Duke Energy Corp. (DUK) directors Theresa M. Stone and John D. Baker II, who joined the board when the company took over Progress Energy Inc., resigned and called on Duke to immediately start looking for a new chief executive officer.
Stone and Baker, who previously served on the Progress board, announced their resignations in separate letters filed today with the North Carolina Utilities Commission. The state agency is investigating Duke’s decision to fire Bill Johnson, the former Progress CEO, on July 2 within hours of completing its $17.8 billion merger creating the largest U.S. utility company.
Johnson, who was supposed to become CEO of the combined companies, was replaced by Duke CEO Jim Rogers. Two other former Progress board members, E. Marie McKee and James B. Hyler, told the commission on July 19 they were considering resigning over the executive change. The board of the combined company had voted 10-5 to replace Johnson, with all former Progress members opposed. Hyler declined to comment in an e-mail today.
“The board should immediately identify and adopt a process for selecting a new CEO and institute that process as soon as possible,” Baker wrote in a letter to Rogers and Ann Maynard Gray, the company’s lead director. “Only after taking these immediate steps will the board be able to work together for the best interests of Duke’s shareholders.”
The resignations pave the way for Duke to appoint “new board members who may not be as upset by recent events,” said Paul Patterson, a New York-based utility analyst for Glenrock Associates LLC, who doesn’t rate the stock and owns no shares.
Duke accepted the resignations today and won’t comment on the specifics of the letters, the company said today in an e- mailed statement. The corporate governance committee will recommend replacements to the full board.
“We look forward to working with the entire board to continue the integration process to drive the significant benefits for customers and shareholders that this combination creates,” Tom Williams, Duke’s spokesman, said in an e-mailed statement.
Stone and Baker didn’t return phone calls seeking comment, nor did former Progress director Harris E. DeLoach Jr. McKee declined to comment. Director Carlos A. Saladrigas couldn’t be reached by phone.
Both Stone and Baker said in their letters that Johnson’s replacement revealed problems with the company’s corporate governance practices.
Corroborating testimony by McKee and Hyler, Stone wrote that former Progress board members weren’t notified that Johnson’s dismissal was under consideration when the 18-month merger review came to an end. Gray, who presided over the conference call when the vote was taken, cited only Johnson’s “leadership style” as a reason for his ouster.
Johnson, in testimony, said he was a victim of “buyer’s remorse.” Gray said the Duke board lost confidence in Johnson because of Progress’s poor performance and foot dragging by the CEO in disclosing information about a damaged nuclear reactor in Florida.
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