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Williams: Duke Deceives Investors

One of the cardinal rules in the utility industry is don't surprise your friends. Duke Energy (DUK - Get Report) Chairman and CEO James Rogers just violated that rule.

After Duke's successful acquisition of Progress Energy last Monday, shareholders expected that Rogers would become executive chairman of the board and that Progress Energy's Bill Johnson would become Duke's president and CEO. But at 12:01 a.m. EDT Tuesday morning, just minutes into his new role as Duke's CEO, Johnson was allegedly forced out of the company by a Rogers-friendly board, and Rogers retook full control of the new Duke.

Apparently, the last-minute decision came as a complete surprise to Johnson. It was also a surprise for Progress Energy's leadership team. Had Progress executives known about Rogers' plan for a management switch before the merger closed, in all likelihood, they would've suspended final approvals.

It couldn't have been a surprise to Rogers. Duke is a big company and cannot spin on a dime. Rogers' plans had to have been socialized with critical board members well before the merger. (The new board is composed of 11 former Duke and seven former Progress members.)

It appears as though Rogers and his carefully selected board members were deceptive and withheld critical information from fellow board members, shareholders, executives and regulators. Worse, it appears as though the Rogers-controlled board members disregarded their fiduciary responsibilities to all shareholders, including the former Progress shareholders.

There is also the issue of corporate culture. As the industry learned from one of Rogers' former employers, Enron, corporate culture starts from the top. If deceptive maneuvers and ambush tactics are adopted and rewarded by senior executives, that culture will find its way down the corporate ladder and become a fixture throughout Duke's organization. That type of management style is not what most shareholders, regulators or the public expect of a nuclear utility.

Public trust and confidence is an essential ingredient for successful utility operations. The public's trust is imperiled when utility management is engaged in deceit. It's further imperiled when a management team's reputation with state and federal regulators is soiled, and Rogers' coup d'état has already attracted unfavorable regulatory attention.

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