U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant:
MASSEY ENERGY COMPANY
2. Name of person relying on exemption:
CtW INVESTMENT GROUP
3. Address of person relying on exemption:
1900 L Street, NW, Suite 900, Washington, DC 20036
CtW INVESTMENT GROUP
April 29, 2010
Dear fellow Massey Energy shareholder:
WE URGE YOU TO VOTE "WITHHOLD" ON DIRECTORS RICHARD M. GABRYS, DAN R. MOORE
AND BAXTER F. PHILLIPS, JR. AT THE MASSEY ENERGY COMPANY ANNUAL MEETING ON
MAY 18. As members of the Safety, Environmental and Public Policy
Committee (SEPPC), these directors are ultimately responsible for serious
and systematic non-compliance with mine safety laws over an extended
period, a risk oversight failure that likely led to the catastrophic and
preventable mine explosion on April 5 that killed 29 miners and destroyed
$1.1 billion in shareholder value.
Massey's serious compliance failures have led to costly litigation and
recurrent fines, including record fines in 2008 for worker safety and
environmental violations. Despite shareholder efforts to strengthen board
of director oversight of safety compliance, including through a litigation
settlement in 2008 that mandated extensive responsibilities for SEPPC
members, Massey's violation rate remains abysmal. The fourth largest U.S.
coal producer, Massey has received the most warnings that its mines could
face greater scrutiny because of their repeated violations.
In our view, Massey's alarming record of non-compliance ultimately reflects
the board's fundamental inability to exercise independent oversight of
Donald Blankenship, a domineering Chairman and CEO who fosters a reckless,
"production first" culture and takes a confrontational approach to
regulators, shareholders and workers. Other signs of an entrenched board
include its classified structure and record of allowing related-party
transactions, awarding excessive CEO compensation and ignoring investor
concerns, including a majority vote against a director.
These are among the concerns we raised in a March 31, 2010 letter informing
lead director Bobby R. Inman that we would oppose the election of directors
Gabrys, Moore and Phillips on May 18 unless the board took immediate steps
to enhance its independence and accountability. We also cited concerns
raised in a June 2007 board resignation letter from two Massey directors,
including the board's "misguided insistence on keeping [Mr. Blankenship] in
place as CEO" and "unwillingness to confront" the company's "poor risk
management" and "confrontational handling of environmental and regulatory
matters."
The recent mine tragedy underscores the urgency of our concerns with the
board's three nominees. In addition to serving on the SEPPC, Messrs.
Gabrys and Moore are on the governance committee responsible for Massey's
poor governance. Mr. Moore also has conflicts of interest that compromise
his independence and is on the compensation committee that has granted
excessive CEO compensation and failed to set incentives tied to safety
compliance. Finally, Mr. Phillips is the company's President and thus an
especially conflicted and unsuitable director on a board that we believe is
effectively captured by his boss, CEO Don Blankenship.
The CtW Investment Group works with pension funds sponsored by unions
affiliated with Change to Win, a coalition of unions representing nearly
six million members. These funds have over $200 billion in assets and are
substantial long-term Massey shareholders. We detail our concerns below,
including:
I. Massey's Record of Systematic and Serious Regulatory
Non-Compliance (p. 2)
II. Director Responsibility for Compliance, Pay and Governance
Failures (p. 5)
III. Recommendation: Vote "Withhold" on directors Gabrys, Moore and
Phillips (p. 8)
1900 L Street, NW, Suite 900, Washington, DC 20036 - 330 W. 42nd Street,
Suite 900, New York, NY 10036
202-721-6060
www.ctwinvestmentgroup.com
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.
CtW Investment Group to Massey Energy shareholders
April 29, 2010, Page 2 of 8
I. MASSEY'S RECORD OF SYSTEMATIC AND SERIOUS REGULATORY NON-COMPLIANCE
THE MINE BLAST THAT KILLED 29 MINERS AND DESTROYED $1.1 BILLION IN
SHAREHOLDER VALUE WAS PREVENTABLE AND OCCURRED AT A MINE WITH AN ALARMING
RECORD OF SERIOUS VIOLATIONS.
Massey has projected a second-quarter charge of $80 million to $150 million
for costs associated with damage to its Upper Big Branch (UBB) mine and
benefit payments to victims' families. But the 24% drop in its share price
between April 5 and April 28, which erased $1.1 billion in shareholder
value, suggests investors believe the long-term financial impact will be
far higher. The S&P 500 was unchanged over this period, while shares of
the three larger U.S. coal producers - Arch Coal, CONSOL Energy and Peabody
Energy - rose an average of 5%.
A preliminary report by the Mine Safety and Health Administration (MSHA)
states that coal mine explosions are preventable. While investigations to
determine the exact cause of the UBB mine explosion are now underway, the
report indicates that most such explosions are caused by the accumulation
of methane and coal dust. MSHA had cited the mine in the month before the
blast for failing to control dust; improperly planning to ventilate the
mine of dust and the combustible gas methane; inadequate protection from
roof falls; failing to maintain proper escapeways; and allowing the
accumulation of combustible materials.
MSHA's preliminary report states that the safety and health citations it
issued to the mine "have not only been more numerous than average, they
have also been more serious." After MSHA warned the mine in December 2007
that it had a "potential pattern of violations" given its 204 "serious and
significant" violations over the previous two years, the mine escaped the
added federal oversight such a warning precedes by quickly reducing its
violation rate by more than 30%. The rapidity and magnitude of the
improvement suggest Massey has the ability to substantially improve
compliance when it is a top priority.
UBB's violation rate subsequently soared. MSHA issued 515 total citations
to UBB in 2009, up 160% from 2008 and equal to 1.76 times the 2009 national
average of 292 citations per mine. The number of serious violations was
especially alarming. In 2009, MSHA issued 48 withdrawal orders at the mine
for "repeated significant and substantial violations that the mine operator
either knew, or should have known, constituted a hazard; this was nearly 19
times the national rate. These data contradict Massey's April 9 claim that
UBB's violation rate since January 2009 has been "consistent with national
averages."
MASSEY HAS A COMPANY-WIDE RECORD OF SERIOUS WORKER SAFETY VIOLATIONS THAT
IS AMONG THE WORST IN THE INDUSTRY AND THAT HAS WORSENED OVER THE PAST FIVE
YEARS.
Although it is the fourth largest U.S. coal producer, Massey has received
more warnings than any other that its mines could face greater scrutiny
because of their repeated violations. Three of its mines also have more
citations classified as "significant and substantial" than the mine that
suffered the explosion. These three mines are among the top 20 in the U.S.
ranked by the number of "significant and substantial" violations accrued
since January 2009.
Massey not only has a very poor compliance record, but its violation rate
continues to rise. Massey's total safety violations more than doubled,
from 4,698 to 10,653, between 2005 and 2009. By contrast, the national
average number of citations issued per mine increased by only 18% over this
period. Significantly, Massey's total coal production fell 10% between
2005 and 2009, so increased mining activity was not a factor in its
steadily rising violation rate.
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.
CtW Investment Group to Massey Energy shareholders
April 29, 2010, Page 3 of 8
The rise in serious violations, though not continuous, is even more
dramatic. Massey's serious violations jumped 355%, from 54 to 246, between
2005 and 2009. These include 104(d) citations for violations that
significantly and substantially contribute to a mine safety or health
hazard; 104(d) withdrawal orders for unwarrantable failure to comply; and
107(a) imminent danger withdrawal orders. While serious violations
declined in 2008, after spiking to record highs in 2007, they returned to
near record levels in 2009.
MASSEY ENERGY - SERIOUS MSHA VIOLATIONS
2005 2006 2007 2008 2009
[ ]107(a) Orders 9 9 16 23 21
[ ]104(d)(2) Orders 16 88 163 114 111
[ ]104(d)(1) Orders 13 74 58 40 78
[ ]104(d)(1) Citations 16 19 33 25 36
The increase in serious violations in 2009 is especially disturbing given
Massey was assessed record fines for both worker safety and environmental
violations in 2008:
- In January 2008, the Environmental Protection Agency fined Massey $20
million for violating water pollution permit limits more than 4,500
times from January 2000 to December 2006. IT WAS THE LARGEST CIVIL
PENALTY EVER LEVIED BY THE FEDERAL GOVERNMENT FOR A POLLUTION
VIOLATION OF THIS TYPE UNDER THE CLEAN WATER ACT.
- In December 2008, Massey agreed to pay $4.2 million in civil and
criminal penalties and plead guilty to federal charges stemming from a
fire that killed two miners at one of its West Virginia mines in
January 2006. Prior to the agreement, the Assistant Secretary for
MSHA stated that "[t]he number and severity of safety violations at
the mine at the time of the fire demonstrated reckless disregard for
safety, WARRANTING THE HIGHEST FINE MSHA HAS LEVIED FOR A FATAL COAL
MINING INCIDENT." (Reuters, 3/29/07)
Even before the UBB tragedy that prompted a 24% collapse in Massey's share
price, "criticism for an array of safety violations and environmental
issues over the years" had led "some big Wall Street banks [to] refuse to
finance [the company]," according to ABC News (4/7/10). Bank of America is
reportedly in the process of ending its relationship due to environmental
concerns, chiefly ground water contamination, and JP Morgan stopped
financing Massey in 2008, though the reason is unclear.
WE BELIEVE CEO BLANKENSHIP'S "PRODUCTION FIRST" EMPHASIS HAS FOSTERED A
CULTURE THAT TOLERATES UNACCEPTABLE SAFETY AND COMPLIANCE FAILURES.
In an October 19, 2005 memo to Massey's deep mine superintendents, CEO
Blankenship wrote: "If any of you have been asked by your group presidents,
your supervisors, engineers or anyone else to do anything other than run
coal (i.e., build overcasts, do construction jobs, or whatever) you need to
ignore them and run coal." He sent a follow-up memo a week later in which
he "question[ed] the membership of anyone who thought that I consider
safety to be a secondary responsibility," based on misinterpreting his
October 19 memo (Massey employees are "members"). Given that overcasts are
part of a mine's ventilation system, and thus critical to mine safety, we
believe it is difficult to interpret Mr. Blankenship's initial memo
otherwise.
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.
CtW Investment Group to Massey Energy shareholders
April 29, 2010, Page 4 of 8
Media reports suggest this "production first" culture persists. A Massey
foreman now working with federal prosecutors investigating the mine said
that "Every single day, the [methane] levels were double or triple what
they were supposed to be," an account corroborated in part by MSHA records,
according to the New York Times (4/23/10). The foreman asked not to be
identified because, according to the Times, "speaking out is not acceptable
in the culture of his company." Another longtime Massey miner told ABC
News (4/8/10) that working for Mr. Blankenship was "like living under a
hammer. It's all about the bottom line, we all know that."
MSHA inspectors also noted Massey's "reckless disregard" for worker safety
in the months before the UBB blast. In handwritten notes made available to
the Washington Post, an inspector at the mine wrote in January 2010 that
"the operator has shown a reckless disregard of care to the miners on this
section and [eligible] men that use this escapeway. . . . I believe the
operator has shown high negligence due to fact of management knowing where
problem is." He was referring to a serious ventilation problem - air
flowing the wrong direction in an intake duct - that could "result in fatal
injuries" and that had not been fixed because top executives of the Massey
subsidiary
that operates the mine had instructed a foreman to disregard the issue.
(Washington Post, 4/23/10)
MASSEY HAS TAKEN A CONFRONTATIONAL APPROACH TO REGULATORS UNDER
BLANKENSHIP'S LEADERSHIP THAT EVEN FORMER DIRECTORS HAVE SAID IS
"COUNTERPRODUCTIVE."
MSHA assessed Massey over $42 million in civil penalties for 37,794
violations between 2005 and 2009, of which the company contested $32
million. According to MSHA, contesting serious violations is a tactic used
by mines with troubling safety records to avoid potential pattern of
violation status. The UBB mine, for example, contested 97% of its
significant and substantial violations in 2007 alone. While Massey is not
the only company to use the tactic, an analysis prepared earlier this year
for the House Education and Labor Committee found that Massey appealed more
MSHA citations in 2009 than any other coal company.
We believe Massey's confrontational approach to regulators is symptomatic
of a management and board culture that does not prioritize compliance. In
a 2003 interview, CEO Don Blankenship said, "We don't pay much attention to
the violation count." (Forbes, 5/26/03) He was responding to the fact that
Massey was cited by West Virginia officials for violating regulations 501
times in 2000 and 2001, while its three biggest rivals, mining twice as
much coal in the state as Massey, were cited a collective 175 times.
Recent press reports have also noted that Mr. Blankenship "has been an
outspoken critic of federal regulators." (CNN, 4/26/10)
Admiral Inman, the board's lead director, has also sought to deflect blame
for the company's high rate of safety violations away from management and
the board. According to an April 16, 2010 article in his local paper, the
Austin, Texas-based Inman "blamed the citations on an effort to target
Massey's nonunion mines." (Statesman, 4/16/10) At an April 26 press
conference, Admiral Inman blamed a plaintiff's lawyer, labor union
officials and "even the president of the United States" for propagating a
"big lie" that Massey "traded safety for profit." (Reuters, 4/26/10)
Admiral Inman's comments notwithstanding, the data indicate that the board
has failed to address management's systematic non-compliance with worker
safety laws. As detailed below, this is first and foremost a failure of
the SEPPC, but also of the compensation committee, which has failed to tie
Mr. Blankenship's pay to the company's worker safety compliance
performance.
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.
CtW Investment Group to Massey Energy shareholders
April 29, 2010, Page 5 of 8
II. DIRECTOR RESPONSIBILITY FOR COMPLIANCE, PAY AND GOVERNANCE FAILURES
SEPPC DIRECTORS GABRYS, MOORE AND PHILLIPS ARE ULTIMATELY RESPONSIBLE FOR
MASSEY'S ALARMING SAFETY COMPLIANCE RECORD.
In apparent recognition of the need for added board oversight of worker
safety compliance following a January 2006 fire that killed two workers at
a Massey mine, the board established the SEPPC in its current form in or
around February 2006. It was formerly called the Public and Environmental
Policy Committee (PEPC) and did not have responsibility for safety matters.
In May 2008, Massey agreed to add extensive safety-related responsibilities
to the SEPPC as a condition of the Agreed Final Judgment settling
shareholder litigation concerning the 2006 fire.
The current SEPPC charter largely reflects these additions and includes a
wide range of responsibilities with respect to safety compliance, including
to: review, assess risks and make recommendations regarding policies,
programs and goals; report to the board on worker safety compliance, rules,
regulations and goals; and recommend quantitative goals for reducing mine
safety incidents. Although not in the SEPPC charter, the Stipulation of
Settlement incorporated into the 2008 Agreed Final Judgment also mandated
that "The Board shall make a Corporate Social Responsibility report to its
shareholders on an annual basis that shall include, among other things, a
report on the Company's environmental and worker safety compliance."
However, our review of Massey's 2009 CSR report, the most recent available,
found no meaningful reporting of its compliance with worker safety laws and
regulations. The sole reference to safety (as opposed to environmental)
compliance is to the "millions of dollars" invested to comply with safety
regulations. Instead, the company' focuses its entire safety discussion on
its non-fatal days lost (NFDL) rate, which measures injuries, not
compliance.
The board's apparent failure to report to shareholders on Massey's worker
safety compliance is among the reasons the shareholder-plaintiff party to
the 2008 Stipulation of Settlement filed a new lawsuit on April 15, 2010.
The 2010 shareholder litigation alleges that, despite agreeing to the
monitoring and reporting requirements in the 2008 Stipulation of
Settlement, the board consciously (a) ignored the company's obligations to
comply with federal and state safety laws, (b) failed to implement
effective controls and to make reasonable inquiries, and (c) failed to
monitor and oversee the company's operations despite the red flags raised
in the earlier litigation and knowledge of "unsound and illegal conditions"
at Massey's mines.
Massey recently affirmed SEPPC responsibility for risk oversight and
compliance regarding worker safety in an April 26 public letter regarding
the UBB explosion: "In order to carry out [the board's] risk oversight
function, the Audit, Compensation, Finance, Governance and Nominating and
[SEPPC] are each responsible for risk oversight within each committee's
area of responsibility." The letter further states that the SEPPC "meets
on a quarterly basis regarding our compliance with worker safety,
environmental compliance rules, regulations and goals."
Given Massey's serious and systematic non-compliance with mine safety
regulations over an extended period, a risk oversight failure that likely
led to the catastrophic mine explosion on April 5, we believe the SEPPC
members - including director nominees GABRYS, MOORE and PHILLIPS - have
failed in their duties with respect to worker safety risk oversight and
compliance. The committee's failure is especially troubling given repeated
efforts by investors to strengthen board oversight of worker safety
compliance, including through litigation settlements that mandated
governance reforms. This suggests the problem is with the directors not
the policies.
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.
CtW Investment Group to Massey Energy shareholders
April 29, 2010, Page 6 of 8
COMPENSATION COMMITTEE DIRECTOR DAN MOORE FAILED TO TIE CEO PAY TO SAFETY
COMPLIANCE, RESULTING IN MAXIMUM PAYOUTS FOR SAFETY DESPITE RECORD
VIOLATIONS AND CONTRIBUTING TO CLEARLY EXCESSIVE CEO PAY.
It should come as no surprise that Mr. Blankenship told Forbes that Massey
doesn't "pay much attention to the violation count" since his pay is
unaffected by it. In fact, the only safety-related metric considered as
part of his incentive pay is Massey's non-fatal days lost (NFDL). It may
be appropriate to measure reported workplace injuries resulting in time
lost. But an NFDL rate is not a measure of regulatory compliance. It
certainly does not reflect the presence of conditions and systems in place
to prevent accidents. The accuracy of such measures has already been
questioned by both governmental and corporate reviews.<F1> Moreover, Mr.
Blankenship's incentive plans set low targets and high rewards for his NFDL
goals.
Specifically, the threshold, target and maximum targets set by Massey were
low and were set relative to Massey's past performance rather than to
objective standards. The threshold, target and maximum were a 0%, 1% and 2%
reduction in Massey's previous NFDL rate; to receive a bonus for safety,
Mr. Blankenship did not need to improve performance over the previous year.
In fact, Massey reported a 13.9% reduction in its NFDL rate, suggesting
that the target was too easily achievable. As the following table
illustrates, Mr. Blankenship received the maximum payout for safety
achievements, which provided 18% of his total bonus (vs. a %10 target).
Blankenship 2009 Annual Bonus Threshold Target Maximum Actual
NFDL Reduction $ 45,000 $ 90,000 $ 225,000 $ 225,000
Environmental violation reduction $ 45,000 $ 90,000 $ 225,000 $ 225,000
EBIT $ 67,500 $135,000 $ 337,500 $ 69,750
Strategic Planning $112,500 $225,000 $ 562,500 $ 480,000
Coal Production Targets $180,000 $360,000 $ 900,000 $ 278,250
TOTAL $450,000 $900,000 $2,250,000 $1,278,000
Similarly, of the $9.7 million in cash and stock awards Mr. Blankenship
received under the 2009 LTIP, 10% was targeted for NFDL reduction, while
the actual award of $2 million accounted for 21% and was paid for
surpassing the maximum NFDL reduction.
Significantly, the Mine Safety Technology and Training Commission formed in
the wake of the tragic accidents at the Sago and Alma mines of West
Virginia issued a December 2006 report recommending "a comprehensive
approach, founded on the establishment of a culture of prevention." CONSOL
Energy (whose CEO was a member of the Commission) now uses this proactive
safety approach, including a goal of zero accidents and uses the rate of
reportable incidents (rather than NFDL) as a safety metric. In 2009,
CONSOL's reportable incident rate improved by 9% and was 2.6 times better
than the industry average.
___________________________________
<FN>
<F1> US Government Accountability Office: Workplace Safety and Health:
Enhancing OSHA's Records Audit Process Could Improve the Accuracy of Worker
Injury and Illness Data, GAO-10-10 October 15, 2009; US Chemical and Safety
and Hazard Investigation Board. Investigation Report: Refinery Explosion
and Fire, BP, Texas City, Texas, March 23, 2005. Report No. 2005-04-I-TX,
March 2007.; BP U.S. Refineries Independent Safety Review Panel ("Baker
Panel"), Report, January, 2007 ("BP mistakenly interpreted improving
personal injury rates as an indication of acceptable process safety
performance at its U.S. refineries. BP's reliance on this data, combined
with an inadequate process safety understanding, created a false sense of
confidence that BP was properly addressing process safety risks."; Panel
Findings, p. xii).
<FN>
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.
CtW Investment Group to Massey Energy shareholders
April 29, 2010, Page 7 of 8
Significantly the Salt Lake Tribune (4/11/10) reported the following based
on an interview with former MSHA head Davitt McAteer shortly after the UBB
mine tragedy:
"Look at who's been involved in accidents the last 10 to
15 years," McAteer] added. It's not Consol Energy, Peabody
or Arch Coal, companies that have taken a proactive approach
to safety. "We can, in fact, identify companies that have had
record years with no accidents. There is a model that works."
Finally, in addition to its failure to tie CEO compensation to compliance
with worker safety laws, the Compensation Committee has a record of
awarding clearly excessive pay to Mr. Blankenship that is disconnected from
financial performance. This has led independent proxy advisor Glass Lewis
to give Massey an "F" grade for its executive compensation practices in
each year from 2006 to 2008 (Glass Lewis's 2010 report on 2009 pay has not
been issued yet).
Our review indicates that the compensation committee once again awarded
clearly excessive compensation to Mr. Blankenship in 2009. His total
compensation, valued at $17.8 million, was 186% above the average total
compensation of the CEOs at Massey's three larger U.S. peers (Arch Coal,
Consol Energy and Peabody Energy), even though Massey reported net income
that was 70% lower than the average of its larger peers. Relative to the
peer group medians, his pay was 157% above these peers, while Massey's net
income was 77% lower.
GOVERNANCE COMMITTEE DIRECTORS GABRYS AND MOORE ARE RESPONSIBLE FOR
MASSEY'S POOR GOVERNANCE PRACTICES, INCLUDING ITS ENTRENCHED BOARD.
Independent proxy advisors have repeatedly expressed concerns with Massey's
governance. Massey's Corporate Governance Quotient from RiskMetrics is in
the bottom decile of the S&P 500 as of April 1, 2010. Similarly, The
Corporate Library assigns Massey's governance a "D" grade. These
governance concerns are shared by Massey shareholders, who have sponsored
proposals to enhance the board's accountability and environmental
compliance practices and cast substantial withhold votes against directors
in each of the past two years.
In the highest vote of no confidence in any S&P 500 director last year,
Massey shareholders withheld 59% of shares voted from director Lady Barbara
Thomas Judge at Massey's 2009 annual meeting. Even more telling than the
extraordinary opposition vote was the board's response. The board not only
reseated Lady Judge but also elevated her to chair of the governance
committee. After we called on the board to immediately seek her
resignation in a March 31, 2010 letter, the board demonstrated its
continued support by including her as a director in its 2010 proxy
statement filed on April 16. Despite the board's backing, Lady Judge
abruptly resigned as a Massey director three days later, on April 19,
citing other obligations.
Finally, the governance committee has permitted Massey to engage in
disclosed and undisclosed transactions with directors. We believe these
transactions create conflicts of interest that compromise the directors'
independence, exacerbating investor concerns with the board's independence
and accountability. In total, three of Massey's six outside directors,
including director nominee Dan Moore, have significant financial ties to
the company:
DAN MOORE owns the Moore Group, Inc., a West Virginia auto dealership that
sells vehicles and services to Massey. Massey's 2010 proxy discloses that
2009 amounts represented less than 0.5% of Moore Group's total sales, but
does not disclose the amounts. Based on prior years' proxies, Massey paid
the Moore Group $870,907 for 2005 to 2008, including $183,350 in 2008.
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.
CtW Investment Group to Massey Energy shareholders
April 29, 2010, Page 8 of 8
In 2004, when director Moore ran for Governor of West Virginia, he received
$17,750 in campaign contributions from employees and directors at Massey
and its business associates, including its longtime law firm Jackson Kelly
PLLC.
ROBERT H. FOGLESONG is the founder and CEO of the Appalachian Leadership
and Education Foundation (ALEF), which sponsors fellowships. Although not
disclosed in Massey's 2009 or 2010 proxy statements, which define a
related-person transaction as exceeding $120,000 annually, Massey donated
$115,000 to ALEF in 2008. Massey cited the donation in its 2009 CSR
report; its 2010 report is not yet available. According to a shareholder
lawsuit filed April 15, 2010, Massey has pledged $500,000 to ALEF over five
years. According to a prior lawsuit dated December 14, 2007, one third of
ALEF's named fellowships are associated with Massey or its current and
former directors.
STANLEY C. SUBOLESKI, formerly a longtime Massey executive under CEO Don
Blankenship, provides consulting services to the company. He retired from
Massey as a Vice President in 1997, rejoined the company as an Executive
Vice President and Interim Chief Operating Officer from December 2001 to
May 2003, and then left to join MSHA in June 2003. He left MSHA in 2006
and joined the Massey board in May 2008. Massey's 2010 proxy discloses the
consulting relationship, but not the amounts, which it states do not
constitute a related-party transaction. Massey's 2009 proxy disclosed that
it paid $57,915 in consulting fees to Mr. Suboleski in 2008.
Given these conflicts, we believe only three of Massey's eight directors
are genuinely independent. Moreover, lead director Inman has been a
director since 1985, a tenure that calls into question his independence as
well. Given these concerns, which are reinforced by the board's apparent
acquiescence to CEO Don Blankenship, we believe it is especially
problematic that 2010 director nominee BAXTER PHILLIPS, the company's
President, is on the board.
III. RECOMMENDATION: VOTE "WITHHOLD" ON DIRECTORS GABRYS, MOORE AND
PHILLIPS
We urge you to join us in withholding votes from directors RICHARD M.
GABRYS, DAN R. MOORE and BAXTER F. PHILLIPS, JR., the three directors
standing for election at Massey's annual meeting on May 18.
With Massey's management and board now under intense scrutiny by investors,
regulators and the public, we believe replacing these three directors with
qualified, independent directors is essential to restore confidence in the
board and strengthen its oversight, independence and accountability. It is
also a predicate to ensuring effective worker safety practices and
compliance at Massey and creating sustainable, long-term value for its
shareholders.
Please contact Michael Garland at 212-471-1317 for additional information.
Sincerely,
/s/
William Patterson
Executive Director
____________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be accepted.