Corporate Governance
PG&E’s corporate governance practices are foundational for how we operate as a business and engage as corporate citizens. The Corporate Governance section of our website details the policies and practices of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company (together, the “Boards”), including governance guidelines, bylaws (PDF), disclosure standards, and Codes of Conduct for directors and employees.
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An underlying factor for strong corporate governance is the independence of the Boards and their fiduciary responsibilities to the companies and their respective shareholders. The companies’ respective Corporate Governance Guidelines (PDF) promote board independence by requiring policies and practices such as the following:
- At least 75 percent of the directors of each company must be independent.
- An independent Chair of the Board or independent lead director (if the Chair is not independent) is elected by the Board.
- Only independent directors are allowed to serve on PG&E Corporation’s key standing Board committees. Further, members of each company’s Audit Committee and PG&E Corporation’s Compensation Committee also must meet additional independence standards.
- Executive sessions of the independent directors are held at each regularly scheduled Board meeting, without the presence of each company’s management.
Board diversity also contributes to strong corporate governance, and our policy considers diversity, age, skills, applicable legal requirements and other factors, as part of the Boards’ assessment of PG&E’s needs at the given time. The Boards believe in developing a balanced and multidisciplinary Board at each company, and annually review director nominees and the extent to which diverse backgrounds, perspectives, skills and experiences are represented. The directors for each company reflect this diversity. Of the 13 PG&E Corporation directors, 62 percent are diverse (five are female, one of African-American, and two are Hispanic). Of the 14 Pacific Gas and Electric Company directors, 57 percent are diverse (five are female, one is African-American, and two are Hispanic).
The Compliance and Public Policy Committee of the PG&E Corporation Board of Directors has primary oversight of compliance and ethics and corporate sustainability issues, such as environmental compliance and leadership, climate change, workforce development, and other policy matters. This includes an annual review of PG&E’s environmental performance and sustainability practices. Other committees of the PG&E Corporation Board and the Pacific Gas and Electric Company Board, as well as the full Boards, address other components of PG&E’s sustainability commitment, such as public and employee safety, operational excellence and investments to increase our delivery of safe, affordable, and clean energy to our customers, and enabling a low-carbon future.
In 2019, the Compliance and Public Policy Committee also was assigned the responsibility of tracking progress against the Utility’s Wildfire Safety Improvement Plan, as approved by the CPUC, reflecting the terms of the Utility’s probation regarding wildfire safety.
The PG&E Corporation and Pacific Gas and Electric Company 2019 Joint Proxy Statement (PDF) includes information on director qualifications and the oversight role of the Boards with respect to risk management, compliance and ethics, political contributions, corporate sustainability, safety, and management succession, among other items.
In connection with the 2017 settlement of shareholder derivative suits relating to the San Bruno accident, PG&E Corporation and Pacific Gas and Electric Company committed to making several enhancements (“therapeutics”) to its corporate governance and gas safety practices.
The corporate governance “therapeutics” include establishment and enhancement of Board committees responsible for safety oversight; regular public disclosure of API 1173 certification status; enhanced commitment to shareholder involvement through regular dialogue regarding corporate governance; updating the employee and supplier Codes of Conduct to incorporate various enhancements and updates, including updates to more fully promote and ensure safety culture and reporting; stating the respective responsibilities of the Chief Safety Officer (CSO), the Chief Ethics and Compliance Officer (CECO), and the Boards and their committees regarding instillation of safety culture, including responsibilities for communication and reporting; providing for regular attendance and reporting by the CSO and the CECO at Board and Board committee meetings, and providing those officers with access to senior management and employees; clarification regarding the incorporation of safety, compliance, and ethics into officer compensation; enhancement of a speak-up culture for employees and Board members; and enhancement of safety training for employees and Board members. To date, PG&E has implemented all of these corporate governance practices.
2018 Milestones
The tragic wildfires of the past two years have been extraordinarily challenging. PG&E has heard the calls for change, and PG&E is committed to taking actions that will help re-earn the trust of all stakeholders.
In 2019, these actions included appointing William “Bill” Johnson as PG&E Corporation’s new CEO and President and conducting a significant Board refreshment process that resulted in the appointment of 11 new independent members of the Boards. As detailed in the 2019 Joint Proxy Statement (PDF), both Bill and the new Boards have the expertise, experience and commitment to guide PG&E through the complex challenges that are before us, and build toward becoming one of the safest, most reliable and clean utility operators in the industry.
Measuring Progress
Annual Meeting Voting Results
Each year at the annual meeting, shareholders are asked to vote upon various items that may be proposed by management or by other shareholders. Proposals submitted by shareholders are either withdrawn by the shareholder (usually following discussions with management and a resolution of the shareholder’s concern); excluded from consideration, according to Securities and Exchange Commission guidelines; or published in the joint proxy statement to be voted on by shareholders at the annual meeting. A summary of the annual meeting voting results from 2015 to 2019 is provided below.
| Percent In Favor Footnote 1 | |||||
|---|---|---|---|---|---|
| Proxy Item | 2015 | 2016 | 2017 | 2018 | 2019 |
| Election of directors (average) Footnote 2a | 98.2 | 97.6 | 99.5 | 99.2 | 99.6 |
| Ratification of independent auditors Footnote 2b | 98.5 | 97.9 | 97.9 | 97.1 | 98.9 |
| Advisory vote on executive compensation Footnote 2c | 94.3 | 80.1 | 95.8 | 94.9 | 93.6 |
| Independent board chairman Footnote 3a | 45.6 | – | – | – | – |
| Advisory vote on the frequency of the advisory vote on executive compensation (1 year) Footnote 3b | – | – | 90.5 | – | – |
| Customer approval of charitable giving program Footnote 3c | – | – | 3.3 | 1.0 | – |
| Amendment of proxy access bylaw provisions Footnote 3d | – | – | – | 26.6 | 34.9 |
| Amendment to Restated Articles of Incorporation to increase the maximum and minimum numbers of directors Footnote 2d, Footnote 4a | – | – | – | – | 70.2 |
| Corporation structure reform Footnote 4b | – | – | – | – | 13.5 |
- 1. Defined as For/(For+Against), expressed as a percentage, unless otherwise specified. 1
- 2. Management proposal. 2a, 2b, 2c, 2d
- 3. Shareholder proposal. 3a, 3b, 3c, 3d
- 4. Defined as For/(For+Against+Abstain) as required by the New York Stock Exchange, expressed as a percentage. 4a, 4b
| Percent In Favor Footnote 1 | |||||
|---|---|---|---|---|---|
| Proxy Item | 2015 | 2016 | 2017 | 2018 | 2019 |
| Election of directors (average) Footnote 2a | 99.9 | 99.9 | 99.9 | 99.9 | 99.9 |
| Ratification of independent auditors Footnote 2b | 99.9 | 99.9 | 99.9 | 99.9 | 99.9 |
| Advisory vote on executive compensation Footnote 2c | 99.9 | 99.8 | 99.8 | 99.8 | 99.9 |
| Advisory vote on the frequency of the advisory vote on executive compensation (1 year) Footnote 2d | – | – | 99.9 | – | – |
- 1. Defined as For/(For+Against), expressed as a percentage, unless otherwise specified.1
- 2. Management proposal. 2a, 2b, 2c, 2d
Corporate Governance and Environment and Social Rankings
PG&E Corporation’s corporate governance practices are evaluated by several institutional shareholder groups and corporate governance organizations, such as Institutional Shareholder Services Inc. (ISS), an independent provider of risk management and corporate governance products and services to financial market participants. We have consistently received above-average ratings, both within our industry and overall.
| Score Footnote 2 | |
|---|---|
| Overall Governance Score | 1 |
| Board Structure | 1 |
| Compensation | 1 |
| Shareholder Rights | 1 |
| Audit | 5 Footnote 3 |
- 1. As of September 15, 2019.1
- 2. Scores indicate decile rank relative to index or region. A score of 1 indicates lower governance risk; a score of 10 indicates higher governance risk.2
- 3. Reflects PG&E Corporation and Pacific Gas and Electric Company Chapter 11 filings on January 29, 2019.3
ISS also evaluates PG&E’s disclosure practices with respect to environmental and social issues. PG&E has received above-average ratings in this area as well.
| Environment Score | |
|---|---|
| Overall Environment Score | 1 |
| Risks and Opportunities | 3 |
| Carbon and Climate | 1 |
| Natural Resources | 1 |
| Waste and Toxicity | 1 |
| Social Score | |
| Overall Social Score | 2 |
| Human Rights | 4 |
| Labor, Health and Safety | 2 |
| Stakeholders and Society | 1 |
| Product Safety, Quality and Brand | N/A |
- 1. As of September 15, 2019. A score of 1 indicates higher E&S disclosure; a score of 10 indicates lower E&S disclosure.1