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Just weeks after handing out $50 million in bonuses while on the verge of financial collapse, PG&E is asking a judge's permission to award $17.5 million in additional payouts to the management team that guided the utility into bankruptcy.
Pacific Gas and Electric Co. made the surprise filing in federal court late Friday, just ahead of the three-day holiday weekend.
Consumer advocates reacted yesterday with astonishment.
"It's remarkable," said Mike Florio, senior attorney for The Utility Reform Network in San Francisco. "They're just showering money on the same people who got them into this mess."
PG&E said it requires the bonuses for a "management retention program" intended to prevent about 226 top executives from departing during the bankruptcy process.
The company's chairman, Robert Glynn, and nearly two dozen other senior executives would receive additional payments of 100 percent of their base salaries if Bankruptcy Judge Dennis Montali approves the plan.
PG&E also is requesting that hundreds of other managers be eligible for bonuses of between 25 percent and 75 percent of their salaries. A hearing is scheduled for June 18.
First, however, PG&E will have to get past a meeting with creditors of the bankrupt utility to be held June 7 in San Francisco.
The sudden awarding of millions of dollars in bonuses is expected to be a key topic of discussion.
$50 MILLION ALREADY AWARDED
"That's money that the creditors think they're entitled to," Florio said. "I'm sure there's going to be some push-back on this one."
The payouts would be on top of the $50 million in bonuses and raises awarded just before PG&E's April 6 bankruptcy filing. The utility argued then, as well, that the money was necessary to keep senior managers from leaving.
This time, PG&E also put a consumer-friendly spin on its generosity to its top brass.
"The loss of important personnel due to economic uncertainty or sagging employee morale may threaten PG&E's continued provision of safe, reliable and responsive service to its customers and jeopardize its reorganization efforts, " the utility said in its filing.
Greg Pruett, a PG&E spokesman, was more explicit about the need for additional bonuses.
"It's necessary to keep senior management from jumping ship and going to a competitor," he said.
Pruett said that the utility is prepared to shrug off the public relations hit inevitable with any such request under Chapter 11 proceedings.
"As much as you care about public opinion, you have to take the long view," he said.
PG&E filed for bankruptcy protection after amassing more than $9 billion in debt because of California's bungled deregulation effort. The utility said it had no choice after the collapse of bailout talks with Gov. Gray Davis.
"The bankruptcy itself was outrageous," said Linda Sherry, a spokeswoman for Consumer Action in San Francisco. "It's completely preposterous to give these people a reward for what they've done."
PG&E made a special point of observing last month that senior managers of the utility's parent company received no bonuses in 2000 because of the company's lackluster financial performance.
Glynn, chairman of both the parent company and the utility, was forced to get by with a raise of $100,000, bringing his total annual salary to $900,000. In 1999, he earned $800,000 in salary and $1.2 million in bonuses.
If the new bonuses are approved, Glynn's compensation would return to the $2 million range.
Glynn's standing with PG&E's board of directors appears unblemished despite the utility's financial meltdown and billions of dollars in losses incurred by the parent company. But concern has grown within the company that other managers may be on verge of calling it quits.
Still, with layoffs rampant in the technology industry, it would seem there is no shortage of skilled managers looking for work should PG&E suddenly find itself with vacancies to fill.
But Eric Wheel, general manager of Management Recruiters of Northern California, an executive-search service, said it would be difficult to find people with the necessary expertise to run a major utility, especially one in the midst of bankruptcy.
Number Bonus Management receiving (Percent of level bonuses base salary) Senior officers 6 100% (Including Chairman Robert Glynn) Other executives 17 100% Directors and 77 50% to 75% main attorneys Managers and other 126 25% to 50% attorneys . Source: PG&E . Chronicle Graphic
SAN FRANCISCO -- Pacific Gas and Electric Company has asked a federal court for permission to pay out $17.5 million in bonuses to the management team that guided the utility into bankruptcy.
PG&E made the filing late Friday before the long holiday weekend.
The utility says it requires the bonuses for a "management retention program."
But an attorney for The Utility Reform Network says PG&E is simply rewarding managers of a failed business effort.
"It's remarkable," said TURN's Mike Florio. "They're just showering money on the same people who got them in this mess.
If Judge Dennis Montali approves PG&E's bankruptcy plan, several senior vice presidents at the utility would receive additional payments matching their base salaries, according to the company's chairman Robert Glynn.
Those payouts would come on top of $50 million in bonuses and raises PG&E awarded just before the April 6 bankruptcy filing.
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A
fast-growing compensation package To discourage
senior executives from leaving, PG&E asked the
bankruptcy court for permission to award millions of
dollars in bonuses. A handful of top managers, including Chairman
Robert Glynn (in photo), would see their paychecks
double.