dcsimg
About the Business

Corporate Governance

PG&E’s corporate governance practices have consistently received ratings that are well above average compared with other utility companies, as well as general industry companies.

PG&E adheres to strong corporate governance practices aimed at ensuring that our business is managed and operated with integrity, accountability and transparency. The policies and practices we follow are detailed in the Corporate Governance Guidelines adopted by the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company (together, the “Boards”). These guidelines are publicly available through the Corporate Governance section of our 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.

Director Independence

The foundation for strong corporate governance is the independence of the Boards and their fiduciary responsibilities to the companies and their respective shareholders. The companies’ Corporate Governance Guidelines set forth a number of policies and practices that support and promote board independence. For example:

  • We require that at least 75 percent of the directors of each company be independent, as defined in the Guidelines.
  • We have an independent lead director, who is elected by the independent chairs of the standing Board committees. The duties of the lead director are clearly delineated and include:
    • Establishing the agenda for, and presiding at, the executive sessions of the independent board members
    • Approving agendas and schedules for Board meetings
    • Presiding at Board meetings in the Chairman’s absence
    • Evaluating, along with the Compensation Committee members and the other independent directors, the CEO’s performance
  • We allow only independent directors to serve on PG&E Corporation’s standing board committees, which include the Compensation Committee; Finance Committee; Nominating and Governance Committee; the Nuclear, Operations and Safety Committee; and the Public Policy Committee. Each company’s Audit Committee members also must be independent and meet additional independence standards.
  • We require that executive sessions of the independent directors be held at each regularly scheduled Board meeting, without the presence of management.

Say on Pay

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

PG&E committed to giving shareholders a “say on pay” well before the Dodd-Frank requirement became effective in 2011. Since 2010, we have provided shareholders with an annual advisory vote on both executive compensation paid and each company’s pay-for-performance compensation policies and practices. As shown below, shareholders have approved PG&E’s executive compensation each time that such a vote has been held.

Shareholder Approval of Executive Compensation

TIP: Click on the items in the chart legend to selectively remove or restore chart data.

Since 2011, PG&E Corporation and the Utility also have 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. 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. The Public Policy Committee charter is publicly available on our website.

PG&E Corporation Chairman, CEO and President Tony Earley and Pacific Gas and Electric Company President Chris Johns at the annual shareholders’ meeting.

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.

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);
  • Candidates and candidate-controlled committees;
  • Ballot measure committees;
  • 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 and political parties at both the federal and state levels, as well as other political action committees. By law, PG&E cannot use corporate funds to make contributions to federal candidates.

In 2012, PG&E Corporation Employees EnergyPAC and Pacific Gas and Electric Company State and Local PAC made contributions of $373,458 and $1,500, respectively. PG&E contributed $3,986,914 to state and local political candidates, ballot measures, political parties and other committees.

Our annual political contributions are publicly reported on PG&E Corporation’s website.

Political Contributions—2012
PG&E Employees Federal PAC Contributions
U.S. House $137,958
U.S. Senate $58,000
Leadership/Other PAC $177,500
Total $373,458

PG&E Employees State and Local PAC Contributions
Total $1,500

Corporate Campaign Contributions
Total California Corporate Contributions to Candidates $398,858
Total Corporate Contributions to Other Committees $3,588,056
Total $3,986,914

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

Trade Association Dues—20121
Portion of Dues That Were Non-Deductible
Total $487,729

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.

Institutional Shareholder Services, Inc. (ISS), an independent provider of risk management and corporate governance products and services to financial market participants, ranks governance risk across four categories: audit, board structure, compensation and shareholder rights, using a decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. As of May 6, 2013, ISS ranked PG&E Corporation a “1” relative to the S&P 500 index in the categories of audit, compensation and shareholder rights, and a “2” in the board structure category.