IEEFA Media Monitor: Nonprofit ‘Shills’ for a Utility Merger

Exelon and Pepco Throw Some Money Around; Peabody Spins Its ‘Pay Cut’ Story; What Lies Past the Pay Walls

Media Monitor 050115Mark Rosenman minces no words in a Chronicle of Philanthropy column this week about corporations that shape public policy by giving money to charities and then getting those charities to support what they want.

Rosenman notes that it’s a time-tested and dark art being practiced with gusto (and success) recently by Exelon Corp. and Pepco Holdings as the two companies seek to sway public opinion in favor of their proposed merger, which would be to the likely detriment of electricity customers in the District of Columbia, Maryland and Delaware.

After sifting through various and sundry public records, Rosenman says he perceives “a self-serving and deeply unsettling subservience among nonprofits” and foundations that have taken donations from Exelon and Pepco and subsequently endorsed the merger. He notes that IEEFA, several D.C. council members, the D.C. Office of People’s Counsel and the attorney general of Maryland have challenged the deal on the grounds that it will ultimately raise local electricity rates and thwart renewable-energy development.

On the other hand, several of the area’s community-service foundations and nonprofits, including the Salvation Army of the National Capital Area, the Urban Alliance, the American Red Cross of the National Capital Region, the Latin American Youth Center, the YWCA of the National Capital Area, and the Homeless Children’s Playtime, the United Negro College Fund and the Washington Area Women’s Foundation have written nice—and weirdly similar—letters in support of Exelon-Pepco.

“How did we get to a point where some funders and their beneficiaries are operating so contrary to what their communities really need?” Rosenman asks.

Follow the money, he says.

The column appears under the headline “When Charities Act as a Shill for Corporate Interests, the Public Good Suffers.”

PEABODY ENERGY GETS MUCH OF THE ENERGY-INDUSTRY PRESS TO TAKE THE BAIT on a Securities and Exchange Commission filing last week creating the impression that the company’s top executives will suffer a serious pay hit for Peabody’s consistently horrific performance. The company continues to post weak financial results, and its stock is off by more than 70 percent over the past year.

The Wall Street Journal still goes with the spin on lower base salaries for CEO Gregory Boyce and CEO-Elect Glenn Kellow with an unequivocal headline “Peabody Energy Executives to Take Temporary Pay Cuts.” Temporary is right, since—insignificant though they may be—the reductions are for only part of this year.

The cuts are actually picayunish in the larger compensation schemes for Boyce and Kellow, notes IEEFA’s David Schlissel in a piercing commentary this week that explains the truth of the matter: While Peabody investors and employees are at risk the top brass continue to do just fine. Schlissel explains that the reality of the Boyce-Kelly pay cuts is that they amount to less than 1 percent of what the two men are paid.

Coal Age, unfortunately, had William Coley, chairman of Peabody’s compensation committee, obsequiously thanking Boyce’s and Kellow’s “display of leadership and recognition of the company’s situation in these challenging times.”

Reuters at least puts the item in proper perspective by quoting Lucas Pipes, a Brean Capital energy-industry “who said he would have preferred to see ‘concrete targets’ for Peabody’s cost-cutting efforts.”

SOME OF THE MOST INFORMED JOURNALISM IN THE WORLD SITS BEHIND HIGH-PRICED PAY WALLS OUT OF SIGHT OF A BROAD PUBLIC, although its impact can be substantial because of the influential audience it attracts.

Pay walls exist for good reason. Newsgathering costs money, and specialized newsgathering costs more money. If the music is to play, the piper must be paid, whether by advertisers or subscribers, or both, and sometimes it’s a strict case of either-or.

Bloomberg LP’s core business is built around the sale of news-and-data subscriptions that cost each and every user in excess of $20,000 per year. More than 300,000 subscribers are willing to pay that price for the exclusive and vast content that comes with a subscription. While Bloomberg shares much of its material for free at Bloomberg.com, the company hews to a 50-50 rule by which half of its news content is for subscribers only.

That’s why an incisive article by Bloomberg’s Tim Loh last week quoting IEEFA’s Tom Sanzillo at length went largely unseen by most business-news consumers. The gist of Loh’s main question to Sanzillo: Are coal-company leaders being realistic in their insistence that the deflated coal industry has no place to go but up?

An emphatic no was the answer.

“Sanzillo said the industry must be more honest with investors and coalfield communities about the likelihood that the coal industry will need to be significantly smaller before it returns to profitability,” Loh wrote. “‘It is a false hope to communities where the mining is taking place,’ he said. ‘It’s no longer believed by investors, and their share prices are showing that.’”

Loh added the following note: “This view is at odds with the one adopted by the coal industry, which is cutting costs and fighting emissions policies in anticipation of higher prices, possibly by next year.”

Over at SNL, a smaller and lesser-known Bloomberg competitor also built on an expensive subscription model and whose day-to-day energy reportage rivals anyone’s, Taylor Kuykendall had two follow-on articles of note.

One was an item citing a research note by Mark Levin, a BB&T Capital Markets analyst, saying that U.S. coal producers Walter Energy and Patriot Coal may be facing imminent bankruptcy, setting off a potential “domino effect” across the industry. The other focused on Alliance Resources Partners CEO Joseph Craft II saying that the U.S. coal industry as currently structured is “unsustainable” and that a “shakeout” is imminent.

Most investors saw none of the Bloomberg or SNL material. But that doesn’t diminish its importance.

Karl Cates is IEEFA’s director of media relations.

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