DukeEmployees.com - Duke Energy Employee Advocate
Noon Rebuttal - Page 2 - 2003
Noon Rebuttal - June 2003Employee Advocate - DukeEmployees.com - June 30, 2003
The Noon Meeting was hosted by Fred Fowler, president and COO, on June 9, 2003. It was held in Charlotte, North Carolina.
Mr. Fowler spoke of the “six strategic directives.” Get ready. You will hear about these until you are sick of them, if you are not already sick. When management comes up with a new distraction program, they harp on and on and on. They never let up. What’s so bad, the new program is usually very weak. But his does not stop them from grinding in with it. On and on they will go: the six strategic directives, the six strategic directives, the six strategic directives, the six strategic directives, the six strategic directives, ad infinitum!
You just thought that you were sick of hearing about “the six tools.” And another thing, why does Duke think that every solution must come in a six-pack? From the looks of things, too many “solutions” have already come from the bottom of a six-pack!
You may be thinking that Duke gave some wino a few bucks to come up with these directives. But it took the Executive Advisory Council and the Board of Directors to produce these gems.
Mr. Fowler said “We have had some legal victories recently, and a FERC staff report supports what we have been saying from the beginning—Duke Energy did not manipulate prices during the summer of 2000 in California through withholding of power or improper bidding practices.”
There are quite a few qualifiers in that statement! It only applies to the summer. It only applies to the year 2000. It is applicable only to California. It only applies to manipulating prices. It only covers manipulating prices in two specific ways.
That is a presidential quality denial! “I did not have sex with that woman on April 14, 2000, at 9:05 PM, as a wild monkey screamed from the chandelier, during a total lunar eclipse.”
Although the statement may be technically true, it is sort of meaningless.
And, that is not the statement that Rick Priory and other executives have been making all along. There were claims of “complete exoneration.” Throwing in a ton of qualifiers does not validate the original statement. Claiming to have made that dubious statement all along serves only to taint it even more.
If this is an example of how legal risk will be reduced, let the sideshows begin!
Mr. Fowler talked of California Senate Bill 888, to re-regulate California’s electricity market. He said “We are working with the authors of Senate Bill 888 and interested parties to ensure there is a level playing field…”
Duke has zero interest in a level playing field. Corporations always want everything tilted in their favor. They want everything tilted, so that if a quarter falls on the ground, it rolls into the executives’ pockets. Political contributions and lobbyists are fully employed to insure that the playing field is anything but level!
In answering one question, Mr. Fowler said “I don't think anybody foresaw the meltdown of a company the size of Enron. Even if they had, it was hard to predict the widespread, dramatic impacts across our sector.”
One thing is for sure; Rick Priory did not even suspect it. Even when Enron collapsed, Mr. Priory continued to deny that it would have any bearing on the energy trading business. What arrogance!
But there were people who foresaw the potential for disaster at Enron. One such person was an Enron employee. She took her concerns to the Enron CEO. Her concerns were brushed aside, with typical corporate arrogance. That’s when she became a whistleblower.
There just may be a lesson here somewhere for swaggering executives. When management refuses to listen to employees, someone else always will!
If Duke executives would have listen to the concerns of an employee a few years ago, there would be no federal grand jury and FBI investigations today. The executives had no time to listen. There were energy contracts to trade and merchant power to sell.
Today, there are few energy contracts to trade and little merchant power to sell. What management once had no time to listen to, now has their undivided attention! Their focus has shifted from world conquest to survival.
Mr. Fowler said “Duke Energy reacted very quickly to avoid being caught by the liquidity wave that is hurting so many others.”
Duke executives denied everything and even said that they would NOT downsize energy trading. Only at the very last instant did Duke executives suddenly realize that their way was the way to bankruptcy. Even after making a 180 degree turn, they are still denying any mistakes. They are trying to salvage a shred of dignity by pointing to companies that are in worse shape. Pointing to someone who has failed worse will never compensate for one’s own failures.
Mr. Fowler said “We're paring down the trading and marketing group, we've stopped proprietary trading, and we've refocused the group on managing the risks around our assets. We're moving away from a trading model: building generation plants and hedging them on financial markets. We're refocusing that business on our 'megawatt factories' and developing products and services from those factories and going out and selling them to customers. We want to sell them electricity on a long-term basis, build a relationship and use our trading to manage the price risk.”
At last! After the equivalent of 45 blows to the head with a nine pound sledgehammer, Duke executives began to get an inkling that they were going down the wrong path. Denial was not going to save them. Wall Street Journal ads were not going to save them. The setting up of smoke screens was not going to save them.
The only thing that could save them was a complete reversal of direction. The direction of greed and follow-the-leader was heading for destruction. All the grand schemes that Rick Priory gave the hard sell to employees, were doomed to failure.
Six and one-half years ago, Rick Priory became the CEO and Chairman of a company that could run itself. It was a monopoly! It was guaranteed to make a profit! A trained chimpanzee could have run the company and it would have turned a profit. As long as a reactor did not meltdown, money was going to be made. The risk of ruin was near zero. Employee problems were almost non-existent. The customers loved the company. Lawsuits and bad press were almost unheard of. What better business could one possibly want?
Well, Mr. Priory wanted a different business. He wanted one with infinite risk. He wanted to trade derivatives. He wanted to trade energy and sell it on the open market. He wanted less emphasis on a blue chip stock with steady dividends. He wanted Duke Energy to become another Enron. If fact, he used Enron as an example of where Duke needed to be! He wanted world domination of the energy market.
Mr. Priory was riding a unicycle that was 45 feet tall. He was juggling running chain saws with one hand and spinning plates on a stick with the other hand. He was bouncing a beach ball on his forehead and playing the Blue Danube Waltz on a harmonica. Nothing greater ever was – until he hit the stump.
Mr. Fowler said “Last year was tough for our international businesses. We had built some pretty big positions, and last year we cleaned up and got focused on the right things. Where we had acquired a position, we needed to start operating those assets the same way we run our U.S. assets: sell off the non-core pieces, get our cost structure right, and get the return on our investment up.”
Fred Fowler was billed as being a straightforward guy. Although he is not rhetoric-free, his answers are probably the straightest that you will get from a Duke executive.
Mr. Fowler said “We continue to operate ethically, responsibly and with a strong and compelling fact set.”
No, he is not exactly rhetoric-free. It is disturbing that Duke executives take every opportunity to announce how ethical they are. Why are they compelled to do this? When anyone starts telling you how ethical and honest he is, it should send up warning flags. If you don’t always get the truth, maybe you will at least get a “strong and compelling fact set.”
Someone sent in a pertinent question about bankruptcy and if the employees’ retirement money would be protected.
The answer was, in part: “Yes. Until all liabilities for benefits under the respective plan have been satisfied, funds held in trust for the Duke Energy Retirement Cash Balance Plan (RCBP) and for the Retirement Savings Plan (RSP) are not available to the company or its creditors.”
That is comforting to know. It would be more comforting to know that the full amount of promised retirement money would be protected and available to employees. As it is, only the artificially reduced amount will be available in the cash balance plan. (Even if you get the “protected/frozen” amount, you may have lost years of accruals.)
This disclaimer was thrown in: “If an investment fund, such as the Duke Energy Common Stock Fund, in which your RSP account is invested experiences a loss, your account balance, which is your RSP benefit, will decrease.”
There was no disclaimer about the effects of round-trip trading on your RSP balance.
Noon Rebuttal - May 2003Employee Advocate - DukeEmployees.com – May 27, 2003
The Noon Meeting was held May 12, 2003 in Charlotte, North Carolina. It was hosted by Rick Priory, chairman and CEO.
Rick Priory: We are managing through a number of issues related to the collapse in the wholesale market, and we’re making steady progress. We addressed a number of merchant energy issues during the first quarter and worked hard to strengthen our balance sheet. We made considerable adjustments in sizing and aligning our company, and we will emerge from this down cycle in a strong position to take advantage of some of the upside opportunities when the market begins to turn.
Employee Advocate: Translation: I fell flat on my face with all my big energy trading and merchant energy marketing schemes. I am trying to salvage something by reducing these cash draining ventures, even though I said that the trading department would not be reduced.
Rick Priory: Many people would like to believe that the market turned in the first quarter, but I’m not convinced of that. I am a little more pessimistic.
Employee Advocate: Glory be! That’s the most realistic thing that Mr. Priory has ever said, and none too soon. Everyone has heard enough of his cheerleading, price pumping, and empty promises. Too bad he did not have the foresight to realize that his grand promises only set him up for eventual failure. He may be catching on to the fact that there is no penalty for doing better than projected.
Rick Priory: Franchised Electric and Natural Gas Transmission contributed the bulk of our earnings, and they continue to perform strongly. During this down cycle for the merchant business, we expect the majority of our earnings to come from the regulated area.
Employee Advocate: Was it the regulated areas that Mr. Priory once despised? Yes it was! How humiliating. Poor Mr. Priory is forced to embrace the businesses that he was once so ashamed of. The glamorous businesses that he promoted only brought him disrepute and near disaster.
Rick Priory: The unregulated businesses did excellent work, by not only modifying their businesses, but also pursuing cost reductions and operational excellence. The market’s not giving them a whole lot of opportunities right now, and they’ve switched their focus to other means of creating value for the company.
Employee Advocate: Translation: I cut my losses by dropping the losers before the company was completely consumed.
Rick Priory: The board of directors voted to pay a quarterly dividend for the 77th consecutive year. There is ongoing dialogue among analysts, bondholders and shareholders with regard to the dividend. We have laid out a financial plan, and that plan includes our continued payment of the dividend at its current level.
Employee Advocate: Mr. Priory once considered the dividend a relic of a bygone era. He would have rather used the money to chase more get rich quick schemes. Now, Mr. Priory cannot talk enough about the dividend. Mr. Priory has undergone conversion by fire. It remains to be seen how long his jailhouse religion will last.
Note that Mr. Priory has, once again, strongly implied that the dividend will not be cut.
Rick Priory: I was happy to tell shareholders at the annual meeting that we have made good progress on our financial goals. We’re well ahead of the 2003 goals we established.
Employee Advocate: Such things are possible when one does not make outlandishly optimistic promises. Once again, there is no penalty for exceeding projections.
Rick Priory: I thank all Duke Energy employees for assisting us in cutting expenditures during this credit squeeze.
Employee Advocate: As we have said: Management can break it, but it always takes everyone to fix it.
Of the heads separated from 10 percent of the employees, not all were “voluntary separations”!
Rick Priory: There has been a great deal of misinformation in financial circles about our credit situation.
Employee Advocate: Duke should be qualified in recognizing misinformation, as Duke is expert in generating it! How many employees fully understand all aspects of the cash balance pension plan? How many even know how much they lost?
Rick Priory: We continue to work with Moody’s Investor Services, which has us on review for potential downgrade.
They’ve cited concerns over cash flow, earnings volatility in our marketing and trading operations, uncertainty around DEI and DENA, and industry uncertainty around federal and state investigations.
Regarding the other credit rating services, both Standard & Poor's and Fitch Ratings have Duke Energy on negative outlook due to similar concerns.
Going forward, we’ll publically (sic) share more information in far more detail than we ever did before.
Employee Advocate: This is one of the few times that Mr. Priory has presented the facts, without distortion, hedging, or waffling.
Rick Priory: We announced our exit from proprietary trading in DENA.
Proprietary trading, in which we traded commodities not specifically linked to one of our physical or contractual assets, was a small part of DENA’s business. It typically represented less than 10 percent of DENA’s gross margin.
Unfortunately, a number of players in the industry were more exposed. Proprietary trading can lead to sizeable and rapidly moving collateral requirements. We decided to close that shop, reduce our risk profile and wait until the environment changes to decide whether to resume.
Employee Advocate: That was a prudent move. With everything else hanging over Mr. Priory’s head, he did not need to even be in such a potentially volatile area. He is really taking the right steps. It would have been better if he had taken these steps years ago. It would have been much better if he had never led the company into this quagmire.
Rick Priory: FERC issued rulings around the California refund hearings.
The rulings focused on charges of withholding power from the California market and price manipulation. We were among the companies accused and FERC’s ruling helped clear up the facts.
Fact one: Duke Energy did not withhold power anywhere in the state of California during the energy crisis.
Employee Advocate: FERC is not known as strict regulator. FERC is not known as even a mediocre regulator. It appeared that the California power crisis was well underway before FERC came to realize that it was a regulator! Often if a matter is not investigated quickly, evidence tends to get “lost.” If FERC had taken action immediately, a clearer picture may have developed.
Mr. Priory initially welcomed a full investigation, but kept a clamp on the data. While publicly calling for investigations, he secretly offered deals to Governor Davis. In the early stages of the investigation, Mr. Priory was already claiming “complete exoneration.”
As FERC sat by, G. W. Bush covered for the power companies, refusing to see any problems caused by his old pal Kenny Boy. Bush refused to help the people of California, who were facing outrageous power bills. Dick Cheney did conduct secret energy meeting, but these meetings were held only with energy company executives. It is unlikely that these meeting we ever intended to benefit the public. The full scope of the meetings still remain secret. Cheney has defied legal attempts to obtain notes of the meetings. If Enron had not imploded, FERC may have still been sitting on its hands. With Enron "bodies" being unearthed daily, it made it difficult for FERC to ignore the situation any longer. Too much still remains hidden. There is a severe lack of sunshine in this whole rotten affair.
In 2001, at least five former employees charged that Duke Energy withheld power to drive up prices, according to San Diego Channel 10 News. No more was heard about these charges for over a year. It was very strange.
In late 2002, the San Diego Union-Tribune published allegations that the Duke whistleblowers had been intimidated into silence by FERC! It was alleged that FERC showed no interest in investigating Duke Energy. The whistleblowers said that FERC’s full investigation was directed against them! They said that FERC officials threatened them with federal prison it they discuss their allegations further.
When an Enron power trader pled guilty to charges of market rigging, and other evidence became public, the Duke whistleblowers decided to break their silence.
Here is a quote from the article: “Michael Aguirre, a former assistant U.S. Attorney who is working with the Duke employees and is pursuing a class-action suit against power providers, said an attempt by FERC to keep whistle-blowers from public comment cannot be justified.”
It is understandable that these former employees did not trust FERC to conduct an unbiased investigation and were forced to use the courts. So, if FERC says no power was withheld, but the courts say that it was, does this constitute “completely exonerated”? Hardly!
Duke parses each sentence about each ruling to get in “completely exonerated” as many times as possible.
Assume that a person is found guilty of murder, fraud, and treason, but is acquitted of jaywalking. He could truthfully claim that he was “completely exonerated” of jaywalking at his trial. He could run announcements everywhere: “At the murder, fraud, treason, jaywalking trial, I was COMPLETELY EXONERATED (of jaywalking).” If he is convicted of jaywalking in 50 states, but acquitted in Timbuktu, he can proclaim: “COMPLETELY EXONERATED (of jaywalking in Timbuktu).” The term begins to lose all meaning. More precisely, the term is deliberately used as a tool of deception. Just getting the phrase “completely exonerated” in the sentence, anywhere, tends to blot out the negatives.
Some may think that slicing and dicing the words to get a misleading headline is clever – it’s really an act of desperation.
Rick Priory: Fact two: Duke Energy did not manipulate any prices in the state of California. Fact three: An ISO report in January 2001 named 37 suppliers as suspects for Enron-like trading. We also will be completely exonerated of that.
Employee Advocate: Here we go parsing again. “Enron-like trading” can be used to manipulate markets. Where does one stop and the other begin? Mr. Priory has made many other boastful statements that didn’t quite work out. We will wait for the official results.
Rick Priory: California is not over, however.
Employee Advocate: Mr. Priory finally admits that the investigation is not over.
Rick Priory: The FERC has come up with a complex refund calculation. Rest assured that your management is not going to willingly send your money and our shareholders’ money off to Washington to pay for something that we didn’t do.
Employee Advocate: Our money? Our money? Now it's our money! If this blows over, the money goes back into the executives' personal piggy bank. They will continue to manipulate the rules to take from the employees and reward themselves. The only thing employees ever owned was there retirement benefits – and the executives found a way to get at that! All the investors could count on was the dividend. But Mr. Priory watered down the dividend and it is now on life support.
Note that when the chips are down management always uses the “we are all in this together” approach. Any other time they use the “it’s all mine” approach.
Question: I have the first question, but it will be kind of a statement. In my role in corporate communications, I want to comment on the Charlotte Observer’s story on Sunday. The company is absolutely cooperating with the federal investigation into Duke Power accounting allegations. We are very confident in our own facts in this issue, and those of us in corporate communications will continue to get those facts out to the media. But we’re exceedingly frustrated when this kind of story appears.
Employee Advocate: Frustrated? Did the story contain any inaccuracies? If the article contained facts, why would anyone be “frustrated.” Unless, of course, individuals are frustrated because they cannot suppress true statements. The days when Duke could control the news are gone.
Duke probably has fill-in-the-blank forms for new charges:
“We are outraged that Duke has been accused of __________. We are calling for a full investigation of __________ . We are certain that we will be completely exonerated of __________. Failing that, we believe that any forthcoming litigation concerning __________ is without merit. We promise a vigorous defense of the __________ lawsuit.”
Just take out another Wall Street Journal ad, that will solve everything.
The article that has Duke in a tizzy:
Question: I was wondering if you could comment on the true “root causes” that seem to be attributed to California, but may lie elsewhere in the company. For example, the $3,880 per megawatt-hour price, the admitted round-trip trading, and the nuclear insurance accounting/utility commission audit. Would you opine that these recent market and public relations challenges stemmed from general weaknesses in governance and internal controls rather than a defective strategic investment in California generation assets?
Answer: We do not view the events relating to California, round-trip trading, or utility commission audit as having been caused by a lack of appropriate internal controls. In all aspects of our businesses we continually strive to improve and that goal applies to internal controls…
Employee Advocate: Greed.
Question: In a recent Noon Meeting, someone asked about salaries of corporate executives. For several years now, I have heard that executive compensation, much like compensation for any other profession, is determined by the marketplace. But why do we have to follow the marketplace? Why can’t we lead and set the example for corporate America by slowing executive increases and increasing wages for low to middle income workers? Wouldn’t this boost company morale and demonstrate how innovative we are while improving the image of corporate America?
Answer: Our approach is to continuously benchmark compensation for all positions within the organization, to ensure we’re offering a competitive compensation mix (including base salary, cash incentives, stock-based incentives, and benefits) for each position. Executive compensation is no exception.
Having said that, Duke Energy recognizes that executive compensation markets are currently in a period of significant change due to market and industry conditions. The company has responded by holding compensation flat for most executives in 2003, and in some cases, decreasing compensation levels. In addition, a greater portion of executives’ 2003 compensation is “at risk” – it will be delivered to our executives only if both short- and long-term value is created for shareholders, and at levels proportionate to the value created.
Employee Advocate: Translation: Executives still want all the money.
Question: News reports indicate that Rick Priory was paid $5.94 million in 2002, an increase of 23 percent from the 2001 figure of $4.81 million. Why did Mr. Priory receive an increase in 2002 when shareholders suffered due to the decline in Duke Energy’s stock price? Is this appropriate compensation?
Answer: Rick received a base salary increase of 9.1 percent for 2002. This was approved effective Feb. 1, 2002, and was based on 2001 performance -- not 2002 performance. His salary in 2002 was $1.19 million. Additionally, Rick had a 2002 bonus opportunity based solely on earnings per share performance, which he did not receive as the company did not meet its EPS goals.
In 2002, Rick also received a $2.2 million long-term incentive plan payout in Duke Energy common stock related to the achievement of a total shareholder return goal in 2000. This payout was based on 2000 performance, not 2002. He elected to defer receipt of this payment until his employment ends at Duke Energy.
In 2002, Rick received a greater portion of his long-term incentive opportunity in the form of phantom stock, which will be paid over time in the form of common stock. The value of this stock on the award date was $1.68 million. The value of these shares has declined more than 50 percent since the award was made. The compensation Rick ultimately receives when these shares are paid will depend on the future value of DUK…
Employee Advocate: You are probably asking: How can employees get in on this phantom stock giveaway? There is a special deal for employees. They get phantom retirement health and pension benefits!
Question: I understand that Duke Energy paid for Rick Priory’s relocation for security purposes. What type of security risk was he experiencing?
Answer: Security measures and costs associated with Rick’s relocation were directed and approved by the Duke Energy board of directors. While we can’t share the specifics as that could compromise security plans, be assured that the board’s decisions were based on reliable, actionable information.
Employee Advocate: But, of course!
Question: Why did Duke Energy pay nearly $1 million to move Robert Brace from the United Kingdom to North Carolina?
Answer: Duke Energy is an international company. Therefore, when hiring new employees, we do not limit our search to any particular geographic area. Instead, we search for the top talent, regardless of where that talent is located. When reimbursing employees for expenses associated with international relocations, a variety of factors, including various tax laws, come into play and can add to the expense. The relocation package negotiated with Robert took special circumstances into consideration, including market conditions in London.
Employee Advocate: Price is no object for someone who can make the numbers walk and talk. Or, maybe it was just the accent they had to have.
Question: Why did Duke Energy pay $70,000 for Robert Brace’s club membership? Do we routinely pay for club memberships?
Answer: Duke Energy provides minimal perquisites, but the company does pay the country club membership fees of its senior-level executives and other employees who regularly entertain customers.
Employee Advocate: Executives get many perks that are not reportable. Ponder this as you try to live on your phantom retirement benefits.
Question: I have noticed that the corporation has many more officers than Duke Power had in years past. For example, I believe there are approximately 150 officers now as compared to approximately 50 during the 1980s. However, the total number of employees is very similar. I have heard that by creating more officers, accountability is improved. However, this seems to be backwards. Would it not make more sense to have fewer officers to simplify determining who is accountable?”
Answer: A lot has changed since the 1980s. Today, Duke Energy is an international company with many lines of business. It’s a more complex company than the former Duke Power or PanEnergy, and it stands to reason that we could have more officers. The number of managers/supervisors in the company, however, has actually decreased by about 10 percent since 2001…
Employee Advocate: If you don’t like the question, answer one that was not asked. The question was about officer increase from 50 in the 1980’s to 150 now. No one asked about the percentage differential from 2001 to now.
Question: Following the release of 2002 year-end earnings, we have continued to receive questions regarding the funding status of the Duke Energy Retirement Cash Balance Plan (RCBP) and questions about whether the company will make contributions to the plan.
Answer: The actuarial valuation is not yet complete; however, using the best information available, the company disclosed in the annual report that a required contribution to the RCBP of approximately $100 million is expected for plan year 2003. Final results from the actuarial valuation are not expected to vary materially from this estimate. Generally, contributions for the 2003 plan year must be made by September 2004.
Employee Advocate: The Cash Balance Plan will haunt executives to their graves. And, it should. Their biggest worry is: Will it haunt them beyond?
Question: Why does Duke Energy provide such generous severance agreements to our executives? Also, can you share how we define termination “for cause” in our senior executives’ employment agreements?
Answer: We use severance agreements sparingly, and typically base those agreements on marketplace comparisons. When used appropriately, severance agreements allow the executive to focus on running the business and facilitate the company’s ability to end an employment relationship if and when it’s in the best interest of the company and its shareholders to do so. In exchange for the benefit, the company’s interests are typically protected by prohibiting the executive’s near-term future employment with a competing company.
Employee Advocate: It could possibly be worthwhile to pay a departing executive to keep his mouth shut, through a non-disclosure agreement.
Answer, part two: We define “for cause” as the conviction of a felony or crime, an egregious act of dishonesty in connection with employment, violation of confidentiality and non-compete provisions of an employment agreement, material failure to carry out reasonably assigned duties or instructions consistent with a position, or a malicious action toward employees of Duke Energy or a Duke Energy affiliate.
Employee Advocate: An egregious act of dishonesty? A malicious action toward employees? The cash balance plan could have cleaned out the whole house!
Noon Rebuttal - April 2003Employee Advocate - DukeEmployees.com - April 29, 2003
The April 2003 Noon Meeting was cancelled, but answers were posted to questions received through the portal.
Question: What is happening with Duke Energy’s stock price? The steady fall is adversely affecting everyone's 401(k). What is the plan for turning things around? How has Enron's downfall affected the pricing? What is the future for Duke Energy?
Answer: …We are working hard to educate Wall Street on the soundness of our business plan and the progress we are making on the six strategic directives for the year. Our major objective for 2003 is to strengthen core businesses and reposition the company for the future. In 2003 and 2004, you’ll find us adhering closely to these directives and preparing for the opportunities that will come with market recovery.
Employee Advocate: Duke executives do not seem to grasp a fundamental point. Wall Street will tell Duke exactly what its stock is worth, down to a fraction of a cent. Duke can do all the “educating” in the world, but in the end, Wall Street will always dictated the price of Duke stock. It will never be the other way around. And now, Duke is laboring under the baggage of over six years of dubious credibility.
Question: I submitted a question to a previous Noon Meeting. I noted that the question was not published in its entirety and that certain words were edited out. I do not feel that the concern I raised in the question was accurately portrayed by the edited version. Why are questions not presented as submitted?
Answer: There are several instances where we might edit questions. Often, we receive questions on the same topic from several different employees. When we do, we combine the questions into one, hopefully addressing the various nuances in each individual question. Sometimes, an employee poses a question that requires clarification. If that employee chooses not to leave his or her name, we can’t follow up for further information and may have to do our best to fill in the blanks. Lastly, we reserve the right to edit questions for readability and grammar, and we sometimes provide contextual information that may help other employees understand the question.
Not knowing which question you submitted, we can’t say for certain which scenario applies. Our goal is to accurately portray and directly respond to each question. We regret that we didn’t meet your expectations in this instance.
Employee Advocate: Translation: Portions of a question that do not meet the happy talk criteria will likely end up on the floor. Questions such as: “Gee, I love my job and think that Mr. Priory is handsome and smart. Please tell me more about EBIT,” will always be printed in their entirety.
Question: In the event of bankruptcy or any other event that might require Duke Energy to need capital, is Duke Energy allowed to seize assets in the Retirement Cash Balance Plan, or accounts used to fund employee health and insurance benefits? If such assets can be seized, is there insurance to ensure that an employee does not lose these funds and benefits?
Answer: Until all plan liabilities have been satisfied, funds held in trust for Duke Energy’s Retirement Cash Balance Plan (RCBP), Retirements Savings Plan (RSP) and the company’s health and insurance plans are not available to the company or its creditors.
Employee Advocate: That question really laid things out in the open. Employees do not ask bankruptcy questions about a healthy company. Only employees that have been burnt before ask if they will lose even more of their pension. It was a reasonable question. Duke took pension money in good times. What can one expect during bad times?
Question: Could you explain how a former employee can use insider trading knowledge when exercising stock options last year and not have any accountability to the company or the board of directors? If his area was being investigated and the employee knew that there was going to be an unfavorable announcement released very soon, and the employee exercised his options just before this announcement, it must be unethical and against Duke Energy’s Code of Business Ethics. Didn't the employee have to sign the same Code of Ethics form that everyone else had to? If it's not unethical, explain why.
Answer: Yes, our Code of Business Ethics (CoBE) is applicable to all employees and it specifically states that all Duke Energy employees must act with integrity when trading securities, adhering to all applicable laws.
Federal law prohibits anyone from trading a company’s stock or other securities, including options, while in possession of material nonpublic information about that company, where the person trading has a relationship of trust or confidentiality with the company, through employment or otherwise. Additionally, the Corporate Treasurer, Corporate Controller and members of the Chairman’s Council and Executive Advisory Council are subject to additional trading restrictions detailed in the company’s Stock Trading Policy to avoid even the appearance of insider trading.
As a precaution, employees with questions on whether or not they may have material inside information at the time they are considering any trade should contact the Law Department.
Last year, the company retained an outside law firm to conduct an investigation into allegations that certain officers and directors had engaged in insider trading. No evidence suggested that individuals traded securities while in the possession of material nonpublic information.
Your question indicates specific knowledge related to the actions of an individual employee. Without knowing more of the facts, we can’t address your question further, other than to strongly encourage you to share your information and concerns with your supervisor, the Ethics and Compliance Officer or our EthicsLine. We take matters such as those you raise very seriously, and are committed to the highest ethical standards. If you or any other employee has information that an employee has failed to behave ethically or has violated any laws or regulations, we expect you to let us know so we can look into the issue and address appropriately.
Employee Advocate: Do you see a paradox with the ethics program? The “It is Unethical to Eat Stolen Chickens” course is being taught by the foxes. The foxes also teach the course to other foxes. Then they all go out for a chicken lunch!
Consider this: If one has zero ethics and is 100% controlled by greed, just what restraint is a worthless piece of paper going to provide? Why was Saddam Husein not just sent an ethics paper to sign? It could have saved hundreds of lives and a few hundred billion dollars.
The ethics bandwagon started rolling some years ago as an answer to fraudulent brokers. These con artists were shot through an ethics course, and were then expected to become model citizens. How well did these classes work? The courses taught them one thing – to lay low until the heat was off. Big time broker frauds are still in the news today.
Question: What is the company doing to address morale? After layoffs, many of us have been asked to take on additional work. Yet we’ve been told there will be no salary increases or bonuses this year. We continue to worry about our declining 401(k) accounts. It all adds up to an atmosphere where it’s difficult to stay motivated. Can we institute flexible work schedules (such as one day off a month for extra time worked) or get paid every other week instead of once a month? I think these simple changes could help improve morale.
Answer: Because morale can vary from business unit to business unit, location to location, and even person to person, we rely on local management to determine the best course of action to address employee morale issues within their businesses. Even so, employee morale is a concern that’s top of mind for Duke Energy’s senior leaders. In fact, employee morale was on the agenda of the Chairman’s Expanded Staff meeting in early April. To understand how issues such as morale affect the company, we traditionally use our annual Employee Opinion Survey to collect quantifiable data, which can then be acted upon appropriately. This year's survey will be sent to every U.S. and international employee in the June timeframe. We encourage you to respond to the survey to make sure your opinions and concerns are heard. The survey is the most comprehensive tool we have for gauging employee morale issues and determining what actions we might need to take to address those.
Employee Advocate: The beating will continue until morale improves. The employee who has lost much of his pension, lost his retirement health care, and lost much of the value of his medical insurance is not likely to be swayed by such contrived efforts such as altering paydays. That sounds like a management solution – give nothing, but sell it as a benefit. Better yet – take away something – and sell it as a benefit. Remember the booklet “The Cash Balance Plan Advantage”?
What could improve morale is resetting employee benefits to the pre 1997 level. Sorry, but the company cannot buy their way out of this one with a coffee mug and ball cap.
Any morale meetings were probably along the lines of “How can we improve morale, without actually giving anything back?”
Duke executives continue to ignore the elephant in the room, while conducting surveys. Employees have made it loud an clear for over six years what the problems are. Duke will continue to take surveys in the hopes of finding a solution with a price tag of zero.
It is a good thing that Duke Energy does not run a hospital. If someone came into the emergency room with a knife stuck in their back and bleeding profusely, what would Duke do? Why, they would take a survey, of course!
Question: In my medical plan PPO, my card uses my Social Security number as an ID. Is there any way Duke Energy can change this? It's a number I don't like to give out or have made public.
Answer: We are aware of issues related to Social Security numbers and are committed to moving away from their use with new internal applications whenever possible. A good example is the portal, which uses LAN IDs for log-on identifiers. We use Social Security numbers with the Medical Plan, however, because most medical administrators and providers recognize Social Security numbers as an identifier for their records, payment of claims, internal communications, etc. If Social Security numbers weren’t used, the claims submission and payment process wouldn’t be as accurate. Until the medical industry changes system requirements to universally accept another identifier, we will continue using Social Security numbers for Medical Plan purposes. If you’re concerned about identity theft, you might want to consider marking out your Social Security number on your Medical Plan card. Just remember that, at the time of service, you will be asked to provide your Social Security number.
Employee Advocate: This question is asked year after year. The answer is always meaningless and nothing ever changes. It is a valid tactic though. If the company stalls long enough, sooner or later, all the employees will be dead – and then it will not matter.
“We generate solutions.”