Risk & Compliance

Irate Shareholders Roil Utility’s Annual Meeting

They complain that top executives of PG&E Corp. earned millions of dollars while the company's main subsidiary had been in bankruptcy and dividends...
Stephen TaubApril 26, 2004

This is clearly not your father’s annual-meeting season. Last week, a day after a fight broke out at Coca-Cola’s shareholder gathering, more than 200 attendees to PG&E Corp.’s annual meeting staged a raucous protest against the utility’s compensation practices.

It seems they were not very happy that top executives earned millions of dollars while the company’s main subsidiary had been in bankruptcy and dividends had been suspended. Indeed, the annual meeting took place just nine days after the unit, Pacific Gas & Electric Co., emerged from three years of bankruptcy.

According to Reuters, shareholders repeatedly complained that chief executive officer Robert Glynn earned more than $17 million in 2003. Glynn’s package consisted of salary, bonus, long-term incentive payouts, and “other” compensation that included about $3 million for retirement obligations.

Attendees no doubt were also mindful of the fact that Business Week recently named Glynn one of the worst executives of 2003, the news service observed.

“You folks are the people who put the company into bankruptcy and yet you didn’t suffer,” said a shareholder from Fresno, California, quoted by Reuters. The shareholder said he had suffered financially since Pacific Gas went into bankruptcy in 2001 and the parent company suspended its dividend. “You, Mr. Glynn, made $17 million…How can you justify that?”

Glynn defended the company’s $84 million retention-bonus program, explaining it “was designed to incent this team to deliver the restoration of the company’s financial health,” according to the Contra Costa Times.

The CEO also answered that management restored $7 billion to the overall value of PG&E, according to Reuters. Glynn also reportedly served up an optimistic forecast of the company’s fortunes.

Ray Chevedden, a shareholder-critic, accused PG&E’s eight outside directors of being too cozy with management, the Contra Costa newspaper reported. Glynn responded that from his viewpoint as the executive directly answerable to the board, he saw in it “an inordinate amount of independence.”

After the meeting, PG&E director David Coulter, a member of the compensation committee, defended the company’s executive compensation practices. “You try to say what is a competitive level for performance,” he told Reuters.

At the meeting, shareholders also supported a non-binding resolution urging the board to put any takeover bids to a shareholder vote before implementing a poison pill to impede the deal, according to the wire service.

On the other hand, a proposal to limit “golden parachute” severance packages for executives received fell short of majority supported, receiving only 43.6 percent of total votes. And just 34 percent of the voters supported a demand that the company separate the roles of chairman and CEO.

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