PG&E cancels $130 million in employee bonuses

February 24, 2019

Faced with public backlash over the company’s handling of its bankruptcy process, PG&E will not award $130 million in bonuses that its employees were in line to receive. [SF Chronicle]

With the company facing billions of dollars in liabilities for involvement in California wildfires, PG&E filed for Chapter 11 bankruptcy last month. PG&E has since been criticized over plans to compensate its employees before providing compensation to victims of the wildfires that PG&E equipment caused or is suspected of causing.

The company had already decided it would not award bonuses to any of its top executives this year. Then on Friday, interim CEO John Simon announced in an internal message that PG&E would not award any of the planned $130 million in 2018 performance bonuses that thousands of employees had earned.

PG&E previously told the bankruptcy court that about 14,000 employees were eligible for the bonuses, which were set to be awarded next month. The company decided, though, the bonus payments were inappropriate because of PG&E’s financial situation and the destruction caused by recent wildfires.

However, PG&E employees could soon receive ongoing bonuses for their performance in 2019 and beyond. PG&E is seeking to institute a new kind of program for 2019 that could give employees incentive awards as soon as April, Simon said.

Simon said the decision to revoke the 2018 bonuses was immensely difficult and his view on the matter evolved over time.

“The more I stepped back and thought about the impacts the wildfires have had on so many people outside our company, regardless of fault, the more I came to believe paying (performance bonuses) in 2018 was not the right thing to do,” Simon said in the internal email.

Simon also said PG&E executives and board members decided to revoke the 2018 bonuses because awarding them would, in effect, put senior company leaders at the front of the line for bonus payments ahead of thousands of people who have claims against the utility and creditors who are currently not being paid and must await resolution of the bankruptcy process.

The interim CEO noted in his email that the company has lost half of its market value, which has cost investors more than $10 billion.

At least one union has reacted angrily to PG&E’s decision to cancel bonuses. John Mader, the president of the Engineers and Scientists of California Local 20, IFPTE, which represents 3,700 professional and technical PG&E employees, about 1,200 of whom are eligible for short-term incentive payments, said his union is very upset.

“I just don’t see how it’s constructive to confiscate employee compensation, especially the people… who try and prevent these kinds of tragedies,” Mader said.

Mader said the employees affected by the decision to revoke bonuses did not make decisions that led to recent wildfires. The union president also said he is worried bonus payments will be reduced in bankruptcy.

Meanwhile, Jamie Court, president of the nonprofit Consumer Watchdog, said PG&E’s decision to take away bonuses was the least the company could do considering that fire victims are not getting paid.

“I think this is just crisis management,” Court said. “Clearly, it’s the right decision, but it should have been done in the first place, not after a public shaming.”

In March, PG&E will ask the bankruptcy judge to approve bonuses going forward in 2019, if benchmarks are met. Employees could potentially receive bonuses in April, July, October and January, Simon said. The bonuses would be based 50 percent on safety, 40 percent on financial stewardship and 10 percent on customer related measures.

Additionally, PG&E will offer merit raises above base pay in March, Simon said.