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LOGO
ONE WORLD TRADE CENTER
121 SW SALMON STREET
PORTLAND, OREGON 97204
Dear Common Shareholder:
You are cordially invited to attend Portland General Corporation's Annual
Meeting of Shareholders. The meeting will be held:
Tuesday, May 7, 1996 - 1:30 p.m.
Portland General Electric Company
Western Region Center
14655 SW Old Scholls Ferry Road
Beaverton, Oregon 97007
Please refer to page 25 for a map and directions to the meeting.
The Notice of Annual Meeting of Shareholders and Proxy Statement for
Portland General Corporation follow. Even if you plan to attend the Annual
Meeting in person, it is extremely important that you return the enclosed Proxy
Card to ensure that your shares are voted at the meeting. Please MARK, DATE,
SIGN, AND RETURN your Proxy Card promptly in the enclosed postage-paid envelope.
The Directors, officers, and employees of Portland General Corporation look
forward to seeing you at the meeting.
Sincerely,
LOGO
Ken L. Harrison
Chairman of the Board,
Chief Executive Officer, and
President
<PAGE> 2
LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1996
To the Shareholders:
You are invited to be present, either in person or by proxy, at the Annual
Meeting of Shareholders of Portland General Corporation to be held on Tuesday,
May 7, 1996 at 1:30 p.m. to take action on:
1. Election of three Class I members of the Board of Directors to hold
office until the 1999 Annual Meeting or until their successors are
elected and qualified.
2. Ratification of the appointment of Arthur Andersen LLP as independent
public accountants for the year 1996.
3. A shareholder proposal concerning appointment of independent public
accountants.
4. A shareholder proposal concerning confidential voting.
5. A shareholder proposal concerning executive compensation upon change in
control.
6. Any other business as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record of Common Stock at the close of business on
March 19, 1996 will be entitled to notice of and to vote on these items at the
Annual Meeting. If you have shares registered in the name of a brokerage firm or
trustee and plan to attend the meeting, please obtain from the firm or trustee a
letter, account statement, or other evidence of your beneficial ownership of
those shares to facilitate your admittance to the meeting. The stock transfer
books will not be closed.
Shareholders planning to attend the meeting in person are requested to
arrive shortly after 1:00 p.m. This will permit registration and admittance in
ample time to begin the meeting promptly at 1:30 p.m.
Portland, Oregon
April 1, 1996
By Order of the Board of Directors
ALVIN ALEXANDERSON
Senior Vice President,
General Counsel, and Secretary
YOUR VOTE IS IMPORTANT
Your vote is important, regardless of the number of shares you own, and is
necessary to ensure a quorum for the meeting. Therefore, whether you expect to
attend the meeting in person or not, please mark, date, sign, and return your
Proxy Card promptly in the enclosed postage-paid envelope. This will also help
expedite the counting of votes. If you attend the meeting and prefer to vote in
person, you may revoke your proxy.
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PROXY STATEMENT
OF
PORTLAND GENERAL CORPORATION
(FIRST MAILED APRIL 1, 1996)
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Portland General Corporation ("Portland
General" or "Company"), an Oregon corporation, for use at the Annual Meeting of
Shareholders to be held Tuesday, May 7, 1996, and any adjournment thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
To ensure that your shares will be voted, please mark, sign, and return the
form of proxy enclosed with this Proxy Statement. Shareholders who execute
proxies may revoke them before they are voted by attending the meeting and
voting in person, by providing a written notice of revocation, or by returning a
duly executed proxy bearing a later date to the Company's Transfer Agent, First
Chicago Trust Company of New York, PO Box 8626, Edison, NJ 08818-9133. All valid
proxies received, unless revoked, will be voted at the meeting as directed by
the shareholder. If no direction is given, proxies received will be voted FOR
the Directors who are up for election, FOR the ratification of the appointment
of Arthur Andersen LLP as independent public accountants for the year 1996, and
AGAINST each of the Shareholder proposals.
Solicitation of proxies will be primarily by mail. Directors, officers, and
employees of Portland General or its subsidiaries, or of its Transfer Agent, may
also solicit proxies by telephone, by mail, and in person. In addition, Portland
General has engaged Beacon Hill Partners, Inc. at a cost of $4,500.00, plus
reasonable out-of-pocket expenses, to solicit proxies in the same manner. The
expenses of solicitation, including the cost of preparing and mailing this Proxy
Statement and enclosures, will be paid by Portland General. Solicitation costs
will include reimbursement to brokerage firms and others for their reasonable
expenses in forwarding material to beneficial owners of stock, in accordance
with the New York Stock Exchange schedule of charges.
A copy of Portland General's 1995 Annual Report accompanies this Notice and
Proxy Statement or was previously mailed under separate cover beginning on or
about April 1, 1996.
VOTING
Only holders of Common Stock of record at the close of business on March
19, 1996 will be entitled to notice of and to vote at the meeting, either in
person or by proxy. On that date, Portland General had 51,100,119 shares of
Common Stock issued and outstanding, including shares owned beneficially by
participants in the Dividend Reinvestment and Optional Cash Payment Plan, the
Employee Stock Purchase Plan, and the Retirement Savings Plan. Each share
outstanding is entitled to one vote.
A majority of the shares of Common Stock outstanding must be represented at
the meeting, in person or by proxy, to constitute a quorum for the transaction
of business. Under Oregon law a favorable vote by a plurality of shares of
Common Stock voting on the Directors is required to elect the Directors, and a
favorable vote by a majority of shares of Common Stock voting is required to
ratify the appointment of the independent public accountants and to approve each
of the shareholder proposals. Votes that are withheld will be excluded from the
vote and will have no effect on the election of Directors. Abstentions and
broker non-votes are counted in determining if a quorum exists, but are not
counted in determining the outcome of the vote for the ratification of the
appointment of independent auditors or the three shareholder proposals.
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NOTE TO PARTICIPANTS IN THE DIVIDEND REINVESTMENT AND
OPTIONAL CASH PAYMENT PLAN AND EMPLOYEE BENEFIT PLANS
The enclosed proxy includes power to vote the number of shares of Common
Stock registered in your name, according to the books of Portland General's
Transfer Agent, and the number of shares of Common Stock beneficially owned by
you in the Dividend Reinvestment and Optional Cash Payment Plan ("DRP"). In
addition, if you are a participant in the Retirement Savings Plan ("RSP") or the
Employee Stock Purchase Plan ("ESPP"), the proxy also serves as your voting
instructions to the Trustee and Plan Administrator of those plans to vote the
shares of Common Stock beneficially owned by you in those Plans.
Portland General will mail this Proxy Statement and a proxy to all persons
who, according to the books of Portland General's Transfer Agent and the books
of the Trustee and Plan Administrator of the RSP and ESPP, beneficially hold
shares of Common Stock in the DRP, RSP or ESPP.
ELECTION OF DIRECTORS
The three Class I Directors elected at this Annual Meeting will serve a
three-year term ending at the time of the Annual Meeting in 1999, or until their
successors are elected and qualified.
In the absence of contrary instruction, it is the intention of the persons
named in the proxy to vote such proxy FOR the persons listed, all of whom are
presently members of the Board of Directors. Should any nominee be unable to
serve, the persons named in the proxy will have discretionary authority to
nominate and vote for a suitable substitute or substitutes.
Except as specifically noted, each Director and nominee has been employed
for more than five years in the capacity indicated. No family relationships
exist among the Directors, nominees, or Portland General's officers.
NAME, AGE, PRINCIPAL OCCUPATION
AND OTHER DIRECTORSHIPS(1)
- --------------------------------------------------------------------------------
CLASS I
(NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS EXPIRING IN 1999)
RICHARD GEARY, age 61. Director since 1996
Mr. Geary is President, Kiewit Pacific Company, a highway and heavy
construction company located in Vancouver, Washington, a division of Peter
Kiewit Sons, Inc., Omaha, Nebraska. Mr. Geary also serves on the following
boards: Peter Kiewit Sons, Inc.; Standard Insurance; Portland Opera; Oregon
Health Sciences University Foundation; and Oregon Independent College
Foundation.
JERRY E. HUDSON, age 58. Director since 1984(2)
Dr. Hudson is President, Willamette University, Salem, Oregon.
BRUCE G. WILLISON, age 47. Director since 1989
Mr. Willison has served as Chairman, President, Chief Executive Officer and
a Director, First Interstate Bank of California, a subsidiary of First
Interstate Bancorp, Los Angeles, California, since January 1991. Mr.
Willison served as Chairman of the Board, Chief Executive Officer and a
Director, First Interstate Bank of Oregon, N.A., Portland, Oregon from July
1986 to January 1991.
CLASS II
(TERM EXPIRING IN 1997)
CAROLYN S. CHAMBERS, age 64. Director since 1993
Ms. Chambers is Chairwoman and Chief Executive Officer, Chambers
Communication Corporation, a television and broadcasting company located in
Eugene, Oregon. Ms. Chambers is also a Director of U.S. Bancorp; Chambers
Construction Company; Peacehealth; McKenzie River Motors; University of
Oregon Foundation; and C-Span.
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NAME, AGE, PRINCIPAL OCCUPATION
AND OTHER DIRECTORSHIPS(1)
- --------------------------------------------------------------------------------
KEN L. HARRISON, age 53. Director since 1987
Mr. Harrison is Chairman of the Board, Chief Executive Officer, and
President, Portland General and Portland General Electric Company.
WARREN E. McCAIN, age 70. Director since 1989
Mr. McCain has served since February 1991 as a Director and Chairman of the
Executive Committee of Albertson's, Inc., a retail food and drug chain
headquartered in Boise, Idaho and operating in 17 western and southern
states. He is a retired Chairman of the Board and Chief Executive Officer,
Albertson's, Inc. Mr. McCain is also a Director of West One Bancorp and
Pope and Talbot, Inc. (3)
JEROME J. MEYER, age 58. Director since 1993
Mr. Meyer is Chairman and Chief Executive Officer and a Director,
Tektronix, Inc., an electronics manufacturer located in Wilsonville,
Oregon. Prior to joining the electronics firm in November 1990, he served
as President of Honeywell, Inc.'s Industrial Group in Minneapolis,
Minnesota. Mr. Meyer is also a Director of Esterline Technologies and AMP,
Inc.
CLASS III
(TERM EXPIRING IN 1998)
GWYNETH GAMBLE BOOTH, age 59. Director since 1981(2)
Ms. Booth is a television producer/reporter, media consultant, and
community activist. She is a facilitator at the Dougy Center for grieving
children and Vice President of the Portland Art Museum. She is also a
member of the Board of Trustees of the Neighborhood Partnership Fund of
Oregon Community Foundation and the Dant Foundation of the Oregon Heart
Association. (4)
PETER J. BRIX, age 59. Director since 1983(2)
Mr. Brix is President, Hayden Investment Corporation, a marine
transportation and petroleum sales and investment company located in
Portland, Oregon. He was Chairman of the Board and Chief Executive Officer,
Brix Maritime Company until September 1993. Mr. Brix is also a Director of
Idaho Forest Industries; a Trustee of Willamette University; a Director of
Totem Resources Corporation; and a Director of Regents Assisted Living,
Inc.
JOHN W. CREIGHTON, age 63. Director since 1990
Mr. Creighton is President, Chief Executive Officer and a Director,
Weyerhaeuser Company, a forest products company located in Tacoma,
Washington. Mr. Creighton is also a Director of Washington Energy Company;
MIP Properties, Inc.; and Quality Food Centers, Inc.
RANDOLPH L. MILLER, age 48. Director since 1987
Mr. Miller is President, Milcor, Inc., dba The Moore Company, a wholesale
distributor of consumer electronics, computer and telecommunications
products, and appliances located in Portland, Oregon. Mr. Miller is also a
Director of the Automobile Association of America, Oregon and Vice Chairman
of the National Computing Technology Industry Association, Distributor
Section.
- ---------------
(1) All Directors of Portland General are also Directors of Portland General
Electric Company, a wholly owned subsidiary of Portland General.
(2) Includes time served on the Board of Portland General Electric Company prior
to the formation of Portland General in 1985.
(3) Mr. McCain will retire from the Board on the date of the Annual Meeting of
Shareholders.
(4) During 1995, Portland General and its subsidiaries retained the legal
services of Tonkon, Torp, Galen, Marmaduke & Booth. Ms. Booth's husband is a
partner in that firm. Portland General and its subsidiaries have retained
that firm for services to be rendered in 1996 and may retain the firm in the
future.
3
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BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors has established standing audit, compensation, and
nominating committees. The names of these committees, their current membership,
and a brief statement of their principal responsibilities are presented below.
MEETINGS OF THE BOARD OF PORTLAND GENERAL DURING 1995
During 1995, the Board of Directors of Portland General held six meetings.
All Directors attended 75 percent or more of the aggregate of the meetings of
the Board and the Committees on which they serve, except for Bruce Willison who
attended 69 percent of the meetings.
BOARD COMMITTEES
The members of the Audit Committee are Bruce G. Willison, Chair; John W.
Creighton; Jerome J. Meyer; and Randolph L. Miller. Functions of this Committee
are to ensure adequate, appropriate, and responsive auditing services; recommend
independent auditors; review financial statements; review the effectiveness of
existing systems of control; review reports issued by the Internal Audit
Department; review policies concerning business practices; and undertake other
responsibilities deemed appropriate by the Board of Directors. The Committee
held two meetings during 1995.
The members of the Human Resources Committee are Warren E. McCain, Chair;
Gwyneth Gamble Booth; John W. Creighton; Jerome J. Meyer; and Randolph L.
Miller. Functions of this Committee are to advise the Board of Directors on
executive and employee compensation and benefit plans, establish investment
policy for certain employee benefit trusts, and address other related matters.
The Committee held four meetings during 1995.
The members of the Board Nominating and Governance Committee are Jerry E.
Hudson, Chair; Peter J. Brix; Warren E. McCain; and Ken Harrison. Functions of
this Committee are to plan for, identify, evaluate, and recommend candidates for
vacancies on the Board of Directors. The Committee held one meeting during 1995.
Under the Bylaws, to nominate a Director at the Annual Meeting a
shareholder must give written notice of intent to make the nomination either by
personal delivery or by mail, to the Secretary, not later than 90 days prior to
the anniversary date of the immediately preceding Annual Meeting. Each notice
must include: (a) the name and address of the shareholder making the nomination
and the nominee; (b) a representation that the shareholder is a holder of record
of Common Stock and intends to appear in person or by proxy at the meeting to
make the nomination; (c) a description of all arrangements or understandings
between the shareholder and each nominee and any other persons (naming them)
pursuant to which the nomination is to be made; (d) such other information
regarding each nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission; and
(e) the consent of each nominee to serve as a Director if elected. Unless this
procedure has been followed, the presiding officer of the meeting may refuse to
acknowledge the nomination. There is no formal procedure if a shareholder merely
wants to submit a recommendation to the Company for consideration.
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SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The shares of Common Stock beneficially owned by each Director, the
executive officers named in the table on page 12, and all Directors and
executive officers of the Company as a group as of January 31, 1996 are given in
the following table. No Director or executive officer owns more than 1 percent
of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP
- ------------------------ -----------------
<S> <C>
Gwyneth Gamble Booth 8,914(1)(2)
Peter J. Brix 11,877(1)
Carolyn S. Chambers 2,537(1)
John W. Creighton 8,181(1)
Richard Geary 1,610(5)
Ken L. Harrison 41,806(3)(4)
Jerry E. Hudson 6,774(1)
Warren E. McCain 6,973(1)(6)
Jerome J. Meyer 2,537(1)
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP
- ------------------------ -----------------
<S> <C>
Randolph L. Miller 9,020(1)
Richard G. Reiten 4,859(3)(7)
Bruce G. Willison 7,029(1)
Alvin Alexanderson 13,738(3)(4)
Richard E. Dyer 16,813(3)(4)
Joseph M. Hirko 18,164(3)(4)
Leonard A. Girard 16,861(3)(4)(8)
All executive officers
and Directors as a group
(19 persons) 222,443(9)
=======
</TABLE>
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(1) Includes shares under the Outside Directors' Stock Compensation Plan.
(2) Does not include 500 shares of Common Stock held by spouse for which
beneficial interest is disclaimed.
(3) Includes shares held in the Retirement Savings Plan as of December 31, 1995.
(4) Includes shares held under the Performance Accelerated Restricted Stock
Program of the Long-Term Incentive Master Plan.
(5) Shares as of March 8, 1996. Mr. Geary was appointed to the Board of
Directors on February 16, 1996.
(6) Mr. McCain will retire from the Board on the date of the Annual Meeting of
Shareholders.
(7) Mr. Reiten retired December 31, 1995.
(8) Mr. Girard resigned as an executive officer on December 12, 1995.
(9) For executive officers not named above, shares reported include shares held
in the Retirement Savings Plan and under the Performance Accelerated
Restricted Stock Program of the Long-Term Incentive Master Plan as of
December 31, 1995.
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OUTSIDE DIRECTORS' COMPENSATION
In February 1996, the Board of Directors modified the compensation and
benefits for nonemployee Directors. As described more fully below, the annual
retainer has been replaced with per meeting fees, the amount of compensation in
the form of Common Stock has been increased, and the retirement plan has been
suspended with no further accrual of benefits.
In 1995, compensation for nonemployee Directors was an annual cash retainer
of $20,000 plus an additional $2,500 for serving as Chair of a standing Board
Committee. There were no additional per meeting fees.
Commencing April 1, 1996, the annual cash retainer has been eliminated. In
its place, nonemployee Directors will receive $1,600 per Board meeting attended
and $1,000 per Committee meeting attended. In addition, the Chair of a standing
Board Committee will receive an annual fee of $3,000. This fee will be paid at
year-end and will be prorated for any period during which the Director did not
serve as the Chair of a Committee.
Also during 1995, nonemployee Directors participated in the Outside
Directors' Stock Compensation Plan ("Stock Plan"). Prior to amendment as
discussed below, every five years each nonemployee Director was granted $50,000
of Common Stock, one-fifth of which vests each year over the succeeding
five-year period ("Five Year Grant"). Unvested shares under a Five Year Grant
are forfeited if the recipient ceases to be a nonemployee Director for any
reason except death, in which case the shares scheduled to vest on the next
anniversary date vest immediately.
Effective February 1996, the Stock Plan has been amended. Nonemployee
Directors who presently have unvested Stock under a Five Year Grant will receive
an additional grant of Common Stock worth $6,500 times the number of years
remaining before all of the Stock under their present Five Year Grant vests.
Each year that a portion of the Stock under the present Five Year Grant vests, a
one-year portion of the Stock under the additional grant also vests. There will
be no future Five Year Grants under the Stock Plan.
Nonemployee Directors first appointed or elected to the Board after January
1, 1996, and all other nonemployee Directors, once their present Five Year
Grants fully vest, will be granted Common Stock worth $16,500 per year, based on
the market value of the Stock on the date of purchase, times the number of years
remaining in the three-year term of the Class of Directors in which the Director
serves ("Three Year Grants"). Three Year Grants will be made upon election or
appointment of each nonemployee Director and thereafter on the date of the
Annual Meeting of Shareholders at which the Class in which the Director serves
is elected. Appointment for a partial year of more than six months will be
treated as a full year unless the Director is appointed to fill a vacancy in a
class that will be elected at the next Annual Meeting of Shareholders. In that
case, if appointment is six months or more before the next Annual Meeting, the
Director will be granted $16,500 worth of Common Stock which will vest at the
date of the next Annual Meeting. Thereafter, Common Stock will be granted in
three-year amounts coinciding with the three-year term of the Class in which the
Director serves. If the appointment is less than six months before the next
Annual Meeting, the Director will be granted three years' worth of Common Stock,
none of which will vest until three years later on the date of the Annual
Meeting at which the Class in which the Director serves is again elected. If a
Director ceases to be a Director for any reason, except death, before the Common
Stock vests, all of it is forfeited. In the event of death, all of the Common
Stock will immediately vest. Dividends paid on unvested shares under both Five
Year Grants and Three Year Grants are reinvested under the Portland General
Dividend Reinvestment and Optional Cash Payment Plan and are fully vested upon
payment. Upon the removal of a nonemployee Director from the Board of Portland
General during a current term of office and within three (3) years following a
Change in Control (as defined in the Stock Plan), shares will vest up to the
number that would have vested had the Director completed the current term of
office. A Change in Control
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occurs when any person or group becomes the beneficial owner of more than 30
percent of the outstanding voting stock of Portland General without the approval
of the Board of Directors, or when, during any period of two consecutive years,
individuals who were Directors at the beginning of the period (and Directors
whose election to the Board was approved by at least two-thirds of the such
Directors or Directors who were so approved) cease to constitute a majority of
the Board.
Nonemployee Directors may elect to defer up to 100 percent of their cash
fees paid during the year. Interest is credited at a rate equal to a three
calendar month average of Moody's Average Corporate Bond Yield Index plus 3
percent. Deferred amounts may be withdrawn before a Director ceases to be a
member of the Board for limited cases of hardship, or upon written request,
amounts may be withdrawn with a 10 percent forfeiture of the amount paid to the
participant. Payments will be made in a lump sum, or in a series of monthly
payments over a period of up to 15 years, in the event of death or termination.
Upon written request, amounts may be withdrawn with a 6 percent forfeiture of
the amount paid to the participant in the event of a Change in Control (as
defined in the above discussion of the Stock Plan). During 1995, the amount of
interest credited under the Plan was $31,733 for Mr. Brix, $5,718 for Mr.
Creighton, $32,651 for Mr. Hudson, $18,787 for Mr. McCain, $3,135 for Mr. Meyer,
and $2,219 for Mr. Willison.
The split-dollar life insurance arrangement has been eliminated for
nonemployee Directors first appointed or elected to the Board after January 1,
1996. Present participants are provided life insurance benefits of $200,000.
Portland General and the participant share the cost of the premium. However,
Portland General advances to the participant his/her share of the premium and
treats it as compensation. Upon surrender or cancellation of the policy, the
participant is entitled to the balance of the cash value of the policy after
Portland General has recovered its share of the premiums paid. In the event of a
Change in Control (as defined in the above section of the Stock Plan), Portland
General will release its collateral interest in the policies and pay each
participant the amount required to maintain the level of death benefit provided
under the policies. The amounts paid by Portland General for the Directors'
share of the premiums in 1995 were $432 for Mr. Brix and Ms. Booth; $584 for Ms.
Chambers; $558 for Mr. Creighton; $424 for Mr. Hudson; $1,018 for Mr. McCain;
$424 for Mr. Meyer; $228 for Mr. Miller; and $202 for Mr. Willison. No Director
first appointed or elected after January 1, 1996 will participate in this
program.
Effective January 1, 1996, the retirement plan for nonemployee Directors
has been suspended. All accruals ceased and all accrued benefits were fully
vested to each nonemployee Director in office on that date. Benefit payout will
not begin until a Director ceases to be a member of the Board. Interest will not
accrue on the benefit amount. There will not be a retirement plan for
nonemployee Directors first appointed or elected to the Board after January 1,
1996.
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<PAGE> 10
HUMAN RESOURCES COMMITTEE
AND
COMMITTEE UNDER THE LONG-TERM INCENTIVE PLAN
REPORT ON EXECUTIVE COMPENSATION
The objective of the Company's executive compensation program is to provide
competitive compensation which will attract, retain, and reward executives who
are capable of helping Portland General and Portland General Electric Company
("PGE") achieve their business objectives. Compensation is both market based and
performance driven. Total direct executive compensation consists of three
components: base pay, annual incentives and long-term incentives. These
executive pay programs are strongly linked to Company performance.
BASE PAY
Annually, the Human Resources Committee ("Committee") reviews and
recommends to the Board of Directors executive base pay for the Chairman, Senior
Vice Presidents, and anyone more highly paid than these individuals. Current
market compensation for similar positions, Company performance and individual
performance are reviewed by the Committee before setting executive compensation.
The Committee uses market data from two different sources to assure that the
compensation decisions for the named executive officers are competitive and
fair. For the Chief Executive Officer ("CEO"), the PGE President, the Senior
Vice President, Power Supply, and the Chief Financial Officer, a
Committee-selected group of 14 national electric utilities and utility holding
companies is used as the market for making compensation decisions. These
utilities, whose selection is annually affirmed by the Committee, are a subset
of the Edison Electric Institute 100 Index of utilities utilized in the
performance graph on page 15. These utilities were chosen based on their
comparability, including historical performance records, to Portland General and
its principal electric utility subsidiary, PGE. Compensation for the General
Counsel is determined by reviewing the comparator group of 14 utilities and
general industry data for the position. Actual base compensation varies above or
below middle-of-the-market compensation depending upon corporate performance and
the individual executive's long-term contributions to the Company's business.
The CEO sets the compensation for any other officers. In making the compensation
decision, factors of market data for each position, executive responsibilities,
individual performance, and internal comparability are reviewed by the CEO.
As a result of the Committee's review of the Company's 1994 earnings
performance and the market compensation for a CEO of a utility of comparable
size to the Company, the Committee adjusted the CEO's base pay upward to
slightly above the 50th percentile effective January 1, 1995. For 1995,
compensation for officers other than the CEO was also influenced by the expected
strategic impact of the position in the coming year, 1994 performance and
internal equity. Further adjustments were made in the latter half of the year to
the salary levels of four vice presidents who were elevated to senior vice
presidents due to a senior management reorganization designed to help the
Company compete successfully in today's regulated environment while preparing
for tomorrow's competitive marketplace.
ANNUAL INCENTIVE COMPENSATION
Annual incentive compensation is totally dependent upon performance under
the Company's Annual Incentive Master Plan. The objectives of the plan are to
provide competitive management compensation and stimulate and reinforce
outstanding performance by participants to contribute substantially to the
achievement of annual financial and strategic objectives of the Company.
Superior performance is encouraged by setting the annual incentive pay
opportunity at approximately the 75th percentile of compensation of the Edison
Electric Institute's survey of over 100 utilities. In general, an award of
annual incentive compensation is based on achieving a corporate financial goal
and key corporate, strategic and individual goals. Any annual incentive
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<PAGE> 11
compensation awards made are based on individual participant and Company
achievement as measured against the established targets. The award is paid in
cash.
The 1995 annual incentive compensation program was designed to pay for good
earnings performance. The 1995 award target range for the earnings goal was from
one-half of the annual incentive pay opportunity when earnings per share are 90
percent of targeted earnings per share and up to two times the annual incentive
pay opportunity for earnings per share at 120 percent of the targeted earnings
per share. Both the Annual Incentive Program and the Company's broad-based
employee incentive program incorporate a provision whereby no performance awards
will be paid through these programs, regardless of individual goal achievement,
unless the Company's earnings per share are at least equal to its common stock
dividend. The Board has the discretion to modify performance objectives during
the course of the year if it determines they are no longer suitable due to a
change in the Company's business operations, corporate structure, capital
structure, extraordinary financial events, or other material conditions.
Accordingly, the Board of Directors revised the 1995 Annual Cash Incentive
target range to exclude regulatory disallowances related to Trojan and deferred
power costs.
In 1995, awards for the CEO and PGE President were entirely dependent upon
achieving targeted earnings per share. For the other named executives listed on
page 12, 70 percent of annual incentive compensation was based on achieving the
earnings per share goal and 30 percent was based on individual achievement of
strategic goals. The strategic goals were: Senior Vice President and Chief
Financial Officer -- organization efficiency, flexibility and customer service
strategies; competitive, strategically aligned finance and accounting services;
personal effectiveness and leadership skills; Senior Vice President, Power
Supply -- commercial operation of Coyote Springs; implementation of Trading
Floor and Tule Hub operations; achievement of targets for generating plant
performance; asset utilization; Leadership for Excellence Program; personal
health and fitness program; Senior Vice President, General Counsel &
Secretary -- integrated wholesale and retail marketing strategy; superior new
product development and commercialization capability; Trojan regulatory
transition; alternative economic regulation strategy; revision of focus of
regulatory and marketing activities; least cost plan; succession planning;
Company asset utilization; personal improvement plan; personal health and
fitness; Special Counsel to the CEO - legal department effectiveness and cost
management; rates and regulatory affairs strategies; legal support for customer
growth and market penetration strategies; competitive culture initiatives; legal
support for Trojan decommissioning and legal challenges. Goals were not
weighted. Incentive compensation awards for achieving strategic goals for all
other executive officers ranged from zero to one and one-half times the target
strategic incentive compensation award.
Earnings-per-share performance in 1995 exceeded 120 percent of the targeted
earnings per share, resulting in the CEO receiving an award at two times the
target award. Good hydro conditions, a competitive wholesale market, and
improved Company operating efficiencies made positive contributions to 1995
earnings.
LONG-TERM INCENTIVE COMPENSATION
The Company's 1990 Long-Term Incentive Master Plan ("LTIP") is designed to
ensure executive focus on long-term shareholder value and Common Stock
performance. The objective of the LTIP is to motivate executives to make
decisions that will enhance the long-term financial performance of the business,
thereby positively affecting the long-term total return to shareholders. The
LTIP, approved by shareholders in 1991, permits the granting by the Committee
under the LTIP ("LTIP Committee") of several different types of stock-based
awards. Although the LTIP Committee is a separate committee from the Human
Resources Committee, members are presently the same as the Human Resources
Committee. To date, two types of awards -- Nonqualified Stock Options ("NQSO")
and Performance Accelerated Restricted Stock -- have been granted to executive
officers.
9
<PAGE> 12
The NQSO program will provide rewards to the executives only when the price
of the Company's Common Stock increases above the price at which the executive
has an option to buy the stock. The option price was set at fair market value at
the date of the grant. NQSO grants may be exercised five years after the grant
date. None of the named executive officers listed on page 12 have received NQSO
grants since 1991.
In 1993, the LTIP Committee retained an independent executive compensation
consultant to explore and recommend a long-term incentive program for
executives. Upon the recommendation of the consultant, the LTIP Committee
approved a Performance Accelerated Restricted Stock program for executive
officers. The objectives of the Performance Accelerated Restricted Stock program
are to focus management attention on building long-term shareholder and customer
value by tying accelerated vesting to achievement of goals that are in the
interests of those constituents and by increasing executive ownership of Common
Stock. The risk of forfeiture inherent in the Performance Accelerated Restricted
Stock program will also assist in retaining the management team. The stock
granted under the Performance Accelerated Restricted Stock program vests seven
years from the date of the grant, subject to certain forfeiture restrictions.
Recipients of a Performance Accelerated Restricted Stock grant receive dividends
on the stock starting with the first regular dividend after the grant date.
Officers have received three grants under the program. To encourage executive
focus on shareholder value, accelerated vesting will occur at the end of each of
years three, four, and five for 1993 and 1994 awards if the goals listed below
are met. For 1995 awards, vesting will occur at the end of year five if the
goals listed below are met in years three, four, or five.
(1) Accelerated vesting of 75 percent of the stock will occur if the
Company's cumulative three-year total shareholder return is in the top
30 percent of approximately 90 national electric utilities. Nearly all
of these 90 utilities are included in the Edison Electric Utilities 100
Index performance graph on page 15. Total shareholder return encompasses
both stock price appreciation and reinvested dividends.
(2) An additional 25 percent of the stock will vest if the cumulative
three-year total shareholder return is met and, at the end of the second
year of the cumulative three-year cycle, PGE's cost per kilowatt-hour is
in the top 30 percent of lowest costs of approximately 33 Western
regional investor-owned and public utility districts.
In 1993, the CEO received a Performance Accelerated Restricted Stock award
at the median of the Edison Electric Institute's trend line for the comparator
group. Awards for the other named executive officers listed on page 12 were set
as a percentage of the CEO's target. In 1994, the CEO's Performance Accelerated
Restricted Stock award was increased to the 58th percentile to increase the
CEO's ownership in the Company. Other officers received a reduced number of
shares compared to the previous year, at the discretion of the LTIP Committee.
In 1995, the CEO's Performance Accelerated Restricted Stock award was set at the
75th percentile, at the discretion of the Committee. Three vice presidents who
were promoted to senior vice presidents in September of 1995 received awards
above the 75th percentile in recognition of their added responsibilities. Other
officers received awards at the same or lower levels than the previous year, at
the discretion of the LTIP Committee.
To strengthen the focus on shareholder value, the LTIP Committee has
adopted a policy whereby no Performance Accelerated Restricted Stock grants will
be awarded in the event that the Annual Incentive Program's earnings per share
goal is not achieved at the threshold level or greater for the previous year.
SUMMARY
The goal of the Company's executive compensation program is to strengthen
management focus on creating shareholder value by targeting base pay at the
middle of the market and targeting annual and long-term compensation incentives
above the middle of the market. Annual incentive targets for the CEO and the
10
<PAGE> 13
other executive officers are set at the 75th percentile of compensation of the
Edison Electric Institute's survey of over 100 utilities. Long-term incentives
are targeted between the median and 75th percentile of the comparator group for
the CEO. The target for the other executive officers is set at the discretion of
the Committee. Goals for incentive plans are established annually and are not
tied to the one-year total shareholder graph shown on page 15. Base pay, annual
incentives and long-term incentives all fluctuate depending upon Company
performance. The CEO's annual incentive compensation and long-term incentive
compensation represented 80 percent and 66 percent, respectively, of the CEO's
base compensation in 1995.
PHILOSOPHY ON QUALIFYING COMPENSATION FOR DEDUCTIBILITY UNDER IRC SECTION 162(M)
Qualifying compensation for deductibility under IRC Section 162(m) is one
of many factors the Committee considers in determining executive compensation
arrangements. Deductibility will be maintained when it does not conflict with
overall compensation objectives. Present arrangements include the ability for
executives to defer base salary and bonuses and the incorporation of a provision
in the Performance Accelerated Restricted Stock agreement to ensure the
corporate tax deductibility of the Performance Accelerated Restricted Stock
awards.
EMPLOYMENT AGREEMENTS
Employment Agreements were approved by the Human Resources Committee and by
the Board of Directors in February 1996. The Agreements replace previous Change
in Control Severance Agreements with certain officers. The Committee decided to
replace previous Change in Control Severance Agreements in order to provide all
Officers with broader agreements which incorporate noncompete and
confidentiality clauses -- necessary elements for an evolving, competitive
marketplace.
It is the Committee's belief that, upon a termination of employment, a
minimum amount of disruption takes place when the terms and conditions of
payments and benefits upon termination have been incorporated into an agreement.
In addition, agreements also serve to enhance continuity of management in the
event of Change in Control. This Proxy Statement contains a description of the
terms and conditions of the Employment Agreements, including the Class of
employees eligible for these Agreements on page 17.
HUMAN RESOURCES COMMITTEE AND LONG-TERM INCENTIVE PLAN COMMITTEE:
<TABLE>
<S> <C>
Warren E. McCain, Chairman Jerome J. Meyer
Gwyneth Gamble Booth Randolph L. Miller
John W. Creighton
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Human Resources Committee are: Warren E. McCain, Gwyneth
Gamble Booth, John W. Creighton, Jerome J. Meyer, and Randolph L. Miller.
11
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation earned for each year
ended December 31, 1995, 1994, and 1993 by the Chief Executive Officer and the
four most highly compensated executive officers of the Company and PGE.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ ---------------- ALL OTHER
SALARY ($) BONUS ($) RESTRICTED STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR (1) (1) AWARDS ($)(2) ($)(3)
--------------------------- ---- ---------- --------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Ken L. Harrison 1995 $491,664 $371,167 $305,250 $69,507
Chairman of the Board and 1994 465,228 198,096 202,500 57,500
Chief Executive Officer 1993 438,719 178,472 200,000 56,010
Richard G. Reiten (4) 1995 347,747 229,250 0 30,578
President, PGE 1994 311,340 118,050 118,125 23,152
1993 280,357 103,740 160,000 25,357
Joseph M. Hirko 1995 215,963 114,389 138,750 22,626
Senior Vice President, 1994 183,027 63,363 67,500 20,063
Chief Financial Officer, 1993 174,447 58,029 120,000 16,800
Chief Accounting Officer,
and Treasurer
Richard E. Dyer 1995 198,297 104,655 111,000 11,979
Senior Vice President, 1994 180,833 52,061 50,625 12,386
Power Supply, PGE 1993 158,549 43,203 120,000 19,362
Alvin Alexanderson 1995 179,732 77,779 83,250 32,224
Senior Vice President, 1994 169,180 48,266 50,625 27,789
General Counsel, and 1993 158,585 43,945 80,000 26,370
Secretary
Leonard A. Girard (4) 1995 210,000 106,994 83,250 25,092
Special Counsel to CEO 1994 205,000 68,889 50,625 35,641
1993 200,000 70,386 120,000 28,273
</TABLE>
- ---------------
(1) Amounts shown include cash compensation earned and received by the executive
officer, as well as amounts earned but deferred at the election of the
officer. Year 1993 was adjusted to include amounts in lieu of unused
vacation not previously reported.
(2) Restricted stock awards are valued at the closing price of $27.75 per share
for the November 6, 1995 grant; $16.875 per share for the October 4, 1994
grant and at $20.00 per share for the December 6, 1993 grant. The number and
value of the aggregate restricted stock holdings for the officers listed in
the Summary Compensation Table are outlined in the table on the following
page. Dividends on the restricted stock are paid to the officer as declared.
The seven-year vesting period can be accelerated by the achievement of
performance goals, as discussed in the Report on Executive Compensation on
page 8. In the event of a change in control, all nonvested shares
immediately vest. Aggregate restricted stock holdings are valued at $29.125
per share, the closing price of the Common Stock on December 29, 1995.
(Continued)
12
<PAGE> 15
AGGREGATE RESTRICTED STOCK HOLDINGS
<TABLE>
<CAPTION>
AGGREGATE SHARES (#) VALUE ($)
-------------------- ---------
<S> <C> <C>
Ken L. Harrison.......................... 33,000 $961,125
Richard G. Reiten........................ 0 0
Joseph M. Hirko.......................... 15,000 436,875
Richard E. Dyer.......................... 13,000 378,625
Alvin Alexanderson....................... 10,000 291,250
Leonard A. Girard........................ 12,000 349,500
</TABLE>
(3) The table below includes 1995 amounts: (i) Company-paid split dollar
insurance premiums; (ii) the dollar value of life insurance benefits as
determined under the SEC methodology for valuing such benefits; (iii)
Company contributions to the Retirement Savings Plan and Management Deferred
Compensation Plan ("MDCP"); and (iv) earnings on amounts in the MDCP which
are greater than 120 percent of the federal long-term rate which was in
effect at the time the rate was set.
<TABLE>
<CAPTION>
SPLIT DOLLAR DOLLAR VALUE CONTRIBUTIONS ABOVE MARKET
INSURANCE OF LIFE TO 401(K) AND INTEREST ON
PREMIUM INSURANCE MDCP MDCP TOTAL
------------ ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Ken L. Harrison....... $1,460 $7,650 $18,186.49 $42,211 $69,507
Richard G. Reiten..... 1,388 0 13,715.74 15,474 30,578
Joseph M. Hirko....... 378 4,871 12,215.27 5,162 22,626
Richard E. Dyer....... 865 0 9,339.52 1,774 11,979
Alvin Alexanderson.... 570 0 10,090.28 21,564 32,224
Leonard A. Girard..... 1,095 2,374 12,587.52 9,035 25,092
</TABLE>
(4) Richard G. Reiten retired on December 31, 1995, and all Restricted Stock was
forfeited. Leonard A. Girard resigned from his duties of Senior Vice
President, General Counsel & Secretary on December 12, 1995.
13
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END (FY) OPTION VALUES
The table below displays the number and value of options for the named
executive officers.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF IN-THE-MONEY
SHARES OPTIONS (1) OPTIONS (2)
ACQUIRED --------------------------- ---------------------------
ON VALUE NOT NOT
NAME EXERCISE REALIZED EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
---- -------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ken L. Harrison......... 0 0 120,000 0 $1,605,000 0
Richard G. Reiten....... 30,000 $355,551 30,000 0 $ 401,250 0
Joseph M. Hirko......... 0 0 20,000 10,000 $ 267,500 $143,750
Richard E. Dyer......... 0 0 25,000 7,500 $ 334,375 $107,812
Alvin Alexanderson...... 0 0 0 32,500 0 $401,562
Leonard A. Girard....... 0 0 50,000 0 $ 668,750 0
</TABLE>
- ---------------
(1) Options were granted under Portland General's LTIP. No options have been
granted to the named executive officers since 1991. Options granted in
previous years were granted at fair market value. These options vest five
years after the grant date and are exercisable for five years subsequent to
vesting. In the event of a Change in Control, all remaining nonvested
options will immediately vest.
(2) Value of unexercised in-the-money options is based on the difference between
the Common Stock price of $29.125 on December 29, 1995 and the exercise
option price.
14
<PAGE> 17
FIVE-YEAR SHAREHOLDER RETURN
The following graphs compare the cumulative five-year and the one-year
total shareholder return of the Company on an indexed basis with the S&P 500
Stock Index and the EEI 100 Index of Investor-Owned Electrics, an index of 100
electric utilities prepared by Edison Electric Institute ("EEI"). The five-year
line graph assumes an investment of $100 was made at the close of business on
December 31, 1990 in the Company's Common Stock and in each index. Total return
assumes reinvestment of dividends and is determined as of December 31 of each
year.
[GRAPH]
CUMULATIVE TOTAL SHAREHOLDER RETURN
1990 TO 1995
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Portland General...... $100 $ 94 $118 $139 $140 $221
S&P 500............... 100 130 140 155 157 216
EEI 100 Electric...... 100 129 139 154 136 179
- --------------------------------------------------------------------------
</TABLE>
A list of the electric utilities included in the EEI Index will be provided upon
request to the Shareholder Services Department, 121 SW Salmon Street, Portland,
Oregon 97204.
15
<PAGE> 18
EXECUTIVE ANNUAL RETIREMENT BENEFIT
Estimated annual retirement benefits payable upon normal retirement at age
65 for the executive officers named in the table on page 12 are shown in the
table below. Amounts in the table reflect payments from the Portland General
Pension Plan and Supplemental Executive Retirement Plan ("SERP") combined.
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFIT
STRAIGHT-LIFE ANNUITY, AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ------------------------------------------
EARNINGS OF: 15 20 25+
- ------------- -------- -------- --------
<S> <C> <C> <C>
$ 150,000 67,500 78,750 90,000
175,000 78,750 91,875 105,000
200,000 90,000 105,000 120,000
225,000 101,250 118,125 135,000
250,000 112,500 131,250 150,000
300,000 135,000 157,500 180,000
400,000 180,000 210,000 240,000
450,000 202,500 236,250 270,000
500,000 225,000 262,500 300,000
600,000 270,000 315,000 360,000
700,000 315,000 367,500 420,000
</TABLE>
Compensation used to calculate benefits under the combined Pension Plan and
SERP is based on a three-year average of base salary and bonus amounts earned
(the highest 36 consecutive months within the last 10 years), as reported in the
Summary Compensation Table on page 12. SERP participants may retire without
age-based reductions in benefits when their age plus years of service equals 85.
Surviving spouses receive one half the participant's retirement benefit from the
SERP plus the joint and survivor benefit, if any, from the Pension Plan. In
addition to the aforementioned annual retirement benefit, an additional
temporary Social Security Supplement is paid until the participant is eligible
for Social Security retirement benefits. Retirement benefits are not subject to
any deduction for Social Security.
The executive officers named in the table on page 12 have had the following
number of service years with the Company: Ken L. Harrison, 21; Richard G.
Reiten, 10; Richard E. Dyer, 29; Joseph M. Hirko, 16; Alvin Alexanderson, 17;
and Leonard A. Girard, 8. Under the Company's SERP, the named executives are
eligible to retire without a reduction in benefits upon attainment of the
following ages: Ken L. Harrison, 59; Richard E. Dyer, 55; Joseph M. Hirko, 55;
Alvin Alexanderson, 57; and Leonard A. Girard, 62. Richard G. Reiten retired on
December 31, 1995.
16
<PAGE> 19
EMPLOYMENT AGREEMENTS
Each of the executive officers named in the table on page 12, with the
exception of Mr. Reiten who has retired and Mr. Girard who has ceased to be an
executive officer, has entered into an employment agreement which contains
certain noncompete and confidentiality provisions. Absent a Change in Control,
as defined below, the agreements are perpetual, but generally may be terminated
with 12 months' notice. The agreements provide for liquidated damages equal to
24 months' base salary in the event that the executive is terminated for a
nonallowable reason during the term of the agreement. Unless the Company decides
otherwise, the damages are payable at the same time and in the same manner as if
the executive officer had remained employed.
In the event of a Change in Control, as defined below, the term of the
agreements is extended to the date three years following the Change in Control.
An executive officer who is terminated or whose duties are reduced without
cause, as defined in the agreements, within three years after a Change in
Control is entitled to a payment equal to the sum of three times annual base
salary and target bonus for the year in which employment terminated, an amount
equivalent to the actuarial value of adding three additional years of service
and three additional years of age to the SERP, and $30,000. The executive
officer may, in lieu of any further benefits under the SERP, elect to receive a
single sum actuarial equivalent to the executive's vested accrued benefits
reduced by 6 percent. An executive officer covered under the Company's medical
and dental plans will be provided the equivalent coverage for up to 36 months,
provided that the executive officer must make contributions equal to those
required from time to time by employees for equivalent coverages. Payments to
the executive officer will be in a cash lump sum within 10 days following
termination of employment.
As defined in the agreements, a Change in Control occurs upon any person or
group becoming the beneficial owner of more than 30 percent of the combined
voting power of the then outstanding voting stock of Portland General; upon,
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors (and any new Director whose
election by the Board or whose nomination for election by the Shareholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were Directors at the beginning of such period or whose election or
nomination for election was previously so approved) ceasing for any reason to
constitute a majority thereof; upon the occurrence of certain mergers or
consolidations; or upon the sale of substantial assets.
The Change in Control Severance Agreements previously entered into with the
named executive officers have been terminated.
17
<PAGE> 20
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16 of the Securities Exchange Act of 1934 requires Portland
General's Directors and executive officers and persons who own more than 10
percent of a registered class of Portland General's equity securities to file
various reports with the Securities and Exchange Commission ("SEC") and the New
York Stock Exchange concerning their holdings of, and transactions in,
securities of Portland General. Copies of those filings must be furnished to the
Company.
Portland General offers assistance to its Directors and executive officers
in meeting their obligations under Section 16 with regard to information
concerning the applicable law and the completion and filing of the required
reports.
Based on a review of the copies of the reports received by Portland General
and written representations from certain reporting persons that they have
complied with the relevant filing requirements, Portland General believes that
all filing requirements applicable to its Directors and executive officers were
complied with as of December 31, 1995.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has served in the capacity of independent
public accountants for Portland General and its subsidiaries for many years.
Services rendered during 1995 in connection with their audit function included
the examination of annual financial statements, review of unaudited quarterly
financial information, and consultation in connection with filing certain
reports with the Securities and Exchange Commission and other governmental and
regulatory agencies.
RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Arthur Andersen LLP as independent public accountants for
the year 1996. Such appointment is proposed for ratification by the
shareholders. In the absence of contrary instructions, it is the intention of
the persons named in the proxy to vote such proxy FOR ratification. If the
reappointment is not ratified, the Audit Committee and the Board of Directors
will consider such vote in subsequent appointments.
A representative of Arthur Andersen LLP plans to attend the Annual Meeting
of Shareholders. The representative will have an opportunity to make a statement
if so desired and will be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of the
appointment.
18
<PAGE> 21
SHAREHOLDER PROPOSALS
PROPOSAL 1
Mr. Emil Rossi, PO Box 249, Boonville, California 95415, holder of 1,933
shares of Common Stock, has given notice that he will present the following
proposal for action at the Annual Meeting. The proposal and supporting
statement, for which the Board of Directors and the Company accept no
responsibility, is as follows:
"The shareholders of Portland General request the Board of Directors
take the necessary steps to amend the Company's governing instruments to
adopt the following: Beginning on the 1997 Portland General fiscal year,
the present auditing firm, Arthur Anderson, will be changed, and every four
(4) years a new auditing firm will be hired."
STATEMENT OF SHAREHOLDER IN SUPPORT OF PROPOSAL
"I know of no other subject more important to share holders than to
know that the figures on various reports from your Company are truthful,
accurate, and honest. Any one who says auditors are always correct are
living in a dream world. All one has to do is look at the recent savings
and loan scandal.
"The reason we put term limits and have elections between two or more
candidates is to keep them from getting entrenched. It is just natural when
we are immune to go astray and do any bidding of management. Our
forefathers who wrote the constitution knew this and incorporated checks
and balances thru out our government. It is way past the time to put this
check into our corporations. This proposal will do that."
STATEMENT OF BOARD OF DIRECTORS AGAINST PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
This proposal was rejected by the Company's Shareholders at last year's
annual meeting. In submitting the proposal again this year, the proponent is
seeking to require Portland General to replace its independent public accounting
firm every four years. Your Company believes that there is nothing to be gained
by this proposal.
- - Auditors, including Arthur Andersen LLP, rotate personnel regularly and, in
accordance with rules of the Securities and Exchange Commission, rotate the
engagement partner at least every seven years. This reduces the likelihood of
too close a relationship between the auditor and management and provides for
a "fresh look" by new personnel, while retaining the accounting firm's
institutional knowledge and experience with the Company.
- - Every three years public accounting firms, including Arthur Andersen LLP,
undergo a review by another independent public accounting firm that
critically evaluates its processes and procedures to ensure objectivity,
independence and professional behavior.
- - Auditing problems are much more likely to occur when auditors lack a solid
base of experience with the Company's business, operations and systems.
Rotating auditors is likely to result in poorer, not better audits.
- - Rotating auditors is expensive. The Company would have to pay the
considerable start-up and learning costs necessary for a new accounting firm
to become familiar with the Company and its operations, procedures and
systems. Those expenses would be repeated every four years. Moreover,
efficiencies developed by the prior auditor would be lost, resulting in
costly duplication of effort.
- - Although not required to do so, for many years the Company has sought
shareholder ratification of the appointment of its auditors. This offers you
the opportunity to make your concerns known through your vote.
19
<PAGE> 22
- - The Company has an Audit Committee made up entirely of outside Directors.
This Committee oversees the Company's relationship with the auditors and the
auditing process. The Audit Committee regularly meets with Arthur Andersen
LLP in private to address concerns, including objectivity.
Your Company believes that the best way to ensure accurate, timely and
independent audits by the Company's auditors is through oversight by the Audit
Committee, not through mandatory rotation.
For all of these reasons, the Board of Directors recommends that
shareholders reject this proposal.
Adoption of the proposal will require the approval of a majority of the
shares of Common Stock voting on the proposal. In the absence of contrary
instructions, it is the intention of persons named in the proxy to vote such
proxy AGAINST the proposal.
PROPOSAL 2
Mr. Chris Rossi, PO Box 249, Boonville, CA 95415, holder of 700 shares of
Common Stock, has given notice that he will present the following proposal for
action at the Annual Meeting. The proposed resolution and supporting statement,
for which the Board of Directors and the Company accept no responsibility, are
as follows:
"RESOLVED, that shareholders recommend the Company adopt a policy of
confidential shareholder voting. The sole exceptions to this shall be (1)
disclosure required by law, or (2) disclosure to independent inspectors of
election to certify the results of the vote, or (3) comments on the cards
may be disclosed to management, so long as the shareholders' vote is not
revealed."
STATEMENT OF SHAREHOLDER IN SUPPORT OF PROPOSAL
"Thousand of companies have some form of confidential shareholder voting.
Our Company should join them.
"When you step into a voting booth to elect public officials or union
officials, your vote is confidential. The same policy should be following with
shareholder voting.
"If in 1989 you invested $100 in the S&P Index, your holding would have
been worth $154 in 1994 -- that's $26 more than if you invested in PG. We need a
management which is more responsive to shareholders.
"Shareholders should not have to fear retaliation for voting contrary to
management's recommendation, a natural fear for the many shareholders who have
other relationships with management -- for example, being employed by PG. Stock
held by employees outside the employee stock plans should carry the same privacy
rights as stock inside such plans, which is voted confidentially through plan
administrators.
"Many institutional shareholders do other business with PG. Many more
shareholders do business with the companies headed by members of PG's board of
directors, such as Weyerhaeuser, Albertson's and First Interstate. These
shareholders should not have to fear retaliation for how they vote.
"No on is accusing PG of actually retaliating against anyone -- it's just
that fear should not even be in the back of shareholders' minds when they choose
how to vote.
"It is no answer to say that shareholders can obtain confidentiality by
holding through a broker. Shareholders should not have to incur brokerage fees
to keep their votes private. They should not have to give up the legal rights
attached to owning stock in one's own name. They should not have to rely on an
outsider to both cast their votes in a timely way and keep their confidences.
"A vote FOR this proposal is a vote FOR shareholders' interests."
20
<PAGE> 23
STATEMENT OF BOARD OF DIRECTORS AGAINST PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Since receiving the proponent's proposal, the Company has adopted a policy
on confidential voting which is set out below in full:
It is the Company's policy that all shareholder proxies, ballots, and
voting tabulations that identify the votes of specific shareholders be kept
confidential except as may be required by law or to assist in the pursuit
or defense of claims or judicial actions, and except in the event of a
contested proxy solicitation. In addition, comments written on proxies,
ballots or other voting materials, together with the name and address of
the commenting shareholder, will be made available to the Company without
reference to the vote of the shareholder, except where such vote is
included in the comment or disclosure is necessary to understand the
comment. Certain vote tabulation information may also be made available to
the Company, provided the Company is unable to determine how any particular
shareholder voted.
Access to proxies, ballots and other shareholder voting records will
be limited to inspectors of election who are not employees of the Company
and to certain Company employees and agents engaged in the receipt, count
and tabulation of proxies.
In the opinion of the Board of Directors, the most significant difference
between the Company's policy and that urged by the proponent concerns a
contested proxy solicitation. The Company's policy provides that confidential
voting will not be applicable in such cases. That Board believes that its
responsibility as steward of the Company confers on the Board an obligation to
be a strong and vocal advocate of its vision for the Company, particularly when
insurgents or outsiders seek a change in direction that would be adverse to
Shareholder interests. In a proxy contest, the person soliciting proxies in
competition with the Board will not be bound by confidentiality. The Board
believes that a proxy contest should be conducted on a "level playing field" and
that tying only the Company's hands in a proxy contest is not the way to protect
Shareholder interests. Moreover, the exception for contested solicitations is
consistent with the confidential voting policies adopted by many other
corporations.
Although the proponent's supporting statement says that there is no
accusation of retaliation, it implies that Shareholders may have feared being
coerced into voting with the Board. This suggestion of possible pressure or the
fear of retaliation is entirely hypothetical. The Company has always conducted
its election processes and all communications with Shareholders in a fair,
constructive, and non-coercive manner. The Board states unequivocally that it
knows of no coercion or threat of coercion. The Company has never monitored
shareholder voting for the purpose of taking retribution based on the way a
Shareholder, including an employee, voted. No Shareholder need fear retaliation
for voting or giving a proxy.
For many years, the Company has used an independent inspector of elections
to tabulate voting results, and it will continue to do so. The proponent's
resolution would have no effect on this long-standing practice.
In a statement unrelated to voting, the proponent uses the growth in your
investment in Portland General measured against the S&P index to argue that
management is unresponsive. As the graph on Page 15 of this Proxy Statement
clearly points out, over the most recent five years your investment in Portland
General has exceeded the S&P index. Your Board and management have been and will
continue working for your interests. The policy of confidential voting adopted
by the Company will support that effort. The Board believes that the proponent's
resolution provides no additional value and could impede that effort.
The Board believes that by adopting the policy on confidential voting
described above it has satisfied the concerns of the proponent while maintaining
the ability of the Board to work for your interests. The Board urges a vote
AGAINST the proposal.
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<PAGE> 24
Adoption of the proposal will require the approval of a majority of the
shares of Common Stock voting on the proposal. In the absence of contrary
instructions, it is the intention of persons named in the proxy to vote such
proxy AGAINST the proposal.
PROPOSAL 3
Mr. Nick Rossi, PO Box 249, Boonville, CA 95415, holder of 700 shares of
Common Stock, has given notice that he will present the following proposal for
action at the Annual Meeting. The proposed resolution and supporting statement,
for which the Board of Directors and the Company accept no responsibility, are
as follows:
"RESOLVED, that shareholders recommend that, unless and until such a
policy is approved by a shareholder vote, the company should end its policy
of automatically providing 2.99 years' worth of severance pay and benefits
to executives who quit or are fired after a change in control."
STATEMENT BY SHAREHOLDER IN SUPPORT OF PROPOSAL
"PG's current policy is to give top managers 2.99 years' worth of pay and
benefits if they are discharged or quit following a change in control.
"Unlike many other companies' policies, this payment is made even if the
executive finds a new and better-paying job the very next day. PG's current
policy says the executive has no duty whatsoever to mitigate his losses by even
looking for a new job.
"It is also outrageous that shareholders should have to make the same
payment to top executives who quit after shareholders exercise their rights to
sell their stock or otherwise change management.
"The preconditions for such payments in the current policy are very easy to
meet: 'a significant detrimental change in the nature or scope of the
Executive's authorities or duties', or 'a reduction in total compensation or
customary increases', or a 'reasonable determination' by the executive that
circumstances have changed such that he 'is unable to exercise the authorities,
powers, functions or duties attached to the Executive's position.'
"How many rank-and-file PG employees can quit because their job duties
change, and then collect 2.99 years' worth of severance pay? None.
"Overly-generous deals with top executives like this are bad for overall
employee morale and productivity.
"The current policy sends the wrong message to employees, who should be
encouraged to be flexible about changing job duties, rather than expect a
windfall after such changes.
"Shareholders supposedly have the right to approve a merger or replace the
current board. Golden parachutes like these simply represent a large tax on
these shareholder rights. Such taxes should not be imposed without first having
been put before shareholders for a vote. That is all this proposal calls for."
STATEMENT OF BOARD OF DIRECTORS AGAINST PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The Board of Directors believes that change in control agreements provide a
reasonable contingent benefit to key executives who are terminated following a
change in control while they are still ready, willing, and able to work. Such
arrangements serve the best interests of Shareholders and are an impartial and
entirely appropriate element of sound corporate governance.
The need to retain key employees is especially important in heavily
regulated industries like the utility industry. Any takeover or merger would
require lengthy negotiations between the parties, followed by many
22
<PAGE> 25
months of regulatory proceedings. Negotiations and hearings could last years,
during which time there is a great need to retain key executives and to ensure
that they are able to devote their full attention to the Company's business,
including the protection of the Shareholders' interests during negotiations and
hearings. The change in control arrangements used by the Company are designed to
ensure that management assesses any takeover or merger proposal objectively, and
advises the Board as to whether the proposal is in the best interest of the
Company and its Shareholders without undue concern for personal financial loss
or other personal uncertainties. The Board believes that these arrangements
minimize any conflict of interest between what is best for the executive and
what is best for the Company and Shareholders. As a result, the Board strongly
believes that the executives covered by these arrangements have every incentive
to act in the Company's and Shareholders' best interest.
Contrary to the assertion by the proponent, payments are not automatic and
are not made whenever an executive is fired or quits. No benefits are paid
unless (1) a change in control occurs, and (2) within three years thereafter the
executive is directly or constructively discharged from employment. There are no
payments if an executive is fired for cause. No payments are made when an
executive quits unless he or she was first demoted without cause or
constructively discharged without cause. When a key executive is prohibited from
exercising the authority of his or her position, or the authority that is usual
and customary for that position is reduced, the executive no longer holds the
same position and has effectively been demoted or, in the extreme case,
discharged. No payments are made unless the discharge or constructive discharge
is within three years of a change in control. Change in control features in
various benefit plans are designed to ensure that benefits are not lost merely
because of a change in control, but are paid as contemplated by the plans.
An executive does not receive a payment unless the person who acquires
control of the Company adversely changes the terms of the executive's
employment. Thus, it is the potential acquirer - and not the executive - who
controls whether the termination benefits will be owed.
None of the Company's change in control arrangements have any current cost
to the Company or its Shareholders and are similar to those that exist at many
companies within and without the electric utility industry.
The Board strongly disagrees with the proponent's statement that these
arrangements are bad for employee morale and send the wrong message to
employees. The proponent provides no support for his assertion. The Board and
management know of nothing that suggests these arrangements have harmed the
morale of the Company's employees or provided anyone an expectation of a
"windfall".
The Board believes that these arrangements are in the best interest of
Shareholders and that requiring advance approval may weaken the Board's
flexibility to act promptly, decisively, and with a competitive edge with
respect to retaining and attracting seasoned executives, thereby potentially
depriving the Company and the Shareholders of the strength and leadership
necessary to strive for long-term maximization of Shareholder value in the
current utility environment. The Board urges a vote AGAINST the proposal.
Adoption of the proposal will require the approval of a majority of the
shares of Common Stock voting on the proposal. In the absence of contrary
instructions, it is the intention of persons named in the proxy to vote such
proxy AGAINST the proposal.
SHAREHOLDER PROPOSALS FOR THE 1996 ANNUAL MEETING
Proposals of shareholders which may be proper subjects for inclusion in
proxy material for the Annual Meeting of Shareholders to be held in 1997 must be
received no later than December 3, 1996 and should be mailed to the Secretary of
Portland General Corporation at the Company's principal executive office, One
World Trade Center, 121 SW Salmon Street, Portland, Oregon 97204.
23
<PAGE> 26
OTHER MATTERS
Under Portland General's Bylaws, in order to bring business before the
Annual Meeting of Shareholders, written notice to the Secretary must be
delivered or mailed and received at the Company's executive offices not more
than 70 days nor less than 35 days prior to the Annual Meeting. However, if
notice or public disclosure of the date of the Annual Meeting is made less than
50 days in advance, the notice to the Secretary must be received no later than
15 days after the announcement. If the Annual Meeting date is announced less
than 15 days before the meeting, the notice must be received no later than the
day before the Annual Meeting.
The notice must (a) briefly describe the business to be presented and the
reason for presenting it at the Annual Meeting, (b) state the name and address
of the shareholder proposing the business, (c) state the class and number of
shares of stock owned by the shareholder, and (d) describe any material interest
the shareholder has in the business.
For this 1996 Annual Meeting, notice must be received by no later than 15
days after the date of this Proxy Statement.
Management is not aware of any business which may properly come before the
meeting other than the matters listed in the accompanying Notice of Annual
Meeting of Shareholders and in this Proxy Statement. If other matters should
properly come before the meeting, the persons named in the proxy, or their
substitutes, will vote the shares represented by the proxies, to the extent
permitted by law, in accordance with their best judgment.
By Order of the Board of Directors
ALVIN ALEXANDERSON
Senior Vice President,
General Counsel, and Secretary
Portland, Oregon
April 1, 1996
24
<PAGE> 27
[MAP SHOWING LOCATION OF ANNUAL MEETING]
25
<PAGE> 28
PORTLAND GENERAL CORPORATION
One World Trade Center 121 S.W. Salmon Street Portland, OR 97204
COMMON STOCK PROXY
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement and hereby appoints Gwyneth Gamble Booth, Peter J. Brix and Ken L.
Harrison, or any of them as Proxies, each with the power to appoint a
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse side, all the shares of Common Stock of Portland General
Corporation held of record by the undersigned on March 19, 1996, at the Annual
Meeting of Shareholders to be held on May 7, 1996, or any adjournment thereof.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot
vote your shares unless you sign and return this card.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
SEE
REVERSE SIDE
FOLD AND DETACH HERE
Annual Meeting of Shareholders
Tuesday, May 7, 1996 1:30 p.m.
[MAP]
For additional directions to the meeting, refer to
page 25 of the Proxy Statement.
<PAGE> 29
[X] Please mark your [
vote as in this [ 9334
sample [________
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
Directors, FOR proposal 2, AGAINST proposals 3, 4 and 5.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR AGAINST WITHHOLD FOR AGAINST WITHHOLD
1. Election of Class I a. Richard Geary [ ] [ ] [ ] 2. Ratification of the appoint- [ ] [ ] [ ]
Directors (terms b. Jerry E. Hudson [ ] [ ] [ ] ment of public accountants
expiring in 1999). c. Bruce G. Willson [ ] [ ] [ ] for the year 1996.
3. Shareholder proposal con- [ ] [ ] [ ]
cerning appointment of inde-
pendent public accountants.
4. Shareholder proposal [ ] [ ] [ ]
concerning confidential
voting.
5. Shareholder proposal con- [ ] [ ] [ ]
cerning executive compen-
sation upon change in control.
6. In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
before the meeting.
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
---------------------------------------------------------
---------------------------------------------------------
SIGNATURE(S) DATE
</TABLE>
FOLD AND DETACH HERE
[LOGO]
Dear Shareholder:
The Annual Meeting of Shareholders of Portland General Corporation will be
held on May 7, 1996. Your vote is very important. We urge you to promptly sign,
date, and return the above proxy card in the envelope provided.
/s/ Ken Harrison
----------------
Chairman of the Board,
Chief Executive Officer,
and President
