There once was a time when shareholders of what used to be called Utah Power & Light Co. would attend the company's annual meeting at the old Salt Palace, listen attentively, maybe ask a polite question or two and then adjourn for the free refreshments.
In the brave new world of shareholder activism, several hundred owners of PacifiCorp stock showed up at the utility's annual meeting at the Doubletree Hotel Wednesday, asked management dozens of pointed but impolite questions, and many left angry and frustrated.But most of them still lined up for the free refreshments anyway.
That's what happens when utility stocks, once considered the perfect investment for "widows and orphans," become as volatile as the shares of a start-up high-tech company and fail to provide a secure source of strong dividend income.
There were no picket signs demanding that PacifiCorp management fall on their swords, or at least resign, nor was there any shouted name calling, but one after another shareholders trooped to the microphones in the hotel's Grand Ballroom to castigate president and CEO Fred Buckman and his staff for what they clearly think is one of the worst investments they've ever made.
Last year, PacifiCorp, which has thousands of shareholders in Utah, returned a meager 2.2 percent to investors. Compare that to the 22.8 percent return of the S&P 500 and one can legitimately wonder why anyone would want to own shares in the Portland, Ore.-based electric utility.
Still, compared to the S&P Electrics, PacifiCorp acquitted itself quite well last year. That group of companies, overall, logged a negative 0.3 percent return for their shareholders. For the period 1993 through 1996, PacifiCorp came in with a three-year compounded return of 8.0 percent, nearly double the 4.3 percent for the S&P Electrics, but woefully short of the S&P 500's return of 19.6 percent.
Whether justified or not, PacifiCorp's shareholders are not happy campers. At Wednesday's meeting, the more hostile the question by a shareholder, the louder the applause.
To his credit, Buckman stoically answered all the questions put to him in a logical and convincing manner.
Even the tough ones, such as that posed by a man who expressed outrage at six-figure management bonuses last year, including Buckman's, at a time when the company was offering such meager returns to investors.
Buckman candidly admitted that he is as surprised as anyone at his compensation. "If you had told me when I was 35 (Buckman is now 51) that I would be making $1 million a year I would never have believed it."
Still, he said, the bonuses are justified because the company not only met its goal last year of earning $1.54 per share, but exceeded it by earning $1.64 per share. Buckman said executive compensation by way of salaries, bonuses and - particularly galling to shareholders: stock options - are necessary if the company is to attract and keep good people.
And far from being angry over executive "stock incentive' plans for company executives, he said, shareholders should applaud them because they mean that management doesn't make money (on the options) unless all shareholders make money (through rising share prices).
Other shareholder criticisms included the size of the company's board of directors (12 members) which "we have to pay for" as one shareholder noted, to the alleged lack of knowledge and expertise of the electric power business by those same board members.
But it was the "dollars and cents" as one shareholder put it, that was at the root of the complaints. It seemed clear that if the company were making a better return for investors they would be willing to ignore bonuses and stock incentives and too many directors. As it stands, it was clear that many had been going over the company's annual report with a magnifying glass.
But like it or not, the utility business will never be the safe, secure investment that it was in the past, and as deregulation gains steam, that will only become more true.
Richard T. O'Brien, chief financial officer, summed it up this way: "The days of guaranteed returns for electrical utility investors are over."