Monday, March 05, 2007

Executives at CH Energy Group "Thank God" for Bonuses

It is he who made the earth by his power, who established the world by his wisdom, and by his understanding stretched out the heavens. When he utters his voice there is a tumult of waters in the heavens, and he makes the mist rise from the ends of the earth. He makes lightnings for the rain, and he brings forth the wind from his storehouses. (Jeremiah 51:15, 16)

Even though electric and gas utility operator CH Energy Group Inc. (CHG-$46.51) did not achieve its financial goals for 2006, top management still managed to make some decent ‘bling.’

CEO Steven Lant, for example, earned a salary and cash/long-term bonus payments in fiscal 2006 of $490,000 and $1.07 million, respectively.

Helping key employees at this utility company in depressed times are the following clauses attached to their bonus payouts:

  • The annual incentive amounts for each Named Executive Officer may be adjusted upwards or downwards by up to 50% based upon the Committee's ‘discretionary’ assessment of the individual’s performance. In this regard, adjustments were made to the 2006 annual incentive amounts for the following Named Executive Officers: CEO Steve Lant, a 20% upward adjustment; CFO Christopher Capone, a 15% upward adjustment; and COO Carl Meyer, a 15% upward adjustment;
  • Performance goals related to the Company’s earnings per share can be adjusted for "unusual weather"”;
  • Weighted adjustments of 20 percent (upwards/downwards) to contracted performance goals will be made for a J.D. Powers “Customer Satisfaction” Survey; and,
  • "How Did We Do?" survey administered by Central Hudson during 2006 to employees: (+/-) 10 percent for “Highly Satisfied” and (+/-) 10 percent for “Satisfied and Highly Satisfied.”

According to a perusal of the Company’s 2006 Proxy Statement, the methodology behind these aforementioned compensation packages was to motivate executives to meet or exceed their performance goals. To wit: “Our executive compensation program emphasizes pay for performance. Performance is measured based on performance goals and metrics that align the interests of executives with the interests of the Corporation and its shareholders.”

Shares of CH Energy have tumbled about 12 percent since management revealed on February 13 that “
unseasonably warm weather for the winter of 2006-07 will dampen net income for the first half of fiscal 2007 [by at least] ten cents per share.”

Look out behind you
A thousand faces wait
Waiting for excuses
Now before it’s too late
…. – Casus Belli (In the Name of the Rose, Track No. 5 “Wrongly Right,” 2005)

We wager shareholders wish they had an
act of God clause that would indemnify them from warm weather and permit them to default on their contractual obligations to pay for CH Energy shares bought two weeks ago at more than $50 per share.


Anonymous said...

Are you insinuating that 1.5k for a CEO is too much?

David J. Phillips said...

$1.1 million in 'performance' bonus is TOO much when the Compensation Committee lowers the bar for payouts when expected guidance is not met.

I was in sales for many years--if I did not meet MY EXPECTED GOALS--I would have been fired! This is what's wrong w. big business today--a separate class where the normal rules of business do not apply to them!

re: CH Energy: the Compensation Committee explicitly said that management's bonuses were structured to better align performance w. the interests of ALL shareholders.--THEY LIED!