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Massey Resistance

Dead miners, massive protest and an angry Congress do little to deter Massey Energy's entrenched chief executive.

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With his shaky hand hitting the microphone, Robert C. Byrd, the 92-year-old senator from West Virginia, stared hard at the Massey Energy chief executive and said in a raspy voice, “Twenty-nine men are now dead, dead, dead, simply because they went to work that morning.”

At the Senate hearing May 20, coal company chief Don Blankenship repeatedly turned aside accusations, saying “I feel terrible about it,” but also blaming federal regulators for making the ventilation too complex at the Upper Big Branch mine where 29 miners were killed in an April 5 blast.

The pressure is hardly off Massey Energy after turning Richmond's Jefferson Hotel into an armed camp for its May 18 shareholders' meeting. While as many as 1,000 protestors chanted on Franklin Street, Blankenship beat back attempts by furious institutional investors to dump three board directors, including the company president, and force the company to turn itself around.

“In the case of Massey, the board hit almost all the bad governance triggers you could hit,” says Ricardo Duran, spokesman for the California State Teachers' Retirement System, which with eight other pension funds owns about $64 million in Massey stock. He says the company has reappointed directors who failed to receive a majority of votes, some of whom had conflicts of interest and were given excessive perks.

Another institutional shareholder, the Connecticut Retirement Plans and Trust Funds, had joined with eight public pension funds with assets of more than $500 billion trying to block the re-election of three Massey directors. “Massey's record of past safety violations compounded by the failure of the board to insist on corrective action reveal a history of contemptible conduct,” says Denise L. Nappier, the state treasurer of Connecticut.

The three directors were under fire because they were on the board's safety and compliance committee that should have acted to resolve Massey's bad record, says Michael Garland of CTW Investment Group, which represents union investments. Another was on the compensation committee that recommends Blankenship's salary. Director Baxter F. Phillips Jr. is Massey's president and answers to Blankenship, helping him dominate the board, Garland says.

Even though Blankenship beat back the attack, he's under pressure to change his board, Garland says. He's already agreed to have all eight directors stand for election at the same time, allowing for a clean sweep and perhaps expanding the board.

Lead director Bobby Ray Inman, a former head of the super secret National Security Agency and a former top CIA official, reportedly is looking for new directors with more regulatory and Wall Street experience. Another globally prominent director, Lady Barbara Judge, head of Great Britain's atomic energy commission, resigned about the time of the April 5 accident.

Even with new directors, it appears that Blankenship would be secure in his job. One factor that could put him in jeopardy would be if he's indicted as part of an ongoing criminal probe of the accident. Congress, meanwhile, might close the loopholes that allow Massey to hold up and fight just about every regulatory challenge to its operations. But at least in the short term, there won't be big changes at Massey Energy.

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