Orphans & executives at American Electric Power…

Once, utilities were deemed sound investments for the most vulnerable in society, so solid and secure — thanks in large part to regional monopolies and stringent government oversight — that you couldn’t lose investing in them, even if they weren’t likely to make you rich.

That was before Enron, of course, and the deregulation of the nation’s electricity market. But at least one utility, American Electric Power (AEP), still seems to offer that rock-solid protection for a select few: its top executives.

That’s the message in proxy that the company filed this week. Michael G. Morris, who has been the company’s chairman and chief executive since 2004, pulled in $9 million last year, up from $7.5 million in 2009 — a tidy 20% raise, entirely in the form of $1.6 million non-equity incentive pay (aka performance bonus). Three other top executives saw their total compensation nearly double or more than double.

The question, though, is what performance AEP’s board was rewarding. AEP’s shares have trailed the S&P 500 for the last two years. And — lest you think that AEP was merely unlucky to be an electric utility while the sector was out of favor — they have trailed the utility industry generally every year since 2008. Net income and operating income are down, even as revenue has risen.

As it turns out, the board carefully constructed a compensation program for Morris and other executives, taking into account “four areas of performance: safety, operating performance, regulatory performance and strategic initiatives.” The proxy continues:

“This balanced scorecard served as a tool to communicate and align the efforts of executive officers and other employees with the performance measures included on the scorecard.”

Then, during the year, the company chucked the whole thing, and determined that everyone’s performance would be measured according to a companywide performance gauge (essentially, earnings per share minus some bad stuff , including a health-care reform tax change, a regulatory decision preventing AEP from recovering certain costs from ratepayers, and restructuring charges). Here’s how the proxy put it:

“Due to AEP’s reorganization and cost cutting initiative it was impractical to revise and track all the goals established for each of AEP’s business units for 2010. In light of these unusual circumstances, in July 2010 all business unit scorecards were suspended for the year and replaced with the executive council scorecard for all employees. … As a result, the score was the same for each business unit, including executive officers.”

Voila, everyone got 113.5% of their target bonus, which for Morris worked out to $1.58 million. For what it’s worth, every member of the board that made these decisions collected more than $200,000 last year — and as much as $220,000 — for eight regular board meetings and three special meetings, plus meetings for the board’s six committees, which met anywhere from zero to nine times last year.

Morris’ rewards didn’t end with his incentive pay, of course. In addition to $1.27 million in salary and $5.3 million in stock awards, he also got $512,969 in “other” income — including $444,737 in private jaunts on the corporate jet. (For that kind of outlay, he could have flown first-class and at the last minute from AEP’s Columbus, Ohio, headquarters to Honolulu, and back — 156 times.)

The go-go days of Enron and company it isn’t. But clearly, there’s still money in power — for a few people, anyway. We’ll see how much trickles out to widows, orphans and other shareholders.

Image source: AEP corporate sustainability website