Corporate governance team of 2010 (small to mid-cap): Constellation Energy
George Stamas from Kirkland & Ellis (third from left) with, from left to right the Constellation team: Robert McKay, Joyce Rigsby, Charles Berardesco, Sean Klein and Linda Way- Smith
Often, a single year or series of events can define a company. While Constellation has been a leader in the energy sector for many years, the 12 months or so leading up to the Corporate Governance Awards 2010 contained many single events that helped it stand out from the crowd and achieve a level of excellence in governance it had not previously known.
The Fortune 500 company took on a number of significant transactions this year, in addition to making some important changes to its general governance and shareholder communication practices. Perhaps the central event of the year was the sale of $4.5 billion of its nuclear generation business to a foreign buyer, Electricité de France (EDF). This move essentially created a 50/50 joint venture and made Constellation shine like a star above the other firms in the category.
The corporate governance team, led by senior vice president, general counsel and corporate secretary Charles Berardesco and assistant corporate secretary Sean Klein, worked together with administrative staff to oversee the EDF transaction, which was completed in late 2009. In May 2010, the company also acquired two gas-fired generation plants in Texas. ‘We are a pretty diversified energy company, and because of this we must be in compliance with a range of regulations,’ says Berardesco.
From July 2009 to June 2010, Berardesco’s team was a vital component in equipping Constellation’s board of directors with the necessary skills and information to effectively manage the implementation of future strategic initiatives and pending deals. With last year’s EDF transaction, the governance team at Constellation worked to overcome a controversial regulatory approval process in Maryland and set a new precedent at the Nuclear Regulatory Commission involving joint ventures with foreign partners.
‘We initially had some disagreements with EDF,’ Berardesco recalls. ‘It disputed our ability to sell the company. We did have some difficulties with the new nuclear partnership, which restructured our agreement, but EDF took it over in total and we resolved our differences.’
The problems didn’t end there, however. In February 2010, Maryland state regulators pushed for Constellation and Baltimore Gas and Electric Company to ensure that ring-fencing of the regulated facility was completed within a three-month time frame, adding
more pressure to the small but dynamic legal team.
Notice and access
In addition to these transactions – or perhaps as a natural extension of them – the company decided to implement notice and access for the first time for the 2010 annual meeting season. ‘We had to think about the strategies to make sure we had the right votes out,’ says Berardesco. ‘That’s one of the risky things we have done; we were slightly concerned that we were moving to a process that might diminish the retail voter turnout, but we worked with good proxy solicitors to make sure all our strategies were suitable.’
By implementing notice and access and dramatically reducing fulfillment requirements, the company saved approximately $300,000 while maintaining a high level of retail participation. ‘We created strategies to help us through the process,’ explains Berardesco, ‘and we have implemented things that have worked well in the past.’
The team sought to think outside the box in order to enhance other areas outside of the legal spectrum that could contribute to the overall performance of the team and the company. ‘Because we are an industry that directly affects the environment, during all those transactions we printed fewer document copies and proxy statements and eliminated some inefficient processes,’ says Berardesco.
Ultimately, he believes it all boils down to teamwork. ‘How did we do this? I would say motivation,’ Berardesco says. ‘I walk the hall and talk to people.’ He feels the company’s success was a result of a structured team that was able to identify issues, understand them and listen to each other along the way. ‘We are lawyers for a reason,’ he explains. ‘Law is taught using the Socratic method, and one of my methodologies is to challenge people and have them challenge me back – it’s all about creating an environment where we can all express our views.’
Perhaps the message can best be summed up by looking at the company’s motto: ‘The way energy works’. The governance team at Constellation takes seriously the need to show shareholders and other stakeholders how the company works.
