Obviously, this is not how Duke Energy wanted things to go. Big, powerful companies and their top executives do not like to be embarrassed.
The ouster of CEO Bill Johnson has been embarrassing for Duke.
Jim Rogers, now back in the saddle at Duke, had to come to Raleigh to see if he could calm down the N.C. Utilities Commission.
The last thing he wanted to be doing this week was to sit in front of the commission to testify under oath. And his explanation for Johnson’s firing must not have been fun to deliver. Because there’s really only two possibilities: Either Duke didn’t do adequate due diligence, or there is more going on here.
The Duke board, Rogers said, found Johnson’s management style “autocratic.” Let’s assume that was the case. If all the autocratic CEOs in the country were fired by their boards, there would be a lot more ex-CEOs playing golf and counting their severance.
Jack Welch, the legendary former CEO of General Electric, was not known as a shy and retiring sort. His nickname was Neutron Jack, as in neutron bomb, for his propensity to fire lots of people and shut down inefficient operations. He could be a little on the autocratic side, but the GE board overlooked that while he was making their company one of the most valuable in the world by market capitalization.
Rogers also said the board was unhappy with problems at Progress Energy’s nuclear plants, including the extremely troubled Crystal River plant in Florida. But the problems at Crystal River were well-known by January 2011, when Duke and Progress announced their merger. The N&O’s John Murawski wrote about Progress’ nuclear problems in April 2011. These problem were no secret.
Is it possible that 18 months ago, Duke’s senior executives and board did not know much about Bill Johnson’s purported management style and did not fully appreciate Progress’ nuclear problems? I guess that’s possible. But given that Duke lives next door to Progress, I dunno.
A few observations:
• Weep not for Bill Johnson. He got more than $44 million to walk away, including up to $1.5 million not to say bad things about Duke. He’s still a young man and so I’m sure he is already getting calls from corporate headhunters. Maybe he can get a sweet executive-in-residence gig at some elite business school, maybe at the other Duke.
• Mergers are hard enough to pull off under the best of circumstances. Different cultures, different ways of doing things. Now Duke has to contend with some unhappy Progress employees who feel like when Johnson got the boot, they lost. How long that feeling lasts is anyone’s guess. But there’s going to be some us-versus-them, Raleigh-versus-Charlotte, for a while.
• No one likes to be taken advantage of, and the utilities commission probably feels like Duke pulled a fast one by getting the commission’s approval of the merger and then dumping Johnson. It doesn’t help Duke to have a bunch of irritated commissioners in Raleigh. There are dozens of ways a woke-up commission can make life uncomfortable for a regulated public utility.
The Duke board of directors is made up of experienced business executives. These are smart people who have dealt with all kinds of problems in their careers. I’m sure they didn’t remove Johnson without considering the fallout.
But one thing sticks in my head from Rogers’ testimony. He said that the Duke board did not meet with Johnson to discuss their concerns. “They felt his style was autocratic and discouraged different points of view.”
I kind of hope there was more to it than that, because in most companies, you don’t fire someone without at least a couple candid conversations. Especially if you have to pay the guy $44 million as he goes out the door.
Dan Barkin is a senior editor of The News & Observer