It was a remarkably ugly exercise of boardroom behavior, and now will cost Duke Energy $27 million (covered by insurance and paid to Duke itself ). In 2012, Duke Energy and Progress Energy, large investor-owned utilities in the Carolinas, agreed to a merger, largely brokered by Duke’s then-CEO Jim Rogers (not the legendary investor Jim Rogers).
Part of the $13.7 billion deal was that Progress CEO Bill Johnson would become the combined company’s CEO upon the conclusion of the merger. It was a done deal…sort of.
That executive suite switcheroo didn’t suit the Duke board (and there have long been suspicions that it didn’t suit Rogers either, who may have been unwilling to yield control). So Johnson ended up having perhaps the shortest reign as a major CEO in history, a matter of minutes. Rogers, who has since retired, ended up in control.
As the deal formally closed, the Duke members of the merged company’s board, outnumbering the contingent from Progress, immediately voted to oust Johnson. It wasn’t a financial hardship for Johnson, now the CEO of the Tennessee Valley Authority, who exited Duke with a reported $44 million golden parachute.
The two-man musical chairs game led a group of shareholders to sue Duke, charging that the board failed to disclose the company’s intent to defenestrate Johnson upon the closure of the deal, although they had concluded to take the action before the deal was consummated. In September, a judge in Delaware Chancery Court said the board “elected to make it appear that they were going to comply with the merger agreement, when in fact they had decided to fire Johnson immediately post-merger and replace him” with Jim Rogers. Judge Sam Glasscock III rejected Duke’s motion to dismiss the suit.
Last week (Nov. 9), Duke and the shareholders agreed to the $27 million settlement. The agreement, Duke said, makes “no admission of any liability or wrongdoing….” The suit was derivative litigation, with the shareholders claiming that the board harmed the company; the insurance money will go to Duke.
The Charlotte-based utility issued a predictably anodyne statement: “Duke Energy is pleased that the parties were able to reach a settlement agreement to resolve all remaining litigation stemming from the CEO change that occurred following the Duke Energy-Progress Energy merger in 2012.”