FirstEnergy shareholders reject proposal to link top execs' pay to sustainability goals

Three FirstEnergy Corp. shareholder proposals, including two tied to executive compensation, were voted down Wednesday as the Akron-based utility's stock owners convened online for their annual meeting.

The utility’s board of directors had recommended that shareholders vote against all three proposals.

In a separate advisory vote, shareholders approved the company's proposed pay structure for its top executive officers, according to the preliminary voting results. Shareholders also elected 10 board directors to one-year terms and ratified the appointment of accounting firm to examine the utility’s books and accounts for this year, per preliminary voting results.

According to the utility’s 2024 proxy statement, 2023 compensation including base salary and performance-related incentives exceeded eight figures for two FirstEnergy executives: Brian X. Tierney, president and CEO, with roughly $13.9 million, and John W. Somerhalder II, non-executive board chair and former interim president and CEO, with about $10.3 million.

One of the defeated measures would have tied top executives' compensation levels to their success in meeting climate-related goals. The utility had previously announced plans to reduce its greenhouse gas emissions by 30% by 2030 and achieve carbon neutrality by 2050.

The proposal crafted by the Office of the New York State Comptroller said: “We believe that alignment of a corporate climate transition strategy with executive compensation metrics and incentives can increase the likelihood of the Company achieving a timely climate transition. Compensation packages are designed to reward executives for achieving companies’ strategic objectives.”

FirstEnergy, which has operations in New York, nixed the state's 2030 goal in February, citing its dependence on coal in West Virginia, according to law firm Frost Brown Todd.

In a written response to the proposal, FirstEnergy’s board of directors said its compensation committee “already has a robust and comprehensive process for developing and approving our executive compensation program design which includes a periodic assessment as to the feasibility of incorporating environmental and climate-related performance goals.”

Proposal to adjust clawback policy for executive pay

Shareholder John Chevedden proposed that FirstEnergy’s clawback policy be amended so that named executive officers’ incentive pay is recouped based on executives’ negligence or “conduct.”

In his proposal, he asserted that FirstEnergy’s policy “does not address situations where an executive fails to exercise oversight responsibilities that result in significant financial or reputational damage to FirstEnergy.”

Chevedden said the House Bill 6 scandal is one reason that FirstEnergy’s clawback policy should be more robust, noting that the U.S. Attorney for the Southern District of Ohio fined FirstEnergy $230 million in 2021.

FirstEnergy’s board stated in its proxy statement that the utility has two compensation recoupment policies that it considers “fulsome” and already cover what Chevedden raised in his proposal.

Group pushes for audit of climate-related initiatives

The third failed proposal, presented by the National Center for Public Policy Research, would have required FirstEnergy to conduct an audit examining whether its commitment to environmental sustainability goals is based on "relevant evidence and research."

The Washington-based group, which describes itself as a nonpartisan, free-market, independent conservative think tank, cited a 2023 Energy Policy Research Foundation study that concluded oil and gas "play irreplaceable roles in modern civilization that are not reproducible with low-carbon alternatives. The attempt to substitute them with inferior, less efficient, energy sources will have enormous micro- and macroeconomic consequences and profound geopolitical implications.’”

FirstEnergy stated in its proxy statement response that the center’s proposal is “neither reasonable nor practical.”

Patrick Williams covers growth and development for the Akron Beacon Journal. He can be reached by email at pwilliams@gannett.com or on X, formerly known as Twitter, @pwilliamsOH.

This article originally appeared on Akron Beacon Journal: FirstEnergy shareholders veto 3 proposals at annual meeting