Monday, May 31, 2010

Never Underestimate the Voter's Sense of Smell

PG&E's panicked infusion of an extra $11 million into its floundering Yes On 16 propaganda machine may trigger a familiar domino-falling, death watch process.  Titillated by even the remote prospect of political upset, and with no public polls to provide guidance, the forensic teams are starting to gather.  How could a utility with unlimited access to its customers' pocketbooks -- spending $46.1 million as of May 27, 84% above the low end of the original budget it reported to shareholders, vs. $77,000 expended by the No on 16 side -- possibly lose?

What has gone wrong?  Why wasn't the original $25 - 35 million arsenal -- widely condemned by editorial boards across the state as obscenely excessive -- sufficient?  In February, PG&E took the unprecedented step of disclosing to shareholders that Prop. 16 would cost 6 to 9 cents per share in earnings -- a ploy to reinforce the fiction that the campaign war chest was "shareholder money" despite every dime having been collected from customers.  The 84% cost overrun is something one associates with PG&E power plant construction budgets, not political battles with Lilliputians who have already been outspent 325 to 1.  Will taking that ratio up to 600 to 1 really make any difference?

Oddly, as of May 31, none of the $11 million Prop. 16 budget overrun has been reported in 8-K filings with the federal Securities and Exchange Commission -- even though the arithmetic has changed to nearly 12 cents a share!  Maybe it's close enough to Election Day to drop the "shareholder money" pretense.  Maybe not.  

Memo to the PG&E Law Department:  you guys still awake?  Memo to the PG&E PR Department:  ditto.

If the Prop. 16 skunk goes down, the postmortems will be voluminous.  The almost universal denunciations from what remains of the traditional mainstream media will be justly credited.  Some seers will perceive a promising reinvigoration of democracy from the blogosphere and social media.  The spontaneous uprising of an ideologically and geographically diverse opposition, in the absence of any visible semblance of an organized campaign, will perplex the pundits.

And that Abraham Lincoln tautology about how many of the people you can fool how much of the time will have been upended.  

However, not every voter reads newspapers or blogs.  Facebook and YouTube have a finite reach. 

But everybody breathes.  While difficult to measure empirically, PG&E's Prop. 16 effort has emitted an undeniable stench, wafting through California's televisions, radios, and mailboxes, and building up to nauseating levels.  The first rule of human interaction -- apparently lost on PG&E's political consultants -- is pay attention to the nostrils.

And all the money in the world won't mask a certain stink.

Nine years of coddled, post-bankruptcy existence in the regulatory recovery room has bred a smell of hubris in the PG&E executive suite.  A small cadre of obsequious yes-men and -women, who have survived endless purges, surrounds CEO Peter Darbee.  Their primary function seems to be maintaining a bubble around the Leader.  Combined with an almost pathological fear of his customers preferring to flee to other competitors, Darbee has relied on a primitive application of George Orwell to selectively redefine his own reality.  

Nowhere was this better on display than at the May 12  annual shareholders meeting.  Darbee's freakish oration, preserved for posterity on video here at the PG&E web site, goes a long way toward explaining the philosophy that produced Prop. 16.  Ironically, since Prop. 16 is the first instance in California history that any regulated utility has ever attempted to place its own language into the State Constitution, he made no effort to offer a rationale for doing so -- in fact, no mention of Prop. 16 was made in any of the presentations to shareholders -- and he declined to answer three separate, increasingly pointed questions on the ballot measure from the floor.

The PG&E CEO is obviously quite taken with Orwell's concept of "doublethink,"  defined in the book, 1984, as "the power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them," the ability "to tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed, to deny the existence of objective reality and all the while to take account of the reality which one denies."

What follows is a verbatim transcript of portions of his remarks (3:50 to 12:15 on the video tape):

What I'd like to do is explain the strategy of the Company, the common sense strategy that we developed nearly five years ago when we set out to define a new vision for PG&E and the strategy that would support that vision.

It's a strategy that's driven by values, values of the Company like accountability, open and honest communication, respect, and inclusion.  And together with our values, the strategies guide our actions.  Now it's important, given the strategy that we have, to reaffirm it on a regular basis and explain how it reinforces, and to reinforce the strategy that we have, the common sense strategy.
You know, what's truly remarkable is the strategy we developed more than five years ago is even more relevant and more appropriate given the business environment that we face today.  Given that the economy is depressed, and given how business has conducted itself in America over the last several years, America's trust and respect for business has been eroded over the past couple of years.

In the wake of the financial crisis and the economic downturn, there's a challenge for business today.  Americans want to see business doing a number of things.  Specifically, focusing on the longer term rather than the short term.  Americans are looking for transparency and honesty.  Americans are looking for accountability.  They want management to step up and take accountability for its actions.  And they want managers to be responsible for the way their business impacts society and the environment.  And, of course, at the same time, in addition to these lofty ideals, they want to make sure that business is demonstrating competence and providing quality products and services.
We've recognized that customers come first and if you ever lose sight of serving the customer, you've lost your bearings.  We've put an emphasis on operational excellence, so that we continually improve the products and services that we deliver our customers.  We've constructed a strategy that is built on accountability, integrity, and open and honest communication.  And finally, we have a strategy that's focused on the environment and the community.
... but beyond that we need to have a culture of accountability.  Accountability really comes down to one thing:  that is, for each member of the Company, each employee, to ask themselves, "what more can I do, what more can our team do, to better serve our customers -- better, faster, and more cost-effectively?"  So that's something that we're trying to, to communicate, and involve our employees in, saying, "I may not be in generation, or I may be at the nuclear power plant, or I may be up in Redding, but I stand ready to serve our customers and ask 'what more can I do?'"

The next element of the strategy is to have constructive relationships with our regulators and our policymakers.  So how do we do that?  Well the first part of any constructive relationship is to listen and to listen to people deeply, to treat them with respect, to attempt to conduct oneself with humility, to be responsive to the questions that regulators and policymakers might have, and to do so in a timely fashion.  And then when we're answering the questions and concerns of the regulators and policymakers, to do so with data.  With facts.  With good quality analysis.  And then, the conclusions and recommendations that we have should follow from that a, from that data and that analysis.  But underpinning the overall strategy with respect to regulators and with regard to our policymakers is to pursue win/win collaborative solutions -- to understand what their objectives are and to understand what our objectives are and find the win/win solutions in that.

Now I have to say that we're not going to agree with our regulators and policymakers each and every time.  There will be times when we have a different point of view.  But that's only going to happen after we've tried and tried again to find that common ground.  And most of the time when it happens, it will be because we have the same objectives in mind, but we have a different view on how to achieve those objectives.

And so Darbee's Prop. 16 spend-a-thon grows in intensity.  This week it was the full-page ads in newspapers throughout the state, showcasing the various "rent-a-friend" endorsements an ample budget can procure -- an escort service approach held in low esteem among dating adults, but a strategy someone has persuaded Darbee can build political credibility.  

This just in from Pyongyang -- Darbee's horse-choking 2009 $10.6 million compensation package (74% above the median for large energy utility CEOs, according to the Wall Street Journal's annual compensation survey, and 8% more than Goldman Sachs paid its CEO in 2009) was approved by the shareholder "non-binding advisory vote" :   251,040,122 to 10,214,679, with 3,831,599 abstaining.

Only our sense of smell protects us from the abyss. 

(Photo credit:  Darbee, Genesis Photo Agency) 

Here comes the Video Cavalry!  10 Short Films that will  rock the vote!  Just click here!