In January of this year, the Greenlining Institute and I negotiated an agreement with Pacific Gas & Electric to create an annual report that shows the entire scope of PG&E's executive compensation. Everything is included on two pages: all current and proposed future executive income.
PG&E signed the agreement for one reason – they were in a hurry to get out of bankruptcy. The biggest thing that could have held up their exit from bankruptcy was for the California Public Utilities Commission to delay its findings on a new $5 billion ten-year package of electricity rate increases. The action that could have delayed the Commission announcing its findings would have been my filing before the CPUC that said PG&E had just paid seventeen executives an unexpected $84 million as bonuses for running a successful business during bankruptcy. I had testified in June 2003 that PG&E and other utilities had hidden executive compensation. PG&E didn’t want the issue revisited, especially since I was right.
The agreement between me, Greenlining and PG&E in January 2004 required PG&E to file a report conducted by an audit firm that was independent of PG&E’s primary auditor. This report is a modified example of it.
The agreement also required PG&E to support having other regulated utilities provide comparable open disclosure of executive compensation.
This is a significant step forward for transparency in executive compensation. I post this blog on the same day that Ken Lay was indicted.
I have never believed there was a simple, reasonable and rational way to set executive compensation. The only solution I see is for the financial public to be as completely aware of the amount being paid as inside board members know. Now we have that for PG&E. Lets get it for every other major public company.
The website I posted the material on has four pages. The first is the independent audit report. The two key paragraphs are: The reason for these pages is “to assist the management of PG&E Corporation (PG&E) and Greenlining Institute (parties) in evaluating the full disclosure of the elements of the accompanying PG&E Corporation's 2003 Executive Compensation” and “The elements of the accompanying 2003 Executive Compensation Supplement are fully disclosed and clearly described; and are consistent with the books and records of PG&E, authorization of PG&E's Nominating, Compensating and Governance Committee, and the documents filed with the Securities Exchange Commission and other sources available on the internet.”
This sentence says two very important things. (1) The two page audit report includes everything the Board of PG&E knows about current and future executive compensation. (2) All sub-documents are available on the internet.
The audit cover letter is followed by exerpts of the two pages listing all thirty executive's compensation. The first page is current and future the second page is current and is published in full in the PG&E annual report. The third page is footnotes.
The documents I have posted show the type of information provided in a full disclosure. While the complete document, with numbers in it, is available by phoning or going to the CPUC, neither PG&E nor the CPUC has decided to put the full documents on the internet. Of course they should.