The Birmingham Water Utility is at the center of a significant public discussion as its next chief executive officer could command a substantial CEO salary reaching up to $750,000 annually. This potential compensation package, revealed in an initial analysis by the executive search firm, has ignited debates regarding executive compensation within public utilities and the efficient management of regional water resources in Central Alabama.
Central Alabama Water, formerly known as the Birmingham Water Works, has engaged Chicago-based Russell Reynolds Associates to spearhead the intensive search for its new leader. The firm’s preliminary assessment suggests that a candidate of the desired caliber would command a total annual compensation, including base salary, bonuses, and long-term incentives, within the $650,000 to $750,000 range. The search firm itself stands to receive up to $250,000 for its services, an amount tied to a percentage of the incoming CEO’s compensation.
This projected high-end CEO salary is justified by consultants based on market knowledge and comparisons with other major water management entities. For instance, the Los Angeles Department of Water and Power, recognized as the nation’s largest publicly-owned water and power utility, currently compensates its chief executive and engineer at the top end of this scale, $750,000 annually. This benchmarking underscores the board’s perceived need to attract an elite professional to lead the critical regional public utility.
The creation of the new CEO position itself stems from recent controversial state legislation that restructured the water works board, transforming it into a regional entity with altered governance. Board members emphasize that this move is mandated by law and is part of a broader strategy aimed at improving efficiency and potentially reducing operational costs within the utility’s complex corporate governance framework.
Board member Phillip Wiedmeyer articulated that the investment in a highly skilled CEO salary is strategic. He posited that the right executive, with extensive connections and expertise in water management, could secure federal and state grants for capital projects and optimize operations, ultimately leading to significant cost reductions. Such leadership is viewed as pivotal for the future financial health and operational excellence of the Birmingham Water Utility.
Currently, the daily operations in Birmingham are overseen by General Manager Mac Underwood, who earns $446,118 annually, with his contract extending through 2030. He supervises a team of four assistant general managers, all on six-figure salaries. The new CEO is expected to have complete authority to restructure the system’s management team, making necessary changes to positions and salaries in alignment with the broader goals of the public utilities board.
Despite the strategic justifications, the composition of the CEO search committee has sparked internal controversy among the seven-member board. Two board members representing Birmingham expressed concerns about the fairness of the process, highlighting that no city representatives were included despite Birmingham’s substantial customer base within the five-county service area, particularly given that 44% of all customers reside within the city limits, emphasizing the need for robust corporate governance.
Further exacerbating the debate on representation, board member David Standridge from Blount County serves on the committee, even though Blount County accounts for less than 0.17% of the utility’s customers. This imbalance in committee composition, contrasted with Blount County’s significance as the location of Inland Lake—the utility’s largest water source—adds another layer to the discussion surrounding transparency and equitable representation in the Birmingham Water Utility’s highest-level appointments.
The unfolding scenario underscores the intricate balance between attracting top-tier executive compensation for water management leadership and ensuring accountability and equitable representation in the governance of vital public utilities for the benefit of all stakeholders.
Leave a Reply