Two riled directors of America's largest electric company resigned Friday, complaining they were blindsided by a surprise CEO switch that has put pressure on Duke Energy Corp.'s credit rating and stock price.
John Baker II and Theresa Stone said in resignation letters that the remaining members of the board of directors should start a search to replace current CEO Jim Rogers. Baker and Stone had been on Progress Energy's board of directors and joined the Duke Energy board when the companies merged July 2.
Hours after the merger deal was done, the top Progress Energy executive who the companies had promised for 18 months would lead the combined company was out. Rogers was in. Ousted CEO Bill Johnson also had a seat on the board of directors, so what had started out as an 18-member supervisory panel now has three vacancies.
Two other Progress Energy directors who moved over to Duke Energy said last week they were thinking about quitting.
Charlotte-based Duke Energy provides electricity to 7.1 million residential and business customers in North Carolina, South Carolina, Ohio, Kentucky, Indiana and Florida.
Following the CEO switch, Duke Energy's credit rating was downgraded by Standard & Poor's. In addition, North Carolina's utilities regulator and attorney general started investigations and the share price is down 3 percent.
"In light of the negative reaction among important constituencies to the corporate governance issues raised" by the CEO surprise, Stone wrote, "I believe that the company faces major hurdles in restoring trust and confidence."
Stone, a retired investment banker and finance executive at the Massachusetts Institute of Technology, wrote that one step in overcoming the concerns "would be the immediate announcement of a well-designed, formal CEO search process."
Baker also said the company should show it's moving to find a replacement for Rogers.
Duke Energy said in a prepared statement it would not comment on the contents of the resignation letters.
Rogers had been Duke Energy's CEO since 2006. He said during sworn testimony to the North Carolina Utilities Commission that he was prepared to take a leadership role with fewer day-to-day demands until two directors on the pre-merger Duke Energy board approached him in May. The two directors who asked Rogers if he'd remain as CEO of the combined company testified last week they turned to him after deciding they disliked Johnson's leadership style.
The utilities regulator has the power to rescind its approval of the merger or make changes to the deal.