POISON PILL?
Herman Morris didn’t get to the top of Memphis Light, Gas & Water without sweating details and knowing which way the wind’s blowing. When it became clear years ago that there was a quiet rift between him and Mayor Willie Herenton, Morris — an attorney for MLGW for nine years before being named president — got the board to approve a unique package of severance benefits for himself, other officers, and MLGW employees in case they lost their jobs.
When the mayor decided last month not to reappoint Morris, the Flyer requested details of MLGW’s severance and benefits policy from the utility company and the city. Documents show Morris is seeking severance, pension, outplacement, sick leave, and vacation benefits worth $1,171,286. The Commercial Appeal reported in a front-page story Tuesday that “Morris bows out with $205,000.” That is less than one-fifth of his total proposed severance and benefits package.
Under his proposal, Morris would agree not to sue the city, disclose proprietary information, or solicit existing or prospective customers from MLGW or Memphis Networx. Morris also would agree to “forfeit” $113,267 of compensatory time “earned through business travel on weekends, storm restoration, and out-of-town meetings” and 58 percent of his unused “sick leave days,” worth $127,425 by his calculations.
The greater impact of the 15-page Severance Benefit Personnel Policy is that it applies not just to Morris but to other top executives and hundreds of employees. Several managers with longer tenure than Morris could be entitled to packages worth well over $1 million if they “voluntarily enter into separation and release agreements.” In other words, if they quit, they define the terms.
Herenton was stunned when he learned details of the severance provisions two weeks ago. He called them “vulgar” in a meeting with MLGW board members in his office last week and scolded board members for being derelict in their duty. He earlier made an oblique reference to the severance provisions as “something troubling I learned yesterday” when he met with City Council members last Tuesday.
The stealth severance deal was adopted without discussion or publicity by the board effective January 1, 2001, and revised November 18, 2002. Morris’ five-year term expired in 2002 but he continued to serve as president through 2003. He proposes that a few days of his vacation days be bumped into 2004 so his service will total 15 years.
Part of Morris’ proposed package could be money he contributed to MLGW’s pension plan. The summary doesn’t say exactly how much, if any, Morris contributed. Instead, it uses a multiplier to bring the figure to $513,937. In addition to that, Morris proposes that he be paid another $518,926 “representing the difference between the value of a normal pension based on 15 years of service and the amount of the multiple of contributions refunded by the pension plan.”
Parts of the proposal are unusual, although Morris is hardly the only public employee to exploit the complicated array of city, county, school-board, and MLGW pensions and retirement policies. MLGW officials responded to the Flyer with a one-paragraph faxed statement saying, “MLGW employees are eligible for severance benefits under a policy that covers both management and bargaining unit employees.”
Several things about MLGW’s pension/severance plan bother the mayor, who was sharply criticized himself 13 years ago for “double-dipping” his pension after he resigned as school superintendent.
The concept of severance pay for appointed public officials whose terms expire is “something I have never seen in government anywhere in America,” Herenton said. Storm restoration pay is another puzzler. The mayor, police director, and several other division directors are generally considered to be on call for emergencies around the clock as part of their duties. The pension multiplier is a third area of concern.
Herenton is in an awkward position to criticize the policy since he appointed Morris and all five board members and is supposed to get regular briefings from them. In reality, however, his relations with MLGW have been strained for several years. In 1998, Herenton made an aborted proposal to the City Council to consider selling publicly owned MLGW to a private utility. MLGW executives have been on guard ever since. The breaking point came when Herenton blasted MLGW management in remarks to the council and told Morris that he and the board would not be reappointed. Herenton would like to replace Morris with Joseph Lee, director of the Division of Finance and Administration. But the council balked at Lee and wants a national search instead.
Barring a legal challenge, Herenton’s hands may be tied by the severance surprise. It applies to employees and officers appointed to full-time positions who lose their jobs due to downsizing, change in control or ownership of MLGW, or — as in the case of Morris — expiration of their appointed term. At least 12 MLGW managers make more than $100,000 annually, and some of them have worked longer than 15 years.
In the corporate world, an anti-takeover provision is known as a poison pill. Herenton is familiar with the tactic from serving on the boards of First Tennessee and Holiday Inns years ago. “We did that to insulate management,” he said. “This is a corporate model applied to a public agency.”
The severance policy specifically addresses several shake-up scenarios, from privatization to merging MLGW with another government entity. One clause talks about reorganization as an authority and consolidation of city and Shelby County government. Neither of those would be considered a change in control.
In a column in The Commercial Appeal last week, former MLGW president William Crawford proposed reorganizing MLGW along the lines of the Memphis and Shelby County Airport Authority. Herenton, however, has something quite different in mind. He believes MLGW has become wasteful, overpaid, and “an island unto itself.”
“For years MLGW has wanted me to support them becoming an authority,” said Herenton. “I would never go for it. This is why it is so important to me to get Joseph Lee in as president. I want someone with the same philosophy I have of the relationship of MLGW to city government as a whole. [MLGW] just absorbed a $27 million budget reduction without making personnel cuts. That conveys to me that there is a lot of fluff.”
