DEF 14A 1 d116252ddef14a.htm DEF 14A DEF 14A
Table of Contents

  

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

FirstEnergy Corp.

(Name of Registrant as Specified In Its Charter)

         

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

 

Title of each class of securities to which transaction applies:

 

 

   

 

 

(2)

 

Aggregate number of securities to which transaction applies:

 

 

   

 

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

   

 

 

(4)

 

Proposed maximum aggregate value of transaction:

 

 

   

 

 

(5)

 

Total fee paid:

        
   

 

 

Fee paid previously with preliminary materials:

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

 

Amount Previously Paid:

 

 

   

 

 

(2)

 

Form, Schedule or Registration Statement No.

 

 

   

 

 

(3)

 

Filing Party:

 

 

   

 

 

(4)

 

Date Filed:

 

 

   

 

 

 

 


Table of Contents

LOGO


Table of Contents

 

 

 

 

On the Cover: As part of our commitment to making the environment better, we’re promoting biodiverse, pollinator-friendly habitats in the transmission rights-of-way across our service area.

Location: Centre County, Pennsylvania (service territory of Penelec, an electric utility operating subsidiary of FirstEnergy)

Our Vegetation Management group participates in ongoing collaborative research with The Pennsylvania State University to monitor plants and pollinators in our transmission corridors. This and other similar research projects help FirstEnergy develop best practices for creating sustainable habitats in our rights-of-way, while also supporting the safe and reliable delivery of electricity to our customers.


Table of Contents

LOGO

 

 

Chairman’s Letter

  

             LOGO

 

     March 26, 2021  

Dear FirstEnergy Shareholders:

Thank you for your continued confidence in FirstEnergy. On behalf of your Board of Directors and management, I cordially invite you to attend our 2021 Annual Meeting of Shareholders on May 18, 2021. The attached Notice of the 2021 Annual Meeting of Shareholders and Proxy Statement contain information about the business to be conducted at the Meeting.

Taking Decisive Actions to Position FirstEnergy for Long-Term Success. Let me begin by underscoring that staying true to our Core Values and Behaviors – and acting at all times and at all levels of the Company with the highest ethical standards – remains at the heart of who we seek to be as a company and starts at the top. As summarized on pages 1-3 of this proxy statement, your Board has taken decisive actions, including announcing significant leadership changes as a result of a Board-led, independent, thorough and robust internal investigation related to the ongoing government investigations beginning last July. Your Board and executive management team are working diligently to enhance our corporate compliance program and processes to foster a culture of ethics, integrity, and accountability at every level of the organization and rebuild trust with our stakeholders. At the same time, we have remained focused on executing the Company’s strategy and implementing initiatives to transform FirstEnergy in a way that provides near-term value while opening new opportunities for longer-term growth. We believe that these actions, together with the strength of the Company’s strategy, mission and 12,000 employees, will position FirstEnergy for long-term success.

A Resilient and Committed Team. On behalf of your Board, I want to express our gratitude to the employees across FirstEnergy who help make our communities stronger while delivering results for the business. In 2020, the FirstEnergy team came together to work smarter, more creatively and more efficiently. These efforts resulted in solid underlying performance in 2020, even in the context of the disruption and uncertainty caused by the COVID-19 pandemic.

A New Chief Executive Officer with Significant Operational Experience and a Deep Knowledge of the Business. Steven E. Strah, our new CEO of FirstEnergy, is a highly respected executive with a deep understanding of FirstEnergy’s business and significant operational experience, having served in various leadership roles at the Company during his 36-year career. He was appointed President in May 2020 and acting CEO in October 2020. Over the past several months, he has taken meaningful steps to put FirstEnergy on the right path forward, including ensuring a renewed emphasis on compliance and transparency throughout the organization; laying out his strategy, through FE Forward, to transform the Company; and working to reduce regulatory uncertainty affecting the Company’s Ohio utilities. Your Board is confident that his appointment to CEO and a member of the Board in March 2021 was the right step for FirstEnergy.

As CEO, your Board believes Steve will position FirstEnergy to move forward with positive momentum and execute FirstEnergy’s strategic priorities for the benefit of all stakeholders and drive enhanced value for shareholders. We look forward to continuing to work alongside Steve and the rest of the management team to build on the Company’s strong performance.

A Strong Highly Independent Board with the Right Skillset and Enhanced Oversight to Drive Value for Shareholders. Your Board is comprised of highly-qualified individuals who have a diverse set of skills, experiences, backgrounds and perspectives. We have periodically refreshed our Board with new Board members whom we believe bring new ideas and fresh perspectives into the boardroom – nine of the fourteen nominees will be new Board members added since 2016 (including our new director nominee – Melvin Williams). We have also entered into an agreement with Carl C. Icahn to appoint Andrew Teno and Jesse A. Lynn – both of whom are employees of Icahn entities – to your Board as independent directors. We are pleased to have reached this agreement with Mr. Icahn and we welcome the insights and experiences Mr. Teno and Mr. Lynn bring to your Board.

Your Board has also enhanced its oversight, including the formation of a Compliance Oversight Sub-Committee of the Audit Committee – comprised entirely of independent directors – tasked with overseeing the assessment of the Company’s corporate compliance program and governance practices. This sub-committee, supported by independent counsel and compliance advisors, assists in making recommendations, and overseeing the implementation of and enhancements to the Company’s corporate compliance program, structure and governance


Table of Contents

practices, with the goal of building a best-in-class culture of compliance. Additionally, your Board has appointed John Somerhalder, a 40-year energy industry executive, as Vice Chairperson to help lead efforts to rebuild trust with FirstEnergy’s external stakeholders. He also joined the management team as Executive Director in a transitional capacity to support efforts to achieve FirstEnergy’s priorities and strengthen the Company’s governance and compliance functions. Your Board is focused on holding management accountable for implementing our strategy consistent with our risk management framework and fulfilling our regulatory obligations. For more information relating to your Board’s enhanced oversight, please refer to the “Board Oversight – Board Response to Government Investigations” section on page 1.

Our Bright Future. Your Board and management team are deeply committed to creating value for you. We are continuing to work quickly, decisively and with a strong sense of urgency to address current challenges and execute key initiatives to enhance shareholder value and reshape FirstEnergy into a more resilient, industry-leading organization of the future.

We remain focused on our mission to be a forward-thinking electric utility powered by a diverse team of employees committed to making customers’ lives brighter, the environment better and our communities stronger. As part of that mission, we have introduced an ambitious new carbon neutrality goal and comprehensive climate strategy that are fully aligned with our regulated business strategy and support our commitments to our customers, communities and investors, as well as environmental stewardship.

As always, we will continue to engage with you regularly to keep you updated on our progress. We encourage you to read more about your Board, our environmental, social and governance practices, and our executive compensation programs in the accompanying proxy statement. We’re grateful for your support and thank you in advance for voting promptly.

 

Sincerely,

LOGO

Donald T. Misheff

Chairman of the Board


Table of Contents

Notice of Annual Meeting of Shareholders

 

 

Please carefully review this Notice, the Company’s Annual Report to Shareholders for the year ended December 31, 2020 (the “2020 Annual Report”) and the accompanying proxy statement and vote your shares by following the instructions on your proxy card/voting instruction form or Notice of Internet Availability of Proxy Materials to ensure your representation at the Annual Meeting.

 

   

Date and Time    

  Tuesday, May 18, 2021 8:00 a.m. EDT
   

Location    

 

To protect the health and safety of the shareholders, employees, and the broader community, during the COVID-19 crisis, your Board has decided that the Annual Meeting will be a virtual meeting of shareholders, conducted via live webcast, and will take place at: www.cesonlineservices.com/fe21_vm. Online access will begin at 7:30 a.m. EDT on May 18, 2021. There will be no physical location for in-person attendance at the Annual Meeting.

 

If you plan to attend the virtual Annual Meeting, you must register in advance. See the “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register. Shareholders may only participate online and must pre-register to vote and ask questions at the virtual Annual Meeting.

   

Agenda    

 

   Elect the 14 nominees named in the accompanying proxy statement to the Board of Directors to hold office until the 2022 Annual Meeting of Shareholders and until their successors shall have been elected;

   Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021;

   Approve, on an advisory basis, named executive officer compensation; and

   Take action on other business that may come properly before the Annual Meeting and any adjournment or postponement thereof.

   

Record Date    

 

March 19, 2021

 

Only shareholders of record as of the close of business on March 19, 2021, or their proxy holders, may vote at the Annual Meeting.

 

On behalf of the Board of Directors,

 

LOGO

Mary M. Swann

Corporate Secretary and

Associate General Counsel

 

Akron, Ohio

This Notice and accompanying Proxy Statement are being mailed or made available to shareholders on or about March 29, 2021.

 

 

Important Notice Regarding Availability of Proxy Materials

 

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 18, 2021. The accompanying proxy statement and the 2020 Annual Report are available at www.FirstEnergyCorp.com/AnnualMeeting.

 

 


Table of Contents

Table of Contents

 

 

 

 

  Proxy Statement Summary    i
  
     

1

Corporate Governance & Board of Directors

  Corporate Governance and Board of Directors Information    1
  Board Qualifications    8
  Biographical Information and Qualifications of Nominees for Election as Directors    12
 

Board Committees

   19
    
        

2

Items to Be Voted On

    
    
  Items to Be Voted On    23
    
    
     

3

Executive & Director Compensation

  Executive Compensation    26
 

Compensation Committee Report

   26
 

Compensation Discussion and Analysis

   26
 

Executive Summary

   28
  Compensation Tables    55
  Director Compensation in Fiscal Year 2020    75
    
     

4

Other Important Matters

  Human Capital Management    78
  Corporate Responsibility (including environmental & social initiatives)    82
  Security Ownership of Management    84
 

Security Ownership of Certain Beneficial Owners

   86
 

Compensation Committee Interlocks and Insider Participation

   87
 

Certain Relationships and Related Person Transactions

   87
 

Audit Committee Report

   91
 

Matters Relating to the Independent Registered Public Accounting Firm

   92
    
     

5

Q&A About the Annual Meeting

  Questions and Answers about the Annual Meeting    93
 

Proxy Materials

   93
 

Voting Matters

   95
 

How You Can Vote

   96
 

Attending the Virtual Annual Meeting

   98
 

Proposals and Business by Shareholders

   99
 

Obtaining Additional Information

   100
        


Table of Contents

LOGO

2021 Annual Meeting of Shareholders (the “Annual Meeting” or the “Meeting”)

 

 

    Time and Date: 8:00 a.m. EDT on Tuesday, May 18, 2021

 

    Location: To protect the health and safety of the shareholders, employees, and the broader community, during the COVID-19 crisis, your Board has decided that the Annual Meeting will be a virtual meeting of shareholders, conducted via live webcast, and will take place at: www.cesonlineservices.com/fe21_vm. Online access will begin at 7:30 a.m. EDT on May 18, 2021.

 

   

If you plan to attend the virtual Annual Meeting, you must register in advance. See the “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register. Shareholders may only participate online and must pre-register to vote and ask questions at the virtual Annual Meeting.

 

    Record Date: March 19, 2021

 

    Voting: Shareholders of record of FirstEnergy Corp. (“FirstEnergy”, the “Company”, “we”, “us” or “our”) common stock as of the Record Date are entitled to receive the Notice of Annual Meeting of Shareholders and they or their proxy holders may vote their shares at the Annual Meeting.

 

    Admission: If you plan to attend the Annual Meeting, you must register in advance. See the “Attending the Virtual Annual Meeting” section of the “Questions and Answers about the Annual Meeting” in the accompanying proxy statement for instructions on how to register. Shareholders may only participate online and must pre-register to vote and ask questions at the virtual Annual Meeting.

Voting Matters

 

 

Item

 

1

 

 

Elect the 14 nominees named in this proxy statement to the Board of Directors. Refer to page 23 for more detail.

 

 

Your Board recommends you vote FOR the election of all the nominees listed in this proxy statement.

 

 

Item

 

2

 

 

Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021. Refer to page 24 for more detail.

 

 

Your Board recommends you vote FOR this item.

 

     

Item

 

3

 

 

Approve on an advisory basis named executive officer compensation. Refer to page 25 for more detail.

 

 

Your Board recommends you vote FOR this item.

   
 

 

i


Table of Contents

How to Cast Your Vote

 

Your vote is important! Even if you plan to attend our Annual Meeting virtually, please cast your vote as soon as possible by:

 

LOGO

 

  

LOGO

 

  

LOGO

 

 

Do you hold shares directly with FirstEnergy or in the FirstEnergy Corp. Savings Plan?

 

Use the internet at
www.cesvote.com

 

   Call toll-free at
1-888-693-8683
   Mail by returning your proxy
card/voting instruction form (1)

 

Do you hold shares through a bank, broker or other institution (beneficial ownership)? (2)

 

Use the internet at
www.proxyvote.com
   Call toll-free at
1-800-454-8683
   Mail by returning your proxy
card/voting instruction form

 

(1)   If your envelope is misplaced, send your proxy card to Corporate Election Services, Inc., the Company’s independent proxy tabulator and Inspector of Election. The address is FirstEnergy Corp., c/o Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230.

(2)    Not all beneficial owners may be able vote at the web address and phone number provided above. If your control number is not recognized, please refer to your voting instruction form for specific voting instructions.

Please follow the instructions provided on your proxy card/voting instruction form (the “proxy card”), Notice of Internet Availability of Proxy Materials, or electronic or other communications included with your proxy materials. Shareholders as of the March 19, 2021 record date may attend the virtual Annual Meeting and vote if registered in advance by following the Advance Registration Instructions below. Refer to the “Questions and Answers about the Annual Meeting” section below for more details, including the Advance Registration Instructions and questions 2, 13 and 15.

You may have multiple accounts and therefore receive more than one proxy card or voting instruction form and related materials. Please vote each proxy card and voting instruction form that you receive.

 

ii


Table of Contents

Board Nominees

 

 

The following table provides summary information about each nominee standing for election to your Board of Directors (your “Board”). Each member stands for election annually. Sandra Pianalto is not standing for re-election at the Annual Meeting. In addition, the Board has nominated Melvin Williams for election to your Board at the Annual Meeting.

 

                  Standing Committee Memberships (1)   

Number

of Other

Public

Company

Boards(2)

 

  Name

 

  

Age

 

  

Director

Since

 

 

Independent

 

 

Audit

 

 

Compensation

 

 

Corporate

Governance

and Corporate

Responsibility

 

 

Finance

 

 

Operations
and Safety
Oversight

 

  Michael J. Anderson

   69    2007   Yes   Chair            1

  Steven J. Demetriou

   62    2017   Yes         Chair      1

  Julia L. Johnson

   58    2011   Yes       Chair        3

  Jesse A. Lynn (3)

   50    2021   Yes              2

  Donald T. Misheff

   64    2012   Yes              2

  Thomas N. Mitchell

   65    2016   Yes           Chair    0

  James F. O’Neil III

   62    2017   Yes     Chair          1

  Christopher D. Pappas(4)

   65    2011   Yes              1

  Luis A. Reyes

   69    2013   Yes              0

  John W. Somerhalder II

   65    2021   No              1

  Steven E. Strah

   57    2021   No              0

  Andrew Teno(5)

   36    2021   Yes              2

  Leslie M. Turner

   63    2018   Yes              0

  Melvin Williams(6)

   57    N/A   Yes                        0

 

(1) 

In 2020, your Board created certain other special oversight committees, including the Independent Review Committee, and the new Compliance Oversight Sub-Committee of the Audit Committee to assess and implement potential changes as appropriate in your Company’s compliance program. The special Board oversight committees are described in greater detail in the “Board Committees – Special Board Oversight Committees” section beginning on page 22.

(2) 

As defined under New York Stock Exchange Listed Company Manual Section 303A Corporate Governance Standards Frequently Asked Questions.

(3) 

Mr. Lynn’s committee membership was effective March 23, 2021.

(4) 

Mr. Pappas’ committee memberships are effective April 1, 2021.

(5) 

Mr. Teno’s Audit Committee and Finance Committee memberships were effective March 18, 2021 and March 23, 2021, respectively.

(6) 

Mr. Williams is a new director nominee.

Key Facts About Your Board

 

We seek to maintain a well-rounded and diverse Board representing a wide breadth of experience and perspectives that balances the institutional knowledge of longer-tenured directors with the fresh perspectives brought by newer directors. Below are highlights regarding our 14 director nominees standing for election to your Board.

 

LOGO

 

iii


Table of Contents

Corporate Governance Highlights

 

 

Your Company is committed to strong corporate governance, which we believe is important to the success of our business and in advancing shareholder interests. Highlights include:

 

   
  Independent Oversight       Board & Committee Oversight

  Independent Review Committee established to oversee the independent investigation, supported by independent counsel

  Separate roles for Chief Executive Officer (“CEO”) and Independent Board Chairman

  All directors are independent, other than our Vice-Chairperson of the Board and Executive Director and CEO

  Board’s standing committees are comprised entirely of independent directors

  Independent directors regularly hold executive sessions without management at Board and committee meetings

  Please also refer to the “Board Oversight” section on page 1 for additional information.

   

  Enterprise risk oversight by full Board and its committees

  Corporate Governance and Corporate Responsibility Committee oversees corporate citizenship practices including ESG and sustainability initiatives

  Audit Committee oversees risks related to cybersecurity, in addition to matters related to financial statements and compliance

  Compensation Committee ensures alignment between pay and performance

  Compliance Oversight Sub-Committee of the Audit Committee, comprised of all independent directors and supported by independent counsel, oversight of review and recommendations for implementation of compliance program enhancements

 

   
   
  Shareholder Rights & Accountability       Board Practices

  Annual election of all directors

  Clear, effective process for shareholders to raise concerns to your Board

  Majority voting standard for uncontested director elections, with an accompanying Director Resignation Policy

  General majority voting threshold

  Direct investor relations and governance engagement and outreach to shareholders

  Advisory vote on named executive officer compensation is held on an annual basis, consistent with the shareholder advisory vote on frequency

  Shareholders may nominate directors through proxy access

  Shareholders of 25 percent or more shares outstanding and entitled to vote may call a special meeting

   

  Goal targeting at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future

  Actively seek highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experience, to include in the nominee pool

  A robust annual evaluation process: full Board evaluation including third-party interviews, Board committee evaluations and individual director evaluations

  Mandatory director retirement age of 72 pursuant to our Corporate Governance Policies

  Corporate Governance and Corporate Responsibility Committee and full Board engage in rigorous director succession planning

  Extensive director orientation and continuing education

  Robust stock ownership guidelines

  Anti-Hedging and Anti-Pledging Policies

  No poison pill

       

Our corporate governance practices are described in greater detail in the “Corporate Governance and Board of Directors Information” section beginning on page 1.

 

iv


Table of Contents

Executive Compensation Highlights

 

Under our compensation design, the percentage of pay that is based on performance increases as the responsibilities of a Named Executive Officer (“NEO”) increase. The charts below illustrate the annual base salary rate, 2020 short-term incentive program (“FE STIP”) and long-term incentive program (“FE LTIP”) awards, of which approximately 87% of the Former CEO’s total target pay, 79% of the then Acting CEO’s total target pay and 72% of our other NEOs’ average target pay is variable and could be reduced to zero if performance metrics are not met at a minimum threshold level. For the continuing NEOs, the values shown are effective as of December 31, 2020 (“FYE”).

 

Former CEO

2020 Pay Mix at Target

 

 

Acting CEO (as of FYE)

2020 Pay Mix at Target

 

 

Other NEOs

2020 Pay Mix at Target

 

LOGO   LOGO   LOGO

We believe what we do and don’t do with respect to executive compensation aligns with the long-term interests of our shareholders and with commonly viewed best practices in the market.

 

   

What We Do

 

 

What We Don’t Do

 

 

    Pay-for-performance

•  FE LTIP is 100% at risk, with no solely time-based vesting requirements

•  FE STIP is 100% at risk

 

   Threshold and caps on incentive awards:

•  Threshold financial performance hurdle for Operating Earnings must be achieved before any FE STIP award is paid

 

•  Individual FE STIP awards capped at 200% (consistent with our peer companies)

 

•  Individual FE LTIP awards capped at 200% (consistent with our peer companies) and capped at 100% if absolute Total Shareholder Return (“TSR”) over the performance period is negative

 

  Non-overlapping financial performance measures in our FE STIP and FE LTIP

 

  Combination of absolute and relative performance goals

 

  Robust stock ownership guidelines

 

  Clawback policy applicable to financial and reputational harm, and other detrimental activity

 

  Mitigate undue risk through compensation design, corporate policies, and effective governance

 

  Annual Say-on-Pay vote

 

  Double-trigger change in control (“CIC”) provisions

 

  Compensation Committee comprised of only independent directors supported by an independent compensation consultant

 

 

 

LOGO    No executive hedging or pledging is permitted

 

LOGO    No employment agreements

 

LOGO    No tax gross-ups for our NEOs

 

LOGO    No repricing of underwater stock options without shareholder approval – not currently used in plan design

 

LOGO    No excessive perquisites

 

LOGO    No payment of dividend equivalents on unearned awards

 

LOGO    No new entrants in the Supplemental Executive Retirement Plan (“SERP”) – SERP closed since 2014

Our executive compensation practices are described in greater detail in the “Executive Compensation” section beginning on page 26.

 

v


Table of Contents

Human Capital Management (HCM) Highlights

 

FirstEnergy’s workforce is essential in our ability to execute on our strategy, deliver on our business priorities and move FirstEnergy forward. While 2020 presented unprecedented challenges, our commitment to our employees and their health and safety has not wavered. Our focus on keeping our Core Values and Behaviors at the center of everything we do, our desire to help our employees do their best each day, and further details on FirstEnergy’s COVID-19 response, is included in the “Human Capital Management” section beginning on page 78.

Corporate Responsibility Highlights

 

 

LOGO

Our environmental and sustainability initiatives are described in greater detail in the “Corporate Responsibility” section beginning on page 82.

 

vi


Table of Contents

 

Note About Forward-Looking Statements

 

Forward-Looking Statements: This proxy statement includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management. Such statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “forecast,” “target,” “will,” “intend,” “believe,” “project,” “estimate,” “plan” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the results of our ongoing internal investigation matters and evaluation of our controls framework and remediation of our material weakness in internal control over financial reporting; the risks and uncertainties associated with government investigations regarding Ohio House Bill 6 and related matters including potential adverse impacts on federal or state regulatory matters including, but not limited to, matters relating to rates; the risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, maintaining financial flexibility, overcoming current uncertainties and challenges associated with the ongoing governmental investigations, executing our transmission and distribution investment plans, controlling costs, improving our credit metrics, strengthening our balance sheet and growing earnings; economic and weather conditions affecting future operating results, such as a recession, significant weather events and other natural disasters, and associated regulatory events or actions in response to such conditions; mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets; the extent and duration of COVID-19 and the impacts to our business, operations and financial condition resulting from the outbreak of COVID-19 including, but not limited to, disruption of businesses in our territories, volatile capital and credit markets, legislative and regulatory actions, the effectiveness of our pandemic and business continuity plans, the precautionary measures we are taking on behalf of our customers, contractors and employees, our customers’ ability to make their utility payment and the potential for supply-chain disruptions; the potential of non-compliance with debt covenants in our credit facilities due to matters associated with the government investigations regarding Ohio House Bill 6 and related matters; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions; actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity; changes in assumptions regarding economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities; changes in customers’ demand for power, including, but not limited to, the impact of climate change or energy efficiency and peak demand reduction mandates; changes in national and regional economic conditions affecting us and/or our major industrial and commercial customers or others with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; the ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates; changes to environmental laws and regulations, including, but not limited to, those related to climate change; changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts and other trust funds, or causing us to make contributions sooner, or in amounts that are larger, than currently anticipated; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, or adverse tax audit results or rulings; and the risks and other factors discussed from time to time in our SEC filings. Dividends declared from time to time on FirstEnergy Corp.’s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.’s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy Corp.’s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any current intention to update or revise, except as required by law, any forward-looking statements contained herein or the information incorporated by reference as a result of new information, future events or otherwise.

 

 

vii


Table of Contents

LOGO

 

Corporate Governance and Board of Directors Information

 

 

Board Leadership Structure

The three positions of CEO, Chairman of the Board, and Vice Chairperson of the Board and Executive Director are separated. Our Amended and Restated Code of Regulations and Corporate Governance Policies do not require that these positions be separate, and your Board has not adopted a specific policy or philosophy on whether such roles should remain separate. However, having separate roles has allowed your CEO to focus more time on our day-to-day operations and, in your Board’s judgment, is appropriate at this time.

Mr. Steven E. Strah was appointed as our new CEO (in addition to his then-existing President role) and elected as a director of your Board effective as of March 8, 2021. Independent members of your Board previously appointed Mr. Strah to the position of Acting CEO (in addition to his then-existing President role) and Mr. Christopher D. Pappas, a current member of the Board, to the temporary non-employee position of Executive Director, each effective as of October 29, 2020. Effective March 1, 2021, Mr. John W. Somerhalder II was appointed Vice Chairperson of your Board and Executive Director servings as a member of your Company’s executive leadership team in a transitional capacity while we focus on advancing our immediate key strategic priorities. As Vice Chairperson, Mr. Somerhalder will help lead efforts to rebuild trust with our external stakeholders, including regulators and the financial community. In his role as Executive Director, Mr. Somerhalder will also support the senior leadership team’s efforts to achieve its priorities and strengthen your Company’s governance and compliance functions during this time of unprecedented change. Mr. Somerhalder will report to your Board, working closely with Mr. Donald T. Misheff, as the independent non-executive Chairman of your Board. Mr. Pappas will continue to serve on your Board as an independent director.

Your Board schedules regular executive sessions for your independent directors to meet without management participation. Because an independent director is required to preside over each such executive session of independent directors, we believe it is efficient and appropriate to have your independent Chairman of the Board preside over such meetings.

Board Composition and Refreshment

Your Board is comprised of individuals who are highly-qualified, diverse, and independent (other than Messrs. Somerhalder and Strah, who are not considered independent because of their employment with the Company). Your Board’s succession planning takes into account the importance of Board refreshment and having an appropriate balance of experience and perspectives on your Board. As further discussed in the “Board Qualifications” section of this proxy statement, your Board and the Corporate Governance and Corporate Responsibility Committee recognizes that the racial, ethnic and gender diversity of your Board, as well as diversity of thought, background and experiences, are an important part of its analysis as to whether your Board possesses a variety of complementary skills and experiences. Accordingly, your Board has set a goal targeting at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future.

The Corporate Governance and Corporate Responsibility Committee focuses on Board refreshment planning on an ongoing basis. In performing this function, the Committee recruits and recommends nominees for election as directors to your Board. Accordingly, we have regularly added directors who we believe infuse diversity, new ideas and fresh perspectives into the boardroom. Since the beginning of 2016, nine of the fourteen nominees, if elected, will be new Board members. The result is over 64% of your Board’s director nominees have tenure of five years or less. During this time, your Board added three directors that increased its diversity profile.

Board Oversight

Board Response to Government Investigations

Your Company has been cooperating fully with requests related to ongoing government investigations. We’ve pledged full and continuing cooperation with the ongoing government investigations.

Your Board has formed various special Board oversight committees, including an Independent Review Committee primarily responsible for directing an independent, and what we believe to be a thorough and

 

1  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

robust internal investigation related to the ongoing government investigations. The Independent Review Committee has met regularly since July 2020, and together with the advice of its own independent external legal advisors, has provided valuable counsel to your Board. In addition, your Audit Committee formed the Compliance Oversight Sub-Committee, supported by its own independent external advisors and leading compliance advisors, to oversee the assessment of the Company’s corporate compliance program and governance practices, as well as to oversee the implementation of recommendations to enhance the program, which such work remains ongoing. These special Board oversight committees are described in greater detail in the “Board Committees – Special Board Oversight Committees” section below.

While your Board cannot predict the outcome of the ongoing government investigations and related matters, as your stewards, we are fully committed to providing thorough and complete oversight and will, as a Board, take any necessary actions to address these matters. Your Board will not tolerate any actions or behaviors demonstrating anything less than a commitment to high standards of ethics and compliance for your Company and is committed to improving the compliance policy and culture at FirstEnergy.

In partnership with the Company’s management team, your Board has taken a number of additional decisive actions to respond to the ongoing government investigations, rebuild trust with Company stakeholders, and put FirstEnergy on the right path forward. These include:

 

   

Launching a robust and ongoing internal investigation overseen by the Board’s Independent Review Committee, with oversight from independent counsel.

 

   

Terminating three senior executives after the Board’s Independent Review Committee determined that those executives violated certain FirstEnergy policies and its code of conduct, and that certain former members of senior management did not reasonably ensure that relevant information was communicated within our organization and not withheld from our independent directors, our Audit Committee, and our independent auditor.

 

   

Separating two additional members of senior management due to inaction and conduct that the Board determined was influenced by the improper tone at the top.

 

   

Naming Steven E. Strah as Acting CEO in October 2020 and then CEO in March 2021, and electing Mr. Strah as a director of the Board.

 

   

Naming Hyun Park as Senior Vice President and Chief Legal Officer in January 2021.

 

   

Establishing an Executive Director role to oversee the management team’s execution of FirstEnergy’s strategic initiatives, engage with the Company’s external stakeholders, and support the development of enhanced controls and governance policies and procedures.

 

   

Naming John W. Somerhalder as Vice Chairperson of the Board and Executive Director in February 2021.

 

   

Expanding the Board Chair role to help navigate the challenges the Company is facing.

 

   

Naming Antonio Fernandez as Chief Ethics and Compliance Officer in March 2021, reporting to the Chief Legal Officer, with a direct line to the Audit Committee and its Compliance Oversight Sub-Committee, helping to further drive a culture of compliance.

 

   

Supporting the management team’s enhanced oversight over all the Company’s political and legislative engagement advocacy and limiting participation in the political process. This also includes ensuring that the disclosures around the Company’s political and legislative engagement advocacy are more robust going forward so that it is clear what efforts the Company appropriately supports.

 

   

Supporting the Company’s partial settlement with the Ohio Attorney General and the cities of Columbus and Cincinnati regarding decoupling, which resulted in the Ohio Companies requesting Public Utilities Commission of Ohio approval to set the rates under Rider CSR to zero as of February 9, 2021.

 

   

Supporting the Company’s decision to not seek to recover lost distribution revenue that it was authorized to collect from residential and commercial customers under its current Electric Security Plan through May 31, 2024.

 

2  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

   

Initiating FE Forward, a Company-wide transformational program expected to build upon FirstEnergy’s strong operations and business fundamentals; deliver immediate value and resilience; and enable FirstEnergy to become a more nimble organization.

Driving a Culture of Compliance and Integrity

Your Board has enhanced its oversight, including the formation of a Compliance Oversight Sub-committee of the Audit Committee – comprised entirely of independent directors – tasked with overseeing the assessment of the Company’s corporate compliance program and governance practices. This sub-committee, supported by independent counsel and compliance advisors, assists in making recommendations, and overseeing the implementation of and enhancements to the Company’s corporate compliance program, structure and governance practices, with the goal of building a best-in-class culture of compliance. Key initial actions planned to enhance our compliance program include:

People: centralizing the compliance function with dedicated personnel

 

   

Hiring Antonio Fernandez as Chief Ethics and Compliance Officer, reporting to the Chief Legal Officer, with a direct line to the Audit Committee and its Compliance Oversight Sub-Committee.

 

   

Implementing a dedicated corporate ethics and compliance office, with appropriate resources.

 

   

Establishing an ethics and compliance steering committee.

Processes: enhance compliance standards, policies, and procedures, focusing on:

 

   

Remediating tone at the top material weakness.

 

   

Political and charitable donations.

 

   

Third-party management.

 

   

Financial controls and approval authorities.

Reporting: augment reporting mechanisms from employees to the Board and back.

 

   

Multiple channels of reporting and transparency in process.

 

   

Communicate compliance updates through regular cadence of newsletters, updates on the Company Intranet, townhalls, etc.

Benchmarking: metrics to measure program:

 

   

Data analytics and trend or issue spotting.

 

   

Continuous improvement and sustainability through regular assessments.

Risk Management

The Company recognizes that the effective management of the risks it must take in the ordinary course of business contributes to the overall success of the Company. The Company has implemented a process to identify, prioritize, report, monitor, manage, and mitigate its significant risks. A management Risk Policy Committee, consisting of the Vice President, Risk & Internal Audit and other senior executive officers, provides oversight and monitoring to ensure that appropriate risk policies are established and carried out and processes are executed in accordance with selected limits and approval levels. In addition, other management committees are focused on addressing topical risk issues. Timely reports on significant risk issues are provided as appropriate to employees, management, senior executive officers, respective Board committees, and the full Board. The Vice President, Risk & Internal Audit also prepares enterprise-wide risk management reports that are presented to the Audit Committee, the Finance Committee and your Board.

Your Board administers its risk oversight function through the full Board, as well as through the various Board committees. Specifically, your Board considers risks applicable to the Company at each meeting in connection with its consideration of significant business and financial developments of the Company. Also, the Audit Committee charter requires the Audit Committee to oversee, assess, discuss, and generally review the Company’s policies with respect to the assessment and management of risks, including risks related to the financial statements and financial reporting process of the Company, credit risk, liquidity and commodity market risks, and risks related to cybersecurity. The Audit Committee also reviews and discusses with

 

3  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

management the steps taken to monitor, control, and mitigate such exposures. Through this oversight process, your Board obtains an understanding of significant risk issues on a timely basis, including the risks inherent in the Company’s strategy. In addition, while the Company’s Vice President, Risk & Internal Audit administratively reports to your Senior Vice President and Chief Legal Officer, he also has full access to the Audit Committee and Finance Committee and is scheduled to attend their committee meetings.

In addition to the Audit Committee’s role in risk oversight, our other Board committees also play a role in risk oversight within each of their areas of responsibility. Specifically, the Compensation Committee reviews, discusses, and assesses risks related to compensation programs, including incentive compensation and equity-based plans, as well as the relationship between our risk management policies and practices and compensation. See also, “Risk Assessment of Compensation Programs” found in the CD&A section in this proxy statement. The Corporate Governance and Corporate Responsibility Committee considers risks related to corporate governance, including Board and committee membership, Board effectiveness, related person transactions, and the Company’s ESG strategies and corporate citizenship practices. The Finance Committee evaluates risks relating to financial resources and strategies, including capital structure policies, financial forecasts, budgets and financial transactions, commitments, expenditures, long and short-term debt levels, dividend policy, issuance of securities, exposure to fluctuation in interest rates, share repurchase programs and other financial matters deemed appropriate by your Board. The Operations and Safety Oversight Committee considers risks associated with the safety, reliability, and quality relating to the Company’s electric distribution, transmission, and generation facilities and, prior to December 18, 2020, a retired nuclear unit. Further, day-to-day risk oversight is conducted by our Corporate Risk department and our senior management and is shared with your Board or Board committees, as appropriate. We believe that your Board’s role in risk oversight is consistent with and complemented by your Board’s leadership structure. In addition, the section in this proxy statement entitled “Board Leadership Structure” provides information relating to our separation of the Chairman of the Board and CEO positions.

Cybersecurity

FirstEnergy is committed to protecting its employees, customers, facilities, and the ongoing reliability of its electric system. We work closely with state and federal agencies and our peers in the electric utility industry to identify physical and cyber security risks, exchange information, and put safeguards in place to comply with strict reliability and security standards. From a security standpoint, no other industry – including gas pipelines – is as heavily regulated as the electric utility sector. We have comprehensive cyber and physical security plans in place, but we don’t publicly disclose details about these measures that could aid those who want to harm our customers and our employees.

Your Board has identified cybersecurity as a key enterprise risk and prioritizes the mitigation of this risk. Your Board receives cybersecurity updates from the Chief Information Officer at each of its regularly scheduled meetings. The Audit Committee reviews our cybersecurity risk management practices and performance, primarily through reports provided by management. The Audit Committee also reviews and discusses with management the steps taken to monitor, control, and mitigate such exposure. Among other things, these reports have focused on incident response management and recent cyber risk and cybersecurity developments.

Security enhancements are also a key component of FirstEnergy’s Energizing the Future transmission investment program. The Company invests heavily in sophisticated and layered security measures that use both technology and hard defenses to protect critical transmission facilities and our digital communications networks.

Public Policy and Engagement

We are making significant changes in our approach to political and legislative engagement and advocacy. Our activity in this space will be much more limited than it was in the past, with additional oversight and significantly more robust disclosure around lobbying activities. With this additional transparency, our goal is to make it clear exactly what efforts FirstEnergy supports, appropriately, going forward.

Our Corporate Political Activity Policy available on our website describes the criteria for certain political contributions and ballot initiative expenditures and the process for approving such contributions and expenditures. Also, your Board’s Corporate Governance and Corporate Responsibility Committee periodically reviews this policy and related practices as well as dues and/or contributions to industry groups and trade associations.

 

4  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Based on feedback from our shareholder engagement and outreach, we expanded our website disclosure to include reports on federal and state level lobbying, as well as, the lobbying portion of certain trade association dues.

Evaluating Board Effectiveness

Your Board is committed to a rigorous evaluation process as further described below. Annually, Board, committee and individual director evaluations are performed and coordinated by the Corporate Governance and Corporate Responsibility Committee.

Board Evaluations: A Multi-Step Process

 

 

 

LOGO

 

5  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Shareholder Outreach and Engagement Program

We Have a Robust Shareholder Outreach and Engagement Program

We believe it is incumbent upon us to engage regularly with our shareholders. We maintain a robust shareholder outreach and engagement program to understand our investors’ perspectives on certain topics, including, among others, ESG policies and executive compensation. With support from your Board, the Company’s CEO and the management team, including members of the Corporate Secretary’s office and departments of Corporate Responsibility, Investor Relations, Legal, Human Resources, and Finance focus significant efforts on engaging with our shareholders and the broader investment community. Shareholder feedback and suggestions are reported to the Compensation Committee, Corporate Governance and Corporate Responsibility Committee and, as needed, your Board or various committees of your Board for consideration. We also conduct ongoing governance reviews (for example, assessing governance trends). This process enables your Board and management to understand and consider the topics that matter most to our shareholders so we can most effectively address them.

 

LOGO

Outreach and Engagement Program Shareholder Feedback

As part of our commitment to continue to understand our investors’ perspectives through and as part of our corporate governance shareholder engagement program, we appreciate the opportunity to engage with our shareholders, and we continue to find our meetings to be enlightening and productive. Shareholders we meet with often express appreciation for our proactive interest in their views, and we certainly appreciate the time they took to share their thoughts with us. During these meetings, participants included members from management and your Board.

Other Governance Practices and Policies

Communications with your Board of Directors

Your Board provides a process for shareholders and interested parties to send communications to your Board and non-management directors, including our Chairman of the Board. As set forth in the Company’s Corporate Governance Policies, shareholders and interested parties may send written communications to your Board or a specified individual director, including our Chairman of the Board, by mailing any such communications to the FirstEnergy Board of Directors at the Company’s principal executive office, c/o Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, OH 44308-1890. Our Corporate Governance Policies can be viewed by visiting our website at www.firstenergycorp.com/charters.

The Corporate Secretary or a member of her staff reviews all such communications promptly and relays them directly to a Board member, provided that such communications: (i) bear relevance to the Company and the interests of the shareholder, (ii) are capable of being implemented by your Board, (iii) do not contain any obscene or offensive remarks, (iv) are of a reasonable length, and (v) are not from a shareholder who

 

6  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

already has sent two such communications to your Board in the last year. Your Board may modify procedures for sorting shareholders’ and interested parties’ communications or adopt any additional procedures, provided they are approved by a majority of the independent directors.

Your Audit Committee also receives, reviews, and acts on complaints and concerns regarding accounting, internal accounting controls or auditing matters, including complaints regarding material ethical or criminal misconduct on the part of the Board of Directors, the Chief Executive Officer, any officer reporting directly to the Chief Executive Officer, the Controller & Chief Accounting Officer or the Chief Audit Officer, and complaints regarding matters that could lead to significant reputational damage to the Company. Complaints or concerns specifically related to such matters may be made directly to your Audit Committee. Correspondence with the Audit Committee should be addressed to the attention of the Audit Committee Chair (c/o Corporate Secretary), FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890.

Attendance at Board Meetings, Committee Meetings and the Annual Meeting of Shareholders

Our Corporate Governance Policies provide that directors are expected to attend all scheduled Board and applicable committee meetings and the Company’s annual meetings of shareholders. Your Board held 16 meetings during 2020. During their tenure in 2020, all directors attended at least 75 percent of the meetings of your Board and of the committees on which they served during 2020. Also, all of our directors who were directors at the time of the 2020 annual meeting attended the 2020 annual meeting.

Non-management directors, who are all independent directors, are required to meet as a group in executive sessions without the CEO or any other non-independent director or management at least six times in each calendar year, and our independent Chairman of the Board presided over all executive sessions.

Codes of Business Conduct

The Company’s Code of Business Conduct applies to all Company personnel, including our Executive Director, CEO, CFO and Chief Accounting Officer. In addition, your Board has implemented a separate Board of Directors Code of Ethics and Business Conduct. Any substantive amendments to, or waivers of, the provisions of these documents will be disclosed and made available on our website, as permitted by the SEC and as disclosed in our most recent Annual Report. Both codes are available, without charge, upon written request to the Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890 or may be viewed on our website at https://www.firstenergycorp.com/investor/corporate_governance/responsibility.html.

Corporate Governance Documents

Your Board believes that the Company’s policies and practices should enhance your Board’s ability to represent your interests as shareholders. Your Board established Corporate Governance Policies which, together with Board committee charters, serve as a framework for meeting your Board’s duties and responsibilities with respect to the governance of the Company. Our Corporate Governance Policies and Board committee charters can be viewed by visiting our website at www.firstenergycorp.com/charters. Any amendments to these documents will promptly be made available on our website.

Director Orientation and Continuing Education

Your Board recognizes the importance of its members to keep current on Company, industry and governance issues and their responsibilities as directors. All new directors participate in orientation soon after being elected to your Board. Also, your Board makes available and encourages continuing education programs for Board members, which include internal strategy meetings, internally developed materials such as on-line presentations, third-party presentations and external programs.

Other Public Company Board Membership

Our Corporate Governance Policies provide that directors will not, without your Board’s approval, serve on a total of more than four public company board of directors. Further, without your Board’s approval, no director who serves as an executive officer of any public company may serve on a total of more than two public company boards of directors.

 

7  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Board Qualifications

 

 

The Corporate Governance and Corporate Responsibility Committee recommends Board candidates by identifying qualified individuals in a manner that is consistent with criteria approved by your Board. In consultation with the CEO, the Chairman of the Board and the full Board, the Corporate Governance and Corporate Responsibility Committee searches for, recruits, screens, interviews and recommends prospective directors to provide an appropriate balance of knowledge, experience, diversity attributes and capability on your Board. Suggestions for potential Board candidates come to the Corporate Governance and Corporate Responsibility Committee from a number of sources, including a third-party search firm, incumbent directors, officers and others. The Corporate Governance and Corporate Responsibility Committee has sole authority to retain and engage a third-party search firm to identify a candidate or candidates.

The Committee has actively engaged in director succession planning and regularly evaluates the addition of a director or directors with particular attributes with an appropriate mix of long-, medium-, and short-term tenured directors in its succession planning.

The Corporate Governance and Corporate Responsibility Committee considers suggestions for candidates for membership on your Board, including candidates recommended by shareholders for your Board. Provided that shareholders suggesting director candidates have complied with the procedural requirements set forth in the Corporate Governance and Corporate Responsibility Committee Charter and Amended and Restated Code of Regulations, the Corporate Governance and Corporate Responsibility Committee applies the same criteria and employs substantially similar procedures for evaluating candidates suggested by shareholders for your Board as it would for evaluating any other Board candidate. The Corporate Governance and Corporate Responsibility Committee will give due consideration to all recommended candidates that are submitted in writing to the Corporate Governance and Corporate Responsibility Committee, in care of the Corporate Secretary, FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890, received at least 120 days before the publication of the Company’s annual proxy statement from a shareholder or group of shareholders owning one half of one percent (0.5 percent) or more of the Company’s voting stock for at least one year, and accompanied by a description of the proposed nominee’s qualifications and other relevant biographical information, together with the written consent of the proposed nominee to be named in the proxy statement and to serve on your Board.

Also refer to the “Proposals and Business by Shareholders” section of the “Questions and Answers about the Annual Meeting” below for information regarding nominations under the Company’s Amended and Restated Code of Regulations.

Director Nomination Agreement

On March 16, 2021, your Company entered into a Director Appointment and Nomination Agreement (the “Director Nomination Agreement”) with Carl C. Icahn, Andrew Teno, Jesse A. Lynn, Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Enterprises G.P. Inc., Icahn Enterprises Holdings L.P., IPH GP LLC, Icahn Capital LP, Icahn Onshore LP, Icahn Offshore LP and Beckton Corp. (collectively, the “Icahn Group”). Pursuant to the Director Nomination Agreement, effective as of March 18, 2021, your Board, among other matters agreed to: (i) increase the size of the Board from 12 to 14 directors, resulting in a total of two vacancies; and (ii) appoint Andrew Teno and Jesse A. Lynn (the “Icahn Designees”) to serve as directors of the Company to fill such vacancies, each with a term expiring at the Annual Meeting. A summary of the terms of the Director Nomination Agreement is provided in the “Certain Relationships and Related Person Transactions” section below.

Attributes, Experience, Qualifications and Skills of your Board

In recruiting and selecting Board candidates, the Corporate Governance and Corporate Responsibility Committee takes into account the size of your Board and considers a “skills matrix” to determine whether those skills and/or other attributes qualify candidates for service on your Board. The attributes, experiences, qualifications and skills considered in accordance with Corporate Governance Policies and the Corporate Governance and Corporate Responsibility Committee charter for each director nominee led your Board to conclude that the nominee is qualified to serve on your Board.

 

8  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

The high-level overview below depicts some of the attributes, experiences, qualifications and skills of our director nominees the committee takes into account. It is not intended to be an exhaustive list of each director nominee’s skills or contributions to your Board. Also, additional biographical information and qualifications for each nominee is provided in the “Biographical Information and Qualifications of Nominees for Election as Directors” section below and contains information regarding the person’s service as a director, principal occupation, business experience along with key attributes, experience and skills. Each of the nominees brings a strong and unique background and skill set to your Board, giving your Board, as a whole, competence and experience in a wide variety of areas necessary to oversee the operations of the Company.

 

LOGO

The above takes into account a level of knowledge that could include direct experience, subject matter expertise, directly managing one or more members of management engaged in such activities or exposure as a board or board committee member, including on your Board and Board committees.

Board’s Focus on Diversity

The Company is committed to a policy of inclusiveness and believes that well assembled boards consist of a diverse group of individuals who possess a variety of complementary skills and experiences. The Corporate Governance and Corporate Responsibility Committee regularly assesses the size and composition of your Board in light of the current operating requirements of the Company and the current needs of your Board, and is also committed to actively seeking out highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experience, to include in the pool from which Board nominees are chosen. Accordingly, your Board has set a goal targeting at least 30% diverse members (by race, ethnicity and gender combined) for the foreseeable future. The Corporate Governance and Corporate Responsibility Committee also considers differences in point of view, professional experience, education, and other individual skills, qualities, and attributes that contribute to the optimal functioning of your Board as a whole. Also, our Corporate Governance Policies provide that your Board will not nominate for election a non-employee director following his or her 72nd birthday.

 

9  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Director Independence

Your Board annually reviews the independence of each of its members to make the affirmative determination of independence that is called for by our Corporate Governance Policies and required by the SEC and NYSE listing standards, including certain independence requirements of Board members serving on the Audit Committee, the Compensation Committee and the Corporate Governance and Corporate Responsibility Committee.

Your Board adheres to the definition of an “independent” director as established by the NYSE and the SEC. The definition used by your Board to determine independence is included in our Corporate Governance Policies and can be viewed by visiting our website at www.firstenergycorp.com/charters. All non-employee directors who served during any part of 2020 were independent under applicable standards.

Each year, our directors complete a questionnaire to assist your Board in assessing whether each director meets the applicable independence standards and the related provisions in the Company’s Corporate Governance Policies. The Company facilitates this review by examining its financial records to determine if amounts paid to or received from entities in which each non-employee director or immediate family member has a relationship based on responses to the questionnaires. Subject to the categorical standards approved by your Board and described below, a list of the relevant entities and the amounts the Company paid to or received from those entities is provided to your Board for the non-employee directors. Utilizing this information, the Corporate Governance and Corporate Responsibility Committee presents to your Board (i) an evaluation, with regard to each director, whether the director has any material relationship with the Company or any of its subsidiaries; (ii) a recommendation of whether the amount of any payments between the Company and relevant entities could interfere with a director’s ability to exercise independent judgment; and (iii) a review of any other relevant facts and circumstances regarding the nature of these relationships, to determine whether other factors, regardless of the categorical standards your Board has adopted or under the NYSE’s independence standards, might impede a director’s independence. Based on a review of information concerning each of its non-employee directors and the recommendation of the Corporate Governance and Corporate Responsibility Committee, your Board will affirmatively determine whether a director may be considered “independent.”

Your Board recognizes that in the ordinary course of business, relationships and transactions may occur between the Company and its subsidiaries and entities with which some of our directors are or have been affiliated. Our Corporate Governance Policies provide categorical standards to assist your Board in determining what does not constitute a material relationship for purposes of determining a director’s independence. Accordingly, the following commercial and charitable relationships will not be considered to be a material relationship that would impair a director’s independence: (i) if the director, an immediate family member or a person or organization with which the director has an affiliation purchases electricity or related products or services from the Company or its subsidiaries in the ordinary course of business and the rates or charges involved in the transaction are fixed in conformity with law or governmental authority or otherwise meet the requirements of Regulation S-K Item 404(a) Instruction 7, (ii) the aggregate charitable contributions made by the Company to an organization with which a director, an immediate family member or a person or organization with which the director has an affiliation were less than $100,000 in each of the last three fiscal years, or (iii) the aggregate of other payments made by the Company to another entity or organization with which the director, an immediate family member or a person with which the director has an affiliation, or received by the Company from that other entity or organization, were less than the greater of $1 million or 2% of the affiliated company’s revenues in each of the last three fiscal years. Your Board does not typically consider such immaterial relationships in making independence determinations. Notwithstanding the foregoing, your Board will not treat a director’s relationship with the Company as categorically immaterial if the relationship otherwise conflicts with the NYSE corporate governance listing standards or is required to be disclosed by the Company pursuant to Item 404 of Regulation S-K.

Based on the March 2021 independence review, your Board affirmatively determined that Melvin Williams (our new director nominee), all other non-employee director nominees — Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Jesse A. Lynn, Donald T. Misheff, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Luis A. Reyes, Andrew Teno and Leslie M. Turner — and Sandra Pianalto are independent pursuant to our Corporate Governance Polices, the rules and regulations of the SEC and the listing standards of the NYSE. In all cases, your Board determined that the nature of the business conducted and any interest of the applicable director in that business were immaterial both to the Company and to the director. Outside of their service as a Company director, none of the Company’s independent directors currently provide professional or other services to the Company, its affiliates or any officer of the

 

10  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Company and none of the Company’s directors are related to any executive officer of the Company. Messrs. Somerhalder and Strah are not considered independent directors because of their employment with your Company. Additionally, your Board previously determined that our former CEO and director Charles E. Jones, who resigned from your Board effective October 29, 2020, was not independent due to his prior employment with your Company.

The Corporate Governance and Corporate Responsibility Committee also determined that none of the relationships described above constituted a related person transaction requiring disclosure under the heading “Certain Relationships and Related Person Transactions” in this proxy statement. Also, in each case where the director is a current executive officer of another company, any transactions constituted less than one percent of the Company’s and the other company’s consolidated gross revenues in each of the last three completed fiscal years.

 

11  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Biographical Information and

Qualifications of Nominees for Election as Directors

 

 

The following provides information about each director nominee as of the date of this proxy statement. The information presented below includes each nominee’s specific experiences, qualifications, attributes, and skills that contributed to the conclusion by the Corporate Governance and Corporate Responsibility Committee and your Board that he/she should serve as a director of the Company.

 

 

Michael J. Anderson

 

Position, Principal Occupation and Business Experience: Chairman of the board of directors of The Andersons, Inc., a diversified public company with interests in the grain, ethanol and plant nutrient sectors of U.S. agriculture, as well as in railcar leasing and repair and turf products production, since 2016. He also served as CEO and chairman of the board of directors from 2009 to 2015 and chief executive officer from 1999 to 2015, of The Andersons, Inc.

 

Key Attributes, Experience and Skills: Mr. Anderson received an M.B.A. in Finance and Accounting from the Northwestern University Kellogg Graduate School of Management and was a Certified Public Accountant. He participated in the Harvard Advanced Management Program. Mr. Anderson was an auditor for Arthur Young & Co. In 1996, he became president and chief operating officer of The Andersons, Inc., and he is currently its chairman. Mr. Anderson’s experience in the accounting and executive management areas are invaluable assets for your Board.

 

 

LOGO

 

Age 69

 

FirstEnergy

Director since 2007

 

Standing Committees:

Audit

(Chair); Finance

 

   

Steven J. Demetriou

 

Position, Principal Occupation and Business Experience: Chair, chief executive officer and director of Jacobs Engineering Group Inc., a provider of technical professional services, including consulting, technical, scientific and project delivery for the government and private sector since August 2015. Chairman and chief executive officer (from 2004 to 2015) of Aleris Corporation (“Aleris”), a manufacturer of aluminum rolled products. He served as a director of the OM Group (from 2005 to 2015); and director of Kraton Corporation (from 2009 to 2017).

 

Key Attributes, Experience and Skills: Mr. Demetriou received his Bachelor of Science degree in chemical engineering from Tufts University. He has extensive experience in leadership and senior management roles, including the role of chief executive officer. In addition, he brings experience in a variety of industries, including engineering, construction and oil and gas. His extensive executive and board experience have equipped him with leadership skills and the knowledge of board processes and functions. This experience qualifies him to serve as a member of your Board.

 

 

LOGO

 

Age 62

 

FirstEnergy

Director since 2017

 

Standing Committees:

Finance (Chair);
Operations and
Safety Oversight

 

12  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

Julia L. Johnson

 

Position, Principal Occupation and Business Experience: President of NetCommunications, LLC, a national regulatory and public affairs firm focusing primarily on energy and telecommunications regulation, since 2000. She serves as a director of the following three other public companies: American Water Works Company, Inc., MasTec, Inc., and NorthWestern Corporation.

 

Key Attributes, Experience and Skills: Ms. Johnson received her law degree from the University of Florida College of Law after graduating from the University of Florida with a Bachelor of Science in business administration. She is a former chairman and commissioner of the Florida Public Service Commission, which provides her with valuable insight into the electric utility industry. In her current position as president of NetCommunications, LLC, she develops strategies for achieving objectives through advocacy directed at critical decision makers. She previously served as senior vice president of Communications and Marketing at Milcom Technologies and also has additional public company board experience. Ms. Johnson’s extensive regulatory background, legal experience and additional board experience qualify her to serve as a member of your Board.

 

 

LOGO

 

Age 58

 

FirstEnergy

Director since 2011

 

Standing Committees:

Corporate

Governance and
Corporate
Responsibility (Chair);

Finance

 

 

Jesse A. Lynn

 

Position, Principal Occupation and Business Experience: General Counsel of Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment, energy, automotive, food packaging, metals, real estate, home fashion and pharma, since 2014. Mr. Lynn also serves as a director of the following two other public companies: Cloudera, Inc., and Conduent Incorporated. Mr. Lynn was previously a director of Herbalife Nutrition Ltd (from 2014 to January 2021) and The Manitowoc Company, Inc. (from April 2015 to February 2018).

 

Key Attributes, Experience and Skills: Mr. Lynn received a B.A. from the University of Michigan and a J.D. from the Boston University School of Law. He has extensive experience in a variety of businesses, including investment, energy, automotive, food packaging, metals, real estate, home fashion and pharma. Prior to his current position, Mr. Lynn, was Assistant General Counsel of Icahn Enterprises L.P. (from 2004 to 2014). Prior to joining Icahn Enterprises L.P., Mr. Lynn worked as an associate in the New York office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in its business and finance department and as an associate in the corporate group at Gordon Altman Butowsky Weitzen Shalov & Wein. Mr. Lynn’s legal experience and his experience in a variety of industries along with his broad business skills make him a valuable member of your Board.

 

 

 

LOGO

 

Age 50

 

FirstEnergy

Director since March 2021

 

Standing Committee:

Corporate

Governance and
Corporate
Responsibility

 

13  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

Donald T. Misheff

 

Position, Principal Occupation and Business Experience: Non-executive Chairman of your Board since May 2018. Retired in 2011 as managing partner (position held since 2003) of the Northeast Ohio offices of Ernst & Young LLP, a public accounting firm. He serves as a director of the following two other public companies: TimkenSteel Corp. and Trinseo S.A. He served as a director of Aleris Corporation, whose common stock is privately held (from 2015 to 2018).

 

Key Attributes, Experience and Skills: Mr. Misheff graduated from The University of Akron with a major in accounting and is a Certified Public Accountant. As the managing partner of the Northeast Ohio offices of Ernst & Young LLP from 2003 until his retirement in 2011, he advised many of the region’s largest companies on financial and corporate governance issues. He began his career with Ernst & Young LLP in 1978 as part of the audit staff and later joined the tax practice, specializing in accounting/financial reporting for income taxes, purchase accounting, and mergers and acquisitions. He has extensive experience performing, reviewing, and overseeing the audits of financial statements of a wide range of public companies. Mr. Misheff’s vast financial and corporate governance experience, together with his extensive experience with a wide range of public companies provides an excellent background for his current position as our non-executive Chairman of the Board.

 

 

 

LOGO

 

Age 64

 

FirstEnergy

Director since 2012

 

Standing Committees:

Audit; Corporate

Governance and
Corporate
Responsibility

 

Thomas N. Mitchell

 

Position, Principal Occupation and Business Experience: Chairman of the World Association of Nuclear Operators, an independent, nonprofit organization established to promote the highest standards of nuclear safety, since 2019. Retired in 2015 as the president, chief executive officer and director (positions held since 2009) of Ontario Power Generation Inc. (“OPG”), an Ontario-based electricity generation company. He is also a former director and member of the leadership and compensation committee of the Electric Power Research Institute, an independent, nonprofit organization for public interest energy and environmental research.

 

Key Attributes, Experience and Skills: Mr. Mitchell received his undergraduate degree in Engineering (Nuclear and Thermal Sciences) from Cornell University, his Master of Science degree in Mechanical Engineering from George Washington University and his LLD (Hon) from University of Ontario Institute of Technology, which is an honorary degree. He has extensive experience as a senior utility executive in the operation, modification and construction of nuclear, hydroelectric and thermal power stations. Prior to his most recent executive position at OPG, he held progressively more responsible leadership roles before being named the site vice president at the Peach Bottom Atomic Power Station and Pickering Nuclear Generating Station, where he was responsible for the safe and reliable operations of the stations. He also served as a vice president for the Institute of Nuclear Power Operations and as a Lieutenant (Naval Reactors) in the US Navy. His experience in the nuclear industry also provides him substantial experience in physical security and cybersecurity. Mr. Mitchell’s engineering, environmental, regulatory, physical security and cybersecurity, safety and industry experience, along with his broad leadership and business skills, are essential to your Board.

 

 

 

LOGO

 

Age 65

 

FirstEnergy

Director since 2016

 

Standing Committees:

Operations and Safety

Oversight (Chair);
Corporate

Governance and
Corporate
Responsibility

 

14  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

James F. O’Neil III

 

Position, Principal Occupation and Business Experience: Chief executive officer and vice chairman of Orbital Energy Group (formerly known as CUI Global Inc.), a company focused on acquisition and development of innovative companies to create a diversified energy services platform. Principal owner of Forefront Solutions, LLC, which provides consulting services primarily to the energy infrastructure industry, since October 2017. Former president, chief executive officer and director of Quanta Services, Inc., a provider of specialty contracting services to the electric power and oil and gas industries (from 2011 to 2016). He served as a director of Hennessy Capital Acquisition Corp IV (2019 to 2020), NRC Group Holdings (from 2017 to 2019) and Spark Power Group Inc. (from 2018 to 2019).

 

Key Attributes, Experience and Skills: Mr. O’Neil received his Bachelor of Science degree in civil engineering from Tulane University. He has extensive leadership and senior management experience, including the role of chief executive officer, chief operating officer and senior vice president of operations integration and audit. His extensive executive and board experience have equipped him with leadership skills and the knowledge of board processes and functions. Additionally, Mr. O’Neil’s audit, general corporate decision-making and engineering experience makes him a valuable member to your Board.

 

 

 

LOGO

 

Age 62

 

FirstEnergy

Director since 2017

 

Standing Committees:

Compensation (Chair);
Operations and Safety Oversight

 

Christopher D. Pappas

 

Position, Principal Occupation and Business Experience: Executive Director of your Board (from October 2020 to April 1, 2021). Retired in May 2019 from Trinseo S.A., a producer of plastics, latex and rubber, after serving as president and chief executive officer (from 2010 to 2019) and special adviser (2019). He was a director of Trinseo SA until his retirement from its board of directors (from 2010 to 2020). He serves as a director of one other public company: Univar Inc. (chairman), a chemical distributor and provider.

 

Key Attributes, Experience and Skills: Mr. Pappas received an M.B.A. from the Wharton School, University of Pennsylvania and an undergraduate degree in Civil Engineering from the Georgia Institute of Technology. He served in various leadership capacities at NOVA Chemicals Corporation, Dow Chemical, and DuPont Dow Elastomers. His extensive executive experience, and extensive board experience over the past 18 years with five public companies, have equipped him with leadership skills and the knowledge of board processes and functions. Additionally, Mr. Pappas’ general corporate decision-making and senior executive experience with a commodity-based business provides a useful background for understanding the operations of the Company.

 

 

 

LOGO

 

Age 65

 

FirstEnergy

Director since 2011

 

Standing Committees:

(Effective April 1, 2021) Corporate

Governance and
Corporate
Responsibility; Finance

 

15  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

Luis A. Reyes

 

Position, Principal Occupation and Business Experience: Retired in 2011 as a Regional Administrator (position held since 2008) of the U.S. Nuclear Regulatory Commission (the “NRC”), a federal regulatory agency.

 

Key Attributes, Experience and Skills: Reyes received his undergraduate degree in Electrical Engineering and his Master of Science degree in Nuclear Engineering from the University of Puerto Rico. He has extensive experience in the nuclear field and has held senior leadership positions with the NRC, an independent government agency that regulates commercial nuclear power plants and other uses of nuclear materials such as in nuclear medicine. He joined the NRC in 1978 where he held progressively more responsible leadership roles before being named executive director of operations in 2004, where he managed the agency’s day-to-day operations relating to the safe use of radioactive materials for beneficial civilian purposes while protecting people and the environment. He also served as regional administrator for NRC Region II, overseeing all new commercial nuclear power plant construction in the United States as well as safety and operating plant inspections in the southeast United States. His experience in the nuclear field also provides him substantial experience in physical security and cybersecurity. Reyes retired from the NRC in 2011 with 33 years of service. Reyes’ engineering, physical security and cybersecurity, safety, environmental, regulatory and industry experience is essential to the FirstEnergy Board.

 

 

 

LOGO

 

Age 69

 

FirstEnergy

Director since 2013

 

Standing Committees:

Corporate

Governance and
Corporate
Responsibility;

Operations and Safety Oversight

 

John W. Somerhalder II

 

Position, Principal Occupation and Business Experience: Vice Chairperson and Executive Director of your Board and a member of management since March 2021. Mr. Somerhalder recently served as Interim President and Chief Executive Officer of CenterPoint Energy, Inc., an electric and natural gas utility serving several U.S. markets (from February 2020 to July 2020), and served as a member of the CenterPoint Energy’s board of directors (from 2016 through July 2020). Mr. Somerhalder serves as a director of Gulfport Energy Corp. He served as a director and board chairman of Enable Midstream Partners, LP (from February 2020 to July 2020), as a Director of SunCoke Energy Partners GP LLC (from August 2017 to July 2019), and as director at Crestwood Equity GP LLC, the general partner of Crestwood Equity Partners LP (from October 2013 to February 2020).

 

Key Attributes, Experience and Skills: Mr. Somerhalder holds a Bachelor of Science degree in chemical engineering from the University of Arizona. He served as Interim President and Chief Executive Officer of Colonial Pipeline Company, a U.S. refined products pipeline company (from February 2017 to October 2017). Prior to that, he was president and chief executive officer of AGL Resources Inc., a former publicly traded energy services holding company (from March 2006 to his retirement in December 2015), and chairman of AGL Resources board of directors (from November 2007 to December 2015). Prior to joining AGL Resources, Mr. Somerhalder served in a number of roles with El Paso Corporation, a publicly traded natural gas and related energy products provider, where he spent almost 30 years, starting his career as an engineer and progressing through leadership roles before being named president of El Paso Pipeline Group and executive vice president of El Paso Corporation. He has extensive leadership and senior management experience, including the roles of chief executive officer and board chairman. His extensive energy industry, executive and board experience have equipped him with leadership skills and knowledge of the industry, and board processes and functions. Mr. Somerhalder’s extensive experience qualifies him to serve on your Board and lead efforts to rebuild trust with our external stakeholders, and support our senior leadership team’s efforts to achieve its priorities and strengthen your Company’s governance and compliance functions.

 

 

 

LOGO

 

Age 65

 

FirstEnergy

Director since March 2021

 

16  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

Steven E. Strah

 

Position, Principal Occupation and Business Experience: President, CEO and director of your Company since March 2021. He was President and Acting CEO (from October 2020 to March 2021), and President (since May 2020). He also served as Senior Vice President and Chief Financial Officer of your Company (from 2018 to 2020), and Senior Vice President and President of FirstEnergy Utilities (from 2015 to 2018). He also serves as a director of many other subsidiaries of the Company.

 

Key Attributes, Experience and Skills: Mr. Strah received his Bachelor of Science degree in business administration from Baldwin Wallace University. His extensive career began in 1984 at The Illuminating Company, now a subsidiary of your Company, and continued at FirstEnergy Corp. He has held numerous executive leadership positions at your Company including President at various FirstEnergy subsidiaries. Mr. Strah’s vast experience brings to your Board an extraordinary understanding of the inner workings of the public utilities industry and FirstEnergy.

 

 

 

LOGO

 

Age 57

 

FirstEnergy

Director since March 2021

 

Andrew Teno

 

Position, Principal Occupation and Business Experience: Portfolio Manager of Icahn Capital LP., a diversified holding company engaged in a variety of businesses including investment, energy, automotive, food packaging, metals, real estate, home fashion and pharma, since October 2020. Mr. Teno serves as a director of the following two public companies: Herc Holdings Inc. and Cheniere Energy, Inc. He served as a director of Eco-Stim Energy Solutions (from March 2017 to December 2018).

 

Key Attributes, Experience and Skills: Mr. Teno received an undergraduate business degree from the Wharton School at the University of Pennsylvania in 2007. Prior to his position at Icahn Capital, Mr. Teno worked at Fir Tree Partners, a NY based private investment firm that invests worldwide in public and private companies, real estate and sovereign debt. Prior to Fir Tree, he worked at Crestview Partners from July 2009 to July 2011 as an associate in their private equity business and at Gleacher Partners, a boutique mergers and acquisitions firm. Mr. Teno’s investment expertise and experience in a variety of industries, along with his business skills make him a valuable member of your Board.

 

 

 

LOGO

 

Age 36

 

FirstEnergy

Director since March 2021

 

Standing Committees:

Audit, Finance

 

17  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

Leslie M. Turner

 

Position, Principal Occupation and Business Experience: Retired in March 2018 as senior vice president, general counsel and corporate secretary (positions held since 2012) of The Hershey Company, a global confectionery company.

 

Key Attributes, Experience and Skills: Ms. Turner received her law degree from the Georgetown University Law Center after graduating from the New York University with a Bachelor of Science degree. She also received a Master of Laws in Law and Government from the American University, Washington College of Law. Ms. Turner has extensive and wide-ranging leadership, legal, governance and corporate strategy skills through her former roles with The Hershey Company and The Coca-Cola Company. Ms. Turner served as senior vice president, general counsel, and corporate secretary of The Hershey Company from 2012 until her retirement in March 2018. In this role, Ms. Turner was the leader of Hershey’s legal, government relations, corporate secretary, and corporate security functions. She also advised Hershey on M&A opportunities and other stakeholder considerations facing publicly traded companies. Prior to joining Hershey, Ms. Turner’s career included progressively more responsible leadership roles at Coca-Cola North America, Akin Gump Hauer & Feld, LLP and the senior executive service level of the federal government. Ms. Turner’s legal experience and additional regulatory experience qualify her to serve as a member of your Board.

 

 

 

LOGO

 

Age 63

 

FirstEnergy

Director since 2018

 

Standing Committees:

Audit;
Compensation

 

Melvin Williams

 

Position, Principal Occupation and Business Experience: Retired in 2020 as president of Nicor Gas, a natural gas distribution company and subsidiary of the Southern Company, and senior vice president of Southern Company Gas (positions held since 2015).

 

Key Attributes, Experience and Skills: Mr. Williams received his Bachelor of Science degree in business administration from the Savannah State University. Prior to his most recent positions, he held progressively more responsible leadership roles including senior vice president, planning and business services at Nicor Gas and vice president and general manager at Atlanta Gas Light Company and Florida City Gas Company. He is a champion for leadership development and diversity and inclusion-related matters. Over 32 years of utility experience that includes customer engagement, safety, sales, marketing and new business development, regulatory affairs, financial planning and utility operations will enable Mr. Williams to provide valuable insight and qualifies him to serve as a member of your Board.

 

 

 

LOGO

 

Age 57

 

FirstEnergy

Director nominee

 

Standing Committees:

N/A

 

18  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Board Committees

 

 

Your Board established five standing committees listed below. Also provided below is information relating to certain other special oversight committees your Board created in 2020, including the Compliance Oversight Sub-Committee of the Audit Committee to assess and implement potential changes as appropriate in your Company’s compliance program. All standing committees are comprised solely of independent directors as determined by your Board in accordance with our Corporate Governance Policies, which incorporate the New York Stock Exchange (“NYSE”) listing standards and applicable Securities and Exchange Commission (“SEC”) rules, including the members of the Audit Committee, Compensation Committee and the Corporate Governance and Corporate Responsibility Committee. Messrs. Somerhalder and Strah, your only directors who are not considered independent because of their employment with your Company, do not serve on any standing Board committee.

 

  Audit Committee

 

 

    12 meetings in fiscal year 2020        
   

LOGO

 

Michael J. Anderson (Chair) *

    Donald T. Misheff *

    Sandra Pianalto *

    Andrew Teno

    Leslie M. Turner

 

    * Financial Experts

   

The Audit Committee is primarily responsible for assisting your Board with oversight of:

 

  the integrity of the Company’s financial statements;

  compliance with legal, risk management and regulatory requirements;

  independent auditor’s qualifications and independence;

  performance of the Company’s internal audit function and independent auditor;

  systems of internal control with respect to the accuracy of financial records, adherence to Company policies and compliance with legal and regulatory requirements; and

  major financial risk exposures, including risks related to cybersecurity.

 

The purpose of the Audit Committee’s new Compliance Oversight Sub-Committee discussed further below is to assess and implement potential changes as appropriate in your Company’s compliance program. The Audit Committee is also directly responsible for the appointment, compensation and retention of, and the oversight of the work and pre-approval of all services provided by the Company’s independent registered public accounting firm. For a complete list of responsibilities and other information, please refer to the Audit Committee Charter available on our website at www.firstenergycorp.com/charters.

Your Board appoints at least one member of the Audit Committee who, in your Board’s business judgment, is an “Audit Committee Financial Expert,” as such term is defined by the SEC. Your Board determined that Messrs. Anderson, Misheff and Ms. Pianalto meet this definition. All members of the Audit Committee are financially literate. As required by the applicable NYSE listing standards, to the extent any member of the Company’s Audit Committee simultaneously serves on the audit committee of more than three public companies, the Company will disclose on its website (www.firstenergycorp.com under the tab “Investors”, “Governance” and “Board of Directors”) your Board’s determination whether such simultaneous service impairs the ability of that individual to serve effectively on the Company’s Audit Committee. See the Audit Committee Report in this proxy statement for additional information regarding the Audit Committee.

Mr. Teno was appointed to the Audit Committee effective March 18, 2021.

 

 

 

19  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

  Compensation Committee

 

 

  5 meetings in fiscal year 2020        
     

LOGO

 

James F. O’Neil III (Chair)

                  Sandra Pianalto

                  Leslie M. Turner

   

The Compensation Committee is primarily responsible for:

 

  discharging the responsibilities of your Board relating to compensation of certain executive officers of the Company, including our CEO;

  endorsing a compensation philosophy and objectives that support competitive pay for performance and are consistent with our corporate strategy;

  establishing the appropriate incentive compensation and equity-based plans for our senior-level officers;

  reviewing and discussing with our management the disclosures in the CD&A below and making a recommendation to your Board whether these disclosures should be included in the Company’s Annual Report on Form 10-K and this proxy statement; and

  producing the Compensation Committee Report to be included in the Company’s Annual Report on Form 10-K and this proxy statement.

 

The Compensation Committee also reviews and, if appropriate, makes recommendations to your Board regarding the compensation and benefits of our non-employee directors. To the extent permitted under NYSE listing standards and applicable law, the Compensation Committee is authorized to delegate to one or more sub-committees. For information regarding the role of executive officers and our independent compensation consultant in determining or recommending the amount or form of executive and director compensation, see the CD&A section below. For a complete list of responsibilities and other information, refer to the Compensation Committee Charter available on our website at www.firstenergycorp.com/charters.

Mr. Pappas transitioned off of the Compensation Committee in October 2020.

 

 

 

  Corporate Governance and Corporate Responsibility Committee

 

 

  5 meetings in fiscal year 2020        
     

LOGO

 

Julia L. Johnson (Chair)

                  Donald T. Misheff

                  Thomas N. Mitchell

                  Luis A. Reyes

 

   

The Corporate Governance and Corporate Responsibility Committee is primarily responsible for:

 

  Board succession, including ensuring the appropriate balance of diversity of attributes, experience, skills, ethnicity and gender of our directors;

  recommending Director nominees (also refer to the “Board Qualifications” section below for more details); and

  developing and periodically reviewing our corporate governance policies.

 

The Committee is also directly responsible for oversight of our (i) political activities and practices and (ii) our corporate citizenship practices, including sustainability, environmental and corporate social responsibility initiatives. For a complete list of responsibilities and other information, refer to the Corporate Governance and Corporate Responsibility Committee Charter available on our website at www.firstenergycorp.com/charters.

Mr. Lynn and Mr. Pappas were appointed to the Corporate Governance and Corporate Responsibility Committee effective March 23, 2021 and April 1, 2021, respectively.

 

 

 

20  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

Finance Committee

 

  

 

7 meetings in fiscal year 2020

  

LOGO

 

Steven J. Demetriou (Chair)

    Michael J. Anderson

    Julia L. Johnson

  

The Finance Committee is primarily responsible for monitoring and overseeing the Company’s financial resources and strategies, with emphasis on those issues that are long-term in nature. For a complete list of responsibilities and other information, refer to the Finance Committee Charter available on website at www.firstenergycorp.com/charters.

 

Mr. Demetriou was appointed Chair of the Finance Committee and Mr. Pappas transitioned off of the Finance Committee in October 2020. Mr. Pappas has been appointed to transition back onto the Finance Committee effective April 1, 2021, and Mr. Teno was appointed to the Finance Committee effective March 23, 2021.

      

 

 

Operations and Safety Oversight Committee

 

  

 

5 meetings in fiscal year 2020

 

  

LOGO

 

Thomas N. Mitchell (Chair)

        Steven J. Demetriou

        James F. O’Neil III

        Luis A. Reyes

   The Operations and Safety Oversight Committee is primarily responsible for monitoring and overseeing the Company’s significant operating matters relating to the Company’s distribution and transmission facilities, and electric power generation together with the safety matters relating to such operations. For a complete list of responsibilities and other information, refer to the Operations and Safety Oversight Committee Charter available on our website at www.firstenergycorp.com/charters.
      

 

21  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

 

Special Board Oversight Committees

 

  
Since July 2020, your Board has directed an internal investigation related to ongoing government investigations, including implementing potential changes as appropriate in your Company’s compliance program. To assist with its oversight, your Board formed the special committees discussed below.
      
 

LOGO

 

    Leslie M. Turner (Chair)

  

Compliance Oversight Sub-Committee of the Audit Committee is primarily responsible for assessing your Company’s corporate compliance program and overseeing the implementation of recommended enhancements, as appropriate.

 

   Members: Leslie M. Turner (Chair), Julia L. Johnson, Thomas N. Mitchell, Sandra Pianalto, Luis A. Reyes and Andrew Teno

   Two meetings in fiscal year 2020

 

Mr. Teno was appointed to the Compliance Oversight Sub-Committee of the Audit Committee effective March 18, 2021.

 

  

Demand Review Committee is primarily responsible for oversight of certain litigation related to the ongoing government investigations.

 

   Members: Leslie M. Turner (Chair), Julia L. Johnson, Jesse A. Lynn, Sandra Pianalto and John W. Somerhalder II Two meetings in fiscal year 2020

   One meeting in fiscal year 2020

 

Mr. Lynn was appointed to the Demand Review Committee effective March 18, 2021.

      

 

LOGO

 

Donald T. Misheff (Chair)

  

Independent Review Committee is primarily responsible for directing an internal investigation related to ongoing government investigations.

 

   Members: Donald T. Misheff (Chair), Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Jesse A. Lynn, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Sandra Pianalto, Luis A. Reyes, John W. Somerhalder II and Leslie M. Turner

   20 meetings in fiscal year 2020

 

Mr. Lynn was appointed to the Independent Review Committee effective March 18, 2021.

      

 

22  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Items to Be Voted On

 

 

 

Item  1

 

  

Election of Directors

 

Your Board recommends that you vote FOR All Nominees.

You are being asked to vote for the following 14 nominees (13 current directors and one new director nominee) to serve on your Board for a term expiring at the annual meeting of shareholders in 2022 and until their successors shall have been elected: Michael J. Anderson, Steven J. Demetriou, Julia L. Johnson, Jesse A. Lynn, Donald T. Misheff, Thomas N. Mitchell, James F. O’Neil III, Christopher D. Pappas, Luis A. Reyes, John W. Somerhalder II, Steven E. Strah, Andrew Teno, Leslie M. Turner and Melvin Williams. Messrs. Somerhalder and Strah were elected to your Board effective March 1, 2021 and March 8, 2021, respectively, and are nominees for election by shareholders at the Annual Meeting. Messrs. Lynn and Teno were appointed to your Board effective March 18, 2021, pursuant to the Director Nomination Agreement and are nominees for election by shareholders at the Annual Meeting. Mr. Somerhalder and Mr. Williams were identified by a third-party search firm as potential candidates and recommended as directors by the members of our Corporate Governance and Corporate Responsibility Committee. In addition, Sandra Pianalto has not been nominated for re-election at the Annual Meeting, and her term on your Board will expire at the conclusion of the Annual Meeting.

The “Biographical Information and Qualifications of Nominees for Election as Directors” section of this proxy statement provides information for all nominees for election at the Annual Meeting. The “Board Qualifications” section of this proxy statement provides information relating to your Board’s and Corporate Governance and Corporate Responsibility Committee’s review of nominees. Your Board has no reason to believe that the persons nominated will not be available to serve after being elected. If any of these nominees would not be available to serve for any reason, shares represented by the appointed proxies will be voted either for a lesser number of directors or for another person selected by your Board. However, if the inability to serve is believed to be temporary in nature, the shares represented by the appointed proxies will be voted for that person who, if elected, will serve when able to do so.

Pursuant to the Company’s Amended and Restated Code of Regulations, at any election of directors, a nominee shall be elected to your Board only if the vote “For” the candidate exceed the votes “Against” the nominee; abstentions and broker non-votes will have no effect. Our Corporate Governance Policies also provide that in an uncontested election of directors (i.e., an election where the only nominees are those recommended by your Board), any nominee for director who receives a greater number of votes “Against” his or her election than votes “For” his or her election will promptly tender his or her resignation to the Corporate Governance and Corporate Responsibility Committee following certification of the shareholder vote. The Corporate Governance and Corporate Responsibility Committee will promptly consider the tendered resignation and will recommend to your Board whether to accept or reject the tendered resignation no later than 60 days following the date of the shareholders’ meeting at which the election occurred. In considering whether to recommend acceptance or rejection of the tendered resignation, the Corporate Governance and Corporate Responsibility Committee will consider factors deemed relevant by the committee members, including the director’s length of service, the director’s particular qualifications and contributions to the Company, the reasons underlying the majority withheld vote, if known, and whether these reasons can be cured, and compliance with stock exchange listing standards and the Corporate Governance Policies. In considering the Corporate Governance and Corporate Responsibility Committee’s recommendation, your Board will consider the factors considered by the Corporate Governance and Corporate Responsibility Committee and any such additional information and factors your Board believes to be relevant. Your Board will act on the Corporate Governance and Corporate Responsibility Committee’s recommendation no later than at its next regularly scheduled Board meeting.

 

Your Board Recommends That You Vote “For” All Nominees in Item 1.

 

23  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Item  2

 

  

Ratification of the Appointment of the Independent Registered Public Accounting Firm For 2021

 

Your Board recommends that you vote FOR Item 2.

You are being asked to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to examine the books and accounts of the Company for the fiscal year ending December 31, 2021. While our Amended and Restated Code of Regulations does not require shareholders to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, we are submitting the proposal for ratification as a matter of good corporate governance. However, if shareholders do not ratify the appointment, the Audit Committee will reconsider retaining PricewaterhouseCoopers LLP. Even if the appointment is ratified, the Audit Committee, at its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders. A representative of PricewaterhouseCoopers LLP is expected to attend the Annual Meeting and will be available to respond to appropriate questions and have an opportunity to make a statement if he or she wishes to do so. We refer you to the “Matters Relating to the Independent Registered Public Accounting Firm” section of this proxy statement for information regarding services performed by, and fees paid to, PricewaterhouseCoopers LLP during the years 2019 and 2020. Item 2 requires the affirmative vote of a majority of the votes cast and abstentions will have no effect. There can be no broker non-votes on Item 2 as it is considered a “routine” matter under applicable NYSE rules.

 

Your Board Recommends That You Vote “For” Item 2.

 

24  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Item  3

 

  

Approve, on an Advisory Basis, Named Executive Officer Compensation

 

Your Board recommends that you vote FOR Item 3.

The following proposal provides shareholders the opportunity to cast an advisory, non-binding vote to approve the compensation of the NEOs (a “Say-on-Pay” vote) as further described in the CD&A and the related compensation tables and narrative disclosure. This resolution is required pursuant to Section 14A of the Securities Exchange Act of 1934. Currently, the advisory vote is held annually. The next advisory vote on NEO compensation is scheduled to occur at the Company’s 2022 Annual Meeting of Shareholders. Your Board strongly supports the Company’s executive pay practices and asks shareholders to support its executive compensation program by adopting the following resolution:

“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the FirstEnergy Corp. Named Executive Officers, as such compensation is disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables, and the other related narrative executive compensation disclosure contained in the proxy statement.”

The primary objectives of the Company’s executive compensation program are to attract, motivate, retain, and reward the talented executives, including the NEOs, who we believe can provide the performance and leadership to achieve success in the highly complex energy industry. Our executive compensation program is centered on a pay-for-performance philosophy. After robust benchmarking and shareholder outreach, the Compensation Committee and your Board approved a number of key changes effective in 2018 and generally maintained the executive compensation program for 2019 and 2020, to better align executive pay with shareholder interests.

In deciding how to vote on this proposal, we encourage you to read the CD&A for a more detailed discussion of our executive compensation programs and practices applicable to the NEOs, beginning on page 26.

Your Board strongly believes that our compensation philosophy, in conjunction with continued shareholder outreach, is in the best interests of shareholders. We will continue to annually review and evaluate all compensation plans and programs with the goal of aligning such plans and programs with market practice and the best interests of our shareholders. Item 3 is an advisory proposal that requires the affirmative vote of a majority of the votes cast; abstentions and broker non-votes will have no effect.

Although this advisory vote is non-binding, your Board and the Compensation Committee value the views of our shareholders and expect to consider the voting results when considering future executive compensation practices for the NEOs.

 

Your Board Recommends That You Vote “For” Item 3.

 

25  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Executive Compensation

 

 

Compensation Committee Report

 

 

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with management and, based on such review and discussions, the Compensation Committee recommended to your Board that the CD&A be included (or incorporated by reference, as applicable) in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and this 2021 Proxy Statement.

Compensation Committee: James F. O’Neil III (Chair), Sandra Pianalto, and Leslie M. Turner.

Compensation Discussion and Analysis

 

 

Introduction

This CD&A provides an overview of the Company’s strategy and performance, shareholder engagement process, 2020 executive compensation programs and decisions, and initial plans for the 2021 executive compensation programs. This CD&A focuses on the compensation of our NEOs, who are as follows, for fiscal year 2020:

 

   
 Named Executive  Officer   Current Title

 Steven E. Strah

  President and Chief Executive Officer (“CEO”)

 K. Jon Taylor

  Senior Vice President and Chief Financial Officer (“CFO”)

 Samuel L. Belcher

  Senior Vice President and President, FirstEnergy Utilities

 Gary D. Benz

  Senior Vice President, Strategy

 Christine L. Walker

  Senior Vice President and Chief Human Resources Officer

 Charles E. Jones

  Former Chief Executive Officer

 Robert P. Reffner

  Former Senior Vice President and Chief Legal Officer

Key Executive Officer Transitions

On October 29, 2020, Mr. Strah became Acting CEO in addition to serving as the President of the Company, a position to which he was promoted in May 2020 after previously serving as Senior Vice President and CFO of the Company since March 2018. Mr. Strah’s appointment to Acting CEO followed the determination by the Independent Review Committee of the Board of Directors (“Independent Review Committee”) to terminate Mr. Jones as the Company’s Chief Executive Officer effective October 29, 2020. These actions by the Independent Review Committee follow the Company’s internal review related to the ongoing government investigations, the existence of which was previously disclosed in the Company’s Form 10-Q for the period ended June 30, 2020. As a result of Mr. Jones’ termination, and due to the determination that Mr. Jones violated certain Company policies and its code of conduct, all grants, awards and compensation under the Company’s short-term incentive compensation program and long-term incentive compensation program with respect to Mr. Jones that were outstanding on the date of termination have been forfeited. On March 7, 2021, the Board appointed Mr. Strah to the position of CEO of FirstEnergy, effective as of March 8, 2021. The Board also elected Mr. Strah as a Director of the Company, effective as of March 8, 2021.

In May 2020, Mr. Taylor became Senior Vice President and CFO after previously serving as Vice President, Utility Operations since April 2019. Mr. Reffner was appointed to the position of Senior Vice President and Chief Legal Officer in May 2020 after serving as Senior Vice President and General Counsel since September 2018. On November 8, 2020, Mr. Reffner was separated from the Company.

Additional Information

This CD&A uses certain capitalized terms, which are defined in the Glossary of Terms, beginning on page 53. In general, we use the term “CEO” in this CD&A to refer, generally speaking, to the individual serving as our Chief Executive Officer from time to time, including Mr. Strah in his role as Acting CEO beginning October 29, 2020. In addition, certain of the performance incentive metrics discussed and utilized in

 

26  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

measuring pay-for-performance are based on non-GAAP figures, and the definitions for those metrics in the Glossary of Terms explain the calculation methodology to the closest GAAP measure. The Compensation Committee believes that using such non-GAAP metrics best aligns NEO incentive opportunity with Company performance, which directly supports long-term shareholder value. Use of such non-GAAP metrics are helpful to understand and evaluate performance trends when assessing pay-for-performance and are aligned with key aspects of the Company’s financial performance disclosures.

CD&A Quick Reference Guide

 

 

Key Sections

 

 

 

Core Topics

 

  

 

    Page    

 

     
Executive Summary  

•  Moving Forward

 

•  Continued Execution on the Business Plan

 

•  Looking to the Future

 

•  Shareholder Engagement and Say-on-Pay Results

 

•  Our Responses to Shareholder Feedback

 

   28
     

Governance of Our

Compensation

Programs

 

•  Compensation Philosophy

 

•  What We Do and Don’t Do

 

•  Role of our Compensation Committee, Management and Compensation Consultant

 

•  Benchmarking

 

   32
     

 

Components of

Total Direct

Compensation

Programs

 

•  Key Elements of 2020 NEO Compensation

 

•  Compensation Mix

 

•  Determination of Compensation for 2020

 

-  Target Compensation (Base Salary + Incentive Compensation)

 

-  Incentive Compensation Programs

 

-  FE STIP

 

-  KPIs and Weightings for FE STIP

 

-  FE LTIP

 

•  Incentive Compensation Payouts for 2020

 

-  FE STIP Payout

 

-  FE LTIP Payouts

 

•  Outstanding Award Cycles (2019-2021 and 2020-2022)

 

•  Realized Compensation

 

•  2021 Incentive Plan Design and Continuing NEO Compensation

 

   37
     

 

Other Compensation

Policies and Practices 

 

•  Retirement Benefits, Executive Deferred Compensation Plan (“EDCP”), Personal Benefits and Perquisites

 

•  Severance and Change in Control (“CIC”) Policies

 

•  Share Ownership Guidelines

 

•  Hedging Policies

 

•  Clawback Policy

 

•  Risk Assessment of Compensation Programs

 

•  Impact of Tax Requirements on Compensation

 

   47
CD&A Glossary of Terms  

•  Key Terms and Definitions

 

   53

 

27  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Executive Summary

 

 

Moving Forward

Your Board and the management team have acted with a sense of urgency to move your Company forward by taking the steps necessary to address current challenges, improve our compliance culture, and position FirstEnergy for long-term stability and success. As part of this, we are committed to strengthening every part of FirstEnergy’s business and taking the necessary steps to enhance credibility with our shareholders and other stakeholders, including our regulators and the ratings agencies.

When inappropriate conduct was discovered during the course of the internal investigation, which was led by the Independent Review Committee of the Board and outside counsel, your Board took swift and deliberate action by terminating certain members of senior management, including the chief executive officer, and, shortly thereafter, separating with the chief legal and chief ethics officers. To improve the tone at the top, the Board appointed a new acting chief executive officer, named an independent Board member as executive director and enhanced the role of Board Chair. Furthermore, in 2021, your Company externally hired an SVP and chief legal officer, a vice chairperson and executive director, and recently announced that a chief ethics and compliance officer will join your Company in mid-April. These hires will help embed a stronger culture of compliance, ethics, integrity and accountability at FirstEnergy.

In addition to strengthening the leadership team, a new Compliance Oversight Sub-Committee of our Audit Committee was formed to spearhead the Board’s assessment of FirstEnergy’s compliance program and oversee implementation of potential changes, as appropriate. This effort, led by independent director Leslie Turner, engages with outside expertise for help and best practices. To support engagement with all employees, new compliance ambassadors will be designated throughout the Company, and all non-bargaining employees have been assigned a cascading priority from President and CEO Steven E. Strah that supports our objectives around a culture of integrity, accountability, ethics and compliance. Additionally, in March 2021, the Board approved an ethics and compliance component to the 2021 FE STIP which will serve as a negative modifier at the individual level, with downward adjustment only, to reinforce that acting with ethics and integrity is at the core of how your Company operates. This addition to the incentive compensation program supports the desire for a meaningful culture change and a focus on continuing to evolve our ethics and compliance program.

With the Board’s oversight, senior management has made significant changes to your Company’s approach to governmental affairs engagement and is limiting participation in the political process. This also includes ensuring that the disclosures around your Company’s political advocacy are more robust going forward so that it is clear what efforts your Company supports and why they are supported. In March 2021, your Board voted to suspend employee contributions to the FirstEnergy Political Action Committee (FEPAC) made through automatic payroll deduction while the next steps for the FEPAC are evaluated.

We have also taken proactive steps to resolve a range of regulatory proceedings affecting our Ohio utilities. We believe resolving these matters in a comprehensive manner is a critical step to demonstrate our commitment to transparency and integrity in every aspect of our business, while also enabling FirstEnergy to remove uncertainty relating to current Ohio regulatory matters.

Continued Execution on the Business Plan

In 2020, FirstEnergy displayed strong operational performance, and we successfully executed our regulated growth strategies. Key achievements during the year include:

 

 

Safely and successfully managing our operations during the global pandemic while nearly 7,000 of our 12,000 employees worked from home, and others adopted new health and safety protocols. For more information about your Company’s COVID-19 response, refer to the “Human Capital Management” section beginning on page 78;

 

 

Driving quantifiable reliability enhancements through our customer-focused investments;

 

 

Advancing a regulatory framework in several service territories to support continued investments to benefit our customers, including the following:

 

  o

Jersey Central Power & Light (“JCP&L”) implementation of forward-looking transmission rates, subject to refund;

 

28  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

  o

New Jersey Board of Public Utilities approval of our JCP&L distribution base rate case settlement agreement, which includes a $94 million increase in annual base distribution revenues for recovery of storm costs and to provide safe and reliable electric service to customers;

 

  o

FERC approval to convert the existing stated transmission rates of Mon Power, Penelec and West Penn Power to a forward-looking formula transmission rate, effective January 1, 2021; and

 

  o

Pennsylvania Public Utility Commission approval for Distribution System Improvement Charge waiver for Penn Power, which increased the cap from 5% to 7.5%; and

 

 

Completing our strategy to exit the competitive generation business with our former subsidiary’s emergence from bankruptcy on February 27, 2020.

We continue to strengthen our transmission and distribution systems through significant investments designed to improve reliability and support our customers’ evolving energy needs. We remain excited about the significant investment opportunities that will help us drive solid earnings and growth in the years ahead.

Looking to the Future

FE Forward

Your Board and executive management team are also implementing key initiatives to enhance shareholder value and reshape FirstEnergy into a more resilient, industry-leading organization of the future. This includes the company-wide FE Forward program that is expected to transform FirstEnergy in a way that provides near-term value while opening new opportunities for longer-term growth.

FE Forward was launched in the fourth quarter of 2020, to support your Company’s future growth trajectory for the benefit of shareholders and all stakeholders. In partnership with McKinsey & Company, employees across our organization are challenging organization traditions, conventional wisdom, and cultural norms. At the same time, we are focused on modernizing our business policies, management practices, processes and technology platforms. This project is expected to deliver substantial operating and capital efficiencies and improve our credit profile, while enabling your Company to reinvest in a truly modern and distinctive experience that improves customer service and satisfaction.

Key opportunities of FE Forward include:

 

 

Optimizing operations by expanding capabilities in areas such as strategic sourcing, inventory optimization, and commercial contract terms, and by standardizing best-in-class work management policies across the enterprise;

 

 

Accelerating your Company’s digital transformation by revamping customers’ online experience, automating sourcing data collection and management, and deploying advanced analytics in asset health decisions as well as vegetation management programs; and

 

 

Productivity improvements through system integration that puts advanced technology tools, such as mobile dashboards and remote access to asset management information, in the hands of frontline employees.

By 2024, FE Forward is projected to generate approximately $300 million in annualized capital expenditure efficiencies while continuing to hold operating expenses flat by absorbing approximately $100 million in projected increases. In addition, your Company expects to generate approximately $250 million in working capital improvements by 2022. This program includes an estimated $150 million of costs to achieve through 2023, which are expected to be self-funded through these efficiencies.

FE Forward is not a downsizing effort and there will not be any involuntary employee reductions in connection with this program. It is expected to be a significant catalyst to augment your Company’s growth potential by taking a more strategic approach to operating expenditures and reinvesting in a more diversified capital program that over the long term continues to support a smarter and cleaner electric grid.

Strategic Goals

We have established new goals for key areas of our business that support our mission to be a forward-thinking electric utility powered by a diverse team of employees committed to making customers’ lives brighter, the environment better and our communities stronger.

 

29  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

For example, in November 2020, we published our Climate Strategy, which includes a new comprehensive and ambitious greenhouse gas emission goal. We pledged to achieve carbon neutrality by 2050 and set an interim goal for a 30% reduction in greenhouse gases within your Company’s direct operational control by 2030, based on 2019 levels. In addition, we set a fleet electrification goal beginning in 2021 as we plan 100% of new purchases for our light duty and aerial truck fleet to be electric or hybrid vehicles, creating a path to electrify 30% of a 3,500-vehicle fleet by 2030 with a goal of complete electrification of the vehicle fleet by 2050. Also, the Company’s West Virginia utility, Monongahela Power, will seek approval to construct at least 50 MWs) of solar generation.

To offer additional clarity into our future opportunities and strategies in a rapidly changing industry, we updated our Strategic Plan in January 2021. The plan reinforces our Core Values and Behaviors, which serve as the foundation for how we strive to do business. The Strategic Plan, available online at www.firstenergycorp.com/FEstrategicplan, articulates numerous goals that support our objectives and values, including our carbon neutrality pledge and specific targets related to:

 

   

Enhancing a culture of compliance through transparency and accountability;

 

   

Enabling a smarter, more resilient electric system;

 

   

Embracing innovation across the organization;

 

   

Meeting the challenges of climate change;

 

   

Developing a diverse and inclusive workforce, including 2025 goals to increase the number of employees and leaders from underrepresented racial and ethnic groups by 30% each and targeting 20% of our supply chain spend be with diverse suppliers;

 

   

Building collaborative relationships, marked by trust and respect, with all our stakeholders;

 

   

Strengthening your Company’s safety-first culture; and

 

   

Delivering strong and predictable financial results.

Shareholder Engagement and Say-on-Pay Results

Our Board and Compensation Committee recognize the seriousness of the events that occurred in 2020 and have taken actions in our 2020 incentive pay programs for members of our senior leadership team, including the continuing NEOs, as further described in the CD&A. Our Board and Compensation Committee are continuing to review the incentive programs in 2021 to appropriately reflect the Company’s needs and continue to drive shareholder value as a result of the experiences in 2020.

Our Board and management are committed to engaging our shareholders and soliciting their perspectives on key performance, compensation and governance issues. Consistent with prior years, select board members and management representatives conducted extensive outreach during 2020.

Our 2020 Say-On-Pay vote successfully passed with about 98% support, which is consistent with the vote in 2019 and an increase over the 2018 Say-On-Pay vote of 95%. Accordingly, in 2020, we continued with the design of our compensation plans and programs and did not make any substantial changes following the 2020 Say-On-Pay voting results. In an effort to align our compensation programs with the interests of shareholders, improve the relationship between pay and performance, better tie our executive compensation programs to our business strategies, and drive the right executive behaviors, the following summary of incentive design changes were proactively made to FirstEnergy’s incentive programs beginning with awards granted in 2018 and continuing for awards in 2019 and 2020.

 

30  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Our Responses to Shareholder Feedback

 

   
Shareholder Feedback   Actions
Shareholders want pay-for-performance alignment; metrics should drive Company strategy and long-term shareholder value  

•  Programs linked to key drivers of shareholder value:

 

   FE STIP tied to a funding “gate” based on Operating Earnings;

 

   FE LTIP tied to Operating Earnings per Share (“Operating EPS”) and Capital Effectiveness, both of which are strong indicators of shareholder value in the utility industry; and

 

   External segment reporting is consistent with the internal financial reports to regularly assess performance of the business and allocate resources.

 

•  Maintained FE LTIP:

 

   Includes a Relative Total Shareholder Return (“RTSR”) modifier, which will increase or decrease the FE LTIP payout based on performance against companies in the S&P 500 Utilities Index to enhance link to shareholder value; and

 

   Includes a TSR cap (if absolute TSR is negative over the three-year FE LTIP period, the payout will be capped at 100%).

 

•  Increased the stretch (maximum) payout opportunity level from 150% to 200% of target in the FE STIP in 2020 to be consistent with market practices and further align the incentive program with that of your Company’s peers.

 

•  Maintained current cap on FE LTIP (maximum payout 200%).

Shareholders prefer performance-based vs. time-based awards  

•  100% performance-based long-term incentives, a leading practice compared to our peer groups.

Shareholders prefer 3-year cumulative vs. successive

annual performance

periods for the long-term incentive plans

 

•  Maintained 3-year cumulative goals focused on an Operating EPS KPI and 3-year Average Capital Effectiveness;

 

•  Maintained 3-year RTSR modifier with an absolute TSR cap; and

 

•  Maintained FE LTIP design with cumulative metrics instead of annual accumulation of points.

Goals need to be set rigorously and the process needs to be transparent  

•  Maintained additional stretch-level performance measure through goal setting process. As an example, in the 2020 FE STIP, we added $0.04 to the stretch-level KPI Operating EPS above what was communicated to investors in November 2019;

 

•  Established performance levels to align pay opportunity with performance; and

 

•  Established goals with detailed reconciliations following an independent assessment of the rigor of incentive compensation performance goals for their reasonableness and competitiveness.

FE STIP and FE LTIP metrics should be relevant to the business and not overlapping  

•  FE STIP incorporates a financial Operating Earnings goal, operational goals, safety goals, and Diversity and Inclusion (“D&I”) goals; and

 

•  FE LTIP incorporates 3-year cumulative Operating EPS growth and average Capital Effectiveness goals to reward the achievement of longer-term goals and to drive shareholder value.

 

31  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Governance of our Executive Compensation Programs

 

 

Compensation Philosophy

The primary objectives of our executive compensation programs are to:

 

   

Attract, retain, focus and reward talented executives who drive our success in the highly complex utility industry by offering competitive total compensation for our executives overall;

 

   

Promote the long-term financial health of the business, and the creation of value for the sustained benefit of shareholders, by emphasizing long-term incentives in the pay mix;

 

   

Seek to calibrate pay for performance to ensure the interests of our executives and shareholders are aligned, such that 50th percentile compensation is realized for strong corporate performance, above 50th percentile compensation is realized for exceptional performance, and below 50th percentile compensation is realized for below expected performance;

 

   

Tie executive awards to corporate results as well as to overall business unit performance to hold executives accountable for their areas of responsibility;

 

   

Recognize individual contributions, including individual performance, experience, and future potential in determining actual pay levels to ensure that the Company retains our most critical talent; and

 

   

Conduct ourselves in a way that comports with standards of good governance, consistent with creating long-term value for shareholders.

 

32  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

What We Do and Don’t Do

We continually strive to make improvements to our executive compensation plans and programs. Below is a summary of what we do and don’t do with respect to executive compensation, the totality of which we believe aligns with the long-term interests of our shareholders and with commonly viewed best practices in the market:

 

   
What We Do   What We Don’t Do

 

   Pay-for-performance

•  FE LTIP is 100% at risk, with no solely time-based vesting requirements

•  FE STIP is 100% at risk

   Threshold and caps on incentive awards:

 

•  Threshold financial performance hurdle for Operating Earnings must be achieved before any FE STIP award is paid

 

•  Individual FE STIP awards capped at 200% (consistent with our peer companies)

 

•  Individual FE LTIP awards capped at 200% (consistent with our peer companies) and capped at 100% if absolute TSR over the performance period is negative

 

   Non-overlapping financial performance measures in our FE STIP and FE LTIP

 

   Combination of absolute and relative performance goals

 

   Robust stock ownership guidelines

 

   Clawback policy applicable to financial and reputational harm, and other detrimental activity

 

   Mitigate undue risk through compensation design, corporate policies, and effective governance

 

   Annual Say-on-Pay vote

 

   Double-trigger CIC provisions

 

   Compensation Committee comprised of only independent directors supported by an independent compensation consultant

 

 

 

LOGO    No executive hedging or pledging is permitted

 

LOGO    No employment agreements

 

LOGO    No tax gross-ups for our NEOs

 

LOGO    No repricing of underwater stock options without shareholder approval – not currently used in plan design

 

LOGO    No excessive perquisites

 

LOGO    No payment of dividend equivalents on unearned awards

 

LOGO    No new entrants in the SERP – SERP closed since 2014

Role of our Compensation Committee, Management and Compensation Consultant

The Compensation Committee is responsible for overseeing executive compensation and making recommendations to the Board for establishing appropriate salary and incentive compensation for our NEOs, in accordance with our compensation philosophy, while also aligning our executives’ interests with Company and business unit performance, business strategies and corporate objectives, including ESG-related goals, and drivers for growth in shareholder value. The Compensation Committee is further responsible for administering our compensation plans in a manner consistent with these objectives. In this process, the Compensation Committee evaluates information provided by its independent compensation consultant and our CEO, as discussed below. Since December 2017, the Compensation Committee has engaged the services of Farient Advisors (“Farient”) as the Compensation Committee’s independent compensation consultant. The Compensation Committee reviews the mix and level of compensation by each component individually and in the aggregate. The Compensation Committee, using tally sheets and accumulated wealth summaries, also reviews current and previously awarded but unvested compensation.

 

33  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Management identifies high-potential executive successors, including a focus to identify high-performing, diverse leaders. The Company’s talent philosophy is that all leaders, regardless of level, must demonstrate the ability to motivate future performance, be accountable for their behaviors and results, and enable employees to do their best every day. Executive succession is reviewed periodically by the CEO, the Senior Vice President and Chief Human Resources Officer, and the Compensation Committee. Executive succession plans are previewed by the Compensation Committee, as applicable, and with the full Board at its annual strategy retreat.

With respect to our CEO’s compensation, the Compensation Committee also annually:

 

   

Reviews, determines, and recommends to the Board the Company’s goals and objectives; and

 

   

Makes compensation recommendations to the Board for its approval or ratification based upon the CEO’s performance, competitive compensation benchmarking survey data and the utility peer group proxy data.

The Compensation Committee and Board are responsible for establishing the compensation of the NEOs. Neither the CEO nor any other NEO makes recommendations for setting his or her own compensation. The recommendation of the CEO’s compensation is determined in Compensation Committee meetings during an executive session and is presented to the independent members of your Board for review and approval. Annually, the Compensation Committee also reviews the goals and targets of the incentive compensation programs with a focus on setting challenging, but realistic, targets to drive performance and to improve shareholder value over the long term.

The CEO, with guidance from Human Resources, typically makes recommendations to the Compensation Committee with respect to the compensation of the other NEOs. The CEO possesses insight regarding individual performance, experience, future promotion potential, and intentions in retaining particular senior executives. The CEO presents his recommendations to the Compensation Committee for review. However, the Compensation Committee may modify or disregard the CEO’s recommendations. Farient, as discussed below, regularly provides market-level commentary and observations regarding compensation adjustments to the Compensation Committee.

The Compensation Committee also engages Farient to provide independent advice with respect to executive and director compensation and corporate governance matters related to executive compensation. The Compensation Committee relies on Farient’s expertise in benchmarking and familiarity with competitive compensation practices in the utility and general industry sectors. In addition, the Compensation Committee regularly requests advice from Farient concerning the design, communication, and implementation of our incentive compensation plans and other programs.

The services provided by Farient to the Compensation Committee in 2020 included:

 

   

Review of our compensation philosophy, including the alignment of our executive compensation practices with our compensation philosophy and assessing potential changes to address trends in market practice and shareholder expectations;

 

   

Review of our peer groups used for compensation benchmarking purposes for executives and directors;

 

   

Independent review and assessment of the rigor of incentive compensation performance goals and the goal setting process, including:

 

  o

Evaluating historical and projected performance;

 

  o

Reviewing analyst estimates to understand external expectations;

 

  o

Analyzing historical and projected peer data; and

 

  o

Calculating the probability of achievement of targets to assess the competitiveness of goals.

 

   

Analysis of competitive compensation practices for executives and directors within our peer groups;

 

   

Review of the description of our executive compensation practices in our annual proxy statement and apprising the Compensation Committee of Farient’s recommendations and necessary changes;

 

   

Review of share ownership guidelines;

 

34  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

   

Review of all aspects of FE STIP and FE LTIP plan designs, including measures, weightings, leverage, and cash versus equity mix;

 

   

Review of our current clawback policy and alignment with competitive practice;

 

   

Review of CIC benefits to ensure alignment with our compensation philosophy and competitive practice;

 

   

Regularly informing the Compensation Committee of legislative and regulatory changes, market trends and current issues with respect to executive compensation and educating members on our processes, plans and programs;

 

   

Preparation for and attendance at all Compensation Committee meetings, including executive sessions, if applicable and as needed; and

 

   

Ad hoc analysis and research for the Compensation Committee as requested and when necessary.

Also, in November 2020, the Compensation Committee, in conjunction with Farient, reviewed Mr. Strah’s compensation and recommended to the Board for its approval a base salary increase and increase in the FE STIP award opportunity for Mr. Strah in his role as then Acting CEO.

The Compensation Committee considered representations from Farient that they were an independent consultant and that there were no conflicts of interest. The Compensation Committee assessed the independence of Farient, as required by SEC and NYSE rules and requirements. The Compensation Committee also considered and assessed relevant factors that could give rise to a potential conflict of interest with respect to Farient and their work. Based on this review, the Compensation Committee is not aware of any conflict of interest that has been raised by the work performed by Farient.

Benchmarking

The Compensation Committee uses competitive benchmarking data to evaluate compensation practices and develop compensation recommendations for each of the NEOs. The Company uses a combination of a utility peer group and a general industry peer group to determine an overall competitive total rewards package. Employee and executive compensation, executive benefits and perquisites, broad-based benefits (retirement benefits, death benefits, long-term disability and health care) and director compensation are all benchmarked against the same peer groups. The Compensation Committee uses competitive “blended” market data (in other words, the average of the revenue-regressed 50th percentile of our utility peer group and general industry peer group, referred to as the “Blended Median”) to set compensation levels, to determine any adjustment and to assess the competitiveness of the base salary, short- and long-term target incentive opportunities and total target compensation. The Compensation Committee considers a range of 80% to 120% of the Blended Median for each component of pay to be competitive.

In 2019, the Compensation Committee, in consultation with Farient, performed a comprehensive peer group review after which the peer groups for 2020 were selected. The 2020 peer groups were comprised of a utility peer group of 23 companies and a general industry peer group of 32 companies. Compared to the 2019 peer groups, WEC Energy Group was added to the utility peer group, and the general industry peer group was reviewed and reduced from 44 peers including industries whose compensation and/or business models are relatively similar to utility companies. With respect to the general industry peer group, we removed 29 peers (3M Company; Baxter International; Bristol Myers Squibb; Colgate-Palmolive; Cummins; CSX Corp.; Ecolab; Eli Lilly & Co.; Emerson Electric; General Mills; Genuine Parts; Halliburton; Illinois Tool Works; International Paper; Jabril Circuit; Kimberly Clark; Navistar International; Norfolk Southern; Northrop Grumman; Owens Corning; Paccar; Qualcomm; Raytheon; Stryker; The Mosaic Company; Union Pacific; Waste Management; Whirlpool and Xerox) and added 17 peers (Arconic; Ball Corporation; Borgwarner; Campbell Soup Company; Eastman Chemical; Fortune Brands Home Security; Hanesbrands; Harley-Davidson; Hormel Foods; Masco; PVH; Rockwell Automation; Stanley Black & Decker; Clorox; Estee Lauder; Hershey and V.F. Corporation). In addition, due to merger and acquisition activity, Arconic Inc. was removed from the general industry peer group in 2020 and replaced with Howmet Aerospace, Inc.

 

35  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

For 2020, the general industry peer group is comprised of companies that are both larger and smaller than FirstEnergy by revenue size. The median revenue of the utility and general industry peer groups are aligned with FirstEnergy’s revenue of approximately $11 billion in 2020. The 2020 peer groups were based on the following criteria:

 

   

Included companies with revenues between $5.5 and $28 billion (a range of approximately 0.5 to 2.5 times our revenue) with whom we compete for talent, and which are members of the S&P 500, and participate in compensation surveys;

 

   

Included companies within a close geographic proximity to the Company; and

 

   

Excluded companies and industries whose compensation or business models significantly differ from utilities, such as financial services, health care, retail, franchise, media, and companies that are internationally headquartered.

As a result, the peer groups for 2020 included the following 23 utility peer companies and 32 general industry peer companies:

 

 

2020 Utility Peer Group

 

AES CORPORATION

AMEREN CORPORATION

AMERICAN ELECTRIC POWER CO INC

CENTERPOINT ENERGY INC

CMS ENERGY CORP.

CONSOLIDATED EDISON, INC

DOMINION RESOURCES, INC

DTE ENERGY COMPANY

 

DUKE ENERGY CORPORATION

EDISON INTERNATIONAL

ENTERGY CORPORATION

EVERSOURCE ENERGY

EXELON CORPORATION

NEXTERA ENERGY, INC

NISOURCE INC

NRG ENERGY, INC.

 

PG&E CORPORATION

PPL CORPORATION

PUBLIC SERVICE ENTERPRISE GROUP

SEMPRA ENERGY

SOUTHERN COMPANY

WEC ENERGY GROUP

XCEL ENERGY INC

 

2020 General Industry Peer Group

 

AIR PRODUCTS & CHEMICALS INC

ALCOA CORPORATION

AUTOMATIC DATA PROCESSING INC

BALL CORPORATION

BORGWARNER INC.

CAMPBELL SOUP COMPANY

CONAGRA BRANDS, INC

EASTMAN CHEMICAL COMPANY

EATON CORPORATION

FORTUNE BRANDS HOME & SECURITY, INC.

HANESBRANDS, INC.

 

HARLEY-DAVIDSON, INC.

HONEYWELL INTERNATIONAL INC

HORMEL FOODS CORPORATION

HOWMET AEROSPACE, INC.

KELLOGG COMPANY

L 3 HARRIS TECHNOLOGIES, INC

MASCO CORPORATION

ONEOK INC

PARKER HANNIFIN CORP

PPG INDUSTRIES INC

PVH CORP

 

ROCKWELL AUTOMATION, INC.

STANLEY BLACK & DECKER, INC.

TEXTRON INC

THE CLOROX COMPANY

THE ESTEE LAUDER COMPANIES INC.

THE GOODYEAR TIRE & RUBBER CO

THE HERSHEY COMPANY

THE PROGRESSIVE CORPORATION

THE SHERWIN WILLIAMS COMPANY

V.F.CORPORATION

In February 2020, at the Compensation Committee’s request, Farient collected benchmark compensation data for our peer companies based on Willis Towers Watson executive surveys and AonHewitt’s Total Compensation Measurement database, and determined that our executives’ total direct compensation, in the aggregate, continues to be positioned at approximately the 50th percentile of the market. The total compensation for our NEOs (excluding Mr. Strah since he was promoted into an Acting CEO role in October 2020), in the aggregate, was 96% of the Blended Median, which is within the competitive range of 80% to 120%.

 

36  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Components of Total Direct Compensation Programs

 

 

Key Elements of 2020 NEO Compensation

The key elements of our NEO compensation program to attract, retain and motivate key executive leaders are described below:

 

Element

 

 

Description

 

 

 Key Characteristics and Considerations

 

     
Base Salary   Bi-weekly, fixed cash compensation designed to reward past performance and motivate strong performance in the future  

•  The Compensation Committee uses the Blended Median to set base salary levels and determine any adjustments

 

•  Other factors including individual experience, performance, impact by role, and recent compensation adjustments for the NEO may also be considered

 

•  The Compensation Committee, CEO and Board annually review each NEO’s base salary

     
FE Short-Term Incentive Program (FE STIP)   Variable cash compensation designed to reward the achievement of near-term corporate and business unit objectives based on financial, operational, safety and D&I performance measures, including ESG-related goals  

•  The Compensation Committee uses the Blended Median to set target opportunity levels

 

•  Completely at-risk compensation and 100% performance-based

 

•  Payouts may range from 0% to 200% of target opportunity levels

 

•  For 2020, the FE STIP goals included:

 

   Financial: Operating Earnings and business unit financial performance

 

   Operational: Includes a mix of customer, reliability and environmental operating metrics

 

   Safety: Includes Life Changing Events (“LCE”) and Days Away/Restricted or Job Transfer Rate (“DART Rate”)

 

   D&I: Includes metrics for diverse succession planning, diverse professional hiring, and improvement on inclusion survey scoring

 

•  A threshold financial performance hurdle must be reached based on Operating Earnings (as defined below on page 53)

 

•  Weighted 50%-70% for corporate financial performance and 30%-50% for operational performance, including safety and D&I

 

     
FE Long-Term Incentive Program (FE LTIP)   Variable cash and equity compensation designed to reward the achievement of longer-term goals and drive shareholder value and growth  

•  The Compensation Committee uses the Blended Median to set target opportunity levels

 

•  Completely at-risk compensation and 100% performance-based consisting of performance-adjusted RSUs

 

•  Comprised entirely of performance-adjusted RSUs with 2/3 of the earned award payable in stock and 1/3 of the earned award payable in cash

 

•  The 2020-2022 cycle of the FE LTIP will vest, if at all, after a three-year performance period based on the achievement of two financial KPIs over the performance period, which are weighted equally:

 

   Operating EPS Growth (cumulative)

 

   Average Capital Effectiveness

 

•  RTSR modifier may increase or decrease payout up to 25% based on performance against companies within the S&P 500 Utility Index

 

   Includes a payout cap (100% target) if absolute TSR is negative over the three-year performance period

 

•  Payouts may range from 0% to 200% of target opportunity levels

 

37  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Compensation Mix

We review our compensation philosophy, pay mix and pay vehicles for our NEOs annually to ensure that they support our strategy and align with shareholder interests. The Compensation Committee sets NEO overall compensation levels consistent with the Blended Median, but provides a greater portion of target pay in the form of performance-based FE LTIP awards compared to our peer groups. Under our compensation design, the percentage of pay that is based on performance increases as a NEO’s responsibilities increase. The charts below illustrate the annual base salary rate, FE STIP and FE LTIP, of which approximately 87% of the Former CEO’s total target pay, 79% of the then Acting CEO’s total target pay and 72% of our other NEOs’ average target pay was performance-based, and approximately 72% of the Former CEO’s total target pay, 58% of the then Acting CEO’s total target pay and 53% of our other NEOs’ average target pay was predicated on long-term performance, based on each NEO’s final 2020 total target pay levels as described in the “2020 Target Compensation (Base Salary + Incentive Compensation)” section below. For the continuing NEOs, the values shown are effective as of December 31, 2020 (“FYE”).

 

Former CEO

2020 Pay Mix at Target

 

Acting CEO (as of FYE)

2020 Pay Mix at Target

 

Other NEOs

2020 Pay Mix at Target

LOGO   LOGO   LOGO

Determination of Compensation for 2020

Target Compensation (Base Salary + Incentive Compensation)

In December 2019, the Compensation Committee reviewed a competitive benchmarking analysis prepared by Farient. This report assessed each NEO’s compensation levels and mix against the Blended Median. In February 2020, the Committee decided, with input from management, to approve increases in compensation for certain NEOs and other executive officers to continue to align with the Blended Median, in the aggregate (within the 80% to 120% competitive range).

For 2020, target opportunities continued to be set at or near the Blended Median of our peer groups. As of December 31, 2020, target compensation levels for the continuing NEOs were as follows:

 

Executive   

2020 Base

Salary

 

2020 Target

Opportunity FE STIP

(% of Salary)

 

2020 Target

Opportunity

FE LTIP Awards

(% of Salary)(6)

 

2020 Target

Total

Compensation  

         

Steven E. Strah(1)

   $950,000   100%   275%   $4,512,500
         

K. Jon Taylor(2)

   $600,000   75%   225%   $2,400,000
         

Samuel L. Belcher(3)

   $650,000   75%   235%   $2,665,000
         

Gary D. Benz(3)

   $410,000   65%   165%   $1,353,000
         

Christine L. Walker(3)

   $410,000   60%   130%   $1,189,000
         

Charles E. Jones (4)

   —     —     —     —  
         

Robert P. Reffner(5)

   —     —     —     —  

 

(1)

Reflects annualized base salary rate and target opportunity levels as a percent of base salary in effect following Mr. Strah’s promotion from President, FE Corp. to President and Acting CEO in October 2020. In February 2020, while Mr. Strah served as SVP and CFO, he received an increase from $650,000 to $675,000 in annualized base salary rate, 80% to 85% in FE STIP target opportunity level, and 235% to 245% in FE LTIP target opportunity level. Following his promotion to

 

38  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

  President, FE Corp. in May 2020, Mr. Strah received an increase from $675,000 to $800,000 in his annualized base salary rate, 85% to 90% in FE STIP target opportunity level and 245% to 275% in FE LTIP target opportunity level.
(2)

Reflects annualized base salary rate and target opportunity levels as a percent of base salary in effect following Mr. Taylor’s promotion from VP, Utility Operations to SVP and CFO in May 2020. In February 2020, while Mr. Taylor served as VP, Utility Operations, he received an increase from $378,000 to $405,000 in base salary rate, and 120% to 175% in FE LTIP target opportunity level.

(3)

Reflects annualized base salary rates and target opportunity levels as a percent of base salary in effect following increases in February 2020. Prior to their increases, the annual base salary rates were $610,000 for Mr. Belcher, $401,000 for Mr. Benz and $380,000 for Ms. Walker, and FE STIP and FE LTIP target opportunity levels were 75% and 215% for Mr. Belcher, 65% and 165% for Mr. Benz, and 55% and 110% for Ms. Walker, respectively.

(4)

Mr. Jones’ annualized base salary rate and FE STIP and FE LTIP target opportunity levels as a percent of base salary as in effect prior to his termination on October 29, 2020 were $1,133,000, 115% and 545%, respectively.

(5)

Mr. Reffner’s annualized base salary rate and FE STIP and FE LTIP target opportunity levels as a percent of base salary in effect prior to his separation on November 8, 2020 and following his promotion from SVP and General Counsel to SVP and Chief Legal Officer in May 2020 were $625,000, 75% and 225%, respectively. In February 2020, while Mr. Reffner served as SVP and General Counsel, he received an increase from $550,000 to $580,000 in annualized base salary rate, and 175% to 200% in FE LTIP target opportunity level.

(6)

All FE LTIP awards, if earned, are paid 1/3 in cash and 2/3 in stock.

The maximum payout under both the FE STIP and FE LTIP is 200% of an individual’s target opportunity. However, unlike market practices, the FE LTIP is 100% performance-based and does not contain any time-based components. The NEOs may earn nothing or may receive payments that are below their target opportunities, for the incentive awards if the Company falls short of its pre-established goals or may earn above their target opportunities if the Company performs above its pre-established goals. Except in limited circumstances as described in the plan documents, the Compensation Committee may use discretion to make adjustments to awards based on a formula or on a discretionary basis.

Incentive Compensation Programs

Shareholders previously approved the 2007 Incentive Plan and 2015 Incentive Compensation Plan, and in May 2020, shareholders approved the new 2020 Incentive Compensation Plan (together, the “Incentive Compensation Plans”). The purpose of the Incentive Compensation Plans is to promote the success of FirstEnergy by providing incentives to certain employees and directors that link their personal interests to both short-term performance on key metrics and the long-term financial success of your Company to increase shareholder value, providing for various types of awards including equity and equity-based awards and cash-based awards.

The Compensation Committee, with support from Farient, conducted its annual goal rigor analysis to establish the goal ranges for the 2020 FE STIP and FE LTIP awards. In setting the goals, the Compensation Committee considers prior year results, company performance, and strategic accomplishments for the year and over the long-term, on both a relative and absolute basis. The Compensation Committee expects goals that are realistic but challenging and that drive differentiating performance year-over-year.

FE STIP

The FE STIP provides annual cash awards to executives whose contributions support the achievement of your Company’s identified financial and operational KPI goals, which are linked to the Company’s business strategy and corporate objectives, including ESG-related goals. The Compensation Committee annually reviews the goals and targets with a focus on setting challenging but realistic targets that are intended to align with shareholder value.

The Compensation Committee annually establishes the KPIs under the FE STIP that must be satisfied for a NEO to receive an award for such performance period and recommends that the Board approve the relative weightings for each KPI with respect to each participating NEO. The Compensation Committee recommended, and the Board approved, the following design elements for the 2020 FE STIP:

 

   

Increase the stretch (maximum) payout opportunity level from 150% to 200% of target to be consistent with market practices and further align the incentive program with that of your Company’s peers;

 

 

Preserve focus on an Operating Earnings KPI, as compared to the Operating EPS goal maintained in the FE LTIP;

 

39  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

   

Maintain weighting of safety metrics at 15% in FE STIP to promote a Company-wide safety Core Value;

 

  o

Increased the weightings of DART Rate and LCEs from 5% to 7.5% each while eliminating Occupational Safety and Health Administration (“OSHA”) Recordable Incidents as a metric in 2020; and

 

  o

While OSHA recordable incidents remain an important measure of the safety culture, it was removed as a KPI since it is not fully aligned with your Company’s proactive focus on reducing exposure and eliminating serious, life-changing events and injuries;

 

   

Continue use of a financial performance threshold for the FE STIP requiring that financial performance as measured by Operating Earnings is met before operational performance is rewarded; and

 

   

Maintain weighting of D&I KPI goals at 15%;

 

  o

The Compensation Committee increased the weighting from 10% to 15% in 2019. The same goals have been maintained since 2018.

FE STIP payouts are driven by financial, operating, safety, and D&I metrics, with 70% of the then Acting CEO’s opportunity and 50-60% of the other NEOs’ opportunities tied to corporate and business unit financial performance and the remaining opportunities tied to operating, safety and D&I metrics. For 2020, the Operating Earnings threshold of $1,301 million, including the cost of the STIP payments, must be achieved before a payout is made.

 

40  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

KPIs and Weightings for FE STIP

The Compensation Committee reviewed, and the Board approved, the FE STIP performance metrics and weightings for each of the NEOs in December 2019. For 2020, the NEOs had the following metrics and weightings.

 

       
KPI Measures   Rationale  

  Acting  

CEO

(As of
FYE)(1)(2)

    All Other  
NEOs

Financial

Operating

Earnings

 

•   Drives shareholder value while providing greater focus on driving the Regulated Distribution and Regulated Transmission businesses

•   Increases in Operating Earnings indicate growth and efficiency of the business

•   Provides a consistent and comparable measure of performance to help shareholders understand performance trends

 

  70%   60%

(50% for

Belcher

only)3

Operational

Systemwide O&M  

•   Monitors spending and focuses on overall cash flow and liquidity within the regulated distribution, regulated transmission and Corporate non-deferred labor

 

  N/A   10%
(Belcher
only)3

Operations Index

 

•   Based on five key operating metrics equally weighted

•   Focused on customer service, reliability and environmental metrics that drive the Company’s long-term success

 

  10%

Safety

 

Systemwide DART

 

 

•   A Core Value of the Company

•   Measured for the Company and each business unit

•   Based on two key metrics that are equally weighted: systemwide LCEs and DART Rate

•   Safety metrics include LCEs and DART Rate to consider severity of injuries and drive better conversations with employees

•   Fatality Reduction Rule applies – in the event of a fatality of any employee, other than certain no-fault fatalities, there will be no payout on the Safety KPI as part of the FE STIP

 

  15%

 

Systemwide LCEs

 

Diversity & Inclusion

Diversity and Inclusion
Index
 

•   Integral part of a successful revenue generating business and innovation

•   Based on three key metrics that are equally weighted

•   Measures diverse succession planning, diverse hiring, and improvement on inclusion survey scoring

 

  15%

 

(1)

Prior to his promotion to President and Acting CEO, Mr. Strah’s weighting for the Operating Earnings and Operations Index KPIs were 60% and 15%, respectively while serving as Senior Vice President and CFO. Final STIP payout is prorated to reflect the number of days served in each role throughout the year.

(2)

Represent Mr. Jones’ weightings while serving as CEO.

 

41  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

(3)

Prior to his promotion to Senior Vice President and CFO, Mr. Taylor’s weightings for the Operating Earnings and Systemwide O&M KPIs were 50% and 10%, respectively while serving as Vice President, Utility Operations. Final STIP payout is prorated to reflect the number of days served in each role throughout the year.

Threshold, target, and stretch levels are established for the KPIs based on Operating Earnings and achieving continuous improvement in safety and operational performance. All threshold, target and stretch goals were set at equal or more rigorous levels in 2020 compared to 2019. In 2020, the threshold, target, and stretch levels under the FE STIP for the NEOs were (dollars in millions):

 

2020 FE STIP Goal Ranges(1)  
2020 KPI Measures   Threshold   Target     Stretch  
       

Financial

           

Operating Earnings

  $1,301     $1,356       $1,431  

Operational

           

Systemwide O&M (Taylor and Belcher only)

  $1,427     $1,413       $1,385  

Operations Index

  2.50     5.00       7.50  

Safety

                   

Systemwide LCE

  2     1       0  

Systemwide DART Rate

  0.67     0.36       0.22  

Diversity and Inclusion

                   

Diversity & Inclusion Index

  1.50     3.00       4.50  

 

(1)

Interpolated for performance between discrete points. Refer to page 43 for details regarding 2020 payout.

FE LTIP

The 2020 FE LTIP design was maintained to include financial goals including a cumulative three-year performance period for measuring goals, and maintaining a relative shareholder performance measure. See the chart below on page 43, which identifies the KPI measures under the 2020 FE LTIP for more information.

The FE LTIP is comprised entirely of performance-adjusted RSUs with 2/3 of the earned award payable in Company stock and 1/3 of the earned award payable in cash. Both the stock-settled and cash-settled portions of the performance-adjusted RSU awards have a minimum payout of 0% and a maximum payout of 200% based on a formulaic structure where actual performance results are evaluated against the threshold, target and stretch performance goals over a three-year performance period. Performance results are interpolated on a straight-line basis between the minimum payout and maximum payout. The RTSR modifier is applied to the formulaic result for the payout percentage to determine the final payout amount.

The Compensation Committee and Board approved the FE LTIP grants at their regularly scheduled meeting in February 2020. For 2020, the grant date for performance-adjusted RSUs for both the stock-settled and cash-settled portions of the awards was March 1, 2020. We use the target FE LTIP award by individual divided by the average of the high and low prices of our common stock as of the date of grant to determine the number of units comprising each NEO’s award of performance-adjusted RSUs. Any equity grants awarded or vesting near an earnings announcement or other market event are coincidental.

The “Grants of Plan-Based Awards in Fiscal Year 2020” table provides the target number of performance-adjusted RSUs granted to each NEO in 2020 based on the percentage of base salary as described earlier in the CD&A. Additional details regarding the 2020-2022 LTIP grants are provided in the narrative following the “Grants of Plan-Based Awards in Fiscal Year 2020” table.

The 2020 FE LTIP uses two performance measures, weighted equally: Cumulative Operating EPS and Average Capital Effectiveness. These performance measures support continued financial improvement and increase focus on earnings across the Company’s Regulated Distribution and Regulated Transmission businesses. This creates a direct line of sight for executives to balance the value of our investments with the earnings they produce and drives shareholder value. In addition, Average Capital Effectiveness measures the financial effectiveness of investment in operational assets over the performance period. A high ratio

 

42  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

indicates the business generates larger returns on its investment in operational assets and vice versa. The KPIs used for performance-adjusted RSUs under the FE LTIP in 2020 were based on:

 

 

Program

 

 

 

KPI Measures

 

 

 

Rationale

 

FE LTIP   Cumulative Operating EPS   A non-GAAP measure of the financial performance of business units’ contribution to Operating Earnings growth over the 2020-2022 cycle.
  Average Capital Effectiveness   A non-GAAP measure of the financial return effectiveness on our capital investment in operational assets of the business units’ over the 2020-2022 cycle.

The performance goals for the 2020-2022 performance period are based on:

 

2020 FE LTIP Goal Ranges
       
2020 Financial KPIs    Threshold    Target    Stretch

Cumulative Operating EPS

   $7.57    $7.84    $8.15

Average Capital Effectiveness

   4.00%    4.15%    4.31%

The RTSR modifier is calculated over the three-year performance period as compared against the S&P 500 Utility Index. The modifier operates as follows:

 

   

Plus 25%, up to the maximum of 200%, will be earned if upper quartile RTSR performance is achieved;

 

   

Minus 25%, if lower quartile RTSR performance is achieved; and

 

   

Between the lower and upper quartile RTSR performance, a straight-line interpolation will be utilized to determine the modifier percentage.

If the Company’s absolute TSR is negative for the three-year cumulative performance period of 2020-2022, the LTIP awards will be capped at a target opportunity level of payout (100%).

Incentive Compensation Payouts for 2020

FE STIP Payout

In February 2021, based on actual 2020 KPI results, the Compensation Committee recommended, and the independent members of the Board approved, the following 2020 short-term incentive KPI results for our NEOs:

 

2020 FE STIP Results
2020 KPI Measures   Threshold        Target     Stretch     Actual Results     Payout Results     
           

Financial

                   

Operating Earnings

  $1,301          $1,356       $1,431       $1,381     Between Target     
and Stretch     

Operational

                   

Systemwide O&M (Taylor and Belcher only)

  $1,427          $1,413       $1,385       $1,447     Below Threshold     

Operations Index

  2.50          5.00       7.50       5.86     Between Target     
and Stretch     

Safety

                               

Systemwide LCE

  2          1       0       0     Meets Stretch     

Systemwide DART Rate

  0.67          0.36       0.22       0.36     Meets Target     

Diversity and Inclusion

                               

Diversity & Inclusion Index

  1.50          3.00       4.50       3.72     Between Target     
and Stretch     

 

43  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

On February 5, 2021, the Board exercised negative discretion to cap the FE STIP payout for 2020 at 100% of target opportunity for the senior leadership team, which includes our continuing NEOs, instead of paying for actual performance results at 138.1% of target opportunity for each NEO (other than Mr. Taylor and Mr. Belcher for whom payout for actual performance results would have been at 133.6% and 124.8% of target opportunity, respectively). While the Board continues to show strong support for our leadership team, the Board’s decision to cap payouts resulted from the current situation facing the Company, including the cultural and tone at the top issues the senior leadership team continues to address.

Additionally, with respect to FE STIP compensation, the FE STIP Policy states that, “The Compensation Committee retains the discretion to adjust the STIP payouts downward/upward without the participant’s consent regardless of the Company’s actual performance against the Corporate Financial and Operational Key Performance Indicators, either on a formula or discretionary basis or a combination of the two, as the Compensation Committee determines in its sole discretion.” On February 4, 2021, the Compensation Committee considered whether to pay the FE STIP to Mr. Reffner and resolved to exercise its negative discretion to reduce final payouts to zero as a result of the events leading to his separation. These decisions resulted in the following 2020 short-term incentive award payouts for our NEOs:

 

           
Executive  

2020 Base

Salary

 

2020 STIP
Award

Payout-Based
on Actual
Performance ($)

 

2020 STIP
Award –

Actual
Payout ($)

  Payout Impact
as a Result of
Negative
Discretion ($)
 

Actual Payout
as a %

of Base Salary

           

Steven E. Strah

  $950,000   $1,176,969   $852,146   ($324,823)   90%

K. Jon Taylor

  $600,000   $553,822   $414,591   ($139,231)   69%

Samuel L. Belcher

  $650,000   $608,425   $487,501   ($120,924)   75%

Gary D. Benz

  $410,000   $368,139   $266,501   ($101,638)   65%

Christine L. Walker

  $410,000   $339,819   $246,000   ($93,819)   60%

Charles E. Jones(1)

  $1,133,000   $0   $0   $0   0%

Robert P. Reffner(2)

  $625,000   $0   $0   $0   0%

 

(1)

Mr. Jones’ FE STIP payout was forfeited due to his termination.

(2)

The Compensation Committee considered whether to pay the FE STIP to Mr. Reffner and resolved to exercise its negative discretion to reduce the FE STIP payout to zero.

FE LTIP Payouts

The FE LTIP for the 2018-2020 cycle used a similar design as the 2019-2021 and 2020-2022 cycles (see “Outstanding Award Cycles (2019-2021 and 2020-2022)” below). Beginning with the 2018-2020 LTIP cycle, the Committee approved an incentive structure that measures actual performance against threshold, target and stretch goals based on 3-year cumulative and average goals over the performance period.

The 2018-2020 FE LTIP was comprised of the following two performance measures, weighted equally: Cumulative Operating EPS and Average Capital Effectiveness.

Additionally, FirstEnergy’s three-year annualized RTSR ranked at the 28th percentile relative to the S&P 500 Utility Index during the 2018-2020 performance cycle, which triggered the RTSR modifier and resulted in an interpolated result that reduced the final LTIP payout by 22% for all plan participants. Based on the average of FirstEnergy stock prices for December 2020, the average stock price with reinvested dividends of $33.31 was greater than the average stock price in December 2017 of $31.82 needed to pay the 2018-2020 LTIP cycle as earned (capped at 200%). As a result, the absolute TSR modifier did not apply to the 2018-2020 cycle payout.

 

44  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Below is a summary of the results for the 2018-2020 cumulative performance period:

 

2018-2020 FE LTIP Results
KPI Measures   Threshold        Target        Stretch        Actual
Results
  Payout
Results

Cumulative Operating EPS

  $6.47        $7.00        $7.59        $7.44        Between Target
and Stretch
Average Capital Effectiveness   3.87%        4.19%        4.54%        4.40%        Between Target
and Stretch

Based on the results of the two performance measures and the RTSR modifier for the 2018-2020 cycle described above, the Board approved the payout at 146% of target payout opportunity, plus dividend equivalents, for our continuing NEOs. The Board did not permit any KPI exceptions for the senior leadership team, including the NEOs, related to the Company’s partial settlement with the Ohio Attorney General and the cities of Columbus and Cincinnati regarding decoupling. In March 2021, the performance-adjusted RSUs granted in 2018 were paid in shares of our common stock and cash respectively as follows: Mr. Strah: 47,916 shares and $802,805; Mr. Taylor: 14,650 shares and $247,017; Mr. Belcher: 34,488 shares and $581,519; Mr. Benz: 20,758 shares and $350,026; Ms. Walker: 8,043 shares and $132,943.

For Mr. Jones, the performance-adjusted RSUs for the 2018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles were forfeited due to his termination from the Company effective October 29, 2020. Additionally, the Performance-Adjusted Restricted Stock Unit (RSU) award agreements for the LTIP awards for Mr. Reffner state that, “Notwithstanding any provision in this Agreement or the Plan to the contrary, the Committee shall retain the discretion to adjust the number of RSUs that vest under this Agreement without the Grantee’s consent, notwithstanding the Company’s actual performance against the Performance Goals, either on a formula or discretionary basis or a combination of the two, as the Committee determines in its sole discretion.” On February 4, 2021, the Compensation Committee considered whether to pay the FE LTIP to Mr. Reffner and resolved to exercise its negative discretion to reduce final payouts with respect to the performance-adjusted RSUs for the 2018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles to zero as a result of the events leading to his separation.

Restricted Stock Award Vesting for Mr. Belcher

On September 15, 2015, Mr. Belcher was awarded a restricted stock award under the FirstEnergy Corp. 2015 Incentive Compensation Plan upon his promotion to President & Chief Nuclear Officer, FirstEnergy Nuclear Operating Co (“FENOC”). This award vested 50% on March 8, 2020 with respect to 12,279 shares at a value of $561,289. The remaining 50% of this award will vest on March 8, 2025.

Outstanding Award Cycles (2019-2021 and 2020-2022)

The NEOs were granted the following number of target RSUs (rounded) in 2019 and 2020 for each three-year FE LTIP cycle, respectively. Although dividend equivalents accrue and are reinvested throughout the performance period, subject to the same restrictions and performance conditions of the underlying awards, they are excluded in the tables below.

 

 
Number of Performance-Based RSUs Granted At Target
             
Executive  

Number of     

Cash-Settled     

RSUs     

granted for the     

2019-2021     

Cycle     

 

Number of     

Stock-Settled     

RSUs     

granted for the     

2019-2021     

Cycle     

 

Total RSUs     

granted for the     

2019-2021     

Cycle     

 

Number of     

Cash-Settled     

RSUs     

granted for the     

2020-2022     

Cycle     

 

Number of     

Stock-Based     

RSUs     

granted for the     

2020-2022     

Cycle     

 

Total RSUs     

granted for the     

2020-2022     

Cycle     

             

Steven E. Strah

  12,448        25,056        37,504        12,466        24,781        37,247     
             

K. Jon Taylor

  3,712        7,425        11,137        5,291        10,673        15,964     
             

Samuel L. Belcher

  10,783        21,417        32,200        11,419        22,985        34,404     
             

Gary D. Benz

  5,415        10,830        16,245        5,079        10,158        15,237     
             

Christine L. Walker

  3,316        6,542        9,858        3,971        8,034        12,005     

 

45  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Given that the 2019-2021 and 2020-2022 cycles of performance-adjusted RSUs are based on three-year cumulative metrics, the performance and actual payout is unknown at this time. For Mr. Jones and Mr. Reffner, the original number of RSUs granted for each FE LTIP cycle in 2019 and 2020 are as follows: Mr. Jones: 151,605 and 139,073; and Mr. Reffner: 23,632 and 26,126. As a result of Mr. Jones’ termination from the Company effective October 29, 2020, the RSUs for both the 2019-2021 and 2020-2022 cycles have been forfeited. As a result of the events leading to Mr. Reffner’s separation from the Company effective November 8, 2020, the Compensation Committee resolved to exercise its negative discretion to reduce final payouts with respect to the performance-adjusted RSUs outstanding for the 2019-2021 and 2020-2022 cycles to zero.

Realized Compensation

We provide this alternative view of compensation paid to the continuing NEOs as a supplement to, but not as a substitute for, the Summary Compensation Table (“SCT”) because this realized compensation table below illustrates the way our Compensation Committee views the actual compensation earned or received by our continuing NEOs in 2020 under the FE STIP, and the 2018-2020 cycle of the FE LTIP.

Based on the Board’s decision to exercise negative discretion, all continuing NEOs FE STIP payments were capped at 100% of target opportunity.

The table below summarizes realized compensation in 2020 for our continuing NEOs:

 

           
Executive  

2020

Earned

Salary

 

2020 FE STIP

(Paid in

2021)

 

Performance-

Adjusted RSUs

(Earned in three-

year period

ended in 2020,

Paid in 2021)

  Restricted
Stock Award
(Vested in 2020)
 

Total 2020

Realized

Compensation

Steven E. Strah

  $776,058   $852,146   $2,418,772   N/A   $4,046,976

K. Jon Taylor

  $521,807   $414,591   $741,088   N/A   $1,677,486

Samuel L. Belcher

  $647,132   $487,501   $1,744,627   $561,289(1)   $3,440,549

Gary D. Benz

  $410,804   $266,501   $1,050,090   N/A   $1,727,395

Christine L. Walker

  $407,423   $246,000   $404,193   N/A   $1,057,616

 

(1)

Reflects the value of Mr. Belcher’s restricted stock award in which 50% of the award vested on March 8, 2020 as discussed on page 45.

2021 Incentive Plan Design and Continuing NEO Compensation

Following substantial changes to our short-term and long-term incentive compensation programs in 2018 as well as strong Say-on-Pay voting results, the Company has maintained the same general structure and design for both of our incentive compensation programs through 2020, for the NEOs listed below. The 2021 design and goals of our incentive compensation programs have a similar structure to that of prior years with a few key modifications to support a meaningful culture change and attention to compliance and ethics, place additional emphasis on the Company’s cash flow performance and reinforce our continued focus on ensuring pay-for-performance alignment. In March 2021, your Board approved an ethics and compliance modifier as well as a new financial KPI centered around FirstEnergy’s cash flow for the 2021 FE STIP. The ethics and compliance modifier will serve as a negative modifier at the individual level, with downward adjustments only, that can range from 0% and 100%. The FirstEnergy Cash Flow KPI is intended to drive additional organizational focus on the cash generated from our business as well as optimizing working capital and reinforces the importance of conserving and managing cash. While still an important measure of the Company’s financial discipline, an O&M KPI will not be included in the 2021 FE STIP following the addition of the new financial KPI.

An additional adjustment for the 2021 FE STIP consists of revisions to the D&I Index. Since its inclusion as a KPI in 2018, the D&I Index has maintained the same goals and the Company has continued to improve its performance against the metric through 2019 and 2020. For 2021, the D&I Index has evolved to drive accelerated improvement in achieving our workforce aspirations and advancement for diverse groups with an enhanced focus on racial/ethnic diversity. The 2021 FE STIP includes racially/ethnically diverse

 

46  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

performance gates for the succession planning and hiring components of the D&I Index to ensure continued progress in these two areas.

The FE LTIP generally maintains the current incentive compensation program structure for the 2021-2023 cycle. However, the threshold payout will decrease from 50% to 25% of target with the maximum payout remaining at 200%. This change is consistent with market practices and more closely aligns our LTIP with that of our peers. While the 2021-2023 FE LTIP cycle will continue to use cumulative Operating EPS and Average Capital Effectiveness as two equally weighted KPIs, the RTSR modifier for this cycle will adjust final LTIP payouts by up to 25%, plus or minus, based on the performance of our stock compared to our utility peers between the 25th and 85th percentiles. The 85th percentile level is a higher hurdle to achieve than the level applicable in previous cycles (which was the 75th percentile) and again, more closely aligns with the performance required by our peers. The 2021 FE LTIP payout will continue to be capped at 100% of target if our absolute TSR is negative over the three-year performance period.

For 2021, target opportunities continue to be set at or near the Blended Median of our peer groups. 2021 target compensation levels for the continuing NEOs are as follows:

 

Executive   2021 Base Salary Rate   2021 STIP (as a % of
Base Salary)
  2021 LTIP (as a % of
Base Salary)

Steven E. Strah

  $1,100,000   115%   450%

K. Jon Taylor

  $675,000   85%   250%

Samuel L. Belcher

  $700,000   75%   250%

Gary D. Benz

  $410,000   65%   165%

Christine L. Walker

  $440,000   60%   130%

In February 2021, your Board approved increases in compensation for certain NEOs and other executive officers given the successful achievement of several strategic initiatives in 2020 and changes in market data provided by our independent consultant. The Board was supportive of pay increases for Messrs. Strah and Taylor following their promotions to President and Acting CEO in October 2020 and SVP and CFO in May 2020, respectively. The Board was also supportive of pay increases for Mr. Belcher and Ms. Walker, given that they continue to perform well in their respective positions, and such increases will continue to move them toward the Blended Median. Despite demonstrating strong performance in 2020, no pay increases were recommended for Mr. Benz as his total target compensation is currently well positioned above the Blended Median. In March 2021, following Mr. Strah’s promotion to President and CEO, the Board approved base pay and incentive target increases that position Mr. Strah below the Blended Median and appropriately as a new CEO. The Board also elected Mr. Strah as a Director of the Company, effective as of March 8, 2021.

Other Compensation Policies and Practices

 

 

Retirement Benefits

We offer retirement benefits to our NEOs through our qualified and nonqualified supplemental plans under the FirstEnergy Corp. Pension Plan and the EDCP, respectively. The qualified plan benefit historically has been based on earnings, length of service, and age at retirement and is considered a defined benefit plan under the IRC. The qualified plan benefit is subject to applicable federal and plan limits. The EDCP is designed to provide a benefit to executives that is competitive and comparable to that for our general employee population.

Additionally, Mr. Jones was a participant in the Supplemental Executive Retirement Plan (“SERP”). No other NEOs are participants in the SERP. In 2014, the SERP was formally closed to new entrants to better align our executive retirement benefits with current market practices. Historically, participation in the SERP was provided to certain key executives as part of the integrated compensation program intended to attract, focus, motivate, and retain top executives who are in positions to make significant contributions to our business. As of December 31, 2020, there are no active employees who are participants in the SERP. Pursuant to a historical arrangement upon their hire, Mr. Belcher is (and Mr. Reffner was) eligible to be credited with five years of additional service for purposes of calculating the nonqualified supplemental pension benefit. For more information, refer to the “Pension Benefits as of December 31, 2020” table on page 62. Retirement benefits for the NEOs are further discussed in the narrative section following the Pension Benefits table later in this proxy statement.

 

47  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

EDCP (Elective Deferrals)

NEOs may elect to defer a portion of their compensation into the EDCP. They may defer from 1% to 50% of base salary to a cash retirement account; from 1% to 85% of FE STIP awards to either a cash or stock account; and from 1% to 85% of FE LTIP awards to a stock account. The EDCP offers executives the opportunity to accumulate assets denominated both in cash and in Company common stock, on a tax-favored basis. Beginning in 2017, any deferral elections to a cash or stock account made by a participant will ultimately be paid only in cash based upon the participant’s distribution elections.

Earnings on deferrals in the EDCP stock accounts of NEOs track FirstEnergy shares. Earnings on deferrals into the cash retirement accounts of NEOs were credited at the Moody’s Corporate Long-term Bond Yield Index rate plus 3% for funds deferred prior to 2013 and the Moody’s Corporate Long-term Bond Yield Index rate plus 1% for funds deferred in 2013 and later. Any above-market earnings for 2020 are included in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the SCT.

Personal Benefits and Perquisites

The Company does not provide excessive perquisites to our NEOs.

In 2020, our NEOs could use the corporate aircraft for limited personal use. With CEO approval, other executives, including the NEOs, may from time to time use our corporate aircraft for personal travel, which may include family travel. We have a written policy that sets forth guidelines regarding the personal use of the corporate aircraft by executive officers and other employees in accordance with the IRS regulations and customary compensation practices.

The Compensation Committee believes the foregoing perquisite is reasonable, competitive, and consistent with our overall compensation philosophy.

Severance Benefits upon an Involuntary Separation

In the event of an involuntary separation without cause, the CEO’s severance benefits, if any, are to be determined by the Compensation Committee, in its discretion, and approved by the Board. In the case of Mr. Jones’ termination from the Company effective October 29, 2020, no severance benefits were provided to him by the Compensation Committee. The other NEOs are covered in the event of an involuntary separation under the FirstEnergy Corp. Amended and Restated Executive Severance Benefits Plan (the “Severance Plan”). Upon Mr. Strah’s appointment to CEO in March 2021, he is no longer eligible to be covered under the Severance Plan in the event of an involuntary separation without cause.

The Severance Plan provides severance benefits to executives who are involuntarily separated due to the sale or closing of a facility, merger, acquisition, corporate restructuring, reduction in the workforce or job elimination. Benefits under the Severance Plan are also offered if an executive rejects a job assignment that would result in the occurrence of any one or more of the following events: (1) a 15% or greater reduction in the executive’s then current base salary; (2) a requirement that the executive make a 50 mile or greater relocation from his or her current residence for reasons related to the new job; or (3) a requirement that the executive make a 50 mile or greater change in his or her daily commute from their residence to a new reporting location. Mr. Jones and Mr. Reffner did not receive any benefits under the Severance Plan in connection with their departures from the Company.

The Severance Plan provides for three weeks of base pay for each full year of service with a minimum benefit of 52 weeks of base salary and a maximum benefit of 104 weeks of base salary. Additionally, executives who elect continuation of health care for the severance period will be provided this benefit at active employee rates, not to exceed 18 months. Executives must pay taxes on any continuation of health care value in excess of what employees with the same level of service would receive under the FirstEnergy Employee Severance Benefits Plan.

CIC Plan

The Compensation Committee believes that your Company’s Change in Control Severance Plan (“CIC Plan”) is aligned with the market practices of our peer groups and it is available to all NEOs. Of the NEOs, Mr. Strah, Mr. Taylor, Mr. Belcher, Mr. Benz, Ms. Walker and Mr. Reffner participated in the CIC Plan in 2020. The initial term of the CIC Plan commenced on January 1, 2017. Annually, the Committee determines if any changes need to be recommended to the Board for approval. If no changes are needed, then the CIC

 

48  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Plan will automatically renew for an additional year. In September 2020, the Compensation Committee determined that no changes were needed and the term of the CIC Plan automatically extended to December 31, 2022 by its terms. All participating NEOs are eligible for the same level of benefits, which include:

 

   

A two-times base salary plus target bonus multiplier for cash severance;

 

   

The annual FE STIP paid at target, prorated for the number of days worked in the year;

 

   

If the FE LTIP is not replaced by the buyer, FE LTIP awards will be paid at target, prorated for the number of full months worked in the cycle;

 

   

Outplacement services for one year following the CIC, capped at a value of $30,000; and

 

   

Non-competition and non-disparagement obligations that protect the Company.

There are no excise tax “gross-up” provisions. Payments are “cut back” in the event that an excise tax would otherwise apply to the safe harbor amount minus one dollar, unless the participant would receive greater after-tax proceeds absent such cutback. In such a case, the participating NEOs will receive payment of all CIC benefits and will be responsible for paying any excise tax imposed on the payment.

Share Ownership Guidelines

We believe it is critical that the interests of executives, directors and shareholders are clearly aligned. Therefore, the Compensation Committee maintains share ownership guidelines to promote meaningful stock ownership by our executives, including our continuing NEOs and directors. Your Company not only wants executives to meet their required share ownership levels in a timely manner, but also to build an ownership mentality and demonstrate commitment to aligning their interests with shareholders.

These guidelines specify the value of Company shares that our executives must accumulate within five years of becoming an executive officer. Additionally, executives who are not on track to meet their required share ownership levels or have failed to achieve required share ownership levels within the five-year compliance period may be subject to the following consequences imposed at the discretion of the Compensation Committee, subject to approval by the Board:

 

   

Reduce or eliminate the annual FE STIP award opportunity (as necessary) and consider replacement with a discretionary stock award; and/or

 

   

Require executives to purchase sufficient shares to meet their required share ownership levels.

Each executive is required to retain all Company shares earned under equity grants or purchased or accumulated until the executive meets his or her share ownership guidelines. Additionally, executives are prohibited from selling shares held in excess of the share ownership guidelines without permission from the CEO. The specific share ownership guidelines are based on a multiple of an executive officer’s base salary, with the higher multiples applicable to the executives having the highest levels of responsibility.

The share ownership multiples for the continuing NEOs in 2020 were as follows:

 

NEO    Share Ownership Multiple    
   

Steven E. Strah(1)

   4X base salary

K. Jon Taylor

   4X base salary

Samuel L. Belcher

   3X base salary

Gary D. Benz

   3X base salary

Christine L. Walker

   3X base salary

 

(1)

Reflects ownership multiple while Mr. Strah served as President and Acting CEO. Upon his promotion to President and CEO effective March 8, 2021, his ownership multiple increased to 7X base salary.

 

49  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

To be consistent with an entirely performance-based long-term incentive plan design, unvested performance-adjusted RSUs are not counted as eligible shares for executives to meet their share ownership requirements. The following types of holdings will count toward the share ownership guidelines:

 

   

Shares directly or jointly owned in certificate form or in a stock investment plan, including 60% of any unvested restricted stock;

 

   

Shares owned through the FirstEnergy Corp. Savings Plan;

 

   

Shares held individually or jointly by a broker, or, in certain circumstances, held in trust, or in an IRA, shares held by a spouse, or other beneficially owned shares, to the extent known by the Company; and

 

   

Units deferred pursuant to the EDCP.

All continuing NEOs have met their share ownership requirements. Mr. Jones and Mr. Reffner are no longer executive officers of the Company and are no longer subject to the stock ownership guidelines. Although the Compensation Committee established share ownership guidelines for executives, such equity ownership typically does not impact the establishment of compensation levels. The Compensation Committee does review previously granted awards, both vested and unvested, that are still outstanding on a regular basis.

Hedging Policies

As described more in this section, we prohibit our employees (including officers) and directors from engaging in hedging or monetizing transactions that would allow them to own Company securities without the full risks and rewards of ownership, including economic exposure to potential decreases in the market value of Company securities.

Your Company has adopted formal policies as part of its Insider Trading Policy regarding hedging practices. The following categories of “Covered Persons” are covered by our Insider Trading Policy:

 

   

all of the Company’s directors;

 

   

all officers (including NEOs) and employees of the Company and its affiliates and subsidiaries; and

 

   

any other persons that the Company determines should be covered, such as contractors, consultants and professional advisors who have access to material nonpublic information.

In addition to the Insider Trading Policy applying to Covered Persons, the following are also covered by our Insider Trading Policy:

 

   

the portfolio manager and other individuals who can trade in (or make changes in investments in) Company Securities for the Covered Persons; and

 

   

the Covered Persons’ Related Persons (except family members who do not reside with a Covered Person — unless such family member confers with the Covered Person when making investment decisions in Company Securities or is directed, influenced or controlled by the Covered Person with respect to transactions in Company Securities); and

 

   

any entities that the Covered Persons influence or control.

For these purposes, we consider “Related Persons” of a Covered Person to be her family members and others who reside with her, and any family members who do not live with her but whose transactions in Company Securities are directed, influenced or controlled by her. In addition, “Company Securities” broadly includes all securities of the Company and of its direct and indirect subsidiaries, including but not limited to common stock, options, preferred stock, convertible debentures or other debt securities, and warrants (as well as derivative securities not issued by the Company or its subsidiaries, such as exchange-traded put or call options or swaps relating to any of the foregoing securities).

The Insider Trading Policy generally prohibits a Covered Person from engaging in certain transactions regarding Company Securities owned by her or that she beneficially owns, but the Insider Trading Policy does not apply to transactions in Company Securities where such transactions are not initiated by the Covered Person or approved by her, or are not subject to her influence or control (such as mutual fund

 

50  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

transactions in Company Securities). More specifically, the prohibition on pledging, hedging or other monetization transactions for Covered Persons explicitly covers a number of possible transactions:

 

 

Company directors and Company “officers” (under Exchange Act Rule 16a-1(f)) are prohibited from engaging in short-term opposite-way trading within a six-month period; and

 

   

Covered Persons are prohibited from engaging in short sales, trading in market-based put and call options or other non-compensatory derivative securities, or engaging in specific hedging and monetization transactions, such as prepaid variable forward contracts, equity swaps, collars and exchange funds.

In addition, under the Insider Trading Policy, certain “Designated Insiders” (Company directors, Company “Executive Officers” under Exchange Act Rule 3b-7, Company “officers” under Exchange Act Rule 16a-1(f), members of the Company’s executive council, members of its disclosure committee and certain other employees with regular access to financial information or otherwise as identified from time to time by the Company), are prohibited from holding Company Securities in a margin account, pledging Company Securities as collateral for a loan, or placing standing or limit orders on Company Securities that remain effective after the day on which they are placed (apart from Company-authorized Rule 10b5-1 trading plans). Other Covered Persons may place standing or limit orders on Company Securities that remain effective after the day on which they are placed, but only for short durations and in a manner that complies with Company restrictions and procedures set forth in the Insider Trading Policy (such as pre-clearance procedures).

Clawback Policy

Your Company has a clawback policy (its “Recoupment Policy”) that covers all current or former Executive Officers, Section 16 Officers and other selected executives. In 2019, the Compensation Committee approved enhancements to the Recoupment Policy to continue the previously existing clawback provisions in the event of a financial restatement of the Company, and to include clawback provisions in the event of certain other detrimental activity, as defined in the Recoupment Policy, resulting in significant operational, financial or reputational harm to the Company as determined in good faith by the Compensation Committee. In the event that the Company is required to file a financial restatement due to material noncompliance with financial reporting requirements under U.S. securities laws, regardless of misconduct or contribution to the restatement requirement, the clawback policy allows for recoupment of incentive-based compensation granted, vested or accrued after January 1, 2014, and during the three-year period preceding the filing of the accounting restatement, to the extent such compensation received exceeded what would have been received based on the corrected data relating to the restatement. In the event of significant or material operational, financial or reputational harm resulting from an executive’s detrimental activity, the Compensation Committee may direct the Company to recoup from such executive incentive-based compensation granted, vested or accrued in an amount as reasonably determined by the Compensation Committee in good faith.

Risk Assessment of Compensation Programs

At the request of the Compensation Committee, completed on an annual basis, management assessed the risks associated with our compensation policies, practices, and programs for employees. In addition, management paid particular attention to those programs that allow for variable payouts where an employee may potentially be able to influence payout factors in those programs. The Compensation Committee reviewed management’s assessment and concurred with its conclusions. Based on this assessment, the Compensation Committee concluded that the risks associated with our compensation policies and practices are not reasonably likely to have a material adverse effect on your Company.

The Compensation Committee and management designed our compensation programs to align our executives’ interests with the long-term interests of our shareholders without encouraging excessive risk taking. In this regard, our compensation structure contains various features intended to mitigate excessive risk taking. These features include, among others:

 

   

The mix of compensation among base salary, and short- and long-term incentive programs is not overly weighted toward short-term incentives, and thus, does not encourage excessive risk taking;

 

   

Our annual incentive compensation is based on multiple, diversified performance metrics, including financial, safety/operational, diversity, and business unit measures that are consistent with our long-term goals;

 

51  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

   

Our long-term incentive compensation in 2020 consisted entirely of performance-adjusted RSUs that vest over a three-year period, emphasizing the achievement of performance over a longer time horizon;

 

   

The Compensation Committee oversees our compensation policies and practices and is responsible for reviewing, approving and/or recommending for approval by the Board, where necessary, executive compensation, including annual incentive compensation plans applicable to senior management employees and other compensation plans, as appropriate; and

 

   

Certain of our executives are required to own a specified level of shares to comply with share ownership guidelines, encouraging a long-term focus on enhancing shareholder value.

Additionally, our Vice President, Risk and Internal Auditing participated in the discussion with senior management regarding the establishment of goals and their weightings and measurements for our short- and long-term incentive compensation programs and the 2020 performance results. The Vice President, Risk and Internal Auditing provided his view to the Compensation Committee that:

 

   

The measurement of 2020 performance results were conducted in accordance with prescribed methodologies and precluded any beneficiary from controlling the calculation;

 

   

Proposed goals would not create inappropriate incentives or inadvertently encourage willingness to embrace risk exposures other than those we encounter in the normal course of our business;

 

   

By avoiding individually based goals or goals applicable only to a small group of employees, the risk of encouraging inappropriate behavior is greatly mitigated; and

 

   

There are adequate controls in place so that the beneficiary of any incentive payout cannot unilaterally control the measurement methodology.

For additional information regarding your Company’s risk management process and your Board’s role in risk oversight, see the related discussion in the “Corporate Governance and Board of Directors Information” section of this proxy statement.

Impact of Tax Requirements on Compensation

Section 162(m) of the IRC generally limits the tax deduction to $1 million for certain compensation paid to certain of our executive officers (and, beginning in 2018, certain former executive officers). Historically, compensation that qualified as “performance-based compensation” could be excluded from this $1 million limit. This exception was repealed, effective for taxable years beginning after December 31, 2017, except for certain compensation arrangements in place as of November 2, 2017 for which transition relief is available. The Compensation Committee and your Board sought from time to time to potentially qualify certain executive compensation as tax deductible under Section 162(m) as in effect prior to 2018, where we believed it was in our best interest and in the best interest of our shareholders. However, we have not permitted this tax provision to distort the effective development and execution of our compensation program in the past, nor will we in the future.

We continue to evaluate the impact of the revisions to Section 162(m) of the IRC for their potential impact on your Company. Regardless of that impact, however, we will continue to design and maintain executive compensation arrangements that we believe will attract, retain, focus, and reward the executive talent that we need to compete successfully, even if in certain cases such compensation is not deductible for federal income tax purposes. In addition, because of the continued development of the application and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m), as in effect prior to 2018, will in fact be deductible.

 

52  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

CD&A Glossary of Terms

 

 

Average Capital Effectiveness: Measures the financial effectiveness of investment in operational assets over time. Creates a direct line of sight for executives to balance the value of our investments with the earnings they produce and create value for shareholders. It is a ratio of Operating Earnings over Net Plant in Service (“NPIS”) plus Construction Work in Progress (“CWIP”). Operating Earnings are an important measure of profitability. The NPIS plus CWIP is the value of the assets being used to generate revenues and profits. A high ratio indicates the business generates larger returns on its investment in operational assets and vice versa.

Corporate/Other: The Corporate/Other business segment.

CWIP: Construction Work in Progress.

DART Rate: OSHA-recordable incidents that involve days away from work, days of restricted work activity, and/or days of job transfer in the period per 100 employees. DART cases are work-related injuries or illnesses that result in at least one day of lost time, transfer or restriction excluding the day of injury.

Detrimental Activity: Refers to an executive officer’s: (i) use for profit or disclosure to unauthorized persons of confidential information or trade secrets of the Company or any of its subsidiaries; (ii) breach of any contract with or violation of any fiduciary obligation to the Company or any of its subsidiaries, that results in (or was reasonably likely to result in) significant operational, financial or reputational harm (generally meaning behaviors resulting in financial harm or reputational damage to the Company or any of its subsidiaries) to the Company or any of its subsidiaries, such breach or violation may include, but is not limited to, engagement in any unethical conduct, fraud, dishonesty, violations of Company policy or the law, recklessness, gross negligence, failure to act, or other misconduct including but not limited to sexual harassment or misconduct, data security violations, or criminal activities; or (iii) engagement in conduct described in (ii) above that, even absent a breach of contract or violation of any fiduciary duty, is (or was reasonably likely to be) materially detrimental to the Company or any of its subsidiaries; in each case as determined by the Compensation Committee reasonably and in good faith.

Diversity and Inclusion Index: Measures diverse succession planning, diverse hiring, and improvement on inclusion survey scoring. Measures earn points based on the level of performance; all components within the index are weighted equally. For the purposes of this KPI, “diverse” is defined as female, historically under-represented racial and ethnic demographic groups (Black and African American, Alaskan Native, Asian American, Native Hawaiian and other Pacific Islander, people of two or more races, Hispanic and Latino ethnicity), LGBTQIA (Lesbian, Gay, Bisexual, Transgender, Queer/Questioning, Intersex, and Asexual), and/or Disabled.

Environmental Excursions and Notices of Violation (‘NOVs’): Measures issues related to air emissions, water discharges or other unauthorized releases from facilities, that exceed the allowable limitations, conditions or deadlines established in the facilities’ environmental permits and applicable NOVs issued by a Federal, State or Local Regulatory Agency for the violation of an environmental law or regulation.

First Call Resolution: Transactional voice of customer survey that measures the percent of customer issues resolved on a single interaction with a contact center representative.

KPI (Key Performance Indicators): Financial or operational metrics used to measure Company performance and aligned to our key business objectives. KPIs are used in setting threshold, target and stretch performance goals for our incentive compensation programs.

LCEs: Life Changing Events include life-threatening work-related injuries or illnesses that required immediate life-preserving rescue action, and if not applied immediately would likely have resulted in the death of that person; life-altering work-related injuries or illnesses that resulted in a permanent and significant loss of a major body part or organ, or function thereof, that permanently changes or disables that person’s normal life activity; and work-related fatalities.

NPIS: Net Plant in Service.

Operating Earnings: Operating Earnings (non-GAAP) is calculated using the aggregate GAAP earnings adjusted for special items that are consistent with the Company’s external operating earnings (non-GAAP) reporting. Results for 2020 will exclude the following: (i) the impacts associated with restructuring the

 

53  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

business or other strategic decisions including the associated tax impacts, (ii) non-deferred major storm O&M expenses above or below the budgeted amount of $38 million, and (iii) the impacts of legal reserves or related expenses. External segment reporting is consistent with the internal financial reports to regularly assess performance of the business and allocate resources.

Operating EPS: Measured on the performance of the business units’ contribution to operating earnings growth over the course of 2020-2022, including RD, RT, and Corporate/Other segments. Results for 2020 will exclude the following: (i) the impact of all Special Items that are excluded from non-GAAP Operating Earnings, (ii) the impacts associated with restructuring the business or other strategic decisions including the associated tax impacts, (iii) non-deferred major storm O&M expenses above or below the budgeted amount of $38 million, and (iv) the impacts of legal reserves or related expenses. External segment reporting is consistent with the internal financial reports to regularly assess performance of the business and allocate resources.

Operations Index: Metric made up of the following five components, weighted equally (refer to each component for a separate definition):

 

  1.

SAIDI;

 

  2.

TOF;

 

  3.

First Call Resolution;

 

  4.

Environmental Excursions and NOVs; and

 

  5.

Reg Gen EFOR.

Reg Gen EFOR: The percentage of generation that was not available versus the amount of time a unit was requested to be online.

Regulated Distribution or RD: The Regulated Distribution business segment. Refers collectively to The Cleveland Electric Illuminating Company, Jersey Central Power & Light Company, Metropolitan Edison Company, Monongahela Power Company, Ohio Edison Company, The Potomac Edison Company, Pennsylvania Power Company, Pennsylvania Electric Company, The Toledo Edison Company, and West Penn Power Company.

RSUs (Restricted Stock Units): An equity vehicle commonly used in long-term incentive programs to reward employees and promote ownership within the Company. RSUs represent the right to receive future delivery of actual stock or cash subject to vesting restrictions (service-based and/or performance-based).

Regulated Transmission or RT: The Regulated Transmission business segment. Refers collectively to FirstEnergy Transmission, LLC, and its subsidiaries, American Transmission Systems, Incorporated, Potomac-Appalachian Transmission Highline, LLC, Trans-Allegheny Interstate Line Company, and Mid-Atlantic Interstate Transmission.

RTSR (Relative Total Shareholder Return): The total return of a stock to a shareholder for our Company measured against the total return of stock for other companies within a selected peer group. The calculation is based on a set period (e.g., three years) and assumes that dividends are reinvested over this period. RTSR is a common performance measure used within long-term incentive plans and helps to align executive payouts to shareholder value creation.

SAIDI: Distribution System Average Interruption Duration Index is the average total duration of outage minutes in a year for each customer served adjusted for major storms.

Systemwide O&M: Measures RD, RT, and Corporate/Other non-deferred labor and other-than-labor costs.

TOF: Transmission Outage Frequency measures the transmission line frequency of outages (total number of transmission circuit outages divided by average number of circuits) on 100kV to 500kV circuits after adjustment for major events (Six Sigma). Transmission circuit outages are defined as any loss of flow, momentary or sustained, that is a result of an automatic switching operation. Scheduled outages, emergency forced outages, and operational outages are excluded from the calculation.

TSR (Total Shareholder Return): A measure of stock price appreciation and dividend payments over a period of time.

 

54  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Compensation Tables

 

 

2020 Summary Compensation Table

The following table summarizes the total compensation paid to or earned by each of our NEOs for the fiscal years ended December 31, 2020, 2019, and 2018, as applicable:

 

Name and Principal

Position

  Year    

Salary

($)

   

Bonus

($)

   

Stock

Awards

($)(2)

   

Non-Equity

Incentive Plan

Compensation

($)(3)

   

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)(4)

   

All Other

Compensation

($)(5)

   

Total

($)

        

SEC Total

Without

Change In

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)(6)

 

Steven E. Strah

    2020     $ 776,058     $ 0     $ 1,614,667     $ 852,146     $         2,527,603     $ 21,758     $ 5,792,232       $         3,264,629  

President & CEO

    2019     $ 643,599     $ 0     $ 1,545,570     $ 626,590     $ 3,189,722     $ 28,647     $ 6,034,128       $ 2,844,406  
    2018     $ 594,835     $ 0     $ 1,602,699     $ 574,240     $ 696,989     $ 26,749     $ 3,495,512       $ 2,798,523  

K. Jon Taylor

    2020     $ 521,807     $ 0     $ 692,019     $ 414,591     $ 329,051     $ 24,759     $ 1,982,227       $ 1,653,176  

SVP & CFO

                   

Samuel L. Belcher

    2020     $ 647,132     $ 0     $ 1,491,410     $ 487,501     $ 671,168     $ 12,228     $ 3,309,439       $ 2,638,271  

SVP & President, FE

    2019     $ 604,308     $ 0     $ 1,327,003     $ 540,575     $ 667,407     $ 13,650     $ 3,152,943       $ 2,485,536  

Utilities

    2018     $ 548,060     $ 434,700     $ 1,503,221     $ 506,951     $ 120,352     $ 11,087     $ 3,124,371       $ 3,004,019  

Gary D. Benz

    2020     $ 410,804     $ 0     $ 660,517     $ 266,501     $ 636,996     $ 50,093     $ 2,024,911       $ 1,387,915  

SVP, Strategy

                   

Christine L. Walker

    2020     $ 407,423     $ 0     $ 520,405     $ 246,000     $ 1,226,402     $ 11,865     $ 2,412,095       $ 1,185,693  

SVP & Chief Human Resources Officer

                   

Charles E. Jones(1)

    2020     $ 944,997     $ 0     $ 6,028,833     $ 0     $ 2,988,951     $         104,175     $ 10,066,956       $ 7,078,005  

Former President & CEO

    2019     $ 1,136,113     $ 0     $ 6,247,802     $         1,615,111     $ 5,611,583     $ 74,050     $ 14,684,659       $ 9,073,076  
    2018     $ 1,136,113     $ 0     $ 7,018,621     $ 1,662,674     $ 1,265,019     $ 40,701     $ 11,123,128       $ 9,858,109  

Robert P. Reffner(1)

    2020     $ 513,083     $ 0     $ 1,132,573     $ 0     $ 622,090     $ 42,011     $ 2,309,757       $ 1,687,667  

Former SVP & Chief Legal Officer

    2019     $ 537,594     $ 0     $ 973,901     $ 463,918     $ 479,043     $ 13,435     $ 2,467,891       $ 1,988,848  

 

(1)

Mr. Jones was terminated from the Company effective October 29, 2020 and Mr. Reffner was separated from the Company effective November 8, 2020.

(2)

The amounts set forth in the “Stock Awards” column for 2020 represent grants provided under the Incentive Compensation Plans at the aggregate grant date fair value calculated in accordance with FASB ASC Topic 718 “Stock Compensation” and are based on target payout. The assumptions used in determining values for the 2020 fiscal year are reflected in Note 6 to the Notes to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K filed with the SEC on February 18, 2021. The grant date fair value at the maximum payout level for each of the NEOs for 2020 is as follows: Strah: $3,229,334; Taylor: $1,384,039; Belcher: $2,982,820; Benz: $1,321,033; Walker: $1,040,809; Jones: $12,057,667; and Reffner: $2,265,146. These awards are not payable to the executive until the vesting date or other qualifying event shown in the Outstanding Equity Awards at Fiscal Year-End 2020 table or the 2020 Post-Termination Compensation and Benefits table described later in this proxy statement. Mr. Jones’ outstanding equity awards were forfeited on October 29, 2020 as a result of his termination. As a result of the events leading to Mr. Reffner’s separation from the Company effective November 8, 2020, the Compensation Committee exercised its negative discretion to reduce final payouts with respect to the performance-adjusted RSUs for the 2018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles to zero.

(3)

The amounts set forth in the “Non-Equity Incentive Plan Compensation” column for 2020 were earned under the FE STIP for 2020 and were paid in the first quarter of 2021. On February 5, 2021, the Board exercised negative discretion to cap the FE STIP payout for 2020 at target for all continuing NEOs. As a result of Mr. Jones’ termination, all outstanding awards of incentive compensation were forfeited. On February 4, 2021, the Compensation Committee considered whether to pay the FE STIP to Mr. Reffner and resolved to reduce final payouts to zero as a result of the events leading to his separation.

(4)

The amounts set forth in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column reflect the aggregate increase in actuarial value to the NEO of all defined benefit and actuarial plans (including supplemental plans) accrued during the year and above-market earnings on nonqualified deferred compensation. The disclosure assumes 2.67% (qualified pension) and 2.56% (nonqualified supplemental pension) are the discount rates for the present value obligation calculations. The change in values for the pension plans for 2020 are as follows: Strah: $2,512,170; Taylor: $321,825; Belcher: $1,310,579; Benz: $629,896; Walker: $1,208,848; Jones: $2,983,653; and Reffner: $617,002. The change in pension value amounts for Mr. Belcher for 2020, 2019 and 2018 include an adjustment that reflects his eligibility to receive five additional years of credited service for purposes of the nonqualified (supplemental) pension, which was not taken into account in the calculation of his value reported in the Summary Compensation Tables in prior years. This adjustment for Mr. Belcher results in an increase in his actuarial value of approximately $210,512 as of December 31, 2020; $248,703 as of December 31, 2019; and $19,056 as of December 31, 2018. The change in pension value is heavily dependent on the discount rate and mortality assumptions and does not represent the actual value of the change in pension benefit accrued by the NEO during the year. The formula used to determine the above market earnings equals 2020 total interest multiplied by the difference between 120% of the AFR and the plan rate and divided by the plan rate. The above market earnings on nonqualified deferred compensation for 2020 are as follows: Strah: $15,433; Taylor: $7,226; Belcher: $5,092; Benz: $7,100; Walker: $17,554; Jones: $5,298; and Reffner: $5,088.

 

55  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

(5)

The following table sets forth detail about the amounts for 2020 in the “All Other Compensation” column and includes compensation not required to be included in any other column:

 

                                                                                                                                                                                                     
Name  

401(k)

Employer

Contributions

($) (a)

   

Health Care

Employer

Contributions

($) (b)

   

Wellness

Program

($) (c)

   

Charitable

Matching

($) (d)

   

Group

Personal

Excess

Liability

($) (e)

   

Life

Insurance

($) (f)

   

Personal

Aircraft

Usage

($) (g)

   

Payments

Upon

Termination/

Separation

($) (h)

    Total ($)  

Steven E. Strah

  $         8,550     $         1,000       -       -     $         1,130     $         1,357     $ 9,721       -     $ 21,758  

K. Jon Taylor

  $ 8,382     $ 1,000       -       -     $ 1,130     $ 857     $         13,390       -     $ 24,759  

Samuel L. Belcher

  $ 8,550     $ 1,000       -     $ 620     $ 1,130     $ 928       -       -     $ 12,228  

Gary D. Benz

  $ 8,550     $ 1,000     $         600     $ 5,000     $ 1,130     $ 585     $ 33,228       -     $ 50,093  

Christine L. Walker

  $ 8,550     $ 1,000     $ 600       -     $ 1,130     $ 585       -       -     $ 11,865  

Charles E. Jones

  $ 8,550     $ 1,000       -     $ 2,000     $ 1,130     $ 1,052     $ 62,203     $         28,240     $         104,175  

Robert P. Reffner

  $ 8,550     $ 1,000     $ 429     $         2,500     $ 1,130     $ 402       -     $ 28,000     $ 42,011  

 

  a)

The value of matching Company contributions under the FirstEnergy Corp. Savings Plan for all of the NEOs, which were subject to a maximum of $8,550.

  b)

The value of Company contributions to the NEOs’ Health Savings Accounts or FirstEnergy Corp. Savings Plan or cash.

  c)

The value of Company credits under the broad-based wellness program, which are subject to a maximum of $600 annually.

  d)

The value of charitable matching contributions for 2020. The Company provides a dollar-for-dollar match, up to $5,000 annually, of employee contributions to qualified nonprofit organizations and educational institutions.

  e)

Premiums for all NEOs covered under the group personal excess liability insurance policy in 2020.

  f)

Employer cost for basic life insurance premiums in 2020. Coverage for each of Messrs. Jones and Reffner was reduced due to age and prorated for a partial year of coverage due their termination and separation of employment, respectively.

  g)

The value of the personal use of corporate aircraft is calculated based on the actual invoiced costs or the aggregate variable operating costs to the Company, including fuel costs, trip-related maintenance, universal weather-monitoring costs, on-board catering, landing/ramp fees, and other miscellaneous variable costs. Fixed costs which do not change based on usage, such as pilots’ salaries, the amortized costs of the aircraft, and the cost of maintenance not related to trips are excluded. NEOs’ spouses and immediate family members may accompany NEOs on Company aircraft using unoccupied space on flights that were already scheduled, and the Company incurs no aggregate incremental cost in connection with such use.

  h)

Upon termination of employment, Mr. Jones received $28,240 for 132 hours and Mr. Reffner received $28,000 for 160 hours of banked and frozen vacation, in each case earned prior to 2008 and based on the effective pay rate as of December 31, 2008, when FirstEnergy’s vacation policies were revised, and employees and executives could no longer accumulate banked vacation.

 

(6)

The amounts set forth in the “SEC Total Without Change In Pension Value” and “Nonqualified Deferred Compensation Earnings” column differ substantially from, and are not a substitute for, the amounts required to be reported in the Total column pursuant to SEC regulations. We are presenting this supplemental column to illustrate how the Compensation Committee views the annual compensation elements for the NEOs. The column adjusts the amount reported in the Total column, as determined under applicable SEC rules, by subtracting the value reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column to show how year-over-year changes in these values impact total compensation. The change in pension value amount reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column does not reflect current compensation and represents the present value of an estimated stream of payments to be made following retirement. The methodology used to report the change in pension value under applicable accounting rules is sensitive to external variables such as assumptions about life expectancy and changes in the discount rate determined at each year end, which are functions of economic factors and actuarial calculations that do not relate to the Company’s performance and are outside of the control of the Compensation Committee.

 

56  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Grants of Plan-Based Awards in Fiscal Year 2020

The following table summarizes the stock awards granted to our NEOs during 2020 as well as threshold, target, and maximum amounts payable under the applicable short-term and long-term compensation plans.

 

                    Estimated Possible
Payouts Under
Non-Equity Incentive
Plan Awards(3)
    Estimated Future
Payouts Under
Equity Incentive
Plan Awards(4)
   

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units (#)

 

Grant

Date Fair

Value of

Stock

and

Option

Awards

($)(5)

 
Name  

Grant/Payout

Type

 

Grant

Date(1)

   

Board
Action

Date(2)

   

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

Steven E. Strah

  FE STIP     -       -     $ 426,073     $ 852,146     $ 1,704,291       -       -       -     -     -  
  Performance-Adjusted

RSUs

– Stock-Based

    3/1/2020       2/7/2020       -       -       -       12,391       24,781       49,562     -   $ 1,074,257  
  Performance-Adjusted

RSUs

– Cash-Based

    3/1/2020       2/7/2020       -       -       -       6,233       12,466       24,932     -   $ 540,410  

K. Jon Taylor

  FE STIP     -       -     $ 207,295     $ 414,591     $ 829,181       -       -       -     -     -  
  Performance-Adjusted

RSUs

– Stock-Based

    3/1/2020       2/7/2020       -       -       -       5,337       10,673       21,346     -   $ 462,674  
  Performance-Adjusted

RSUs

– Cash-Based

    3/1/2020       2/7/2020       -       -       -       2,645       5,291       10,581     -   $ 229,345  

Samuel L. Belcher

  FE STIP     -       -     $ 243,750     $ 487,501     $ 975,000       -       -       -     -     -  
  Performance-Adjusted

RSUs

– Stock-Based

    3/1/2020       2/7/2020       -       -       -       11,493       22,985       45,970     -   $ 996,400  
  Performance-Adjusted

RSUs

– Cash-Based

    3/1/2020       2/7/2020       -       -       -       5,709       11,419       22,838     -   $ 495,010  

Gary D. Benz

  FE STIP     -       -     $ 133,251     $ 266,501     $ 533,000       -       -       -     -     -  
  Performance-Adjusted

RSUs

– Stock-Based

    3/1/2020       2/7/2020       -       -       -       5,079       10,158       20,316     -   $ 440,349  
  Performance-Adjusted

RSUs

– Cash-Based

    3/1/2020       2/7/2020       -       -       -       2,539       5,079       10,158     -   $ 220,168  

Christine L. Walker

  FE STIP     -       -     $ 123,000     $ 246,000     $ 492,000       -       -       -     -     -  
  Performance-Adjusted

RSUs

– Stock-Based

    3/1/2020       2/7/2020       -       -       -       4,017       8,034       16,068     -   $ 348,274  
  Performance-Adjusted

RSUs

– Cash-Based

    3/1/2020       2/7/2020       -       -       -       1,985       3,971       7,941     -   $ 172,131  

Charles E. Jones

  FE STIP     -       -     $ 651,475     $ 1,302,949     $ 2,605,899       -       -       -     -     -  
  Performance-Adjusted

RSUs

– Stock-Based

    3/1/2020       2/7/2020       -       -       -       46,571       93,141       186,282     -   $ 4,037,662  
  Performance-Adjusted

RSUs

– Cash-Based

    3/1/2020       2/7/2020       -       -       -       22,966       45,932       91,864     -   $ 1,991,171  

Robert P. Reffner

  FE STIP     -       -     $ 228,227     $ 456,455     $ 912,911       -       -       -     -     -  
  Performance-Adjusted

RSUs

– Stock-Based

    3/1/2020       2/7/2020       -       -       -       8,687       17,374       34,748     -   $ 753,163  
  Performance-Adjusted

RSUs

– Cash-Based

    3/1/2020       2/7/2020       -       -       -       4,376       8,752       17,505     -   $ 379,410  

 

(1)

The effective grant date for the Performance-Adjusted RSUs is March 1, 2020 due to the accounting rules under FASB ASC Topic 718. Since March 1, 2020 was a Sunday, as per the 2015 Incentive Compensation Plan, the grant date fair value used to convert the target opportunity value into units was based on the average high and low of the stock price on February 28, 2020.

(2)

The dates set forth in the “Board Action Date” column for these awards represent the date your Board took action to grant the awards.

(3)

The amounts set forth in the “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” columns reflect the potential payouts for each NEO under the FE STIP based upon the achievement of KPIs described in the CD&A. If the threshold level of performance was not achieved, no payout would be made. The amounts reported in this column were calculated using annualized STIP target opportunity levels as a percent of base salary, prorated for the following mid-year increases in the NEOs’ target opportunity levels: Mr. Strah’s change in target in May and November 2020; Mr. Taylor’s change in target in May 2020; and Mr. Reffner’s change in target in May 2020. Mr. Jones’ FE STIP opportunity for 2020 was forfeited on October 29, 2020 due to his termination. The Compensation Committee considered whether to pay the FE STIP to Mr. Reffner and resolved to exercise its negative discretion to reduce final payouts to zero as a result of the events leading to his separation.

 

57  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

(4)

The amounts set forth in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns reflect the threshold, target, and maximum payouts for each NEO, based upon the achievement of the performance measures described in the CD&A and reported in the Stock Awards column of the SCT. The Performance-Adjusted RSUs-Cash-Based amounts have been rounded in this table. If the threshold level of performance is not achieved, no payout will be made. Mr. Jones’ FE LTIP opportunity for 2020 was forfeited on October 29, 2020 due to his termination. The Compensation Committee considered whether to pay the FE LTIP to Mr. Reffner and resolved to exercise its negative discretion to reduce final payouts with respect to the performance-adjusted RSUs for the 2018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles to zero as a result of the events leading to his separation.

(5)

The grant date fair value was computed in accordance with FASB ASC Topic 718 and is also reported in the “Stock Awards” column of the Summary Compensation Table. The Performance-Adjusted RSUs components are valued based on a Monte-Carlo simulation of $43.350.

The following chart summarizes the details of the FE LTIP grants for the 2020-2022 cycle:

 

Performance-Adjusted RSUs

 

Weighting

 

   2/3rd stock-based and 1/3rd cash-based

Granted

 

   Annually

Grant Date

 

   In March
Grant Price   

Average high and low stock price on the grant date (to convert the target LTIP opportunity for each eligible NEO into units); Monte Carlo simulation is used to determine the grant date fair value under FASB ASC Topic 718

 

Performance Period

 

   3 years, cliff vest on March 1
Performance Measures   

Cumulative Operating EPS;

Average Capital Effectiveness; and

RTSR modifier overlay

 

Threshold Opportunity Payout

 

   50%
Target Opportunity Payout   

100% (capped at a target level of payout if the Company’s absolute TSR is negative for the three-year performance period)

 

Maximum Opportunity Payout

 

   200%
Settled   

Stock or cash, as applicable

 

Dividend Equivalent Units   

Reinvested based on the average high and low stock price on the payable date, subject to same restrictions as initial grant

 

Payout   

Based on the average high and low stock price on the vesting date

 

Performance-Adjusted RSUs

Performance-adjusted RSUs are described in the CD&A and are a component of our FE LTIP. On March 1, 2021, the performance-adjusted RSUs granted in 2018 became vested. As previously stated, the two performance measures in the FE LTIP 2018-2020 cycle, along with the 22% reduction based on performance of the relative TSR modifier resulted in a payout at 146% of target opportunity for this grant. The vesting period for performance-adjusted RSUs granted in 2019 and 2020 will end on March 1, 2022, and March 1, 2023, respectively, although performance is measured through December 31 of the year prior to vesting. Performance-adjusted RSUs settled in stock are treated as a fixed expense and performance adjusted RSUs settled in cash are treated as a mark-to-market expense for accounting purposes and are valued in accordance with FASB ASC Topic 718. Mr. Jones’ outstanding performance-adjusted RSUs were forfeited on October 29, 2020 due to his termination. The Compensation Committee resolved to exercise negative discretion in the case of Mr. Reffner to reduce final payouts with respect to the performance-adjusted RSUs outstanding for the 2019-2021 and 2020-2022 cycles to zero.

Other Information

For more information regarding certain compensation arrangements with our NEOs, please refer to the “Potential Post-Employment Payments” section on page 68. For more information regarding the amount of various compensation elements in proportion to total compensation, see the NEO pay mix charts in the “Compensation Mix” section on page 38.

 

58  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Outstanding Equity Awards at Fiscal Year-End 2020

The following table summarizes the outstanding equity award holdings of our NEOs as of December 31, 2020:

 

Option Awards

    Stock Awards                  
Name  

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

   

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

   

Option

Exercise

Price

($)

   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)(1)(6)

   

Grant

Type(7)

 

Market Value

of Shares or

Units of

Stock That

Have Not

Vested

($)(5)

   

Equity

Incentive

Plan
Awards:

Number of

Unearned

Shares,

Units or

Other
Rights

That
Have Not

Vested

(#)(1)

    Grant Type(7)  

Equity

Incentive

Plan Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other
Rights

That
Have Not

Vested

($)(5)

 
   

Steven E. Strah

            47,368     2018 Performance-

Adjusted RSUs –

Stock-Based

  $ 1,449,934       26,910     2019 Performance-

Adjusted RSUs –

Stock-Based

  $ 823,715  
            23,533     2018 Performance-

Adjusted RSUs –

Cash-Based

  $ 720,345       13,369     2019 Performance-

Adjusted RSUs –

Cash-Based

  $ 409,225  
                  25,723     2020 Performance-

Adjusted RSUs –

Stock-Based

  $ 787,381  
                  12,941     2020 Performance-

Adjusted RSUs –

Cash-Based

  $ 396,124  

K. Jon Taylor

            8,609     RS (2)   $ 263,521       7,975     2019 Performance-

Adjusted RSUs –

Stock-Based

  $ 244,115  
            14,483     2018 Performance-

Adjusted RSUs –

Stock-Based

  $ 443,325       3,987     2019 Performance-

Adjusted RSUs –

Cash-Based

  $ 122,042  
            7,241     2018 Performance-

Adjusted RSUs –

Cash-Based

  $ 221,647       11,079     2020 Performance-

Adjusted RSUs –

Stock-Based

  $ 339,128  
                  5,492     2020 Performance-

Adjusted RSUs –

Cash-Based

  $ 168,110  
   

Samuel L. Belcher

            12,745     RS (3)   $ 390,124       23,002     2019 Performance-

Adjusted RSUs –

Stock-Based

  $ 704,091  
            34,094     2018 Performance-

Adjusted RSUs –

Stock-Based

  $ 1,043,617       11,581     2019 Performance-

Adjusted RSUs –

Cash-Based

  $ 354,494  
            17,046     2018 Performance-

Adjusted RSUs –

Cash-Based

    521,778       23,859     2020 Performance-

Adjusted RSUs –

Stock-Based

  $ 730,324  
                  11,853     2020 Performance-

Adjusted RSUs –

Cash-Based

  $ 362,820  

Gary D. Benz

            20,521     2018 Performance-

Adjusted RSUs –

Stock-Based

  $ 628,148       11,632     2019 Performance-

Adjusted RSUs –

Stock-Based

  $ 356,056  
            10,261     2018 Performance-

Adjusted RSUs –

Cash-Based

  $ 314,089       5,816     2019 Performance-

Adjusted RSUs –

Cash-Based

  $ 178,028  
                  10,545     2020 Performance-

Adjusted RSUs –

Stock-Based

  $ 322,782  
                  5,272     2020 Performance-

Adjusted RSUs –

Cash-Based

  $ 161,376  

 

59  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Option Awards

    Stock Awards                  
Name  

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

   

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

   

Option

Exercise

Price

($)

   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)(1)(6)

   

Grant

Type(7)

 

Market Value

of Shares or

Units of

Stock That

Have Not

Vested

($)(5)

   

Equity

Incentive

Plan
Awards:

Number of

Unearned

Shares,

Units or

Other
Rights

That
Have Not

Vested

(#)(1)

    Grant Type(7)  

Equity

Incentive

Plan Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other
Rights

That
Have Not

Vested

($)(5)

 
   

Christine L. Walker

            12,475     RS (4)   $ 381,860       7,026     2019 Performance-

Adjusted RSUs –

Stock-Based

  $ 215,066  
            7,951     2018 Performance-

Adjusted RSUs –

Stock-Based

  $ 243,380       3,562     2019 Performance-

Adjusted RSUs –

Cash-Based

  $ 109,033  
            3,897     2018 Performance-

Adjusted RSUs –

Cash-Based

  $ 119,287       8,340     2020 Performance-

Adjusted RSUs –

Stock-Based

  $ 255,287  
                  4,122     2020 Performance-

Adjusted RSUs –

Cash-Based

  $ 126,174  
   

Charles E. Jones(8)

                   
   

Robert P. Reffner(9)

            14,245     2018 Performance-

Adjusted RSUs –

Stock-Based

  $ 436,039       16,969     2019 Performance-

Adjusted RSUs –

Stock-Based

  $ 519,421  
            7,016     2018 Performance-

Adjusted RSUs –

Cash-Based

  $ 214,760       8,412     2019 Performance-

Adjusted RSUs –

Cash-Based

  $ 257,491  
                  18,035     2020 Performance-

Adjusted RSUs –

Stock-Based

  $ 552,051  
                  9,085     2020 Performance-

Adjusted RSUs –

Cash-Based

  $ 278,092  

 

(1)

The number of shares set forth in both the “Number of Shares or Units of Stock That Have Not Vested” and the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” columns include all dividends or dividend equivalents earned and reinvested through December 31, 2020. The Performance-Adjusted RSUs have been rounded up to the nearest whole unit in this table.

(2)

Mr. Taylor’s restricted stock award cliff vests on April 1, 2021.

(3)

Mr. Belcher’s restricted stock award is graded vesting. Mr. Belcher’s award vested 50% on March 8, 2020 and the remaining 50% will vest on March 8, 2025.

(4)

Ms. Walker’s restricted stock award cliff vests on September 15, 2022.

(5)

The values set forth in both the “Market Value of Shares or Units of Stock That Have Not Vested” and the “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested” columns are determined by multiplying the number of shares or units by our common stock closing price of $30.61 on the last business day of December 31, 2020.

(6)

The number of shares or units set forth in the “Number of Shares or Units of Stock That Have Not Vested” column is based on actual performance of 146% for the 2018 performance-adjusted RSUs. This payout result includes a 22% reduction for the performance of the relative TSR modifier. For the other cycles, target performance is assumed.

(7)

The awards set forth in the “Grant Type” column are described in the CD&A and Grants of Plan-Based Awards narrative section of this proxy statement. The vesting dates are as follows: 2018 performance-adjusted RSU — stock-based (March 1, 2021); 2018 performance-adjusted RSU — cash-based (March 1, 2021); 2019 performance-adjusted RSU — stock-based (March 1, 2022); 2019 performance-adjusted RSU — cash-based (March 1, 2022); 2020 performance-adjusted RSU — stock-based (March 1, 2023); and 2020 performance-adjusted RSU — cash-based (March 1, 2023).

(8)

Mr. Jones’ outstanding stock options and other stock awards were forfeited due to his termination of employment on October 29, 2020.

(9)

The values shown for Mr. Reffner reflect the awards as of December 31, 2020. On February 4, 2021, the Compensation Committee considered whether to pay the FE LTIP to Mr. Reffner and resolved to exercise its negative discretion to reduce final payouts with respect to the performance-adjusted RSUs for the 2018-2020 cycle as well as the outstanding 2019-2021 and 2020-2022 cycles to zero as a result of the events leading to his separation.

 

60  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Option Exercises and Stock Vested in 2020

The following table summarizes the vesting of stock awards held by our NEOs during 2020.

 

          Option Awards   Stock Awards  
Name   Award Type  

Number of Shares

Acquired on

Exercise (#)

  Value Realized
on Exercise
($)
 

Number of Shares

Acquired on

Vesting (#)(1)(2)

 

Value Realized on

Vesting ($)(3)

 

Steven E. Strah

 

2017 Performance-Adjusted

RSUs

(stock-based)

  -   -   48,040   $ 2,132,978  
 

2017 Performance-Adjusted

RSUs

(cash-based)

  -   -   -   $ 1,066,472  

K. Jon Taylor

 

2017 Performance-Adjusted

RSUs

(stock-based)

  -   -   18,177   $ 807,097  
 

2017 Performance-Adjusted

RSUs

(cash-based)

  -   -   -   $ 403,534  

Samuel L. Belcher(4)

  2018 Transition Award RSU   -   -   22,235   $ 987,237  
 

2015 Restricted Stock

Award

(stock-based)

  -   -   12,279   $ 561,289  

Gary D. Benz

 

2017 Performance-Adjusted

RSUs

(stock-based)

  -   -   21,545   $ 956,608  
 

2017 Performance-Adjusted

RSUs

(cash-based)

  -   -   -   $ 597,840  

Christine L. Walker

 

2017 Performance-Adjusted

RSUs

(stock-based)

  -   -   9,864   $ 437,964  
 

2017 Performance-Adjusted

RSUs

(cash-based)

  -   -   -   $ 214,636  

Charles E. Jones

 

2017 Performance-Adjusted

RSUs

(stock-based)

  -   -   272,891   $ 12,116,394  
 

2017 Performance-Adjusted

RSUs

(cash-based)

  -   -   -   $ 5,975,174  

Robert P. Reffner

 

2017 Performance-Adjusted

RSUs

(stock-based)

  -   -   18,694   $ 830,024  
 

2017 Performance-Adjusted

RSUs

(cash-based)

  -   -   -   $ 408,799  

 

(1)

For all NEOs other than Mr. Belcher, the number of shares set forth in the “Number of Shares Acquired on Vesting” column reflect the number of 2017 performance-adjusted RSUs (settled in stock), which vested on March 2, 2020. The number of shares includes dividend equivalent units earned and reinvested through the vesting date. The number of shares were rounded down and the fractional share value was paid in cash and is less than the value of one share.

(2)

The number of units from the 2017 performance-adjusted RSUs (settled in cash), which vested on March 2, 2020 are as follows: Mr. Strah: 24,019.6415; Mr. Taylor: 9,088.5968; Mr. Belcher: 0; Mr. Benz: 13,464.8580; Ms. Walker: 4,834.1507; Mr. Jones: 134,575.9914; and Mr. Reffner: 9,207.1782. The number of units includes dividend equivalent units earned and reinvested through the vesting date.

(3)

The amounts set forth in the “Value Realized on Vesting” column are based on the average high/low stock price on the vesting date, which was $44.40 for both the 2017 performance-adjusted RSUs and Mr. Belcher’s 2018-2019 Transition Award, and $45.71 for Mr. Belcher’s 2015 Restricted Stock Award. The performance-adjusted RSUs for all NEOs, other than Mr. Belcher, were paid at 185% of target. The amounts include certain stock-based 2017 performance-adjusted RSUs that were deferred under the EDCP according to the NEOs’ election in the following amounts: $2,029,528 for Mr. Strah; $767,593 for Mr. Taylor; $939,356 for Mr. Belcher; and $227,554 for Mr. Benz.

 

61  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

(4)

Mr. Belcher was granted a 2018-2019 Transition Award to replace the value of the FE LTIP grant opportunity for the 2017-2019 cycle because of his transition from FENOC into the Company. The Transition Award for Mr. Belcher was paid at 193% of target. The number of shares includes dividend equivalent units earned and reinvested through the vesting date. The number of shares were rounded down and the fractional share value was paid in cash and is less than the value of one share. In addition, Mr. Belcher’s 2015 Restricted Stock Award vested 50% on March 8, 2020 and the remaining 50% will vest on March 8, 2025.

Post-Employment Compensation

Pension Benefits as of December 31, 2020

The following table provides information regarding the pension benefits of our NEOs as of December 31, 2020:

 

  Name   Plan Name  

Number of

Years

Credited

Service (#)(1)

 

Present

Value of

Accumulated

Benefit

($)(2)

 

  Steven E. Strah

 

Qualified Plan

  36   $ 2,439,310  
 

Nonqualified (Supplemental) Plan

  36   $ 9,409,966  
 

Supplemental Executive Retirement Plan

      N/A  
     

 

 

 
 

Total

     

$    11,849,276

 

  K. Jon Taylor

 

Qualified Plan

  11   $ 429,939  
 

Nonqualified (Supplemental) Plan

  11   $ 643,177  
 

Supplemental Executive Retirement Plan

      N/A  
     

 

 

 
 

Total

    $ 1,073,116  

  Samuel L. Belcher

 

Qualified Plan

  8   $ 345,465  
 

Nonqualified (Supplemental) Plan

  13   $ 1,851,847  
 

Supplemental Executive Retirement Plan

      N/A  
     

 

 

 
 

Total

    $ 2,197,312  
  Gary D. Benz  

Qualified Plan

  31   $ 2,333,659  
 

Nonqualified (Supplemental) Plan

  31   $ 4,167,859  
 

Supplemental Executive Retirement Plan

      N/A  
     

 

 

 
 

Total

    $ 6,501,518  

  Christine L. Walker

 

Qualified Plan

  35   $ 2,411,951  
 

Nonqualified (Supplemental) Plan

  35   $ 2,668,888  
 

Supplemental Executive Retirement Plan

      N/A  
     

 

 

 
 

Total

    $ 5,080,839  

  Charles E. Jones(3)

 

Qualified Plan

  41   $ 2,687,157  
 

Nonqualified (Supplemental) Plan

  41   $     28,697,147  
 

Supplemental Executive Retirement Plan

    $ 0  
     

 

 

 
 

Total

    $ 31,384,304  

  Robert P. Reffner(3)

 

Qualified Plan

  13   $ 631,729  
 

Nonqualified (Supplemental) Plan

  18   $ 2,113,436  
 

Supplemental Executive Retirement Plan

      N/A  
     

 

 

 
 

Total

    $ 2,745,165  

 

(1)

Pursuant to a historical arrangement, Messrs. Belcher and Reffner are eligible to receive five additional years of credited service for purposes of the nonqualified (supplemental) pension calculation, resulting in 13 and 18 years of credited service, respectively. As a result of this arrangement, the amounts in the Present Value of Accumulated Benefit column for each of Messrs. Belcher and Reffner has an increased value of $855,015 and $737,498, respectively.

(2)

The amounts set forth in the “Present Value of Accumulated Benefit” column are determined as of December 31, 2020, using the following assumptions: December 31, 2020 discount rates of 2.67% (qualified plan) and 2.56% (nonqualified supplemental plan) and the Pri-2012 mortality table projected generationally using scale MP-2020 (base year 2012) for the qualified plan and Pri-2012 mortality table with white collar adjustment projected generationally using scale MP-2020 (base year 2012) for the nonqualified plans at the earliest unreduced age.

(3)

Mr. Jones employment with the Company terminated effective October 29, 2020, and Mr. Reffner separated from the Company effective November 8, 2020.

 

62  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Pension Benefits

Qualified and Nonqualified Plans

We offer a qualified and nonqualified (supplemental) pension plan to provide retirement benefits to all of our NEOs. We pay the entire cost of these plans. Retirement benefits from the qualified plan provided under the FirstEnergy Corp. Master Pension Plan (“Master Pension Plan”) are calculated using pensionable earnings up to the applicable federal and plan limits. The Master Pension Plan was amended to provide a cash-balance formula for all employees hired or rehired on or after January 1, 2014. In conjunction with the new cash-balance formula, the Company adopted a new nonqualified supplemental plan, which will provide a benefit, based upon the cash-balance formula, to eligible executives hired or rehired on or after January 1, 2014, but without the restriction of federal limits that apply under the qualified pension plan. All of the NEOs were hired prior to January 1, 2014 and are subject to the formulas discussed below.

The supplemental plan provided under the EDCP provides a benefit based upon the formula used in the qualified plan but is calculated using all pensionable earnings without the restrictions of federal and certain plan limits. Based on the applicable formula of the plan under which the NEO is a participant, the retirement benefit from the qualified and nonqualified plans will be the benefit determined using one or more of the following three formulas:

 

  1.

Career Earnings Benefit Formula: A fixed (2.125%) factor is applied to the executive’s total career earnings to determine the accrued (age 65) career earnings benefit. Pensionable earnings under the career earnings formula generally include base salary, annual incentive awards, and other similar compensation.

 

  2.

Adjusted Highest Average Monthly Base Earnings Benefit Formula: The benefit is equal to the sum of A and B where A is the highest average monthly base earnings (“HAMBE”) times the sum of:

 

   

1.58% times the first 20 years of benefit service;

 

   

1.18% times the next 10 years of benefit service;

 

   

0.78% times the next 5 years of benefit service; and

 

   

1.10% times each year of benefit service in excess of 35 years.

and B is an amount equal to 0.32% times number of years of service (up to 35 years) times the difference between the HAMBE and the lesser of 150% of covered compensation or the Social Security Wage Base, except that B cannot be less than zero.

The HAMBE for the qualified plan are the highest 48 consecutive months of base earnings the executive had in the 120 months immediately preceding retirement or other termination of employment. Pensionable earnings under the qualified plan HAMBE formula generally include base salary and deferred compensation of base salary after 2004. The pensionable earnings under the nonqualified plan HAMBE formula are the same as the qualified plan described above except that deferred compensation of base salary excluded under the qualified plan and annual incentive awards that are paid or deferred are included. Covered compensation represents the average (without indexing) Social Security Taxable Wage Base in effect for each calendar year during the 35-year period that ends when the executive reaches the Social Security normal retirement age.

 

  3.

Final Average Total Pay (“FATP”) Formula: The pension benefit under FATP is calculated by determining the HAMBE, multiplying this amount by a fixed factor (1.2%) and then multiplying it by the number of years of Benefit Service at the time of separation or retirement. This amount is then divided by 12 to determine the accrued & vested monthly pension benefit amount.

Under the Master Pension Plan, normal retirement is at age 65 and the completion of five years of eligibility service. The earliest retirement is at age 55 if the employee has at least 10 years of eligibility service. Mr. Benz is currently eligible for an unreduced pension benefit, as were Messrs. Jones and Reffner at the time of termination and separation, respectively. Mr. Strah and Ms. Walker are currently eligible for a reduced pension benefit based on the Early Retirement Reduction Table below and Messrs. Taylor and Belcher will become eligible when they turn 55 in 2028 and 2023, respectively. The earliest retirement age without reduction for the qualified plan is age 60 with the exception of those covered under the FATP plan. The earliest retirement age without reduction for FATP is age 62.

 

63  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Early Retirement Reduction Table

 

If payment
        begins at age        
 

        The benefit is        

multiplied by

60 and up   100%
59   88%
58   84%
57   80%
56   75%
55   70%

FATP Early Retirement Reduction Table

 

If payment
        begins at age        
 

        The benefit is        

multiplied by

62 and up   100%
61   96%
60   92%
59   88%
58   84%
57   80%
56   76%
55   72%

The accrued benefits vest upon the completion of five years of service. The benefits generally are payable in the case of a married employee in the form of a qualified spouse 50% joint and survivor annuity or in the case of an unmarried employee in the form of a single life annuity. Unmarried employees can designate a non-spouse beneficiary to receive up to a 100% joint and survivor annuity depending upon the non-spousal beneficiary’s age. For the married employee, there also is an option to receive the benefit as a joint and survivor annuity with or without a pop-up provision or a period certain annuity. The annuity provides a reduced monthly benefit, payable to the employee until death. If a joint and survivor annuity is chosen, the employee’s named beneficiary will receive 25%, 50%, 75%, or 100% of the employee’s benefit based on the employee’s and the beneficiary’s ages and the elected percentage to be continued after the employee’s death. Under the pop-up provisions, the monthly payment to the employee “pops-up” to the single life annuity amount if the beneficiary predeceases the employee. The period certain annuity provides a reduced benefit for the life of the employee and continues the benefit to the named beneficiary for a guaranteed period if the employee’s death occurs before the end of the 5, 10 or 15-year period, as elected. No further payments are made if the employee’s death occurs after the end of the elected period.

As noted in the CD&A, pursuant to a historical arrangement, Mr. Belcher is (and Mr. Reffner was) eligible to be credited with five years of additional service for purposes of calculating the supplemental pension benefit. For more information, refer to the “Pension Benefits as of December 31, 2020” table on page 62.

Supplemental Executive Retirement Plan (“SERP”)

In addition to the qualified and nonqualified plans, certain NEOs may receive additional nonqualified benefits from the SERP. As of December 31, 2020, there are no longer any active participants in the SERP. In 2014, the Committee formally closed the SERP to new entrants.

 

64  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Of the NEOs, only Mr. Jones was a participant in the SERP. The NEOs who are participants in the SERP, or the NEO’s surviving spouse, are eligible to receive a supplemental benefit after the NEO’s termination of employment due to retirement, death, disability, or involuntary separation. Whether or not a supplemental benefit under the SERP will be paid is determined upon the date the NEO terminates employment under the conditions described in the following sections:

Retirement Benefit

An eligible NEO who retires on or after age 55 and who has completed 10 years of service will be entitled to receive, commencing at retirement, a monthly supplemental retirement benefit under the SERP equal to (a) 65% of the average of the highest 12 consecutive full months of base salary earnings paid to the NEO in the 120 consecutive full months prior to termination of employment, including any salary deferred into the EDCP or the FirstEnergy Corp. Savings Plan, but excluding any incentive payments, or (b) 55% of the average of the highest 36 consecutive full months of base salary earnings and annual incentive awards paid to the NEO in the 120 consecutive full months prior to termination of employment, including any salary deferred into the EDCP and FirstEnergy Corp. Savings Plan, whichever is greater, multiplied by the number of months of service the executive has completed after having completed 10 years of service, up to a maximum of 60 months, divided by 60, less:

 

  1.

The monthly primary Social Security benefit to which the executive may be entitled upon retirement (or the projected age 62 benefit if retirement occurs prior to age 62), irrespective of whether the executive actually receives such benefit at the time of retirement; and

 

  2.

The monthly retirement income benefit to which the executive may be entitled upon retirement under the Master Pension Plan and nonqualified supplemental pension, calculated based on the NEO’s marital status at the time of such retirement as follows:

 

   

In the case of a married NEO in the form of a 50% joint and survivor annuity.

 

   

In the case of an unmarried NEO, in the form of a single life annuity.

For an NEO who retires prior to attaining age 65, the net dollar amount above shall be reduced further by one-fourth of 1% for each month the commencement of benefits under the SERP precedes the month the executive attains age 65.

Death Benefit

If a married NEO that participates in the SERP dies, 50% of the NEO’s SERP benefit actuarially adjusted for the NEO’s and spouse’s ages will be paid to the NEO’s surviving spouse. In general, payment will begin the first of the month following the later of the date the NEO would have attained age 55 or death and continue for the remainder of the surviving spouse’s life. If the NEO had at least 10 years of eligibility service before January 1, 2009, the payment will begin on the first day of the month following the NEO’s death. For an NEO who dies prior to attaining age 65, the benefit shall be reduced further by one-fourth of 1% for each month the commencement precedes the NEO’s attainment of age 65, with a maximum reduction of 30%.

Disability Benefit

If an NEO participant in the SERP terminates employment due to a disability, he/she may be entitled to receive a monthly supplemental retirement benefit under the SERP. If applicable, SERP payments will commence on the first of the month following the NEO’s attaining age 60 if the disability termination occurs before age 55. If the disability termination occurs on or after the NEO attains age 55, applicable SERP payments will begin the first of the month following termination. The retirement benefit will equal the greater of 65% of the NEO’s base salary earnings as set forth in (a) of the Retirement Benefit section above, or 55% of the NEO’s base salary earnings plus their annual incentive awards as set forth in (b) of the Retirement Benefit section above. That amount will be reduced by disability benefits the NEO is projected to receive from Social Security, the Master Pension Plan and the FirstEnergy Corp. Long Term Disability Plan. The disability benefit continues until the NEO attains age 65, is no longer disabled or dies, whichever occurs first. Upon attaining age 65, benefits are calculated as described in the Retirement Benefit section above. In the event of death, benefits are calculated as described in the Death Benefit section above.

 

65  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Nonqualified Deferred Compensation as of December 31, 2020

The following table summarizes nonqualified deferred compensation earned or contributed by or on behalf of our NEOs during 2020.

 

  Name   

Executive

Contributions

in Last FY

($)(1)

    

Registrant

Contributions

in Last FY

($)

    

Aggregate

Earnings

in Last FY

($)(2)

   

Aggregate

Withdrawals/

Distributions

($)

    

Aggregate

Balance at
Last

FYE

($)(3)

 

  Steven E. Strah

   $ 1,607,714      $                 0      $ (731,967   $ 0      $     3,167,133  

  K. Jon Taylor

   $ 595,459      $ 0      $ (856,924   $ 0      $ 2,184,271  

  Samuel L. Belcher

   $ 0      $ 0      $ (455,804   $ 0      $ 1,293,096  

  Gary D. Benz

   $ 175,642      $ 0      $ (75,991   $ 0      $ 739,958  

  Christine L. Walker

   $ 113,396      $ 0      $ 7,398     $ 0      $ 1,501,164  

  Charles E. Jones

   $ 0      $ 0      $ (139,646   $ 0      $ 1,083,973  

  Robert P. Reffner

   $ 56,595      $ 0      $ (13,561   $ 0      $ 327,313  

 

(1)

The amount set forth in the “Executive Contributions in Last FY” column for Mr. Strah includes the deferral of (a) 2020 base salary in the amount of $101,893 and (b) 2018-2020 stock-based RSUs deferred in the amount of $1,505,821. The amount for Mr. Taylor includes the deferral of (a) 2020 base salary in the amount of $48,552; (b) 2020 STIP earned in 2020 and deferred in 2021 in the amount of $82,918; and (c) 2018-2020 stock-based RSUs deferred in the amount of $463,989. The amount for Mr. Benz includes the deferral of (a) 2020 base salary in the amount of $45,295 and (b) 2018-2020 stock-based RSUs deferred in the amount of $130,347. The amount for Ms. Walker includes the deferral of (a) 2020 base salary in the amount of $51,896; and (b) 2020 STIP earned in 2020 and deferred in 2021 in the amount of $61,500. The amount for Mr. Reffner includes the deferral of 2020 base salary in the amount of $56,595. The base salary amount is also included in the Salary column of the current year Summary Compensation Table, and the 2020 STIP amount is also included in the “Non-Equity Incentive Plan Compensation” column of the current year Summary Compensation Table.

(2)

The compounded annual rate of return on pre-2013 retirement accounts was 7.02%, and 5.02% on the retirement accounts in 2013 and thereafter. The compounded annual rate of return on stock accounts was -34.13%, which includes dividends. The amounts set forth in the Aggregate Earnings in Last FY column include above-market earnings which have been reported in the Summary Compensation Table for 2020 as follows: Mr. Strah: $15,433; Mr. Taylor: $7,226; Mr. Belcher: $5,092; Mr. Benz: $7,100; Ms. Walker: $17,554; Mr. Jones: $5,298; and Mr. Reffner: $5,088.

(3)

The amounts set forth in the “Aggregate Balance at Last FYE” column include amounts reported in the Summary Compensation Tables in prior years as follows: Mr. Strah: $44,530; Mr. Belcher: $10,010; Mr. Jones: $58,679; and Mr. Reffner: $3,754. Mr. Taylor, Mr. Benz and Ms. Walker did not have any amounts reported in the Summary Compensation Tables in prior years.

EDCP

The EDCP is a nonqualified deferred compensation plan which provides for the voluntary deferral of compensation. Our NEOs may defer up to 50% of base salary, up to 85% of STIP awards and up to 85% of LTIP awards.

Two investment options are available under the EDCP. NEOs may direct deferrals of base salary and STIP awards to an annual cash retirement account, which accrues interest. The interest rate changes annually and is based upon the Moody’s Corporate Long-Term Bond Yield Index rate (later referred to as Moody’s). In 2020, the interest rate was based on the Moody’s rate plus one percentage point (5.02%) for amounts credited to accounts in 2013 or later and Moody’s plus three percentage points (7.02%) for amounts credited to accounts prior to 2013. NEOs may direct deferrals of STIP awards and performance-adjusted RSU LTIP awards to an annual stock account. The stock accounts are tracked in stock units and accrue additional stock units based upon the payment of dividends. The stock accounts are valued at the fair market value of our common stock. Payments made with respect to any dividend equivalent units that accrue after May 17, 2014 will be paid in cash.

 

66  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Payments made with respect to performance shares that are deferred into a participant’s stock account on or after February 23, 2015 will be paid in cash instead of shares of common stock. In addition, with respect to future deferrals, if a participant has elected to receive a distribution of his or her stock account following a three-year deferral period and the participant terminates employment prior to the end of the three-year period, then the stock account distribution will be paid in cash in accordance with the payment terms of the participant’s retirement account.

Effective for deferral elections made on or after November 1, 2015:

 

 

Participants may elect to defer RSUs only to the stock account, rather than to a separate RSU account; and

 

 

Participants may no longer elect to receive a distribution after three years (or any later date specified by the participant, in the case of RSUs), as all amounts deferred to the stock account, including deferred RSUs, will be held in that account until separation from service, death, or disability, at which point it will be transferred to a participant’s retirement account and paid only in cash based on his/her distribution elections for the retirement account.

NEOs may elect to receive distributions from the cash retirement accounts in any combination of lump sum payment and/or monthly installment payments for up to 25 years. Differing distribution elections may be made for retirement, disability, and pre-retirement death. In the event of involuntary separation prior to retirement eligibility, the accounts accrued and vested as of December 31, 2004, may be paid in a single lump sum payment or in three annual installments. In the event of a participant’s separation from service for reasons other than retirement, death or disability, accounts accrued after January 1, 2005, are paid in a single lump sum payment. Payments may not commence until separation from service. Amounts that were vested as of December 31, 2004, are available for an in-service withdrawal of the full account, subject to a 10% penalty. There is no in-service withdrawal option for retirement accounts accrued after January 1, 2005, other than as permitted for hardships under the EDCP.

For deferrals to the stock account prior to November 1, 2015, generally, stock account distributions were made in a lump sum payment in the form of our common stock at the end of the three-year period following the initial deferral, unless further deferred. If further deferred until termination or retirement (or for future deferrals, if termination occurred prior to the end of the initial three-year period, regardless of age at termination), the account was converted to cash, based upon the fair market value of the account at termination, and the balance was rolled over to the corresponding annual retirement account for distribution in lump sum or monthly installments as elected under the retirement account.

 

67  |  FirstEnergy Corp. 2021 Proxy Statement


Table of Contents

LOGO

 

Potential Post-Employment Payments

2020 Post-Termination Compensation and Benefits

The following table summarizes the compensation and benefits that would be payable to our continuing NEOs in the event of a termination or following a CIC absent a termination as of December 31, 2020, which is the last business day of the year:

 

     Retirement(1)  

Involuntary

Separation

(Other Than

For Cause)