Update: After publication of this article, in an updated report to shareholders, Hawaiian Electric Industries reported that HEI chief executive Scott Seu and Hawaiian Electric Co. CEO Shelee Kimura repaid to HEI and HECO the incentive compensation they received for 2024. The company noted the board and compensation committee, which had recommended the incentives, may decide later to pay back to Seu and Kimura the amounts the executives returned.

Hawaiian Electric Industries Inc. and its subsidiaries faced torrents of bad news in 2024.

Federal investigators found the company’s equipment had started the Lahaina wildfire that killed 102 people and destroyed most of the historic town. The company agreed to pay $1.9 billion to settle hundreds of lawsuits blaming it for the fire. Legislative measures to help bail out the company stalled.

The bottom line: a net loss of $1.4 billion for the company.

But none of that prevented Hawaiian Electric Industries executives from getting raises, some in the seven figures. The compensation data, and the company’s reasoning for fattening executives’ paychecks after a historically bad year, are laid out in detail in a report to shareholders HEI filed with securities regulators on Friday.

Hawaiian Electric Industries’ president and chief executive, Scott Seu, got a one-year bump of $1.7 million, boosting his take-home pay to $3.2 million in 2024. Shelee Kimura, president and chief executive of HEI’s utility subsidiary, Hawaiian Electric Co. Inc., had a pay jump from $859,000 in 2023 to $1.5 million last year. And Ann Teranishi, president and chief executive of American Savings Bank, another HEI subsidiary, took home $2.6 million, up from $1.2 million the previous year. 

Those amounts don’t include additional, more speculative compensation that potentially vests with the executives later if the companies perform well. Counting total compensation, including stock awards, Seu earned $6.5 million in 2024 compared with $5.4 million in 2023, and Kimura earned $2.6 million versus $2.1 million. Those incentives do not apply to Teranishi because HEI sold its controlling interest in the bank in December.

Julie Smolinski, HEI’s vice president for strategy and corporate sustainability, said the raises were justified because the executives brought the companies back from the brink of bankruptcy in 2024 without imposing additional costs on customers.

“If you start the year facing the possibility of bankruptcy, then ending the year in a much stronger position — where you’ve put that behind you — that is a major accomplishment,” she said.

“Given where we started, how do you measure success?” she added.

Major accomplishments included raising $558 million from the sale of new stock, and selling a 90% stake in American Savings Bank to a local investor group, which raised another $384 million in cash, Smolinski said.

That allowed HEI to fund its share of a $4.04 billion Maui wildfire settlement without costing customers, said Jim Kelly, Hawaiian Electric Co. Inc.’s vice president for government and community relations and corporate communications. And lawmakers seem willing to further shore up HECO’s finances by advancing two bills this legislative session, he said.

“I feel like we’re sitting here on March 19 with some momentum behind them,” Kelly said.

Nonetheless, the scope of the executive pay may sit poorly with HECO customers, who pay the highest power rates in the country. Seu’s total compensation last year — $6,536,011 — is 58 times more than the average total compensation of the median HEI employee, which was $112,593, the company reported to shareholders.

Seu’s compensation is paid by HEI shareholders, not utility ratepayers, Kelly stressed.

Jack Roose, principal of the consulting firm Organizational Alignment, which has advised Hawaiʻi nonprofits and trusts on executives compensation, said pay incentives generally reward leaders for meeting strategic goals.

The challenge is when there’s an incident like the Lahaina fire, which can undermine executives’ ability to meet performance goals unless metrics are adjusted for such black swan events.

“The incentive plans are geared for normal life,” Roose said. “Things like the Maui situation are once-in-100-years events.”

In HEI’s case, a board of directors Compensation and Human Capital Management Committee establishes metrics with the help of an independent compensation consultant, Frederic W. Cook & Co. Inc. 

Some elements of compensation such as base salaries are established by looking at salaries of similar-sized utilities, the company’s proxy statement indicates. That’s meant to attract and retain quality executives, Smolinski said.

HEI’s stock performance in 2023 and 2024 — a key metric for incentive pay — met none of the goals laid out in the company’s long-term incentive metrics. As a result, executives qualified for none of those compensation incentives.

But for 2024, the metrics were adjusted by the compensation committee, Smolinski said, so executives wouldn’t be penalized for helping craft a settlement that freed the company from litigation risks at great cost to its bottom line. Shareholders will be able to vote for or against the raises during HEI’s annual meeting in May.