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Chuck Jones has been the CEO of FirstEnergy Corp. (NYSE:FE) since 2015, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
See our latest analysis for FirstEnergy
How Does Total Compensation For Chuck Jones Compare With Other Companies In The Industry?
Our data indicates that FirstEnergy Corp. has a market capitalization of US$23b, and total annual CEO compensation was reported as US$15m for the year to December 2019. That's a notable increase of 32% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.1m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$14m. So it looks like FirstEnergy compensates Chuck Jones in line with the median for the industry. What's more, Chuck Jones holds US$26m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, around 14% of total compensation represents salary and 86% is other remuneration. In FirstEnergy's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
FirstEnergy Corp.'s Growth
Over the past three years, FirstEnergy Corp. has seen its earnings per share (EPS) grow by 127% per year. In the last year, its revenue is down 3.7%.
This demonstrates that the company has been improving recently and is good news for the shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has FirstEnergy Corp. Been A Good Investment?
Boasting a total shareholder return of 49% over three years, FirstEnergy Corp. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
As we touched on above, FirstEnergy Corp. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. The company is growing earnings per share and total shareholder returns have been pleasing. Indeed, many might consider that Chuck is compensated rather modestly, given the solid company performance! Also, such solid returns might lead to shareholders warming to the idea of a bump in pay.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for FirstEnergy (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Arguably, business quality is much more important than CEO compensation levels. So check out this freelist of interesting companies that have HIGH return on equity and low debt.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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AKRON, Ohio – FirstEnergy Corp. disclosed in a filing with the Securities and Exchange Commission that Steven Strah, who became president of the Akron-based utility company on Sunday, is set to make a base salary of $800,000.
Strah succeeded Charles Jones, who has been FirstEnergy’s president, CEO and a member of the board since 2015. Jones will continue as CEO and a member of the board, and will still earn his base salary of $1,136,113, according to a company spokeswoman.
FirstEnergy’s Board of Directors elected Strah president during a meeting last week during which they appointed people to other leadership positions, including electing K. Jon Taylor as senior vice president and chief financial officer. Taylor is set to earn a base salary of $600,000, according to the SEC filing.
Strah started working for The Illuminating Company in 1984 and has held various manager positions in Cleveland, Toledo and New Jersey. In 2005, he was named regional president of Ohio Edison, and was promoted to vice president of distribution support in 2011. He was named senior vice president of FirstEnergy in January 2015.
Taylor, who will oversee the company’s finances and report to Strah, joined FirstEnergy in 2009. He has held roles in the company’s finance department, including vice president, controller and chief accounting officer. He was named president of Ohio Operations in 2018 and was promoted to vice president of Utility Operations in 2019.
FirstEnergy's top lawyer, chief ethics officer are out; acting CEO gets $150,000 pay raise
FirstEnergy Corp. parted ways with its top lawyer and its chief ethics officer Sunday in apparent ongoing fallout from the $61 million Larry Householder bribery investigation.
The Akron utility also gave its acting chief executive officer a pay raise to $950,000 a year.
Robert Reffner, senior vice president and chief legal officer at FirstEnergy, was "separated" from the company effective Sunday, FirstEnergy said in a filing with the Securities and Exchange Commission.
Ebony Yeboah-Amankwah, vice president, general counsel and chief ethics officer, also was separated from the company, effective Sunday.
The company did not give a reason for the separations in its SEC filing, including saying whether the executives left voluntarily. A company spokesperson said the utility will not comment further on the leadership changes other than to say no successors have been named.
FirstEnergy used different language in ousting former CEO Chuck Jones and two other executives on Oct. 29. FirstEnergy said in that release that it terminated the jobs of Jones; Dennis M. Chack, senior vice president of product development, marketing, and branding; and Michael Dowling, senior vice president of external affairs. Dowling in 2019 was appointed a University of Akron trustee by Gov. Mike DeWine.
More: FirstEnergy fires CEO Chuck Jones after 2 plead guilty in Householder bribery scheme
The Oct. 29 firings came the same day that two men pleaded guilty in the ongoing federal Householder investigation tied to the passage of House Bill 6 . The law provides more than $1 billion in subsidies to two nuclear plants previously owned by FirstEnergy and now owned by Akron-based Energy Harbor, a former FirstEnergy subsidiary.
Also in Monday's SEC filing, FirstEnergy said it increased the salary of acting CEO Steven Strah by $150,000 to $950,000. It also boosted other compensation that includes short-term incentives. Strah, a long-time FirstEnergy executive, previously was its chief financial officer until being promoted to president earlier this year.
More: FirstEnergy's troubles amid Ohio bribery scandal concern leaders in Akron, region
Board member Christopher Pappas, named board executive director, will receive $75,000 a month in his new role, with three months advanced payment, the SEC filing shows.
In addition, non-executive board Chairman Donald Misheff will be paid a cash stipend of $62,500 a month, with three months advanced payment.
Leslie Turneer, named chair of a new Audit Committee subcommittee reviewing FirstEnergy's compliance programs, will receive $3,750 a quarter in her new role, and a pro-rated amount of $2,500 for November and December, the SEC filing said.
FirstEnergy also announced it cannot file its latest quarterly report, called a 10-Q, with the SEC on time because of the ongoing investigations. Its third quarter ended on Sept. 30 and the utility released financial results for the quarter on Nov. 2.
"In connection with the ongoing government investigations, the company’s re-evaluation of its controls framework, which could include identifying one or more material weaknesses, the company requires additional time to complete its quarterly review and closing procedures and to provide appropriate disclosure in the Form 10-Q," FirstEnergy said in a separate report Monday with the SEC.
Jim Mackinnon covers business. He can be reached at 330-996-3544 or [email protected] Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.
|Anthony J Alexander|
Total Compensation: $6.5 mil(#200)
5-Year Compensation Total: $N/A thou
Anthony J Alexander has been CEO of FirstEnergy (FE) for 1 years. Mr. Alexander has been with the company for 33 years . The 53 year old executive ranks 11 within Utilities
College: University of Akron BS ' 72
Graduate School: University of Akron JD ' 75
|Anthony J Alexander's Compensation Vs. Utilities Medians|
|Stock Gains ($thou)||1,227||85|
|Total Compensation ($thou)||6,491||3,440|
(FE: quote, news, executives)
76 South Main Street
Akron, OH 44308-1890
Salary first energy ceo
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FirstEnergy Corporation’s regulated electric distribution companies serve customers in Maryland, Ohio, New Jersey, Pennsylvania, and West Virginia. The compensation mix for FirstEnergy’s CEO in 2019 was 87% performance-based, and 13% base salary. Long-term incentives were 72% of total compensation and short-term incentives were 15%.
For other named executive officers (NEOs), the compensation mix was 74% performance-based and 26% base salary. Long-term incentives were 54% of total compensation, and short-term incentives were 20%.
FirstEnergy’s executive incentive compensation plans prioritize earnings over ESG goals
FirstEnergy’s long-term incentive program for 2019 to 2021 is based on two equally weighted metrics: operating earnings per share (EPS) growth and average capital effectiveness.
The utility’s short-term incentive program (STIP) “provides annual cash awards to executives whose contributions support the achievement of the Company’s identified financial and operational KPI [Key Performance Indicators] goals, which are linked to the Company’s business strategy and corporate objectives, including ESG-related [environmental, social, and governance] goals.”
Performance metrics for the STIP are weighted as follows: operating earnings comprise 70% for the CEO and 60% for most other NEOs, operational 10% (except CEO), safety 15%, and diversity 15%.
FirstEnergy has a goal of reducing carbon dioxide emissions by 90% from 2005 levels by 2045, and said in its 2020 proxy statement that it “achieved an 80% reduction of carbon dioxide (CO2) emissions as a result of its transformation to a high-performance, pure-play regulated utility.”
FirstEnergy’s carbon reduction goal does not cover the power it purchases, which accounted for 30% of its carbon emissions in 2017. The utility’s carbon reduction claims also take credit for the loss of much of its fossil fuel generation during the bankruptcy of its former subsidiary FirstEnergy Solutions, CO2-emitting generation that is now largely owned by a new company called Energy Harbor that emerged from the bankruptcy.
“To reinforce and align our executives with these objectives, a portion of our annual incentive cash program is tied to ESG related goals, including Diversity & Inclusion, environmental and safety,” FirstEnergy said in its 2020 proxy statement.
No portion of FirstEnergy’s incentives is tied specifically to decarbonization. Performance metrics for FirstEnergy’s STIP include an operational component weighted at 10%, which is based on six equally weighted metrics, of which environmental measures account for only 1.67%.
Environmental performance metrics are limited to “environmental excursions and Notices of Violations (NOVs)”, which measure “issues related to air emissions, water discharges or other unauthorized releases from facilities, that exceed the allowable limitations, conditions or deadlines established in the facilities’ environmental permits and applicable NOVs issued by a Federal, State or Local Regulatory Agency for the violation of an environmental law or regulation.”
In other words, FirstEnergy sets a low bar for executives on environmental performance, simply requiring compliance with the law, rather than meeting corporate targets for reducing emissions.
Metrics that could be used for performance-based awards under FirstEnergy’s 2020 executive compensation plan include, “Shaping legislative and regulatory initiatives and outcomes.”
FirstEnergy recently publicized how it won an award from the Edison Electric Institute for its role in passing a 2019 bill in its home state of Ohio that included subsidies for coal plants, and that rolled back the state’s renewable energy and energy efficiency standards for electric utilities. It has also supported the Trump administration’s rollback of the Environmental Protection Agency’s limits on CO2 emissions from power plants.
Executives benefit from FirstEnergy’s exclusion of negative outcomes from performance measures
FirstEnergy pay-for-performance programs employ non-GAAP performance metrics, which tend to result in higher performance numbers than Generally Accepted Accounting Principles (GAAP) metrics.
Financial results for FirstEnergy based on GAAP show earnings per share of $1.70 for 2019 and $1.99 for 2018, compared to non-GAAP operating EPS of $2.58 for 2019 and $2.59 for 2018.
“Special Items” excluded from non-GAAP performance metrics account for the significant difference in earnings measurements. These special items include FirstEnergy’s “exit of competitive generation” through the bankruptcy of its subsidiary FirstEnergy Solutions, which emerged from bankruptcy in 2020 as a separate company called Energy Harbor.
FirstEnergy’s 2020 proxy statement describes many additional items excluded from calculations of non-GAAP performance metrics used in calculations of executive pay-for-performance programs, including operating earnings, capital effectiveness index, funds from operations (FFO) to adjusted debt index, and operating EPS.
Among the exclusions is “the impact of the Ohio Distribution Modernization Rider,” a charge that cost customers in Ohio over $150 million per year, and which was struck down by the Ohio Supreme Court in 2019. The Environmental Defense Fund described the charge as “an illegal bailout of FirstEnergy’s uneconomic coal and nuclear plants.” Other exclusions include the impact of tax reform-related refunds to customers that “exceeded budgeted amounts,” as well as the impacts of legal reserves or related expenses. Transmission outage frequency, another performance measure, excludes, “Scheduled outages, emergency forced outages, and operational outages.”
“In establishing performance measures, the [Compensation] Committee may provide that any financial factor that in whole or in part comprises any performance measure will be determined in accordance with U.S. generally accepted accounting principles (later referred to as GAAP) or that any such financial factor may be non-GAAP (i.e., that such financial factor may be adjusted to exclude from its calculation one or more GAAP or non-GAAP items),” according to FirstEnergy’s 2020 proxy statement.
FirstEnergy’s proxy statement provided details about its 2020 incentive compensation plan, including a “non-exhaustive list of performance measures that could be used for performance based awards” under the plan.
FirstEnergy justifies its executive compensation by comparing to that of much larger companies
One of the common measures utilities employ to determine executive compensation is comparison to peer companies. FirstEnergy’s Compensation Committee packed its 2019 peer group with larger enterprises, most from outside the utility industry. The Compensation Committee then approved certain NEOs an increase in compensation “to continue to align with the Blended Median, in the aggregate (within the 85% to 120% competitive range)”.
FirstEnergy’s net income was $908 million in 2019. Yet companies in its “general industry” peer group serving to benchmark its executives’ compensation include the following – all of which earned much more income, and whose CEOs made millions more than FirstEnergy’s CEO:
Table: Several companies that are part of FirstEnergy’s “general industry” peer group skews its executive compensation
None of these companies include FirstEnergy in their own peer groups to determine compensation.
FirstEnergy’s decreased its CEO-to-employee pay ratio by eliminating employees of its bankrupt competitive subsidiaries from the analysis
Investor-owned utilities report annually on their CEO pay ratio, which illustrates the gap between the annual total compensation for a utility’s CEO and average compensation for other employees of the company. Large swings in the annual CEO pay ratio reported by utilities may be due to changes in CEO compensation, but also to other factors like corporate restructurings.
FirstEnergyreported its highest CEO pay ratio of 115:1 in 2018, a year in which CEO Charles E. Jones received his lowest annual compensation for the three-year period between 2017 and 2019. In 2018, FirstEnergy reported CEO compensation of $11.1 million and median employee compensation of $96,805.
The previous year, in 2017, FirstEnergy reported its highest annual CEO compensation of almost $15.3 million for Jones, but a lower CEO pay ratio of 90:1. The median employee compensation FirstEnergy reported for that year was nearly double, at $170,299.
In 2018, FirstEnergy excluded all employees in its Competitive Energy Services businesses from its median employee compensation analysis due to the “deconsolidation” (i.e. bankruptcy) of its subsidiaries, FirstEnergy Solutions and the FirstEnergy Nuclear Operating Company. Those subsidiaries later emerged as a new company called Energy Harbor, and the median compensation of the employees left at FirstEnergy fell.
Perquisites include personal use of corporate aircraft
“The Company does not provide excessive perquisites to our NEOs,” FirstEnergy says in its 2020 proxy statement.
However, perquisites offered by FirstEnergy include personal use of corporate aircraft for NEOs and Board members:
“In 2019, our NEOs could use the corporate aircraft for limited personal use. Mr. Jones is authorized to use either a commercial carrier or our corporate aircraft for any business or personal travel at his discretion. With CEO approval, other executives, including the NEOs, may from time to time use our corporate aircraft for personal travel, which may include family travel. We have a written policy that sets forth guidelines regarding the personal use of the corporate aircraft by executive officers and other employees in accordance with the IRS regulations and customary compensation practices.”
Personal aircraft usage in 2019 was valued at $59,308 for Jones, and $14,795 for Senior Vice President and CFO Steven E. Strah.
In 2017, Ohio state representative Larry Householder flew to Donald Trump’s presidential inauguration on board FirstEnergy’s corporate plane.
“The trip marked a new period of cooperation between Householder and FirstEnergy Corp. as they worked to save the company’s struggling coal and nuclear plants in Ohio and Pennsylvania,” E&E News later reported.
Three years later, Householder would be removed as speaker of the Ohio House of Representatives and indicted on federal racketeering charges. Federal investigators allege Householder and several other defendants secretly used $60 million from FirstEnergy to elect Householder as speaker, and then enact a $1 billion bailout that allowed a bankrupt subsidiary of the utility to cancel plans to deactivate two nuclear plants and a coal plant. FirstEnergy also benefits from a decoupling mechanism enacted along with the bailout, which has helped shield the company from the economic impacts of the COVID-19 epidemic, even as it prepares to resume disconnections for customers struggling to make ends meet.
Other compensation for 2019 also included charitable matching contributions made by the FirstEnergy Foundation that ranged from $2,500 to $2,600 for Jones and several other NEOs. A total of $5,000 in charitable matching contributions was reported for Leila Vespoli, who retired in 2019 and was previously Chief Legal Officer and Executive Vice President of Corporate Strategy and Regulatory Affairs.
FirstEnergy also made matching charitable contributions that ranged from $3,000 to $5,000 on behalf of several members of its Board of Directors in 2019.
|CEO compensation ranking among utilities studied, 2019||98:1|
|Compensation ratio: CEO to median employee, 2019||-3.9% ($597,226)|
|Percent change in CEO compensation, 2017-2019||-3.9% ($597,226)|
|Maximum payout of performance-based shares as a percentage of target, 2019||No. FirstEnergy says that its annual incentive program is tied to environmental goals, but executive compensation policies do not consider greenhouse gas emissions reductions; instead the environmental metrics are focused on rewarding executives for abiding by legal air and water pollution laws and permits.|
|Is FirstEnergy’s executive compensation structure aligned with decarbonization?||No. FirstEnergy says that its annual incentive program is tied to environmental goals, but its executive compensation policies do not consider greenhouse gas emissions reductions; instead the environmental metrics are focused on rewarding executives for abiding by legal air and water pollution laws and permits.|
|Is there evidence from SEC filings that FirstEnergy is using misleading financial metrics to determine executive compensation?||Yes. FirstEnergy excluded several “special items” from performance metrics like non-GAAP operating earnings and EPS, including its “exit of competitive generation” through the bankruptcy of FirstEnergy Solutions, which emerged in 2020 as a separate new company called Energy Harbor. These exclusions yielded a non-GAAP EPS in 2019 that was significantly higher than the standard GAAP calculation. Non-GAAP operating EPS accounted for half of the performance measures used to calculate FirstEnergy’s long-term incentives, and also constituted 70% of short-term incentive measures for the CEO and 50 to 60% for other NEOs.|
|What key perquisites or benefits do FirstEnergy executives receive?||Executives are allowed “limited” personal use of corporate aircraft, and are eligible for charitable gift matching.|
As Former President & CEO at FIRSTENERGY CORP, Charles E. Jones made $7,078,005 in total compensation. Of this total $944,997 was received as a salary, $0 was received as a bonus, $0 was received in stock options, $6,028,833 was awarded as stock and $104,175 came from other types of compensation. This information is according to proxy statements filed for the 2020 fiscal year.
The chart on this page features a breakdown of the total annual pay for Charles E. Jones, Former President & CEO at FIRSTENERGY CORP as reported in their proxy statements.
Total Cash Compensation information is comprised of yearly Base Pay and Bonuses. FIRSTENERGY CORP income statements for executive base pay and bonus are filed yearly with the SEC in the edgar filing system. FIRSTENERGY CORP annual reports of executive compensation and pay are most commonly found in the Def 14a documents.
Total Equity aggregates grant date fair value of stock and option awards and long term incentives granted during the fiscal year.
Other Compensation covers all compensation-like awards that don't fit in any of these other standard categories. Numbers reported do not include change in pension value and non-qualified deferred compensation earnings.
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This report is not for commercial use. Thorough reviews have been conducted to assure this data accurately reflects disclosures. However for a complete and definitive understanding of the pay practices of any company, users should refer directly to the actual, complete proxy statement.
Use of Data / Disclaimer
The information shown here is a reporting of information included in the company's proxy statement. The proxy statement includes footnotes and explanations of this information plus other information that is pertinent in assessing the overall value and appropriateness of the compensation information. For those interested in conducting a detailed compensation analysis, we recommend that you review the entire proxy statement. You may retrieve the full proxy statement by going to the Securities and Exchange Commission (SEC) website at www.sec.gov and entering the company's name and then looking in the first column for an entry of "Form DEF 14A" (or any similar code). You may also find the annual proxy statement by going directly to the company's website.
What is a proxy statement?
A proxy statement (or "proxy") is a form that every publicly traded U.S. company is required to file with the U.S. Securities & Exchange Commission (SEC) within 120 days after the end of its fiscal year. The proxy must be sent to every shareholder in advance of the company's annual shareholders meeting. All proxy statements are public filings made available to the general public by the SEC. The proxy statement's main purpose is to alert shareholders to the annual meeting and provide them information about the issues that will be voted on during the annual meeting, including decisions such as electing directors, ratifying the selection of auditors, and other shareholder-related decisions, including shareholder-initiated initiatives. Also, proxies must disclose specific detailed information regarding the pay practices for certain executives.
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