WASHINGTON, May 26, 2011 /PRNewswire/ -- Today, the CtW
Investment Group sent the following letter to the board of the
Alpha Natural Resources (NYSE: ANR) board calling for urgent action
– including the rescinding of employment agreements with Massey
Energy (NYSE: MEE) executives - in response to the findings of the
West Virginia Governor's
Independent Investigation Panel on the causes of the Upper Big
Branch mining disaster.
May 26, 2011
Mr. Michael Quillen,
Chairman,
Board of Directors
Alpha Natural Resources, Inc.
One Alpha Place
P.O. Box 2345
Abingdon, VA 24212
Dear Mr. Quillen:
In light of this week's scathing report regarding Massey
Energy's Upper Big Branch (UBB) operations by the West Virginia Governor's Independent
Investigation Panel (GIIP) -- and in advance of next week's
shareholder meeting -- the CtW Investment Group, on behalf of
shareholders of Alpha Natural Resources and Massey Energy, calls
for the board to sever employment agreements with key Massey
executives and managers and take immediate steps to fortify the
independent oversight of safety, including appointing additional
independent directors. Failure to take swift action could
undercut the future of the combined entity to both sets of
shareholders -- exposing the company to the same tragic lapses of
safety, heightening the integration risks, and eroding any
potential synergies. Ignoring the report's findings could also
undermine one of the key benefits of the merger -- resetting
Massey's acrimonious and increasingly burdensome relationship with
its regulators -- and instead potentially taint Alpha with the
worst elements of Massey.
The CtW Investment Group works with pension funds sponsored by
unions affiliated with Change to Win, a coalition of unions
representing five million members, to enhance long-term shareholder
returns through active ownership. Members of CtW affiliates
participate in Taft-Hartley plans with over $200 billion in assets, including shares of both
Massey and Alpha.
CtW Investment Group wrote to the Massey board prior to the UBB
catastrophe arguing that board failure to exercise sufficient
oversight over former CEO Don
Blankenship exposes "Massey and its shareholders to
unnecessary legal, regulatory and reputational risks."
Subsequent to the accident, we worked with a coalition of
institutional investors in a campaign against directors serving on
Massey's safety committee. They were opposed by 48.5 to 49.8
percent of the shares voted at Massey's 2010 annual meeting.
We believe this investor coalition ultimately caused the
board to break with executives and led to the retirement of
Blankenship.
As detailed in the enclosed analysis, which draws three key
recommendations for minimizing integration risk, the GIIP describes
a manner of "profoundly reckless" operating at the UBB mine, the
"normalization of deviance," and a "corporate mentality that placed
the drive to produce above worker 'safety."(1) For Massey
shareholders the concern is that the failure to purge the combined
company of this toxic culture could lead to future exposures,
whilst at the same time rewarding executives for failure. For Alpha
investors, we worry that integration and cultural issues may have
been underappreciated during the diligence process, which demands
heightened board vigilance going forward. The key lesson of the
Massey tragedy, applicable to both shareholders, is the importance
of independent oversight.
Accordingly, we call upon the board to:
- Rescind offers of employment agreements to Massey executives
and managers responsible for underground coal operations. As
detailed in the report, we are aware of five senior Massey
executives who are slated to continue employment at Alpha.
- Appoint additional independent directors and ensure that going
forward the safety committee is entirely independent (currently not
the case).
- Immediately determine the actual state of legal compliance in
Massey facilities, and create a culture of safety for the newly
combined entity.
- Determine the liabilities that Massey's systematic
non-compliance poses to Alpha's financial status (including any
resulting reduction in the financial "synergies" that were in part
the basis for the board's approval of the merger).
For the reasons detailed in the attached analysis, we believe
the board should take immediate steps to name new, independent
directors to oversee efforts to assure immediate compliance with
coal mine safety law in all facilities, beginning with the Massey
mines, and provide them with the authority and responsibility to
conduct the investigations and continuing oversight required to fix
the problems at the Massey facilities. Only such highest-level
authority is able to grapple with the cavalier approach to
compliance which is evidently so deeply-ingrained in the Massey
culture.
We further believe that shareholders must hear from the board
what steps it intends to take to ensure the board's proper
oversight of compliance functions at all Alpha and Massey coal
mines, and to make such disclosure at the up-coming meeting.
We look forward to discussing with you the board's process and
timeline for addressing shareholder concerns. Please contact
my colleague Per Olstad at (202)
721-6027 to schedule a call or meeting at your convenience.
Sincerely,
William Patterson
Executive Director
(1) Upper Big Branch - The April 5, 2010, explosion: a failure of basic coal
mine safety practices, Governor's Independent Investigation
Panel, May 19, 2011
SOURCE CtW Investment Group