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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PG&E CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF PG&E] PG&E Corporation and Pacific Gas and Electric Company
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Joint Notice of 1997 Annual Meetings . Joint Proxy Statement
March 3, 1997
To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company
(PG&E):
You are cordially invited to attend the first annual meeting of PG&E
Corporation and the 91st annual meeting of Pacific Gas and Electric Company. The
meetings will be held concurrently on Wednesday, April 16, 1997, at 10:00 a.m.,
in the Masonic Auditorium, 1111 California Street, San Francisco, California.
On January 1, 1997, PG&E Corporation became the holding company of PG&E.
All outstanding shares of PG&E common stock became shares of PG&E Corporation
common stock on that date. The outstanding shares of PG&E preferred stock remain
unchanged. Therefore, if you hold shares of common stock, your stock is in PG&E
Corporation and if you hold shares of preferred stock, your stock is in PG&E.
The accompanying Joint Proxy Statement contains information about matters
to be considered at both the PG&E Corporation and PG&E annual meetings. At the
annual meetings, PG&E Corporation and PG&E shareholders will be asked to vote on
the election of directors and ratification of the selection of independent
public accountants for 1997 for their respective companies. The Boards of
Directors and management of PG&E Corporation and PG&E recommend that you vote
"FOR" the nominees for directors and the ratification of the appointment of
Arthur Andersen LLP as the independent public accountants for 1997, as set forth
in the Joint Proxy Statement.
In addition to the matters described above, PG&E Corporation shareholders
will be asked to vote on the proposals submitted by individual PG&E Corporation
shareholders described in the Joint Proxy Statement, if such proposals are
properly presented at the annual meeting. For the reasons stated in the Joint
Proxy Statement, the PG&E Corporation Board of Directors and management
recommend that PG&E Corporation shareholders vote "AGAINST" these proposals.
Your vote on the business at the annual meeting is important. Whether or
not you plan to attend, please sign, date, and return your proxy as soon as
possible in the envelope provided so that your shares can be represented at the
annual meeting. If you hold shares in both PG&E Corporation and PG&E, you will
be provided with a proxy card for each company. Be sure to return both proxy
cards in the envelopes provided.
During the annual meetings, PG&E Corporation and PG&E management also
will report on operations and other matters affecting PG&E Corporation and PG&E,
act on such other matters as may properly be presented at the meetings, and
respond to shareholders' questions.
Sincerely,
/s/ Stanley T. Skinner
Stanley T. Skinner
Chairman of the Board and
Chief Executive Officer of
PG&E Corporation and PG&E
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Table of Contents
Joint Notice of Annual Meetings of Shareholders
Joint Proxy Statement
General Information 1
Item No. 1: Election of Directors 2
Information Regarding the Boards of Directors of PG&E Corporation and PG&E 6
Item No. 2: Ratification of Appointment of Independent Public Accountants 11
Item Nos. 3-8: Shareholder Proposals 12
(To Be Voted on by PG&E Corporation Shareholders Only)
Executive Compensation 19
Other Information 28
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Joint Notice of Annual Meetings of Shareholders
of PG&E Corporation and Pacific Gas and Electric Company
March 3, 1997
To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company
(PG&E):
The annual meetings of shareholders of PG&E Corporation and PG&E
will be held concurrently in the Masonic Auditorium, 1111 California Street, San
Francisco, California, on Wednesday, April 16, 1997, at 10:00 a.m., for the
purpose of considering the following proposals:
(1) For PG&E Corporation and PG&E shareholders, to elect the following
16 directors to each Board for the ensuing year:
Richard A. Clarke Mary S. Metz
Harry M. Conger Rebecca Q. Morgan
David A. Coulter Samuel T. Reeves
C. Lee Cox Carl E. Reichardt
William S. Davila John C. Sawhill
Robert D. Glynn, Jr. Alan Seelenfreund
David M. Lawrence, MD Stanley T. Skinner
Richard B. Madden Barry Lawson Williams
(2) For PG&E Corporation and PG&E shareholders, to ratify each
Board of Directors' appointment of Arthur Andersen LLP as
independent public accountants for 1997 for PG&E Corporation
and PG&E;
(3) For PG&E Corporation shareholders only, to act upon the six
proposals submitted by PG&E Corporation shareholders and
described on pages 12-18 of the Joint Proxy Statement, if
such proposals are properly presented at the meeting; and
(4) For PG&E Corporation and PG&E shareholders, to transact such
other business as may properly come before the meetings and
any adjournments or postponements thereof.
Shareholders of record of PG&E Corporation and PG&E at the close
of business on February 18, 1997, and valid proxyholders may attend and
vote at the respective annual meetings. If your shares are registered in
the name of a brokerage firm or trustee and you plan to attend the
meeting, please obtain from the firm or trustee a letter or other
evidence of your beneficial ownership of those shares to facilitate your
admittance to the meeting. If you are a participant in the
PG&E Corporation Dividend Reinvestment Plan, please note that the
PG&E Corporation proxy covers all shares of common stock in your account,
including any shares which may be held in that Plan. If you hold shares
in both PG&E Corporation and PG&E, you will be provided with a proxy card
for each company. Please return both proxy cards in the envelopes
provided.
By Order of the Boards of Directors,
/s/ Leslie H. Everett
Leslie H. Everett
Corporate Secretary, PG&E Corporation
Vice President and Corporate Secretary, PG&E
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PG&E Corporation
Pacific Gas and Electric Company
Joint Proxy Statement
Introduction
This Joint Proxy Statement is provided to the shareholders of PG&E
Corporation and Pacific Gas and Electric Company ("PG&E") in connection with
their respective annual meetings of shareholders and any adjournments or
postponements thereof. The annual meetings are scheduled to be held concurrently
at 10:00 a.m., Wednesday, April 16, 1997, at the Masonic Auditorium, 1111
California Street, San Francisco, California.
As a result of the holding company formation merger approved by PG&E
shareholders at their 1996 annual meeting (the "Merger"), on January 1, 1997,
the outstanding shares of PG&E common stock were converted, on a one-for-one
basis, into shares of PG&E Corporation common stock. PG&E Corporation holds 100
percent of the issued and outstanding shares of PG&E common stock and
approximately 95 percent of the total outstanding voting stock of PG&E. The
outstanding shares of PG&E's first preferred stock are unchanged by the Merger
and continue to be outstanding shares of PG&E.
General Information
The Boards of Directors of PG&E Corporation and PG&E are soliciting
proxies hereunder for use at their respective annual meetings to be held on
April 16, 1997, and at any adjournments or postponements thereof, and a
respective form of proxy is provided with this Joint Proxy Statement. This Joint
Proxy Statement and the accompanying PG&E Corporation or PG&E proxy form were
first mailed on or about March 3, 1997, to PG&E Corporation and PG&E
shareholders, respectively, entitled to vote at the annual meetings.
To the knowledge of the Boards of Directors of PG&E Corporation and PG&E,
the only items of business to be considered at the meetings are listed in the
preceding PG&E Corporation and PG&E Joint Notice of Annual Meetings of
Shareholders and are explained in more detail on the following pages. By
returning your signed proxy, you authorize the proxyholders named in the proxy
to vote your shares as you indicate on these items of business and to vote your
shares in accordance with management's best judgment in response to other
proposals properly presented by others at the meeting.
You may revoke your signed proxy at any time before it is exercised at the
annual meeting. You may do this by advising the Corporate Secretary of PG&E
Corporation or PG&E (as the case may be) in writing of your desire to revoke
your proxy, or by submitting a duly executed proxy bearing a later date. You
also may revoke your proxy by attending the annual meeting and indicating that
you wish to vote in person.
The Boards of Directors of PG&E Corporation and PG&E have established
February 18, 1997, as the record date for the determination of shareholders of
PG&E Corporation and PG&E entitled to receive notice of and to vote at their
respective annual meetings. As of February 18, 1997, there were 416,528,027
shares of PG&E Corporation common stock, without par value, outstanding and
entitled to vote at the PG&E Corporation annual meeting; each such share is
entitled to one vote. As of February 18, 1997, there were 21,582,228 shares of
PG&E first preferred stock, $25 par value, and 409,120,387 shares of PG&E common
stock, $5 par value, outstanding and entitled to vote at the PG&E annual
meeting; each such share is entitled to one vote.
Shares represented by properly executed proxies received by PG&E
Corporation or PG&E prior to or at the annual meetings will be voted at the
respective annual meeting in accordance with the instructions specified in
each proxy, and will be counted for purposes of establishing a quorum,
regardless of how or whether such shares are voted on any specific proposal. If
no instructions are specified in the PG&E Corporation proxy, the subject shares
will be voted (i) FOR the election of the nominees of the PG&E Corporation Board
of Directors, unless authority to vote is withheld as provided in the proxy,
(ii) FOR ratification of the appointment of Arthur Andersen LLP as PG&E
Corporation's independent public accountants for 1997, and (iii) AGAINST each of
the shareholder proposals that are properly presented at the meeting. If no
instructions are specified in the PG&E proxy, the subject shares will be voted
(i) FOR the election of the nominees of the PG&E Board of Directors, unless
authority to vote is withheld as provided in the proxy, and (ii) FOR
ratification of the appointment of Arthur Andersen LLP as PG&E's independent
public accountants for 1997.
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Other than with respect to the election of directors, each proposal which
may be presented at the meeting must receive the affirmative vote of a majority
of the shares represented and voting on the proposal. In addition, the
affirmative votes must constitute at least a majority of the required quorum.
PG&E Corporation and PG&E intend to count abstentions both for purposes of
determining the presence or absence of a quorum and in the total number of
shares represented and voting with respect to a proposal. Accordingly,
abstentions will have the same effect as a vote against a proposal. Broker
non-votes, if any, with respect to a proposal will be counted for purposes of
determining the presence or absence of a quorum, but will not be counted as
shares represented and voting with respect to that proposal.
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Item No. 1:
Election of Directors of PG&E Corporation and PG&E
Sixteen directors will be elected to serve on the Boards of Directors of
PG&E Corporation and PG&E to hold office until the next annual meetings or until
their successors shall be elected and qualified. The sixteen nominees for
director of PG&E Corporation and the sixteen nominees for director of PG&E whom
the respective Boards propose for election are the same. The composition of
these identical slates of nominees is consistent with the policy of
PG&E Corporation and PG&E that at least 75 percent of their Boards shall be
composed of directors who are neither current nor former officers or employees
of PG&E Corporation, PG&E, or any of their respective subsidiaries.
Information is provided on the following pages about the nominees for
directors, including their principal occupations for the past five years,
certain other directorships, age, and length of service as a director of
PG&E Corporation and PG&E. Membership on Board committees, attendance at Board
and committee meetings, and ownership of stock in PG&E Corporation are indicated
in separate sections following the individual resumes of the nominees.
Directors of PG&E Corporation and PG&E are elected from those nominated
based on a plurality of votes cast. The nominees receiving the highest number of
affirmative votes (up to the number of directors to be elected) are elected.
Votes against a nominee or votes withheld have no legal effect. Unless authority
to vote is withheld or another contrary instruction is indicated, properly
executed proxies received by PG&E Corporation or PG&E prior to or at the annual
meetings will be voted FOR the election of the nominees listed on the following
pages. All of the nominees named below have agreed to serve if elected. Should
any of the nominees become unavailable at the time of the meeting to accept
nomination or election as a director, the respective proxyholders named in the
enclosed PG&E Corporation or PG&E proxy will vote for substitute nominees at
their discretion.
The Boards of Directors of PG&E Corporation and PG&E Recommend the Election of
Their Respective Nominees for Director Presented in This Joint Proxy Statement.
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Nominees for Directors of PG&E Corporation and PG&E
Biographical Information
[PHOTO]
Richard A. Clarke
Mr. Clarke is former Chairman of the Board of PG&E. He was Chairman of the Board
of PG&E from May 1986 until his retirement in May 1995, and also was Chief
Executive Officer of PG&E from May 1986 to June 1994. Mr. Clarke, 66, has been a
director of PG&E since 1985 and a director of PG&E Corporation since December
1996. He also is a director of BankAmerica Corporation, Bank of America NT&SA,
Consolidated Freightways, Inc., doing business as CNF Transportation, and
Potlatch Corporation.
[PHOTO]
Harry M. Conger
Mr. Conger is Chairman of the Board of Homestake Mining Company. He was Chief
Executive Officer of Homestake Mining Company from December 1978 until his
retirement in May 1996, and continues to serve as a director of that company.
Mr. Conger, 66, has been a director of PG&E since 1982 and a director of PG&E
Corporation since December 1996. He also is a director of ASA Limited, Baker
Hughes Inc., and CalMat Co.
[PHOTO]
David A. Coulter
Mr. Coulter is Chairman and Chief Executive Officer of BankAmerica Corporation
(bank holding company) and Bank of America NT&SA and has been an executive
officer of Bank of America for the past five years. Mr. Coulter, 49, has been a
director of PG&E since May 1996 and a director of PG&E Corporation since
December 1996.
[PHOTO]
C. Lee Cox
Mr. Cox is Vice Chairman of AirTouch Communications, Inc. and retired President
and Chief Executive Officer of AirTouch Cellular (cellular telephone and paging
services). He has been an executive officer of AirTouch Communications, Inc. and
its predecessor, PacTel Corporation, for more than the past five years. Mr. Cox,
55, has been a director of PG&E since February 1996 and a director of PG&E
Corporation since December 1996.
[PHOTO]
William S. Davila
Mr. Davila is President Emeritus of The Vons Companies, Inc. (retail grocery).
He was President of The Vons Companies, Inc. from 1986 until his retirement in
May 1992 and continues to serve as a director of that company. Mr. Davila, 65,
has been a director of PG&E since 1992 and a director of PG&E Corporation since
December 1996. He also is a director of Hormel Foods Corporation and Wells Fargo
& Company.
3
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Nominees for Directors of PG&E Corporation and PG&E
Continued
[PHOTO]
Robert D. Glynn, Jr.
Mr. Glynn is President and Chief Operating Officer of PG&E Corporation and PG&E
and has been an officer of PG&E for more than the past five years. Mr. Glynn,
54, has been a director of PG&E since 1995 and a director of PG&E Corporation
since December 1996. He also is a director of URS Corporation.
[PHOTO]
David M. Lawrence, MD
Dr. Lawrence is Chairman and Chief Executive Officer of Kaiser Foundation Health
Plan, Inc. and Kaiser Foundation Hospitals and has been an executive officer of
those companies for more than the past five years. Dr. Lawrence, 56, has been a
director of PG&E since 1995 and a director of PG&E Corporation since December
1996. He also is a director of Hewlett-Packard Company.
[PHOTO]
Richard B. Madden
Mr. Madden is former Chairman of the Board and Chief Executive Officer of
Potlatch Corporation (diversified forest products). He was Chief Executive
Officer of Potlatch Corporation from 1971 until his retirement in May 1994 and
continues to serve as a director of that company. Mr. Madden, 67, has been a
director of PG&E since 1977 and a director of PG&E Corporation since December
1996. He also is a director of Consolidated Freightways, Inc., doing business as
CNF Transportation, and URS Corporation.
[PHOTO]
Mary S. Metz
Dr. Metz is Dean of University Extension, University of California, Berkeley and
has held that position for more than the past five years. Dr. Metz, 59, has been
a director of PG&E since 1986 and a director of PG&E Corporation since December
1996. She also is a director of Longs Drug Stores Corporation, Pacific Telesis
Group, and Union Bank of California.
[PHOTO]
Rebecca Q. Morgan
Mrs. Morgan is President and Chief Executive Officer of Joint Venture: Silicon
Valley Network (nonprofit collaborative formed to address critical issues facing
Silicon Valley). She has held that position since September 1, 1993. Prior to
that date, she was a California State Senator since 1984. Mrs. Morgan, 58, has
been a director of PG&E since 1995 and a director of PG&E Corporation since
December 1996.
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[PHOTO]
Samuel T. Reeves
Mr. Reeves is President of Pinnacle Trading, LLC (international investing). He
has held that position since July 1, 1995. Prior to that date, he was President
and Co-Chairman of the Board of Dunavant Enterprises, Inc. (cotton
merchandising) from 1978 until his retirement in June 1995. Mr. Reeves, 62, has
been a director of PG&E since 1992 and a director of PG&E Corporation since
December 1996. He also is a director of Morgan Stanley Institutional Fund, Inc.,
Morgan Stanley Fund, Inc., and Morgan Stanley Universal Fund, Inc., registered
investment companies, and Tiger Management Corporation.
[PHOTO]
Carl E. Reichardt
Mr. Reichardt is former Chairman of the Board and Chief Executive Officer of
Wells Fargo & Company (bank holding company) and Wells Fargo Bank, N.A. He was
an executive officer of Wells Fargo Bank, N.A. from 1978 until his retirement in
December 1994 and continues to serve as a director of Wells Fargo & Company and
Wells Fargo Bank, N.A. Mr. Reichardt, 65, has been a director of PG&E since 1985
and a director of PG&E Corporation since December 1996. He also is a director of
Columbia/HCA Healthcare Corporation, ConAgra, Inc., Ford Motor Company, McKesson
Corporation, Newhall Management Corporation, and SunAmerica, Inc.
[PHOTO]
John C. Sawhill
Dr. Sawhill is President and Chief Executive Officer of The Nature Conservancy
(international environmental organization) and has held that position for more
than the past five years. Dr. Sawhill, 60, has been a director of PG&E since
1990 and a director of PG&E Corporation since December 1996. He also is a
director of The Vanguard Group, Inc. and each of the Vanguard Funds, registered
investment companies, Procter and Gamble, and NACCO Industries, Inc.
[PHOTO]
Alan Seelenfreund
Mr. Seelenfreund is Chairman of the Board and Chief Executive Officer of
McKesson Corporation (distributor of pharmaceuticals and health care products)
and has been an executive officer of that company for more than the past five
years. He will retire as Chief Executive Officer of McKesson Corporation,
effective April 1, 1997. He will remain Chairman of the Board. Mr. Seelenfreund,
60, has been a director of PG&E since 1993 and a director of PG&E Corporation
since December 1996.
[PHOTO]
Stanley T. Skinner
Mr. Skinner is Chairman of the Board and Chief Executive Officer of PG&E
Corporation and PG&E and has been an executive officer of PG&E for more than the
past five years. Mr. Skinner, 59, has been a director of PG&E since 1986 and a
director of PG&E Corporation since December 1996. He also is a director of The
Federal Reserve Bank of San Francisco.
[PHOTO]
Barry Lawson Williams
Mr. Williams is President of Williams Pacific Ventures, Inc. (venture capital
and real estate, consulting, and mediation) and has been an executive officer of
that company for more than the past five years. Mr. Williams, 52, has been a
director of PG&E since 1990 and a director of PG&E Corporation since December
1996. He also is a director of APL Limited, Newhall Management Corporation,
Tenera, Inc., and Simpson Manufacturing Co., Inc.
5
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Information Regarding the
Boards of Directors of PG&E Corporation and PG&E
Board Committees
The committees of the PG&E Corporation Board of Directors are the
Executive Committee, Audit Committee, Capital Investment Committee, Finance
Committee, Nominating and Compensation Committee, and Public Policy Committee.
The Committees of the PG&E Board of Directors are the Executive Committee, Audit
Committee, Finance Committee, Nominating and Compensation Committee, and Public
Policy Committee. The composition of the Executive Committee, Audit Committee,
Finance Committee, Nominating and Compensation Committee, and Public Policy
Committee is the same for PG&E Corporation and PG&E. The membership and duties
of the committees are as follows:
Capital
Executive Audit Investment
Committees Committees Committee
S. T. Skinner* H. M. Conger* C. E. Reichardt*
H. M. Conger C. L. Cox R. B. Madden
R. D. Glynn, Jr. W. S. Davila S. T. Reeves
R. B. Madden M. S. Metz J. C. Sawhill
M. S. Metz R. Q. Morgan B. L. Williams
C. E. Reichardt B. L. Williams
Nominating and
Finance Compensation Public Policy
Committees Committees Committees
R. B. Madden* C. E. Reichardt* M. S. Metz*
R. A. Clarke D. M. Lawrence, MD R. A. Clarke
D. A. Coulter S. T. Reeves W. S. Davila
C. E. Reichardt J. C. Sawhill R. D. Glynn, Jr.
S. T. Skinner A. Seelenfreund J. C. Sawhill
B. L. Williams
*Chair
Executive Committees
Each Executive Committee (no meetings held in 1996), subject to the
provisions of law and certain limits imposed by the PG&E Corporation or PG&E
Board (as the case may be), may exercise any of the powers and perform any of
the duties of the PG&E Corporation or PG&E Board, respectively. The Executive
Committees meet as needed.
Audit Committees
The Audit Committees of PG&E Corporation and PG&E (four PG&E committee
meetings held in 1996) satisfy themselves as to the independence and competence
of PG&E Corporation's or PG&E's independent public accountants. They review with
the independent accountants and with PG&E Corporation's or PG&E's officers and
internal auditors the scope and results of the independent accountants' audit
work, annual financial statements, internal accounting and control systems, and
compliance with laws, regulations, policies, and programs. Each Audit Committee
also recommends to the respective Board of Directors the firm of independent
public accountants to be selected to audit the accounts, and makes further
inquiries as it deems necessary or desirable to inform itself as to the conduct
of PG&E Corporation's or PG&E's affairs. The Audit Committees are composed
entirely of directors who are neither (a) present or former officers or
employees of PG&E Corporation, PG&E, or any of their respective subsidiaries;
(b) consultants to PG&E Corporation, PG&E, or any of their subsidiaries; nor (c)
officers or employees of any other corporation on whose board of directors any
PG&E Corporation or PG&E officer serves as a member. One member of each
Committee is appointed by the respective Board of Directors as the Committee's
Chair.
Capital Investment Committee
The Capital Investment Committee of PG&E Corporation advises and assists
the PG&E Corporation Board on long-term capital investment strategies, and
reviews, acts upon, or recommends Board action on specific investment and
divestment opportunities. The Capital Investment Committee is composed entirely
of directors who are neither (a) present or former officers or employees of PG&E
Corporation or any of its subsidiaries; (b) consultants to PG&E Corporation or
any of its subsidiaries; nor (c) officers or employees of any other corporation
on whose board of directors any PG&E Corporation officer serves as a member. One
member of the Committee is appointed by the PG&E Corporation Board of Directors
as the Committee's Chair. The Committee was formed on January 1, 1997, and,
therefore, held no meetings in 1996.
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Finance Committees
The Finance Committees of PG&E Corporation and PG&E (six PG&E committee
meetings held in 1996) review and recommend to the PG&E Corporation or PG&E
Board long-range financial policies and objectives, and actions required to
achieve those objectives. Specifically, each Finance Committee reviews capital
and operating budgets, current and projected financial results of operations,
short-term and long-range financing plans, dividend policy, financial management
of PG&E's retirement plan and other major investment trusts, risk management
activities, and major commercial banking, investment banking, financial
consulting, and other financial relations of PG&E Corporation or PG&E.
Each Finance Committee is composed of the Chairman of the Board and of
directors who are neither officers nor employees of PG&E Corporation or PG&E.
One member of each Committee, who is neither a current nor former officer or
employee of PG&E Corporation or PG&E, is appointed by the respective Board of
Directors as the Committee's Chair.
Nominating and Compensation Committees
The Nominating and Compensation Committees of PG&E Corporation and PG&E
(five PG&E committee meetings held in 1996) review and make recommendations to
the respective Board of Directors regarding the selection of nominees to serve
as advisory directors and directors of PG&E Corporation or PG&E, and the
compensation and benefit policies and practices of PG&E Corporation or PG&E.
Each Committee reviews and approves the compensation of officers and certain
non-officers of PG&E Corporation or PG&E except that of the Chairman of the
Board and Chief Executive Officer, whose compensation is established by the full
PG&E Corporation or PG&E Board upon recommendation of the respective Committee.
Each Committee also reviews long-range planning for executive development and
succession, and the composition and performance of the PG&E Corporation or PG&E
Board. Each Nominating and Compensation Committee is composed entirely of
directors who are neither (a) present or former officers or employees of PG&E
Corporation, PG&E, or any of their respective subsidiaries; (b) consultants to
PG&E Corporation, PG&E, or any of their subsidiaries; nor (c) officers or
employees of any other corporation on whose board of directors any PG&E
Corporation or PG&E officer serves as a member. One member of each Committee is
appointed by the respective Board of Directors as the Committee's Chair.
Each Nominating and Compensation Committee will consider nominees
recommended by shareholders for election to the respective Board of Directors.
The names of such nominees, accompanied by relevant biographical information,
should be submitted in writing to the Corporate Secretary of PG&E Corporation or
PG&E (as the case may be). Each Nominating and Compensation Committee seeks
qualified, dedicated, and highly regarded individuals who have experience
relevant to PG&E Corporation's and PG&E's business operations, who understand
the complexities of PG&E Corporation's and PG&E's business environment, and who
will represent the best interests of PG&E Corporation, PG&E, and their
respective shareholders. In accordance with PG&E's long-standing commitment to
equal opportunity, each Committee continues to seek qualified women and minority
candidates for the respective Board.
Public Policy Committees
The Public Policy Committees of PG&E Corporation and PG&E (three PG&E
committee meetings held in 1996) advise the respective Board of Directors
regarding public policy issues which could significantly affect PG&E
Corporation's or PG&E's customers, shareholders, or employees, or the
communities which PG&E Corporation or PG&E serves.
Each Public Policy Committee reviews PG&E Corporation's or PG&E's policies
and practices to protect and improve the quality of the environment, to support
and contribute to charitable and community service organizations, to ensure
equal opportunity in hiring and promoting employees, and to encourage
development of minority-owned and women-owned businesses as suppliers to PG&E
Corporation or PG&E. One member of each Committee, who is neither a current nor
former officer or employee of PG&E Corporation, PG&E, or their respective
subsidiaries, is appointed by the respective Board of Directors as the
Committee's Chair.
Attendance at Board and Committee Meetings
There was one meeting of the PG&E Corporation Board of Directors in 1996.
Attendance at this meeting was 100%. There were no meetings of any
PG&E Corporation Board committees in 1996.
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Fourteen meetings of the PG&E Board of Directors and 18 meetings of the
PG&E Board committees were held in 1996. Overall attendance at such meetings was
93%. Individual attendance at meetings of the Board of Directors and Board
committees was as follows: R. A. Clarke 100%, H. M. Conger 89%, D. A. Coulter
82%, C. L. Cox 93%, W. S. Davila 86%, R. D. Glynn, Jr. 100%, D. M. Lawrence 83%,
R. B. Madden 90%, M. S. Metz 100%, R. Q. Morgan 89%, S. T. Reeves 100%, C. E.
Reichardt 92%, J. C. Sawhill 100%, A. Seelenfreund 74%, S. T. Skinner 100%, and
B. L. Williams 100%.
Compensation of Directors
Each director who is not an officer or employee of PG&E Corporation or
PG&E receives a quarterly retainer of $5,500 plus a fee of $1,000 for each Board
or Board committee meeting attended. Non-employee directors who chair Board
committees receive an additional quarterly retainer of $625. Under the
Directors' Deferred Compensation Plan, directors of PG&E Corporation or PG&E may
elect to defer with interest all or part of such compensation for varying
periods.
No director who serves on both the PG&E Corporation and PG&E Boards and
corresponding committees is paid additional compensation for concurrent service
on PG&E's Board or its committees, except that separate meeting fees are paid
for each meeting of the PG&E Board, or one of the PG&E Board committees, that is
not held concurrently or sequentially with a meeting of the PG&E Corporation
Board or a corresponding PG&E Corporation Board committee. Additional meeting
fees also are paid for attendance at meetings of the Capital Investment
Committee of the PG&E Corporation Board. It is the usual practice of PG&E
Corporation and PG&E that meetings of the PG&E Corporation and PG&E Boards, and
corresponding committees, are held concurrently with each other and a single
meeting fee is paid to each Director for each set of meetings.
In addition, directors of PG&E Corporation or PG&E are reimbursed for
reasonable expenses incurred in attending Board or committee meetings. Directors
of PG&E Corporation or PG&E also are reimbursed for reasonable expenses incurred
in connection with other activities undertaken on behalf of or for the benefit
of PG&E Corporation or PG&E.
Effective January 1, 1997, the PG&E Retirement Plan for Non-Employee
Directors was terminated except for retired directors currently receiving
benefits under the plan. Benefits under the PG&E Retirement Plan for
Non-Employee Directors were similar to benefits provided under the PG&E
Corporation Retirement Plan for non-employee directors described below.
The PG&E Corporation Retirement Plan for Non-Employee Directors provides a
retirement benefit for non-employee directors with at least five years of
service on the PG&E Corporation Board or prior to January 1, 1997, the PG&E
Board. Eligible retirees are entitled to receive quarterly payments equal to the
number of quarters that they served on the Board. The amount of the quarterly
payment is equal to the quarterly retainer as of the date of the director's
retirement. Indemnity policies cover a portion of the accrued benefits earned
under the PG&E Retirement Plan for Non-Employee Directors and the PG&E
Directors' Deferred Compensation Plan in the event that benefits are not paid
when due. Simultaneous service on both Boards does not duplicate benefits earned
under the plans.
Pursuant to the PG&E Corporation Restricted Stock Plan for Non-Employee
Directors, which was adopted effective as of January 1, 1996, on the first
business day of each year, each non-employee director of PG&E Corporation
receives restricted shares of PG&E Corporation common stock having a market
value of $10,000 on the date of grant. Stock awarded under the plan vests over
the five-year period following the award, except that all shares vest
immediately at the time of mandatory retirement from the PG&E Corporation Board,
upon a director's death or disability, or in the event of a change in control.
Unvested shares are forfeited if the recipient ceases to be a director for any
other reason. The Restricted Stock Plan for Non-Employee Directors originally
was adopted as a PG&E plan and was approved by the shareholders at PG&E's 1996
annual meeting. The plan was assumed by PG&E Corporation effective January 1,
1997, in connection with the formation of the holding company. For 1997, 473
restricted shares of PG&E Corporation common stock were issued to each person
who was a non-employee director of PG&E Corporation on January 2, 1997.
Mr. Clarke, a director of PG&E Corporation and PG&E, was paid $7,200
during 1996 for professional services rendered in reviewing documents, providing
testimony, and appearing at hearings relating to a regulatory proceeding that
was pending at the California Public Utilities Commission.
PG&E Corporation and PG&E officers who also are directors receive no
additional compensation for services as a member of the PG&E Corporation or PG&E
Board, any Board committee, or the Board or any Board committee of any
subsidiary.
8
<PAGE>
Certain Relationships and Related Transactions
Mr. Coulter, a director of PG&E Corporation and PG&E, is Chairman and
Chief Executive Officer of BankAmerica Corporation and Bank America NT&SA, which
was paid approximately $626,847 in fees by PG&E and its subsidiaries during 1996
in connection with providing credit and banking services to PG&E and its
subsidiaries in the normal course of business. Such credit arrangements and
services are expected to continue to be provided to PG&E Corporation, PG&E, and
their respective subsidiaries in the future. Mr. Coulter has no personal
interest in these transactions.
Mr. Cox, a director of PG&E Corporation and PG&E, also is Vice Chairman of
AirTouch Communications, Inc. and retired President and Chief Executive Officer
of AirTouch Cellular, which were paid approximately $1,042,466 in fees by PG&E
during 1996 in connection with providing cellular telephone and paging services
to PG&E in the normal course of business. Such services are expected to continue
to be provided to PG&E Corporation, PG&E, and their respective subsidiaries in
the future. Mr. Cox has no personal interest in these transactions.
Dr. Lawrence, a director of PG&E Corporation and PG&E, also is Chairman
and Chief Executive Officer of Kaiser Foundation Health Plan, Inc. and Kaiser
Foundation Hospitals, which were paid approximately $21,980,178 in fees by PG&E
and its subsidiaries during 1996 in connection with providing health care
services for employees, retirees, and surviving dependents in the normal course
of business. Such services are expected to continue to be provided in the
future. Dr. Lawrence has no personal interest in these transactions.
Mrs. Morgan, a director of PG&E Corporation and PG&E, also is President
and Chief Executive Officer of Joint Venture: Silicon Valley Network (JVSV
Network), a nonprofit collaborative. As part of PG&E's overall efforts to retain
customers and to stimulate the economy in PG&E's service territory, in 1996 PG&E
provided $100,000 of support to JVSV Network. PG&E expects to continue providing
support to JVSV Network in the future. Mrs. Morgan has no personal interest in
these transactions.
Board of Directors Retirement Policy
It is the policy of the Boards of Directors of PG&E Corporation and PG&E
that a person may not be designated as a candidate for election or re-election
as a director of PG&E Corporation or PG&E after he or she has reached the age of
70.
9
<PAGE>
Security Ownership of Management
The following table sets forth the number of shares of PG&E Corporation
common stock beneficially owned (as defined in the rules of the Securities and
Exchange Commission) as of January 31, 1997, by the directors of PG&E
Corporation and PG&E, the nominees for director, the executive officers named in
the Summary Compensation Table on page 24, and all directors and executive
officers of PG&E Corporation and PG&E as a group. The number of shares shown for
each such person, and for the directors, nominees for director, and executive
officers as a group, constituted less than 1% of the outstanding shares of PG&E
Corporation common stock. On January 1, 1997, as a result of the formation of
the holding company, the shares of PG&E common stock previously held by all such
directors, nominees for director, and executive officers were converted into
shares of PG&E Corporation common stock. As of January 31, 1997, no director,
nominee for director, or executive officer owned shares of any class of PG&E
securities.
<TABLE>
<CAPTION>
(A) (B) (C)
Current Vested Options to
Name Stock Ownership(1) Purchase Common Stock(2) Total
<S> <C> <C> <C>
Richard A. Clarke 12,201 125,000 137,201
Harry M. Conger 5,968 5,968
David A. Coulter 1,170 1,170
C. Lee Cox 2,315 2,315
William S. Davila 6,493 6,493
Robert D. Glynn, Jr. 4,969 23,334 28,303
David M. Lawrence, MD 826 826
Richard B. Madden 3,826 3,826
Mary S. Metz 4,030 4,030
Rebecca Q. Morgan 1,975 1,975
Samuel T. Reeves 13,826 13,826
Carl E. Reichardt 2,826 2,826
John C. Sawhill 25,918 25,918
Alan Seelenfreund 1,326 1,326
Stanley T. Skinner 20,144 48,334 68,478
Barry Lawson Williams 3,090 3,090
James D. Shiffer(3) 5,652 30,001 35,653
Robert J. Haywood(3) 110 13,000 13,110
Gordon R. Smith(3) 4,945 17,500 22,445
Bruce R. Worthington(3) 3,274 9,667 12,941
All directors and executive
officers as a group (23 persons) 129,669 327,336 457,005
</TABLE>
(1) Includes any shares held in the name of the spouse, minor children, or
other relatives sharing the home of the director or executive officer and,
in the case of executive officers, includes shares held in PG&E's Savings
Fund Plan. Except as otherwise indicated below, the directors, nominees
for director, and executive officers have sole voting and investment power
over the shares shown. Voting power includes the power to direct the
voting of the shares held, and investment power includes the power to
direct the disposition of the shares held.
Also includes the following shares of PG&E Corporation common stock in
which the beneficial owners share voting and investment power: Mr.
Coulter, 509 shares; Mr. Cox, 1,509 shares; Mr. Davila, 200 shares; Mr.
Madden, 3,000 shares; Dr. Metz, 1,803 shares; Mr. Reeves, 5,000 shares;
Mr. Smith, 3,884 shares; and all directors and executive officers as a
group, 15,906 shares.
(2) Includes shares of PG&E Corporation common stock which the executive
officers have the right to acquire within 60 days of January 31, 1997,
through the exercise of vested stock options granted under the PG&E
Corporation Stock Option Plan. The executive officers have neither voting
power nor investment power with respect to shares shown unless and until
such shares are purchased through the exercise of the options, pursuant to
the terms of the Stock Option Plan.
(3) Messrs. Shiffer, Haywood, Smith, and Worthington are executive officers
named in the Summary Compensation Table on page 24.
10
<PAGE>
- --------------------------------------------------------------------------------
Item No. 2:
Ratification of Appointment of Independent Public Accountants
On the recommendation of their respective Audit Committees, the Boards of
Directors of PG&E Corporation and PG&E have selected Arthur Andersen LLP as the
independent public accountants to examine the financial statements of PG&E
Corporation, PG&E, and their respective subsidiaries for the year 1997. Arthur
Andersen LLP has been employed to perform this function for PG&E since 1981.
One or more representatives of Arthur Andersen LLP will be present at the
annual meetings, and will have the opportunity to make a statement and to
respond to appropriate questions.
Although this appointment is not required to be submitted to a vote of the
shareholders, the Boards of Directors of PG&E Corporation and PG&E believe it is
appropriate as a matter of policy to request that the shareholders ratify the
appointment. If the shareholders should not ratify the appointment, the PG&E
Corporation and PG&E Audit Committees will investigate the reasons for rejection
by the shareholders and each Board of Directors will reconsider the appointment.
The affirmative vote of a majority of the shares represented and voting on
the proposal is required to ratify the appointment of the independent public
accountants. Abstentions will have the same effect as a vote against the
proposal. Unless marked to the contrary, properly executed proxies received by
PG&E Corporation or PG&E prior to or at the annual meetings will be voted for
this proposal.
The Boards of Directors of PG&E Corporation and PG&E Recommend a
Vote FOR the Proposal To Ratify the Appointment of Arthur Andersen LLP.
- --------------------------------------------------------------------------------
If you do not hold any shares of PG&E Corporation common stock, you are not
entitled to vote on the following six shareholder proposals.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Item Nos. 3-8:
Shareholder Proposals
For Consideration by PG&E Corporation Shareholders Only
The following proposals have been submitted by shareholders for action at
the PG&E Corporation annual meeting. To be approved, each properly presented
proposal must receive the affirmative vote of a majority of the PG&E Corporation
shares represented and voting on the proposal and the affirmative votes must
constitute at least a majority of the required quorum. Abstentions will be
counted in the number of shares represented and voting and will have the same
effect as a vote against the proposal. Broker non-votes with respect to a
particular proposal will be counted for purposes of determining the presence or
absence of a quorum, but will not be counted in the number of shares represented
and voting on the proposal. Proxies solicited by the PG&E Corporation Board of
Directors will be voted "AGAINST" these proposals unless PG&E Corporation
shareholders specify otherwise in their proxies.
Item No. 3: Shareholder Proposal Regarding Lead Director and Vice Chairman
Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach,
California, 90278, on behalf of Ray T. Chevedden and Veronica G. Chevedden,
Trustees of the Ray T. Chevedden and Veronica G. Chevedden Family Trust, holder
of 3,000 shares of PG&E Corporation common stock, has given notice of his
intention to present the following proposal for action at the PG&E Corporation
annual meeting:
"Resolved: Shareholders recommend the Board of Directors and
Management take the necessary steps to ensure that from now forward the
Board have an outside independent Lead Director and Vice Chairman for
creative and independent oversight of management that will improve PG&E
performance.
"Supporting Statement
"An outside independent Lead Director and Vice Chairman will enable
PG&E to better meet the challenge PG&E highlighted in its 1996 proxy as
the need `to respond to the changing operational, regulatory, and economic
environment for utilities' in the new competitive environment of
deregulation.
"The outside independent Lead Director and Vice Chairman will result
in a creative and independent chemistry and oversight for management that
will improve its performance. The outside independent Lead Director and
Vice Chairman will heighten the performance and accountability of PG&E
Management and its Board of Directors.
"Additionally, this is a small list of the concerns to shareholders,
employees, customers and stakeholders that call for heightened Management
& Board of Directors performance, vigilance and accountability:
PG&E cuts dividend 39%.
The Los Angeles Times October 17, 1996
PG&E rates 40% above national average.
San Francisco Chronicle March 30, 1996
PG&E to pay $333 million in pollution suit.
San Francisco Chronicle July 2, 1996
PG&E saddled with some of the highest electrical costs in the
nation.
San Francisco Chronicle May 14, 1996
State Senator wants stricter PG&E Standards, denouncing PG&E slow
response to last winter's record power outages.
San Francisco Chronicle June 8, 1996
12
<PAGE>
PG&E blew customer calls during storm, Judge says.
San Francisco Chronicle July 4, 1996
Fire toll sparks anger at PG&E.
San Francisco Chronicle August 11, 1996
"Due to these concerns, shareholders may also wish to consider
withholding their votes for the Board of Directors. There is virtually no
chance that the Directors will not be elected, but withholding 10% or more
of the vote will convey a powerful message that the shareholders are
concerned about corporate performance, profitability and customer service.
"An important role for the outside independent Lead Director/Vice
Chairman, the Directors and Management is to consider for implementation
these good corporate governance policies:
1. Delete pensions for the Board, pensions that endanger the
Board's independence. Directors don't need a PG&E pension
because they already have other pensions.
2. Adopt a secret PG&E proxy ballot, like our national Presidential
and Congressional elections.
3. To tabulate unmarked PG&E proxies in the same proportion as the
overall vote.
4. All Management and Board stock options require the respective
stock to be held for 3 years after leaving the company, to
ensure PG&E focus on long-term profitability.
5. Board members must not be employed by a customer, supplier or
provider of professional services to PG&E or be on more than 3
Boards including PG&E.
"Vote yes for this resolution: Recommend the Board of Directors take
the necessary steps to ensure that starting now that PG&E have the
advantage of an Independent Lead Director and Vice Chairman to increase
the opportunity for the above good corporate governance practices being
implemented."
The Board of Directors of PG&E Corporation Recommends a Vote AGAINST This
Proposal.
In March 1995, the PG&E Board of Directors adopted a comprehensive set of
corporate governance guidelines. These guidelines set forth the PG&E Board's
positions with respect to fundamental governance issues such as composition of
the Board, independence of directors, characteristics of directors, assessment
of Board and Board committee performance, director compensation, formal
evaluation of the Chief Executive Officer, and management development and
succession planning. On the basis of these guidelines and the PG&E Board's
involvement in the process to review and adopt the guidelines, the California
Public Employees' Retirement System (CalPERS) awarded PG&E an "A+" for its
response to CalPERS' survey of the corporate governance practices of the 300
largest U.S. public companies. In December 1996, in anticipation of the
formation of the holding company, the PG&E Corporation Board of Directors
adopted a set of corporate governance guidelines substantially identical to
those adopted by the PG&E Board.
Among the corporate governance guidelines adopted by the PG&E Corporation
and PG&E Boards are policies which call for 75 percent of the respective Boards
to be composed of directors who are neither current nor former employees of PG&E
Corporation, PG&E, or any of their subsidiaries. Of the sixteen directors of
PG&E Corporation, only two directors are also PG&E employees, and only one
director is a former PG&E employee. The Board believes that none of the
directors who are affiliated with other companies which are customers or
suppliers of, or providers of services to, PG&E Corporation, PG&E, or their
affiliates possesses a personal interest in the transactions which would
compromise his or her independence or preclude the ability to faithfully fulfill
fiduciary duties to the Corporation's shareholders. The Audit Committees and the
Nominating and Compensation Committees of the PG&E Corporation and PG&E Boards,
and the Capital Investment Committee of the PG&E Corporation Board, are
each composed entirely of independent directors, i.e., directors who are neither
(a) current nor former employees of nor consultants to the Corporation or its
subsidiaries, nor (b) current nor former officers or employees of any other
corporation on whose board of directors any officer of PG&E Corporation or PG&E
(as the case may be) serves as a member. Finally, the corporate governance
guidelines provide that the independent directors meet in executive session at
least once a year, without directors who are current or former officers of PG&E
Corporation or PG&E.
13
<PAGE>
The PG&E Corporation Board of Directors believes that its current Board
structure and corporate governance policies ensure independent oversight of
management and that each director provides creative and valuable advice. The
Board believes that implementing an inflexible requirement to appoint an
independent Lead Director and Vice Chairman would not be in the best interests
of shareholders and that the structure of the PG&E Corporation Board, within the
corporate governance guidelines adopted by the Board, is best determined by the
Board.
The proponent also has included suggested corporate governance policies in
his supporting statement which are not subject to a separate vote by
shareholders, and therefore will not be addressed in detail. The PG&E
Corporation Board of Directors believes that the existing policies and
procedures with respect to director compensation, proxy tabulation and voting,
stock options, and director independence reflect the Corporation's commitment to
good corporate governance practices and adequately protect the interests of the
Corporation's shareholders.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
Item No. 4: Shareholder Proposal Regarding Board Attendance
Mr. Sidney Dishal, 9 Selborne Drive, Piedmont, California, 94611, holder
of 1,600 shares of PG&E Corporation common stock, has given notice of his
intention to present the following proposal for action at the PG&E Corporation
annual meeting:
"The shareholders of PG&E request that the Board of Directors take
the necessary steps to ensure that effective for meetings subsequent to
the 1997 Annual Meeting every Director shall be required to have a minimum
of 90% attendance at all Board meetings and such Committee meetings as
requested. Any Director with an attendance less than 90% shall be removed
from the Board."
In support of this proposal, Mr. Dishal has submitted the following statement:
"It is doubtful that there is anyone who holds a job with an
attendance record of 75% to 89%, so why should a Board member be allowed
to do so? To be an effective member of the Board, an attendance record of
90% is essential. This creates a board which will be a positive and
productive force in building a strong company. Particularly at this
crucial time with deregulation."
The Board of Directors of PG&E Corporation Recommends a Vote AGAINST This
Proposal.
The Board of Directors agrees that attendance by each Board member at all
meetings of the Board and of Board committees of which the director is a member
is important for effective Board and Committee functioning. However, the Board
of Directors does not agree that the inability to attend 90 percent of all such
meetings, including unscheduled Board and Committee meetings, should disqualify
a director from being eligible to serve.
Each year, the schedule of regular Board and Committee meetings is
established in advance and provided to each director. However, each year, a
number of unscheduled meetings are held where advance notice of the meeting date
is not possible. For these unscheduled meetings, it is unlikely that all
directors will be able to attend due to prior commitments. In addition, there
may be extenuating circumstances that prevent a director from attending all
Board and Committee meetings. Therefore, the Board of Directors does not agree
that the inability to attend 90 percent of all meetings should disqualify a
director from being eligible to serve.
Further, if the proposal were approved by shareholders, the recommended
action could not be legally implemented. The proposal recommends the removal of
any director who attended less than 90 percent of all Board and Committee
meetings. Under California law, with limited exceptions, no director can be
removed without the affirmative vote of a majority of the outstanding shares.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
14
<PAGE>
Item No. 5: Shareholder Proposal Regarding Restricted Stock Plan for
Non-Employee Directors
Mr. Milton Greenstein, 162 Selborne Way, Moraga, California, 94556, as
Trustee of the M. & M. Greenstein Trust, holder of 3,909 shares of PG&E
Corporation common stock, has given notice of his intention to present the
following proposal for action at the PG&E Corporation annual meeting:
"Shareholders of PG&E Corporation recommend that the Board of
Directors take the necessary steps to repeal the restricted stock plan as
a future retirement benefit for non-employee Directors. Any stock issued
to date shall be fully vested and remain with the Directors in conformance
with existing contract agreements."
In support of this proposal, Mr. Greenstein has submitted the following
statement:
"I can see absolutely no reason to give the Directors a raise, which
is what the Plan is doing. I have heard nothing to the effect that the
Board was doing anything to offset the forthcoming deregulation. With
Board members attending meetings ranging from 15 to 26 in 1995, there has
to be reason to give them a raise."
The Board of Directors of PG&E Corporation Recommends a Vote AGAINST This
Proposal.
The Restricted Stock Plan for Non-Employee Directors was approved by
shareholders at the 1996 annual meeting. That action reflects the belief that a
significant portion of directors' compensation should be tied directly to the
value of PG&E Corporation stock.
Under the Plan, each non-employee director receives restricted shares of
PG&E Corporation common stock having a market value of $10,000 on the first
business day of each year during the term of the Long-Term Incentive Program.
Stock awarded under the Plan vests over the five-year period following the date
of the award. During the vesting period the restricted shares may not be sold.
Unvested shares are forfeited if the recipient ceases to be a director for any
other reason other than mandatory retirement at age 70, death or disability, or
a change in control. The value of the shares awarded under the Plan could
increase or decline, a risk shared by all PG&E Corporation shareholders.
PG&E Corporation must offer a competitive compensation package to attract
and retain highly qualified people to serve as directors. PG&E Corporation
regularly surveys the compensation of directors at other large utilities and
other industrial companies with the assistance of an independent compensation
consultant. According to data from these surveys, PG&E Corporation's total
director compensation package, including the award of restricted shares under
the Plan, is within the range of compensation provided by the surveyed companies
both in the overall value of the compensation and in the type of compensation
provided.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
Item No. 6: Shareholder Proposal Regarding Proxy Voting
Ms. Jane Q. Kennedy, 1109 Greenwich, San Francisco, California, 94109,
holder of 705 shares of PG&E Corporation common stock, has given notice of her
intention to present the following proposal for action at the PG&E Corporation
annual meeting:
"WHEREAS the usual practice for annual meeting ballots is to include
a statement to the effect `if no direction is made the proxy will be voted
for the positions held by the company management.'
"This skews the voting result and does not reflect the desires of
voting stockholders. In a political election it would be tantamount to
counting those that do not vote as being in favor of the incumbent.
"THEREFORE, it is resolved that shareholders recommend that the
Board of Directors take the necessary steps to cause proxy balloting to be
tabulated as in favor, opposed and not voting with the decision determined
by the count of in favor and opposed."
The Board of Directors of PG&E Corporation Recommends a Vote AGAINST This
Proposal.
15
<PAGE>
When a shareholder returns a properly executed but unmarked proxy to PG&E
Corporation, the shareholder has voted. PG&E Corporation's proxy statement and
proxy card clearly state that, if no instructions are specified in a properly
signed proxy that is returned in a timely manner, the subject shares will be
voted in accordance with the recommendations of the Board of Directors. It is
common practice among publicly held corporations that those shareholders who
properly sign and return their unmarked proxy are voting in accordance with the
recommendations of the board of directors. Additionally, federal proxy rules
promulgated by the Securities and Exchange Commission (SEC) explicitly recognize
and permit this practice.
This shareholder proposal appears to assume that many shareholders who
sign and return unmarked proxy cards do not intend to cast any vote--an
assumption that PG&E Corporation believes is incorrect. Rather, every
shareholder who returns a properly signed but unmarked proxy card has made a
decision to cast a vote as recommended by the Board of Directors, as is clearly
explained in the proxy statement and proxy card. PG&E Corporation's Board of
Directors is obligated to recognize the opinions of all shareholders who wish to
participate, whether those shareholders choose to do so by marking the proxy
card with a specific vote or by returning a signed but unmarked proxy card with
the knowledge that their shares will be voted in accordance with the Board's
recommendations. If the shareholders approved this proposal and if the
Corporation implemented the recommendation contained in the proposal for future
annual meetings, shareholders who wish to vote in accordance with management's
recommendations would no longer have the ability to sign and return an unmarked
proxy card since shares represented by signed but unmarked proxies would be
considered "not voting."
Finally, the proxy statement and proxy card state that properly executed
and returned proxies grant discretionary voting authority to the proxyholders to
vote on matters which may be presented unexpectedly at the meeting and on
certain other matters. If the proponent's proposal were approved by the
shareholders and implemented, this discretionary voting authority would be
eliminated, thereby depriving those shareholders who intended to be represented
by proxy at the meeting from having their shares voted with respect to such
other matters.
The Board of Directors believes that PG&E Corporation's present voting
procedures, which follow California state law, SEC rules, and customary practice
among public corporations, are appropriate and essential for good corporate
governance.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
Item No. 7: Shareholder Proposal Regarding Compensation of Directors
Mr. Nick Rossi, P.O. Box 249, Boonville, California, 95415, holder of 600
shares of PG&E Corporation common stock, has given notice of his intention to
present the following proposal for action at the PG&E Corporation annual
meeting:
"The shareholders of Pacific Gas and Electric request the Board of
Directors take the necessary steps to amend the company's governing
instruments to adopt the following:
"Beginning on the 1998 Pacific Gas and Electric fiscal year all
members of the Board of Director's total compensation will be solely in
shares of Pacific Gas and Electric common stock each year. No other
compensation of any kind will be paid. Including, the elimination of
retirement benefits to directors, excluding existing contracts with
directors."
In support of this proposal, Mr. Rossi has submitted the following statement:
"For many years the Rossi family have been submitting for
shareholder vote, at this corporation as well as other corporations,
proposals aimed at putting management on the same playing field as the
shareholders. This proposal would do just that.
"A few corporations have seen the wisdom in paying directors solely
in stock. Most notably, Scott Paper (now Kimberly Clark) and Travelers.
Ownership in the company is the American way. We feel that this method of
compensation should be welcomed by anyone who feels they have the ability
to direct a major corporation's fortunes.
16
<PAGE>
"The directors would receive shares each year. If the corporation
does well, the directors will make more money in the value of the stock
they receive and the dividend that usually rise with more profits. If
things go bad, they will be much more inclined to correct things, because
it will be coming directly out of their pockets. Instead of the way it is
done now, where directors receive the same compensation for good or bad
performance."
The Board of Directors of PG&E Corporation Recommends a Vote AGAINST This
Proposal.
PG&E Corporation believes that a portion of its directors' compensation
should be composed of equity ownership in the Corporation. At PG&E's 1996 annual
meeting, the shareholders approved the Restricted Stock Plan for Non-Employee
Directors, a new component of the Long-Term Incentive Program. Under that plan,
each non-employee director receives restricted shares of PG&E Corporation common
stock having a market value of $10,000 on the first business day of each year
during the term of the Long-Term Incentive Program. Stock awarded under the plan
vests over the five-year period following the date of the award, except that all
shares vest immediately upon mandatory retirement from the Board at age 70, upon
a director's death or disability, or in the event of a change in control.
Unvested shares are forfeited if the recipient ceases to be a director for any
other reason. PG&E Corporation believes that the annual stock awards made under
this plan will more closely align the interests of directors and shareholders.
In addition, PG&E Corporation has a program through which directors may, at
their option, reinvest all or a portion of their non-stock retainers and fees in
PG&E Corporation common stock, thereby facilitating their increased stock
ownership over time.
PG&E Corporation does not agree that directors should be paid solely in
stock. PG&E Corporation desires to have a diverse Board and requiring that all
compensation paid to directors be in the form of stock could discourage or
prevent highly qualified individuals from serving on the Board in the future.
PG&E Corporation must offer a competitive compensation package to attract
and retain highly qualified people to serve as directors. PG&E Corporation
regularly surveys the compensation of directors at other large utilities and
other industrial companies with the assistance of an independent compensation
consultant. According to data from these surveys, PG&E Corporation's total
director compensation package is within the range of compensation provided by
the surveyed companies both in the overall value of the compensation and in the
type of compensation provided, including retirement benefits.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
Item No. 8: Shareholder Proposal Regarding PG&E's Action on Proposition 209
Mr. Lawrence C. Wanlass, 11476 Ghirardelli Court, Gold River, California,
95670, holder of 2,046 shares of PG&E Corporation common stock, has given notice
of his intention to present the following proposal for action at the PG&E
Corporation annual meeting:
"It is proposed that the following resolution be voted upon by the
shareholders in conjunction with the 1997 annual meeting.
"Be it RESOLVED that the shareholders of the Pacific Gas and
Electric Company take exception to the action of the company's Chief
Executive Officer and the elected Directors of the company in actively
opposing the California Civil Rights Initiative (CCRI), Proposition 209,
leading up to the November 5, 1996 California election.
"Be it further RESOLVED that a wiser course of action would have
been to leave this question of the use of quotas and preferences, which
the company states it does not employ, to the voters."
In support of this proposal, Mr. Wanlass has submitted the following statement:
"PG&E's CEO and elected Directors should NOT have actively opposed
the California Civil Rights Initiative (CCRI), known as Proposition 209 on
the California November 5, 1996 election ballot for the following reasons:
17
<PAGE>
"It was unnecessary and contradictory. Unnecessary because a
statement extolling PG&E's good affirmative action record would have been
sufficient. Contradictory because CCRI dealt with quotas and preferences
(as legally determined by the courts), which PG&E states it does not
employ and opposes.
"It politicized the company. Whatever may have been gained by siding
with Democrats over this highly divisive issue was lost by deeply
offending Republican office holders.
"It was unwise. The Directors are elected by the shareholders, whom
they represent. It is a far reach to believe that the company's
shareholders are being adequately represented through support of quotas
and preferences, which, in turn, are contrary to the 14th amendment to the
U.S. Constitution and to the Civil Rights Act of 1964.
"Further to the above, the ROLE of shareholders of PG&E, as with
many other corporations, is too often minimized. The CEO and the Directors
need to be REMINDED that the shareholders are the owners of the
corporation. In a letter to me, dated August 21, 1996, Mr. Stanley Skinner
in his CEO capacity justified opposition to 209 by citing as his
constituent groups the corporation's employees, suppliers, and various
minority groups. All of these are important, but he made no mention of the
shareholders. In his response to this proposal, I believe he will tell you
that everything he does is in support of the shareholders. This is too
easy as an answer; and with regard to Proposition 209, it is NOT ADEQUATE.
"A LINE needs to be drawn beyond which shareholders will not be
pushed."
The Board of Directors of PG&E Corporation Recommends a Vote AGAINST This
Proposal.
If adopted, this shareholder proposal would limit severely the ability of
PG&E Corporation to lobby on behalf of proposed legislation and statewide
initiatives, or to advocate the business interests of our shareholders. PG&E
opposed Proposition 209, the California Civil Rights Initiative, for important
business reasons. PG&E has a long history of consistently supporting affirmative
action and diversity. Although Proposition 209 affects only state government
agencies in California, the proposal was characterized as anti-affirmative
action and we believed it was important for our employees and the community to
know where we stood. Affirmative action programs, and the principles of
non-discrimination on which they are based, make eminently good business sense
for the Company--diversity is a source of strength and it makes sound business
sense to encourage diversity in PG&E's customers, its suppliers, and its
employees. Thus, encouraging diversity is an extremely important--and
legitimate--business issue, and one to which PG&E Corporation is strongly
committed.
This proposal, if adopted, would have a chilling effect on PG&E
Corporation's ability to support or oppose future legislation that could
significantly affect the business interests of the Corporation and its
shareholders. PG&E Corporation has an ongoing responsibility to its shareholders
and customers to stay abreast of local, state, and federal political trends and
legislative proposals that may affect PG&E Corporation and its business. PG&E
actively has followed legislation since the formation of the Company. Taking a
stance on proposed bills and lobbying on behalf of PG&E Corporation are common
industry practices which we believe are in the best interests of our
shareholders.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
18
<PAGE>
- --------------------------------------------------------------------------------
Executive Compensation
Nominating and Compensation Committee Report on Compensation
Effective January 1, 1997, PG&E Corporation became the holding company of
PG&E, Pacific Gas Transmission Company, and PG&E Enterprises. This new holding
company structure, which is used by many utilities nationwide and by all major
utilities headquartered in the State of California, will enhance PG&E
Corporation's ability to respond to competitive changes in the energy utility
industry and to new energy-related business opportunities. The structure will
improve the financial separation of the holding company's California utility
business from its other businesses, while providing greater financial
flexibility.
On December 18, 1996, PG&E, which was the sole shareholder of PG&E
Corporation prior to the formation of the holding company structure, elected the
Board of Directors of PG&E Corporation. The members of the Nominating and
Compensation Committees of the PG&E Corporation and PG&E Boards of Directors are
identical. This report relates to the compensation paid to executive officers of
PG&E during the fiscal year ended December 31, 1996. Directors and officers of
PG&E Corporation did not receive any additional compensation for their service
on behalf of PG&E Corporation in 1996.
PG&E, the principal subsidiary of PG&E Corporation, is one of the nation's
largest investor-owned gas and electric utilities, serving more than 13 million
people in Northern and Central California. PG&E's assets at December 31, 1996,
totaled $26 billion and its earnings for the year exceeded $722 million. PG&E
delivers power to customers from a diversified electric generating system,
including hydroelectric, geothermal, and gas-fired facilities, and from one of
the most successful nuclear power plants in the world.
PG&E is committed to maintaining a high level of safety and service while
at the same time creating value for the shareholders of PG&E Corporation.
Meeting this challenge in an increasingly competitive world requires exceptional
leadership provided by men and women who possess skill, experience, vision, and
entrepreneurial spirit. PG&E's compensation programs are designed to attract,
retain, and motivate these exceptional people. The programs reflect two
fundamental principles which apply to every officer of PG&E:
1. PG&E's compensation and benefits programs are competitive with those
of other employers. PG&E competes for talent. Every company wants the
most qualified and competent employees. Attracting and retaining
employees who make the difference for shareholders, customers, and the
Corporation require that PG&E offer competitive compensation and
benefits.
2. Part of every officer's compensation is tied directly to PG&E
Corporation's financial performance for shareholders. If shareholders
do well, officer compensation rises. If shareholders do not do well,
officer compensation declines. In other words, a portion of every
officer's compensation is "incentive compensation" which is at risk
based on PG&E Corporation's financial performance. The greater the
officer's management responsibilities, the larger the share of his or
her total compensation is at risk.
In order to implement these principles, PG&E established the following
four objectives which were used to set 1996 compensation for officers:
1. Total compensation (base salary, target annual incentive, long-term
incentives, and benefits) and the pay mix should be competitive with
the average compensation paid to all officers in a comparator group of
companies that includes both major utilities and general industry
companies.
2. For utility-specific positions, annual cash compensation (base salary
and target annual incentive) should be approximately equal to the
average cash compensation paid by other large utilities.
3. Approximately one-half of target total compensation should be tied
directly to financial performance for shareholders.
4. Incentive compensation should be tied to both short-term and long-term
corporate financial performance. This reflects PG&E Corporation's
commitment to achieve sustained growth in value for shareholders.
Compensation for the Chief Executive Officer of PG&E is approved by the
PG&E Board of Directors based on the recommendation of the Nominating and
Compensation Committee, which is composed entirely of independent non-employee
directors. In establishing the compensation of the Chief Executive Officer for
1996, the PG&E Board
19
<PAGE>
of Directors approved the recommendation of the Nominating and Compensation
Committee without modification. Compensation for all other PG&E officers is
approved by the Nominating and Compensation Committee. The Committee retains an
independent consultant, Hewitt Associates, to help evaluate PG&E's compensation
policies and to recommend compensation alternatives which are consistent with
those policies. Founded in 1940, Hewitt Associates is an international firm of
consultants and actuaries specializing in the design and administration of
employee compensation and benefit programs. Hewitt Associates has been engaged
by the PG&E Nominating and Compensation Committee since 1990.
Effective in 1994, Section 162(m) of the Internal Revenue Code eliminated
the deductibility of compensation over $1 million paid to the five highest paid
executive officers of public corporations. However, the deduction limitation
does not apply to amounts paid pursuant to performance-based compensation
programs, provided that (1) the performance targets are preestablished,
objective standards, (2) the programs have been approved by shareholders, and
(3) there is no discretion to modify or alter payments after the performance
targets have been established for the year. A substantial portion of the
compensation paid to PG&E's officers is wholly dependent upon corporate
financial performance and is determined by comparing changes in shareholder
value against predetermined performance targets set by the Nominating and
Compensation Committee at the beginning of each year.
Two of the three performance-based plans which PG&E currently uses are
tied exclusively to total shareholder return from stock price appreciation and
dividends. At last year's annual meeting, the PG&E shareholders approved
amendments to these plans to adopt provisions required by the final regulations
issued under Section 162(m). The third performance-based plan is tied to the
attainment of financial and service-related objectives.
To the extent consistent with the Nominating and Compensation Committee's
overall policy of maintaining a competitive, performance-based compensation
program, it is PG&E's intent to maintain the tax deductibility of the
compensation which it pays. However, due to the restrictive nature of Section
162(m), technical compliance with its requirements can reduce or eliminate the
value of using certain types of plans designed to provide incentives to increase
shareholder value. As a result, although the Committee, in designing and
maintaining a competitive incentive compensation program, will qualify as much
of the program for deduction under Section 162(m) as is reasonably possible,
such qualification is not a mandatory precondition to payments where technical
compliance is inconsistent with program objectives. It is anticipated that the
amount of any tax deduction forgone due to the impact of the Section 162(m)
limit will be insignificant.
Principal Components of Compensation
Base Salary
PG&E's executive salaries are reviewed annually by the Nominating and
Compensation Committee based on (a) the results achieved by each individual, (b)
expected corporate financial performance, measured by combined earnings per
share, dividends, and stock price performance, and (c) changes in the average
salaries paid by other large energy utilities and general industry companies.
For 1996, the Nominating and Compensation Committee adopted the following
officer pay objectives: (1) for all officers, a target total compensation (base
salary, target annual incentive, long-term incentives, and benefits) objective
of the average compensation paid to all officers of companies in a comparator
group consisting of 32 major utilities and general industry companies, and (2)
for utility-specific officer positions, a target cash compensation (base salary
plus target annual incentive) objective of the average cash compensation paid by
the utilities included in the comparator group. These utilities and general
industry companies were selected by the Committee because they are comparable to
PG&E in size and their approach to compensation emphasizes long-term incentives.
Seven of the 14 utilities in the comparator group are included in the Dow Jones
Utilities Index. Twenty-eight of the 32 utilities and general industry companies
in the comparator group are included in the Standard & Poor's 500 Stock Index.
In setting the 1996 salary levels for PG&E's executive officers, the Committee's
objective was that the overall average of the salaries paid to all PG&E officers
as a group (including the Chief Executive Officer) should be approximately equal
to the target competitive level.
In 1996, PG&E Chairman of the Board and Chief Executive Officer Stanley T.
Skinner received a base salary of $660,000. This salary level is 20 percent
below the average salary of chief executive officers of the 32 utilities and
general industry companies in the comparator group. The overall average of the
actual base salaries received by all PG&E officers (including Mr. Skinner) for
1996 was below the average salary paid to all officers of the comparator group.
20
<PAGE>
Annual Incentive
The PG&E Performance Incentive Plan for 1996 was designed to provide
annual incentives to all officers and all management and non-bargaining unit
employees based on the achievement of financial and service-related objectives.
The performance measures for 1996 were (a) PG&E's success in meeting the
corporate earnings-per-share (EPS) objective, and (b) the success of each
employee's organizational unit in meeting its individual objectives, such as
cost control, quality of customer service, and operational efficiency. Awards
for the Chairman of the Board and Chief Executive Officer, the President and
Chief Operating Officer, the Executive Vice President, and certain other
officers are based entirely on the corporate EPS performance objective. Awards
for other participating employees are based on the corporate EPS performance
objective plus the sum of the performance results in some or all of the
following categories: organization, department, and individual objectives. These
objectives are not necessarily weighted equally; the actual weightings for a
given organizational unit are determined by the Chairman of the Board and Chief
Executive Officer and the head of the organizational unit.
At the beginning of the year, target awards are set based on each
participating employee's job responsibilities and salary level. Final awards are
determined by the Nominating and Compensation Committee and may range from zero
to twice the target, depending on the extent to which the financial and
service-related objectives are achieved. The Committee has discretion to modify
or eliminate awards.
In 1996, PG&E did not achieve its corporate EPS objective. Therefore, no
1996 Performance Incentive Plan awards were made to the Chairman of the Board
and Chief Executive Officer, the President and Chief Operating Officer, the
Executive Vice President, or certain other PG&E officers whose awards were based
solely on achievement of the EPS objective. The remaining officers, whose awards
are based on a combination of EPS and other performance measures, received
Performance Incentive Plan awards ranging from 56 percent to 88 percent of their
target awards depending on the extent to which the particular service,
operational, and other performance objectives set for each officer were
achieved.
Long-Term Incentives
The Stock Option Plan and the Performance Unit Plan (each of which is a
component of the Long-Term Incentive Program) provide incentives based on PG&E
Corporation's financial performance over time. On January 1, 1997, when PG&E
Corporation became the holding company of PG&E, PG&E Corporation assumed the
Long-Term Incentive Program, including the Stock Option Plan and the Performance
Unit Plan, as well as options and performance unit awards then outstanding. The
Nominating and Compensation Committee of the PG&E Corporation Board of Directors
now administers these plans. As of January 1, 1997, all stock-based awards made
under these plans relate to PG&E Corporation common stock.
The Stock Option Plan provides incentives based on PG&E Corporation's
ability to sustain financial performance over a three-to-ten year period. Under
the Plan, officers, managers, and other key employees of PG&E receive stock
options based on their responsibilities and position in PG&E. These options
allow them to purchase a certain number of shares of PG&E Corporation common
stock at the market price on the date of grant (typically the first business day
of each year), provided that they hold the options for at least two full years
and exercise them within ten years. PG&E Corporation does not reprice or change
the terms of options once they have been granted.
At the Nominating and Compensation Committee's discretion, stock options
may be granted with tandem "stock appreciation rights" which have vesting
periods and exercise guidelines that are similar to the options. These rights
allow option-holders to surrender their options when they have vested and
receive a cash payment equal to the difference between the exercise price and
the current market price. No stock appreciation rights have been granted since
1991.
Stock options also may be granted with tandem "dividend equivalents" which
provide for credits to be made to a dividend equivalent account equal to the
current common stock dividend multiplied by the recipient's unexercised options.
This reflects the importance of dividends as a component of total shareholder
return. Option-holders are entitled to receive the amounts accumulated in their
dividend equivalent account only when, and to the extent that, the underlying
options or stock appreciation rights are exercised. If a stock appreciation
right is exercised, the option-holder receives the associated dividend
equivalent only if the stock price has appreciated by at least 5 percent per
year from the date of grant or by at least 25 percent if the options have been
held for more than five years.
The size of the stock option grant for each PG&E executive officer in 1996
was determined by the Nominating and Compensation Committee of the PG&E Board of
Directors based on PG&E's objectives of paying total compensation at the average
total compensation of the 32 utilities and general industry companies in the
comparator group, and of tying
21
<PAGE>
approximately one-half of target total compensation directly to financial
performance for shareholders. In making stock option grants, the Committee
considered the amount of stock options previously granted to the executive
officers, but the size of each executive officer's stock option grant was
determined primarily based on the compensation objectives described above.
For 1996, the Chairman of the Board and Chief Executive Officer, the
President and Chief Operating Officer, the Executive Vice President, and the six
Senior Vice Presidents of PG&E each received a supplemental stock option grant
(without dividend equivalents) in addition to their annual stock option grant.
These supplemental grants are intended to align the long-term incentive
compensation for PG&E's senior officers with the long-term incentive
compensation for senior officers of other major utilities and general industry
companies, while increasing the portion of those officers' total compensation
which is at risk and tied directly to PG&E Corporation's performance for
shareholders.
The Performance Unit Plan provides incentives based on PG&E Corporation's
ability to sustain superior total returns for shareholders (dividends plus stock
price appreciation) over a three-year period. Although the discussion below
refers to PG&E common stock and PG&E's corporate performance, as of January 1,
1997, incentives are based on PG&E Corporation's ability to sustain total
returns for PG&E Corporation shareholders.
Under the Plan, officers receive performance units reflecting their level
of responsibility within PG&E. One-third of the units vest each year. At the end
of each year, the number of vested performance units is increased or decreased
based on PG&E's three-year total return for shareholders (dividends plus stock
price appreciation) as compared with that of the 49 other largest energy
utilities in the nation. Each officer receives an incentive payment equal to the
final number of vested units multiplied by the average market price of PG&E
common stock during the 30-day calendar period prior to the end of the year. In
determining Performance Unit Plan results for a given year, PG&E's corporate
performance in the current year is weighted at 60 percent, the performance in
the prior year at 25 percent, and the performance in the year before that at 15
percent. Each time a cash dividend is declared on PG&E common stock, an amount
equal to the cash dividend per share multiplied by the number of units held by a
recipient will be accrued on behalf of the recipient and, at the end of the
year, the amount of accrued dividend equivalents will be increased or decreased
by the same percentage used to increase or decrease the recipient's number of
vested performance units for the year.
For the three years ended December 31, 1996, PG&E's total shareholder
return had a weighted average ranking in the bottom quartile of the 50 largest
utilities in the nation, below the minimum ranking required under the Plan for
any payout. Therefore, no payouts were made to PG&E officers under the Plan for
1996.
Benefits
PG&E provides retirement benefits for most of its employees through a
combination of lifetime annuities based on salary level and years of service and
tax-deferred savings arrangements which provide employees with an opportunity to
supplement their retirement income through employee and PG&E matching
contributions. The PG&E Flexible Benefits Plan allows all employees not covered
by collective bargaining agreements to choose among a variety of benefit
options, including medical and dental coverage and life insurance.
Summary
We, the members of the Nominating and Compensation Committees of the
Boards of Directors of PG&E Corporation and PG&E, believe that PG&E's
compensation programs are successful in attracting and retaining qualified
employees and in tying compensation directly to performance for shareholders and
service to customers. We will continue to monitor closely the effectiveness and
appropriateness of each of the components of compensation to reflect changes in
PG&E Corporation's and PG&E's business environment.
March 3, 1997
Nominating and Compensation Committees of the
Boards of Directors of PG&E Corporation and PG&E
Carl E. Reichardt, Chair
David M. Lawrence, MD
Samuel T. Reeves
John C. Sawhill
Alan Seelenfreund
22
<PAGE>
Comparison of Five-Year Cumulative Total Shareholder Return(1)
[This graph compares the cumulative total return on PG&E common stock (equal to
dividends plus stock price appreciation) during the past five years with that of
the Standard & Poor's 500 Stock Index and the Dow Jones Utilities Index. As of
January 1, 1997, all outstanding shares of PG&E common stock were converted on a
one-for-one basis to shares of PG&E Corporation common stock.]
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PG&E $100 $107 $120 $ 89 $112 $ 90
- ------------------------------------------------------
S&P $100 $108 $118 $120 $165 $203
- ------------------------------------------------------
DJUI $100 $104 $114 $ 97 $128 $139
- ------------------------------------------------------
</TABLE>
(1) Assumes $100 invested on December 31, 1991, in PG&E common stock, the
Standard & Poor's 500 Stock Index, and the Dow Jones Utilities Index, and
assumes quarterly reinvestment of dividends. The total shareholder returns
shown are not necessarily indicative of future returns.
23
<PAGE>
Summary Compensation Table
[This table summarizes the principal components of compensation paid to the
Chief Executive Officer and the five other most highly compensated executive
officers of PG&E during the past year.]
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------------- --------------------------------
Awards Payouts
(A) (B) (C) (D) (E) (F) (G) (H) (I)
Total Other All
Annual Annual Securities Other
Compen- Compen- Underlying LTIP Compen-
sation Salary Bonus sation Options/SARs Payouts sation
Position Year ($) ($) ($)(1) ($)(2) (# of Shares) ($)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley T. Skinner, 1996 $ 676,595 $660,000 $ 0 $16,595 80,000 $ 0 $35,369
Chairman of the Board and 1995 1,074,923 570,000 471,380 33,543 25,000 34,720 31,020
Chief Executive Officer of 1994 710,366 550,000 134,173 26,193 15,000 33,785 56,860
PG&E Corporation and PG&E
Robert D. Glynn, Jr., 1996 $ 463,311 $450,000 $ 0 $13,311 48,000 $ 0 $29,108
President and Chief 1995 588,924 338,333 229,437 21,154 10,000 16,986 23,312
Operating Officer of 1994 313,052 244,000 50,817 18,235 7,500 17,120 13,960
PG&E Corporation and PG&E
James D. Shiffer, 1996 $ 352,573 $340,000 $ 0 $12,573 26,500 $ 0 $16,340
Executive Vice President of 1995 516,858 320,000 175,824 21,034 10,000 17,920 15,420
PG&E 1994 394,197 310,000 61,776 22,421 10,000 21,622 33,130
Robert J. Haywood, 1996 $ 306,956 $235,000 $ 67,306 $ 4,650 23,500 $ 0 $11,478
Senior Vice President and 1995 318,542 190,000 119,497 9,045 7,500 8,960 9,130
General Manager 1994 187,533 160,000 21,450 6,083 4,500 8,180 8,038
Customer Energy Services of
PG&E
Gordon R. Smith, 1996 $ 260,805 $250,000 $ 0 $10,805 23,500 $ 0 $11,861
Chief Financial Officer of 1995 355,138 207,000 130,535 17,603 7,500 11,944 9,925
PG&E Corporation and 1994 261,591 207,000 39,858 14,733 7,500 12,611 9,926
Senior Vice President and
Chief Financial Officer of
PG&E
Bruce R. Worthington, 1996 $ 259,054 $250,000 $ 0 $ 9,054 23,500 $ 0 $11,250
General Counsel of 1995 323,734 207,000 106,461 10,273 5,000 3,862 9,315
PG&E Corporation and 1994 210,425 190,980 19,445 0 3,000 0 10,586
Senior Vice President and
General Counsel of PG&E
</TABLE>
(1) Represents payments received or deferred in 1996 and 1995 for achievement
of corporate and organizational objectives in 1995 and 1994, respectively,
under the Performance Incentive Plan. No payments were made under the Plan
in 1997 with respect to corporate performance in 1996.
(2) Amounts reported consist of (i) officer benefit allowances, (ii) payments
of related taxes, and (iii) with respect to 1995 and 1994, dividend
equivalent payments on performance units under the Performance Unit Plan.
(3) Represents payments received or deferred in 1996 and 1995 for achievement
of corporate performance objectives for the period 1992 through 1995 under
the Performance Unit Plan. No payments were made under the Plan in 1997
with respect to corporate performance for the period 1994 through 1996.
(4) Amounts reported for 1996 consist of: (i) PG&E matching contributions to
the PG&E Savings Fund Plan (Mr. Skinner $6,750, Mr. Glynn $6,750, Mr.
Shiffer $6,750, Mr. Haywood $6,750, Mr. Smith $6,750, and Mr. Worthington
$6,750); (ii) PG&E-paid premiums on indemnity policies to secure the
payment of benefits under the Supplemental Executive Retirement Plan and
the Deferred Compensation Plan (Mr. Skinner $5,370, Mr. Glynn $780, Mr.
Shiffer $1,020, Mr. Haywood $580, and Mr. Smith $610); (iii) payments
received in lieu of vacation (Mr. Glynn $7,307); (iv) PG&E matching
contributions received or deferred under the PG&E Savings Fund Plan excess
benefit arrangement (Mr. Skinner $22,950, Mr. Glynn $13,500, Mr. Shiffer
$8,550, Mr. Haywood $3,825, Mr. Smith $4,500, and Mr. Worthington $4,500);
and (v) that portion of interest accrued on deferred compensation account
balances in 1996 above 120% of the then applicable federal rate (Mr.
Skinner $299, Mr. Glynn $772, Mr. Shiffer $20, Mr. Haywood $323, and Mr.
Smith $1).
24
<PAGE>
Option/SAR Grants in 1996
[This table summarizes the distribution and the terms and conditions of stock
options granted to the executive officers named in the Summary Compensation
Table during the past year.]
<TABLE>
<CAPTION>
Grant
Individual Grants Date Value
- --------------------------------------------------------------------------------------------- ----------
(A) (B) (C) (D) (E) (F)
% of Total
Number of Securities Options/SARs Exercise or Grant Date
Underlying Options/SARs Granted to Base Price Expiration Present
Name Granted (#)(1) Employees in 1996 ($/Sh)(2) Date(3) Value ($)(4)
<S> <C> <C> <C> <C> <C>
Stanley T. Skinner 80,000 9.11% $28.25 01-03-2006 $378,100
Robert D. Glynn, Jr. 48,000 5.47% $28.25 01-03-2006 226,860
James D. Shiffer 26,500 3.02% $28.25 01-03-2006 136,855
Robert H. Haywood 23,500 2.68% $28.25 01-03-2006 108,745
Gordon R. Smith 23,500 2.68% $28.25 01-03-2006 108,745
Bruce R. Worthington 23,500 2.68% $28.25 01-03-2006 108,745
</TABLE>
(1) All options granted to executive officers in 1996 are exercisable as
follows: one-third of the options may be exercised on or after the second
anniversary of the date of grant, two-thirds on or after the third
anniversary, and 100 percent on or after the fourth anniversary. Options
for the following number of shares were accompanied by tandem dividend
equivalents which provide for credits to be made to the officer's dividend
equivalent account in the amount of the current PG&E Corporation common
stock dividend multiplied by the officer's unexercised options: Mr. Skinner
30,000 shares, Mr. Glynn 18,000 shares, Mr. Shiffer 11,500 shares, Mr.
Haywood 8,500 shares, Mr. Smith 8,500 shares, and Mr. Worthington 8,500
shares. Funds in the account are paid out only when, and to the extent
that, the underlying options are exercised. At the time of exercise, the
exercise price may be paid in cash or shares of PG&E Corporation common
stock owned by the optionee for at least one year, or "cashless exercise"
procedures may be used.
(2) The exercise price is equal to the closing price of PG&E common stock on
January 2, 1996, the date of grant.
(3) All options granted to executive officers in 1996 expire 10 years and one
day from the date of grant, subject to earlier expiration in the
event of the officer's termination of employment with PG&E.
(4) Estimated present values are based on the Black-Scholes Model, a
mathematical formula used to value options traded on stock exchanges and,
for options granted with dividend equivalents, estimated present values
include dividend equivalents. The Black-Scholes Model considers a number of
factors, including the expected volatility and dividend rate of the stock,
interest rates, and time of exercise of the option. The following
assumptions were used in applying the Black-Scholes Model to the 1996
option grants shown in the table above: volatility of 15.12%, risk-free
rate of return of 5.93%, dividend yield of $1.96 (the annual dividend rate
on the grant date), and an exercise date five years after the date of
grant. The ultimate value of the options will depend on the future market
price of PG&E Corporation common stock, which cannot be forecast with
reasonable accuracy. That value will depend on the future success achieved
by employees for the benefit of all shareholders. The estimated grant date
present values for options with and without dividend equivalents are $9.37
and $1.94 per share, respectively.
25
<PAGE>
Aggregated Option/SAR Exercises in 1996 and Year-End Option/SAR Values
[This table summarizes exercises of stock options and tandem stock appreciation
rights (granted in prior years) by the executive officers named in the Summary
Compensation Table during the past year, as well as the number and value of all
unexercised options held by such named executive officers at the end of 1996.]
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Acquired Value Realized Options/SARs at Options/SARs at
Name on Exercise ($)(2) End of 1996 (#) End of 1996 ($)(3)
(#)(1) (Exercisable/ (Exercisable/
Unexercisable) Unexercisable)
<S> <C> <C> <C> <C>
Stanley T. Skinner 0 $0 48,334/101,666 $0/$0
Robert D. Glynn, Jr. 0 0 23,334/ 57,166 0/ 0
James D. Shiffer 0 0 30,001/ 36,499 0/ 0
Robert J. Haywood 0 0 13,000/ 30,000 0/ 0
Gordon R. Smith 0 0 17,500/ 31,000 0/ 0
Bruce R. Worthington 0 0 9,667/ 27,833 0/ 0
</TABLE>
(1) Represents the number of shares for which the named executive officers
exercised options and tandem SARs payable in cash. No shares were received
upon exercise of options due to the use of "cashless exercise" procedures.
(2) Excludes amounts received under tandem dividend equivalents, if any.
(3) Based on the difference between the option exercise price (without
reduction for the amount of accrued dividend equivalents, if any) and a
fair market value of $21.00, which was the closing price of PG&E common
stock on December 31, 1996.
26
<PAGE>
Long-Term Incentive Plan--Awards in 1996
[This table summarizes the long-term incentive awards made to the executive
officers named in the Summary Compensation Table during the past year.]
<TABLE>
<CAPTION>
Estimated Future Payouts Under
Awards Non-Stock Price-Based Plans
--------------------------------------------- --------------------------------------------
(A) (B) (C) (D) (E) (F)
Performance or
Other Period
Number of Shares, Until Maturation Threshold Target Maximum
Name Units, or Other Rights(1) or Payout ($ or #)(2) ($ or #)(2) ($ or #)(2)
<S> <C> <C> <C> <C> <C>
Stanley T. Skinner 12,000 3 years 0 units 12,000 units 24,000 units
Robert D. Glynn, Jr. 6,000 3 years 0 units 6,000 units 12,000 units
James D. Shiffer 4,000 3 years 0 units 4,000 units 8,000 units
Robert J. Haywood 3,000 3 years 0 units 3,000 units 6,000 units
Gordon R. Smith 3,000 3 years 0 units 3,000 units 6,000 units
Bruce R. Worthington 3,000 3 years 0 units 3,000 units 6,000 units
</TABLE>
(1) Represents performance units granted under the Performance Unit Plan. The
units vest one-third in each of the three years following the grant year,
and are earned over the vesting period based on PG&E Corporation's
three-year total annual shareholder return (dividends plus stock price
appreciation) as compared with that achieved by the 49 other largest
domestic energy utilities. This performance target may be adjusted during
the vesting period, at the sole discretion of the Nominating and
Compensation Committee, to reflect extraordinary events beyond management's
control. In determining PG&E Corporation's total annual shareholder return
relative to the 49 other utilities, third-year performance is weighted at
60%, second-year performance at 25%, and first-year performance at 15%.
Each time a cash dividend is declared on PG&E Corporation common stock, an
amount equal to the cash dividend per share multiplied by the number of
units held by a recipient will be accrued on behalf of the recipient and,
at the end of the year, the amount of accrued dividend equivalents will be
increased or decreased by the same percentage used to increase or decrease
the recipient's number of vested performance units for the year.
(2) Payments are determined by multiplying the number of units earned in a
given year by the average market price of PG&E Corporation common stock for
the last 30-day calendar period of the year.
Retirement Benefits
PG&E provides retirement benefits to the executive officers named in the
Summary Compensation Table on page 24. The benefit formula is 1.6 percent of the
average of the three highest combined salary and annual incentive awards during
the last ten years of service multiplied by years of credited service. As of
December 31, 1996, the estimated annual retirement benefits for the most highly
compensated executive officers, assuming credited service to age 65, are as
follows: Mr. Skinner, $513,440; Mr. Glynn, $180,184; Mr. Shiffer, $297,430; Mr.
Haywood $145,277; Mr. Smith, $203,412; and Mr. Worthington, $172,347. The
amounts shown are single life annuity benefits and would not be subject to any
Social Security offsets.
27
<PAGE>
- --------------------------------------------------------------------------------
Other Information
Principal Shareholders
The following table presents certain information regarding shareholders who
are known to PG&E Corporation or PG&E to be the beneficial owners of more than 5
percent of any class of voting securities of PG&E Corporation or PG&E as of
January 31, 1997:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Class of Stock Beneficial Owner Beneficial Ownership of Class
<S> <C> <C> <C>
PG&E common stock PG&E Corporation(1) 409,120,387 100
77 Beale Street
San Francisco, CA 94105
PG&E Corporation State Street Bank and 43,819,920 10.71
common stock Trust Company(2)
225 Franklin Street
Boston, MA 02110
</TABLE>
(1) As a result of the formation of the holding company, PG&E Corporation
became the holder of all issued and outstanding shares of PG&E
common stock on January 1, 1997.
(2) The information relating to State Street Bank and Trust Company is based
on beneficial ownership as of December 31, 1996, as reported in a Schedule
13G, dated February 10, 1997, filed with the Securities and Exchange
Commission. 39,556,596 shares are held by the bank in its capacity as
Trustee of the PG&E Savings Fund Plan for its employees. The Trustee may
not vote these shares in the absence of voting instructions from the Plan
participants. The bank also holds 4,263,324 shares of PG&E Corporation
common stock as trustee of various collective investment funds and trusts.
The bank has sole voting power with respect to 3,688,724 of these shares,
shared voting power with respect to 3,200 of these shares, sole investment
power with respect to 4,254,641 of these shares, and shared investment
power with respect to 8,683 of these shares.
28
<PAGE>
Proposals by Shareholders - 1998
Any proposal by a shareholder to be submitted for inclusion in proxy
soliciting material for the 1998 annual shareholders' meetings of PG&E
Corporation and PG&E must be received by the Corporate Secretary after April 16,
1997, but no later than November 3, 1997.
Annual Report
PG&E Corporation's and PG&E's joint 1996 Annual Report to Shareholders,
including financial statements, accompanies this Joint Proxy Statement.
Method and Cost of Soliciting Proxies
PG&E Corporation and PG&E intend to solicit proxies principally by mail.
Proxies also may be solicited by personal contact, telephone, or other means by
officers and other employees of PG&E Corporation or PG&E. PG&E Corporation and
PG&E have retained D. F. King & Co., Inc. to assist in the solicitation of
proxies at an estimated fee of $11,500 plus reimbursement of reasonable
expenses. In addition, brokers, banks, and other fiduciaries and nominees will
be reimbursed for the reasonable expenses of forwarding the Joint Proxy
Statement and other proxy materials to beneficial owners of PG&E Corporation and
PG&E stock. The entire cost of soliciting proxies will be paid by PG&E
Corporation and PG&E.
PG&E Corporation and PG&E also have retained Corporate Election Services,
Inc. to assist in the tabulation of proxies and to act as the inspector of
election at the annual meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
In accordance with Section 16(a) of the Securities Exchange Act of 1934
and Securities and Exchange Commission ("SEC") regulations, PG&E Corporation's
and PG&E's respective directors, certain officers, and persons who own greater
than 10 percent of PG&E Corporation's or PG&E's equity securities are required
to file reports of ownership and changes in ownership of such equity securities
with the SEC and the principal national securities exchange on which such equity
securities are registered, and to furnish PG&E Corporation or PG&E (as the case
may be) with copies of all such reports they file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, PG&E Corporation and PG&E
believe that during 1996 all filing requirements applicable to their directors,
officers, and 10 percent shareholders were satisfied.
Other Matters
Management does not know of any matter to be acted upon at the meetings
other than the matters above described. However, if any other matter should
properly come before the annual meetings, the proxyholders named in the enclosed
proxy will vote the shares for which they hold proxies at their discretion.
By Order of the Boards of Directors of
PG&E Corporation and PG&E,
/s/ Leslie H. Everett
Leslie H. Everett
Corporate Secretary, PG&E Corporation
Vice President and Corporate Secretary, PG&E
At the annual meetings of shareholders, real-time captioning services and
headsets will be available for the hearing impaired. Please contact an usher at
the meeting if you wish to be seated in the real-time captioning section or to
use a headset.
Audio cassette recordings of the meetings will be available, without
charge, for shareholders with impaired vision. Please contact the office of the
Corporate Secretary, 77 Beale Street, Mail Code B32, P.O. Box 770000, San
Francisco, CA 94177, or call (415) 973-2880.
Your vote is important.
Please sign, date, and return your proxy as soon as possible.
29
<PAGE>
[RECYCLE LOGO] Printed with soybean ink on recycled/recyclable paper
<PAGE>
The undersigned hereby appoints Stanley T. Skinner, Robert D. Glynn, Jr., and
Leslie H. Everett, or any of them, proxies of the undersigned, with full power
of substitution, to vote the stock of the undersigned at the annual meeting of
shareholders of PG&E Corporation, to be held at 1111 California Street, San
Francisco, California, on Wednesday, April 16, 1997, at 10:00 a.m., and at any
adjournment or postponement thereof, as instructed on the reverse hereof and
upon all motions and resolutions which may properly be presented for
consideration at said meeting. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF PG&E CORPORATION.
PG&E CORPORATION
Please mark, sign, date, and return this proxy
promptly to Corporate Election Services, P.O.
Box 3200, Pittsburgh, PA 15230-3200.
----------------------------- -----------, 1997
----------------------------- -----------, 1997
SHAREHOLDER'S SIGNATURE DATE
If you are signing for the shareholder, please
sign the shareholder's name and your name, and
state the capacity in which you act.
Shareholder's Proxy For Annual Meeting, April 16, 1997
- --------------------------------------------------------------------------------
- PLEASE DETACH HERE AND RETURN THIS PROXY TO CORPORATE ELECTION SERVICES
IN THE ENCLOSED REPLY ENVELOPE. -
[LOGO OF PG&E PG&E CORPORATION
CORPORATION] ----------------
ANNUAL MEETING
TO BE HELD AT:
MASONIC AUDITORIUM
1111 CALIFORNIA STREET
SAN FRANCISCO, CA 94108
APRIL 16, 1997, AT 10:00 A.M.
- - PLEASE USE THE ATTACHED TICKET TO ATTEND THE PG&E CORPORATION ANNUAL MEETING.
YOU ALSO MAY REGISTER AT THE MEETING. -
- --------------------------------------------------------------------------------
PG&E CORPORATION 1997 Annual Meeting Ticket
FOR THE ANNUAL SHAREHOLDERS' MEETING AT
----------------------------
10:00 A.M. ON APRIL 16, 1997
----------------------------
TO BE HELD AT THE MASONIC AUDITORIUM, 1111 CALIFORNIA STREET, SAN FRANCISCO.
(DOORS OPEN AT 9:00 A.M. YOU MAY BYPASS THE REGISTRATION AREA
AND PRESENT THIS TICKET AT THE ENTRANCE TO THE AUDITORIUM.)
Note: Cellular telephones, cameras, tape recorders, etc., will not be allowed in
the auditorium during the meeting, other than for PG&E Corporation purposes. A
checkroom will be provided. For your protection, all briefcases, purses,
packages, etc., will be subject to inspection as you enter the meeting. We
regret any inconvenience this may cause you. (See reverse side for additional
information.)
<PAGE>
- --------------------------------------------------------------------------------
YOUR PROXY IS SOLICITED BY THE PG&E CORPORATION BOARD OF DIRECTORS. Unless
contrary instructions are given below, the above designated proxies will vote
the PG&E Corporation shares for which they hold proxies FOR Items 1 and 2 and
AGAINST Items 3, 4, 5, 6, 7, and 8.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PG&E 1. Election of Directors
CORPORATION Nominees are: Richard A. Clarke; Harry M. Conger; David A. Coulter; C. Lee Cox; William S. Davila; Robert D.
DIRECTORS Glynn, Jr.; David M. Lawrence, MD; Richard B. Madden; Mary S. Metz; Rebecca Q. Morgan; Samuel T. Reeves; Carl E.
RECOMMEND Reichardt; John C. Sawhill; Alan Seelenfreund; Stanley T. Skinner; and Barry Lawson Williams
A VOTE
FOR [ ] FOR all nominees listed above (except [ ] WITHHOLD vote [ ] WITHHOLD vote only for
ITEMS 1 AND 2 as indicated to the contrary) for ALL nominees ______________________
2. Ratification of the appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN
PG&E Corporation's independent public accountants............. [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 3. Shareholder Proposal Regarding Lead Director and Vice Chairman..................... [_] [_] [_]
DIRECTORS 4. Shareholder Proposal Regarding Board Attendance.................................... [_] [_] [_]
RECOMMEND 5. Shareholder Proposal Regarding Restricted Stock Plan for Non-Employee Directors.... [_] [_] [_]
A VOTE 6. Shareholder Proposal Regarding Proxy Voting........................................ [_] [_] [_]
AGAINST 7. Shareholder Proposal Regarding Compensation of Directors........................... [_] [_] [_]
ITEMS 3, 4, 5, 8. Shareholder Proposal Regarding PG&E's Action on Proposition 209.................... [_] [_] [_]
6, 7, AND 8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- DETACH HERE AND RETURN THE TOP SECTION TO CORPORATION ELECTION SERVICES
IN THE ENCLOSED REPLY ENVELOPE.-
All available space at the Memorial Temple Garage at 1101 California Street
(adjacent to the Masonic Auditorium) has been reserved to provide complimentary
parking for shareholders. However, capacity is limited. Please show your annual
meeting ticket to the garage attendant as you enter the garage.
Real-time captioning services and headsets will be available at the meeting for
shareholders with impaired hearing. Please contact an usher at the meeting if
you wish to be seated in the real-time captioning section or to use a headset.
<PAGE>
[LOGO OF PG&E PG&E CORPORATION 1997 ANNUAL MEETING
CORPORATION] ----------------
SAVINGS FUND PLAN FOR EMPLOYEES
OF PACIFIC GAS AND ELECTRIC COMPANY
VOTING INSTRUCTIONS TO THE TRUSTEE
PLEASE SIGN, DATE, AND RETURN THIS FORM PROMPTLY.
(Mark your voting instructions on the reverse side.)
----------------------- --------------, 1997
Signature Date
- --------------------------------------------------------------------------------
- Please detach here and return the top section to the Trustee
-------
in the enclosed reply envelope.-
TO ALL PARTICIPANTS IN THE SAVINGS FUND PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF PG&E CORPORATION COMMON STOCK ALLOCATED TO YOUR ACCOUNT. This form
is provided for your use in giving the Trustee of the Plan confidential
instructions to vote your stock held in the Plan at PG&E Corporation's annual
meeting of shareholders on April 16, 1997. You have one vote for each share of
PG&E Corporation common stock credited to your account as of February 18, 1997.
Enclosed is a joint proxy statement which sets forth the business to be
transacted at the meeting. Please indicate your instructions on this form and
sign, date, and return the top section to STATE STREET BANK AND TRUST COMPANY,
TRUSTEE OF THE PLAN, in the envelope provided. IF YOU SIGN BUT DO NOT OTHERWISE
COMPLETE THE FORM, THE TRUSTEE WILL VOTE ALL SHARES IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE PG&E CORPORATION BOARD OF DIRECTORS. Stock in your Plan
account for which the Trustee has not received a signed voting instruction form
will not be voted by the Trustee. Participants who also own stock outside the
Plan will receive a separate proxy form for those shares. Those proxies should
be returned directly to Corporate Election Services for tabulation.
To ensure that your shares of PG&E Corporation common stock are represented
at the meeting, it is important that your voting instructions be received by the
Trustee on or before April 15, 1997.
State Street Bank and Trust Company, as Trustee
of the Savings Fund Plan for Employees of
Pacific Gas and Electric Company
Box 1997 G.P.O.
New York, N.Y. 10117-0024
RETAIN THE BOTTOM SECTION FOR YOUR RECORDS
<PAGE>
- -------------------------------------------------------------------------------
TO STATE STREET BANK AND TRUST COMPANY, TRUSTEE
PURSUANT TO THE PROVISIONS OF THE SAVINGS FUND PLAN FOR EMPLOYEES OF
PACIFIC GAS AND ELECTRIC COMPANY, YOU ARE INSTRUCTED AS INDICATED BELOW
WITH RESPECT TO VOTING THE SHARES OF STOCK CREDITED TO MY ACCOUNT IN THE
PLAN AS OF FEBRUARY 18, 1997, AT THE ANNUAL MEETING OF SHAREHOLDERS OF PG&E
CORPORATION TO BE HELD ON APRIL 16, 1997, AND AT ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
VOTING INSTRUCTIONS TO THE TRUSTEE -- 1997
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PG&E 1. Election of Directors
CORPORATION Nominees are: Richard A. Clarke; Harry M. Conger; David A. Coulter; C. Lee Cox; William S. Davila; Robert D.
DIRECTORS Glynn, Jr.; David M. Lawrence, MD; Richard B. Madden; Mary S. Metz; Rebecca Q. Morgan; Samuel T. Reeves; Carl E.
RECOMMEND Reichardt; John C. Sawhill; Alan Seelenfreund; Stanley T. Skinner; and Barry Lawson Williams
A VOTE
FOR [ ] FOR all nominees listed above (except [ ] WITHHOLD vote [ ] WITHHOLD vote only for
ITEMS 1 AND 2 as indicated to the contrary) for ALL nominees ______________________
2. Ratification of the appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN
PG&E Corporation's independent public accountants.............. [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 3. Shareholder Proposal Regarding Lead Director and Vice Chairman..................... [_] [_] [_]
DIRECTORS 4. Shareholder Proposal Regarding Board Attendance.................................... [_] [_] [_]
RECOMMEND 5. Shareholder Proposal Regarding Restricted Stock Plan for Non-Employee Directors.... [_] [_] [_]
A VOTE 6. Shareholder Proposal Regarding Proxy Voting........................................ [_] [_] [_]
AGAINST 7. Shareholder Proposal Regarding Compensation of Directors........................... [_] [_] [_]
ITEMS 3, 4, 5, 8. Shareholder Proposal Regarding PG&E's Action on Proposition 209.................... [_] [_] [_]
6, 7, AND 8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- DETACH HERE AND RETURN THE TOP SECTION TO THE TRUSTEE
-------
IN THE ENCLOSED REPLY ENVELOPE.-
