Duke Energy CEO Jim Rogers broke the silence Tuesday on the controversial decision of his company's board to keep him in the top spot, rather than installing Progress CEO Bill Johnson. Rogers provided a lengthy - and detailed - testimony to North Carolina utility regulators about what led to Johnson's ouster.
Duke and Progress Energy had said for 18 months that Bill Johnson would lead the combined companies. So the board's decision to oust him just 20 minutes after the merger was complete on July 2 surprised just about everyone - shareholders, employees, regulators, analysts. But it did not surprise Jim Rogers who says he was "advised of the nature of the board's concerns with Mr. Johnson" on June 23 - a week before the merger was complete.
That was the beginning of a string of revelations by Rogers testifying under oath Tuesday before the North Carolina Utilities Commission. "There was no one precipitating factor but rather an accumulation of a number of factors that led to a loss of confidence in Bill's ability to lead the combined company," says Rogers.
NC Utilities Commission Chairman Ed Finley as for a list, and Rogers obliged. "Our board did not feel his style was appropriate or transferrable . . . they felt his style was autocratic and discouraged different points of view. . . they were concerned about a lack of transparency," answered Rogers. He said the Duke board was also very concerned that Johnson and Progress Energy officials weren't completely straightforward about how they were handling the company's crippled nuclear plant in Florida called Crystal River.
And there were power-dynamics at play. Rogers says he and the Duke board saw the merger as one of equals - even though Duke is much bigger than Progress. But he says that's not how Johnson and the Progress team were acting. "This was a troubling aspect from my board's perspective - that Progress viewed this as a takeover of Duke - based on behaviors, based on actions, treatment of people," says Rogers.
Duke's board didn't like that and ultimately pulled a takeover of their own. They outnumber Progress Energy directors on the board of the newly-merged company. Rogers testified the decision to oust Johnson fell along those company lines. Rogers also insisted the move was not a power grab on his part: "I was fully prepared to be executive chairman and not CEO. I had been recruited by the Nature Conservancy, Brookings Institute, Aspen Institute and other organizations to join their board and I was looking forward to moving in that direction."
And Rogers maintains he was telling the truth every time he appeared before the North Carolina Utilities Commission and testified that Bill Johnson would be the CEO of the new Duke Energy. It was only May of this year that Duke board members started having serious conversations about firing Johnson, says Rogers.
So, did it occur to the Duke Energy board that state regulators might want to know things had changed with regard to who might be CEO of the new company? asked Utilities Commission Chairman Finley. They were after all, deciding whether or not to approve the merger, based on the belief Johnson would be in charge.
"That was discussed and the conclusion was that we hadn't made a decision - there was nothing really to say," says Rogers. The decision wasn't final until the board voted on July 2 - after the merger was complete. Furthermore, Rogers says the Duke board didn't want to do anything that might stand in the way of their contractual obligation to Progress Energy to complete the merger by July 8. And Rogers adds, the Duke Energy board thought it was "solely within responsibility of a corporation" to decide who would serve "in what position on the management team."
That did not sit well with Chairman Finley. "It's true, your board can fire the CEO just like Berkshire Hathaway can fire Warren Buffett," says Finley. "But in this particular context, there's a different set of rules that should apply here when this was an important feature of this merger, when we listened to what you said about what was going to happen and we relied upon it."
The North Carolina Utilities Commission has the legal authority to rescind the merger approval or modify it in some way. Commissioners didn't indicate in yesterday's hearing how they might act. They did, however, make it abundantly clear they feel burned by Duke Energy and will be reluctant to take the company at its word going forward.