Pacific Gas and Electric (PG&E) is the largest utility in the U.S., delivering electricity and natural gas to 16 million customers across 70,000 square miles of California. In 1996 and 2006, PG&E paid a total of $628 million to settle lawsuits involving its contamination of drinking water in the communities of Hinkley and Kettleman City. The 2000 movie Erin Brockovich was a dramatization of the Hinkley events. Despite ultimately taking responsibility, the toxic bloom is still spreading in Hinkley at a rate of 2.5 feet per day and “the entire town is threatened with extinction” because PG&E has failed to undertake the required containment. In 1997, PG&E was convicted of 700 misdemeanors for its failure to minimize fire hazards, re-routing the money it had received for that task to other purposes. In 2010, San Bruno was devastated when a PG&E gas line exploded with the force of a 1.1-magnitude earthquake, throwing a fireball 1000 feet into the sky and blasting a crater 167 feet wide. Eight people were killed and dozens were injured. Thirty eight homes were destroyed and another 66 were damaged. PG&E paid $565 million in damages. The California Public Utilities Commission (CPUC) imposed a $1.6 billion fine, and PG&E was convicted of several felonies, including obstructing the investigation. The National Transportation Safety Board concluded that the pipe was constructed in a “shoddy” fashion from “odd-shaped pieces and not welded properly.” It also concluded that PG&E’s recordkeeping system was so poor that it could not determine whether pressure levels were safe.

Questions 

1. Can PG&E be fairly characterized as a “fundamentally unethical company” or has it just acted appropriately on behalf of its shareholders? Explain. 

2. What do you think has allowed PG&E to engage in this kind of behavior for decades? Explain. 

3. How do you assess PG&E’s corporate governance the performance of its management and board of directors? Explain.