Executive Compensation at Aquila: Moving from Utility Services to Power Trading Harvard Case Solution & Analysis

In the late 1990s, UtiliCorp United, owned utility that natural gas and power assets in the Midwest and on the international level, has moved aggressively into the business of wholesale energy trading. The move came after Congress passed a law that opened the wholesale energy markets to competition, in the hope that competition will lead to lower prices. According to the legislation, trading activity in these markets exploded, a trend UtiliCorp participate in its energy through energy trading subsidiary Aquila Merchant. In recognition of the important role that trade in energy is expected to play for the company going forward, UtiliCorp officially changed its name to Aquila in March 2002. At the same time, the board received a discretionary bonus of $ 4.5 million CEO Robert Green, "in recognition of his contribution to the establishment and development of business commercial services." He was on the job for only three months, having his older brother Richard Greene Jr., who remained chairman. After just a few months later, however, the energy markets have collapsed, and the company reported major losses. As a result, Aquila announced that it will close its energy trading division, and that Robert Green will step down as CEO. He wanted to keep it a bonus, as well as to take a significant and controversial package. This case is the appropriateness of these payments, subject to changes in the strategic model of the company and performance. "Hide
by David F. Larcker, Brian Tayan Source: Stanford Graduate School of Business 20 pages. Publication Date: May 10, 2008. Prod. #: CG14-PDF-ENG

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