Duke Energy ash spill needs outside investigator, state treasurer says
04/30/2014 4:33 PM
05/01/2014 7:02 AM
Duke Energy shareholders will gather Thursday for an annual meeting framed by investors critical of Duke’s response to a Feb. 2 coal ash spill into the Dan River.
State Treasurer Janet Cowell’s office said Wednesday it will vote to oust one director, and urged Duke’s board to seek an outside probe of the “corporate decisions that led to the Dan River spill.”
Cowell, who oversees the $80 billion pension plan for state and local government employees, became at least the third of Duke’s institutional investors to urge new blood on its 15-member board.
Advocacy groups say up to 400 protesters will demonstrate outside the Church Street meeting, with dozens who own shares or hold proxy votes expected to enter it. Charlotte has declared the meeting an “extraordinary event,” which increases security precautions.
Cowell joined institutional investors calling for an investigation of Duke’s management decisions leading up to the spill.
“Although Duke Energy is being evaluated today by various federal and state government bodies, none of those organizations will be focused on ways to improve corporate governance or management practices,” her office wrote Duke. “Independent internal investigations have unique aspects that can help teach companies how to better run their business.”
Cowell’s office said it will vote against the reelection of director Carlos Saladrigas, saying the regulatory policy committee he serves on needs more expertise in environmental cleanup management.
Saladrigas, a human resources and healthcare executive in Florida, is the only committee member who had served for more than a month before the Feb. 2 spill.
Pension funds in California and New York City have also urged shareholders to dump Saladrigas and three other directors who serve on the committee. The funds together own 3.9 million Duke shares.
“We are concerned that the board isn’t looking hard enough at the issues that matter for risk oversight – the environmental and regulatory policies and practices and internal controls – while the company seems incurious about whether the composition of the board itself makes sense,” New York City comptroller Scott Stringer said in a statement Wednesday.
Nineteen institutional investors organized by the Nathan Cummings Foundation of New York have also asked Duke’s board to investigate management decisions.
CEO Lynn Good, in a April 21 letter to shareholders, said Duke takes those concerns seriously but urged that all directors be reelected. Good will preside over the annual meeting for the first time as chief executive.
In a presentation to Glass Lewis, a firm that advises institutional investors on proxy votes, Duke declared that “this matter has our full attention. The entire board, including the committee, is focused on getting this right.”
Glass Lewis recommended that investors withhold votes for Saladrigas. It added that an independent investigation of the spill would “greatly reassure shareholders.”
A similar firm, Institutional Shareholder Services, recommended that all directors be reelected.
Both advised shareholders to vote for fuller disclosure of Duke’s political contributions, a question raised by the Nathan Cummings Foundation.
Gov. Pat McCrory was a longtime Duke executive and his administration has been accused by environmental advocates of regulating Duke too softly.
Duke has reported that it spent $15 million through March in responding to the spill. The company told a legislative commission last week that closing its 33 North Carolina ash ponds would cost up to $10 billion.
In a response to institutional investors last month, outgoing regulatory and policy committee chairman Philip Sharp defended the board’s oversight of management.
“If, at any time, we believe the company’s shareholders would be better served by the board or committee initiating an independent investigation, separate from the thorough reviews already underway by the company and various state and federal regulators, we will not hesitate to do so,” Sharp wrote.
Feedback on response
Dan Fogel, a strategic management expert at Wake Forest University, said Duke was smart to quickly apologize and take responsibility for the spill.
The company named an internal task force to review what happened and hired independent engineers to assess its ash operations. Their report is to be finished by May 31.
But Fogel said Duke missed a chance to tout its in-house expertise and publicize clear timelines for action.
“The way they’ve handled their external communications hasn’t been great,” he said. “I think they’ve got a better story to tell than they have told.”
Environmental and clean-energy advocates, meanwhile, have used the ash spill to ratchet up their pressure on Duke.
More than 70 clergy members from Western North Carolina have signed a letter asking Duke to phase out its Asheville coal-fired power plant in favor of cleaner alternatives.
“This letter has been in process well before the Dan River spill,” said the Rev. Steve Runholt of Warren Wilson Presbyterian Church in Swannanoa, who will deliver the letter Thursday. “It gave it increased impetus for sure.”
The Sierra Club launched an ad campaign Wednesday on television and cable stations in Charlotte and Asheville. The 30-second spots, featuring images of the Dan River spill, urge Duke to clean up its ash basins and move “beyond coal.”
Ken Kneidel, a retired Charlotte Latin science teacher, will be among the throng outside the Duke building Thursday morning.
“My mood is more optimistic because the Dan River thing has really damaged their image, and that’s opened the window to push for bigger issues, which is to move away from fossil fuels,” he said.
As Duke is pressed to invest more in renewable energy, Kneidel said, “this makes me feel like all that’s a little more likely.”
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