A federal bankruptcy judge granted Pacific Gas & Electric Co. tentative permission Monday to pay company executives $17.5 million in bonuses as incentives for staying with the financially troubled utility during its reorganization.
Judge Dennis Montali rejected arguments from a U.S. trustee and the city of San Francisco that the bonuses to more than 200 employees, averaging $77,000, are unjustified and inappropriate.
PG&E; successfully argued that 23 high-ranking executives were paid only 36% to 40% of their compensation packages last year and deserve something more than virtually worthless stock options as inducements to stay.
Acknowledging that it is common to provide financial incentives to help keep executives during bankruptcy proceedings, the judge said, "This is a dramatic adjustment for 23 people--100% [of salary]. . . . Where do we draw the line?"
Montali criticized PG&E; attorneys for not disclosing the names, or at least titles and salaries, of these top employees in its filings. "This has been like an Easter egg hunt to get the facts," he said.
Montali directed PG&E; to provide further details about the bonuses before giving final approval. He also requested a list of key employees who have left the company since PG&E; filed for Chapter 11 bankruptcy protection on April 6.
The plan called for the doubling of PG&E; President Gordon Smith's $630,000 base salary, along with those of five other senior officers, totaling more than $2 million.
Seventeen senior vice presidents would have their $182,360 base salaries doubled. More than 200 other managers and in-house lawyers would see increases of 25% to 75%, for a total of $12.4 million.
Irving Sulmeyer, representing San Francisco, argued PG&E; should not be awarding bonuses while California is buying power for the utility's customers: "At the same moment there is not enough money to buy electricity, they have money to offer bonuses to their executives."