Power Sector CEOs Join Top Execs in Redefining Corporate Purpose

The list of 181 CEOs who earlier this week moved to publicly degrade shareholder value in a bid to redefine the “purpose of a corporation” includes several chief executives from power companies. 

The Aug. 19 statement issued by the Business Roundtable, an association of CEOs “to promote a thriving U.S. economy and expanded opportunity for all Americans through sound public policy,” moves away from the primacy of shareholder interests. That notion—that corporations exist principally to serve shareholders—has belied principles endorsed by the group since 1997.

Instead, the group sought to outline a “modern standard for corporate responsibility.” While it still emphasizes a commitment to generate “long-term value” to shareholders, who provide capital that allow companies to “invest, grow, and innovate,” the group’s new statement prioritizes delivering value to customers, investing in employees, dealing fairly and ethically with suppliers, and community support. 

The shift comes as large corporations face increasing public pressure over their societal impacts, including over working conditions, wages, and product safety. Major U.S. power companies, in particular, have come under fire for a gamut of environmental issues from pollution, plant accidents, storms and wildfires, and climate change. 

But in some notable power industry cases, public concerns have translated into shareholder activism that have prompted major corporations to overhaul their generation profiles in a bid to cut risks. For example, among key priorities the Edison Electric Institute (EEI)—a group whose members include all U.S. investor-owned electric companies—outlined for Wall Street this February, are efforts to make “significant strides in carbon reduction, deployment of renewables, transportation electrification, and more,” all which are “in line with customer preferences,” it said.  

A key reason for industry’s pivot to support the clean energy transformation is because “our customers increasingly are informed about energy, and it matters to them where it comes from and how they use it,” EEI President Tom Kuhn noted. “Saving money, using less energy, and protecting the environment are all important to them, and to us.”

And as Ceres, a sustainability nonprofit organization that works with influential investors and companies, told POWER on Aug. 15, “Investors have grown increasingly concerned with the ways climate change and regulatory responses to it could impact their holdings in the electric power sector. Many are raising these concerns through direct engagement with power companies and through the shareholder resolution process.” 

To satisfy investors, the EEI recently rolled out a first-of-its-kind, industry-wide environmental, social, and governance (ESG)/sustainability reporting template. In November 2018, the template was expanded to include members of the American Gas Association. “The template helps member companies provide investors, Wall Street analysts, and other key stakeholders with more consistent and uniform ESG/sustainability data and information delivered in a timely way,” Kuhn said. 

Customer preferences, meanwhile, have also reshaped future business models at major power companies. NRG Energy, for example, a pure independent power producer until 2009, last year transitioned to a more more simplified customer-driven integrated power model that favors its retail businesses. 

Power industry CEOs who signed the Business Roundtable statement include: 

  • AES Corp—Andrés Gluski
  • Alliant Energy—John O. Larsen 
  • American Electric Power—Nicholas K. Akins 
  • Duke Energy—Lynn Good
  • Edison International—Pedro J. Pizarro
  • ITC Holdings Corp.—Linda H. Apsey
  • NRG Energy—Mauricio Gutierrez
  • Sempra Energy—Jeffrey W. Martin
  • Southern Co.—Thomas A. Fanning
  • Vistra Energy—Curt Morgan

Signatories from major power sector contractors and suppliers include: 

  • Bechtel Group—Brendan P. Bechtel 
  • Caterpillar Inc.—D. James Umpleby III Day & Zimmerman—Hal Yoh 
  • Deloitte—Punit Renjen 
  • Eaton—Craig Arnold
  • EY—Carmine Di Sibio
  • Fluor Corp.—Carlos M. Hernandez
  • Honeywell—Darius Adamczyk
  • Kiewitt Corp.—Bruce E. Grewcock
  • KPMG—Lynne M. Doughtie
  • Lockheed Martin Corp.—Marillyn A. Hewson
  • Northrop Grumman Corp.—Kathy Warden
  • PWC—Bob Moritz
  • Rockwell Automation—Blake D. Moret
  • Siemens Corp. USA—Lisa Davis
  • United Technologies Corp.—Gregory J. Hayes

Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine)