Shareholders Lay Blame on PG&E; Managers, Davis
Angry PG&E; Corp. shareholders vented their frustration during the company’s annual meeting Wednesday, blaming management for a bankruptcy filing that could wipe out their investments.
Dozens of retired company employees and other stockholders cheered at calls for the resignation of Chief Executive Robert Glynn at the contentious meeting in a Nob Hill auditorium as police barriers kept activists at a distance outside.
While many of the hundreds who attended described themselves as company loyalists furious at bungling by Sacramento lawmakers and Gov. Gray Davis, others said PG&E; bore responsibility for backing the state’s 1996 attempt at electricity deregulation.
“The PG&E; management, infatuated with the fairy tale of deregulation, joyfully sold us down the river,” shareholder Clyde Vaughn said to applause. “The very top managers who led us into this mess were recently given multihundred thousand dollar raises. The truth of the matter is you all should have been fired for incompetence.”
Profit taken in by PG&E;’s utility unit, Pacific Gas & Electric Co., after 1996 was sent to the parent company, which is not in bankruptcy. PG&E;’s stock fell 55 cents to $11 Wednesday on the New York Stock Exchange, down from more than $30 in September.
As at virtually all annual meetings of public companies, the actual balance of power was never in doubt. The company’s nominees for director ran unopposed, and management’s proposals for enlarging a stock-based incentive plan and other measures passed by a 5-to-1 ratio.
But Glynn was careful to avoid seeming arrogant, professing disappointment with the past year’s performance and treating most of his sometimes voluble critics with respect.
“No one wanted this to happen,” Glynn said of the bankruptcy filing.
Certainly not the shareholders, many of whom had regarded PG&E; shares as among their safest investments.
“They shouldn’t have filed,” said E.C. Nielsen, 84, adding that much of her income had been from PG&E; holdings. “I’ve lived through two depressions. You don’t give up.”
Of those that spoke against the management, a 28-year rank-and-file employee got the warmest response from the crowd for suggesting that perception had become more important than reality at PG&E; and that regular workers should be appointed to the board.
“Put someone up there that can get you away from a policy of plausible deniability,” mechanic Jim Findley said. “Someone with dirt under their fingernails.”
In his opening remarks and in answering questions from the floor, Glynn accused Davis, state regulators and others for the mess now threatening to cut power to California homes and businesses on a routine basis this summer.
At its core, the problem is that the prices Pacific Gas & Electric could charge for electricity were capped by the state, while the wholesale prices it paid for electricity were not. Those prices rose much higher than envisioned when the deregulation plan was approved, and the utility’s attempts to win approval to charge more were rebuffed.
“If the state had approved the comprehensive rate stabilization plan we filed last November, Pacific Gas & Electric would still be credit worthy and not in Chapter 11” as the third-largest U.S. bankruptcy, Glynn said. The filing six weeks ago listed $18 billion in liabilities.
He said a last-ditch plan to sell the company’s transmission lines to the state fell apart when Davis’ negotiators backed off earlier commitments. He said that the idea could be revived in bankruptcy court.
“We are not seeking a rescue, a bailout or a handout from the state or anyone else,” Glynn said. “We are simply asking the state to follow the law, which allows us to recover wholesale power costs in retail rates.”
Pacific Gas & Electric intends to file a proposed reorganization plan to pay creditors and begin moving out of bankruptcy court by August, he said. In the meantime, more power plants are being built.
Glynn said the company will fight to recover the multibillion-dollar hit it has taken because of the skewed prices, in part from electricity suppliers that federal regulators say overcharged. If the government doesn’t sue those firms, he said, other interested parties, including consumer groups, will.
A few shareholder activists at the meeting proposed a raft of measures, including steps to increase the size of the board. One such reform measure passed, recommending that the board allow a majority of shareholders to approve any takeover even if company directors object.
The leader of a consumer and human rights activist group said she was initially barred from the meeting despite having proxies carrying the right to vote on behalf of four shareholders.
Medea Benjamin of Global Exchange later reentered and shouted criticism of the company as the two-hour meeting ended before she and others were recognized to speak. She was removed by security guards and charged with trespassing.
As shareholders left, PG&E; staffers handed out miniature flashlights bearing the company’s logo.
A spokesman said the trinkets were a tradition predating the energy crisis and weren’t intended either as commentary or as tools to cope with rolling blackouts.
