Capitol Alert

PG&E’s CEO could make up to $110 million in bonuses if its stock rebounds, investors warn

PG&E bondholders seeking to get a deal on the company’s stock are raising concerns about the CEO’s pay structure, warning Bill Johnson could earn up to $110 million if the company’s share prices return to their 2017 peak.

His annual base pay is $2.5 million, but an analysis circulated by some investors shows he could earn substantially more.

Johnson, who took over PG&E in April, said those estimates are unrealistic and that he didn’t join the company for the money.

“I assume if you do enough gymnastics, you can get to some set of numbers like that,” Johnson said. “Those numbers will never occur. If anybody thinks that I came here to PG&E or that that has anything to do with my compensation, they have misjudged me seriously. I came here for one reason, and that is to help.”

Behind the scenes, stockholders and competing investors are engaged in a heated fight over how PG&E should exit bankruptcy. The bondholders want to provide $30 billion to PG&E and get stocks at about $2 per share — a substantial decrease from the current $12 price. PG&E opposes the plan.

They spent Wednesday alerting the Capitol community about Johnson’s pay structure.

Meanwhile, stockholders and PG&E are pushing a plan in the Legislature that would give the company access to tax-free state bonds, according to PG&E and a 28-page document obtained by The Sacramento Bee that shows the draft language of the bill.

Assemblyman Chad Mayes, R-Yucca Valley, is carrying Assembly Bill 235, which must clear the Legislature by Sept. 13 in order to get to Gov. Gavin Newsom’s desk. Newsom would then have until Oct. 13 to sign or veto it.

Johnson met with lawmakers in Sacramento on Wednesday to push for the bill. PG&E is expected to have billions in liability costs to victims, following deadly wildfires in 2017 and 2018. He sees the bonds as a way to pay out victims’ claims faster without passing along costs through customers’ utility bills.

“These bonds would hold PG&E accountable to wildfire victims and will be repaid using PG&E profits, not customer dollars,” the company said in a statement. “Today’s discussions aim to accurately communicate the proposal before the final weeks of session.”

Johnson disputed the perception PG&E would be bailed out.

“Instead of calling this a bailout, I would say this is a pay-up bill,” Johnson said. “If anybody’s being bailed out here, it’s the victims of wildfires. This is PG&E saying we’re accountable for this.”

Bondholders, including Pimco and Elliott Management, believe the bill would help enrich Johnson, given Johnson’s motivation to stabilize the stock price and avoid diluting share prices to $2. An analysis released on their behalf Wednesday by Parella Weinberg Partners shows Johnson would earn $74 million to $110 million if the price rises to $65 a share. If it jumps to $75 per share, Johnson would earn $103 million to $153 million, according to the group.

A court approved Johnson’s compensation package earlier this month. He’s now receiving an annual base salary of $2.5 million for three years. Johnson would also receive $2.5 million if he’s fired without cause. The median employee at PG&E earned $177,765 in 2018, according to a Securities and Exchange Commission filing.

Lynsey Paulo, a spokeswoman for PG&E, said Johnson’s bonuses are also tied to safety measures.

“If the company’s performance on key wildfire safety-related metrics are not met, senior leaders will see their overall incentive rewards reduced substantially,” Paulo said. “These plans are in line with those of other companies in similar situations, and the incentives paid cannot be funded by customer rates.”

Bryan Anderson is a political reporter for The Bee. He covers the California Legislature and reports on wildfires and transportation. He also hosts The Bee’s “California Nation” podcast.