TVA adopts changes to trim CEO compensation
The Tennessee Valley Authority is scaling back the formula used to compensate its CEO, potentially trimming the pay for America’s highest-paid federal employee.
The TVA act requires the federal utility to pay its employees similar to the compensation of others in the industry. But the TVA directors voted Thursday to roll back some of the incentive pay for TVA President Jeff Lyash, who Donald Trump urged the TVA board to pay significantly less when Trump was president four years ago.
Lyash, who has headed TVA since 2019, is the highest-paid federal employee in the country and received a compensation package in fiscal 2023 totaling $10.5 million. Most of Lyash’s compensation came from performance pay linked to corporate goals, and much of his pay package is in deferred compensation or pension payments. But Lyash was given a $74,750 increase in his base salary in 2023, and his $1.227 million base salary is more than triple the $400,000 salary paid to the president of the United States.
TVA’s pay consultants estimated Lyash was paid 29% below the median compensation for CEOs at comparably sized utilities last year.
Two-thirds of Lyash’s pay is based on whether the federal utility meets performance standards for power reliability, cost and cleanliness along with a variety of safety and economic development criteria.
Although Trump urged the TVA board in 2020 to cut Lyash’s pay, the current TVA board — most of whom have been appointed by President Joe Biden — is the first TVA board to reduce the pay targets for a TVA CEO since the current board structure was adopted nearly two decades ago. TVA directors decided in the fall to scale back the payments to Lyash and other executives based on agency goals from the record-high levels reached for fiscal 2023.
TVA Director Wade White, who pushed for the TVA board to review its executive compensation, said the changes adopted Thursday “will make this process more transparent and more in line with public power.”
At the urging of White and TVA Director Bobby Klein, TVA created a task force in the fall to study TVA’s executive pay and hired the independent consulting firm Frederic W. Cook & Co. to determine the peer group and
the benchmarking process used to help evaluate competitive compensation. TVA’s top executives were paid anywhere from $2.5 million to $10.5 million in fiscal 2023, according to TVA’s filings with the U.S. Securities and Exchange Commission.
PAY MULTIPLIER
During the board’s quarterly meeting at Lipscomb University in Nashville on Thursday, TVA directors voted to cut the maximum multiplier that determines Lyash’s annual performance pay from 200% of his salary back to 150% if all of the corporate goals are achieved. Had such changes been in place last year, Lyash’s performance pay would have been $275,000 lower than the $1.3 million he received in his annual performance award.
Beth Harwell, a former Tennessee speaker of the House who serves as chair of the TVA board’s People and Governance Committee, said the changes were made “considering the base and performance pay for the CEO and the important role of TVA’s public service mission.”
Last week, the Center for Biological Diversity published a report, “Perverse Pay,” that criticized TVA for paying its executives some of the highest pay of any government workers and giving TVA’s top brass more than $3 million to reward them for effective fossil fuel use at TVA coal and natural gas plants. Gaby Sarri-Tobar, energy justice campaigner at the center, said in a telephone interview that the board action “is an important start” in limiting excessive executive pay and changing the incentives away from carbon-producing energy.
“We’re pleased that the TVA board is taking a closer look at executive compensation and creating more pay transparency,” Sarri-Tobar said. “Families across the region who are facing unaffordable utility bills are subsidizing CEO Jeff Lyash’s $10.5 million payout and his reckless gas buildout. The board needs to completely toss out bonuses that keep TVA in the fossil fuel past and instead prioritize renewable energy, resilience and environmental justice.”
MARKET RATE
In response to Trump’s criticism of Lyash’s pay, the TVA board previously reviewed Lyash’s pay nearly four years ago but ultimately decided in 2021 to raise Lyash’s pay since his compensation was below comparable CEOs for investor-owned utilities even though TVA, by many measurements, was performing better than other energy companies.
The TVA board in 2020 hired outside consulting firms and a Nashville law firm to review TVA pay after Trump urged the TVA board to cut Lyash’s pay by “a whole lot.”
“After a complete review, we came to the conclusion that the compensation system that we have is what is required by the TVA Act, which requires us to benchmark our pay against our peer utilities, and is the one that best serves the 10 million people of the Tennessee Valley we serve,” TVA’s then Chair John Ryder, a former chief counsel for the Republican National Committee, said in 2021. “I think you’ve got to pay the market rate.”
Ryder was elevated to TVA chair in 2020 after Trump fired both of the two previous TVA chairs for their support of paying Lyash compensation levels that the former president labeled as “ridiculous.”
Asked about the potential pay cut from the board action, Lyash said Thursday he supports the board’s review of executive compensation and setting his pay level.
“It’s not appropriate for me to comment except to say that I think it is entirely appropriate for this board every few years to review its compensation program and to make adjustments that they feel are appropriate,” Lyash said. “I leave that to them.”