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Ameren: World's Worst Company?
After Ameren wiped out Johnson Shut-Ins State Park in southeastern Missouri, some of felt a little sorry for the company. Six months after that tragedy, a powerful thunderstorm knocked down power lines and transformers, leaving more than 100,000 Ameren customers without electricity – some for more than week. Still, Ameren had viable defenses. Among them:
·*Property owners blocked the company from trimming trees that threatened power lines
·*The storm was the strongest in 100 years
·*The system was already taxed by high temperatures
·*Crews from neighboring power companies in Illinois, Arkansas, and Kansas were busy with storm-related outages of their own
While some consumer groups and legislators wanted sanctions against the company, cooler head prevailed, give Ameren the benefit of the doubt. The company promised to do more to protect power lines, to develop better storm response plans, and to look for alternatives to vulnerable, above ground wires, such as burying them in underground pipes.
Then, an ice storm hit Missouri in late November, repeating the summer’s outage. Again, customers went without power for weeks. Again, the company trotted out a plethora of excuses that sounded a lot like the list it recited in July. This time, patience ran out. The Missouri Attorney-General, Jay Nixon, filed suit against the utility over the Taum Sauk reservoir disaster which demolished a state park in December 2005. Legislatures and municipalities began talking of suits and ultimatums to bury wires below ground.
Many companies would put their PR departments to work, ask for advice on how to rebuild their images, and offer some compensations to their abused customers. Not Ameren. Instead, the utility asked consumers to pay billions of dollars more in order increase the utility’s profits, according to the St. Louis Post-Dispatch:
St. Louis-based Ameren is asking for an increase of $360 million a year, or 18 percent. The company said it has invested more than $2.6 billion over three years in power plants, poles and wires to serve customers, and it faces rising costs for aluminum wire, health care and pension benefits, and coal to generate electricity.
But that was just the start. In a classic example of management stupidity, the company cancelled annual bonuses to rank and file employees only to turn around, cook the books, and restore bonuses to its bungling, incompetent, and corrupt executives.
In an Enron-style maneuver, Ameren’s HR department first calculated earnings in a way that denied bonuses to non-executives. In a letter to regular employees, the company lamented that 2006 was a bad year for the utility, that the company missed its Earnings Per Share goal (which is higher for workers than it is for executives), and that, as a result, there would be no bonuses.
But executives don’t like doing without. The executive committee recalculated the same numbers that denied bonuses to employees in order to find money to pay bonuses in the executive suites. Says the Post-Dispatch:
Getting the extra money required some numbers shuffling. The Human Resources Committee of Ameren’s board stripped out “extraordinary” expenses — $53 million related to the storms, and another $15 million in low-income assistance for Illinois, thus reaching the minimum profit threshold last year to trigger the cash bonuses.
Columnist Bill McClellan quotes a second letter—this one to executives—that announces the shiftless scam:
At its February meeting, Ameren’s Board of Directors recognized the exceptional efforts of management employees in dealing with the events of 2006, as well as several events outside management’s control. As such the board, in accordance with Ameren’s incentive plans, adjusted the 2006 incentive to an equivalent EPS of $2.99
That’s right: the executive committee recognizes the efforts of management, but not the efforts of the line crews who worked around the clock in life-threatening conditions to restore power. The line workers efforts, clearly, were ordinary and unexceptional. But the suits who sat in air conditioned or heated offices and fumbled every weather challenge presented to them did something extraordinary. Perhaps having the extraordinary testicularity to demand its customers finance the bonuses.
In America, we tend to reward incompetent and corrupt business executives. Therefore, readers should take my admonition with a grain of salt. When a company has a bad year, it is management’s fault. All problems are problems of management, according to Peter Drucker. Ameren’s employees lost their bonuses, not because of their own actions, because their bosses are corrupt and incompetent. But the bosses got bonuses because they are corrupt and incompetent.
When you, as a manager, are faced with accepting accountability for your own poor performance, you must accept the punishment, whatever it may be. Be a man or a woman about it, not a criminal like Gary Rainwater, the corrupt CEO of Ameren. Cancel executive bonuses and use the money to hire better managers, institute better practices, or reward the men and women who risked their lives to resotre power to your customers.
If you disagree with the bonuses or the rate hike, contact Ameren at 800.552.7583. Ameren claims to have an e-mail address, but it provides a dead link. So, please, call. I’m sure they’re eager to hear from you. And tell them Bill Hennessy sent you.