Friday, 6 July 2012

CEO for 20 minutes

How would you like to be CEO for 20 minutes ? No this is not one of those employee motivation exercises, nor is it a joke. This is all too real.  That's precisely what happened to Bill Johnson the CEO designate of Duke Energy.

All this arose from a merger between Duke and Progress, two giant utility companies in the US. It is now the largest electric utility in the US. As is typical in such merger of giants, the CEO of Duke was to become the Chairman of the combined entity and the CEO of Progress, Bill Johnson, was to become the CEO of the combined entity. Regulatory and shareholder permissions were sought , and received. All very good. On 27th June, Bill Johnson signed his new employment contract and  that was that.

The merger was consummated at 4.00 PM on Monday 2nd July. Immediately thereafter the new Board met and sacked Bill Johnson. At 4.20 PM Johnson resigned - he resigned rather than refusing to do so, as he was getting a $10m settlement that way. CEO for 20 minutes.

This is not a tin pot company, nor is the Board a bunch of jokers (although you have to rethink that now). Both the companies are giants in their own right and the combined entity is a behemoth. And yet, did they seriously believe that they would get away with this sort of behaviour? Did they expect the regulators and the shareholders to keep quiet. Even a moron can see that this is probably the worst move that you can make.

Mergers and acquisitions are notoriously difficult to implement. More go wrong than right. But if you start off like this, what chance do you have of any success ?

The future is all too predictable. The Board will defend for 3 days that all was right. Public and regulatory outcry will build up. Then the Chairman will resign. As will a few more Board members, if not all. A new CEO will be appointed. More turmoil. And the acquisition will steadily go downhill. Two years from now, Progress will be divested at one tenth the acquisition value.

It boggles the mind how corporations can monkey around like this. They seem to be their own worst enemies.

PS. Since all this drama is happening in Gils's current hometown,  perhaps, the esteemed blogger might pen a first hand account in the comments section :)


gils said...

first hand account podreno illayo..firstu comment poturren :)

gils said...

depends on whats ur take on the expansion for CEO...looks like it is Charlottla Eelichavaai Oraayiram...antha aal 10 mill. vaanginathu kedakattum..keragam..enga veetuku 50$ penalty poattu EB billulatheetiputaanga :( intha kodumaiya enga poi solrathu

Sandhya Sriram said...

Let me complete the story. Johnson had already signed his new contract on 27th June. Johnson now has 10 Mln in the pocket and a new role.

Life is as usual in both Duke and Progress. they can make or kill themselves, with or without Johnson and hence that is a separate topic by itself.

the board members and North Carolina Utilities Commission have been left gaping on what they say on text and what they saw in substance before approval and they will continue to gape until a bigger thing hits them.

This also draws a thread to your earlier post. the yours truly categories can create further disclosure requirements "Disclose all Key Movements by Key Personnels in the Deal" and the great Lawyers could disclose the number of times Johnson went to the loo other than in his home. after all Loos are the only places without Cc TV cameras and where secret discussions can be held"

what say.

Ramesh said...

@Gilsu - Boss - If you watch movies non stop on TV, internet, etc etc and also make rasam everyday, electricity bill yeraththaan yerum !!

@Sandhya - Ha ha Ha. As usual your comment is spot on !!

Vishal said...

hard to believe, Ramesh! indeed wonder, why it has to be done this if had to be done at all...???

Ramesh said...

@Vishal - There's a lot of background. Politics of course, but there's also a nuclear plant of Progress which ran into trouble , massive cost of clean up and underestimation of the trouble by Jonhson. But still, does it have to be done like this ?

Reflections said...

All I can think of is....Bill Johnson must have laughed all the way to the bank;-P.

And I'm also thinking....Ramesh is a natural blogger, a blogger in the truest sense; right and you can make whatever u want out of it;-D

Ramesh said...

@Reflections - There are many types of laughing/smiling, you see. Bill Johnson's is one. Another is that silly smile I am sporting after reading your so very kind comment :)

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