Corporate Governance

We are committed to good corporate governance practices that provide a framework within which the Boards of Directors and management of PG&E Corporation and the Utility can pursue the business objectives of both companies. Transparency, integrity and accountability form the basis of this commitment. We want our many stakeholders to have visibility into our processes, policies and practices so that they are assured we are operating ethically, are able to deliver on our goals and are accountable for our actions.

Corporate Governance Guidelines and Director Independence

The policies and practices described in our Corporate Governance Guidelines demonstrate PG&E’s commitment to good corporate governance practices. The foundation for these practices is the independent nature of the Boards and their fiduciary responsibility to the companies’ shareholders.

The companies’ Corporate Governance Guidelines set forth a policy that 75 percent of the directors of each company should be independent, as defined in the Guidelines. Additionally, only independent directors may serve on PG&E Corporation’s standing board committees, which include the following: Compensation Committee, Finance Committee, Nominating and Governance Committee, Public Policy Committee and the newly established Nuclear, Operations and Safety Committee. Each company’s Audit Committee members also must be independent and meet additional independence standards.

Our Corporate Governance Guidelines are published annually in PG&E Corporation’s and Pacific Gas and Electric Company’s Joint Proxy Statement and also are available through each company’s website, along with our Bylaws, Board committee charters, codes of conduct for directors and employees, PG&E’s Political Engagement Policy and the PG&E Corporation Disclosure and Guidance Standard.

Recent Actions

To further our commitment to good corporate governance and accountability to shareholders, the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company recently took the following actions.

  • Established the Nuclear, Operations and Safety Committee of the PG&E Corporation Board of Directors. This Committee is responsible for the oversight and review of safety, operational performance and compliance issues related to the Utility’s operations and facilities (e.g., nuclear, generation, gas and electric transmission, and gas and electric distribution operations), as well as the oversight of the risk management policies and practices for such operations and facilities.
  • Expanded the scope of the management-level Risk Policy Committee to include general oversight of the companies’ risk management activities, including safety and operations by line of business. This responsibility is in addition to the Risk Policy Committee’s oversight of energy procurement transactions and credit/market risk.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, effective with their 2011 annual shareholders meeting, large companies were required to (1) provide their shareholders with a non-binding advisory vote on executive compensation paid, or a “say on pay,” and (2) at least once every six years, provide their shareholders with a non-binding advisory vote on whether the say-on-pay vote should occur every one, two or three years.

PG&E Corporation and the Utility committed to giving shareholders a “say on pay” well before the Dodd-Frank requirement became effective. In 2009, both companies announced that they would provide shareholders with an annual advisory vote on both executive compensation paid and each company’s pay-for-performance compensation policies and practices. The first such vote was offered at the companies’ 2010 annual meetings and earned approval from 96.1 percent and 99.8 percent, respectively, of PG&E Corporation and Utility shares that voted.

At the companies’ 2011 annual meetings, PG&E Corporation and the Utility again provided shareholders with a say on pay. In 2011, the companies also provided shareholders with a non-binding advisory vote on the frequency of the advisory say-on-pay vote. In keeping with the companies’ 2009 commitment, the Boards recommended that shareholders vote for a frequency of one year. The shareholders of each company approved a one-year frequency for the say-on-pay vote. In addition, in the companies’ 2011 say-on-pay vote, PG&E’s executive compensation was approved by 97.8 percent and 99.9 percent, respectively, of PG&E Corporation and Utility shares voted.

Also in 2011, PG&E Corporation and the Utility expanded their proxy statement disclosure on director qualifications and the oversight role of the Boards with respect to risk management, political contributions and management succession, among other items.

Governance Structures

The Boards of Directors of PG&E Corporation and the Utility are regularly engaged in governance matters, including those related to environmental performance, corporate responsibility and political activities. For example, the Public Policy Committee of the PG&E Corporation Board has specific oversight of many of the areas addressed in this Corporate Responsibility and Sustainability Report, including but not limited to corporate philanthropy, community involvement, supplier diversity, workforce diversity, climate change and the quality of the environment. In addition, the Public Policy Committee oversees issues pertaining to political contributions and related activities.

PG&E has structures in place to assure stakeholders that all activities related to the myriad aspects of corporate responsibility and our political activities are consistently measured, implemented and reported to the PG&E Corporation and Utility Boards of Directors.

For example, PG&E’s total community investment budget and individual charitable commitments of more than $1 million are approved by the Boards of Directors of PG&E Corporation and/or the Utility. Smaller donations are approved by the PG&E Corporation CEO or staff executives within the Corporate Affairs department, working with colleagues from throughout PG&E. To reduce the potential for conflicts of interest, no one may approve a charitable donation from PG&E funds to an organization in which they or family members have a financial interest, including serving on the organization’s board of directors. Community investments are publicly disclosed on the Utility’s website. Learn more about PG&E’s community investments.

In addition, the Public Policy Committee reviews PG&E’s political contributions program and recommends to the PG&E Corporation and Utility Boards and senior management approval limits for political contributions from PG&E to candidates, measures, initiatives, political action committees and certain other organizations that may engage in political activity. The Public Policy Committee also directs the preparation of an annual report detailing political contributions made by PG&E during the preceding year.

Consistent with PG&E’s values, PG&E Corporation and its affiliates and subsidiaries are committed to full compliance with both the letter and the spirit of all federal, state, local and foreign political laws and to maintaining the highest ethical standards in the way we conduct our business.

PG&E makes corporate political contributions to:

  • Political action committees (PACs);
  • Political parties and other organizations that engage in voter registration and similar activities that encourage citizen involvement in the political process; and
  • Non-profit organizations, including those formed under Section 501(c)(4) and 527 of the Internal Revenue Code.

Along with civic, charitable and volunteer activities, employees can participate in the political process. All eligible employees may make voluntary contributions to the company’s political action committees: PG&E Corporation Employees EnergyPAC and Pacific Gas and Electric Company State and Local PAC. PAC contributions go directly to support candidates for elective office at both the federal and state levels as well as other committees. By law, PG&E cannot use corporate funds to make contributions to federal candidates.

In 2011, PG&E Corporation Employees EnergyPAC and Pacific Gas and Electric Company State and Local PAC made contributions of $237,750 and $10,000, respectively. PG&E contributed $2,060,216 to state and local political candidates, ballot measures, political parties and other committees. Disclosure of our annual political contributions is publicly available on PG&E Corporation's website.

Political Contributions—2011
PG&E Employees Federal PAC Contributions
U.S. House $94,250.00
U.S. Senate $21,000.00
Leadership/Other PAC $122,500.00
Total $237,750.00

PG&E Employees State and Local PAC Contributions
Total $10,000.00

Corporate Campaign Contributions
Total California Corporate Contributions to Candidates $220,575.00
Total Corporate Contributions to Other Committees $1,839,641.36
Total $2,060,216.36

PG&E also discloses its policies and procedures on its lobbying activities and trade association payments, including portions of its annual membership dues over $50,000 to trade associations that are used for political purposes.

Trade Association Dues—20111
Portion of Dues That Were Non-Deductible
Total $513,979

1 Represents the portion of membership dues to trade associations that was non-deductible under Section 162(e)(1) of the Internal Revenue Code. Includes trade associations that received annual membership dues over $50,000. The reported amount is based on information provided by the trade associations to PG&E Corporation and Pacific Gas and Electric Company.

Corporate Governance Rankings

PG&E’s corporate governance practices have been evaluated and rated by several institutional shareholder groups and corporate governance organizations. We have consistently received ratings that are well above average compared with other utility companies, as well as general industry companies.

As of April 24, 2012, Institutional Shareholder Services, Inc. (ISS), an independent provider of risk management and corporate governance products and services to financial market participants, rated PG&E Corporation’s governance practices “low concern” (based on a low, medium or high level of concern) in the audit, board structure and shareholder rights categories. ISS rated PG&E Corporation “high concern” in the compensation category, while still supporting the company on its 2012 say-on-pay proposal.