DEF 14A 1 lpcg2021_def14a.htm PACIFIC GAS AND ELECTRIC COMPANY - DEF 14A PG&E CORPORATION DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Exchange Act of 1934 (Amendment No. )

 

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PACIFIC GAS AND ELECTRIC COMPANY

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PG&E Corporation

Pacific Gas and Electric Company

 

 

 

 

Joint Notice of 2021 Annual Meetings
Joint Proxy Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thursday, May 20, 2021

10:00 a.m., Pacific Time

PG&E Corporation and Pacific Gas and Electric Company

 

 

PG&E Corporation
Pacific Gas and Electric Company

                                                                   

 

April 8, 2021

 

Dear Shareholders,

 

After more than a century of service to Northern and Central California, the year 2020 brought PG&E(1) to a turning point unlike any other in our history.

 

Together, PG&E Corporation and its subsidiary, Pacific Gas and Electric Company, took responsibility for a series of devastating wildfires caused by our electric equipment, including the 2018 Camp fire. The Utility pleaded guilty to involuntary manslaughter in the deaths of the 84 people who lost their lives in that tragedy. We settled billions of dollars in damage claims by fire victims, as well as by cities, counties, and other public entities.

 

We concluded an 18-month Chapter 11 proceeding while fending off hostile takeover attempts. And we emerged with a plan of reorganization that includes strong commitments regarding our corporate governance, operations, and financial structure — forged with guidance from both the California Governor’s Office and our state regulator — that are designed to further prioritize safety. Now, under the leadership of PG&E Corporation CEO Patricia K. Poppe and substantially new Boards of Directors, we are embarked on a new era for PG&E, charting a new path toward a brighter future as a different enterprise—one that we expect will provide better outcomes and more sustainable results for all those who depend on us.

 

Yet we will not forget the hard lessons we have learned. Rather, we will use them as a driving force for continuous improvement, accountability, and sustained performance in the work we do every day. Earning back the trust we have lost will require us to meet each one of our obligations and deliver on our promises, without fail.

 

Overall, we believe that the course we have set will position PG&E as a sustainable, financially sound energy business with the appropriate governance and oversight to safely serve our customers for the long-term, while also making the investments required to help the State achieve its climate and clean energy goals.

 

Accordingly, we have recommitted our support for California’s climate leadership, including electrification of the energy grid, a charging network sufficient to power millions of electric vehicles, and a carbon-neutral economy by 2045. We are adapting our systems to climate risks, particularly the rising threat of wildfires and extreme weather. And we are doing so with the recognition that both the costs and benefits of these innovations must be shared equitably across the economic spectrum.

 

Within our own organization, we are responding to calls for racial equity by deepening PG&E’s long-standing dedication to diversity, inclusion, and equal opportunity in the workplace, while intensifying our focus on the health and safety of our customers, workforce, and communities.

 

As we pursue that vision, we understand that our success will be measured in tangible results, not intentions, pledges, or words. We welcome your feedback on our progress in the days ahead.

 

Sincerely,

 

 

 

Robert C. Flexon

Chair of the Board, PG&E Corporation

 

(1)  “PG&E” or “companies” refer to both PG&E Corporation and its subsidiary, Pacific Gas and Electric Company, or the “Utility.”
 

 

PG&E Corporation
Pacific Gas and Electric Company

                                                                   

 

 

April 8, 2021 Dear Shareholders,

 

Shortly after joining PG&E Corporation as the company’s new CEO, I shared a favorite song with my 23,000 coworkers. It’s one of those “oldie but goodie” classics — a single released in 1970 by the Five Stairsteps. Like so many popular tunes, the lyrics don’t scan on paper as well as they pair with music. But when times are tough, their upbeat message never fails to help me get through:

 

Oooh, …child

Things are gonna get easier

Oooh, …child

Things are gonna get brighter

 

We all know that PG&E has been through its own tough times over the past few years. Bankruptcy. Wildfires. Season after season of extreme weather events. And like everyone, the COVID-19 pandemic.

 

But things will get better. And we at PG&E are going to be part of making the future brighter for everyone who relies on PG&E, as measured by our “Triple Bottom Line” of people, planet, and prosperity.

 

People, because providing safe and affordable energy to those we are privileged to serve is the reason we exist. Planet, because doing so in a way that does no harm to the environment that sustains us is our solemn responsibility. Prosperity, because the special business charter we enjoy comes with a social duty to help our economy grow and thrive.

 

Already, we are delivering results across all three.

 

In the people category, we are assembling a diverse new team of senior leaders skilled in the kind of organizational design, standards, and processes that will enable us to deliver a “hometown service” experience for our customers and communities — one tailored to the specific local needs within our distinctive geographic regions.

 

For the planet, we are meeting California’s clean energy and climate goals, while continuing to look aggressively for new ways to reduce our carbon footprint.

 

And in support of prosperity, we successfully executed the sale of our transmission tower wireless licenses, yielding $973 million in initial proceeds —roughly half of which we intend to return to customers in the form of lower rates — and significantly reducing our 2021 equity needs.

 

The Triple Bottom Line will continue to guide our decision-making in the months and years ahead, underpinned by a relentless focus on performance. Only by keeping our promises and doing what we say we will do can we earn back trust and become the enterprise that all of our stakeholders deserve.

 

Unlike the Five Stairsteps, I don’t know how to create an inspirational song. But I do have a passion for creating the playbook for a great energy business, and that’s what we’ll be writing here at PG&E — for our customers, our coworkers, and our investors.

 

Sincerely,

 

 

Patricia K. Poppe

CEO, PG&E Corporation

 

“OOH CHILD” lyrics by Stan Vincent.

Used by Permission of Sony Music Publishing (US) LLC. All rights reserved.

 

Senior Leadership Team of PG&E Corporation and Pacific Gas and Electric Company

 

     
  Patricia K. Poppe   Adam L. Wright  
  Chief Executive Officer,
PG&E Corporation
  Executive Vice President, Operations and
Chief Operating Officer
Pacific Gas and Electric Company
 
         
     
  Marlene Santos   Julius Cox  
  Executive Vice President and
Chief Customer Officer
Pacific Gas and Electric Company
  Executive Vice President, People,
Shared Services, and Supply Chain
PG&E Corporation
Pacific Gas and Electric Company
 
         
     
  Christopher A. Foster   John R. Simon  
  Executive Vice President and
Chief Financial Officer1
PG&E Corporation
  Executive Vice President, General Counsel and
Chief Ethics and Compliance Officer
PG&E Corporation
 
         
     
  Francisco Benavides   Sumeet Singh  
  Senior Vice President and
Chief Safety Officer
PG&E Corporation
Pacific Gas and Electric Company
  Senior Vice President and
Chief Risk Officer
PG&E Corporation
Pacific Gas and Electric Company
 
         
         
     
  Ajay Waghray   Robert S. Kenney  
  Senior Vice President and
Chief Information Officer
PG&E Corporation
  Vice President, Regulatory and
External Affiars
Pacific Gas and Electric Company
 

 

(1) Appointed as the PG&E Corporation Executive Vice President and Chief Financial Officer on March 21, 2021.
 

Joint Notice of 2021 Annual Meetings of Shareholders of PG&E Corporation and Pacific Gas and Electric Company

 

  Items to be Voted On   Corporation   Utility   Recommendation
1 Election of Directors   6 Nominees   7 Nominees    
  Cheryl F. Campbell   X   X   FOR
  Kerry W. Cooper   X   X   FOR
  Arno L. Harris   X   X   FOR
  Michael R. Niggli   X   X   FOR
  Oluwadara J. Treseder   X   X   FOR
  Benjamin F. Wilson   X   X   FOR
  Adam L. Wright       X   FOR
2 Ratification of Deloitte and Touche, LLP as the Independent Public Accounting Firm   X   X   FOR
3 Advisory Vote on Executive Compensation   X   X   FOR
4 Management Proposal to Approve the PG&E Corporation 2021 Long-Term Incentive Plan   X       FOR

 

 

Your Vote is Extremely Important

 

April 8, 2021

 

 

Brian M. Wong
Corporate Secretary
PG&E Corporation
Pacific Gas and Electric Company

Meeting Information

 

Date: May 20, 2021

 

Time: 10:00 a.m. PDT

 

Location: Virtual Meeting(1)

 

Record Date

 

Shareholders as of March 22, 2021, are entitled to vote at the Joint Annual Meetings.

 

Voting Your Shares

 

You can vote over the Internet, by phone, by returning the proxy card by mail, or virtually at the 2021 Annual Meetings. The deadline to vote is 11:59p.m. Eastern Time on May 19, 2021, or 11:59p.m. Eastern Time on May 17, 2021, if you are a participant in PG&E’s 401k Plan.

 

Solicitation of Proxies

 

The Boards of Directors are soliciting proxies from you for use at the Annual Meetings or any adjournments or postponements. Proxies allow designated individuals to vote on your behalf.


 

IMPORTANT NOTICE OF AVAILABILITY OF 2021 PROXY MATERIALS FOR THE JOINT ANNUAL MEETINGS:

 

We are making the Joint Proxy Statement and form of proxy available to shareholders starting on or about April 8, 2021. The Joint Proxy Statement and Annual Report are available at investor.pgecorp.com/financials/annual-reports-and-proxy-statements. Detailed information on how to vote your proxy is included in the User Guide at the end of this Joint Proxy Statement.

 

(1)  Due to the COVID-19 pandemic, the 2021 Annual Meetings will be virtual to protect the health and safety of our shareholders, customers, and employees. Holders of PG&E Corporation shares can access the 2021 Annual Meetings, vote, and ask questions at www.virtualshareholdermeeting.com/PCG2021. Holders of Utility shares can access the 2021 Annual Meetings, vote, and ask questions at www.virtualshareholdermeeting.com/PCG-P2021.

 

2021 Joint Proxy Statement    1
 

TABLE OF CONTENTS

 

JOINT NOTICE OF 2021 ANNUAL MEETINGS OF SHAREHOLDERS OF PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY 1
   
OUR VALUES 3
   
OUR BOARD 7
Item No. 1: Election of Directors of PG&E Corporation and Pacific Gas and Electric Company 7
Director Biographies 8
Director Nominee Selection 16
Diversity 16
Skills 17
Independence 19
Commitment to Our Board 19
Service on Other Boards 19
   
OUR GOVERNANCE PRACTICES 20
Leadership Structure 20
Committees and Membership 21
Oversight 24
Management Succession 26
Evaluations 26
Orientation and Continuing Education 27
Shareholder Engagement 27
Correspondence 28
Compensation of Non-Employee Directors 28
   
OUR AUDITORS 32
Item No. 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm for PG&E Corporation and Pacific Gas and Electric Company 32
Information Regarding the Independent Auditor for PG&E Corporation and Pacific Gas and Electric Company 33
Report of the Audit Committees 36
   
OUR PAY 37
Item No. 3: Advisory Vote on Executive Compensation for PG&E Corporation and Pacific Gas and Electric Company 37
Compensation Committee Report 38
Compensation Discussion and Analysis 39
Executive Officer Compensation Information 69
Item No. 4: PG&E Corporation Proposal to Approve the PG&E Corporation 2021 Long-term Incentive Plan 88
   
OUR SHAREHOLDERS 97
Share Ownership Information 97
Related Party Transactions 100
Related Person Transactions 101
   
LEGAL PROCEEDINGS 102
   
USER GUIDE 104
Defined Terms 104
Website Availability of Governance Documents 106
General Information About the 2021 Annual Meetings and Voting 107
2022 Annual Meetings 113
   
APPENDIX A: PG&E CORPORATION 2021 LONG-TERM INCENTIVE PLAN A-1

 

2021 Joint Proxy Statement    2
 
 

Our Values

 

PG&E Corporation and Pacific Gas and Electric Company together provide 16 million Californians with combined natural gas and electric utility service. Our primary purpose is to provide safe, reliable, affordable, and clean energy to our customers. Our customers also look to us for grid innovation, clean energy technology, and support in achieving our state’s zero carbon goals. Our values, focused on safety, people, planet, and California’s prosperity, shape the way we approach our challenges and opportunities.

 

Safety

 

Protecting the safety of the public, our co-workers, and contractors must come before anything else, all the time, everywhere. Our goal is to continually reduce risk to keep our customers, the communities we serve, and our workforce (co-workers and contractors) safe. Our focus is on continuously building an organization where we have designed every work activity to facilitate safe performance, every member of our workforce knows and practices safe behaviors, and every individual is encouraged to speak up and stop work if they see unsafe or risky behavior, and has confidence that their concerns and ideas will be heard and pursued. Our performance during the past few years has fallen short of that aspiration. We are committed to significantly improving our safety performance by strengthening our risk-based focus so we understand our risks, prioritize our work, and use controls to reduce them, and continuously measure and improve risk reduction. We are creating a culture in which we hold each other accountable for safety, resolve issues promptly, and have engagement at all levels.

 

People

 

PG&E Corporation’s and the Utility’s human capital resource objectives are to build and retain an engaged, well-trained, diverse, and equitable workforce. 

 

We provide stable, benefits-paying jobs for our co-workers, and promote health, wellness, work-life balance, teamwork, and an ability to perform well for our customers. We offer:

OUR WORKFORCE IS STRONG

 

Approximately 15,000 employees of 24,000 are covered by collective bargaining agreements. Forty-two percent of our employees have a tenure of more than 10 years.

 

•   Medical, health, and wellness plans, health screenings, and coaching.

•   Employee Assistance Programs that help support mental health and offer confidential counseling.

•   Peer volunteer programs that support co-workers who are in long-term recovery from substance use disorders.

•   401(k) retirement plans.

•   Life and accident insurance.

•   Free financial counseling.

•   We create careers for our co-workers:

 

•   PG&E Academy develops PG&E’s next leaders.

•   We fund major reskilling initiatives when our operations change, such as when we began to decommission our Diablo Canyon Power Plant.

•   We operate thirty-one apprenticeship programs to reduce barriers to entry for prospective employees.

•   We create opportunity with PowerPathway, an innovative program designed to enlarge the talent pool of local qualified diverse candidates for skilled craft and utility jobs. PowerPathway helps people, including women and military veterans, prepare for high demand jobs in the utility and energy industry by providing eight weeks of training necessary to compete for in-demand jobs. Ninety-three percent of our PowerPathway graduates (including women and veterans) find industry jobs.

 

 

2021 Joint Proxy Statement    3
 
We maintain and are building on leading Diversity, Equity, and Inclusion (DEI) programs:

 

  Forty-six percent of our co-workers are ethnic minorities, twenty-seven percent are women and seven percent are military veterans.
  We disclose detailed race, ethnic, and gender workforce statistics on our website.
  Sixty percent of our management is racially or gender diverse.
  We support fourteen employee resource groups (ERGs) and have won multiple awards for diversity, equity, and inclusion leadership. Our ERGs hosted 80 programs in 2020 ranging from professional development series to intersectional presentations on identity and bias, including discussions featuring members of PG&E’s Boards of Directors.
  The Diversity Council is chaired by PG&E Corporation’s CEO and includes representatives from our ERGs and Engineering Network Groups as well as our Diversity Champions.
  We consistently participate in external partnerships in support of building a diverse workforce with the National Society of Black Engineers, Society of Hispanic Engineers, and Society of Women Engineers.

 

We listen:

 

  We conduct biennial employee engagement surveys, quarterly pulse surveys, and voluntary upward feedback surveys and maintain a Corrective Action Program to support continuous improvement based on this feedback.
  Our “Here to Help” hotline and health and wellness hotline provide 24/7 access.
  We conduct quarterly performance conversations with employees.

 

Planet

 

California has long been at the forefront of protecting our planet, and PG&E continues to actively embrace our state’s bold climate and clean energy goals. There are many ways we can be a force for good, and our size and scale enable PG&E to meaningfully address the growing threat of climate change.

 

Our longstanding commitment includes aligning our resources and business strategy with California’s clean energy goals and advocating for policies and programs that enable safe, reliable, and affordable clean and resilient energy for our customers. At the same time, we are working to reduce the ever-growing risks posed by extreme weather and wildfires by incorporating forward-looking climate data into our asset management and decision-making today. These efforts are complementary and consistent — every action taken in climate mitigation also supports climate resilience.

 

California has set an ambitious goal to achieve carbon neutrality by 2045. We embrace our foundational role in achieving this goal and transitioning California to a decarbonized and more climate-resilient economy. We are proud of our track record with renewable energy, exceeding California’s renewable portfolio standards goal for each utility (including the Utility) to deliver 33 percent of renewable energy by the end of 2020, and delivering clean electricity to our customers last year that was more than 88 percent greenhouse gas free. More than 535,000 of PG&E’s customers have adopted private rooftop solar and one in five electric vehicles in the U.S. plugs into PG&E’s grid. We are excited about the growth opportunities that a cleaner future presents for PG&E and our customers, including a strong push for more electric vehicles. We also believe clean energy alternatives should be affordable for and inclusive of all economic backgrounds.

 

 

In 2020, we:

 

Delivered some of the nation’s cleanest electricity to customers, with more than 35 percent from renewable sources — and we remain on track to meet the state’s goal of 60 percent by 2030.
Remained on track to meet the Million Ton Challenge, a voluntary goal to avoid one million tons of greenhouse gas emissions from our operations over five years.
Helped customers avoid the emission of more than 534,000 metric tons of carbon dioxide through our energy efficiency programs – moving towards the state’s goal to double energy efficiency in existing buildings by 2030. This number is roughly equal to $308 million in energy bill savings.
Awarded contracts for more than 1 gigawatt of battery energy storage, strengthening the state’s grid efficiency and reliability and reducing the need for additional fossil fuel generation plants.

 

2021 Joint Proxy Statement    4
 
Installed 4,180 Level 2 fast-charging ports for electric vehicles at workplaces and multi-family dwellings — with more than one-third in disadvantaged communities — and also offered programs to support medium- and heavy-duty fleets and public fast charging in support of the state’s goal of 100 percent sales of light duty zero emission vehicles by 2035.
Brought the total number of interconnected private solar customers to more than 500,000.
Supported more than 18,600 customers who have installed battery storage at their homes or businesses, often paired with a solar power system.
Further integrated climate change adaptation planning into our risk management processes.

 

We are focused on protecting and preserving California’s natural beauty

 

As one of California’s largest private landowners, we are committed to protecting threatened and endangered species and their habitats and safeguarding watershed lands. We continue to make significant progress in securing Habitat Conservation Plans, which enable PG&E to efficiently conduct operations and maintenance activities while protecting listed endangered species. We also permanently protected 13,250 acres of land last year as part of our Land Conservation Commitment, which ultimately will protect approximately 140,000 acres of PG&E-owned watershed lands in perpetuity.

 

We do this work transparently, reporting our progress in our annual Corporate Responsibility and Sustainability Report (which starting in 2020 now incorporates reporting using the Sustainability Accounting Standards Board voluntary reporting framework), and in our responses to the CDP (formerly the Carbon Disclosure Project) and related organizations. We are conducting a multi-year, system-wide climate vulnerability assessment to better understand how climate-driven natural hazards will impact our assets, services, and operations. We also plan to issue a Climate Strategy Report, which will align with the guidance from the Task Force on Climate-Related Financial Disclosures (TCFD).

 

California’s Prosperity

 

We believe clean energy alternatives need to be affordable for and inclusive of all economic backgrounds.

 

We are supporting our customers and co-workers through the COVID-19 pandemic

 

We are helping our customers throughout this crisis by providing financial assistance programs, and tools and tips to save energy. To protect our co-workers’ health and safety, we are providing essential safety gear and continually updating guidance on how to perform critical work safely while keeping virus transmission at bay. We are working with our local communities to assist with vaccination efforts, and to vaccinate our employees.

 

We are addressing energy affordability and accessibility along with the California Public Utilities Commission (CPUC).

 

  In 2020, PG&E helped almost 200,000 customers enroll in the California Alternate Rates for Energy (CARE) program, providing income-qualified customers with a monthly discount on their Utility bill. At the end of January 2021, more than 1.58 million PG&E customers were enrolled in CARE, compared to the 1.39 million enrolled at the end of February 2020 prior to the shelter-at-home mandates in response to the COVID-19 pandemic.
  PG&E’s Energy Savings Assistance program provides income-qualified households with no-cost improvements to make their homes more energy efficient, safe, and comfortable.
  The federally funded Low-Income Home Energy Assistance Program provides financial assistance to help offset eligible household energy costs, including heating, cooling, and home weatherization expenses.

WE SUPPORT COMMUNITY PROSPERITY

 

Over one-third (37.9 percent) of our 2020 spend went to businesses owned by women, minorities, service-disabled veterans, and LGBTQ individuals.

•   Convenient ways to better manage energy costs are available to all customers through online account tools that monitor energy use and check or compare rate plans, as well as help avoid or manage unanticipated high bills.

•   We help our communities prosper: For the first time in the 40-year history of PG&E’s supplier diversity program, our spending with diverse suppliers reached $4.1 billion, representing 37.9 percent of our total spend, and exceeding goals set by the CPUC.

•   We support the communities we serve through employee community volunteer and charitable giving programs as well as through our own donations and matching donations.

 

•   In 2020, although we suspended company-wide volunteer activities due to the global pandemic, a quick shift to virtual volunteerism enabled 700 employees to volunteer in support of 16 community-based organizations throughout our service territory with home-based virtual volunteer events, sending nearly 3,500 care packages to community members in need.

 

   
2021 Joint Proxy Statement    5
 

 

Our Performance

 

We are decentralizing regionally to place more co-workers and operational leadership closer to our customers. We aim to:

 

  Address local issues faster;
  Reduce outage response times;
  Create faster interconnections for our customers connecting solar or distributed energy to the grid; and
  Build stronger relationships and information flow between us and our customers.

 

We worked to make our Public Safety Power Shutoff (PSPS) program more targeted and focused in 2020. We used technology to achieve:

 

  More than twice as precise modelling capabilities for the 2020 season;
  Fifty-five percent fewer average impacted customers, exceeding our 33 percent goal; and
  Restoration of 96 percent of impacted customers within 12 daylight hours.

 

We intend even greater improvements in 2021:

 

  Further utilization of PSPS mitigations including sectionalizing devices for both distribution and transmission, temporary generation applications, and implementation of pilot technologies.
  Enhanced customer support for our most vulnerable and frequently impacted customers, including batteries to support medical devices, meal replacements, and improved in-event PSPS communications though our partnerships with community-based organizations.

 

The majority of our executives’ variable (non-salary) pay is tied directly to customer and safety metrics:

 

  Seventy-five percent of annual variable incentive pay granted in 2020 was tied to public and employee safety performance.
  Fifty percent of our long-term incentive executive pay granted in 2020 was tied to public safety and reliability performance, and the other 50 percent tied to customer experience (half tied to a customer satisfaction score and half to PSPS notification accuracy).

 

We continue to make progress on the core elements of our Wildfire Mitigation Plan, including:

 

  System hardening;
  Vegetation management;
  Enhanced inspections;
  Improved situation monitoring and modeling; and
  Improved risk assessments in project planning and execution.

 

We have improved financial clarity due to progress in key regulatory cases.
We are projecting 10 percent non-GAAP core earnings per share1 compound average growth from 2021 through 2025.
We are projecting approximately 8.5 percent rate base growth, largely driven by wildfire mitigation capital investments.

 

Cautionary Statement Concerning Forward-Looking Statements

 

This Joint Proxy Statement contains forward-looking statements that are not historical facts, including statements about the beliefs, expectations, estimates, future plans and strategies of PG&E Corporation and the Utility, as well as forecasts and estimates regarding PG&E Corporation’s non-GAAP core earnings per share, rate base growth, PSPS program, Wildfire Mitigation Plan and other financial and operating expectations, estimates, plans and strategies. These statements are based on current expectations and assumptions, which management believes are reasonable, and on information currently available to management, but are necessarily subject to various risks and uncertainties. In addition to the risk that these assumptions prove to be inaccurate, factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include factors disclosed in PG&E Corporation’s and the Utility’s annual report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC, which are available on PG&E Corporation’s website at www.pgecorp.com and on the SEC website at www.sec.gov. PG&E Corporation and the Utility undertake no obligation to publicly update or revise any forward-looking statements, whether due to new information, future events or otherwise, except to the extent required by law.

 

1 “Non-GAAP core earnings” and “Non-GAAP core earnings per share” are non-GAAP financial measures. See Exhibit A at the end of the CD&A for a reconciliation of results based on non-GAAP core earnings to results based on income available for common shareholders in accordance with GAAP

 

2021 Joint Proxy Statement    6
 
 

Our Board

 

ITEM NO. 1: ELECTION OF DIRECTORS OF PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY 

 

We ask for your support to elect 6 directors to serve on the Board of PG&E Corporation and 7 directors to serve on the Board of the Utility.

 

To create stability as we emerged from Chapter 11 in 2020, as part of our Plan of Reorganization, we agreed with the CPUC that our Boards would be divided into two classes, with each class elected for two-year terms. These terms will be phased out over the next three years so that, in 2024, all directors will be elected for one-year terms and stand for election annually.

 

All nominees for director of the Corporation in 2021 also are nominees for director of the Utility. In addition, Adam L. Wright, the Executive Vice President, Operations and Chief Operating Officer of the Utility, is a nominee for the Board of the Utility. Each nominee is an incumbent director and each was elected to the Boards in July 2020 in connection with the companies’ emergence from Chapter 11, except for Mr. Wright, who joined the Utility Board in February 2021.

 

Name Age Independent
Cheryl F. Campbell 61
Kerry W. Cooper 49
Arno L. Harris 51
Michael R. Niggli 71
Oluwadara J. Treseder 32
Benjamin F. Wilson 62
UTILITY BOARD ONLY    
Adam L. Wright 43  

 

If elected as directors, all of the 2021 nominees have agreed to serve and will hold office until the 2023 annual meetings or until their successors are elected and qualified, except in the case of death, resignation, or removal of a director. Each nominee has consented to being named in this Joint Proxy Statement and intends to serve if elected.

 

If any of the nominees is unable at the time of the 2021 Annual Meetings to accept nomination or serve as a director, the proxy holders named on the PG&E Corporation or Utility Proxy Card (as applicable) will vote for substitute nominees at their discretion.

 

As you will read in the biographical information that follows, the current Boards, including the incumbent nominees, bring significant experience in utility management, safety, technology, finance, emergency management, communications, remediation projects, and public policy, and familiarity with the needs of the state of California.

 

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company Unanimously Recommend Voting FOR Each of the Nominees for Director Presented in This Joint Proxy Statement.

 

2021 Joint Proxy Statement    7
 

Director Biographies

 

Class “A” Directors (Standing for Election in 2021)

 

 

Cheryl F. Campbell

 

 

Age: 61

 

Director Since: April 2019

 

Current Board Committees: Compliance and Public Policy, Executive, Nominating and Governance, Safety and Nuclear Oversight Committee (Chair)

 

Current Position: Consultant, Former Senior Vice President, Xcel Energy, Inc.

 

Prior Positions:

 

Ms. Campbell served as the Senior Vice President, Gas at Xcel Energy, and President and CEO of West Gas Interstate, In. a FERC-regulated pipeline owned by Xcel Energy, from 2011 to 2018. Prior to Xcel Energy Inc., Ms. Campbell worked at Coastal Corporation (1984 to 2001) where she held various roles, including director.

 

Other Board Experience:

 

Ms. Campbell currently serves as a board member of Summit Utilities, Inc. (energy) (2020 to present), and National Underground Group (construction) (2018 to present). Advisory director for JANA Corporation (software development/IT) (2020 to present).

 

Experience, Skills, and Expertise:

 

Ms. Campbell has extensive experience in risk management, employee and public safety, and improving customer, regulatory, and financial outcomes. She has worked at the national level with the Department of Transportation on safety regulations, as well as with organizations involved in environmental sustainability. Ms. Campbell served as a member of the independent panel assessing the enterprise risk management and overall safety of the 11 gas utilities in Massachusetts in the aftermath of the September 2018 explosions and fires in Merrimack Valley. She is also committed to public service, with leadership roles in non-profit organizations, including Boardbound by Women’s Leadership Foundation, which focuses on educating and increasing the number of women on boards.

 

2021 Joint Proxy Statement    8
 
 

Kerry W. Cooper

 

 

Age: 49

 

Director Since: July 2020

 

Current Board Committees: Finance, Audit, Compliance and Public Policy

 

Most Recent Position: President and Chief Operations Officer, Rothy's, Inc.

 

Prior Positions:

 

Ms. Cooper served as the President and Chief Operating Officer at Rothy's, a consumer goods company, from November 2017 to January 2020, where she built the brand and growth marketing teams as well as the operations, merchandising, and planning functions. Prior to that, she served as CEO of Choose Energy (national energy marketplace) (2013 to 2016), Chief Operating Officer and Chief Marketing Officer of Modcloth (consumer goods) (2010 to 2013), and held various leadership positions at Walmart (2008 to 2010).

 

Other Board Experience:

 

Ms. Cooper currently serves as a board member of Fernish (furniture rental) (2020 to present), Treau (HVAC start-up) (2020 to present), and The Production Board (capital holding company) (March 2020 to present). She formerly served on the boards of BevMo! (2017 to 2020), Weddington Way (2015 to 2017), and Choose Energy (2013 to 2016).

 

Experience, Skills, and Expertise:

 

Ms. Cooper brings extensive experience in implementing large-scale customer programs, as well as building businesses and teams, which are critical as the Boards oversee PG&E’s efforts to decentralize and bring operations closer to the customer. During her time at Choose Energy, she oversaw its expansion to operating in all deregulated states, and added natural gas and solar, and shifted the marketing mix from largely paid online acquisition to diverse channels. Ms. Cooper was responsible for owning and driving major technology projects at Walmart.com, driving omnichannel integration, building new products (e.g., marketplace), and building big data connections between store and online. Ms. Cooper also provides the perspective of a PG&E customer and California resident. Ms. Cooper has been responsible for building consumer brands, especially in the energy sector, and connecting to consumers’ needs.

     
 

Arno L. Harris

 

 

Age: 51

 

Director Since: July 2020

 

Current Board Committees: Compliance and Public Policy, Finance, Technology and Cybersecurity

 

Current Position: Managing Partner, AHC

 

Prior Positions:

 

Mr. Harris served as the CEO of Alta Motors, an electric motorcycle manufacturer, from October 2017 to October 2018. He previously founded and served as the CEO of Recurrent Energy (U.S. utility-scale solar and energy storage project developer) (2006 to 2015).

 

Other Public Company Board Experience:

 

Mr. Harris has served on the boards of Azure Power Global Limited (solar IPP and developer in India) since 2016, and ArcLight Clean Transition Corp. (SPAC / energy transition) since 2020.

 

Other Board Experience:

 

Mr. Harris has also served on the boards of Alta Motors (2017 to 2018) and Advanced Energy Economy (trade association) (2012 to 2015), and chaired the Solar Energy Industries Association board (trade association) (2014 to 2015) and the Recurrent Energy board (2006 to 2015).

 

Experience, Skills, and Expertise:

 

Mr. Harris brings 25 years of experience in clean technology and renewable energy, with deep experience working on climate change issues through the intersection of technology, business, and public policy. Mr. Harris' understanding of energy, sustainability, and commercial operations within California's regulatory environment contributes to the Boards' effective oversight of ESG and climate change issues. Mr. Harris is also a longtime California resident and PG&E customer, who has demonstrated a commitment to the community through his work supporting Tipping Point Community, a non-profit focused on alleviating poverty.

 

2021 Joint Proxy Statement    9
 
 

Michael R. Niggli

 

 

Age: 71

 

Director Since: July 2020

 

Current Board Committees: Finance, Safety and Nuclear Oversight, Technology and Cybersecurity

 

Most Recent Position: President and Chief Operations Officer, San Diego Gas & Electric Company

 

Prior Positions:

 

Mr. Niggli served as President and Chief Operating Officer of San Diego Gas & Electric Company (SDG&E), a regulated utility company owned by Sempra Energy, from 2010 through December 2013. He held other leadership positions at Sempra Energy, including as Chief Operating Officer of SDG&E (2008 to 2010), Chief Operating Officer of both SDG&E & Southern California Gas Company (2006 to 2007), and President of Sempra Generation (2000 to 2006). Prior to his time at Sempra Energy, he served as the Chairman of the Board, CEO, and President of Sierra Pacific Resources (1999 to 2000), and Chairman of the Board, CEO, and President of Nevada Power Company (1998 to 1999).

 

Other Board Experience:

 

Mr. Niggli currently serves on the boards of American Transmission Company (2015 to present), ESVAL (subsidiary of AndesCan SpA in Chile) (2015 to present), ESSBIO (subsidiary of AndesCan SpA in Chile) (2015 to present), and as Chairman of the Board of ESS, Inc. (energy storage) (Board member from 2015 to present).

 

Experience, Skills, and Expertise:

 

With over four decades of experience in the utility and energy sector, Mr. Niggli brings significant operations, risk management and leadership experience, particularly in regulated utilities in California. Mr. Niggli provides in-depth knowledge of the California regulatory landscape, and while in his leadership role at SDG&E, established first-of-their-kind wildfire and public safety programs aimed at reducing risks associated with wildfire. Mr. Niggli has been a longtime supporter of and leader for the Great Basin National Park Foundation, working to preserve and make accessible the natural beauty of the park.

     
 

Oluwadara (Dara) J. Treseder

 

 

Age: 32

 

Director Since: July 2020

 

Current Board Committees: Compensation, Finance

 

Current Position: Senior Vice President, Head of Global Marketing & Communications, Peloton Interactive, Inc.

 

Prior Positions:

 

Ms. Treseder was the Chief Marketing and Communications Officer at Carbon Inc., a 3D printing technology company, from December 2018 to August 2020, where she led marketing, communications, and inside sales. Prior to that, she was the Chief Marketing Officer at GE Business Innovations and GE Ventures (2017 to 2018) and Marketing Manager and Global Head of Demand Generation, File Maker, at Apple, Inc. (2015 to 2017).

 

Other Board Experience:

 

Ms. Treseder currently serves on the board of the Public Health Institute (non-profit public health organization) (2017 to present).

 

Experience, Skills, and Expertise:

 

Ms. Treseder brings experience in large-scale customer operations, consumer insights, and communication to the PG&E Boards. Ms. Treseder has a background leading communications in highly regulated industries and driving customer engagement, a strong understanding of finance and, financial planning, and knowledge of management incentives and compensation. Ms. Treseder has been a champion for underserved and marginalized groups and remains committed to building strong communities that work for everyone.

 

2021 Joint Proxy Statement    10
 
 

Benjamin F. Wilson

 

 

Age: 62

 

Director Since: July 2020

 

Current Board Committees: Audit (Chair), Executive, Nominating and Governance

 

Current Position: Chairman, Beveridge & Diamond PC

 

Prior Positions:

 

Mr. Wilson has spent 35 years at Beveridge & Diamond PC, an environmental law practice group.

 

Other Board Experience:

 

Mr. Wilson currently serves as a board member of Northwestern Mutual Life Insurance Company (2013 to present), Beveridge & Diamond, P.C. (2015 to present), and Environmental Law Institute (2011 to present). He has also served on the board of Dartmouth College (2012 to 2020).

 

Experience, Skills, and Expertise:

 

Mr. Wilson brings a depth of experience, having been lead counsel in numerous complex environmental and regulatory matters for major consumer product corporations, retailers, oil and gas companies, municipalities, and developers. His service as Monitor for the Duke Energy coal ash spill remediation project and as Deputy Monitor in the Volkswagen emissions proceedings provides an important perspective to the Board. Mr. Wilson also offers deep experience with environmental justice issues and is a recognized leader on diversity and inclusion issues in the legal profession. Mr. Wilson served on the Audit Committee of the board of directors of Northwestern Mutual Life Insurance Company and chaired the Audit Committee for the Board of Trustees of Dartmouth College.

     
 

Adam L. Wright

 

 

Age: 43

 

Director Since: February 2021

 

Current Position: Executive Vice President, Operations and Chief Operating Officer, Pacific Gas and Electric Company

 

Prior Positions:

 

Mr. Wright served as President and CEO of MidAmerican Energy Company (MEC), a Berkshire Hathaway Energy company, from January 2018 to January 2021. In his 18-year tenure with the Berkshire Hathaway Energy family of businesses, he served in various leadership positions, including as MEC’s Vice President of Gas Delivery (2015 to 2017) and Vice President of Wind Generation and Development (2012 to 2015).

 

Other Board Experience:

 

Mr. Wright has served on the boards of MEC (2018 to 2021), the Iowa Business Council (2018 to 2021) and Iowa Utility Association (2018 to 2021). He was also an advisory director for the American Gas Association.

 

Experience, Skills, and Expertise:

 

Mr. Wright provides the Utility Board with knowledge of the Utility’s operations, experienced utility leadership, and engineering background. He also brings experience in safety, compliance, operations, customer service, natural gas, renewable generation, and transmission and distribution developed during his career with MEC and other Berkshire Hathaway Energy companies. As PG&E’s Executive Vice President of Operations and Chief Operating Officer, Mr. Wright focuses on safety, increasing connectivity among operational groups, and promoting excellence.

 

2021 Joint Proxy Statement    11
 

Class “B” Directors (Not Standing for Election in 2021)

 

 

Rajat Bahri

 

 

Age: 57

 

Director Since: July 2020

 

Current Board Committees: Audit, Technology and Cybersecurity

 

Current Position: Chief Financial Officer, Wish, Inc.

 

Prior Positions:

 

Mr. Bahri served as Chief Financial Officer at Jasper Technologies, Inc., a leading Internet of Things service platform, from July 2013 until June 2016, where he scaled the company, prepared the company for an initial public offering, and successfully sold the company to Cisco Systems, Inc. He previously served as Chief Financial Officer for Trimble Navigation (2005 to 2013), Kraft Canada, Inc. (2001 to 2004), and Kraft Pizza Company (2000 to 2001).

 

Other Public Company Board Experience:

 

Mr. Bahri previously served on the board of Stec, Inc. (computer storage) (2008 to 2011), where he was Chair of the Audit Committee.

 

Other Board Experience: N/A Experience, Skills, and Expertise:

 

Mr. Bahri is a seasoned CFO with public company and leadership experience and extensive knowledge of finance, financial performance, and planning and audit. At Wish, Mr. Bahri supported the company’s global expansion to over 80 countries and prepared its infrastructure and resources for the initial public offering in 2020. He is skilled at building enterprise-wide systems and teams and brings decades of experience in executive compensation, enterprise risk management, and corporate governance, as well as the operation of audit committees. As a California resident, Mr. Bahri also provides the perspective of a utility customer to the Boards.

     
 

Jessica L. Denecour

 

 

Age: 59

 

Director Since: July 2020

 

Current Board Committees: Compensation, Executive, Nominating and Governance, Technology and Cybersecurity (Chair)

 

Most Recent Position: Senior Vice President and Chief Information Officer, Varian Medical Systems, Inc.

 

Prior Positions:

 

Ms. Denecour was the Senior Vice President and Chief Information Officer of Varian Medical Systems, Inc., a leading manufacturer of medical devices and software for cancer treatments, from January 2006 to September 2017. Prior to that, she held numerous senior roles at Agilent Technologies, Inc. (chemical analysis, life sciences, and diagnostics) (1999 to 2005) and The Hewlett- Packard Company (information technology and services) (1983 to 1999). 

 

Other Public Company Board Experience:

 

Ms. Denecour served on the board of MobileIron, Inc. (software security) (2017 to 2020).

 

Other Board Experience: N/A Experience, Skills, and Expertise: 

 

Ms. Denecour has more than 30 years of experience as an information technology and cybersecurity executive, including overseeing investments in new and innovative technology. She has a deep understanding of threats and mitigations in cybersecurity risk management. During her career, she has led multiple IT transformations, built effective data privacy and security programs, and implemented state-of-the-art IT governance. A long-time California resident and utility customer, Ms. Denecour has also demonstrated a commitment to the community through her board work supporting non-profits aimed at achieving gender parity in the boardroom, as well as supporting creativity and lifelong learning in children.

 

2021 Joint Proxy Statement    12
 
 

Admiral Mark E. Ferguson III, USN (ret.)

 

 

Age: 64

 

Director Since: July 2020

 

Current Board Committees: Compensation (Chair), Executive, Safety and Nuclear Oversight, Technology and Cybersecurity

 

Current Position: Senior Advisor, Institute for Defense Analyses and NATO

 

Prior Positions:

 

Admiral Ferguson retired from the U.S. Navy in 2016 after 38 years of service, having most recently served as Commander of the U.S. Naval Forces in Europe and Africa and NATO Allied Joint Force Command, Naples, Italy (2014 to 2016). Prior to that, he served as Vice Chief of Naval Operations (2011 to 2014) and Chief of Naval Personnel (2008 to 2011). He served as a Senior Advisor with McKinsey & Company (2016 to 2020) and as an independent aerospace and defense consultant.

 

Public Company Board Experience:

 

Mr. Ferguson serves on the board of VSE Corporation (logistics and supply chain) (2017 to present).

 

Other Board Experience: 

 

Mr. Ferguson also serves on the board of trustees for the Center for Naval Analyses (federally-funded R&D center) (2017 to present).

 

Experience, Skills, and Expertise: 

 

Admiral Ferguson brings decades of experience in nuclear reactor operations, risk and change management, and cyber preparedness. During his tenure in the U.S. Navy, he directed the transformation of its personnel management system and education programs; his organization received the Workforce Magazine Optimas Award for innovative personnel policies supporting diversity and women in the workplace. He presently is a member of several veteran service organizations.

     
 

Robert C. Flexon

 

 

Age: 62

 

Director Since: July 2020, Independent non-executive Chair of the Corporation Board since July 2020.

 

Current Board Committees: Audit, Compensation, Executive (Chair, Corporation committee), Nominating and Governance (Chair)

 

Most Recent Position: Chief Executive Officer, Dynegy

 

Prior Positions:

 

Mr. Flexon served as President and CEO of Dynegy Inc., a power and energy supplier and marketer serving the Northeast, Midwest, Texas, and California from June 2011 to May 2018, where he was a key architect in creating the largest independent power producer in the U.S. through the strategic combination with Vistra Corp. Prior to his tenure at Dynegy, he was President and CEO of Foster Wheeler AG (Engineering and Construction) (2009 to 2010), and held a variety of leadership positions at NRG Energy, Inc. (integrated independent power generator and marketer (2004 to 2009).

 

Public Company Board Experience:

 

Mr. Flexon currently serves on the boards of Capstone Turbine Corporation (micro turbine manufacturer) (2017 to present) and Charah Solutions, Inc. (coal ash management, remediation and marketing) (2018 to present). Mr. Flexon previously served on the board of Dynegy (2011 to 2018), TransAlta Corporation (power generator and energy marketer) (2018 to 2020), and Westmoreland Coal Company (coal mining) (2016 to 2019).

 

Other Board Experience:

 

Mr. Flexon has served on the board of Genesys Works Houston since 2016, providing career education and professional experience to high school students in the underserved communities of Houston, Texas.

 

Experience, Skills, and Expertise: 

 

Mr. Flexon provides executive leadership experience in the competitive power and oil and gas sectors. During his time at Dynegy, he executed cultural, operational, and financial restructuring, and achieved top decile safety performance, and enhanced employee engagement. Mr. Flexon brings extensive safety, risk management and labor relations experience, as well as experience with turnarounds, having led both Dynegy’s 2011 bankruptcy and its culture transformation and growth post-emergence.

 

2021 Joint Proxy Statement    13
 
 

W. Craig Fugate

 

 

Age: 61

 

Director Since: July 2020

 

Current Board Committees: Compliance and Public Policy, Safety and Nuclear Oversight

 

Current Position: Chief Emergency Management Officer, One Concern (Emergency management technology)

 

Prior Positions:

 

Mr. Fugate was appointed by President Barack Obama to serve as the Administrator of the Federal Emergency Management Agency (FEMA) from May 2009 to January 2017. Prior to that, he served as Florida Governor Jeb Bush’s Emergency Management Director (2001 to 2009).

 

Other Board Experience:

 

Mr. Fugate currently serves on the board of America’s Public Television Stations (2018 to present).

 

Experience, Skills, and Expertise: 

 

Mr. Fugate has an unparalleled background in emergency management and crisis response at the county, state, and federal level. In addition to being the Chief Emergency Management Officer at One Concern, he is also a Senior Advisor at the Pew Trust for Flood Prepared Communities and a Consultant for Resilient Force, among other positions. During his time at FEMA, Mr. Fugate led the organization through multiple record-breaking disaster years and oversaw the Federal Government’s response to major events, such as the Joplin and Moore tornadoes, Hurricane Sandy, Hurricane Matthew, and the 2016 Louisiana flooding. Mr. Fugate also demonstrates leadership in establishing a strong safety culture and driving a community-oriented approach to emergency management.

     
 

Dean Seavers

 

 

Age: 60

 

Director Since: July 2020, Independent non-executive Chair of the Utility Board since July 2020.

 

Current Board Committees: Executive (Chair, Utility committee), Finance (Chair), Nominating and Governance, Safety and Nuclear Oversight

 

Most Recent Position: President and Executive Director, National Grid

 

Prior Positions:

 

Mr. Seavers served as the President of National Grid US and Executive Director of National Grid plc, a multinational electric and gas utility, from December 2014 to January 2020, where he led business transformation initiatives to improve financial performance, safety, and employee engagement. Prior to that, he was the founder and CEO of Red Hawk Fire & Security (facilities services) (2012 to 2018), President of Global Services at United Technologies Fire and Security (2010 to 2011), and President and CEO of GE Security (electronic security and fire systems) (2007 to 2010).

 

Other Public Company Board Experience:

 

Mr. Seavers has served on the boards of James Hardie Industries plc (building materials) since February 2021, and Albemarle Corporation (specialty chemicals) since 2018.

 

Experience, Skills, and Expertise: 

 

Mr. Seavers brings a broad utility and safety background to the Boards of the Corporation and the Utility, as well as utility leadership experience. He has a deep background in risk management and operational planning in large customer-oriented companies, and understands the needs of employees and workforce safety. During his tenure at National Grid, he led the implementation of National Grid’s jurisdictional model which placed operational control with jurisdictional presidents, which is particularly relevant as PG&E moves to decentralize operations in order to drive a customer focus.

 

2021 Joint Proxy Statement    14
 
 

Patricia K. Poppe

 

 

Age: 52

 

Director Since: January 2021

 

Current Board Committee: Executive

 

Current Position: Chief Executive Officer, PG&E Corporation

 

Prior Positions:

 

Ms. Poppe served as President and CEO of CMS Energy Corporation and its principal subsidiary, Consumers Energy Company, from July 2016 to December 2020, where she focused on connecting the utility more closely with its customers and adapting lean operating system principles throughout the business. In her decade-long career with CMS Energy, she held various leadership positions, including Senior Vice President of Distribution Operations, Engineering and Transmission; Vice President of Customer Experience, Rates and Regulation; and Vice President of Customer Operations. Prior to her tenure at CMS, she served as a Power Plant Director at DTE Energy Company (2005 to 2010).

 

Other Public Company Board Experience:

 

Ms. Poppe currently serves on the board of Whirlpool Corporation (2019 to present).

 

Other Company Board Experience:

 

Ms. Poppe also serves on the board of AEGIS Insurance Services, Inc. (2019 to present), and on the executive committees for the Edison Electric Institute and the American Gas Association.

 

Experience, Skills, and Expertise: 

 

Ms. Poppe brings over 15 years of experience, including as chief executive, in the highly regulated utility industry. Under her leadership, CMS Energy and Consumers Energy earned consistent industry recognition and maintained strong operational and financial performance. PG&E values Ms. Poppe’s extensive utility experience championing safety and workplace equity, developing strong working relationships with labor, and building broad support for clean energy.

     
 

William M. Smith

 

 

Age: 63

 

Director Since: October 2019

 

Current Board Committees: Executive, Finance, Technology and Cybersecurity

 

Most Recent Position: President of AT&T Technology Operations, AT&T Services, Inc.

 

Prior Positions:

 

Mr. Smith served as the interim CEO of PG&E Corporation from July 2020 to December 2020, following the Company’s emergence from Chapter 11, providing stability and leadership during a time of transition. Prior to that, he was the President of Technology Operations at AT&T Services, Inc. (telecommunications) where he spent 37 years (1979 to 2016). Mr. Smith previously served on the advisory boards of Blue Ridge Networks, Inc. (telecommunications) (2018 to 2020) and ASOCS Ltd., (telecommunications) (2018 to present).

 

Other Public Company Board Experience:

 

Mr. Smith previously served as a director of Oclaro, Inc. (telecommunications) (2009 to 2012, 2018).

 

Other Board Experience:

 

Mr. Smith currently serves on the board of Tillman Infrastructure, LLV. (infrastructure) (2017 to present).

 

Experience, Skills, and Expertise: 

 

Mr. Smith brings in-depth knowledge of PG&E’s operations to the Boards, along with a background in implementation of technology and innovation on large scale operations. Mr. Smith also brings an ability to identify and leverage new technologies to meet future business needs, experience in cybersecurity and risk management, knowledge of financial planning, and a track record of delivering on commitments to public and employee safety.

 

2021 Joint Proxy Statement    15
 

DIRECTOR NOMINEE SELECTION

 

In July 2020, each company seated 11 new Board members after a comprehensive search conducted by two leading national independent search firms, with specific mandates to identify diverse candidates. Three existing Board members remained on each Board. All Board members were selected based on criteria approved by or agreed upon with our regulators and key stakeholders, including diversity, skills, experience, and their understanding of the needs of Californians. Their appointments were reviewed and supported broadly, including by the Governor of California. These Board members represent the companies’ commitment to stability as well as a vision of how the companies can best serve customers in the future.

 

Our ongoing process to select directors begins with the PG&E Corporation Nominating and Governance Committee, who selects the nominees who will be submitted for shareholder vote. The Nominating and Governance Committee recommends an eligible director for re-election if it believes the director would continue to be a productive and effective contributor to the Boards. The Nominating and Governance Committee makes these assessments together with the Boards of each company.

 

For new Board nominees, the Committee works with independent search firms (retained by the Boards or the Committee) to identify candidates who are qualified to serve and who demonstrate one or more of the pre-determined skills that the Boards have approved as being desirable to meet the companies’ needs. The companies also accept recommendations for director nominees from a variety of sources, including shareholders, community-based organizations, management, and other directors. We use the same criteria, described below under “Skills,” to review all candidates recommended for nomination at the annual meetings - including candidates nominated by shareholders - and review all such candidates at the same time.

 

Shareholders may recommend a person for the Committee to consider as a nominee for director of PG&E Corporation or the Utility, by writing to that company’s Corporate Secretary. Recommendations must include (a) a description of the candidate (name, age, principal occupation, business address, and residence address), (b) the class and number of shares of the company’s stock owned by the shareholder and the candidate, (c) other information about the candidate that would be in a proxy statement listing the candidate as a director nominee, and (d) any interest of the shareholder in the candidate’s nomination. We may request additional information on the candidate or the shareholder if needed.

 

DIVERSITY

 

Diversity is a core value for us as demonstrated by our Boards, and one that we will continue to champion in the future.

 

The Nominating and Governance Committee’s policy, as reflected in each company’s Guidelines, is to seek nominees with a range of different backgrounds, perspectives, skills, and experiences. The Guidelines further specify that candidates are evaluated based on a range of skills and attributes (see Skills section below), including consideration of important public policy objectives, such as diversity.

 

We asked the continuing directors to self-identify using the categories of underrepresented communities listed in California’s Assembly Bill 979 (AB 979) on board diversity: Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or gay, lesbian, bisexual, or transgender. 9 of 14 directors of PG&E Corporation, and 10 of 15 directors of the Utility identify as either being members of an underrepresented community or identify as female. More specifically, 5 directors identify as female, 1 as Asian or Pacific Islander, and 4 as Black or African American (3 on the PG&E Corporation Board). Each company’s continuing Board exceeds the requirements of AB 979.

 

2021 Joint Proxy Statement    16
 

Our commitment to diversity extends beyond just seating members from under-represented communities on our Boards - it also includes representation on key leadership positions on the Boards:

 

Corporation Chief Executive Officer   Utility Chief Operating Officer   Independent Chair of Utility Board of Directors/ Chair of Finance Committee
Chair of Audit Committee   Chair of Safety and Nuclear Oversight Committee   Chair of Technology and Cybersecurity Committee

 

The Committee and the Boards annually review whether the diversity represented by the members of the Boards serves the needs of the companies, given the current operating environment. If a diversity gap is identified, the Committee will consider and prioritize the need to close that gap, along with other factors, in its director recruitment process.

 

SKILLS

 

Our Boards exhibit diversity of experience, skills, and attributes, and this allows them to effectively oversee the companies’ operations. As part of the establishment of the Boards in 2020, we agreed that directors should demonstrate one or more of a list of skills specific to our companies' needs (the skills matrix), and key Board leaders would have substantial expertise in areas such as wildfire mitigation, natural gas operations, risk management, and cybersecurity. The Nominating and Governance Committee reviews and the Boards approve the skills matrix annually, taking into account the current composition of the Boards and the criteria previously agreed upon with our key stakeholders and regulators.

 

Each director is nominated after consideration of his or her skills on this list, as well as diversity, character, and fit with Board culture, including characteristics like integrity, ethical standards, judgment, interpersonal skills and relations, communication skills, and the ability to work collaboratively with others. The Committee and Boards also consider important public policy objectives such as diversity, representation from regions PG&E serves, and commitment to California’s climate change goals, and also consider a candidate’s age (in light of each Board’s director retirement policy), applicable legal requirements, residency, and such other factors as it deems appropriate given the current needs of the Board and the Company.

 

2021 Joint Proxy Statement    17
 

Skills Matrix

 

Wildfire safety, preparedness, prevention, mitigation, response and/or recovery   Workforce safety and public safety
Technology and cybersecurity   Nuclear generation safety
Natural gas transmission, distribution, operation, and safety   Public policy (legal, regulatory, or government)
Leadership in the energy or utility industry   Utility operation or related engineering experience
Innovation and technology in the clean energy or utility industry   Risk management (including enterprise risk management)
Climate change mitigation or climate resilience   Renewable energy and related engineering experience
Financial performance and planning   Financial literacy
Audit   Management incentives
Labor relations   Large-scale customer experience
Public company board experience   Community leadership

 

 

2021 Joint Proxy Statement    18
 

INDEPENDENCE

 

On PG&E Corporation’s Board, all of the current non-employee directors are independent as defined by the NYSE. The definitions of independence found in the Corporation and Utility’s Corporate Governance Guidelines reflect the applicable NYSE definitions and are available on the company’s website.

 

On the Utility's Board, all of the current non-employee directors are independent as defined by the NYSE. The Utility Board is exempt from NYSE American rules requiring that at least a majority of the directors meet that stock exchange’s definition of “independent director” because PG&E Corporation holds approximately 96 percent of the voting power of the Utility and the Utility is a “controlled” subsidiary.

 

PG&E Corporation and the Utility also have determined that from January 1, 2020 to the date of this Proxy Statement, each of the following past directors was independent while serving on the Boards, according to the applicable company’s Corporate Governance Guidelines: Richard R. Barrera, Jeffrey L. Bleich, Nora Mead Brownell, Fred J. Fowler, William D. Johnson, Michael J. Leffell, Dominique Mielle, Meridee A. Moore, Eric D. Mullins, Kristine M. Schmidt, and Alejandro D. Wolff.

 

We found no transactions or relationships that would compromise any non-employee director’s general independence during 2020. We considered that (1) during 2020 the Utility paid membership fees (less than $10,000) to a non-profit entity on which one of the companies’ non-employee directors served as interim executive officer at the beginning of 2020; and (2) that one former non-employee director had a family member who is a non-partner executive at the companies’ independent auditor, but who did not provide audit or attest services.

 

There are no family relationships between any director of the Corporation or the Utility, executive officer of the Corporation or the Utility, or person nominated or chosen to become a director or executive officer of the Corporation or the Utility.

 

COMMITMENT TO OUR BOARD

 

During 2020, there were 38 meetings of the PG&E Corporation Board. Each of the current Corporation directors attended 95 percent or more of the aggregate of all meetings of the Corporation Board and of the Corporation Board committees held during the time in which that director served during 2020.

 

During 2020, there were 38 meetings of the Utility Board. Each of the current Utility directors attended 95 percent or more of the aggregate of all meetings of the Utility Board and of the Utility Board committees held during the time in which that director served during 2020.

 

Under each company’s Guidelines, directors are expected to attend annual meetings of that company’s shareholders. There was no annual meeting held in 2020 for either company, due to the companies’ Chapter 11 proceedings.

 

SERVICE ON OTHER BOARDS

 

If a director is considering serving on the board of another public company (in addition to PG&E Corporation, the Utility, and their respective subsidiaries), that director must inform the Chair of the Nominating and Governance Committee and the Chair of the Board of the Corporation and/or the Utility, as applicable, before accepting membership on any such board. Unless otherwise approved by the applicable Board, (1) a director may not serve on more than three public company boards (in addition to the Corporation and Utility Boards) and (2) a director who is the principal executive officer of a public company (including the Corporation and the Utility) may not serve on more than two public company boards in addition to the board of his or her employer. For these purposes, the Boards of the Corporation and the Utility would count as one board.

 

If an Audit Committee member simultaneously serves on the audit committees of three or more public companies other than PG&E Corporation, the Utility, and their respective subsidiaries, that Committee member must inform the applicable company’s Board. In order for that member to continue serving on the Audit Committees, each Board must affirmatively determine that the simultaneous service does not impair that committee member’s ability to serve effectively on the applicable Audit Committee.

 

All members of the Boards are in compliance with the above policies regarding service on other public company boards, as well as on audit committees of other public company boards. 

 

2021 Joint Proxy Statement    19
 
 

Our Governance Practices

 

We believe our current governance practices provide the foundation for excellence. Our practices include:

 

All non-executive directors are independent, including Board chairs   Regular executive sessions without management
All independent committees (other than Executive Committees)   Ongoing director education
Proxy access provisions consistent with market standards   Board oversight of key areas, including risk, cybersecurity, safety, sustainability, and compliance and ethics
Director over-boarding policy prohibiting service on more than three other boards   Executive and director stock ownership guidelines
Majority vote for directors, with mandatory resignation policy and plurality carve-out for contested elections   One share, one vote
Policy limiting obtaining certain types of services from the independent auditor   Board input into agendas
Annual Board and Committee evaluations   Confidential voting policy for uncontested elections
No anti-takeover poison pill - shareholder approval required for adoption   No supermajority vote requirements

 

Many of our governance practices are documented in the Guidelines adopted by the Boards of PG&E Corporation and the Utility and available on our website. These Guidelines are reviewed and updated from time to time as recommended by the Nominating and Governance Committee.

 

LEADERSHIP STRUCTURE

 

PG&E Corporation 

 

The positions of Chair and principal executive officer have been separated since March 2017. In July 2020, Robert C. Flexon became the independent non-executive Chair of the Corporation Board. The Corporation Board believes that it is appropriate to separate the Chair and CEO positions, so that the PG&E Corporation CEO (Ms. Poppe) can focus on management of the business and execution of key strategic initiatives, while Mr. Flexon leads the Board’s independent oversight of management.

 

Mr. Flexon’s responsibilities include presiding over meetings of the Corporation Board, including special meetings, as well as executive session of the Corporation’s independent directors and concurrent executive session meetings of the Corporation and Utility Boards.

 

Pacific Gas and Electric Company

 

The positions of Chair and principal executive officer have been separated since January 2008. In July 2020, Dean L. Seavers became the independent non-executive Chair of the Utility Board. As of March 2021, no single individual serves as the Utility’s principal executive officer, and the Utility Board has allocated the duties and powers of the office of the Utility President to both Adam L. Wright, who since February 2021 has served as the Utility’s Executive Vice President, Operations and Chief Operating Officer, and Marlene Santos, who since March 2021 has served as the Utility’s Executive Vice President and Chief Customer Officer. Separating the roles of Chair and principal executive officer allows the Utility to preserve continuity while continuing to attract and retain top talent and allows customers and other stakeholders to benefit from the complementary skill sets and business experiences of Mr. Seavers, Mr. Wright, and Ms. Santos. As a subsidiary of PG&E Corporation, the Utility also benefits from the fact that Mr. Flexon is a member of the Utility Board. Pursuant to the CPUC’s affiliate rules, no individual may serve as Chair of the Board, CEO, or President, or in a functionally equivalent position, of both PG&E Corporation and the Utility.   

 

Mr. Seavers’ responsibilities include presiding over meetings of the Utility Board only, including special meetings and executive session.

 

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Lead Independent Director

 

At each company, if the Chair is not independent, then the independent directors must elect a lead independent director from among the independent chairs of the standing PG&E Corporation and Utility Board committees. Currently, each company has an independent Chair, and so neither company has a lead independent director.

 

COMMITTEES AND MEMBERSHIP

 

Committee Responsibilities

 

The Boards of PG&E Corporation and the Utility have permanent standing committees, which support each Board’s basic responsibilities, with formal charters that set forth their responsibilities. Each Board also may establish temporary ad hoc committees, subcommittees, or other informal governing bodies from time to time.

 

Where a committee exists at PG&E Corporation only, that committee’s responsibilities include assisting and advising the Utility Board on matters within the committee’s scope of responsibility.

 

As the needs of the enterprise change, the composition and responsibilities of the committees may change, particularly as the inter-connected nature of many of the responsibilities continues to manifest. Consolidation of some of the committees may allow for directors to apply their skills more broadly and to connect related oversight responsibilities.

 

Committee Name Company Primary Duties/Scope of Responsibility
Executive PG&E Corporation and Utility Exercises powers and performs duties of the applicable Board, subject to limits imposed by state law.
Audit(1) PG&E Corporation and Utility Oversees and monitors:
   

Integrity of the company financial statements, and financial and accounting practices

    Internal controls over financial reporting, and external and internal auditing programs
    Selection and oversight of the companies’ Independent Auditor
    Compliance with legal and regulatory requirements, in concert with other Board committees
    Related party transactions
Compensation PG&E Corporation Oversees matters relating to compensation and benefits, including:
    Compensation for non-employee directors
    Development, selection, and compensation of policy-making officers
    Annual approval of the corporate goals and objectives of the PG&E Corporation CEO and the Utility CEO (or if that position is not filled, the principal executive officer(s))
    Management evaluation and officer succession planning
    Employment, compensation, and benefits policies and practices
Compliance and Public Policy PG&E Corporation Coordinates compliance-related oversight and oversees public policy, sustainability, and corporate responsibility issues, including:
    The companies’ compliance and ethics program
    Energy and utility policy positions
    Environmental protection and sustainability
    Community relations programs, activities, and contributions
    Political contributions and political activities
    Workforce development and diversity and inclusion

 

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Committee Name Company Primary Duties/Scope of Responsibility
Finance(2) PG&E Corporation Oversees matters relating to financial and investment planning, policies, and risks, including:
    Financial and investment plans and strategies, including a multi-year financial outlook
    Dividend policy
    Proposed capital projects and divestitures
    Financing plans
Nominating and Governance PG&E Corporation Oversees matters relating to selection of directors and corporate governance, including:
    Recommendation of Board candidates, including a review of skills and characteristics required of Board members
    Selection of the chairs and membership of Board committees, and the nomination of a lead director of each company’s Board, as necessary
    Corporate governance matters, including the companies’ governance principles and practices, and the review of shareholder proposals
    Evaluation of the Boards’ performance and effectiveness
Safety and Nuclear Oversight PG&E Corporation and Utility Oversees matters relating to safety, risk, wildfire safety, and operational performance, including:
    Safety programs, promotion of safety culture, and long-term and short-term safety plans
    Wildfire risk reduction and performance against the wildfire safety commitments made by the Utility
    Operational performance and risks related to the Utility’s nuclear, generation, and gas and electric transmission and distribution facilities
Technology and Cybersecurity PG&E Corporation Oversees matters related to the deployment and use of technology, as well as cybersecurity risks, including:
    Deployment of technology linked to operational performance
    Cybersecurity measures and controls
    Evaluation of new technology
(1) Established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
(2) Each year, the Finance Committee presents for the PG&E Corporation and the Utility Boards’ review and/or concurrence (1) a multi-year financial outlook for the Corporation and the Utility that, among other things, summarizes projected financial performance and establishes the basis for the annual budgets, and (2) an annual financial performance plan that establishes financial objectives and sets operating expense and capital spending budgets that reflect the first year of the multi-year financial outlook. Members of the Boards receive a monthly report that compares actual to budgeted financial performance and provides other information about financial and operational performance.

 

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Committee Membership Requirements

 

Committee Membership

 

Reflects membership as of April 8, 2021.

 

  Audit(1) Comp Finance Nominating &
Governance
Safety &
Nuclear
Oversight(1)
Compliance
& Public
Policy
Technology &
Cyber
security
Executive(1)
R. Bahri            
C. Campbell        
K. Cooper          
J. Denecour            
M. Ferguson                
R. Flexon            
C. Fugate            
A. Harris            
M. Niggli            
D. Seavers            
W. Smith              
D. Treseder            
B. Wilson            
J. Woolard              
Number of Meetings in 2020 6 16 14 6 11 10 4

 

(1) Meetings of the Corporation and Utility committees are concurrent, and numbers reflect numbers for both committees.

 

Independent Committee Member Committee Chair

 

The Audit Committees, the Compensation Committee, and the Nominating and Governance Committee are composed entirely of independent directors, as required and defined by the NYSE.

 

Each of the standing committees (other than the Executive Committees) is composed entirely of independent directors, as defined in the applicable company’s Guidelines and the Committee’s charters.

 

The Utility is a “controlled” subsidiary of PG&E Corporation for purposes of the NYSE American standards. Therefore, the Utility is not subject to NYSE American rules that otherwise would require that the Utility’s Board committees responsible for executive compensation and governance consist of “independent” directors, and would impose requirements on the Utility’s director nomination and compensation-setting processes. 

 

Each member of the Audit Committees and each member of the Compensation Committee also satisfies heightened independence standards established by SEC rules and applicable stock exchange requirements regarding independence of audit committee members and compensation committee members. There were no impermissible interlocks or inside directors on the Compensation Committee.

 

Each member of the Audit Committees also is financially literate. The following Audit Committee members have been identified as audit committee financial experts (and background information for each audit committee financial expert can be found in their director biographies beginning on page 8:

 

Rajat Bahri Robert C. Flexon Benjamin F. Wilson

 

Members of the Safety and Nuclear Oversight Committees are required to have special expertise in one of the following areas (pursuant to an agreement reached with the CPUC):

 

Specific substantial expertise related to wildfire safety, wildfire prevention, and/or wildfire mitigation
Specific substantial expertise related to the safe operation of a natural gas distribution company
Specific substantial expertise related to enterprise risk management, including cyber security, and/or experience with nuclear safety

 

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OVERSIGHT

 

The Boards oversee and provide guidance on the business, and monitor the performance of the Utility and the Corporation. The Boards have delegated responsibility for day-to-day business operations to senior management.

 

Risk

 

In 2020, PG&E took significant steps to enhance risk management, including appointing a Chief Risk Officer with significant experience in managing operational risk and further strengthening risk-modeling capabilities that inform the planning and execution of work to mitigate PG&E’s highest operational risks. PG&E receives regular feedback from the CPUC and other stakeholders about its risk management practices. This feedback is used to continue working to improve the use of quantitative models to distinguish risk at greater levels of detail, including taking into consideration low-frequency, high-consequence events in risk assessment. For example, PG&E has recently developed and implemented machine learning capabilities for its wildfire risk models enabling an evolution from static to dynamic models that are informed by fire ignition probability and potential wildfire consequences, including considering fast-burning fuels, predictive fire behavior, and buildings and population density impacts. The recently implemented risk models further improve upon the fire spread predictive capabilities by incorporating fire scars from actual wildfires, including consideration of prevailing weather conditions, topography, and fuels. These models are being used to inform key wildfire safety measures, such as enhanced vegetation management and system hardening, as part of PG&E’s 2021 Wildfire Mitigation Plan, which is focused on addressing the highest risk areas for mitigation as the top-most priority.  

 

The Boards oversee the companies’ enterprise risk management process through reports and discussions regarding key risk areas provided by management at Board and Committee meetings. Enterprise risks are reviewed at least annually by the Boards’ Audit Committees. The Audit Committees also oversee the guidelines and policies that govern the processes by which major risks are assessed and managed, and allocate responsibility for oversight for specific risk categories to various Board committees, consistent with the substantive scope of each committee’s charter. Each committee provides a report of its activities to the Boards. The specific allocation of Board-level risk oversight was last reviewed by the Audit Committees in December 2020, and is reviewed at least annually.

 

Board and Committee Risk Oversight Responsibilities    
Audit: Oversees enterprise risk program, and guidelines and policies that govern the processes by which major risks are assessed and managed. Allocates oversight of specific risks to Committees   Safety and Nuclear Oversight: Oversees risks arising from operations, including safety, electric, gas and generation operations, and risks associated with facilities, wildfire, and emergency response
Finance Committee: Oversees risks associated with financial markets and liquidity   Technology and Cybersecurity: Oversees risks associated with cybersecurity and cyber attacks
Compensation Committee: Oversees potential risks arising from the companies’ compensation policies and practices   Boards: Oversee risks associated with major investments and strategic initiatives 

 

The Boards’ role in risk oversight was not considered by either Board when assessing that Board’s leadership structure.

 

Cybersecurity

 

PG&E Corporation and the Utility have identified cybersecurity as a key enterprise risk. Oversight for this risk is exercised jointly by the Technology and Cybersecurity Committee and the Safety and Nuclear Oversight Committees. At each meeting, the Technology and Cybersecurity Committee receives updates from PG&E Corporation’s Chief Information Officer. These reports describe cybersecurity threats, defenses, and data analytics that impact the companies’ most critical assets, as well as mitigations employed, such as incident response exercises and annual training programs for all employees. The Safety and Nuclear Oversight Committees of both PG&E Corporation and the Utility jointly participate in cybersecurity risk reviews to promote alignment in operations and asset management in the implementation of mitigations designed to reduce the risk of cybersecurity threats.

 

Safety

 

The Boards believe the safety of employees, contractors, customers and the public is the top priority for the PG&E Corporation Chief Executive Officer, the senior management team, and PG&E management. PG&E’s Chief Safety Officer has broad responsibilities to implement safety programs and culture, and as part of the Boards’ oversight function,

 

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the Boards engage directly with the Chief Safety Officer and other operational leaders within the companies on the development and implementation of these programs. The Boards’ Safety and Nuclear Oversight Committees that maintain joint responsibility with the Boards for safety oversight at the companies. The Safety and Nuclear Oversight Committees receive regular safety reports from management that include performance metrics, reporting on serious incidents, and actions to improve employee, contractor, customer, and public safety.

 

In 2020, the Boards and their Committees oversaw the Utility’s Wildfire Mitigation Plan. The Safety and Nuclear Oversight Committees continued to receive regular updates on the execution of the Wildfire Mitigation Plan, engage with senior leadership, and report out to the Board on a regular basis on progress. In addition, the Chair of the Safety and Nuclear Oversight Committees personally interacts with the CPUC on an ad hoc basis to provide insight on the Wildfire Mitigation Plan. Other significant focus areas in the past two years have included worker and public safety, safety culture, safe nuclear operations, and evaluation of top enterprise risks, such as risks to key assets, facilities, and technologies.

 

As discussed in the Compensation Discussion and Analysis below, the Safety and Nuclear Oversight Committees work closely with the Compensation Committee in the selection of the safety performance metrics for inclusion in the short-and long-term incentive compensation plans, and in the evaluation of performance to determine individual awards.

 

ESG

 

At PG&E, corporate sustainability as business strategy is integral to delivering on the Triple Bottom Line of people, planet, and prosperity underscored by strong operational performance. We believe that integrating and managing ESG topics, such as addressing climate change, into PG&E’s business strategy, creates long-term value for PG&E, and for our customers, communities, coworkers, and other stakeholders. Mitigating and adapting to the impacts of climate change presents opportunities for growth for our business and economic opportunity in our communities, and highlights the need to adopt a longer-term perspective about potential risks posed by climate change and to incorporate a resilience mindset and approach. The Boards oversee safety, climate change, and other ESG topics, with the support of committees.

 

The Boards Oversee ESG risks and opportunities, including legislation and the direction of the companies’ clean energy strategies and programs, such as renewable energy, distributed energy resources, and electric vehicle infrastructure.
  Review corporate goals related to safety, reliability, and people management.
  Participate in ERG events to support the companies’ diversity and inclusion initiatives.
Compliance and Public Policy Oversees corporate sustainability issues, such as environmental compliance and leadership, climate change resilience, community investments, workforce development, and diversity and inclusion.
  Includes annual reviews of PG&E’s sustainability practices and performance.
Safety and Nuclear Oversight Oversee the risks associated with the impact of climate change on operations, assets and facilities, and planned mitigations.
  Oversee the companies’ programs related to public, employee and contractor safety, and operational excellence.
Nominating and Governance Oversees consideration of diversity when identifying nominees to the Board.
Compensation Committee Approves incentive compensation structures, which reinforce sustainability commitments.
  Oversees diversity and inclusion in workforce planning and management succession.
Finance Committee Approves capital budgets and investments in zero-carbon technologies and grid modernization.
Technology and Cybersecurity Committee Oversees technology investments that support a zero-carbon future.  

 

For additional information regarding PG&E’s sustainability efforts and progress, please see our online Corporate Responsibility and Sustainability Report 2020, which can be accessed at the sustainability portion of PG&E Corporation’s website at www.pgecorp.com/sustainability.

 

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Political Contributions

 

The Compliance and Public Policy Committee reviews PG&E Corporation’s and the Utility’s political contributions and recommends Board approval limits for political contributions from the companies to candidates, measures, initiatives, political action committees, and certain other organizations that may engage in activities involving elections. All political contributions from the companies are made in full compliance with applicable federal, state, and local laws and regulations. The Compliance and Public Policy Committee also directs preparation of an annual report summarizing political contributions and certain other expenditures made by the companies during the preceding year.

 

In 2021, PG&E Corporation Employees EnergyPAC, funded by PG&E Corporation and Utility employee voluntary contributions, updated its political contributions policy after conducting a series of listening sessions with employees and members. The updated criteria for contributions require candidates to share company values such as diversity and inclusion and the need to protect the environment, and ask whether the candidate is prepared to work in a bipartisan fashion. The new criteria also disqualify candidates who promote hate, violence, or discrimination.

 

Additional information regarding each company’s political engagement policies and political contributions is available on PG&E Corporation’s website at www.pgecorp.com/corp/about-us/corporate-governance/corporation-policies/ political-engagement.page.  

 

MANAGEMENT SUCCESSION

 

At least annually, the PG&E Corporation and Utility Boards each reviews the applicable company’s plan for CEO succession, both in the ordinary course of business and in response to emergency situations. Each company’s Board also develops profiles of appropriate responsibilities, attributes, and requirements for the principal executive officer positions, which reflect that company’s business functions, vision, and strategy. Potential candidates for principal executive officer positions may be identified internally within the companies in consultation with the Compensation Committee (which oversees the evaluation of management) and the CEO, as well as externally through various sources, including independent third-party consultants.

 

The succession planning process also addresses the continuing development of appropriate leadership skills for internal candidates for CEO, as well as candidates for other leadership positions within the companies. The Compensation Committee is responsible for reviewing the CEO’s long-range plans for officer development and succession for PG&E Corporation and the Utility, in connection with its review of officer elections, promotions, and compensation matters during the year.

 

Throughout 2020, the Compensation Committee addressed management succession and executive development in connection with its review of officer elections, promotions, and compensation matters during the year.

 

EVALUATIONS

 

Board and Committee Evaluation Process

 

Our Boards and Committees evaluate their own effectiveness throughout the year. Directors conduct a formal evaluation process annually, developed by the PG&E Corporation Nominating and Governance Committee and administered by the Chair of the Corporation Board, in partnership with the Chair of the Utility Board. The Boards carefully evaluate the effectiveness of the Boards, the Committees, and individual directors, and include a formal check in mid-year on the effectiveness of implemented changes to help ensure accountability for improvements.

 

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ORIENTATION AND CONTINUING EDUCATION

 

Directors regularly receive information on subjects that would assist them in discharging their duties both in formal Board and committee meetings and on an ad hoc basis in response to PG&E or industry events or expressed areas of interest or growth. Topics include business operations; safety, risk management, and cybersecurity; corporate governance matters; legal proceedings and the regulatory and policy landscape; sustainability goals and activities; financial performance; and other key stakeholder issues.

 

In July 2020, as part of the onboarding of new directors, the PG&E Corporation and Utility Boards hosted several topic-specific onboarding sessions and a Board meeting during which the new directors and the continuing directors met together, and with PG&E officers, to, among other things, discuss the overall context for the companies’ current situation and establish the Boards’ governance framework.

 

Each director receives information regarding opportunities for continuing education and is expected to stay current on important developments pertaining to such director’s function and duties to the companies by attending such programs as appropriate or otherwise.

 

SHAREHOLDER ENGAGEMENT

 

PG&E Corporation and the Utility value our shareholders’ views and are committed to ongoing constructive dialogue with shareholders to advance the long-term viability and interests of the companies.

 

We regularly provide opportunities for dialogue with shareholders to further promote the exchange of ideas regarding corporate governance and other issues. In addition, our outreach efforts with the Corporation’s largest shareholders, which collectively hold a majority of the outstanding common stock, include discussions with members of senior management and the Boards, as applicable, ongoing meetings with our investor relations team, and other institutional shareholder forums. 

 

PG&E Corporation has a record of Board responsiveness to shareholders. Since the beginning of 2020, the Boards and management have engaged in the following shareholder engagement activities:

 

•   Meetings, calls, and other direct communication

 

•   Engagement during Board refreshment

 

•   Engagement during quarterly earnings calls and other significant events

 

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CORRESPONDENCE

 

Under the companies’ Guidelines, available on our website, the independent Chairs of the Boards are responsible for responding to written communications that are directed to the Boards from shareholders and other parties. Section 34 of each company’s Guidelines provides more details on these communications.

 

Correspondence to directors and executive officers should be sent to the applicable company’s principal executive office, in care of the Corporate Secretary. Consistent with procedures adopted and approved by the Boards, the Corporate Secretary will forward to the independent lead director or the independent non-executive Chair any communications addressed to the Board as a body or to all of the independent or non-management directors in their entirety, and such other communications as the Corporate Secretary, in his or her discretion, determines is appropriate. The Corporate Secretary also will receive communications directed to individual directors or officers, including the independent non-executive Chair, and will forward those as appropriate.

 

The address of the principal executive office for each company is:

 

PG&E Corporation

Pacific Gas and Electric Company

77 Beale Street, P.O. Box 770000

San Francisco, California 94177

 

COMPENSATION OF NON-EMPLOYEE DIRECTORS

 

Each of the Boards of PG&E Corporation and the Utility establishes the level of compensation for that company’s non-employee directors, based on the recommendation of the Compensation Committee. Directors who serve as employees of either company receive no additional compensation for concurrent service as directors.

 

The Compensation Committee periodically reviews the amount and form of compensation paid to non-employee directors of PG&E Corporation and the Utility. As part of this review, the Committee reviews the compensation provided to the companies’ non-employee directors as compared to other comparable U.S. peer companies (including both other utilities and companies within the S&P 250), with the objective of ensuring that non-employee director compensation is:

 

Market-competitive in terms of annual compensation value, and
Consistent with emerging market practices and trends

 

Compensation paid to non-employee directors for 2020 for service on the Boards and their committees was based upon periodic compensation reviews conducted in consultation with the Committee’s executive compensation consultant for 2020, Pay Governance LLC. The Compensation Committee’s most recent reviews of non-employee director compensation were conducted in July 2020.

 

Non-Employee Director Total 2020 Compensation Summary

 

The following framework was in effect from July 1, 2020. Additional details are provided in the sections that follow.

 

Annual Retainer   Per Quarter   Annual
Non-Employee Directors(1)   $30,000   $120,000
Corporation Chair of the Board   $25,000 additional   $100,000 additional
Utility Chair of the Board(1)   $5,000 additional   $20,000 additional
Committee Chair Additional Retainers(2)        
Audit Committees(1)   $7,500   $30,000
Compensation Committee   $5,000   $20,000
Safety and Nuclear Oversight (SNO) Committees   $5,000   $20,000
Finance, Compliance and Public Policy, and Technology and Cybersecurity Committees(1)   $3,750   $15,000
Special Committee Additional Retainer        
As determined by the applicable Board (none paid during 2020)        

 

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Annual Equity Award(3)
Non-Employee Directors   n/a   $140,000
Corporation Chair of the Board(1)   n/a   $80,000 additional
Per-Meeting Fees
No meeting fees for attendance at Board, Board committee, or shareholder meetings        
Special Committee Per-Meeting Fees(1)        
As determined by the applicable Board (none paid during 2020)        

 

(1) No additional retainer, equity award, or per-meeting fee will be paid by the Utility for any quarter during which the director is paid a retainer, equity award, or per-meeting fee from the Corporation for the same role.
(2) No additional retainer is paid for directors serving as members on Board committees.
(3) For 2020, the value of the annual LTIP award was pro-rated to reflect service from the July 1, 2020 election of new Board members through the anticipated date of the 2021 annual meeting.

 

Retainers and Fees

 

Retainers and fees are paid as described in the summary table above. Any director who serves on the PG&E Corporation Board, Audit Committee, Executive Committee, or Safety and Nuclear Oversight Committee does not receive additional retainers for concurrent service on the Utility Board, Audit Committee, Executive Committee, or Safety and Nuclear Oversight Committee, as applicable.

 

Effective July 29, 2020, the following director compensation program changes were implemented:

 

Technology and Cybersecurity Committee Chair retainer of $15,000 introduced in association with the establishment of a new Board committee
Safety and Nuclear Oversight Committees Chair retainer increased from $15,000 to $20,000 reflecting expanded scope of responsibility
Audit Committees Chair retainer decreased from $50,000 to $30,000 reflecting market benchmarks
Equity awards granted in 2020 were pro-rated to reflect the period of service from July 1, 2020, to May 2021

 

Non-Employee Director Stock-Based Compensation

 

Under the 2014 LTIP, each non-employee director of PG&E Corporation is entitled to receive annual awards of stock-based compensation. Pursuant to the terms of the 2014 LTIP, as approved by PG&E Corporation’s shareholders, the annual value of equity awards provided to any one non-employee director is limited to $400,000 in any calendar year.

 

Awards for 2020 were granted on August 3, 2020, and were pro-rated to reflect the fact that most members of the Board were elected on July 1, 2020. Each non-employee director’s award—other than that for the Chair of PG&E Corporation—had a total aggregate value of $116,662 (rounded down to reflect awards equivalent to whole units with values equivalent to whole shares of PG&E Corporation common stock) and consisted of RSUs that were granted to each non-employee director after his or her election to the Board. The award for the Chair of PG&E Corporation had a total aggregate value of $183,329 (rounded down to reflect awards equivalent to whole units with values equivalent to whole shares of PG&E Corporation common stock) and consisted of RSUs that were granted after his or her election to the Board. These RSUs will vest at the earlier of May 22, 2021, or the date of the 2021 Annual Meeting of Shareholders (or other annual election of directors) and then will be settled as shares of PG&E Corporation common stock. RSUs also will vest and be settled upon the director’s death or disability, or if there is both a Change in Control (as defined on page A-1) and the director ceases to be on the Board for any reason other than the director’s resignation. Otherwise, RSUs are forfeited if the director ceases to be a member of the Board prior to vesting. Non-employee directors also may elect to defer settlement of vested RSUs.

 

As approved by the Bankruptcy Court, in lieu of stock-based compensation during 2019, a replacement equity award (Replacement Award) was granted to non-employee directors for 2019. The Replacement Awards were granted at a specified dollar value and settled in post-reorganization equity of PG&E Corporation immediately following emergence from Chapter 11 on June 30, 2020. The Replacement Award values were based on the value of annual equity awards paid to non-employee directors prior to commencement of the Chapter 11 Cases, as specified in the LTIP, and pro-

 

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rated for directors who joined the PG&E Corporation Board after the June 2019 annual meeting. The Replacement Awards were granted as dollar values effective November 13, 2019, and covered services as non-employee directors for 2019, but were not converted into stock-based equivalents until emergence from Chapter 11 on July 1, 2020, and thus are reflected in this Proxy Statement, in the 2020 Director Compensation table, below. Replacement Awards were forfeitable upon a separation from service prior to the effective date of the Corporation’s Plan of Reorganization, except in the event of the recipient’s death, disability (as defined in section 409A of the Internal Revenue Code), resignation in connection or anticipation of the confirmation of the Plan of Reorganization, the Nominating and Governance Committee’s approval of vesting in connection with any resignation or removal, or a separation from service relating to a change in control. The Replacement Awards were not reflected in prior tabular disclosures relating to non-employee director compensation granted during 2019.

 

2020 Director Compensation

 

The following table summarizes the principal components of compensation paid or granted to individuals for their service as non-employee directors of PG&E Corporation and the Utility during 2020. William L. Smith received compensation in 2020 for his service both as a non-employee director and as Interim CEO and President of PG&E Corporation from June 30 to December 31, 2020. In accordance with SEC guidance, all compensation paid to Mr. Smith for his service as non-employee director and as Interim CEO and President is provided only in the Summary Compensation Table and other executive compensation disclosures starting on page 69. None of the compensation paid during 2020 to Mr. Smith for his service as non-employee director or as Interim CEO and President is reflected in the Director Compensation Table below.

 

 Name Fees
Earned
Or Paid in
  Cash ($)(1)
  Stock
Awards
($)(2)
  Option
Awards
($)(3)
  All Other
Compensation
($)
  Total
($)
Rajat Bahri(4) 60,000   116,662           176,662
Cheryl F. Campbell 137,500   256,663           394,163
Kerry W. Cooper(4) 60,000   116,662           176,662
Jessica L. Denecour(4) 67,500   116,662           184,162
Admiral Mark Ferguson III(4) 70,000   116,662           186,662
Robert C. Flexon(4) 117,500   183,329           300,829
W. Craig Fugate(4) 60,000   116,662           176,662
Arno L. Harris(4) 60,000   116,662           176,662
Michael R. Niggli(4) 60,000   116,662           176,662
Dean L. Seavers(4) 77,500   116,662           194,162
Oluwadara J. Treseder(4) 60,000   116,662           176,662
Benjamin F. Wilson(4) 75,000   116,662           191,662
John M. Woolard 127,500   221,663           349,163
Richard R. Barrera(5) 67,500   140,001           207,501
Jeffrey L. Bleich(6) 75,000   140,001           215,001
Nora Mead Brownell(5) 110,000   219,998           329,998
Fred J. Fowler(5) 60,000   140,001           200,001
Michael J. Leffell(5) 67,500   140,001           207,501
Dominique Mielle(7) 85,000   140,001           225,001
Meridee A. Moore(5) 70,000   140,001           210,001
Eric D. Mullins(5) 60,000   140,001           200,001
Kristine M. Schmidt(5) 67,500   140,001           207,501
Alejandro D. Wolff(5) 60,000   140,001           200,001

 

(1) Represents receipt of retainers described above under “Non-Employee Director Total 2020 Compensation Summary.”

 

2021 Joint Proxy Statement    30
 
(2) Represents the grant date fair value of equity awards granted to non-employee directors of PG&E Corporation in 2020, measured in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation—Stock Compensation” (“FASB ASC Topic 718”). Grant date fair value for RSUs is measured using the closing price of PG&E Corporation common stock on the date of grant. The table above includes two separate equity awards provided in 2020: (i) awards for 2020 and (ii) replacement awards for 2019.
  (i) Each non-employee director who was elected effective July 1, 2020 in connection with PG&E Corporation’s emergence from Chapter 11—except the Chair of the PG&E Corporation Board—received 12,820 RSUs with a grant date value of $116,662. The Chair of the PG&E Corporation Board received 20,146 RSUs with a grant date value of $183,329. These values reflect the proration of service from July 2020 through May 2021. The aggregate number of stock awards outstanding for each non-employee director at December 31, 2020 was: Mr. Bahri, Ms. Campbell, Mr. Cooper, Ms. Denecour, Mr. Ferguson, Mr. Fugate, Mr. Harris, Mr. Niggli, Mr. Seavers, Ms. Treseder, Mr. Wilson, and Mr. Woolard, 12,820 each, and Mr. Flexon, 20,146.
  (ii) Each non-employee director who was elected at the 2019 annual meetings—except the Chair of the PG&E Corporation Board—received a stock award with a grant date value of $140,001, which converted to 15,504 shares of PG&E Corporation stock upon vesting and settlement following emergence from Chapter 11 in July 2020. The Chair of the PG&E Corporation Board received a stock award with a grant date value of $219,998, which converted to 24,363 shares of PG&E Corporation stock upon vesting and settlement. Mr.  Woolard, who joined the Board in October 2019, received a stock award with a pro-rated grant date fair value of $105,001, which converted to 11,628 shares of PG&E Corporation common stock upon vesting and settlement.
(3) No stock options were granted in 2020. No option awards were outstanding as of December 31, 2020.
(4) Mr. Bahri, Ms. Cooper, Ms. Denecour, Mr. Ferguson, Mr. Flexon, Mr. Fugate, Mr. Harris, Mr. Niggli, Mr. Seavers, Ms. Treseder, and Mr. Wilson joined the PG&E Corporation Board effective July 1, 2020. These individuals also joined the Utility Board effective July 1, 2020, with the exception of Ms. Denecour, Mr. Flexon, and Mr. Niggli, who joined the Utility Board on October 28, 2020.
(5) Mr. Barrera, Ms. Brownell, Mr. Fowler, Mr. Leffell, Ms. Moore, Mr. Mullins, Ms. Schmidt, and Mr. Wolff resigned from the PG&E Corporation and Utility Boards effective July 1, 2020.
(6) Mr. Bleich resigned from the PG&E Corporation and Utility Boards effective May 1, 2020. (7) Ms. Mielle resigned from the PG&E Corporation and Utility Boards effective June 30, 2020.

 

Stock Ownership Guidelines

 

Non-employee directors of PG&E Corporation are expected to own shares of PG&E Corporation common stock having a dollar value of at least five times the value of the then-applicable annual Board retainer. If any non-employee director is on the Utility Board only, then that director also may satisfy his or her stock ownership obligation with Utility preferred stock. Directors generally have five years to meet the guidelines. Ownership includes beneficial ownership of common stock, as well as RSUs and common stock equivalents. These guidelines were adopted to more closely align the interests of directors and each company’s shareholders.

 

Deferral of Retainers and Fees

 

Under the PG&E Corporation 2005 Deferred Compensation Plan for Non-Employee Directors, directors of PG&E Corporation and the Utility may elect to defer all of their retainers, all of their meeting fees, or both. Directors who participate in the Deferred Compensation Plan may elect either to (1) convert their deferred compensation into common stock equivalents, the value of which is tied to the market value of PG&E Corporation common stock, or (2) have their deferred compensation deemed to be invested in the Utility Bond Fund (which is described in the narrative following the “Non-Qualified Deferred Compensation—2020” table beginning on page 77).

 

Reimbursement for Travel and Other Expenses

 

Directors of PG&E Corporation and the Utility are reimbursed for reasonable expenses incurred in connection with attending Board, Board committee, or shareholder meetings, or participating in other activities undertaken on behalf of the Corporation or the Utility. 

 

Retirement Benefits from PG&E Corporation or the Utility

 

The non-employee directors of the Boards of PG&E Corporation and the Utility are not provided retirement benefits.

 

2021 Joint Proxy Statement    31
 
 

Our Auditors

 

ITEM NO. 2: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY

 

The Audit Committees of PG&E Corporation and the Utility each has selected and appointed Deloitte & Touche LLP as the independent auditor for that company to audit the consolidated financial statements as of and for the year ended December 31, 2021, and to audit the effectiveness of internal control over financial reporting as of December 31, 2021. Deloitte & Touche is a major national accounting firm with substantial expertise in the energy and utility businesses. Deloitte & Touche has served as the independent auditors for PG&E Corporation and the Utility since 1999.

 

One or more representatives of Deloitte & Touche are expected to be present at the annual meetings. They will have the opportunity to make a statement if they wish and are expected to be available to respond to questions from shareholders.

 

Each company’s Board believes that the appointment of Deloitte & Touche is in the best interests of that company and its shareholders.

 

PG&E Corporation and the Utility are not required to submit these appointments to a vote of their shareholders. However, each Board believes that requesting shareholder ratification of this selection is a good corporate governance practice. If the shareholders of either PG&E Corporation or the Utility do not ratify the appointment, the applicable Audit Committee will investigate the reasons for rejection by the shareholders and will reconsider the appointment. Even if a company’s shareholders ratify the selection, the applicable Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of that company and its shareholders.

 

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company Unanimously Recommend a Vote FOR the Proposal to Ratify the Appointment of Deloitte & Touche.

 

2021 Joint Proxy Statement    32
 

INFORMATION REGARDING THE INDEPENDENT AUDITOR FOR PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY

 

Selection and Oversight of the Independent Auditor

 

Each Audit Committee is responsible for the appointment, replacement, compensation, and oversight of the work of the independent auditor. The Audit Committees review the scope of the audit, including the terms of the engagement. The independent auditor reports directly to the Audit Committees; at each Audit Committee meeting, the independent auditor meets separately with the Audit Committees, without management present.

 

Annually, each Audit Committee also evaluates the independence, qualifications, and performance of the independent auditor, taking into account the opinions of management and the internal auditors. To help ensure continuing independence of the independent auditor, the Audit Committees also consider whether there should be rotation of the independent auditor. In accordance with SEC rules, the lead audit partner may provide a maximum number of five consecutive years of service to the companies. Consistent with that requirement, Deloitte & Touche assigned a new lead auditor to lead the integrated audit of PG&E Corporation’s and the Utility’s financial statements, starting in 2017. The Audit Committees reviewed and evaluated the new lead auditor as part of their annual process for reviewing the independent auditor.

 

For 2021, the Audit Committees selected Deloitte & Touche as the companies’ independent auditor, following consideration of the following factors and criteria: (1) status as a registered public accounting firm and is subject to oversight by the Public Company Accounting Oversight Board; (2) status as a “Big Four” public accounting firm, nationally and internationally recognized as an expert in accounting and auditing; (3) having one of the largest utility practices of the “Big Four” public accounting firms; (4) having made a strong commitment to supporting supplier diversity; (5) having significant experience with the companies; and (6) having an experienced team, including the lead partner, familiar with the industry, assigned to the companies’ engagements. The Audit Committees also considered (1) Deloitte & Touche’s quality control report, (2) Deloitte & Touche’s discussion of its independence, and (3) a review of Deloitte & Touche’s proposed audit plan (including draft engagement letter) for 2021.

 

Although Deloitte & Touche has been the companies’ independent auditor since 1999, in 2015 and at the Audit Committees’ direction, the companies solicited bids from accounting firms to conduct the external audits of the companies’ financial statements for the year ending December 31, 2016. The bids were evaluated by the Auditor Selection Committee, which consisted of members from the companies’ accounting, internal auditing, regulatory, operational, sourcing, and legal functions. The bids were evaluated with respect to four key factors: firm capabilities and background, firm resources and audit plan, supplier diversity plans, and pricing. Upon consideration of the information provided by the Auditor Selection Committee, each Audit Committee appointed Deloitte & Touche as the independent auditor for the year ending December 31, 2016.

 

Fees Paid to the Independent Auditor During 2020 and 2019

 

The Audit Committees have reviewed the audit and non-audit fees that PG&E Corporation, the Utility, and their respective controlled subsidiaries have paid to the independent auditor (including subsidiaries and affiliates), in order to consider whether the nature and relative value of those fees are compatible with maintaining the firm’s independence.

 

2021 Joint Proxy Statement    33
 

Table 1: Fees Billed to PG&E Corporation

 

(Amounts include Fees Billed to the Utility and its Subsidiaries shown in Table 2 below)

 

  2020 2019
Audit Fees $7.962 million $6.351 million
Audit-Related Fees $0.130 million $0.169 million
Tax Fees $0 $0
All Other Fees $0 $0

 

Table 2: Fees Billed to the Utility and its Subsidiaries

 

(Amounts are included in Fees Billed to PG&E Corporation shown in Table 1 above)

 

  2020 2019
Audit Fees $6.953 million $5.715 million
Audit-Related Fees $0.130 million $0.150 million
Tax Fees $0 $0
All Other Fees $0 $0

 

Audit Fees

 

Audit fees billed for 2020 and 2019 relate to services rendered by Deloitte & Touche and its affiliates in connection with reviews of Quarterly Reports on Form 10-Q; certain limited procedures on registration statements; the audits of the annual financial statements of PG&E Corporation and its subsidiaries and the Utility and its subsidiaries; the audits of both PG&E Corporation’s and the Utility’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act; advice regarding adoption of new accounting pronouncements; support for statutory or regulatory filings or engagements and regulators’ reviews of auditor workpapers; procedures related to the California wildfires and participation in the wildfire fund established under Assembly Bill 1054 (AB 1054); and services rendered for post-bankruptcy matters.

 

The increase in audit fees billed for 2020 as compared to 2019 is primarily due to an increase in billings related to post-bankruptcy matters of approximately $530,000 and an increase related to the Utility’s and PG&E Corporation’s integrated annual audits and quarterly reviews of approximately $285 thousand and $50 thousand, respectively, in 2020.

 

Audit-Related Fees

 

Audit-related fees billed in 2020 and 2019 relate to services rendered by Deloitte & Touche and its affiliates for nuclear decommissioning trust audits, consultations on financial accounting and reporting standards, required agreed-upon procedure reports related to contractual obligations of the Utility and its subsidiaries, advice regarding proposed transactions, advice regarding adoption of new accounting pronouncements, training, and advice concerning internal controls surrounding new applications, systems, or activities.

 

The decrease in audit-related fees billed in 2020 as compared to 2019 is primarily due to a decrease in billings related to consultations on financial accounting and reporting standards in 2020.

 

Tax Fees and All Other Fees

 

Deloitte & Touche and its affiliates provided no services in these categories during 2020 and 2019.

 

2021 Joint Proxy Statement    34
 

Obtaining Services from the Independent Auditor

 

Annual Review and Pre-Approval of Services

 

For each fiscal year, each Audit Committee approves a list of services that will be obtained during that year by the applicable company and its controlled subsidiaries and affiliates from the independent auditor (including its affiliates). The approved services generally are consistent with the descriptions below:

 

Category   Description
Audit services   Audit and review of annual and quarterly financial statements, expressing opinions on the conformity of the audited financial statements with generally accepted accounting principles, auditing management’s assessment of the effectiveness of internal control over financial reporting, and services that only the independent auditor reasonably can provide (e.g., comfort letters, statutory and regulatory audits, attest services, consents, assistance with and review of documents filed with the SEC, and assistance with new accounting standards, laws, and regulations).
Audit-related services         Assurance and related services that traditionally are performed by the independent auditor (e.g., agreed-upon procedure reports related to contractual obligations and financing activities, consulting regarding accounting pronouncements, nuclear decommissioning trust audits, and attest services).
Tax services     Advice relating to compliance, tax strategy, tax appeals, and specialized tax issues, all of which also must be permitted under the Sarbanes-Oxley Act.
Non-audit services   None.

 

The Audit Committees also approve maximum fee amounts for each type of approved service.

 

As part of the review process, the Audit Committees assess, among other things, the impact of that service on the independent auditor’s independence.

 

During 2018, management adopted a policy of retaining Deloitte & Touche, Deloitte Consulting, or their subsidiaries or affiliates (together, “Deloitte”) for non-audit services only if the services (1) do not impair Deloitte & Touche’s independence, in fact or appearance, and are permitted by any rules regarding auditor independence, and (2) when aggregated, total amounts paid per year by the companies to Deloitte for “tax service” and “other services” (non-audit services) will be no more than 20 percent of the expected amounts that the companies will pay to Deloitte for “audit services” and “audit-related services.”

 

Mid-Year Monitoring and Approval of Additional Services

 

During the year, management periodically updates each Audit Committee as to the extent to which the approved services have already been provided. The Audit Committees also must approve (1) any proposed new services that were not approved during the annual review and (2) any increase in authorized fee amounts for previously approved services.

 

Delegation of Pre-Approval Authority

 

Each Audit Committee has delegated to its Committee Chair, or to any other independent Committee member if the Chair is not available, the authority to pre-approve services provided by the applicable company’s independent auditor. These pre-approvals must be presented to the full Audit Committee at its next regularly scheduled Committee meeting.

 

Services Provided During 2020 and 2019

 

During 2020 and 2019, all services provided by Deloitte & Touche to PG&E Corporation, the Utility, and their consolidated affiliates were approved consistent with the applicable pre-approval procedures.

 

2021 Joint Proxy Statement    35
 

REPORT OF THE AUDIT COMMITTEES

 

The Audit Committees of PG&E Corporation and Pacific Gas and Electric Company are made up of independent directors and operate under written charters adopted by their respective Boards. The members of the Audit Committees of PG&E Corporation and the Utility are identical. At both PG&E Corporation and the Utility, management is responsible for internal controls and the integrity of the financial reporting process.

 

The Committees reviewed and discussed the audited consolidated financial statements of PG&E Corporation and the Utility with management and the independent auditor. The Committees also discussed with the independent auditor the matters that are required to be discussed by applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission.

 

Deloitte & Touche LLP was the independent auditor for PG&E Corporation and the Utility in 2020. Deloitte & Touche LLP provided to the Committees the written disclosures and letter required by applicable requirements of the PCAOB regarding an independent auditor’s communications with an audit committee concerning independence and non-audit services, and the Committees discussed with Deloitte & Touche LLP that firm’s independence.

 

Based on the Committees’ review and discussions described above, the Committees recommended to the respective Boards and their delegates that the audited consolidated financial statements for PG&E Corporation and the Utility 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, 2020, filed with the Securities and Exchange Commission.

 

February 25, 2021

 

Audit Committees of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company

 

Benjamin F. Wilson, Chair

Rajat Bahri
Kerry W. Cooper

Robert C. Flexon

 

2021 Joint Proxy Statement    36
 
 

Our Pay

 

Item No. 3: Advisory Vote on Executive Compensation for PG&E Corporation and Pacific Gas and Electric Company

 

PG&E Corporation and the Utility each asks their respective shareholders to approve the following:

 

RESOLVED that the compensation paid for 2020 to the company’s executive officers named in the Summary Compensation Table of this Joint Proxy Statement, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, and the accompanying narrative discussion, is hereby APPROVED.

 

Each of PG&E Corporation and the Utility believes that its executive compensation policies and practices for 2020 were effective in tying a significant portion of pay to performance, while providing competitive compensation to attract, retain, and motivate talented executives, and aligning the interests of our executive officers with those of our shareholders.

 

In establishing PG&E Corporation’s officer compensation programs for 2020 (which also cover officers of the Utility), the Compensation Committee established three objectives. These objectives, and how these objectives were met for 2020, are discussed in the CD&A, which can be found immediately following this Item No. 3. These objectives are summarized below.

 

A significant portion of every officer’s compensation should be tied directly to PG&E Corporation’s performance, without promoting excessive risk-taking.

With the exception of base salary and perquisites, all elements of 2020 annual officer compensation were tied to corporate operational and/or financial performance and, therefore, provided a direct connection between compensation and performance in the achievement of both key operating results and long-term shareholder value. For William L. Smith, who served as the PG&E Corporation Interim CEO on December 31, 2020, approximately 86 percent of 2020 target compensation was tied to corporate performance. For the other NEOs, approximately 61 percent of average 2020 target compensation was tied to corporate performance.

 

The Compensation Committee’s independent general compensation consultant during 2020, Pay Governance LLC, advised that for 2020 there were no material issues regarding PG&E Corporation’s and the Utility’s executive compensation programs, and that the design of the companies’ incentive pay plans posed a low risk. As such, incentive plan design posed a low likelihood of incenting employees to engage in behaviors that are likely to have an adverse material impact on the companies.

A significant component of officer compensation should be tied to PG&E Corporation’s long-term performance for shareholders, in the form of long-term incentive awards.

The annual long-term incentive awards for 2020 consisted of 50 percent performance shares using customer experience metrics and 50 percent performance shares using public safety metrics. Additionally, the 2020 awards include a financial stability modifier based on relative total shareholder return (TSR) and ranging from 75 percent to 125 percent, which will be applied to the final performance results for all metrics underlying performance shares. Performance shares granted in 2020 will vest, if at all, at the end of a three-year period, and their value is tied to the price of PG&E Corporation common stock. In addition, the value of the TSR modifier is tied to the relative three-year performance of PG&E Corporation common stock price appreciation and dividends paid, as compared to the TSR of companies in the 2020 Performance Comparator Group.

 

Target cash compensation (base salary and target short-term incentive) should be competitive with the median target cash compensation for comparable officers in the 2020 Pay Comparator Group.

Target cash compensation for NEOs in 2020 generally was within a range of 8 percent above to 6 percent below the corresponding market median for companies in the 2020 Pay Comparator Group.

 

This vote is non-binding and is required by Section 14A of the Securities Exchange Act of 1934. PG&E Corporation and the Utility each currently plan to submit this vote to shareholders annually and expect to next submit this matter to shareholders in connection with next year’s annual shareholder meeting. If the shareholders of either company do not approve this proposal, the Compensation Committee and members of management will investigate the reasons for disapproval and will consider those reasons when developing future executive compensation programs, practices, and policies.

 

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company Unanimously Recommend a Vote FOR This Proposal to Approve the Compensation of Each Company’s Executive Officers Named in the Summary Compensation Table, as Described in This Joint Proxy Statement.

 

2021 Joint Proxy Statement    37
 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed this Compensation Discussion and Analysis with management. Based on this review, the related discussions, and such other matters deemed relevant, the Compensation Committee has recommended to the Boards of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for the year ended December 31, 2020.

 

Mark E. Ferguson III (Chair)

Jessica L. Denecour

Robert C. Flexon

Dara J. Treseder

 

2021 Joint Proxy Statement    38
 

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis (CD&A) provides our shareholders and other stakeholders with information about PG&E Corporation’s and Pacific Gas and Electric Company’s performance, compensation framework, compensation decisions, and associated governance for our Named Executive Officers (NEOs) in 2020 at both PG&E Corporation and the Utility (together, the companies or PG&E).

 

1.  Executive Summary  40
2.  Overview 40
3.  Compensation Design  44
4.  Compensation Governance  48
5.  2020 Compensation Decision and Outcomes  54
6.  Long-Term Incentives  58
7.  2021 Compensation Structure  64
8.  Additional Information 66

 

“Supporting Information” callout boxes are used within the CD&A to provide additional context where appropriate.

 

2021 Joint Proxy Statement    39
 

Executive Summary

 

2020 was a year of transition for the companies. During the year, we emerged from bankruptcy, seated new Board members, and set the foundation for a new PG&E Corporation chief executive officer and a refreshed executive team.
   
Our leadership took strong and swift actions to mitigate the impacts of COVID-19 on the business. Our priorities were to protect the safety and health of our workforce—particularly our mission-critical frontline workers, maintain the level of service that our customers expect, and promote the resilience of the business. There were no compensation program changes made due to the COVID-19 pandemic.
   
We delivered solid performance for shareholders. Our fiscal year 2020 non-GAAP Core Earnings per Share was $1.61, in line with guidance.2
   
Our compensation program is focused on safety and operations. The design of our program is informed by the unique requirements that apply to our companies, including those stemming from our bankruptcy emergence and the commitments applicable under our Plan of Reorganization Order Instituting Investigation (POR OII) with the CPUC, and executive compensation criteria set out in California Assembly Bill 1054 (AB 1054).
   
The Compensation Committee exercised negative discretion to reduce short-term incentive payouts to 65 percent of target in respect of company performance. Operational performance and financial results combined to produce a formulaic result of 74.6 percent. In view of the companies’ overall safety performance and performance reports from the Federal Monitor, the Compensation Committee elected to exercise negative discretion to reduce short-term incentive payouts for our NEOs to 65 percent of target.
   
Performance-based long-term incentive awards granted in 2018 did not pay out. Operational performance and financial results combined to produce a formulaic result of 72 percent. The Compensation Committee exercised negative discretion to reduce any remaining performance share payouts for our NEOs to zero, aligning long-term compensation payouts with shareholder outcomes. The discretion applied to results of both short- and long-term incentives will result in a reduction of incentive compensation, in the form of 2020 short-term incentive payments and 2018 performance share payments, to officers for 2020 by an average of 58 percent from target for those elements of incentives.
   
The Compensation Committee continues to evolve our program. The Compensation Committee focused its work on redesigning performance metrics to focus on results. For the 2021 short-term incentive, we are capping payouts at 200 percent of target and removing the individual performance modifier. For our 2021 long-term awards, we have reintroduced restricted stock units for executives not subject to the executive compensation criteria of AB 1054 and reduced the maximum payout opportunity for performance share units to 200 percent. We also adjusted several short- and long-term metrics to increase the focus on operational, results-oriented outcomes and provide for better alignment with our commitments to stakeholders.

 

Overview

 

Our Companies

 

PG&E Corporation is a holding company whose primary operating subsidiary is the Utility, a public utility operating in northern and central California. The Utility generates revenues mainly through making investments in operating assets and earning an authorized rate of return on those assets through regulated rates for the sale and delivery of electricity and natural gas to customers. The compensation program described in this CD&A applies to PG&E Corporation and the Utility, with the same philosophy, structure, metrics, and goals applying to both.

 

As of December 31, 2020, the companies had approximately 24,000 regular employees, nine of whom were employees of PG&E Corporation.

 

 

2 PG&E Corporation discloses historical financial results and bases guidance on “earnings from operations” in order to provide a measure that allows investors to compare the underlying financial performance of the business from one period to another, exclusive of items that management believes do not reflect the normal course of operations. Earnings from operations are not a substitute or alternative for income available for common shareholders presented in accordance with Generally Accepted Accounting Principles (GAAP) (see Exhibit A at the end of this CD&A for a reconciliation of results based on earnings from operations to results based on income available for common shareholders in accordance with GAAP).

 

2021 Joint Proxy Statement    40
 

Our Named Executive Officers

 

PG&E Corporation (positions as of 12/31/2020)    
William L. Smith Christopher A. Foster John R. Simon William D. Johnson
Interim Chief Executive
Officer and President(1)
Vice President and Interim
Chief Financial Officer(2)
Executive Vice President,
General Counsel and
Chief Ethics & Compliance
Officer(3)
Former Chief Executive
Officer and President(4)
Jason P. Wells Janet C. Loduca    
Former Executive Vice
President and Chief
Financial Officer(5)
Former Senior Vice President
and General Counsel, PG&E
Corporation and Pacific Gas
and Electric Company(6)
   
       
Pacific Gas and Electric Company (positions as of 12/31/2020)  
Michael A. Lewis David S. Thomason James M. Welsch Andrew M. Vesey
Interim President(7) Vice President, Chief
Financial Officer and
Controller
Senior Vice President,
Generation and Chief
Nuclear Officer
Former Chief Executive
Officer and President(8)

  Ms. Loduca was an NEO of the Utility in addition to PG&E Corporation. Messrs. Lewis and Vesey were NEOs of PG&E Corporation in addition to the Utility.
     
Notes. (1) Effective June 30, 2020.
     
  (2) Effective September 26, 2020. From January 1 through March 8, 2020, Mr. Foster was Vice President, Investor Relations. From March 9 through September 25, 2020, Mr. Foster was Vice President, Treasury & Investor Relations.
     
  (3) Title effective August 15, 2020. From January 1 through August 14, 2020, Mr. Simon was Executive Vice President, Law, Strategy & Policy.
     
  (4) Retired effective July 1, 2020.
     
  (5) Resigned effective September 26, 2020.
     
  (6) Separated effective August 16, 2020.
     
  (7) Effective August 1, 2020. From January 1 through July 31, 2020 Mr. Lewis was Senior Vice President, Electric Operations.
     
  (8) Separated effective August 4, 2020.

 

Leadership Changes

 

The companies experienced several significant leadership transitions during 2020. Mr. Johnson retired as CEO and President of PG&E Corporation effective July 1 and the PG&E Corporation Board appointed Mr. Smith on an interim basis from June 30 until the start date of a new CEO. Additionally, Mr. Vesey, Ms. Loduca, and Mr. Wells all left employment with the companies during the year.

 

In association with these changes the Compensation Committee reviewed and approved interim compensation arrangements and retention awards for select NEOs. Further details can be found in the “Interim CEO Compensation,” 2020 Compensation Decisions and Outcomes” and “Retention Awards” sections, starting on page 61, 54 and 60 respectively.

 

In November 2020, Patricia K. Poppe was hired as the new CEO of PG&E Corporation, effective January 4, 2021.

 

Our Response to COVID-19

 

The COVID-19 pandemic added operational challenges for the companies in 2020. As providers of an essential service we are committed to maintaining business continuity and services for the benefit of the communities in which we operate. Leadership acted quickly to protect the safety and health of our dedicated workforce, particularly our mission-critical frontline workers, implementing policies such as remote working where possible, the provision of PPE for our field workers, enhanced healthcare benefits, and interim time off and leave policies, all to maintain the level of service that our customers expect.

 

2021 Joint Proxy Statement    41
 

Performance Highlights

 

The 2020 performance year was one of transition for the companies. In addition to our exit from bankruptcy, executive team changes, renewed focus on safety, and focus on reliability and reducing operational risk, we also recommitted to the citizens of California that we would lead from the front on issues of climate change, wildfire mitigation, and environmental sustainability.

 

The companies took responsibility for a series of devastating wildfires caused by our electric equipment, including the 2018 Camp fire. The Utility pleaded guilty to involuntary manslaughter in the deaths of the 84 people who lost their lives in that tragedy and settled billions of dollars in damage claims by fire victims as well as cities, counties, and other public entities.

 

In August, California experienced some of the most severe weather in recent history, including extreme heat, dangerously high winds, and a “lightning siege” that ignited wildfires across the Utility’s service territory. These events strained the capacity of the state’s electric grid, forcing the independent system operator to impose “rolling backouts” affecting hundreds of thousands of PG&E customers. Dangerous weather conditions recurred throughout the summer, fall, and into the winter, necessitating several PSPS events, many of which affected the same communities multiple times.

 

Within our challenging operating environment, the companies succeeded in achieving many of the performance objectives set for 2020:

 

We laid the groundwork for further improvements in the wildfire management program in 2021. We committed to ensuring that our PSPS events would be targeted and focused, and demonstrated clear year-over-year improvements that received positive feedback from the CPUC.
   
We exited bankruptcy, expedited the resolution of wildfire victims’ claims, and successfully closed major regulatory cases at both the state and federal level.
   
We seated a diverse, deeply experienced Board at each company, and began recruiting new members for the companies’ executive teams, naming Patricia K. Poppe as the incoming CEO of PG&E Corporation in November.

 

However, the companies’ 2020 performance also fell short in several key areas:

 

We experienced five employee and contractor fatalities, including a helicopter crash that claimed three lives.
   
Both the safety shutoffs and the state-mandated rolling blackouts contributed to frequent and extended service interruptions.
   
Our gas operations recorded several large overpressure incidents that, while managed safely, did not reflect our standards or expectations.
   
The year’s extreme weather contributed to a number of fire ignitions connected to PG&E equipment.
   
Throughout 2020, and continuing into 2021, the Utility continued to face questions and criticism from the federal judge overseeing its probation. The judge expressed his view that the Utility was not complying with conditions linked to the vegetation management and safety metrics detailed in the Utility’s Wildfire Mitigation Plan. With the concurrence of the US Attorney’s Office and the CPUC, these concerns were resolved when the Utility agreed to new conditions of probation ultimately approved by the court.

 

2021 Joint Proxy Statement    42
 

Compensation Framework

 

Our core compensation program, which consists of base salary, a cash-based short-term incentive, and an equity-based long-term incentive, is applied consistently to both PG&E Corporation and the Utility. This compensation framework applied to all NEOs during the year other than the former CEO and President of PG&E Corporation, who was subject to a three-year agreement based on the prevailing bankruptcy conditions in 2019, and the Interim CEO and President of PG&E Corporation, whose pay arrangements reflected the transitionary nature of the role.

 

Core Pay Component and Rationale 2020 NEO Target Direct
Compensation Mix(1)
2020 Performance Measures Performance
Period
Form of
Payment
Base Salary
Fixed pay to attract and retain talent;
takes account of scope, performance and experience
   N/A N/A Cash
Short-Term Incentive
Variable pay to incent and recognize performance in areas of short-term strategic importance

   Electric Operations

   Gas Operations

   Generation

   Additional Public Safety & Reliability

   Financial Stability

Individual Performance Modifier

Specific metrics associated with each category; see below

One year Cash
Long-Term Incentives
Equity-based pay to incent and
recognize performance in areas of long-term strategic importance, promote retention and stability, and align executives with shareholders

   Customer Satisfaction Score

   PSPS Notification Accuracy

   System Hardening

   Substation Enablement

Relative TSR Modifier

Three years PSUs
  In addition to these core direct components of compensation, NEOs receive modest perquisites, are eligible to participate in post-employment benefit programs on terms broadly similar to our other employees, and are covered by an executive severance plan.
     
Notes. (1) Reflects target compensation for our NEOs who remained in employment on December 31, 2020, other than Mr. Smith given his unique and temporary compensation arrangements as Interim CEO and President.

 

From time to time, the Compensation Committee might also approve cash or equity awards in addition to the annual incentive awards. Typically, these include awards to new hires, promotional awards, or retention awards. One-time awards were made during 2020 to address retention concerns and reflected the fact that certain individuals took on expanded roles following NEO departures. Further details on the operation of all elements of compensation in 2020, including awards related to expanded duties and retention, can be found in the “2020 Compensation Decisions and Outcomes” section starting on page 54.

 

Looking Ahead

 

2021 is expected to be a year of significant change and rebuilding for the companies, with Ms. Poppe’s appointment as CEO of PG&E Corporation and a new executive leadership team leading the companies in a post-bankruptcy environment. On joining PG&E Corporation, Ms. Poppe immediately began meeting with customers, policymakers, investors, and co-workers across the companies to gather insights on how to improve outcomes, reduce risk, and rebuild trust. Her approach centers on results that deliver benefits across the “Triple Bottom Line” of People, Planet, and Prosperity, underpinned by our safety mindset and supported by consistent operational performance.

 

For 2021, the Compensation Committee has maintained a compensation structure broadly consistent with 2020, with changes to performance metrics and weightings to reflect priorities for the year ahead with an emphasis on results. These changes reinforce important areas of operational focus, including increased emphasis on safety, while maintaining alignment with the criteria of AB 1054 and our commitments under the POR OII.

 

2021 Joint Proxy Statement    43
 

As the Boards and refreshed executive team continue to refine our long-term strategic objectives, the Compensation Committee will work to help ensure that our compensation philosophy and practices appropriately focus on operational, financial, safety, and customer-centered priorities that represent the stakeholders we serve. During 2021, we plan to re-engage with investors, proxy advisors, regulators, and other constituencies to gather feedback on our executive compensation programs. We will also conduct a comprehensive review of our compensation philosophy, programs, and practices to help ensure strong alignment with the interests of our shareholders, customers, and stakeholders, and competitive pay-for-performance positioning. Further information about our 2021 compensation design can be found in the “2021 Compensation Structure” section starting on page 64.

 

Compensation Design

 

Compensation Objectives

 

Our companies’ mission is to deliver safe, reliable, affordable, and clean electricity and gas to our customers. Our focus on customer welfare, prioritizing both public and employee safety, is central to how we operate and reflected in our executive officer compensation program design. We believe that focusing on those attributes of our business will lead to long-term value creation for our shareholders. This focus also aligns with the criteria under AB 1054 and our commitments under the POR OII.

 

To be successful, we need to attract, motivate, and retain executives with the necessary skills and experience, who are aligned with our vision, and who can deliver on our commitments to all stakeholders. Four fundamental objectives form the foundation of our compensation program.

 

Objective   How we achieve this1
Pay for performance A significant portion of total compensation is at-risk and based on performance – in 2020 an average of 61 percent of NEO target compensation was at-risk
  Short- and long-term incentives are earned based on performance reflecting safety, customer, operational, and financial goals, including shareholder returns
  Metrics and goals are designed so as not to promote excessive risk-taking
Align with shareholders Equity-based compensation, the value of which reflects movements in our stock price, accounted for an average of 47 percent of NEO target compensation in 2020
  Total shareholder return relative to our Performance Comparator Group is used as a performance measure or modifier (applies to 2018 and 2020 PSU awards; no awards were made in 2019)
Provide market competitive pay Target cash compensation should be competitive with the median for comparable roles in our Pay Comparator Group
Comply with legal requirements The officer compensation structure is designed and reviewed to reflect both the letter and spirit of legal requirements
     
Notes. (1) Reflects target compensation for our NEOs who remained in employment on December 31, 2020, other than Mr. Smith given his unique and temporary compensation arrangements as Interim CEO and President.

 

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Compensation Policies and Practices

 

We are focused on creating an effective compensation program that successfully aligns our key strategic objectives with the interests of our shareholders and broader stakeholders. To reinforce this, we have adopted policies and practices that guide our compensation practices as summarized below.

 

  We Do…   We Do Not…
Pay for performance | Majority of compensation is at risk, linked to company performance and shareholder interests Pay tax gross-ups | No tax gross-ups are provided, except for those generally available to all management employees, such as for one-time relocation expenses upon hire
Engage with shareholders | Ongoing discussions with key institutional investors, including on the topic of compensation(1) Permit hedging or pledging | Our policy prohibits hedging and pledging of either company’s stock
Require meaningful ownership | Executives subject to share ownership and retention requirements Reprice stock options | Any repricing would require advance shareholder approval
Engage an independent consultant | The Compensation Committee engages a consultant and annually assesses independence Provide additional service credits | No granting of additional service under the Supplemental Executive Retirement Plan
Operate clawback provisions | Incentive compensation and severance for certain officers is subject to clawback or restriction Pay unearned dividends | No dividends or dividend equivalents are paid on unvested equity awards
Have a double trigger | Change in control severance requires a change in control and involuntary termination (includes constructive termination for good reason) Provide excessive benefits or perquisites | Benefits and perquisites are limited, reflecting market norms
Notes. (1) Engagement related to executive compensation was temporarily suspended during bankruptcy proceedings and will recommence in 2021.

 

Commitment to Compliance

 

The Utility is subject to AB 1054, a California law which, among other things, sets out certain criteria regarding the design of the Utility’s executive compensation program. Although these criteria only apply to the Utility’s executive officers as defined in AB 1054, the criteria also have influenced the executive compensation design and arrangements for officers at both companies. There are also additional executive compensation requirements that the Utility is subject to as a result of the POR OII.

 

Supporting Information: California Assembly Bill 1054 Considerations 

 

AB 1054 is legislation applying to the Utility that addresses the dangers and devastation from catastrophic wildfires in California caused by electric utility infrastructure. There are two subsections setting forth criteria regarding executive compensation with which the Utility complies. These criteria apply specifically to a subset of Utility officers and influence the design of our programs more broadly at both the Utility and PG&E Corporation.

 

Supporting Information: Chapter 11 Considerations - Plan of Reorganization Order Instituting Investigation

 

The POR OII is the process by which the CPUC reviewed and approved the companies’ Chapter 11 Plan of Reorganization. As part of the POR OII, the Utility is subject to additional requirements regarding executive compensation that apply specifically to a subset of Utility officers, and we have designed our programs to comply with these requirements, as described below.

 

2021 Joint Proxy Statement    45
 
Requirement(1)   How We Achieve This(2,3)
Compensation should be structured to promote safety as a priority and to ensure public safety Incentive plan metrics are weighted toward customer and workforce welfare, placing a priority on public safety
All long-term incentive awards also incent customer and workforce welfare indirectly due to their exposure to absolute and relative stock performance
A significant portion of long-term incentive compensation shall be based on safety, customer satisfaction, engagement, and welfare; the remaining portion may be based on financial performance or other considerations PSU metrics promote customer experience and public safety
Compensation should be structured to promote utility financial stability Incentive plan metrics collectively promote customer, public, and workforce safety, thus contributing indirectly to financial stability
Short-term incentive includes a core earnings per share metric, a measure sensitive to dilution incurred during emergence from Chapter 11
Long-term incentive awards are subject to a financial or relative TSR metric, either as a modifier or standalone measure, that reduces payouts if our relative returns lag those of other energy companies
Incentive compensation should be based on meeting performance metrics that are measurable and enforceable Incentive plan metrics are designed to be objective, measurable, enforceable, and auditable
Metrics are predominantly outcome-based, focused on end results rather than operational activity or effort
Guaranteed cash compensation should be limited, with the primary portion of executive officers’ compensation based on the achievement of objective performance metrics Compensation structure emphasizes at-risk, performance-based variable pay, making up an average of 61 percent of NEO target compensation in 2020
Short- and long-term incentives constitute at least 50 percent of target compensation; as noted above, in 2020, on average 61 percent of NEO target pay was at-risk variable pay
Long-term incentive awards are aligned with shareholders and are performance-based through share price exposure (all equity-based compensation) and the application of performance metrics (PSUs)
The compensation structure must not include any guaranteed monetary incentives Short- and long-term incentives are entirely at risk
The only guaranteed cash payments are base salary and a modest stipend in lieu of broader, market-typical perquisites
The compensation should include a significant long-term element based on the electrical corporation’s long-term performance and value, held or deferred for at least three years Long-term incentive awards represent a significant portion of total compensation
Performance-based equity is subject to a three-year performance period
Performance-based equity is subject to a three-year hold from the date of grant
Ancillary compensation that is not aligned with shareholder and taxpayer interests in the electrical corporation should be minimal or eliminated Executives receive modest stipends in lieu of perquisites
These are de minimis in value and aligned with stakeholder interests as they are aligned with market norms within the industry, and thus contribute to the attraction and retention of talent
Notes. (1) This is an abbreviated summary of some of the criteria and not intended to be comprehensive or contain formal legal definitions.
     
  (2) Unless noted otherwise, comments pertain to compensation arrangements post-Chapter 11 emergence, given the restrictions placed on practices during Chapter 11.
     
  (3) Unless otherwise noted, target compensation refers to salary, target short-term incentive and the target annual long-term incentive award with percentages reflecting target compensation for our NEOs who remained in employment after December 31, 2020, other than Mr. Smith given his unique and temporary compensation arrangements as Interim CEO and President.

 

2021 Joint Proxy Statement    46
 

Strategic Alignment

 

It is important that the performance metrics used in our officer compensation framework align with our strategic priorities if we are to be effective in paying for performance and demonstrating accountability. Our performance metrics reflect our focus on customer welfare, prioritizing both public and employee safety including contributing to long-term sustainable value for our shareholders.

 

The majority of both our short- and long-term incentive plan metrics are connected to our focus on customer welfare, prioritizing public and employee safety. These metrics are described below.

 

Additional details regarding each of the listed performance measures can be found in the discussions of “Short-Term Incentives” and “Long-Term Incentives” below.

 

2020 Performance Metric   Short-Term   Long-Term   Why This Matters
ELECTRIC OPERATIONS            
Reportable fire ignitions         Public safety measure of the results of work to mitigate wildfire risk
Electric asset failure         Public safety and reliability measure of the results of work to mitigate wildfire and system failure risks
Distribution circuit sectionalization         Public safety and reliability measure of mitigation of the scope and impact of, and risks associated with, PSPS events
GAS OPERATIONS            
Large overpressure events         Public safety measure of the results of work to mitigate the risk of loss of gas containment
Total gas dig-ins reductions         Public safety measure of the results of work to mitigate the risk of loss of containment from underground gas transmission and distribution facilities
GENERATION            
Safe dam operating capacity         Public safety measure of the results of work to mitigate the risk of large uncontrolled water release
Diablo Canyon Power Plant (DCPP) reliability and safety indicator         Public safety measure of the results of work to reduce the risk of a nuclear core damaging event with the potential for radiological release; composite metric of 11 performance indicators
WORKFORCE SAFETY            
Days away, restricted, and transferred rate         Employee safety measure of the results of reduced risk of workforce injuries; reflects Occupational Safety and Health Administration (OSHA) record keeping requirements
RELIABILITY            
Gas customer emergency response         Public safety measure of work to reduce risk and increase reliability of service by promoting prompt responses to customer calls, or notifications reporting a gas odor, or gas emergency
911 emergency response         Public safety measure of the percentage of incidents where Utility personnel arrive onsite within 60 minutes of a 911 call; promotes prompt response times that reduce public safety risks and frees up public agency resources to respond to other emergency situations
Customers experiencing multiple interruptions         Customer experience measure of the results of efforts to promote system reliability
System hardening         Public safety and reliability measure assessing actions taken to mitigate the risk of catastrophic wildfires
Substation enablement         Public safety and reliability measure promoting and assessing success in efforts to reduce the scope and customer impact of PSPS events
             
CUSTOMER EXPERIENCE            
Customer satisfaction         Customer experience measure of satisfaction with the services offered by the companies
Public safety power shutoff (PSPS) notifications         Customer experience measure of advance and accurate notification of PSPS outages

 

2021 Joint Proxy Statement    47
 

Our incentive programs also incorporate metrics and goals reflecting our financial stability.

 

Supporting Information: What “Financial Stability” Means for Us
Our business model generates revenue through making investments in operating assets and earning an authorized rate of return on those assets through regulated rates, or “cost of service ratemaking.” There is no guarantee that regulated rates will yield the authorized rate of return; only by managing costs within the framework of authorized rates can we deliver value to shareholders. With limited exceptions, we do not make more money by selling more electricity and gas. Reducing our operating cost, which is tied to customer affordability through our rate-setting process, is directly aligned with creating shareholder value.

 

2020 Performance Metric
FINANCIAL STABILITY   Short-Term   Long-Term   Why This Matters
Non-GAAP core earnings per share         Measure to promote and assess financial stability; aligns with cost efficiency; promotes customer affordability; financial stability critical to continued provision of services to customers
Relative TSR         Measure to assess relative value created for our shareholders, providing an indirect external assessment of our performance in all other areas. In 2020 relative TSR was used as a modifier rather than a metric

 

 

Compensation Governance

 

Role of the Compensation Committee

 

The Compensation Committee is made up of at least three, and currently four, independent directors who collectively have the delegated authority to oversee matters relating to defined compensation, benefits, and human capital issues. In discharging their duties, the Compensation Committee receives input from the management teams and external independent consultants as appropriate.

 

 

The core activities of the Compensation Committee include:

 

Recommending the total target compensation for the CEO of PG&E Corporation and the Utility President (or equivalent officer(s)) to the relevant Board for approval, informed by reviews of comparative data, advice from the Compensation Committee’s independent compensation consultants, and an assessment of individual performance, objectives, and scope of responsibilities.

 

2021 Joint Proxy Statement    48
 
Approving the total target compensation for all other executive officers based on similar contextual inputs and proposals from the PG&E Corporation CEO and the Utility President (or equivalent officer(s)), as applicable. The PG&E Corporation CEO has the authority to approve compensation within the guidelines approved by the Compensation Committee for lower-level officers (excluding Section 16 Officers) and non-officer employees.
   
Approving compensation guidelines based on input from management for different categories of employees, including target short- and long-term incentive opportunities, an aggregate cap on the value of long-term incentive awards, and the terms and conditions that will apply to long-term incentive awards made during the year.
   
Administering the Long-Term Incentive Plan (LTIP), under which equity-based awards are made, with the ability to delegate ministerial matters to management.
   
Reviewing and approving the performance metrics and associated goals proposed by management, for the short- and long-term incentive awards.

 

Role of Management

 

The PG&E Corporation CEO and the Utility President (or equivalent officer(s)) are generally invited to Compensation Committee meetings but do not participate in discussions on their own compensation. In certain areas, as described above, the Compensation Committee welcomes these officers’ feedback on NEO performance given their knowledge of executives’ contributions and gives this feedback appropriate consideration in the executive compensation-setting process. The Compensation Committee may exercise its discretion to accept, reject, or modify their feedback based on the Compensation Committee members’ collective assessment of the NEOs’ performance and pay position relative to the peer groups, and PG&E Corporation’s overall financial and operating performance and other factors that the Compensation Committee deems appropriate.

 

Use of Consultants and Advisors

 

To assist in discharging its duties, the Compensation Committee retains an independent compensation consultant to provide advice and data, including advising and reviewing annual executive compensation arrangements and individual compensation packages. From September 2014 through the end of 2020, the Compensation Committee retained Pay Governance, LLC as an independent consultant to provide advice on general compensation issues. During this period Pay Governance did not provide services to management of either company or their respective affiliates, although Pay Governance was invited to maintain a working relationship with management in order to effectively fulfill an advisor role to the Compensation Committee. During and in respect of 2020, Pay Governance advised the Compensation Committee on the following matters:

 

Non-employee director compensation
Market competitiveness of executive officer compensation
Emerging trends and best practices in executive pay and corporate governance
Performance goal and metric selection
Compensation risk
Shareholder advisory firms’ pay and performance analyses
Disclosures relating to compensation
Severance and change-in-control practices and policies
Chapter 11 compensation-related matters

 

In addition, for 2020, the companies engaged Willis Towers Watson for the specific purpose of advising the Boards of Directors, the Compensation Committee and management on incentive plans, retention plans, and non-employee director compensation for companies undergoing financial restructurings. Fees in respect of this work totaled $198,000 in 2020. Willis Towers Watson also provides actuarial and consulting services with respect to employee compensation and benefit plan administration, with fees totaling $2.35 million in 2020. The Willis Towers Watson representatives who worked on the executive and director compensation issues have no relationships with the Boards’ members or executive management, other than through the provision of this advice, and are independent of the team working on ongoing customary services for the companies. Compensation received by the Willis Towers Watson executive compensation team is not tied to the other fees paid to Willis Towers Watson by PG&E Corporation and the Utility.

 

The Compensation Committee determined that no conflicts of interest were raised by the work of Pay Governance or Willis Towers Watson during 2020.

 

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In the fourth quarter of 2020 the Compensation Committee conducted a review of executive compensation advisory firms. This reflected the healthy governance practice of conducting a periodic review, and providing an opportunity to consider the merits of engaging the perspective of a new independent consultant. After careful consideration of a number of well-qualified nationally-recognized independent executive compensation consultants, Meridian Compensation Partners, LLC was selected to advise the Compensation Committee as of January 1, 2021. The Compensation Committee assessed Meridian’s independence and determined that no conflict of interests exist.

 

The Compensation Committee may also engage other compensation consultants, legal counsel, and advisers, after consideration of their independence and the potential for conflicts of interest. PG&E Corporation pays the reasonable compensation costs for any such advisers and consultants. Management may also retain separate compensation consultants.

 

Shareholder Engagement

 

Feedback from shareholders is an important consideration for the Compensation Committee when reviewing and setting compensation for our executive officers. In a typical year, this feedback is collected through two primary channels:

 

Directly through proactive engagement with our major shareholders and stakeholders throughout the year, and
Indirectly through the results of our say-on pay vote.

 

In 2020 our direct engagement with shareholders specific to executive compensation was limited prior to our emergence from bankruptcy.

 

 

2021 Joint Proxy Statement    50
 

Compensation and Risk

 

The Compensation Committee annually reviews an assessment of the general risk factors associated with the companies’ compensation policies and practices to determine whether they encourage inappropriate risk-taking. The Compensation Committee’s independent compensation consultant in 2020, Pay Governance, assisted in this review. The Compensation Committee also receives advice from the Safety and Nuclear Oversight Committees of the companies’ respective Boards of Directors.

 

Annual Risk Assessment   Safety and Nuclear Oversight
Committees’ Input
  Compensation Risk Mitigation
Policies and Practices
         

Annual risk assessment conducted by Pay Governance covered:

 

•  Compensation structure and mix

 

•  Incentive plan structures

 

•  Other pay plans

 

•  Governance of plan design and administration oversight

 

•  Target and maximum opportunities

 

•  Nature and mix of performance metrics

 

•  Risk of earnings manipulation

 

•  Compensation Committee/Board discretion to reduce or eliminate performance

 

•  Advice regarding appropriate safety and operational incentive measures

 

•  Assessment of emphasis on and overlap/consistency in safety metrics and weightings, and the extent to which these metrics and weightings support an organization-wide focus on safety

 

•  Executive stock ownership guidelines

 

•  Clawback policy

 

•  Hedging and pledging policy

 

•  Severance and change-in-control benefits

 

•  Incentive goal-setting approach

   
  Pay Governance concluded that the companies’ compensation warrangements have a low-risk profile. The companies believe compensation programs and policies are not reasonably likely to have a material adverse effect on either PG&E Corporation or the Utility.

 

For 2020, Pay Governance concluded that there were no material issues regarding the companies’ executive pay programs, and that the design of the companies’ incentive pay plans has a low risk of encouraging employees to take risks that could potentially have material adverse consequences to the organization. The Pay Governance conclusion extends to the CEOs and Presidents (and equivalent officers) of PG&E Corporation and the Utility and the other NEOs who participated in the incentive arrangements during 2020. Based on this, the companies concluded that the risks arising from the overall compensation policies and practices are not reasonably likely to have a material adverse effect on either PG&E Corporation or the Utility.

 

Executive Stock Ownership Guidelines

 

We believe that stock ownership further aligns the interests of our executives with those of our shareholders, encouraging executives to consider the long-term performance and prospects for our companies. Our guidelines require senior executive officers to achieve and maintain a minimum investment in PG&E Corporation common stock, expressed as a percentage of their base salary. Until an executive meets the applicable guideline, the executive is subject to a 50 percent holding requirement in relation to the net shares realized after tax withholding from the vesting of RSUs or PSUs. In assessing compliance, unvested RSUs are counted if the executive is eligible for retirement under the award’s terms.

 

The current guidelines are as follows:

 

Roles   Guideline
(% of Base Salary)
CEO, PG&E Corporation            600%
President, Pacific Gas and Electric Company Executive Vice Presidents   300%
Other Executive Officers   150%

 

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Clawback

 

The Executive Incentive Compensation Recoupment Policy is a robust policy that enables the Compensation Committee and Boards to recoup payments made to Section 16 Officers across both companies in defined circumstances, including no-fault scenarios that would negatively impact our shareholders. The policy remains under periodic review to help ensure continued relevance.

 

What   Why
     

  Short-term incentives

 

  Long-term cash incentives

 

  Equity-based incentives

   

  Financial restatement with the SEC for any of the three most recently completed fiscal years

 

  A material miscalculation with respect to the amount of any payment

 

  Individual involvement in fraud or misconduct that caused material financial or reputational harm

 

The 2012 Officer Severance Policy, as amended, further enables the Committee and Boards to recoup severance rights, payments, and benefits provided executive officers across both companies (including executive officers as defined in AB 1054), in defined circumstances.

 

What   Why
                                                                                 
  Severance benefits     Individual misconduct materially contributes to PG&E Corporation or Utility felony conviction relating to public health or safety or company financial misconduct

 

Anti-Hedging and Anti-Pledging Policy

 

The Insider Trading Policy prohibits certain hedging and pledging activities conducted by the companies’ Board members, officers, and designated employees who are subject to a quarterly earnings blackout period or event-specific blackout period. The policy covers equity instruments related directly or indirectly to either company or their subsidiaries. Covered individuals may not engage in short sales, transactions in publicly traded options, or hedging or monetization transactions; hold securities in a margin account; or pledge securities as collateral for a loan.

 

Use of Market Data

 

The Compensation Committee refers to two peer groups: one for benchmarking pay and the other for measuring the companies’ relative performance. Distinct groups are maintained to help ensure each is relevant for its primary purpose. In particular, larger companies may be reasonable comparators for performance but not for compensation levels.

 

Pay
Comparator

Group
  Provides insights into compensation levels and design within companies that PG&E Corporation and the Utility compete with for talent and that are similar in terms of size and business operations.
  Comprises publicly traded gas and electric energy companies, primarily based on the constituents of the Philadelphia Utility Index administered by NASDAQ.
  Supplemented by pay practice data from surveys for the broader energy services sector and general industry companies based on survey data.
       
Performance
Comparator
Group
  Provides comparative benchmark for PG&E Corporation‘s total shareholder return performance, and other relative industry-standard benchmarks that might be considered in goal setting.
  Comprises publicly traded gas and electric energy companies that are categorized consistently by the investment community as “regulated” and have a market capitalization of at least $6 billion.

 

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Each year the Compensation Committee approves the constituents of the pay and performance comparator groups. Informed by recommendations from the independent compensation consultant the Compensation Committee approved the following comparator groups for 2020, which were unchanged relative to the prior respective groups.

 

Company Pay Performance
AES Corporation  
Alliant Energy Corporation    
Ameren Corporation
American Electric Power Company, Inc.
CenterPoint Energy, Inc.
CMS Energy Corporation    
Consolidated Edison, Inc.
Dominion Resources, Inc.
DTE Energy Company  
Duke Energy Corporation
Edison International
Entergy Corporation
Evergy, Inc.    
Eversource Energy
Exelon Corporation
FirstEnergy Corp.  
NextEra Energy, Inc.  
NiSource Inc.  
Pinnacle West Capital Corporation  
Public Service Enterprise Group  
Sempra Energy  
Southern Company
WEC Energy Group, Inc.
Xcel Energy Inc

 

Consistent with prior years, the groups differ from the constituents of the Philadelphia Utility Index to maximize relevance for companies as follows:

 

American Water Works, El Paso Electric and Pinnacle West Capital Corporation were removed due to dissimilar business models or relative size.
Sempra Energy was added to the pay comparator group and WEC Energy was added to both groups given their direct relevance, despite not being included in the Index.

 

In reviewing pay data the Compensation Committee does not adhere strictly to formulas or data to determine the actual mix and amounts of compensation. When referencing positioning against market data the Compensation Committee also considers factors including each NEO’s scope of responsibility and organizational impact, experience, and performance, as well as PG&E Corporation’s and the Utility’s overall safety, operating, and financial results in reaching decisions. This flexibility is important in supporting the overall pay-for-performance philosophy and in meeting the Compensation Committee’s objectives of attracting, retaining, and motivating a talented executive leadership team.

 

Incentive Plan Goal Setting

 

To be successful in aligning pay with performance it is important that performance goals are set appropriately within our incentive plans. For each of the metrics used in our incentive plans the Compensation Committee reviews a comprehensive analysis that typically sets out the following, on a metric-specific basis:

 

Data on historic performance, showing multi-year trends;
Projected performance on a multi-year basis, driven by workplans and anticipated timing of milestone achievements;
Target setting methodology, with recommended ranges around the target to establish threshold and maximum goals; and
Degree of change in the proposed threshold, target, and maximum goals as compared with the prior year.

 

While the Compensation Committee monitored the impact of COVID-19 during the year, no changes were made to our incentive metrics or goals for 2020. This reflected the important role that the companies played for our direct and indirect customers during 2020, and no change in the standards was expected despite the significant challenges faced.

 

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2020 Compensation Decision and Outcomes

 

During 2020 there were several departures among our executive officers, with others stepping into roles on an interim basis. The impact of these interim duties on 2020 compensation is discussed below.

 

Base Salary

 

Base salaries are reviewed on an annual basis and are targeted to be within a competitive range of market median for comparable roles in the Pay Comparator Group. In determining each NEO’s base salary consideration is given to role scope and individual experience and performance. The Compensation Committee believes that this level of comparability to market is appropriate and consistent with its pay philosophy of taking into consideration factors other than market data in establishing individual pay levels, while delivering cash compensation that is competitive with the market.

 

In 2019, as a result of the Chapter 11 Cases, no executive officers received an increase. For 2020, increases ranged from 0 to 15 percent, with an average of 5.8 percent. Increases reflected market realignment, changes in role scope, and promotions. Salaries were effective March 1, 2020, unless otherwise noted.

 

NEO  Role (as of 12/31/20)  2020 Salary(1)  Increase(2) 
William L. Smith  Interim Chief Executive Officer and President, PG&E Corporation   $1,500,000  N/A 
Michael A. Lewis  Interim President, Pacific Gas and Electric Company   $556,500  5.0% 
Christopher A. Foster(3)  Vice President and Interim Chief Financial Officer, PG&E Corporation   $345,000  15.0% 
David S. Thomason(4)  Vice President and Chief Financial Officer and Controller, Pacific Gas and Electric Company   $350,000  7.7% 
John R. Simon  Executive Vice President, General Counsel and Chief Ethics & Compliance Officer, PG&E Corporation   $726,280  4.5% 
James M. Welsch  Senior Vice President, Generation and Chief Nuclear Officer, Pacific Gas and Electric Company   $577,700  6.0% 
William D. Johnson  Former Chief Executive Officer and President, PG&E Corporation   $2,500,000  0.0% 
Andrew M. Vesey  Former Chief Executive Officer and President, Pacific Gas and Electric Company   $1,000,000  0.0% 
Jason P. Wells  Former Executive Vice President and Chief Financial Officer, PG&E Corporation   $674,100  7.0% 
Janet C. Loduca  Former Senior Vice President and General Counsel, PG&E Corporation and Pacific Gas and Electric Company   $615,250  7.0% 

 

Notes. (1) Annualized salary as of December 31, 2020, or date of termination if applicable.
  (2) Increase relative to salary as of December 31, 2019.
  (3) Salary increased from $300,000 to $318,000 effective March 1, 2020 in association with annual merit review. Salary increased from $318,000 to $345,000 effective March 9, 2020 in association with the addition of responsibility for Treasury to Mr. Foster’s role. As Interim Chief Financial Officer of PG&E Corporation, Mr. Foster received an additional monthly fee of $20,000 starting September 26, 2020, which is not included in his salary.
  (4) Salary increased from $325,000 to $334,750 effective March 1, 2020 in association with annual merit review. Salary increased from $334,750 to $350,000 effective August 1, 2020 in association with promotion.

 

Short-Term Incentives

 

Our Short-Term Incentive Plan (STIP) is designed to drive the companies’ business objectives and strategic priorities, providing an opportunity for a cash payout reflecting the results achieved during the year. The plan focuses on quantifiable outcome-based metrics in the overall company score and includes a modifier for individual performance based on year-end rating.

 

 

2021 Joint Proxy Statement    54
 

The Compensation Committee establishes an annual target opportunity, expressed as a percentage of an individual’s base salary, set with reference to market median practices in our Pay Comparator Group. Target opportunities for the NEOs eligible to participate in the program in 2020 ranged from 45 percent to 85 percent of salary. In respect of the company score, achieving threshold performance will earn a payout at 50 percent of target and achieving maximum performance will earn a payout at 150 percent of target. After the application of the individual performance modifier, awards can be earned up to 187.5 percent of target.

 

The Compensation Committee retains complete and sole discretion to adjust any performance formula or score, including to zero, on any and all incentive plan performance measures or modifiers for any reason, including consideration of (without limitation) performance with respect to safety, compliance, and ethics.

 

Supporting Information: CEO Compensation Considerations
In 2019, our CEOs and Chapter 11 insiders were not eligible to participate in the STIP. Mr. Johnson’s three-year compensation arrangement entered into at the time reflected this limitation. Mr. Smith also did not receive an award under the 2020 STIP given the transitionary nature of his role as Interim CEO and President of PG&E Corporation. Further details can be found in the “Interim CEO Compensation” section starting on page 61.

 

The Compensation Committee established 2020 metrics across six performance areas, weighted 75 percent towards metrics that focus on underlying objectives tied to customer welfare and safety, and 25 percent towards financial stability, which itself is inherently tied to our safety performance.

 

 

In determining and approving the appropriate performance metrics in each of these performance areas the Compensation Committee considered factors including:

 

The alignment with our fundamental belief that safety is paramount, complemented by a focus on customer welfare across all aspects of our business.
   
The interaction between metrics to help ensure they collectively drive the right behaviors. For example, an overly narrow focus on reporting might result in employees failing to seek appropriate medical treatment for work-related injuries in order to keep reported injury metrics low.
   
Guidance from the CPUC reinforcing the priority placed on outcome-based metrics for alignment with reducing the companies’ highest-priority risks, such as the risk of catastrophic events like wildfires, dam failures, or gas explosions.
   
The companies’ ability to establish robust threshold, target, and maximum achievement milestones.
   
The proportion of metrics that are outcome-based, as opposed to metrics that are based on operational activity or effort.

 

 

2021 Joint Proxy Statement    55
 

As described in the earlier “Incentive Plan Goal Setting” section on page 53, in approving performance goals, the Compensation Committee references a range of factors including historic performance inclusive of multi-year trends; projected performance driven by workplans and anticipated timing of milestone achievements; the target-setting methodology, with recommended ranges around target to establish threshold and maximum goals; and the degree of change the proposed goals represent versus the prior year.

 

Each metric has a clear definition with a pre-approved calculation methodology.

 

Metric   Definition(1)
Reportable fire ignitions   Reportable fire incidents where (i) ignition is associated with the Utility’s transmission and/or distribution powerlines, (ii) something other than Utility facilities burned, and (iii) the fire traveled more than one meter from the ignition point
Electric asset failure   Failure incidents of electric distribution, transmission, and substation underground and overhead assets resulting in sustained outages, including (i) distribution and distribution substation asset failures limited to high risk threat district (HRFD) areas, and (ii) transmission and transmission substation asset failures system-wide
Distribution circuit sectionalization   Timely installation and operationalization of sectionalization devices
Large overpressure events   Number of large overpressure events (when gas pressure exceeds the maximum allowable operating pressure), with pre-established pressure limits
Total gas dig-ins reductions   Number of gas dig-ins (damage that occurs during excavation activities and results in a repair or replacement of an underground gas facility) per 1,000 Underground Service Alert (third party public service program) tickets received for gas
Safe dam operating capacity   Operating capability of mechanical equipment used as main control to reduce enterprise risk of large uncontrolled water release, calculated with reference to controlled outlet days forced out and controlled outlet days available
DCPP reliability and safety indicator   Year-end score based on 11 performance indicators developed by the nuclear industry for nuclear power generation applied to all U.S. nuclear power plans
Gas customer emergency response   Number of minutes from the time the Utility is notified to the time the Utility personnel or another qualified first responder arrives onsite to the location
911 emergency response   Percentage of incidents where Utility personnel arrive onsite within 60 minutes of receiving a 911 call
Customers experiencing multiple interruptions   Number of customers who experience five or more sustained service interruptions, both planned and unplanned
Days away, restricted, and transferred rate   Number of Occupational Safety and Health Administration (OSHA) recordable cases that have resulted in at least one lost workday or one day of job restriction or transfer; excludes fatalities
Non-GAAP core earnings per share   Actual GAAP earnings from operations less non-core items, meaning items that (i) management does not consider representative of ongoing earnings, and (ii) affect comparability of financial results between periods. See Exhibit A for a list of non-core items.

 

Notes. (1) These are abbreviated summary definitions and may not reflect complete details, including certain exclusions, for each metric.

 

The metrics and associated goals were initially proposed in February 2020 and approved after emergence from Chapter 11 in July 2020. The Compensation Committee did not make any adjustments in response to COVID-19 given the imperative to continue operating at a high standard and to meet the needs of our customers through the crisis.

 

2021 Joint Proxy Statement    56
 

In the first quarter of 2021, the Compensation Committee reviewed and certified the following results for the company score:

 

Performance Metric  

Weight

  

Threshold

(25%)

   

Target

(100%)

 

Maximum

(150%)

   

Actual

   

Unweighted

Score

 

Weighted

Score

 
Electric Operations  25%                      0.202 
Reportable fire ignitions  10%   105    101  96   148   0.000    
Electric asset failure  10%   2,328    2,166  2,058   1,823   1.500    
Distribution circuit sectionalization  5%   October 1    September 1  June 1   August 26   1.033    
Gas Operations  15%                      0.113 
Large overpressure events  7.5%   8    6  4   9   0.000    
Total dig-ins reductions  7.5%   1.53    1.44  1.28   1.11   1.500    
Generation  10%                      0.097 
Safe dam operating capacity  5%   96.92%   97.70%  98.92%   98.77%   1.439    
DCPP reliability and safety indicator  5%   92.5    95.0  97.5   92.5   0.500    
Additional Public Safety & Reliability  10%                      0.084 
Gas customer emergency response  3.3%   22.0    20.8  20.0   20.5   1.188    
911 emergency response  3.3%   95.5%   96.5%  97.5%   97.2%   1.345    
Customers experiencing multiple interruptions  3.3%   3.28%    3.12%  3.05%   3.56%   0.000    
Workforce Safety  15%                      0.000 
Days away, restricted, and transferred rate  15%   1.19    0.90  0.81   1.34   0.000    
Financial Stability  25%                      0.188 
Non-GAAP core earnings per share  25%   1.53    1.61  1.69   1.61   1.000    
2020 Overall Short-Term Incentive Plan Company Score          0.746 
2020 Overall Short-Term Incentive Plan Company Score for NEOs (after discretion)      0.650 

 

In reviewing company and NEO performance for 2020, the Compensation Committee considered the totality of circumstances over the year, including but not limited to:

 

The Utility’s overall public and workforce safety, which included five fatalities from the company and contractor workforces;
   
The possibility that Utility assets were the ignition source of the Zogg fire, which resulted in four public fatalities and property damage;
   
Compliance fines levied against the Utility by regulators; and
   
Reports provided to the Boards by the Federal Monitor on the Utility’s operational and safety performance.

 

In addition to discussions with management, the Compensation Committee consulted with independent compensation consultants and outside legal counsel to review the range of actions taken by other utilities in comparable circumstances.

 

Based upon the totality of the circumstances described above, management’s proposal, and extensive consideration, the Compensation Committee determined to exercise its discretion to materially reduce incentive compensation paid to all NEOs and officers for the STIP 2020 performance year and the 2018 LTIP performance period ending in 2020. These actions resulted in a reduction of incentive compensation, in the form of 2020 STIP payments and 2018 performance share payments, to officers for 2020 by an average of 58 percent from target for those elements of incentives.

 

The Compensation Committee arrived at the overall reduction in part by reducing the STIP company score for NEOs and officers from 0.746 to 0.650. The Compensation Committee also reduced the payout with respect to the PSUs awarded in 2018 as described further in the “Assessment of 2018 Performance Share Awards” section below.

 

In respect of individual performance, for the 2020 performance year, a modifier is applied based on annual performance ratings. The following payments reflect approved individual performance modifiers, and were approved in respect of 2020 performance.

 

2021 Joint Proxy Statement    57
 

NEO  

Target Incentive

(percent of

Base)

 

Target

Incentive

 

Company

Score

 

Individual
Performance

Modifier

 

Actual

Incentive

 

Actual

Incentive

(percent of

Target)

Michael A. Lewis   60%   $343,931   0.650   100%   $223,555   65%
Christopher A. Foster   45%   $151,645   0.650   110%   $108,426   72%
David S. Thomason(1)   50%   $160,057   0.650   110%   $114,441   72%
John R. Simon   75%   $540,800   0.650   125%   $439,400   81%
James M. Welsch   60%   $343,350   0.650   110%   $245,495   72%

 

Notes. (1) Target opportunity increased from 45% to 50% effective August 1, 2020 in association with promotion.

 

Following her separation from the companies, Ms. Loduca received a 2020 short-term incentive payment based on actual company performance, pro-rated for her time in role prior to separation. Mr. Wells received no short-term incentive payments for 2020 performance, consistent with his resignation from PG&E Corporation. Following his separation from the Utility, Mr. Vesey received a lump-sum payment equivalent to his target payout under the 2020 short-term incentive plan and waived his right to a pro-rated 2020 short-term incentive payout reflecting company performance at the end of the performance period. Additional details regarding severance benefits can be found in the sections entitled “Potential Payments—Termination Without Cause” beginning on page 83.

 

Long-Term Incentives

 

2020 Long-Term Incentive Awards

 

Our LTIP awards are designed to measure our success in ensuring operational continuity and employee engagement through a focus on customer welfare and our financial stability. For 2020, awards were made solely in the form of performance-based equity. Reflecting our emergence from Chapter 11, the Compensation Committee approved target grant values in March 2020, which were converted into PSUs in July based on the average closing price of PG&E Corporation’s common stock on the first 15 consecutive trading days following emergence.

 

Metrics were quantifiable, and where possible outcome-based, and will be measured over the three-year performance period from January 2020 to December 2022. Awards can be earned depending on performance over the three-year period ending December 31, 2022, and will vest, subject to performance, three years after the grant date, in accordance with the three-year holding period for equity required under AB 1054. Dividend equivalents, if any, are accrued and paid in cash at the end of the performance period, on earned shares only. In 2020, the Compensation Committee established annual target opportunities for each NEO, expressed as an absolute dollar values.

 

NEO   Role  

2020 Target

Long-Term

Incentive

Michael A. Lewis(1)   Interim President, Pacific Gas and Electric Company   $700,000
Christopher A. Foster   Vice President and Interim Chief Financial Officer, PG&E Corporation   $300,000
David S. Thomason   Vice President and Chief Financial Officer and Controller, Pacific Gas and Electric Company   $400,000
John R. Simon   Executive Vice President, General Counsel and Chief Ethics & Compliance Officer, PG&E Corporation   $1,750,000
James M. Welsch   Senior Vice President, Generation and Chief Nuclear Officer, Pacific Gas and Electric Company   $650,000
Andrew M. Vesey(2)   Former CEO and President, Pacific Gas and Electric Company   $2,250,000
Jason P. Wells(3)   Former Executive Vice President and Chief Financial Officer, PG&E Corporation   $1,750,000
Janet C. Loduca(4)   Former Senior Vice President and General Counsel, PG&E Corporation and Pacific Gas and Electric Company   $1,200,000
     
Notes. (1) Consists of a base award of $650,000 and a supplementary award of $50,000 reflecting Interim President duties a portion of 2020.
     
  (2) Separated effective August 4, 2020; reflecting the terms of separation, Mr. Vesey was not granted a 2020 long-term incentive award.
     
  (3) Resigned effective September 26, 2020; forfeited 2020 long-term incentive award.
     
  (4) Separated effective August 16, 2020; pro-rated award remains subject to the original award terms for severance.

 

Compensation Committee retains complete and sole discretion to adjust any performance formula or score, including to zero, on any and all incentive plan performance measures or modifiers for any reason.

 

2021 Joint Proxy Statement    58
 

Supporting Information: CEO Compensation Considerations

In 2019, our CEOs and Chapter 11 insiders were not eligible to participate in the LTIP. Mr. Johnson’s three-year compensation arrangement entered into at the time reflected this limitation. Mr. Smith also did not receive an annual LTIP award on the same terms as other executives in 2020 given the transitionary nature of his role as Interim CEO and President of PG&E Corporation. Further details can be found in the “Interim CEO Compensation” section starting on page 61.

 

Supporting Information: Chapter 11 Considerations

The addition of 30 million shares to be made available for issuance under the 2021 LTIP was approved by the Bankruptcy Court in connection with the Plan of Reorganization and further approved by PG&E Corporation’s Board on April 28, 2020. Under California law, approval of the additional shares for the 2021 LTIP as part of the reorganization was deemed to be approved by PG&E Corporation’s shareholders.

 

In determining the performance metrics for the 2020 awards the Compensation Committee considered a range of factors similar to those noted above in respect of the STIP. These included alignment with our core focus on customer welfare; the interaction with other metrics under the short- and long-term incentive programs; the companies’ ability to establish robust goals; and the extent to which the metrics measure outcomes in an objective manner. Four equally weighted metrics were approved for the 2020 awards, with a relative TSR modifier that could adjust the level of payout up or down by up to 25 percent, depending on PG&E Corporation’s relative performance.

 

The Compensation Committee retains complete discretion to adjust the formula and results and the final score, including to zero, on any and all incentive plan performance measures for any reason.

 

 

Performance Metric and Definition Weight Threshold
(25%)
Target
(100%)
Maximum
(200%)
Customer Satisfaction Score | Customer responses to “How would you rate the products and/or services offered by PG&E?” in a quarterly survey conducted by a third party 25% 71.7 72.3 74.4
PSPS Notification Accuracy | Percentage of PSPS-affected customers who receive notifications at least 12 hours in advance of a PSPS outage 25% 98.0% 99.0% 99.9%
System Hardening | Completion of (i) rebuild of overhead circuitry to current hardening design standards; (ii) targeted undergrounding; or (iii) elimination of overhead circuitry 25% 919 miles 1,021 miles 1,225 miles
Substation Enablement | The number of substations, out of a possible 64 substations, that are “energizable” during a transmission-level PSPS event 25% 30 substations 40 substations 50 substations

 

While our success in delivering safe and reliable services to customers is the core focus of the 2020 PSU awards, the level of vesting may be modified to reflect our financial stability as measured by relative TSR.

 

Performance Metric and Definition Weight Threshold
0.75x
Target
1.00x
Maximum
1.25x
PG&E Corporation’s TSR compared to a group of select comparator companies(1) Modifier 25th percentile 50th percentile 80th percentile

 

Notes:  (1) Comparator companies included: Alliant Energy Corporation, Ameren Corporation, American Electric Power Company, Inc., CMS Energy Corporation, Consolidated Edison, Inc., DTE Energy Company, Duke Energy Corporation, Edison International, Evergy, Inc., Eversource Energy, NiSource Inc., Pinnacle West Capital Corporation, Southern Company, WEC Energy Group, Inc., and Xcel Energy Inc. See “Use of Market Data” section on page 52 for details on peer group selection.

 

Actual performance relative to the goals approved by the Compensation Committee will be disclosed following the conclusion of the three-year performance period and certification of results in the first quarter of 2023.

 

2021 Joint Proxy Statement    59
 

Assessment of 2018 Performance Share Awards

 

The three-year performance period for the 2018 PSU awards concluded on December 31, 2020. The 2018 PSUs were subject to three performance metrics reflecting strategic priorities at the time of grant: relative TSR, safety, and earnings from operations per share. In the first quarter of 2021, the Compensation Committee assessed performance over the three-year performance period, and similar to the STIP, no adjustments were made to account for the impact of COVID-19 as the Compensation Committee did not believe this was a relevant consideration.

 

Performance Metric Weight(3) Threshold
(25%)
Target
(100%)
Maximum
(200%)
Actual
Performance
Formula-
Based
Payout
Actual
Payout
PG&E Corporation’s TSR compared to a group of select comparator companies(1) 57% 25th
Percentile
60th
Percentile
90th
Percentile
0th
percentile
0% 0%
Serious Injury and Fatality (SIF) actual, potential injury or near-hit events 29% ≥122 111 ≤101 81 200% 0%
Earnings from operations per share based on average annual performance(2) 14% 95% of
Target
Guidance 105% of
Target
99% of
Target
98% 0%
Total weighted payout           72% 0%

 

Notes: (1) Comparator companies included: Alliant Energy Corporation, Ameren Corporation, American Electric Power Company, Inc., CMS Energy Corporation, Consolidated Edison, Inc., DTE Energy Company, Duke Energy Corporation, Edison International Eversource Energy, NiSource Inc., Pinnacle West Capital Corporation, SCANA Corporation, Southern Company, WEC Energy Group, Inc., Xcel Energy Inc.
  (2) This measure is non-GAAP: Adjusted to exclude items that impacted comparability as described in “Exhibit A,” starting on page 67.
  (3) Weights in the table are expressed as a percentage of the PSU component of the 2018 total LTIP award mix (which also included RSUs). PSUs made up 35% of the total LTIP award mix in 2018; PSUs with TSR, SIF, and earnings per share metrics made up 20%, 10% and 5% of total LTIP award mix, respectively.

 

In reviewing company and NEO performance for 2020, the Compensation Committee considered the totality of circumstances over the year, including but not limited to:

 

The Utility’s overall public and workforce safety, which included five fatalities from the company and contractor workforces;
The possibility that Utility assets were the ignition source of the Zogg fire, which resulted in four public fatalities and property damage;
Compliance fines levied against the Utility by regulators; and
Reports provided to the Boards by the Federal Monitor on the Utility’s operational and safety performance.

 

In addition to discussions with management, the Compensation Committee consulted with independent compensation consultants and outside legal counsel to review the range of actions taken by other utilities in comparable circumstances.

 

Based upon the totality of the circumstances described above, management’s proposal, and extensive consideration, the Compensation Committee determined to exercise its discretion to materially reduce incentive compensation paid to all NEOs and officers for the STIP 2020 performance year and the 2018 LTIP performance period ending in 2020. These actions resulted in a reduction of incentive compensation, in the form of 2020 STIP payments and 2018 performance share payments, to officers for 2020 by an average of 58 percent from target for those elements of incentives.

 

The Compensation Committee arrived at the overall reduction in part by reducing the 2018 PSU awards payout for NEOs and officers to zero. The Compensation Committee also reduced the payout in respect of the STIP company score as described further in the “Short-Term Incentives” section above.

 

Retention Awards

 

2020 was a transition year for the companies, with our emergence from bankruptcy and changes in our leadership team. In August 2020, the Compensation Committee approved one-time retention awards for four NEOs to secure their continued service. The Compensation Committee believed continuity in leadership was in shareholders’ best interests and that making such awards was a market-typical practice in periods of significant organizational and leadership transition.

 

2021 Joint Proxy Statement    60
 

Messrs. Simon and Wells each received an award of RSUs at the value of $1,312,500 scheduled to vest in two equal tranches in August 2021 and August 2022. Following his resignation in September 2020, Mr. Wells forfeited his retention award in full. Messrs. Thomason and Welsch each received an award of PSUs, subject to the same terms and conditions as the 2020 PSU awards, described above, and reflecting our POR OII commitments that precluded the award of RSUs to these NEOs in 2020.

 

NEO Terms   2020
Retention
Award
David S. Thomason PSUs subject to the same terms as the 2020 PSU awards      $ 300,000
John R. Simon RSUs with 50% vesting in August 2021 and 50% vesting in August 2022 $ 1,312,500
James M. Welsch PSUs subject to the same terms as the 2020 PSU awards $ 488,000
Jason P. Wells (1) RSUs with 50% vesting in August 2021 and 50% vesting in August 2022 $ 1,312,500

 

Notes. (1) Award forfeited in full on resignation effective September 26, 2020.

 

Interim CEO Compensation

 

Mr. Johnson retired as CEO and President of PG&E Corporation effective July 1, 2020. From June 30, 2020, Mr. Smith served in the role of Interim CEO and President of PG&E Corporation until Ms. Poppe’s start date.

 

The Compensation Committee approved a compensation package that reflected the unique and transitionary nature of Mr. Smith’s role. This package comprised an annualized base salary of $1,500,000 and a total target equity award value of $5,000,000, pro-rated to reflect employment in 2020. The equity award combined a grant of RSUs with PSUs:

 

Compensation
Element
Details
Base Salary $1,500,000 annual base salary
  $755,682 received in 2020 in respect of time employed
Short-Term Incentive Not eligible to participate
RSUs 30% of the total equity award value
  Award value of $1,500,000
  Award vested on the election of a PG&E Corporation CEO in accordance with the approved terms
PSUs 70% of the equity award value
  Annualized target award value of $3,500,000 pro-rated to reflect employment in 2020; the number of shares vesting was adjusted by 6/12ths to reflect the six full months employed in 2020
  The PSU performance score had a threshold, target, and maximum level of performance based on STIP results for 2020, with performance at threshold, target, and maximum levels resulting in 50%, 100% and 200% of target payout, respectively
  The PSUs vested upon certification of the performance results by the Compensation Committee in February 2021

 

As detailed in the “Short-Term Incentives” section starting on page 54, the Compensation Committee exercised its discretion and approved a payout factor of 0.650 in respect of 2020 performance for all NEOs and officers, including Mr. Smith. The Compensation Committee and the independent members of the PG&E Corporation Board applied a 110 percent individual performance modifier to Mr. Smith’s final payout. The Compensation Committee determined this individual performance modifier was appropriate based on the Board’s and the Compensation Committee’s evaluation of Mr. Smith’s performance in 2020, including his leadership during a transitional year for the companies. The 110 percent individual performance modifier aligns with the average modifier applied to other officers. After the proration described above, the below-target payout factor, and the impact of the individual performance modifier, Mr. Smith earned 35.8 percent of the target PSU award.

 

2021 Joint Proxy Statement    61
 

Post-Retirement Benefits

 

PG&E Corporation and the Utility provide retirement benefits to eligible employees, including the NEOs. Eligibility for different plans reflects factors including appointment date and employing entity. Tax-qualified pensions or similar plans, other tax-qualified defined contribution plans (e.g., 401(k) plans), and non-tax-qualified retirement plans for NEOs are common in our Pay Comparator Group, and the Compensation Committee believes these defined benefit and defined contribution plans offer significant recruiting and retention incentives.

 

The different benefits that NEOs are eligible for are summarized below.

 

Benefit Eligible Key Features
PG&E Corporation Retirement Savings Plan All NEOs

   Tax-qualified 401(k) plan

 

   Maximum matching contribution of 75 cents for each dollar contributed, up to

 

   6% of base salary for individuals eligible for the final average pay pension benefit

 

   8% of base salary for individuals eligible for a cash balance pension benefit

 

   Matching funds above IRS limits contributed to the NEO’s account in the PG&E Corporation 2005 Supplemental Retirement Savings Plan, a non-qualified deferred compensation plan

Retirement Plan All NEOs

   Utility’s tax-qualified defined benefit plan

 

   Takes the form of either a final average pay pension benefit or a cash balance benefit

 

   During bankruptcy proceedings, lump sum payments of more than $5,000 were not permitted

PG&E Corporation Supplemental Executive Retirement Plan (SERP) Simon, Wells, Loduca

   Non-tax-qualified defined benefit pension plan

 

   Frozen to new entrants after 2012

PG&E Corporation Defined Contribution Executive Supplemental Retirement Plan (DC-ESRP) Lewis, Thomason, Welsch, Johnson, Vesey

   Non-tax-qualified defined contribution pension plan

 

   Covers all officers elected on or after January 1, 2013

 

Upon retirement, NEOs also may be eligible for post-retirement health, welfare, insurance, and other benefits broadly similar to those provided to all employees. Additional details regarding the retirement programs and post-retirement benefits, and the value of pension benefits accumulated as of December 31, 2020, for the NEOs can be found in the table entitled “Pension Benefits – 2020,” the table entitled “Non-qualified Deferred Compensation – 2020,” and the section entitled “Potential Payments – Resignation/Retirement.”

 

Perquisites

 

NEOs generally receive limited perquisites that are comparable in value and scope to those provided to executive officers in the Pay Comparator Group. Perquisites are provided to reflect market norms and to enable the executives to effectively discharge their roles. The value of these services is taxable to the recipient and they generally include:

 

A partial subsidy for financial planning, partial reimbursement of certain health club fees, on-site parking including electric vehicle charging, executive health services, and de minimis value perquisites under a pre-approved policy; and
A lump-sum annual stipend in lieu of providing other market-typical perquisites.

 

The PG&E Corporation and Utility principal executive officers also received safety-and security-based car transportation services in 2020. In 2021, the ground transportation policy was updated to specify such transportation services are provided only when the executive is traveling for business purposes.

 

2021 Joint Proxy Statement    62
 

Severance Benefits

 

General severance benefits are provided to the NEOs through the Officer Severance Policy and specific incentive plan award agreements and guidelines. The purpose of this policy is to:

 

Attract and retain senior management by providing severance benefits that are part of a competitive total compensation package;
Provide consistent treatment for all terminated officers;
Minimize potential litigation costs in connection with terminations of employment by conditioning payments upon a general release of claims; and
Focus management on maximizing shareholder value and aligning interests, rather than being distracted by concerns about job security in a potential change-in-control situation.

 

Change-in-control benefits require a “double trigger” and are not payable based on a change-in-control event alone, which the Compensation Committee believes best reflects shareholder interests and aligns with typical market practices.

 

Termination
Scenario
Eligible Key Provisions
Termination without cause All NEOs Cash severance of one-times the sum of base salary and STIP target
  Pro-rata vesting of PSUs
  Continued vesting of unvested RSUs for one year
  Continued vesting of stock options for one year, with an exercise period equal to the lesser of one year or the remaining term of the options
  Limited COBRA benefits and outplacement services
Termination for cause or resignation when not retirement eligible All NEOs(1) Termination for cause or resignation when not retirement eligible:
Forfeits all unvested PSUs, RSUs, and stock options
Forfeits any unpaid dividends associated with long-term incentive awards
Termination following a Change in Control Smith, Simon, Johnson, Vesey, Wells, Loduca Cash severance of two-times the sum of base salary and STIP target
LTIP award agreements detail treatment that accelerate vesting of all awards on a change of control (CIC) if either (1) the officer is severed in connection with the CIC, or (2) the award is not continued, assumed, or substituted
  Lewis, Foster, Thomason, Welsch General severance benefits only (i.e. those set out above, not related to a change in control)
LTIP award agreements detail treatment that accelerate vesting of all awards on a CIC if either (1) the officer is severed in connection with the CIC, or (2) the award is not continued, assumed, or substituted

 

Notes. (1) Messrs. Simon and Welsch are eligible for retirement.

 

The Golden Parachute Restriction Policy requires shareholder approval of certain defined executive severance payments provided in connection with a change in control of PG&E Corporation, to the extent that those payments exceed 2.99 times the sum of a covered officer’s base salary and target short-term incentive award.

 

The Officer Severance Policy also permits reduction and repayment of severance benefits from certain officers, with certain triggers.

 

Specifically, the Boards of Directors of PG&E Corporation and the Utility will have:

 

a right to cancel, reduce, or require forfeiture of severance payments or benefits from (1) executive officers of either company in the event of a felony conviction of either company related to public health and safety or financial misconduct by either company following its July 1, 2020 emergence from Chapter 11 (Company Conviction), provided that an affected executive officer was serving as an executive officer of the convicted company at the time of the conduct leading to the Company Conviction; or (2) either company’s CEO or CFO if that company is required to restate its financial statements due to that company’s material non-compliance with financial reporting requirements as a result of misconduct, provided that the individual was serving as CEO or CFO during the period covered by the restatement; and
a right to recoup or require reimbursement or repayment of severance rights, payments, and benefits from executive officers in the event such executive officers engaged in misconduct that materially contributed to some of the actions or omissions on which a Company Conviction is based.

 

2021 Joint Proxy Statement    63
 

Additional details regarding severance benefits can be found in the sections entitled “Potential Payments—Termination Without Cause” beginning on page 83, and “Potential Payments—Severance in Connection with Change in Control” beginning on page 84.

 

2021 Compensation Structure

 

Following emergence, and the appointment of our restructured Board, the Compensation Committee focused on areas that would begin to shape our 2021 compensation programs. This included the attraction, employment, and compensation of the Corporation’s new CEO and the metrics and goals for our 2021 short- and long-term incentive programs.

 

Chief Executive Officer Appointment

 

In November 2020, Ms. Poppe was appointed CEO of PG&E Corporation effective January 4, 2021. As disclosed in our November 18, 2021 Form 8-K filingwith the SEC, the independent members of the Corporation Board approved an annual compensation arrangement in association with her role as CEO, as well as one-time make-whole and inducement awards to secure her employment.

 

Annual Compensation

 

The key aspects of Ms. Poppe’s initial annual compensation, set out in an offer letter that also provides for a five-year term with automatic annual renewals, are as follows:

 

Compensation
Element
Details
Base Salary $1,350,000 annual base salary
Short-Term
Incentive
130% target opportunity
Subject to the metrics described in the “Incentive Compensation” section below
Long-Term
Incentive
Target award value of $9,250,000 for 2021
Made according to the terms of the annual LTIP design approved by the Compensation Committee

 

Ms. Poppe will be eligible under our existing perquisite and benefit programs.

 

Perquisites will be in line with those provided to the other executive officers, including a lump-sum stipend of $35,000 in lieu of providing certain market-typical benefits.
One-time benefits linked to her appointment and relocation including up to six family roundtrips to the Corporation’s headquarters, $26,202 in costs related to specific limited relocation activities, and reimbursement of legal expenses up to $25,000.
Post-retirement benefits will be provided under the PG&E Corporation Retirement Savings Plan (a tax-qualified 401(k) plan), the Pacific Gas and Electric Company Retirement Plan, and the PG&E Corporation Defined-Contribution Executive Supplemental Retirement Plan.
Severance benefits will be provided for under the Officer Severance Policy.

 

2021 Joint Proxy Statement    64
 

One-Time Compensation

 

In addition, to secure Ms. Poppe’s appointment, the independent members of the PG&E Corporation Board approved two one-time awards intended to compensate her for compensation that was forfeited with her prior employer. The Compensation Committee has determined that such payments are in line with market standards and believes they were appropriately structured to protect shareholder interests through the application of clawback provisions and the ability to reduce payments if certain awards were not in fact forfeited on joining PG&E Corporation.

 

Award Material Details Design Considerations
$31,924,949
RSU award

   RSUs vest in two equal tranches on the first and second anniversaries of grant

 

   Intended to replace certain long-term equity awards with Ms. Poppe’s former employer

 

   Award will be reduced to the extent the awards being replaced are ultimately received from her former employer

   Approved values heavily informed by compensation forfeited to join the Corporation

 

   83% granted in the form of equity, providing immediate alignment with shareholders’ interests with vesting over two years

 

   Awards include the ability to reduce or clawback depending on the circumstances

$6,600,000 cash payment

   Intended to replace her 2020 annual bonus from her former employer, one of the long-term stock awards, and certain unvested nonqualified deferred compensation benefits, and to assist with relocation and expenses

 

   Award is subject to clawback provisions in the event Ms. Poppe resigns, other than for good reason (as defined in the Officer Severance Policy), or is terminated for cause within 12 months of her start date

 

 

Incentive Design

 

For 2021, the Compensation Committee has maintained a broadly consistent incentive compensation structure, with some changes to performance metrics and weightings to reflect priorities for the year ahead. These changes reinforce important areas of operational focus, including increased emphasis on workforce safety, while maintaining alignment with the criteria of AB 1054 and our POR OII commitments. The Compensation Committee followed a rigorous process while reviewing metrics and performance goals, including thoughtful deliberations with the Corporation’s CEO, the companies’ Chief Risk Officer, and the companies’ Chief Safety Officer, and a review of safety-related measures with the Safety and Nuclear Oversight Committees.

 

Short-Term Incentive Plan

 

For 2021, we have eliminated the individual performance modifier to place greater emphasis on the success of the team rather than the individual. To better align with market, the maximum payout under the STIP will be capped at 200 percent of target.

 

In respect of the company score, the weightings associated with our operational performance and reliability and with workforce safety performance areas will increase, reflecting our continued focus on outcome-oriented and risk reduction metrics that prioritize the service provided to our customers and the safety of our workforce. Minor changes have been made to metric definitions, with the inclusion of new metrics in areas relating to wire-down events, average speed of answer for incoming calls regarding emergencies, and serious injuries and fatalities events, investigations, and corrective actions.

 

2021 Joint Proxy Statement    65
 

Long-Term Incentive Plan

 

For 2021, the Compensation Committee approved changes to the metrics that resulted in incorporating TSR performance as a weighted metric rather than a modifier, which reduces the maximum opportunity available under the plan from 250 percent of target (200 percent maximum score times 125 percent maximum modifier) to 200 percent of target (no modifier). This better aligns the plan design with market. Minor changes have been made, including adding new metrics to assess our success in reducing wildfire risk based on our enhanced vegetation management work, and a metric related to achieving affordability for customers through efficiency in operations.

 

For 2021, the Compensation Committee also reintroduced RSUs in the LTIP for officers not subject to AB 1054 to realign the plan to competitive market practices and promote enhanced employee retention.

 

Additional Information

 

Equity Grant Date Policy

 

The PG&E Corporation Equity Grant Date Policy, as last amended in September 2017, generally provides that annual LTIP awards, if any, are granted once per year on March 1 (or if that day is not a business day, then on the following business day). The PG&E Corporation Board or the Compensation Committee may determine a different grant date if appropriate or necessary.

 

The grant date for non-annual equity awards to employees (such as for newly hired or newly promoted officers or awards made for retention, recognition, or other purposes) is the later of (1) the date that the non-annual award is approved by the independent members of the PG&E Corporation or Utility Board, the Compensation Committee, or the PG&E Corporation CEO, as applicable, (2) the effective date of the LTIP award recipient’s employment, promotion, or recognition, or (3) the date otherwise specified by the applicable Board, the Compensation Committee, or the PG&E Corporation CEO. If the grant date of any non-annual LTIP award would occur during a trading blackout period, as defined under the companies’ Insider Trading Policy, then the actual grant date will be the first business day after the trading blackout period ends.

 

Use of Non-GAAP Financial Metrics

 

NEOs receive incentive awards that are subject to earnings metrics that are considered “Non-GAAP financial measures” under SEC rules and regulations. “Exhibit A,” starting on page 67, explains how these measures are calculated from our audited financial statements.

 

Tax and Accounting Considerations

 

The Compensation Committee sets NEO compensation in accordance with our compensation philosophy and continues to believe that attracting, retaining, and motivating our employees with a compensation program that supports long-term value creation is in the best interests of our shareholders. In reaching decisions on executive compensation, the Compensation Committee considers the tax and accounting consequences. With the passage of the Tax Cuts and Jobs Act of 2017, Section 162(m) of the Internal Revenue Code no longer permits companies to deduct certain qualified performance-based executive compensation. As a result, in establishing compensation, the Compensation Committee no longer considered the tax deductibility limitations imposed by Section 162(m). Despite the new limits on the deductibility of performance-based compensation, the Compensation Committee continues to believe that a significant portion of NEO compensation should be tied to company performance.

 

2021 Joint Proxy Statement    66
 

EXHIBIT A

 

Reconciliation of PG&E Corporation’s Consolidated Income Available for Common Shareholders in Accordance with Generally Accepted Accounting Principles (“GAAP”) to Earnings from Operations.

 

For the year ended December 31, 2020.

 

(in millions, except per share amounts) Earnings  

Per Share

Amounts

(Diluted)

PG&E Corporation Earnings on a GAAP basis $ (1,318)   $(1.05)
Items Impacting Comparability:(1)      
Amortization of wildfire fund contribution(2) 297   0.24
Investigation remedies(3) 223   0.18
Bankruptcy and legal costs(4) 2,651   2.11
2019-2020 Wildfire-related costs, net of insurance(5) 213   0.17
Prior period net regulatory recoveries(6) (46)   (0.04)
PG&E Corporation Earnings from Operations(7) $ 2,020   $1.61

 

(1) “Items impacting comparability” represent items that management does not consider part of the normal course of operations and that affect comparability of financial results between periods. Items impacting comparability reconcile earnings from operations with Consolidated Income Available for Common Shareholders as reported in accordance with GAAP. All amounts presented in the table above are tax adjusted at PG&E Corporation’s statutory tax rate of 27.98 percent for 2020, except for certain costs that are not tax deductible, as identified in the following footnotes. Amounts may not sum due to rounding.
   
(2) The Utility recorded costs of $413 million (before the tax impact of $116 million) associated with the amortization of wildfire fund contributions related to Assembly Bill 1054.
   
(3) The Utility recorded costs of $296 million (before the tax impact of $73 million) associated with investigation remedies. This includes $231 million (before the tax impact of $62 million) related to the Order Instituting Investigation into the 2017 Northern California Wildfires and the 2018 Camp Fire (Wildfire OII) settlement, as modified by the Decision Different dated April 20, 2020 ($10 million of Wildfire OII system enhancement costs are not tax deductible). The Utility also incurred restoration and rebuild costs of $36 million (before the tax impact of $10 million) associated with the town of Paradise (2018 Camp fire). The Utility also recorded costs of $29 million (before the tax impact of $1 million) for system enhancements related to the Locate and Mark OII ($25 million of Locate and Mark OII system enhancement costs are not tax deductible).

 

(in millions, pre-tax)  

Twelve Months Ended

December 31, 2020

Wildfire OII disallowance and system enhancements   $ 231
Paradise restoration and rebuild   36
Locate and Mark OII system enhancements   29
Investigation remedies   $ 296

 

(4) PG&E Corporation and the Utility recorded costs of $2.8 billion (before the tax impact of $125 million) associated with bankruptcy and legal costs. This includes $1.7 billion (before the tax impact of $41 million) related to exit financing costs ($1.5 billion of exit financing costs are not tax deductible). Also, the Utility recorded a $619 million reduction to the deferred tax asset related to the value of PG&E Corporation’s common stock transferred to the Fire Victim Trust. PG&E Corporation and the Utility also incurred legal and other costs of $486 million (before the tax impact of $84 million); $184 million of legal and other costs were treated as not tax deductible.

 

(in millions, pre-tax)  

Twelve Months Ended

December 31, 2020

Exit financing   $ 1,672
Fire Victim Trust tax valuation   619
Legal and other costs   486
Bankruptcy and legal costs   $ 2,776

 

(5) The Utility incurred costs, net of probable insurance recoveries, of $296 million (before the tax impact of $84 million) associated with 2019-2020 wildfires. This includes accrued charges for third-party claims of $625 million (before the tax impact of $175 million) related to Kincade fire, and $275 million (before the tax impact of $77 million) related to Zogg fire. The Utility also incurred costs of $35 million (before the tax impact of $10 million) for clean-up and repair costs related to Kincade fire. In addition, the Utility incurred legal and other costs of $6 million (before the tax impact of $2 million) related to Kincade fire, as well as $4 million (before the tax impact of $1 million) related to Zogg fire. These costs were partially offset by probable insurance recoveries of $430 million (before the tax impact of $120 million) related to Kincade fire, as well as $219 million (before the tax impact of $61 million) related to Zogg fire.

 

(in millions, pre-tax)  

Twelve Months Ended

December 31, 2020

2019 Kincade fire-related costs, net of insurance:    

 

2021 Joint Proxy Statement    67
 
(in millions, pre-tax)  

Twelve Months Ended

December 31, 2020

Third-party claims   $ 625
Utility clean-up and repairs   35
Legal and other costs   6
Insurance recoveries   (430)
2020 Zogg fire-related costs, net of insurance:    
Third-party claims   275
Legal and other costs   4
Insurance recoveries   (219)
Total 2019-2020 Wildfire-related costs, net of insurance   $ 296

 

(6) The Utility recorded net revenue of $64 million (before the tax impact of $18 million) associated with prior period net regulatory recoveries. This includes $31 million (before the tax impact of $9 million) for allowance for funds used during construction (AFUDC) capital structure impact on 2019 revenues. The Utility also incurred $70 million (before the tax impact of $20 million) for the impact of the Transmission Owner (TO) 20 settlement on 2019 revenues and the TO18 FERC order on 2017, 2018, and 2019 revenues. Also, as a result of the 2011 Gas Transmission and Storage (GT&S) capital audit, the Utility recorded revenues of $103 million (before the tax impact of $29 million) related to the recovery of capital expenditures from 2011 through 2014 above amounts adopted in the 2011 GT&S rate case.

 

(in millions, pre-tax)  

Twelve Months Ended

December 31, 2020

AFUDC capital structure impact   $ (31)
TO proceedings impact   70
2011 GT&S capital audit   (103)
Prior period net regulatory recoveries   $ (64)

 

(7) “Earnings from operations” is a non-GAAP financial measure and is calculated as income available for common shareholders less items impacting comparability as described in Note (1) above. PG&E Corporation uses earnings from operations to understand and compare operating results across reporting periods for various purposes, including internal budgeting and forecasting, short- and long-term operating plans, and employee incentive compensation. PG&E Corporation believes that non-GAAP earnings from operations provide additional insight into the underlying trends of the business allowing for a better comparison against historical results and expectations for future performance. Earnings from operations is not a substitute or alternative for GAAP measures such as consolidated income available for common shareholders and may not be comparable to similarly titled measures used by other companies.

 

2021 Joint Proxy Statement    68
 

EXECUTIVE OFFICER COMPENSATION INFORMATION

 

Summary Compensation Table – 2020

 

This table summarizes the principal components of compensation paid or granted during 2020 (including cash incentives earned for corporate performance in 2020 but paid in 2021). This table also includes information disclosed in the 2019 Form 10-K/A and 2019 Joint Proxy Statement for compensation paid or granted to certain officers during 2019 and 2018, respectively.

 

Name and
Principal Position
  Year   Salary
($)(1)
  Bonus
($)
  Stock
Awards
($)(2)
  Option
Awards
($)(3)
  Non-Equity
Incentive
Plan
Compensation
($)(4)
  Change in
Pension
Value and
Nonqualified
Deferred

Compensation
Earnings
($)(5)
  All Other
Compensation
($)(6)
  Total
($)
William L. Smith(a)
Interim Chief Executive Officer and President, PG&E Corporation
  2020   755,682   0   5,105,000   0   0   21,354   292,179   6,174,215
                                   
                                   
Michael A. Lewis(b)
Interim President, Pacific Gas and Electric Company
  2020   973,069   0   699,993   0   223,555   22,011   163,793   2,082,421
  2019   474,855   125,000   0   0   0   15,603   81,785   697,243
                                   
Christopher A. Foster(c)
Vice President and Interim Chief Financial Officer, PG&E Corporation
  2020   438,095   0   300,001   0   108,426   166,195   67,636   1,080,353
                                   
                                   
David S. Thomason
Vice President, Chief Financial Officer and Controller, Pacific Gas and Electric Company
  2020   353,853   0   700,002   0   114,441   303,438   55,516   1,527,251
  2019   331,250   0   0   0   0   275,136   52,973   659,359
  2018   323,718   0   260,039   65,001   0   0   59,900   708,658
John R. Simon(d)
Executive Vice President, General Counsel, and Chief Ethics & Compliance Officer, PG&E Corporation
  2020   768,786   0   3,062,499   0   439,400   790,616   67,543   5,128,845
  2019   749,031   0   0   0   0   728,771   69,696   1,547,499
  2018   599,000   0   1,800,090   450,007   0   203,765   71,766   3,124,628
James M. Welsch
Senior Vice President, Generation and Chief Nuclear Officer, Pacific Gas and Electric Company
  2020   606,437   0   1,137,995   0   245,495   283,136   86,127   2,359,190
  2019   533,181   0   0   0   143,563   298,748   95,257   1,070,749
                                   
William D. Johnson(e)
Former Chief Executive Officer and President, PG&E Corporation
  2020   1,532,963   0   0   0   0   23,238   199,542   1,755,742
  2019   1,657,609   3,000,000   2,333,358   11,102,001   0   22,400   414,474   18,529,842
                                   
Andrew M. Vesey(f)
Former Chief Executive Officer and President, Pacific Gas and Electric Company
  2020   666,596   0   0   0   0   24,480   2,939,494   3,630,569
  2019   371,212   1,000,000   833,558   0   0   21,159   147,842(7)   2,373,771
                                   
Jason P. Wells(g)
Former Executive Vice President and Chief Financial Officer, PG&E Corporation
  2020   722,042   0   3,062,499   0   0   95,227   54,491   3,934,259
  2019   630,000   0   0   0   0   525,086   60,866   1,215,952
  2018   625,000   0   2,000,122   500,001   0   0   72,151   3,197,274

 

2021 Joint Proxy Statement    69
 

Summary Compensation Table – 2020 (Continued)

 

Name and

Principal Position

  Year  

Salary

($)(1)

 

Bonus

($)

 

Stock

Awards

($)(2)

 

Option

Awards

($)(3)

 

Non-Equity

Incentive

Plan Compensation

($)(4)

 

Change in

Pension

Value and

Nonqualified

Deferred
Compensation

Earnings

($)(5)

 

All

Other
Compensation

($)(6)

 

Total

($)

Janet C. Loduca(h)   2020   583,924   0   1,200,004   0   261,189   510,881   1,150,910   3,706,908
Former Senior Vice President and General Counsel, PG&E Corporation and Pacific Gas and Electric Company   2019   636,995   0   0   0   0   526,675   58,430   1,222,101
                                   
                                   

 

(a) Effective June 30, 2020, Mr. Smith became Interim Chief Executive Officer and President of PG&E Corporation.
   
(b) Mr. Lewis served as Senior Vice President, Electric Operations of Pacific Gas and Electric Company until July 31, 2020. Effective August 1, 2020, Mr. Lewis became Interim President of Pacific Gas and Electric Company.
   
(c) Mr. Foster served as Vice President, Investor Relations of PG&E Corporation until March 8, 2020. Effective March 9, 2020, Mr. Foster became Vice President, Treasury & Investor Relations of PG&E Corporation. Effective September 26, 2020, Mr. Foster became Vice President and Interim Chief Financial Officer of PG&E Corporation.
   
(d) Mr. Simon served as Executive Vice President, Law, Strategy & Policy of PG&E Corporation until August 14, 2020. Effective August 15, 2020, Mr. Simon became Executive Vice President, General Counsel, and Chief Ethics & Compliance Officer of PG&E Corporation.
   
(e) Effective July 1, 2020, Mr. Johnson retired from PG&E Corporation.
   
(f) Effective August 4, 2020, Mr. Vesey separated from the Utility.
   
(g) Effective September 26, 2020, Mr. Wells resigned from PG&E Corporation.
   
(h) Effective August 16, 2020, Ms. Loduca separated from the companies.
   
(1) Includes payments for accrued vacation.
   
(2) Represents the grant date fair value of performance shares and RSUs measured in accordance with FASB ASC Topic 718, without considering an estimate of forfeitures related to service-based vesting. For performance shares using safety and affordability measures, and for RSUs, grant date fair value is measured using the closing price of PG&E Corporation common stock on the grant date. If the highest level of performance conditions were achieved, the estimated maximum grant date value of performance shares granted in 2020 would be: Mr. Smith $8,750,008, Mr. Lewis $1,749,983, Mr. Foster $750,007, Mr. Thomason $1,750,011, Mr. Simon $4,375,008, Mr. Welsch $2,844,991, Mr. Johnson $0, Mr. Vesey $0, Mr. Wells $4,375,008, and Ms. Loduca $3,000,011. For Mr. Smith, also includes the value of RSUs he received as a non-employee director in 2019, as further described in footnote 2(ii) to the “2020 Director Compensation” table on page 31, and the section entitled “Non-Employee Director Stock-Based Compensation” on page 30.
   
(3) Represents the grant date fair value of stock options based on a Black-Scholes American Call valuation model. No stock options were granted in 2020.
   
(4) Amounts represent payments received or deferred in 2021, 2020, and 2019 for achievement of corporate and organizational objectives in 2020, 2019, and 2018, respectively, under the STIP.
   
(5) Amounts reported for 2020 consist of (i) the change in pension value during 2020 for all NEOs and (ii) the above-market earnings on compensation deferred into the PG&E Corporation Supplemental Retirement Savings Plan and invested in the AA Utility Bond Fund for Mr. Simon only ($15,569). The AA Utility Bond Fund accrues interest based on the long-term corporate bond yield average for AA utilities reported by Moody’s Investors Service. The above-market earnings are calculated as the difference between actual earnings from the AA Utility Bond Fund investment option and hypothetical earnings that would have resulted using an interest rate equal to 120 percent of the applicable federal rate.
   
(6) Amounts reported for 2020 consist of (i) perquisites and personal benefits (Mr. Smith $84,300, Mr. Lewis $50,099, Mr. Foster $54, Mr. Thomason $1,296, Mr. Simon $8,987, Mr. Welsch $54, Mr. Johnson $2,042, Mr. Vesey $1,935, Mr. Wells $6,052, and Ms. Loduca $9,323), (ii) a lump-sum annual stipend paid in lieu of providing perquisite benefits, with the exception of perquisite benefits noted in the chart below (Mr. Smith $35,000, Mr. Lewis $20,000, Mr. Foster $15,000, Mr. Thomason $15,000, Mr. Simon $25,000, Mr. Welsch $20,000, Mr. Johnson $35,000, Mr. Vesey $25,000, Mr. Wells $25,000, and Ms. Loduca $25,000), (iii) company contributions to defined contribution retirement plans (Mr. Smith $43,750, Mr. Lewis $71,771, Mr. Foster $52,503, Mr. Thomason $39,040, Mr. Simon $32,448, Mr. Welsch $65,809, Mr. Johnson $162,500, Mr. Vesey $76,349, Mr. Wells $22,075, and Ms. Loduca $16,947), (iv) tax-restoration payments to reflect additional taxation on relocation benefits (Mr. Smith $69,129 and Mr. Vesey $182) and temporary housing (Mr. Lewis $21,923), (v) severance payments earned upon separation from service (Mr. Vesey $2,863,209, Ms. Loduca $1,098,801), (vi) retainer provided to Mr. Smith for service as a member of the Boards of Directors from January 1 through June 30, 2020 ($60,000), and (vii) the value of interest paid on 2019 and 2020 dividends whose payout had been delayed until after the companies’ July 2020 emergence from Chapter 11 (Mr. Foster $79, Mr. Thomason $180, Mr. Simon $1,108, Mr. Welsch $264, Mr. Wells $1,364, and Ms. Loduca $239),
   
(7) This number has increased slightly since our 2019 10-K/A to reflect updated assumptions on the applicable tax rates.

 

2021 Joint Proxy Statement    70
 

Summary Compensation Table – 2020 (Continued)

 

The following chart provides additional information regarding certain perquisites and personal benefits that are included in the Summary Compensation Table and discussed in section (i) of footnote 6. Additionally, NEOs may receive de minimis incidental perquisites under a pre-approved perquisite policy (including company-paid insurance, service awards, electric vehicle charging, and similar benefits).

 

   

Transportation

Services

($)

 

Fitness

($)

 

Executive

Health

($)

 

Financial

Services

($)

 

Relocation

Services

($)

W. L. Smith   3,814   0   0   0   80,459
M. A. Lewis   1,135   0   0   0   48,910
C. A. Foster   0   0   0   0   0
D. S. Thomason   0   0   0   0   0
J. R. Simon   0   322   0   8,136   0
J. M. Welsch   0   0   0   0   0
W. D. Johnson   1,070   0   0   0   945
A. M. Vesey   1,899   0   0   0   0
J. P. Wells   0   0   0   5,584   0
J. C. Loduca   0   308   0   8,520   0

 

The above perquisites and personal benefits consist of the following:

 

  Transportation services for Messrs. Smith, Lewis, Johnson, and Vesey to help ensure their safety and security while serving in the positions of CEO of PG&E Corporation and President of the Utility, consisting of car transportation for commute and incidental non-business travel. Amounts include the prorated salary and benefits burden of the drivers, and vehicle costs. The provision of such services in 2021 has been limited to business-related travel only.
     
  The value of reimbursements for health club fees, pursuant to a program available to certain management employees, including non-officers.
     
  The cost of executive health services provided to executive officers. Amounts vary among officers, reflecting (i) the decisions of each individual officer regarding the specific types of tests and consultations provided, and (ii) the exact value of reimbursed expenses. Such benefit was suspended during 2020 due to lack of provider availability during the COVID-19 pandemic.
     
  Fees paid to partially subsidize financial services provided by an independent contractor selected by PG&E Corporation to provide such services.
     
  The cost to PG&E Corporation and the Utility, as applicable, for relocation assistance services, which may include moving services, payments to a third-party home sale assistance firm (which may include inspection, appraisal, and other costs related to the sale of the home, third-party service fees, etc.), mortgage subsidies, and commuting expenses during the relocation process. Recipients of relocation assistance also received tax reimbursement payments (Mr. Smith $69,129, and Mr. Lewis $21,923) with respect to this benefit in accordance with a broad-based program that provides relocation benefits to all employees. Such tax restoration payments are reflected in section (iv) of footnote 6 above.

 

In addition to the perquisite benefits described above, NEOs are given a set stipend that each NEO may use as the officer sees fit. The stipend is intended to cover miscellaneous items in each NEO’s discretion (such as membership in professional organizations). The amount of this stipend is included in the Summary Compensation Table in the “All Other Compensation” column and is addressed in section (ii) of footnote 6. NEOs also were eligible to receive on-site parking, which was provided at no additional incremental cost to PG&E Corporation and the Utility.

 

Please see the CD&A beginning on page 39 for additional information regarding the elements of compensation discussed above, including information regarding salary, short-term incentives, and long-term incentives. Additional information regarding grants of LTIP awards can be found in the narrative following the “Grants of Plan-Based Awards in 2020” table.

 

2021 Joint Proxy Statement    71
 

Grants of Plan-Based Awards in 2020

 

This table provides information regarding incentive awards and other stock-based awards granted during 2020 to NEOs.

 

      Committee /  Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards(1)
  Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
  All Other
Stock
Awards:
Number
of Shares
of Stock
  Grant
Date Fair
Value of
Stock and
Option
      Board Action  Threshold  Target  Maximum  Threshold  Target  Maximum  or Units  Awards
Name  Grant Date  Date  ($)  ($)  ($)  (#)  (#)  (#)  (#)(3)  ($)(4)
W. L. Smith(5)   11/13/2019   9/25/2019                           11,628   105,001
    8/3/2020   7/29/2020                           163,934   1,499,996
    8/3/2020   7/29/2020               191,257   382,514   956,285       3,500,003
M. A. Lewis           171,966   343,931   644,871                    
    3/2/2020   3/4/2020               35,519   71,038   177,595       649,998
    3/2/2020   3/4/2020               2,732   5,464   13,660       49,996
C. A. Foster           75,822   151,645   284,334                    
    3/2/2020   3/4/2020               16,394   32,787   81,968       300,001
D. S. Thomason           80,029   160,057   300,107                    
    3/2/2020   3/4/2020               21,858   43,716   109,290       400,001
    3/2/2020   8/13/2020               16,394   32,787   81,968       300,001
J. R. Simon           270,400   540,800   1,014,000                    
    3/2/2020   3/4/2020               95,629   191,257   478,143       1,750,002
    8/14/2020   8/13/2020                           139,479   1,312,497
J. M. Welsch           171,675   343,350   643,781                    
    3/2/2020   3/4/2020               35,519   71,038   177,595       649,998
    3/2/2020   8/13/2020               26,667   53,333   133,333       487,997
W. D. Johnson(6)           0   0   0                   0
A. M. Vesey(7)           249,603   499,206   936,012                   0
J. P. Wells           183,962   367,924   689,857                    
    3/2/2020   3/4/2020               95,629   191,257   478,143       1,750,002
    8/14/2020   8/13/2020                           139,479   1,312,497
J. C. Loduca           200,914   401,829   753,429                    
    3/2/3030   3/4/2020               65,574   131,148   327,870       1,200,004

 

(1) Compensation opportunity granted for 2020 under the STIP. Actual amounts earned are reported in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. Threshold represents a 0.5 enterprise-wide STIP performance score and a 100 percent individual performance modifier. Maximum reflects a 1.5 enterprise-wide STIP performance score and a 125 percent individual performance modifier.
(2) Represents performance shares granted in 2020 under the 2014 LTIP. Threshold equals 0.5 times target. Maximum equals 2.0 times target and a 125 percent financial stability modifier based on TSR.
(3) Represents RSUs granted in 2020 under the 2014 LTIP. For Mr. Smith only, includes RSUs received as a non-employee director in 2019, as further described in footnote 2(ii) to the “2020 Director Compensation” table on page 31, and the section entitled “Non-Employee Director Stock-Based Compensation” on page 30. Such awards were granted following receipt of approval from the Bankruptcy Court, and consistent with the Equity Grant Date Policy.
(4) For RSUs and performance shares, the grant date fair value is based on the PG&E Corporation stock price at close on the grant date.
(5) Mr. Smith did not participate in the STIP in 2020.
(6) Mr. Johnson did not participate in the STIP and did not receive any grants under the LTIP in 2020.
(7) Mr. Vesey did not receive an LTIP award for 2020, according to the terms of his separation agreement.

 

Detailed information regarding compensation reported in the tables entitled “Summary Compensation Table” and “Grants of Plan-Based Awards,” including the relative amounts apportioned to different elements of compensation, can be found in the CD&A. Information regarding specific grants and arrangements is provided below.

 

Annual awards for 2020 were approved in March 2020, subject to approval from the Bankruptcy Court. As such, the awards were not formally provided until after the companies’ emergence from Chapter 11, at which time they were ratified by the refreshed Compensation Committee.

 

2021 Joint Proxy Statement    72
 

Grants of Plan-Based Awards in 2020 (Continued)

 

STIP Awards

 

Information regarding the terms and basis of 2020 STIP awards can be found in the CD&A.

 

Performance Shares

 

Performance shares granted in 2020 will vest, if at all, upon certification of performance against preestablished operational and financial measures at the end of the three-year performance period from January 1, 2020, to December 31, 2022. Upon vesting, performance shares are settled in shares of PG&E Corporation common stock, net of the number of shares having a value equal to required withholding taxes. The specific payout formulas are discussed in the CD&A.

 

Each time that a cash dividend is paid on PG&E Corporation common stock, an amount equal to the cash dividend per share multiplied by the number of performance shares granted to the recipient will be accrued on behalf of the recipient. At the end of the vesting period, the amount of any accrued dividend equivalents will be increased or decreased by the same payout factor used to increase or decrease the number of vested performance shares for the period.

 

Restricted Stock Units

 

No annual RSU awards were granted in 2020. The $1,312,500 RSU retention award granted to Mr. Simon on August 14, 2020, vests one-half on August 14, 2021, and one-half on August 14, 2022. Upon vesting, RSUs are settled in an equivalent number of shares of PG&E Corporation common stock, net of the number of shares having a value equal to required withholding taxes. All RSUs may be subject to earlier vesting or forfeiture upon certain events, in accordance with the terms of the grant. The $1,312,500 RSU retention award granted to Mr. Wells on August 14, 2020, was forfeited upon Mr. Wells’ resignation on September 26, 2020.

 

Each time that a cash dividend is paid on PG&E Corporation common stock, an amount equal to the cash dividend per share multiplied by the number of outstanding RSUs granted to the recipient will be accrued on behalf of the recipient. Any accrued dividends are paid in cash at the time the related RSUs are settled.

 

Mr. Smith received RSUs in 2019 as a non-employee director, as further described in footnote 2(ii) to the “2020 Director Compensation” table on page 31, and the section entitled “Non-Employee Director Stock-Based Compensation” on page 30.

 

2021 Joint Proxy Statement    73