Bonus shock

Our view : Constellation's choice to back down from bonuses the smart move

March 22, 2009

In a week when the term "executive bonus" became a profanity, leadership at Constellation Energy did the right thing and reversed itself on millions of dollars in extra retention and performance pay for top executives that was part of the company's $4.5 billion sale of nuclear assets to EDF Group.

This was never comparable to the scandalous behavior at taxpayer-subsidized American International Group, but the Constellation bonuses were unquestionably poorly timed. Lawmakers in Annapolis are on the verge of deciding whether to re-regulate the energy industry here, and many ratepayers are fuming over big winter utility bills.

What does one thing have to do with the other? Not much, frankly. But if the atmosphere for a public conversation about utility costs and regulations weren't already poisonous enough in this state, the bigwigs at Constellation nearly wiped out the ozone layer.

In announcing the decision, Constellation CEO Mayo A. Shattuck III noted that the program had been misconstrued as a potential cost to Baltimore Gas and Electric customers. He's right, but that wasn't the only - or even the best - reason to rethink the bonuses. What was peculiar was that this extra compensation was originally tied to the sale of the company to Warren E. Buffett's MidAmerican Energy Holdings. EDF proposed keeping this benefit after the MidAmerican deal fell apart even though there would be no change in controlling interest.

Shareholders smarting from the nose dive of Constellation's stock couldn't have been too pleased with so much money going to 120 employees no matter how deserving they may be. A more appropriate payout might have been to the low-income families facing shut-off notices.

Constellation didn't go quite that far, but at least it finally dawned on management that these aren't ordinary times - even for people earning six-figure salaries.

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