<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
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Pacific Gas and Electric Company
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..............................................................................
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<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
Notice of 1994 Annual Meeting . Proxy Statement
[GRAPHIC APPEARS HERE]
[LOGO OF PACIFIC GAS AND ELECTRIC COMPANY APPEARS HERE]
<PAGE>
Pacific Gas and Electric Company 77 Beale Street Richard A. Clarke
P.O. Box 770000 Chairman of the Board and
San Francisco, Chief Executive Officer
CA 94177
[LOGO OF PACIFIC GAS AND March 3, 1994
ELECTRIC COMPANY APPEARS HERE]
Dear PG&E Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Pacific Gas and Electric Company on Wednesday, April 20, 1994. For the
convenience of our shareholders, this year's annual meeting will begin at
10:00 a.m. The meeting will be held in the Masonic Auditorium, 1111 California
Street, San Francisco, California.
Your vote on the business to be considered at this meeting is important,
regardless of the number of shares you own. Whether or not you plan to attend
the meeting, please sign, date, and return your proxy as soon as possible in
the envelope provided so that your shares can be voted in accordance with your
instructions.
In addition to the election of directors and ratification of the
selection of independent public accountants for 1994, action also will be
taken on such other matters as may properly be presented at the meeting. These
include two proposals submitted by individual shareholders. For the reasons
given, the Board of Directors and management recommend that shareholders vote
against these proposals.
During the meeting, management will report on operations and other matters
affecting the Company, and will respond to shareholders' questions.
Sincerely,
Richard A. Clarke
Richard A. Clarke
Chairman of the Board and
Chief Executive Officer
<PAGE>
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Table of Contents
<TABLE>
<CAPTION>
Notice of Annual Meeting of Shareholders
<S> <C>
Proxy Statement
Items of Business
Election of Directors 2
Ratification of Selection of Independent Public Accountants 9
Proposals by Shareholders 9
Executive Compensation 11
Other Information 18
</TABLE>
Important
The Company has approximately 288,000 shareholder accounts. Many shareholders
own 100 shares or less. To ensure a proper representation at the meeting, each
shareholder, regardless of the number of shares owned, is requested to sign,
date, and return promptly the enclosed proxy, using the accompanying postage-
paid return envelope.
<PAGE>
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Notice of Annual Meeting of Shareholders
March 3, 1994
To the Shareholders of Pacific Gas and Electric Company:
The annual meeting of shareholders of Pacific Gas and Electric Company will
be held in the Masonic Auditorium, 1111 California Street, San Francisco,
California, on Wednesday, April 20, 1994, at 10:00 a.m., for the purposes of:
[ ] electing 16 directors to serve for the ensuing year;
[ ] ratifying the Board of Directors' selection of Arthur Andersen & Co.
as the Company's independent public accountants for 1994;
[ ] acting upon two proposals submitted by individual shareholders and
described on pages 9-10; and
[ ] transacting such other business as may properly come before the
meeting and any adjournment thereof.
Shareholders of record at the close of business on February 22, 1994, and
valid proxyholders may attend and vote at the meeting. 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 Dividend Reinvestment Plan, please note
that the enclosed proxy covers all shares in your account, including any shares
which may be held in that Plan.
By Order of the Board of Directors,
Leslie H. Everett
Leslie H. Everett
Corporate Secretary
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 meeting will be available, without charge,
for shareholders with impaired vision. Please contact the office of the
Corporate Secretary, Mail Code B32, P.O. Box 770000, San Francisco, CA 94177, or
call (415) 973-2880.
<PAGE>
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Proxy Statement
Your proxy, using the enclosed form, is solicited by the PG&E Board of Directors
for use at the annual meeting of shareholders to be held on April 20, 1994, and
at any adjournment thereof.
The only items of business which management intends to present at the
meeting are listed in the preceding Notice of Annual Meeting of Shareholders and
are explained in more detail on the following pages. By returning your signed
proxy, you authorize management 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 proposals initiated 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 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.
Each shareholder of record at the close of business on February 22, 1994,
is entitled, for each share then held, to one vote on each proposal or item that
comes before the annual meeting. On February 22, 1994, the Company had
outstanding 32,319,782 shares of first preferred stock and 428,739,596 shares of
common stock entitled to vote at the meeting.
If you mark "Abstain" with respect to any proposal on your proxy,
your shares will be counted in the number of votes cast, but will not be counted
as votes for or against the proposal. If a broker or other nominee holding
shares for a beneficial owner does not vote on a proposal, the shares will not
be counted in the number of votes cast.
This proxy statement and accompanying proxy form were first mailed on or
about March 3, 1994, to shareholders entitled to vote at the meeting.
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Election of Directors
Sixteen directors will be elected to serve on the Company's Board of Directors
until the next annual meeting of shareholders or until their successors shall be
elected and qualified. The nominees for director whom the Board proposes for
election are consistent with the Company's policy that at least 75 percent of
the Board shall be composed of directors who are neither current nor former
officers or employees of the Company.
On the following pages, information is provided about the nominees for
director, including their principal occupations for the past five years, certain
other directorships, age, and length of service as a director of the Company.
Membership on Board committees, attendance at Board and committee meetings, and
ownership of stock in the Company are indicated in separate sections following
the individual resumes of the nominees.
Directors are elected from those nominated based on a plurality of votes
cast. Unless authority to vote is withheld or another contrary instruction is
indicated, signed proxies received will be voted for the election of the
nominees listed on the following pages, all of whom 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 proxyholders named
in the enclosed proxy will vote for substitute nominees at their discretion.
2
<PAGE>
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Nominees for Director
Biographical Information
Richard A. Clarke
[PHOTO OF Mr. Clarke is Chairman of the Board and Chief Executive Officer
RICHARD A. of PG&E and has been an executive officer of the Company for
CLARKE more than the past five years. Mr. Clarke, age 63, has been a
APPEARS HERE] director of the Company since 1985 and also serves as a
director of BankAmerica Corporation and Potlatch Corporation.
Harry M. Conger
[PHOTO OF Mr. Conger is Chairman of the Board and Chief Executive Officer
HARRY M. of Homestake Mining Company and has been an executive officer
CONGER of that company for more than the past five years. Mr. Conger,
APPEARS HERE] age 63, has been a director of the Company since 1982 and also
serves as a director of ASA Limited, Baker Hughes Inc., and
CalMat Co.
William S. Davila
[PHOTO OF Mr. Davila is President Emeritus of The Vons Companies, Inc.
WILLIAM S. (retail grocery), having been President from 1986 until his
DAVILA retirement on May 1, 1992. He also is a director of The Vons
APPEARS HERE] Companies, Inc. Mr. Davila, age 62, has been a director of the
Company since 1992 and also serves as a director of Geo. A.
Hormel & Company and Wells Fargo & Company.
Melvin B. Lane
[PHOTO OF Mr. Lane is publishing consultant to Time Warner Inc.
MELVIN B. (publishing, music, and entertainment) and former Co-Chairman
LANE of the Board of Lane Publishing Company (publisher of Sunset
APPEARS HERE] magazine), having held the latter position from December 1985
until May 1990. Mr. Lane, age 71, has been a director of the
Company since 1987 and also serves as a director of Time Inc.
Leslie L. Luttgens
[PHOTO OF Mrs. Luttgens is a civic and community leader and has been
LESLIE L. active in various civic, public service, and cultural
LUTTGENS activities for more than the past five years. Mrs. Luttgens,
APPEARS HERE] age 71, has been a director of the Company since 1980 and also
serves as a director of McKesson Corporation.
3
<PAGE>
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Nominees for Director
Continued
Richard B. Madden
[PHOTO OF Mr. Madden is Chairman of the Board and Chief Executive Officer
RICHARD B. of Potlatch Corporation (diversified forest products), having
MADDEN been an executive officer of that company for more than the
APPEARS HERE] past five years. Mr. Madden, age 64, has been a director of the
Company since 1977 and also serves as a director of
Consolidated Freightways, Inc. and URS Corporation.
George A. Maneatis
[PHOTO OF Mr. Maneatis is former President of the Company, having held
GEORGE A. that position from 1985 until his retirement on November 1,
MANEATIS 1991. Mr. Maneatis, age 67, has been a director of the Company
APPEARS HERE] since 1986 and also serves as a director of ANGUS Chemical
Company.
Mary S. Metz
[PHOTO OF Dr. Metz is Dean of University Extension, University of
MARY S. California, Berkeley, having held that position since July
METZ 1991. Prior to that date, she was President of Mills College,
APPEARS HERE] having held that position from 1981 until June 30, 1990. Dr.
Metz, age 56, has been a director of the Company since 1986 and
also serves as a director of Longs Drug Stores Corporation,
Pacific Telesis Group, and Union Bank.
William F. Miller
[PHOTO OF Dr. Miller is Professor of Public and Private Management and
WILLIAM F. Professor of Computer Science at Stanford University. He is
MILLER President Emeritus of SRI International (research and
APPEARS HERE] consulting), having been President and Chief Executive Officer
from September 1, 1979 until his retirement on December 1,
1990. Dr. Miller, age 68, has been a director of the Company
since 1983 and also serves as a director of First Interstate
Bancorp, Scios Nova, Inc., and Varian Associates, Inc.
John B. M. Place
[PHOTO OF Mr. Place is former Chairman of the Board and Chief Executive
JOHN B.M. Officer of Crocker National Corporation (formerly a bank
PLACE holding company) and Crocker National Bank. Mr. Place, age 68,
APPEARS HERE] has been a director of the Company since 1982 and also serves
as a director of The Metropolitan Life Insurance Company.
4
<PAGE>
Samuel T. Reeves
[PHOTO OF Mr. Reeves is President and Co-Chairman of the Board of
SAMUEL T. Dunavant Enterprises, Inc. (cotton merchandising) and has been
REEVES an executive officer of that company for more than the past
APPEARS HERE] five years. Mr. Reeves, age 59, has been a director of the
Company since 1992.
Carl E. Reichardt
[PHOTO OF Mr. Reichardt is Chairman of the Board and Chief Executive
CARL E. Officer of Wells Fargo & Company (bank holding company) and
REICHARDT Wells Fargo Bank, N.A., and has been an executive officer of
APPEARS HERE] Wells Fargo Bank, N.A., for more than the past five years. Mr.
Reichardt, age 62, has been a director of the Company since
1985 and also serves as a director of ConAgra, Inc., Ford Motor
Company, Hospital Corporation of America, and Newhall
Management Corporation.
John C. Sawhill
[PHOTO OF Dr. Sawhill is President and Chief Executive Officer of The
JOHN C. Nature Conservancy (international environmental organization),
SAWHILL having held that position since April 1, 1990. Prior to that
APPEARS HERE] date, he was a director of McKinsey & Company, Inc. (management
consultants) for more than five years. Dr. Sawhill, age 57, has
been a director of the Company since 1990 and also serves as a
director of The Vanguard Group, Inc. and each of the Vanguard
Funds, registered investment companies, and NACCO Industries,
Inc.
Alan Seelenfreund
[PHOTO OF Mr. Seelenfreund is Chairman of the Board and Chief Executive
ALAN Officer of McKesson Corporation (distributor of pharmaceuticals
SEELENFREUND and health care products), and has been an executive officer of
APPEARS HERE] that company for more than the past five years. Mr.
Seelenfreund, age 57, was elected a director of the Company by
the Board of Directors on October 1, 1993, and also serves as a
director of Armor All Products Corporation.
Stanley T. Skinner
[PHOTO OF Mr. Skinner is President and Chief Operating Officer of PG&E
STANLEY T. and has been an executive officer of the Company for more than
SKINNER the past five years. Mr. Skinner, age 56, has been a director
APPEARS HERE] of the Company since 1986.
Barry Lawson Williams
[PHOTO OF Mr. Williams is President of Williams Pacific Ventures, Inc.
BARRY LAWSON (venture capital and real estate) and has been an executive
WILLIAMS officer of that company for more than the past five years. Mr.
APPEARS HERE] Williams, age 49, has been a director of the Company since 1990
and also serves as a director of American President Companies,
Ltd., Northwestern Mutual Life Insurance Company, and Tenera,
L.P.
5
<PAGE>
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Information Regarding the Board of Directors
Board Committees
The Board of Directors is responsible for the overall affairs of the
corporation. To assist it in carrying out this responsibility, the Board has
delegated certain authority to several permanent committees, the membership and
duties of which are as follows:
<TABLE>
<CAPTION>
Nominating and
Executive Audit Finance Compensation Public Policy
Committee Committee Committee Committee Committee
<S> <C> <C> <C> <C>
R. A. Clarke* H. M. Conger* R. A. Clarke* L. L. Luttgens* R. A. Clarke*
H. M. Conger W. S. Davila R. B. Madden W. F. Miller W. S. Davila
L. L. Luttgens M. B. Lane W. F. Miller J. B. M. Place M. B. Lane
R. B. Madden M. S. Metz C. E. Reichardt S. T. Reeves M. S. Metz
J. B. M. Place A. Seelenfreund S. T. Skinner J. C. Sawhill J. C. Sawhill
S. T. Skinner B. L. Williams B. L. Williams
*Chairman
</TABLE>
Executive Committee. The Executive Committee (no meeting held in 1993), subject
to the provisions of law and certain limits imposed by the Board of Directors,
may exercise any of the powers and perform any of the duties of the Board. The
Committee meets as needed.
Audit Committee. The Audit Committee (four meetings held in 1993) satisfies
itself as to the independence and competence of the Company's independent public
accountants. It reviews with them and with the Company's officers and internal
auditors the scope and results of the independent accountants' audit work, the
Company's annual financial statements, and the Company's internal accounting and
control systems. The Committee also recommends to the Board the firm of
independent public accountants to be selected to audit the Company's accounts,
and makes further inquiries as it deems necessary or desirable to inform itself
as to the conduct of the Company's affairs. The Committee is composed entirely
of directors who are neither (a) officers or employees of, or consultants to,
the Company or any of its subsidiaries; nor (b) officers or employees of any
other corporation on whose board of directors any PG&E officer serves as a
member.
Finance Committee. The Finance Committee (four meetings held in 1993) reviews
and recommends to the Board long-range financial policies and objectives, and
actions required to achieve those objectives. Specifically, the 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 the Company's retirement plan, and major commercial
banking, investment banking, financial consulting, and other financial relations
of the Company.
Nominating and Compensation Committee. The Nominating and Compensation Committee
(eight meetings held in 1993) reviews and makes recommendations to the Board of
Directors regarding the selection of nominees to serve as advisory directors and
directors of the Company, and the compensation and benefit policies and
practices of the Company. The Committee reviews and approves the compensation of
officers and certain non-officers of the Company except that of the Chairman and
Chief Executive Officer, whose compensation is established by the full Board.
The Committee also reviews long-range planning for executive development and
succession. The Committee is composed entirely of directors who are neither (a)
officers or employees of, or consultants to, the Company or any of its
subsidiaries; nor (b) officers or employees of any other corporation on whose
board of directors any PG&E officer serves as a member.
The Committee will consider nominees recommended by shareholders for
election to the Board of Directors. The names of such nominees, accompanied by
relevant biographical information, should be submitted in writing to the
Corporate Secretary. The Committee seeks qualified, dedicated, and highly
regarded individuals who have experience relevant to PG&E's business operations,
who understand the complexities of the Company's business environment, and who
will represent the best interests of PG&E and all of its shareholders. In
accordance with the Company's long-standing commitment to equal opportunity, the
Committee continues to seek women and minority candidates for the Board.
6
<PAGE>
Public Policy Committee. The Public Policy Committee (three meetings held in
1993) advises the Board of Directors regarding public policy issues which could
significantly affect the Company's customers, shareholders, employees, or the
communities the Company serves.
The Committee reviews the Company'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, to encourage development of minority-owned and women-owned
businesses as suppliers to the Company, and to address shareholder rights and
corporate democracy issues.
Attendance at Board and Committee Meetings
Fourteen meetings of the Board of Directors and nineteen meetings of Board
committees were held in 1993. 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 81%, H. M. Conger 100%, W. S. Davila 74%, M. B.
Lane 90%, L. L. Luttgens 100%, R. B. Madden 94%, G. A. Maneatis 100%, M. S. Metz
86%, W. F. Miller 96%, J. B. M. Place 100%, S. T. Reeves 90%, C. E. Reichardt
78%, J. C. Sawhill 100%, A. Seelenfreund 80%, S. T. Skinner 100%, and
B. L. Williams 100%.
Compensation of Directors
Each director who is not an employee of the Company 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 a deferred compensation plan,
directors may elect to defer with interest all or part of such compensation for
varying periods.
The Company's Retirement Plan for Non-Employee Directors provides a
retirement benefit for non-employee directors with at least five years of
service on the Board. Eligible retirees are entitled to receive quarterly
payments equal to the number of quarters which 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 accrued benefits
under the Retirement Plan for Non-Employee Directors and the Director's Deferred
Compensation Plan in the event that benefits are not paid when due.
Company officers who also are directors receive no additional compensation
for services as a member of the Board of Directors or of any Board committee.
Mr. Maneatis, a director of the Company, has an agreement with the Company
under which he provides strategic consulting services relating to his expertise
in nuclear power plant operations. The agreement is expected to continue through
October 1994, unless terminated earlier by either party. Under the terms of the
agreement, Mr. Maneatis receives an annual retainer and fees for actual
consulting time. In 1993, Mr. Maneatis was paid $90,200 under the agreement.
Certain Relationships and Related Transactions
Mr. Clarke, Chairman of the Board and Chief Executive Officer of the Company,
also is a director of Bank of America NT&SA, which was paid approximately
$5,124,600 by the Company and its subsidiaries during 1993 in fees and interest
in connection with providing credit and banking services to the Company and its
subsidiaries in the normal course of business. Such credit arrangements and
services are expected to continue to be provided in the future. Mr. Clarke has
no personal interest in these transactions.
Mr. Reichardt, a director of the Company, also is Chairman of the Board and
Chief Executive Officer of Wells Fargo Bank, N.A., which was paid approximately
$1,189,300 by the Company and its subsidiaries during 1993 in fees and interest
in connection with providing credit and banking services to the Company and its
subsidiaries in the normal course of business. Wells Fargo Nikko Investment
Advisors, a joint venture in which Wells Fargo Bank, N.A., has a 50 percent
interest, was paid approximately $694,900 for investment management services
provided in the normal course of business to PG&E's Retirement Plan during
1993. Such credit arrangements and services are expected to continue to be
provided in the future. Mr. Reichardt has no personal interest in these
transactions.
Board of Directors Retirement Policy
In December 1990, the Board of Directors reduced from 72 to 70 the age above
which any person may not be designated by the Board as a candidate for election
or reelection to the Board. Current directors who already had reached the age of
67 as of December 19, 1990, were exempted from this lower retirement age. The
Board also continued its policy that, in the case of a director who also is an
officer of the Company, the director's term ends upon his or her retirement from
active employment unless the term is extended by special action of the Board.
7
<PAGE>
Security Ownership of Management
The following table sets forth the number of shares of the Company's common
stock beneficially owned (as defined in the rules of the Securities and Exchange
Commission) as of January 31, 1994, by the directors, the executive officers
named in the Summary Compensation Table on page 15, and all directors and
executive officers as a group. None of the directors or executive officers owned
any shares of the Company's preferred stock. None of the directors or executive
officers, nor the directors and executive officers as a group, owned as much as
1% of any class of 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 24,217 71,534 95,751
Harry M. Conger 4,101 4,101
William S. Davila 2,212 2,212
Melvin B. Lane 2,000 2,000
Leslie L. Luttgens 2,846 2,846
Richard B. Madden 3,000 3,000
George A. Maneatis 16,471 33,000 49,471
Mary S. Metz 2,295 2,295
William F. Miller 10,184 10,184
John B. M. Place 3,319 3,319
Samuel T. Reeves 8,000 8,000
Carl E. Reichardt 2,000 2,000
John C. Sawhill 17,194 17,194
Alan Seelenfreund 500 500
Stanley T. Skinner 14,439 26,333 40,772
Barry Lawson Williams 1,258 1,258
Jerry R. McLeod 2,056 7,500 9,556
James D. Shiffer 6,421 10,000 16,421
Gregory M. Rueger 5,876 13,833 19,709
All directors and executive
officers as a group (29 persons) 176,640 242,597 419,237
</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 the
Company's Savings Fund Plan. Except as otherwise indicated below, the
directors 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 the Company's common stock in which
the beneficial owners share voting and investment power: Mr. Davila, 200
shares; Mr. Lane, 2,000 shares; Mr. Madden, 3,000 shares; Dr. Metz, 1,289
shares; Dr. Miller, 10,184 shares; Mr. Place, 2,222 shares; and all
directors and executive officers as a group, 22,779 shares.
(2) Includes shares of the Company's common stock which Mr. Maneatis and the
executive officers have the right to acquire within 60 days of January
31, 1994, through the exercise of vested stock options granted under the
Company's Stock Option Plan. Mr. Maneatis and 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.
8
<PAGE>
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Ratification of Selection of Independent Public Accountants
On the recommendation of the Audit Committee, the Board of Directors has
selected Arthur Andersen & Co. as the independent public accountants to examine
the financial statements of the Company and its subsidiaries for the year 1994.
Arthur Andersen & Co. has been employed to perform this function for the Company
since 1981.
One or more representatives of Arthur Andersen & Co. will be present at the
annual meeting, 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 Board believes 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 Audit Committee will investigate the reasons for
shareholder rejection and the Board will reconsider the appointment.
A majority of the votes cast is required to ratify the appointment of the
independent public accountants.
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of Arthur Andersen & Co. Proxies solicited by the Board of Directors
will be so voted unless shareholders specify otherwise in their proxies.
- --------------------------------------------------------------------------------
Proposals by Shareholders
Shareholder Proposal 1:
Compensation of the Chief Executive Officer
Mr. Nick Rossi, P. O. Box 249, Boonville, California, 95415, holder of 500
shares of common stock, has given notice of his intention to present the
following proposal for action at the annual meeting:
"Resolved, that the stockholders of Pacific Gas and Electric recommend that
the board of directors adopt the following policy: As relates to future
contracts, the Chief Executive Officer's total compensation will be determined
as follows: The C.E.O.'s beginning total compensation will be 25 times more than
the average Pacific Gas and Electric employee's 1992 annual wages or salary. The
C.E.O.'s total compensation will go up or down in direct proportions to the
company's performance. To be determined as follows: One half of the compensation
shall go up or down gauged against the ten year average earnings per common
share (adjusted for stock splits) from 1983 to 1992. The remaining one half
shall go up or down gauged against the ten year average dividends per common
share (adjusted for stock splits) from 1983 to 1992."
The Board of Directors recommends a vote AGAINST this proposal:
PG&E agrees that compensation for the chief executive officer, and all
management, should be based on performance. In fact, that is the primary basis
which the Board of Directors has used for many years to set the CEO's
compensation.
The CEO's compensation is composed of two major parts: base salary and
incentive payments.
His base salary is reviewed annually by the Board of Directors and set
based upon the Company's overall performance and his achievement of specific
individual objectives. His incentive compensation is tied directly and
exclusively to the Company's performance for shareholders, as measured by
earnings per share and total returns for shareholders (dividends plus stock
price appreciation). If the Company performs well, the CEO's incentive
compensation increases. If the Company performs poorly for shareholders, the
incentive amounts will be zero (as was the case in 1988).
9
<PAGE>
As with all PG&E officers and management employees, the CEO's total
compensation is designed to be competitive with the compensation paid to
employees in similar positions. In a normal year, when the Company meets all of
its targets for shareholders, the CEO's salary and annual incentive compensation
is about equal to the average compensation paid by other large utilities. His
total compensation is about 80 percent of the average total compensation paid to
CEOs of general industry.
This shareholder proposal would reduce the ability of the Board of
Directors to establish appropriate compensation for the CEO. Compensation would
be set using a rigid formula. That formula would fail to consider whether the
level of compensation is competitive with that offered by other employers. It
also would fail to consider important qualitative and quantitative factors, such
as the Company's progress in meeting long-term business objectives. Perhaps most
important, it would totally ignore the Company's stock price performance, which
is of significant importance to shareholders.
For these reasons, the Board of Directors recommends that shareholders
reject this proposal.
Approval of this shareholder proposal requires an affirmative vote of a
majority of the votes cast. Unless they are marked to the contrary, proxies
received will be voted AGAINST this proposal.
Shareholder Proposal 2:
Compensation of Officers
Mr. and Mrs. Jerome R. Mikulski, 4715 Caviou Place, Colorado Springs, Colorado,
80918, holders of 300 shares of common stock, have given notice of their
intention to present the following proposal for action at the annual meeting:
"RESOLVED: That the shareholders of Pacific Gas & Electric Company
recommend that the Board of Directors take the necessary steps to institute a
salary ceiling such that no senior executive officer or director or consultant
acting in the capacity of an executive officer or director of the Company
receive a combined salary and other compensation which is more than one hundred
and fifty (150%) of the salary provided to the President of the United States."
In support of this proposal, Mr. and Mrs. Mikulski have submitted the
following statement:
"REASONS: There is no corporation which exceeds the size or has the
complexity of the government of the United States run by the President of the
United States. Even most government agencies far exceed the size, as measured by
personnel and budget of any private corporation. The President of the United
States receives a salary of $200,000, while the heads of agencies and even
members of Congress are paid somewhat in excess of $100,000.
"In order of overcome even the appearance that officers of public
corporations run the corporations for their benefit rather than for the benefit
of the shareholders, the salary and compensation should not exceed that set
forth above. Usually, there is no direct correlation between the profitability
of a corporation and the compensation to officers. In fact, in many
corporations, the compensation increases even as profits fall. Thus, it is clear
that compensation does not usually serve as an incentive for a better run or
more profitable corporation. Any officer who believes he can better his
corporation should be sufficiently motivated by stock options or by his purchase
of stock on the open market.
"There is a general consensus in the United States that corporate officials
are grossly overpaid and that this state of affairs is promulgated by the 'hands
off' policy of Boards of Directors. Many Qualified people would gladly step in
and do as good a job as the incumbent officers of the Corporation and they would
have no hesitation to serve under the aforementioned ceiling on compensation.
"If you agree, please mark your proxy FOR this resolution."
The Board of Directors recommends a vote AGAINST this proposal:
As discussed above, PG&E agrees that management compensation should be based on
performance, and that is the policy which the Board of Directors observes in
setting pay for its officers and management.
This proposal would impose an absolute ceiling on the compensation paid to
senior management. Although the proponents suggest that pay should reflect
performance, their proposal would have the opposite effect. The absolute ceiling
would require that all compensation be limited, no matter how much success the
Company achieved for shareholders and no matter how well the individual officer
performed.
In addition, by limiting compensation to officers, this proposal would
seriously inhibit PG&E's ability to attract and retain the outstanding
management we must have to sustain superior financial performance for our
shareholders. PG&E's officers include experts in nuclear power plant operations,
gas and electric supply, legal and regulatory affairs, and other critical
functions. These skills and talents are in great demand. This proposal would
severely limit PG&E's ability to pay compensation which is competitive with that
offered by other utilities and industrial companies. As a result, it would be
inevitable that we would lose critically important management and would be
unable to attract competent replacements.
For these reasons, the Board of Directors recommends that shareholders
reject this proposal.
Approval of this shareholder proposal requires an affirmative vote of a
majority of the votes cast. Unless they are marked to the contrary, proxies
received will be voted AGAINST this proposal.
10
<PAGE>
- --------------------------------------------------------------------------------
Executive Compensation
Nominating and Compensation Committee Report on Compensation
PG&E is the nation's largest investor-owned gas and electric utility, serving
over 12 million people in Northern and Central California. In 1993, the
Company's assets totalled $27 billion and its earnings exceeded $1 billion. PG&E
delivers power to customers from a highly diversified electric generating
system, including hydroelectric, geothermal, wind, solar, and gas-fired
facilities, and from one of the most successful nuclear power plants in the
world. Through its affiliates, U.S. Generating Company and PG&E Resources
Company, PG&E has become a national leader in the growing independent power
production business and a significant participant in the gas exploration and
production industry.
During the past five years, the Company has provided shareholders an
average annual return--the combination of dividends and stock price
appreciation--of 22 percent and, as shown in the graph on page 14, a cumulative
total shareholder return of 173 percent.
Sustaining this success requires exceptional people: men and women with
skill, experience, vision, and entrepreneurial spirit. It is these men and
women, at every level in the Company, who make the difference between superior
performance and mediocrity, and who create value for PG&E's shareholders and
customers.
PG&E's compensation programs are designed to attract, retain, and motivate
these exceptional people. They reflect two fundamental principles which apply to
every officer of the Company:
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 Company
require that PG&E offer competitive compensation and benefits.
2. Part of every officer's compensation is tied directly to the Company's
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 the
Company's financial performance. The greater the officer's management
responsibilities, the larger the share of his or her total compensation
is at risk.
For officers, the Company has established the following four objectives to
implement these principles:
1. Base salary and annual incentive compensation combined should be
approximately equal to the average compensation paid by other large
energy utilities.
2. Total compensation (base salary, annual incentives, long-term
incentives, and benefits) should be about 80 percent of the average
total compensation of general industry.
3. Approximately one-half of target total compensation is tied directly to
corporate performance for shareholders.
4. Incentive compensation is tied to both the Company's short-term and
longer-term financial performance. This reflects PG&E's commitment to
achieve sustained growth in value for shareholders.
Compensation for the Chief Executive Officer is approved by the
Board of Directors. Compensation for all other officers is approved by the
Nominating and Compensation Committee of the Board, which is composed entirely
of independent non-employee directors. The Nominating and Compensation Committee
retains an independent consultant, Hewitt Associates, to help evaluate the
Company'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 Nominating and Compensation Committee since 1990.
Effective with the Company's 1994 tax year, the Omnibus Budget
Reconciliation Act of 1993 eliminated the deductibility of compensation over $1
million paid to the five highest paid executive officers. However, the new law
does not apply to performance-based compensation provided that the performance
targets are objective and have been approved by shareholders. A substantial
portion of the compensation paid to PG&E's officers is wholly dependent upon the
performance of the Company and is determined by comparing changes in shareholder
value against predetermined performance targets set by the Committee at the
beginning of each year. Two of the three performance-based plans which the
Company currently uses were previously approved by the shareholders in 1992 and
these plans are exclusively tied to total shareholder return from stock price
appreciation and dividends.
In light of the new law, the Nominating and Compensation Committee is
currently reviewing the Company's performance-based plans to determine whether
additional changes would be appropriate. However, the proposed regulations
explaining the new law were not issued until late in December 1993, and it is
likely that these rules will be further changed to reflect suggestions made
during the formal comment period, which ended on February 18, 1994. As a result,
it would be premature as of this date to take action on the Company's
performance-based plans in
11
<PAGE>
time to submit changes to the shareholders for action at the 1994 annual
meeting of shareholders. As soon as final regulations are issued, the
Committee will determine if changes are appropriate and whether the plans will
be submitted to the shareholders at the 1995 annual shareholders meeting. It
is also anticipated that the effect, if any, of the new tax law on the
Company's compensation tax deduction for 1994 will be de minimis.
Principal Components of Compensation
Base Salary. Executive salaries are reviewed annually by the Nominating
and Compensation Committee based on (a) the results achieved by each individual,
(b) the Company's expected financial performance, measured by earnings per share
for the Company overall as well as for the Company's three major types of
operations (utility, Diablo Canyon, and PG&E Enterprises), dividends, and stock
price appreciation, and (c) changes in the average salaries paid by other large
energy utilities. Currently, 12 utilities are used as comparators for the
purpose of setting base salary and annual incentives. These utilities, which are
among the largest utilities nationwide, were selected by the Committee because
they are comparable to PG&E in size, and their approach to compensation
emphasizes long-term incentives; five of these utilities are included in the Dow
Jones Utilities Index.
In 1993, Chairman of the Board and Chief Executive Officer Richard A.
Clarke received a base salary of $640,000. This salary level is slightly below
the average salary of chief executive officers of other major energy utilities
and slightly below 80 percent of the average salary of CEOs of major industrial
companies. Consistent with economic conditions and the Company's extensive
efforts to reduce costs in 1993, Mr. Clarke did not receive a base salary
increase for 1993, nor did the Company's President and two Executive Vice
Presidents.
Annual Incentive. The Performance Incentive Plan for 1993 provided annual
incentives to all employees based on the achievement of financial and service-
related objectives. The performance measures for 1993 were (a) the Company's
success in meeting earnings-per-share (EPS) objectives, 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 Chief Executive Officer, President, and two Executive Vice Presidents
for 1993 are based entirely on the Company's EPS for utility operations (75
percent), Diablo Canyon (20 percent), and PG&E Enterprises (5 percent). Awards
for other participating employees are increased or decreased based on each
organizational unit's success in meeting its performance 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 the
head of the organizational unit. For 1994, the EPS objectives for the Company's
three types of operations will be replaced by a single corporate EPS objective,
thereby ensuring that awards will not be paid if the Company's overall financial
performance is unsatisfactory.
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 Company achieves its
financial and service-related objectives. The Committee has discretion to modify
or eliminate awards.
In 1993, the Company substantially exceeded its EPS objective for Diablo
Canyon as a result of excellent plant operations. The Company fell short of its
EPS objective for utility operations largely due to several one-time earnings
adjustments relating to reorganization of the Company, restructuring of its gas
operations and other events. The Company exceeded its EPS objective for PG&E
Enterprises. The Company's overall performance resulted in Performance Incentive
Plan awards to the Chief Executive Officer, President, and two Executive Vice
Presidents which were 46 percent of their target awards.
Long-Term Incentives. The Stock Option Plan and the Performance Unit Plan
provide incentives based on the Company's financial performance over time.
The Stock Option Plan provides incentives based on the Company's ability to
sustain financial performance over a three-to-ten year period.
Under the Plan, officers, managers, and other key employees receive stock
options based on their responsibilities and position in the Company. These
options allow them to purchase a certain number of shares of PG&E stock at the
market price on the date of grant (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. The Company 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 under
the Plan 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 as applied to 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
12
<PAGE>
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 executive officer in 1993 was
determined by the Nominating and Compensation Committee based on the Company's
objectives of paying total compensation (base salary, annual incentives, long-
term incentives, and benefits) at about 80 percent of the average total
compensation of general industry and of tying approximately one-half of target
total compensation directly to corporate performance for shareholders. In making
stock option grants, the Committee is sensitive to the amount of stock options
previously granted to the executive officers, but the size of each executive
officer's stock option grant is determined primarily based on the compensation
objectives described above.
The Performance Unit Plan provides incentives based on the Company's
ability to sustain superior total returns for shareholders (dividends plus stock
price appreciation) over a three-year period.
Under the Plan, officers receive performance units reflecting their level
of responsibility in the Company. 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 the Company'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 the Company's common stock during the 30-day calendar period
prior to the end of the year. In order to align incentive payments more closely
with current Company performance, the Plan was revised for 1993 so that 1993
performance was weighted at 60%, 1992 performance at 25%, and 1991 performance
at 15%.
Each time the Company pays a cash dividend on common stock, a recipient of
a performance unit receives a dividend equivalent payment in an amount equal to
the cash dividend per share as applied to the number of units held by the
recipient.
During the three years ended December 31, 1993, 1992, and 1991, the
Company's total return for shareholders ranked 24th, 33rd, and 12th,
respectively, among the 50 largest energy utilities in the nation. This
performance resulted in Performance Unit Plan payouts to officers for 1993
which were 107 percent of target payouts. In 1993, officers also were granted
units under the Performance Unit Plan for the three-year performance period
ending December 31, 1995.
Benefits. The Retirement Plan provides a lifetime annuity to all vested
employees, based on their salary level and years of service. The Savings Fund
Plan provides an opportunity for all employees to supplement their retirement
income through employee and Company contributions. The 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 Committee of the Board
of Directors, believe that the Company'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 the Company's business environment.
Leslie L. Luttgens, Chairman
William F. Miller
John B. M. Place
Samuel T. Reeves
John C. Sawhill
13
<PAGE>
Comparison of Five-Year Cumulative Total Shareholder Return(1)
[This graph compares the Company's cumulative total return to shareholders
(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.]
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
Pacific Gas and Electric
Company (PG&E) $100 $135 $164 $228 $244 $273
Standard & Poor's 500
Stock Index (S&P) $100 $132 $128 $166 $179 $197
Dow Jones Utilities
Index (DJUI) $100 $136 $129 $149 $155 $170
</TABLE>
(1) Assumes $100 invested on December 30, 1988, in Pacific Gas and
Electric Company common stock, the Standard & Poor's 500 Stock Index, and
the Dow Jones Utilities Index, and assumes quarterly reinvestment of
dividends. The total shareholder returns shown are not necessarily
indicative of future returns.
14
<PAGE>
Summary Compensation Table
[This table summarizes the principal components of compensation of the Company's
five highest paid executive officers.]
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------- -----------------------------------------
Awards Payouts
(A) (B) (C) (D) (E) (F) (G) (H)
Securities
Other Annual Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Options/SARs Payouts Compensation
Position Year ($) ($)(1) ($)(2) (# of Shares) ($)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C>
Richard A. Clarke, 1993 $640,000 $143,070 $40,950 25,000 $370,488 $42,238
Chairman of the Board and 1992 640,000 303,000 43,678 25,000 652,000 42,561
Chief Executive Officer 1991 600,000 386,590 31,636 25,000 413,087 29,220
Stanley T. Skinner, 1993 $475,000 $ 88,760 $20,678 15,000 $203,768 $37,757
President and Chief 1992 475,000 188,100 31,822 15,000 358,600 42,108
Operating Officer 1991 425,000 222,870 16,023 15,000 262,703 20,020
Jerry R. McLeod, 1993 $310,000 $ 53,340 $20,612 10,000 $135,858 $15,399
Executive Vice President(5) 1992 310,000 112,800 88,309 10,000 217,377 14,541
1991 283,333 115,890 81,361 7,500 123,920 6,608
James D. Shiffer, 1993 $265,000 $ 53,340 $24,282 10,000 $135,858 $33,357
Executive Vice President 1992 265,000 112,800 22,895 10,000 217,377 30,088
1991 216,667 139,480 28,701 7,500 123,920 22,106
Gregory M. Rueger, 1993 $233,000 $149,100 $19,227 7,500 $111,146 $11,242
Senior Vice President and 1992 225,000 146,300 22,146 7,500 195,600 10,955
General Manager, 1991 211,667 101,160 10,426 7,500 123,920 9,575
Nuclear Power Generation
Business Unit
</TABLE>
(1) Represents payments received or deferred in 1994, 1993, and 1992
for achievement of corporate and organizational objectives in 1993, 1992,
and 1991, respectively, under the Performance Incentive Plan.
(2) Amounts reported consist of (i) officer benefit allowances, (ii)
payments of related taxes, and (iii) dividend equivalent payments on
performance units under the Performance Unit Plan.
(3) Represents payments received or deferred in 1994, 1993, and 1992
for achievement of corporate performance objectives for the period 1990
through 1993 under the Performance Unit Plan.
(4) Amounts reported for 1993 consist of:
(i) Company matching contributions to the Savings Fund Plan (Mr. Clarke
$10,613, Mr. Skinner $10,613, Mr. McLeod $10,613, Mr. Shiffer
$7,557, and Mr. Rueger $10,485);
(ii) Company-paid premiums on indemnity policies to secure the payment
of benefits under the Supplemental Executive Retirement Plan and
the Deferred Compensation Plan (Mr. Clarke $13,320, Mr. Skinner
$5,370, Mr. McLeod $1,400, Mr. Shiffer $1,050, and Mr. Rueger
$750);
(iii) payments received in lieu of vacation (Mr. Skinner $10,960 and Mr.
Shiffer $20,381);
(iv) amounts received or deferred under the Savings Fund Plan excess
benefit arrangement (Mr. Clarke $18,187, Mr. Skinner $10,762, Mr.
McLeod $3,337, and Mr. Shiffer $4,368); and
(v) that portion of interest accrued on deferred compensation account
balances in 1993 above 120% of the then applicable federal rate
(Mr. Clarke $118, Mr. Skinner $52, Mr. McLeod $49, Mr. Shiffer $1,
and Mr. Rueger $7).
(5) The Company has an agreement with Mr. McLeod which provides for separation
payments in the event that, following a change in the ownership of the
Company, he is terminated or constructively terminated. Under the terms of
the agreement, Mr. McLeod would receive a severance payment equal to the
sum of: (i) two times his current base salary and (ii) two times the
average of his final three annual Performance Incentive Plan awards.
Separation payments would not be payable in the event that termination was
for cause.
15
<PAGE>
Option/SAR Grants in 1993
[This table summarizes the distribution and the terms and conditions of stock
options granted to the five highest paid executive officers in the past year.]
<TABLE>
<CAPTION>
Grant
Individual Grants Date Value
- -------------------------------------------------------------------------------------------------------- -----------
(A) (B) (C) (D) (E) (F)
% of Total
Number of Securities Options/SARs Exercise or Grant Date
Underlying Options/SARs Granted to Base Price Expiration Present
Name Granted (#)(1) Employees in 1993 ($/Sh)(2) Date(3) Value($)(4)
<S> <C> <C> <C> <C> <C>
Richard A. Clarke 25,000 3.62% $33.125 01-05-2003 $280,750
Stanley T. Skinner 15,000 2.17% 33.125 01-05-2003 168,450
Jerry R. McLeod 10,000 1.45% 33.125 01-05-2003 112,300
James D. Shiffer 10,000 1.45% 33.125 01-05-2003 112,300
Gregory M. Rueger 7,500 1.09% 33.125 01-05-2003 84,225
</TABLE>
(1) All options granted to executive officers in 1993 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. The
options 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 common stock dividend as applied to the officer's
unexercised options. 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 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 the Company's common
stock on January 4, 1993, the date of grant.
(3) All options granted to executive officers in 1993 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 the Company.
(4) Estimated present values include dividend equivalents and are based
on the Black-Scholes Model, a mathematical formula used to value options
traded on stock exchanges. 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 1993
option grants shown in the table above: volatility of 13.33%, risk-free
rate of return of 6.04%, dividend yield of $1.88, and an exercise date five
years after the date of grant. The ultimate value of the options will
depend on the future market price of the Company's stock, which cannot be
forecast with reasonable accuracy. That value will depend on the future
success achieved by employees for the benefit of all shareholders.
Aggregated Option/SAR Exercises in 1993 and Year-End Option/SAR Values
[This table summarizes exercises of stock options and tandem stock appreciation
rights (granted in prior years) by the five highest paid executive officers in
the past year, as well as the number and value of all unexercised options held
by the named executive officers at the end of 1993.]
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
Number of Securities Value of Unexercised
Shares Acquired Underlying Unexercised In-the-Money
on Exercise Value Realized Options/SARs at Options/SARs at
Name (#)(1) ($)(2) End of 1993 (#) End of 1993 ($)(3)
(Exercisable/ (Exercisable/
Unexercisable) Unexercisable)
<S> <C> <C> <C> <C>
Richard A. Clarke 0 $ 0 48,201/73,332 $631,277/$387,063
Stanley T. Skinner 0 0 12,667/43,666 171,421/ 227,783
Jerry R. McLeod 7,333 88,877 0/26,666 0/ 124,158
James D. Shiffer 4,334 51,924 2,500/26,666 25,938/ 124,158
Gregory M. Rueger 0 0 7,167/21,666 94,024/ 111,658
</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.
(3) Based on a fair market value of $35.125, which was the closing price of
the Company's common stock on December 31, 1993.
16
<PAGE>
Long-Term Incentive Plan--Awards in 1993
[This table summarizes the long-term incentive awards made to the five highest
paid executive officers in the past year.]
<TABLE>
<CAPTION>
Estimated Future Payouts Under
Awards Non-Stock Price-Based Plans
------------------------------------------------ -------------------------------------------------
(A) (B) (C) (D) (E) (F)
Performance or
Other Period
Number of Shares, Until Maturation Threshold Target Maximum
Name Units, or Other Rights(1) or Payout ($ or #)(2) ($ or #)(2) ($ or#)(2)
<S> <C> <C> <C> <C> <C>
Richard A. Clarke 10,000 3 years 0 units 10,000 units 20,000 units
Stanley T. Skinner 5,500 3 years 0 units 5,500 units 11,000 units
Jerry R. McLeod 4,000 3 years 0 units 4,000 units 8,000 units
James D. Shiffer 4,000 3 years 0 units 4,000 units 8,000 units
Gregory M. Rueger 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 the Company'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 the Company'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 the
Company pays a cash dividend on common stock, the recipient of a
performance unit receives a dividend equivalent payment equal to the common
stock dividend as applied to the number of units held by the recipient.
(2) Payments are determined by multiplying the number of units earned in a
given year by the average market price of the Company's common stock for
the last 30-day calendar period of the year.
Retirement Benefits
The Company provides retirement benefits to the executive officers named in the
Summary Compensation Table on page 15. 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, 1993, the estimated annual retirement benefits for the five most
highly compensated executive officers, assuming credited service to age 65, are
as follows: Mr. Clarke, $480,783; Mr. Skinner, $381,566; Mr. McLeod, $177,030;
Mr. Shiffer, $249,647; and Mr. Rueger, $232,443. The amounts shown are single
life annuity benefits and would not be subject to any Social Security offsets.
17
<PAGE>
- --------------------------------------------------------------------------------
Other Information
Principal Shareholders
The only person or group known by the Company to be the beneficial owner of more
than 5 percent of any class of the Company's stock is shown below:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership(1) of Class
<S> <C> <C> <C>
Common Stock State Street Bank 49,079,307 11.43
and Trust Company(2)
225 Franklin Street
Boston, MA 02110
</TABLE>
(1) This information is based on beneficial ownership as of December 31, 1993.
(2) The information relating to the beneficial ownership of State Street Bank
and Trust Company is based on a Schedule 13G, dated February 10, 1994,
filed with the Securities and Exchange Commission. 44,970,065 shares are
held by the bank in its capacity as Trustee of the Company's 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 4,109,242 shares of the Company's common stock as trustee of various
collective investment funds and trusts. The bank has sole voting power with
respect to 3,369,280 of these shares, shared voting power with respect to
3,662 of these shares, sole investment power with respect to 4,100,073 of
these shares, and shared investment power with respect to 7,535 of these
shares.
18
<PAGE>
Proposals by Shareholders - 1995
Any proposal by a shareholder to be submitted for inclusion in proxy soliciting
material for the 1995 annual shareholders meeting must be received by the
Corporate Secretary of the Company after April 20, 1994, but no later than
November 3, 1994.
Annual Report
The Company's annual report for 1993, including financial statements, was mailed
to shareholders on or about March 3, 1994.
Method and Cost of Soliciting Proxies
The Company intends to solicit proxies principally by mail. Proxies also may be
solicited by personal contact, telephone, or other means by officers and other
employees of the Company. The Company has retained D. F. King & Co., Inc., to
assist in the solicitation of proxies at an estimated fee of $10,000 plus
reimbursement of reasonable expenses. In addition, banks, brokers, and other
fiduciaries and nominees will be reimbursed for the reasonable expenses of
forwarding proxy materials to beneficial owners of the Company's stock. The
entire cost of soliciting proxies will be paid by the Company.
Section 16(a) Compliance
In accordance with Section 16(a) of the Securities Exchange Act of 1934 and
Securities and Exchange Commission ("SEC") regulations, the Company's directors,
certain officers, and greater than 10 percent shareholders are required to file
reports of ownership and changes in ownership with the SEC and the New York
Stock Exchange and to furnish the Company 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, the Company believes that during
1993 all filing requirements applicable to its directors, officers, and 10
percent shareholders were satisfied.
Other Matters
Management does not know of any matter to be acted upon at the meeting other
than the matters above described. However, if any other matter should properly
come before the meeting, the proxyholders named in the enclosed proxy will vote
the shares for which they hold proxies in their discretion.
By Order of the Board of Directors,
Leslie H. Everett
Leslie H. Everett
Corporate Secretary
Please sign, date, and return your proxy as soon as possible.
19
<PAGE>
[LOGO OF PACIFIC GAS AND ELECTRIC COMPANY APPEARS HERE]
Printed with soybean ink on recycled/recyclable paper
<PAGE>
The undersigned hereby appoints Richard A. Clarke, Stanley T. Skinner, and
Leslie H. Everett, and 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 Pacific Gas and Electric Company, to be held at
1111 California Street, San Francisco, California on Wednesday, April 20,
1994, at 10:00 a.m., and at any adjournment 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 Pacific Gas and Electric Company.
PG&E
[_]
Please mark, sign, date, and return
this proxy promptly.
--------------------------- -------, 1994
--------------------------- -------, 1994
SHAREHOLDER'S SIGNATURE DATE
Shareholder's Proxy For Annual If you are signing for the shareholder,
Meeting, April 20, 1994 please sign the shareholder's name and
your name, and state the capacity in
which you act.
- --------------------------------------------------------------------------------
* Please detach here and return this proxy in the enclosed reply envelope.*
[LOGO OF PACIFIC GAS AND PACIFIC GAS AND ELECTRIC COMPANY
ELECTRIC COMPANY APPEARS HERE]
Annual Meeting to be held at
Masonic Auditorium
1111 California Street
San Francisco, CA 94108
April 20, 1994, at 10:00 a.m.
* Please use the attached ticket to attend the 1994 Annual Meeting. You also
may register at the meeting. *
- --------------------------------------------------------------------------------
PG&E 1994 Annual Meeting Ticket
For the Annual Shareholders Meeting at
--------------------------------
10:00 a.m., on April 20, 1994,
--------------------------------
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: Cameras, tape recorders, etc., will not be allowed in the auditorium
during the meeting, other than for Company purposes. A checkroom will be
provided. For your protection, all briefcases, purses, packages, etc., will
be subject to an 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 Board of Directors. Unless contrary
instructions are given below, the above designated proxies will vote the
shares for which they hold proxies in accordance with the recommendations of
the Board of Directors.
A. ELECTION OF DIRECTORS -- The Board of Directors recommends a vote FOR the
- -----------------------------------------------------------------------------
nominees named below.
---------------------
FOR all nominees listed below. (Except as indicated to the contrary
below) [_]
WITHHOLD AUTHORITY to vote for all nominees. [_]
Richard A. Clarke, Harry M. Conger, William S. Davila, Melvin B. Lane,
Leslie L. Luttgens, Richard B. Madden, George A. Maneatis, Mary S. Metz,
William F. Miller, John B. M. Place, Samuel T. Reeves, Carl E. Reichardt,
John C. Sawhill, Alan Seelenfreund, Stanley T. Skinner, Barry Lawson
Williams.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
B. The Board of Directors recommends a vote FOR the following:
- ---------------------------------------------------------------
The proposal to ratify the selection of Arthur Andersen & Co. as the
Company's independent public accountants.
FOR AGAINST ABSTAIN
[_] [_] [_]
C. The Board of Directors recommends a vote AGAINST the following:
- -------------------------------------------------------------------
Shareholder Proposal 1: Compensation of the Chief Executive Officer
FOR AGAINST ABSTAIN
[_] [_] [_]
Shareholder Proposal 2: Compensation of Officers
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
*Detach here and return the top section in the enclosed reply envelope.*
PG&E has reserved all available space at the Memorial Temple Garage at 1101
California Street (adjacent to the Masonic Auditorium) to provide
complimentary parking for our 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>
PG&E 1994 ANNUAL MEETING
SAVINGS FUND PLAN FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
VOTING INSTRUCTIONS TO THE TRUSTEE
[_]
PLEASE SIGN, DATE, AND RETURN THIS FORM.
(Mark your voting instructions on the
reverse side.)
---------------------------- -------, 1994
SIGNATURE DATE
- --------------------------------------------------------------------------------
* Please detach here and return the top section to the Trustee in the enclosed
-------
reply envelope. *
TO ALL MEMBERS OF THE SAVINGS FUND PLAN:
As a member, you are entitled to direct the Trustee how to vote the
shares of PG&E 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 the Company's annual meeting of
shareholders on April 20, 1994. You have one vote for each share of stock
credited to your account as of February 22, 1994. Enclosed is a 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
Board of Directors. Stock in your Plan account for which the Trustee has not
received a proxy will not be voted by the Trustee. Members who also own stock
outside the Plan will receive a separate proxy form for those shares. Those
proxies should be returned directly to the Company.
To ensure that your shares are represented at the meeting, it is
important that your voting instructions be received by the Trustee on or
before April 19, 1994.
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 22, 1994, at the annual meeting of shareholders of the
Company to be held on April 20, 1994, and at any adjournment thereof.
VOTING INSTRUCTIONS TO THE TRUSTEE -- 1994
A. ELECTION OF DIRECTORS -- The Board of Directors recommends a vote FOR the
- ----------------------------------------------------------------------------
nominees named below.
---------------------
FOR all nominees listed below. (Except as indicated to the contrary below)
[_]
WITHHOLD AUTHORITY to vote for all nominees. [_]
Richard A. Clarke, Harry M. Conger, William S. Davila, Melvin B. Lane,
Leslie L. Luttgens, Richard B. Madden, George A. Maneatis, Mary S. Metz,
William F. Miller, John B. M. Place, Samuel T. Reeves, Carl E. Reichardt,
John C. Sawhill, Alan Seelenfreund, Stanley T. Skinner, Barry Lawson
Williams.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
B. The Board of Directors recommends a vote FOR the following:
- --------------------------------------------------------------
The proposal to ratify the selection of Arthur Andersen & Co. as the
Company's independent public accountants.
FOR AGAINST ABSTAIN
[_] [_] [_]
C. The Board of Directors recommends a vote AGAINST the following:
- ------------------------------------------------------------------
Shareholder Proposal 1: Compensation of the Chief Executive Officer
FOR AGAINST ABSTAIN
[_] [_] [_]
Shareholder Proposal 2: Compensation of Officers
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
* Detach here and return the top section in the enclosed reply envelope. *
