Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Appointment of President and Chief Executive Officer
On March 22, 2023, the Board of Directors (the “Board”) of FirstEnergy Corp.
(the “Company”) appointed Brian X. Tierney to the position of President and
Chief Executive Officer of the Company, effective as of June 1, 2023. Mr.
Tierney, 55, currently serves as Senior Managing Director and Global Head of
Infrastructure Operations and Asset Management at Blackstone Inc. (“Blackstone”)
where he leads the team that partners with executives of Blackstone
Infrastructure’s portfolio companies to create and accelerate value. Prior to
joining Blackstone in July 2021, Mr. Tierney spent 23 years with American
Electric Power Company Inc. (“AEP”), having served most recently as the
Executive Vice President of Strategy in 2021. In that role he had responsibility
for AEP’s corporate strategy as well as its operational and performance
management function. From 2009 to 2020, he served as the Executive Vice
President and Chief Financial Officer of AEP. In that role, in addition to
traditional finance and accounting activities, he was also responsible for
strategy, procurement, supply chain, and fleet operations.
On March 22, 2023, at the recommendation of the Compensation Committee of the
Board, the Board approved the following compensation package for Mr. Tierney in
connection with his new position, subject to applicable tax withholding:
•Annual base salary rate of $1,500,000, which will be reviewed annually;
•An annual short-term incentive award target opportunity equal to 150% of base
salary (this award for 2023 can be earned from 0% to 200% of target, depending
on actual performance, but will be prorated for actual service during 2023);
•Starting in 2024, an annual long-term incentive awards target opportunity equal
to 683% of base salary (weighted one- third in cash-based performance-adjusted
restricted stock units and two-thirds in stock-based performance-adjusted
restricted stock units), with awards generally earned from 0% to 200% of target,
depending on actual performance;
•Pro-rated awards of stock-based performance-adjusted restricted stock units for
the 2021-2023 and 2022-2024 performance periods (Mr. Tierney’s target
opportunity, generally equal to $10,245,000, will be pro-rated for nine out of
36 months for the 2021-2023 award and for 21 out of 36 months for the 2022-2024
award), with each award generally earned from 0% to 200% of the pro-rated
target, depending on actual performance and the specific terms of the award;
•A pro-rated award for the 2023-2025 performance period (weighted one-third in
cash-based performance-adjusted restricted stock units and two-thirds in
stock-based performance-adjusted restricted stock units), with Mr. Tierney’s
target opportunity of $10,245,000 pro-rated for 31 out of 36 months and the
award generally earned from 0% to 200% of the pro-rated target, depending on
actual performance and the specific terms of the award;
•A hiring bonus equal to $1,500,000 (subject to repayment before June 1, 2024
under certain conditions);
•A service-based restricted stock award equal to $5,000,000 that will vest in
equal amounts over four years; and
•Participation in the Company’s 2017 Change in Control Severance Plan, Cash
Balance Pension Plan and Cash Balance Restoration Plan.
Each of the (i) pro-rated awards of stock-based performance-adjusted restricted
stock units for the 2021-2023 and 2022-2024 performance periods, (ii) hiring
bonus, and (iii) service-based restricted stock award is included in the
compensation package as a partial make-whole for awards and compensation being
forfeited by Mr. Tierney due to his departure from Blackstone.
Mr. Tierney is also expected to be eligible to participate in the Company’s
executive relocation program, executive deferred compensation plan, 401(k) plan,
vacation and paid time off program, and standard health and welfare benefits.
Mr. Tierney will be subject to the Company’s share ownership guidelines, under
which his target share ownership after five years will be 700% of his annual
base salary rate.
There are no related party transactions involving Mr. Tierney that would require
disclosure pursuant to Item 404(a) of Regulation S-K.
The Company expects to enter into a Director and Officer Indemnification
Agreement with Mr. Tierney on or before June 1, 2023, substantially in the form
of the Director and Officer Indemnification Agreement previously filed with the
SEC on May 16, 2018, as Exhibit 10.1 to the Company’s Current Report on Form
8-K, which is incorporated herein by reference.
Interim President and Chief Executive Officer
With the Board’s appointment of Mr. Tierney to the position of President and
Chief Executive Officer of the Company, effective as of June 1, 2023, John W.
Somerhalder II will end his role as Interim President and Chief Executive
Officer of the Company at the conclusion of May 31, 2023. Mr. Somerhalder will
continue after such date to serve as the Chairman of the Board and will be
eligible to receive the same compensation as the Company’s other non-employee
directors, which is described from year to year in the Company’s definitive
proxy statements for its Annual Meetings of Shareholders.
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Item 7.01 Regulation FD Disclosure.
In a press release dated March 27, 2023, the Company announced, among other
things, that the Company’s Board appointed Brian X. Tierney as President and
Chief Executive Officer of the Company. A copy of the press release regarding
the Company’s announcement is attached as Exhibit 99.1 hereto and incorporated
herein by reference.
The information set forth in and incorporated by reference into this Item 7.01
of this Current Report on Form 8-K is being furnished pursuant to Item 7.01 of
Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference into any of the
Company’s filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934, whether made before or after the date hereof and regardless of any
general incorporation language in such filings, except to the extent expressly
set forth by specific reference in such a filing. The furnishing of this Item
7.01 of this Current Report on Form 8-K shall not be deemed an admission as to
the materiality of any information herein that is required to be disclosed
solely by reason of Regulation FD.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
99.1 Press Release issued by FirstEnergy Corp., dated March 27, 2023
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded
within the Inline XBRL document)
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Forward-Looking Statements: This Form 8-K 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 potential liabilities, increased costs and
unanticipated developments resulting from government investigations and
agreements, including those associated with compliance with or failure to comply
with the Deferred Prosecution Agreement entered into July 21, 2021 with the U.S.
Attorney’s Office for the Southern District of Ohio; the risks and uncertainties
associated with government investigations and audits regarding Ohio House Bill
6, as passed by Ohio’s 133rd General Assembly (“HB 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, particularly regarding HB 6 related matters, including risks
associated with obtaining dismissal of the derivative shareholder lawsuits;
changes in national and regional economic conditions, including recession,
inflationary pressure, supply chain disruptions, higher energy costs, and
workforce impacts, affecting us and/or our customers and those vendors with
which we do business; weather conditions, such as temperature variations and
severe weather conditions, or other natural disasters affecting future operating
results and associated regulatory actions or outcomes in response to such
conditions; legislative and regulatory developments, including, but not limited
to, matters related to rates, compliance and enforcement activity,
cybersecurity, and climate change; the risks associated with cyber-attacks and
other disruptions to our, or our vendors’, 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 accomplish or realize anticipated benefits, particularly
operations and maintenance expense savings, from our FE Forward initiative and
our other strategic and financial goals, including, but not limited to,
overcoming current uncertainties and challenges associated with the ongoing
government investigations, executing our transmission and distribution
investment plans, greenhouse gas reduction goals, controlling costs, improving
our credit metrics, growing earnings in line with our annual growth rate target,
strengthening our balance sheet, and satisfying the conditions necessary to
close the sale of additional membership interests of FirstEnergy Transmission,
LLC; changing market conditions affecting the measurement of certain liabilities
and the value of assets held in our pension trusts may negatively impact our
forecasted growth rate, results of operations, and may also cause us to make
contributions to our pension sooner or in amounts that are larger than currently
anticipated; mitigating exposure for remedial activities associated with retired
and formerly owned electric generation assets; changes to environmental laws and
regulations, including, but not limited to, those related to climate change;
changes in customers’ demand for power, including, but not limited to, economic
conditions, the impact of climate change, or energy efficiency and peak demand
reduction mandates; 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 factors such as 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; the potential of non-compliance with
debt covenants in our credit facilities; the ability to comply with applicable
reliability standards and energy efficiency or peak demand reduction mandates;
human capital management challenges, including among other things, attracting
and retaining appropriately trained and qualified employees and labor
disruptions by our unionized workforce; changes to significant accounting
policies; any changes in tax laws or regulations, including, but not limited to,
the Inflation Reduction Act of 2022, or adverse tax audit results or rulings;
and the risks and other factors discussed from time to time in our Securities
and Exchange Commission (“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. These forward-looking statements
are also qualified by, and should be read together with, the risk factors
included in FirstEnergy Corp.’s 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 Corp. expressly disclaims any obligation to update or revise, except
as required by law, any forward-looking statements contained herein or in the
information incorporated by reference as a result of new information, future
events or otherwise.
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