DukeEmployees.com - Duke Energy Employee Advocate
Noon Rebuttal - Page 1 - 2001
Noon Rebuttal - March 2001
The Noon Meeting was hosted by Rick Priory in Charlotte North Carolina March 15, 2001.
Advocate: Yes, but many of these “investigations” were merely telephone interviews.
The results of some investigations have been kept secret. A Senate panel is also starting its own investigation. One cannot get the truth out of these cats without subpoena power: “Investigations by the state attorney general and federal regulators are continuing, but remain largely secret. The Senate panel could offer the most open and wide-ranging examination yet of alleged misconduct among power sellers. The bipartisan panel expects to begin requesting documents from power producers as early as today and begin hearings in a few weeks. Committee members stress that they are hoping the power companies will cooperate but are ready to issue subpoenas if necessary."
Everything has NOT been whitewashed: “Last month, the Federal Energy Regulatory Commission said it found evidence of $124 million in 'unjust and unreasonable' charges during the severest periods of electricity shortage. The commission, often criticized for being too lenient on private power companies, ordered the firms to refund the money or further justify the charges. Some firms are contesting the findings, saying the prices they charged were justified.”
Here is a problem with previous investigation attempts: “Investigators and regulators have faced a vexing challenge trying to unravel the complex financial workings of the large power traders. The companies closely guard information, and some recently refused to comply with subpoenas from the state Public Utilities Commission, which is also probing the power market.”
The link below it to a article about the Senate investigation. The Senate is concerned about “mixed messages” offered by power generators. Out of one side of their mouths, they talked of the huge profits that they would reap. Out of the other side of their mouths, they talked of the great savings for ratepayers. Well, you know how that turned out. Duke Energy and Rick Priory are mentioned in the article.
Notice the same pattern with the cash balance plan pension conversion. Actuaries boasted of the huge pension savings they could generate for employers. Then the actuarial firms and employers told the employees what a great deal it was for them! The truth: some ratepayers now cannot pay their electric bills and many retiree’s only hope is to die early.
Rick Priory: We made Business Week's list of leaders in 2000 sales, jumping to No. 18 from No. 66 last year, after a 127 percent increase in sales. Data from 900 companies was used to compute the list.
Advocate: Yes, but Duke Energy did not rank in the “100 Best Corporate Citizens for 2001.” The problem is not lack of revenue; it's lack of ethics. The ethics policy has received a makeover and has been spoon fed to employees. The rub is that employees recognize hollow words, devoid of action. The ethics policy only serves to amplify the injustice of the cash balance conversion. It is one thing to be a scoundrel. There are many truthful scoundrels. They live to separate you from your money, and they will tell you that. It is quite another to be a scoundrel and a hypocrite. These are the types who smile in your face and say kind words as they lift your wallet.
Question: There was a recent article in the Wall Street Journal about executives selling their shares of Duke Energy stock. Can you put that in perspective?
Rick Priory: Many of our executives, as well as executives at other comparable companies, are incented with stock options, which often represent a large portion of their annual compensation. If these options aren't exercised, they expire and lose all of their value. And, Duke Energy's options are attractive today, as a result of our company's tremendous performance in 2000. At Duke Energy, there are restrictions on when senior level executives can trade stock. In fact, these executives, whose work gives them access to financial performance data, can only trade in Duke Energy stock during four 30-day periods each year. These windows begin two days after each earnings release. That's why you may see some clustering in executive stock sales. In fact, some of our executives did exercise options recently. They were simply trying to capture the value they've earned.
Advocate: Fair enough. You only wanted what the company had promised you and what you had coming to you. But you see, employees only wanted to capture the value they had earned in the pension program when they retired. They only wanted the amounts that they had been promised year after year. They wanted them at the retirement ages that had been promised to them year after year. They only wanted the retirement health coverage that had been promised to them year after year. And, many employees worked far longer to earn their pension benefits than the executives did to earn windfall stock option profits. Many employees risked their lives, and some lost their lives, attempting to gain the promised retirement benefits. Some worked 25 years, only to have the promised benefits snatched away at the last moment. What do we have left?...a new, improved "ethics policy."
Noon Rebuttal - February 2001
Rick Priory hosted the Noon Meeting in Charlotte on February 16, 2001.
Advocate: "If we continue to deliver on our promises..." The company cannot even deliver on pension promises made to employees for 30 years!
Rick Priory: In the past, our growth rate was an issue with analysts. In 1998 and 1999, analysts were skeptical about our ability to grow six to eight percent a year. As a result, we didn't have a lot of credibility.
Advocate: "As a result, we didn't have a lot of credibility." A company that cannot even keep promises to employees will never have any credibility.
Rick Priory: Now, based on our results, some of those same analysts were wondering why we stuck with eight to 10 percent! So last month, we increased our earnings target to 10 to 15 percent for 2001. This is a huge commitment to investors...
Advocate: "This is a huge commitment to investors..." A huge pension commitment was made to employees. But that commitment was dropped when it no longer was convenient to keep. The growth rate was achieved, in part, by the benefits taken from employees. Now that the company is rolling in wealth, do you think that they have ever thought once about giving us our benefits back? The answer is no. Mr. Priory has only jacked up the growth rate "promises" even more.
Rick Priory: "Business as usual" won't get us where we need to go.
Advocate: Maybe, just maybe, if everything falls into place, pension grabbers will end up exactly where they need to go.
Rick Priory: The Federal Energy Regulatory Commission (FERC) recently released a report investigating allegations about generators withholding or limiting capacity to drive up prices. The FERC, "did not discover any evidence suggesting that the audited companies were scheduling maintenance or incurring outages in an effort to influence prices.
Advocate: This "investigation" consisted largely of phone calls made to the power companies.
Rick Priory: We're off and running with GridSouth, and it will be in operation by about mid-December. The FERC is in general agreement with the filing we've submitted, and we're selecting the leadership team. It will happen.
Advocate: A site vice president said that GridSouth was being formed so that it would be independent of Duke Energy. He went on to say that one of the GridSouth owners would be...Duke Energy. Doh! Everything will be made legal by putting a Chinese wall between generation and transmission.
Employee: "Some teammates are upset regarding the fact that most salaried workers receive a substantially higher incentive percentage than hourly teammates and certain lower salary band teammates. This appears to place higher value on salaried teammates. Since their midpoints on average are increased each year in increments similar to the hourly general increase and they are given annual increases based on job performance, it smacks of a caste system. This will be reconciled by using industry comparisons showing how our salaried teammates stack up against other utilities. Yet when hourly wage comparisons are made, they're compared to our region, which includes many low-paying jobs, and aren't comparable to utility workers nationwide. It gives many the impression that the company values them less, even though they're expected to work all night to keep units on line, repair downed lines in ice storms and roll out of bed in the middle of the night on emergency call-outs, etc. Are we all in this together or not?"
Rick Priory: We value all of our employees and we are, indeed, in this together! The implementation of our business plan has been evolutionary, bringing us into new markets and lines of business. It has been a time of change and opportunity. Our future success continues to depend on our ability to remain competitive, create a diverse workforce, implement our strategy, create shareholder value, grow the business and meet our financial commitments. Managers and professional employees are playing an increased leadership role in achieving sustainable business results. Because of this, a greater emphasis was placed on their incentive pay in 2000 for rewarding business results. Additionally, just as the business units vary so do the markets in which they compete. Market comparisons vary, incentive plans vary and so do the comparison groups for the different jobs classifications.
Advocate: Ouch! You hit them where it hurts with that one. And for your effort, you got a little "soft shoe." You have, no doubt, noticed that management has a pot of tricky phrases and buzzwords. When a question is asked, they just reach into the pot and toss out a few. It does not matter if the answers are meaningful or even if they makes any sense. The answers can usually be translated as follows: "You are not getting any more money; you are not getting your benefits back. Now get out there and do more!"
Employee: How much money does the California Power Exchange (CalPX) owe Duke Energy for power sold to PGE and SCE? If PGE and/or SCE declared bankruptcy, could they default on payments to the CalPX, which could then default on payments to Duke Energy?
Answer: DETM is one of many suppliers of natural gas to wholesale markets in the West. Some California utilities and their parent companies have said publicly that they may not be able to pay their bills due to their current financial situations. While we don't discuss specifics of any of our customer relationships, we can discuss our risk management strategy, which includes closely evaluating each of our natural gas transactions in forward markets, including natural gas transactions with the parent companies of California utilities and their unregulated subsidiaries. We are also managing our risk by selling the majority of the power DENA plants produce in forward markets, and encouraging California's utilities to buy more of these contracts from DENA or other companies to manage their own risk exposure. We have signed these types of contracts with PG&E and Southern Cal Edison at competitive prices, and plan to sign more of these types of contracts with utilities in the future.
Advocate: The above is the complete answer given. It is typical; a lot of words, but the question is completely evaded. The translation is: "We don't discuss specifics with employees." It is fine to ask management questions just to see what kind of outlandish answer you will get. They are usually good for a few laughs. But anytime you want the facts, you must consult an outside source. That is how we found out about the pending layoff in 1988. Employees had to consult outside sources to find the truth about the cash balance conversion. All the company will ever give you is happy talk. To answer your question, we quote the Associated Press:
"Duke, for instance, reserved $110 million in the fourth quarter in case it doesn't collect on debts owed for electricity sales in California. As of Dec. 31, Duke said it had about $400 million in outstanding electricity bills in California."
In bankruptcy proceedings, creditors typically receive less that 100% of what is owed. Also, under California law, the state can take the power plants if they want to!
Employee: I understand that Lake Norman near Charlotte was built on land acquired by purchase and/or right of eminent domain, at times against an owner's will. If that's the case, how does Duke Power (or Crescent Resources) justify the immense profit they are now garnering by the commercial development of that land?
Answer: None of the property under or around Lake Norman was acquired by Duke Energy (or Duke Power) by eminent domain... Only the cost of the land under the lake could be placed in rate base. The remainder of the land had to be placed in Duke Energy's unregulated business (Crescent Resources)... Over the last three decades, Crescent has attempted to balance quality land management and responsible real estate development in an environmentally sensitive manner...
Advocate: That is the company line. For another opinion, click the link below:
Employee: I haven't received my new medical insurance card. I changed plans for 2001. According to the Employee Benefit Center, cards should arrive by mid-January. Why is it taking from the end of the enrollment period (Nov. 3) to the middle of January to get a new insurance card? The system should be such that once the confirmation period has passed, the information is processed and cards mailed to employees. It's an inconvenience to have to carry an 8 ½" x 11" confirmation sheet to the doctor's office and then have them call to confirm that I have insurance. We should have had these cards before 2001.
Answer: The collection and management of medical coverage information requires the transferring of data among several different systems. Many factors impact the timing of transferring data. Once the enrollment window closes, a series of edits are run to ensure that all enrollees still remain eligible, contribution rates and deductions are properly calculated, etc. In addition, some benefit administrators can't process future-dated transactions and processing of data does not occur until year's end. Therefore, Medical Plan ID cards are typically produced late in the year or during the first couple of weeks in the new plan year. Corporate human resources is pursuing several options that will improve the ability to more quickly process enrollment data. Medical cards for 2001 have been mailed for all plan options. If you have not received your card, please contact an Employee Service Center representative at 704-382-4724 (local to Charlotte) or 1-800-473-4724 (toll free). As additional information, medical coverage is not technically considered medical "insurance" since coverage under the Duke Energy Medical Plan is not provided through an insurance company.
Translation: "We blew it." The implication is that the delay is justifiable because it in not an "insurance" card! Well, la-de-da! Vital data is constantly withheld from employees. But the company wants to be sure you know that it is not an insurance card.
Employee: In communicating the Retirement Cash Balance Plan (RCBP) to employees, I thought statements like, "excess cash in the plan at years-end would be credited to employee accounts" were made. Have there been any except for the Policy Committee?
Answer: Communications around the Retirement Cash Balance Plan (RCBP) did not state that excess cash would be credited to employee accounts. Individual cash balance accounts grow through pay credits and interest credits. There have been no "special" credits given to Policy Committee members in the RCBP. Plan assets are used to pay plan benefits and expenses, and no reversions have been made to the company.
Advocate: Don't even get us started. First, you have no real account. The amount in your dummy account may or may not have any relationship to reality. If it has not equaled or exceeded your protected amount (very possible), it means nothing. It is designed to make you think you are actually accruing benefits during the wearaway period, which may last for many years. You should know by now where the "excess" funding goes. Hint: it's not to the employees. Take a 1 billion dollar plan fully funded, with no excess, and convert it to pay the employees only one-half billion dollars - suddenly there is a one-half billion dollar excess! The answer stated that no "special" credits were given to Policy Committee Members. By giving you a useless, but technically correct answer, they hope to evade your real question. They knew exactly what you were asking about, but chose to ignore it on a technicality. (As in: "No, your insurance card was not late, because it is not an insurance card.")
It was the "Executive Officers" who reaped the cash balance plan benefits. In 1998 Rick Priory received a $337,100.00 SUPPLEMENTAL credit to his Executive Cash Balance Pension Plan! This was in ADDITION to his opening balance "derived from a variety of factors." Mr. Coley received $102,800, Mr. Osborne received $137,062, and Mr. Blackburn received $89,075, all in SUPPLEMENTAL credits to their existing amounts.
What Duke tells you is to throw you off course. What they don't tell you is to keep you in the dark. Yes, they still subscribe to the old "mushroom theory" of management:
To learn one way the pension "excess" gets sent to the bottom line and to the CEO, click below:
Noon Rebuttal - January 2001
Rick Priory hosted the Noon Meeting in Charlotte on January 15, 2001.
Advocate: It was only last June that Mr. Priory stated: “we're not trying to appeal to small investors...” We suppose that their money is suddenly good enough for Duke to take. Senior management realized that a dime just might slip through their fingers. We are touched. Now the poor, wretched, huddled masses can purchase Duke Energy stock!
Rick Priory: … In our case, our stock price loss of $15 ($85 down to $70) represents a $5.5 billion loss of market capitalization.
Advocate: The Duke Energy stock sell off is an interesting point. Typically, an investor who is considering a profitable stock sale will wait until after the turn of the new year to sell. That gives them a whole year before their profits are reportable to the IRS. Generally, they will sell near the end of the year only if they feel the stock is going to tank. It is always better to pay taxes on profits than to watch those profits evaporate by trying to save tax dollars. Several company officers, including Mr. Priory, unloaded millions of dollars worth of stock options late last year. Company insiders always have the benefit of superior fundamental information. It appeared that these insiders were unwilling to hold their options into the new year. So far, they are smelling like a rose.
Rick Priory: Related to the California situation is restructuring activity in the Carolinas. On January 4, I participated in a restructuring meeting to discuss legislation on electric restructuring in North Carolina. As you might expect, legislators are nervous about restructuring in view of the situation in California. California's problems, however, are a direct result of the fact that they haven't built any new generation in about 15 years. Our recommendation is to move forward with deregulation of the wholesale market first (which is what we've recommended all along), followed by retail deregulation in 2005 or 2006.
Advocate: And just who do you think will have their interests protected at all cost: A. Ratepayers, B. Employees, C. Duke Energy? It is easy to win when you make the rules and then change them at will.
Rick Priory: Finally, there were some rumors of losses in our trading operations.
Advocate: Well, don’t look here. We do not have to deal in rumors. The facts are abundantly available from credible, public sources. All one has to do is look.
Rick Priory: The Department of Justice filed a suit on behalf of the Environmental Protection Agency against Duke Power's eight coal-fired plants, arguing that while upgrading the plants, we didn't comply with new source requirements… The bottom line: Duke Energy would never walk a tight line around environmental compliance. We stay on the conservative side of compliance.
Advocate: We would find that statement more believable if Duke Energy had not walked a tight line around the ERISA pension laws. If the company has stayed on the conservative side of compliance, they would not be under investigation by the Internal Revenue Service, Department of Labor, Equal Employment Opportunity Commission, Treasury Department, and various law firms. Aided by their consultants, they used every loophole available to extract the maximum amount from the employee’s pension fund.
Rick Priory: Duke Power and Piedmont Natural Gas are combining forces to look at how we can work together with meter reading and related activities to reduce costs to both companies. Additional projects, that have the potential to contain costs and enhance customer satisfaction for each partner, are also under consideration.
Advocate: This could have been done years ago. Instead, much energy was wasted by blaming Piedmont Natural Gas for all of Duke’s problems.
Rick Priory: The Financial Times named Duke Energy the world's most respected utility company again this year. Researchers surveyed 720 CEOs from around the world, asking which companies and business leaders they most respect and why. We were followed in the utilities category by Vivendi (#2), Scottish Power (#3) and EDF (#4).
Advocate: We beg to differ. Clearly, Vivendi is number one. Mr. Priory has vehemently stated that Duke Energy is NOT an utility company. He has refused to attend meetings because other utility CEO’s would be present. He has refused to be associated with utilities in any way, shape, or form. But when awards are being passed out, suddenly Duke Energy is an utility! It would seem that since Duke Energy is not an utility, the award would be forfeited by default. The chameleon will change colors when it suits his purpose. He will change his color back when it is beneficial to him to do so.
Rick Priory: First of all, we want to do what the legislators want. If they want to deregulate the market, then we're on board; if they don't, we're on board with that as well. If they ask our opinion, we're going to tell them we'd like to see a very deliberate move to a rational system that avoids the risks encountered in California. That's the path they're currently heading down. The task force recommendation to the North Carolina legislature in May would not have resulted in the same problems California has faced. In fact, the actions the task force recommended are proving to be sound in spite of the California problems. We recommended bilateral and forward contracting, and that the wholesale part of the business be deregulated first to get supply and demand in balance. You protect customers during that period of time by fixing prices for a four-year period of time. So as we're getting the wholesale market straight, Duke Power and CP&L are fixing the price. In California, they fixed the price, but they made the utilities sell their generation. Those utilities then ended up buying about 85 percent of their power the day before they need it. They were forced to operate this way, however, because the utility commission told them that if they were to buy forward and the spot market showed power to be less expensive, then the expense would fall to their shareholders. We're trying to make sure things like that don't happen in the Carolinas. We have a real obligation and commitment to make this work in the Carolinas.
Advocate: Everything will be solved by a collusion to fix prices? We don’t want to hear anymore!
Rick Priory: Our goals remain very much as they were, although the probability of achieving success increases considerably with Jacqui Gates on board. We have had pretty aggressive goals regarding the introduction and progression of both minorities and females within the company. We've had some successes, although not as many as we would have liked. Jacqui has a long history of success in this arena. With this new focus, I expect we're going to be very successful. We have terrific talent in this company, from all walks of life. Our goal is to marshal the best of that talent, regardless of each individual's background, and put the best people in key roles to ensure our company's success.
Advocate: We must admit that male and female employees of all races were equally deprived of retirement medical and pension benefits. (We never said that age discrimination was not involved.)
Employee: There are a number of employees and retirees who worked at our facilities, both fossil and nuclear, during the time prior to recognizing the hazards of asbestos. Some were exposed to this substance. I know of a number of employees/retirees who have developed asbestos-related illnesses, some of which have proved fatal. Does an affected person have to pursue formal legal action to gain any form of restitution or is there an established policy, which addresses this matter?
Answer: You do not need to pursue formal legal action if you believe you have lung problems as a result of exposure to asbestos-containing materials at a Duke Energy facility. Rather, you can participate in the asbestos medical monitoring program that has been established for Duke Energy employees and retirees. If you believe you have lung problems because of exposure to asbestos at Duke Energy, tell your immediate supervisor or contact Duke Energy's medical department facility where you work or last worked to get into the medical monitoring program. If it is determined that you have lung problems as a result of exposure to asbestos at a Duke Energy facility, you can receive compensation by contacting our risk management department.
Advocate: You hit a nerve with that question! Asbestosis is a dirty little secrete that Duke does not like to acknowledge. Yes, you can get into Duke’s “asbestos medical monitoring program.” “Company doctors” will monitor you, and monitor you, and monitor you. They will “track and trend,” take X-rays, and monitor some more. When you eventually die, no more monitoring will be required and you will no longer be enrolled in the program. If getting hopelessly tied up in Duke’s stonewalling process is not what you had in mind, see an attorney immediately. It is important that you do not delay. As asbestos producing companies continue to go bankrupt, less and less money is available to pay claims. Employees in the asbestos medical monitoring program have said that all that ever occurs is monitoring. These employees have said that the company doctors just cannot seem to ever find any asbestos related damage! Imagine that! These same employees said that when they sought the services of an attorney and private physician, they were diagnosed with asbestosis and received a settlement. They did not say the settlement came quickly. Even after a settlement is awarded, the company stalls as long as possible before actually paying the settlement. Employees have said this. An Attorney who has handled these cases has said that this is always the case.
About a decade ago, some retired employees received asbestosis settlements from Duke Energy. The company paid the agreed amount for a while, then stopped. The employees had to take action to get their payment restarted. This happened again and again. Finally, Duke was cited for having an uncaring attitude toward the retirees!
Before Duke had an asbestos program, employees were told that asbestos would not cause any harm. Last year at this time, there were at least thirty former Duke Energy employees with asbestos related lung cancer. Management was only half right. Employees working with asbestos will not cause lung cancer to those in management.
Employee: Would HR consider exploring new ideas related to employee parking? The cost of parking is very expensive and usually the lower seniority and lower salaried employees are the ones who absorb this cost. Many flexible alternatives have been introduced in benefits lately. Let's continue to show we are leaders unafraid to explore innovative ideas. For example, I celebrate my fifth anniversary with the company this year. I wish I had the flexibility to exchange my third week of vacation for one year of free parking instead, or that I had the flexibility to exchange unused sick time for paid parking. I'd be grateful if HR would consider this idea and respond.
Answer: Parking is an issue of keen interest to many employees - particularly those working in Charlotte, which places a high premium on limited parking availability. Parking procedures vary across the company based on business need and availability. In the uptown Charlotte area, company-paid parking assignments are made on an individual basis, based on length of service. If you have at least 15 years of service and would like to submit a parking application, you can do so through the electronic forms repository (form #24095, Parking Space Request). We do not currently have plans to change the parking policy, but will continue to review our options and your suggestions.
Advocate: The employee made a nice try. He/she offered to give up vacation for parking. The employee tried to use the old “leaders with innovative ideas” ploy on management. Management only uses the buzz words to get what they want. If it is taking away benefits from employees, then by Jove, they will lead with innovation! When it comes to employee benefits, the company has no incentive to lead with any improvements. The company surveys other companies, and then reduces our benefits accordingly!
But the company does have a deal for you. When you get in ten more years of service, be sure to fill out form #24095! Hey, at Duke Energy, if employees have problems, the company has solutions. Sure, the solutions may miss the mark by ten years, or so. You want a parking place. You can fill out a form in ten years. We were promised that we would have decent retirement benefits at age fifty-five with medical coverage. Now we can get it after ten more years of toiling. And as far as retirement medical benefits go, you are on your own.
Employee: Frequently in the Noon Report when a question is asked about pay and/or benefits, the response talks about 'benchmarking' and what the other companies are doing. Instead of waiting to see what other companies are doing, why doesn't Duke Energy take the lead and say, "This is what we are doing." It seems as if Duke, in the pay/benefits area at least, always wants to 'test the wind' instead of creating its own wind.
Answer: Market knowledge is critical in determining Duke Energy's success in many areas - from merchant power generator, energy trader and as an employer of top-flight talent. Benchmarking allows us to compare the ongoing competitiveness of our pay and benefits offerings with that of comparable companies. That's important to us because offering competitive pay and benefits is one thing we can do to help both employees and the company prosper in a competitive market. Through this process, we frequently discover that we're actually market leaders, or we take steps to become market leaders, in the area of total compensation, which includes base pay, benefits and incentives.
Advocate: Again, nice try. But understand that Duke Energy only leads in reducing benefits. “Benchmarking” is a code word for benefit reduction. Benchmarking is used to take away benefits and it is used to explain away benefit concerns of employees.
There was a time when Duke said: “This is what we are doing.” Senior management created the pension program and used it to lure employees to work for them. After many employees had spent/wasted most of their lives with the company, Duke started benchmarking. The benchmarking revealed that there were company with crummier pension benefits. So, Duke “took the lead” in blindly following the companies with the cheaper pension programs. There is a fly in the ointment with this approach. Just what about the thirty years of promises? Well, Rick Priory has zero concern about these promises. He is only concerned about promises recently made to Wall Street investors! Oh, Duke creates its own wind, all right. But that wind has never blown any good to the employees. That wind only blows millions of dollars worth of stock options to executives, and hundreds of thousands of dollars in supplemental credits to the “executive cash balance plan.”
There they go again. Using the term “total compensation.” That was precisely the term used to explain that our pay was lower than many companies, but our nifty retirement pension and medical benefits would balance things out. Get it? A good pension added to mediocre pay equals the total compensation. After employees had put in the required years, the second leg of the total compensation evaporated!
Employee: (Supervisors are employees also.) How should a supervisor respond to an employee who says they are targeting their job performance in the 50th to 75th percentile range and who justifies this behavior by stating it is in line with their compensation?
Answer: Business units have some discretion in establishing compensation policy and benefit levels to fit their business needs. There is no ONE policy. At the same time, we line up both compensation and benefits to be competitive in the markets where we compete. We evaluate positions and benchmark them against various companies of comparable size and in the geographies in which we compete for talent. We keep our basic pay policy competitive. Then, when it comes time to make individual compensation decisions, we consider a number of factors, including the individual's performance. If you manage an individual with average or less than average performance, that should be reflected in his/her performance rating, which has a direct impact on his/her compensation.
Advocate: This employees has evidently noticed the discrepancy in what Duke wants and in what Duke is willing to pay for. Duke has stated that they want top quartile performance from employees. Yet, the “total compensation” is closer to fifty percent. And the rules can change any day of the week. Just because Duke makes the rules, does not mean that they have any intention of following them. They will just change the rules to suite their purpose. Can you imagine being in a card game where your opponent can change the rules at any time? It is very difficult to win. It is very difficult to break even!
Employee: A retiree who recently cashed out his Duke Energy retirement fund was told by the plan administrator in Orlando that a wire transfer couldn't be made; a check would be sent to his home. Not only did he lose a week's interest on an amount well into six figures, but it was sent by First Class mail. Don't you think a check of this size warrants Priority or Express mail? And why not wire transfers? It seems this is a basic tool of bankers and investment funds.
Answer: The administrative procedures established for the both for the Retirement Cash Balance Plan (RCBP) and the Retirement Savings Plan (RSP) call for checks to be delivered via First Class mail which, in our experience has proven to be timely and secure. The mail-out process reduces potential delays due to misplaced checks or wire transfer difficulties. For rollovers, checks are written to the rollover institution, but are still mailed directly to the participant. This lets the employee know that the funds have been delivered to the institution. The size of the distribution is not a determining factor on whether to use first class mail or wire transfers.
Advocate: Oh! We see. That’s just the way thing have always been done. Have you noticed that there is a willingness to change only when it squeezes something out of the employees?
Employee: When will it be determined if storm costs will/will not be included with the EIP?
Answer: This issue is currently being reviewed, and we expect a decision soon. Details will be shared with affected employees when decisions are finalized.
Advocate: An actuary was asked what is the sum of one plus one? His answer: “If I can add all the footnotes I want, the sum will be anything I want it to be.” When the rules are made up on the fly, the results will always be exactly what was expected by the rule maker.
Employee: A recent newspaper article indicated that the only way companies can spend excess pension funds is to close their pension funds and offer different, less expensive plans, such as a cash balance plan. Did Duke Energy access any excess pension funds in the conversion to cash balance? If so, how much, and what was the money used for?
Answer: There have been no reversions of pension assets from the pension trust to Duke Energy. Plan assets are used to pay plan benefits and plan expenses. If you're interested in reviewing the cash flows of the pension assets, you should refer to your Summary Annual Report (which was mailed to all plan participants' homes).
Advocate: We love these questions! It is true that companies can access “excess” pension funds if the plan is terminated. When companies make a thinly veiled threat to terminate the pension plan, they are usually bluffing. First, the employees would receive the entire amount of pension accruals. The ridiculously small amount that comprised your initial cash balance was NOT the entire amount you had accrued. This was because Duke did not terminate the plan; they converted it. Also, if the plan is terminated, there is a fifty percent penalty payable to the IRS. Those are two very good reasons why most companies are not about to terminate plans. Duke was looking for a way to get their hands on the employees pension money, not have to give them the full amount that they had earned, and not pay any penalties to the IRS. The easiest way to take money from employees was to eliminate the early retirement subsidy. Your pension dollars were actuarially carried forward to age sixty-five. When they were brought back to the present day value – you were left with peanuts. Goal one accomplished; they have your money. Since the plan was not terminated, Duke cannot just help themselves to the pension funds. But in a conversion, the IRS allowes some fund expenses to be paid from the excess. Well! If one can spend fund money, one does not have to meet these expenses out of earnings! Goal two is accomplished; the bottom line is enhanced. What about the fifty percent penalty? Goal three is accomplished because the plan was not terminated and no penalty is required in a conversion. It gets even better! Now that the company has forced you into a cash balance plan, they are in a better position to actually terminate the plan with no penalty! If by hook or crook, the company can shift enough employees into other plans, the old plan can be terminated with no penalty. Do you think such events happen by accident? Hardly! Years are spent scheming to be able to squeeze to maximum dollars from the employees pension fund. Yes, Duke left a few details out of their explanation. They wanted you to believe that the conversion was made because the new plans are sooooo easy to understand. That is rich.
You were advised to consult the Summary Annual Report. You can consult it all you want, but your questions will never be answered. The summary is not designed to provide you with any details. It is designed only to confuse and befuddle you. The intention is to lay enough stumbling blocks in your path to the truth, that you will just give up trying to understand what happened. When you give up, Duke wins again!
Employee: Identity theft is becoming a serious problem. The federal government offers several suggestions for minimizing risk, one of which is, "give your Social Security number only when absolutely necessary, and ask to use other types of identifiers when possible." The new Duke Energy ID cards, which give an employee number rather than Social Security number are a step in the right direction. However, our Medical Plan cards still reveal employees' Social Security numbers. What action are we taking to provide an alternative Medical Plan ID?
Answer: We use Social Security numbers because, universally, 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 aren't used, the claims submission and payment process would have a higher degree of inaccuracy. Until the medical industry changes the system requirements to universally accept another identifier, we will continue using Social Security numbers for Medical Plan purposes. If you're concerned about identify theft, you may 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.
Advocate: Mark out your Social Security number? Maybe you were expecting a little more high tech solution?
Here is an interesting Social Security number story. One employee was explaining to another employee about the possible danger of Social Security number theft. The employee listening was not buying it. He belligerently said: “And just how is anyone going to get my Social Security number?” A third employee was observing the conversation. He reached over with a barcode reader, and shot the employee’s ID badge. In less that a second, he had the unbelieving employee’s Social Security number in his computer! It is not clear if the employee ever knew what happened.
Employee: Does the Board decision to keep the dividend at 55 cents per share (27.5 post split) mean that the dividend is frozen indefinitely? Or is the dividend still frozen until it becomes 50 percent of earnings as was the previous policy? Please clarify.
Answer: Our Board of Directors adopted a dividend policy that maintains the current quarterly payment of 55 cents per share (27.5 cents per share after the stock split). The revised dividend policy is no longer associated with a 50 percent earnings payout target, and will not be tied to a payout percentage of any specific amount. At this time, the Board has not set a timeline for review of the dividend policy. The dividend policy was revised to meet the financial needs of our company, which has evolved from a regulated utility to a high-growth energy company. In making this revision, we attempted to strike a balance between providing a competitive dividend yield and ensuring that cash is available to fund the company's growth. This policy provides investors the advantage of a regular quarterly dividend and the potential for share price appreciation that accompanies a leading, high-growth energy company.
Advocate: We understand your dilemma in trying to keep up with senior management’s constantly changing rules. The old rule is out. Now, the new rule is in. When Duke makes a promise to you, look at it as a promise written in sand by the seashore. It is only good until the next wave comes in.