FirstEnergy Corp. is now operating under a revamped and smaller board of directors.
And other significant changes may be in the works: The Akron utility is looking at combining its Ohio utilities in the state, and doing the same thing for its Pennsylvania utility subsidiaries.
FirstEnergy this week was forced to shake up its board of directors as part of the fallout from the utility's involvement in the $61 million Larry Householder bribery scheme over the passage and support of House Bill 6. The bill, which became law, provided significant subsidies to two Ohio nuclear power plants previously owned by FirstEnergy. The end result is that six long-standing directors have left the oversight board, which also was downsized from 16 people to 12.
Now, following Tuesday's annual shareholders meeting, the longest-serving FirstEnergy director first came to the board in 2017. Two members are new this year to FirstEnergy, and seven other reappointed members first joined the board in 2021.
Two board members represent the interests of billionaire investor Carl Icahn and Icahn Capital, which bought up significant shares of FirstEnergy a year ago with a goal of forcing a settlement over House Bill 6 with federal investigators. Investment group Blackstone Inc. also got a seat on the FirstEnergy board after agreeing with the utility to buy about $1 billion in FirstEnergy stock.
Not standing for reelection to the board were Michael J. Anderson, Thomas N. Mitchell, Christopher D. Pappas, Luis A. Reyes, Julia L. Johnson and Don Misheff, the non-executive board chair, all of whom had oversight over the utility in the period it has since acknowledged it was bribing public officials.
Misheff, a director since 2012, opened the webcast annual meeting and introduced the shareholder voting matters. He thanked shareholders and the outgoing directors.
"I'm confident FirstEnergy will continue to move forward as a stronger, customer-focused organization centered on integrity," Misheff said. He said senior management is "building a best in class" ethics and compliance program and is committed to fostering a culture of trust and integrity.
These newest board changes came about as part of a shareholder lawsuit settlement.
FirstEnergy also has a deferred prosecution agreement with federal prosecutors in which the utility paid a $230 million fine for admitting it paid bribes and so-called dark money to support House Bill 6.
Tuesday morning's 2022 shareholders meeting started at 8 a.m. and was over less than 40 minutes later; the formal part of the meeting concluded at 8:13 a.m.
Strah: 'Pivotal changes'
The rest of the program involved a recorded video by Steve Strah, president and chief executive officer, who reviewed 2021 and developments from earlier this year. Strah then, in audio only, answered written questions live from shareholders. Strah succeeded Chuck Jones as CEO; Jones was fired in October 2020 as part of the HB 6 scandal.
"In 2021, we embraced pivotal changes, changes which advanced a culture that prioritizes integrity and accountability," Strah said in the 10-minute video. "... In the last year, we've implemented substantial actions to resolve the challenges we've been working through since 2020. These actions include strengthening the leadership team, building a best-in-class compliance program and substantially modifying our approach to political engagement. These significant and continuous efforts facilitated (the deferred prosecution) agreement between FirstEnergy and the Department of Justice in July 2021."
Strah said the parties in shareholder derivative cases agreed earlier this year to a global settlement, subject to court approval. He also noted that in April, FirstEnergy reached a $37.5 million settlement in a ratepayer civil RICO (Racketeer Influenced and Corrupt Organizations) lawsuit.
Strah also addressed the board changes.
"I look forward to working with our refreshed board, including new directors Sean Klimczak of Blackstone and Jana Croom, who is chief financial officer for Kimball Electronics," he said. Strah thanked the outgoing directors.
Utilities may be combined
Strah said FirstEnergy is beginning a long-term review to consider combining its Ohio utilities, and its utilities in Pennsylvania, legally and financially. In Ohio, it has Ohio Edison, Toledo Edison and The Illuminating Co. In Pennsylvania, its utilities are Penelec, West Penn Power, Penn Power and Met-Ed.
"This effort also presents an opportunity for us to look at how we brand our utility companies with our customers," Strah said.
2022 board of directors
The 2022 FirstEnergy board members:
• Jana T. Croom, chief financial officer, Kimball Electronics. (New)
• Steven J. Demetriou, chief executive officer, Jacobs Engineering Group. (Director since 2017)
• Lisa Winston Hicks, chair, MV Transportation Inc. (Director since 2021)
• Paul Kaleta, retired executive vice president and general counsel, First Solar Inc. (Director since 2021)
• Sean T. Klimczak, senior managing director, Blackstone Inc. (New)
• Jesse A. Lynn, general counsel, Icahn Enterprises. (Director since 2021)
• James F. O'Neil, chief executive officer, Orbital Energy Group. (Director since 2017)
• John W. Somerhalder, FirstEnergy board vice chair and executive director, and former CEO of CenterPoint Energy. (Director since 2021)
• Steven E. Strah, FirstEnergy CEO. (Director since 2021)
• Andrew Teno, portfolio manager, Icahn Capital. (Director since 2021)
• Leslie M. Turner, former senior vice president, general counsel, The Hershey Co. (Director since 2018)
• Melvin Williams, retired president of Nicor Gas. (Director since 2021)
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.