Massachusetts Attorney General Martha Coakley on Thursday called on the Securities and Exchange Commission to eliminate a reporting technicality that allowed Northeast Utilities to withhold a full accounting of chief executive Thomas J. May’s pay in 2012.
May led NStar until early April, when the Boston utility merged with Northeast Utilities of Hartford and May became chief executive of the combined company. Since NStar no longer exists as its own public company, SEC rules say the company need not disclose what May earned in his last three months at NStar, including any bonuses or the millions in accelerated stock awards he was expected to receive as a result of the merger.
“While requirements over compensation filings lie with the SEC, we believe this loophole should be closed so that shareholders and the public can know the full compensation involved,” Coakley, the state’s ratepayer advocate, said in a statement.
Massachusetts Senate President Therese Murray said through a spokesman that Northeast Utilities’ refusal to detail all of May’s 2012 earnings shows that regulators should have given more scrutiny to the merger before approving it.
The situation is “one of the reasons why the Senate president was opposed to rushing the merger through without full transparency and a complete understanding of its impact on ratepayers,” said Murray spokesman David Falcone.
But few other state officials and legislators with jurisdiction over financial issues or utilities would address whether Northeast Utilities should fully disclose May’s compensation.
Governor Deval Patrick, whose administration played a major role in allowing the merger, declined to comment.
Senator Benjamin Downing and Representative John D. Keenan, chairmen of the Legislature’s Joint Committee on Telecommunications, Utilities, and Energy, did not respond to requests for comment. Neither did state Senator Anthony Petruccelli and state Representative Michael Costello, who chair the Joint Committee on Financial Services.
Secretary of State William Galvin, Massachusetts’ top securities regulator, initially declined to comment. But his spokesman, Brian McNiff, later said: “His office, even though he regulates securities, it does not cover this sort of material. It doesn’t mean he doesn’t think you should be able to get this information: He just has no authority to get it.”
Northeast Utilities, meanwhile, continued to refuse to disclose full details of May’s 2012 NStar pay. A recent SEC filing showed May earned $4.2 million in total compensation from April 10 to the end of the year from Northeast Utilities. That’s less than half the $9.2 million he earned from NStar in 2011.
But some financial documents suggest May did better than that in 2012. A 2011 SEC filing estimated May would garner roughly $9.3 million in accelerated stock awards when the merger was finalized.
Michael Durand, a Northeast Utilities spokesman, defended the publicly traded company’s reporting of just nine months of May’s earnings.
“We’ve been upfront and open by clearly providing all reportable information from last year in our [SEC] filing,” Durand said. “We will continue to follow all SEC reporting requirements as we have always done.”
But Scott Hempling, a Washington-area lawyer who advises state utility regulators, questioned the resistance to disclosing May’s total pay, even if it’s not technically required by the SEC. First, going above and beyond reporting requirements sends a positive signal to investors and the public, he said.
Second, he said, utility regulators should have particular interest in full disclosure of executive compensation because it’s their job to ensure the companies are operating as best and cost effectively as they can.
“They may want to know that the company is paying enough to get the best executives there,” Hempling said, and “if the company has a culture of overpaying for its executives it could mean that it has a culture of not being overly disciplined [in its overall operations].”
Regulators at the Massachusetts Department of Public Utilities said earlier this week that they have kept close tabs on Northeast Utilities in the months after the merger and will take a close look at May’s and other executives’ pay when Northeast Utilities files a required report on the merger’s effects in 2015.
Regulators, Coakley, and other watchdogs spent a year and a half reviewing the deal before it was approved with stipulations. On Thursday, the attorney general reiterated the protections her office helped win for ratepayers.
“We ensured that any compensation resulting from the merger comes out of shareholders’ profits, not ratepayers’ pockets,” she said.
Mark McDonald, president of the New England Gas Workers Association, a legislative and public safety group, said he considers NStar one of the “better and safer gas companies in Massachusetts,” and that’s what leaves him puzzled as to why Northeast Utilities would refuse to disclose the Boston utility’s financials for the first three months of 2012.
“What is there to hide?” McDonald asked. “Clearly they’re embarrassed by it — otherwise they would just disclose it.”