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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)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)
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[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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):
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[_] 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:
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Notes:
[LOGO OF FIRST HAWAIIAN, INC.]
P.O. Box 3200
Honolulu, Hawaii 96847
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 18, 1996 at 9:30 o'clock A.M. in the 20th
floor Dining Room of The Plaza Club, 900 Fort 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 1999, and until their successors are elected and
qualified.
2. To fix the total number of Directors at 15.
3. To approve an amendment to the Corporation's Certificate of
Incorporation (the "Charter") to increase the number of shares of
authorized stock of the Corporation by authorizing 50,000,000 shares
of a new class of preferred stock, par value $5.00 per share, which
may be issued from time to time in one or more series, with such
voting rights, designations, dividend and liquidation preferences,
conversion and other rights, qualifications, limitations and
restrictions as shall be determined by the Board of Directors at the
time of issuance.
4. To elect the Auditor of the Corporation.
5. 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 23, 1996,
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 1, 1996
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.
[LOGO OF FIRST HAWAIIAN, INC.]
P.O. Box 3200
Honolulu, Hawaii 96847
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 18, 1996, and any adjournments thereof.
The annual report of the Corporation, containing consolidated financial
statements as at and for the year ended December 31, 1995, 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 1, 1996.
First Hawaiian, Inc. is a holding company for First Hawaiian Bank (the
"Bank"), First Hawaiian Creditcorp, Inc., First Hawaiian Leasing, Inc., FHI
International, Inc., and Pioneer Federal Savings Bank.
OUTSTANDING SHARES; VOTING RIGHTS
At the close of business on February 23, 1996 (the "record date") there
were 31,117,863 shares of common stock (the "Common Stock") of the Corporation
outstanding. Each 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 8,000,000 shares 25.71
Ganley and Walter A. Dods, Jr., as Trustees
under the Will and of the Estate of
S.M. Damon, 1132 Bishop Street,
Honolulu, Hawaii 96813(1)
Asset Management Division, First Hawaiian Bank, 3,399,937 shares(2) 10.93
P.O. Box 3200, Honolulu, Hawaii 96847
Alexander & Baldwin, Inc., 822 Bishop Street 1,692,894 shares 5.44
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 Asset Management Division in fiduciary accounts
include: 1,489,861 shares as to which it has sole voting power and
1,464,231 shares as to which it has sole investment power; 1,432,933 shares
as to which it has shared voting power and 1,466,961 shares as to which it
has shared investment power; 477,144 shares as to which sole voting power
is retained by the settlors of the trusts; and 468,745 shares as to which
sole investment power is held by outside investment advisers.
(3) Mr. Robert J. Pfeiffer, who retired as a Director of the Corporation on
June 30, 1995, was Chairman of the Board of Alexander & Baldwin, Inc. until
March 31, 1995. Mr. John C. Couch, a Director of the Corporation, and
President and Chief Executive Officer of Alexander & Baldwin, Inc. since
April 1992, is now Chairman of the Board of that company. 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 1999 at February 23, 1996 Class
------------------------------------------------ ------------------------ -------
WALTER A. DODS, JR., 54, has been Chairman of the Board 8,320,267 26.74
the Board and 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
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 1999 at February 23, 1996 Class
------------------------------------------------ ------------------------ -------
Stock includes 924 shares held in his wife's individual
retirement account as to which Mr. Dods disclaims
beneficial ownership, and 48,550 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
Mr. Dods disclaims beneficial ownership. He is a
Trustee of Punahou School, which owns 209,316 shares of
the Common Stock; he has shared voting and investment
powers with respect to such shares and disclaims
beneficial ownership thereof.
PAUL MULLIN GANLEY, 56, has been a Director of the 8,050,993 25.87
Corporation 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; 19,108
shares in his revocable living trust as to which he has
sole voting and investment powers; 12,336 shares in a
profit sharing plan as to which he has sole voting and
investment powers; and 17,094 shares in two individual
retirement accounts as to which he has sole voting and
investment powers.
DR. RICHARD T. MAMIYA, 71, has been a Director of the 4,000 *
Corporation since 1994 and a Director of the Bank since
1980. He is 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, 71, has been a Director of the 2,602 *
Corporation since 1987 and a Director of the Bank since
1985. He is President of the Japan-America Institute of
Management Science. 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., 57, has been a Director of the 2,783 *
Corporation 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.
*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.
4
Each of the foregoing nominees attended 75% or more of the combined total
number of meetings held during 1995 of the Board and Committees on which he
sits. The Board of Directors met 13 times in 1995.
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 23, 1996 Class
----------------------------- ------------------------ -------
JOHN W. A. BUYERS, 68, (1997) has been a Director of the 2,012 *
Corporation since 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 land and agriculture business, since 1992.
From 1982 to 1992 he was Chairman and President of C.
Brewer and Company, Limited. From 1975 to 1982, he was
President and Chief Executive Officer of C. Brewer and
Company, Limited. Since 1989, 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.
JOHN C. COUCH, 56, (1997) has been a Director of the 8,800 *
Corporation since 1991 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. Since April, 1989, he
has been 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.
5
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Serve at February 23, 1996 Class
----------------------------- ------------------------ -------
DR. JULIA ANN FROHLICH, 55, (1998) has been a Director 1,200 *
of the Corporation 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.
DAVID M. HAIG, 44, (1997) has been a Director of the 8,018,221 25.77
Corporation since 1989 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, and 2,600 shares owned by a trust as
to which Mr. Haig shares voting and investment powers.
He is beneficiary of an HR-10 plan which holds 8,160
shares of the Common Stock as to which he has sole
voting and investment powers.
JOHN A. HOAG, 63, (1998) was an Executive Vice President 64,358 *
of the 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 is the Chairman, CEO, President of Hawaii
Reserves Inc., a commercial land management
corporation. His reported beneficial ownership of the
Common Stock includes 928 shares owned jointly with his
wife as to which Mr. Hoag shares voting and investment
powers, 19,020 shares in his wife's revocable living
trust as to which Mr. Hoag disclaims beneficial
ownership and 26,272 shares that Mr. Hoag has the right
to acquire within 60 days through the exercise of stock
options.
BERT T. KOBAYASHI, JR., 55, (1998) has been a Director 5,485 *
of the Corporation 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.
DR. RODERICK F. McPHEE, 67, (1997) has been a Director 12,129 *
of the Corporation 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 209,316 shares of the Common Stock.
He has no voting or investment powers with respect to
such shares and disclaims beneficial ownership thereof.
JOHN K. TSUI, 57, (1997) was elected as a Director of the 13,362 *
Corporation to fill the unexpired term of Mr. Pfeiffer
on July 20, 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 included 5,440
shares that Mr. Tsui has the right to acquire within 60
days through the exercise of stock options.
6
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Serve at February 23, 1996 Class
----------------------------- ------------------------ -------
FRED C. WEYAND, 79, (1998) has been a Director of the 8,021,305 25.78
Corporation 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
11,305 shares in his wife's revocable living trust as
to which he shares voting and investment powers.
ROBERT C. WO, 70, (1998) was a Director of the Corporation 14,850 *
from 1974 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.
Executive Officers
------------------
PHILIP H. CHING--His reported beneficial ownership of 31,101 *
the Common Stock includes 10,808 shares held in his
wife's revocable living trust as to which Mr. Ching
disclaims beneficial ownership and 8,387 shares that
Mr. Ching has the right to acquire within 60 days
through the exercise of stock options.
DONALD G. HORNER--His reported beneficial ownership of 31,508 *
the Common Stock includes 9,704 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 68,894 *
Common Stock includes 2,118 shares held in his wife's
revocable living trust and 602 shares held in his
wife's individual retirement account as to which Mr.
Karr disclaims beneficial ownership, and 2,500 shares
held in a custodial account for a child for which he
has sole voting and investment powers, and 12,440
shares that Mr. Karr 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 8,673,870 27.87
Executive Officers as a Group (19 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.
7
Each of the foregoing Directors attended 75% or more of the combined total
number of meetings held during 1995 of the Board and Committees on which he or
she sits. The Board of Directors met 13 times in 1995. 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 1995 and to
date in 1996 were timely filed. Mr. Robert C. Wo, a Director, inadvertently
failed to report the ownership of 400 shares of the Common Stock on his Form 3
initial statement of ownership filed in 1992, and a purchase of 100 shares with
his wife on a Form 4 change in ownership report in 1993.
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 twice in
1995. 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 Board of Directors with
respect to the appropriate senior management compensation structure. The
Committee met 6 times in 1995. 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 5 times during 1995, 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 1995 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 1995, 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.
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 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.
8
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, 1995, 1994 and 1993.
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. 1995 $776,100 $313,220 $23,761 $202,034 21,000 None $35,242
Chairman of the 1994 $714,580 $ 31,250 $42,887 -- 22,000 None $34,158
Board of Directors, 1993 $711,190 $334,021 $34,645 -- 18,000 $306,822 $41,432
Chief Executive
Officer, and
Director of the
Corporation
and Bank
John K. Tsui 1995 $501,733 $ 720 $28,658 -- 11,760 None $ 4,296
President and 1994 $227,258 $ 420 $ 7,102 -- 10,000 None $ 3,047
Director of the 1993 N/A N/A N/A N/A N/A N/A N/A
Corporation and
President and Chief
Operating Officer
and Director of the
Bank
Howard H. Karr 1995 $296,033 $100,720 $13,210 -- 5,880 None $ 1,804
Executive Vice 1994 $278,144 $ 12,500 $19,464 -- 5,660 None $ 1,317
President and 1993 $271,992 $124,646 $19,447 -- 4,960 $ 62,039 $ 9,480
Treasurer of the
Corporation and
Vice Chairman,
Chief Financial Officer
and Treasurer of
the Bank
Donald G. Horner 1995 $262,633 $ 72,720 $14,375 -- 5,290 None $ 992
Executive Vice 1994 $232,615 $ 10,750 $19,101 -- 3,870 None $ 695
President of the 1993 $222,550 $102,500 $18,999 -- 3,730 $ 51,091 $ 6,351
Corporation and
Vice Chairman of
the Bank
Philip H. Ching 1995 $238,861 $ 720 $11,563 $ 68,186 None None $ 4,055
Executive Vice 1994 $243,486 $ 10,624 $25,612 -- 4,010 None $ 2,941
President of the 1993 $243,664 $106,249 $22,115 -- 3,510 $ 45,815 $12,282
Corporation and
Vice Chairman
of the Bank
9
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........ 1995 $687,500 $88,600 $ -- $776,100
1994 $625,000 $85,800 $3,780 $714,580
1993 $625,000 $82,200 $3,990 $711,190
Tsui........ 1995 $433,333 $68,400 $ -- $501,733
1994 $200,000 $25,800 $1,458 $227,258
1993 N/A N/A N/A N/A
Karr........ 1995 $270,833 $25,200 $ -- $296,033
1994 $250,000 $25,200 $2,944 $278,144
1993 $250,000 $20,300 $1,692 $271,992
Horner...... 1995 $245,833 $16,800 $ -- $262,633
1994 $215,000 $16,800 $ 815 $232,615
1993 $205,000 $16,800 $ 750 $222,550
Ching....... 1995 $213,661 $25,200 $ -- $238,861
1994 $212,500 $25,200 $5,786 $243,486
1993 $212,500 $25,900 $5,264 $243,664
Note (2) Includes cash payments under the Profit Sharing Plan and Cash Bonus
Plan for 1994 and 1993 and 1995 and 1993 cash payments under the IPKE.
IPKE payments for the calendar year 1994 were paid in 1995. Profit
Sharing Plan and Cash Bonus Plan and IPKE payments for calendar year
1995 are in the process of being calculated and will be reported in
the Proxy Statement for the 1997 annual meeting.
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 1993, and automobile allowance in 1995. [The
amounts of Other Annual Compensation for the above named officers
other than Mr. Ching in each of the 3 most recent years were less than
$50,000 or 10% of Salary and Bonus. Mr. Ching received imputed income,
including "gross-up," related to club memberships and dues in the
amounts of $3,763, $8,542 and $8,322 for 1995, 1994 and 1993,
respectively, automobile allowance of $7,800 in 1995, and imputed
amounts, including "gross-up," related to automobiles of $17,070 and
$13,793 for 1994 and 1993, respectively.]
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, 1995, 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, 1995) follow:
Number of Market
Shares Vesting In Value
1998 12/31/95
------ --------
Dods......... -- $ --
Tsui......... 3,922 117,660
Karr......... -- --
Horner....... 17,666 529,980
Ching........ -- --
------ --------
Total.... 21,588 $647,640
10
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.
Note (5) The amounts of LTIP payouts for the first LTIP cycle (1991-1993) were
determined and paid in 1994. 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, no awards were paid in
1995 or will be payable in 1996 for the cycles which ended December
31, 1994 and 1995, respectively.
Note (6) Includes premiums for term life insurance, including "gross-up" for
income taxes, and split dollar insurance agreements as discussed
below. Details of All Other Compensation for each of the above-named
executive officers for 1995 are as follows:
Term Split Dollar
Insurance Insurance Total
--------- ------------ -------
Dods.......... $32,483 $2,759 $35,242
Tsui.......... $ -- $4,296 $ 4,296
Karr.......... $ -- $1,804 $ 1,804
Horner........ $ -- $ 992 $ 992
Ching......... $ -- $4,055 $ 4,055
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 8, 1995
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.
11
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.......... 21,000 14.2% $25.50 3/08/05 $336,773 $853,449
John K. Tsui................ 11,760 7.9% $25.50 3/08/05 $188,593 $477,931
Howard H. Karr.............. 5,880 4.0% $25.50 3/08/05 $ 94,296 $238,966
Donald G. Horner............ 5,290 3.6% $25.50 3/08/05 $ 84,835 $214,988
Philip H. Ching............. None --% $25.50 3/08/05 $ -- $ --
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
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.
12
OPTION VALUES AT DECEMBER 31, 1995
The following table reflects the securities underlying unexercised options
and the value of these options as of December 31, 1995:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1995 December 31, 1995
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
----------------------- ----------------- -----------------
Walter A. Dods, Jr..... 28,600/51,200 $75,650/$171,050
John K. Tsui........... 2,500/19,260 $ 5,625/$69,795
Howard H. Karr......... 7,210/13,710 $ 18,213/$45,738
Donald G. Horner....... 5,569/10,971 $ 14,333/$37,618
Philip H. Ching........ 5,569/5,701 $ 14,755/$14,280
There were no options exercised by the named executive officers in 1995.
TEN-YEAR OPTION REPRICINGS
For the year ended December 31, 1995, 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 1995, the Executive Compensation Committee established the formula for
LTIP awards for the 3-year cycle 1995 to 1997. 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 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 average 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 1995 for the three-year cycle 1992-1994 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 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.
13
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 1995 and ending in 1997. Actual
payouts are contingent upon the Corporation meeting its threshold ROA and are
subject to adjustment by the Committee as described above, based upon corporate
and individual performances, which will be determined in 1998 for the 1995-1997
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 12/31/97 None $343,750 $673,750
John K. Tsui........... None 12/31/97 None $130,000 $254,800
Howard H. Karr......... None 12/31/97 None $ 67,708 $132,708
Donald G. Horner....... None 12/31/97 None $ 61,458 $120,458
Philip H. Ching........ None 12/31/97 None $ 53,415 $104,693
NOTES TO LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR:
Note (1) Performance period beginning January 1, 1995 and ending December 31,
1997.
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, 1995.
Note (3) If the Corporation does not meet its threshold 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 $ 50,362 $ 67,149 $ 83,936 $100,723 $117,510 $134,298
250,000 63,487 84,649 105,811 126,973 148,135 169,298
300,000 76,612 102,149 127,686 153,223 178,760 204,298
350,000 89,737 119,649 149,561 179,473 209,385 239,298
400,000 102,862 137,149 171,436 205,723 240,010 274,298
450,000 115,987 154,649 193,311 231,973 270,635 309,298
500,000 129,112 172,149 215,186 258,223 301,260 344,298
600,000 155,362 207,149 258,936 310,723 362,510 414,298
700,000 181,612 242,149 302,686 363,223 423,760 484,298
800,000 207,862 277,149 346,436 415,723 485,010 554,298
900,000 234,112 312,149 390,186 468,223 546,260 624,298
1,000,000 260,362 347,149 433,936 520,723 607,510 694,298
1,100,000 286,612 382,149 477,686 573,223 668,760 764,298
1,200,000 312,862 417,149 521,436 625,723 730,010 834,298
1,300,000 339,112 452,149 565,186 678,223 791,260 904,298
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, the Profit Sharing Plan 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, 1995, 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, 27 years; Mr. Tsui, 12 years (2 years actual service plus 10
years added by the Executive Compensation Committee when Mr. Tsui was
hired); Mr. Karr, 23 years; Mr. Ching, 38 years; and Mr. Horner, 17
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.
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.
15
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 1995 December 31, 1995 Annum
-------------------- ------------ ----------------- -------------
John C. Couch....... $1,993,915 $1,857,704 5.500%-9.500%
David M. Haig....... $1,115,477 $1,046,419 8.000%-8.250%
Richard T. Mamiya... $2,654,613 $2,611,528 5.500%-9.875%
Fujio Matsuda....... $ 387,577 $ 357,973 5.500%-8,250%
Roderick F. McPhee.. $ 283,957 $ 280,217 8.125%
Mr. Couch is Chairman of the Board, President and CEO, and a director of
A&B, which owns 5.44% of the Corporation's outstanding Common Stock. Mr. Dods is
a director of A&B and the Asset Management Division of First Hawaiian Bank holds
2,634,994 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.
This Committee was reconstituted in 1995 to comply with Section 162(m) of the
Internal Revenue Code and regulations thereunder governing the composition of
the Committee. The Board of Directors has delegated responsibility for
administering the executive compensation program of the Corporation and its
subsidiaries to the Committee.
The philosophy underlying the administration of the Corporation's executive
compensation program is an appropriate linkage between executive compensation,
financial and operating performance, and the creation of stockholder value. 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 adopted 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.
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
16
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.
Before 1994, IPKE bonuses were calculated and awarded in December of the
performance year based upon year-end projections. Beginning in 1994, however,
the Chief Executive Officer recommended, and the Committee approved, deferral of
calculation and award of IPKE bonuses for each year's performance 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 1995 performance year have been calculated and they are
not reported in this Proxy Statement. IPKE awards granted in 1995 for 1994
performance for the named executive officers are reported in "Executive
Compensation--Summary Compensation Table."
Executive officers are also eligible to receive annual 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
1995, 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 15% 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 asset growth over the period. Relative ROA
and growth of assets 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 1993-1995 performance cycle. The
Corporation's average ROE for the period was 12.56%, which did not exceed the
current threshold level for awards to be earned during the cycle. Accordingly,
no awards will be payable for the 1993-1995 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 1995-1997 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, 1995, the Committee reviewed Mr. Dods' performance and
concluded that his management performance continued to be outstanding,
especially during this difficult economic period. The Committee particularly
noted the Corporation's sustained financial performance and Mr. Dods' long-range
planning initiatives. Based on these factors, the Committee concluded that a
merit increase in base salary was warranted and accordingly set his salary at
$700,000 effective March 1, 1995.
ANNUAL INCENTIVES As stated above, IPKE payments for 1995 have not yet been
determined. The IPKE payment for Mr. Dods to be granted in 1996 for 1995
performance will be reflected in the proxy statement for the 1997 annual
meeting. As a result of the Corporation's and his performance for 1994, the
Committee awarded him $312,500 under the IPKE, which was paid in 1995.
LONG-TERM INCENTIVES In March, 1995, Mr. Dods received options to purchase
21,000 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
performance cycle, no LTIP payout was made to Mr. Dods in 1995. As discussed
above, Mr. Dods will not receive an LTIP payout in 1996 for the 1993-1995 cycle
because the threshold level was not met.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the
deductibility by corporations 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).
[CHART APPEARS HERE]
First Hawaiian, Inc. Common Stock 100 145 157 141 141 186
------------------------------------------------------------------------
S&P 500 Index 100 130 140 154 156 215
------------------------------------------------------------------------
S&P Major Regional Bank Index 100 179 228 241 228 359
------------------------------------------------------------------------
*Total return assumes reinvestment of dividends and $100 invested on December
31, 1990 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 $1,460,126 at December 31, 1995.
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
1995. 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 1995 1995 Annum
- -------------------------- ------------ ------------ -------------
John W. A. Buyers $ 971,121 $ 957,142 5.500%-6.375%
Director
Philip H. Ching $ 430,161 $ 424,781 5.500%-9.600%
Executive Vice President
John C. Couch $1,993,915 $1,857,704 5.500%-9.500%
Director
Walter A. Dods, Jr. $1,242,226 $ 250,135 5.500%-9.600%
Chairman, Chief
Executive Officer
and Director
David M. Haig $1,115,477 $1,046,419 8.000%-8.250%
Director
John A. Hoag $ 342,900 $ 0 7.500%-9.600%
Director
Donald G. Horner $ 443,441 $ 404,254 5.500%-9.600%
Executive Vice President
Howard H. Karr $ 730,124 $ 719,993 5.500%-9.600%
Executive Vice President
and Treasurer
Bert T. Kobayashi, Jr. $ 838,365 $ 812,462 5.500%-8.000%
Director
Richard T. Mamiya $2,654,613 $2,611,528 5.500%-9.875%
Director
Fujio Matsuda $ 387,577 $ 357,973 5.500%-8.250%
Director
Roderick F. McPhee $ 283,957 $ 280,217 8.125%
Director
John K. Tsui $ 456,996 $ 450,511 6.500%-8.250%
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.
20
The Bank leases 4,178 square feet of office space to the Estate of S.M.
Damon in a downtown Honolulu office building in which the Bank's headquarters
are temporarily located pending the construction of a new headquarters building.
The Estate leased 4,031 square feet 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 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 temporary location 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
temporary location, the temporary 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 is a
principal of the law firm of Kobayashi, Sugita & Goda. In 1995 the Corporation
and its subsidiaries paid legal fees to Kobayashi, Sugita & Goda in the amount
of $1,026,487.
CHARTER AMENDMENTS
The Board of Directors believes, for the reasons set forth below, that it
is advisable and in the best interest of the Corporation's stockholders to amend
the Corporation's Certificate of Incorporation (the "Charter") by approving an
amendment to the Charter to create a new class of preferred stock (the
"Preferred Stock") consisting of 50,000,000 shares of a par value of $5.00 each,
which may be issued from time to time in one or more series in the future (the
"Charter Amendment").
The affirmative vote of a majority of the votes entitled to be cast by the
holders of all of the outstanding shares of Common Stock is required to approve
the Charter Amendment. Accordingly, abstentions and broker non-votes as to the
Charter Amendment will have the same effect as votes against the Charter
Amendment. The full text of the proposed Charter Amendment is attached as
Appendix I to this Proxy Statement and incorporated herein by reference.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE CHARTER AMENDMENT, DESIGNATED AS PROPOSAL 3 ON YOUR PROXY CARD.
DESCRIPTION OF THE CHARTER AMENDMENT
The Charter currently authorizes the Corporation to issue 100,000,000
shares of Common Stock having a par value of $5.00 each. The Charter Amendment
would increase the number of shares of stock which the Corporation is authorized
to issue to 150,000,000 shares of a par value of $5.00 each and would divide
such shares into two classes: 100,000,000 shares which would be designated as
shares of Common Stock, and 50,000,000 shares which would be designated as
shares of Preferred Stock. The Charter Amendment would provide the Board of
Directors with the authority (without action by the stockholders, unless such
action is required for a particular transaction by applicable law or the rules
of NASDAQ) to issue shares of Preferred Stock in one or more series from time to
time in the future and to determine the voting rights, designations, preferences
as to dividends and in liquidation (including any preferences or priorities over
the Common Stock as to the payment of dividends or upon liquidation), conversion
and other rights, qualifications, limitations and restrictions of each such
series at the time of the issuance thereof. The Charter Amendment would not
affect the number of authorized or outstanding shares of Common Stock or change
the terms of the Common Stock as set forth in the Charter.
The Board of Directors believes that it is in the best interest of the
Corporation and its stockholders to create a class of Preferred Stock so that
shares of Preferred Stock will be available for issuance from time to time in
the future in connection with possible future financing programs and
acquisitions and for other general corporate purposes. Having such authorized
shares of Preferred Stock available for issuance in the future will give the
Corporation significantly greater flexibility than it now has to take advantage
of opportunities to obtain additional capital on favorable terms, to use
different types of capital stock as consideration for possible acquisitions, and
to take advantage of other corporate opportunities. The Charter Amendment would,
for example, permit the Corporation to strengthen and expand its capital base by
issuing securities that qualify as additional Tier 1 or core capital under the
Federal Reserve Board's regulatory capital rules without diluting the voting or
equity interests of existing holders of the Corporation's Common Stock.
In connection with its recommendation that the stockholders vote for the
Charter Amendment, the
21
Board of Directors has represented that, without the prior approval of the
stockholders, it will not issue the Preferred Stock (i) for any defensive or
anti-takeover purpose; (ii) to implement any stockholders' rights plan; or (iii)
with features intended to make any attempted acquisition of the Corporation more
difficult or costly and that no Preferred Stock will be issued to any individual
or group for the purpose of creating a block of voting power to support
management on a controversial issue. The determination of whether any particular
Board action complies with the foregoing representations will involve questions
of fact as to, among other things, the effect of and the Board's reasons for
taking such action. Accordingly, a court's determination as to the applicability
of the foregoing provisions to a particular Board action would be dependent upon
the facts and circumstances relating to such action.
Article Ninth of the Charter provides that upon any increase in the
authorized capital stock of the Corporation, except for issuance in connection
with certain mergers or acquisitions or as otherwise provided by resolution of
the stockholders of the Corporation, the Board of Directors must first offer the
additional authorized capital stock pro rata to all current stockholders of
record. These "preemptive rights" would apply to the proposed Preferred Stock if
the Charter Amendment is approved.
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 1997
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of the Corporation must be received by the Corporate Secretary of the
Corporation on or prior to December 31, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
FIRST HAWAIIAN, INC.
Herbert E. Wolff
Senior Vice President
and Secretary
Dated: March 1, 1996
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, 1996, WILL BE AVAILABLE
AFTER THAT DATE TO EACH STOCKHOLDER UPON WRITTEN REQUEST THEREFOR.
22
APPENDIX I
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FIRST HAWAIIAN, INC.
* * * * *
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
* * * * *
First Hawaiian, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (hereinafter, the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation held
on January 18, 1996, resolutions were adopted setting forth proposed amendments
to the Certificate of Incorporation of the Corporation, declaring said
amendments to be advisable, and directing that said amendments be considered at
the annual meeting of the stockholders of the Corporation. The resolution
setting forth the proposed amendments is as follows:
"RESOLVED, that the Board of Directors of the Corporation hereby
declares it advisable that Article Fourth of the Certificate of
Incorporation of the Corporation be amended by deleting said article in its
entirety and by substituting in lieu thereof the following:
'Fourth. The total number of shares of stock which this
corporation shall have authority to issue is One Hundred Fifty Million
(150,000,000) shares having a par value of Five Dollars ($5.00) per
share, divided into two classes: One Hundred Million (100,000,000)
shares designated as Common Stock (hereinafter, the "Common Stock");
and Fifty Million (50,000,000) shares designated as Preferred Stock
(hereinafter, the "Preferred Stock"). The Board of Directors of the
corporation is authorized to fix, by resolution or resolutions, the
designation of each series of Preferred Stock and the voting rights,
preferences as to dividends and in liquidation, conversion and other
rights, qualifications, limitations and restrictions thereof and such
other subjects or matters as may be fixed by resolution or resolutions
of the Board of Directors under the General Corporation Law of the
State of Delaware.'"
SECOND: That thereafter, pursuant to resolution of the Board of Directors
of the Corporation, a meeting of the stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute and the Certificate of Incorporation was voted
in favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
23
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this Certificate to be signed by its ________________________ and
attested to by its ________________________ this __________ day of
_______________, 1996.
FIRST HAWAIIAN, INC.
By: _____________________________
Name:
Title:
ATTEST:
_______________________________
Name:
Title:
24
FIRST HAWAIIAN, INC. THIS IS YOUR PROXY FORM
- -------------------------------------------------------------------------------
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF FIRST HAWAIIAN, INC.
ANNUAL MEETING - APRIL 18, 1996
The undersigned hereby appoints R.F. McPHEE, F.C. WEYAND, and R.C. WO,
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 18, 1996 in the 20th floor Dining Room of THE PLAZA CLUB, 900 Fort 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)
[X] Please mark your votes
as in this example.
FOR all
nominees listed WITHHOLD
at right AUTHORITY
1. ELECTION [ ] [ ] Nominees: Walter A. Dods, Jr.
OF Paul Mullin Ganley
DIRECTORS Richard T. Mamiya
*(INSTRUCTIONS: To withhold authority to Fujio Matsuda
vote for any individual nominee write that George P. Shea, Jr.
nominee's name in the space provided below.)
- --------------------------------------------
FOR AGAINST ABSTAIN
2. Fix the total number of Directors at fifteen. [ ] [ ] [ ]
3. Proposal to authorize 50,000,000 shares of a [ ] [ ] [ ]
new class of Preferred Stock.
4. Proposal to approve the election of Coopers [ ] [ ] [ ]
& Lybrand L.L.P. as Auditor.
This proxy will be voted as directed, but if no direction is specified, it will
be voted FOR Proposals 1, 2, 3 and 4.
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.
