Nominating and Compensation Committee
February 21, 2001
SENIOR EXECUTIVE RETENTION
It is recommended that the Nominating and Compensation Committee approve Special Senior Executive
Retention Grants as a mechanism to retain a small group of key executive officers. The concept is outlined below.
Specific individual recommendations will be presented for the Committee's approval at its meeting on December
We have built a very strong senior executive team. Many of our key executives are very attractive candidates for
senior positions in other companies. Our goal is to retain individuals who are sought after to be CEOs or senior
officers in other companies that may have more attractive growth prospects. Our ability to retain these key
individuals is critical to our success. We must provide a retention mechanism to make them less vulnerable to
leaving by providing them with a strong incentive to stay.
The eligible group excludes any key executives from the National Energy Group (NEG) who might otherwise be
eligible were it not for the Corporation's plan to take that entity public in the near future.
The concept is a multi-year, cliff-vesting incentive award of phantom PG&E Corporation restricted stock units.
The phantom restricted stock units will provide an incentive equal three times an eligible officer's base salary plus
target short-term incentive award. Grants will be made effective January 1, 2001, and will vest on December 31,
2004 subject to either one of the following conditions:
- 50 percent will automatically vest on December 31, 2004. The remaining 50 percent will vest on December 31,
2004 only if the Corporation's performance, as measured by relative Total Shareholder Return (TSR) on a
cumulative basis over four years, is at or above the 55th percentile of its comparator group; or
- if, at the end of the third year of the grant, December 31, 2003, the Corporation's performance as meas