Last November, one of

Duke's

(DUK) - Get Report

busiest outside directors found the time -- and the millions -- to place an enormous bet on the company.

George Johnson, a director at three public companies and CEO of another, scooped up 500,000 Duke shares just weeks after Paul Anderson agreed to take over as the company's new leader. When Anderson officially joined Duke on Dec. 1 -- exactly five years after launching the miraculous turnaround of another troubled company -- Johnson coughed up the dough for yet another 300,000 Duke shares.

After spending nearly two decades on Duke's board, Johnson was finally showing some real faith in the company. Johnson, who now ranks as the biggest Duke shareholder on the company's board, owns more than 20 times as much Duke stock as he did just three months ago.

To be sure, Johnson is gambling on a CEO who has earned his title as a heavyweight stock market favorite. By now,

Anderson has rescued ailing companies on both sides of the globe. His mere arrival at Duke, along with the board's protection of an overly rich dividend, has sent the company's stock soaring by 15% to $20 and change.

But nobody -- not even a winner like Anderson -- is ever a sure-fire bet. After all, Anderson needed at least a little luck with commodity prices to turn his last company around. And he fills just one slot on a Duke board that has already fumbled the company's glory away in an astonishing losing streak.

Bonus Points

In all fairness, Duke has made some calls that deserve applause.

For starters, Duke's board has steered clear of the related-party deals that stir up conflicts at so many other companies. Moreover, the board has adopted a new stand on executive compensation: It voted to link executive bonuses directly to earnings targets and pay its new CEO entirely in stock, thus aligning his interests exactly with common shareholders.

The Corporate Library, which rates the performance of company boards, actually issued an interim report just to praise Duke's decision. Although it criticized a few details of Anderson's deal, the rating firm was complimentary of the arrangement overall.

"The new pay package for Anderson has some extremely positive aspects," wrote Paul Hodgson, senior research associate at the Corporate Library. "While the potential rewards from the package could be substantial, this will largely depend on the performance of the company over the next three years."

In the meantime, Anderson will be relying on some awfully familiar players to help him call the shots.

Double Overtime

Last October, just after Duke elected to replaceits CEO, Moody's noted the static nature of the board.

"Duke's corporate strategy and competitiveposition has changed substantially over the past 18months, along with many members of its seniormanagement team," Moody's analyst James Hempsteadwrote. "Board turnover, however, has been relativelymodest."

Duke spokesman Randy Wheeless said the company tends to lose a director or two every year. Even so, eight remaining directors -- of 11 total -- have spent at least a decade on the company's board. In the eyes of Hodgson, at least, those tenuresare already too long.

"Our cutoff is around eight years," he said. "Ifdirectors sit on a board very long, they can sometimesget too cozy with management."

Duke's eight veteran directors have spent anaverage of 14 years on the company's board. And thethree newcomers -- added after Duke's business started to cool in late 2001 -- are the only energy experts of the bunch.

"The board doesn't have to reflect just your industry," Wheeless said. "There are lessons we can learn" from outsiders. He went on to point at one board member's experience at

Sprint

(FON)

-- and the director's specific knowledge of deregulated industries -- as a strong example.

But the Corporate Library, which gives Duke's currentboard a C rating, believes that companies shouldalways choose at least a couple of directors withindustry expertise. And Tom Hazen, professor of corporatesecurities law at the University of North Carolina atChapel Hill, goes one step further.

"A majority of the board has to have familiaritywith the industry," he stated.

Industry Rookies

Instead, Duke has consistently favored outsidedirectors with no energy experience -- and, in somecases, little spare time to gain any.

Take Johnson, for example. Since 1995, nine yearsafter he joined Duke's board, Johnson has served asthe founding CEO of discount hotel chain

ExtendedStay America

(ESA)

. He pulls extra duty as a directorof two Florida companies --

AutoNation

(AN) - Get Report

and

Boca Resorts

(RST) - Get Report

-- that are criticized for theirincredibly tangled relationship. And he chairs a realestate firm co-owned by his brother, who also sits onthe Extended Stay board.

Johnson crosses paths with another Duke directorin at least one of those boardrooms. Robert Brown, apublic relations executive who joined Duke's board adecade ago, serves as an AutoNation director as well.And Brown, in turn, finds himself among familiar Dukecompany at yet another corporation.

Together with Duke Power President Ruth Shaw,Brown sits on the board -- and signs off on thecompensation for executives -- at investment firm

Wachovia

(WB) - Get Report

. Brown wound up on Wachovia's boardafter the company's 2001 merger with First Union,which claimed yet another Duke director as one of itsown.

Alex Bernhardt, who joined Duke's board 13 yearsago, used to sit on First Union's board as well. Thesedays, however, Bernhardt spends most of his timegrowing his family's successful furniture company. Andlately, that means promoting a new furniture linedeveloped by none other than scandal-plagued MarthaStewart.

For Bernhardt at least, the relationship hasalready paid off.

"The program is selling better than any launch atBernhardt in our 114-year history," Bernhardt told thelocal

Charlotte Observer

in June.

He went on to describe Stewart -- who's headed totrial for possible insider trading -- as a newpersonal friend. And he offered some public supportfor her cause.

"I feel for her personally and professionally," hetold the

Observer

. "I believe she's innocentuntil proven otherwise."

Duke also employs one director who's embroiled inhis own controversy. William Esrey, the most veteranof Duke's longtime directors, found himself oustedlast year from the top spot at Sprint over hisuse of controversial tax shelters fashioned by thecompany's independent auditors. With Esrey serving aschairman -- and doubling as an outside director for atleast three other public companies -- Sprint's boardfound itself ranked among the 10 worst in the nationby Corporate Library.

But Wheeless said Duke isn't necessarily concerned about its directors stretching themselves too thin.

"As long as they feel they can make a proper commitment to us, that's OK," he said, adding that Duke has no plans for any "massive changes" on its board.

Still, Hodgson believes that busy directors -- of whichDuke has plenty -- can prove ineffective.

"The job entails a lot more time and effort thanit did in the past, when it probably should haveentailed more," Hodgson said. "It would seem to usthat anyone serving on more than three boards would bebeginning to push the limits."

Still very active, Esrey continues to juggle hisduties at Duke with boardroom responsibilities at both

General Mills

(GIS) - Get Report

and

ExxonMobil

(XOM) - Get Report

,the latter of which partnered with Duke in a doomedenergy-trading venture that is currently being wounddown.

One of Duke's newer directors, an energy executivewho came to the board through a 2002 merger, has ablack mark by his name as well. Michael Phelps sits onthe board of

Canadian Imperial Bank of Commerce

(BCM) - Get Report

,which recently agreed to pay $80 million to settleallegations that it helped

Enron

carry out its massiveaccounting fraud. Phelps serves as a director of threemore Canadian companies and as chairman of the DukeEnergy Canadian Advisory Council.

Big Talk

Meanwhile, Max Lennon has been run off from hisregular day job -- twice -- during his 16-year stinton Duke's board. In the first instance, he resigned aspresident of Clemson University in 1994 just beforethe faculty senate planned to hold a no-confidencevote on his performance.

"He was very articulate and appeared to have bigplans," former Clemson faculty member Alan Schaffertold the

Ashville-Citizen Times

years later."But ... very little actually happened, despite thefact that the university had serious problems."

More recently, in 2002, Lennon found himselfousted from the top spot at smaller Mars Hill Collegeafter the faculty there pulled off a no-confidenceelection, with only four votes -- of 84 cast --falling in Lennon's favor. Lennon also serves on theboards of closely related companies

DeltaApparel

(DLA) - Get Report

and

Delta Woodside

(DLW)

, thelatter of which nearly faced a proxy showdown afterthe company's co-founder and former CFO accused theboard of "playing fast and loose" with bothshareholder value and corporate governance rules.

James Martin, the former North Carolina governorwho joined Duke's board a year after leaving office in1993, has actually weathered a full-blown proxy fight.He sits on the board of

Palomar MedicalTechnologies

(PMTI)

, which Institutional ShareholderServices recommended replacing in 1999. The incumbentsnevertheless prevailed after the dissidents failed toprevent a quorum by refusing to vote their shares.Afterward, the stock continued to tumble -- finallybottoming out at a record low of $1.01 early this year-- before rebounding strongly in recent months. Martinalso serves as a director at two other companies,including well-respected

Family Dollar

(FDO)

, inaddition to Duke.

Ann Maynard Gray, who joined Duke's board 10 yearsago, has fielded shareholder criticism at anothercompany as well. Last year, investors beganquestioning the performance of

Elan's

(ELN)

board --where Gray fills a seat -- after the Irishpharmaceutical company saw its shares tumble by 95% ina matter of months over concerns about accountingissues. The stock finally began to recover after theboard voted to boot the company's embattled topexecutives. Gray, a former senior executive for ABC,also serves as a director for J.P. Morgan Funds and

Phoenix Cos.

(PNX)

.

Skepticism

In contrast, longtime Duke Director Leo Linbeckserves on no other boards except his company's own. Heis chairman of Linbeck Corp., the holding company offour construction firms. But he's unafraid to ventureoutside his own field. A few years ago, he scoredheadlines after landing a contract to investigate abonfire that injured 49 people, some of them fatally,at Texas A&M University. Linbeck dismissed his lack ofinvestigative experience in a 1999 interview with the

Associated Press

.

"One has to bring an inquisitive mind and acertain skepticism to first impressions to any oflife's undertaking, or else you are going to miss themark," Linbeck explained. "I've missed the mark many,many times. So perhaps from the point of view ofhaving failed a lot, it will help me better understandwhat's needed to bring the truth to the surface."

Still, Duke has at least one director who'slearned plenty from his successes as well. JamesRhodes transformed Virginia Power, the state's largestutility, from an underperformer into a top operatorand positioned it well for the deregulatedenvironment. He went on to run the Institute ofNuclear Power Operations until 2001, at which time heretired and joined Duke's board.

Like Anderson, Duke's new CEO, Rhodes has won therespect of experts across the energy industry. Heshares another trait with Anderson as well. Both menhave spent a lot of spare time atop

Harley-Davidson

(HDI)

motorcycles. But the duo, together with the rest ofDuke's board, still faces a tough ride ahead. Theymust shed assets in a depressed market -- and hope foran industry turnaround -- while paying a loftydividend that continues to drain cash from the heavilyleveraged company.

J.P. Morgan analyst Jim von Riesemann smelledpossible danger as soon as Duke laid out its roadmapfor Wall Street last week.

"Duke's actions today to maintain the dividend, sell assets and eliminate noncore activities boils down to two fundamental positions that newly anointed Chairman and CEO Paul Anderson is taking: a rebound in commodity prices ... and completing asset sales," wrote von Riesemann, who has a neutral rating on Duke's shares. "Today's announcement is a missed opportunity, and we think the company's path is now a long, unwinding road."