Flying high at Allegheny Energy…

Except for the potential lawsuit that Allegheny Energy, Inc. (AYE) has on the horizon (a coal-fired power plant in West Virginia allegedly violated the Clean Water Act by releasing arsenic into the Cheat River watershed), a lot of the news about the company has been decidedly more upbeat.

For example, earnings per share were up for 2010 (the seventh consecutive year of growth, Paul J. Evanson, Allegheny’s Chairman, President and CEO, noted in the company’s Feb. 23 press release), and it received regulatory approvals for its proposed merger with FirstEnergy Corp. (FE).

But the upbeat news didn’t stop there. Based on the 10-K that Allegheny filed on Feb. 23, we know that Evanson’s total compensation rose from nearly $12.59 million in 2009 to more than $12.97 million in 2010.

So how did the company pay that $12.97 million? For starters, an interesting little footnote at the top of page 212 disclosed that the Evanson’s “Other” compensation included “…reimbursement for certain legal fees and $358,982 for the personal use of AE’s aircraft, which includes the costs associated with travel to outside board meetings.” (Wondering what those might be, we dug into Allegheny’s March, 2010 proxy and learned that “Mr. Evanson is a director of the Edison Electric Institute, and a member of the Board of Trustees at St. John’s University and the Westmoreland Museum of American Art in Pennsylvania.”)

An earlier section of the 10-K explained that “the vast majority” of Evanson’s personal use of the plane “has been for commuting purposes by the CEO himself,” although he and his family get to hop aboard the plane for personal travel “on a limited basis.” (The company doesn’t define “limited,” so we’re left to wonder: Is there a limit on the number of hours the jet can be used? Is it a limit on the number of trips? Is a trip to Australia okay, or do the Evansons need to relax stateside?)

The filing adds:

“This arrangement was a key driver in AE’s ability to hire its CEO in 2003, and its continuation has been a key driver in AE being able to retain his services…. AE’s policy with respect to personal use of the aircraft requires the CEO to lease the aircraft from AE for any personal use in excess of $325,000 and to pay the incremental costs of such personal flights, up to the maximum established under Federal Aviation Administration rules.”

However, it turns out that Evanson isn’t the only executive who gets to whisk the family off for a little fun in the sun, courtesy of Allegheny’s shareholders. The filing also states that – so long as Evanson approves – the other NEOs and their immediate family members can use the corporate aircraft “for personal travel on a limited basis”, which – once again – isn’t defined.

In terms of Evanson’s other forms of compensation for 2010, his salary increased to $1,213,151, he got a bonus of $224,000, and a non-equity incentive bonus of $2.066 million, as well as stock awards worth $8.249 million.

Call us sticklers for fiscal responsibility, but we think that with that kind of money an executive ought to be able to buy his family’s leisure plane tickets just by raiding his own piggy bank.

Image source: Razor512 via flickr


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