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WEIL, GOTSHAL & MANGES LLP

Stephen Karotkin (pro hac vice)

(stephen.karotkin@weil.com)

Ray C. Schrock, P.C. (pro hac vice)

(ray.schrock@weil.com)

Jessica Liou (pro hac vice)

(jessica.liou@weil.com) 

Matthew Goren (pro hac vice)

(matthew.goren@weil.com)

767 Fifth Avenue

New York, NY 10153-0119

Tel: 212 310 8000

Fax: 212 310 8007

KELLER & BENVENUTTI LLP

Tobias S. Keller (#151445)

(tkeller@kellerbenvenutti.com)

Jane Kim (#298192)

(jkim@kellerbenvenutti.com)

650 California Street, Suite 1900

San Francisco, CA 94108

Tel: 415 496 6723

Fax: 650 636 9251

Attorneys for Debtors 

and Debtors in Possession

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

- and -

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors. 

Bankruptcy Case 

No. 19-30088 (DM)

Chapter 11

(Lead Case)(Jointly Administered) 

DECLARATION OF DOUGLAS J. FRISKE IN 

SUPPORT OF MOTION OF DEBTORS 

PURSUANT TO 11 U.S.C. §§ 363 AND 105(a) 

FOR AN ORDER APPROVING TERMS OF 

EMPLOYMENT FOR NEW CHIEF 

EXECUTIVE OFFICER AND PRESIDENT OF 

PG&E CORPORATION

Date: July 24, 2019

Time: 9:30 a.m. (Pacific Time)

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

☐Affects PG&E Corporation 

☐Affects Pacific Gas and Electric Company 

☒Affects both Debtors

* All papers shall be filed in the Lead Case, 

No. 19-30088 (DM).

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I, Douglas J. Friske, pursuant to section 1746 of title 28 of the United States Code, hereby declare 

under penalty of perjury that the following is true to the best of my knowledge, information and belief:

I am a Managing Director at Willis Towers Watson PLC (“WTW”). WTW has been retained 

by Weil, Gotshal & Manges LLP (“Weil”) on behalf of PG&E Corp. (and, together with Pacific Gas and 

Electric Company, “PG&E” or the “Debtors”) to provide compensation consulting services to the 

Debtors. I am familiar with the pre- and post-petition structure of the Debtors’ compensation programs, 

including the terms of employment for William D. Johnson as Chief Executive Officer (“CEO”) and 

President of PG&E Corp. as set forth in the Motion of Debtors Pursuant to 11 U.S.C. §§ 363 and 105(a) 

for an Order Approving Terms of Employment for New Chief Executive Officer and President of PG&E 

Corporation (the “Motion”).1

 I submit this Declaration (the “Declaration”) in support of the Motion. 

The statements in this Declaration are, except where specifically noted, based on my personal 

knowledge or opinion, on information from the Debtors’ books and records, the Debtors’ employees, the 

Debtors’ advisors and their employees, or from other members of the WTW team working under my 

supervision or direction. I have overseen a compensation consulting team since December 2018 that has 

provided various employee compensation consulting services to the Debtors.

I am not being specifically compensated for this testimony other than through payments received 

by WTW as a professional whose retention the Debtors will seek to obtain this Court’s approval of 

pursuant to an application to be filed with this Court at a later date. I am over the age of 18 years and 

authorized to submit this Declaration on behalf of the Debtors. If I were called upon to testify, I could 

and would competently testify to the facts set forth herein.

My team and I have reviewed information supplied to us by members of the Debtors’ 

management team and the Debtors’ other advisors. For the reasons described below, it is my opinion

that the compensation terms are reasonable in light of the Debtors’ circumstances. Additionally, the 

implementation of the Debtors’ proposed compensation terms will provide Mr. Johnson with a total 

compensation opportunity that is within the range of market practice among the Debtors’ utility industry 

peers.

 1 Capitalized terms used but not defined herein shall have the respective meanings ascribed to such 

terms in the Motion.

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A. Background and Qualifications

I received my Bachelor’s degree in Finance from the University of Illinois in 1986. After 

working at Allstate and Chubb Insurance Companies, I returned to school at Northwestern University, 

where I received a Master’s degree in Management from Northwestern University’s J.L. Kellogg 

Graduate School of Management in 1990. Since that time, I have been employed by WTW or its 

predecessor firms. 

WTW is an international professional services firm that offers a wide variety of services to public 

and private clients, including expert analysis of executive and management compensation. WTW

designs and delivers solutions that manage risk, optimize benefits, cultivate talent, and expand the power 

of capital to protect and strengthen institutions and individuals. WTW focuses on four key business 

segments: corporate risk and brokering, human capital and benefits, exchange solutions, and investment, 

risk, and reinsurance.

My responsibilities at WTW have primarily involved consulting to large companies, specifically 

with regard to executive compensation. I have worked with numerous Fortune 1000 companies, and 

have participated in the development and design of hundreds of management and employee incentive 

plans for companies inside and outside of bankruptcy. I am frequently retained by large companies to 

advise them on their employee compensation strategies, programs and pay levels, including 

compensation programs for new and incumbent Chief Executive Officers. 

I am highly experienced in executive, management, and employee compensation matters with 

more than 28 years of experience in the field. During this time, I have been the lead or supporting 

employee compensation expert in approximately 100 bankruptcy cases, and have frequently testified as 

to the reasonableness of a variety of post-petition compensation arrangements. Specifically, I have been 

involved in the review and design of key employee incentive plans, management incentive plans, and 

other similar-type plans in the chapter 11 cases of, among many, American Airlines, Avaya, Breitburn 

Energy Partners, Claire’s Stores, Inc., Energy Future Holdings, GenOn, The Great Atlantic & Pacific 

Tea Company, Longview Power, Midstates, Orchard Brands, Orexigen, Penn Virginia, Pernix,

RadioShack, Reader’s Digest Association, Round Table Pizza, Sabine Oil & Gas, Samson Resources, 

Sbarro, Southeastern Grocers, VER Technologies, Sears Holdings Corporation, and Westmoreland Coal.

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B. WTW’s Involvement with the Debtors

Since WTW was retained by Weil in December 2018, my team and I have familiarized ourselves 

with the Debtors’ operations and business goals. At the start of our engagement, WTW discussed with 

the Debtors and their advisors the Debtors’ operational history, financial performance, and various issues 

regarding the Debtors’ workforce and employee programs. 

As the Court is aware, I advised the Debtors in connection with the formulation of their recently 

approved 2019 STIP and I submitted a Declaration in support of the Debtors’ motion seeking approval 

and implementation of the 2019 STIP. Over the course of these interactions, I reviewed the Debtors’ 

compensation structure, which provides for a base salary supplemented by certain incentive programs.

My team and I collaborated with PG&E Corp.’s Compensation Committee of the Board of 

Directors (the “Compensation Committee”), the Board of Directors (the “Board”), and other outside 

advisors in reviewing and advising on the terms of Mr. Johnson’s compensation. Among other things, 

my team and I provided input and advice on the terms of Mr. Johnson’s compensation for 

reasonableness. A primary goal in the course of these interactions was to develop an independent 

assessment of Mr. Johnson’s compensation that drew directly upon relevant market data.

C. Terms of Employment 

Pursuant to the Motion, the Debtors seek approval of Mr. Johnson’s employment terms. The 

following is a summary of the material economic terms of Mr. Johnson’s employment arrangements for 

a three-year employment period: 

Category Description

Base Salary • Annual base salary of $2.5 million.

Transition Payment • One-time cash transition payment of $3 million.

2

• PG&E Corp.’s standard relocation policy for expenses relating to 

moving to California.

 2 Subject to claw-back and repayment in the event Mr. Johnson resigns or is terminated for “Cause” within 12 months of his start date. “Cause” is defined in the PG&E Corp. 2012 Officer Severance 

Policy. Case: 19-30088 Doc# 2666 Filed: 06/19/19 Entered: 06/19/19 22:55:03 Page 4 of

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Equity Awards3 • Equity awards will consist of (i) time based restricted stock units 

(“RSUs”) and performance-based restricted stock units 

(“PRSUs”); and (ii) stock options (“Options”). 4

• RSUs and PRSUs. Annual equity award with a target value of $3.5 

million. 25% of such award consisting of RSUs and 75% of such 

award consisting of PRSUs. 

• Each annual award of RSUs will vest in three equal installments on 

each of the first three anniversaries of the date of the grant.

• Each annual award of PRSUs will be subject to annual

performance-based vesting metrics (the “Performance Metrics”). 

The first annual award of PRSUs will have a performance period 

beginning on April 1, 2019 and ending on December 31, 2019, and 

the second and third annual awards will have one-year performance 

periods ending on December 31, 2020 and December 31, 2021, 

respectively. As set forth below, the Performance Metrics for 2019 

have been established, and consistent with customary practice, 

Performance Metrics for the ensuing two years will be established 

by the Board. 

• Stock Options. One-time grant of three tranches of performance- based Options, (payable in cash or shares at Mr. Johnson’s option) 

as follows: (i) tranche 1 consists of a maximum 1.2 million Options 

(800,000 Options at target level performance) with an exercise 

price of $25.00 per share exercisable until the fourth anniversary of 

the grant date, (ii) tranche 2 consists of a maximum 1.5 million 

Options (1 million Options at target level performance) with an 

exercise price of $40.00 per share exercisable until the fourth 

anniversary of the grant date, and (iii) tranche 3 consists of a 

maximum 1.6 million Options (approximately 1.1 million Options 

at target level performance) with an exercise price of $50.00 per 

share exercisable until the fifth anniversary of the grant date. Each 

tranche of Options will be subject to annual Performance Metrics

and will be divided into three equal installments. The first 

installment of each tranche will have a performance period starting 

on April 1, 2019 and ending December 31, 2019. The second and 

third installments of each tranche will have one-year performance 

periods ending December 31, 2020 and December 31, 2021, 

respectively. Each tranche of Options will vest annually in three 

equal installments based on performance results certified by 

Internal Auditing and approved by the Compensation Committee.

Anti-Dilution • All equity incentive compensation will be subject to anti-dilution 

provisions upon a spin-off to shareholders and in connection with a 

rights offering to shareholders or other transactions in which 

shareholders are subject to the same anti-dilution protections as Mr. 

Johnson.

 3 If Mr. Johnson’s employment is terminated by PG&E Corp. for Cause, all outstanding equity awards 

will be forfeited for no consideration. 

4 The initial award of RSUs and PRSUs will be based on the volume-weighted average price of PG&E 

Corp. common stock for the 15 consecutive trading days immediately preceding April 3, 2019. 

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Severance5 • If Mr. Johnson’s employment is terminated by PG&E Corp. 

without Cause, Mr. Johnson will be entitled to a cash payment of 

$2.5 million. 

• With respect to Mr. Johnson’s RSUs, if Mr. Johnson’s employment 

is terminated by PG&E Corp. without Cause, a pro-rated portion of 

Mr. Johnson’s RSUs will vest proportionally based on the number 

of months that Mr. Johnson was employed in the current annual 

vesting period, divided by 12. 

• With respect to Mr. Johnson’s annual award of PRSUs, (i) if Mr. 

Johnson’s employment is terminated by PG&E Corp. without 

Cause during the 2019 calendar year, a pro-rated portion of Mr. 

Johnson’s PRSUs will vest proportionally based on the number of 

months that Mr. Johnson was employed in 2019, divided by 8 (the 

number of months from May 2, 2019 until year end), and 

achievement of his 2019 Performance Metrics, and (ii) if Mr. 

Johnson’s employment is terminated by PG&E Corp. without 

Cause during the 2020 or 2021 calendar year, a pro-rated portion of 

Mr. Johnson’s PRSUs will vest proportionally based on the number 

of months that Mr. Johnson was employed in 2020 or 2021, as 

applicable, divided by 12, and the achievement of the Performance 

Metrics for PRSUs granted for the prior year.

The employment terms also include, among other things, customary health, retirement, and other 

benefits provided to senior executives of the Debtors. As set forth above, Mr. Johnson’s annual grant of 

PRSUs and grant of Options are subject to the Performance Metrics. Mr. Johnson’s 2019 annual grant 

of PRSUs and the first of three installments of Options have a performance period beginning April 1, 

2019 and ending December 31, 2019 (collectively, the “2019 Performance-Based Awards”). Mr. 

Johnson’s 2019 Performance-Based Awards vest annually.

In order to align Mr. Johnson’s 2019 Performance-Based Awards with the performance metrics 

utilized in the 2019 STIP, the newly-constituted Board determined that the performance-based vesting 

conditions of Mr. Johnson’s 2019 Performance-Based Awards should use the same Performance Metrics 

and weightings as the 2019 STIP, subject to the Public Safety Index (“PSI”) modifier described below. 

The 2019 STIP calculates an overall company score by adding public and employee safety metrics 

weighted at 65%, financial metrics weighted at 25%, and customer metrics weighted at 10%, subject to 

a threshold, target, and maximum for each metric. To be consistent with the 2019 STIP, the Board 

 5 Any severance payments to be made to Mr. Johnson during the pendency of these Chapter 11 Cases 

shall be subject to the provisions of the Bankruptcy Code. Case: 19-30088 Doc# 2666 Filed: 06/19/19 Entered: 06/19/19 22:55:03 Page 6 of

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determined that the payout ranges for all metrics of Mr. Johnson’s 2019 Performance-based Awards 

would conform to the following payout ranges under the 2019 STIP: 

• Threshold: 50% of target

• Target: 100% of target

• Maximum: 150% of target

Additionally, the Board determined that the Performance Metrics for Mr. Johnson’s 2019 

Performance-Based Awards should be further modified to place greater emphasis on the PSI metric, 

which is the metric most closely aligned with wildfire safety. More specifically, the PSI metric measures 

the electric operations safety subcomponent of the Debtors’ safety metric (25% of the overall 

Performance Metrics). Accordingly, unlike the 2019 STIP, Mr. Johnson’s 2019 Performance-Based 

Awards will be subject to a PSI modifier. If for the 2019 performance period, the aggregate score for 

the PSI metric is below threshold, the total payout for Mr. Johnson’s 2019 Performance-Based Awards 

across all components will be reduced by 50%. If, for the 2019 performance period, the aggregate score 

for the PSI metric is at or above threshold but below target, the total payout for Mr. Johnson’s 2019 

Performance-Based Awards across all components will be reduced by 25%.

D. Analysis of Total Target Direct Compensation 

In assessing the reasonableness of Mr. Johnson’s total target direct compensation, I worked with 

my team to analyze competitive total target direct compensation, a standard benchmark that includes 

base salary, target annual bonus, and long-term incentives. 

My team and I developed competitive market total target direct compensation benchmarks from 

multiple data sources including (1) data from recently filed public proxy disclosures for 19 peer 

companies;6 and (2) published survey data from the broader energy services industry. The market data 

represents a blend of 50% proxy data from the Peer Companies and 50% published survey data from the 

broader energy services industry. My team and I compared Mr. Johnson’s total target direct 

compensation to the market rates of total target direct compensation. When compared to the market 

 6 The peer companies include: Ameren Corporation; American Electric Power Company, Inc., 

CenterPoint Energy, Inc.; Consolidated Edison, Inc.; Dominion Energy, Inc.; DTE Energy Company; 

Duke Energy Corporation; Edison International; Entergy Corporation; Eversource Energy; Exelon 

Corporation; FirstEnergy Corp.; NextEra Energy, Inc.; Public Service Enterprise Group Incorporated; 

Sempra Energy; The AES Corporation; The Southern Company; WEC Energy Group, Inc.; and Xcel 

Energy Inc. Case: 19-30088 Doc# 2666 Filed: 06/19/19 Entered: 06/19/19 22:55:03 Page 7 of

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data, Mr. Johnson’s total target direct compensation falls between the 50th percentile and 75th percentile

of the market. 

My team and I also reviewed the structure of Mr. Johnson’s incentive awards relative to our 

knowledge of utility industry practice, broader industry practice and CEO compensation within the 

context of a restructuring. Against all of these market reference points, it is my opinion that Mr. 

Johnson’s compensation terms are more performance oriented than typical market practice. Specific 

features of the terms that are more performance oriented than typical market practice include:

i. The absence of an annual cash incentive opportunity, which in this case has been replaced 

by the restricted stock unit awards;

ii. Stock options with exercise prices that exceed the stock price on the date of grant;

iii. Performance vesting conditions on stock options;

iv. The use of a performance modifier (the PSI modifier) that is applied to all aspects of 

performance-conditioned awards; and

v. A modifier that only applies a negative adjustment to an award that is determined based 

on the defined vesting conditions.

Furthermore, the use of equity awards and stock options to incent executives in a restructuring is highly 

unusual, creating greater incentives and corresponding risk of forfeiture or devaluation than would exist 

if the compensation was denominated solely in cash.

F. Conclusion

WTW has reviewed Mr. Johnson’s total target direct compensation and believes that the target 

pay opportunity is consistent with that provided to CEOs within the Debtors’ industry. In addition, I 

believe the structure of Mr. Johnson’s compensation is more highly performance oriented than typical 

market practice relative to the utility industry as well as other restructurings. Based on my experience 

and the work WTW and I have performed in these and similar cases, I believe Mr. Johnson’s 

compensation is reasonable given the facts and circumstances of these Chapter 11 Cases.

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Pursuant to section 1746 of title 28 of the United States Code, I declare under the penalty 

of perjury that the foregoing is true and correct. 

Dated: June 19, 2019 

Chicago, Illinois

____________________________

Douglas J. Friske, Managing Director 

Willis Towers Watson PLC 

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