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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant | |
Filed by a Party other than the Registranto | |
Check the appropriate box: |
o | Preliminary Proxy Statement | ||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
xDefinitive Proxy Statement | |||
o | Definitive Additional Materials | ||
o | Soliciting Material Pursuant to §240.14a-12 |
PG&E Corporation
Payment of Filing Fee (Check the appropriate box):
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o | Fee computed on table below per Exchange Act Rules 14a-6(i) |
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PG&E Corporation and Pacific Gas and Electric Company Joint Notice of |
March 13, 2007 | ||
To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company: | ||
You are cordially invited to attend the 11th annual meeting of PG&E Corporation and the 101st annual meeting of Pacific Gas and Electric Company. The meetings will be held concurrently on Wednesday, April 18, 2007, at 10:00 a.m., at the San Ramon Valley Conference Center, 3301 Crow Canyon Road, San Ramon, California. | ||
The accompanying Joint Proxy Statement contains information about matters to be considered at both the PG&E Corporation and Pacific Gas and Electric Company annual meetings. At the annual meetings, PG&E Corporation and Pacific Gas and Electric Company shareholders will be asked to vote on the election of directors and ratification of the appointment of the independent registered public accounting firm for 2007 for each company. The Boards of Directors and management of PG&E Corporation and Pacific Gas and Electric Company recommend that you vote “FOR” the nominees for directors and the ratification of the appointment of Deloitte & Touche LLP as each company’s independent registered public accounting firm for 2007, as set forth in the Joint Proxy Statement. | ||
PG&E Corporation shareholders also will be asked to vote on the proposals submitted by individual PG&E Corporation shareholders described in the Joint Proxy Statement. For the reasons stated in the Joint Proxy Statement, the PG&E Corporation Board of Directors and management recommend that PG&E Corporation shareholders vote “AGAINST” these proposals. | ||
Your vote on the business at the annual meetings is important. For your convenience, we offer you the option of submitting your proxy and voting instructions over the Internet, by telephone, or by mail. Whether or not you plan to attend, please vote as soon as possible so that your shares can be represented at the annual meetings. | ||
Sincerely, | ||
Peter A. Darbee | ||
Chairman of the Board, Chief Executive Officer, | ||
and President of PG&E Corporation | ||
Chairman of the Board of | ||
Pacific Gas and Electric Company |
13, 2007
You are cordially invited to attend the 10th annual meeting of PG&E Corporation and the 100th annual meeting of Pacific Gas and Electric Company. The meetings will be held concurrently on Wednesday, April 19, 2006, at 10:00 a.m., at the San Ramon Valley Conference Center, 3301 Crow Canyon Road,San Ramon, California.
The accompanying Joint Proxy Statement contains information about matters to be considered at both the PG&E Corporation and Pacific Gas and Electric Company annual meetings. At the annual meetings, PG&E Corporation and Pacific Gas and Electric Company shareholders will be asked to vote on the election of directors and ratification of the appointment of the independent registered public accounting firm for 2006 for each company. The Boards of Directors and management of PG&E Corporation and Pacific Gas and Electric Company recommend that you vote "FOR" the nominees for directors and the ratification of the appointment of Deloitte & Touche LLP as each company's independent registered public accounting firm for 2006, as set forth in the Joint Proxy Statement.
PG&E Corporation shareholders also will be asked to vote on the proposals submitted by individual PG&E Corporation shareholders described in the Joint Proxy Statement. For the reasons stated in the Joint Proxy Statement, the PG&E Corporation Board of Directors and management recommend that PG&E Corporation shareholders vote "AGAINST" these proposals.
Your vote on the business at the annual meetings is important. For your convenience, we offer you the option of submitting your proxy and voting instructions over the Internet, by telephone, or by mail. Whether or not you plan to attend, please vote as soon as possible so that your shares can be represented at the annual meetings.
Sincerely,
Peter A. DarbeeChairman of the Board, Chief Executive Officer,and President of PG&E CorporationChairman of the Board ofPacific Gas and Electric Company
Table of Contents
Joint Notice of Annual Meetings of Shareholdersof PG&E Corporation and Pacific Gas and Electric Company
March 14, 2006
To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company:
1. | For PG&E Corporation and Pacific Gas and Electric Company shareholders, to elect the following 10 and 11 directors, respectively, to each Board for the ensuing year: |
David R. Andrews | Peter A. Darbee | Mary S. Metz | ||
Leslie S. Biller | Maryellen C. Herringer | Barbara L. Rambo | ||
David A. Coulter | Thomas B. King* | Barry Lawson Williams | ||
C. Lee Cox | ||||
* Thomas B. King is a nominee for director of Pacific Gas and Electric Company only. |
* Thomas B. King is a nominee for director of Pacific Gas and Electric Company only.
2. | For PG&E Corporation and Pacific Gas and Electric Company shareholders, to ratify each Audit Committee’s appointment of Deloitte & Touche LLP as the independent registered public accounting firm for 2007 for PG&E Corporation and Pacific Gas and Electric Company, |
3. | For PG&E Corporation shareholders only, to act upon proposals submitted by PG&E Corporation shareholders and described on pages 34 through 36 of the Joint Proxy Statement, and |
4. | For PG&E Corporation and Pacific Gas and Electric Company shareholders, to transact any other business that may properly come before the meetings and any adjournments or postponements of the meetings. |
13, 2007. this Joint Proxy Statement. 18, 2007.companies'companies’ annual meetings of shareholders, including any adjournments or postponements.21, 2006.20, 2007. This date is the record date set by the Boards to determine which shareholders may vote at the annual meetings.20052006 annual report to shareholders, were mailed to shareholders beginning on or about March 14, 2006.19, 2006,18, 2007, at 10:00 a.m., at the San Ramon Valley Conference Center, 3301 Crow Canyon Road, San Ramon, California.The San Ramon Valley Conference Center is located in San Ramon right off Interstate 680, approximately 35 miles eastSan Francisco. From Highway 680, take the Crow Canyon Road exit, go east on Crow Canyon Road past Camino Ramon, and turn right into the Conference Center parking lot.1.Over the Internet athttp://www.proxyvoting.com/pcg,2.By telephone by calling toll-free 1-866-540-5760, and3.By completing your proxy card and mailing it in the enclosed postage-paid envelope.1. Over the Internet athttp://www.proxyvoting.com/pcg, 2. By telephone by calling toll-free 1-866-540-5760, and 3. By completing your proxy card and mailing it in the enclosed postage-paid envelope. 18, 2006.17, 2007. These Internet and telephone voting procedures comply with California law.19, 2006.the Board'seach Board’s voting recommendations?
Item | Board’s Voting | ||||||||||||
No. | Description | Recommendation | |||||||||||
1 | Election of Directors | For all nominees | |||||||||||
2 | Ratification of Appointment of the Independent Registered Public Accounting Firm | For this proposal | |||||||||||
3-4 | Shareholder Proposals | Against these proposals |
Item | Board’s Voting | ||||||||||||
No. | Description | Recommendation | |||||||||||
1 | Election of Directors | For all nominees | |||||||||||
2 | Ratification of Appointment of the Independent Registered Public Accounting Firm | For this proposal |
To approve other items described in the Joint Proxy Statement:
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20, 2007.
1-800-719-9056.
Can I change my proxy vote?
2
20, 2007.
For each shareholder proposal, a qualified representative will have an opportunity to discuss that item. Shareholders will have an opportunity to raise other comments and questions regarding that proposal.
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1. | A brief description of the candidate, |
2. | The candidate’s name, age, business address, and residence address, |
3. | The candidate’s principal occupation and the class and number of shares of the company’s stock owned by the candidate, and |
4. | Any other information that would be required under the rules of the Securities and Exchange Commission in a proxy statement listing the candidate as a nominee for director. |
1. | A brief description of your nomination, |
2. | Your name and address, as they appear in the company’s records, |
3. | The class and number of shares of the company’s stock that you own, |
4. | Any material interest you may have in the nomination, |
5. | The nominee’s name, age, business address, and residence address, |
6. | The nominee’s principal occupation and the class and number of shares of the company’s stock owned by the nominee, and |
7. | Any other information that would be required under the rules of the Securities and Exchange Commission in a proxy statement listing the nominee as a candidate for director. |
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Advance notices of director nominations that shareholders wish to bring before the 20072008 annual meetings of PG&E Corporation or Pacific Gas and Electric Company must be received at the principal executive office of the appropriate company no later than5:00 p.m., Pacific time, on January 26, 200728, 2008.. If you wish to submit a nomination for a director candidate, we recommend that you use a method that allows you to determine when the nomination was received at the principal executive office of the appropriate company.
12.
• | PG&E Corporation’s and Pacific Gas and Electric Company’s codes of conduct and ethics that apply to each company’s directors and employees, including executive officers, |
• | PG&E Corporation’s and Pacific Gas and Electric Company’s Corporate Governance Guidelines, and |
• | Charters of key Board committees, including charters for the companies’ Audit Committees, Executive Committees, the PG&E Corporation Finance Committee, the PG&E Corporation Nominating, Compensation, and Governance Committee, and the PG&E Corporation Public Policy Committee. |
How do I contact the directors or officers of PG&E Corporation or Pacific Gas and Electric Company?
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Your vote is important.6
If you are not executing and submitting your proxy and voting instructions over the Internet or by telephone, please mark, sign, date, and mail the enclosed proxy card as soon as possible.
20, 200615, 2004company'scompany’s shareholders.1. Election of DirectorsAll members of the Board of Directors of PG&E Corporation (the "Corporation") are elected each year and serve one-year terms. Directors are not elected for multiple-year, staggered terms.2. Composition of the BoardThe Board's membership is composed of qualified, dedicated, ethical, and highly regarded individuals who have experience relevant to the Corporation's operations and understand the complexities of the Corporation's1. Election of Directors All members of the Board of Directors of PG&E Corporation (the “Corporation”) are elected each year and serve one-year terms. Directors are not elected for multiple-year, staggered terms. 2. Composition of the Board The Board’s membership is composed of qualified, dedicated, ethical, and highly regarded individuals who have experience relevant to the Corporation’s operations and understand the complexities of the Corporation’s business environment. The Board seeks to include a diversity of backgrounds, perspectives, and skills among its members. No member of the Board of Directors may be an employee of the American Stock Exchange or a floor member of that exchange.3. Independence of DirectorsAll members of the Board have a fiduciary responsibility to represent the best interests of the Corporation and all of its shareholders.At least 75 percent of the Board is composed of independent directors, defined as directors who (1) are neither current nor former officers or employees of nor consultants to the Corporation or its subsidiaries, (2) are neither current nor former officers or employees of any other corporation on whose board of directors any officer of the Corporation serves as a member, and (3) otherwise meet the applicable definition of "independence" set forth in the New York Stock Exchange, American Stock Exchange, and Pacific Exchange or a floor member of that exchange.3. Independence of Directors All members of the Board have a fiduciary responsibility to represent the best interests of the Corporation and all of its shareholders. At least 75 percent of the Board is composed of independent directors, defined as directors who (1) are neither current nor former officers or employees of nor consultants to the Corporation or its subsidiaries, (2) are neither current nor former officers or employees of any other corporation on whose board of directors any officer of the Corporation serves as a member, and (3) otherwise meet the definition of “independence” set forth in applicable stock exchange rules. The Board must affirmatively determine whether a director is independent, and may develop categorical standards to assist the Board in determining whether a director has a material relationship with the Corporation, and thus is not independent. Such standards are set forth inExhibit A to these Corporate Governance Guidelines. As provided in Article III, Section 1 of the Corporation’s Bylaws, the Chairman of the Board and the President are members of the Board. 4. Selection of Directors The Board nominates directors for election at the annual meeting of shareholders and selects directors to fill vacancies which occur between annual meetings. The Nominating, Compensation, and Governance Committee, in consultation with the Chairman of the Board and the Chief Executive Officer (CEO) (if the Chairman is not the CEO), reviews the qualifications of the Board candidates and presents recommendations to the full Board for action. 5. Characteristics of Directors The Nominating, Compensation, and Governance Committee annually reviews with the Board, and submits for Board approval, the appropriate skills and characteristics required of Board members in the context of the current composition of the Board. In conducting this assessment, the Committee considers diversity, age, skills, and such other factors as it deems appropriate given the current needs of the Board and the Corporation. 6. Selection of the Chairman of the Board and the Chief Executive Officer The Chairman of the Board and the Chief Executive Officer are elected by the Board.
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Based on the circumstances existing at a time that there is a vacancy in the office of either the Chairman of the Board or the Chief Executive Officer, the Board will consider whether the role of Chief Executive Officer should be separate from that of Chairman of the Board, and, if the roles are separate, whether the Chairman should be selected from the independent directors or should be an employee of the Corporation. |
7. | Assessing the Board’s and Committees’ Performance |
The Nominating, Compensation, and Governance Committee oversees the process for evaluating and assessing the performance of the Board, including Board committees. The Board conducts an evaluation at least annually to determine whether it and its committees are functioning effectively. The Board evaluation includes an assessment of the Board’s contribution as a whole and specific areas in which the Board and/or management believes a better contribution could be made. The purpose of the review is to increase the effectiveness of the Board as a whole, not to discuss the performance of individual directors. The Audit Committee and the Nominating, Compensation, and Governance Committee conduct annual evaluations, and any other permanent Board committee that meets on a regular basis conducts periodic evaluations. The Board committees provide the results of any evaluation to the Nominating, Compensation, and Governance Committee, which will review those results and provide them to the Board for consideration in the Board’s evaluation. |
8. | Size of the Board |
As provided in paragraph I of Article Third of the Corporation’s Articles of Incorporation, the Board is composed of no less than 7 and no more than 13 members. The exact number of directors is determined by the Board based on its current composition and requirements, and is specified in Article II, Section 1 of the Corporation’s Bylaws. |
9. | Advisory Directors |
The Board may designate future directors as advisory directors in advance of their formal election to the Board. Advisory directors attend Board and committee meetings, and receive the same compensation as regular directors. They do not, however, vote on matters before the Board. In this manner, they become familiar with the Corporation’s business before assuming the responsibility of serving as a regular director. |
10. | Directors Who Change Responsibilities |
Directors shall offer their resignations when they change employment or the major responsibilities they held when they joined the Board. This does not mean that such directors should leave the Board. However, the Board, via the Nominating, Compensation, and Governance Committee, should have the opportunity to review the appropriateness of such directors’ nomination for re-election to the Board under these circumstances. | |
Directors who are officers of the Corporation also shall offer their resignations upon retirement or other termination of active PG&E Corporation employment. |
11. | Retirement Age |
The Board may not designate any person as a candidate for election or re-election as a director after such person has reached the age of 70. |
12. | Compensation of Directors |
The Board sets the level of compensation for directors, based on the recommendation of the Nominating, Compensation, and Governance Committee, and taking into account the impact of compensation on director independence. Directors who are also current employees of the Corporation receive no additional compensation for service as directors. | |
The Nominating, Compensation, and Governance Committee reviews periodically the amount and form of compensation paid to directors, taking into account the compensation paid to directors of other comparable U.S. companies. The Committee conducts its review with the assistance of outside experts in the field of executive compensation. |
13. | Director Stock Ownership Guidelines |
In order to more closely align the interests of directors and the Corporation’s shareholders, directors are encouraged to own a significant equity interest in the Corporation within a reasonable time after election to the Board. A director should own shares of the Corporation’s common stock having a dollar value of at least $200,000, measured at the time the stock is acquired or on the first business day of January 2007, whichever is later. A director should achieve this ownership target within five years from the date of his or her election to the Board or the adoption of these guidelines (December 20, 2006), whichever is later. For |
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purposes of calculating a director’s level of share ownership, the following are included: (1) shares of PG&E Corporation common stock beneficially owned by the director (as determined in accordance with the rules of the Securities and Exchange Commission), and (2) PG&E Corporation restricted stock units and common stock equivalents held by the director. |
14. | Meetings of the Board |
As provided in Article II, Section 4 of the Corporation’s Bylaws, the Board meets regularly on previously determined dates. Board meetings shall be held at least quarterly. As provided in Article II, Section 5 of the Bylaws, the Chairman of the Board, the President, the Chair of the Executive Committee, or any five directors may call a special meeting of the Board at any time. | |
Each Board member is expected to regularly attend Board meetings and meetings of the committees on which the director serves (either in person or by telephone or other similar communication equipment), and to attend annual meetings of the Corporation’s shareholders. Pursuant to proxy disclosure rules, the Corporation’s proxy statement identifies each director who during the last fiscal year attended fewer than 75 percent of the aggregate of the total number of meetings of the Board and each Board committee on which the director served. |
15. | Lead Director |
The Chair of the Nominating, Compensation, and Governance Committee shall be the lead director, and shall be selected by the independent directors. The lead director shall act as a liaison between the Chairman of the Board and the independent directors, and shall preside at all meetings at which the Chairman is not present. The lead director approves the agendas and schedules for meetings of the Board, and approves information sent to the members of the Board. The lead director has authority to call special meetings of the independent directors. |
16. | Meetings of Independent Directors |
The independent directors meet at each regularly scheduled Board meeting in executive session. These executive session meetings are chaired by the lead director. Following each such meeting, the lead director, or one or more other independent directors designated by the lead director, has a discussion with the Chairman of the Board (if the Chairman is not an independent director) and the Chief Executive Officer (if the Chairman is not the CEO) regarding the executive session meeting. | |
The Chair of the Nominating, Compensation, and Governance Committee, as lead director, establishes the agenda for each executive session meeting of independent directors, and also determines which, if any, other individuals, including members of management and independent advisors, should attend each such meeting. |
17. | Board Agenda Items |
The Chairman of the Board, in consultation with the Chief Executive Officer (if the Chairman is not the CEO), establishes the agenda for each meeting. | |
Board members are encouraged to suggest the inclusion of items on the agenda. |
18. | Board Materials and Presentations |
The agenda for each meeting is provided in advance of the meeting, together with written materials on matters to be presented for consideration, for the directors’ review prior to the meeting. As a general rule, written materials are provided in advance on all matters requiring Board action. Written materials are concise summaries of the relevant information, designed to provide a foundation for the Board’s discussion of key issues and make the most efficient use of the Board’s meeting time. Directors may request from the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO) any additional information they believe to be necessary to perform their duties. |
19. | Regular Attendance of Non-Directors at Board Meetings |
Members of management, as designated by the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO), attend each meeting of the Board. |
20. | Board Committees |
The Board establishes committees to assist the Board in overseeing the affairs of the Corporation. | |
Currently, there are five committees. The Executive Committee exercises all powers of the Board (subject to the provisions of law and limits imposed by the Board) and meets only at such times as it is infeasible to convene a meeting of the full Board. The Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy |
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Committee are each responsible for defined areas delegated by the Board. |
21. | Membership of Board Committees |
All permanent Board committees, other than the Executive Committee, are chaired by independent directors. Each independent committee chair shall act as a liaison between the Chairman of the Board and the respective committee, and shall preside at all meetings of that committee. Each independent committee chair approves the agendas and schedules for meetings of the respective committee, and approves information sent to the committee members. Each independent committee chair has authority to call special meetings of the respective committee. | |
The Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee are composed entirely of independent directors, as defined in Section 3 of these guidelines. | |
Members of the Audit Committee also must satisfy the audit committee independence and qualification requirements established by the Securities and Exchange Commission and any stock exchange on which securities of the Corporation or Pacific Gas and Electric Company are listed. If an Audit Committee member simultaneously serves on the audit committees of three or more public companies other than the Corporation and its subsidiaries, that Committee member must inform the Corporation’s Board of Directors and, in order for that member to continue serving on the Corporation’s Audit Committee, the Board of Directors must affirmatively determine that such simultaneous service does not impair the ability of that member to serve effectively on the Corporation’s Audit Committee. |
22. | Appointment of Committee Members |
The composition of each committee is determined by the Board of Directors. | |
The Nominating, Compensation, and Governance Committee, after consultation with the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO) and with consideration of the wishes of the individual directors, recommends to the full Board the chairmanship and membership of each committee. |
23. | Committee Agenda Items |
The chair of each committee, in consultation with the appropriate members of management, establishes the agenda for each meeting. | |
At the beginning of the year, each committee issues a work plan of subjects to be discussed during the year, to the extent such subjects can be foreseen. Copies of these annual work plans are provided to all directors. |
24. | Committee Materials and Presentations |
The agenda for each committee meeting is provided in advance of the meeting, together with written materials on matters to be presented for consideration, for the committee members’ review prior to the meeting. As a general rule, written materials are provided in advance on all matters to be presented for committee action. |
25. | Attendance at Committee Meetings |
The chair of each committee, after consultation with the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO), determines the appropriate members of management to attend each meeting of the Committee. | |
Any director or advisory director may attend any meeting of any committee with the concurrence of the committee chair. |
26. | Formal Evaluation of the Chief Executive Officer |
The independent directors annually review and evaluate the performance of the Chief Executive Officer. The review is based upon objective criteria, including the performance of the business and accomplishment of objectives previously established in consultation with the Chief Executive Officer. | |
The results of the review and evaluation are communicated to the Chief Executive Officer by the Chair of the Nominating, Compensation, and Governance Committee, and are used by that Committee and the Board when considering the compensation of the CEO. |
27. | Management Development and Succession Planning |
The Chief Executive Officer reports annually to the Board on management development and succession planning. This report includes the CEO’s recommendation for a successor should the CEO become unexpectedly disabled. |
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28. | Communications with External Entities |
The Chief Executive Officer is responsible for all communications with the media, the financial community, or other external entities pertaining to the affairs of the Corporation. Directors refer any inquiries from such entities to the CEO for handling. |
29. | Access to Independent Advisors |
The Board of Directors and its committees have the right to retain independent outside financial, legal, or other advisors, as necessary and appropriate. The Corporation shall bear the costs of retaining such advisors. |
30. | Director Orientation and Continuing Education |
The Corporation provides information to new directors on subjects that would assist them in discharging their duties, and periodically provides briefing sessions or materials for all directors on such subjects. |
31. | Communications with Shareholders |
The Chair of the Nominating, Compensation, and Governance Committee shall be designated as the director who receives written communications from the Corporation’s shareholders, in care of the Corporate Secretary. The Corporate Secretary shall forward to the Chair of the Nominating, Compensation, and Governance Committee any shareholder communications addressed to the Board of Directors as a body or to all the directors in their entirety, and such other communications as the Corporate Secretary, in his or her discretion, determines is appropriate. |
32. | Legal Compliance and Business Ethics |
The Board of Directors is responsible for exercising reasonable oversight with respect to the implementation and effectiveness of the Corporation’s legal compliance and ethics program. In that role, the Board of Directors shall be knowledgeable about the content and operation of the Corporation’s compliance and ethics program, but may delegate more detailed oversight to a committee of the Board of Directors. |
4. Selection of Directors
The Board nominates directors for election at the annual meeting of shareholders and selects directors to fill vacancies which occur between annual meetings. The Nominating, Compensation, and Governance Committee, in consultation with the Chairman of the Board and the Chief Executive Officer (CEO) (if the Chairman is not the CEO), reviews the qualifications of the Board candidates and presents recommendations to the full Board for action.
5. Characteristics of Directors
The Nominating, Compensation, and Governance Committee annually reviews with the Board, and submits for Board approval, the appropriate skills and characteristics required of Board members in the context of the current composition of the Board. In conducting this assessment, the
Committee considers diversity, age, skills, and such other factors as it deems appropriate given the current needs of the Board and the Corporation.
6. Selection of the Chairman of the Board and the Chief Executive Officer
The Chairman of the Board and the Chief Executive Officer are elected by the Board.
Based on the circumstances existing at a time that there is a vacancy in the office of either the Chairman of the Board or the Chief Executive Officer, the Board will consider whether the role of Chief Executive Officer should be separate from that of Chairman of the Board, and, if the roles are separate, whether the Chairman should be selected from the independent directors or should be an employee of the Corporation.
7. Assessing the Board's and Committees' Performance
The Nominating, Compensation, and Governance Committee oversees the process for evaluating and assessing the performance of the Board, including Board committees. The Board conducts a self-evaluation at least annually to determine whether it and its committees are functioning effectively. The Board evaluation includes an assessment of the Board's contribution as a whole and specific areas in which the Board and/or management believes a better contribution could be made. The purpose of the review is to increase the effectiveness of the Board as a whole, not to discuss the performance of individual directors. The Audit Committee and the Nominating, Compensation, and Governance Committee conduct annual self-evaluations, and any other permanent Board committee that meets on a regular basis conducts periodic self-evaluations. The Board committees provide the results of any self-evaluation to the Nominating, Compensation, and Governance Committee, which will review those results and provide them to the Board for consideration in the Board's self-evaluation.
8. Size of the Board
As provided in paragraph I of Article Third of the Corporation's Articles of Incorporation, the Board is composed of no less than 7 and no more than 13 members. The exact number of directors is determined by the Board based on its current composition and requirements, and is specified in Article II, Section 1 of the Corporation's Bylaws.
9. Advisory Directors
The Board may designate future directors as advisory directors in advance of their formal election to the Board. Advisory directors attend Board and committee meetings, and receive the same compensation as regular directors. They do not, however, vote on matters before the Board. In this manner, they become familiar with the Corporation's business before assuming the responsibility of serving as a regular director.
10. Directors Who Change Responsibilities
Directors shall offer their resignations when they change employment or the major responsibilities they held when they joined the Board. This does not mean that such directors should leave the Board. However, the Board, via the Nominating, Compensation, and Governance Committee, should have the opportunity to review the appropriateness of such directors' nomination for re-election to the Board under these circumstances.
Directors who are officers of the Corporation also shall offer their resignations upon retirement or other termination of active PG&E Corporation employment.
11. Retirement Age
The Board may not designate any person as a candidate for election or re-election as a director after such person has reached the age of 70.
12. Compensation of Directors
The Board sets the level of compensation for directors, based on the recommendation of the Nominating, Compensation, and Governance Committee, and taking into account the impact of compensation on director independence. Directors who are also current employees of the Corporation receive no additional compensation for service as directors.
The Nominating, Compensation, and Governance Committee reviews periodically the amount and form of compensation paid to directors, taking into account the compensation paid to directors of other comparable U.S. companies. The Committee conducts its review with the assistance of outside experts in the field of executive compensation.
13. Meetings of the Board
As provided in Article II, Section 4 of the Corporation's Bylaws, the Board meets regularly on previously determined dates. Board meetings shall be held at least quarterly. As provided in Article II, Section 5 of the Bylaws, the Chairman of the Board, the President, the Chair of the Executive Committee, or any five directors may call a special meeting of the Board at any time.
Each Board member is expected to regularly attend Board meetings and meetings of the committees on which the director serves (either in person or by telephone or other similar communication equipment), and to attend annual meetings of the Corporation's shareholders. Pursuant to proxy disclosure rules, the Corporation's proxy statement identifies each director who during the last fiscal year attended fewer than 75 percent of the aggregate of the total number of meetings of the Board and each Board committee on which the director served.
14. Lead Director
The Chair of the Nominating, Compensation, and Governance Committee shall be the lead director, and shall be selected by the independent directors. The lead director shall act as a liaison between the Chairman of the Board and the independent directors, and shall preside at all meetings at which the Chairman is not present. The lead director approves the agendas and schedules for meetings of the Board, and approves information sent to the members of the Board. The lead director has authority to call special meetings of the independent directors.
15. Meetings of Independent Directors
The independent directors meet at each regularly scheduled Board meeting in executive session. These executive session meetings are chaired by the lead director. Each such meeting includes a subsequent discussion with the Chairman of the Board (if the Chairman is not an independent director) and the Chief Executive Officer (if the Chairman is not the CEO).
The Chair of the Nominating, Compensation, and Governance Committee, as lead director, establishes the agenda for each executive session meeting of independent directors, and also determines which, if any, other individuals, including members of management and independent advisors, should attend each such meeting.
16. Board Agenda Items
The Chairman of the Board, in consultation with the Chief Executive Officer (if the Chairman is not the CEO), establishes the agenda for each meeting.
Board members are encouraged to suggest the inclusion of items on the agenda.
17. Board Materials and Presentations
The agenda for each meeting is provided in advance of the meeting, together with written materials on matters to be presented for consideration, for the directors' review prior to the meeting. As a general rule, written materials are provided in advance on all matters requiring Board action. Written materials are concise summaries of the relevant information, designed to provide a foundation for the Board's discussion of key issues and make the most efficient use of the Board's meeting time. Directors may request from the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO) any additional information they believe to be necessary to perform their duties.
18. Regular Attendance of Non-Directors at Board Meetings
Members of management, as designated by the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO), attend each meeting of the Board.
19. Board Committees
The Board establishes committees to assist the Board in overseeing the affairs of the Corporation.
Currently, there are five committees. The Executive Committee exercises all powers of the Board (subject to the provisions of law and limits imposed by the Board) and meets only at such times as it is infeasible to convene a meeting of the full Board. The Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee are each responsible for defined areas delegated by the Board.
20. Membership of Board Committees
All permanent Board committees, other than the Executive Committee, are chaired by independent directors. Each independent committee chair shall act as a liaison between the Chairman of the Board and the respective committee, and shall preside at all meetings of that committee. Each independent committee chair approves the agendas and schedules for meetings of the respective committee, and approves information sent to the committee members. Each independent committee chair has authority to call special meetings of the respective committee.
The Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee are composed entirely of independent directors, as defined in Section 3 of these guidelines.
Members of the Audit Committee also must satisfy the audit committee independence and qualification requirements established by the Securities and Exchange Commission, the New York Stock Exchange, the American Stock Exchange, the Pacific Exchange, and any other stock exchange on which securities of the Corporation or Pacific Gas and Electric Company are listed. If an Audit Committee member simultaneously serves on the audit committees of three or more public companies other than the Corporation and its subsidiaries, that Committee member must inform the Corporation's Board of Directors and, in order for that member to continue serving on the Corporation's Audit Committee, the Board of Directors must affirmatively determine that such simultaneous service does not impair the ability of that member to serve effectively on the Corporation's Audit Committee.
21. Appointment of Committee Members
The composition of each committee is determined by the Board of Directors.
The Nominating, Compensation, and Governance Committee, after consultation with the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO) and with consideration of the wishes of the individual directors, recommends to the full Board the chairmanship and membership of each committee.
22. Committee Agenda Items
The chair of each committee, in consultation with the appropriate members of management, establishes the agenda for each meeting.
At the beginning of the year, each committee issues a work plan of subjects to be discussed during the year, to the extent such subjects can be foreseen. Copies of these annual work plans are provided to all directors.
23. Committee Materials and Presentations
The agenda for each committee meeting is provided in advance of the meeting, together with written materials on matters to be presented for consideration, for the committee members' review prior to the meeting. As a general rule, written materials are provided in advance on all matters to be presented for committee action.
24. Attendance at Committee Meetings
The chair of each committee, after consultation with the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO), determines the appropriate members of management to attend each meeting of the Committee.
Any director or advisory director may attend any meeting of any committee with the concurrence of the committee chair.
25. Formal Evaluation of the Chief Executive Officer
The independent directors annually review and evaluate the performance of the Chief Executive Officer. The review is based upon objective criteria, including the performance of the business and accomplishment of objectives previously established in consultation with the Chief Executive Officer.
The results of the review and evaluation are communicated to the Chief Executive Officer by the Chair of the Nominating, Compensation, and Governance Committee, and are used by that Committee and the Board when considering the compensation of the CEO.
26. Management Development and Succession Planning
The Chief Executive Officer reports annually to the Board on management development and succession planning. This report includes the
CEO's recommendation for a successor should the CEO become unexpectedly disabled.
27. Communications with External Entities
The Chief Executive Officer is responsible for all communications with the media, the financial community, or other external entities pertaining to the affairs of the Corporation. Directors refer any inquiries from such entities to the CEO for handling.
28. Access to Independent Advisors
The Board of Directors and its committees have the right to retain independent outside financial, legal, or other advisors, as necessary and appropriate. The Corporation shall bear the costs of retaining such advisors.
29. Director Orientation and Continuing Education
The Corporation provides information to new directors on subjects that would assist them in discharging their duties, and periodically provides briefing sessions or materials for all directors on such subjects.
30. Communications with Shareholders
The Chair of the Nominating, Compensation, and Governance Committee shall be designated as the director who receives written communications from the Corporation's shareholders, in care of the Corporate Secretary. The Corporate Secretary shall forward to the Chair of the Nominating, Compensation, and Governance Committee any shareholder communications addressed to the Board of Directors as a body or to all the directors in their entirety, and such other communications as the Corporate Secretary, in his or her discretion, determines is appropriate.
31. Legal Compliance and Business Ethics
The Board of Directors is responsible for exercising reasonable oversight with respect to the implementation and effectiveness of the Corporation's legal compliance and ethics program. In that role, the Board of Directors shall be knowledgeable about the content and operation of the Corporation's compliance and ethics program, but may delegate more detailed oversight to a committee of the Board of Directors.
PG&E Corporation
Corporate Governance Guidelines
and December 20, 2006
• | If a director is a current or former employee of the Corporation. |
• | If a member of the director’s immediate family is or was employed as a Section 16 Officer of the Corporation, unless such employment ended more than three years ago. |
• | If a director is a consultant to the Corporation. |
• | If a director or his or her immediate family member receives, or during the past three years received, more than $100,000 per year or rolling12-month period in direct compensation from the Corporation. “Direct compensation” does not include director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on |
11
continued service) or compensation received by a director’s immediate family member for service as an employee (unless the immediate family member received compensation for services as a Section 16 Officer, in which case the director has a material relationship with the Corporation). |
• | If a director or his or her immediate family member is, or during the past three years was, affiliated with, or employed by, a firm that serves or served during the past three years as the Corporation’s internal or external auditor. |
• | If a director is a current or former officer or employee of any other company on whose board of directors any officer of the Corporation serves as a member. |
• | If a director’s immediate family member is, or during the past three years was, employed by another company where any of the Corporation’s present Section 16 Officers concurrently serves on that company’s compensation committee. |
• If a director is a current Section 16 Officer or employee, or his or her immediate family member is a current Section 16 Officer, of a company (which does not include charitable, non-profit, or tax-exempt entities) that makes payments to, or receives payments from, the Corporation for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2 percent of such other company’s consolidated gross revenues, during any of the past three years. The director is not “independent” until three years after falling below such threshold. (Both the payments and the consolidated gross revenues to be measured shall be those reported in the last completed fiscal year. The look-back provision for this test applies solely to the financial relationship between the Corporation and the director’s or immediate family member’s current employer; the Corporation need not consider former employment of the director or immediate family member.) •If the director (or a relative) is a trustee, director, or employee of a charitable or non-profit organization that receives grants or endowments from the Corporation or its affiliates exceeding the greater of $200,000 or 2 percent of the recipient's gross revenues during the Corporation's or the recipient's most recent completed fiscal year.• If the director (or a relative) is a trustee, director, or employee of a charitable or non-profit organization that receives grants or endowments from the Corporation or its affiliates exceeding the greater of $200,000 or 2 percent of the recipient’s gross revenues during the Corporation’s or the recipient’s most recent completed fiscal year. • “Immediate family member” includes a person’s spouse, parents, children, siblings, mothers- andfathers-in-law, sons- anddaughters-in-law, brothers-andsisters-in-law, and anyone (other than domestic employees) who shares such person’s home, or is financially dependent on such person. • “Corporation” includes any consolidated subsidiaries or parent companies. • “Section 16 Officer” means “officer” as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, and includes the president, the principal financial officer, the principal accounting officer, any vice president in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policymaking function, or any other person who performs similar policymaking functions for that company.
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910 directors to serve on the Board of Directors of PG&E Corporation and 1011 directors to serve on the Board of Directors of Pacific Gas and Electric Company. If elected as director, those individuals will hold office until the next annual meetings or until their successors shall be elected and qualified, except in the case of death, resignation, or removal of a director.910 nominees for director of PG&E Corporation and the 1011 nominees for director of Pacific Gas and Electric Company whom the respective Boards propose for election are the same, except for Thomas B. King, who is a nominee for the Pacific Gas and Electric Company Board only.company'scompany’s Corporate Governance Guidelines that at least 75 percent of the Board shall be composed of "independent"“independent” directors, as defined in the Corporate Governance Guidelines, and as set forth on pages 7 through 1312 of this Joint Proxy Statement.andand/or Pacific Gas and Electric Company. Membership on Board committees, attendance at Board and committee meetings, and ownership of stock of PG&E Corporation and Pacific Gas and Electric Company are provided in separate sections following the biographical information on the nominees.
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Nominees for Directors of PG&E Corporation and
David R. Andrews Mr. Andrews | ||
Leslie S. Biller Mr. Biller is retired Vice Chairman and Chief Operating Officer of Wells Fargo & Company (financial services and retail banking). Mr. Biller held that position from November 1998 until his retirement in October 2002. Mr. Biller, | ||
David A. Coulter Mr. Coulter is Managing Director and Senior Advisor of Warburg Pincus LLC (global private equity firm) and has held that position since November 2005. Prior to joining Warburg Pincus LLC, Mr. Coulter was Vice Chairman of JPMorgan Chase & Co. (financial services and retail banking) from January 2001 until his retirement in September 2005. Prior to the merger with J.P. Morgan & Co. Incorporated, he was Vice Chairman of The Chase Manhattan Corporation (bank holding company) from August 2000 to December 2000. He was a partner in the Beacon Group, L.P. (investment banking firm) from January 2000 to July 2000, and was Chairman and Chief Executive Officer of BankAmerica Corporation and Bank of America NT&SA from May 1996 to October 1998. Mr. Coulter, | ||
C. Lee Cox Mr. Cox is retired Vice Chairman of AirTouch Communications, Inc. and retired President and Chief Executive Officer of AirTouch Cellular (cellular telephone and paging services). He was an executive officer of AirTouch Communications, Inc. and its predecessor, PacTel Corporation, from 1987 until his retirement in April 1997. Mr. Cox, | ||
Peter A. Darbee Mr. Darbee is Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation and Chairman of the Board of Pacific Gas and Electric Company and has held those positions since January 2006. He was President and Chief Executive Officer of PG&E Corporation from January 2005 to December 2005 and Senior Vice President and Chief Financial Officer of PG&E Corporation from September 1999 to December 2004. Mr. Darbee, |
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Maryellen C. Herringer Ms. Herringer is an attorney-at-law. She held various executive positions at APL Limited (intermodal shipping and rail transportation company) from 1991 until it was acquired by Neptune Orient Lines in December 1997, most recently serving as Executive Vice President, General Counsel, and Secretary. Prior to joining APL Limited, Ms. Herringer was a partner in the law firm of Morrison & Foerster. Ms. Herringer, | ||
Thomas B. King* Mr. King is | ||
Richard A. Meserve Dr. Meserve is President of the Carnegie Institution of Washington (scientific research institution) and has held that position since April 2003. He also has served as Senior Of Counsel to the law firm of Covington & Burling LLP since April 2004 and was a partner in that firm from 1984 through 1999. Prior to joining the Carnegie Institution of Washington, Dr. Meserve was Chairman of the U.S. Nuclear Regulatory Commission from October 1999 to March 2003. Dr. Meserve, 62, has been a director of PG&E Corporation and Pacific Gas and Electric Company since December 2006. | ||
Mary S. Metz Dr. Metz is retired President of S. H. Cowell Foundation and held that position from January 1999 to March 2005. She is Dean Emerita of University Extension of the University of California, Berkeley, and President Emerita of Mills College. Dr. Metz, | ||
Barbara L. Rambo Ms. Rambo is |
Thomas B. King is a nominee for director of Pacific Gas and Electric Company only. |
15
Barry Lawson Williams Mr. Williams is President of Williams Pacific Ventures, Inc. (business investment and consulting) | ||
16
”and Pacific Exchange rules, which require that a majority of the directors be independent, as defined in the specific stock exchange'sexchange’s rules, and that independent directors meet regularly.The In addition, the Board of Directors of Pacific Gas and Electric Company is subject to American Stock Exchange rules requiring that the independent directors meet regularly. The Pacific Gas and Electric Company Board is not subject to American Stock Exchange and Pacific Exchange rules requiring that at least a majority of the directors meet the specific stock exchange'sexchange’s definition of "independent“independent director."” Pacific Gas and Electric Company is exempt from these requirements because PG&E Corporation and a subsidiary hold approximately 96 percent of the voting power in Pacific Gas and Electric Company, and Pacific Gas and Electric Company is a "controlled“controlled subsidiary."•Do not have any material relationship with either PG&E Corporation or Pacific Gas and Electric Company that would interfere with the exercise of independent judgment,•Are "independent" as defined by applicable New York Stock Exchange, American Stock Exchange, and Pacific Exchange rules, and•Satisfy each of the categorical standards adopted by the Boards for determining whether a specific relationship is "material" and a director is independent. Those categorical standards are set forth on pages 12 and 13 of this Joint Proxy Statement.• Do not have any material relationship with either PG&E Corporation or Pacific Gas and Electric Company that would interfere with the exercise of independent judgment, • Are “independent” as defined by applicable New York Stock Exchange and American Stock Exchange rules, and • Satisfy each of the categorical standards adopted by the Boards for determining whether a specific relationship is “material” and a director is independent. Those categorical standards are set forth as Exhibit A to the Corporate Governance Guidelines, which can be found on pages 11 and 12 of this Joint Proxy Statement and in the Corporate Governance section of PG&E Corporation’s website,www.pgecorp.com, or Pacific Gas and Electric Company’s website,www.pge.com. Corporation'sCorporation’s Audit Committee, Finance Committee, Nominating, Compensation, and Governance Committee, and Public Policy Committee, and on Pacific Gas and Electric Company'sCompany’s Audit Committee. Independent directors also must serve as chairs of any key committees of the PG&E Corporation or Pacific Gas and Electric Company BoardsBoard of Directors, with the exception of the Executive Committees.
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The Chair ofOfficer regarding the Nominating, Compensation, and Governance Committee, as lead director, establishes the agenda for each executive session meeting of independent directors. The lead director currently is C. Lee Cox. The lead director also determines which, if any, other individuals, including members of management and independent advisors, should attend each executive session meeting.
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Board Committees
Corporation'sCorporation’s and Pacific Gas and Electric Company'sCompany’s books, records, and other documents. The current membership and duties of these committees are described below. Executive
Committees Audit
Committees Finance
Committee Nominating,
Compensation,
and Governance
Committee Public
Policy
Committee Non-Employee Directors: D. R. Andrews X X L. S. Biller X X D. A. Coulter X X * X C. L. Cox X X X *(1) M. C. Herringer X (2) X (2) M. S. Metz X X X * B. L. Rambo X X B. L. Williams X X *(3) X X Employee Directors: P. A. Darbee X * T. B. King X (2)(4) Number of Meetings in 2005 (PG&E Corporation/Pacific Gas and Electric Company where applicable) 0/0 4/4 6 6 4 *Committee Chair(1)Lead director(2)Beginning January 1, 2006(3)Audit Committee financial expert as defined by the Securities and Exchange Commission(4)Member of the Pacific Gas and Electric Company Executive Committee only
Nominating, | ||||||||||||||||||||
Compensation, | Public | |||||||||||||||||||
Executive | Audit | Finance | and Governance | Policy | ||||||||||||||||
Committees | �� | Committees | Committee | Committee | Committee | |||||||||||||||
Non-Employee Directors: | ||||||||||||||||||||
D. R. Andrews | X | X | ||||||||||||||||||
L. S. Biller | X | X | ||||||||||||||||||
D. A. Coulter | X | X | * | X | ||||||||||||||||
C. L. Cox | X | X | X | *(1) | ||||||||||||||||
M. C. Herringer | X | X | ||||||||||||||||||
R. A. Meserve | X | |||||||||||||||||||
M. S. Metz | X | X | X | * | ||||||||||||||||
B. L. Rambo | X | X | ||||||||||||||||||
B. L. Williams | X | X | *(2) | X | X | |||||||||||||||
Employee Directors: | ||||||||||||||||||||
P. A. Darbee | X | * | ||||||||||||||||||
T. B. King | X | (3) | ||||||||||||||||||
Number of Meetings in 2006 (PG&E Corporation/ Pacific Gas and Electric Company where applicable) | 0/0 | 4/4 | 5 | 5 | 3 | |||||||||||||||
* | Committee Chair |
(1) | Lead director |
(2) | Audit Committee financial expert as defined by the Securities and Exchange Commission |
(3) | Member of the Pacific Gas and Electric Company Executive Committee only |
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Executive Committees
Committees'Committees’ responsibilities?company'scompany’s Chairman of the Board serves as the Chair of that company'scompany’s Executive Committee.Committees'Committees’ responsibilities?Committees'Committees’ responsibilities are set forth in each Committee'sCommittee’s charter. Among other things, the Audit Committees:•Are responsible for the selection, appointment, compensation, and oversight of the work of the independent registered public accounting firm that PG&E Corporation and Pacific Gas and Electric Company, as applicable, employ to prepare or issue audit reports or perform related work,•Satisfy themselves as to the independence and competence of the appropriate company's independent registered public accounting firm,•Pre-approve all auditing and non-auditing services that the independent registered public accounting firm provides to PG&E Corporation and Pacific Gas and Electric Company, as applicable,•Review and discuss with the independent registered public accounting firm, and with the appropriate company's officers and internal auditors, the scope and results of the independent registered public accounting firm's audit work, consolidated quarterly and annual financial statements, the quality and effectiveness of internal controls, and compliance with laws, regulations, policies, and programs, and•Make further inquiries as they deem necessary or desirable to inform themselves of the affairs of the companies and their subsidiaries.• Are responsible for the selection, appointment, compensation, and oversight of the work of the independent registered public accounting firm that PG&E Corporation and Pacific Gas and Electric Company, as applicable, employ to prepare or issue audit reports or perform related work, • Satisfy themselves as to the independence and competence of the appropriate company’s independent registered public accounting firm, • Pre-approve all auditing and non-auditing services that the independent registered public accounting firm provides to PG&E Corporation and Pacific Gas and Electric Company, as applicable, • Review and discuss with the independent registered public accounting firm, and with the appropriate company’s officers and internal auditors, the scope and results of the independent registered public accounting firm’s audit work, consolidated quarterly and annual financial statements, the quality and effectiveness of internal controls, and compliance with laws, regulations, policies, and programs, and • Make further inquiries as they deem necessary or desirable to inform themselves of the affairs of the companies and their subsidiaries. Committee'sCommittee’s Chair.as defined in applicable New York Stock Exchange and American Stock Exchange and Pacific Exchange rules.company'scompany’s Audit Committee are independent under applicable regulations. Exchange, and Pacific Exchange rules. All members of the Audit Committees are financially literate."audit“audit committee financial expert"expert” or otherwise have accounting or related financial management expertise. The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company each have determined that Barry Lawson Williams, the independent chair of each company'scompany’s Audit Committee, is an "audit“audit committee financial expert,"” as defined by the Securities and Exchange Commission.company'scompany’s Corporate Governance Guidelines set forth a policy regarding how manythe number of other public company audit committees on which thean Audit Committee membersmember may serve. If an Audit Committee member simultaneously serves on the audit committees of three or more public companies other than PG&E Corporation, Pacific Gas and Electric Company, and their subsidiaries, that Committee member must inform the appropriate company'scompany’s Board of Directors. In order for that member to continue serving on the Audit Committee, the Board of Directors must affirmatively determine that the simultaneous service does not impair that committee member'smember’s ability to serve effectively on the Audit Committee.
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No member of the Audit Committees currently serves on three or more additional public company audit committees.
Governance Committee. The Nominating, Compensation, and Governance Committee'sCommittee’s responsibilities?Committee'sCommittee’s responsibilities are set forth in the Committee'sCommittee’s charter. Among other things, the Committee reviews:•Long-term financial and investment plans and strategies,•Annual financial plans,•Dividend policy,•Short-term and long-term financing plans,•Proposed capital expenditures,•Proposed divestitures,•Major commercial banking, investment banking, financial consulting, and other financial relations of PG&E Corporation or its subsidiaries, and•Risk management activities.• Long-term financial and investment plans and strategies, • Annual financial plans, • Dividend policy, • Short-term and long-term financing plans, • Proposed capital projects, • Proposed divestitures, • Strategic plans and initiatives, • Major commercial banking, investment banking, financial consulting, and other financial relationships of PG&E Corporation or its subsidiaries, and • Risk management activities. Directors'Directors’ review and approval (1) a five-year financial plan for PG&E Corporation and its subsidiaries that incorporates, among other things, the Corporation'sCorporation’s business strategy goals, and (2) an annual budget that reflects elements of the approved five-year plan. Members of the Board of Directors receive a monthly report that compares the Corporation'sCorporation’s performance to the budget and provides other information about financial performance.Committee'sCommittee’s Chair.and Pacific Exchange rules. All Committee members meet these independence requirements.Committee'sCommittee’s responsibilities?•• The selection and compensation of directors, • Employment, compensation, and benefits policies and practices, • The development, selection, and compensation of policy-making officers, and • Corporate governance matters, including the performance and effectiveness of the Boards and the companies’ governance principles and practices. selectionPG&E Corporation Board of Directors has delegated its authority to administer the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP), under which equity-based awards are made, to the Nominating, Compensation, and compensationGovernance Committee. The Board of directors,•Employment, compensation,Directors also has delegated to the Chief Executive Officer of PG&E Corporation the authority to make LTIP awards to certain eligible participants within the guidelines adopted by the Nominating, Compensation, and benefits policies and practices,•The development, selection, and compensation of policy-making officers, and•Corporate governance matters, including the performance and effectiveness of the Boards and the companies' governance principles and practices.Committee'sCommittee may delegate its authority with respect to ministerial matters under the LTIP to the Chief Executive Officer or the Senior Vice President of Human Resources. The Nominating, Compensation, and Governance Committee also oversees other employee benefit plans.Committee'sCommittee’s charter. Among other things, the Committee:• Reviews and acts upon the compensation of officers of PG&E Corporation and its subsidiaries, although the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers, • Recommends to the independent members of the appropriate Board of Directors the compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company, • Reviews long-range planning for executive development and succession,
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• | Reviews the composition and performance of the Boards of PG&E Corporation and Pacific Gas and Electric Company, and |
• | Reviews the Corporate Governance Guidelines of PG&E Corporation and Pacific Gas and Electric Company. |
Do special requirements apply to members of the Nominating, Compensation, and Governance Committee?
• | Protection and improvement of the quality of the environment, |
• | Charitable and community service organizations and activities, |
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• | Political contributions, |
• | Equal opportunity in hiring and promoting employees, and |
• | Development of minority-owned and women-owned businesses as suppliers to PG&E Corporation, Pacific Gas and Electric Company, and their subsidiaries. |
2006?
2006.
2006.
Nine
Ten
• | Target total compensation (i.e., retainer, meeting fees, chairperson retainer, and equity) should be equal to the average of the comparator group; |
• | Director compensation should be set for two-year periods, to achieve the preceding objective at the midpoint of each period; and |
• | Target total compensation for the Audit Committees and their Chair should reflect a premium to account for their growing responsibility and accountability due to new stock exchange requirements and legislation. |
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Fees Earned or | Stock | Option | All Other | |||||||||||||||||
Paid in Cash | Awards | Awards | Compensation | Total | ||||||||||||||||
Name | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($) | |||||||||||||||
D. R. Andrews | $ | 73,500 | $ | 18,000 | $ | 51,849 | $ | 95 | $ | 143,444 | ||||||||||
L. S. Biller | $ | 78,750 | $ | 38,000 | $ | 27,090 | $ | 95 | $ | 143,935 | ||||||||||
D. A. Coulter | $ | 78,750 | $ | 48,000 | $ | 0 | $ | 95 | $ | 126,845 | ||||||||||
C. L. Cox | $ | 126,500 | $ | 48,000 | $ | 0 | $ | 95 | $ | 174,595 | ||||||||||
M. C. Herringer | $ | 73,500 | $ | 9,750 | $ | 5,077 | $ | 95 | $ | 88,422 | ||||||||||
R. A Meserve(5) | $ | 3,217 | $ | 0 | $ | 0 | $ | 3 | $ | 3,220 | ||||||||||
M. S. Metz | $ | 81,000 | $ | 48,000 | $ | 0 | $ | 2,555 | $ | 131,555 | ||||||||||
B. L. Rambo | $ | 76,500 | $ | 30,000 | $ | 0 | $ | 95 | $ | 106,595 | ||||||||||
B. L. Williams | $ | 137,500 | $ | 18,000 | $ | 51,849 | $ | 2,595 | $ | 209,944 |
(1) | Each non-employee director received $45,000 in annual retainers, except that Dr. Meserve (who was elected as a director on December 20, 2006) received a pro-rated retainer of $1,467. The Chairs of the Finance Committee (Mr. Coulter) and the Public Policy Committee (Dr. Metz) each received an additional $7,500 in annual retainers. The Chair of the Audit Committees (Mr. Williams) and the Chair of the Nominating, Compensation, and Governance Committee, who is the lead director (Mr. Cox), each received an additional $50,000 in annual retainers. Non-employee directors also received a fee of $1,750 for each Board or Board committee meeting attended, except that members of the Audit Committees received a fee of $2,750 for each Audit Committee meeting attended. Total meeting fees were: Mr. Andrews $28,500, Mr. Biller $33,750, Mr. Coulter $26,250, Mr. Cox $31,500, Ms. Herringer $28,500, Dr. Meserve $1,750, Dr. Metz $28,500, Ms. Rambo $31,500, and Mr. Williams $42,500. |
(2) | Represents the 2006 compensation cost of restricted stock, phantom stock, and restricted stock units granted in 2006 and prior years, measured in accordance with Statement of Financial Accounting Standards (SFAS) No. 123R, without taking into account an estimate of forfeitures related to service conditions. In 2006, each non-employee director except Dr. Meserve (who was elected as a director on December 20, 2006) received 800 shares of restricted stock with a grant date value of $29,976. Mr. Biller, Mr. Coulter, Mr. Cox, Dr. Metz, and Ms. Rambo each received 801 restricted stock units with a grant date value of $30,000. Ms. Herringer received 400 restricted stock units with a grant date value of $15,000. The aggregate number of stock awards outstanding for each non-employee director at December 31, 2006 was: Mr. Andrews 2,926, Mr. Biller 3,617, Mr. Coulter 11,007, Mr. Cox 6,132, Ms. Herringer 1,210, Dr. Meserve 0, Dr. Metz 8,530, Ms. Rambo 3,309, and Mr. Williams 3,421. |
(3) | Represents the 2006 compensation cost of stock options granted in 2006 and prior years, measured in accordance with SFAS No. 123R, without taking into account an estimate of forfeitures related to service conditions. Assumptions used in determining the grant date fair value are set forth in the Stock Options section of Note 14 to the Consolidated Financial Statements in the 2005 and 2006 Annual Reports to Shareholders of PG&E Corporation and Pacific Gas and Electric Company. In 2006, Mr. Andrews and Mr. Williams each received 4,983 stock options with a grant date value of $40,626 and Ms. Herringer received 2,491 stock options with a grant date value of $20,309. The exercise price of the stock options, $37.47, is the closing price of PG&E Corporation common stock on the January 3, 2006 grant date. The aggregate number of option awards outstanding for each non-employee director at December 31, 2006 was: Mr. Andrews 24,167, Mr. Biller 9,290, Mr. Coulter 0, Mr. Cox 26,971, Ms. Herringer 2,491, Dr. Meserve 0, Dr. Metz 15,626, Ms. Rambo 0, and Mr. Williams 38,802. |
(4) | Represents (i) premiums paid for accidental death and dismemberment insurance, and (ii) matching gifts to qualified educational and environmental nonprofit organizations pursuant to the PG&E Corporation Matching Gifts Program, which each year establishes a set fund for matching eligible gifts made by employees and directors on a dollar-for-dollar basis, up to a total of $2,500 per calendar year per individual (Dr. Metz $2,460 and Mr. Williams $2,500). |
(5) | Dr. Meserve was elected as a director of PG&E Corporation and Pacific Gas and Electric Company on December 20, 2006. |
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Each
• | Restricted shares of PG&E Corporation common stock valued at $30,000 (based on the closing price of PG&E Corporation common stock on the first business day of the year), and |
• | A combination, as elected by the director, of non-qualified stock options and restricted stock units with a total value of $30,000, based on increments valued at $5,000. |
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held concurrently and, therefore, that a single meeting fee is paid to each director for each set of meetings.
26
participation in Pacific Gas and Electric Company's Chapter 11 proceedings. The Bankruptcy Court directed the Attorney General to file an amended complaint omitting certain of his Section 17200 allegations and remanded the amended complaint to the Superior Court. In August 2002, the Attorney General filed his amended complaint in the Superior Court. The Attorney General also appealed the Bankruptcy Court's remand order to the U.S. District Court for the Northern District of California (District Court).
On October 8, 2003, the District Court reversed, in part, the Bankruptcy Court's June 2002 decision and ordered that the Attorney General's restitution claims under Section 17200 be sent to the Bankruptcy Court. concerning jurisdictional issues. The District Court found that these claims are the property of Pacific Gas and Electric Company's Chapter 11 estate and therefore within the Bankruptcy Court's jurisdiction. The District Court also affirmed, in part, the Bankruptcy Court's June 2002 decision andNinth Circuit found that the Superior Court had jurisdiction over the Attorney General's civil penalty and injunctive relief claims under Section 17200 could be resolved in Superior Court. The Attorney General appealed the District Court's remand order toGeneral’s restitution claims. (In October 2006, the U.S. Supreme Court of Appeals fordeclined to grant PG&E Corporation’s request to review the Ninth Circuit (Ninth Circuit).
In December 2004, while the Ninth Circuit appeal was pending, the Superior Court considered the appropriate standard for determining what constitutes a separate violation of Section 17200 in order to determine the magnitude of potential penalties under Section 17200 (up to $2,500 per separate "violation"Circuit’s decision.). The Superior Court did not address the question of whether any violations occurred. In March 2005, the Superior Court issued a decision rejecting the "per victim" and "per [customer] bill" approaches advocated by the Attorney General, which standards potentially could have resulted in millions of separate "violations." The Superior Court found that the appropriate standard was each transfer of money from Pacific Gas and Electric Company to PG&E Corporation that the Attorney General alleges violated Section 17200. On July 27, 2005, the California Court of Appeal summarily denied a petition filed by the Attorney General seeking to overturn this decision.
On January 10, 2006, a three-judge panel of the Ninth Circuit issued a 2-1 decision reversing the District Court's October 2003 order regarding which court had jurisdiction of the Attorney General's restitution claims. The Ninth Circuit ruled that the Attorney General's restitution claims were actions to enforce police or regulatory power, and therefore were exempt from the provisions of the Bankruptcy Code permitting removal of state actions to Bankruptcy Court. The Ninth Circuit remanded the restitution claims back to the Superior Court. PG&E Corporation filed a request for rehearing with the Ninth Circuit.
The Ninth Circuit did not address the Attorney General'sGeneral’s underlying allegations that PG&E Corporation and the other defendants violated Section 17200. The Ninth Circuit also did not decide who would be entitled to receive the proceeds, if any, of a restitution award. PG&E Corporation continues to believe that any such proceeds would be the property of Pacific Gas and Electric Company. ThePursuant to the December 19, 2003 Settlement Agreement provides thatto resolve Pacific Gas and Electric Company’s proceeding under Chapter 11 of the U.S. Bankruptcy Code, the CPUC released all claims by the CPUC against PG&E Corporation or Pacific Gas and Electric Company arising out of or in any way related to the energy crisis, are released, including the CPUC'sCPUC’s investigation into past PG&E Corporation actions during the energy crisis. Accordingly, PG&E Corporation believes that any claims for such proceeds by the CPUC would be precluded.
Certain Relationships
“per [customer] bill” approaches advocated by the Attorney General, which standards potentially could have resulted in millions of separate “violations.” The following describes compensation paid during 2005 to employeesSuperior Court found that the appropriate standard was each transfer of money from Pacific Gas and Electric Company who also are immediate family membersto PG&E Corporation that the Attorney General alleges violated Section 17200. In July 2005, the California Court of individuals who served asAppeal summarily denied a director or executive officerpetition filed by the Attorney General seeking to overturn this decision. The Attorney General has resumed discovery in the Superior Court action. The next case management conference is scheduled for April 17, 2007.
• | Upon Pacific Gas and Electric Company’s emergence from Chapter 11 in April 2004, the company placed into the Goldman Sachs FS Federal Fund 520 (Goldman Fund) a portion of the total funds placed in escrow at Deutsche Bank for possible payment to members of Class 6 in the company’s Chapter 11 case. This investment was made before GSAM obtained greater than 5 percent of PG&E Corporation’s stock. As of December 31, 2006, Pacific Gas and Electric Company held $242.7 million in the Goldman Fund, out of the total $1.25 billion in Class 6 settlement funds placed in escrow at Deutsche Bank. For 2006, it is estimated that GSAM earned approximately $500,000 from management of Pacific Gas and Electric Company’s investment in the Goldman Fund. The company’s investment in the Goldman Fund will be reduced to the extent that (i) Class 6 claims are settled, or (ii) alternate investment funds are selected. |
• | GSAM manages the Goldman Sachs Asset Management Core Flex Fund (Goldman Core Fund). Approximately $270 million in the PG&E Corporation Retirement Master Trust and approximately $35 million in the Pacific Gas and Electric Company Post-Retirement Medical Trust for Bargaining-Unit Employees are invested in the Goldman Core Fund. Investment decisions for these pension trusts are made by the PG&E Corporation Employee Benefit Committee, which is comprised of officers from PG&E Corporation and Pacific Gas and Electric Company. For 2006, it is estimated that GSAM earned approximately $1 million in fees from management of this investment. Such management services are expected to continue in the future. |
27
28
Security Ownership of Management
Beneficial Stock | Percent of | Common Stock | ||||||||||||||
Name | Ownership(1)(2)(3) | Class(4) | Equivalents(5) | Total | ||||||||||||
David R. Andrews(6) | 18,879 | * | 812 | 19,691 | ||||||||||||
Leslie S. Biller(6) | 6,542 | * | 10,399 | 16,941 | ||||||||||||
David A. Coulter(6) | 8,702 | * | 34,192 | 42,894 | ||||||||||||
C. Lee Cox(6) | 65,957 | * | 6,495 | 72,452 | ||||||||||||
Peter A. Darbee(7) | 231,877 | * | 11,153 | 243,030 | ||||||||||||
Maryellen C. Herringer(6) | 3,746 | * | 2,159 | 5,905 | ||||||||||||
Thomas B. King(8) | 189,105 | * | 10,125 | 199,230 | ||||||||||||
Richard A. Meserve(6) | 846 | * | 0 | 846 | ||||||||||||
Mary S. Metz(6) | 26,648 | * | 7,302 | 33,950 | ||||||||||||
Barbara L. Rambo(6) | 2,554 | * | 0 | 2,554 | ||||||||||||
Barry Lawson Williams(6) | 37,772 | * | 6,918 | 44,690 | ||||||||||||
Christopher P. Johns(9) | 107,607 | * | 23,830 | 131,437 | ||||||||||||
Leslie H. Everett(9) | 34,156 | * | 0 | 34,156 | ||||||||||||
Kent M. Harvey(10) | 47,146 | * | 5,211 | 52,357 | ||||||||||||
Thomas E. Bottorff(11) | 50,811 | * | 58 | 50,869 | ||||||||||||
All PG&E Corporation directors and executive officers as a group (17 persons) | 834,863 | * | 118,595 | 953,458 | ||||||||||||
All Pacific Gas and Electric Company directors and executive officers as a group (21 persons) | 1,051,896 | * | 113,442 | 1,165,338 |
* | Less than 1 percent |
(1) | This column includes any shares held in the name of the spouse, minor children, or other relatives sharing the home of the listed individuals and, in the case of current and retired executive officers, includes shares of PG&E Corporation common stock held in the defined contribution retirement plan maintained by PG&E Corporation. Except as otherwise indicated below, the listed individuals have sole voting and investment power over the shares shown in this column. Voting power includes the power to direct the voting of the shares held, and investment power includes the power to direct the disposition of the shares held. | |
This column also includes the following shares of PG&E Corporation common stock in which the listed individuals share voting and investment power: Mr. Andrews 4,630 shares, Mr. Biller 3,605 shares, Mr. Coulter 8,703 shares, Mr. Cox 38,986 shares, Mr. Darbee 15,950 shares, Ms. Herringer 2,100 shares, Dr. Metz 8,793 shares, all PG&E Corporation directors and executive officers as a group 82,767 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 83,434 shares. |
(2) | This column includes the following shares of PG&E Corporation common stock which the listed individuals have the right to acquire within 60 days of February 7, 2007 through the exercise of vested stock options granted under the PG&E Corporation Long-Term Incentive Program or the PG&E Corporation 2006 Long-Term Incentive Plan, as follows: Mr. Andrews 14,249 shares, Mr. Biller 2,937 shares, Mr. Cox 26,971 shares, Mr. Darbee 69,300 shares, Mr. King 139,252 shares, Dr. Metz 15,628 shares, Mr. Williams 28,884 shares, Mr. Johns 80,100 shares, Ms. Everett 12,575 shares, Mr. Harvey 26,538 shares, Mr. Bottorff 15,850 shares, all PG&E Corporation directors and executive officers as a group 416,434 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 450,612 shares. The listed individuals have neither voting power nor investment power with respect to these shares unless and until they are purchased through the exercise of the options, under the terms of the PG&E Corporation Long-Term Incentive Program. |
Name | Beneficial Stock Ownership(1)(2)(3) | Percent of Class(4) | Common Stock Equivalents(5) | Total | ||||
---|---|---|---|---|---|---|---|---|
David R. Andrews(6) | 13,257 | * | 793 | 14,050 | ||||
Leslie S. Biller(6) | 5,696 | * | 8,170 | 13,866 | ||||
David A. Coulter(6) | 7,613 | * | 30,382 | 37,995 | ||||
C. Lee Cox(6) | 60,946 | * | 5,472 | 66,418 | ||||
Peter A. Darbee(7) | 191,154 | * | 10,806 | 201,960 | ||||
Maryellen C. Herringer(6) | 2,900 | 348 | 3,248 | |||||
Thomas B. King(8) | 286,439 | * | 9,810 | 296,249 | ||||
Mary S. Metz(6) | 25,421 | * | 6,255 | 31,676 | ||||
Barbara L. Rambo(6) | 1,708 | * | 0 | 1,708 | ||||
Barry Lawson Williams(6) | 31,900 | * | 5,884 | 37,784 | ||||
Christopher P. Johns(9) | 122,949 | 23,015 | 145,964 | |||||
Bruce R. Worthington(9) | 245,651 | * | 8,187 | 253,838 | ||||
Robert D. Glynn, Jr.(10) | 142,727 | * | 0 | 142,727 | ||||
Gordon R. Smith(11) | 199,090 | * | 0 | 199,090 | ||||
All PG&E Corporation directors and executive officers as a group (16 persons) | 1,118,699 | * | 114,104 | 1,232,803 | ||||
All Pacific Gas and Electric Company directors and executive officers as a group (19 persons) | 1,173,366 | * | 109,178 | 1,282,544 |
This column also includes the following shares of PG&E Corporation common stock in which the listed individuals share voting and investment power: Mr. Andrews 3,784 shares, Mr. Biller 2,759 shares, Mr. Coulter 7,613 shares, Mr. Cox 33,975 shares, Mr. Darbee 37,241 shares, Ms. Herringer 2,100 shares, Dr. Metz 7,566 shares, Mr. Worthington 12 shares, Mr. Glynn 63,130 shares, Mr. Smith 42,993 shares, all PG&E Corporation directors and executive officers as a group 95,050 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 95,050 shares.29
(3) | This column includes restricted shares of PG&E Corporation common stock awarded under the PG&E Corporation Long-Term Incentive Program and the PG&E Corporation 2006 Long-Term Incentive Plan. As of February 7, 2007, the listed individuals held the following numbers of restricted shares that may not be sold or otherwise transferred until certain vesting conditions are satisfied: Mr. Andrews 4,630 shares, Mr. Biller 3,650 shares, Mr. Coulter 6,257 shares, Mr. Cox 6,257 shares, Mr. Darbee 126,494 shares, Ms. Herringer 1,646 shares, Mr. King 38,527 shares, Dr. Meserve 846 shares, Dr. Metz 6,610 shares, Ms. Rambo 2,554 shares, Mr. Williams 6,610 shares, Mr. Johns 25,035 shares, Ms. Everett 11,473 shares, Mr. Harvey 12,514 shares, Mr. Bottorff 12,059 shares, all PG&E Corporation directors and executive officers as a group 305,679 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 446,095 shares. | |
(4) | The percent of class calculation is based on the number of shares of PG&E Corporation common stock outstanding as of February 7, 2007, excluding shares held by a subsidiary. | |
(5) | This column reflects the number of stock units that were purchased by listed individuals through salary and other compensation deferrals or that were awarded under equity compensation plans. The value of each stock unit is equal to the value of a share of PG&E Corporation common stock and fluctuates daily based on the market price of PG&E Corporation common stock. The listed individuals who own these stock units share the same market risk as PG&E Corporation shareholders, although they do not have voting rights with respect to these stock units. | |
(6) | Mr. Andrews, Mr. Biller, Mr. Coulter, Mr. Cox, Ms. Herringer, Dr. Meserve, Dr. Metz, Ms. Rambo, and Mr. Williams are directors of both PG&E Corporation and Pacific Gas and Electric Company. | |
(7) | Mr. Darbee is a director and an executive officer of both PG&E Corporation and Pacific Gas and Electric Company. He is named in the Summary Compensation Table on pages 46 and 47. | |
(8) | Mr. King is a director and an executive officer of Pacific Gas and Electric Company, and also is an executive officer of PG&E Corporation. He is named in the Summary Compensation Table on pages 46 and 47. | |
(9) | Mr. Johns and Ms. Everett are executive officers of both PG&E Corporation and Pacific Gas and Electric Company and are named in the Summary Compensation Table on pages 46 and 47. |
(10) | Mr. Harvey is an executive officer of PG&E Corporation and is named in the Summary Compensation Table on pages 46 and 47. |
(11) | Mr. Bottorff is an executive officer of Pacific Gas and Electric Company and is named in the Summary Compensation Table on pages 46 and 47. |
30
Item No. 2:2006,2007, and to audit the effectiveness of internal control over financial reporting and management'smanagement’s assessment of internal control over financial reporting, as of December 31, 2006.2007. Deloitte & Touche LLP is a major national accounting firm with substantial expertise in the energy and utility businesses. Deloitte & Touche LLP has served as independent public accountants for PG&E Corporation and Pacific Gas and Electric Company since 1999.
31
firm'sfirm’s independence. 2005 2004 Audit Fees $4.2 million $4.6 million Audit-Related Fees $0.3 million $0.6 million Tax Fees $0.07 million $0.3 million All Other Fees $0 $0
2006 | 2005 | |||||||
Audit Fees | $ | 4.2 million | $ | 4.2 million | ||||
Audit-Related Fees | $ | 0.3 million | $ | 0.3 million | ||||
Tax Fees | $ | 0 | $ | 0.07 million | ||||
All Other Fees | $ | 0 | $ | 0 | ||||
| ||||
---|---|---|---|---|
| 2005 | 2004 | ||
Audit Fees | $3.4 million | $3.6 million | ||
Audit-Related Fees | $0.2 million | $0.2 million | ||
Tax Fees | $0 | $0 | ||
All Other Fees | $0 | $0 |
2006 | 2005 | |||||||
Audit Fees | $ | 3.5 million | $ | 3.4 million | ||||
Audit-Related Fees | $ | 0.2 million | $ | 0.2 million | ||||
Tax Fees | $ | 0 | $ | 0 | ||||
All Other Fees | $ | 0 | $ | 0 | ||||
for 2005.
2005.
• | Audit services, |
• | Audit-related services, and |
• | Tax services that Deloitte & Touche LLP and its affiliates are allowed to provide to Deloitte & |
32
Touche LLP’s audit clients under the Sarbanes-Oxley Act. |
PG&E Corporation and its subsidiaries traditionally have obtained these types of services from its independent registered public accounting firm.
(1)"Audit services" generally include audit and review of annual and quarterly financial statements and services that only the independent registered public accounting firm reasonably can provide (e.g., comfort letters, statutory audits, attest services, consents, and assistance with and review of documents filed with the Securities and Exchange Commission).(2)"Audit-related services" generally include assurance and related services that traditionally are performed by the independent registered public accounting firm (e.g., employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, agreed-upon procedure reports related to contractual obligations, and attest services that are not required by statute or regulation).(3)"Tax services" generally include compliance, tax strategy, tax appeals, and specialized tax issues, all of which also must be permitted under the Sarbanes-Oxley Act.(1) “Audit services”generally include audit and review of annual and quarterly financial statements and services that only the independent registered public accounting firm reasonably can provide (e.g., comfort letters, statutory audits, attest services, consents, and assistance with and review of documents filed with the Securities and Exchange Commission). (2) “Audit-related services”generally include assurance and related services that traditionally are performed by the independent registered public accounting firm (e.g., employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, agreed-upon procedure reports related to contractual obligations, and attest services that are not required by statute or regulation). (3) “Tax services”generally include compliance, tax strategy, tax appeals, and specialized tax issues, all of which also must be permitted under the Sarbanes-Oxley Act. firm'sfirm’s independence.company'scompany’s management and review and pre-approval by the applicable Audit Committee.company'scompany’s independent registered public accounting firm. Any pre-approvals granted under this authority must be presented to the full Audit Committee at the next regularly scheduled Committee meeting. year-to-dateyear-to-date fees paid for those services, and a comparison of year-to-dateyear-to-date fees to the pre-approved amounts.20052006 and 2004.2005. During 20052006 and 2004,2005, all services provided by Deloitte & Touche LLP to PG&E Corporation, Pacific Gas and Electric Company, and their consolidated affiliates were approved under the applicable pre-approval procedures.
33
“3 – Performance Based Stock Options Resolved, Shareholders request that our Board of Directors adopt a policy whereby at least 75% of future equity compensation (stock options and restricted stock) awarded to senior executives shall be performance-based, and the performance criteria adopted by the Board disclosed to shareowners. “Performance-based” equity compensation is defined here as: (a) Indexed stock options, the exercise price of which is linked to an industry index; (b) Premium-priced stock options, the exercise price of which is substantially above the market price on the grant date; or (c) Performance-vesting options or restricted stock, which vest only when the market price of the stock exceeds a specific target for a substantial period. This is not intended to unlawfully interfere with existing employment contracts. However, if there is a conflict with any existing employment contract, our Compensation Committee is urged for the good of our company to negotiate revised contracts that are consistent with this proposal. As a long-term shareholder, I support compensation policies for senior executives that provide challenging performance objectives that motivate executives to achieve long-term shareowner value. I believe that a greater reliance on performance-based equity grants is particularly warranted at PG&E. Many leading investors criticize standard options as inappropriately rewarding mediocre performance. Warren Buffett has characterized standard stock options as “really a royalty on the passage of time” and has spoken in favor of indexed options. In contrast, peer-indexed options reward executives for outperforming their direct competitors and discourage re-pricing. Premium-priced options reward executives who enhance overall shareholder value. Performance-vesting equity grants tie compensation more closely to key measures of shareholder value, such as share appreciation and net operating income, thereby encouraging executives to set and meet performance targets. Performance Based Stock Options
34
"3 – Redeem or Vote Poison Pill
RESOLVED, Shareholders request that our Board redeem any future or current poison pill, unless such poison pill is subject to a shareholder vote as a separate ballot item, to be held as soon as may be practicable. Charter or bylaw inclusion if practicable.
Thus there would be no loophole to allow exceptions to override the implementation of a shareholder vote as soon as may be practicable. Since a vote would be as soon as may be practicable, it accordingly could take place within 4-months of the adoption of a new poison pill. To give our board valuable insight on our views of their poison pill, a vote would occur even if our board had promptly terminated a new poison pill because our board could turnaround and readopt their poison pill.
Shareholder Accountability Sadly Lacking at Our 2005 Annual Meeting
The ability to have a shareholder vote on a management poison pill would focus our management on greater accountability. Shareholder accountability was sadly lacking at our April 20, 2005 annual meeting. Our management moved the meeting out of San Francisco – creating a hardship for shareholders who live in San Francisco and do not have a car.
At our 2005 annual meeting I do not believe our management followed the definitive proxy it filed with the SEC establishing the order of business. Apparently our management intended that the formal discussion of ballot items 1 through 8 would take about 5 minutes. It was a surprise that the company flashed the voting results for all 8 ballot items on a screen and shortly thereafter opened the meeting to random questions. It was amazing how fast the first person jumped up to ask the first question – "company-ringer" concern.
Proponents of the five formal 14a-8 proposals had to interrupt the random questions to introduce their proposals. (If proponents did not formally introduce their proposals at the meeting, PG&E could argue that the votes do not count.) Our new CEO, Mr. Darbee did not initiate a call to any proponent to present a proposal.
These random questions were readily accepted by our management. Some questions appeared to be planted by company "ringers." This included soft-ball questions and testimonials of praise. Our management had a group of uniformed military personnel wait throughout the entire 2-plus hour meeting before properly acknowledging them. Our management has repeatedly ignored requests for a transcript of this confusing and rude annual meeting.
Pills Entrench Current Management
"Poison Pills... prevent shareholders, and the overall market, from exercising their right to discipline management by turning it out. They entrench the current management, even when it's doing a poor job. They water down shareholders' votes and deprive them of a meaningful voice in corporate affairs."
"Take on the Street" by Arthur Levitt, SEC Chairman, 1993-2001
Stock Value
If a poison pill makes our stock difficult to sell at a profit – the value of our stock could suffer.
Redeem or Vote Poison Pill
“4 – Cumulative Voting | |
RESOLVED: Cumulative Voting. Shareholders recommend that our Board adopt cumulative voting. Cumulative voting means that each shareholder may cast as many votes as equal to number of shares held, multiplied by the number of directors to be elected. A shareholder may cast all such cumulated votes for a single candidate or split votes between multiple candidates, as that shareholder sees fit. Under cumulative voting shareholders can withhold votes from certain nominees in order to cast multiple votes for others. | |
Mr. Simon Levine, 960 Shorepoint Ct., No. 306, Alameda, CA 94501 sponsors this proposal. | |
Cumulative voting won impressive yes-votes of 54% at Aetna and 56% at Alaska Air in 2005 and 55% at GM in 2006. The GM 55% vote was up from 49% in 2005. The Council of Institutional Investorswww.cii.org formally recommends adoption of this proposal topic. | |
Cumulative voting allows a significant group of shareholders to elect a director of its choice — safeguarding minority shareholder interests and bringing independent perspectives to Board decisions. | |
Cumulative Voting could increase the possibility of electing at least one director with a specialized expertise and advocacy needed at our company to improve our corporate governance. For instance to convince other directors that we need an independent board chairman, especially since we do not even have an independent lead director. Also to guard against a repeat of our dividend suspension for years while our former Chairman, Mr. Glynn was paid buckets of money like $14 million in one year. | |
And furthermore to repeat a reoccurrence of a fiasco like this: Court Rejects PG&E Appeal of State Case Bloomberg News, October 3, 2006 | |
PG&E Corp. lost a U.S. Supreme Court appeal aimed at thwarting California’s effort to recoup $5 billion transferred by the company’s Pacific Gas & Electric utility unit before its 2001 bankruptcy filing. The justices, without comment, refused to consider PG&E’s arguments. | |
Pacific Gas & Electric, California’s largest utility, filed for bankruptcy protection in April 2001 after accruing $9 billion in losses by buying power for more than it could charge customers. | |
Cumulative voting allows a significant group of shareholders to elect a director of its choice — safeguarding minority shareholder interests and bringing independent perspectives to Board decisions. | |
Cumulative Voting |
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
This proposal is unnecessary. The
Also, in furtherancemeeting would be capable of electing a director. This is true even if the holders of the Corporation's commitmentremaining 91 percent of the voting shares are opposed to goodthe election of that candidate and cast their votes to elect 10 other directors.
35
The 12-month period in the Corporation's policy provides the Board of Directors a reasonable amount of time to seek a shareholder vote on any new shareholder rights plan that the Board may adopt if it decides that such a plan is in the best interest of shareholders. The 12-month period also is consistent with the policy ofutility companies, as rated by Institutional Shareholder Services (ISS), an independent corporate governance firm. The CGQ rating is a leading proxy advisory firm.
The proponent recommends thatcommonly referenced measure of corporate governance practices, and is included in company profiles on Yahoo! Finance. Also, contrary to the Board obtain a shareholder vote within only four months of taking action. As a practical matter, this time period might not be sufficient forproponent’s statement, the Corporation to obtain, tally,has had a designated independent lead director since 2003.
The proponent's objection to the conductinterests of the Corporation's 2005 annual meeting is not justified, nor is it relevant to the subject matter of this proposal. Contrary to the proponent's claims, the format of the Corporation's 2005 annual meeting was designed to increase shareholder participation and management accountability to shareholders. The location of the meeting was more accessible to the Corporation's manyall shareholders living outside San Francisco. Unnecessary formalities were removed to provide more time for shareholders to share their thoughts with management and the Board, and to give a wider variety of shareholders an opportunity to speak and ask questions during the meeting.
All of the proposals included in the Corporation's 2005 proxy statement were presented at the annual meeting for voting and each individual who represented a shareholder proposal had an opportunity to speak about that proposal at the meeting. Preliminary voting results were presented during the meeting, consistent with past practice.
equally.
Item No. 4: Shareholder Proposal36
Mr. Nick Rossi, P.O. Box 249, Boonville, California 95415, beneficial owner of 600 shares
"4 – Independent Board Chairman
RESOLVED: Stockholders request that our Board of Directors change our governing documents (Charter or Bylaws if practicable) to require that the Chairman of our Board serve in that capacity onlySummary Compensation Table (on pages 46 and have no management duties, titles, or responsibilities. This proposal gives our company an opportunity to cure our Chairman's loss of independence should it exist or occur once this proposal is adopted.
The primary purpose of the Board of Directors is to protect shareholders' interests by providing independent oversight of management, including our new CEO. Separating the roles of Chairman and CEO can promote greater management accountability to shareholders and lead to a more objective evaluation of our new CEO.
When a person acts both as a company's Chairman and its CEO, a vital separation of power is eliminated – and we as the owners of our company are deprived of both a crucial protection against conflicts of interest and also of a clear and direct channel of communication to our company through our Chairman.
The Council of Institutional Investorswww.cii.org, whose members have $3 trillion invested, recommends adoption47 of this proposal topic.
Mr. Darbee's Conduct at his First Annual Meeting
The needJoint Proxy Statement). This section also discusses the compensation that was awarded to, have one personearned by, or paid during 2006 to act solelythese executive officers, as our Chairman was illustrated by our new CEO Mr. Darbee's conduct at his first annual meetingdetailed in 2005. Our management filed papers with the Securities and Exchange Commission leading shareholders to believe that the first formal items for discussion at our 2005 annual meeting would be the 8 ballot items – 3 from management and 5 from shareholders. However, the 5 shareholder items were not allowed to be completely presented until after nearly 2-hours and after dozens of random questions and testimonials of praise were readily accepted by Mr. Darbee (planted by company "ringer" concern).
Ratings Downgrade
The Corporate Library's April 26, 2005 Ratings Downgrade of our management stated: It's hard for us to believe that any board aloof and dismissive of shareholders can be genuinely effective, and we suspect that there may well be deeper, as yet undisclosed concerns here that will ultimately have a negative impact on PG&E's overall value. Combine these concerns with the company's latest reported compensation policies and practices and we find we have no choice but to downgrade PG&E's overall rating to a "D".
Moreover
It is well to remember that at Enron, WorldCom, Tyco, and other legends of mis-management and/or corruption, the Chairman also served as CEO. When a Chairman runs a company as Chairman and CEO, the information given to directors may or may not be accurate. If a CEO wants to cover up improprieties and directors disagree, with whom do they lodge complaints? The Chairman?
Independent Board ChairmanYes on 4"
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
This proposal is not necessary. The Corporation's existing governance practices already ensure independent oversight of management and sound policymaking. These practices include the following:
The Corporation's Corporate Governance Guidelines providenarrative disclosure that based on the circumstances existing at a time that there is a vacancy in the office of either the Chairman of the Board or the Chief Executive Officer (CEO), the Board will consider whether the role of the CEO should be separate from that of Chairman of the Board, and, if the roles are separate, whether the Chairman should be selected from the independent directors or should be an employee of the Corporation.
Atfollow this time, it is neither appropriate nor prudent to prohibit the CEO from serving as Chairman. Combining the offices of CEO and Chairman contributes to a more efficient and effective Board. The CEO bears primary responsibility for managing the Corporation's business day to day, and is the person in the best position to chair regular Board meetings and help ensure that key business issues and stakeholder interests are brought to the Board's attention. Any director may request the inclusion of specific agenda items for discussion at Board meetings.
The proponent's comments regarding the conduct of the 2005 annual meeting are unjustified and they are not relevant to the subject matter of this proposal. The Corporation's response to these comments is contained in management's response to Item No. 3 (see page 31).
For these reasons, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.
Nominating, Compensation, and Governance Committee Report on Compensation
The Nominating, Compensation, and Governance Committee of the PG&E Corporation Board of Directors (Committee) is responsible for overseeing and establishing officer compensation policies for PG&E Corporation and its subsidiaries, including Pacific Gas and Electric Company. The Committee also overseesadministers the equity-based incentive programs of PG&E Corporation as well as2006 Long-Term Incentive Plan (LTIP) under which equity-based awards are made, and oversees other employee benefit plans. The Committee is composed entirelyBoard of independent directors as defined by the New York Stock Exchange and the Pacific Exchange, and each company's Corporate Governance Guidelines.
This report relates to the compensation for officersDirectors of PG&E Corporation andor Pacific Gas and Electric Company during(as the fiscal year ended December 31, 2005.
For 2005,case may be) is responsible for approving compensation for the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company was approved bybased on the independent members of the applicable Board of Directors, who ratified the recommendations of the Committee.
Compensation for all other PG&E Corporation and Pacific Gas and Electric Company officers is approved by the Committee, except that the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers of PG&E Corporation and Pacific Gas and Electric Company. However, under New York Stock Exchange rules, the Committee may not delegate authority to approve compensation for individuals who are "executive officers" for purposes of Section 16 of the Securities Exchange Act.
Committee’s recommendations.
1 | The primary comparator group used for purposes of setting 2006 officer compensation consists of all companies listed in the Dow Jones Utility Index and the Standard & Poor’s Electrics Index, and all California investor-owned utilities (the “Pay Comparator Group”): AES Corporation, Allegheny Energy, Inc., Ameren Corporation, American Electric Power Company, Inc., CenterPoint Energy, Inc., Cinergy Corp., Consolidated Edison, Inc., DTE Energy Company, Dominion Resources, Inc., Duke Energy Group, Edison International, Entergy Corporation, Exelon Corporation, First Energy Corp., FPL Group, Inc., NiSource Inc., PPL Corporation, Pinnacle West Capital Corporation, Progress Energy, Inc., Public Service Enterprise Group, Sempra Energy, Southern Company, TECO Energy, Inc., TXU Corp., Williams Companies, and Xcel Energy Inc. This group of companies is broad enough to provide statistical validity and data availability, represents the segment of the market where PG&E Corporation and Pacific Gas and Electric Company recruit officers with industry-specific experience, and is determined on an objective and transparent basis. For purposes of corporate performance comparisons (including the relative total shareholder return measured for the 2006-2008 performance share award cycle), the Committee uses a subgroup of 12 companies that have similar characteristics and business models as PG&E Corporation (the “Performance Comparator Group”): Ameren Corporation, American Electric Power, CenterPoint Energy, Inc., Consolidated Edison, Entergy Corporation, FPL Group, NiSource Inc., Pinnacle West Capital, Progress Energy, Inc., Southern Company, TECO Energy, and Xcel Energy. This group of companies is a subset of the Pay Comparator Group and, like PG&E Corporation, is focused on core regulated-utility activities with either a distribution or an integrated-utility focus. |
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OfficerPacific Gas and Electric Company) considers such factors as (1) the officer’s experience, (2) individual performance, (3) the officer’s role in achieving corporate objectives established at the beginning of the year, (4) the officer’s compensation compared to individuals in similar positions in the Pay Comparator Group as well as compared to other officers internally, and (5) when appropriate, other relevant factors.
Program Objectives?
• | To emphasize long-term incentives to further align shareholders’ and officers’ interests, and focus employees on enhancing total return for shareholders. |
• | To attract, retain, and motivate employees with the necessary mix of skills and experience for the development and successful operation of PG&E Corporation’s businesses. |
• | To manage the delivery of compensation in a cost-efficient and transparent manner. |
• | A significant component of every officer’s compensation should be tied directly to PG&E Corporation’s performance for shareholders. |
• | Target cash compensation (base salary and target short-term incentive) should be equal to the average target cash compensation for comparable officers in the Pay Comparator Group. |
• | The Committee’s objective is to provide long-term compensation in line with PG&E Corporation’s performance for shareholders. Performance is defined as total shareholder return (TSR). The terms of performance-based long-term incentive awards are designed to track PG&E Corporation’s TSR relative to companies in the Performance Comparator Group. For example, if PG&E Corporation performs only at the 50th percentile of the Performance Comparator Group, the total long-term incentive value realized by grant recipients would be approximately equal to long-term compensation at the 50th percentile of the Pay Comparator Group. |
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2 | “Beneficially owned” stock includes actual shares of stock held in the name of the officer (or his/her immediate family members) and stock held in a 401(k) or deferred compensation plan. It does not include stock options or restricted stock. |
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42
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In addition, the Committee defines the specific compensation objectives for all officers as follows:
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In order to provide compensation that is competitive with companies similar to PG&E Corporation in 2005,is comprised of independent directors and operates under a written charter adopted by the Committee selected a group consisting of 15 other major energy companies (the comparator group) that are comparable to PG&E Corporation in size, scope, business mix,Board of Directors. The Nominating, Compensation, and other characteristics. The majority of the companies in the comparator group are included in the Dow Jones Utility Index.
In June 2005, theGovernance Committee approved a modification to the comparator group to address changes in the industry over the last few years. Beginning in 2006, the comparator groupis responsible for overseeing and establishing officer compensation programs will consist of all companies listed in the Dow Jones Utility Index and the Standard & Poor's Electric Utilities Index, and all investor-owned California utilities, currently 26 companies.
Under Section 162(m) of the U.S. Internal Revenue Code (the "Code"), a public corporation may not take a tax deductionpolicies for compensation in excess of $1 million paid to any of the five highest paid officers, unless certain specific and detailed criteria are satisfied. Section 162(m) does not limit the deductibility of qualified performance-based compensation (as defined in the tax law). When evaluating compensation program alternatives, the Committee's philosophy is to retain maximum program flexibility in designing competitive, performance-based compensation programs that meet the Committee's stated objectives and protect shareholder interests. The Committee considers the potential impact of Section 162(m) on PG&E Corporation's compensation programs, and how that comports with the Committee's overall compensation philosophy. The Committee does not limit compensation to those levels or types of compensation that will be deductible.
Officer Compensation
The principal components of officer compensation at PG&E Corporation and its subsidiaries, including Pacific Gas and Electric Company are: (1) base salary, (2) short-term incentives, (3) long-term incentives,Company.
Base Salary
Executive officer salaries at PG&E CorporationGovernance Committee has reviewed and Pacific Gasdiscussed the section of this Joint Proxy Statement entitled “Compensation Discussion and Electric Company are reviewed annually byAnalysis” with management. Based on its review and discussion with management, the Nominating, Compensation, and Governance Committee based on (1)has recommended to the results achieved by each individual, (2) expected corporate financial performance, measured by combined earnings per share, dividends, and stock price performance, and (3) changes in the salaries paid to comparable executive officers in the comparator group.
In setting the 2005 base salary levels for the executive officersBoards of Directors of PG&E Corporation and Pacific Gas and Electric Company that the Committee's objective was“Compensation Discussion and Analysis” section be included in this Joint Proxy Statement.
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The overall average of the base salaries received by each executive officerChief Financial Officer of PG&E Corporation and Pacific Gas and Electric Company, (includingand certain other officers of those entities, including the companies' Chief Executive Officers) for 2005 was approximately equal to the average base salaries paid to the comparablenext three most highly compensated executive officers during the past year.
Change in | ||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||
Non- | Value and | |||||||||||||||||||||||||||||||
Equity | Nonqualified | |||||||||||||||||||||||||||||||
Incentive | Deferred | All | ||||||||||||||||||||||||||||||
Stock | Option | Plan | Compensation | Other | ||||||||||||||||||||||||||||
Name and | Salary | Awards | Award(s) | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||
Principal Position | Year | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($)(6) | ($) | ||||||||||||||||||||||||
Peter A. Darbee(7) | 2006 | $ | 975,000 | $ | 3,666,389 | $ | 604,092 | $ | 1,485,900 | $ | 1,028,440 | $ | 230,237 | $ | 7,990,058 | |||||||||||||||||
Christopher P. Johns(8) | 2006 | $ | 494,000 | $ | 931,415 | $ | 221,802 | $ | 414,071 | $ | 157,985 | $ | 94,638 | $ | 2,313,911 | |||||||||||||||||
Leslie H. Everett(9) | 2006 | $ | 290,000 | $ | 762,746 | $ | 101,552 | $ | 220,980 | $ | 332,140 | $ | 33,050 | $ | 1,740,468 | |||||||||||||||||
Kent M. Harvey(10) | 2006 | $ | 352,085 | $ | 565,087 | $ | 182,526 | $ | 268,290 | $ | 116,713 | $ | 44,919 | $ | 1,529,620 | |||||||||||||||||
Bruce R. Worthington(11) | 2006 | $ | 489,250 | $ | 1,793,902 | $ | 374,182 | $ | 410,090 | $ | 518,882 | $ | 65,008 | $ | 3,651,314 | |||||||||||||||||
Thomas B. King(12) | 2006 | $ | 615,000 | $ | 1,590,363 | $ | 395,251 | $ | 702,945 | $ | 855,085 | $ | 69,465 | $ | 4,228,109 | |||||||||||||||||
Thomas E. Bottorff(13) | 2006 | $ | 282,500 | $ | 557,625 | $ | 134,151 | $ | 215,265 | $ | 204,202 | $ | 46,106 | $ | 1,439,849 |
(1) | Includes 2006 base salary deferred at the election of the officer (Mr. Johns $163,020, Ms. Everett $81,200, and Mr. Worthington $244,625). | |
(2) | Represents the 2006 compensation cost of restricted stock, performance shares, common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs), and a retention award in the form of restricted phantom stock units, granted in 2006 and prior years, measured in accordance with SFAS No. 123R, without taking into account an estimate of forfeitures related to service-based vesting. | |
(3) | Represents the 2006 compensation cost of stock options granted in prior years, measured in accordance with SFAS No. 123R without taking into account an estimate of forfeitures related to service-based vesting. Assumptions used in determining the grant date fair value are set forth in the Stock Options section of Note 14 to the Consolidated Financial Statements in the 2005 and 2006 Annual Reports to Shareholders of PG&E Corporation and Pacific Gas and Electric Company. | |
(4) | Amounts represent payments received or deferred in 2007 for achievement of corporate or organizational objectives in 2006 under the Short-Term Incentive Plan. | |
(5) | Amounts consist of (i) the change in pension value during 2006 (Mr. Darbee $1,023,619, Mr. Johns $157,918, Ms. Everett $330,681, Mr. Harvey $116,623, Mr. Worthington $502,001, Mr. King $853,356, and Mr. Bottorff $204,139), and (ii) the above-market earnings on deferred compensation (Mr. Darbee $4,821, Mr. Johns $67, Ms. Everett $1,459, Mr. Harvey $90, Mr. Worthington $16,881, Mr. King $1,729, and Mr. Bottorff $63). The above-market earnings are calculated as the difference between actual earnings from the Utility Bond Fund investment option of the Supplemental Retirement Savings Plan and hypothetical earnings that would have resulted using an interest rate equal to 120% of the applicable federal rate. Earnings for the Utility Bond Fund are based on Moody’s Investors Service’s long-term Aa bond rate for utilities. | |
(6) | Amounts consist of (i) perquisites and personal benefits, as detailed below (Mr. Darbee $181,494, Mr. Johns $40,405, Ms. Everett $20,000, Mr. Harvey $23,613, Mr. Worthington $39,488, Mr. King $41,790, and Mr. Bottorff $24,943, (ii) tax reimbursement payments (Mr. Darbee $4,868, Mr. Johns $3,504, Mr. Harvey $994, and Mr. Worthington $3,504), (iii) sale of vacation (Mr. Johns $28,499, Mr. Harvey $20,312, and Mr. Bottorff $8,451), and (iv) contributions to defined contribution retirement plans (Mr. Darbee $43,875, Mr. Johns $22,230, Ms. Everett $13,050, Mr. Worthington $22,016, Mr. King $27,675, and Mr. Bottorff $12,712). | |
(7) | During 2006, Mr. Darbee served as Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation and Chairman of the Board of Pacific Gas and Electric Company. |
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(8) | During 2006, Mr. Johns served as Senior Vice President, Chief Financial Officer, and Treasurer of PG&E Corporation and Pacific Gas and Electric Company. | |
(9) | During 2006, Ms. Everett served as Senior Vice President, Communications and Public Affairs of PG&E Corporation. | |
(10) | During 2006, Mr. Harvey served as Senior Vice President and Chief Risk and Audit Officer of PG&E Corporation. | |
(11) | Mr. Worthington served as Senior Vice President and General Counsel of PG&E Corporation through November 10, 2006. | |
(12) | Mr. King served as Senior Vice President of PG&E Corporation and President and Chief Executive Officer of Pacific Gas and Electric Company through August 14, 2006, and as Senior Vice President of PG&E Corporation and Chief Executive Officer of Pacific Gas and Electric Company thereafter. | |
(13) | During 2006, Mr. Bottorff served as Senior Vice President, Regulatory Relations of Pacific Gas and Electric Company. |
Short-Term Incentives
Summary Compensation Table.
Transpor- | Life | Execu- | ||||||||||||||||||||||||||||||
Perquisite | tation | Insur- | tive | Financial | ||||||||||||||||||||||||||||
Allowance | Services | ance | Parking | Fitness | Health | Services | Total | |||||||||||||||||||||||||
P. A. Darbee | $ | 35,000 | $ | 127,883 | $ | 2,208 | $ | 4,750 | $ | 4,495 | $ | 7,158 | $ | 181,494 | ||||||||||||||||||
C. P. Johns | $ | 25,000 | $ | 4,750 | $ | 4,085 | $ | 6,570 | $ | 40,405 | ||||||||||||||||||||||
L. H. Everett | $ | 20,000 | $ | 20,000 | ||||||||||||||||||||||||||||
K. M. Harvey | $ | 20,000 | $ | 2,070 | $ | 1,543 | $ | 23,613 | ||||||||||||||||||||||||
B. R. Worthington | $ | 25,000 | $ | 4,750 | $ | 2,145 | $ | 7,593 | $ | 39,488 | ||||||||||||||||||||||
T. B. King | $ | 25,000 | $ | 4,160 | $ | 2,100 | $ | 1,237 | $ | 3,377 | $ | 5,916 | $ | 41,790 | ||||||||||||||||||
T. E. Bottorff | $ | 20,000 | $ | 2,843 | $ | 2,100 | $ | 24,943 |
At the beginningabove perquisites consist of the year, targets are set basedfollowing:
• | Alump-sum perquisite allowance. |
• | Transportation services for Mr. Darbee, consisting of car transportation for Mr. Darbee’s commute and non-business travel. Amounts include the pro-rated salary and burden of the driver and vehicle costs. |
• | The cost of life insurance coverage exceeding amounts available to all employees (i.e., $50,000). |
• | The cost of parking. |
• | The value of reimbursements for health club fees, pursuant to a program available to certain management employees. |
• | The cost of executive health services provided to executive officers. Amounts vary between officers, reflecting the decisions of each individual officer regarding the specific types of tests and consultations provided, and the exact value of reimbursed expenses. |
• | Fees paid for financial services provided by an independent contractor selected by PG&E Corporation to provide such services. |
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All Other | ||||||||||||||||||||||||||||||||||||||||
Stock | ||||||||||||||||||||||||||||||||||||||||
Awards | ||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non- | Estimated Future Payouts Under | Number | Grant Date | |||||||||||||||||||||||||||||||||||||
Equity Incentive Plan Awards(1) | Equity Incentive Plan Awards(2) | of Shares | Fair Value of | |||||||||||||||||||||||||||||||||||||
Committee | of Stock | Stock and | ||||||||||||||||||||||||||||||||||||||
Grant | Action | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units | Option | |||||||||||||||||||||||||||||||
Name | Date | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#)(3) | Awards | ||||||||||||||||||||||||||||||
P. A. Darbee | $ | 0 | $ | 975,000 | $ | 1,950,000 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 0 | 48,705 | 97,410 | $ | 1,824,976 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 48,705 | $ | 1,824,976 | ||||||||||||||||||||||||||||||||||||
C. P. Johns | $ | 0 | $ | 271,700 | $ | 543,400 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 0 | 12,520 | 25,040 | $ | 469,124 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 12,520 | $ | 469,124 | ||||||||||||||||||||||||||||||||||||
L. H. Everett | $ | 0 | $ | 145,000 | $ | 290,000 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 0 | 5,565 | 11,130 | $ | 208,521 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 5,565 | $ | 208,521 | ||||||||||||||||||||||||||||||||||||
1/3/06 | (4) | 695 | $ | 26,053 | ||||||||||||||||||||||||||||||||||||
K. M Harvey | $ | 0 | $ | 176,043 | $ | 352,085 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 0 | 5,565 | 11,130 | $ | 208,521 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 5,565 | $ | 208,521 | ||||||||||||||||||||||||||||||||||||
B. R. Worthington | $ | 0 | $ | 269,088 | $ | 538,176 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 0 | 11,130 | 22,260 | $ | 417,041 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 11,130 | $ | 417,041 | ||||||||||||||||||||||||||||||||||||
T. B. King | $ | 0 | $ | 461,250 | $ | 922,500 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 0 | 20,175 | 40,350 | $ | 755,957 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 20,175 | $ | 755,957 | ||||||||||||||||||||||||||||||||||||
7/12/06 | 7/12/06 | 25,233 | $ | 1,000,000 | ||||||||||||||||||||||||||||||||||||
T. E. Bottorff | $ | 0 | $ | 141,250 | $ | 282,500 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 0 | 5,910 | 11,820 | $ | 221,448 | ||||||||||||||||||||||||||||||||||
1/3/06 | 12/21/05 | 5,910 | $ | 221,448 | ||||||||||||||||||||||||||||||||||||
1/3/06 | (4) | 3,026 | $ | 113,400 |
(1) | Compensation opportunity granted for 2006 under the Short-Term Incentive Plan (STIP). Actual amounts earned are reported in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. |
(2) | Represents performance shares granted under the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP). |
(3) | Represents shares of restricted stock granted under the LTIP. In addition, Mr. King received a retention award in the form of a grant of 25,233 restricted phantom stock units. Ms. Everett received 695 common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) and Mr. Bottorff received 3,026 SISOPs. |
(4) | Award of SISOPs under the Executive Stock Ownership Program. No specific action is required by the PG&E Corporation Nominating, Compensation, and Governance Committee, or by the PG&E Corporation or Pacific Gas and Electric Company Board of Directors. |
In 2005, PG&E Corporation achieved earnings from operations of $907 million. The majorityshares of PG&E Corporation and Pacific Gas and Electric Company officers received Short-Term Incentive Plan awards that ranged from 141common stock. Shares of restricted stock granted in 2006 will vest in 20 percent to 150 percent of their target awards.
Long-Term Incentives
For 2005, various types of stock-based incentives were granted to officers and other key employeesincrements over three years, with an acceleration of the Corporation and Pacific Gas and Electric Company underremaining 40 percent on the PG&E Corporation Long-Term Incentive Program (PG&E LTIP). The PG&E LTIP expired on December 31, 2005, and was replaced by its successor, the PG&E Corporation 2006 Long-Term Incentive Plan (2006 LTIP), which also permits similar long-term stock-based incentives to be granted to officers and other key employeesthird anniversary of the Corporation and Pacific Gas and Electric Company.date of grant if PG&E Corporation's performance aspiration is to be a top quartile performer. Consistent with this performance aspiration, the Committee's objective is to set long-term incentive targets for officers at this performance level that are equal to the 75th percentile target compensation for comparable officers in the comparator group.
The Committee uses a mixture of equity-based incentives to provide long-term incentive compensation, including stock options, restricted stock, and performance shares. The size of each officer's grant is determined primarily based on the compensation objectives described above.
Performance Shares. Performance shares provide incentives based on a comparison ofCorporation’s total shareholder return (dividends plus(TSR) for the prior three-year period is in the top quartile relative to the Performance Comparator Group. If PG&E Corporation’s TSR for that period is not in the top quartile, the restrictions will continue, and the remaining 40 percent of the restricted stock price appreciation) with returns provided bywill vest on the comparator group over a three-year period.
Performance Shares. The Committee determined that performance shares are hypothetical shares of stock thatgranted in 2006 will vest at the end of a three-year period, and are settleddepending on PG&E Corporation’s TSR relative to the Performance Comparator Group for the period. The payment for performance shares will be in cash only if performance targets are met. Forand will be
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Stock Options. Stock options provide incentives based on PG&E Corporation's abilityinterpolation, adjusted to sustain financial performance. Officers and other key employeesround numbers (i.e., the nearest multiple of PG&E Corporation and its subsidiaries receive stock options based on their responsibilities. After options vest, the holder may purchase a specified number of shares of PG&E Corporation common stock at the market price on the date of grant.
Stock options granted in 2005 vest in annual increments of 25 percent on the first, second, third, and fourth anniversaries of the date of grant. Options generally must be exercised within 10 years of the date of grant.
Restricted Stock. Restricted stock provides incentives based on its intrinsic economic value, and its future value as tied to the price performance of PG&E Corporation common stock. Officers and other key employees of PG&E Corporation receive restricted stock based on their responsibilities and performance. Restricted stock also aligns the recipients' motivational interests with those of shareholders.
For restricted stock granted in 2005, the restrictions lapse in annual increments of up to 25 percent on the first business day of each of the next four years following the date of grant.
CEO Compensation
The Committee followed the philosophy described above in determining 2005 compensation for Peter A. Darbee, Chief Executive Officer of PG&E Corporation, and for Gordon R. Smith, who served as Chief Executive Officer of Pacific Gas and Electric Company through December 31, 2005.
Mr. Darbee received an annual base salary of $850,000 in 2005. The salary level for Mr. Darbee is in the bottom quartile when compared to the salaries of chief executive officers in the comparator group, reflecting his tenure in the Chief Executive Officer position and the fact that he did not have the additional responsibility of Chairman of the Board in 2005. As noted in the accompanying compensation tables, during 2005, Mr. Darbee also received stock options, restricted stock, and performance shares. These grants were made based on the same factors and criteria as apply to similar grants for other PG&E Corporation officers.
Mr. Smith received an annual base salary of $810,000 in 2005. The salary level for Mr. Smith is above the average salary of senior executive officers in comparable positions in the comparator group. As noted in the accompanying compensation tables, during 2005, Mr. Smith also received stock options, restricted stock, and performance shares. These grants were made based on the same factors and criteria as apply to similar grants for other Pacific Gas and Electric Company officers.
Summary
We, the members of the Nominating, Compensation, and Governance Committee of the Board of Directors of PG&E Corporation, believe that the compensation programs of PG&E Corporation and Pacific Gas and Electric Company are successful in attracting and retaining qualified employees and in tying compensation directly to performance for shareholders. We will continue to monitor closely the effectiveness and appropriateness of each of the components of compensation to reflect changes in the business environment of PG&E Corporation and Pacific Gas and Electric Company.
March 14, 2006
Nominating, Compensation, and Governance Committee of the Board of Directors of PG&E Corporation
C. Lee Cox, ChairDavid A. CoulterBarbara L. RamboBarry Lawson Williams
This table summarizes the principal components of compensation paid to the Chief Executive Officers, the Chairman of the Board, and other officers, including the other most highly compensated executive officers of PG&E Corporation and Pacific Gas and Electric Company during the past year.
This table summarizes the distribution and the terms and conditions of stock options granted to the officers named in the Summary Compensation Table during the past year.
Individual Grants | Grant Date Value | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Options/SARs Granted(#)(1)(2) | % of Total Options/SARs Granted to Employees in 2005(2) | Exercise or Base Price ($/Sh)(3) | Expiration Date(4) | Grant Date Present Value ($)(5) | |||||||
Peter A. Darbee | 108,700 | 7.47 | % | $ | 33.02 | 01-04-2015 | $ | 833,729 | ||||
Christopher P. Johns | 30,400 | 2.09 | % | 33.02 | 01-04-2015 | 233,168 | ||||||
Bruce R. Worthington | 39,100 | 2.69 | % | 33.02 | 01-04-2015 | 299,897 | ||||||
Gordon R. Smith | 69,550 | 4.78 | % | 33.02 | 01-04-2015 | 533,449 | ||||||
Thomas B. King | 43,450 | 2.99 | % | 33.02 | 01-04-2015 | 333,262 | ||||||
Robert D. Glynn, Jr. | 0 | 0 | % | 0 |
Aggregated Option/SAR Exercises in 2005 and Year-End Option/SAR Values
This table summarizes exercises of stock options and tandem stock appreciation rights (granted in prior years) by the officers named in the Summary Compensation Table during the past year, as well as the number and value of all unexercised options held by such named officers at the end of 2005.
Name | Shares Acquired on Exercise (#) | Value Realized ($) | Number of Securities Underlying Unexercised Options/SARs at End of 2005 (#) (Exercisable/ Unexercisable) | Value of Unexercised In-the-Money Options/SARs at End of 2005 ($)(1) (Exercisable/ Unexercisable) | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Peter A. Darbee | 253,391 | $ | 3,159,728 | 0/209,750 | $ | 0/$2,084,258 | ||||
Christopher P. Johns | 79,700 | 811,576 | 69,050/75,450 | 1,368,170/820,692 | ||||||
Bruce R. Worthington | 196,825 | 3,877,782 | 167,525/124,125 | 1,125,006/1,501,590 | ||||||
Gordon R. Smith | 366,679 | 3,967,467 | 220,662/0 | 2,668,732/0 | ||||||
Thomas B. King | 122,700 | 1,913,666 | 248,245/131,962 | 2,897,003/1,549,832 | ||||||
Robert D. Glynn, Jr. | 1,158,973 | 12,168,621 | 484,250/0 | 8,244,893/0 |
Long-Term Incentive Program – Awards in 2005
This table summarizes the long-term incentive grants made to the officers named in the Summary Compensation Table during the past year.
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Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||||
Equity | Incentive Plan | ||||||||||||||||||||||||||||||||
Incentive Plan | Awards: | ||||||||||||||||||||||||||||||||
Awards: | Market or | ||||||||||||||||||||||||||||||||
Market | Number of | Payout Value | |||||||||||||||||||||||||||||||
Number of | Value of | Unearned | of Unearned | ||||||||||||||||||||||||||||||
Number of | Number of | Shares or | Shares or | Shares, Units | Shares, Units | ||||||||||||||||||||||||||||
Securities | Securities | Units of | Units of | or Other | or Other | ||||||||||||||||||||||||||||
Underlying | Underlying | Option | Stock That | Stock That | Rights That | Rights That | |||||||||||||||||||||||||||
Unexercised | Unexercised | Exercise | Option | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||||||
Options (#) | Options (#) | Price | Expiration | Vested | Vested | Vested | Vested | ||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | (#)(1) | ($)(2) | (#)(3) | ($)(2) | |||||||||||||||||||||||||
P. A. Darbee | 25,325 | (4) | $ | 14.61 | 1/3/13 | 83,625 | (5) | $ | 3,957,971 | 89,766 | (6) | $ | 8,387,397 | ||||||||||||||||||||
33,600 | (7) | $ | 27.23 | 1/3/14 | |||||||||||||||||||||||||||||
81,525 | (8) | $ | 33.02 | 1/4/15 | |||||||||||||||||||||||||||||
C. P. Johns | 4,500 | $ | 21.125 | 1/3/07 | 27,561 | (9) | $ | 1,304,462 | 27,278 | (10) | $ | 2,539,160 | |||||||||||||||||||||
29,775 | 9,925 | (11) | $ | 14.61 | 1/3/13 | �� | |||||||||||||||||||||||||||
16,800 | 16,800 | (12) | $ | 27.23 | 1/3/14 | ||||||||||||||||||||||||||||
7,600 | 22,800 | (13) | $ | 33.02 | 1/4/15 | ||||||||||||||||||||||||||||
L. H. Everett | 4,425 | (14) | $ | 14.61 | 1/3/13 | 12,534 | (15) | $ | 593,234 | 13,248 | (16) | $ | 1,234,982 | ||||||||||||||||||||
5,874 | (17) | $ | 27.23 | 1/3/14 | |||||||||||||||||||||||||||||
863 | 1,724 | (18) | $ | 28.40 | 8/3/14 | ||||||||||||||||||||||||||||
13,050 | (19) | $ | 33.02 | 1/4/15 | |||||||||||||||||||||||||||||
K. M. Harvey | 10,175 | (20) | $ | 14.61 | 1/3/13 | 15,507 | (21) | $ | 733,946 | 16,567 | (22) | $ | 1,524,121 | ||||||||||||||||||||
14,274 | (23) | $ | 27.23 | 1/3/14 | |||||||||||||||||||||||||||||
4,613 | 13,837 | (24) | $ | 33.02 | 1/4/15 | ||||||||||||||||||||||||||||
B. R. Worthington | 19,825 | (25) | $ | 14.61 | 1/3/13 | 31,314 | (26) | $ | 1,482,092 | 34,276 | (27) | $ | 3,158,615 | ||||||||||||||||||||
30,250 | (28) | $ | 27.23 | 1/3/14 | |||||||||||||||||||||||||||||
9,775 | 29,325 | (29) | $ | 33.02 | 1/4/15 | ||||||||||||||||||||||||||||
T. B. King | 50,000 | $ | 32.00 | 12/17/08 | 67,129 | (30) | $ | 3,177,216 | 45,501 | (31) | $ | 4,221,173 | |||||||||||||||||||||
100,000 | $ | 30.9375 | 1/5/09 | ||||||||||||||||||||||||||||||
19,825 | (32) | $ | 14.61 | 1/3/13 | |||||||||||||||||||||||||||||
30,250 | 30,250 | (33) | $ | 27.23 | 1/3/14 | ||||||||||||||||||||||||||||
2,326 | 2,324 | (34) | $ | 28.40 | 8/3/14 | ||||||||||||||||||||||||||||
10,863 | 32,587 | (35) | $ | 33.02 | 1/4/15 | ||||||||||||||||||||||||||||
T. E. Bottorff | 6,800 | (36) | $ | 14.61 | 1/3/13 | 16,417 | (37) | $ | 777,017 | 14,371 | (38) | $ | 1,330,967 | ||||||||||||||||||||
9,400 | (39) | $ | 27.23 | 1/3/14 | |||||||||||||||||||||||||||||
13,050 | (40) | $ | 33.02 | 1/14/15 |
(1) | Includes restricted stock and stock-based awards such as restricted stock units and phantom stock awards granted under the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP) and its predecessor (the PG&E Corporation Long-Term Incentive Program), common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) that were granted under the Executive Stock Ownership Program, and individual retention and incentive awards. See the Compensation Discussion and Analysis section on pages 37 to 44 of this Joint Proxy Statement for additional details regarding grants in 2006. |
(2) | Value based on the December 29, 2006 closing price of PG&E Corporation common stock ($47.33). Consistent with Securities and Exchange Commission rules, performance shares are valued at the maximum payout because PG&E Corporation exceeded its target performance measure in the previous year. | |
(3) | Includes performance shares and restricted stock with a performance requirement granted under the LTIP and its predecessor. See the Compensation Discussion and Analysis section on pages 37 to 44 of this Joint Proxy Statement for additional details regarding grants in 2006. |
50
(4) | 25,325 stock options vested on January 2, 2007. | |
(5) | Restrictions on 28,711 shares of restricted stock lapsed January 3, 2007. Restrictions on 19,426 shares will lapse January 2, 2008, and on 16,006 shares January 2, 2009. Restrictions on an additional 19,482 shares will lapse January 4, 2011 but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. | |
(6) | Restrictions on 2,321 shares of restricted stock lapsed January 3, 2007. 13,680 performance shares vested on January 3, 2007 (10,944 actually paid out following application of the performance-based payout factor). 25,060 performance shares are scheduled to vest January 2, 2008 and 48,705 performance shares are scheduled to vest January 2, 2009. | |
(7) | 16,800 stock options vested on January 2, 2007 and 16,800 stock options vest January 2, 2008. | |
(8) | 27,175 stock options vested on January 3, 2007, 27,175 stock options vest January 3, 2008, and 27,175 stock options vest January 3, 2009. | |
(9) | Restrictions on 9,602 shares of restricted stock lapsed January 3, 2007. Restrictions on 5,966 shares will lapse January 2, 2008, and on 4,256 shares January 2, 2009. Restrictions on an additional 5,008 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 75 SISOPs vested January 2, 2007. 2,654 SISOPs will vest January 3, 2008. |
(10) | Restrictions on 908 shares of restricted stock lapsed January 3, 2007. 6,840 performance shares vested on January 3, 2007 (5,472 actually paid out following application of the performance-based payout factor). 7,010 performance shares are scheduled to vest January 2, 2008 and 12,520 performance shares are scheduled to vest January 2, 2009. |
(11) | 9,925 stock options vested on January 2, 2007. |
(12) | 8,400 stock options vested on January 2, 2007, and 8,400 stock options vest January 2, 2008. |
(13) | 7,600 stock options vested on January 3, 2007, 7,600 stock options vest January 3, 2008, and 7,600 stock options vest January 3, 2009. |
(14) | 4,425 stock options vested on January 2, 2007. |
(15) | Restrictions on 4,548 shares of restricted stock lapsed January 3, 2007. Restrictions on 2,932 shares will lapse January 2, 2008, and on 2,115 shares January 2, 2009. Restrictions on an additional 2,226 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 713 SISOPs will vest January 3, 2009. |
(16) | Restrictions on 403 shares of restricted stock lapsed January 3, 2007. 3,270 performance shares vested on January 3, 2007 (2,616 actually paid out following application of the performance-based payout factor). 4,010 performance shares are scheduled to vest January 2, 2008 and 5,565 performance shares are scheduled to vest January 2, 2009. |
(17) | 2,937 stock options vested on January 2, 2007 and 2,937 stock options vest January 2, 2008. |
(18) | 862 stock options vest August 2, 2007 and 862 stock options vest August 2, 2008. |
(19) | 4,350 stock options vested on January 3, 2007, 4,350 stock options vest January 3, 2008, and 4,350 stock options vest January 3, 2009. |
(20) | 10,175 stock options vested on January 2, 2007. |
(21) | Restrictions on 7,360 shares of restricted stock lapsed January 3, 2007. Restrictions on 3,630 shares will lapse January 2, 2008, and 2,178 shares January 2, 2009. Restrictions on an additional 2,226 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. Of 113 SISOPs scheduled to vest January 2, 2007, 68 vested. |
(22) | Restrictions on 932 shares of restricted stock lapsed January 3, 2007. 5,810 performance shares vested on January 3, 2007 (4,648 actually paid out following application of the performance-based payout factor). 4,260 performance shares are scheduled to vest January 2, 2008 and 5,565 performance shares are scheduled to vest January 2, 2009. |
(23) | 7,137 stock options vested on January 2, 2007 and 7,137 stock options vest January 2, 2008. |
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(24) | 4,613 stock options vested on January 3, 2007, 4,612 stock options vest January 3, 2008, and 4,612 stock options vest January 3, 2009. |
(25) | 19,825 stock options vested on January 2, 2007. |
(26) | Restrictions on 14,823 shares of restricted stock lapsed January 3, 2007. Restrictions on 7,558 shares will lapse January 2, 2008, and on 4,481 shares January 2, 2009. Restrictions on an additional 4,452 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. |
(27) | Restrictions on 1,816 shares of restricted stock lapsed January 3, 2007. 12,310 performance shares vested on January 3, 2007 (9,848 actually paid out following application of the performance-based payout factor). 9,020 performance shares are scheduled to vest January 2, 2008 and 11,130 performance shares are scheduled to vest January 2, 2009. |
(28) | 15,125 stock options vested on January 2, 2007, and 15,125 stock options vest January 2, 2008. |
(29) | 9,775 stock options vested on January 3, 2007, 9,775 stock options vest January 3, 2008, and 9,775 stock options vest January 3, 2009. |
(30) | Restrictions on 17,177 shares of restricted stock lapsed January 3, 2007. Restrictions on 9,912 shares will lapse January 2, 2008, and on 6,540 shares January 2, 2009. Restrictions on an additional 8,070 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 25,430 restricted phantom stock units will vest May 12, 2011. |
(31) | Restrictions on 1,816 shares of restricted stock lapsed January 3, 2007. 13,490 performance shares vested on January 3, 2007 (10,792 actually paid out following application of the performance-based payout factor). 10,020 performance shares are scheduled to vest January 2, 2008 and 20,175 performance shares are scheduled to vest January 2, 2009. |
(32) | 19,825 stock options vested on January 2, 2007. |
(33) | 15,125 stock options vested on January 2, 2007 and 15,125 stock options vest January 2, 2008. |
(34) | 1,162 stock options vested on August 2, 2007 and 1,162 stock options vest August 2, 2008. |
(35) | 10,863 stock options vested on January 3, 2007, 10,862 stock options vest January 3, 2008, and 10,862 stock options vest January 3, 2009. |
(36) | 6,800 stock options vested on January 2, 2007. |
(37) | Restrictions on 5,627 shares of restricted stock lapsed January 3, 2007. Restrictions on 3,141 shares will lapse January 2, 2008, and on 2,184 shares January 2, 2009. Restrictions on an additional 2,364 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 3,101 SISOPs will vest January 3, 2009. |
(38) | Restrictions on 621 shares of restricted stock lapsed January 3, 2007. 3,830 performance shares vested on January 3, 2007 (3,064 actually paid out following application of the performance-based payout factor). 4,010 performance shares are scheduled to vest January 2, 2008 and 5,910 performance shares are scheduled to vest January 2, 2009. |
(39) | 4,700 stock options vested on January 2, 2007 and 4,700 stock options vest January 2, 2008. |
(40) | 4,350 stock options vested on January 3, 2007, 4,350 stock options vest January 3, 2008, and 4,350 stock options vest January 3, 2009. |
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Option Awards | Stock Awards | |||||||||||||||
Number of Shares | Number of Shares | |||||||||||||||
Acquired on | Value Realized on | Acquired on Vesting | Value Realized on | |||||||||||||
Name | Exercise (#) | Exercise ($) | (#)(1) | Vesting ($)(1) | ||||||||||||
P. A. Darbee | 69,300 | $ | 1,016,034 | 18,970 | $ | 698,616 | ||||||||||
C. P. Johns | 36,300 | $ | 889,590 | 9,819 | $ | 363,501 | ||||||||||
L. H. Everett | 11,713 | $ | 174,961 | 3,436 | $ | 127,420 | ||||||||||
K. M. Harvey | 17,313 | $ | 341,705 | 10,262 | $ | 380,188 | ||||||||||
B. R. Worthington | 202,475 | $ | 2,845,725 | 12,598 | $ | 464,456 | ||||||||||
T. B. King | 101,782 | $ | 2,509,948 | 13,143 | $ | 484,576 | ||||||||||
T. E. Bottorff | 15,850 | $ | 272,541 | 4,446 | $ | 165,223 |
(1) | Reflects both restricted stock and common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) that were granted under the Executive Stock Ownership Program and that vested on January 2, 2006. For Mr. Johns, stock awards include 2,721 SISOPs and the value realized on vesting was $100,995. For Mr. Harvey, stock awards include 4,014 SISOPs and the value realized on vesting was $148,985. Receipt has been deferred until the seventh month following the termination of Mr. John’s and Mr. Harvey’s employment. |
Number of | Present Value of | Payments | ||||||||||||
Years Credited | Accumulated | During Last | ||||||||||||
Name | Plan Name | Service (#) | Benefits ($) | Fiscal Year ($) | ||||||||||
P. A. Darbee | PG&E Corporation Supplemental Executive Retirement Plan | 8.5 | (1) | $ | 2,500,911 | $ | 0 | |||||||
C. P. Johns | Pacific Gas and Electric Company Retirement Plan | 10.6 | $ | 480,040 | $ | 0 | ||||||||
PG&E Corporation Supplemental Executive Retirement Plan | 10.6 | $ | 170,438 | $ | 0 | |||||||||
L. H. Everett | Pacific Gas and Electric Company Retirement Plan | 29.6 | $ | 1,552,296 | $ | 0 | ||||||||
PG&E Corporation Supplemental Executive Retirement Plan | 29.6 | $ | 749,658 | $ | 0 | |||||||||
K. M. Harvey | Pacific Gas and Electric Company Retirement Plan | 24.3 | $ | 1,030,464 | $ | 0 | ||||||||
PG&E Corporation Supplemental Executive Retirement Plan | 24.3 | $ | 648,172 | $ | 0 | |||||||||
B. R. Worthington | Pacific Gas and Electric Company Retirement Plan | 32.5 | $ | 1,614,365 | $ | 0 | ||||||||
PG&E Corporation Supplemental Executive Retirement Plan | 32.5 | $ | 3,554,603 | $ | 0 |
53
Number of | Present Value of | Payments | ||||||||||||
Years Credited | Accumulated | During Last | ||||||||||||
Name | Plan Name | Service (#) | Benefits ($) | Fiscal Year ($) | ||||||||||
T. B. King | Pacific Gas and Electric Company Retirement Plan | 3.2 | $ | 175,888 | $ | 0 | ||||||||
PG&E Corporation Supplemental Executive Retirement Plan | 8.5 | (2) | $ | 1,511,717 | $ | 0 | ||||||||
T. E. Bottorff | Pacific Gas and Electric Company Retirement Plan | 24.8 | $ | 1,289,924 | $ | 0 | ||||||||
PG&E Corporation Supplemental Executive Retirement Plan | 24.8 | $ | 358,456 | $ | 0 |
(1) | Effective July 1, 2003, Mr. Darbee became a participant in the Supplemental Executive Retirement Plan (SERP) with five years of credited service. |
(2) | Effective July 1, 2003, Mr. King became a participant in the SERP with five years of credited service. |
During 2002 and 2003, annuities were purchased to replace The benefit payable from the SERP is reduced by any benefit payable from the Retirement Plan. Payments are in the form of a significant portionsingle life annuity or, at the election of the unfundedofficer, a joint spousal annuity. Normal retirement benefits for certain officers whose entire accrued benefit could not be provided under the Retirement Plan dueage is 65. Benefits may begin earlier, subject to tax code limits. The annuities will not change the amount or timing of the after-tax benefits that would have been provided upon retirement under the Supplemental Executive Retirement Plan (SERP) or similar arrangements. In connection with the annuities, tax restoration payments were made such that the annuitization was tax-neutral to the officer.
Effective July 1, 2003, Mr. Darbee and Mr. King became participants in the SERP with fivereduction depending on years of credited service. Mr. Darbee and Mr. King will each earn an additional five years of credited service under the SERP, provided that they are employed by PG&E Corporation or a subsidiary on July 1, 2008. If Mr. King remains employed by PG&E Corporation or a subsidiary until age 55, any early retirement reduction factors will be eliminated.
As54
Executive | Registrant | Aggregate | ||||||||||||||||||
Contributions in | Contributions in | Aggregate Earnings | Withdrawals/ | Aggregate Balance | ||||||||||||||||
Last FY | Last FY | in Last FY | Distribution | at Last FYE | ||||||||||||||||
Name | ($)(1) | ($)(2) | ($)(3) | ($) | ($)(4) | |||||||||||||||
P. A. Darbee | $ | 0 | $ | 31,875 | $ | 326,625 | $ | 0 | $ | 2,382,946 | ||||||||||
C. P. Johns | $ | 454,467 | $ | 14,001 | $ | 336,798 | $ | 0 | $ | 1,915,542 | ||||||||||
L. H. Everett | $ | 101,200 | $ | 2,700 | $ | 13,367 | $ | 290,000 | $ | 288,545 | ||||||||||
K. M. Harvey | $ | 148,985 | $ | 5,895 | $ | 60,400 | $ | 0 | $ | 268,203 | ||||||||||
B. R. Worthington | $ | 650,528 | $ | 17,813 | $ | 214,921 | $ | 0 | $ | 2,764,404 | ||||||||||
T. B. King | $ | 0 | $ | 16,200 | $ | 127,646 | $ | 0 | $ | 713,600 | ||||||||||
T. E. Bottorff | $ | 0 | $ | 2,700 | $ | 1,607 | $ | 0 | $ | 16,456 |
(1) | Includes the following amounts which were reported as compensation in the Summary Compensation Table: Mr. Johns $163,020, Ms. Everett $101,200, and Mr. Worthington $269,625. |
(2) | Represents amounts earned in 2005 and credited to the officer’s deferred compensation account on the first business day of 2006. |
(3) | Represents earnings from the Supplemental Retirement Savings Plan (SRSP). Includes the following amounts which were reported as compensation in the Summary Compensation Table: Mr. Darbee $4,821, Mr. Johns $67, Ms. Everett $1,459, Mr. Harvey $90, Mr. Worthington $16,881, Mr. King $1,729, and Mr. Bottorff $63. |
(4) | Includes the following amounts which were reported as compensation in the Summary Compensation Table for 2006 and prior years: Mr. Darbee $1,704,356, Mr. Johns $979,399, Ms. Everett $102,659, Mr. Harvey $5,430, Mr. Worthington $1,885,559, and Mr. King $432,797. |
Employment Contracts,55
What types of employment contracts exist forDeath, or Disability
NoTable are eligible to receive certain benefits upon termination, a change in the officer’s responsibilities, or a change in control. PG&E Corporation’s and Pacific Gas and Electric Company’s policy is not to provide benefits conditioned solely upon a change in control. In general, payments are triggered only if (1) the change in control has been implemented (not just approved by shareholders), (2) there has been termination or constructive termination of the individual, and (3) with respect to vesting of equity-based awards, the successor entity has elected not to continue any equity-based grants in a manner that preserves the value of those grants.
What types ofCompany (as the case may be).
Non-Qualified | ||||||||||||||||
Present Value | Deferred | Equity-Based | ||||||||||||||
Of Accumulated | Compensation | Grants | ||||||||||||||
Pension | Aggregate | That Accelerate | ||||||||||||||
Benefits | Balance | Upon Retirement(1) | Total | |||||||||||||
P. A. Darbee | $ | 2,036,302 | $ | 2,382,946 | $ | 4,419,248 | ||||||||||
C. P. Johns | $ | 744,496 | $ | 1,915,542 | $ | 2,660,038 | ||||||||||
L. H. Everett | $ | 2,510,992 | $ | 288,545 | $ | 1,827,940 | $ | 4,627,477 | ||||||||
K. M. Harvey | $ | 1,760,491 | $ | 268,203 | $ | 2,028,694 | ||||||||||
B. R. Worthington | $ | 5,625,638 | $ | 2,764,404 | $ | 5,034,322 | $ | 13,424,364 | ||||||||
T. B. King | $ | 892,508 | $ | 713,600 | $ | 1,606,108 | ||||||||||
T. E. Bottorff | $ | 1,729,979 | $ | 16,456 | $ | 1,746,435 |
(1) | If Ms. Everett or Mr. Worthington had resigned effective December 31, 2006, they would have been eligible for retirement benefits under the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP) and its predecessor, the PG&E Corporation Long-Term Incentive Program. Those payments are discussed separately in the narrative discussion following this table, below. |
56
Non-Qualified | ||||||||||||||||
Present Value | Deferred | Equity-Based | ||||||||||||||
Of Accumulated | Compensation | Grants | ||||||||||||||
Pension | Aggregate | That Accelerate | ||||||||||||||
Benefits | Balance | Upon Retirement(1) | Total | |||||||||||||
P. A. Darbee | $ | 2,036,302 | $ | 2,382,946 | $ | 4,419,248 | ||||||||||
C. P. Johns | $ | 744,496 | $ | 1,915,542 | $ | 2,660,038 | ||||||||||
L. H. Everett | $ | 2,510,992 | $ | 288,545 | $ | 1,827,940 | $ | 4,627,477 | ||||||||
K. M. Harvey | $ | 1,760,491 | $ | 268,203 | $ | 2,028,694 | ||||||||||
B.R. Worthington | $ | 5,625,638 | $ | 2,764,404 | $ | 5,034,322 | $ | 13,424,364 | ||||||||
T. B. King | $ | 892,508 | $ | 713,600 | $ | 1,606,108 | ||||||||||
T. E. Bottorff | $ | 1,729,979 | $ | 16,456 | $ | 1,746,435 |
(1) | If Ms. Everett or Mr. Worthington had been terminated for cause effective December 31, 2006, they would have been eligible for retirement benefits under the LTIP. Those payments are discussed separately in the narrative discussion following this table, below. |
Non-Qualified | ||||||||||||||||||||||||||||||||
Value of | Value of | Value of | Deferred | |||||||||||||||||||||||||||||
Stock | Stock | Accum. | Compensation | |||||||||||||||||||||||||||||
Severance | Options | Awards | Pension | Aggregate | Career | |||||||||||||||||||||||||||
Payment | Vesting(1) | Vesting(2) | Benefits | Balance | COBRA(3) | Transition | Total | |||||||||||||||||||||||||
P. A. Darbee | $ | 3,750,401 | $ | 2,281,743 | $ | 5,051,869 | $ | 2,185,901 | $ | 2,382,946 | $ | 32,266 | $ | 15,000 | $ | 15,700,126 | ||||||||||||||||
C. P. Johns | $ | 913,060 | $ | 879,938 | $ | 1,719,659 | $ | 1,362,836 | $ | 1,915,542 | $ | 31,571 | $ | 15,000 | $ | 6,837,606 | ||||||||||||||||
L. H. Everett | $ | 870,000 | $ | 482,234 | $ | 1,345,706 | $ | 2,510,992 | $ | 288,545 | $ | 16,786 | $ | 15,000 | $ | 5,529,263 | ||||||||||||||||
K. M. Harvey | $ | 163,532 | $ | 751,843 | $ | 1,123,562 | $ | 2,653,214 | $ | 268,203 | $ | 31,571 | $ | 15,000 | $ | 5,006,925 | ||||||||||||||||
B. R. Worthington | $ | 1,516,675 | $ | 1,676,340 | $ | 3,357,982 | $ | 5,625,638 | $ | 2,764,404 | $ | 17,798 | $ | 15,000 | $ | 14,973,837 | ||||||||||||||||
T. B. King | $ | 1,300,002 | $ | 1,611,577 | $ | 3,830,964 | $ | 1,745,006 | $ | 713,600 | $ | 32,266 | $ | 15,000 | $ | 9,248,415 | ||||||||||||||||
T. E. Bottorff | $ | 587,027 | $ | 535,933 | $ | 1,300,552 | $ | 1,990,452 | $ | 16,456 | $ | 17,640 | $ | 15,000 | $ | 4,463,060 |
(1) | Value based on the difference between the option exercise price and $47.33, which was the closing price of PG&E Corporation common stock on December 29, 2006. |
(2) | Value based on the December 29, 2006 closing price of $47.33. |
(3) | As required by the health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). |
57
1. | A lump sum payment of one and one-half or two times annual base salary and Short-Term Incentive Plan target (the applicable severance multiple being dependent on an officer’s level), |
2. | Continued vesting of equity-based incentives for one and one-half or two years after termination (depending on the applicable severance multiple), |
3. | Accelerated vesting of up to two-thirds of the Special Incentive Stock Ownership Premiums (SISOPs) granted under the Executive Stock Ownership Program (depending on an officer’s level), and |
4. | Payment of health care insurance premiums for 18 months after termination. |
What types of58
control of PG&E Corporation and its affiliates, and (1) the successor company does not continue the outstanding awards in a manner that preserves their value, and (2) the individual is terminated or constructively terminated effective December 31, 2006.
Present | Non-Qualified | |||||||||||||||||||||||||||||||
Value of | Value of | Value of | Deferred | |||||||||||||||||||||||||||||
Short-Term | Stock | Stock | Accumulated | Compensation | ||||||||||||||||||||||||||||
Incentive | Severance | Tax | Options | Awards | Pension | Aggregate | ||||||||||||||||||||||||||
Plan Award | Payment | Restoration | Vesting(1) | Vesting(2) | Benefits | Balance | Total | |||||||||||||||||||||||||
P. A. Darbee | $ | 975,000 | $ | 5,850,000 | $ | 0 | $ | 2,670,617 | $ | 8,829,955 | $ | 3,234,128 | $ | 2,382,946 | $ | 23,942,646 | ||||||||||||||||
C. P. Johns | $ | 271,700 | $ | 2,297,100 | $ | 1,881,886 | $ | 988,694 | $ | 2,751,751 | $ | 744,496 | $ | 1,915,542 | $ | 10,851,169 | ||||||||||||||||
L. H. Everett | $ | 145,000 | $ | 1,305,000 | $ | 920,917 | $ | 482,234 | $ | 1,307,862 | $ | 2,510,992 | $ | 288,545 | $ | 6,960,550 | ||||||||||||||||
K. M. Harvey | $ | 176,043 | $ | 1,584,383 | $ | 0 | $ | 817,841 | $ | 1,602,264 | $ | 1,760,491 | $ | 268,203 | $ | 6,209,225 | ||||||||||||||||
B. R. Worthington | $ | 269,088 | $ | 2,275,014 | $ | 0 | $ | 1,676,340 | $ | 3,278,916 | $ | 5,625,638 | $ | 2,764,404 | $ | 15,889,400 | ||||||||||||||||
T. B. King | $ | 461,250 | $ | 3,228,750 | $ | 0 | $ | 1,767,012 | $ | 5,543,873 | $ | 2,022,930 | $ | 713,600 | $ | 13,737,415 | ||||||||||||||||
T. E. Bottorff | $ | 141,250 | $ | 1,271,250 | $ | 0 | $ | 598,182 | $ | 1,545,080 | $ | 1,729,979 | $ | 16,456 | $ | 5,302,197 |
(1) | Value based on the difference between the option exercise price and $47.33, which was the closing price of PG&E Corporation common stock on December 29, 2006. |
(2) | Value based on the December 29, 2006 closing price of $47.33. |
policy provides for a lump sum payment equal to the total of:
1. | Unpaid base salary earned through the termination date, |
2. | Short-Term Incentive Plan target calculated for the fiscal year in which termination occurs (Target Bonus), |
3. | Any accrued but unpaid vacation pay, and |
4. | Three times the sum of Target Bonus and the officer’s annual base salary in effect immediately before either the date of termination or the change in control, whichever base salary is greater. |
59
1. | Any time periods relating to the exercise or realization of any stock-based incentive (including performance shares, stock options, performance units, and Special Incentive Stock Ownership Premiums (SISOPs) granted under the Executive Stock Ownership Program) will be accelerated so that such incentive may be exercised or realized in full immediately upon the change in control, |
2. | All shares of restricted stock will immediately cease to be forfeitable, and |
3. | All conditions relating to the realization of any stock-based incentive will terminate immediately. |
Specifically, the PG&E Corporation Officer Severance Policy and 2006 LTIP, as amended, define a change in control as follows:
1. | Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but excluding any benefit plan for employees or any trustee, agent, or other fiduciary for any such plan acting in such person’s capacity as such fiduciary), directly or indirectly, becomes the beneficial owner of securities of PG&E Corporation representing 20 percent or more of the combined voting power of PG&E Corporation’s then outstanding securities, |
2. | During any two consecutive years, individuals who at the beginning of that period constitute the Board of Directors cease for any reason to constitute at least a majority of the Board of Directors, unless the election, or the nomination for election by the shareholders of PG&E Corporation, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, or |
3. | Any consolidation or merger of PG&E Corporation shall have been approved by the shareholders and consummated, other than a merger or consolidation that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent of such surviving entity) at least 70 percent of the combined voting power of the Corporation, such surviving entity, or the parent of such surviving entity outstanding immediately after the merger or consolidation, |
4. | The shareholders of PG&E Corporation shall have approved: |
a. | Any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation, or | |
b. | Any plan or proposal for the liquidation or dissolution of the Corporation. |
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ComparisonPotential Payments Upon Termination Due to Death or Disability
Value of | Non-Qualified | |||||||||||||||||||
Value of | Value of | Accum. | Deferred | |||||||||||||||||
Stock | Stock | Pension | Compensation | |||||||||||||||||
Options | Awards | Benefits | Aggregate | |||||||||||||||||
Vesting | Vesting | (Upon Death) | Balance | Total | ||||||||||||||||
P. A. Darbee | $ | 2,670,617 | $ | 9,003,193 | $ | 1,060,253 | $ | 2,382,946 | $ | 15,117,009 | ||||||||||
C. P. Johns | $ | 988,694 | $ | 2,797,296 | $ | 384,260 | $ | 1,915,542 | $ | 6,085,792 | ||||||||||
L. H. Everett | $ | 482,234 | $ | 1,329,699 | $ | 1,452,127 | $ | 288,545 | $ | 3,552,605 | ||||||||||
K. M. Harvey | $ | 817,841 | $ | 1,624,547 | $ | 1,898,506 | $ | 268,203 | $ | 4,609,097 | ||||||||||
B. R. Worthington | $ | 1,676,340 | $ | 3,324,373 | $ | 3,490,883 | $ | 2,764,404 | $ | 11,256,000 | ||||||||||
T. B. King | $ | 1,767,012 | $ | 5,614,991 | $ | 460,117 | $ | 713,600 | $ | 8,555,720 | ||||||||||
T. E. Bottorff | $ | 598,182 | $ | 1,567,828 | $ | 1,445,996 | $ | 16,456 | $ | 3,628,462 |
This graph comparesdisability, the cumulative total returnofficer is entitled to pension payments consistent with benefits paid upon resignation. These payments are detailed above in the table entitled “Potential Payments Upon Resignation/ Retirement.”
• | All unvested options vest immediately and are exercisable for the shorter of one year or the option term. |
• | Restrictions on restricted stock vest on the first business day of January of the following year. |
• | Unvested performance shares vest immediately. Vested shares are payable, if at all, as soon as practicable after completion of the performance period relevant to the performance share grant. The payout percentage is based on the same formula applied to active employees’ performance shares. Beneficiaries also may receive a cash payment equal to the amount of dividends accrued over a performance period with respect to the performance shares, multiplied by the same payout percentage used to determine the amount, if any, of the performance shares. |
• | Unvested Special Incentive Stock Ownership Premiums (SISOPs) vest immediately and are payable in the seventh month following termination. |
61
Year End
13, 2007auditors.registered public accounting firm. The Audit Committees also reviewed with the independent auditorsregistered public accounting firm matters that are required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees).auditorregistered public accounting firm for PG&E Corporation and Pacific Gas and Electric Company in 2005.2006. The Corporation's independent auditorsregistered public accounting firm provided to the Committees the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees), and the Committees discussed with the independent auditorsregistered public accounting firm that firm'sfirm’s independence.Committees'Committees’ reviews and discussion with management and the independent auditors,registered public accounting firm, the Committees recommended to the Boards of Directors that the audited consolidated financial statements for PG&E Corporation and Pacific Gas and Electric Company be included in the PG&E Corporation and Pacific Gas and Electric Company Annual Report on Form 10-K for the year ended December 31, 2005,2006, filed with the Securities and Exchange Commission.14, 2006Leslie S. Biller
62
9, 2007:1, 2006: Class of Stock Name and Address of
Beneficial Owner Amount and Nature of
Beneficial Ownership Percent
of Class
Pacific Gas and Electric
Company stock(1) PG&E Corporation(2)
One Market, Spear Tower,
Suite 2400
San Francisco, CA 94105 279,624,823 96.44 % (1)Pacific Gas and Electric Company's common stock and preferred stock vote together as a single class. Each share is entitled to one vote.(2)As a result of the formation of the holding company on January 1, 1997, PG&E Corporation became the holder of all issued and outstanding shares of Pacific Gas and Electric Company common stock. As of February 1, 2006, PG&E Corporation and a subsidiary held 100 percent of the issued and outstanding shares of Pacific Gas and Electric Company common stock, and neither PG&E Corporation nor any of its subsidiaries held shares of Pacific Gas and Electric Company preferred stock.
Name and Address of | Amount and Nature of | Percent | ||||||||
Class of Stock | Beneficial Owner | Beneficial Ownership | of Class | |||||||
Pacific Gas and Electric Company stock(1) | PG&E Corporation(2) One Market, Spear Tower, Suite 2400 San Francisco, CA 94105 | 279,624,823 | 96.44% | |||||||
PG&E Corporation Common stock | Goldman Sachs Asset Management, L.P.(3) 32 Old Slip New York, NY 10005 | 23,027,874 | 6.60% |
(1) | Pacific Gas and Electric Company’s common stock and preferred stock vote together as a single class. Each share is entitled to one vote. |
(2) | As a result of the formation of the holding company on January 1, 1997, PG&E Corporation became the holder of all issued and outstanding shares of Pacific Gas and Electric Company common stock. As of February 7, 2007, PG&E Corporation and a subsidiary held 100 percent of the issued and outstanding shares of Pacific Gas and Electric Company common stock, and neither PG&E Corporation nor any of its subsidiaries held shares of Pacific Gas and Electric Company preferred stock. |
(3) | The information relating to Goldman Sachs Asset Management, L.P. is based on beneficial ownership as of December 31, 2006, as reported in a Schedule 13G filed with the Securities and Exchange Commission on February 9, 2007. Goldman Sachs Asset Management, L.P. has sole voting power with respect to 18,855,442 of these shares and sole dispositive power with respect to 23,027,874 of these shares. |
63
Your proxy is solicited on behalf of the PG&E Corporation Board of Directors. Unless contrary instructions are given below, the designated proxies will vote the PG&E Corporation shares for which they hold proxies FOR Items 1 and 2 and AGAINST Items 3 and 4. | Please Mark Here | o | |||
SEE REVERSE SIDE |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFOR MANAGEMENT ITEMS 1 and 2.
PG&E CORPORATION DIRECTORS RECOMMEND A VOTE FOR MANAGEMENT ITEMS 1 and 2. | PG&E CORPORATION DIRECTORS RECOMMEND A VOTE AGAINST SHAREHOLDER ITEMS 3 and 4. | ||||||||||||||||||||||||||||
WITHHOLD | |||||||||||||||||||||||||||||
FOR ALL | FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||||||
ITEM 1. | ELECTION OF DIRECTORS | o | o | ITEM 2. | RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | o | o | o | |||||||||||||||||||||
NOMINEES ARE: | FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||||||
01-David R. Andrews, 02-Leslie S. Biller, 03-David A. Coulter, 04-C. Lee Cox, 05-Peter A. Darbee, 06-Maryellen C. Herringer, 09-Barbara L. Rambo, | ITEM 3. | PERFORMANCE-BASED STOCK OPTIONS | o | o | o | ||||||||||||||||||||||||
FOR | AGAINST | ABSTAIN | |||||||||||||||||||||||||||
ITEM 4. | CUMULATIVE VOTING | o | o | o | |||||||||||||||||||||||||
WITHHOLD vote only for: | WILL ATTEND | ||||||||||||||||||||||||||||
If you plan to attend the Annual Meeting, please mark the Will Attend box | o |
Signature | Signature | Date | ||||||||||
If you are signing for the shareholder, please sign the shareholder’s name and your name, and specify the capacity in which you act. 5If you are |
- If you arenot submitting your proxy over the Internet or by telephone, please detach here and mail this proxy card in the enclosed envelope. -5
PRIOR TO VOTING, READ THE ACCOMPANYING JOINT PROXY STATEMENT AND THE ABOVE PROXY CARD.
PRIOR TO VOTING, READ THE ACCOMPANYING JOINT PROXY STATEMENT AND THE ABOVE PROXY CARD. |
Internet | Telephone | |||||||||||||
http://www.proxyvoting.com/pcg | 1-866-540-5760 | |||||||||||||
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. | OR | Use any touch-tone telephone in the U.S. or Canada to vote your proxy. Have your proxy card in hand when you call. | OR | Mark, sign, and date your proxy card and return it in the enclosed postage-paid envelope. | ||||||||||
- Please use the attached ticket to attend the PG&E Corporation Annual Meeting. -6
Ticket for the annual meeting on Wednesday, April 18, 2007, at 10:00 a.m., to be held at the San Ramon Valley Conference Center, 3301 Crow Canyon Road, San Ramon, California. Doors open at 9:00 a.m. You may bypass the shareholder registration area and present this ticket at the entrance to the meeting room. |
Ticket for the annual meeting on Wednesday, April 19, 2006, at 10:00 a.m., to be held at the San Ramon Valley Conference Center, 3301 Crow Canyon Road, San Ramon, California. Doors open at 9:00 a.m. You may bypass the shareholder registration area and present this ticket at the entrance to the meeting room.
The undersigned hereby appoints Peter A. Darbee and Linda Y.H. Cheng, or either of them severally, proxies of the undersigned, with full power of substitution, to vote the stock of the undersigned at the annual meeting of shareholders of PG&E Corporation, to be held at the San Ramon Valley Conference Center, 3301 Crow Canyon Road, San Ramon, California, on Wednesday, April 18, 2007, at 10:00 a.m., and at any adjournment or postponement thereof, as indicated on this proxy card, and in their discretion to the extent permitted by law, upon all motions and resolutions which may properly come before said meeting, adjournments, or postponements thereof. | ||
(Continued, and to be marked, signed, and dated on the reverse side.) | ||
As an alternative to completing and mailing this proxy card, you may submit your proxy and voting instructions over the Internet athttp://www.proxyvoting.com/pcgor by touch-tone telephone at1-866-540-5760(from anywhere in the United States or Canada). Please have your proxy card in hand when voting over the Internet or by telephone. These Internet and telephone voting procedures comply with California law. | ||
Address Change (Mark the corresponding box on the reverse side) | ||||
The undersigned hereby appoints Peter A. Darbee and Linda Y.H. Cheng, or either of them, proxies of the undersigned, with full power of substitution, to vote the stock of the undersigned at the annual meeting of shareholders of PG&E Corporation, to be held at the San Ramon Valley Conference Center, 3301 Crow Canyon Road, San Ramon, California, on Wednesday, April 19, 2006, at 10:00 a.m., and at any adjournment or postponement thereof, as indicated on this proxy card, and in their discretion to the extent permitted by law, upon all motions and resolutions which may properly come before said meeting, adjournments, or postponements thereof.
(Continued, and to be marked, signed, and dated on the reverse side.)
As an alternative to completing and mailing this proxy card, you may submit your proxy and voting instructions over the Internet athttp://www.proxyvoting.com/pcg or by touch-tone telephone at1-866-540-5760 (from anywhere in the United States or Canada). Please have your proxy card in hand when voting over the Internet or by telephone. These Internet and telephone voting procedures comply with California law.
Address Change(Mark the corresponding box on the reverse side)
- If you arenot submitting your proxy over the Internet or by telephone, please detach here and mail this proxy card in the enclosed envelope. -5
ANNUAL MEETING OF SHAREHOLDERS
There is free parking at the San Ramon Valley Conference Center.
Note: Shareholders will be asked to present valid photo identification, such as a driver's license or passport, before being admitted to the meeting. Cellular telephones and pagers must be turned off prior to entering the meeting. Cameras, tape recorders, and other electronic recording devices will not be allowed in the meeting, other than for PG&E Corporation purposes. A checkroom will be available. For your protection, all briefcases, purses, packages, etc., will be subject to inspection as you enter the meeting. No items will be allowed into the meeting that might pose a safety or security risk. We regret any inconvenience this may cause.
Real-time captioning services and assistive listening devices will be available for the hearing impaired. Please contact an usher at the meeting if you wish to be seated in the real-time captioning section or require an assistive listening device.
There is free parking at the San Ramon Valley Conference Center. | ||
Note: Shareholders will be asked to present valid photo identification, such as a driver’s license or passport, before being admitted to the meeting. Cellular telephones and pagers must be turned off prior to entering the meeting. Cameras, tape recorders, and other electronic recording devices will not be allowed in the meeting, other than for PG&E Corporation purposes. A checkroom will be available. For your protection, all briefcases, purses, packages, etc., will be subject to inspection as you enter the meeting. No items will be allowed into the meeting that might pose a safety or security risk. We regret any inconvenience this may cause. | ||
Real-time captioning services and assistive listening devices will be available. Please |
The undersigned hereby appoints Peter A. Darbee and Linda Y.H. Cheng, or either of them severally, proxies of the undersigned, with full power of substitution, to vote the stock of the undersigned at the annual meeting of shareholders of PG&E Corporation, to be held at the San Ramon Valley Conference Center, 3301 Crow Canyon Road, San Ramon, California, on Wednesday, April 18, 2007, at 10:00 a.m., and at any adjournment or postponement thereof, as indicated on this proxy card, and in their discretion to the extent permitted by law, upon all motions and resolutions which may properly come before said meeting, adjournments, or postponements thereof. | ||
(Continued, and to be marked, signed, and dated on the reverse side.) | ||
As an alternative to completing and mailing this proxy card, you may submit your proxy and voting instructions over the Internet at | ||
Address Change (Mark the corresponding box on the reverse side) | ||||
VOTING INSTRUCTIONS TO THE TRUSTEE - 2007 | Please | o | ||
Mark Here | ||||
for Address Change | ||||
SEE REVERSE SIDE |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFOR MANAGEMENT ITEMS 1 and 2.
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFOR MANAGEMENT ITEMS 1 and 2. | PG&E CORPORATION DIRECTORS RECOMMEND A VOTE AGAINST SHAREHOLDER ITEMS 3 and 4. | |||||||||||||||||||
WITHHOLD | ||||||||||||||||||||
FOR ALL | FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | ||||||||||||||
ITEM 1. ELECTION OF DIRECTORS | o | o | ITEM 2. RATIFICATION OF APPOINTMENT | o | o | o | ITEM 3. PERFORMANCE-BASED | o | o | o | ||||||||||
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | STOCK OPTIONS | |||||||||||||||||||
NOMINEES ARE: | ||||||||||||||||||||
01-David R. Andrews, 02-Leslie S. Biller, | FOR | AGAINST | ABSTAIN | |||||||||||||||||
03-David A. Coulter, 04-C. Lee Cox, | ITEM 4. CUMULATIVE VOTING | o | o | o | ||||||||||||||||
05-Peter A. Darbee, 06-Maryellen C. Herringer, | ||||||||||||||||||||
07-Richard A. Meserve, 08-Mary S. Metz, | ||||||||||||||||||||
09-Barbara L. Rambo, 10-Barry Lawson Williams | ||||||||||||||||||||
WITHHOLD vote only for: | ||||||||||||||||||||
Signature | Signature | Date | ||||||||||||
Internet | Telephone | |||||||||||||
http://www.proxyvoting.com/pcg | 1-866-540-5760 | |||||||||||||
Use the Internet to submit your voting instructions. Have the above voting instruction card in hand when you access the web site. | OR | Use any touch-tone telephone in the U.S. or Canada to submit your voting instructions. Have the above voting instruction card in hand when you call. | OR | Mark, sign, and date your voting instruction card and return it in the enclosed postage-paid envelope. | ||||||||||
PG&E CORPORATION RETIREMENT SAVINGS PLAN AND RETIREMENT SAVINGS PLAN FOR UNION REPRESENTED EMPLOYEES VOTING INSTRUCTIONS TO THE TRUSTEE - 2007 | ||
TO FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE: | ||
Pursuant to the provisions of the PG&E Corporation Retirement Savings Plan and Retirement Savings Plan for Union Represented Employees, you are instructed to vote the shares of PG&E Corporation common stock credited to my Plan account as of February 20, 2007, at the annual meeting of shareholders of PG&E Corporation to be held on April 18, 2007, and at any adjournment or postponement thereof, as indicated on this voting instruction card, and upon all motions and resolutions which may properly come before said meeting, adjournments, or postponements thereof. | ||
(Continued, and to be marked, signed, and dated on the reverse side.) | ||
TO PARTICIPANTS IN THE RETIREMENT SAVINGS PLAN AND RETIREMENT SAVINGS PLAN FOR UNION REPRESENTED EMPLOYEES: If you recommendations of the PG&E Corporation Board of Directors. |
Address Change (Mark the corresponding box on the reverse side) | ||||
Vote by Internet or Telephone or Mail 24 Hours a Day, 7 Days a Week
VOTING INSTRUCTIONS SUBMITTED OVER THE INTERNET, BY TELEPHONE, OR BY MAIL MUST BERECEIVED BY 11:59 P.M., EASTERN TIME, ON MONDAY, APRIL 17,2006.
PRIOR TO SUBMITTING YOUR VOTING INSTRUCTIONS, READ THE ACCOMPANYING JOINT PROXY STATEMENT AND THE ABOVE PROXY CARD.
TO PARTICIPANTS IN THE RETIREMENT SAVINGS PLAN AND RETIREMENT SAVINGS PLAN FOR UNION REPRESENTED EMPLOYEES: | |||||||
http://www.proxyvoting.com/pcg or by touch-tone telephone at1-866-540-5760 (from anywhere in the United States and Canada). Please have your voting instruction card in hand when submitting your voting instructions over the Internet or by telephone. These Internet and telephone voting procedures comply with California law. Stock in your Plan account for which the Trustee has not received voting instructions will not be voted by the Trustee. Participants who also own stock outside the Plan will receive a separate proxy or voting instruction card for those shares. | |||||||
If you submit your voting instructions over the Internet or by telephone, you do NOT need to return your voting instruction card.
(See reverse side for additional information.)
PG&E CORPORATIONRETIREMENT SAVINGS PLAN AND RETIREMENT SAVINGS PLAN FORUNION REPRESENTED EMPLOYEESVOTING INSTRUCTIONS TO THE TRUSTEE—2006
TO FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE:
Pursuant to the provisions of the PG&E Corporation Retirement Savings Plan and Retirement Savings Plan for Union Represented Employees, you are instructed to vote the shares of PG&E Corporation common stock credited to my Plan account as of February 21, 2006, at the annual meeting of shareholders of PG&E Corporation to be held on April 19, 2006, and at any adjournment or postponement thereof, as indicated on this voting instruction card, and upon all motions and resolutions which may properly come before said meeting, adjournments, or postponements thereof.
(Continued, and to be marked, signed, and dated on the reverse side.)
TO PARTICIPANTS IN THE RETIREMENT SAVINGS PLAN AND RETIREMENT SAVINGS PLAN FOR UNION REPRESENTED EMPLOYEES:
If you sign but do not otherwise complete the card, you will be instructing the Trustee to vote all shares in accordance with the recommendations of the PG&E Corporation Board of Directors.
Address Change(Mark the corresponding box on the reverse side)
- If you arenot submitting your voting instructions over the Internet or by telephone, please detach here and mail this card in the enclosed envelope. -
TO PARTICIPANTS IN THE RETIREMENT SAVINGS PLAN AND RETIREMENT SAVINGS PLAN FOR UNION REPRESENTED EMPLOYEES:
As a participant, you are entitled to direct the Trustee how to vote the shares of PG&E Corporation common stock allocated to your account. The above voting instruction card is provided for your use in giving the Trustee confidential instructions to vote stock held in your Plan account at PG&E Corporation's annual meeting of shareholders on April 19, 2006. You have one vote for each share of PG&E Corporation common stock credited to your account as of February 21, 2006. Enclosed is a Joint Proxy Statement which sets forth the business to be conducted at the meeting. Please mark your instructions on the above card and sign, date, and return it in the enclosed postage-paid envelope. As an alternative to completing and mailing the card, you may submit your voting instructions over the Internet athttp://www.proxyvoting.com/pcg or by touch-tone telephone at1-866-540-5760 (from anywhere in the United States and Canada). Please have your voting instruction card in hand when submitting your voting instructions over the Internet or by telephone. These Internet and telephone voting procedures comply with California law. Stock in your Plan account for which the Trustee has not received voting instructions will not be voted by the Trustee. Participants who also own stock outside the Plan will receive a separate proxy or voting instruction card for those shares.
Your proxy is solicited on behalf of the PG&E Corporation Board of Directors. Unless contrary instructions are given below, the designated proxies will vote the PG&E Corporation shares for which they hold proxies FOR Items 1 and 2 and AGAINST Items 3 and 4. | Please | o | ||
Mark Here | ||||
for Address Change | ||||
SEE REVERSE SIDE |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFOR MANAGEMENT ITEMS 1 and 2.
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFOR MANAGEMENT ITEMS 1 and 2. | PG&E CORPORATION DIRECTORS RECOMMEND A VOTEAGAINST SHAREHOLDER ITEMS 3 and 4. | |||||||||||||||||||
WITHHOLD | ||||||||||||||||||||
FOR ALL | FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | ||||||||||||||
ITEM 1. ELECTION OF DIRECTORS | o | o | ITEM 2. RATIFICATION OF APPOINTMENT | o | o | o | ITEM 3. PERFORMANCE-BASED | o | o | o | ||||||||||
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | STOCK OPTIONS | |||||||||||||||||||
NOMINEES ARE: | ||||||||||||||||||||
01-David R. Andrews, 02-Leslie S. Biller, | FOR | AGAINST | ABSTAIN | |||||||||||||||||
03-David A. Coulter, 04-C. Lee Cox, | ITEM 4. CUMULATIVE VOTING | o | o | o | ||||||||||||||||
05-Peter A. Darbee, 06-Maryellen C. Herringer, | ||||||||||||||||||||
07-Richard A. Meserve, 08-Mary S. Metz, | ||||||||||||||||||||
09-Barbara L. Rambo, | ||||||||||||||||||||
WITHHOLD vote only for: | WILL ATTEND | |||||||||||||||||||
If you plan to attend the Annual Meeting, please mark the Will Attend box | o | |||||||||||||||||||
The undersigned hereby appoints Peter A. Darbee
Signature | Signature | Date | ||||||||||||
(Continued, and to be marked, signed, and dated on the reverse side.)
As an alternative to completing and mailing this proxy card, you may submit your proxy and voting instructions over the Internet athttp://www.proxyvoting.com/pcg or by touch-tone telephone at1-866-540-5760 (from anywhere in the United States or Canada). Please have your proxy card in hand when voting over the Internet or by telephone. These Internet and telephone voting procedures comply with California law.act.
Address Change(Mark the corresponding box on the reverse side)