Great Moments in Executive Compensation: Pacific Gas and Electric

Graef Crystal, call your office! In the May 30 San Francisco Chronicle, David Lazarus reports the astonishing news that Pacific Gas and Electric is asking a federal bankruptcy court to allow it to give $17.5 million in bonuses to its top management team, including nearly $1 million to PG&E Chairman Robert Glynn (thereby doubling Glynn’s current salary). The worry is that if it doesn’t fork over the cash, the California utility will have trouble retaining the crack team that ran it into the ground! OK. That’s a little unfair. The causes of the current electricity crisis in California are many and complex. No one deserves the sole blame. But it’s hard to see how anyone deserves any reward, either. Are you losing sleep over possible management turnover at America’s most cash-poor electric utility? Chatterbox’s guess is that PG&E’s creditors, which include the Bank of New York, the California Power Exchange, Bankers Trust, and assorted other suckers (click here for a list of the top 20), have rather different ideas about how to spend that $17.5 million. Particularly since PG&E already doled out $50 million in bonuses and raises right before its April 6 bankruptcy filing. And it’s a cinch that California ratepayers would prefer that any available loose change be applied toward lowering their electricity bills.

The PG&E motion requesting the bonuses is an important contribution to the burgeoning field of Chutzpah Studies. Here are some choice excerpts:

The Management Retention Program … provides for payments ranging from 25% to 100% of annual base salary as of the Petition Date (the “Retention Payments”) to certain officers and other members of its leadership team if they stay with PG&E over the next several years and continue to contribute to PG&E’s successful operation [italics Chatterbox’s] and restructuring during these difficult times. The program classifies eligible participants into four “tiers,” with participation ranging from 25% to 100% of eligible employees in each tier. … To place a cap on the cost of this program and to ensure that it is employed as a retention tool only where it is needed, no more than one third [italics Chatterbox’s] of the approximately 682 management employees occupying eligible positions in these four tiers (i.e., 226 employees) would be entitled to payments under the Management Retention Program. … With certain limited exceptions, [italics Chatterbox’s] to receive Retention Payments, Participants must be employed by PG&E [italics Chatterbox’s] at the time of such payments. …

The unabridged document can be accessed by clicking here. Share it with someone you love.

[Clarification, June 1: The Chronicle didn’t actually break the PG&E story. Lawrence Viele of Bloomberg News did on May 25.]