RALEIGH, N.C. — The man unexpectedly appointed as Duke Energy’s CEO said Tuesday the executive who was to succeed him in the top job was dumped minutes after creating America’s largest electric company.
Progress Energy CEO Bill Johnson had been designated to head the expanded company, but it was Duke Energy CEO Jim Rogers who ended up getting the job after the two companies were merged.
The N.C. Utilities Commission is investigating whether it was misled after approving the merger June 29. State law allows the commission to rescind or alter its decision approving the merger. The regulatory board also approves electricity rate increase requests. Both Duke Energy and Progress Energy, which remain separate operating companies in the Carolinas, are expected to seek rate increases later this year.
In testimony before the commission, Rogers described a boardroom surprise minutes after the merger closed July 2. He said Duke Energy’s 10 representatives on the expanded company’s board of directors voted to oust Johnson while five Progress Energy directors voted to keep Johnson at the top. Rogers said neither he nor Johnson took part in that closed-door meeting.
Rogers told state regulators Duke Energy directors told him they were disappointed in Johnson’s authoritarian-seeming style, ongoing problems with Progress Energy’s closed Crystal River nuclear plant in Florida, and disappointing Progress financial performance.
“Our board did not feel that his style was appropriate or transferrable to leadership of the combined company,” Rogers said. “They felt his style was autocratic and discouraged different points of view.”
“When I boil all this down, there was a loss of confidence in Bill and each director had different reasons,” Rogers said.
Johnson’s attorney declined to dispute details of Rogers’ testimony.
“The fact that he is held in the highest regard by his peers in the utility industry and in the North Carolina business community speaks volumes about his leadership and business capabilities,” attorney Wade Smith said in a statement.
Johnson, 58, signed a three-year employment contract five days before the merger concluded. The new company announced hours after the merger closed Johnson was leaving by “mutual agreement.” Johnson is due to receive up to almost $45 million in severance, pension benefits, deferred compensation, and stock awards.
The package “will all be paid by the investors and none will be charged to customers of this state,” Rogers, 64, assured commission members.
While regulators were promised Johnson would become the post-merger CEO, no one said for how long, Rogers said.
Corporate directors asked him more than a week before the deal closed whether he’d consider staying as CEO, but nothing was final until the expanded company’s directors met after legalizing the merger, Rogers said.
The utilities commission reopened hearings on the final details pending before the state regulatory body on June 25. That was two days after Rogers said he became aware Johnson might be dumped. Commission Chairman Edward Finley asked Rogers whether Duke Energy shouldn’t have informed regulators that a possible switch as CEO was in the offing.
“The decision was not made until it was made,” Rogers said. “Corporate decisions are announced when they are made, not when they are contemplated.”
Duke Energy’s directors had a responsibility to shareholders to close the deal, and the commission decided the merger was in the best interest of consumers after placing about 200 conditions on the deal, Rogers said.
Bernstein Research analyst Hugh Wynne said in a note to investors Tuesday that Duke Energy’s legal and regulatory troubles could last for months, during which the company’s stock price could suffer. The merger’s prolonged aftermath could leave the company’s directors and senior managers “preoccupied with protecting the company and themselves from legal and regulatory challenges rather than completing the integration of the two companies,” Wynne said.
Public statements by former Progress Energy board members John Mullin and Alfred Tollison Jr. that they felt misled by the last-minute CEO switch could encourage former shareholders of Progress to sue, Wynne said. Progress Energy directors agreed to a relatively low sale price to Duke Energy due in part to being assured their top executive would lead the expanded company.
The combined company will serve more than 7 million customers in North Carolina, Kentucky, Ohio, Indiana, Florida and South Carolina. Duke Energy’s more than $100 billion in assets include power plants in Central America and South America and a portfolio of wind and solar renewable energy projects in the U.S.