Real estate developer Michael Browning never has been the wallflower type. So those who have crossed paths with him during his more than three decades as an Indianapolis businessman and civic leader won’t be surprised to learn he was a key player on Charlotte, N.C.-based Duke Energy Corp.’s board when it orchestrated the surprise ouster of CEO Bill Johnson in July.
They also surely aren’t surprised that the 66-year-old Browning came down on the side of prior CEO Jim Rogers, whom the board immediately reinstated to the top job. Browning and Rogers go back to Rogers’ days leading Plainfield-based PSI Energy. Browning was a PSI board member and became a director of Cincinnati-based Cinergy Corp. after it bought PSI in 2004. Rogers ascended to the top job at Cinergy before selling that utility to Duke and becoming CEO there.
Johnson was serving as CEO of Raleigh, N.C.-based Progress Energy Inc. when he helped engineer its $18 billion merger with Duke, creating the nation’s largest electric utility. The merger agreement called for him to take the top job. But the Duke board deposed him as CEO just hours after appointing him—a reversal that astounded corporate governance watchdogs and rankled utility regulators.
Browning, CEO of Browning Investments in Indianapolis, didn’t respond to phone and e-mail requests for comment. But in testimony before the North Carolina Utilities Commission, he and lead director Ann Gray said they led the CEO switch, an impression reinforced by disclosures in thousands of internal documents turned over to regulators.
The pair told the utilities commission that after the deal was announced in December 2010, they grew increasingly wary of Johnson’s “controlling” style as well as persistent operating problems at Progress’ nuclear power plants.
In May, after Progress reported weaker-than-expected first-quarter results, Browning sniped in an e-mail to Duke Chief Financial Officer Lynn Good, “This is the nicest description of a really lousy quarter that I have ever read.”
At a June 24 meeting with Rogers at the picturesque Quail Hollow Country Club in Charlotte, Browning and Gray shared their deep misgivings about Johnson—and asked Rogers if he would stay on as CEO if the board fired Johnson once the deal was complete.
Everything seemed routine at the late afternoon July 2 board meeting finalizing the merger and appointing Johnson as CEO. But then, at an executive session that excluded management, Gray read a motion demanding the resignation of Johnson and the appointment of Rogers as CEO. Browning, participating in the meeting by phone from Indianapolis, seconded the motion.
The five board members in the room from Progress sat powerless—and stunned—as the 10 members of the former Duke board approved the motion.
“I didn’t know whether to cry or throw up,” former Progress director Marie McKee told the North Carolina Utilities Commission.
Hours of testimony from executives and board members of Duke and Progress did little to settle whether Johnson’s ouster was justified.
Gray said her first concerns about Johnson arose early in merger negotiations when Johnson described himself “as a person who liked to learn but didn’t like to be taught.”
“That stayed with me,” she told the commission. “It was the first red flag.”
Commission Chairman Edward Finley Jr. asked Gray if she realized the quote originally was attributed to British Prime Minister Winston Churchill, who was widely regarded for his leadership skills. She said she hadn’t, but still believed it was indicative of Johnson’s controlling style.
Johnson complained to the commission that no one told him the board had problems with his management style. He also said he had tried to attend several Duke board meetings but was told by Rogers that there was “no need” and that “everything was fine.”
Browning said once Duke’s board members lost confidence, additional meetings would have served no purpose.
“The toothpaste was out of the tube,” he said, “and I couldn’t figure out how to get it back in if I talked to him or not.”
But commission member ToNola Brown-Bland accused Duke’s board of holding Johnson to a different standard than Rogers. Under his leadership, Duke has had its own issues, including in Indiana, where the Edwardsport coal gasification plant is more than $1 billion over budget.
Duke and the North Carolina Utilities Commission this month patched things up, reaching a settlement under which Rogers agreed to retire by the end of 2013. Under the deal, Duke agreed to provide additional savings of $25 million to customers on top of the $650 million originally promised in the merger.
In the settlement, Duke denied illegal or improper actions in the CEO shakeup, although it agreed “its activities have fallen short of the commission’s understanding of Duke’s obligations” as a regulated utility.•