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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant x |
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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o | Preliminary Proxy Statement |
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o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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x | Definitive Proxy Statement |
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o | Definitive Additional Materials |
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o | Soliciting Material under §240.14a-12 |
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Bank of Hawaii Corporation |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Payment of Filing Fee (Check the appropriate box): |
x | No fee required. |
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o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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| (1) | Title of each class of securities to which transaction applies: |
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| (2) | Aggregate number of securities to which transaction applies: |
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| (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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| (4) | Proposed maximum aggregate value of transaction: |
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| (5) | Total fee paid: |
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o | Fee paid previously with preliminary materials. |
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o | 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. |
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| (1) | Amount Previously Paid: |
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| (2) | Form, Schedule or Registration Statement No.: |
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| (3) | Filing Party: |
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| (4) | Date Filed: |
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Your VOTE is important!
Notice of 2017
Annual Meeting of Shareholders
and Proxy Statement
Meeting Date: April 28, 2017
Bank of Hawaii Corporation
130 Merchant Street
Honolulu, Hawaii 96813
Bank of Hawaii Corporation
130 Merchant Street
Honolulu, Hawaii 96813
March 17, 2017
Dear Shareholder:
The 2017 Annual Meeting of Shareholders of Bank of Hawaii Corporation will be held on Friday, April 28, 2017 at 8:30 a.m. on the Fifth Floor of the Bank of Hawaii Building, 111 South King Street, Honolulu, Hawaii. Each shareholder may be asked to present valid picture identification. Shareholders holding stock in brokerage accounts will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date.
The Notice of Meeting and Proxy Statement accompanying this letter describe the business we will consider and vote upon at the meeting. A report to shareholders on the affairs of Bank of Hawaii Corporation also will be given and shareholders will have the opportunity to discuss matters of interest concerning the Company.
For reasons explained in the accompanying Proxy Statement, the Board of Directors recommends that you vote FOR Proposal 1: Election of Directors, FOR Proposal 2: Advisory Vote on Executive Compensation, FOR "Every Year" on Proposal 3: Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation, FOR Proposal 4: Approval of Amendment to the Bank of Hawaii Corporation 2014 Stock and Incentive Plan, and FOR Proposal 5: Ratification of the Re-appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the 2017 fiscal year.
Your vote is very important. Please complete, sign, date and return the enclosed proxy card and mail it promptly in the enclosed postage-paid return envelope, even if you plan to attend the Annual Meeting. If you wish to do so, your proxy may be revoked at any time before voting occurs at the Annual Meeting. You may also vote and change your vote by telephone or via the Internet until 1:00 a.m. Central Time, April 28, 2017.
On behalf of the Board of Directors, thank you for your cooperation and support. |
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| Sincerely, |
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| Peter S. Ho Chairman of the Board, Chief Executive Officer, and President |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 28, 2017
To Our Shareholders:
The 2017 Annual Meeting of Shareholders of Bank of Hawaii Corporation will be held on Friday, April 28, 2017, at 8:30 a.m. on the Fifth Floor of the Bank of Hawaii Building, 111 South King Street, Honolulu, Hawaii, for the following purposes:
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1. | To elect 13 persons to serve as directors of the Company for a term of one year each until the 2018 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified. |
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2. | To hold an advisory vote on executive compensation. |
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3. | To hold an advisory vote on the frequency of holding advisory votes on executive compensation. |
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4. | To approve an amendment to the Bank of Hawaii Corporation 2014 Stock and Incentive Plan (the "2014 Plan") to increase the number of shares of common stock available for grant under the 2014 Plan. |
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5. | To ratify the re-appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the 2017 fiscal year. |
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6. | To transact any other business that may be properly brought before the meeting or any adjournment or postponement thereof. |
Shareholders of record of Bank of Hawaii Corporation common stock (NYSE: BOH) at the close of business on February 28, 2017 are entitled to attend the meeting and vote on the business brought before it.
We look forward to seeing you at the meeting. However, if you cannot attend the meeting, your shares may still be voted by telephone or via the Internet, or you may complete, sign, date, and return the enclosed proxy card in the enclosed postage-paid return envelope. |
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| By Order of the Board of Directors, |
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| Mark A. Rossi |
| Vice Chairman and Corporate Secretary |
| Bank of Hawaii Corporation |
Honolulu, Hawaii
Dated: March 17, 2017
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IMPORTANT |
Please sign and return the enclosed proxy card or vote by telephone or on the Internet as promptly as possible. This will save the expense of a supplementary solicitation. |
Thank you for acting promptly. |
Important Notice Regarding the Availability of Proxy Materials
for the 2017 Annual Meeting of Shareholders to be Held on April 28, 2017.
The Proxy Statement and the Bank of Hawaii Corporation 2016 Annual Report on Form 10-K to Shareholders for the year ended December 31, 2016 are available at www.edocumentview.com/boh. We encourage you to access and review all of the information in the proxy materials before voting.
BANK OF HAWAII CORPORATION
PROXY STATEMENT
TABLE OF CONTENTS
PROXY STATEMENT
GENERAL INFORMATION
The Board of Directors (the “Board”) of Bank of Hawaii Corporation (the “Company”) is soliciting the enclosed proxy for the Company's 2017 Annual Meeting of Shareholders. The proxy statement, proxy card, and the Company's Annual Report to Shareholders and Annual Report on Form 10-K are being distributed to the Company's shareholders on or about March 17, 2017.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
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A: | A proxy is your legal designation of another person to vote the shares you own. That other person that you designate is called a proxy and is required to vote your shares in the manner you instruct. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. If you vote by phone or via the Internet, you will have designated Mark A. Rossi and/or Nathan Sult to act as your proxy to vote your shares at the Annual Meeting in the manner you direct. |
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A: | You are voting on the election of 13 directors and amendments to the Company's 2014 Stock and Incentive Plan (the "2014 Plan") to add 800,000 shares. In addition, you are voting on an advisory and non-binding basis, on the Company's executive compensation as described in the Compensation Discussion and Analysis and related tables, the frequency of the advisory non-binding vote on executive compensation and the ratification of the re-appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the 2017 fiscal year, and are voting on any other business that may be properly brought before the meeting. Your votes on the Company’s executive compensation, the frequency of the advisory vote with respect to executive compensation and the ratification of the re-appointment of the Company’s independent public accounting firm are advisory only, and will not bind the Company. |
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Q: | Who may vote at the annual meeting? |
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A: | Shareholders of record of Bank of Hawaii Corporation's common stock, par value $0.01 per share, as of the close of business on February 28, 2017 (the “Record Date”) are entitled to attend and vote at the annual meeting. Each share of common stock is entitled to one vote. On the Record Date, there were 42,834,514 shares of common stock issued and outstanding. |
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Q: | How many shares must be present to hold the annual meeting? |
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A: | The holders of at least one-third of the outstanding common stock on the Record Date entitled to vote at the annual meeting must be represented, in person or by proxy, to conduct business. That amount is called a quorum. Shares are counted as present at the meeting if a shareholder entitled to vote is present at the meeting, or has submitted a properly signed proxy in writing, or by voting by telephone or via the Internet. We also count abstentions and broker non-votes as present for purposes of determining a quorum. |
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Q: | What shares can I vote? |
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A: | You may vote all shares you own on the Record Date. |
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Q: | Why did I receive a one-page notice (the “Notice”) in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials? |
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A: | The rules and regulations of the Securities and Exchange Commission (the “SEC”) allow companies to furnish proxy materials by providing access to such documents on the Internet instead of mailing a printed copy of proxy materials |
to each shareholder of record. Shareholders who previously requested to receive printed copies of proxy materials by mail will continue to receive them by mail. Shareholders who have not previously indicated a preference for printed copies of proxy materials are receiving the Notice this year. The Notice provides instructions on how to access and review all of the proxy materials and how to submit your proxy via the Internet. If you would like to receive a printed or e-mail copy of the proxy materials, please follow the instructions for requesting such materials in the Notice.
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Q: | Why am I being asked to vote on executive compensation? |
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A: | In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted, requiring that public company shareholders be given the opportunity for a non-binding general advisory vote regarding the compensation paid to named executive officers. The Dodd-Frank Act also requires a non-binding vote at least every six years as to how frequently the general advisory vote should occur (annually, biannually or triennially). At the Annual Meeting of Shareholders in 2011, our shareholders strongly supported an annual vote on executive compensation and, in light of that preference, the Board determined to hold the advisory vote annually until next determined at the 2017 Annual Meeting of Shareholders (see Proposal 3). |
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Q: | How can I vote my shares in person at the annual meeting? |
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A: | If you are a shareholder of record, you can attend the annual meeting and vote in person the shares you hold directly in your name as the shareholder of record. If you choose to do that, please bring the enclosed proxy card or notice, admission ticket, and proof of identification. If you hold your shares in street name, you must vote your shares through your broker or other nominee. |
Even if you plan to attend the annual meeting, we recommend you also submit your proxy so your vote will be counted if you later decide not to attend the annual meeting.
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Q: | How can I vote my shares without attending the annual meeting? |
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A: | You may vote without attending the annual meeting. If you hold your shares as the shareholder of record, you may instruct the proxies how to vote your shares by mail, telephone, or the Internet. If your shares are held by a broker or other nominee, you will receive instructions that you must follow to have your shares voted. Please refer to the summary instructions below and those on your proxy card, or, for shares held in street name, the voting instruction card sent by your broker or nominee. |
Mail. You may mail your proxy by signing your proxy card or, for shares held in street name, the voting instruction card included by your broker or nominee, and mailing it in the enclosed, postage-paid return envelope. If you provide specific voting instructions, your shares will be voted as you instruct. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board.
Telephone. If you live in the United States, you may submit your proxy by following the “Vote by Telephone” instructions on the proxy card.
Internet. If you have Internet access, you may submit your proxy by following the “Vote by Internet” instructions on your proxy card.
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A: | Yes. You may change your proxy instructions any time before the vote at the annual meeting. For shares you hold as shareholder of record, you may change your vote by providing notice to the Corporate Secretary, granting a new proxy with a later date or by attending the annual meeting and voting in person. Attendance at the annual meeting will not cause your previously granted proxy to be revoked unless you also vote at the meeting. If you voted by telephone or via the Internet, you may change your vote until 1:00 a.m. Central Time, April 28, 2017. For shares you hold in street name, you may change your vote by submitting new voting instructions to your broker or nominee. |
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Q: | What is a broker non-vote? |
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A: | The NYSE allows its member-brokers to vote shares held by them for their customers on matters the NYSE determines are routine, even though the brokers have not received voting instructions from their customers. Of the |
proposals anticipated to be brought at the annual meeting, only Proposal 5 (the ratification of the re-appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the 2017 fiscal year) is considered by the NYSE to be a routine matter. Your broker, therefore, may vote your shares in its discretion on Proposal 5 if you do not instruct your broker how to vote. If the NYSE does not consider a matter routine, then your broker is prohibited from voting your shares on the matter unless you have given voting instructions on that matter to your broker. Therefore, your broker will need to return a proxy card without voting on these non-routine matters if you do not give voting instructions with respect to these matters. This is referred to as a "broker non-vote." The NYSE does not consider Proposal 1 (election of Directors), Proposal 2 (advisory vote on executive compensation), Proposal 3 (advisory vote on frequency of advisory vote on executive compensation), and Proposal 4 (vote on amendments to the 2014 Plan), to be routine matters, so your broker may not vote on these matters in its discretion. It is important, therefore, that you provide instructions to your broker if your shares are held by a broker so that your vote is counted with respect to these non-routine matters.
Q: What are the voting procedures?
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A: | Under our Certificate of Incorporation, Directors are elected annually by majority vote (Proposal 1). This means that a director is elected if the number of votes cast for the nominee exceed the number of votes cast against the nominee. In the event of a contested election, the election is determined by plurality vote. This means that the nominees who receive the highest number of affirmative votes are elected. Abstentions and broker non-votes do not affect the outcome of the vote. |
The advisory vote on executive compensation (Proposal 2), advisory vote on the frequency of the advisory vote on executive compensation (Proposal 3), amendments to the 2014 Plan (Proposal 4) and the advisory vote on the ratification of the reappointment of our independent registered public accounting firm (Proposal 5) are also decided by majority vote. For Proposals 1, 2, 3 and 4, broker non-votes will be treated as not entitled to vote and will not affect the outcome. Abstentions will have the same effect as votes cast against the proposal. For Proposal 5, your broker, bank, trustee, or other nominee may exercise its discretion and vote.
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Q: | Why are there 13 Directors on the ballot for election? |
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A: | The number of directors to be elected was increased and fixed by the Board from 12 to 13 at the February 24, 2017 meeting of the Board. Director nominee Alicia E. Moy was also elected by the Board at the February 24, 2017 meeting to serve as a director for the unexpired term until her successor shall have been duly elected and qualified. |
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Q: | Is my vote confidential? |
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A: | Yes. We have procedures to ensure that, regardless of whether shareholders vote by mail, telephone, the Internet, or in person, all proxies, ballots and voting tabulations that identify shareholders are kept permanently confidential, except as disclosure may be required by federal or state law or as expressly permitted by a shareholder. We also have the voting tabulations performed by an independent third party. |
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Q: | Who will bear the cost of soliciting proxies? |
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A: | We will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, we expect that a number of our employees on behalf of the Board will solicit proxies from shareholders, personally, and by telephone, the Internet, facsimile, or other means. None of these employees will receive any additional or special compensation for soliciting proxies. We have retained Georgeson, Inc., 480 Washington Boulevard, Jersey City, New Jersey 07310 to assist in the solicitation of proxies for an estimated fee of $12,000 plus reasonable out-of-pocket expenses. We will, upon request, reimburse brokers or other nominees for their reasonable out-of-pocket expenses in forwarding proxy materials to their customers who are beneficial owners and obtaining their voting instructions. |
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Q: | What does it mean if I get more than one proxy card? |
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A: | It means your shares are registered differently and are held in more than one account. Sign and return all proxy cards or vote each proxy card by telephone or Internet, to ensure all your shares are voted. To provide better shareholder services, we encourage you to have all accounts registered in the same name and address. You may do that by contacting our transfer agent: Computershare Investor Services (1-888-660-5443). |
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Q: | May I propose actions for consideration at next year's annual meeting of shareholders? |
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A: | Yes. You may submit proposals for consideration at the 2018 Annual Meeting of Shareholders by presenting your proposal in writing to the Corporate Secretary at 130 Merchant Street, Honolulu, Hawaii 96813 and in accordance with the following schedule and requirements. |
Proposals To Be Included In The Proxy Statement and Voted On At The Meeting. Proposals that shareholders wish to have included in the proxy statement for the 2018 Annual Meeting of Shareholders must be made in accordance with SEC Rule 14a-8. Proposals must be received by the Company's Corporate Secretary on or before November 17, 2017 at the above address.
Proposals To Be Voted On At The Meeting Only. Under Section 1.12 of the Company's Bylaws, for a shareholder to bring a proposal before the 2018 Annual Meeting, the Company must receive the written proposal no later than 80 days nor earlier than 90 days before the first anniversary of the 2017 annual meeting; in other words, no earlier than January 28, 2018 and no later than February 7, 2018. The proposal also must contain the information required in the Bylaws. If you wish to make one or more nominations for election to the Board, the required information includes, among other things, the written consent of such individual to serve as director and (i) the name, age, business address and, if known, residence address of each nominee, (ii) the principal occupation or employment of each nominee, and (iii) the number of shares of Bank of Hawaii Corporation common stock each nominee beneficially owns. These advance notice provisions are separate from the requirements a shareholder must meet to have a proposal included in the proxy statement under SEC rules. By complying with these provisions, a shareholder may present a proposal in person at the meeting, but will not be entitled to have the proposal included in the Company's proxy statement unless they comply with the requirements described in the preceding paragraph. Persons holding proxies solicited by the Board may exercise discretionary authority to vote against such proposals.
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Q: | Where can I find the voting results of the annual meeting? |
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A: | We plan to announce preliminary voting results at the annual meeting. We will publish final voting results in a report on Form 8-K within four business days of the annual meeting. |
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Q: | What happens if the meeting is postponed or adjourned? |
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A: | Your proxy will remain valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted. |
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Q: | Where can I find out more information about the Company before the annual meeting? |
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A: | You can find more information about the Company on-line at: www.boh.com. |
PROPOSAL 1: ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Company’s Certificate of Incorporation requires that the Company’s Board consist of not fewer than three directors and not more than 15 directors, with the exact number to be determined by the Board. The Board has fixed the number of directors at 13. Each of the 13 directors listed below has been nominated for a one-year term to serve until the 2018 Annual Meeting of Shareholders or until his or her successor is elected and qualified. In the event that any or all of the director nominees are unable to stand for election as director, the Board, upon the recommendation of the Nominating & Corporate Governance Committee, may select different nominees for election as directors.
Certain information with respect to each of the nominees is set forth below, including his or her principal occupation, qualifications, and directorships during the past five years. Each nominee has consented to serve and all nominees are currently serving on the Company’s Board. The nominees were each recommended to the Board by the Company’s Nominating & Corporate Governance Committee whose goal is to assemble a board that operates cohesively, encourages candid communication and discussion, and focuses on activities that help the Company maximize shareholder value. The Nominating & Corporate Governance Committee also looks at the individual strengths of directors, their ability to contribute to the board, and whether their skills and experience complement those of the other directors. A more detailed discussion on the nomination process and the criteria the Nominating & Corporate Governance Committee considers in their evaluation of director candidates is found in the Corporate Governance section which begins on page 13.
The Board of Directors recommends a vote “FOR” each of the nominees.
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Name, Age, and Year First Elected as Director | | Principal Occupation(s) and Qualifications | | Other Public Directorships Held in the Last 5 Years |
S. Haunani Apoliona; 67; 2004 | | Former Trustee, Office of Hawaiian Affairs (“OHA”) (entity established by the Constitution of the State of Hawaii to improve the conditions and protect the entitlements of Native Hawaiians). Ms. Apoliona was elected OHA Trustee in 1996, and served five four-year terms ending November 8, 2016. Ms. Apoliona has dedicated more than 35 years working with and on behalf of Native Hawaiians. As Chairman of the OHA Board from 2000 through 2010 and Trustee of OHA since 1996, she has led the pursuit of Federal Recognition for Native Hawaiians, resolution of long-standing ceded land revenue disputes, and a vast array of advocacy initiatives for Native Hawaiians. Prior to OHA, she was President and Chief Executive Officer of Alu Like, a non-profit organization whose mission is to assist Native Hawaiians in achieving social and economic self-sufficiency, including workforce training, vocational education, and training in entrepreneurship, business development and computer technology. Ms. Apoliona studied at the University of Hawai‘i Mānoa graduating with Double Bachelor's degrees in Sociology and Liberal Arts (Hawaiian Studies) and a Master's Degree from the School of Social Work. She has served on the board of the Smithsonian’s National Museum of the American Indian. Ms. Apoliona’s knowledge of Native Hawaiian affairs and with cultural and charitable causes in Hawaii gives her a unique perspective on the values and interests of our core market, which pervade the business environment. These insights inform the discussion at both the Board and on the Nominating & Corporate Governance Committee on which all of the independent directors serve. | | — |
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Name, Age, and Year First Elected as Director | | Principal Occupation(s) and Qualifications | | Other Public Directorships Held in the Last 5 Years |
Mary G. F. Bitterman; 72; 1994 | | Dr. Bitterman has served as President and Director of the Bernard Osher Foundation (a 40 year-old philanthropic organization headquartered in San Francisco that supports higher education and the arts) since 2004. Previously, Dr. Bitterman was President and CEO of the James Irvine Foundation, an independent grant-making foundation serving Californians, and before that President and CEO of KQED, one of the major public broadcasting centers in the United States, Executive Director of the Hawaii Public Broadcasting Authority, Director of the Voice of America, and Director of the Hawaii State Department of Commerce and Consumer Affairs (and simultaneously ex-officio Commissioner of Financial Institutions, Commissioner of Securities, and Insurance Commissioner). Until BlackRock’s acquisition of Barclays Global Investors (“BGI”) in 2009, she was a member of the BGI board for nine years, serving on the Audit & Risk Committee as well as chairing the Nominating & Corporate Governance Committee. Dr. Bitterman currently serves as a director of the Bay Area Council Economic Institute, the Hawaii Community Foundation, the Commonwealth Club of California and Board Chair of the PBS Foundation, and an Advisory Council member of the Stanford Institute for Economic Policy Research and the Public Policy Institute of California. She is an Honorary Member of the National Presswomen’s Federation and a Fellow of the National Academy of Public Administration. Dr. Bitterman received her bachelor of arts degree from Santa Clara University and her M.A. and Ph.D. from Bryn Mawr College. Dr. Bitterman’s considerable experience in broadcasting, media and public policy, her experience as a regulator with authority over Bank of Hawaii and other state-chartered banks, her service on the board of a large mutual fund complex and its key committees, and her deep understanding of the Company and the financial services industry provide her with broad expertise across a range of issues of critical importance to the Company’s activities in a highly regulated and public-facing environment. Dr. Bitterman has gained extensive and valuable Company insight from her tenure as Lead Independent Director of the Board and she serves ex-officio as a member of each of the Board’s standing committees. | | — |
Mark A. Burak; 68; 2009 | | Retired. Formerly an independent consultant providing planning and business performance evaluation advisory services, and Executive Vice President for Planning, Analysis and Performance Measurement, Bank of America, having retired in 2000 after more than thirty years of service. Mr. Burak held various accounting and finance positions based in Chicago, London, San Francisco, and Charlotte at Bank of America and the former Continental Illinois National Bank, now part of Bank of America. As a consultant for Bank of Hawaii from late 2000 through 2003, he oversaw the development of the strategic plan and restructured the Company’s management accounting processes, including the implementation of a capital allocation methodology and development of a formal business unit performance evaluation process. Among other positions, Mr. Burak served as Controller, Managing Director of Management Accounting & Analysis, Business Segment Controller, and Regional Controller for Europe and Asia for the former Continental Illinois National Bank. Mr. Burak is a Certified Public Accountant. He serves on the Board of Trustees of the Honolulu Museum of Art and additionally as Treasurer and Chairman of the Finance Committee. He is a member of Financial Executives International, having served on several local chapter boards and as President of the San Francisco Chapter, and is a member of the American Institute of Certified Public Accountants. Mr. Burak received his bachelor's degree in business administration in public accounting from Loyola University of Chicago and his M.B.A. in finance from the Kellogg Graduate School of Management at Northwestern University. Mr. Burak’s career in accounting, finance and strategic planning for major banking organizations brings a high level of sophistication to his participation in Board discussion of a wide range of financial, strategic planning and operating matters, and his prior engagement as a consultant to Bank of Hawaii gives him direct knowledge of our business. His professional experience and educational background led the Board to appoint him to its Audit & Risk Committee and to designate him as a financial expert on that Committee. Along with all of the other independent directors, Mr. Burak also serves on the Board’s Nominating & Corporate Governance Committee. | | — |
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Name, Age, and Year First Elected as Director | | Principal Occupation(s) and Qualifications | | Other Public Directorships Held in the Last 5 Years |
Michael J. Chun; 73; 2004 | | Retired. Formerly President and Headmaster of Kamehameha Schools - Kapalama (a college preparatory school serving children of Hawaiian ancestry) from 2001 - 2012 and President, Kamehameha Schools from 1988 - 2012. As President and Headmaster, he was responsible for the leadership, financial management, administration and effectiveness of the college preparatory education program at the flagship Kapalama campus. Prior to his appointment at Kamehameha Schools, Dr. Chun was Vice President of Park Engineering, a Honolulu engineering consulting firm. He also served as Chief Engineer of the City and County of Honolulu and taught at the University of Hawaii where he directed graduate instruction and research in environmental engineering. In addition to being a director of Matson, Inc. (a shipping company that split from Alexander & Baldwin, Inc. in 2012), he serves on the boards of various professional and community organizations, including the Metropolitan Board of the YMCA of Honolulu, Partners in Development Foundation and USS Missouri Memorial. Dr. Chun received his bachelor of science degree in civil engineering and his Ph.D. in environmental engineering from the University of Kansas, and his M.S. in civil engineering from the University of Hawaii. Dr. Chun’s leadership of one of Hawaii’s premier educational institutions both provides him with insights into key segments of our markets and customer base and, together with his engineering background, assists the Board in its consideration of a range of operational matters. These insights inform the discussion at both the Board and on the Nominating & Corporate Governance Committee on which all of the independent directors serve. | | Matson, Inc., Alexander & Baldwin, Inc. |
Clinton R. Churchill; 73; 2001 | | Trustee, The Estate of James Campbell (an organization that administered the assets held in trust under the will of James Campbell) from 1992 through 2016 (Chairman 1998, 2000, 2004, 2008, 2012, and 2016). Mr. Churchill served as COO and CEO of The Estate of James Campbell prior to becoming one of its Trustees. He also served as Controller, Financial Vice President, and President of Gaspro, Inc. and three years as a management consultant with Touche Ross & Co. Mr. Churchill serves as Chairman of Pacific Aviation Museum at Pearl Harbor and Challenger Center Hawaii. He received his bachelor of science degree in business and his M.B.A. in management and finance from the University of Arizona. Mr. Churchill’s long association with the Estate of James Campbell (now the James Campbell Company LLC), a nationally diversified real estate company and a major Hawaii landowner, has given him a broad perspective on business affairs in the Company’s core market as well as a deep knowledge of an industry that represents a large portion of our customer base. That perspective as well as Mr. Churchill’s background in financial accounting led the Board to appoint him to its Audit & Risk Committee, which he chairs. Along with all of the other independent directors, Mr. Churchill also serves on the Board’s Nominating & Corporate Governance Committee. | | — |
Peter S. Ho; 51; 2009 | | Chairman and Chief Executive Officer of the Company since July 2010; President since April 2008; Vice Chairman and Chief Banking Officer from January 2006 to April 2008; Vice Chairman, Investment Services from April 2004 to December 2005; and Executive Vice President, Hawaii Commercial Banking Group from February 2003 to April 2004. Bank of Hawaii has been ranked in the top 10 of America's best banks by Forbes for the past eight consecutive years. In 2015, Mr. Ho was elected to serve a second three-year term on the board of the Federal Reserve Bank of San Francisco. In 2010, Mr. Ho was named Chairman of the Asia Pacific Economic Cooperation ("APEC") 2011 Hawaii Host Committee, a public-private entity comprised of private sector, labor and elected leaders created to support Hawaii, the country and President Obama’s hosting of APEC Leaders Week in November 2011. Mr. Ho is active in the Hawaii community and serves on several boards, including Aloha United Way, American Red Cross-Hawaii, Hawaii Community Foundation, McInerny Foundation, Shane Victorino Foundation, the Strong Foundation, Catholic Charities-Hawaii, the East-West Center, and the Hawaii Bankers Association. He is a member of the Financial Services Roundtable, the Hawaii Business Roundtable, the Hawaii Asia Pacific Association, the Hawaii Chamber of Commerce - Military Affairs Council Executive Committee, and the National Host Committee for International Union for Conservation of Nature (IUCN) - 2016 IUCN World Conservation Congress in Hawaii. Mr. Ho was named Young Business Person of the Year by Pacific Business News in 2003. In 2012, Mr. Ho was recognized as Hawaii’s distinguished citizen by the Aloha Council of the Boy Scouts of America. Mr. Ho holds a bachelor of science degree in business administration and an M.B.A. from the University of Southern California. He is also a 2008 graduate of Harvard Business School's Advanced Management Program. Mr. Ho's long career at Bank of Hawaii, his management responsibilities for all aspects of the Company's banking operations and his deep knowledge of our markets, community and culture all qualify him for service on our Board. | | — |
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Name, Age, and Year First Elected as Director | | Principal Occupation(s) and Qualifications | | Other Public Directorships Held in the Last 5 Years |
Robert Huret; 71; 2000 | | Since 1998, Founding Partner of FTV Capital, a multi-stage private equity firm whose limited partners include many of the world’s foremost financial institutions. Mr. Huret is also Chairman of Huret Rothenberg & Co. a private investment firm, and is a director of Cloudmark, Inc. and Financial Engines, Inc. Previously he was a senior consultant to Montgomery Securities. He has served as Senior Vice President, Finance and Trust Executive Officer at the Bank of California. Mr. Huret was also Vice President of Planning and Mergers and Acquisitions at First Chicago Corporation. He has 48 years of commercial banking, investment banking and private equity investment experience. He has participated in over 100 bank and bank-related mergers, public offerings and joint ventures, with an emphasis on technology companies focused in the financial services industry. He has served as Trustee of Cornell University and San Francisco University High School. He received his bachelor of science degree in industrial and labor relations from Cornell University and his M.B.A. with distinction from Harvard University. Mr. Huret’s knowledge of the commercial and investment banking business, his experience in finance and investment activities and his participation in strategic transactions across the financial services spectrum give him a broad and deep perspective on all facets of our business. These qualifications led the Board to appoint him to its Audit & Risk Committee, to designate him as a financial expert, and to appoint him Vice Chairman of the Committee. Along with all of the other independent directors, Mr. Huret also serves on the Board’s Nominating & Corporate Governance Committee. | | Financial Engines, Inc. |
Kent T. Lucien; 63; 2006 | | Mr. Lucien served as Vice Chairman and Chief Financial Officer of the Company from April 2008-February 2017. Effective March 1, 2017, Mr. Lucien assumed the role of Vice Chairman and Chief Strategy Officer as a part of the Company’s ongoing succession planning and development. As Vice Chairman and Chief Strategy Officer, Mr. Lucien will continue his responsibilities as a member of the Company’s Managing Committee and the development and execution of the bank’s key strategic initiatives, including the “Branch of Tomorrow” modernization project and leveraging information and technology to reshape the delivery of banking services, products and experiences with a customer focus. He will continue to oversee the bank’s Corporate Facilities and Real Estate Department. Prior to his employment with the Company in 2008, Mr. Lucien served as a Trustee for C. Brewer & Co. Ltd., (a Hawaii corporation engaged in agriculture, real estate and power production) from April 2006 to December 2007; and Chief Executive Officer Operations, C. Brewer & Co., Ltd. from May 2001 to April 2006. He also held the positions of Controller and Chief Financial Officer and various other executive positions at C. Brewer & Co., Ltd. Prior to C. Brewer & Co., Ltd., Mr. Lucien worked for Pricewaterhouse Coopers. He is a Certified Public Accountant (inactive). Mr. Lucien also serves on the board of Wailuku Water Company LLC. Mr. Lucien received his bachelor's degree from Occidental College and his M.B.A. from Stanford University. Mr. Lucien’s senior executive experience in significant Hawaiian businesses and his background in finance and accounting led the Board to nominate him as a director in 2006 and, prior to becoming the Company’s Chief Financial Officer, to serve on the Audit & Risk Committee as its chair and to be designated as a financial expert. These qualifications, coupled with his deep knowledge of the Company’s finances gained during his tenure with the Company continue to qualify him for Board service. | | Maui Land & Pineapple Co., Inc. |
Alicia E. Moy; 39; 2017 | | President and chief executive officer of Hawai'i Gas since May 2013. Hawai'i Gas was established in 1904 as the state’s only government-franchised, full-service gas company. From 2001 to 2013, Ms. Moy was senior vice president with Macquarie Infrastructure and Real Assets (MIRA). At MIRA, Ms. Moy oversaw corporate strategy, strategic planning, funding and management of several MIRA-managed utility companies, including Hawai'i Gas. She has served as a member of Hawai'i Gas’ board of directors since 2011. From 1999 to 2001, Ms. Moy worked for Morgan Stanley in the Investment Banking division, where she was involved in corporate finance and mergers and acquisitions for private equity clients. Ms. Moy is a member of the Hawaii Business Roundtable and serves on the boards of Aloha United Way, the Chamber of Commerce of Hawaii, the Western Energy Institute and MIC Renewable Energy Holdings. She also sits on advisory boards for the Hawaii Clean Energy Initiative and Women in Renewable Energy. Ms. Moy holds a bachelor’s degree in finance and marketing from the University of Miami and a master’s degree in finance from INSEAD. Ms. Moy’s expertise in utilities and energy has given her a unique and holistic perspective on the integrated nature of Hawaii’s energy ecosystem and how it is transforming to meet the state’s renewable energy goals. Given the importance of energy in Hawaii and how it impacts all consumers in the state, Ms. Moy’s perspective in this key segment of the markets we serve will bring valuable insights to the Board’s deliberations. Her leadership in this industry along with her strong executive background in finance and strategic planning qualify her for service on the Board and the Human Resources & Compensation Committee. Ms. Moy also serves on the Board’s Nominating & Corporate Governance Committee along with all of the other independent directors. | | — |
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Name, Age, and Year First Elected as Director | | Principal Occupation(s) and Qualifications | | Other Public Directorships Held in the Last 5 Years |
Victor K. Nichols; 60; 2014 | | Victor Nichols has been the Chief Executive Officer of Valassis, a leader in intelligent media delivery since April 2015. In October 2016, Mr. Nichols was also named Chief Executive Officer, effective January 1, 2017, of Harland Clarke Holdings, which oversees Harland Clarke, Scantron and Valassis. Previously, Mr. Nichols was Chief Executive Officer of North America and President of Global Consumer Services for Experian, the leading global information services company providing data and analytical tools to clients around the world. Experian helps businesses manage credit risk, prevent fraud, target marketing and automate decision making, while enabling individuals to better manage creditworthiness and protect themselves against identity theft. While with Experian from 2007 to 2014, Mr. Nichols’ also served as Chief Executive Officer for the United Kingdom, Ireland, Europe, Middle East and Africa and Managing Director of Global Marketing Services, and as Group President, Experian Interactive. Prior to joining Experian, he was with Wells Fargo & Company for seven years where he served as Chief Information Officer and a member of the management committee, leading all key technology functions at the financial institution. Mr. Nichols was past President and founding partner of VICOR, Inc., an advanced technology engineering firm leading business transformation with a concentration in the financial services industry. His experience in information technology and the financial industry also included being President of Safeguard Business Systems and various senior management positions at Bank of America in interstate banking integration, consumer loan services, and operations. Mr. Nichols is a director and a member of the audit committee of Bridgepoint Education, Inc. (a higher education company that includes three academic institutions). Mr. Nichols has been an Advisor to Mitek, an identification technology provider. In addition, he is a member of the Economics Leadership Council, University of California, San Diego and through April 2017, will continue to be Chairman of Crystal Cove Conservancy, a non-profit organization providing education, conservation and restoration in California. He also recently was an Executive Advisor to the Boston Consulting Group and served on the Leadership Council for UCI Bren School of Information and Computer Sciences and on the Dean’s Advisory Board, University of California, Irvine Merage School. He holds a bachelor of science degree in economics from the University of California, San Diego, and an M.B.A. in finance from the University of California, Berkeley. Mr. Nichols’ 36 years of experience and knowledge in both information technology and the financial services industry as well as his background and expertise in strategic planning add a valuable global perspective to the Board in understanding the increasingly important role information technology has in the financial services industry. These qualifications led the Board to appoint him to its Audit & Risk Committee and to designate him as a financial expert on that Committee. Along with other independent directors, Mr. Nichols also serves on the Board’s Nominating & Corporate Governance Committee. | | Bridgepoint Education, Inc. |
Barbara J. Tanabe; 67; 2004 | Owner, Ho’akea Communications, LLC (a public affairs company) since 2003. Ms. Tanabe has expertise in communications and issues management with over 30 years of experience in public affairs, crisis management, and broadcast journalism in the United States and Asia. She served as President and CEO of Hill & Knowlton/Communications Pacific and her own consulting firm, Pacific Century, where she counseled executives and government officials in the areas of cross-cultural communications, crisis and issues management, and news media management. Ms. Tanabe was one of the first Asian-American women journalists in the nation, and pioneered news coverage of issues dealing with ethnic minorities, diversity, and civil rights. She co-founded a public policy research firm, Hawaii Institute of Public Affairs, which produced studies resulting in legislation to promote economic development in Hawaii. She is co-chair and founder of the Hawaii Chapter of Women Corporate Directors, and serves as a member of the boards of the Japan-America Society of Hawaii, the Crown Prince Akihito Scholarship Foundation, and the Pacific Forum (The Asia affiliate of the Center for Strategic and International Studies). She has served on numerous task forces on special assignment with the chief justice of the Hawaii State Supreme Court, and completed a gubernatorial appointment to the East-West Center as vice-chair of the audit and finance committee. In 2013, she received the distinguished Alumni Award from the University of Hawaii. She received her bachelor of arts degree in communications from the University of Washington and an M.B.A. from the University of Hawaii. Ms. Tanabe’s expertise in and sensitivity to public policy matters, the media, and cultural and ethnic diversity in our core market bring insights that inform a wide range of Board deliberations and qualify her for service on the Board. Her management and business ownership background align her views on the Human Resources & Compensation Committee, on which she serves, with those of shareholders. Along with all of the other independent directors, Ms. Tanabe also serves on the Board’s Nominating & Corporate Governance Committee. | | — |
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Name, Age, and Year First Elected as Director | | Principal Occupation(s) and Qualifications | | Other Public Directorships Held in the Last 5 Years |
Raymond P. Vara, Jr.; 47; 2013 | | President and Chief Executive Officer Hawaii Pacific Health. As President and CEO, he oversees Hawaii's largest health care provider comprised of Straub Clinic & Hospital, Kapiolani Medical Center for Women & Children, Pali Momi Medical Center, Wilcox Memorial Hospital and Kauai Medical Clinic. Prior to his appointment in 2012, he served as its Executive Vice President and Chief Executive Officer of Operations since 2004. Mr. Vara also served as the Chief Financial Officer from 1998 to 2000 and Chief Executive Officer from 2000 to 2002 for Los Alamos Medical Center in New Mexico, an integrated health care service provider. Prior to his joining the private sector, Mr. Vara held various positions in the United States Army, including Controller for the Army's Northwestern Healthcare Network, Deputy Chief Financial Officer of the Madigan Army Medical Center in Tacoma, Washington, and Assistant Administrator and Chief Financial Officer of Bassett Army Community Hospital in Fairbanks, Alaska. Mr. Vara is active in the Hawaii community and serves on several boards, including Island Insurance Company, American Heart Association-National Board, Treasurer and Chair of the Finance and Operations Committee, and Hawaii Pacific University. Mr. Vara holds a bachelor's degree in finance from Hawaii Pacific University and received his M.B.A. from the University of Alaska. His community involvement and leadership of Hawaii's largest health care provider and non-governmental employer bring a valuable perspective of a key segment of the markets we serve. Mr. Vara's financial and operational background coupled with his senior executive and audit committee experience make him well-qualified to serve on the Company's Board and led the Board to appoint him to the Audit & Risk Committee in 2013 and to designate him as a financial expert on that Committee. Along with all of the other independent directors, Mr. Vara also serves on the Board’s Nominating & Corporate Governance Committee and joined the Human Resources & Compensation Committee in December 2014. | | — |
Robert W. Wo; 64; 2002 | Owner and Director, C.S. Wo & Sons, Ltd. (a furniture retailer) since 1984. Under Mr. Wo’s leadership, this third generation family-owned and operated business has grown to become Hawaii’s largest furniture retailer, ranking it among the Top 250 companies in the State of Hawaii and among the Top 100 furniture retailers in the nation. He is a member of the Hawaii Business Roundtable whose mission is to promote the overall economic vitality and social health of Hawaii. He has always been active in the community, having served on the boards of Aloha United Way, Junior Achievement of Hawaii, and the Retail Merchants of Hawaii. Currently, Mr. Wo serves on several business and non-profit boards, including Hawaii Medical Service Association, and Assets School. He received his bachelor's degree in economics from Stanford University and earned his M.B.A. from Harvard Business School. Mr. Wo’s deep involvement in the community and knowledge of business affairs throughout the Hawaiian Islands bring a customer perspective to his participation in Board affairs and, as major employer in the state, qualify him for service on the Human Resources & Compensation Committee in addition to his role as a director. Along with all of the other independent directors, Mr. Wo also serves on the Board’s Nominating & Corporate Governance Committee. | | — |
BENEFICIAL OWNERSHIP
At the close of business on January 31, 2017, Bank of Hawaii Corporation had 42,732,807 shares of its common stock outstanding. As of January 31, 2017, this table shows the amount of Bank of Hawaii Corporation common stock owned by (i) each person or entity who is known by us to beneficially own more than five percent of Bank of Hawaii Corporation’s common stock; (ii) each current director and director nominee, (iii) each of the executive officers named in the Summary Compensation Table (the “named executive officers”), and (iv) all of our directors and executive officers as a group. Unless otherwise indicated and subject to applicable community property and similar statutes, all persons listed below have sole voting and investment power over all shares of common stock beneficially owned. Share ownership has been computed in accordance with SEC rules and does not necessarily indicate beneficial ownership for any other purpose.
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Name | | Number of Shares Beneficially Owned | | Right to Acquire Within 60 Days | | Total | | Percent of Outstanding Shares as of January 31, 2017 |
More than Five Percent Beneficial Ownership | | | | | | | |
BlackRock, Inc. 55 East 52nd Street New York, New York 10055 | | 5,801,441 |
| (1) | | — |
| | 5,801,441 |
| | 13.60 | % |
The Vanguard Group 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | | 3,451,671 |
| (2) | | — |
| | 3,451,671 |
| | 8.08 | % |
Neuberger Berman Group LLC 1290 Avenue of the Americas New York, New York 10104 | | 3,041,722 |
| (3) | | — |
| | 3,041,722 |
| | 7.12 | % |
| | | | | | | | | |
Current Directors and Director Nominees | | | | | | | |
S. Haunani Apoliona | | 23,138 |
| (4) | | — |
| | 23,138 |
| | * |
|
Mary G. F. Bitterman | | 38,469 |
| (4)(5) | | — |
| | 38,469 |
| | * |
|
Mark A. Burak | | 7,652 |
| (4) | | — |
| | 7,652 |
| | * |
|
Michael J. Chun | | 24,284 |
| (4)(5) | | — |
| | 24,284 |
| | * |
|
Clinton R. Churchill | | 27,317 |
| (4)(5)(6) | | — |
| | 27,317 |
| | * |
|
Robert Huret | | 45,098 |
| (4) | | — |
| | 45,098 |
| | * |
|
Alicia E. Moy | | — |
| | | — |
| | — |
| | |
Victor K. Nichols | | 4,738 |
| (4) | | — |
| | 4,738 |
| | * |
|
Barbara J. Tanabe | | 18,221 |
| (4) | | — |
| | 18,221 |
| | * |
|
Raymond P. Vara, Jr. | | 3,699 |
| (4) | | — |
| | 3,699 |
| | * |
|
Robert W. Wo | | 55,081 |
| (4)(5) | | — |
| | 55,081 |
| | * |
|
| | | | | | | | | |
Named Executive Officers | | | | | | |
|
| | |
Peter S. Ho (also Director Nominee) | | 167,194 |
| | | 46,666 |
| | 213,860 |
| | * |
|
Kent T. Lucien (also Director Nominee) | | 45,961 |
| (5)(7) | | 15,000 |
| | 60,961 |
| | * |
|
Wayne Y. Hamano | | 28,860 |
| (5) | | — |
| | 28,860 |
| | * |
|
Mark A. Rossi | | 50,054 |
| (8) | | — |
| | 50,054 |
| | * |
|
Mary E. Sellers | | 69,562 |
| (5) | | 30,000 |
| | 99,562 |
| | * |
|
All current directors, director nominees, and executive officers as a group (21 persons) | | 760,774 |
| | | 163,331 |
| | 924,105 |
| | 2.16 | % |
| | | | | | | | | |
* Each of the current directors, director nominees, and named executive officers beneficially owned less than one percent of Bank of Hawaii Corporation's outstanding common stock as of January 31, 2017. |
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(1) | According to its Schedule 13G filed with the SEC on January 12, 2017, BlackRock, Inc. is a parent holding company or control person and may be deemed to have beneficial ownership as of December 31, 2016 of 5,801,441 shares of Bank of Hawaii Corporation common stock owned by its clients, none known to have more than five percent of outstanding shares except subsidiary BlackRock Fund Advisors and the iShares Select Dividend ETF. According to the same filing, BlackRock, Inc. has sole power to vote or to direct the vote over 5,643,357 of those shares and sole power to dispose or to direct the disposition of 5,801,441 shares. |
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(2) | According to its Schedule 13G filed with the SEC on February 10, 2017, The Vanguard Group is an investment adviser and its subsidiaries may be deemed to have beneficial ownership as of December 31, 2016 of 3,451,671 shares of Bank of Hawaii Corporation common stock owned by its clients, none known to have more than five percent of outstanding shares. According to the same filing, The Vanguard Group has sole power to vote or to direct the vote over 25,844 of those shares, sole power to dispose or to direct the disposition of 3,424,027 shares, shared power to vote or to direct the vote over 3,900 shares and shared power to dispose or to direct the disposition of 27,644 shares. |
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(3) | According to its Schedule 13G filed with the SEC on February 14, 2017, Neuberger Berman Group LLC is a parent holding company or control person and its affiliates may be deemed to have beneficial ownership as of December 31, 2016 of 3,041,722 shares of Bank of Hawaii Corporation common stock by its clients, none known to have more than five percent of outstanding shares. According to the same filing, Neuberger Berman Group LLC has shared power to vote or to direct the vote of 3,039,678 of those shares and shared power to dispose or to direct the disposition of 3,041,722 shares. |
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(4) | Includes restricted shares owned by directors under the Director Stock Program: Ms. Apoliona, 14,428 shares; Dr. Bitterman, 768 shares; Mr. Burak, 768 shares; Dr. Chun, 19,568 shares; Mr. Churchill, 19,568 shares; Mr. Huret, 768 shares; Mr. Nichols, 768 shares; Ms. Tanabe, 768 shares; Mr. Vara, 768 shares; and Mr. Wo, 19,568 shares. Also includes shares owned by directors under the Directors Deferred Compensation Plan: Messrs. Churchill, 1,975 shares; Huret, 22,439 shares; Nichols, 2,405 shares; and Wo, 15,797 shares; and Mmes. Apoliona, 3,817 shares and Tanabe, 9,981 shares. |
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(5) | Includes shares held individually or jointly by family members as to which the specified director or officer may be deemed to have shared voting or investment power as follows: Dr. Bitterman, 6,970 shares; Dr. Chun, 2,284 shares; Mr. Churchill, 3,025 shares; Mr. Wo, 10,124 shares; Mr. Lucien, 5,500 shares; Mr. Hamano, 565 shares; and Ms. Sellers, 55,865 shares. |
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(6) | Includes 500 shares held in an Individual Retirement Account. |
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(7) | Includes 1,000 shares held in a Keogh account. |
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(8) | Includes 1,904 shares held in an Individual Retirement Account. |
CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Company and the Board have adopted Corporate Governance Guidelines (“Governance Guidelines”). The Governance Guidelines are posted on the Investor Relations page of the Company's website at www.boh.com. The Governance Guidelines address director qualification and independence standards, responsibilities of the Board, access to management, independence standards and access to independent advisors, compensation, orientation and continuing education, Board committees, Chief Executive Officer (“CEO”) evaluation, management succession, Code of Business Conduct and Ethics, shareholder communications to the Board and the Board’s annual performance evaluation.
The Company’s leadership structure consists of a combined Chairman and CEO and a Lead Independent Director. At this time, the Board believes that it is in the best interests of the Company to have a single individual serve as Chairman and CEO to control and implement the short- and long-term strategies of the Company. The Board believes that this joint position provides it with the ability to perform its oversight role over management with the benefit of a management perspective as to the Company’s business strategy and all other aspects of the business. With its Lead Independent Director, this governance structure also provides a form of leadership that allows the Board to function distinct from management, capable of objective judgment regarding management’s performance, and enables the Board to fulfill its duties effectively and efficiently. The Company’s leadership structure promotes the objectivity of the Board’s decisions and its role in reviewing the performance of management. Through its leadership and governance processes the Company has successfully established a governance structure that provides both oversight and guidance by the Board to management regarding strategic planning, risk assessment and management, and corporate performance.
The Company’s Lead Independent Director is appointed by the Board and the current Lead Independent Director, Dr. Mary G. F. Bitterman, has served in this position since 1999. The Company’s Governance Guidelines clearly define the Lead Independent Director’s role and duties which include, but are not limited to: serving as Chairman of the Company’s Nominating & Corporate Governance Committee, presiding over regularly scheduled executive sessions of the non-management directors, serving as a liaison between the non-management directors and executive management, and assisting the Board and executive management to ensure compliance with the Governance Guidelines.
The Company's Nominating & Corporate Governance Committee has determined that each of the 11 current non-management directors, including the Lead Independent Director, are “independent” as defined by the NYSE rules. The non-management directors meet in executive session without management in attendance for regularly scheduled meetings. The non-management directors may also meet in executive session each time the full Board convenes for a meeting. In 2016, the non-management directors met five times in executive session. The Lead Independent Director also meets regularly on an individual basis with members of the Company’s executive management team.
Director Qualifications and Nomination Process
The Nominating & Corporate Governance Committee is responsible for identifying and assessing all director candidates and recommending nominees to the Board. Potential nominees are evaluated based on their independence, within the meaning of the Governance Guidelines and the rules of the NYSE. Candidates to be nominated as a director, including those submitted by shareholders, are selected based on, among other criteria, their integrity, informed judgment, financial literacy, high performance standards, accomplishments and reputation in the community, experience, skill sets, and ability to commit adequate time to Board and committee matters and to act on behalf of shareholders. The criteria also include a determination of the needs of the Board and of the interplay between each individual’s personal qualities and characteristics and those of the other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Company and its shareholders. In addition, Board members are expected to participate in continuing education and training opportunities to stay current on corporate governance, industry trends and issues and to enhance their understanding of the Company’s business.
The objective of the Nominating & Corporate Governance Committee is to present a combination of candidates that will result in a Board with a wide range of skills, expertise, industry knowledge, viewpoints, and backgrounds, with business and community contacts relevant to the Company’s business. To accomplish this, the Nominating & Corporate Governance Committee seeks candidates from different age groups, ethnicities, genders, industries, and experiences, in addition to the criteria described above. The Board includes directors with experience in public corporations, not-for-profit organizations, and entrepreneurial individuals who have successfully run their own private enterprises. The Board also has the broad set of
skills necessary for providing oversight to a financial institution, which includes proven leadership and expertise in finance, accounting, information technology, risk management, lending, investment management and communications. A shareholder may submit a candidate for consideration by the Board to be included in the Board’s slate of director nominees. Candidates proposed by shareholders will be evaluated by the Nominating & Corporate Governance Committee under the same criteria that are applied to other candidates. The criteria are set forth above and in the Company’s Bylaws and Governance Guidelines. Candidates to be considered for nomination by the Nominating & Corporate Governance Committee at the 2018 Annual Meeting of Shareholders must be presented in writing to the Corporate Secretary on or before November 17, 2017 at 130 Merchant Street, Honolulu, Hawaii 96813.
Director Experience, Tenure and Refreshment
The Board maintains a unique balance of experience, tenure, diversity, cultural and local market knowledge and broad subject matter expertise. While our longer-tenured directors carry a wealth of experience and deep understanding of the Company and our industry, the Board embraces the need for fresh perspectives and is committed to continued director refreshment. Since 2009, the Board has added five new directors with targeted and diverse areas of expertise, including the appointment of Alicia E. Moy in February 2017 to serve as a director for the unexpired term of a newly created director position, to the April 28, 2017 annual meeting of shareholders for which she is standing for re-election. A resident of Hawaii and President and CEO of Hawai'i Gas, Ms. Moy brings a unique and powerful perspective, and insight and business acumen to the local economy and business environment the Company serves. In addition to the Company's proactive refreshment activities, the Company anticipates that it will experience four director retirements over the next four years as a result of certain directors reaching the mandatory retirement age of 75. The Board is actively engaged in identifying future knowledge requirements and matching those requirements with potential director candidates possessing the desired personality and skill sets.
Likewise, the Board employs a balanced approach to populating Board Committees. This refreshment strategy results in a membership that maintains new and contemporary perspectives, ideas and approaches. Ms. Moy's appointment to the Human Resources & Compensation Committee in February 2017 further supports the key committee refreshment approach of the Company, and leverages her skills and expertise in the areas of human resource management and compensation.
Board and Committee Evaluations
The Nominating & Corporate Governance Committee leads and oversees the annual evaluation of the Board and Board committees. The annual evaluation includes an individual director self-assessment and an independent third party hosted survey to determine whether the Board and its committees are functioning effectively. The Nominating & Corporate Governance Committee establishes the evaluation criteria, oversees the evaluation process, discusses the results with the Board, and implements any changes that emerge from the evaluations that the Board deems appropriate to enhance Board effectiveness.
An independent consultant provides assistance with the design of the online survey instrument and administers the survey on behalf of the Nominating & Corporate Governance Committee, thereby assuring anonymity of participant responses through a secure, encrypted website. A written report of total sample data, as well as data for the Board committees, is prepared by the consultant, analyzing the closed-end questions and includes the verbatim comments offered by directors at the close of each section of the survey that may provide recommendations for improvement. The report also tracks current data against results from previous surveys, where comparable.
Majority Voting
The Company's Bylaws and Governance Guidelines provide for majority voting in uncontested elections and a resignation process in the event a director nominee does not obtain a majority of votes cast. The resignation process provides the Board with discretion to accept or reject a tendered resignation if a majority vote is not obtained. If the tendered resignation is not accepted by the Board, the Board shall not nominate such director to stand for re-election at the next annual meeting of shareholders.
Communication with Directors
Shareholders and any interested parties may communicate with the Board, non-management directors, or the Lead Independent Director by sending correspondence c/o the Company’s Corporate Secretary, 130 Merchant Street, Honolulu,
Hawaii 96813. All appropriate communications received will be forwarded to the Board, non-management directors or the Lead Independent Director as addressed.
Code of Business Conduct and Ethics
The Company has earned its reputation as a respected leader in the communities it serves and in the financial services industry by conducting business in an ethical, responsible and professional manner. The Company is proud of the high standards of quality and service that have been its hallmark through the years. These qualities represent fundamental business practices and apply to all directors, officers and employees.
The Company and Board have adopted a Code of Business Conduct and Ethics (the "Code") for directors, executive officers (including the Company's chief executive officer, chief financial officer, chief accounting officer and controller) and employees that is posted on the Investor Relations page of the Company’s website at www.boh.com. The Code addresses the professional, honest and candid conduct required of each director, officer and employee; conflicts of interest, disclosure process, compliance with laws, rules and regulations (including securities trading); corporate opportunities, confidentiality, fair dealing, protection and proper use of Company assets; and encourages the reporting of any illegal or unethical behavior. A waiver of any provision of the Code may be made only by the Audit & Risk Committee of the Board and must be promptly disclosed as required by SEC and NYSE rules. The Company will disclose any such waivers, as well as any amendments to the Code, on the Company’s website at www.boh.com.
Policy Prohibiting Hedging and Pledging of Company Stock
The Company's Securities Trading Policy (the "Policy") specifically prohibits directors and employees from hedging the risk associated with the ownership of Bank of Hawaii Corporation's common stock. The Policy also prohibits directors and employees from pledging transactions involving Bank of Hawaii Corporation common stock as collateral, including the use of a traditional margin account with a broker-dealer.
Director Independence
The Board is comprised of a majority of independent directors as defined by the NYSE listing standards. In affirmatively determining that a director is independent of the Company’s management and has no material relationship with the Company, either directly or indirectly as a partner, shareholder, or officer of an organization that has a relationship with the Company, the Board applies the following categorical standards, in addition to such other factors as the Board deems appropriate:
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a) | In no event shall a director be considered independent if the director is an employee, or a member of the director’s immediate family is an executive officer of the Company until three years after the end of such employment relationship. Employment as an interim Chairman of the Board, CEO, Chief Financial Officer ("CFO") or other executive officer shall not disqualify a director from being considered independent following that employment. |
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b) | In no event shall a director be considered independent if the director receives, or a member of the director’s immediate family receives, more than $120,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). A director may not be considered independent until three years after ceasing to receive such compensation. |
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c) | In no event shall a director be considered independent if the director is a current partner or employee of the Company’s internal or external auditor, or whose immediate family member is a current partner or employee of such a firm and personally works on the Company’s audit; or was a partner or employee of such a firm and personally worked on the Company’s audit within the last three years. |
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d) | In no event shall a director be considered independent if the director is employed, or a member of the director’s immediate family is employed, as an executive officer of another company where any of the Company’s present executives serves on that company’s compensation committee until three years after the end of such service or employment relationship. |
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e) | In no event shall a director be considered independent if the director is an executive officer or employee, or an immediate family member of the director is an executive officer, of a company that makes payments to, or receives payments from, the Company for property or services rendered in an amount which, in any single fiscal year, exceeds the greater of $1.0 million, or 2% of such other company’s consolidated gross revenues for such year, until three years after falling below such threshold. |
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f) | A director will not fail to be deemed independent solely as a result of the director’s and the director’s immediate family members’, or a director’s affiliated entities, banking relationship with the Company if such relationship does not violate paragraphs (a) through (e) above and is made in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with persons not affiliated with the Company and, with respect to extensions of credit, is made in compliance with applicable laws, including Regulation O of the Board of Governors of the Federal Reserve System, and do not involve more than the normal risk of collectability or present other unfavorable features. |
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g) | Audit & Risk Committee members may not receive directly or indirectly any consulting, advisory or other compensatory fee from the Company and shall otherwise meet the independence criteria of Section 10A-3 of the Securities Exchange Act of 1934, as amended. Audit & Risk Committee members may receive directors’ fees and other in-kind consideration ordinarily available to directors, as well as regular benefits that other directors receive (including any additional such fees or consideration paid to directors with respect to service on committees of the Board). |
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h) | Human Resources & Compensation Committee members may not receive directly or indirectly any consulting, advisory or other compensatory fee from the Company, and shall otherwise meet the independence criteria of Section 10C of the Securities Exchange Act of 1934, as amended. Human Resources & Compensation Committee members may receive directors' fees or other in-kind consideration ordinarily available to directors, as well as regular benefits that other directors receive (including any additional such fees or consideration paid to directors with respect to service on committees of the Board). |
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i) | If a particular commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship or transaction that is not addressed by the above standards exists between a director and the Company, the Board will determine, after taking into account all relevant facts and circumstances, whether such relationship or transaction is in the Board’s judgment material, and therefore whether the affected director is independent. |
For purposes of these independence standards, an “immediate family member” includes the director’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than a domestic employee) who shares the director’s home.
The following 11 director nominees standing for re-election have been determined by the Board to be independent: Messrs. Burak, Chun, Churchill, Huret, Nichols, Vara, and Wo, and Mmes. Apoliona, Bitterman, Moy, and Tanabe, and accordingly, the Board has a majority of independent directors as defined by the listing standards of the NYSE and the Governance Guidelines. All of the committees are composed entirely of independent directors who also meet applicable committee independence standards. Mr. Ho is the Chairman, CEO and President of the Company and is therefore not independent. Mr. Lucien is the Vice Chairman and Chief Strategy Officer of the Company and is therefore not independent.
Human Resources & Compensation Committee Interlocks and Insider Participation
No member of the Human Resources & Compensation Committee during fiscal year 2016 served as an officer, former officer, or employee of the Company or had a relationship that was required to be disclosed under “Certain Relationships and Related Transactions.” Further, during 2016, no executive officer of the Company served as:
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• | A member of the Human Resources & Compensation Committee (or equivalent) of any other entity, one of whose executive officers served as one of our directors or was an immediate family member of a director, or served on our Human Resources & Compensation Committee; or |
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• | A director of any other entity, one of whose executive officers or their immediate family member served on our Human Resources & Compensation Committee. |
Corporate Social and Environmental Responsibility
Corporate responsibility comprises the economic, social and environmental choices Bank of Hawaii makes as an enterprise. These choices affect the lives of the bank’s shareholders, customers and employees, and their respective communities. Bank of Hawaii is committed to strengthening the communities it serves through its investments, charitable contributions and community service, and recognizes that a commitment to economic, social and environmental responsibility is an integral element to the Company’s success. In recognition of its efforts, Bank of Hawaii has been the recipient of the Financial Services Roundtable’s Corporate Social Responsibility Leadership Award for the past six years.
Economic Involvement
•Affordable Housing: In 2016, we continued our focus on housing solutions by partnering with developers to finance affordable and workforce housing options that meet a range of community needs for local families and senior citizens across the state of Hawaii and in the Western Pacific. Among them were three phases of Meheula Vista, 225 affordable rental housing units for low-income seniors located in Mililani Mauka on Oahu; Saipan Comfort Homes, 40 affordable housing units for families located near Northern Marianas College; and the renovation of 44 units at Kaneohe Elderly Apartments on Oahu, affordable rentals for low-income seniors. Altogether, Bank of Hawaii helped to finance the construction of nearly 800 affordable housing units in 2016, with more in the pipeline for 2017.
•Supporting Small Businesses: Bank of Hawaii supports businesses both large and small. In 2016, the bank was honored with the U.S. Small Business Administration’s Lender of the Year Award for Category 1, which includes financial institutions with assets in excess of $9.0 billion. Bank of Hawaii provided 58 loans totaling $17 million in Hawaii and Guam, and has received this award for 12 out of the past 14 years.
Financial Education
•SmartMoney Seminars: Presented as a free public service (open to customers and noncustomers), these financial education seminars cover a variety of financial topics, such as the purchase of a first home and how to save and invest. This year, 76 seminars were held at Bank of Hawaii branches, schools and community organizations in Hawaii, Guam, Saipan and Palau. In total, volunteers led these seminars for 1,438 participants. Bank of Hawaii has offered SmartMoney Seminars for the past eight years.
•Educating Students: Each year, Bank of Hawaii employee volunteers visit elementary, middle and high schools to teach students financial literacy. For the 19th annual “Teach Children to Save” initiative, 200 Bank of Hawaii volunteers reached out to more than 2,000 students. For the 13th annual “Get Smart About Credit Day,” Bank of Hawaii volunteers taught more than 2,000 teens at 24 intermediate schools, high schools and select locations across Hawaii, Guam, Saipan, Palau and American Samoa.
•Educating Seniors: Public outreach efforts were conducted specifically aimed at helping seniors protect themselves against financial exploitation. Seminars and print materials were prepared in cooperation with the Better Business Bureau, University of Hawaii and Hawaii Partnership Against Fraud. Bank of Hawaii was also featured in informational sessions about Elder Fraud and aired on 'Ōlelo Community Media, Hawaii’s local public television station.
•Volunteer Income Tax Assistance: Bank of Hawaii is proud to be able to provide the largest number of volunteers to both Goodwill Industries of Hawaii’s and Legal Aid Society of Hawaii’s VITA program. In 2016, 24 of the bank’s IRS-certified employees volunteered income tax assistance for low- and moderate-income families and individuals. Volunteers helped to maximize recipients’ tax refunds. Bank of Hawaii volunteers prepared 372 tax returns, free of charge.
•Assisting Foster Teens: Bank of Hawaii has partnered with EPIC 'Ohana’s Hawaii Youth Opportunities Initiative since 2010 to offer financial education to foster teens. Through this program, teens are able to open matched savings accounts, where each dollar saved is matched up to $1,000 annually, and may be withdrawn between the ages of 14 to 26. This year, Bank of Hawaii opened 77 individual development savings accounts for foster youth transitioning from Child Welfare Services. This has enabled these young people to make 106 purchases, totaling nearly $155,000, primarily to pay for college education, housing and transportation. Since 2010, the Opportunity Passport Program using Bank of Hawaii IDA savings accounts has facilitated 585 transactions totaling $665,000 for former foster youth.
•Mentoring Middle School Students: Starting with the 2016-2017 school year, Bank of Hawaii partnered with the Nu’uanu YMCA and University of Hawaii students from the Atherton YMCA’s College Camp, to launch the Central Middle School Mentoring Program to steer youth onto a successful educational journey. More than 20 Bank of Hawaii employees, along with several graduates of The YMCA College Camp, volunteered to mentor 12 middle school students from Central Middle School. Bank of Hawaii will also participate in mentoring sessions on financial education, and University of Hawaii students will meet with the mentees monthly until they graduate from the program in May 2017.
Social Contributions
•Supporting the “Unbanked” and “Underbanked:” Launched in April 2015, Bank of Hawaii was the first local bank to offer an alternative to traditional checking accounts in the state of Hawaii. EASE by Bank of Hawaii combines convenience and access, is FDIC insured and is among the lowest-fee bank accounts in the U.S. With no checks to bounce, customers do not incur overdraft fees. Customers are also given a free Visa debit card and free access to more than 450 Bank of Hawaii ATMs, do not have direct deposit requirements or monthly service fees for online statements, and are allowed an initial opening balance of $25. They also receive free 24/7 Bankoh by Phone, mobile banking and eBankoh online banking. With 2016 marking the first full year of offering EASE by Bank of Hawaii, we saw an increase in account openings of 125 percent compared to 2015. During the summer of 2016, Bank of Hawaii also added the ability for customers to open EASE accounts online, further enhancing the convenience of the electronic banking option.
•Outstanding Commitment to Community Support: Bank of Hawaii, its Foundation and employees contributed more than $2.7 million to community and philanthropic causes in 2016. In addition, Bank of Hawaii employees recorded more than 12,800 volunteer hours and participated in 244 community events during the course of the year.
•HIKI NŌ: Supporting the nation’s first statewide student news network, Bank of Hawaii Foundation continued its support of PBS Hawaii’s HIKI NŌ program with a $100,000 donation in 2016. This is in addition to $300,000 given to the program since 2011. HIKI NŌ is the first and only student news show with a statewide network of schools. Students from 80 participating public, private and charter high schools and middle schools work with teachers and mentors to create news and feature stories that are shared with Hawaii and the world.
•Employee Scholarship Fund: In its third year, Bank of Hawaii Foundation awarded 35 scholarships totaling $122,000 to children of Bank of Hawaii employees. In total, Bank of Hawaii Foundation has awarded more than $300,000 to its scholars.
•College Assistance Program: Education is fundamental to career success and in 2016 Bank of Hawaii launched its College Assistance Program (CAP) to give employees without a bachelor’s degree access to a college education and potential for full tuition reimbursement. This program provides a unique opportunity for employees to earn their first bachelor’s degree by partnering with Chaminade University of Honolulu’s Professional and Continuing Education online program. Employees are able to choose from a wide variety of majors, regardless of whether or not they relate to their roles at the bank. With a few employees having already completed the first term, an additional 18 employees have begun the enrollment process with Chaminade University for 2017. CAP is in addition to the bank’s other types of assistance, which includes the Tuition Assistance Program, Professional Education Program and Professional Certification.
•Bank of Hawaii Family Sundays: Since 2004, Bank of Hawaii has sponsored a free, once-a-month program of art activities, entertainment and films for the whole family at the Honolulu Museum of Art. This year, the monthly event, called Bankoh Family Sundays, drew more than 23,000 attendees supported by over 100 employee volunteers.
•Hawaii Book & Music Festival: Presented by Bank of Hawaii for the past 11 years, this weekend of award-winning authors, live entertainment and performances for all ages is free and open to the public. Approximately 30,000 people attended the event in 2016. The festival honors cultural arts and promotes literacy. An event highlight is the Bank of Hawaii Book Swap, where approximately 4,000 books were available, with more than 1,000 being donated by BOH employees.
Environmental Contributions
•Supporting Renewable Resources: Bank of Hawaii continues to improve facilities with eco-friendly innovations as part of our energy conservation program. We have significantly reduced energy expenses and consumption to the lowest in our history, in large part due to the installation of photovoltaic solar panels on 12 branches and three buildings so far. We switched on 348 PV panels and two high-efficiency air-conditioning chillers at our downtown Honolulu headquarters, with a combined reduction of over 10,000 barrels of oil. We will continue to strive toward achieving zero carbon emissions as we renovate branches and facilities with energy-saving options.
Oversight of Risk
The Company's governance, including policies, standards and procedures, has been developed with the goal of ensuring that business decisions and the execution of business processes are in compliance with legal and regulatory requirements.
Authority for accepting risk exposures on behalf of the Company originates from the Board. In turn, that authority is delegated through the Board-appointed Managing Committee, chaired by the CEO and comprised of executive management, and its subcommittees, including the Risk Council. The Risk Council, chaired by the Chief Risk Officer, provides the Managing Committee with a forum for the review and communication of both specific and company-wide risk issues, and serves to enhance collaboration among all areas of the Company that create and manage risk, while reinforcing executive management’s responsibility for ensuring risk is managed within established tolerances.
Risk management at the Company is the process for identifying, measuring, controlling and monitoring risk across the enterprise given its business as a financial institution and financial intermediary. Risk management crosses all functions and employees and is embedded in all aspects of planning and performance measurement. The Company’s systems, information and timely reporting are designed to enable the organization to quickly adapt to early warning signs.
The Board is responsible for oversight of the Company’s enterprise risk framework. The Board implements its risk oversight function both as a whole and through delegation to various committees. Management of cyber security risks is the responsibility of the full Board. In 2016, the Company, the Board, and the Audit & Risk Committee continued to strengthen the management and oversight of cyber security risk through new security system enhancements, policies, testing, identification and reporting. The Company continued its program of third party penetration testing and ongoing analysis to identify potential vulnerabilities and need for system enhancements.
The Board has delegated to the Audit & Risk Committee primary responsibility for overseeing financial, credit, investment and operational risk exposures including regulatory and legal risk; to the Fiduciary and Investment Management Committee, comprised of five board members, primary responsibility for oversight of fiduciary and investment risk of client accounts; and to the Human Resources & Compensation Committee primary responsibility for oversight of risk related to management and staff. These committees report to the full Board to ensure the Company’s overall risk exposures are understood, including risk interrelationships. The Board also oversees reputational risk.
Risk reports are provided and discussed at every committee and Board meeting. In addition to detailed reports, the Board reviews an Enterprise Risk Position report that reflects key risk measures and trends across the Company. Key managers responsible for risk management (the Chief Risk Officer, the Treasurer, the Chief Compliance Officer, the General Counsel, and the Chief Fiduciary Officer) regularly provide updates at the respective committee and Board meetings. In support of the Board’s risk oversight role and to ensure that potential problems are surfaced, the Audit & Risk Committee directly oversees the Company’s Internal Audit and Credit Review functions.
Compensation Policies and Risk
The Board’s risk oversight responsibility includes the implementation of compensation programs that do not encourage or incentivize excessive risk taking or inappropriate conduct. The Human Resources & Compensation Committee is responsible for establishing and reviewing the Company’s executive compensation programs, as well as the compensation programs for employees generally, and ensuring that the programs do not encourage unnecessary or excessive risk taking or create risks that are reasonably likely to have a material adverse effect on the Company and its customers.
In 2016, the Company, in addition to its annual comprehensive review, formed a special Steering Committee comprised of its most senior executives to, among other things, examine each of the Company's incentive plans' design, performance, payouts and customer impact, with oversight by and reporting to the Board, Audit and Risk Committee and Human Resources & Compensation Committee. The Steering Committee review included an extensive analysis of potential "red flag" indicators including the existence, nature and extent of any customer complaints, regulatory complaints, legal actions, employee feedback and payout results to determine if the incentive plan design or implementation resulted in employee wrongdoing or customer abuse.
The Steering Committee's review confirmed that the Company's policies and incentive plans do not encourage, nor result in inappropriate employee conduct, wrongdoing or customer abuse. The Steering Committee also confirmed that the policies and incentive plans encourage behavior that is within the Company's risk tolerance, are compatible with effective controls and risk management and are supported by strong corporate governance. The review further confirmed that no individual employee or group of employees incentive plans encourage inappropriate conduct, unnecessary or excessive risk taking or create risks that are reasonably likely to have a material adverse effect on the Company and its customers. The Steering Committee, however, did provide recommendations to improve certain plan designs and enhance the ongoing monitoring and reporting process as well as enhancing employee training programs.
BOARD COMMITTEES AND MEETINGS
The Board met 10 times during 2016. The Board’s policy is that directors should make every effort to regularly attend meetings of the Board and committees on which they serve and the Company’s annual meeting of shareholders. Each director attended at least 75% of the meetings of the Board and 75% of the committee meetings on which he or she served in 2016. All of the Company’s directors attended the 2016 Annual Meeting of Shareholders.
Board Committees
The Board has three standing committees: the Audit & Risk Committee, the Human Resources & Compensation Committee, and the Nominating & Corporate Governance Committee. The charters for the respective Board committees are posted in the Investor Relations section of the Company’s website at www.boh.com.
The Board has affirmatively determined that all of the members of the Audit & Risk, Human Resources & Compensation, and Nominating & Corporate Governance Committees (collectively the “Board Committees”) meet the independence standards of the NYSE and the Company’s Governance Guidelines. The Board Committees’ charters require that each committee perform an annual evaluation of its performance and assess the adequacy of its charter. Each committee has the authority to retain consultants and advisors to assist it in its duties, including the sole authority for the retention, termination and negotiation of the terms and conditions of the engagement.
Below are the members of each current standing committee.
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| | | | |
Audit & Risk | | Human Resources & Compensation | | Nominating & Corporate Governance |
Mary G. F. Bitterman | | Mary G. F. Bitterman | | S. Haunani Apoliona |
Mark A. Burak | | Alicia E. Moy *** | | Mary G. F. Bitterman* |
Clinton R. Churchill* | | Barbara J. Tanabe | | Mark A. Burak |
Robert Huret ** | | Robert W. Wo * | | Michael J. Chun |
Victor K. Nichols | | Raymond P. Vara, Jr. | | Clinton R. Churchill |
Raymond P. Vara, Jr. | | | | Robert Huret |
| | | | Alicia E. Moy *** |
| | | | Victor K. Nichols |
| | | | Barbara J. Tanabe |
| | | | Raymond P. Vara, Jr. |
| | | | Robert W. Wo |
| | | | |
* Committee Chairman | | |
** Committee Vice Chairman | | |
*** Committee Member as of February 2017 | | |
Audit & Risk Committee: 6 Meetings in 2016
The Audit & Risk Committee operates under and annually reviews a charter that has been adopted by the Board. The Audit & Risk Committee’s duties include assisting the Board in its oversight of the following areas of the Company: regulatory and financial accounting, reporting and credit risk management; compliance with legal and regulatory requirements; the independent registered public accounting firm’s qualifications and independence; and the performance of the Company’s internal audit function and independent registered public accounting firm. The Audit & Risk Committee also provides oversight of management’s activities with respect to capital management and liquidity planning, including dividends and share repurchases, and overall interest rate risk management. In addition, the Audit & Risk Committee meets in private session at the conclusion of every regularly scheduled meeting to provide a confidential forum for identification and discussion of issues of importance to the Company. The Audit & Risk Committee also meets with non-member directors on a regularly scheduled basis to brief them on the content and issues discussed at the previous meeting.
The Board has determined that Messrs. Burak, Huret, Nichols, and Vara meet the definition of “financial expert” within the meaning of the SEC regulations adopted under the Sarbanes-Oxley Act of 2002. The Board has determined that all Audit & Risk Committee members meet the NYSE standard of financial literacy and have accounting or related financial management expertise. In addition, the Board has determined that Messrs. Burak, Huret and Nichols meet the definition of "risk expert" under the Federal Reserve Bank rules implementing Section 16 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and 12 CFR 252.22(d)(1).
The Audit & Risk Committee has adopted policies and procedures governing the following: pre-approval of audit and non-audit services; the receipt and treatment of complaints regarding accounting, internal controls, or auditing matters and the confidential, anonymous submission of information by employees of the Company regarding questionable accounting or audit matters; and restrictions on the Company’s hiring of certain employees of the independent registered public accounting firm. The Audit & Risk Committee is also responsible for reviewing Company transactions involving a director or executive officer. The Audit & Risk Committee Report is located on page 67.
Human Resources & Compensation Committee: 10 Meetings in 2016
The Human Resources & Compensation Committee's duties are set forth in its charter, and include responsibility for compensation levels of directors and members of executive management and reviewing the performance of executive management. The Human Resources & Compensation Committee reviews and approves goals and objectives relevant to CEO compensation, and evaluates performance against those goals. It is also their responsibility to review the Company's long-term and short-term incentive compensation plans, equity-based plans, and deferred compensation programs. The Human Resources & Compensation Committee also reviews management development and training programs as well as succession planning for senior and executive management. The Human Resources & Compensation Committee charter allows for the delegation of its duties to its own subcommittee as long as such delegation is in compliance with all applicable laws, rules, and listing standards. The CEO, in consultation with the Director of Human Resources, makes recommendations with respect to non-CEO executive officer compensation. The Human Resources & Compensation Committee Report is located on page 25.
Nominating & Corporate Governance Committee: 8 Meetings in 2016
The Nominating & Corporate Governance Committee's duties are set forth in its charter and include reviewing the qualifications of all Board candidates and recommending qualified candidates for membership on the Board and the oversight of director continuing education opportunities. The Nominating & Corporate Governance Committee reviews the Board’s organization, procedures and committees and makes recommendations concerning the size and composition of the Board and its committees. The Nominating & Corporate Governance Committee makes recommendations to the Board regarding standards for determining non-management director independence and reviews the qualifications and independence of the members of the Board and its committees. The Nominating & Corporate Governance Committee also reviews and evaluates the Company’s compliance with corporate governance requirements and leads and oversees the Board and its committees’ annual performance evaluations. Further information regarding the responsibilities performed by the Nominating & Corporate Governance Committee and the Company’s corporate governance is provided in the committee charter and the Governance Guidelines.
DIRECTOR COMPENSATION
Retainer Fees
In 2016, based on analyses completed by Veritas Executive Compensation Consultants, LLC ("Veritas"), the Board's independent executive compensation consultant, the Board approved the following retainer fees, which remain unchanged from the previous 12-month period:
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• | An annual retainer for service on the Board in the amount of $42,500; |
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• | An additional annual retainer for the Lead Independent Director in the amount of $15,000; |
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• | An annual retainer for Audit & Risk Committee members in the amount of $13,000, an annual retainer for the Chairman of the Audit & Risk Committee in the amount of $20,000, and an annual retainer for the Vice Chairman of the Audit & Risk Committee in the amount of $15,000; and |
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• | An annual retainer for Human Resources & Compensation Committee members in the amount of $11,250 and an annual retainer for the Chairman of the Human Resources & Compensation Committee in the amount of $19,250. |
In addition to these standing committees, the Board has other committees for which directors received fees in 2016. Ms. Apoliona and Mr. Chun are members of the Board-appointed Benefit Plans Committee (“BPC”), and Mmes. Apoliona and Tanabe and Messrs. Chun, and Wo are members of the Fiduciary Investment Management Committee (“FIMC”). In 2016, the FIMC chairman's (Ms. Tanabe) annual retainer was $12,500 and annual retainer fees for the FIMC and BPC members were $7,500 and $5,000, respectively. The Directors are reimbursed for Board-related travel expenses, and directors who reside principally on the U.S. mainland receive an additional $5,000 annually to compensate them for travel time.
Director Stock Plan
The shareholders approved the 2015 Director Stock Compensation Plan (the “Director Stock Plan”) at the 2015 annual meeting. The purpose of the Director Stock Plan is to advance the interests of the Company by encouraging and enabling eligible non-employee members of the Board to acquire and retain throughout each member's tenure as director a proprietary interest in the Company by owning shares of Bank of Hawaii Corporation common stock. The Director Stock Plan allows for the granting of stock options, restricted common stock, and restricted stock units. Under the Director Stock Plan, the Board has the flexibility to set the form and terms of awards. In 2016, each of the 10 non-employee Board members was given a stock award of 768 shares of restricted common stock (“Restricted Shares”) with a vesting date of April 21, 2017. In 2016, no stock options or restricted stock units were granted under the Director Stock Plan.
Directors' Deferred Compensation Plan
The Company maintains the Directors' Deferred Compensation Plan (the “Directors’ Deferred Plan”), under which each non-employee director may participate and elect to defer the payment of all of his/her annual Board and committee retainer fees, or all of his/her annual Board retainer fees, or all of his/her annual committee retainer fees. At the director's choice, deferred amounts under the Directors' Deferred Plan may be payable: 1) beginning on the first day of the first month after the participating director ceases to be a director of the Company; or 2) on an anniversary date of the director's choosing after the director ceases to be a director; or 3) a date specified by the director (which may include a date prior to the date a director ceases to be a director). Deferred amounts are paid to the participant in a lump sum or in equal annual installments over such period of years (not exceeding 10 years) as the participant elects at the time of deferral. If a participant dies, all deferred and previously unpaid amounts will be paid in a lump sum to the participant's beneficiary on the second day of the calendar year following the year of death. A participant's deferred amounts are adjusted for appreciation or depreciation in value based on hypothetical investments in one or more mutual funds or in shares of Bank of Hawaii Corporation common stock, as may be directed by the participant. The Company's obligations under the Directors' Deferred Plan are payable from its general assets, although the Company has established a rabbi trust to assist it in meeting its liabilities under the plan. The assets of the trust are at all times subject to the claims of the Company's general creditors.
Director Stock Ownership Guidelines
The Board believes it is important to support an ownership culture for the Company's directors, employees and shareholders. To ensure that linkage to shareholders occurs among the fiduciaries of the Company each non-management director is required to own a minimum amount of five times his or her annual cash retainer in Bank of Hawaii Corporation
common stock. Directors are given five years from first joining the Board to achieve guideline levels of ownership. Eight of the ten non-management directors standing for re-election have satisfied the ownership guidelines. Directors Victor K. Nichols and Raymond P. Vara, Jr. are expected to satisfy the ownership guidelines within the required five-year period.
Director Compensation
The following table presents, for the year ended December 31, 2016, information on compensation earned by or awarded to each non-employee director who served on the Board of Directors during 2016.
DIRECTOR COMPENSATION TABLE
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| | | | | | | | | | | | | | | | | | | | | |
Name | | Fees Earned or Paid in Cash ($)(1) | | Stock Awards ($)(2) | | Option Awards ($)(3) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($) | | All Other Compensation ($) | | Total ($) |
S. Haunani Apoliona | | 55,000 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 107,539 |
|
Mary G. F. Bitterman | | 86,750 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 139,289 |
|
Mark A. Burak | | 55,500 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 108,039 |
|
Michael J. Chun | | 53,750 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 106,289 |
|
Clinton R. Churchill | | 62,500 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 115,039 |
|
Robert Huret | | 62,500 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 115,039 |
|
Victor K. Nichols | | 60,500 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 113,039 |
|
Martin A. Stein | | 19,625 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 19,625 |
|
Donald M. Takaki | | 13,750 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 13,750 |
|
Barbara J. Tanabe | | 66,250 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 118,789 |
|
Raymond P. Vara, Jr. | | 66,750 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 119,289 |
|
Robert W. Wo | | 69,250 |
| | 52,539 |
| | — |
| | — |
| | — |
| | — |
| | 121,789 |
|
| |
(1) | Ms. Apoliona and Messrs. Huret, Nichols, and Wo elected to defer all of their respective fees earned in 2016. |
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(2) | The amounts in this column reflect the fair value of the restricted stock on the date of grant. On April 29, 2016 the Company issued grants of 768 shares of restricted common stock to each of the non-management directors, having an aggregate fair value of $52,539 based on the closing price of the Company's common stock of $68.41 on the date of the grant; 100% of the grant will vest on April 21, 2017. As of December 31, 2016, each director had the following number of restricted stock awards accumulated in their accounts (which excludes options exercised and held as common stock in their accounts): Ms. Apoliona, 2,568 shares; Dr. Bitterman, 768 shares; Mr. Burak, 768 shares; Dr. Chun, 2,568 shares; Mr. Churchill, 2,568 shares; Mr. Huret, 768 shares; Mr. Nichols, 768 shares; Ms. Tanabe, 768 shares; Mr. Vara, 768 shares; and Mr. Wo, 2,568 shares. |
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(3) | No option awards were granted in 2016. As of December 31, 2016, no director had outstanding options to purchase shares of the Company's common stock. |
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act provides shareholders the opportunity to vote, on an advisory (non-binding) basis, to approve the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s compensation disclosure rules.
As an advisory vote, this proposal is not binding upon the Company. However, the Human Resources & Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders and considers the outcome of the vote when making future compensation decisions for its executive officers. The Company currently conducts annual advisory votes on executive compensation. The Company’s shareholders approved its executive compensation at the 2016 Annual Meeting of Shareholders.
As described in the Compensation Discussion and Analysis, the primary focus of the Company's executive compensation programs is to encourage and reward behavior that the Board believes will promote sustainable growth in shareholder value. Our executive compensation programs are intended to balance risk and reward in relation to the Company’s overall business strategy and further align management’s interests with shareholders’ interests. The Company’s commitment to a performance culture is reflected in its strong financial performance in recent years. Accordingly, the Board of Directors recommends that shareholders approve the executive compensation programs by approving the following advisory resolution:
RESOLVED, that the shareholders of Bank of Hawaii Corporation approve, on an advisory basis, the compensation of the individuals identified in the Summary Compensation Table, as disclosed in the Company’s 2017 proxy statement pursuant to the compensation disclosure rules of the SEC, which disclosure includes the Compensation Discussion and Analysis section, the compensation tables, and the accompanying footnotes in this proxy statement.
The Board of Directors recommends a vote “FOR” the foregoing proposal.
HUMAN RESOURCES & COMPENSATION COMMITTEE REPORT
The Human Resources & Compensation Committee, composed entirely of independent directors in accordance with the applicable laws, regulations, NYSE listing requirements and the Governance Guidelines, sets and administers policies that govern the Company’s executive compensation programs, and various incentive and stock programs. As members of the Human Resources & Compensation Committee, we have reviewed and discussed the Compensation Discussion and Analysis to be included in the Company’s 2017 Proxy Statement with management and, based on these discussions, recommended to the Company’s Board (and the Board subsequently approved the recommendation) that the Compensation Discussion and Analysis be included in such Proxy Statement.
As submitted by the members of the Human Resources & Compensation Committee,
Robert W. Wo, Chairman
Mary G. F. Bitterman
Barbara J. Tanabe
Raymond P. Vara, Jr.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes the compensation structure, process and implementation in 2016 for our Named Executive Officers (“NEOs”). The NEOs in 2016 were:
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Peter S. Ho | Chairman of the Board of Directors, Chief Executive Officer, and President |
Kent T. Lucien | Vice Chairman, Chief Financial Officer |
Wayne Y. Hamano | Vice Chairman, Chief Commercial Officer |
Mark A. Rossi | Vice Chairman, Chief Administrative Officer, General Counsel and Corporate Secretary |
Mary E. Sellers | Vice Chairman, Chief Risk Officer |
CD&A TABLE OF CONTENTS
The CD&A is organized as follows:
Compensation-Related Highlights
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• | 2016 Compensation Program |
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◦ | Short- and long-term incentive plans are 100% performance-based. |
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◦ | The short-term incentive plan provides for 80% quantitative and 20% qualitative performance measures. |
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◦ | The long-term incentive plan provides for a three-year performance period, with a 3-year cliff vesting period, for the 2016-2018 performance period. |
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◦ | The short- and long-term incentive plan quantitative performance metrics are measured relative to the identified peer group performance and are not absolute. |
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• | Strong Operational and Stock Performance |
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◦ | Total shareholder return of 44.8%, exceeding the average performance of the S&P Supercomposite Regional Bank and S&P Supercomposite Bank Indexes (each excluding those banks with greater than $50.0 billion in assets) and the KBW Regional Bank Index. |
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◦ | Return-on-Equity and Stock Price-to-Book Ratio are key measures of the Company’s financial health and are key performance metrics in the executive compensation program. Return-on-Equity was 15.79% in 2016 and Stock Price-to-Book Ratio was 3.26 as of December 31, 2016, both in the top quartile of peers. Tier 1 Capital Ratio, also a key performance metric in the executive compensation program, was 13.24% as of December 31, 2016, far exceeding the minimum ratio necessary to be characterized as “well-capitalized.” |
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◦ | History of consistent dividends, even through the financial crisis. The Company increased the dividend payable to shareholders commencing in the second quarter of 2016. |
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◦ | Recognition For Excellence |
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▪ | Again rated as Hawaii's Best Bank by the Honolulu Star Advertiser and Honolulu magazine, and continues to be ranked in the top 10 performing large U.S. banks, according to Forbes magazine. |
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▪ | Deposits are rated Aa2 by Moody's Investor Services, making us one of the highest-rated financial institutions nationally and globally. |
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▪ | Received the Financial Services Roundtable's "Corporate Social Responsibility Leadership Award" for the sixth consecutive year. |
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▪ | Again honored with U.S. Small Business Administration's Hawaii Lender of the Year Award for Category 1, which includes financial institutions with assets in excess of $9.0 billion. Provided 58 loans totaling $17 million in Hawaii and Guam. This is the 12th year out of the past 14 years that Bank of Hawaii has earned this recognition. |
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▪ | Again named among Hawaii's "Best Places to Work" as ranked by Hawaii Business magazine, and the No. 3 "Most Family Friendly" large company in the state. |
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• | Continued Alignment of Executive Pay with Company Performance |
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◦ | 80% of CEO total compensation (salary, stock awards (long-term incentives), non-equity incentive plan compensation (short-term incentives), and all other compensation) is performance-based; 100% of short- and long-term incentives are performance-based |
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◦ | Short-term and long-term incentives are tied to rigorous performance metrics, 80% of short-term incentives and 100% of long-term incentives are based on quantitative and relative criteria |
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◦ | Significant share ownership requirements (5x base salary for CEO) |
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• | Consistent Shareholder Engagement |
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◦ | During 2016, we again reached out to major shareholders to solicit their input regarding the design, or any other aspects, of our compensation program. We received no suggestions for changing our approach to compensation, evidencing strong shareholder support for the program. |
Say-on-Pay Results
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◦ | At the 2016 Annual Meeting, our say-on-pay proposal received support from 95% of votes cast. |
Executive Summary
2016 Executive Compensation Program Design
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Pay Elements | 2016 Design Elements |
Short-Term Incentive Plan 100% Performance-Based | 80% quantitative performance metrics o Three performance metrics set at challenging levels relative to peers* weighted as follows: § Return-on-Equity (30%); § Stock Price-to-Book Ratio (30%); and § Tier 1 Capital Ratio (20%). o To achieve full payout, top quartile performance in Return-on-Equity, Stock Price-to-Book Ratio and 65th and above percentile performance in Tier 1 Capital Ratio must occur o To achieve any payout, top two quartile performance must occur with the actual payout determined by performance and metric weighting 20% qualitative performance metrics |
Long-Term Incentive Plan 100% Performance-Based | Three-year plan Three-year sustained performance period Three-year cliff vesting 100% quantitative performance metrics o Three performance metrics set at challenging levels relative to peers* weighted as follows: § Return-on-Equity (40%); § Stock Price-to-Book Ratio (40%); and § Tier 1 Capital Ratio (20%). To achieve full payout, top quartile performance in Return-on-Equity, Stock Price-to-Book Ratio and 65th and above percentile performance in Tier 1 Capital Ratio must occur. To achieve any payout, top two quartile performance must occur with the actual payout determined by performance and metric weighting. |
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*S&P Supercomposite Regional Bank Index (excluding banks with assets > $50.0 billion) as of January 4, 2016 |
Performance Metrics
(100% Performance-Based)
Compensation Policies and Practices
Our executive compensation and corporate governance programs are designed to closely link pay with operational performance and increases in long-term shareholder value while minimizing excessive risk taking. To help us accomplish these important objectives, we have adopted the following policies and practices over time:
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Compensation Program Governance Summary |
ü | Robust shareholder engagement process |
ü | Demonstrated responsiveness to shareholder concerns and general feedback |
ü | Compensation program closely aligns pay with performance |
ü | Significant share ownership requirements (5x base salary for CEO, 2x for other NEOs) |
ü | Significant portion of compensation is variable and performance-based |
ü | No employment or severance agreements with NEOs |
ü | Anti-hedging and anti-pledging stock policies |
ü | Competitive benchmarking to ensure executive officer compensation is aligned to the market |
ü | Regularly conduct assessments to identify and mitigate risk in compensation programs |
ü | Formalized clawback policy |
ü | No tax gross-ups |
ü | Double-trigger change-in-control provisions |
ü | No excessive perquisites |
ü | No repricing of equity incentive awards |
ü | Independent compensation consultant |
ü | Independent Committee |
Business and Performance Overview
The Company is a full-service regional financial institution serving businesses, consumers, and governments, in Hawaii, American Samoa, and the West Pacific. Bank of Hawaii, our principal subsidiary, was founded in 1897.
For management reporting purposes we operate in four business segments: Retail Banking, Commercial Banking, Investment Services, and Treasury and Other. Retail Banking offers a broad range of financial products and services to consumers and small businesses. Loan and lease products include residential mortgage loans, home equity lines of credit, automobile loans and leases, personal lines of credit, installment loans, small business loans and leases, and credit cards. Deposit products include checking, savings, and time deposit accounts. Retail Banking also offers retail insurance products. Products and services from Retail Banking are delivered to customers through 69 branch locations and 449 ATMs throughout Hawaii and the Pacific Islands, e-Bankoh (on-line banking service), a 24-hour customer service center, and a mobile banking service.
Commercial Banking offers products including corporate banking, commercial real estate loans, commercial lease financing, auto dealer financing, and deposit products. Commercial lending and deposit products are offered to middle-market and large companies in Hawaii and the Pacific Islands. Commercial real estate mortgages focus on customers that include investors, developers, and builders predominantly domiciled in Hawaii. Commercial Banking also includes international banking and provides merchant services to its small business customers.
Investment Services includes private banking and international client banking, trust services, investment management, and institutional investment advisory services. A significant portion of this segment’s income is derived from fees, which are generally based on the market values of assets under management. The private banking and personal trust group assists individuals and families in building and preserving their wealth by providing investment, credit, and trust services to high-net-worth individuals. The investment management group manages portfolios utilizing a variety of investment products. Institutional client services offer investment advice to corporations, government entities, and foundations. This segment also provides a full service brokerage offering equities, mutual funds, life insurance, and annuity products.
We concluded 2016 with solid financial performance. During the year our loan balances reached $8.9 billion, an increase of 14% from 2015. Deposit growth also remained strong during the year, increasing to a record level of $14.3 billion, up 8% from 2015. Our asset quality remained stable and our capital and liquidity ratios remained quite strong. The Return-on-Equity for the year was 15.79% and our efficiency ratio improved to 57.01%.
Company Performance Highlights
The following briefly summarizes the Company’s recent stock price and financial performance:
Total Shareholder Return (TSR)
In addition to delivering strong financial performance in 2016, the Company outperformed key market indices, delivering total shareholder return of 44.8%. The Company’s one-year TSR exceeded the average performance of the S&P Supercomposite Regional Bank Index and the S&P Supercomposite Bank Index (each excluding those banks with greater than $50.0 billion in assets), and the KBW Regional Bank Index. The Company’s three-year TSR of 63.4% also exceeded the average performance of the S&P Supercomposite Regional Bank Index and the S&P Supercomposite Bank Index (each excluding those banks with greater than $50.0 billion in assets), and the KBW Regional Bank Index.
Putting the Company’s Longer-Term TSRs in Context. The Company’s one-year and three-year TSRs outperformed all relevant indices. On a longer-term basis, we generated significant shareholder value of 133.8% for the five-year TSR. However, on a relative basis, our five-year TSR slightly lagged that of the relevant indices because the Company successfully navigated the financial crisis and, as such, did not experience the stock price volatility and steep stock declines that many other companies experienced during the period. The Company and management performance remained strong throughout the financial crises and we maintained our unbroken record of paying dividends to our shareholders, increasing the dividend payable to shareholders commencing in the second quarter of 2016. The result is that our longer-term relative TSR is not indicative of how well the Company performed over the last five years.
TSR for the Year Ended December 31, 2016
Key Performance Metrics
Deposit and Loan Growth
Strong Credit Risk Profile
Maintaining a Balanced Approach to Capital Return
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• | Dividends: In 2016, the Company increased its quarterly dividend in the second quarter of 2016 by $0.03 per share from $0.45 to $0.48. The Company further increased the quarterly dividend an additional $0.02 per share to $0.50 commencing in the first quarter of 2017. |
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• | Returning Value to Shareholders: The Company returned $61.8 million in capital to shareholders through share repurchases in 2016. |
Detailed Discussion and Analysis
Executive Compensation Philosophy
At Bank of Hawaii, we believe that executive compensation should reflect strong alignment between pay, performance and shareholders' interests while maintaining a balanced approach to risk and reward. Compensation programs should reinforce support for our vision and be consistent with market compensation trends after taking into account the unique circumstances facing Bank of Hawaii in light of geographic, demographic, and economic conditions in the markets served by the Company. The Human Resources & Compensation Committee ("the Committee") believes that compensation should recognize short- and long-term performance by including both cash and equity components.
The primary focus of the Company's executive compensation program is to encourage and reward performance that supports the Company's long-term business strategies and promotes sustainable growth in shareholder value. The Company believes that its goals are best supported by rewarding its NEOs for outstanding contributions to the Company's success, compensating those officers competitively with similarly situated executive officers, and providing its NEOs with equity to encourage and motivate them to focus on the Company's long-term growth and success.
The Committee is responsible for developing and implementing the executive compensation program. With the support of its independent compensation consultant, the Committee has designed and implemented an executive compensation program that is structured to:
◦Align executive compensation with shareholder value creation;
◦Encourage retention and growth opportunities for executives;
◦Compensate executives for measurable and meaningful levels of Company performance; and
◦Balance performance incentives while not encouraging excessive risk taking by executives.
Executive Compensation Philosophy Drives Performance
As evidenced by the Company’s key performance measures, the Company’s pay for performance approach to compensation facilitates consistent strong performance and growth. The Company achieved diluted earnings per share of $4.23 for the full year of 2016, up 14% from diluted earnings per share of $3.70 in 2015. Net income for the year was $181.5 million, up $20.8 million or 13% from net income of $160.7 million in the previous year. The return on average assets for the full year of 2016 was 1.15% compared with 1.06% in 2015. The return-on-equity for the full year of 2016 was 15.79% compared with 14.82% in 2015. The efficiency ratio for the full year of 2016 was 57.01% compared with 59.99% during the full year of 2015.
During 2016 loan balances continued to grow and reached $8.9 billion at December 31, 2016, up 14% from $7.9 billion at December 31, 2015. Total assets increased to $16.5 billion at December 31, 2016, up from $15.5 billion at December 31, 2015. Deposit growth also remained strong during the year, increasing to a record level of $14.3 billion at December 31, 2016, up 8% from $13.3 billion at December 31, 2015. The Company’s overall asset quality continued to remain strong during 2016. Total non-performing assets were $19.8 million at December 31, 2016 compared with $28.8 million at December 31, 2015.
The Company continued to return value to its shareholders through dividends and share repurchases. In 2016, the Company increased its quarterly dividend in the second quarter of 2016 by $0.03 per share from $0.45 to $0.48. The Company further increased the quarterly dividend an additional $0.02 per share to $0.50 commencing in the first quarter of 2017. The Company also continued its share repurchase program, purchasing 847,964 shares in 2016. From the beginning of the share repurchase program initiated during July 2001 through December 31, 2016, the Company has repurchased 53.6 million shares and returned over $2.0 billion to shareholders at an average cost of $37.84 per share. Total shareholders’ equity was $1.16 billion at December 31, 2016, up from $1.12 billion at December 31, 2015.
Executive Compensation Process
The Committee’s annual process for setting NEOs’ compensation begins in the fourth quarter of each year when the Company’s senior management team sets operating and financial goals for the coming year. Using data and analysis provided by an independent compensation consultant and considering senior management’s operating and financial goals, as well as the market environment, the Committee establishes compensation levels and challenging performance goals for the year.
The compensation program is designed and implemented as follows:
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(1) | The Committee leads a robust process to set and measure challenging goals: Company performance objectives are subject to a robust goal-setting process in which the Committee considers business-driven bottom-up and corporate top-down budgets and market projections. In setting each NEO's total compensation, the Committee considers among other factors, Company performance, shareholder value creation, the competitive marketplace, and the awards given to NEOs in past years. |
Commencing in February of each year, the Committee reviews the annual results of the Company compared to the business plan, and uses this review as the basis for the annual evaluation of the CEO. The Committee reviews the relative performance for the quantitative performance metrics. The CEO does not attend executive sessions of the Committee when his own compensation is being reviewed or determined. The Committee's evaluation is discussed with the full Board, excluding the CEO, and communicated to the CEO by the Lead Independent Director.
Based on similar factors and individual objectives, including an assessment of effective risk management, the CEO, assisted by the Director of Human Resources (herself not an NEO), annually reviews the performance of each of the other NEOs. The conclusions and recommendations based on those reviews, including any recommendations for salary adjustments, annual awards and equity components, are presented to the Committee for consideration.
The Committee believes that retaining discretion to assess the qualitative performance of the CEO and other NEOs gives the Committee members the ability to more accurately reflect individual contributions that cannot be quantified.
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(2) | Substantial ‘at risk’ and variable compensation: 80% of CEO and at least 71% of the other NEOs' total compensation (salary, bonus, stock awards (long-term incentives), non-equity incentive plan compensation (short-term incentives), and all other compensation) is variable and impacted by pre-established Company performance metrics. |
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(3) | Alignment with shareholders: Each NEO is subject to robust stock ownership guidelines that require them to hold a significant number of company shares as long as they remain employed at the Company, with the CEO’s requirement at 5x base salary and other NEOs at 2x base salary. |
Peer Group and the Market Check
Each year, the Committee identifies companies to include in a peer group for purposes of benchmarking executive compensation levels and practices. The Committee selects peer companies with the support of Veritas, an independent compensation consultant. For 2016, the Committee selected both a bank peer group, consisting of regional banks that the company competes against for capital and talent, and a broad-based set of peers that are in different industries but similar in size. Companies selected for the peer groups are:
◦Possible sources of, or destinations for, talent.
◦Comparable in:
▪Size
▪Complexity and organizational structure; and
▪Compensation practices and structures.
◦In some cases, peers of our peer companies.
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Peer Group Companies* |
| Market Capitalization | Revenue | Total Assets | Employee Population (FTE)** |
Bank Peers (dollars in millions) |
Associated Banc-Corp |
| $3,657.4 |
|
| $1,060.2 |
|
| $29,139.3 |
| 4,426 |
BancorpSouth, Inc. |
| $2,907.9 |
|
| $726.9 |
|
| $14,611.5 |
| 4,002 |
Bank of the Ozarks, Inc. |
| $6,371.2 |
|
| $703.1 |
|
| $18,890.1 |
| 2,315 |
Cathay General Bancorp |
| $3,000.2 |
|
| $452.6 |
|
| $14,098.8 |
| 1,122 |
Commerce Bancshares Inc |
| $5,863.2 |
|
| $1,154.4 |
|
| $25,641.4 |
| 4,784 |
Community Bank System Inc. |
| $2,717.5 |
|
| $429.8 |
|
| $8,667.6 |
| 2,274 |
East West Bancorp, Inc. |
| $7,327.7 |
|
| $1,135.9 |
|
| $33,255.3 |
| 2,833 |
First Hawaiian, Inc. |
| $4,858.5 |
|
| $709.3 |
|
| $19,661.8 |
| 2,250 |
First Midwest Bancorp Inc. |
| $2,051.9 |
|
| $509.0 |
|
| $11,422.6 |
| 1,790 |
FNB Corp/FL |
| $3,345.1 |
|
| $813.3 |
|
| $21,844.8 |
| 2,976 |
Fulton Financial Corp |
| $3,257.5 |
|
| $711.0 |
|
| $18,944.2 |
| 3,490 |
Glacier Bancorp Inc |
| $2,772.5 |
|
| $418.3 |
|
| $9,316.9 |
| 2,207 |
Hancock Holding Co |
| $3,589.7 |
|
| $909.9 |
|
| $23,975.3 |
| 3,724 |
Home Bancshares, Inc. |
| $3,900.1 |
|
| $493.0 |
|
| $9,808.5 |
| 1,424 |
Intl Bancshares Corp |
| $2,691.3 |
|
| $499.0 |
|
| $11,937.4 |
| 3,020 |
MB Financial Inc/MD |
| $3,915.1 |
|
| $875.6 |
|
| $19,341.9 |
| 2,980 |
Old National Bancorp |
| $2,450.0 |
|
| $655.5 |
|
| $14,860.2 |
| 2,652 |
Privatebancorp Inc |
| $4,317.9 |
|
| $730.2 |
|
| $20,053.8 |
| 1,292 |
Prosperity Bancshares Inc |
| $4,987.5 |
|
| $751.0 |
|
| $22,331.1 |
| 3,037 |
Signature Bank/NY |
| $8,063.2 |
|
| $1,190.0 |
|
| $39,047.6 |
| 1,122 |
Synovus Financial Corporation |
| $5,024.0 |
|
| $1,172.4 |
|
| $30,104.0 |
| 4,418 |
Texas Capital Bancshares Inc |
| $3,842.3 |
|
| $693.1 |
|
| $22,216.4 |
| 1,329 |
Trustmark Corp |
| $2,410.9 |
|
| $579.8 |
|
| $13,352.3 |
| 2,787 |
UMB Financial Corp |
| $3,822.2 |
|
| $971.4 |
|
| $20,682.5 |
| 3,830 |
Umpqua Holdings Corp |
| $4,135.5 |
|
| $1,109.9 |
|
| $24,744.2 |
| 4,491 |
United Bankshares Inc. |
| $3,749.3 |
|
| $480.7 |
|
| $14,344.7 |
| 1,701 |
Valley National Bancorp |
| $3,070.0 |
|
| $686.6 |
|
| $22,864.4 |
| 2,929 |
Webster Financial Corp |
| $4,978.9 |
|
| $983.0 |
|
| $26,064.7 |
| 2,946 |
Western Alliance Bancorporation |
| $4,969.4 |
|
| $699.1 |
|
| $17,042.6 |
| 1,446 |
Wintrust Financial Corp |
| $3,757.0 |
|
| $1,044.0 |
|
| $25,668.6 |
| 3,770 |
Average for Bank Peer Group |
| $4,060.2 |
|
| $778.3 |
|
| $20,131.2 |
| 2,779 |
Bank of Hawaii Corporation |
| $3,781.4 |
|
| $614.9 |
|
| $16,492.4 |
| 2,122 |
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Peer Group Companies* |
| Market Capitalization | Revenue | Employee Population (FTE)** |
Size-Based Peers*** (dollars in millions) | | | |
ABIOMED, Inc. |
| $4,737.6 |
|
| $385.7 |
| 747 |
Alexander & Baldwin, Inc. |
| $2,198.6 |
|
| $471.6 |
| 1,496 |
Aspen Technology, Inc. |
| $4,223.0 |
|
| $472.1 |
| 1,396 |
Bio-Techne Corp. |
| $3,836.6 |
|
| $517.2 |
| 1,560 |
Cavium, Inc. |
| $4,183.7 |
|
| $478.1 |
| 1,005 |
CEB Inc. |
| $1,953.0 |
|
| $938.6 |
| 4,600 |
Choice Hotels International Inc. |
| $3,144.4 |
|
| $927.4 |
| 1,331 |
Cognex Corporation |
| $5,450.1 |
|
| $489.2 |
| 1,305 |
Compass Minerals International Inc. |
| $2,647.2 |
|
| $984.1 |
| 1,984 |
El Paso Electric Co. |
| $1,884.3 |
|
| $875.8 |
| 1,100 |
Five Below, Inc. |
| $2,193.1 |
|
| $938.7 |
| 4,550 |
Knight Transportation Inc. |
| $2,645.1 |
|
| $1,119.7 |
| 6,196 |
Simpson Manufacturing Co., Inc. |
| $2,080.2 |
|
| $845.2 |
| 2,498 |
Tallgrass Energy Partners, LP |
| $3,421.9 |
|
| $594.8 |
| 0 |
WD-40 Company |
| $1,657.1 |
|
| $377.4 |
| 445 |
Average for Size-Based Peer Group |
| $3,083.7 |
|
| $694.4 |
| 2,014 |
Bank of Hawaii Corporation |
| $3,781.4 |
|
| $614.9 |
| 2,122 |
*Peer data provided by Veritas Executive Compensation Consultants as of December 31, 2016, or earlier, based on available data as of January 25, 2017
**FTE represents Full-Time Equivalent Employees
***Size-based peers selected based on being within 50-200% of Bank of Hawaii Corporation in terms of each of average market capitalization, revenue, and average enterprise value
After selecting the peer companies, the Committee does not target a specific relative level of compensation but considers the median levels (the 50th percentile) of the following when determining target pay: (1) base salaries, (2) total cash compensation, including annual incentives on both an actual and target basis, and (3) total direct compensation including long-term incentives at both actual and target levels. If NEO base salaries, total cash compensation, or target or actual incentive compensation result in above-median compensation, it is directly because of measurable Company and/or individual executive performance.
S&P Supercomposite Regional Bank Index
In addition to bank and size-based peer groups, the Company benchmarks key performance metrics and the compensation program against the companies included in the S&P Supercomposite Regional Bank Index, excluding those companies with assets in excess of $50.0 billion. The S&P Supercomposite Regional Bank Index provides an appropriate group for comparison purposes because these are the companies with which the Company competes for capital and talent. The Committee concluded that the Company’s business mix and source of executive talent for the Company are well represented in the S&P Supercomposite Regional Bank Index.
Role of the Compensation Consultant
The Committee is responsible for retaining its compensation consultant and for determining the terms and conditions, including engagement fees. The Committee determines whether the consultant's services are performed objectively and free from the influence of management. The Committee's independent compensation consultant is Veritas. The compensation consultant reports directly to the Committee, takes instructions solely from the Committee, and performs no other services for the Company. The Committee Chairman pre-approves all compensation consulting engagements, including the nature, scope and fees of assignments. In 2016, the Committee considered the factors delineated by the SEC in Rule 10C-1 and determined that Veritas was an independent compensation consultant and that the firm’s work did not raise a conflict of interest with the Company.
In 2016, Veritas helped to ensure that the Company's executive compensation practices were competitive, appropriately designed, and were aimed at linking executive compensation to the business and strategic objectives of the Company. Veritas also provided the Committee with market data and an analysis of competitive compensation for the NEOs.
Compensation and Risk Management
Compensation risks are assessed and managed in the context of the Company's business strategies. The Committee monitors the Company's financial and non-financial performance throughout the year as well as the Company's risk profile and risk management processes to ensure that the Company's compensation policies do not promote inappropriate conduct, or unnecessary or excessive risks that may threaten the value of the Company (see page 19 for greater detail). Several areas are reviewed by the Committee including, but not limited to, how risk management is built into incentive compensation for the Company's executive management, the specific risk profile for a community bank as it relates to loans and investment securities, the controlled and disciplined approach in the compensation structure of the Company, the implementation of new processes with regard to qualitative versus quantitative measures of management performance, and the refinement of best practices.
The Committee also believes that compensation should recognize short- and long-term performance and may include both cash and equity components. The composition of components may vary from year to year based on individual, market and other factors. The Committee does not adhere to a specific formula when determining the mix of pay elements, or the allocation between cash and non-cash compensation or among non-cash forms of pay.
In the following table, neither total compensation nor any element of cash and non-cash compensation is formally benchmarked against a peer group of companies, although the Committee uses the peer group data as a reference. In making compensation decisions, the Committee considers individual performance, experience in the position, breadth of duties, and pay parity among positions of comparable responsibility. The Committee also reviews market data to verify that compensation is competitive and within market ranges.
Elements of the Compensation Program
In order to ensure compensation is tightly linked to long-term shareholder value creation, the Board and the Committee have implemented a well-structured executive compensation program that balances short-term financial results with long-term value through sustainable business growth in our market. To that end, the compensation program uses a number of short- and long-term forms of executive compensation, each specifically structured to incentivize one or more aspects of Company performance the Committee believes are critical to driving long-term shareholder value.
Each NEO receives a balance of variable and fixed compensation. The following describes the various forms of compensation:
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Pay Elements | Components | Rationale for Form of Compensation | |
Base Salary | Cash | • To attract and retain executive talent • To provide a fixed base of compensation generally aligned to peer group levels |
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Short-Term Incentive | Annual Cash Bonus | • To drive the achievement of key business results on an annual basis • To recognize individual executives based on their specific and measurable contributions • To structure a meaningful amount of annual compensation as performance-based and not guaranteed |
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Long-Term Incentive |
Performance Shares (Restricted Stock Grants and Restricted Stock Units) | • To drive the sustainable achievement of key long-term business results • To directly align the interests of executives with shareholders • To structure a meaningful amount of long-term compensation as performance-based and not guaranteed |
2016 Base Salary
Base salary is driven by each individual's responsibilities. The Committee also considers competitive compensation data provided by Veritas. Base salaries are generally established in connection with recruiting or retaining qualified executive officers. The Committee reviews salary levels as part of the Company's annual performance review process, as well as upon promotion or other changes in job responsibility. Merit-based increases to salaries for executive officers other than the CEO are determined by the Committee and include the CEO's assessment of individual performance and his recommendation.
In recommending base salaries, the CEO considers, among other factors, the needs of the Company, internal pay parity among positions of comparable responsibility, and individual performance and contribution to the Company. The Committee also looks at market survey data to verify that salaries are competitive and within market ranges.
Based upon the foregoing, including peer group analysis, market data and recommendations by Veritas, the Committee approved, effective April 1, 2016 the following NEO base salaries which are unchanged from the previous year:
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Name | Base Salary Effective April 1, 2016 ($) |
Peter S. Ho | 780,000 |
Kent T. Lucien | 436,000 |
Wayne Y. Hamano | 357,000 |
Mark A. Rossi | 436,000 |
Mary E. Sellers | 436,000 |
2016 Short-Term Incentive Compensation
The CEO and other NEOs participate in the Executive Incentive Plan (the "EIP"), the Company's short-term incentive plan for executives. The EIP is a 100% performance-based short-term incentive plan.
The EIP provides for a maximum incentive pool of 3% of the Company's net income before taxes for the fiscal year. At the beginning of the performance period, each participating executive is allocated a maximum percentage of the incentive pool. For 2016, the Committee allocated a maximum percentage of 30% to Mr. Ho and 12% to Ms. Sellers and Messrs. Lucien and Rossi and 8.5% to Mr. Hamano. The Company has set a target award of 100% of base salary for the CEO, with a threshold or minimum payout of 50% and maximum payout of 250% of target. To achieve any payout, top two quartile performance must occur with actual payout determined by performance and metric weighting. Company performance below the third quartile of the quantitative measures results in forfeiture of the entire weighted opportunity for each of the quantitative measures. Ms. Sellers and Messrs. Lucien and Rossi have a target award of 80% of base salary and Mr. Hamano has a target award of 70% of base salary. Their threshold or minimum payout is 50% of target and maximum payout is 200% of target. Similar to the CEO, to achieve any payout, top two quartile performance must occur with actual payout determined by performance and metric weighting.
The following chart compares the targeted goals of each quantitative performance metric with actual results:
The following table describes the Short-Term Incentive Plan's disciplined other short-term metrics and achievements of the CEO and NEOs for 2016:
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| | | |
| 2016 Disciplined Other Short-Term Metrics – 20% Weighting * |
| Strategic Initiatives | Community Presence/Reputation | Leadership Development/Succession |
| Employee engagement ◦ Hawaii Business magazine’s “Best Places to Work 2016” for large companies and #3 in “Most Family Friendly” category◦ Launched College Assistance Program which provides tuition reimbursement for employees who are aspiring to earn their first bachelor's degree Total loans and leases up 14% ◦ Commercial lending portfolio up 15% Total deposits up 8%, primarily due to higher commercial and consumer core deposits Overall asset quality remained strong Efficiency ratio improved to 57.01% "Branch of Tomorrow" - offers 21st-century banking experiences, with new technology to support greater convenience and personal interaction to better meet the immediate and future needs of customers. Renovated Pearl City Branch is the first "Branch of Tomorrow" which opened its doors in 2016 Improve customer experience ◦ Launched “Cardless Cash” function via a mobile app which can be used to withdraw funds at any cardless cash enabled BOH ATM; provides additional convenience and security ◦ Introduced the Commercial Purchase Card which allows business customers to make business-to-business electronic disbursements, simplify the purchase-to-pay process and improve efficiencies via a secure and low-fraud channel◦ Launched online consumer lending application for home equity loans, installment loans and personal flexline Overall customer satisfaction has remained high with more than two-thirds of our customers very satisfied; overall customer experience metric improved over 2015 Active management of capital and risk ◦ Shares repurchased in 2016 returned $61.8 million in capital to shareholders◦ Regulatory and compliance initiatives | CEO is director at Federal Reserve Bank of San Francisco - CEO continues to serve his second term as a member of the Board of Directors of the Federal Reserve Bank of San Francisco Naval Heritage Award presented to CEO by the United States Navy Memorial Foundation High levels of industry and press recognition: ◦ Rated Aa2 by Moody’s Investor Services (one of the highest rated financial institutions nationally and globally)◦ Forbes magazine - ranked No. 7 among America’s 100 largest banks for performance; ranked in top 10 for past eight years◦ U.S. Small Business Administration - SBA Lender of the Year - named in Category 1 for large banks◦ Financial Services Roundtable - “Corporate Social Responsibility Leadership Award” for the sixth consecutive year◦ Rated as Hawaii’s “Best Bank” by Honolulu Star Advertiser and Honolulu magazine Significant charitable/community activity: ◦ Employee Giving Programs raised more than $834,000 for local non-profits, an all-time high◦ Employee Volunteer Program held 244 events and contributed more than 12,800 volunteer hours to our communities◦ Bank of Hawaii Foundation Scholarship Fund awarded 35 college scholarships totaling $122,000 to children and grandchildren of Bank of Hawaii employees | Robust executive development process and succession review Promotion and external hires: 67% of movement to executive and senior officer roles were internal promotions; 33% were strategic external hires to fill key business needs Personal development: 36% of executive and senior officers in expanded or new roles through job rotation, position modification and/or promotion Skills and knowledge development: 75% of executive and senior officers participated in formal skills or knowledge development through seminars and/or conferences Non-profit board service: 65% of executive and senior officers furthering their development through service on non-profit boards Expanded Kupuna Series development sessions for executive and senior officers to include vendor partners as well as peer learning Continued to invest in development, skill enhancement and self-improvement for employees through the Pathways to Professional Excellence program, Bank Associate program and robust paid student intern program |
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| * 20% represents CEO weighting and performance. For all other NEOs, this represents 10% of their weighting with the remaining 10% based on accomplishment of their pre-determined individual management/business objectives. |
In evaluating the CEO performance and resulting EIP payment, the Committee employed a weighted scoring system based upon achievement of the performance metrics referenced above. Eighty percent of the performance metrics are quantitative and were selected by the Committee as strong measures of management's ability to drive profitability (Return-on-Equity), enhance shareholder equity (Stock Price-to-Book Ratio) and efficiently and effectively manage capital and risk (Tier 1 Capital Ratio), resulting in both short- and long-term shareholder value. The Committee reviewed and discussed the CEO's performance against the EIP metrics and objectives, and taking into consideration the successful completion of the Company's 2014-2016 Strategic Plan, determined the final EIP award based upon the results of the pre-determined quantitative metrics and the disciplined other short-term metrics. The Committee certified fourth (top) quartile performance for the Return-on-Equity (100.0 percentile), Stock Price-to-Book Ratio (98.5 percentile), and in the third quartile for Tier 1 Capital Ratio (74.6 percentile) metrics. Assessing performance of the qualitative measures, the Committee reviewed and discussed in detail the CEO's individual contributions and rated his performance "OUTSTANDING" in the pre-determined areas of community presence, reputation, leadership development, succession planning and strategic initiatives.

In evaluating the other NEOs, the Committee considered the recommendations of the CEO, and reviewed and discussed the other NEOs performance against the EIP metrics and objectives, the other NEOs performance in their respective managerial spheres of influence (a 10% performance evaluation criteria applicable only to the other NEOs), the individual contributions and achievements of the other NEOs and the successful completion of the Company's 2014-2016 Strategic Plan. The Committee gauged the other NEOs individual performance and the Company performance against the established performance metrics and discussed the individual NEO sphere of influence achievements for each of the other NEOs.
Kent T. Lucien
In 2016, Mr. Lucien served as Vice Chairman and Chief Financial Officer of the Company. In his capacity as Chief Financial Officer, he maintained overall responsibility for the Company’s financial areas including treasury, accounting and tax and served as a member of the Company’s Managing Committee and held responsibility for facilities management and investor relations. Additionally, Mr. Lucien served as Chair of the Company’s Asset and Liability Management Committee.
The Committee noted Mr. Lucien’s exceptional performance in driving shareholder value through the overall financial performance of the Company and investor interaction and communication. In addition, Mr. Lucien’s role in capital management has been key in returning approximately 80% of earnings to shareholders in dividends and share repurchases. He was also active in risk management initiatives and programs including internal financial controls, credit risk and information security. In 2016, he led many successful Company strategic initiates and effectively developed key staff members in preparation for their next assignments. Assessing performance of the qualitative measures set out on the table on page 42, and the sphere of influence measures referenced above, the Committee reviewed and discussed in detail Mr. Lucien’s individual contributions and rated his qualitative performance accomplishments as OUTSTANDING.
Effective March 1, 2017 Mr. Lucien was appointed to the position of Vice Chairman and Chief Strategy Officer, as a part of the Company’s ongoing succession planning and development. As Vice Chairman and Chief Strategy Officer, Mr. Lucien will continue his responsibilities as a member of the Company’s Managing Committee and the development and execution of the bank’s key strategic initiatives, including the “Branch of Tomorrow” modernization project and leveraging information and technology to reshape the delivery of banking services, products and experiences with a customer focus. He will continue to oversee the bank’s Corporate Facilities and Real Estate Department.
Wayne Y. Hamano
Mr. Hamano serves as Chief Commercial Officer and Vice Chairman. He is a member of the Company’s Managing Committee and has overall responsibility for the Commercial Banking Group, Community Banking, and Branch Division. The Commercial Banking Group includes the Company’s corporate banking, Hawaii commercial middle market banking, commercial real estate, equipment leasing, auto dealer flooring, cash management and merchant services businesses. The commercial banking operations in the West Pacific, which includes commercial banking in Guam, Saipan, Palau and American Samoa, are also included within the Commercial Banking Group. Community Banking includes the 69 branches across the state of Hawaii, Guam, Saipan, Palau and American Samoa.
The Committee discussed Mr. Hamano’s role in leading the Commercial Banking Group to outstanding loan and deposit growth, resulting in net income growth and successful completion of the Company’s 2014-2016 strategic plan. In 2016, under Mr. Hamano’s leadership, the Group produced 14.5% loan growth and 7% deposit growth in 2016, exceeding budgeted targets in both areas. Net income grew from $58.4 million in 2015 to $77.3 million in 2016; a 32% improvement.
Mr. Hamano was further recognized for his leadership of the Branch Division to support the continued success of branch delivery while continuing its strategic transformation initiatives in 2016. A 13% increase in sales revenue over 2015 was generated while reducing overall FTE count through technology and innovation. Mr. Hamano has also successfully organized his teams and developed leadership succession.
In recognition of his stellar, industry leading performance, the Committee rated Mr. Hamano OUTSTANDING and approved a final incentive payment which exceeded the maximum range by $50,000.
Mark A. Rossi
Mr. Rossi serves as Chief Administrative Officer, General Counsel, Corporate Secretary and Vice Chairman. He is a member of the Company's Managing Committee and is Chair of the Company's Benefit Plans Committee, overseeing all of the Company's employee retirement plans. He also serves as Chair of the Business Continuity Committee, leading the team through various exercises to ensure the Company is prepared for any business disruption. In 2016, Mr. Rossi's responsibilities included Legal, Human Resources, Employee and Customer Experience, Corporate Communications, Government Relations, Corporate Security, Business Continuity, Corporate Insurance Services, Corporate Secretary, and Board corporate governance and related issues.
The Committee discussed Mr. Rossi's contributions in his area of responsibilities in 2016. Mr. Rossi demonstrated disciplined budget management within established budgets and forecasts, while guiding his team through top performance and service to the Company. The Committee noted his significant contribution in the area of corporate governance in proactively counseling the Board and Board appointed Committees and insuring that all Board and Committee agendas and meeting materials were complete and distributed in a timely manner. In 2016, Mr. Rossi again led the corporate governance shareholder outreach team in preparation for the Company's annual shareholder meeting and insured that all Board related public filings were accurate and timely prepared and filed. The Corporate Secretary Group led the adoption of Board meeting technology initiatives which included conversion to an electronic platform for all Board and Committee meeting agendas and materials.
The Committee also noted Mr. Rossi's participation in leading the successful transition of banking services to the newly created Territorial Bank of American Samoa, receiving high praise and thanks from the American Samoan Government.
Assessing performance of the qualitative measures set out on the table on page 42, and the sphere of influence measures reference above, the Committee reviewed and discussed in detail Mr. Rossi's individual contributions and rated his qualitative performance accomplishments as OUTSTANDING.
Mary E. Sellers
Ms. Sellers serves as Chief Risk Officer and Vice Chairwoman. In her role as Chief Risk Officer, she is responsible for overseeing the management of risk across the organization and is a member of the Company’s Managing Committee, as well as Chair of Risk Council, the Commercial and Retail Credit Policy Committees and the Operational Risk Committee. Areas reporting to her include Commercial and Retail Credit Administration and Approval, Special Assets, Credit Policy and
Training, Commercial and Retail Credit Analytics and Reporting, Collections, Enterprise Risk Management, Model Risk Management, Corporate Compliance, Data Governance, and Business Process and Improvement.
The Committee noted Ms. Sellers’ diverse and complex areas of responsibilities within the Company in critical areas that touch virtually all performance segments of the Company. Specifically, the Committee discussed Ms. Sellers' exemplary performance in 2016 and her accomplishments and responsibilities which include ensuring that the Company has the appropriate integrated risk management framework and infrastructure to support its strategy and business operations while ensuring risk is managed in accordance with the Risk Appetite established by the Board of Directors. Ms. Sellers successively led a number of risk management initiatives in 2016, to include expanded credit risk analytics, which have supported loan growth in both the Commercial and Consumer portfolios while ensuring underwriting and asset quality standards are maintained and aligned with the Company’s Risk Appetite. Asset quality metrics remained strong; net charge-offs for the full year 2016 were 0.04% of total average loans and leases, in part, due to the successful full recovery of a previously charged-off commercial loan, and non-performing assets as a percentage of total loans and leases and foreclosed real estate were 0.22% as of December 31, 2016.
The Committee further discussed Ms. Sellers' success in leading the continued refinement of the Company’s risk management infrastructure to support the Company’s strategic initiatives while concurrently addressing emerging areas of risk focus. This included participation in initiatives to strengthen the information security environment, compensation and sales management practices, the introduction of new products, expanding delivery channels, and key operating processes. Ms. Sellers also displayed strong leadership in the continued development of key staff members in the Risk group, while successfully retaining and recruiting additional staff for leadership roles as part of succession planning.
Assessing performance of the qualitative measures set out on the table on page 42, and the sphere of influence measures referenced above, the Committee reviewed and discussed in detail Ms. Sellers’ individual contributions and rated her qualitative performance accomplishments as OUTSTANDING.
The Committee approved the CEO and the other NEO EIP awards as follows:
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| | | | | | |
Name | Annual Base Salary as of 12/31/2016 ($) | Target Annual Incentive (%) | Final Incentive Payout (% of Annual Base Salary) | Final Incentive Award ($) |
Peter S. Ho | 780,000 |
| 100% | 250% | 1,950,000 |
|
Kent T. Lucien | 436,000 |
| 80% | 160% | 697,600 |
|
Wayne Y. Hamano | 357,000 |
| 70% | 154% | 550,000 |
|
Mark A. Rossi | 436,000 |
| 80% | 160% | 697,600 |
|
Mary E. Sellers | 436,000 |
| 80% | 160% | 697,600 |
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2016 Long-Term Incentive Compensation
In setting the CEO's and other NEOs' long-term incentive compensation, the Committee considered, among other factors, Company performance, shareholder value creation, the competitive marketplace, the awards given in past years, peer group analysis and other market factors. In applying these factors, the Committee determined the number of performance shares to be awarded under the 2016-2018 long-term incentive plan to the CEO and other NEOs, as described in the Grants of Plan-Based Awards in 2016 table on page 53. The Company’s 2016-2018 long-term incentive plan is 100% performance-based and awarded in the form of performance shares with a three-year cliff vesting schedule. The plan requires achievement of a three-year sustained performance period with performance metrics and hurdles as follows:
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|
2016 Design Elements |
Three-year plan Three-year sustained performance period Three-year cliff vesting 100% quantitative performance metrics o Three performance metrics set at challenging levels relative to peers* weighted as follows: § Return-on-Equity (40%); § Stock Price-to-Book Ratio (40%); and § Tier 1 Capital Ratio (20%). To achieve full payout, top quartile performance in Return-On-Equity and Stock Price-to-Book Ratio and 65th and above percentile performance in Tier 1 Capital Ratio must occur To achieve any payout, top two quartile performance must occur with the actual payout determined by performance and metric weighting |
*S&P Supercomposite Regional Bank Index (excluding banks with assets > $50.0 billion) as of January 4, 2016
As indicated above, performance shares awarded to the NEOs pursuant to the 2016 Long-Term Incentive Plan require a three-year (2016-2018) sustained performance period, with the three-year cliff vesting determined at the conclusion of the three-year performance period.
Benefits and Retirement Plans Sponsored by the Company
Executive officers are eligible to participate in health and insurance plans, retirement plans, and other benefits generally available to full-time employees. This is consistent with the Company’s belief in offering employees comprehensive health and retirement benefits that are competitive in our markets. The retirement programs assist employees in planning for their retirement income needs. Benefits under the qualified health and retirement plans are not directly tied to specific Company performance. Employees who meet service requirements are eligible to participate in the Company sponsored Retirement Savings Plan (“RSP”), a tax-qualified defined contribution pension plan. The Committee regularly reviews the value of benefits.
The Committee has adopted the Bank of Hawaii Corporation Executive Deferred Compensation Program (the “Deferred Compensation Program”), a program that offers senior management (including the NEOs) the ability to defer up to 80% of base salary and 100% of incentive amounts under the Executive Incentive Plan in order to allow executives to defer, along with the receipt of the compensation, the income tax liability on such payments (including any appreciation in value as a result of the deemed investment of such amounts) until receipt. This program allows participants to manage their cash flow and estate planning needs.
The Company also maintains the Bank of Hawaii Retirement Savings Excess Benefit Plan (the “Excess Benefit Plan”), a nonqualified supplemental retirement benefit plan that compensates participants for benefits that would otherwise be payable under the Company's Retirement Savings Plan but for certain Internal Revenue Code (“IRC”) limitations. The Committee believes that this plan is important to ensure equitability in retirement funding amounts between those that fall below and above the IRC limitations.
Gains from long-term incentive compensation are not included in the determination of nonqualified deferred compensation benefits.
Perquisites
The Company offers and provides perquisites to NEOs that the Committee believes are competitive, yet reasonable in attracting and retaining a strong executive team. The Committee believes perquisites should be limited in scope and value.
Change-in-Control and Severance Arrangements
The Committee believes that an essential component to protecting and enhancing the best interests of the Company and its shareholders is to provide for the protection of its executive team in the event of a change-in-control of the Company. Change-in-control benefits play an important role in attracting and retaining key executives. The payment of such benefits ensures a smooth transition in management following a change-in-control by giving an executive the incentive to remain with the Company through the transition period, and, in the event the executive's employment is terminated as part of the transition, by compensating the executive with a degree of financial and personal security during a period in which he or she is likely to be unemployed.
The Change-in-Control Retention Plan (the “Retention Plan”), provides benefits only in the event that a participant's employment is terminated by the Company without cause or by the participant for “good reason” within 24 months following a change-in-control. The Committee believes that this encourages executives to remain with the Company upon a change-in-control. The key provisions of the Retention Plan for NEOs, including the CEO and vice chairmen, are:
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• | Severance benefit - a “two times base salary and bonus” payment which is payable in the month following termination of employment. |
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• | Payment for non-competition - an additional “one times base salary and bonus” payment that is payable only if the executive complies with the 12-month non-competition restrictions specified under the Retention Plan. |
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• | In addition to non-competition restrictions, the Retention Plan imposes non-disclosure, non-solicitation and non-disparagement restrictions on participants. |
Each of the NEOs participates in the Retention Plan. See the discussion under "Change-in-Control, Termination, and Other Arrangements" on page 56 for additional information.
No Excise Tax Gross-Ups
The Retention Plan does not permit the Company to pay any tax gross up payments to executives in connection with any payment or benefit under the Plan. In addition, the Retention Plan limits any payment or benefit under the plan to an amount that would not be subject to Excise Tax even if the benefits would be substantially eliminated as a result of this limit.
Vesting of Equity Incentive Compensation on Change-in-Control (Double-Trigger)
The terms of the Company's 2014 Stock and Incentive Compensation Plan provide for full acceleration of vesting of restricted stock, restricted stock units, and stock options upon the occurrence of a change-in-control of the Company (as defined in the Retention Plan, which requires, among other things, a double-trigger termination for vesting to occur). The Committee believes that it is generally appropriate to fully vest equity and incentive-based awards to employees in a change-in-control transaction because such a transaction may often cut short or reduce the employee's ability to realize value with respect to such awards. Similarly, the Executive Incentive Plan provides that incentive awards will, upon a change-in-control of the Company, be prorated as though the applicable performance period ended on the change-in-control date and will be calculated as an amount equal to two times a participant's incentive allocation for the prorated performance period.
Other Matters
Stock Ownership Requirements
The Committee believes that significant ownership of our common stock by our executives directly aligns their interest with those of our shareholders and also helps balance the incentives for risk-taking inherent in equity-based awards. Under the Company's executive stock ownership guidelines, the CEO must own Company common stock having a market value equal to at least five times base salary and vice chairmen must own Company stock having a market value equal to at least two times base salary. Stock ownership includes the value of vested stock options, restricted stock, restricted stock units from qualified plans, and other stock held by the executive. The guidelines require the CEO to comply with the stock ownership levels within five years of the date hired or promoted to such position within the Company; for all other NEOs the attainment period is three years. As of December 31, 2016, all of the NEOs satisfied the stock ownership guidelines.
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Officer | Stockholding Guideline (multiple of base salary) |
Chairman and CEO | 5x |
Vice Chairmen | 2x |
Clawback Policy
To the extent permitted by law, if the Committee determines that any bonus, incentive payment or equity-based compensation has been awarded or received by an executive officer and that such compensation was based on any financial results or operating metrics that were satisfied as a result of such officer’s fraudulent or intentional illegal conduct, as defined by applicable law, then the Committee shall recover from the officer such compensation (in whole or in part) as it deems appropriate under the circumstances. In determining whether to recover such payment, the Committee shall take into account such considerations as it deems appropriate, including whether the assertion of a claim may violate applicable law or prejudice the interests of the Bank in any related proceeding or investigation. Further, following a restatement of the Bank’s financial statements, on the recommendation of the Audit & Risk Committee, the Committee shall cause the Bank to recover any compensation that is required to be recovered by Section 304 of the Sarbanes-Oxley Act of 2002.
Anti-Hedging and Pledging Policies
The Company's Securities Trading Policy specifically prohibits directors and employees from hedging the risk associated with the ownership of Bank of Hawaii Corporation's common stock. The Policy also prohibits directors and employees from pledging transactions involving Bank of Hawaii Corporation common stock as collateral, including the use of a traditional margin account with a broker-dealer. No officers or directors are parties to transactions involving the hedging or pledging of Company stock.
Tax Considerations
Section 162(m) of the IRC limits the deductibility of compensation paid to certain executive officers in excess of $1,000,000, but excludes “performance-based compensation” from this limit. To maintain flexibility in compensating executive officers, the Committee does not require all compensation to be awarded in a tax deductible manner and compensation payable to our executive officers may exceed the Section 162(m) deductible limit at times. However, it is the intent of the Committee that executive compensation be deductible under the provisions of Section 162(m) to the fullest extent possible and consistent with overall corporate goals. In 2016, $36,179 of compensation paid to one executive officer was not deductible by the Company under Section 162(m).
EXECUTIVE COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation paid to or earned by our named executive officers for each of the fiscal years indicated. |
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Name and Principal Position | | Year | | Salary ($)(1) | | Bonus ($)(2) | | Stock Awards ($)(3) | | Option Awards ($) | | Non-Equity Incentive Plan Compensation ($)(4) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | | All Other Compensation ($)(6) | | Total ($) |
Peter S. Ho | | 2016 | | 780,000 |
| | — |
| | 2,096,576 |
| | — |
| | 1,950,000 |
| | 1,260 |
| | 200,019 |
| | 5,027,855 |
|
Chairman of the Board, | | 2015 | | 776,077 |
| | — |
| | 2,318,779 |
| | — |
| | 1,950,000 |
| | — |
| | 150,563 |
| | 5,195,419 |
|
Chief Executive Officer & | | 2014 | | 794,424 |
| | — |
| | 5,680,158 |
| | — |
| | 1,250,000 |
| | 2,358 |
| | 141,969 |
| | 7,868,909 |
|
President | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Kent T. Lucien | | 2016 | | 436,000 |
| | — |
| | 550,223 |
| | — |
| | 697,600 |
| | — |
| | 84,787 |
| | 1,768,610 |
|
Vice Chairman, | | 2015 | | 433,776 |
| | — |
| | 515,561 |
| | — |
| | 495,000 |
| | — |
| | 78,773 |
| | 1,523,110 |
|
Chief Financial Officer | | 2014 | | 443,942 |
| | 425,000 |
| | 912,232 |
| | — |
| | 470,000 |
| | — |
| | 96,970 |
| | 2,348,144 |
|
| | | | | | | | | | | | | | | | | | |
Wayne Y. Hamano | | 2016 | | 357,000 |
| | — |
| | 550,223 |
| | — |
| | 550,000 |
| | 3,406 |
| | 74,217 |
| | 1,534,846 |
|
Vice Chairman, | | 2015 | | 355,170 |
| | — |
| | 515,561 |
| | — |
| | 450,000 |
| | — |
| | 65,118 |
| | 1,385,849 |
|
Chief Commercial Officer | | 2014 | | 358,278 |
| | 450,000 |
| | 912,232 |
| | — |
| | 410,000 |
| | 102,039 |
| | 87,418 |
| | 2,319,967 |
|
| | | | | | | | | | | | | | | | | | |
Mark A. Rossi | | 2016 | | 436,000 |
| | — |
| | 550,223 |
| | — |
| | 697,600 |
| | — |
| | 83,911 |
| | 1,767,734 |
|
Vice Chairman, Chief | | 2015 | | 433,776 |
| | — |
| | 515,561 |
| | — |
| | 495,000 |
| | — |
| | 78,101 |
| | 1,522,438 |
|
Administrative Officer, | | 2014 | | 443,942 |
| | — |
| | 912,232 |
| | — |
| | 470,000 |
| | — |
| | 73,575 |
| | 1,899,749 |
|
General Counsel, & | | | | | | | | | | | | | | | | | | |
Corporate Secretary | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Mary E. Sellers | | 2016 | | 436,000 |
| | — |
| | 550,223 |
| | — |
| | 697,600 |
| | 5,392 |
| | 67,970 |
| | 1,757,185 |
|
Vice Chairman, | | 2015 | | 427,565 |
| | — |
| | 515,561 |
| | — |
| | 495,000 |
| | — |
| | 63,398 |
| | 1,501,524 |
|
Chief Risk Officer | | 2014 | | 419,278 |
| | — |
| | 912,232 |
| | — |
| | 470,000 |
| | 17,518 |
| | 56,831 |
| | 1,875,859 |
|
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(1) | Messrs. Ho and Lucien received no fees or compensation for their services on the Board of Directors. The Company pays on a bi-weekly basis. In 2016 and 2015, there were 26 payrolls in the year; however, in 2014 there was an additional payroll. The 27th payroll is an anomaly to the bi-weekly pay schedule that cycles through every 11 years, and does not indicate a decrease in the NEOs’ base salaries column. |
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(2) | For Messrs. Lucien and Hamano, amounts reported in this line include retention payments made pursuant to employment agreements entered in 2010 and, amended from time to time to extend the retention period. The Company does not generally have employment agreements with its executives. However, the Committee has from time to time entered into agreements to retain key executives. In connection with the Company’s 2010 leadership transition, the Company entered into Retention Agreements with Messrs. Lucien and Hamano. The agreements, as amended, provided for retention payments of $425,000 to Mr. Lucien and $450,000 to Mr. Hamano in August 2014 subject to their continued employment at the Company through July 31, 2014. |
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(3) | This column represents the aggregate grant date fair value of restricted stock and restricted stock units granted to each of the NEOs in accordance with Accounting Standards Codification ("ASC") Topic 718, "Compensation - Stock Compensation." Restricted stock and restricted stock unit awards are valued at the closing price of the Company's common stock on the date of the grant. |
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(4) | All amounts reported under this column relate to awards earned under the Executive Incentive Plan, as described on page 41. |
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(5) | This column represents the annual change in the actuarial present value of accumulated benefits under the Employees’ Retirement Plan of Bank of Hawaii. Messrs. Ho and Hamano and Ms. Sellers are the only NEOs who are participants of this plan, which was frozen at the end of 1995. For 2016, the increase in value of the pension benefits from the prior measurement period is primarily due to the decrease in discount rates (from 4.70% to 4.45% for discount rate; from segment rates 1.76%, 4.15%, and 5.13% to segment rates 1.79%, 3.80%, and 4.71% for lump sum interest rates). For Mr. Ho, the value also increased slightly due to the update in the lump sum mortality table assumption (annual update from 2016 to 2017). For Mr. Hamano and Ms. Sellers, the increase in the value was offset by the change in mortality projection scale assumption (from MMP-2007 to MMP-2016). For 2015, Messrs. Ho and Hamano's pension value declined by $249 and $1,254, respectively. For 2015, Ms. Sellers' pension value declined by $1,627. For 2014, the increase in the value of the pension benefits from the prior measurement date is primarily due to the decrease in the discount rate used to measure the accumulated value of benefits (from 5.22% to 4.25%). In addition, the mortality table and improvement scale were updated for 2014 and for Mr. Hamano, the pension value increased by $93,514 due to the correction in monthly accrued benefits from $257.82 to $813.85. |
The Company has not provided above-market or preferential earnings on any nonqualified deferred compensation and, accordingly, no such amounts are reflected in this column.
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(6) | The All Other Compensation Table that follows provides additional detail regarding the amounts in this column. |
ALL OTHER COMPENSATION TABLE
The following table sets forth a breakdown of All Other Compensation paid to or earned by our NEOs for each of the fiscal years indicated.
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Name | | Year | | Retirement Savings Plan 401(k) Matching Contribution ($)(1) | | Value Sharing Funding ($)(2) | | Excess Plan Value Sharing Funding ($)(3) | | Retirement Savings Plan Company Fixed Contribution ($)(4) | | Excess Plan Company Fixed Contribution ($)(5) | | Executive Deferred Compensation Restoration Contribution ($) (6) | | Other Compensation ($)(7) | | Total All Other Compensation ($) |
Peter S. Ho | | 2016 | | 10,600 |
| | 8,380 |
| | 77,948 |
| | 7,950 |
| | 73,950 |
| | — |
| | 21,191 |
| | 200,019 |
|
| | 2015 | | 10,600 |
| | 7,638 |
| | 50,762 |
| | 7,950 |
| | 52,832 |
| | — |
| | 20,781 |
| | 150,563 |
|
| | 2014 | | 10,400 |
| | 7,173 |
| | 47,848 |
| | 7,800 |
| | 52,032 |
| | — |
| | 16,716 |
| | 141,969 |
|
| | | | | | | | | | | | | | | | | |
|
|
Kent T. Lucien | | 2016 | | 10,600 |
| | 8,380 |
| | 12,840 |
| | 7,950 |
| | 12,181 |
| | 16,019 |
| | 16,817 |
| | 84,787 |
|
| | 2015 | | 10,600 |
| | 7,638 |
| | 15,054 |
| | 7,950 |
| | 15,668 |
| | 6,854 |
| | 15,009 |
| | 78,773 |
|
| | 2014 | | 10,400 |
| | 7,173 |
| | 12,852 |
| | 7,800 |
| | 13,976 |
| | 32,368 |
| | 12,401 |
| | 96,970 |
|
| | | | | | | | | | | | | | | | | |
|
|
Wayne Y. Hamano | | 2016 | | 10,600 |
| | 8,380 |
| | 7,937 |
| | 7,950 |
| | 7,530 |
| | 17,932 |
| | 13,888 |
| | 74,217 |
|
| | 2015 | | 9,600 |
| | 7,638 |
| | 6,345 |
| | 7,950 |
| | 6,603 |
| | 16,474 |
| | 10,508 |
| | 65,118 |
|
| | 2014 | | 10,400 |
| | 7,173 |
| | 19,741 |
| | 7,800 |
| | 21,467 |
| | 10,463 |
| | 10,374 |
| | 87,418 |
|
| | | | | | | | | | | | | | | | | | |
Mark A. Rossi | | 2016 | | 10,600 |
| | 8,380 |
| | 21,060 |
| | 7,950 |
| | 19,980 |
| | — |
| | 15,941 |
| | 83,911 |
|
| | 2015 | | 10,600 |
| | 7,638 |
| | 18,412 |
| | 7,950 |
| | 19,164 |
| | — |
| | 14,337 |
| | 78,101 |
|
| | 2014 | | 10,400 |
| | 7,173 |
| | 16,633 |
| | 7,800 |
| | 18,088 |
| | — |
| | 13,481 |
| | 73,575 |
|
| | | | | | | | | | | | | | | | | |
|
|
Mary E. Sellers | | 2016 | | 10,600 |
| | 8,380 |
| | 21,060 |
| | 7,950 |
| | 19,980 |
| | — |
| | — |
| | 67,970 |
|
| | 2015 | | 10,600 |
| | 7,638 |
| | 18,233 |
| | 7,950 |
| | 18,977 |
| | — |
| | — |
| | 63,398 |
|
| | 2014 | | 10,400 |
| | 7,173 |
| | 14,856 |
| | 7,800 |
| | 16,155 |
| | 447 |
| | — |
| | 56,831 |
|
| |
(1) | This column represents the Company match of an individual’s salary deferral contributions to the RSP, a qualified defined contribution pension plan, subject to the Internal Revenue Code prescribed limit (which in 2016 was limited to $265,000 of eligible compensation), and is available to all eligible employees. The Company makes a matching contribution of $1.25 for each dollar of employee contribution up to 2% of eligible compensation, and a $0.50 matching contribution for every dollar of employee contribution above 2% and up to 5% of eligible compensation. |
| |
(2) | For 2016, the total profit-sharing funding, or “Value Sharing Funding,” equaled 3.16% of eligible compensation. The funding is allocated in the following manner and made available to all eligible employees: 1) a portion of the funding is allocated in cash, 2) to the extent permitted by IRS ($265,000 of eligible compensation in 2016) and RSP provisions, a portion is contributed to the RSP, and 3) any Value Sharing Funding on eligible compensation in excess of IRS limits are contributed to the Excess Benefit Plan (column 3). This column represents the sum of the cash portion and the portion contributed to the RSP. For 2016, the cash portion and the portion contributed to the RSP was $1,499 and $6,881 respectively, for each of the NEOs. |