Bankruptcy Watchdog Takes Aim at PG&E CEO's Pay Package
July 18 2019 - 4:28PM
Dow Jones News
By Soma Biswas
A federal bankruptcy watchdog is objecting to California utility
PG&E Corp.'s request for approval of a $3 million payment to
new Chief Executive William Johnson, according to a court
document.
Acting U.S. Trustee Andrew Vara, a Justice Department employee
monitoring the utility's bankruptcy case, took aim Wednesday at a
$3 million "transition" payment that PG&E paid to Mr. Johnson,
the former head of the Tennessee Valley Authority. The trustee is
also balking at a provision for $2.5 million in severance payable
to Mr. Johnson if the CEO is terminated without cause, according to
a filing in U.S. Bankruptcy Court in New York.
U.S. bankruptcy law generally prohibits severance payments to
company insiders, except under certain narrow conditions. Mr. Vara
wants a bankruptcy judge to deny approval of the employment pact,
saying PG&E has failed to establish that the severance and
"above market" transition payments are in line with prevailing
levels in the industry.
Mr. Johnson's employment contract also calls for an annual base
salary of $2.5 million. The CEO's base salary is significantly
higher than the base salaries for CEOs at such comparable energy
companies as Edison International and Sempra Energy, Mr. Vara
said.
Mr. Johnson is also eligible for annual equity awards tied to
safety and financial performance measures totalling $3.5 million.
PG&E has long been criticized by California residents who blame
PG&E's poor safety record for contributing to a series of
deadly wildfires in northern California.
The Wall Street Journal reported last week that PG&E knew
for years that hundreds of miles of high-voltage power lines could
fail and spark fires, yet it repeatedly failed to perform the
necessary upgrades. The utility has offered to set up a $100
million fund for victims of the 2017 and 2018 blazes that have been
linked to PG&E's equipment.
Separately, the Utility Reform Network, an advocacy group
representing California ratepayers, is opposing the company's
incentive bonus program earmarked for 12 key insiders.
The ratepayer group said PG&E has failed to prove that the
compensation isn't a disguised retention plan. Under the bankruptcy
code, companies are prohibited from providing pay and benefits
meant to induce top executives and other insiders to stay.
The awards under the key employee incentive plan to the 12
insiders range from $5.5 million to more than $16 million based on
a performance scale.
A PG&E representative couldn't immediately be reached for
comment.
Judge Dennis Montali has scheduled a hearing on the compensation
requests for July 24 in San Francisco.
Write to Soma Biswas at soma.biswas@wsj.com
(END) Dow Jones Newswires
July 18, 2019 16:13 ET (20:13 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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