment powers, and
18,025 shares that Mr. Karr has the right to acquire within 60
days through the exercise of stock options.
Gerald M. Pang--His reported beneficial ownership of the Common 12,105 *
Stock includes 9,914 shares that Mr. Pang has the right to acquire
within 60 days through the exercise of stock options.
Nominees, Directors Continuing to Serve and Executive Officers
- --------------------------------------------------------------
Beneficial Ownership of all Nominees, Directors, and Executive 8,654,685 27.26
Officers as a Group (18 persons).
- --------------
*The percentage of shares beneficially owned does not exceed 1% of the shares
currently outstanding, including shares that can be acquired within 60 days
through the exercise of stock options.
Each of the foregoing Directors attended 75% or more of the combined total
number of meetings held during 1996 of the Board and Committees on which he or
she sits. The Board of Directors met 12 times in 1996.
Beneficial Ownership Reporting Compliance
To the Corporation's knowledge, which is based solely on a review of
reports of changes in ownership of the Common Stock as received by the
Corporation from directors, executive officers and other persons owning more
than 10% of the Common Stock, the Corporation believes that all such reports
required to be filed in 1996 and to date in 1997 were timely filed with two
exceptions. Mr. Donald G. Horner, an executive officer, inadvertently filed a
late report regarding a 1996 purchase of 100 shares of the Common Stock through
a discretionary brokerage account. Dr. Richard T. Mamiya, a Director,
inadvertently failed to file reports regarding 3 purchases of 385, 46 and 45
shares, respectively, of the Common Stock through a trust, all in 1994. The
purchases have all been subsequently reported.
Committees of the Board
Among the standing committees of the Board are the Executive Committee,
Executive Compensation Committee and the Joint Audit Committee. The Executive
Committee also acts as the Nominating Committee.
The Executive Committee, acting as the Nominating Committee, advises the
Board of Directors with respect to the total number of Directors to be elected
to the Board and recommends the persons to be nominated for election as
Directors. The Committee will consider nominees recommended by the stockholders
for election as Director. Any such recommendation, together with the nominee's
qualifications and consent to be considered as a nominee, should be sent to the
Secretary of the Corporation in a sufficient time prior to the Annual Meeting of
the Corporation's stockholders for the Committee to consider and act upon such
recommendation. The Committee, acting as the Nominating Committee, met once in
1996. Its members are Bert T. Kobayashi, Jr. (Chairman), Walter A. Dods, Jr.,
Fred C. Weyand and Robert C. Wo.
The Executive Compensation Committee acts upon the executive compensation
program of the Corporation and its subsidiaries. The Committee administers the
Incentive Plan for Key Executives (the "IPKE"), the Long-Term Incentive Plan
(the "LTIP"), the Stock Incentive Plan (the "SIP"), and the Deferred
Compensation Plan, reviews the performance and salaries of the Corporation's
Chief Executive Officer and other senior management officers of the Corporation
and its subsidiaries and makes recommendations to the
8
Board of Directors with respect to the appropriate senior management
compensation structure. The Committee met 5 times in 1996. Its members are Fujio
Matsuda (Chairman), John C. Couch, Julia Ann Frohlich, David M. Haig, Richard T.
Mamiya and Roderick F. McPhee.
The Joint Audit Committee, which met 6 times during 1996, determines on
behalf of the Board whether the performance and examination of the independent
public accounting firm and the Corporation's internal auditor are satisfactory
and adequate to meet the Board's supervisory responsibility. The Committee
reviews internal auditing reports, the adequacy of internal financial and
accounting controls, the work of the external and internal auditors and
management's responses to their audit reports and recommendations. It recommends
the independent public accounting firm proposed for election as Auditor of the
Corporation. It also reviews the Corporation's reports to stockholders and other
financial statements. The Committee reviewed and approved the 1996 audit plan.
The members of the Joint Audit Committee are George P. Shea, Jr. (Chairman),
John W.A. Buyers, Warren H. Haruki, Howard K. Hiroki, Glenn A. Kaya and Wesley
T. Park. Messrs. Haruki and Hiroki are Directors of the Bank and hold certified
public accountants certificates, as does Mr. Shea. Mr. Park is a Director of
Pioneer Federal Savings Bank, a subsidiary of the Corporation. Mr. Kaya is a
Director of the Bank and of First Hawaiian Creditcorp, Inc., a subsidiary of the
Corporation.
Compensation of Directors
In 1996, the Corporation paid a quarterly retainer of $3,000 to each member
of the Board of Directors who was not an employee of the Corporation or its
subsidiaries. All members of the Board received a fee of $800 and reimbursement
for transportation expenses for each Board meeting attended and $700 for each
committee meeting attended. As chairman of the Joint Audit Committee which
involves numerous other meetings with the external and internal auditors and
evaluation of operations, procedures and controls, Mr. Shea is paid an
additional $2,000 per month. Beginning in 1997, Directors who are also employees
of the Corporation or one of its subsidiaries will no longer receive Board and
committee fees.
The Corporation has a Directors' Retirement Plan for non-employee Directors
of the Corporation and the Bank who are not covered by the Corporation's
employees' retirement programs. Following retirement from the Board after
reaching age 55 and at least 10 years of service, the retired Director or his or
her beneficiary will be entitled to receive monthly payments for a 10 year
period at an annual rate equal to one-half of the annual retainer fee in effect
at the time of the Director's retirement.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation for the Chief Executive
Officer and the other four most highly compensated executive officers for the
years ended December 31, 1996, 1995 and 1994.
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- ------------------------ ------------
Name Other
and Annual Restricted Securities All Other
Principal Compen- Stock Underlying LTIP Compen-
Position Year Salary/(1)/ Bonus/(2)/ sation/(3)/ Awards/(4)/ Options Payouts/(5)/ sation/(6)/
- ---------------------- ---- ----------- ---------- ----------- ----------- ---------- ------------ -----------
Walter A. Dods, Jr. 1996 $825,267 $462,691 $29,463 -- 22,000 None $78,500
Chairman of the 1995 $776,100 $336,666 $23,761 -- 21,000 None $59,408
Board of Directors, 1994 $714,580 $ 15,625 $42,887 -- 22,000 None $49,783
Chief Executive
Officer, and
Director of the
Corporation
and Bank
John K. Tsui 1996 $547,133 $131,437 $25,220 110,006 11,680 None $26,562
President and 1995 $501,733 $ 7,733 $28,658 100,011 11,760 None $12,029
Director of the 1994 $227,258 $ 420 $ 7,102 -- 10,000 None $ 3,047
Corporation and
President and Chief
Operating Officer
and Director of the
Bank
9
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- ------------------------ ------------
Name Other
and Annual Restricted Securities All Other
Principal Compen- Stock Underlying LTIP Compen-
Position Year Salary/(1)/ Bonus/(2)/ sation/(3)/ Awards/(4)/ Options Payouts/(5)/ sation/(6)/
- ---------------------- ---- ----------- ---------- ----------- ----------- ---------- ------------ -----------
Howard H. Karr 1996 $321,033 $124,914 $14,044 -- 5,840 None $17,034
Executive Vice 1995 $296,033 $109,520 $13,210 -- 5,880 None $11,324
President and 1994 $278,144 $ 6,250 $19,464 -- 5,660 None $ 7,567
Treasurer of the
Corporation and
Vice Chairman,
Chief Financial Officer
and Treasurer of
the Bank
Donald G. Horner 1996 $287,633 $111,791 $13,951 -- 5,310 None $12,966
Executive Vice 1995 $262,633 $ 98,641 $14,375 -- 5,290 None $ 9,633
President of the 1994 $232,615 $ 5,375 $19,101 -- 3,870 None $ 6,070
Corporation and
Vice Chairman of
the Bank
Gerald M. Pang 1996 $170,863 $ 66,761 $12,514 -- 2,950 None $ 9,270
Senior Vice 1995 $165,680 $ 62,062 $12,188 -- 3,150 None $ 6,595
President and 1994 $161,784 $ 4,017 $17,988 -- 3,030 None $ 4,698
Chief Credit Officer
of the Corporation
and Executive Vice
President and Chief
Credit Officer of
the Bank
Notes to Summary Compensation Table:
Note (1) Includes the following for the above-named executive officers:
Base Director and Total
Year Salary Committee Fees Other Salary
--------------------------------------------------------------------------
Dods............................ 1996 $741,667 $83,600 $ -- $825,267
1995 $687,500 $88,600 $ -- $776,100
1994 $625,000 $85,800 $3,780 $714,580
Tsui............................ 1996 $473,333 $73,800 $ -- $547,133
1995 $433,333 $68,400 $ -- $501,733
1994 $200,000 $25,800 $1,458 $227,258
Karr............................ 1996 $295,833 $25,200 $ -- $321,033
1995 $270,833 $25,200 $ -- $296,033
1994 $250,000 $25,200 $2,944 $278,144
Horner.......................... 1996 $270,833 $16,800 $ -- $287,633
1995 $245,833 $16,800 $ -- $262,633
1994 $215,000 $16,800 $ 815 $232,615
Pang............................ 1996 $170,863 $ -- $ -- $170,863
1995 $165,680 $ -- $ -- $165,680
1994 $160,680 $ -- $1,104 $161,784
Note (2) Includes cash payments under the Corporation's Cash Bonus Plan ("Cash
Bonus Plan") for all three years and cash payments under the IPKE for
1995 and 1994. IPKE payments for the calendar year 1994 were paid in
1995 and for calendar year 1995 in 1996. IPKE payments for calendar
year 1996 are in the process of being calculated and will be reported
in the Proxy Statement for the 1998 annual meeting.
10
Note (3) Includes primarily imputed income, including "gross-up" for income
taxes, related to social club memberships and dues and personal use of
automobiles in 1994, and automobile allowances in 1995 and 1996. The
amounts of Other Annual Compensation for the above-named officers in
each of the three most recent years (other than Mr. Pang in 1994) were
less than $50,000 or 10% of Salary and Bonus. In 1994, Mr. Pang
received imputed income, including "gross-up", related to club
membership and dues in the amount of $4,881; automobile allowance of
$1,200; and imputed amounts, including "gross-up", related to personal
use of an automobile in the amount of $11,907.
Note (4) The Executive Compensation Committee may, at its sole discretion, pay
IPKE awards in restricted Common Stock with a fair market value equal
to the payment amount, in lieu of cash. As of December 31, 1996, the
aggregate number of non-vested restricted shares by the year of vesting
of such shares for each of the above-named executive officers and
aggregate market value (based on the market price of the stock at
December 31, 1996) follow:
Number of Market
Shares Vesting In Value
1998 12/31/96
----------------- ----------
Dods............... -- $ --
Tsui............... 7,816 273,560
Karr............... -- --
Horner............. 17,666 618,310
Pang............... -- --
----------------- ----------
Total........ 25,482 $ 891,870
Dividends are paid to the above-named executive officers on their
restricted stock holdings. Participants are entitled to vote the
restricted shares. Restricted IPKE shares become vested upon the
participant attaining 60 years of age, completion of 20 full years of
employment, retirement, death, or termination of employment prior to
retirement with the approval of the Corporation, whichever occurs
earliest. Beginning in 1989, for those participants who had previously
met the minimum restrictions for vesting by completion of 20 full years
of employment or attaining 60 years of age, the Committee imposed a
five-year minimum waiting period from the date of any subsequent stock
awards. The IPKE also provides for forfeiture by the participant and
reversion to the Corporation of all non-vested shares previously
awarded in certain cases of termination of employment. Mr. Dods'
interest in 8,163 restricted IPKE shares awarded in 1990 became vested
in 1995. The fair market value of the vested shares was reported in the
Proxy Statement for the 1996 Annual Meeting as a Restricted Stock
Award. However, commencing with this Proxy Statement, the Company has
elected to report awards of restricted IPKE shares in the year in which
they are awarded by the Executive Compensation Committee. Consequently,
the fair market values of restricted IPKE share awards to Mr. Tsui in
1995 and 1996 are reflected as Restricted Stock Awards in this Proxy
Statement.
Note (5) Because the Corporation did not exceed its minimum threshold average
return on equity ("ROE") of 15% for the 1992-1994 and 1993-1995
performance cycles, and its minimum threshold ROE of 14% for the 1994-
1996 performance cycle, no awards were paid in 1995 or 1996, or will be
payable in 1997 for the cycle which ended December 31, 1996.
Note (6) Includes (i) premiums for term life insurance, including "gross-up" for
income taxes; (ii) amounts related to split dollar insurance agreements
as discussed below; and (iii) Corporation contributions for the account
of the above-named executive officers to the Corporation's Profit
Sharing Plan ("Profit Sharing Plan") and amounts credited to the
accounts of such executive officers under the profit-sharing portion of
the Corporation's nonqualified, unfunded Supplemental Executive
Retirement Plan ("SERP") that provides benefits that would have been
provided under the Profit Sharing Plan but for Internal Revenue Code
restrictions on such benefits. (In determining profit-sharing benefits
under the SERP, the participant's covered compensation includes base
pay, commissions, overtime, short-term incentive pay, and the annual
cash bonus earned under IPKE; a participant's covered compensation does
not include the cash portion of the Corporation's Cash Bonus Plan.
Details of All Other Compensation for each of the above-named executive
officers for 1996 are as follows:
11
Profit Sharing Plan
Term Split Dollar (including SERP)
Insurance Insurance Contributions Total
--------- ------------ ------------------- -------
Dods......... $32,483 $3,326 $42,691 $78,500
Tsui......... $ -- $5,125 $21,437 $26,562
Karr......... $ -- $2,120 $14,914 $17,034
Horner....... $ -- $1,175 $11,791 $12,966
Pang......... $ -- $ 847 $ 8,423 $ 9,270
The Corporation has split dollar insurance agreements with the named
executive officers, as well as certain other senior officers. The
Corporation pays the insurance premium and imputes the economic benefit
to the executive utilizing the PS58 table published by the Internal
Revenue Service. Under the agreement, the executive owns a policy with
a death benefit equal to three times final salary and the Corporation
owns an interest in the policy on the life of the executive sufficient
to recover all insurance premiums previously paid plus any foregone
interest, net of the income tax benefit, on such premium payments upon
the death of the executive. The amount for each named executive officer
under this split dollar insurance agreement included in the above table
represents the foregone interest, net of applicable income tax benefit.
The Corporation also has a $1,000,000 whole life insurance policy on
the life of Mr. Dods. The premium and related "gross-up" for income
taxes on this policy are included under the Term Insurance column. The
death benefit under this policy is deducted from the death benefit
under Mr. Dods' split dollar policy.
Option Grants in Last Fiscal Year
The following table sets forth the stock options granted on March 6, 1996 to
each of the above-named executive officers under the Corporation's SIP. The
table also lists the potential realizable values of such options on the basis of
assumed annual compounded stock appreciation rates of 5% and 10% over the life
of the options, which is set at 10 years. The Corporation does not have a stock
appreciation rights program.
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants/(1)/ for Option Term/(2)/
--------------------------------------------------------- -----------------------
Number of Percent of
Securities Total Options Exercise
Underlying Granted to or Expira-
Options Employees in Base Price tion
Name Granted/(3)/ Fiscal Year Per Share Date 5% 10%
------------- -------------- ---------- ------- -------- --------
Walter A. Dods, Jr.......... 22,000 15.8% $28.25 3/06/06 $390,858 $990,511
John K. Tsui................ 11,680 8.4% $28.25 3/06/06 $207,510 $525,871
Howard H. Karr.............. 5,840 4.2% $28.25 3/06/06 $103,755 $262,936
Donald G. Horner............ 5,310 3.8% $28.25 3/06/06 $ 94,339 $239,073
Gerald M. Pang.............. 2,950 2.1% $28.25 3/06/06 $ 52,411 $132,819
Notes to Option Grants in Last Fiscal Year:
Note (1) Options under the SIP are granted at 100% of the market value of the
stock on the date of the grant. Options vest 25% per year after the
first anniversary of the date of grant. No option may be exercised
prior to vesting (and in no event earlier than 6 months after the date
of grant) or later than 10 years after the date of grant. The exercise
price of an option is payable either in cash, by tendering previously
acquired shares by the optionee, or by a combination of cash and
previously acquired shares. In the event of a change in control, as
defined in the SIP, all options granted and held at least 6 months
become immediately exercisable and vested. In the event of death,
disability or retirement, the Committee has the discretion to
accelerate the vesting of options previously granted. The SIP provides
for the shortening of the exercise period for vested options if
termination is due to death, disability or retirement. The SIP also
provides for the Corporation to withhold statutory income taxes upon
the exercise of the options by the option holder paying cash or
tendering previously acquired Common Stock or by the Corporation
withholding the appropriate number of option shares which would have
been issued following the option exercise. Without the approval of the
12
stockholders of the Corporation, the SIP cannot be terminated, amended,
or modified to (a) increase the total amount of shares which may be
issued except as provided in the SIP; (b) change the class of eligible
employees; (c) materially increase the cost of the SIP or benefits to
the participants; (d) extend the maximum period after the date of grant
during which the options may be exercised; or (e) change the provisions
of the exercise price.
Note (2) The potential realizable value is reported net of the option exercise
price, but before income taxes associated with exercise. These amounts
represent assumed annual compounded rates of appreciation of the
underlying stock of 5% and 10% from the date of grant to the end of the
option. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Corporation's Common Stock, overall
stock market conditions, and the optionees' continued employment
through the vesting period. The amounts reflected in these columns may
not necessarily be achieved.
Note (3) None of the options granted represent reload options.
Option Values at December 31, 1996
The following table reflects the securities underlying unexercised options
and the value of these options as of December 31, 1996:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1996 December 31, 1996
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
-------------------------------- ----------------- -----------------
Walter A. Dods, Jr.............. 48,550/53,250 $376,700/$413,000
John K. Tsui.................... 7,940/25,500 $ 64,180/$198,880
Howard H. Karr.................. 12,440/14,320 $ 95,470/$111,260
Donald G. Horner................ 9,704/12,146 $ 75,142/$ 94,418
Gerald M. Pang.................. 6,987/ 7,473 $ 54,295/$ 58,302
There were no options exercised by the named executive officers in 1996.
Ten-Year Option Repricings
For the year ended December 31, 1996, there was no adjustment or amendment to
the exercise price of the stock options previously awarded.
Long-Term Incentive Plans-Awards in Last Fiscal Year
The Corporation's LTIP applies to a group of key executives approved by the
Executive Compensation Committee, much smaller than the group eligible for IPKE
and SIP awards. It is intended to provide incentive compensation to participants
based on the Corporation's ability to sustain a target level of performance over
a 3-year performance cycle. The LTIP is administered by the Executive
Compensation Committee and has no expiration date.
Under the LTIP, no "awards" of shares, units or other rights, as such, are
granted. Instead, at the beginning of each 3-year cycle, the Executive
Compensation Committee designates which key executives will be eligible to
participate in the LTIP for the cycle. Additional key executives may be declared
eligible during the cycle. The Committee also establishes target amounts of
individual payouts and corporate performance standards to be met over the 3-year
performance cycle.
In 1996, the Executive Compensation Committee established the formula for
LTIP awards for the 3-year cycle 1996-1998. Under the formula for this cycle,
LTIP payouts are based on target percentages (ranging from 10% to 50%) of each
participant's average base salary over the 3-year performance cycle. If the
Corporation does not achieve a minimum threshold average annual return on assets
("ROA") of 1% over the 3-year performance cycle, no payouts will be due under
the LTIP. When the Corporation's ROA exceeds the minimum threshold level, the
target awards to participants are adjusted by a factor (ranging from 0% to 140%)
based on the Corporation's financial performance compared to a peer group, as
measured by relative return on aver-
13
age equity ("ROE"), and based upon the relative Total Stockholder Return
("TSR"). Relative ROE and relative TSR are equally weighted in the payout
calculation. In addition, LTIP payouts to participants may be adjusted by the
Committee based on that individual's performance (from 0% to 140% of the
individual's targeted amount as adjusted for the Corporation's performance).
The peer group used for comparative ROE and TSR purposes is comprised of
regional bank holding companies similar to the Corporation in size, performance
and nature of operations.
Cash payouts are made after each 3-year performance cycle. There were no
payouts in 1996 for the three-year cycle 1993-1995 because the Corporation did
not achieve the minimum threshold average ROE required for that cycle. (For 3-
year performance cycles ending in years before 1997, the minimum threshold
performance measure was average ROE rather than average ROA.) A participant can
elect to have the cash award deferred for future payment under the Corporation's
Deferred Compensation Plan.
The following table reflects the estimated future payouts, with respect to
the named executive officers, at threshold, target and maximum award levels for
the 3-year performance cycle beginning in 1996 and ending in 1998. Actual
payouts are contingent upon the Corporation meeting its minimum threshold ROA
and are subject to adjustment by the Committee as described above, based upon
corporate and individual performances, which will be determined in 1999 for the
1996-1998 performance cycle.
Performance
Number of or Other Estimated Future Payouts
Shares, Units Period Until under Non-Stock Price-Based Plans/(2)/
or Other Maturation or --------------------------------------------------
Name Rights Payout/(1)/ Threshold/(3)/ Target Maximum/(4)/
- --------------------- ------------- -------------- ------------ -------- ----------
Walter A. Dods, Jr... None 12/31/98 None $370,834 $726,834
John K. Tsui......... None 12/31/98 None $142,000 $278,320
Howard H. Karr....... None 12/31/98 None $ 73,958 $144,958
Donald G. Horner..... None 12/31/98 None $ 67,708 $132,708
Gerald M. Pang....... None 12/31/98 None $ 42,716 $ 83,723
Notes to Long-Term Incentive Plans--Awards in Last Fiscal Year:
Note (1) Performance period beginning January 1, 1996 and ending December 31,
1998.
Note (2) Estimated future payouts under the Target and Maximum columns are based
upon the named executive officer's base salary as of December 31, 1996.
Note (3) If the Corporation does not meet its minimum threshold average ROA or
the participant receives a 0% individual performance rating, there is
no payout.
Note (4) Under the current formula, the maximum individual payout is limited to
196% of the target amount.
Defined Benefit Pension Plans
The Corporation has an Employees' Retirement Plan (the "ERP") for employees
of the Corporation and participating subsidiaries who have completed certain age
and service requirements. Under the ERP, covered compensation includes salary,
including overtime, but excluding bonuses. Pension compensation is also limited
to the maximum allowable under the Internal Revenue Code. Retirement benefits
become payable effective upon an employee's retirement at the normal retirement
age of 65 years. Normal retirement benefits payable under the ERP are based on
total or final compensation and years of credited service. Under specified
circumstances, an employee who has attained a certain age and length of service
may retire early with reduced benefits. The ERP was "frozen" as of December 31,
1995 and no participant will accrue benefits under the ERP for service after
December 31, 1995.
The Corporation also maintains a pension portion of the SERP under which the
above-named executive officers continue to earn benefits based on the ERP
formula. In determining pension benefits under the SERP, the participant's
covered compensation includes base pay, commissions, overtime, short-term
incentive pay, and the annual cash bonus earned under IPKE; a participant's
covered compensation does not include the cash portion of the Corporation's Cash
Bonus Plan or any LTIP bonus. The pension benefit payable under the SERP is
reduced by the participant's "frozen" accrued benefit under the ERP.
14
The following table illustrates the estimated annual pension benefits payable
under the ERP and the SERP to an executive officer at age 65. Whether these
amounts become payable depends on the contingencies and conditions set forth in
the ERP and the SERP.
Years of Service/(2)/
Average -----------------------------------------------------------
Compensation/(1)/ 15 20 25 30 35 40
----------------- ------- ------- ------- ------- ------- ---------
$200,000 $ 50,225 $ 66,967 $ 83,708 $100,450 $117,192 $133,933
250,000 63,350 84,467 105,583 126,700 147,817 169,933
300,000 76,475 101,967 127,458 152,950 178,442 203,933
350,000 89,600 119,467 149,333 179,200 209,067 238,933
400,000 102,725 136,967 171,208 205,450 239,692 273,933
450,000 115,850 154,467 193,083 231,700 270,317 308,933
500,000 128,975 171,967 214,958 257,950 300,942 343,933
550,000 142,100 189,467 236,833 284,200 331,567 378,933
600,000 155,225 206,967 258,708 310,450 362,192 413,933
650,000 168,350 224,467 280,583 336,700 392,817 448,933
700,000 181,475 241,967 302,458 362,950 423,442 483,933
750,000 194,600 259,467 324,333 389,200 454,067 518,933
800,000 207,725 276,967 346,208 415,450 484,692 553,933
850,000 220,850 294,467 368,083 441,700 515,317 588,933
900,000 233,975 311,967 389,958 467,950 545,942 623,933
950,000 247,100 329,467 411,833 494,200 576,567 658,933
1,000,000 260,225 346,967 433,708 520,450 607,192 693,933
1,050,000 273,350 364,467 455,583 546,700 637,817 728,933
1,100,000 286,475 381,967 477,458 572,950 668,442 763,933
1,150,000 299,600 399,467 499,333 599,200 699,067 798,933
1,200,000 312,725 416,967 521,208 625,450 729,692 833,933
1,250,000 325,850 434,467 543,083 651,700 760,317 868,933
1,300,000 338,975 451,967 564,958 677,950 790,942 903,933
1,350,000 352,100 469,467 586,833 704,200 821,567 938,933
1,400,000 365,225 486,967 608,708 730,450 852,192 973,933
1,450,000 378,350 504,467 630,583 756,700 882,817 1,008,933
1,500,000 391,475 521,967 652,458 782,950 913,442 1,043,933
Notes to Defined Benefit Pension Plans Table:
Note (1) Final average compensation represents the average annual compensation
during the highest 60 consecutive calendar months in the last 120
calendar months of creditable service. Compensation for the purpose of
this table includes base salary plus the value of awards under the
IPKE as shown on the Summary Compensation Table (but not bonuses under
the LTIP or the Cash Bonus Plan). Beginning in 1994, the amount of the
IPKE included in compensation for any year for purposes of the ERP and
the SERP is the amount earned for the performance year, though not
paid until March of the following year. See "Report of Executive
Compensation Committee--Annual Incentives." The estimated annual
benefits are computed on the basis of a straight-life annuity form of
payment with no social security offset.
Note(2) As of December 31, 1996, the number of years of creditable service
under the Corporation's defined benefit plans for each of the named
executive officers in the Summary Compensation Table was as follows:
Mr. Dods, 28 years; Mr. Tsui, 13 years (3 years actual service plus 10
years added by the Executive Compensation Committee when Mr. Tsui was
hired); Mr. Karr, 24 years; Mr. Horner, 18 years; and Mr. Pang, 21
years.
Change in Control Arrangements
There are no employment contracts, change-in-control arrangements (other than
in the LTIP, SIP and Deferred Compensation Plan) or termination of employment
arrangements with the named executive officers.
15
Compensation Committee Interlocks and Insider Participation
The members of the Executive Compensation Committee are Fujio Matsuda
(Chairman), John C. Couch, Julia Ann Frohlich, David M. Haig, Richard T. Mamiya
and Roderick F. McPhee.
No member of the Executive Compensation Committee was, at any time during the
last completed fiscal year, an officer or employee of the Corporation or any of
its subsidiaries.
The Corporation has in the ordinary course of business extended credit to
Messrs. Couch and Haig, and to Doctors Matsuda, Mamiya and McPhee (consisting of
real estate mortgages and consumer credit lines) as follows:
Largest Aggregate Interest
Aggregate Indebtedness Rate
Indebtedness Outstanding Per
Name in 1996 December 31, 1996 Annum
-------------------- ------------ ----------------- -------------
John C. Couch....... $1,857,704 $1,832,182 5.000%-9.250%
David M. Haig....... $1,046,419 $ 977,248 8.000%-8.250%
Richard T. Mamiya... $2,611,528 $ 444,444 5.000%-9.875%
Fujio Matsuda....... $ 357,973 $ 326,919 5.000%-8.375%
Roderick F. McPhee.. $ 280,217 $ 276,248 8.125%-8.375%
Mr. Couch is Chairman of the Board and a director of A&B, which owns 5.33% of
the Corporation's outstanding Common Stock. Mr. Dods is a director of A&B and
the Trust and Investments Division of First Hawaiian Bank holds 2,574,606 shares
of A&B's common stock in a fiduciary capacity. Mr. Dods does not serve on the
executive compensation committee (or other board committee performing the
equivalent function) of A&B.
The Bank has (a) made loans to, and issued letters of credit on behalf of,
A&B and its wholly-owned subsidiary, A&B-Hawaii, Inc., (b) made loans to, and
issued a letter of credit on behalf of, Matson Navigation Company, Inc., a
subsidiary of A&B, and (c) made loans to, and issued letters of credit on behalf
of, California and Hawaiian Sugar Company, Inc., a subsidiary of A&B-Hawaii,
Inc. These loans and the letters of credit were made in the ordinary course of
business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risks of collectibility or
present other unfavorable features.
Report of Executive Compensation Committee.
The Executive Compensation Committee of the Board of Directors (the
"Committee") is composed of independent, outside Directors of the Corporation.
The Board of Directors has delegated responsibility for administering the
executive compensation program of the Corporation and its subsidiaries to the
Committee.
The executive compensation philosophy of the Corporation is to provide
remuneration to top performers that is consistent with the quality of their
contributions and the sacrifices they make on behalf of the organization. We
believe that the overall compensation package of executives who contribute to
the long-term advancement of the company should reflect their influence on that
growth. The Corporation intends to make it rewarding for these key executives to
remain until retirement. Key objectives of this philosophy include:
. providing a pay system designed to attract, retain and motivate executives;
. establishing compensation plans which emphasize performance-based pay
opportunities, as measured by operating, financial and strategic objectives
and goals;
. providing longer-term, equity-based incentives for executives to ensure
they are motivated and rewarded for growth in equity value and enhanced
value to the stockholders.
The compensation program administered by the Committee includes three
components designed to implement the foregoing objectives: (1) base salaries;
(2) annual incentives; and (3) long-term incentives. Each of these components of
compensation is discussed separately below.
Base Salaries
Base salaries of executive officers are set annually by the Committee. The
Committee takes into consideration factors such as varying levels of
responsibility, individual performance, consistency and fairness, cost of living
factors, the Corporation's operating results and financial performance and cost
control. The Committee places no particular weight on, or relative importance
to, any single factor in adjusting base salaries.
16
Annual Incentives
Annual incentives for executive officers are provided pursuant to the IPKE,
which provides cash and deferred bonuses based upon the Corporation's
profitability and the executive's performance over the course of the year. The
IPKE promotes the Corporation's pay-for-performance philosophy by providing
executives with direct financial incentives, in the form of annual cash bonuses
or restricted stock awards, to achieve corporate and individual performance
goals. Moreover, annual bonus opportunities allow the Corporation to communicate
specific goals that are of primary importance during the coming year and to
motivate executives to achieve these goals. The IPKE was originally approved by
the stockholders in 1969 and has subsequently been amended several times by the
stockholders.
The total amount of bonuses available under the IPKE is a bonus pool equal to
2 1/2% of consolidated income, before income taxes and securities gains, for the
performance year. Guideline percentages of base salary are set, increasing as
the executives' pay grades increase. The Chief Executive Officer, at his
discretion, allocates a portion of the annual bonus pool to each business unit.
The manager of each business unit recommends how this allocated amount should be
distributed to individual participants in the business unit. Individual awards
above or below guideline percentages are generally based upon the participant's
management level and performance during the performance period. The business
unit manager's recommendations are reviewed and approved or adjusted by the
Chief Executive Officer. These recommendations are then presented to the
Committee for final review and approval. The Committee grants individual bonuses
above or below guideline percentages based upon the Committee's judgment, after
reviewing the recommendation of the Chief Executive Officer, as to individual
performance and relative levels of responsibility.
The IPKE performance year is the fiscal year of the Corporation, which is the
calendar year. Calculation and award of IPKE bonuses for each year's performance
is deferred until the following March. This allows management and the Committee
to base the awards upon final, rather than projected, performance results for
the year. Therefore, no IPKE awards for the 1996 performance year have been
calculated and they are not reported in this Proxy Statement. IPKE awards
granted in 1995 and 1996 for 1994 and 1995 performances for the named executive
officers are reported in "Executive Compensation--Summary Compensation Table."
Executive officers are also eligible to receive annual contributions and
bonuses under the Corporation's Profit Sharing Plan and Cash Bonus Plan, which
are plans with fixed profit sharing formulas in which all eligible employees of
the Corporation participate and which are not administered by the Committee.
Long-Term Incentives
Long-term incentives are provided in the form of cash awards under the
Corporation's LTIP and grants of stock options under the SIP. In keeping with
the Corporation's commitment to provide a total compensation package which
places a significant amount of pay "at-risk", long-term incentives, together
with awards under the IPKE, comprise approximately 40% of the value of an
executive's total compensation package if the Corporation meets its target
performance levels.
The Corporation's LTIP applies to a group of key executives approved by the
Committee that is much smaller than the group eligible for IPKE and SIP awards.
It is intended to provide incentive compensation to participants based on the
Corporation's ability to sustain target levels of performance over a 3-year
performance cycle. Under the formula in effect for the 3-year cycle ending in
1996, LTIP awards were based on target percentages (ranging from 10% to 50%) of
each participant's average base salary over the 3-year performance cycle. If the
Corporation did not achieve a threshold average ROE of 14% over the 3-year
performance cycle, no payouts were to be made under the LTIP. When the
Corporation's average ROE exceeded the threshold level, the target payouts to
participants were to be adjusted by a factor (ranging from 0% to 140%) based on
the Corporation's financial performance compared to a peer group, as measured by
ROA, and based upon the Corporation's average efficiency ratio over the period.
Relative ROA and average efficiency ratio were equally weighted in the payout
determination. In addition, LTIP awards to participants were to be adjusted by
the Committee based on each individual's performance (from 0% to 140% of the
individual's targeted amount as adjusted for the Corporation's performance). In
the Committee's judgment, these performance measures were closely linked to
stockholder value creation and reinforced desired long-term strategies and
performance.
The Corporation has completed the 1994-1996 performance cycle. The
Corporation's average ROE for the period was 11.88%, which did not meet the
minimum threshold level for awards to be earned during the cycle. Accordingly,
no awards will be payable for the 1994-1996 cycle.
17
The peer group used for LTIP purposes is comprised of regional bank holding
companies similar to the Corporation in size, performance and nature of
operations. The group, which is updated and approved annually by the Committee,
includes some, but not all, of the companies in the S&P Major Regional Bank
Index.
The formula for calculating LTIP payouts for the 1996-1998 performance cycle
is described under "Long-Term Incentive Plans--Awards in Last Fiscal Year" in
this proxy statement.
Under the SIP approved by the stockholders, stock options are granted at an
option exercise price not less than the fair market value of the Common Stock on
the date of grant. Accordingly, stock options have value only if the stock price
appreciates from the date the options are granted. This design focuses
executives on the enhancement of stockholder value over the long term and
encourages equity ownership in the Corporation.
Guidelines for setting the size of stock option grants were set by the
Committee at the time the SIP was established, based on the recommendation of an
independent consultant. The guideline for stock option grants is a percentage of
base salary (ranging from 10% to 85%), based upon officer grades (increasing as
grade increases), resulting in a dollar target which is then converted into the
target number of shares by dividing the dollar target by the Corporation's stock
price on the date of grant. The size of individual annual awards is increased or
decreased from the guideline level based on individual performance at the sole
discretion of the Committee.
Chief Executive Officer's Compensation
Base Salary In March, 1996, the Committee reviewed Mr. Dods' performance and
noted his leadership qualities which have successfully led the Corporation to
increased profitability and growth during a sustained period of economic
adversity. Particularly noted was his initiative to expand to new operations in
the Pacific Northwest which will provide major growth opportunities in the
future. Based on these factors, the Committee concluded that a merit increase in
base salary was warranted and accordingly set his salary at $750,000 effective
March 1, 1996.
Annual Incentives As stated above, IPKE payments for 1996 have not yet been
determined. The IPKE payment for Mr. Dods to be granted in 1997 for 1996
performance will be reflected in the proxy statement for the 1998 annual
meeting. As a result of the Corporation's and his performance for 1995, the
Committee awarded him $420,000 under the IPKE, which was paid in 1996.
Long-Term Incentives In March, 1996, Mr. Dods received options to purchase
22,000 shares pursuant to the SIP, as set forth in the table under the section
"Option Grants in Last Fiscal Year." This award was based upon the SIP's
guideline percentage of base salary, and the number of shares was rounded up to
the closest 1,000 shares. The Committee has determined that in its judgment the
number of options granted was appropriate in light of other elements of
compensation awarded and would serve the objective of directly linking a
significant portion of Mr. Dods' compensation to future creation of stockholder
value.
Based on the Corporation's financial performance for the 1992-1994 and 1993-
1995 performance cycles, no LTIP payouts were made to Mr. Dods in 1995 and 1996.
As discussed above, Mr. Dods will not receive an LTIP payout in 1997 for the
1994-1996 performance cycle because the minimum threshold level was not met.
Policy with Respect to the $1 Million Deduction Limit
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation in excess of $1,000,000 paid to certain executive officers, unless
certain requirements are met. The Corporation's pay philosophy is performance
focused and the Committee believes in retaining discretion to increase as well
as decrease incentive awards based on the Committee's assessment of individual
performance and other relevant factors. The Committee will continue to review
its compensation programs for the executive officers subject to the
deductibility limit while preserving its focus on performance-driven
compensation.
Executive Compensation Committee
Fujio Matsuda, Chairman
John C. Couch
Julia Ann Frohlich
David M. Haig
Richard T. Mamiya
Roderick F. McPhee
18
Stockholder Return Performance Graph
The attached Comparison of Five-Year Cumulative Total Stockholder Return
performance graph shows the cumulative total stockholder return (stock price
appreciation and reinvestment of dividends) on the Common Stock during the last
five years as compared to the S&P Major Regional Bank Index and the broader S&P
500 Index.
Comparison of Five-Year
Cumulative Total Stockholder Return*
===================================
Among First Hawaiian, Inc. Common Stock, S&P 500 Index and S&P Major
Regional Bank Index (companies appear in published industry index).
[LINE GRAPH APPEARS HERE]
For the years ended December 31
1991 1992 1993 1994 1995 1996
--------------------------------------------
First Hawaiian,
Inc. Common Stock 100 108 97 97 128 155
----------------------------------------------------------------------------
S&P500 Index 100 108 118 120 165 203
----------------------------------------------------------------------------
S&P Major Regional Bank Index 100 127 135 128 201 275
----------------------------------------------------------------------------
* Total return assumes reinvestment of dividends and $100 invested on
December 31, 1991 in the First Hawaiian, Inc. Common Stock, S&P 500 Index
and S&P Major Regional Bank Index.
19
Certain Transactions
The total amount of loans outstanding to directors and executive officers of
the Corporation from the Bank aggregated $3,169,885 at December 31, 1996. These
loans were made in the ordinary course of business, on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and did not involve more than
normal risks of collectibility or present other unfavorable features.
The following schedule shows detailed information on loans made by the
Corporation to those Directors (including nominees) and executive officers of
the Corporation whose aggregate indebtedness exceeded $60,000 at any time during
1996. All loans are secured by real estate mortgages or are consumer credit
lines:
Aggregate
Largest Indebtedness Interest
Aggregate Outstanding Rate
Indebtedness December 31, Per
Name and Title in 1996 1996 Annum
- ------------------------- ------------ ------------ --------------
John W. A. Buyers $ 957,142 $ 942,867 5.000%-8.875%
Director
John C. Couch $1,857,704 $1,832,182 5.000%-9.250%
Director
Walter A. Dods, Jr. $ 399,075 $ 150,000 5.000%-9.600%
Chairman,
Chief Executive Officer
and Director
David M. Haig $1,046,419 $ 977,248 8.000%-8.250%
Director
Donald G. Horner $ 427,504 $ 374,129 5.000%-9.600%
Executive Vice President
Howard H. Karr $ 719,993 $ 196,289 5.000%-9.600%
Executive Vice President
and Treasurer
Bert T. Kobayashi, Jr. $ 812,462 $ 792,824 5.000%-8.000%
Director
Richard T. Mamiya $2,611,528 $ 444,444 5.000%-9.875%
Director
Fujio Matsuda $ 357,973 $ 326,919 5.000%-8.375%
Director
Roderick F. McPhee $ 280,217 $ 276,248 8.125%-8.375%
Director
John K. Tsui $ 450,511 $ 445,260 6.500%-7.750%
President and Director
The Bank leases a parcel of land, on which a branch of the Bank is located,
from the Estate of S.M. Damon pursuant to a lease commencing July 1, 1967. This
lease is for a term of 50 years, requiring the payment of a fixed annual rent of
$95,713 annually from July 1, 1993 to June 30, 1997. Rents thereafter are to be
fixed for each of two succeeding 10-year periods by agreement or failing
agreement by appraisal. Messrs. Haig, Weyand, Ganley and Dods are Directors of
the Corporation and the Bank and Trustees of the Estate. Management of the
Corporation believes that this transaction is as favorable to the Corporation
and the Bank as that which would have been obtainable in transactions with
persons or companies not affiliated with the Corporation or the Bank.
The Bank leases 6,074 square feet of office space to the Estate of S.M. Damon
in the new downtown Honolulu headquarters building of the Bank. The Estate
leased space in the old headquarters building at $2.00 per square foot per month
for the period ending April 30, 1997. In consideration of the Estate and other
20
tenants of the old headquarters building agreeing to temporarily relocate
their offices to allow for construction of the new building, the Bank offered
the Estate and 3 other unrelated tenants comparable space in the new building at
the same aggregate rent as previously applied in the old building. Management of
the Corporation believes that, while the rent charged to the Estate and the
other tenants may not be market rate rents for the new building, the
arrangements made for the Estate described above are as favorable to the
Corporation and the Bank as those that would have been obtainable in a similar
transaction with persons or companies not affiliated with the Corporation or the
Bank.
Mr. Kobayashi is a director of the Corporation and the Bank and his law
corporation is a partner of the law firm of Kobayashi, Sugita & Goda. In 1996
the Corporation and its subsidiaries paid legal fees to Kobayashi, Sugita & Goda
in the amount of $915,770.
ELECTION OF AUDITOR
The Board of Directors, on recommendation of the Joint Audit Committee,
recommends the election of Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as
Auditor of the Corporation to serve for the ensuing year. Coopers & Lybrand has
served the Corporation in the capacity of independent Auditors since 1973.
Proxies in the accompanying form will be voted for the election of Coopers &
Lybrand unless a contrary specification is indicated therein, in which event
they will be voted as specified. Election of the Auditor requires the
affirmative vote of a majority of the shares present or represented at the
meeting. Under the Corporation's Certificate of Incorporation and Bylaws,
abstentions and broker non-votes will not have the effect of votes in opposition
to the election of Coopers & Lybrand.
It is expected that representatives of Coopers & Lybrand will be at the
Annual Meeting and will be available to respond to questions and make a
statement if they choose.
The Board of Directors recommends a vote FOR the election of Coopers &
Lybrand as Auditor.
OTHER BUSINESS
At the date of this proxy statement, management does not know of any business
to be presented at the Annual Meeting other than the matters set forth above. If
any other matters properly come before the Annual Meeting, it is the intention
of the persons named in the accompanying form of proxy to vote in accordance
with their judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1998
Proposals of stockholders intended to be presented at the 1998 Annual Meeting
of the Corporation must be received by the Corporate Secretary of the
Corporation on or prior to December 31, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
FIRST HAWAIIAN, INC.
Herbert E. Wolff
Senior Vice President and Secretary
Dated: March 3, 1997
A COPY OF THE ANNUAL REPORT OF THE CORPORATION ON FORM 10-K TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PRIOR TO MARCH 31, 1997, WILL BE AVAILABLE
AFTER THAT DATE TO EACH STOCKHOLDER UPON WRITTEN REQUEST THEREFOR.
21
[LOGO OF FIRST HAWAIIAN, INC.] FIRST HAWAIIAN, INC. THIS IS YOUR PROXY FORM
- --------------------------------------------------------------------------------
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF FIRST HAWAIIAN, INC.
ANNUAL MEETING - APRIL 17, 1997
The undersigned hereby appoints F. MATSUDA, R. F. McPHEE, and F. C. WEYAND,
and each of them, each with full power of substitution, the proxies of the
undersigned to attend the Annual Meeting of Stockholders of FIRST HAWAIIAN, INC.
(the "Corporation") to be held at 9:30 o'clock A.M., Hawaiian Standard Time, on
April 17, 1997 in the 30th floor Boardroom of First Hawaiian Center, 999 Bishop
Street, Honolulu, Hawaii, and any adjournments thereof, and to vote at said
meeting and any adjournments thereof all shares of stock of the Corporation
standing in the name of the undersigned, as instructed on the reverse side and
in their judgment on any other business which may properly come before said
meeting:
(To Be Continued And Signed On The Other Side)
A [X] Please mark your votes as in this example.
FOR all
nominees listed WITHHOLD
at right AUTHORITY
1. ELECTION [__] [__] Nominees: John W.A. Buyers
OF John C. Couch
DIRECTORS David M. Haig
Roderick F. McPhee
(INSTRUCTIONS: To withhold authority to John K. Tsui
vote for any individual nominee write that
nominee's name in the space provided below.)
- ------------------------------------------
2. Fix the total number of Directors at fifteen.
FOR AGAINST ABSTAIN
[__] [__] [__]
3. Proposal to approve the election of Coopers & Lybrand L.L.P. as Auditor:
FOR AGAINST ABSTAIN
[__] [__] [__]
This proxy will be voted as directed, but if no direction is specified, it will
be voted FOR Proposals 1, 2 and 3.
SIGNATURE DATE SIGNATURE DATE
------------------ -------- ---------------- --------
IF HELD JOINTLY
NOTE: Stockholder(s) should sign above exactly as name(s) appears hereon. But
minor discrepancies in such signatures shall not invalidate their proxy;
if more than one Stockholder, all should sign.
