Thursday, July 26, 2012

I responded to an opinion article in the Charlotte Observer by former Bank of America CEO Hugh McColl. It also was published in the Charlotte Observer.  McColl's article is first followed by my response:

Printed from the Charlotte Observer -

Posted: Sunday, July 22, 2012

Regulators should stay out of Duke Energy’s board room

From Hugh McColl Jr., retired CEO of Bank of America:

In 53 years of living in North Carolina, I believe I have only written two letters expressing an opinion on public matters, but today I must express my concern for the future of North Carolina.

I am deeply concerned over the North Carolina Utilities Commission’s challenge of Duke Energy’s board of directors’ right to hire and fire their CEO. Such interference will cause companies considering relocating to North Carolina or remaining here to question whether North Carolina is truly a business-friendly state.

I was a director of a public regulated company for more than 25 years and was chairman of the board for 18. As CEO, I worked for the board and understood that my job was generally secure for the day. In addition, I was on the board of two other regulated companies in transportation and insurance. In short, I know what authorities and responsibilities boards have.

One of the principal functions of the board is to hire and fire the CEO. They have the authority to do so, and most important, the fiduciary responsibility to see that the company is well led. The people who wrote and adopted our corporate laws settled this issue long ago. If regulators insert themselves into matters of the board room, they chill the business atmosphere for our state.

One does not have to agree with or applaud the decision of any board, but they must respect it legally. The directors are elected by shareholders, and if the shareholders are unhappy with the board, they have the right to replace them. One could add that we citizens can do the same with our elected leaders.

It should also be said that the stockholders of both companies approved the merger and elected the board whose decision is now being challenged. One doubts that many institutional stockholders gave much weight to the proposed management structure. More than likely, they were interested in efficiencies and earnings potential of the combined entity. Duke Energy has been and will continue to be well-managed.

In addition, Duke Energy has been a good corporate citizen in all the states in which they operate. I believe that will continue. Lastly, one could argue that the commissioners who have had a professional association with Mr. Johnson should recuse themselves from these deliberations.

One hopes that the Commission will avoid further interference into the corporate governance of Duke Energy. It is not in the interest of North Carolina consumers or businesses or the state.

July 25, 2012  Charlotte Observer
McColl misfires on Utilities Commission’s duty to probe Duke
From John Clark, station manager of WDAV for 18 years, now retired, in response to Hugh McColl’s “Regulators should stay out of Duke Energy’s board room” (July 22 For the Record); reach Clark at
I don’t live in Raleigh and don’t have friends, relatives or associates in state government public oversight agencies, but I did find Hugh McColl’s opinion article disappointing.
First admission: I have a great deal of respect for Hugh McColl and his many salient contributions to the life and fabric of the city of Charlotte. I’ve met him a few times and like him.
Second thought: Hugh would have been better served by not requesting the Observer publish his writing. He should have first counted to ten.
The public utilities commission is charged by law to look out for the public’s interest in the matters of a regulated utility. What is a regulated utility? It simply is an organization that is providing such a vital service to the people of a specific region that it gets government approval to operate as a monopoly. A regulated monopoly.
Consequently, it operates neither like the tire store down the street nor like Bank of America. That’s an important distinction that Hugh fails to note. He did cite his experience as head of a company that was regulated – although those regulations over time continued to be eliminated in part through his efforts – and he even admitted he was chairman of his BofA board, which seems to me to contravene at least the spirit of board oversight of the CEO, a position he held at the same time he was chairman.
In short, let’s get real. Boards of directors do indeed have the fiduciary responsibility for the operations of a company and specifically the performance of its CEO. But in reality, and I would argue particularly at BofA, many boards are but a group of yes-men and women. Witness the actions of CEOs with board approval at both BofA and Wachovia leading right up to the Great Recession. Wachovia is gone and BofA has been crippled.
The public utilities commission is within its right and duty to investigate this matter. Whether or not it finds any action punishable by law is not the issue now. It is representing the interests of people like me, especially those citizens in the Raleigh area who, through the merger, are losing a corporate headquarters (we in Charlotte now know what that’s like) and some who will be losing their jobs.
Hugh, your article was right on as a general description of businesses and business boards. Within the context of the Duke-Progress Energy merger and the way it was conducted, your view totally misses the mark. Copyright 2012 . All rights reserved. This material may not be published, broadcast, rewritten or redistributed.