The Easiest Way To Make $44 Million

When it comes to CEO compensation, I usually don’t make a big fuss about multimillion dollar paychecks. I understand the job comes with a ton of pressure and responsibility. But this is just ridiculous:

On June 2nd, Bill Johnson assumed the position of CEO of Duke Energy. Within 24 hours, he had resigned.

Despite his short-lived tenure, Mr. Johnson will receive exit payments worth as much as $44.4 million, according to Duke. That includes $7.4 million in severance, a nearly $1.4 million cash bonus, a special lump-sum payment worth up to $1.5 million and accelerated vesting of his stock awards, according to a Duke regulatory filing Tuesday night.

At what point do companies like Duke need to start rewriting their corporate governance guidelines? Would you still invest in a company with such glaring issues?

This takes the term “cashing in” to a whole new level. Still, there are two sides to every story. Here’s the “this was a rational decision” side:

Mr. Rogers's advocates (he’s replacing Johnson as CEO) viewed him as a consensus builder whose style was better suited to the task of bringing two firms together, one person said. He also had run the larger company. The board informed both men of its decision after the meeting and came to an agreement that Mr. Johnson would step down, people familiar with the matter said.

Ok, so maybe it was a strategic decision. And it looks like Mr. Johnson was fired rather than resigning, so it’s not really his fault for walking into $44 million. Here’s the “this situation is nuts” side:

So assuming that [Johnson] worked for a full eight hours on Monday, that comes out to a nice $5.5 million an hour — some 765,000 times the national minimum wage. His relocation alone is over half the average annual salary for an American worker. Hopefully he didn’t move too near any of his former colleagues. How embarrassing to run into them at the country club, what with Johnson being unemployed and all!

Johnson’s replacement is former Duke CEO Jim Rogers, just starting his fourth day on the job. He’s probably walking around the office, bragging about his longevity.

Again, I usually don’t have too much of a problem with CEOs getting paid so much. What I do have a problem with is this guy worked for one day. He had absolutely no positive (or negative) impact on the company, and left with $44 million. This is money that Duke Energy could have used for R&D, dividends, or—here’s a crazy thought—they could have saved a bunch of money and criticism by simply having some foresight and keeping Jim Rogers at CEO in the first place. Ultimately, this whole situation falls somewhere between comical and infuriating.

What are your thoughts on this?

Sources:
WSJ
Grist

 

Some of the former posts have mentioned it was a horribly written contract, yet it is quite the contrary. On July 3, 2012 Duke Energy merged with Progress Energy. Bill Johnson aka Mr. $44 million was the CEO of Progress Energy while Jim Rogers was the CEO of Duke Energy. In the merger Duke Energy was able to retain its name and apparently the power in the board room by reinstating its former leader, Jim Rogers.

In my eyes Duke Energy struck a home run because they were able to merge. Remember this was a merger not an acquisition, yet they still maintained all the power...no pun intended (they are both energy companies).

Also the $44 million severance package was not because Bill Johnson played CEO for a day, but because he worked at Progress Energy since 1992.

Even though it may seem Bill got the last laugh I personally think Jim Rogers & Duke Energy walked away the winner.

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 
Best Response

Johnson was forced out by Duke board of directors

Rogers, testifying under oath, said Duke’s board developed “an accumulation of concerns” about Johnson’s ability to run the combined company. The board had concerns about Johnson’s management style, and about problems at Progress’ troubled Crystal River nuclear plant in Florida, he said.

“They felt his style was autocratic and discouraged different points of view,” Rogers said...

several former Progress board members say they feel betrayed and that they never would have gone for the deal – which included only a modest premium for Progress shareholders – if they had known Johnson wouldn’t be at the helm. Bernstein analyst Hugh Wynne wrote in a research note issued Tuesday morning that Duke’s “legal and regulatory quagmire” could last months...

Indeed, Rogers said during his testimony that three high-level Progress employees are quitting the company: Mark Mulhern, chief administrative officer, John McArthur, executive vice president of regulated utilities, and Paula Simms, chief integration and innovation officer. Mulhern had been CFO at Progress Energy.

I think this is just the beginning. He likely would have made much more than $44 million if he had stayed on as CEO. Serves the BoD right for ousting him.

My WSO Blog "Unbelievably Believable" -- RG3
 

You are missing a huge piece of the story, which misrepresents how it is being portrayed. While he got 44 million, he totally got fucked over. He agreed to the merger with the notion that he would remain CEO. Post close he got fired. Basically, he got tricked and lost control over night. This was obviously premeditated by Duke Energy and was probably priced into the deal.

 

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