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CHARLOTTE – The woman who would fire Bill Johnson minutes after he became CEO of Duke Energy initially said the company was positioned for “a great future” under his leadership.
Ann Gray, Duke's lead director, wrote Johnson of her support the morning after Duke and Progress board members voted to move forward with a merger.
“Superlatives come to mind on this signing-- brilliant, epic, historic, transforming—should I go on,” Gray wrote in an email to Johnson the morning of Jan. 9, 2011. “You may count on the support of our entire board in the months and years ahead.”
But that support would disintegrate during the ensuing 18 months.
The Duke board ousted Johnson, formerly the CEO of Progress Energy, after the merger deal between the two utilities closed July 2.
Details of email correspondence among Duke's directors and executives emerged from hundreds of pages of documents the company turned over to state regulators Tuesday. The North Carolina Utilities Commission ordered Duke to provide the documents, which include emails, meeting minutes and notes. Some of the materials have been redacted.
Through its attorneys, Duke Energy asserts some of the contents are exempt from the state's public records law. Regulators want to know if they were duped into approving the merger, despite a behind-the-scenes effort to remove Johnson as CEO of the combined company.
Jim Rogers, the longtime Duke chief executive who was set to become executive chairman after the deal closed, stayed on in the top spot.
Rogers, Gray and other Duke executives insist the board had the authority to remove Johnson and followed proper protocol in doing so. The Duke board expressed concerns about Johnson's leadership style and about Progress Energy's troubled nuclear fleet.
Initially, Duke's directors welcomed Johnson, sending him congratulatory emails much like Gray's, speaking of a bright future for what would become the nation's largest electric utility.
“A Threat to the Deal's Success”
But at least one director had early concerns about Johnson serving as CEO of the combined company. Dan DiMicco, the CEO of Charlotte-based Nucor and a member of the Duke board, wrote Rogers in late 2010 about the issue. DiMicco said he viewed Johnson as “a threat to the deal's success.”
“He is either the right guy or he is not,” DiMicco wrote. “If he is not, then it is a deal killer for me.”
In the note, DiMicco alluded to discussions that Johnson could be replaced if he was a poor choice.
“I have to tell you, I was very disturbed by the view if it doesn't work out with Bill we will make the change in two years or so,” he wrote. “This needs to be done right from the beginning.”
As the merger process progressed, concerns about Johnson became more apparent.
In April 2011, Rogers wrote Gray after he received a phone call from Johnson.
“[Johnson] apparently didn't think that I was truly carrying the messages from the Board,” Rogers said. He agreed to set up a meeting that would include Johnson and Duke directors.
Shortly thereafter, the board would deliver an unflattering evaluation of Johnson's leadership style, and directors decided it would be best that the two sides limited their contact.
In early 2012, after federal regulators rejected a Duke-Progress plan to mitigate merger-related concerns, the deal appeared to be on the verge of collapse. Rogers canceled a trip to Europe in order to talk with the board about “where we go from here,” he wrote in an email.
He noted a meeting among Duke and Progress executives, which did not appear to go well.
“They agreed on the challenges but not on what they mean and how best to handle them,” Rogers wrote.
Duke-Progress “Talent Flight”
One such challenge was the departure of senior managers at Duke, including the president of Duke Energy South Carolina, Catherine Heigel.
When Rogers emailed directors about Heigel's departure on May 15, DiMicco replied within an hour.
“Is this the beginning of a merger related talent flight,” he asked Rogers.
“Yes, I am afraid you are right,” Rogers replied. He said several “top tier” female leaders left the company because they sensed “that they could not succeed in the new combined company.”
A day later, Rogers would email Gray with similar sentiments. The employees “expressed deep concern about whether they would be valued in the new organization,” Rogers wrote. “I am disappointed.”
Protests from Shareholders
The chief executive also seemed dismayed by the reception he received at the company's annual meeting.
During the confrontational meeting with shareholders, Rogers found himself defending Duke's environmental and financial reputation.
“We need to re-think how and where we do our annual meetings,” he wrote Gray, suggesting holding future sessions at the Greenbrier resort in West Virginia.
At this point, momentum was building among Duke directors to make a change. Informal discussions about ousting Johnson were underway.
On June 24, Rogers, Gray and another director had a 7 p.m. dinner in the Jefferson Room at south Charlotte's Quail Hollow Country Club, according to emails among them. There, Gray told Rogers of her efforts to remove Johnson. She asked if Rogers would stay on as CEO if the board voted to oust Johnson.
Two weeks later, Gray sent Rogers an email, apparently a draft of a message she would send to Johnson later in the day.
The subject line was, simply, “Test.”
“Bill,” she wrote. “I am in Charlotte and would like to meet with you at the company's headquarters following the executive session, so I would appreciate your waiting for me there.”
At that meeting, she would tell Johnson he was fired.