DukeEmployees.com - Duke Energy Employee Advocate
Noon Rebuttal - Page 2 - 2000
Noon Rebuttal - June 2000
Rick Priory hosted this meeting on June 15, 2000 at the Maine Independence Station near Bangor, ME.
Business Unit Updates:
Advocate: Duke Energy and Boeing should get along famously. The Boeing employees have been in a battle with management for years over pensions and other matters. A retired engineer, Mr. Don Shuper, has been spilling the beans about Boeing for some time. To visit Don Shuper's website click the link below:
Rick Priory: Duke Energy Field Services announced that it would postpone the Initial Public Offering (IPO) of common stock, which had been planned for late May. We said early on that we would only bring this IPO to the marketplace when conditions were favorable. In terms of investor reaction to the delay, the marketplace understands that we looked at the facts and did what we originally said we would do.
Advocate: It is wonderful that senior management occasionally does what they originally said they would do. Have you ever noticed that management will do what they said they would do when it is in their favor? When it is in the employee's favor such as promised pension payments, enhanced early retirement, and retirement health insurance coverage, management's memory gets soooo foggy.
Rick Priory...We conducted our first online reverse auction for coal recently. It's called a "reverse auction" because prices start high and move downward.
Advocate: That sounds a lot like our retirement plan. We were promised certain pension payments after 30 years, but these payments just keep moving downward.
Advocate: This membership does not come without cost. The company does not seem to have the money to keep its retirement commitments to employees. Yet, the company has money to throw in a mud hole!
Rick Priory: Rich Osborne, who had been our executive vice president and chief financial officer for a number of years has assumed the new Policy Committee role of executive vice president and chief risk officer.
Advocate: Capital move! With all the risk Duke is piling up, someone certainly needs to be looking at it. If you have not read about the new position and risk, click the link below:
Rick Priory: The reason companies normally do that is to try to make their stock more attractive to small investors. Many investors in regulated utilities are small investors who are resistant to buying stock at $60 a share. However, we're not trying to appeal to small investors...
Advocate: Management is not trying to appeal to small investors, employees, or any other non-high-roller types. Management feels that these people smell like a wet dog.
Employee: I am a technical worker at La Gloria gas plant, the plant that was going to supply all Duke Energy's plant's gas needs. Why did Duke Energy sell the plant, and are there going to be other sales around the South Texas area?
Rick Priory: ...We have told the Street that the most successful players in this business will be those who know "when to hold them and when to fold them..."
Advocate: As we have said, just listen to Mr. Priory's "casino language." He is a gambler at heart. He will gamble with your retirement future, but never his!
Employee: (Questions were asked about the use of Social Security numbers to log onto the IPO offering.)
Rick Priory: The decision to use Social Security numbers, rather than employee IDs, was made based on our experience that many employees aren't familiar with their employee numbers, and our belief that using that number would have added additional complexity to the process for many employees...
Advocate: We just do not get a lot of credit, do we? Investment tip: If your employee number presents a challenge, maybe you are not ready to move into the world of IPO's.
Employee: I know that Duke Energy is attempting to provide a more diverse work environment. However, this isn't reflected in the current Board of Directors...
Rick Priory: ...Our current 13-member board includes one minority and one female...
Advocate: Tokens acknowledged.
Employee: My question comes from a April 7 memo concerning Virginia Power's withdrawal from the mixed oxide fuel project to support their changing business needs and strategy. What were the business needs and strategy of Virginia Power that would make them change from using this fuel? How safe will this fuel be to work around? Was safety a reason for Virginia Power's withdrawal?
Rick Priory: According to Virginia Power, their withdrawal from the project was due to changes in their company and the electric industry...
Advocate: MOX fuel offers little risk - when you are sitting in the board room and the nuclear plants are miles away. Click the link below to read comments made at the Duke Energy Shareholder's meeting for other opinions:
Employee: I'd like to get a listing of the management fees for the investment funds in our Retirement Savings Plan (RSP).
Rick Priory: Typically, investment management fees are stated in basis points with one basis point equaling one-hundredth of one percent (i.e., 100 basis points = 1 percent). Like mutual funds, investment management fees in the RSP investment funds are accrued daily from the fund...
Advocate: Mr. Priory went on to list the management fees for each fund. Hey, is this the start of a new trend? You ask a question and you get a factual answer. It was probably just a fluke occurrence.
Employee: I started working for Duke Energy when I was 18 years old. At that time, I couldn't participate in the retirement plan because you had to be 21 to participate. Now you can participate at age 18. Has any thought been given to giving everyone credit toward retirement for years actually worked at Duke Energy, regardless of what age they were when they were hired? I have three years of service with Duke Energy that aren't included in the retirement calculation.
Rick Priory: While the pre-merger Duke Power retirement plan did not grant creditable service until age 21, vesting service began as early as age 18. So your age 18 to 21 service enabled you to vest earlier in your retirement benefit. Effective Jan. 1, 1999, the Retirement Cash Balance Plan was changed to use the same minimum age requirement for participation as the Retirement Savings Plan (age 18). The company decided not to apply this change retroactively to increase benefits that had been earned previously in accordance with plan provisions then in effect.
Advocate: Your retirement benefits are constantly being chipped away, and in some cases blasted away! An employee used to have to be 30 years old to start accumulating retirement benefits! Someone asked the question "why" in "The Duke Power News." The company told the truth at least once. They said that the company saved money that way! That is still the real answer to most benefit questions, although the company seldom lets it slip out.
Employee: Since Jan 1, 1999, I started keeping track of the Retirement Savings Plan (RSP) stock prices in a spreadsheet for plotting and trending purposes. I do this because the information is not provided by any other means. When people find that I have this information, they want me to send them the spreadsheet regularly. An engineer shouldn't have to provide this second-hand information to coworkers, supervisors and department heads. It should be provided by the people who manage the RSP, and placed on the Intranet. Why isnít this done?
Rick Priory: Several issues of the monthly Noon Report (with the most recent being the November 1999 issue) detail the process for determining unit values (the information which, I believe, is referenced in your question). Our retirement plans are administered by a third-party administrator through the Retirement Benefits Center. We are in the process of reviewing possible modifications to the Center's computer systems to provide this additional information. In the meantime, you can get the unit values of the RSP investment funds, the number of units you own or the current value of the amount of your investment in the funds by calling the Center's interactive voice response (IVR) unit as follows:
1. Dial 1-888-465-1300.
Advocate: This employee is so right. He should not have to do his job and management's job also. Just as employees should not have to study pension law at night to find out how badly they have been ripped-off. But, if the employees do not do it, it will not get done. Management is off courting investors, wooing Congress, and pursuing "deal flow." Mr. Priory reminds us that he answered this question just last year. The implication is: "I wish you would stop asking that!" Mr. Priory does not seem to grasp that the reason the question is still asked is that he did a very poor job of answering it previously. Just look at the steps that you have to go through to get ONE days data! Can you believe such an archaic process in the year 2000? The website is always behind. With any other security, you can get up to date charts, moving averages, Relative Strength Index, or whatever you want. How can management possibly be so out of touch with the employees? Employees everywhere want information to manage their retirement account over the internet. Click on the link below to read a recent article on the subject:
Employee: Corporate policy states that service will not be bridged for employees rehired after voluntarily leaving the company. I know someone who left Duke Energy voluntarily to work for another company. He was gone for almost one year before being rehired. According to him, his time was fully bridged. I have discussed bridging of service with human resources over the years because, at one time, I left the company for several weeks, and then was rehired. I'm always told that time is never bridged. Is this true or is this actually handled on a case-by-case basis? I lost three years of service because of my break in service.
Rick Priory: We comply with the law on bridging of service for purposes such as the Retirement Cash Balance Plan (RCBP) and the Retirement Savings Plan (RSP). However, each business unit is responsible for managing bridging of service for other purposes such as vacation and parking. If you have questions about bridging of service within your business unit, you should talk with your business unit human resources representative.
Advocate: Duke does comply with the law - the law of the jungle. Duke's bean counters come up with dozens of half-baked, silly rules. When these rules blow up in their faces, they have no problem totally ignoring them.
Great questions people! Keep them coming. Rick Priory will be glad to answer ANY question. You can not make them too hard! He will give you an answer (or whine that he answered it last year and refer you to HR).
Noon Rebuttal - May 2000
Rick Priory hosted this meeting on May 15, 2000.
Rick Priory: "Our folks are making money where no one else made money before..."
Advocate: That is definitely true. No one has ever made a killing off of our pension before!
Rick Priory: "We also awarded our prestigious Environment, Health and Safety Award to three winners:"
Advocate: Not only that, but the company gave out 247 prestigious meal tickets, 84 prestigious mugs, 32 prestigious pen lights, 7 prestigious ZAX dolls, and 5 prestigious parking citations.
Employee: A question was asked about non-regulated businesses.
Rick Priory: "Even though the non-regulated businesses are riskier, the rewards are greater."
Advocate: Agreed. The potential rewards are greater; the potential losses are greater. You never get one without the other, although there are those who only will mention one side of it.
Employee: "I understand it's Duke Energy's policy to pay employees based on the median of other companies of the same size, scope, etc., but I know of many employees who have left Duke Energy for better pay at other local companies. Very often this is for $4,000 to $8,000 more per year. Has Duke Energy looked into why other Charlotte companies pay this much more for essentially the same job responsibilities?"
Rick Priory: "We strive to provide competitive compensation to all employees. We use market data from companies similar in size, scope and lines of business to Duke Energy to help ensure total compensation, including base pay and annual and long-term incentives, is competitive. Generally speaking, our philosophy is to provide total compensation at the market median, with opportunities to earn above the market median through incentives when outstanding performance is achieved. Based on this philosophy, we're confident about the competitiveness of our total compensation packages. I canít respond to the comment about other Charlotte areas firms without knowing the specific industries and details about what is included in their total compensation packages. If you have additional questions about the competitiveness of your compensation, you should speak with your supervisor or with your business unit human resources representative."
Advocate: We are surprised to see the term "total compensation" used. That was a term that was used for years along with "hidden paycheck" and "your security." Duke did not want you to look too hard at your salary, but to look at your promised pension benefits. Your salary, any other incidental value received, and your pension benefits were your TOTAL COMPENSATION. In 1997, havoc was wreaked on our total compensation going back 25 years! We had earned the promised pension benefits. The company received what it wanted for the promises. Much of our pension was wiped out by the new program of the month. Mr. Priory must have thought we had forgotten about it and that the same scam could be run on us again.
More than one question was received about Duke Energy not making certain rankings for top companies. Here is one:
Employee: "Duke Energy didn't make the Forbes 500 benefits and recruitment survey, nor did they make Business Ethics' '100 Best Corporate Citizens' in March 2000, and they didn't rate in the '100 Best Companies to Work For' by Fortune Magazine. Based on this data, Duke Energy's claim of having a competitive benefits package appears to be inaccurate. We appear to be a Fortune 100 company with Fortune 1000 benefits. Do you think the manner in which Duke Energy transitioned a Retirement Cash Balance Plan (RCBP) contributed to the fact that we don't appear on these lists?"
Rick Priory: "No. I don't think our transition to cash balance was a factor here. Our benefit plans are designed to support employees and their families while meeting business needs. In fact, we recently received coverage in a Money magazine article titled, 'America's Best Company Benefits,' where we ranked 10th among 40 Fortune 100 companies. As a general practice, we don't apply for recognition in external publications, but we will continue to benchmark best practices offered at companies similar in size and scope to Duke Energy to ensure we offer competitive benefits."
Advocate: That was not exactly the surprise answer of the year. The only surprise was that Mr. Priory did not say that Duke was included in the prestigious "Americaís Best Company Benefits" article! We take exception to the word "recently." The article was published in the October 1999 issue, which means it was on the newsstands well before October. Just when we thought that the article could not possibly be run into the ground any more, Mr. Priory starts grinding away at it again! A Duke spokesperson referred to the article in "The Charlotte Observer's" article "Utility Workers May File Grievance - Duke Power Employees Upset By Pension Plan" on 11/20/1999. The spokesperson did not get it totally right. She stated that 40 of the Fortune 500 companies were surveyed; actually 40 of the Fortune 100 companies were surveyed. On 11/23/99, Mike Tuckman felt compelled to make a response to the "Observer" article. His solution to all problems was to mention the "Money" article in "Team Nuclear." He also referred to the Fortune 500. He also stated: "As a matter of practice, the company does not conduct discussions with newspapers, as it serves no useful purpose." Did anyone believe that one? Duke will grovel to reporters when it suits their purpose. On November 30, 1999, Rick Priory again mentioned the "Money" article. He did get it right about the Fortune 100 companies being polled. Mr. Priory stated: "we don't apply for recognition in external publications." We don't know about that, but if Duke ever gets any recognition, you never hear the end of it! The "Money" article mentions Duke's matching contributions in what they called the 401 K program. When you consider that this small tidbit cost some employees half of their pension, it is not such a great deal after all! And as usual, the continuous benchmarking of our benefits is only to see what else can be taken away from us. If one group should be making more money, Duke has been known to freeze the salaries of other groups to make it seem like the first group is making more. There is just no end to the games.
Employee: A question was asked about stock.
Rick Priory: "Duke Energy stock is a good investment because our company has a sound balance sheet, our people are second to none, and we have a set of assets unmatched in the industry."
Advocate: We agree that Duke's people are second to none. We say that based on decades of working with them. If senior management really felt that the employees were second to none, would they have tried running the cash balance scam on them? The words sound hollow. The words sound like flattery and another attempt at distraction. Also, words are free. Do you break your word to people who you really think are second to none?
Noon Rebuttal - April 2000
Rick Priory hosted this meeting on April 10, 2000. The opening comments were not given by Rick Priory.
Opening Comments: "Our biggest disappointment of the year, of course, is the performance of our stock. The market is operating on a whole new set of rules - rules that even the analysts themselves don't completely understand. The market is, in many ways, redefining itself."
Translation: We do not have a clue.
Opening Comments: "We will not make 'knee jerk' reactions to the marketplace, and we won't do things that don't create long-term value."
Translation: Everything we tried last month failed, so we will do the exact opposite this month.
Opening Comments: "We are working hard to introduce new financial approaches that take advantage of the new rules."
Translation: Hold on to your billfolds!
Opening Comments: "Our three strategic imperatives for the next six months are: Capitalize on our competitive advantage of creating value through the integration of knowledge, businesses, assets and people. We've moved from a convergence model that sought value from deregulating gas and power industries; To the energy value chain that increased value by integrating enterprise businesses and capabilities; To an integrated network of energy positions and knowledge. We're linking our energy businesses in dynamic, multi-dimensional ways to enhance customer and shareholder value. We will be a network of supply on some nodes, demand on others and adept manager of logistics to get the supply to the demand less expensively than our competitors."
Translation: Computer random generated gibberish (but, we hope it sounds impressive). If you cannot dazzle them with brilliance, you know, baffle them.
Opening Comments: "When it's time to make decisions, we still need to rely on the hierarchical system to help ensure solid, high-quality decisions are made for the company."
Translation: We made such great decisions about benefits, we know that we can make other great decisions.
Opening Comments: "The freer the flow of information, the higher quality decisions we're going to make."
Translation: This was the policy implemented in 1989; by killing it, and then resurrecting it, we can take credit for it. Everyone will forget that we were the ones who killed it, just like they have forgotten about the old pension plan.
Opening Comments: "We'll announce the 1999 winners of our company's prestigious Environment, Health and Safety Award at a luncheon this Wednesday."
Translation: Sure, it will not buy you any food when you retire or pay your medical bills, but it's prestigious, don't you see?
Question: "Do you expect/require exemplary behavior both morally and ethically from your direct reports? To what standards are they held?"
Rick Priory: "I expect all Duke Energy employees, including my direct reports, to behave ethically in the workplace. All employees are held to the ethical standards outlined in our company's Code of Business Ethics."
Advocate: For someone to even ask this question, indicates a problem. The question implies that ethics are not readily apparent, or non existent. Does anyone truly believe that lying to the employees for decades about their pension plan and retirement health insurance was an ethical thing to do? If you search the pockets of anyone who claims the pension conversion was ethical, you will find thirty pieces of silver.
Question: (About executive compensation.)
Rick Priory: "Total compensation, including base salary and incentives, is set for all Duke Energy employees based on competitive market data."
Advocate: "Total compensation" brings up the specter of our "hidden paycheck." We were not supposed to look at just salary. The company wanted us to look at the pension and retirement health insurance benefits that we would receive. We looked at them. Now, we are looking to see where they went!
Question: (About executive compensation.)
Rick Priory: "While it may be difficult to explain why a 19-year-old baseball player is paid $1 million a year, and a 45-year-old nurse, who does a lot of good for society, is paid $25,000 a year, it's simply what the market will bear."
Advocate: So, Mr. Priory is in a position to gouge, and is going to gouge for all it is worth. In 1998, he received a 75 percent pay raise and a one-time grant of shares valued at $2.6 million as of Dec. 31 (link below). On march 1, 1999, he received an 11% pay raise (2000 Proxy, page 18). Some employees have not had a pay increase in seven years! Some employees get put on "standby time" and receive no take-home pay and cannot draw unemployment. Did someone have a question about ethics?
Question: "Over the last couple of years, a lot of time, money and effort has gone into aligning the benefits of all Duke Energy business units. Why would the company want different holiday pay procedures for all the units? How can this be fair to all employees when some work eight hours and get paid for eight, some work 10 and get paid for 10, some work 10 and get paid for eight and some work 12 and get paid for 12? Shouldn't we all get paid holiday pay according to the schedule we normally work, regardless of what subsidiary we work for?"
Rick Priory: "We've addressed paid time off policies several times in these reports, most recently in the March issue. Paid time off policies vary from business unit to business unit based on business needs. If you have additional questions or concerns about paid time, you should talk with your business unit human resources representative who can provide you with the rationale behind your business unit's policy."
Advocate: You will have to forgive Mr. Priory. He just does not get it. In his view of the world, squeezing the employees is just money in his pocket and "great leadership." He does not see why anyone would have a problem with this. He does not realize that when a question keeps coming up over and over that there is a problem. It may not be an immediate problem for him. But, if it is a big enough problem for the employees, it will eventually be HIS problem. He thinks that he can avoid issues by simply referring employees to HR. If anyone had wanted to go to HR, they would have went there to start with! Avoiding employee issues is exactly why the company is under government investigation now. Mr. Priory thinks he is a great leader by brushing employees off and sending them to HR. Everyone knows that all HR can do is explain how the game is rigged against you. If the CEO cannot set things right, what can HR possibly do? The holiday fiasco has to be the most ill conceived move ever. Compared to what we lost with the pension conversion, the holidays are hardly worth mentioning. This what makes the holiday policy so ridiculous. Sure, the pension conversion generated much employee dissatisfaction, but the company gained millions! Evidently the company does not mind dissatisfied employees if they clear enough cash from the deal. But, the company gained nothing from the holiday policy change and still generated huge amounts of employee ill will. Is that what is taught in business school now, to make changes that gain you nothing and create animosity? Not one cent was saved! An employee's base pay is the same, if he gets one holiday a year or 30 holidays per year. The more time off an employee gets, the better job he will do when he is at work. This bean-counter's dream will cost the company in the long run. Mr. Priory does not go to Noon Report meetings to learn what is wrong from the employees and FIX the problems. He comes to the meetings with the attitude that he knows all. He comes prepared to shoot down ideas, ignore obvious problems, and evade issues by referring people to HR. If he had LISTENED to the employees, he would not be facing the problems that he is facing today. If he would listen today, he would not face the problems that he is going to face tomorrow. There are two types of executives, those who fix problems and those who ignore and evade problem. The one who fixes problems does not have to be perfect. As long as the employees feel that he is trying to do the right thing, they will cut him slack. If they feel that they are being ignored and railroaded, any cutting done will not be slack. Over 90% of the employee problems that the company faces are problems that the company created. The company's solution is to make more unreasonable policy changes. And, the death spiral continues.