PROPOSAL 5:
Limits on Outside Board Positions for DirectorsThe Board of Directors recommends a vote AGAINST this shareholder proposal.
Improve Operations of Duke Energy Board
It is noted that nominees for the Board are almost exclusively "professional" directors of one category or another (educational, professional, and religious affiliations inclusive). Furthermore, Board members normally serve actively as full-time executives of Duke Energy or other entities. A key purpose of the Board is to provide management guidance and a degree of independent oversight of company operations. While there is clearly a connection between "experience" and "bringing something" to service on the Board, there is also a concern with "overload" regarding Board members. Overload is possible for busy people, running companies, and serving on the boards of 5 or 6 or more organizations or entities. For example, for the Class II Directors (Expire 2002), Mr. William Coley works full-time for Duke and serves on the boards of 9 other organizations or entities. Mr. Leo Linbeck heads his own company full-time and is on the board of effectively 34 other companies. This raises serious questions concerning whether or not these individuals are "stretching it," or being overextended, from the standpoint of being able to give adequate attention and oversight to Duke Energy business and management decisions and actions, including important nuclear and environmental regulatory matters. For these reasons it is proposed that shareholders ask that the Directors, as a matter of company policy, with only rare and fully justified exception, limit future Board nominations to those persons meeting other, existing, requirements but serving on no more than 4 other boards of other companies, organizations, or entities.
Opposing Statement of the Board of Directors
The Board of Directors recognizes that each person serving as a director must devote the time and attention necessary to fulfill the obligations of a director. In evaluating this proposal, however, the Board of Directors believes that it is important for shareholders not to be misled. First, the references to the board memberships of William Coley and Leo Linbeck are as of March 1999. Please refer to the current information on board membership included under "Board of Directors" in this proxy statement. Second, Messrs. Coley and Linbeck attended all regular meetings of the Board of Directors since the merger with PanEnergy Corp in June 1997 and missed only one special meeting during this entire period. Finally, what is being proposed goes far beyond corporate governance guidelines that have been adopted by some corporations which limit memberships on boards of non-affiliated for-profit companies. The job responsibilities of many executives, including Mr. Coley, for example, require an active role in community affairs, and those executives are often encouraged to serve on the boards of various nonprofit organizations. This proposal, if adopted, would restrict membership by directors of Duke Energy on boards of any philanthropic, community, religious, educational, professional or cultural organization – regardless of time demands – as well as membership on the boards of Duke Energy’s subsidiaries and affiliated companies.
In formulating and reviewing corporate governance guidelines during the past two years, the Corporate Governance Committee specifically considered limiting other board memberships of directors. In its deliberations, the Committee recognized that, while service on boards of other public companies often broadens and deepens the knowledge and experience of directors, service on too many boards can interfere with an individual’s ability to perform his or her responsibilities. The Committee, however, decided not to endorse a specific limitation on the number of directorships an individual may hold, for a number of reasons. Over the years, multiple board memberships have not impaired the effectiveness of any member of the Board of Directors of Duke Energy. Moreover, time demands from board to board and capacities of individual directors vary, and imposing hard and fast rules seemed inappropriate. Instead, the Committee decided to ensure through periodic assessments that other existing and planned future commitments of each current director did not materially interfere with his or her service, and to see to it that future nominees were willing to make the necessary personal dedication of time and energy. The Committee also took into account in arriving at its decision that recent surveys indicate that imposing limitations on board memberships was a diminishing concern in setting governance standards – the surveys show that approximately 97% of corporate boards had no limit on the number of boards directors may serve on.
The Board of Directors believes that adoption of this shareholder proposal is not in the best interests of Duke Energy and its shareholders and recommends against its adoption.
