CEG boss offers charity aid

Shattuck pledges $5 million-$10 million if FPL merger approved

May 02, 2006|By PAUL ADAMS | PAUL ADAMS,SUN REPORTER

Constellation Energy Group's chief executive, who critics charge is getting rich at the expense of Maryland power customers, has pledged to give millions of dollars in merger-related compensation to a charitable foundation if the company's marriage to a Florida utility owner wins approval, regulatory documents filed yesterday show.

The funds that will be donated - estimated at between $5 million and $10 million - amount to a small part of the millions in stock compensation that Mayo A. Shattuck III has received over several years as Constellation's top executive. He also stands to gain potentially tens of millions of dollars in stock and other compensation if the merger goes through.

But the forfeiture of at least a portion of the merger proceeds appears aimed at blunting criticism that executives stand to reap millions while customers of Constellation's regulated utility, Baltimore Gas and Electric Co., are getting hit with a 72 percent rate increase that, for some, will be phased in starting this sum- mer.

The company has yet to disclose how much Shattuck and other Constellation executives stand to gain if the merger is approved.

The unanswered question has been fodder for politicians and consumer activists who hope to extract more money out of the company for rate relief. Revelations of a big payout could be explosive for the company as it strives to stave off a special legislative session that could revive bills aimed at thwarting the merger and getting more money for consumers.

"They certainly have no intention of making this information public until the last possible moment," said Baltimore City Solicitor Ralph S. Tyler, who has pressed regulators to force the company to publicly disclose the bonuses executives will receive as part of the merger with FPL Group Inc. of Juno Beach, Fla.

In a filing yesterday with the federal Securities and Exchange Commission, the company revealed that Shattuck has asked that certain cash proceeds stemming from a long-term incentive plan be remitted to a charitable foundation.

The benefits from that plan accelerate if the merger wins approval and could reach up to $10 million, Constellation officials said.

In a separate agreement dated Friday - the same day that the state Public Service Commission approved a controversial rate plan for BGE customers - Shattuck also agreed to waive a $15 million severance payment designed to protect him if he is fired or his duties diminish after the merger.

The agreement was among several complex maneuvers spelled out in an amendment to Constellation's annual report filed with the SEC yesterday. The document also shows that Shattuck earned a $1 million salary last year and a $3 million bonus.

At the request of the board of directors, Shattuck and other executives also cashed out tens of millions in stock options last year that would have triggered high excise taxes after the merger.

For Shattuck, options worth nearly $44 million were converted to 416,000 shares of stock, which would be worth more than $22.4 million at yesterday's closing price of $53.95 per share. Those are shares Shattuck accumulated before the merger announcement and are unrelated to the deal. After the exercise of those options, Shattuck was issued just over 1 million new options to replace those exercised.

If the merger goes through, Shattuck would get raises ensuring that he makes as much as FPL head Lewis Hay III, his contract shows. The merger would also trigger an upgrade in Shattuck's Constellation pension that would be worth millions of dollars.

And if Shattuck resigns from the company after the merger and his "golden parachute" exceeds federal guidelines, the company must pay a steep excise tax on his behalf.

In a filing in December, Shattuck had already agreed to waive a separate change-of-control trigger worth $15 million and replace it with $13.5 million in restricted stock. The alteration in his employment agreement - made before the merger announcement - was designed to encourage Shattuck to stay on after the merger, rather than take the $15 million and walk away from the company.

"He's not driven by a desire for enrichment, and clearly the merger would not change his lifestyle in any measurable way," Constellation spokesman Rob Gould said of Shattuck.

Executive compensation experts say it is unusual but not unheard of for executives to earmark proceeds from severance payments and other compensation for charity.

"Over the past few years, we're talking about a few out of the hundreds and hundreds of CEOs who have been terminated, so it is pretty unusual," said Paul Hodgson, a compensation expert with the research firm Corporate Library. While Shattuck has pledged a portion of the cash proceeds he expects to gain from the merger, Hodgson noted that most of the payoff for executives involved in mergers comes in the form of stock.

Consumer activists said the real problem with the Constellation merger is the perception that executives and the company are earning big profits while working families are having a tough time making ends meet.

"Clearly his generosity is appreciated to donate that kind of money to a foundation, but the fact remains he's getting an awful lot of money for his personal use when his company is ... getting a substantial rate hike for the people of Maryland," said Tyson Slocum, director of the energy program at Public Citizen, a consumer group founded by Ralph Nader. "At the end of the day, the ratepayers of Maryland are still not going to be satisfied."

paul.adams@baltsun.com

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