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— This January, Stephen L. Baum will retire as Sempra Energy's chief executive in fine shape (rich as Croesus) and at a fine time (as the company faces a jury in a potentially backbreaking lawsuit).

Maybe that's why Sempra, which controls San Diego Gas & Electric and Southern California Gas, held its April annual meeting in what Wall Street calls a "foxhole" -- a location far from shareholders: London. John Chevedden, shareholder activist from Redondo Beach, thinks Sempra chose that locale because of Baum's embarrassment of riches, a $24 billion price-fixing civil suit that will be on trial later this year, and shareholder complaints about the board's insularity and self-serving arrangements.

Last year, Baum gobbled up $13.5 million in total compensation. "Sempra shareholders are being taken to the cleaners," says Michael Shames, executive director of Utility Consumers' Action Network. "Baum is moving from the energy industry into the cleaning industry."

According to Forbes magazine, Baum last year brought home $1.1 million in salary, $2.2 million in bonuses (double the industry median), and $9.7 million in the value of exercised stock options. With the granting of a miscellaneous $541,000, his $13.5 million was almost four times the industry median of $3.4 million. Baum's pay was 98th on the Forbes list, although Sempra is the 235th largest company in the Fortune annual ranking of U.S. corporations by size.

After two decades with the company and five years as chief executive, Baum has amassed $34.6 million in unexercised stock options and $19.5 million worth of Sempra stock. "That is especially high for a public utility, but Baum keeps claiming the company is not a utility" because of its diversification, says Chevedden. Sempra boasts that more than half of its profits last year came from nonutility businesses such as energy trading, power generation, and natural-gas pipelines.

Organized labor is not pleased by Sempra's shoveling of money to its gilded lords. "Sempra's five highest-paid executives received more than 30 percent of all the stock options granted in 2004," says the American Federation of Labor-Congress of Industrial Organizations on its website. "Baum received the lion's share -- nearly 12 percent of all options granted." Sempra was one of five large companies singled out for criticism by the AFL-CIO this year.

Sempra's concentrating of options grants in the ivory tower "is disproportionately lopsided in favor of top management," says Chevedden.

"I would think that a utility would tend to be more egalitarian than elitist," says Graef Crystal, former San Diegan who writes about executive compensation for Bloomberg News. "Utilities used to be considered a halfway house between civil service and business."

In prior days, topside pay at regulated utilities was well below the level of other industries because ratepayers could complain that their pockets were getting picked. Once utilities started diversifying, managements claimed they should be under no such restrictions. Today, salaries at Sempra, a holding company, are not included in the rate base; in theory, ratepayers are not subsidizing Baum's lifestyle. "We have seen a trend in which the concept of 'public' has been taken out of 'public utility,'" says Shames. "The business is now seen by executives as an opportunity to feed at the trough. Any semblance of public service is pretty much gone."

Crystal partly blames himself for that. "I was a compensation consultant to Pacific Gas & Electric for the decade ending in 1987. At the time, utility executives got modest salaries, and at the end of their careers they got a gold watch and a handsome pension. But the industry could only hire the dockside rejects and said it couldn't compete with unregulated companies, couldn't continue to pay peanut wages," he says. So the companies joined the greed parade. Now both pay and pensions are fat: Baum, for example, will make at least $154,000 a month in his retirement.

"I hope he will be able to maintain his current style of living on that diminished monthly amount," chuckles Alan McCutcheon, a retired vice president who is among a group of former executives suing over cost-of-living adjustments they have never received. "I wrote the head of human resources noting that over 17 or 18 years, the dollar amount I was receiving hadn't budged a bit. I never got an answer, a hiccup, a boo."

Crystal says that when averaged out over three years, Baum's pay is about equal to that of other top bosses in companies of the same size (not just utilities). However, Crystal believes -- with concurrence of such magazines as Business Week and Fortune -- that topside compensation has long been out of control. In 1973, chief executives made 45 times what average employees made. That has zoomed to 400 times, by his numbers. He explains that market forces don't determine chief-executive pay. Through corporate consolidations, the number of positions has shrunk, but there are more candidates than ever. "With an increase in supply and shrinkage of demand, pay should have dropped, but it is going up," Crystal says. Chief executives are told they deserve a raise because some other chief executive did better. "We don't have a market."

Sempra spokesman Doug Kline replies that earnings have risen 20 percent a year during Baum's reign. The stock has doubled while other stocks have gone down. Baum is getting paid for achieving internal financial goals, such as earnings, says Kline. But again, the problem with that reasoning is Baum's bloated pay is being compared to other chief executives' bloated pay. Aren't $54 million in stock and possibly $2 million in annual income enough of a retirement nest egg?

That question looms larger as critics raise questions about Sempra's accounting and governance. Are those earnings legitimate? Forbes uses an accounting-governance rating provided by a company named Audit Integrity, which analyzes 8000 corporations. There are four rankings: conservative, average, aggressive, or very aggressive. Sempra is labeled aggressive. That is not good.

For one thing, Sempra doesn't count the cost of stock options as an expense. A labor union that owns stock requested a shareholder vote on that topic. It passed at the London meeting, and Sempra says it will comply. "Their overall corporate governance profile is not good," says Greg Kinczewski, general counsel for Chicago's Marco Consulting Group, which advises employee benefit plans. Among many things, Sempra executives get golden parachutes in the event of a takeover; the company has insulated itself from outside investors wanting a voice, and board members have varying terms so control can't change quickly.

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