CEO's Salary Grew While Mine Safety Suffered

Massey Energy CEO Don Blankenship nearly doubled his multi-million dollar compensation package during the years federal regulators grew increasingly alarmed about safety at the company's coal mines. Massey owns the Upper Big Branch mine in West Virginia where 29 miners died in an explosion April 5. NPR's Howard Berkes joins host Liane Hansen to discuss newly-released documents detailing Blankenship's pay.

LIANE HANSEN, host:

This is WEEKEND EDITION from NPR News. Im Liane Hansen.

The 29 people who died in that coal mine explosion in West Virginia earlier this month worked for a CEO who received hefty raises in his multi-million dollar pay, even as his company's safety violations grew. And last year, that company, Massey Energy, was fined close to $13 million for alleged safety violations.

NPR's Howard Berkes joins us now with more. Good morning, Howard.

HOWARD BERKES: Good morning, Liane.

HANSEN: Youve been reviewing newly released documents that detail CEO's Don Blankenship's compensation package. What did you find?

BERKES: Don Blankenship made $17.8 million last year. His compensation package nearly doubled since 2007. There's a complicated formula, by the way, thats laid-out in these documents, which were filed with the Securities and Exchange Commission. And it starts with a base salary, which is close to a million dollars, and then adds bonuses, awards, perks, incentives - all based on how close Blankenship comes to meeting or exceeding performance targets. Things like how much money Massey made, how much coal it produced, and even how safe his mines are for workers.

HANSEN: But, as I said, Massey had $13 million in safety fines last year. And there have been a lot of revelations about safety problems since that explosion at the Upper Big Branch Mine. Given those safety issues, how does Massey's board of director justify the pay increases?

BERKES: Well, they do have one benchmark for safety thats in this compensation formula: its worker days lost to non-fatal injuries. And the company does have a stellar record when it comes to that particular statistic. A 14 percent reduction in worker days lost to injuries last year, and a better than average rate for that in 17 of the last 19 years. But thats not the only way to measure safety, of course.

HANSEN: Well, I know, you and our colleague Robert Benincasa have been searching the federal mine safety records for those other measures of safety. What did you find?

BERKES: Robert pulled out a couple of things that I think are worth noting that help put all this in perspective. The year that Don Blankenship received what is essentially a $7 million pay raise, four of his mines, including the Upper Big Branch Mine, had an injury rate more than twice the national rate. Ten mines had injury rates that exceeded the national rate, and those 10 mines were cited for these alleged safety violations 2400 times.

Also that year, according to the Mine Safety and Health Administration, the Upper Big Branch Mine, where those Massey workers died, had a rate of repeated significant and substantial violations 19 times the national rate.

HANSEN: So what does Masseys CEO say in response to all of this?

BERKES: There's been nothing specific so far about the compensation package. But both Blankenship and the Massey board strenuously defend their safety record. They point out that there were three Massey mines that received safety awards last year from the same federal mine safety agency thats filing all those safety violations citations. Massey did appeal most of those citations, arguing that they're unjustified.

They say they fix most safety problems the day they're flagged. Now, some Massey shareholders, though, they're not buying this. Two have called for the resignation of Blankenship. A third shareholder has filed suit, accusing Blankenship and the board of consciously failing to assure that the company complied with worker safety laws. So with that and the federal and state probes underway, I guess we're going to see.

LIANE HANSEN, host: NPR's Howard Berkes, Howard, thank you.

BERKES: You're welcome, Liane.

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Massey CEO's Pay Soared As Mine Concerns Grew

Massey Energy Co. CEO Don Blankenship speaks to reporters in Montcoal, W.Va. i

Massey Energy Co. CEO Don Blankenship speaks to reporters in Montcoal, W.Va., on April 6. A filing with the SEC states that Blankenship was paid $17.8 million last year. Haraz N. Ghanbari/AP hide caption

itoggle caption Haraz N. Ghanbari/AP
Massey Energy Co. CEO Don Blankenship speaks to reporters in Montcoal, W.Va.

Massey Energy Co. CEO Don Blankenship speaks to reporters in Montcoal, W.Va., on April 6. A filing with the SEC states that Blankenship was paid $17.8 million last year.

Haraz N. Ghanbari/AP

Massey Energy CEO Don Blankenship was paid $17.8 million last year even as some of the coal mines he supervised accumulated safety violations and injuries at rates that greatly exceed national rates.

That 2009 pay represents a $6.8 million raise over 2008 and almost double his compensation package in 2007.

Blankenship also has a deferred compensation package valued at $27.2 million at the end of last year.

The financial data is contained in Massey's 2010 proxy statement, which was filed with the Securities and Exchange Commission in advance of the company's May 18 annual stockholders meeting in Richmond, Va.

Massey Energy owns the Upper Big Branch Coal Mine in West Virginia where 29 miners died in a massive explosion on April 5. The mine disaster is the nation's deadliest in 40 years.

Proxy Statement

The proxy statement details a formula for compensation that includes corporate earnings, productivity of company mines, environmental violations and work time lost to injuries.

Blankenship met or came close to performance thresholds the Massey board established for each category, including the only safety category.

According to the statement, Blankenship is credited with a 13.9 percent reduction in work days lost to nonfatal injuries. Last year was the best year ever for that measure of safety, according to Massey, and the company's injury rate, as measured in lost work days, was better than the industry average.

"Our lost-time incident rate has been better than the industry average for 17 of the past 19 years and has been improving significantly," Massey Energy said in a statement on April 9.

High Risks For Workers

Four of Massey Energy's mines had injury rates that were more than twice the national rate last year.

But not included in the compensation criteria are other measures of safety at Massey mines that prompted the Mine Safety and Health Administration to label Massey "a company with a history of violations, and a … company that MSHA was watching closely."

MSHA and President Obama described the safety record at Massey's Upper Big Branch Mine as "deeply troubling."

Those assessments are based on analyses of the safety records at Massey and the Upper Big Branch Mine.

In the year it paid Blankenship $17.8 million in salary, bonuses and perks, Massey Energy was assessed $12.9 million in proposed fines for safety violations. Massey has appealed three-quarters of those fines.

An analysis conducted by NPR News found that 10 of Massey's coal mines had injury rates in 2009 that exceeded the national rate. Miners in four of those mines, including Upper Big Branch, were injured at rates more than double the national rate. The 10 mines together received 2,400 federal safety violation citations last year.

MSHA reported this week that the Upper Big Branch Mine had "repeated significant and substantial [safety] violations" last year at 19 times the national rate. These violations prompted 48 "withdrawal orders" in which miners were immediately pulled from affected portions of the mine until the problems were corrected. MSHA characterized these as violations "the mine operator either knew, or should have known, constituted a hazard."

"Massey failed to address these violations over and over again," MSHA reported.

In one safety violation notice, an MSHA inspector wrote “management engaged in aggravated conduct constituting more than ordinary negligence in that production was deemed more important."

Mine Safety and Health News has reported that the rate of safety violations per day at the mine is about 30 percent higher than the industry average.

Massey Energy Statement

Massey Energy has issued several statements defending its safety practices, including this did one dated April 9.

Massey responded to some of the criticisms of its safety record on Thursday with a written statement noting the company received MSHA "Sentinels of Safety" Awards for three of its mines in 2009. That's a record for a single company in a single year, the statement said, adding "Massey believes in safety, accountability and responsibility."

The Associated Press applied its own "compensation formula" to the proxy statement, and concludes that Blankenship actually earned $19.7 million in 2008. That would mean a 12.3 percent decline in compensation in 2009.

Massey stockholders and industry analysts have an opportunity to question the company about Blankenship's compensation package and Massey's safety record, if they care to, during a teleconference April 22 reviewing the company's financial performance for the first three months of 2010.

The annual stockholders meeting May 18 will provide another opportunity for stockholder questions.

At least two shareholders have demanded Blankenship's resignation. Another shareholder group, the Manville Personal Injury Settlement Trust, has filed suit against Blankenship and the Massey Energy Board of Directors.

The lawsuit alleges that Blankenship and the board "consciously failed to ensure that the Company complied with laws and regulations designed to ensure worker safety."

As Massey Energy filed its proxy statement with the SEC, a woman widowed by the Upper Big Branch explosion filed the first wrongful death suit in the incident. Marlene Griffith said she and her husband, William, a miner at Upper Big Branch since 1992, were about to celebrate their 33rd wedding anniversary. William Griffith was among the four miners missing for five days after the explosion.

The average annual wage of a coal miner in West Virginia is $68,000, according to the U.S. Bureau of Labor Statistics.

NPR's Robert Benincasa contributed to this report.

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