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DukeEmployees.com - Duke Energy Employee Advocate

Duke - Page 2 - 2002


“Nothing so undermines management's credibility as promoting ‘a skunk who
makes his numbers.’ " - Joseph L. Badaracco Jr., Harvard Business School professor


Rats On a Sinking Ship

Employee Advocate – DukeEmployees.com – February 4, 2002

Rats are not normally crazy about the water, but they can swim. If the ship that they are on starts to sink, they will swim for the nearest object. They are not overly picky about their new abode. They know that if they do not reach a haven before they are exhausted, they will drown.

The U. S. S. Enron just went down. It was a huge ship, with many compartments. The Lobbying compartment adjoined the Influence-Buying and Political-Favors compartments. The Auditing compartment adjoined the Sweetheart-Deals and Consulting compartments. The Deregulation compartment adjoined the Soft-Money and Special-Rules compartments. The Bush compartment adjoined the “Kenny Boy” compartment.

In the dark, damp cargo hole many hidden agendas were stored. Dick Cheney also had a secret hiding place there. It was near the secret energy meetings hiding place.

The rats scurried through each crevice with no desire to ever be exposed to the sunlight or the water.

When the ship hit the iceberg of truth, its hull was catastrophically ripped open. The rats were now exposed to the two things that they never wanted to face: sunlight and water. They had no choice but to swim.

Some swam to the U. S. S. Pension Reform. Some swam to the U. S. S. Audit Reform. The U. S. S. More Disclosure was boarded. Some of the rats are still being tossed around on the life raft Total Denial. Not all of the rats survived.

That’s the thing about rats. They can never be eradicated; they can only be scattered. They will spread their vermin to each newly inhabited ship.

It is no secret that President Bush is almost totally controlled by the wishes of big business, notably the energy sector. But now, he is in favor of pension reform! Can you imagine that?

Duke Energy Corporation is voluntarily disclosing more financial information! There must be, at least, a heavy frost in Hades!

Four of the "Big Five" audit firms are in favor of audit reform! (the holdout audits Duke’s books).

Some in Congress are demanding campaign finance reform. Now, you know that the situation is truly desperate!

The abrupt shift from corruption to disclosure was not a matter of conscience, any more than rats suddenly decide to go for a swim in the sunlight. It was simply a matter of survival. Now, no one wants to be perceived as being on the wrong side of the Enron sinking.

And, what better place to scuttle any true reform than being right in the middle of it, helping make the new rules? Bush knows that by offering weak pension reform, he stands a chance of sidestepping meaningful reform. He played the same game with health care. Meaningful pension reform must include the cash balance plan issue. More millions of pension dollars have been confiscated due to cash balance conversions than 401 (k) losses. What about the matter of allowing corporations to promise employees pensions in writing, but being bound only to a hidden document that the employees never get to see? Real pension reform would force corporations to deliver on the written promises made to employees for decades!

Auditing firms hope to avoid stringent reform by volunteering to clean up their act - somewhat.

Companies hope that by voluntarily providing a little more data, that they will not be forced to provide a lot more data.

They all hope to mollify the public. If the public can be lulled back to sleep, they will not vigorously demand the necessary changes.

Now is the time to contact Congress by phone, fax, letter, or e-mail. Demand the changes that are important to you. Congress has never been more willing to listen. If Congress perceives that the public has no interest in their own well being, why should Congress show any interest?

Audit Firms Clean Up Act



A Corporate Fear of Too Much Truth

New York Times- by Warren Bennis – February 18, 2002

But I'd shut my eyes in the sentry-box, So I didn't see nothin' wrong. — Rudyard Kipling

(2/17/02) - LOS ANGELES

The sentry boxes of corporate America are its boards of directors, and there is ample evidence that Enron's directors kept their eyes shut when they should have been perusing the company's books. But all the sound and fury about Enron, whose collapse has led to Congressional hearings and media outrage, obscures a more basic problem that is ubiquitous in corporate life today: organizational structures that discourage honesty and suppress truth.

Let us deal with the board issue first. Yes, it is still the case that most board members are, in fact, willing dupes of management. Too many are overpaid, rubber-stamping corporate celebrities. Dogged by the constant threat of litigation, boards are selected by their subordinates — the company officers.

(Shareholders nominally choose them, but typically they vote for the directors the company recommends.) They seldom understand their function and are prone to meddle too much — or, worse, not enough.

Three of the six directors who served on Enron's auditing committee — the people responsible for double- checking Enron's bookkeeping — were executives at firms in the faraway locales of Hong Kong, London and Rio de Janeiro. You can guess how much time they had for the vigilant oversight required of an effective audit committee. And like directors on many other boards, some had served too long. How Enron's directors could have stood by while top Enron executives cashed out more than $1 billion in company stock in the last two years is unfathomable.

But it's not only about the boards. The Enron collapse is emblematic of a problem that is far more imbedded, more intractable and, alas, far more universal than the board failures and malfeasance of a single company. In any one case, you can always fire the chief and other executives, reconstitute the board and file for bankruptcy; that's the easy part. The hard part inheres in the very nature and design of large-scale organizations, whose ethos and leadership too often create mindless and complacent cultures with vacant sentry boxes.

Unless the leadership and the social architecture of these behemoths change, I can promise you Congressional regulations will get tighter, the Securities and Exchange Commission more vigilant — and the problems worse. The basic problem in most organizations today, both public and private, is that they work to block transparency. Most are conveniently designed so that everyone seems to know what's wrong — but nobody admits it or tells anyone else.

A case in point: When I consulted for the State Department, I quickly learned that junior Foreign Service officers often decided not to tell their bosses what they had learned in the field because they believed the bosses wouldn't like it. In fact, their bosses often felt exactly the same way about telling their own bosses what they knew. One State Department panjandrum told me that they gave their fledgling diplomats two rules: Never tell a lie. But never the tell the whole truth, either.

It is never easy for subordinates to be honest with their superiors. After a string of box-office flops, Samuel Goldwyn is said to have told a meeting of his top staff, "I want you to tell me exactly what's wrong with me and M.G.M. — even if means losing your job." Unfortunately, Enron's chief financial officer, Andrew Fastow, didn't have Mr. Goldwyn's sense of humor. When Sherron Watkins sent Kenneth Lay, Enron's chief executive, a letter warning him about Enron's accounting practices, she said, Mr. Fastow tried to fire her.

Unlike top management at Enron, exemplary leaders reward dissent. They encourage it. They understand that, whatever momentary discomfort they experience as a result of being told they might be wrong, it is more than offset by the fact that the information will help them make better decisions. And the trend toward outlandish executive compensation should surely be enough to salve the pricked ego of any leader whose followers speak their minds.

Organizations tend to fail when decision making is based on feedback from yes men. Mr. Lay's failing is not simply his myopia or cupidity or incompetence. It is his inability to create a company culture open to reality, one that does not discourage managers from delivering bad news. No organization can be honest with the public if it is not honest with itself.

So how does an organization institutionalize honesty, the way so many corporations have institutionalized the suppression of it? There is no easy answer. Honesty and candor at the top helps; executives should speak their minds and encourage their peers and subordinates to do so. Many organizations have found ways to generate honest communication — even urging employees to make anonymous suggestions if necessary.

But a culture of honesty, like a healthy balance sheet, is an ongoing effort. It requires sustained attention and constant vigilance.

Warren Bennis is a professor of man agement at the University of Southern California and author of ``On Becoming A Leader.''



Is Your Company Another Enron?

Business2.com – by James Lardner - February 17, 2002

What ruined Enron wasn't just accounting. It was a culture that valued appealing lies over inconvenient truths. Are you sure your company is all that different?

(March issue) - From time to time, Americans find themselves holding a kind of national symposium on an issue defined by a news story of unusual oomph. Enron is a story that has the oomph. Destined to self-destruct as a company, it seems built to last as a scandal. The unsettled question is, What's it about?

Accounting, obviously, for starters. Thanks to Enron, the accounting profession has probably received more public attention in the past few months than in all of its previous history. The stock market, awakening from years of mind-boggling credulity, has been on a search-and-destroy mission against companies whose books seem unnecessarily complex, let alone cooked. Support is building for reforms (some quashed by the Big Five's lobbyists in earlier attempts) that might actually have an effect on what has turned out to be a surprisingly widespread contempt for the principles of fiduciary responsibility and disclosure.

But the story also runs deeper than accounting, to a question raised by the stock market crash and joined again after Sept. 11: What kind of organizations and leaders do we really value? Accounting fraud, after all, does not happen in a vacuum. Michael Young, who oversees the accounting irregularities group at the New York City law firm Willkie Farr & Gallagher, has been investigating fraud for 20 years. "It has everything to do," he says, "with the sociology of organizations – with how the leadership reacts to Wall Street expectations and how that pressure passes down to the junior people."

Much has been said about the driven, cultlike ethos of the organization that styled itself "the world's leading company." Truth to tell, a lot of the things Enron did weren't so very exceptional. Paying insanely large bonuses to executives, for example, often in the form of stock options. (That practice not only hid true compensation costs but also encouraged managers to keep the stock price up by any means necessary.) Promising outlandish growth, year after year, and making absurdly confident predictions about every new market it entered, however untested. Scarcely ever admitting a weakness to the outside world, and showing scant interest in the questions or doubts of some in its own ranks. Camouflaging drab facts in trendy consulto-speak. (Woe to anyone who dared to suggest, in front of former CEO Jeffrey Skilling, that Enron was a mere trading company rather than a company engaged in "substituting hardwiring with markets for the benefit of vertically integrated industries.") This was a culture perfectly attuned to the excesses of the 1990s, and Enron's spectacular demise has created a groundswell of interest in its antithesis -- in the idea, that is, not just of a company whose accounting practices are safely within the bounds of the law, but of one where people look facts in the eye, speak plainly, and don't spend much time promoting what they haven't yet achieved. A company, in short, that puts its credibility ahead of next quarter's results. The first thing to be said about such companies is this: There aren't very many. (Ask for prominent examples, and you'll hear the same names over and over: Berkshire Hathaway, Southwest Airlines, and the Vanguard Group, among them.) Boosterism and self-promotion -- "the same kind of puffery associated with advertising," Thomas Donaldson, a professor of ethics at Wharton School of Business, points out -- have become the norm in American business. Companies don't just market their products; they also market their finances.

Besides, says Jeffrey Pfeffer, a professor at Stanford Business School, building credibility is a long, hard slog, and corporate America offers few good reasons to go to the trouble. "Straight talk is not sought, it is not rewarded, it is not valued," he says. Corporate incentives depend heavily on the stock market, and the stock market, until very recently, strongly preferred beguiling lies to inconvenient truths.

David Sokol received a memorable lesson in these matters during the Asian financial crisis of the late 1990s. Sokol was the CEO of an Omaha-based company then known as CalEnergy (now MidAmerican Energy) when, in January 1998, the government of Indonesia renounced a set of deals with foreign companies, including CalEnergy and half a dozen U.S. competitors, Enron among them. The word from Jakarta came on a Friday. On Monday, Sokol announced an $87 million write-off on two big geothermal projects. Having fulfilled what he saw as a duty, Sokol waited for the other companies to do the same. Not one of them did. And he couldn't help noticing that their share prices held up reasonably well, while CalEnergy's was "absolutely tortured." Convinced that the stock market was no place for a company in a mature industry like energy, Sokol and one of his directors took the company private in 1999.

Sokol's experience left him with a low opinion of Wall Street analysts, a feeling that is widely shared. "Why do we care what some 27-year-old who's never run a company thinks?" Pfeffer asks. "If you run a company for the analysts, you'll run it into the ground." Indeed, one of the biggest complaints against Wall Street is its preoccupation with steadily rising earnings and immediate results, neither of which occur naturally in business, at least not for long. To meet such demands all but requires some manipulation of earnings. It's the only way to make the numbers. And once management starts playing games with the numbers, honesty gets harder all the way down the chain of command.

It starts, of course, at the top. Partly to impress Wall Street, many organizations seek out leaders with evangelical sales skills and larger-than-life personas. These traits, Pfeffer says, often do more to lower the quality of communication in an organization than any number of well-meant pleas for candor can raise it. In some companies, he says, discussion winds up being almost wholly governed by the ideas, the expectations, and the rhetoric of the CEO and a few chosen oracles. Managers fall into what Pfeffer calls the "smart-talk trap," competing for airtime and (in a continuation of habits learned in business or law school) seeking to impress the "professor" by seconding his proposals and shooting down contrary ones.

Just such a dynamic seems to have squelched dissent at Enron. Mark Palmer didn't have the same knowledge of Enron's finances as Sherron Watkins, the now famous whistle-blower. But Palmer, a vice president in the much-touted bandwidth trading operation, was also troubled by the widening gap between the company's nonstop hype and the reality around him. "People in my group were being asked to do things that were unrealistic," says Palmer, 34, who spent three years at Enron before being laid off in December. Palmer kept his concerns to himself. "You're being paid well," he says, "and you don't really go up to your boss and say, 'You're on drugs.'"

Even in some gentler settings, to be fair, people find it hard to challenge the groupthink. In the new book Leading Quietly, Harvard Business School professor Joseph L. Badaracco Jr. tells the true story of the pseudonymous Shirley Silverman, a public-health adviser to a mayor who has vowed to get tough with women who use drugs in pregnancy. Silverman worries that they will be discouraged from seeking prenatal care. She suspects, however, that if she confronts the mayor with her objection, he will simply assign someone else to implement the plan. After a restless 24 hours of cogitation, she approaches a couple of his aides instead and points out that the spectacle of expectant mothers in handcuffs may not play very well in the media. Without ever mentioning her deeper concern, she gets the aides and, through them, the mayor to rethink the issue.

This, Badaracco says, is what truth-telling in organizations is often like -- messier, slower, and far more difficult than in the movies. People take time to size up a problem, to sort through their feelings about it, and to take stock of what Badaracco calls their "organizational capital" -- a subjective reckoning of clout, on the one hand, and job security, on the other.

Organizations have always had these tendencies, of course, as have the people in them. But the consequences are more serious than they used to be. With information itself becoming the vital stuff of business, and with decisions increasingly decentralized, the ready flow of reliable information is not just an ethical but also a business imperative. Lack of trust only occasionally leads to out-and-out fraud, Pfeffer says. Far more often it takes mundane forms: pointless meetings, sloganeering, cynicism, wasted effort, and missed opportunities.

The syndrome is familiar. Managers who genuinely want to do anything about it, Pfeffer and others argue, can start by taking a hard look at themselves, their organizations, and the kind of communication they encourage, consciously and unconsciously. "No one can manufacture trust or mandate it into existence," say Laurence Prusak and Donald J. Cohen, who have studied levels of trust in a variety of workplaces for an IBM-sponsored think tank, the Institute for Knowledge Management. "When someone says, 'You can trust me,' we usually don't, and rightly so. But leaders can make deliberate investments in trust. They can give people reasons to trust one another instead of reasons to watch their backs." Here are some principles to guide you:

Tell Wall Street where to go. Many CEOs of public companies feel compelled to feed the market's hunger for rapid and predictable growth. That way lies the potential not only for accounting chicanery but also for turning internal discussions into cynical, bazaar-style haggling over financial targets, with substantive business issues going neglected. Department heads can fall into a pattern that Lawrence B. MacGregor Serven, a Connecticut human resources consultant, describes as "managing expectations rather than managing results."

Reward real, not sham, performance. Annual bonus plans encourage short-term thinking at best, dishonesty at worst. (The pay of some Enron executives depended on their own estimates of the worth of contracts they had negotiated.) At Nucor Steel, among other companies, bonuses reflect group progress toward specific goals. Who gets promoted counts even more. Nothing so undermines management's credibility, Badaracco says, as promoting "a skunk who makes his numbers."

Don't make unnecessary predictions. "One of the worst things you can do for credibility and company morale," says Jim Collins, the author of Built to Last and Good to Great, "is to hold out false hopes, soon to be swept away by events." Consider Hewlett-Packard's Carly Fiorina, who squandered the considerable credibility she brought to her job by continually setting -- and failing to meet -- ambitious growth targets. Now she may fail to rally enough support to carry off her merger with Compaq.

Acknowledge the obstacles. Thomas Miller, managing partner of Trium, a San Francisco consulting firm that helps companies cultivate honest communication, has been working with McKesson, the San Francisco-based medical-services colossus, which experienced its own accounting scandal in 1999. As part of the effort, McKesson holds retreats where employees are asked to talk explicitly about the fears (usually involving personal failures or weaknesses) that keep them from talking straight. Typically, they expect to be judged harshly for acknowledging such things but end up being trusted more, not less. Once they've had such an experience, Miller says, "they start to say, 'Wow, that didn't feel so bad.'"

Lose the euphemisms. Senior managers should "set a personal example of acknowledging when things have gone wrong," Badaracco says, "and not speaking in the silly code that says, 'We've hit some bumps in the road.'" The standard-setter is Warren Buffett, who, in his 1999 letter to shareholders, confessed to "the worst absolute performance of my tenure and, compared to the S&P, the worst relative performance as well.... My grade for 1999 most assuredly is a D."

Prepare a communications-impact statement. Not literally. But too many managers make important policy decisions without considering the effects on the level of trust in their organization and on their credibility with employees. Enron is just one of many firms with "rank and yank" plans that call for the annual removal of a specified portion of the workforce. Schemes of this sort magnify insecurity and encourage artificial and scripted communication, according to Prusak and Cohen. At Enron one of the "redeployment" program's most visible consequences was the large amount of time people spent at the local Starbucks, buttering up superiors and bad-mouthing peers.

It's the rare manager who wouldn't say that a company's reputation is its most precious asset, or who doesn't take the time, every now and then, to talk about the importance of keeping lines of communication open. But building a company where such statements have real day-to-day meaning requires scrupulous behavior, year in and year out, and it probably won't get you voted the "most innovative" company in America (as Enron was) or win you a price/earnings multiple of 60 (like Enron's, once upon a time). You may have to wait way, way beyond the next quarter for your payback.

But not necessarily forever. In Good to Great, Collins analyzes a group of companies chosen, he says, largely for their sustained stock market performance. "I decided to use Wall Street's own definition of success," he explains. "I figured, Let's begin with the devil and see where it takes us." One of the characteristics of his great companies, Collins concluded, was steadfast resistance to pressure from the Street. By contrast, a group of also-ran companies showed an "almost chronic pattern of selling Wall Street on a future that never really materialized."

More than anything, however, what set the greats apart from the nongreats was, in Collins's words, a "plain unvarnished" CEO with a highly developed capacity for listening, who "couldn't exaggerate if you put a gun to his head." It's not too much of a leap to suppose that the example set by such leaders inspired a similar respect for simple truthfulness throughout their organizations, which also contributed to the companies' financial success.

The corporate-culture consultants at Trium say their mission is to build companies where their children would want to work. An organization where people trust each other enough to look facts in the eye and talk straight about them sounds like it might be that kind of place. It also sounds like the kind of company that will be around long enough for the children to find out.



Enron Probed and Maybe Duke

The Orange County Register – by J. Howard, H. Quach – February 16, 2002

(2/13/02) - SACRAMENTO -- Nearly two years after California's electricity crisis began, state investigations into possible price gouging, conflicts of interest and market misconduct have yielded little - a frustration to consumer groups but little surprise to some energy-industry advocates.

Yet even as the threat of statewide power outages recedes and the public's interest has moved on to other matters, the Legislature's probes are intensifying.

On Tuesday, an investigatory committee headed by state Sen. Joe Dunn, D-Santa Ana, voted to find Enron Corp. in contempt for flouting the committee's demands, and the panel is prepared to review later this month whether at least five other energy companies have done the same.

The Senate Select Committee to Investigate Price Manipulation in the Wholesale Energy Market urged the full Senate to seek criminal investigations by state and local prosecutors into whether the company, or its affiliates, shredded documents sought by the committee. The affiliates include now-closed Enron Energy Services Inc. in Costa Mesa.

"If there was an intent to destroy records to avoid complying with a subpoena, there may be grounds for a criminal action, but we would have to know the facts," said Sandra Michioku, a spokeswoman for state Attorney General Bill Lockyer.

Enron declined to comment.

A daunting task for dunn committee

Dunn's committee has collected millions of documents. Staff members have been combing through the stacks of paper for months, scanning key documents into a computer database.

The key question before the committee is whether energy companies manipulated the market, in part by withholding electricity during critical periods in order to drive up prices. During the height of the crisis early last year, wholesale electricity went above $800 a megawatt- hour. The current price is roughly $33 per megawatt-hour, roughly the price of power before the crisis began.

The investigative task is daunting: Electricity is often bought and sold several times during the course of its life, and tracing thousands of individual transactions over time requires enormous computer capacity - which the staff acknowledges it doesn't have.

Investigators are seeking clues that power providers deliberately cut back during critical periods in order to boost prices in a competitive market. They want inspection records to determine whether power plants were idled for legitimate purposes.

They wonder if Enron, with about 20 percent of the national electricity market, improperly influenced the market in California through complex trading agreements. Although how much Enron made indirectly off of California's energy crisis is unclear, one committee investigator estimated that 70 percent of all wholesale electricity used in California last year at one time passed through Enron's hands.

The company itself had only one small contract to sell power directly to the state. That contract, for 200 megawatts that was sold for up to $285 per megawatt, would have brought the company a gross of as much as $57,000, more than eight times as much as it would have at precrisis prices.

Most of the documents Enron and others have provided are worthless, public documents that the committee could have obtained through public agencies, but have taken time, nonetheless, to sort through, committee Counsel Lawrence Drivon said.

Dunn said his goal is to identify the problems in the state's electricity market and introduce legislation to fix them. Tuesday's actions against Enron, he said, will help that investigation and persuade other companies to cooperate.

"They will send a clear message to the rest of the market participants that, as we have been saying from the beginning, that we are serious about this investigation," Dunn said.

Consumer advocates want officials to act

Consumer groups say the Legislature should pursue criminal charges against the energy companies.

"If the Legislature took the step of filing criminal charges, that would be significant. But this is a shadow play, and they are afraid to address the main issue," said Harry Snyder of the West Coast Regional Office Consumers Union. "Joe's a good guy and an honest policy man, but the test is whether they (the full Senate) will seek criminal charges against the members of Enron who were subpoenaed. If they don't, then we've got zip, zero, nada."

Other companies that have figured in the committee's investigation are North Carolina-based Duke Energy, Williams Energy of Corp of Oklahoma, Reliant and Dynegy of Texas, Georgia-based Mirant Corp., and a number of municipal utilities.

Power producers are convinced the investigations are driven by politics.

"They're looking for an entity that somehow manipulated the market from behind the curtains like the Wizard of Oz and made bad things happen. I don't think there was any such entity," said Jan Smutny-Jones of the Independent Energy Producers, which represents about 50 energy companies. "We have a climate where everyone is under suspicion and everyone is under investigation."

"They are flogging a dead horse, a horse that died a long time ago," said Gary Ackerman of the Western Power Trading Forum.



Arrogance not limited to Enron

Knight Ridder/Tribune – by Herbert London – February 14, 2002

Hubris, the sin of overweening pride or arrogance, is invariably the condition that undermines societies and individuals in classical literature. But we forgot that hubris has its influence on contemporary society as well.

"If you've got it, flaunt it," is a modern expression of hubristic sentiment. A recent financial article noted that John Chambers, chairman of Cisco, only a few years ago was predicting 30 percent to 50 percent annual growth for his company. One year after that, the company had three straight quarters of 70 percent profit declines. There appears to be a price to be paid for boasting.

Kenneth Lay, former CEO of Enron, sent an e-mail to employees on Aug. 14, 2001, noting, "Our performance has never been stronger, our business model has never been more robust. We have the finest organization in American business today." Now, of course, the company is in ruins.

The Wall Street Journal noted that companies that bought the rights to name stadiums after themselves often fell into bankruptcy or financial difficulty. Examples includes Enron, TWA, PSI Net, Fruit of the Loom, 3 Com, Conseco and CMGI Inc.

Hubris usually leads to a belief in invincibility, and a belief in invincibility leads to complacency and failure.

This downside of self-congratulation applies to nations as well. When economic prophets argued in the 1980s that Japan's form of a command economy had solved the riddles of the free market's roller coaster effect, many investors and some Japanese leaders believed the press clippings.

At the time, the Nikkei Index was in the neighborhood of 35,000. Now that 50 percent of the value in the market has been lost, both analysts and Japanese leaders are singing a different tune.

If there is a lesson to be learned, it is good things happen to those who have it and don't flaunt it. I wouldn't invest long on Donald Trump's success since his financial empire has been constructed on hubristic impulses. Nor do I believe Martha Stewart enterprises can continue to be successful after she argued, "I can bend steel with my mind. I can bend anything if I try hard enough."

She may learn that the gods do not reward those who are egotistical enough to believe they can reshape the world.

Hubris should not be confused with confidence. Faith in oneself is healthy and possibly rewarding; it is arrogance and pride that do successful people, institutions and nations in.



Mr. Priory’s $100 Million Freudian Slip

Employee Advocate – DukeEmployees.com – February 12, 2002

The Charlotte Observer article, below, tells of Mr. Priory’s verbal inflation of a donation by $90 million. The inflation was merely words; no extra cash will be given.

In announcing a donation of $10 million to UNC Charlotte, Mr. Priory slipped and said “$100 million.”

Mr. Priory is a smooth talker and a great salesman (as is Kenneth Lay). Even though one can “sell” ideas to others, the seller’s unconscious mind is never fooled by the hype. It is every ready to betray the seller with a Freudian slip, exposing his true thoughts.

Apparently, $10 million dollars was not what was really on Mr. Priory’s mind. Evidently, he was obsessed with $100 million dollars.

We have written before about the amount of $100 million dollars seeming to pop up so much. Were Mr. Priory real thoughts on the $100 million arena proposal? Were they on the potential $100 million Enron loss? Or, were they on the $100 million allegedly hidden from the utility commissions by Duke Power?

Public Citizen charged that "The Nuclear Energy Electricity Supply Assurance Act of 2001" would give the nuclear industry a $100 million subsidy. Gov. Gray Davis said that $100 million was the amount that San Diego ratepayers were overcharged.

It is very easy to see how $100 million could be weighing on Mr. Priory’s mind.

What caused the figure of $10 million to trigger a reference to $100 million? Was the $10 million donation craftily timed to distract public attention from the $100 million audit trigger?

We probably have not seen the last of this reoccurring “magic number.”



Rick Priory Flubs

The Charlotte Observer – February 12, 2002

After a potentially expensive slip of the tongue, Duke Energy Chairman Rick Priory made a smooth correction at an on-campus announcement of his company's huge gift to UNC Charlotte.

Initially, Priory added a zero to the largesse, making it -- for a split second -- $100 million rather than $10 million. He immediately changed the number to its proper amount and there was barely a titter in the crowd of nearly 500 dignitaries in the Barnhardt Student Center.

"It was a slip of the tongue," Priory said. "The script was right."

Still, it gave a start to Ruth Shaw, Duke Energy executive vice president, who oversees the Duke Energy Foundation where the $10 million resides.

"I thought we were going to make this the shortest capital campaign in history," Shaw said.

UNC Charlotte hopes to raise $100 million by 2005. With the $10 million from Duke Energy, it already is at $68 million.



Employees’ New Motto: Trust No One

USA Today – by Stephanie Armour – February 8, 2002

After being laid off six months ago from his job as a product manager at a telecom firm, Tim Kusner has been looking for a new employer. But this time, he's looking for more than good pay and promotional opportunities.

He (is) looking for a company he can trust.

The Enron scandal is eroding the faith that workers place in our nation's business institutions. People who had never heard of the energy giant before it collapsed are suddenly looking at their own employers and wondering whether they could face similar risks.

Layoffs have already shattered employees' sense of security. Arthur Andersen has admitted to destroying auditing records. And dozens of companies — from Polaroid to IBM to Cisco Systems — have canceled severance, halted health benefits, withdrawn job offers, changed pension plans or issued misleading audit reports.

"Executives are looking out for the good of major shareholders, not employees," says Kusner, 33, in Denver. "It's hurt trust. People who lived through the Depression are frugal. This could have the same kind of lasting attitude change."

The breakdown is having ramifications. Anxious employees are swamping financial counselors to learn about protecting themselves from worst-case scenarios. They're negotiating severance and outplacement help before they take a job, taking new steps to provide their own golden parachutes. And they're watching CEOs with a wary eye, putting top executives on the hot seat and demanding more communication from their companies.

The distrust is widespread. Only 10% of adults surveyed think corporations can be trusted a great deal to look out for the interests of their employees, according to a USA TODAY/CNN/Gallup poll.

For companies, this is more than mere inconvenience. This goes to the bottom line. Employers who fail to restore workers' faith risk costly defections: Studies show lack of trust is a top reason employees quit. That's troubling news to companies now dogged by accusations of impropriety, because the breakdown of trust is making it tough to keep and retain top talent just when it's needed most.

Case in point: Arthur Andersen. Already, recruiters are approaching employees, and workers at the accounting firm are asking on online chat boards whether they should leave.

The dismantling of trust could be short-lived, but some fear the accounting scandals and massive layoffs have left workers embracing a new and lasting motto: Trust no one.

Says Kevin Rozsa, 38, a Cleveland-based marketing vice president for automotive parts distributor Transtar Industries: "People stake their livelihoods on public corporations like Enron. Anytime something reaches this kind of magnitude, it will make people wonder about trust."

And consider Sherri Saunders, who lost nearly $1 million in retirement funds when Enron blocked employees from selling stock as company finances faltered. She'd worked as a senior administrative assistant at the company for 24 years. Enron executives have been accused of misleading workers about the company's financial woes.

"What a fool. I feel like I was such a fool," says Saunders, 54, of Houston, who was laid off and is looking for a job. "It's going to be hard to go to work for a big company and have the CEO say, 'We're doing great.' I've been down that road before. I'm still reeling."

Breakdown of trust

This is personal. Workers are looking at their own companies, their own executives and their own corporate directors. Increasingly, they don't like what they see.

Nearly 50% say corporations can be trusted only a little or not at all to look out for the interests of their employees, according to the USA TODAY/CNN/Gallup survey.

And while more than 50% of those answering the survey believe top executives at American companies are interested in doing a good job for their corporations, more than 40% say executives are only interested in looking out for themselves — even if it harms the corporation they work for.

The impact is widespread:

Employees are scrutinizing their own firms. Management experts say workers will become less naïve about their own company's finances and missions after the harrowing Enron headlines. More will ask questions and cast a critical eye on their own CEOs.

"Corporate greed has never been seen on a scale that we're seeing now," says Mike Olson, CEO of Washington, D.C.-based American Society of Association Executives, which promotes voluntary associations. "Employees are going to ask more questions and become more involved in learning about their companies' finances. Companies are going to have to deal with that or find themselves at the end of the line."

Workers are worried about their own finances. Reports of retirees taking hits to their 401(k) plans or losing severance packages have employees trying to determine — and reduce — their risks. It's a seismic shift from the dot-com heyday, when the focus was on which company would offer the potential for fast riches. Now it's all about which will guarantee safety.

And job seekers are protecting themselves: More than 60% of job hunters say it's important to negotiate severance agreements upfront, according to online recruiting service TrueCareers. Forty percent already research severance and outplacement assistance before talking to a company about a job.

Workers concerned about their own financial security in light of Enron are swamping advisers and counselors with questions. ComPsych, a Chicago-based employee-assistance provider, has seen a 35% jump in calls the past three months from workers citing financial issues as a source of stress.

"It's changed how I look at things. I thought of my 401(k) as something that I just had. I never really thought it could be in jeopardy," says Darren Mowry, 27, a project manager in Bethesda, Md. "None of us really do enough research. We just take it for granted. This shows us the big companies aren't always the safe choice."

Wary workers are leaving companies or considering finding safer havens. Turnover triggered by a lack of trust is a risk many employers underestimate. Only 3% of human resource professionals selected lack of trust as one of the top five reasons employees leave, according to a 2001 survey by human resources consulting firm Development Dimensions International. But employees rank lack of trust as one of the top five reasons that they leave.

"Employees are questioning leadership," says Jeffrey Christian, CEO of Cleveland-based executive search firm Christian & Timbers. "It's very scary. Employees don't want to work for leaders who put their own personal agenda first. They leave."

Some take action

One side effect of the trust meltdown: More workers are suing employers for claims that basically amount to a breach of trust.

A coalition of more than 400 current and former Enron employees filed a lawsuit in Houston hoping to recover losses in their 401(k) plan. They say executives urged them to invest in the company while concealing its financial woes, and they say they were unfairly barred from trading during the change of the firm's 401(k) plan administration.

Employees last year filed a lawsuit against Lucent. They say the company was aware of financial problems that made its stock inappropriate for 401(k) savings plans.

Former Polaroid workers have taken legal action to block the firm's initial plan to give millions of dollars in retention bonuses to executives. They're also hoping to restore health benefit subsidies and severance payments that the company halted when it filed for bankruptcy protection in October.

"Corporations don't care at all," says Karl Farmer, a former Polaroid manager in Hampstead, N.H., who helped initiate the legal action to restore some benefits. "It comes down to greed. It's just so sad."

But the news is not all grim. Workers may not trust Corporate America, but they don't believe they're being lied to personally. Fifty percent of respondents have a lot of trust in their company's promises to them and other employees, according to the USA TODAY/CNN/Gallup poll. That's up from an August 1989 CNN/Time poll that found 43% had such faith.

Refocusing on trust

Some management experts say they're not surprised by the doubt in America's business institutions. They say it may not even be such a bad thing.

Workers are becoming savvier about their own finances, their companies' finances and their need to buffer themselves against shifting financial fortunes.

Companies could benefit, too, they say, because employers will have to focus on trust by communicating more and accepting more questioning from workers. Leaders will have to pass harsher scrutiny. The role of the CEO will become even more important, they say, for projecting an image of honesty.

But if the current trend continues, some new critics of big business say, more will be lost than gained.

"We all know about Enron. How many other funny balance sheets are out there? Who do I start believing?" says Jack Kahl, who retired from his job as CEO of Manco, an Avon, Ohio, adhesive manufacturer. "It's made us all look over our shoulders and wonder who you can trust. The whole free enterprise system is built on trust. We're getting further away from the ideals that built this country."

Pat Scarborough of Houston lost about $30,000 in stock value when Enron collapsed. But the former furniture buyer, who was with the company for about seven years, says she had diversified early on, moving funds and exercising options. Her caution kept her from losing more — a lesson she says may benefit other workers.

"Don't just believe what the company says, but read what the analysts are saying. Go to a financial consultant and learn what your money is doing," Scarborough, 57, says.

Like a number of other former Enron workers, Scarborough says her sense of faith in large institutions is so frayed that she wants to work in other industries or smaller companies. Perhaps that will give her better access to top executives, she says, and a better inkling as to what's really going on.

"I've had it with Corporate America," she says.



Duke Energy Steam-rolls Pipeline

Associated Press – February 4, 2002

CHATTANOOGA, Tenn. (AP) - Area residents hope a countywide coalition will help them block the expansion of a natural gas pipeline they fear will put them in danger and also threaten a rare salamander.

"I'm the trustee for (East Brow) park, and I feel a responsibility to protect those salamanders," said Walden resident Leo Brown, one of the coalition's organizers. "And as an alderman of Walden, I feel a responsibility for the safety of the residents of Walden."

The group's target is Duke Energy. Through its subsidiary, East Tennessee Natural Gas Co., Duke expects to receive federal approval next summer to extend its 50-year-old, 287-mile pipeline through Tennessee, North Carolina and Virginia.

Duke officials say their plan is safe and that they have the right of way on the pipeline.

"The line is monitored 24 hours a day, seven days a week," said Duke spokeswoman Gretchen Dewailly Krueger. "It's just an enhancement of a system that's already in place. It would cause more environmental impact moving it (the pipeline) somewhere else."

But Brown, who lives about 700 feet from the pipeline in his small community just outside of Chattanooga, said the expansion is too dangerous and the route needs to be moved to a more rural area.

"It literally, if the gas line were to break, would create an area of devastation 1,100 to 1,200 feet wide," he said. "They're wanting to take care of customers in Virginia and North Carolina and in the meantime, they're sacrificing the lives of people in this area."

Krueger, however, pointed out that residents in other states have pipelines through their property so that Chattanooga can have natural gas, which she says indicates some residents are willing to "make sacrifices for the good of the common cause."

Besides the residents, Brown said he's also concerned about the spotted salamander, whose home is in Brow Pond.

"It's a rare species and needs to be protected, and the right of way is 40 feet from its habitat," he said. "I don't see how they're going to blast sandstone trenches and not damage this ecology."

Brown hopes to have the same success that some protesters have had in the past against Duke. Signal Mountain residents were able to get the company to move a proposed natural gas compressor station out of Hamilton County.

The Kell Road Coalition, which came together to fight the new site for the compressor in Sequatchie County, plans to join Brown and company in their battle.

"We have to come together because they're so big and we're so small," Jim Ballard, who lives on Kell Road, said of Duke. "The Kell Road Coalition was fighting the pump station, but if we draw all these groups together, it's for a bigger goal."

The coalition's first meeting to fight the pipeline's expansion is scheduled for Friday. A petition against the expansion will be at the Town Hall until the meeting.

Brown said he's inviting all affected landowners, political officials and representatives from the Tennessee Aquarium, Tennessee River Gorge Trust, North Chickamauga Creek Conservancy, Tennessee Wildlife Resources Agency, U.S. Army Corps of Engineers, Environmental Protection Agency and other agencies.


Duke - Page 1 - 2002