Are CEOs Sacrificed Too Quickly?

Peter A. Darbee has been CEO of PG&E (NYSE: PCG) since 1999. The company has made strong profits and its stock has performed well over the period since he got his job. He said yesterday that he would leave the firm.

Lee Cox, a board member who will be interim CEO, said “Peter concluded that a change in leadership would create the best opportunity for PG&E to move ahead after a challenging year. The board supported his decision. The search for Peter’s replacement is already underway, and an announcement is expected soon.”

Peter’s trouble is that eight people were killed and 30 homes destroyed when one of the company’s gas lines exploded in San Bruno. PG&E thinks the costs of the disaster will be more than $750 million.

The Darbee departure is not unlike the ones of BP’s Tony Hayward or his predecessor Lord Browne. BP had a checkered safety record under Lord Bowne, but he also may have lied to a court about a gay relationship he had while CEO.

Darbee had no real control over the San Bruno pipeline. PG&E has 20,000 employees. Some of them made mistakes at San Bruno, but those people are probably several steps removed from Darbee in the chain of command. He cannot realistically be expected to ferret out every single problem at his company.

Critics of Darbee and Hayward say that CEOs set the tone about safety at their companies. That may be so, but PG&E operates thousand of miles of pipeline. There has not been any trouble with 99.9% of that infrastructure and there probably won’t be.

PG&E shareholders and employees lost a CEO who has done an excellent job running the company. Perhaps his safety rules have saved the lives of people who live near or operate PG&G facilities. There will never be any way to tell if that is that is the case, so Darbee’s board would have needed to give him the benefit of the doubt.

There has been one major accident on Darbee’s 12 year watch. It is a lot to ask that he pay for that.  Of course, the board did not care about his record. One strike and he was out.

Douglas A. McIntyre