Southern California Edison

Case Summary:

This case also examines whether companies should make adjustments for uncontrollable factors that affect the results measures on which managers are being evaluated, and if so, how the adjustments are made. SCE faced a "tsunami-like"eventtheCalifornia Energy Crisis of 2000 and 2001 caused, in part, byEnronmanagers' manipulation of the power markets. The case allows a discussion of which circumstances should be considered partially or completely uncontrollable by management, and commensurate with these judgments, which adjustments should be made to measured performance for which purposes.

Case Questions:

1. The SCE board and managers made a number of special compensation-related decisions in response to the significant set of uncontrollablefactorstheCalifornia EnergyCrisisthatthe company faced in 2000 and 2001. Identify those decisions.
2. Evaluate those decisions. What were the SCE board and managers trying to achieve with these special decisions? Were those the right objectives? Were those the right decisions to achieve those objectives?