Duke Energy Chairman and CEO James Rogers is not your average energy company leader: He supports capping CO2 emissions, champions climate-change legislation, and preaches energy conservation to his own customers—not exactly the hard line one might expect from the leader of a business largely dependent on the burning of traditional fossil fuels. He has actively lobbied Congress for legislation to cut greenhouse gas emissions in spite of massive opposition to such laws among some of his peers. His name even circulated, according to some reports, as Obama’s possible pick for Secretary of Energy, before the post ultimately went to Nobel laureate Steven Chu. Earlier this year, Newsweek named him to their “Global Elite” list as one of the 50 most powerful people in the world, saying that a revolutionary energy policy will require “CEOs like Rogers who can see past next quarter’s bottom line.” Besides his position at the Charlotte-based Duke, Rogers is also a director at Cigna and Applied Materials and formerly served as chairman of Edison Electric Institute.
You recently announced an increase to your dividend. How are you able to do that when many companies are making cuts?
We have a very strong balance sheet and we have a very large capital program. What we try to do is maintain our dividend and have small, incremental growth in it, which is less than the growth in our earnings. And we’ve been able to do that. While earnings have been somewhat flat—like everyone else, we have been affected by the economy—we continue to batten down the hatches and work our way through this downturn in the economy.
What’s the board’s involvement in the planning process as you plot your way through an environment like this?
I just came off our board retreat. We did something different this year. It takes us 10 years to build a nuclear plant, it costs $10 billion, and the plant will operate for 60 to 80 years. So that’s the kind of timeline we have to have in our minds. So what I did with the board that was different than the past is, I said let’s not worry about the next five years. Instead, I suggested that we focus for five to fifteen years out, and try to imagine what the business will look like. We brought in some people that had views that are different from ours, to help challenge us, so that we don’t find ourselves drinking our own Kool-Aid.
You have earned a reputation as an environmentalist energy company CEO. Wouldn’t it be a lot easier to not address the environmental side? Because in some ways, it makes you a target for both sides of the debate.
It really does, and in some interesting ways. But you know, I actually believe, in my role—we’re the third-largest generator of electricity in the country, the third-largest generator of coal, the third largest generator of nuclear power— and part of my mission is to educate the public on these issues. There’s an amazing lack of understanding of how we generate energy in this country. And so one of the things I strive to do is to get out and tell a story. Now the environmentalist part of it is that I actually believe our mission has changed. In the 20th century, our mission was to provide easy access to electricity in the United States. In the 21st century, our mission is going to be to help our communities become the most energy efficient. We’ll have to change our regulatory business model to do that. We are going to retire and replace every power plant we own between now and 2050. But the country—and the scientists believe this is a problem that needs to be addressed—wants us to have a low-carbon generation fleet. There couldn’t be a better time in history for me to make that transformation, because I’m going to have to replace them with something, so let’s replace it with something that’s low-carbon.
Does your board support your stance on these issues?
We have a rich debate on them. Some of the directors approach the global warming issue slightly different than I do. But I welcome such a different view, because it crystallizes the conversation. You have different points of view that lead to robust conversation, but it also leads to a policy that really reflects a lot of optionality and recognition of: “Well, wouldn’t you do this anyway, without global climate?” or, “Shouldn’t you pursue this option versus that one?” I’m also a big believer in bringing outside speakers in with various points of view. I have a long history of doing that. And I’m a big believer in having diverse points of view on the board and engaging these diverse points of view.
You have a new CFO. What does it require of you and the board when you have a high-level change like that?
I think one of the important things, is that any time you change the CEO, CFO, or COO, it’s really important to have clear communication about why there’s a transition and it’s important to introduce your new person to the primary constituents that they’ll be addressing. So that is one of the things that we did. It was a seamless transition. We had the perfect replacement in Lynn [Good], who was a controller of Cinergy and CFO of Cinergy immediately before the merger with Duke.
How has the role of CEO, generally, changed over time? Do you think there’s a new paradigm for the CEO’s job?
I do. And the advantage for me is that I’ve been a CEO for so long, I have a good sense of the operation, but probably more importantly, I have incredibly strong people in operating roles that really complement my capabilities, but also complement the demands that I have—on me. I’ve started to think that I have two roles: One is the traditional running the business—in military terms, it’s “the general.” I also think that another aspect of my role is external. And this role is about building relationships and collaborating. Business people are used to talking to other business people, but I think the real alliances of the future is when businesspeople are reaching out with NGOs, with environmental groups, with consumer groups, with people outside and with differing points of view. I think that collaborative, working-together role is a key part of what I do. I think the other part, and what I really enjoy now in this very transformative period, is looking at new technologies. I believe I’m a “scout,” so part of my mission is to look at new value propositions and make sure we understand these disruptive technologies and are incorporating them in our business model.
There’s a lot of effort underway to give shareholders more say in what’s going on. Is there a danger that the pendulum swings too far?
The pendulum is swinging, and there is a risk that it swings too far. And a lot of this is a reaction to the economy, and returns are down, and stock prices are down, and it’s a reaction to some excesses that occurred primarily in the banking industry, and bank boards didn’t perform particularly well; in fact, they didn’t understand the products they were selling and investing in. So I think this is a natural thing, and I think we need to be careful to keep it centered.
What are your thoughts on CEO pay and the debate over compensation?
I think it’s changing and I think you will see a push to tie pay more closely with performance. I just signed a contract for five years; I get no cash salary, no cash bonus, and most of the stock I get paid is at the end of the five-year period. And, the way that it works is that part of my stock compensation doesn’t occur until two years after that. So I’m incented to make sure I have a really strong team performing well after I leave.
Directorship interview conducted by Joseph McCafferty.
Jim Rogers may be CEO of Duke Energy and has so many things to deal with, he has not forgoten the people in the trenches,(power plant workers,linemen,etc.) At the power plant that I work at, the emploees had a issue that we did not think was fair, and knowing that Jim Rogers said that he has an open door policy, we took advantage of this policy. We called and made an appointment with him and must to our suprise, a date was set, Jim sat down with the employees and resoved the problem. In my opinion, this is a person that cares not only about the bottom line, but he is concerned about the everyday common person, that person in the trenches. I think that Jim Rogers is not given enough credit for who he really is. It is people like Jim Rogers that makes a person want to work for a company like Cinergy/Duke Energy. By the way I was one of the three people that was welcomed in Jim Rogers office working, trying to work out the issue mentioned above. Thank You.