If I was right, why was I fired?

Power Player

If I was right, why was I fired?


One thing that happens when your termination is announced publicly and covered in The New York Times and Wall Street Journal, as well as the newswires and trade press, is that everyone you encounter thereafter offers you a theory as to why you got fired.

In my case, what has been noteworthy about these "theories about my demise," as I have taken to calling them, is how uniformly they do not pin my downfall on strategy or strategic direction. Even investors who did not like the direction I was taking NRG steered away from telling me my strategy was wrong (although some did console me with words like, "David, I am sure you are going to get to the clean energy future, just not with NRG," which seemed a bit self-evident to me since I had just been fired). And given the company did not announce any change in strategic direction at the time I was fired, or since, it seems my transgression lay elsewhere.

If not strategy, then what? 

The theories put forward to me have varied — I wish I had written them all down — but the most popular rationale has been to tie my dismissal to the short-termism of institutional investors. As this argument goes, my long-term vision for NRG was spot-on, but the market simply couldn't look past short-term implementation stumbles.

The problem is that the short-termism theory doesn't hold up under the facts of the case. And I personally, as a matter of principle, don't object to short-termism anyway.

My view is that the long term is made up of a bunch of short terms strung together so a company can perform in the here and now, or else there will be no long term for it to worry about.

As to the facts of my circumstance, NRG was taking care of the short term just fine at the time of my firing. While there was some underperformance in a couple of NRG's smaller business units, responsibility for one of those businesses was commonly attributed to me while the other underperforming business unit was directly supervised by the company's COO, who became my successor, so this would not seem to have constituted grounds for my dismissal.

Maybe it was failure of the company to perform overall?

No, that couldn't have been it. NRG was delivering solid financial and operational performance year to date 2015, comfortably within its guidance range set back in 2014, which actually was quite remarkable given the collapse in commodity prices over the past 18 months.

So what was it?

NRG's stock was way down in 2015, but so was the stock of every other independent power producer (IPP). Yet I was the only IPP CEO fired.

Okay, then what?

Transformation. I think the problem was transformation.

Brown to green

We were attempting to transform NRG from brown to green, and from centralized to distributed. Investors didn't like it. Many times, institutional investors would complain to me about the complexity and challenge of what we were trying to do. They would point out to me that if they wanted exposure to "brown" (a.k.a. fossil fuels), they could buy Dynegy (DYN). If they similarly wanted "green” (renewables) they could buy Solar City (SCTY), and the portfolio combination of SCTY and DYN was easier for them to carry than NRG.

From an investment perspective, their point has merit. Internal transformation is complex, messy and doesn't occur overnight. Companies highly capable at doing one thing are not innately good at doing something else, even if it is similar. Thus, CEOs’ attempts at internal transformation — even when essential — often end badly. Witness the negative outcomes for well-respected CEOs trying to achieve similar transformations at Westinghouse in the 1990s and Vivendi a decade later.

From a societal perspective, this lack of investor appetite for internal transformation is a dangerous inhibitor to corporate change — change which, in NRG's case, was both essential to its long-term viability and highly desirable from a societal perspective. The global fossil-fuel industry is a $6 trillion-a-year business, dominated by giant investor- and state-owned corporations, with vast reserves of hydrocarbons under their control and on their balance sheets. If we consume all of what they have found, the earth melts. 

So at some point — soon — we need to ask these folks to dramatically change what they do, or at least how they do it, or else go out of business. Not an easy ask.

From oil to energy management

Let's say deep inside the bowels of the long-term planning department of a major oil company, the corporate planners have reached the conclusion that 20 years from now, the gig is up for oil. Society, dealing with a rapidly warming world, simply no longer will permit them to pull their oil out of the ground. This theoretical oil company has the good idea that its future will be in personalized comprehensive energy management services supplied to energy consumers on a highly decentralized and disaggregated basis.

Does it make sense for that oil company's CEO to announce that she will transition her business over time from oil to energy management?

No effing way. Institutional investors, and her board of directors, will throw up on the idea. "Keep drilling," they will say to her, "until we tell you otherwise."

Energy incumbents remain a wellspring of potent opposition to climate advocates in the fight against climate change. Until we find a way to enable the CEOs of these companies to change their business strategy without fear of reprisal, we can count on their dogged resistance to society's transformation to a clean-energy economy.

Until we find a way to hold the CEOs and boards of directors of these companies accountable for disregarding their outsized role in our collective responsibility for the health of the planet, they will continue to insist on recovering from the earth, and then combusting, every last hydrocarbon molecule in their reserves.