Corporate Responsibility and Sustainability Report 2020

Governance Reforms

As part of the Chapter 11 Cases, PG&E Corporation and the Utility committed to a substantial change in the makeup of the Boards of Directors. On July 1, 2020, in connection with our emergence from Chapter 11, PG&E Corporation substantially changed the membership of its Board of Directors to help guide the company post-bankruptcy. The new Board of Directors consists of 14 members, 11 of whom are new. Fifty-seven percent of the new Board members have geographic ties to California, and it is expected that the Board of Directors of the Utility will largely be the same as PG&E Corporation, with the Chief Executive Officer of the Utility serving as an additional member.

Upon our emergence from Chapter 11, William L. Smith became Interim Chief Executive Officer and President of PG&E Corporation effective July 1, 2020. The new Board of Directors of PG&E Corporation will be responsible for selecting a permanent Chief Executive Officer and President of PG&E Corporation.

As part of the Chapter 11 Cases, pursuant to the CPUC’s decision approving the Plan of Reorganization with conditions and modifications, PG&E Corporation and the Utility have committed to certain changes to their corporate governance. Certain of the changes are evidenced by amendments to the articles of incorporation, bylaws, corporate governance guidelines, certain committee charters, and other documents. The principal changes include:

• The Board of Directors of each of PG&E Corporation and the Utility is classified as follows:
  • One class will serve an initial term to expire in 2021, with subsequent terms expiring in 2023, after which terms for this class will revert to one-year terms; and
  • The other class will serve an initial term to expire in 2022, with subsequent terms expiring in 2024, after which there will no longer be a classified Board of Directors and all directors will serve one-year terms;
• The Board of Directors of PG&E Corporation will consist of nine to fifteen directors until December 31, 2020 and twelve to fifteen directors thereafter, and the Board of Directors of the Utility will consist of nine to sixteen directors until December 31, 2020 and twelve to sixteen directors thereafter;
• All of the directors, aside from the Chief Executive Officers of each of PG&E Corporation and the Utility, will be “independent” (as defined under the rules and regulations of the New York Stock Exchange and the SEC);
• The evaluation criteria for candidates for the Board of Directors of PG&E Corporation and the Utility has been expanded to include enhanced safety expertise, including a requirement that the Chair of the Board of the Utility and members of the Safety and Nuclear Oversight Committees meet one or more designated safety expertise criteria;
• There is an executive-level Chief Risk Officer and executive-level Chief Safety Officer, who will be required to provide certain risk and safety reports to the CPUC periodically; and
• The Safety and Nuclear Oversight Committees have been granted increased authority and oversight of public and workplace safety programs, and must approve of executive officer candidates prior to appointments of such officers.

Our Approach

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:

• All directors of each company must be independent, with the exception of the CEOs of each company.
• 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 standing key Board committees. Further, members of each company’s Audit Committee and PG&E Corporation’s Compensation Committee also must meet additional independence standards. Members of the Safety and Nuclear Oversight Committees and the Utility Chair must meet additional safety expertise criteria.
• 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, residency, 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 14 directors, who each serve on the PG&E Corporation and Pacific Gas and Electric Company Boards, 29 percent are female and 29 percent are ethnically diverse (three are African-American and one is Asian).

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.

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. Some elements of this oversight function have been further enhanced by the corporate governance changes described above under Governance Reforms.

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.