Most top executives for Peabody Energy, Arch Coal, and Alpha Natural Resources got compensation increases worth in total millions of dollars as the companies went into massive debt often due to fruitless expansions, the report released Tuesday by Public Citizen, an advocacy organization, found. In conjunction with the report, Public Citizen also sent letters to Peabody Energy, Arch Coal, and Alpha Natural Resources chief executive officers urging them to invest their multi-million dollar bonuses in a trust fund for laid off workers.
The report comes as the coal industry has been facing a steep drop in prices as demand plummets. Moreover, regulations on the industry have become more stringent over the years, raising costs. The report also questions companies’ management and lists compensation increases from 2012 through 2014 — the years ahead of bankruptcy filings — all while pointing to layoffs and a number of attacks on workers’ benefits through the company’s financial struggles.
As profits shrank, executives paid themselves more, laid off staff, and cut worker benefits. Public outcry over executives receiving multi-million compensation packages as business collapse has been a common recurrence in the past decade, particularly after the financial crisis of 2008. Then the spotlight fell on banks, which were awarding billions in salaries, bonuses, and other benefits despite the implosion or near-implosion of the companies. As happened then, it’s unlikely that executives will be asked to forgo any of the compensation.
According to the report, Gregory H. Boyce, former Peabody Energy chief executive officer, got nearly $11 million in compensation packages in 2014, an increase of some $1.5 million from two years prior. Boyce got this increase the same year the company pushed to withdraw from its collective bargaining agreement with the United Mine Workers of America, which provided health coverage for retired mine workers.
Peabody Energy, the world’s largest privately-owned coal company, filed for bankruptcy last month. The company cited an “unprecedented industry downturn,” which it attributed to myriad factors including an economic slowdown in China, low coal prices, and “overproduction of domestic shale gas,” the Washington Post reported.
Meanwhile, John W. Eaves, Arch Coal chief executive officer, got nearly $7.5 million in 2014, an increase of some $3 million from the year before. Arch Coal, the second-largest coal producer in the country, filed for bankruptcy in January, some four years after a $3.4 billion deal to acquire International Coal Group, a mining company. As the company struggles, it has fired 230 employees from a Wyoming mine. However, during the year ahead of its bankruptcy, Arch Coal paid five executives almost $20 million, according to the report, and paid more $18.5 million to bankruptcy advisers.
For its part, Alpha Natural Resources paid its chief executive officer nearly $8 million in compensation. The fourth-largest coal company in the country filed for bankruptcy a year later. Since then, Alpha has petitioned the court to break contracts with the United Mine Workers of America to modify retiree health care benefits while it paid a total of $28.4 million in bankruptcy advisory fees. It also announced plans to lay off hundreds of workers in central Appalachia, the Associated Press reported, citing tough market conditions. In February, the company said lenders offered $500 million for its core assets. It could emerge from bankruptcy in June.
The Energy Information Administration predicts that coal production will fall by 12 percent in 2016, the largest such drop since 1958. All three companies have said that efforts to curb global climate change could impact its business by reducing demand for coal. Yet the drop in coal consumption in the United States is driven primarily by economic and technological factors in the electric utility sector, as well as separate energy policies and legal battles at the state and local level.
Author: Alejandro Davila Fragoso