Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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CHECK THE APPROPRIATE BOX:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule
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The Southern Company
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
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BOX):
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Table of Contents
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Notice
of
2017
Annual Meeting of Stockholders
and
Proxy Statement
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Table of Contents
One of Americas Premier Energy
Companies
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46,000 megawatts of electric
generating capacity and 1,500 billion cubic feet of combined natural gas
consumption and throughput volume serving approximately 9.0 million
electric and gas customers through 11 premier state-regulated utilities, a
competitive generation company serving wholesale customers across America
and a nationally-recognized provider of customized energy
solutions.
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Consistently listed among the top
U.S. electric service providers by American Customer Satisfaction
Index.
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Ranked among best employers for
minorities and veterans.
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Goal to maximize long-term value to
stockholders through a customer, community and relationship-focused
business model that produces sustainable levels of return on energy
infrastructure.
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Goal of achieving an attractive
risk-adjusted return, supported by a simple, transparent business model
and sound financial policy.
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Experienced management focused on
creating and delivering value.
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Goal of supporting a strong credit
profile and preserving the ability to invest in additional value-accretive
projects.
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Dividend Objective: Regular, Predictable and Sustainable
Growth
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68 consecutive years of dividends
equal to or greater than the previous year.
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15 years of consecutive dividend
increases.
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Dividends Per Share
Paid
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2016 Energy
Mix for Southern Company
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What Distinguishes
Southern Company
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Electric Operating
Companies
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Only electric utility system in the
U.S. committed to developing the full portfolio of generation
resources natural gas, 21st century coal,
nuclear and renewables such as wind and solar together with an emphasis on energy
efficiency.
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Southern Company
Gas
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Largest natural gas distribution
operator in the U.S. with seven state-regulated local distribution
companies (LDCs), serving over 4.5 million customers. Midstream operations
include investments in six pipelines, including Southern Natural
Gas.
Gas marketing services complement LDCs
and midstream investments.
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Southern
Power
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Americas premier wholesale energy
partner investing in clean energy solutions serving municipalities,
electric cooperatives, investor-owned utilities and other energy
customers.
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PowerSecure
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Provides energy technologies and
services to electric utilities and large industrial, commercial,
institutional and municipal customers. Customer solutions include
distributed generation systems, utility infrastructure solutions and
energy efficiency products and services.
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Growth in
Renewables
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Approximately 4,000 megawatts of
renewable capacity announced or added since 2012, including the largest
voluntary utility solar portfolio in the U.S. at Georgia
Power.
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Research and
Development
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Industry leader in conducting robust
research, development and deployment of new, innovative energy
technologies.
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Major focus on greenhouse gas
emissions reduction and a record of technology advancement dating back to
the 1960s.
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Table of Contents
Thomas A.
Fanning
Chairman, President and
Chief Executive Officer
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T
here
is no doubt the world is rapidly changing on many fronts. At Southern
Company we are not merely adapting to this changing environment
we have the energy to lead the
change.
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Dear Fellow
Stockholders:
You are invited to attend the 2017 Annual
Meeting of Stockholders at 10:00 a.m., ET on Wednesday, May 24, 2017, at The
Lodge Conference Center at Callaway Gardens, Pine Mountain, Georgia.
2016 was a year of great growth and change
as we continued to fill in the energy value chain to sustain growth.
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We proudly welcomed more than 6,000
new colleagues and over 4.5 million customers with the addition of
Southern Company Gas (formerly AGL Resources Inc.).
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Our wholesale electric subsidiary,
Southern Power Company (Southern Power), continued to acquire solar, wind
and natural gas generation facilities, investing over $4.5
billion.
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We acquired a 50% equity interest in
the Southern Natural Gas pipeline system.
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With the acquisition of PowerSecure
International, Inc. (PowerSecure) and its strategic alliance with Bloom
Energy for the deployment of fuel cell and battery storage technologies,
were developing behind-the-meter infrastructure for customers across the
country.
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These decisions were all designed to help
meet customers current and future energy needs with a focus on the continued
execution of our customer-focused business model supporting constructive
regulatory environments with healthy capital spending and returns on our
investment. We now own and operate 11 premier state-regulated electric and gas
utilities that are complemented by energy assets under long-term contract,
including natural gas and renewable generation, interstate natural gas pipelines
and behind-the-meter infrastructure. We aim to continue to deliver a superior,
risk-adjusted total shareholder return (TSR) supported by regular, predictable
and sustainable earnings and dividends.
I am also proud to report that we were
recognized by
DiversityInc
as one of the Top 50 Companies for Diversity in 2016.
DiversityInc
also
ranked Southern Company number one on its list of Top 10 Companies for
Opportunity. This is especially meaningful because it testifies that we were
recognized not only for cultivating a diverse workplace, but that we are also
considered the number one company in America in which the individuals who
comprise that diverse workforce are afforded the opportunity to advance their
careers. In addition, we earned a perfect score from the Human Rights Campaign
on their Corporate Equality Index for 2017.
We are taking advantage of the notice and
access rules of the Securities and Exchange Commission (SEC) that allow us to
furnish our proxy materials to you over the internet instead of mailing paper
copies to each stockholder. We are mailing a Notice of Internet Availability of
Proxy Materials beginning on or about April 7, 2017 to certain of our
stockholders. The Notice contains instructions on how to access the proxy
materials and vote your proxy. We believe this approach allows us to provide
stockholders with a timely and convenient way to receive proxy materials and
vote, while lowering the costs of delivery and reducing the environmental impact
of the annual meeting.
Your vote is
important. We urge you to vote promptly, even if you plan to attend the annual
meeting.
Thank you for your continued support of
Southern Company.
Thomas A. Fanning
Important Notice Regarding the Availability of Proxy
Materials for the 2017 Annual Meeting of Stockholders to be held on May
24, 2017:
The proxy statement and the annual report
are available at
investor.southerncompany.com.
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investor.southerncompany.com
3
Table of Contents
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Notice of Annual Meeting of Stockholders
of
Southern Company
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Date and
Time
Wednesday, May 24, 2017 at 10:00 a.m.,
ET
Place
The Lodge Conference Center at Callaway
Gardens, Highway 18, Pine Mountain, Georgia 31822
Items of
Business
Stockholders are being asked to vote on
six agenda items at the 2017 annual meeting.
1
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Elect 15 Directors
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2
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Approve an amendment to the
Certificate of Incorporation to reduce the supermajority vote requirement
to a majority vote
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3
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Conduct an advisory vote to approve
executive compensation, often referred to as a Say on Pay
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4
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Conduct an advisory vote to approve
the frequency of future advisory votes on executive compensation, often
referred to as a Say on Frequency
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5
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Ratify the appointment of Deloitte
& Touche LLP as our independent registered public accounting firm for
2017
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6
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Consider a stockholder
proposal, if properly presented at the
meeting
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Record
Date
Stockholders of record at the close
of business on March 27, 2017 are entitled to attend and vote at the annual
meeting. On that date, there were shares of common stock of The Southern Company
(Southern Company, the Company, we, us or our) outstanding and entitled to
vote.
By Order of the Board of Directors.
April 7, 2017
EVERY VOTE IS IMPORTANT TO
SOUTHERN COMPANY
We have created
an annual meeting website to make it easy to access our 2017 annual
meeting materials
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www.southerncompanyannualmeeting.com
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At the annual meeting website you
can find an overview of the items to be voted, the proxy statement and the annual
report to read online or to download, as well as a link to vote your
shares.
Even if you plan to attend the
annual meeting in person, please vote as soon as possible by internet or
by telephone or, if you received a paper copy of the proxy form by mail,
by signing and returning the proxy form.
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Vote by Internet or Telephone
Voting by internet or by telephone is fast and convenient,
and your vote is immediately confirmed and tabulated.
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www.proxyvote.com
24/7
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1-800-690-6903
24/7
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Vote by Mail
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If you received a
paper copy of the proxy form by mail, you can mark, sign, date and return
the proxy form in the enclosed, postage-paid
envelope.
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4
Southern Company
2017 Proxy
Statement
Table of
Contents
This summary highlights information
contained elsewhere in this proxy statement. This summary does not contain all
of the information that you should consider, and you should read the entire
proxy statement carefully before voting.
Annual Meeting Agenda
Item
1
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Elect
15 Directors
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Each nominee holds or has held
senior executive positions, maintains the highest degree of integrity and
ethical standards and complements the needs of the
Company.
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Through their positions,
responsibilities, skills and perspectives, which span various industries
and organizations, these nominees represent a Board of Directors (Board)
that is diverse and possesses appropriate collective knowledge and
experience in accounting, finance, leadership, business operations, risk
management, corporate governance and our industry and key subsidiaries
service territories.
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The Board recommends a vote
FOR
each Director nominee.
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See page 15 for further
information.
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Juanita
Powell
Baranco
Executive Vice President and Chief Operating Officer
of Baranco Automotive Group
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Jon A. Boscia
Founder and President, Boardroom Advisors
LLC
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Henry A. Hal
Clark III
Senior Advisor of Evercore
(retired)
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Age:
68
Director since:
2006
Independent Director:
Yes
Current Committees:
Audit
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Age:
64
Director since:
2007
Independent Director:
Yes
Current Committees:
Audit
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Age:
67
Director since:
2009
Independent Director:
Yes
Current Committees:
Compensation and Management Succession
(Chair), Finance
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Thomas A. Fanning
Chairman of the Board, President and Chief
Executive Officer (CEO), Southern Company
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David J. Grain
Founder and Managing Partner of Grain
Management LLC
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Veronica M. Hagen
Chief Executive Officer, Polymer Group,
Inc. (retired)
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Age:
60
Director since:
2010
Independent Director:
No
Current Committees:
None
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Age:
54
Director since:
2012
Independent Director:
Yes
Current Committees:
Compensation and Management Succession,
Finance (Chair)
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Age:
71
Director since:
2008
Independent Director:
Yes
Current Committees:
Governance (Chair),
Nuclear/Operations
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Warren A. Hood, Jr.
Chairman and Chief Executive Officer, Hood
Companies Inc.
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Linda P. Hudson
Founder, Chairman and Chief Executive
Officer, The Cardea Group
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Donald M. James
Chairman and Chief Executive Officer,
Vulcan Materials Company (retired)
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Age:
65
Director since:
2007
Independent Director:
Yes
Current Committees:
Audit
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Age:
66
Director since:
2014
Independent Director:
Yes
Current Committees:
Governance, Nuclear/Operations, Business
Security Subcommittee (Chair)
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Age:
68
Director since:
1999
Independent Director:
Yes
Current Committees:
Compensation and Management Succession,
Finance
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investor.southerncompany.com
5
Table of
Contents
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Proxy
Summary
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John D. Johns
Chairman and Chief Executive Officer, Protective Life
Corporation
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Dale E. Klein
Associate Vice Chancellor of Research, University of
Texas System
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William G. Smith, Jr.
Chairman, President and Chief Executive
Officer, Capital City Bank Group, Inc.
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Age:
65
Director since:
2015
Independent Director:
Yes
Current Committees:
Audit (Chair)
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Age:
69
Director since:
2010
Independent Director:
Yes
Current Committees:
Compensation and Management Succession,
Nuclear/Operations, Business Security
Subcommittee
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Age:
63
Director since:
2006
Independent Director:
Yes
Current Committees:
Finance,
Governance
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Steven R. Specker
Chief Executive Officer, Tri Alpha Energy,
Inc.
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Larry D. Thompson
John A. Sibley Professor of Corporate and
Business Law, The University of Georgia School of Law
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E. Jenner Wood III
Corporate Executive Vice President
Wholesale Banking, SunTrust Banks, Inc. (retired)
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Age:
71
Director since:
2010
Independent Director:
Yes
Current Committees:
Compensation and Management Succession,
Nuclear/Operations (Chair)
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Age:
71
Director since:
2014
Independent Director:
Yes, Lead Independent Director
Current Committees:
Finance, Governance
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Age:
65
Director since:
2012
Independent Director:
Yes
Current Committees:
Governance,
Nuclear/Operations
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Qualifications, Attributes, Skills and Experience of the
Board as a Whole
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CEO or senior executive
leadership experience
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Diversity of race,
ethnicity, gender, age, cultural background or professional
experience
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Electric or gas utility
experience or nuclear operations experience
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Engineering, innovation
or technology experience
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Federal, state or local
government or regulatory experience
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Financial, banking or
investment experience
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Knowledge of the
traditional electric operating companies or Southern Company
Gas
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Risk oversight or risk
management experience
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Board Independence
All Director
nominees are independent
except the
CEO
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Board Diversity
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6
Southern Company
2017 Proxy
Statement
Table of
Contents
Proxy
Summary
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Key
Corporate Governance Practices
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We seek to establish corporate
governance standards and practices that create long-term value for our
stockholders and positive influences on the governance of the Company. Our key
corporate governance practices include:
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Annual election of
Directors
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Majority voting for Directors, with
a director resignation
policy
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10% threshold for stockholders to
request a special meeting
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Adoption of proxy access bylaw that
provides stockholders
(up to
group of 20) that have maintained ownership of 3% of
shares for three years the ability to
nominate the greater of
two
nominees or 20% of Directors
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14 of 15 Directors are independent
with an average tenure of
independent Directors of seven years
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Strong Lead Independent
Director
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All Board committees are comprised
of
independent
Directors
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Annual Board and committee
self-evaluations
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Proactive stockholder
engagement
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Clawback policy under our Omnibus
Plan
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Strong stock ownership
guidelines
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Annual management succession
planning review
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Anti-hedging and anti-pledging
provisions
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Board Tenure
Tenure of Independent Directors
(Years of consecutive service)
Average Tenure of Independent
Directors:
7
years
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Recent and Proposed Governance and Disclosure
Enhancements
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Adopted a proxy access right for
stockholders
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Continued our stockholder
engagement efforts
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Added five new Directors to the
Board in the past five
years
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Included disclosure about Board
refreshment, Board and
committee self-evaluations and management succession
planning
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Included a message from the Lead
Independent Director
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Eliminated the fair price
anti-takeover provision in the
Certificate of Incorporation
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Proposed an amendment to the
Certificate of Incorporation to
eliminate the supermajority vote
requirement
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Item
2
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Approve
an Amendment to the Certificate of Incorporation to Reduce the
Supermajority Vote Requirement to a Majority Vote
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A
supermajority vote requirement like the one contained in Article Eleventh
of the Certificate of Incorporation, as amended (Certificate of
Incorporation or Certificate), historically has been intended to
facilitate corporate governance stability and provide protection against
self-interested action by large stockholders by requiring broad
stockholder consensus to make certain fundamental changes.
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As corporate governance
standards have evolved, many stockholders and commentators now view a
supermajority requirement as limiting the Boards accountability to
stockholders and the ability of stockholders to effectively participate in
corporate governance.
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The Board recommends a vote
FOR
approval of an amendment to the
Certificate to reduce the supermajority vote requirement to a majority
vote.
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See page 39 for further information.
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investor.southerncompany.com
7
Table of
Contents
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Proxy
Summary
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Item
3
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Advisory Vote to Approve Executive Compensation (Say on
Pay)
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We believe
our compensation program provides the appropriate mix of fixed and
at-risk compensation. Our short- and long-term performance-based
compensation program ties pay to Company performance, rewards achievement
of financial and operational goals and relative TSR, encourages individual
performance that is in-line with our strategy, is aligned with stockholder
interests and remains competitive with our industry peers.
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The Board recommends a vote
FOR
approval of executive
compensation.
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See page 78 for further
information.
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We target the total direct
compensation for our executives at market median and place a significant portion
of that target compensation at risk subject to achieving both short-term and
long-term performance goals. In fact, only the base salary portion of executive
compensation is fixed.
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CEO
Target Pay
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89%
At Risk-Subject to Performance Goals
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Salary
11%
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Annual
Cash
Incentive Award
16%
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Long-Term Equity
Incentive Award
73%
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We have continued with the
same compensation program structure for 2016, tying a significant majority of
executive compensation to performance. The key performance based elements are
the annual cash incentive award and the long-term equity incentive
award.
Annual Cash Incentive Award
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Awards under our Performance Pay
Program (PPP) are earned based
on the achievement of performance goals over a one-year performance
period.
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Performance goals for 2016 include
financial goals (earnings per
share (EPS) and business unit net income), operational goals and individual performance
goals intended to drive
performance that we believe will lead to long-term success for the
Company.
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Payout is made in cash after the
end of the performance period.
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Long-Term Equity Incentive Award
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Awards under our Performance Share
Program (PSP) are granted in
the form of performance share units that are earned based on the achievement of
performance goals over a
three-year performance period.
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Performance goals for the 2016 to
2018 performance period include
a cumulative three-year EPS goal (25% weighting), an equity-weighted return on equity (ROE) goal (25% weighting) and a relative TSR
performance goal (50%
weighting).
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Payout is made in shares of common
stock after the end of the
three-year performance period.
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2016 Financial and Operational
Performance
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2016 was a successful year for
us with our adjusted EPS exceeding our guidance range for the year. We expanded
our reach while continuing the strong financial performance of our traditional
electric operating companies and our electric wholesale subsidiary, Southern
Power. We also demonstrated strong operational performance for the
year.
Financial
Goals and Achievement for 2016 Performance Pay Program
We exceeded the financial
goals for the year set by the Compensation and Management Succession Committee
under our 2016 Performance Pay Program. Financial measures tied to compensation
performance goals included EPS for Southern Company and net income for our
various business units.
Operational Goal Achievement for 2016 Performance Pay
Program
Operating performance was
strong across the Southern Company system for 2016. Operational measures for the
2016 Performance Pay Program included customer satisfaction, reliability,
availability, nuclear plant operations, major projects, safety and culture.
Measures and weightings vary among the operating companies.
8
Southern Company
2017 Proxy
Statement
Table of Contents
Proxy
Summary
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Incentive
Compensation Earned for Performance Periods Ended in
2016
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The compensation earned by our
named executive officers (NEOs) demonstrates our commitment to pay for
performance.
Annual
Cash Incentive Plan 2016 Performance Pay Program
Our Performance Pay Program
rewards annual financial and operational performance as well as individual NEO
performance. We had strong financial and operational performance for 2016,
exceeding our overall targets for the year. The Compensation and Management
Succession Committee also believed the 2016 individual performance contributions
by our NEOs were strong. Accordingly, payouts for all participants in the
program, including the NEOs, were above target. For the NEOs, payouts ranged
from 167% to 174% of target.
Long-Term
Equity Incentive Program 2014-2016 Performance Share Program
In 2014, 60% of the target
value of our long-term equity incentive program was granted in the form of
performance shares under our Performance Share Program. For the three-year
performance period of 2014 through 2016, performance shares could be earned
based on a relative TSR performance goal. Our three-year TSR performance
relative to the utility peer group was below the threshold performance level,
resulting in a payout at 0% for the Performance Share Program awards for all
participants, including the NEOs.
Compensation
Governance Overview
|
What We
Do
✓
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89%
of CEO target pay is at risk based on achievement of performance
goals
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✓
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Performance shares subject to achievement of three
performance measures over a three-year period: cumulative EPS, ROE and
relative TSR
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✓
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Clawback provision for performance-based
pay
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✓
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Independent compensation consultant
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✓
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Policy against hedging and pledging
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✓
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Dividends on stock awards received only if underlying award
is earned
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✓
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Annual charter review and self-evaluation by the Compensation
and Management Succession Committee
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✓
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Strong stock ownership requirements
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✓
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Annual pay risk assessment
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✓
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Change-in-control severance payouts require double-trigger of
change in control and termination of employment
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✓
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Annual review of tally sheets
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✓
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Ongoing stockholder engagement
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✓
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Regular updates on best practices to the Compensation and
Management Succession Committee from the independent compensation
consultant
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What We Dont
Do
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✕
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No tax gross ups for NEOs (except on certain relocation-related
expenses)
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✕
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NEOs receive limited ongoing perquisites that make up a small
portion of total compensation
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✕
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No employment agreements with our executives
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✕
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No stock option repricing without stockholder
approval
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✕
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No excise tax gross-ups on change-in-control severance
arrangements
|
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✕
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Granting of equity awards are not timed to coincide with the
release of material, non-public information
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Changes
to Long-Term Equity Incentive Program
Based on feedback from investors
and input from our independent compensation consultant, along with our
ongoing evaluation of best practices, the makeup of our long-term equity
incentive program has changed over the past five years.
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60% performance
shares with a relative TSR performance measure over a three-year
performance period and 40% stock options
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100% performance
shares with three performance measures over a three-year performance
period: cumulative EPS, equity-weighted ROE and relative TSR
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investor.southerncompany.com
9
Table of Contents
|
|
Proxy
Summary
|
Item
4
|
Advisory Vote to
Approve the Frequency of Future Advisory Votes on Executive Compensation
(Say on Frequency)
|
|
|
We are
required to hold an advisory vote on the frequency of the advisory vote to
approve executive compensation (Say on Frequency) at least once every six
years. In 2011, the Board recommended and the stockholders voted
overwhelmingly in favor of an annual Say on Pay vote. The Board continues
to believe that the Say on Pay vote should be held every year (on an
annual basis).
|
|
|
|
The Board recommends a vote for the frequency of the advisory vote
on executive compensation every
ONE
YEAR
(on an annual basis).
|
|
|
|
See page 78 for further information.
|
Item
5
|
Ratify
the Independent Registered Public Accounting Firm for
2017
|
|
|
The Audit
Committee has appointed Deloitte & Touche LLP (Deloitte & Touche)
as our independent registered public accounting firm for
2017.
|
|
|
This appointment is
being submitted to stockholders for ratification.
|
|
|
|
The Board recommends a vote
FOR
ratification of the appointment of
Deloitte & Touche as our independent registered public accounting firm
for 2017.
|
|
|
|
See page 79 for further information.
|
Stockholder
Proposal
Item
6
|
Vote on
a Stockholder Proposal
|
|
|
We have been
advised that a stockholder proposal is intended to be submitted at
the annual meeting.
|
|
|
|
The Board recommends a vote
AGAINST
the
stockholder proposal.
|
|
|
|
See page 84 for further information.
|
10
Southern Company
2017 Proxy
Statement
Table of Contents
investor.southerncompany.com
11
Table of Contents
|
|
FAQs about Voting and the Annual
Meeting
|
The following table summarizes
the Boards voting recommendations for each proposal, the vote required for each
proposal to pass and the effect of abstentions and uninstructed shares on each
proposal.
Item
|
|
Board
Recommendation
|
|
Voting
Standard
|
|
Abstentions
|
|
Uninstructed
Shares
|
Item 1
Election of Directors
|
|
✓
FOR
|
|
Majority of votes cast for each
Director
|
|
No effect
|
|
No effect
|
Item 2
Approval of an amendment to the
Certificate to reduce the supermajority vote requirement to a majority
vote
|
|
✓
FOR
|
|
At least two-thirds of issued and
outstanding shares
|
|
Count as a vote against
|
|
Count as a vote
against
|
Item 3
Advisory vote to approve
executive compensation (Say on Pay)
|
|
✓
FOR
|
|
Majority of votes cast
|
|
No effect
|
|
No effect
|
Item 4
Advisory vote to approve the
frequency of future advisory votes on executive compensation (Say on
Frequency)
|
|
✓
FOR
|
|
Plurality of the votes
cast
|
|
No effect
|
|
No effect
|
Item 5
Ratification of the appointment
of Deloitte & Touche as the independent registered public accounting
firm for 2017
|
|
✓
FOR
|
|
Majority of votes cast
|
|
No effect
|
|
Discretionary voting by broker
permitted
|
Items 6
Stockholder
Proposal
|
|
✕
AGAINST
|
|
Majority of votes cast
|
|
No effect
|
|
No
effect
|
Q:
|
Who is entitled to vote?
|
A:
|
All
stockholders of record at the close of business on the record date of
March 27, 2017 may vote.
|
Q:
|
Can I attend the annual
meeting?
|
A:
|
All stockholders are invited to the
annual meeting. Attendees need to bring photo identification, such as a
drivers license, and proof of ownership to gain admission to the annual
meeting. If you are a holder of record, the top half of your proxy card is
your proof of ownership. If you hold your shares in street name, you will
need proof of ownership to be admitted to the annual meeting. Examples of
proof of ownership are a recent brokerage statement or a letter from your
bank or broker.
Please note that cameras, sound or
video recording equipment, cellular telephones, smartphones or other
similar equipment and electronic devices are not permitted to be used
during the annual meeting. Large bags or backpacks may not be brought into
the annual meeting.
If you hold your shares in street
name and you want to give voting instructions at the annual meeting, you
must get a legal proxy in your name from the broker, bank or other nominee
that holds your shares.
|
Q:
|
What is notice and
access?
|
A:
|
The SECs notice and access rule allows companies to deliver a Notice of Internet Availability of Proxy Materials (Notice) to stockholders in lieu of a paper copy of the proxy statement and annual report. The Notice provides instructions as to how stockholders can access the proxy statement and the annual report online, contains a listing of matters to be considered at the annual meeting and sets forth instructions as to how shares can be voted. Instructions for requesting a paper copy of the proxy statement and the annual report are set forth on the Notice.
Shares must be voted by internet, by phone or by completing and returning a proxy form. Shares cannot be voted by marking, writing on and/or returning the Notice. Any Notices that are returned will not be counted as votes.
|
Q:
|
How do I give voting instructions?
|
A:
|
You may attend the annual meeting
and give instructions in person or give instructions by internet, by phone
or, if you received a printed proxy form, by mail. Information for giving
voting instructions is on the Notice or form of proxy and trustee voting
instruction form (proxy form).
For those investors whose shares are held by a broker,
bank or other nominee, you must complete and return the voting instruction
form provided by your broker, bank or nominee in order to instruct your
broker, bank or nominee on how to vote.
|
Q:
|
What shares are included on the proxy form?
|
A:
|
If you are a stockholder of record,
you will receive only one Notice or proxy form for all the shares of
common stock you hold in certificate form, in book-entry form and in any
Company benefit plan.
Please vote proxies for all
accounts to ensure that all of your shares are voted. If you wish to
consolidate multiple registered accounts, contact Wells Fargo Shareowner
Services at 1-800-554- 7626 or at
www.shareowneronline.com
.
|
12
Southern Company
2017 Proxy
Statement
Table
of Contents
FAQs
about Voting and the Annual Meeting
|
|
|
Q:
|
Will my
shares be voted if I do not vote by internet, by telephone or by signing
and returning my proxy form?
|
A:
|
If you are a holder of record and
you do not vote, then your shares will not count in deciding the matters
presented for stockholder consideration at the annual meeting. With
respect to certain matters, your failure to vote will have the same effect
as a vote against the matter.
|
|
|
|
If you are a current or former
Southern Company system employee or other individual who holds shares of
common stock in the Southern Company Employee Savings Plan (ESP), AGL
Resources Inc. Retirement Savings Plus Plan (RSP) or Nicor Gas Thrift Plan
(Nicor Plan) and you do not provide the trustee of the relevant plan
(Trustee) with timely voting instructions, the following will occur in
accordance with the applicable plan provision and/or policy for unvoted
shares:
|
|
|
ESP: The Pension Fund Investment
Review Committee may direct the Trustee how to vote these
shares.
|
|
|
RSP: The plans Investment Committee
will direct the Trustee how to vote these
shares.
|
|
|
Nicor Plan: The Trustee may vote
these shares in the same proportion as it votes shares owned by Nicor Plan
participants who voted their shares.
|
|
Procedures are in place to
safeguard the confidentiality of your voting instructions.
If you are a beneficial owner, you
will receive voting instruction information from the bank, broker or other
nominee through which you own your shares of common stock.
If your shares are held through a
bank, broker or other nominee, your broker may vote your shares under
certain limited circumstances if you do not provide voting instructions
before the annual meeting. These circumstances include voting your shares
on routine matters under New York Stock Exchange (NYSE) rules, such as
the ratification of the appointment of our independent registered public
accounting firm described in Item 5 of this proxy statement. With respect
to Item 5, if you do not vote your shares, your bank or broker may vote
your shares on your behalf or leave your shares unvoted. The remaining
proposals are not considered routine matters under NYSE rules. When a
proposal is not a routine matter and the brokerage firm has not received
voting instructions, the brokerage firm cannot vote the shares on that
proposal.
We encourage you to provide
instructions to your broker or bank by voting your proxy so that your
shares will be voted at the annual meeting in accordance with your
wishes.
|
Q:
|
What if I am a stockholder of record and do not specify
a choice for a matter when returning a proxy form?
|
A:
|
Stockholders should
specify their choice for each matter on the proxy form. If no specific
instructions are given, proxies which are signed and returned will be
voted in accordance with the Boards recommendations.
|
|
Q:
|
Can I change my vote?
|
A:
|
Yes. If you are a
holder of record, you may change your vote by submitting a subsequent
proxy, by written request received by the Corporate Secretary prior to the
meeting or by attending the annual meeting and voting your
shares.
|
|
|
If your shares are
held through a broker, bank or other nominee, you must follow the
instructions of your broker, bank or other nominee to revoke your voting
instructions.
|
|
Q:
|
How are votes counted?
|
A:
|
Each share counts as
one vote.
|
|
Q:
|
How many votes do you need to hold the annual
meeting?
|
A:
|
A quorum is required
to transact business at the annual meeting. Stockholders of record holding
shares of stock constituting a majority of the shares entitled to be cast
shall constitute a quorum.
|
|
|
Abstentions that are
marked on the proxy form and broker non-votes are included for the
purpose of determining a quorum, but shares that otherwise are not voted
are not counted toward a quorum.
|
|
Q:
|
What are broker non-votes?
|
A:
|
Broker non-votes occur
on a matter up for vote when a broker, bank or other holder of shares you
own in street name is not permitted to vote on that particular matter
without instructions from you, you do not give such instructions and the
broker, bank or other nominee indicates on its proxy form, or otherwise
notifies us, that it does not have authority to vote its shares on that
matter. Whether a broker has authority to vote its shares on uninstructed
matters is determined by NYSE rules.
|
|
Q:
|
Can the proxy statement be accessed from the
internet?
|
A:
|
Yes. You can access
the proxy statement on our website at
investor.southerncompany.com
.
|
|
Q:
|
Can I request a copy of the Companys 2016 Annual Report on Form
10-K?
|
A:
|
Yes. A copy of our
2016 Annual Report on Form 10-K including financial statements, as filed
with the SEC, may be obtained without charge upon written request to the
Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW,
Atlanta, Georgia 30308. You can also access the document on our website
at
investor.southerncompany.com
.
|
investor.southerncompany.com
13
Table
of Contents
|
|
FAQs about Voting
and the Annual Meeting
|
Q:
|
Does the Company offer electronic delivery of proxy
materials?
|
A:
|
Yes. Most stockholders
can elect to receive an email that will provide an electronic link to the
proxy statement, annual report and proxy voting site. Opting to receive
your proxy materials on- line saves us the cost of producing and mailing
documents.
|
|
|
You may sign up for
electronic delivery when you vote your proxy via the internet or by
visiting
www.icsdelivery.com/so
. Once you enroll for electronic delivery, you will receive proxy
materials electronically as long as your account remains active or until
you cancel your enrollment. If you consent to electronic access, you will
be responsible for your usual internet-related charges (e.g., on-line fees
and telephone charges) in connection with electronic viewing and printing
of the proxy statement and annual report. We will continue to distribute
printed materials to stockholders who do not consent to access these
materials electronically.
|
|
Q:
|
What is householding?
|
A:
|
Stockholders sharing a
single address may receive only one copy of the proxy statement and annual
report or the Notice, unless the transfer agent, broker, bank or other
nominee has received contrary instructions from any owner at that address.
This practice known as householding is designed to reduce printing and
mailing costs. If a stockholder of record would like to either participate
or cancel participation in householding, he or she may contact Wells Fargo
Shareowner Services at 1-800-554-7626. If you own indirectly through a
broker, bank or other nominee, please contact your financial
institution.
|
|
Q:
|
Could any additional proposals be raised at the annual
meeting?
|
A:
|
We do not know of any
items, other than those referred to in the Notice of Annual Meeting of
Stockholders, which may properly come before the annual meeting. As to any
other item or proposal that may properly come before the annual meeting,
including voting on a proposal omitted from this proxy statement pursuant
to the rules of the SEC, it is intended that proxies will be voted in
accordance with the discretion of the proxy holders.
|
|
Q:
|
When are stockholder proposals due for the 2018 annual
meeting of stockholders?
|
A:
|
The deadline for the
receipt of stockholder proposals to be considered for inclusion in our
proxy materials for the 2018 annual meeting is December 8, 2017. Proposals
must be submitted in writing to Corporate Secretary, Southern Company, 30
Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308. The proxy solicited
by the Board of Directors for the 2018 annual meeting will confer
discretionary authority to vote on any stockholder proposal presented at
that meeting that is not included in our proxy materials unless we are
provided written notice of such proposal no later than February 21,
2018.
|
|
Q:
|
Who is soliciting my proxy and who pays the expense of
such solicitations?
|
A:
|
Your proxy is being
solicited on behalf of the Board.
|
|
|
We pay the cost of
soliciting proxies. We expect to retain Georgeson Inc. to assist with the
solicitation of proxies for a fee of $12,500, plus additional fees for
telephone and other solicitation of proxies or other services, if needed,
and reimbursement of out-of-pocket expenses. Our officers or other
employees may solicit proxies to have a larger representation at the
meeting. None of these officers or other employees will receive any
additional compensation for these services. Upon request, we will
reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding solicitation
material to the beneficial owners of the common
stock.
|
14
Southern Company
2017 Proxy
Statement
Table
of Contents
|
|
Corporate Governance at
Southern
Company
|
Company Organization
Southern Company is a holding company
managed by a core group of officers and governed by a Board that is currently
comprised of 15 members. Directors are elected annually.
The Board has adopted and operates under a
set of Corporate Governance Guidelines which are available on our website
at
investor.southerncompany.com
under Corporate Governance.
Board of
Directors Overview
|
|
The Board oversees, counsels and
directs management in the long-term interests of Southern Company and its
stockholders. The Boards major responsibilities include:
Overseeing the conduct of our business and assessing our business
and other enterprise risks;
Reviewing and approving our key financial objectives, strategic
and operating plans and other significant
actions;
Overseeing our processes for maintaining the integrity of our
financial statements and other public disclosures and our compliance with
law and ethics;
Evaluating CEO and senior management performance and
determining executive compensation;
Planning for CEO succession and monitoring managements
succession planning for other key executive officers;
and
Establishing an effective governance structure,
including appropriate Board composition and planning for Board
succession.
|
Item
1
|
Election
of 15
Directors
|
|
The Board,
acting upon the recommendation of the Governance Committee, has nominated
the 15 Directors currently serving for re-election to the Southern Company
Board of Directors.
|
|
|
|
|
|
The Board recommends a vote
FOR
each Director
nominee.
|
Nominees for Election as
Directors
|
|
Each nominee holds or has held
senior executive positions, maintains the highest degree of integrity and
ethical standards and complements the needs of the
Company.
|
|
Through their positions,
responsibilities, skills and perspectives, which span various industries
and organizations, these nominees represent a Board that is diverse and
possesses appropriate collective knowledge and experience in accounting,
finance, leadership, business operations, risk management, corporate
governance and our industry and subsidiaries service
territories.
|
|
Each nominee, if elected, will serve
until the 2018 annual meeting of stockholders.
|
|
The proxies
named on the proxy form will vote each properly executed proxy form for
the election of the 15 Director nominees, unless otherwise
instructed.
|
|
If any named nominee becomes
unavailable for election, the Board may substitute another nominee. In
that event, the proxy would be voted for the substitute nominee unless
instructed otherwise on the proxy
form.
|
investor.southerncompany.com
15
Table
of Contents
|
|
Corporate Governance at Southern
Company
|
Juanita Powell Baranco
(Independent)
|
Age:
68
Director since:
2006
Board
committee:
Audit
|
|
|
|
|
Executive Vice President and
Chief Operating Officer of Baranco Automotive Group, automobile
sales
|
Director highlights:
Ms. Barancos particular expertise in
business operations, her significant familiarity with Georgia Power
Company (Georgia Power or GPC) and her civic involvement are valuable to
the Board.
|
|
Ms. Baranco had a successful legal career, which
included serving as Assistant Attorney General for the State of Georgia,
before she and her husband founded the first Baranco automobile dealership
in Atlanta in 1978.
She served as a Director of Georgia Power, the largest
subsidiary of the Company, from 1997 to 2006. During her tenure on the
Georgia Power Board, she was a member of the Controls and Compliance,
Diversity, Executive and Nuclear Operations Overview
Committees.
She served on the Federal Reserve Bank of Atlanta Board
for a number of years and also on the Boards of Directors of John H.
Harland Company and Cox Radio, Inc.
An active leader in the Atlanta community, she serves on
the Board of Trustees for Clark Atlanta University and on the Advisory
Council for the Catholic Foundation of North Georgia. Ms. Baranco is also
on the Board of the Commerce Club, the Woodruff Arts Center and the
Buckhead Coalition. She is also past Chair of the Board of Regents for the
University System of Georgia and past Board Chair for the Sickle Cell
Foundation of Georgia.
Other public company
directorships:
None (formerly a Director of
Cox Radio, Inc., John H. Harland Company and Georgia
Power)
|
Jon A. Boscia
(Independent)
|
Age:
64
Director since:
2007
Board
committee:
Audit
|
|
|
|
|
Founder and President, Boardroom
Advisors LLC, board governance consulting
firm
|
Director
highlights:
Mr. Boscias extensive
background in finance, investment management, information technology and
corporate governance is valuable to the Board.
|
|
From September 2008 until March 2011, Mr. Boscia served
as President of Sun Life Financial Inc. In this capacity, Mr. Boscia
managed a portfolio of the companys operations with ultimate
responsibility for the United States, United Kingdom and Asia business
groups and directed the global marketing and investment management
functions.
Previously, Mr. Boscia served as Chairman of the Board
and Chief Executive Officer of Lincoln Financial Group, a diversified
financial services organization, until his retirement in 2007. Mr. Boscia
became the Chief Executive Officer of Lincoln Financial Group in 1998.
During his time at Lincoln Financial Group, the company earned a
reputation for its stellar performance in making major
acquisitions.
Mr. Boscia is a past member of the Board of PHH
Corporation, where he was Chair of the Audit Committee and a member of the
Regulatory Oversight Committee, past member of the Board of Sun Life
Financial Inc., where he was a member of the Investment Oversight
Committee and the Risk Review Committee, and past member of the Board of
The Hershey Company, where he chaired the Corporate Governance Committee
and served on the Executive Committee.
In addition, Mr. Boscia has served in leadership
positions on other public company Boards as well as not-for-profit and
industry Boards.
Other public company
directorships:
None (formerly a Director of
PHH Corporation, Sun Life Financial Inc., Armstrong World Industries,
Lincoln Financial Group, Georgia Pacific Corporation and The Hershey
Company)
|
16
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
Henry A. Hal Clark III
(Independent)
|
Age:
67
Director since:
2009
Board
committees:
Compensation and Management
Succession (Chair), Finance
|
|
|
|
|
Senior Advisor of Evercore
(retired), corporate finance advisory firm
|
Director highlights:
Mr. Clarks utility global financial and utility industry
expertise as well as his expertise in capital market transactions are
valuable to the Board.
|
|
Mr. Clark was a Senior Advisor with Evercore (formerly
Evercore Partners Inc.) from July 2009 until his retirement in December 2016. As a
Senior Advisor, Mr. Clark was primarily focused on expanding advisory
activities in North America with a particular focus on the power and utilities
sectors.
With more than 30 years of experience in the global
financial and the utility industries, Mr. Clark brings a wealth of experience
in finance and risk management to his role as a Director.
Prior to joining Evercore Partners Inc., Mr. Clark was
Group Chairman of Global Power and Utilities at Citigroup, Inc. from 2001
to 2009.
His work experience includes numerous capital markets
transactions of debt, equity, bank loans, convertible securities and
securitization, as well as advice in connection with mergers and
acquisitions. He also has served as policy advisor to numerous clients on
capital structure, cost of capital, dividend strategies and various
financing strategies.
He has served as Chair of the Wall Street Advisory Group
of the Edison Electric Institute.
Other public company
directorships:
None
|
Thomas A. Fanning
(Chairman, President and Chief Executive Officer)
|
Age:
60
Director since:
2010
Board
committee:
None
|
|
|
|
|
Chairman of the Board, President
and Chief Executive Officer of the Company
|
Director highlights:
Mr. Fannings knowledge of our business and the
utility industry, understanding of the complex regulatory structure of the
industry and experience in strategy development and execution uniquely
qualify him to be the Chairman of the Board.
|
|
Mr. Fanning has held numerous leadership positions
across the Southern Company system during his more than 30 years with the
Company. He served as Executive Vice President and Chief Operating Officer
of the Company from 2008 to 2010, leading the Companys generation and
transmission, engineering and construction services, research and
environmental affairs, system planning and competitive generation business
units. He served as the Companys Executive Vice President and Chief
Financial Officer from 2003 to 2008, where he was responsible for the
Companys accounting, finance, tax, investor relations, treasury and risk
management functions. In those roles, he also served as the chief risk
officer and had responsibility for corporate strategy.
Mr. Fanning is on the Board of Southern Power, a
subsidiary of Southern Company.
Mr. Fanning is a Director of Vulcan Materials Company,
serving as a member of the Audit Committee and the Compensation Committee,
and the Federal Reserve Bank of Atlanta, serving as Chairman of the
Board.
Other public company
directorships:
Vulcan Materials Company
(formerly a Director of The St. Joe
Company)
|
investor.southerncompany.com
17
Table of Contents
|
|
Corporate Governance
at Southern Company
|
David J. Grain
(Independent)
|
Age:
54
Director since:
2012
Board committees:
Compensation
and Management Succession, Finance (Chair)
|
|
|
|
|
Founder and Managing Partner, Grain Management, LLC, private
equity firm
|
Director
highlights:
Mr. Grains background in finance, investment
management and wireless communications infrastructure, leadership and
civic involvement are valuable to the Board.
|
|
Mr. Grain is the founding member and managing partner of
Grain Management, LLC (Grain Management), a private equity firm focused on
investments in the media and communications sectors, which he founded in
2006. With offices in Sarasota, Florida and Washington, D.C., the firm
manages funds for a number of the countrys leading academic institutions,
endowments and public pension funds. Grain Management also builds, owns
and operates wireless infrastructure assets across North
America.
Mr. Grain also founded and was Chief Executive Officer
of Grain Communications Group, Inc.
Prior to founding Grain Management, he served as
President of Global Signal, Inc., Senior Vice President of AT&T
Broadbands New England Region and Executive Director in the High Yield
Finance Department at Morgan Stanley.
Mr. Grain was appointed by President Obama in 2011 to
the National Infrastructure Advisory Council.
He previously served as Chairman of the Florida State
Board of Administration Investment Advisory Council as an appointee of the
former Governor Charlie Crist.
He is currently a Director at Gateway Bank of Southwest
Florida and a Trustee of the College of the Holy Cross and serves on the
Investment Committee of the United States Tennis Association.
Other public company
directorships:
None
|
Veronica M. Hagen
(Independent)
|
Age:
71
Director since:
2008
Board
committees:
Governance (Chair),
Nuclear/Operations
|
|
|
|
|
Chief Executive Officer, Polymer
Group, Inc. (retired), engineered materials
|
Director highlights:
Ms. Hagens global operational management
experience and commercial business leadership are valuable to the
Board.
|
|
From 2007 until her retirement in 2013, Ms. Hagen served
as Chief Executive Officer of Polymer Group, Inc. and served from 2007 to
2015 as a Director. Ms. Hagen also served as President of Polymer Group,
Inc. from January 2011 until her retirement in 2013. Polymer Group, Inc.
is a leading producer and marketer of engineered materials.
Prior to joining Polymer Group, Inc., Ms. Hagen was the
President and Chief Executive Officer of Sappi Fine Paper, a division of
Sappi Limited, the South African-based global leader in the pulp and paper
industry, from November 2004 until 2007.
She also served as Vice President and Chief Customer
Officer at Alcoa Inc. and owned and operated Metal Sales Associates, a
privately-held metal business.
She serves on the Compensation Committee and the
Nominating/Corporate Governance Committee of the Board of Directors of
American Water Works Company, Inc. Ms. Hagen also serves as the Chair of
the Compensation Committee and a member of the Nominating and Governance
Committee of the Board of Directors of Newmont Mining
Corporation.
Other public company
directorships:
American Water Works
Company, Inc., Newmont Mining
Corporation
|
18
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
Warren A. Hood, Jr.
(Independent)
|
Age:
65
Director since:
2007
Board
committee:
Audit
|
|
|
|
|
Chairman of the Board and Chief
Executive Officer of Hood Companies, Inc., packaging and construction
products
|
Director highlights:
Mr. Hoods business operations,
risk management and financial experience, civic involvement and
significant familiarity with Mississippi Power Company (Mississippi Power
or MPC) are valuable to the Board.
|
|
Mr. Hood is the Chairman and Chief Executive Officer of
Hood Companies, Inc. which he established in 1978. Hood Companies, Inc.
consists of four separate corporations with 74 manufacturing and
distribution sites throughout the United States, Canada and Mexico. Hood
Companies, Inc.s products are currently marketed in North America, the
Caribbean and Western Europe.
Mr. Hood previously served on the Board of the Companys
subsidiary, Mississippi Power, where he was also a member of the
Compensation Committee.
Mr. Hood has long been recognized for his leadership
role in the State of Mississippi. He serves or has served on numerous
corporate, community and philanthropic boards, including Boy Scouts of
America Pine Burr Area Council, Governor Phil Bryants Mississippi Works
Committee and The Governors Commission on Rebuilding, Recovery and
Renewal, which was formed following Hurricane Katrina in
2005.
He serves on the Board of BancorpSouth, Inc., where he
is a member of the Audit Committee.
Other public company
directorships:
BancorpSouth, Inc. (formerly
a Director of Mississippi Power)
|
Linda P. Hudson
(Independent)
|
Age:
66
Director since:
2014
Board
committees:
Governance, Nuclear/
Operations, Business Security Subcommittee (Chair)
|
|
|
|
|
Founder, Chairman and Chief
Executive Officer, The Cardea Group, business management consulting firm,
and former Chief Executive Officer of BAE Systems, Inc. (BAE Systems),
defense, aerospace and security
|
Director highlights:
Ms. Hudsons experience leading
a large, highly-regulated, complex business and expertise in engineering,
technology, operations and risk management are valuable to the
Board.
|
|
Ms. Hudson is the Founder, Chairman and Chief Executive
Officer of The Cardea Group, a business management consulting firm she
founded in 2014.
From October 2009 through February 2014, Ms. Hudson
served as the President and Chief Executive Officer of BAE Systems, a
U.S.-based global defense, aerospace and security company. BAE Systems is
a wholly-owned subsidiary of London-based BAE Systems plc. Previously, Ms.
Hudson served as President of BAE Systems Land & Armaments operating
group, the worlds largest military vehicle and equipment
business.
Before joining BAE Systems in 2006, she served as Vice
President of General Dynamics Corporation and President of General
Dynamics Armament and Technical Products.
Ms. Hudson is a member of Bank of America Corporations
Board of Directors, where she serves on the Compensation and Enterprise
Risk Committee and the Credit Committee. She is also a member of the Board
of Directors of Ingersoll Rand, Inc., where she serves on the Audit and
Finance Committees.
She is a Director of the University of Florida
Foundation.
Other public company
directorships:
Bank of America Corporation,
Ingersoll Rand, Inc.
|
investor.southerncompany.com
19
Table of Contents
|
|
Corporate Governance
at Southern Company
|
Donald M. James
(Independent)
|
Age:
68
Director since:
1999
Board committees:
Compensation and
Management Succession, Finance
|
|
|
|
|
Chairman of the Board and Chief
Executive Officer of Vulcan Materials Company (retired), construction
materials
|
Director highlights:
Mr. James leadership of a large
public company, his legal expertise and his civic involvement are valuable
to the Board.
|
|
Mr. James retired from his position as Chief Executive
Officer of Vulcan Materials Company in July 2014 and Executive Chairman in
January 2015. He retired in December 2015 as Chairman of the Board of
Directors of Vulcan Materials Company. Mr. James joined Vulcan Materials
Company in 1992 as Senior Vice President and General Counsel and then
became President of the Southern Division and then Senior Vice President
of the Construction Materials Group and then President and Chief Executive
Officer.
Prior to joining Vulcan Materials Company, Mr. James was
a partner at the law firm of Bradley, Arant, Rose & White for 10
years.
Mr. James serves on the Finance and the Human Resources
Committees of Wells Fargo & Companys Board of Directors.
Mr. James is a Trustee of the UAB Health System and
Childrens of Alabama, where he serves on the Executive
Committee.
Other public company
directorships:
Wells Fargo & Company
(formerly a Director of Vulcan Materials Company and Protective Life
Corporation)
|
John D. Johns
(Independent)
|
Age:
65
Drector
since:
2015
Board committee:
Audit (Chair)
|
|
|
|
|
Chairman and Chief Executive
Officer of Protective Life Corporation (Protective Life),
insurance
|
Director highlights:
Mr. Johns management and
leadership experience, his significant familiarity with Alabama Power
Company (Alabama Power or APC) and his civic involvement are valuable to
the Board.
|
|
Mr. Johns has served as Chairman and Chief Executive
Officer of Protective Life since 2002 and President from 2002 to January
2016. He joined Protective Life in 1993 as Executive Vice President and
Chief Financial Officer.
Before his tenure at Protective Life, Mr. Johns served
as general counsel of Sonat, Inc., a diversified energy
company.
Prior to joining Sonat, Inc., Mr. Johns was a founding
partner of the law firm Maynard, Cooper & Gale, P.C.
He previously served on the Board of Directors of
Alabama Power from 2004 to 2015. During his tenure on the Alabama Power
Board, he was a member of the Executive Committee.
He is a member of the Board of Directors of Regions
Financial Corporation, where he serves on the Risk Committee, and Genuine
Parts Company, where he serves on the Compensation, Nominating and
Governance Committee and the Executive Committee.
Mr. Johns has served on the Executive Committee of the
Financial Services Roundtable in Washington, D.C. and is the immediate
past chairman of the American Council of Life Insurers.
Mr. Johns has served as the Chairman of the Business
Council of Alabama, the Birmingham Business Alliance, the Greater Alabama
Council, Boy Scouts of America and Innovation Depot, Alabamas leading
business and technology incubator.
Other public company
directorships:
Genuine Parts Company,
Protective Life and Regions Financial Corporation (formerly a Director of
Alabama Power)
|
20
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance
at Southern Company
|
|
|
Dale E. Klein
(Independent)
|
Age:
69
Director since:
2010
Board committees:
Compensation
and Management
Succession,
Nuclear/Operations,
Business Security
Subcommittee
|
|
|
|
|
Associate Vice Chancellor of
Research of the University of Texas System and Associate Director of the
Energy Institute at The University of Texas at Austin and former
Commissioner and Chairman, U.S. Nuclear Regulatory Commission,
energy
|
Director highlights:
Dr. Kleins expertise in nuclear
energy regulation and operations, technology and safety is valuable to the
Board.
|
|
Dr. Klein was Commissioner from 2009 to 2010 and
Chairman from 2006 through 2009 of the U.S. Nuclear Regulatory Commission.
He also served as Assistant to the Secretary of Defense for Nuclear,
Chemical and Biological Defense Programs from 2001 through 2006.
Dr. Klein has more than 35 years of experience in the
nuclear energy industry.
Dr. Klein began his career at the University of Texas in
1977 as a professor of mechanical engineering which included a focus on
the universitys nuclear program. He spent nearly 25 years in various
teaching and leadership positions including Director of the nuclear
engineering teaching laboratory, Associate Dean for research and
administration in the College of Engineering and Vice Chancellor for
special engineering programs.
He serves on the Audit and Nuclear and Operating
Committees of Pinnacle West Capital Corporation, an Arizona energy
company, and is a member of the Board of Pinnacle West Capital
Corporations principal subsidiary, Arizona Public Service
Company.
Other public company
directorships:
Pinnacle West Capital
Corporation, Arizona Public Service
Company
|
William G. Smith, Jr.
(Independent)
|
Age:
63
Director since:
2006
Board committees:
Finance, Governance
|
|
|
|
|
Chairman of the Board, President
and Chief Executive Officer of Capital City Bank Group, Inc.,
banking
|
Director highlights:
Mr. Smiths experience in
finance, business operations and risk management is valuable to the
Board.
|
|
Mr. Smith began his career at Capital City Bank in 1978,
where he worked in a number of positions of increasing responsibility
before being elected President and Chief Executive Officer of Capital City
Bank Group, Inc. in January 1989. He was elected Chairman of the Board of
the Capital City Bank Group, Inc. in 2003. He is also the Chairman and
Chief Executive Officer of Capital City Bank.
He previously served on the Board of Directors of the
Federal Reserve Bank of Atlanta.
Mr. Smith is the former Federal Advisory Council
Representative for the Sixth District of the Federal Reserve System and
past Chair of Tallahassee Memorial HealthCare and the Tallahassee Area
Chamber of Commerce.
Other public company
directorships:
Capital City Bank Group,
Inc.
|
investor.southerncompany.com
21
Table of Contents
|
|
Corporate Governance
at Southern Company
|
Steven R. Specker
(Independent)
|
Age:
71
Director since:
2010
Board committees:
Compensation
and Management
Succession,
Nuclear/
Operations (Chair)
|
|
|
|
|
Chief Executive Officer, Tri Alpha
Energy Inc., energy
|
Director highlights:
Dr. Speckers
keen understanding of the electric industry and insights in innovation and
technology development are valuable to the Board.
|
|
Dr. Specker currently serves as Chief Executive Officer
of Tri Alpha Energy Inc., a position he has held since October 2016. Tri
Alpha Energy is an international private fusion company focusing on clean
fusion energy technology.
Dr. Specker served as President and Chief Executive
Officer of the Electric Power Research Institute (EPRI) from 2004 until
2010.
Prior to joining EPRI, Dr. Specker founded Specker
Consulting, LLC, a private consulting firm, which provided operational and
strategic planning services to technology companies serving the global
electric power industry.
Dr. Specker also served in a number of leadership
positions during his 30-year career at General Electric Company (GE),
including serving as President of GEs nuclear energy business, President
of GE digital energy and Vice President of global marketing.
He is also a member of the Board of Trilliant
Incorporated, a leading provider of Smart Grid communication solutions,
and serves as a member of the Board of Tri Alpha Energy Inc.
Other public company
directorships:
None
|
Larry D. Thompson
(Lead Independent Director since May 2016)
|
Age:
71
Director since:
2014
(previously served
from 2010
to 2012)
Board committees:
Finance, Governance
|
|
|
|
|
John A. Sibley Professor of
Corporate and Business Law, The University of Georgia School of Law, and
former Executive Vice President, Government Affairs, General Counsel and
Corporate Secretary, PepsiCo Inc., food and beverage
|
Director highlights:
Mr. Thompsons
government experience and corporate governance and legal expertise are
valuable to the Board.
|
|
Mr. Thompson has served on the faculty of The University
of Georgia School of Law as the John A. Sibley Chair of Corporate and
Business Law since 2014.
From 2012 until his retirement in 2014, Mr. Thompson
served as Executive Vice President, Government Affairs, General Counsel
and Corporate Secretary for PepsiCo Inc., one of the worlds largest
packaged food and beverage companies. From 2004 to 2011, he served as
Senior Vice President of Government Affairs, General Counsel and Corporate
Secretary of PepsiCo Inc. At PepsiCo Inc., Mr. Thompson was responsible
for its worldwide legal function, its government affairs organization and
its charitable foundation, where he served on the Board.
His government career includes serving as Deputy
Attorney General in the U.S. Department of Justice and leading the
National Security Coordination Council. In 2002, President George W. Bush
named Mr. Thompson to head the Department of Justices Corporate Fraud
Task Force.
Mr. Thompson is an Independent Trustee of various
investment companies in the Franklin Templeton group of mutual funds and a
Director and a member of the Compensation Committee of Graham Holdings
Company (formerly The Washington Post Company).
He also serves as an Advisory Director of the Georgia
Justice Project.
Mr. Thompson served as a Director of Southern Company
from 2010 to 2012 and was a member of the Audit Committee.
Other public company
directorships:
Franklin, Templeton Series
Mutual Funds, Graham Holdings Company (formerly a Director of Cbeyond,
Inc.)
|
22
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
E.
Jenner Wood III
(Independent)
|
Age:
65
Director since:
2012
Board committees:
Governance,
Nuclear/Operations
|
|
|
|
|
Corporate Executive Vice President
Wholesale Banking, SunTrust Banks, Inc. (retired), banking
|
Director highlights:
Mr. Woods
leadership experience and extensive background in finance, his involvement
in the community and his significant familiarity with Georgia Power are
valuable to the Board.
|
|
Mr. Wood served as Corporate Executive Vice President
Wholesale Banking of SunTrust Banks, Inc. from October 2015 until his
retirement in December 2016. Prior to that, he served as Chairman and
Chief Executive Officer of the Atlanta Division of SunTrust Bank from 2001
to 2015. He began his career with SunTrust Banks, Inc. in 1975 and has
advanced through various management positions including Chairman of the
Board, President and Chief Executive Officer of the Georgia/North Florida
Division and Chairman, President and Chief Executive Officer of SunTrusts
Central Group with responsibility over Georgia and Tennessee.
He served as a member of the Board of Georgia Power from
2002 until May 2012. During his tenure on the Georgia Power Board, he
served as a member of the Compensation, Executive and Finance Committees.
Mr. Wood is a Director of Oxford Industries, Inc., where
he serves as Presiding Director and as a member of the Executive
Committee, and a Director of Genuine Parts Company, where he serves on the
Audit Committee and the Compensation, Nominating and Governance Committee.
He is active in numerous civic and community
organizations, serving as the Chairman of the Metro Atlanta Chamber of
Commerce and as a Vice Chairman of the Robert W. Woodruff Foundation, the
Joseph B. Whitehead Foundation and the Lettie Pate Evans Foundation. Mr.
Wood also serves as a Trustee of the Sartain Lanier Family Foundation,
Camp-Younts Foundation and the Jesse Parker Williams
Foundation.
Other public company
directorships:
Genuine Parts Company,
Oxford Industries, Inc. (formerly a Director of Crawford & Company and
Georgia Power)
|
Southern Company Board
Majority Voting for
Directors and Director Resignation Policy
|
Since 2010, we have had a
majority vote standard for Director elections, which requires that a nominee for
Director in an uncontested election receive a majority of the votes cast at a
stockholder meeting in order to be elected to the Board. The Board believes that
the majority vote standard in uncontested Director elections strengthens the
Director nomination process and enhances Director accountability.
The Board believes this
standard for uncontested elections is a more equitable standard than a plurality
vote standard. A plurality vote standard guarantees the election of a Director
in an uncontested election; however, a majority vote standard means that
nominees in uncontested elections are only elected if a majority of the votes
cast
are voted in their
favor.
We also have a Director
resignation policy, which requires any nominee for election as a Director to
submit an irrevocable letter of resignation as a condition to being named as
such nominee, which would be tendered in the event that nominee fails to receive
the affirmative vote of a majority of the votes cast in an uncontested election
at a meeting of stockholders. Such resignation would be considered by the Board,
and the Board would be required to either accept or reject such resignation
within 90 days from the certification of the election results.
investor.southerncompany.com
23
Table of Contents
|
|
Corporate Governance
at Southern Company
|
Director Independence
Standards
|
No Director will be deemed to be
independent unless the Board affirmatively
determines that the Director has no material relationship with the Company directly or as an officer, stockholder or
partner of an organization that has a relationship with the Company. The Board
has adopted categorical guidelines which provide that a Director will not be
deemed to be independent if within the preceding three years:
|
The Director was employed by the
Company or the Directors immediate family member was an executive officer
of the Company.
|
|
The Director has received, or the
Directors immediate family member has received, during any 12-month
period, direct compensation from the Company of more than $120,000, other
than Director and committee fees. (Compensation received by an immediate
family member for service as a non-executive employee of the Company need
not be considered.)
|
|
The Director was affiliated with or
employed by, or the Directors immediate family member was affiliated with
or employed in a professional capacity by, a present or former external
auditor of the Company and personally worked on the Companys
audit.
|
|
The Director was employed, or the Directors
immediate family member was employed, as an executive officer of a company
where any member of the Companys present executive officers at the same
time served on that companys compensation committee.
|
|
The Director is a current employee, or the
Directors immediate family member is a current executive officer, of a
company that has made payments to, or received payments from, the Company
for property or services in an amount which, in any year, exceeds the
greater of $1,000,000 or 2% of that companys consolidated gross
revenues.
|
|
The Director or the Directors spouse serves as
an executive officer of a charitable organization to which the Company
made discretionary contributions which, in any year, exceeds the greater
of $1,000,000 or 2% of the organizations consolidated gross
revenues.
|
Director Independence Review
Process
|
At least annually, the Board receives a
report on all commercial, consulting, legal, accounting, charitable or other
business relationships that a Director or the Directors immediate family
members have with the Company. This report includes all ordinary course
transactions with entities with which the Directors are associated.
The Board determined that the Company and
its subsidiaries followed our procurement policies and procedures, that the
amounts reported were well under the thresholds contained in the Director
independence requirements and that no Director had a direct or indirect material
interest in the transactions included in the report.
The Board reviewed all contributions made
by the Company and its subsidiaries to charitable organizations with which the
Directors are associated. The Board determined that the contributions were
consistent with other contributions by the Company and its
subsidiaries to charitable organizations and none were
approved outside the Companys normal procedures.
In determining Director independence, the
Board considers transactions, if any, identified in the report discussed above
that affect Director independence, including any transactions in which the
amounts reported were above the threshold contained in the Director independence
requirements and in which a Director had a direct or indirect material interest.
No such transactions were identified and, as a result, no such transactions were
considered by the Board. The Board also considered that, in the ordinary course
of the Southern Company systems business, electricity and natural gas are
provided to some Directors and entities with which the Directors are associated
on the same terms and conditions as provided to other customers of the Southern
Company system.
As a result of its review process, the
Board affirmatively determined that 14 of our 15 Directors are
independent
Juanita Powell Baranco
|
Donald M. James
|
Board
Independence
All Director
nominees are independent
except the
CEO
|
Jon A.
Boscia
|
John D. Johns
|
Henry
A. Clark III
|
Dale E. Klein
|
David
J. Grain
|
William G. Smith,
Jr.
|
Veronica M. Hagen
|
Steven R. Specker
|
Warren
A. Hood, Jr.
|
Larry D. Thompson
|
Linda
P. Hudson
|
E. Jenner Wood
III
|
Thomas A. Fanning, Chairman of the Board,
President and Chief Executive Officer of the Company, is an employee and is not
independent.
24
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
Identifying Nominees for
Election to the
Board
|
The
Governance Committee, comprised entirely of independent Directors, is
responsible for identifying, evaluating and recommending nominees for election
to the Board. Final selection of the nominees for election to the Board is
within the sole discretion of the Board.
The Board believes that, as a whole, it
should have collective knowledge and experience in accounting, finance,
leadership, business operations, risk management, corporate governance and our
industry and service territories.
The Governance Committee only considers
candidates with the highest degree of integrity and ethical standards. The
Governance Committee evaluates a candidates independence from management,
ability to provide sound and informed judgment, history of achievement
reflecting superior standards, willingness to commit sufficient time, financial
literacy, number of other Board memberships, genuine interest in the Company and
a recognition that, as a member of the Board, one is accountable to the
stockholders of the Company, not to any particular interest group.
The
Governance Committee also seeks to identify candidates with the capacity to
bring relevant experience, relationships and perspectives regarding the service
territories of our traditional electric operating companies and natural gas
distribution utilities, which have operations in 19 states. We benefit from the
experience of Directors who have previously served on the Boards of our
traditional electric operating companies. We anticipate the same potential from
non-management Directors who serve or will serve on the Southern Company Gas
Board. These operating company Boards provide an opportunity for Director
candidates to cultivate significant relevant experience with our
business.
The
Governance Committee solicits recommendations for candidates for consideration
from its current Directors and is authorized to engage third-party advisers to
assist in the identification and evaluation of candidates for
consideration.
Qualifications,
Attributes, Skills and Experience of the Board as a
Whole
|
|
CEO or
senior executive leadership
experience
|
|
Diversity of race, ethnicity, gender, age, cultural background or
professional experience
|
|
Electric or gas utility or nuclear operations
experience
|
|
Engineering, innovation or technology
experience
|
|
Federal, state or local government or regulatory
experience
|
|
Financial, banking or investment experience
|
|
Knowledge of the traditional electric operating companies or
Southern Company Gas
|
|
Risk oversight or risk management
experience
|
Diversity of our
Board
While
our Corporate Governance Guidelines do not prescribe diversity standards, the
Guidelines mandate that the Board as a whole should be diverse. Our Board also
believes that diversity is important, as a variety of points of view contributes
to a more effective decision-making process.
The
Governance Committee annually evaluates the expertise and needs of the Board to
determine the proper membership and size. As part of this evaluation, the
Governance Committee considers aspects of diversity, such as diversity of race,
gender and ethnicity. Currently, the Board includes three women and three ethnic
minorities, representing 33% of our Board. The Governance Committee also
considers diversity of age, education, industry, business background and
experience in the selection of candidates to serve on the
Board.
The Governance Committee assesses the
effectiveness of its efforts at pursuing diversity through its periodic
evaluation of the Boards composition.
|
Board
Diversit
y
|
|
investor.southerncompany.com
25
Table of Contents
|
|
Corporate Governance
at Southern Company
|
Board Refreshment
The Governance Committee regularly
considers the long-term make up of our Board and how the members of our Board
will change over time, including frequent consideration of potential Board
candidates. The Board aims to strike a balance between the knowledge that comes
from longer-term service on the Board with the new experience, ideas and energy
that can come from adding Directors to the Board. In the last five years, we
have added five independent Directors to our Board and have had two Directors
retire.
We believe the average tenure for our
independent Directors of approximately seven years reflects the balance the Board
seeks between different perspectives brought by long-serving Directors and new
Directors.
Board Tenure
Tenure of Independent Directors
(Years of
consecutive service)
Average Tenure of Independent Directors:
7 years
|
|
Stockholder Recommendation of Board
Candidates
Any
stockholder may make recommendations for candidates for consideration by the
Governance Committee by sending a written statement describing the candidates
qualifications, relevant biographical information and signed consent to serve.
These materials should be submitted in writing to our Corporate Secretary and
received by December 8, 2017 for consideration by the Governance Committee as a
nominee for election at the 2018 annual meeting. A stockholder recommendation is
reviewed in the same manner as candidates identified by the Governance Committee
or recommended to the Governance Committee.
Board Structure and
Processes
|
Board Leadership
Structure
The Board
believes that its current leadership structure, which has a combined role of
Chairman and Chief Executive Officer counterbalanced by a strong independent
Board led by a Lead Independent Director and independent Directors chairing each
of the Board committees, is most suitable for us at this time and is in the best
interest of stockholders because it provides the optimal balance between
independent oversight of management and unified leadership.
|
The combined role of Chairman
and Chief Executive Officer is held by Tom Fanning who is the Director
most familiar with our business and industry, including the regulatory
structure and other industry-specific matters, as well as being most
capable of effectively identifying strategic priorities and leading
discussion and execution of strategy.
|
|
Independent Directors and
management have different perspectives and roles in strategy development.
The Chief Executive Officer brings Company-specific experience and
expertise, while our independent Directors bring experience, oversight and
expertise from outside the Company and its
industry.
|
|
The Board believes that the
combined role of Chairman and Chief Executive Officer promotes the
development and execution of our strategy and facilitates the flow of
information between management and the Board, which is essential to
effective corporate governance.
|
Meetings of Non-Management
Directors
Non-management Directors meet in executive session without any
members of the Companys management present on each regularly-scheduled Board
meeting date. These executive sessions promote an open discussion of matters in
a manner that is independent of the Chairman and Chief Executive Officer. The
Lead Independent Director chairs each of these executive
sessions.
26
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
Meetings
and Attendance
The Board met seven times in
2016. Our Directors are engaged, as demonstrated by the average Director
attendance at all applicable Board and committee meetings in 2016 of 96%. No
nominee attended less than 75% of applicable meetings.
All Director nominees are
expected to attend the annual meeting of stockholders. All members of the Board
serving on May 26, 2016 attended the annual meeting in 2016.
Director Engagement
2016 Board and Committee Meeting
Attendance
|
Board and
Committee Self-Evaluation Process
Our Board has a robust annual
self-evaluation process. The Governance Committee oversees the annual
self-assessment process on behalf of the Board. The charter of each committee of
the Board also requires an annual performance evaluation, which is overseen by
the chair of each committee.
Establish the
Process
In December, the Governance
Committee determines the discussion topics for the annual Board
self-evaluation. Topics change from year to year and include, among
others: tone, conduct and composition of the Board and the committees;
Board duties and member responsiveness to duties; and management's
responsiveness to the needs of the Board. The Chair of the Governance
Committee distributes the discussion topics to each Board member and
schedules individual calls with each Board member.
|
|
Individual Evaluation
Conversations
In December and January, the Chair
of the Governance Committee conducts the individual Board member
evaluation calls. The Chair of the Governance Committee addresses the
discussion topics as well as any other topics the Board member wishes to
discuss.
|
|
|
|
Review and Plan for
the Future
Throughout the rest of the year, any
matters requiring follow-up are addressed by the Chair of the Governance
Committee or the applicable committee Chair. The Board also provides
feedback to management as appropriate.
|
|
Meet and Discuss
Evaluation Results
In February, the Chair of the
Governance Committee presents the results of the individual Board member
evaluations to the Governance Committee. The Chair of the Governance
Committee also presents the results to the full Board. The results are
discussed among the Governance Committee members and the
Board.
|
investor.southerncompany.com
27
Table of Contents
|
|
Corporate Governance
at Southern Company
|
Message from our Lead Independent
Director
|
Larry D. Thompson
We strive to maintain an appropriate balance of tenure,
diversity, skills and experience on the Board to address the needs of the
Company we are today
and the Company we will be
tomorrow.
|
|
I am honored to serve as Lead Independent Director of
Southern Company and proud to be a part of a company that is building the
future of energy. I was elected by the independent Directors to serve in
this role for a two-year term to provide independent Board leadership.
I join with my fellow Board members in overseeing the
long-term interests of our stockholders. Among our most important
responsibilities are reviewing the Companys strategy, risks, financial
plan and leadership to ensure the Company is well-positioned to continue
growing value for stockholders. My fellow independent Directors and I are
committed to, and value, our dialogue with management regarding the
Companys long-term plans for growth.
We are committed to good corporate governance practices, as
we believe that effective governance is a cornerstone of a successful
long-term strategy. We have a strong and independent Board, with 14 of our
15 Directors independent of management and all of our Board committees
chaired by and comprised of independent Directors. We routinely refresh
our Board committees to strengthen our Directors awareness of issues,
broaden their perspectives and diversify each committees expertise.
We regularly and thoughtfully evaluate our governance
structures and practices and keep abreast of emerging governance issues.
In 2016, we adopted proxy access. This year, we again have recommended
that stockholders approve an amendment to the Certificate of Incorporation
to reduce the supermajority vote requirement to a majority vote.
Board composition and refreshment are also a key focus for
our Board, especially in light of the Companys 2016 acquisitions of
Southern Company Gas and PowerSecure. For 2017, we are focused on ensuring
that we have the expertise we need on the Board given our recent
acquisitions and alliances.
As a group, my fellow Directors and I provide a significant
breadth of experience and insight. We strive to maintain an appropriate
balance of tenure, diversity, skills and experience on the Board to
address the needs of the Company we are today and the Company we will be
tomorrow.
Our Board is committed to helping Southern Company remain
among the leaders in our industry, a reliable energy provider for
customers and a solid investment for our stockholders.
|
Role of the Lead Independent Director
The
Lead Independent Director is elected every two years by the independent
Directors of the Board. At the 2016 annual meeting, Larry Thompson was elected
by the independent Directors to serve as Lead Independent Director from May 25,
2016 until the 2018 annual meeting.
The
Lead Independent Director has the following powers and
responsibilities:
|
Approving the agenda and schedule for Board meetings and
information sent to
the Board;
|
|
Calling and chairing executive sessions of the non-management
Directors;
|
|
Chairing Board meetings in the absence of the
Chairman;
|
|
Meeting regularly with the
Chairman;
|
|
Acting as the principal liaison between the Chairman and the
non-management Directors (although every Director has direct and complete
access to the Chairman at any time);
|
|
Serving as the primary contact Director for
stockholders and other interested parties; and
|
|
Communicating any sensitive issues to the
Directors.
|
28
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
The Board and its committees
have both general and specific risk oversight responsibilities. The Board has
broad responsibility to provide oversight of significant risks we face primarily
through direct engagement with our management and through delegation of ongoing
risk oversight responsibilities to the committees. Any risk oversight that is
not allocated to a committee remains with the Board.
At least annually, the Board
reviews our risk profile to ensure that oversight of each risk is properly
designated to an appropriate committee or the full Board. The charters of the
committees and the checklist of agenda items for each committee define the areas
of risk for which each committee is responsible for providing ongoing
oversight.
Audit Committee
|
|
|
Reviews risks and risk management activities related to
financial reporting, ethics and compliance related risks.
|
|
Reviews the adequacy of the risk oversight process and
documentation that appropriate enterprise risk management and oversight
are occurring. The documentation includes a report that tracks which
significant risk reviews have occurred and the committee(s) reviewing such
risks. In addition, an overview is provided at least annually of the risk
assessment and profile process conducted by Company management.
|
|
Receives regular updates from Internal Auditing and
quarterly updates as part of the disclosure controls
process.
|
Compensation and Management
Succession Committee
|
|
|
Reviews risks and associated risk management activities
related to workforce issues.
|
|
Reviews the assessment of risk associated with the
Companys employee compensation policies and practices, particularly
performance-based compensation, as they relate to risk management
practices and/or risk-taking incentives. The review is conducted at least
annually and whenever significant changes to any business units
compensation practices are under consideration.
|
Finance Committee
|
|
|
Reviews risks and risk management activities related to
financial matters of the Company such as financial integrity, major
capital investments, dividend policy and financing
programs.
|
Governance
Committee
|
|
|
Reviews risks and associated risk management activities
related to state and federal regulatory and legislative
environment.
|
Nuclear/Operations
Committee
|
|
|
Reviews risks and associated risk management activities
related to significant operations of the Southern Company system such as
safety, system reliability, nuclear operations, environmental regulations,
fuel cost and availability.
|
|
Business Security subcommittee of the Nuclear/Operations
Committee focuses on business strategies designed to prevent or address
catastrophic business interruption due to physical or cyberattacks or
natural disasters.
|
Each committee provides
ongoing oversight for each of our most significant risks designated to it,
reports to the Board on their oversight activities and elevates review of risk
issues to the Board as appropriate. For each committee, the Chief Executive
Officer of the Company has designated a member of executive management as the
primary responsible officer for providing information and updates related to the
significant risks. These officers ensure that all significant risks identified
in the risk profile we develop are reviewed with the Board and/or the
appropriate committee(s) at least annually.
Southern Company has a robust
enterprise risk management program that facilitates identification,
communication and management of the most significant risks throughout the
Company within a formalized framework. Within this framework, risk governance and oversight are
largely embedded in existing organizational and control structures. As a part of
the governance structure, the Chief Risk Officer is accountable to the Chief
Executive Officer and the Board for ensuring that enterprise risk oversight and
management processes are established and operating effectively.
We believe that our leadership
structure supports the risk oversight function of the Board. While we have a
combined role of Chairman and Chief Executive Officer, an independent Director
chairs each committee. There is regular, open communication between management
and the Directors. All Directors are actively involved in the risk oversight
function.
investor.southerncompany.com
29
Table of Contents
|
|
Corporate Governance
at Southern Company
|
Succession Planning
and Talent Development
|
Valuing and developing our
people is a strategic priority for our Company, and succession planning and
talent development are important at
all levels within our organization to achieve business results. Succession
planning and talent development are systematic and ongoing at all levels throughout the
year.
The Compensation and
Management Succession Committee oversees the development and implementation of
succession plans for senior leadership positions. The process starts with
management undertaking a full internal review of performance and development of
leaders across the organization. Management presents and discusses with the
Compensation and Management Succession Committee its evaluation and
recommendations for senior leadership succession regularly throughout the year.
The Compensation and Management Succession Committee regularly updates the Board
on these discussions. The Compensation and Management Succession Committee is
also regularly updated on key talent
indicators for the overall workforce, including diversity, recruiting and
development programs.
The Board annually reviews and
evaluates succession plans for senior management and the CEO, including both a
long-term succession plan and an emergency succession plan. To assist the Board,
the CEO annually provides his assessment of senior leaders and their potential
to succeed at key senior management positions. The evaluation is done in the
context of the business strategy with a focus on risk management. The Board
meets potential leaders at many levels across the organization through formal
presentations and informal events throughout the year.
Southern Company Accolades
|
|
|
|
|
DiversityInc
recognized our Company as one of the
Top 50 Companies for Diversity.
|
|
DiversityInc
also ranked us No. 1 in its list of the
Top 10 Companies for Opportunity.
|
|
Southern Company was recognized as a
top
employer for veterans and military personnel
by a variety of
publications, including
DiversityInc, GI Jobs
magazine,
CivilianJobs.com and
Military Times EDGE
magazine.
|
|
Black Enterprise
magazine named Southern
Company one of the
Top 50 Best Companies for
Diversity
in its annual survey of the top publicly traded
companies with U.S. operations.
|
|
We earned a
perfect score from
the Human Rights Campaign
on their Workplace Equality Index for
2017.
|
Communicating with
the Board
|
We encourage stockholders or
interested parties to communicate directly with the Companys Board, the
independent Directors or the individual Directors, including the Lead
Independent Director.
|
Communications may be sent to the Board as a
whole, to the independent Directors or to specified Directors, including
the Lead Independent Director, by regular mail or electronic mail.
|
|
Regular mail should be sent to the attention of
the Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW,
Atlanta, Georgia 30308.
|
|
Electronic mail should be directed to
corpgov@southerncompany.com
. The electronic
mail address also can be accessed from the Corporate Governance webpage
located under Corporate Governance on our website at
investor.southerncompany.com
under the link
entitled Governance Inquiries.
|
With the exception of
commercial solicitations, all communications directed to the Board or to
specified Directors will be relayed to them.
30
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
Other Governance
Policies and Practices
|
Certain
Relationships and Related Transactions
We have a robust system for
identifying potential related person transactions.
|
Our
Audit Committee is responsible for overseeing our Code of Ethics, which
includes policies relating to conflicts of interest. The Code of Ethics
requires that all employees and Directors avoid conflicts of interest,
defined as situations where the persons private interests conflict, or
even appear to conflict, with the interests of the Company as a
whole.
|
|
We
conduct a review of our financial systems to identify potential conflicts
of interest and related person transactions.
|
|
At
least annually, each Director and executive officer completes a detailed
questionnaire that asks about any business relationship that may give rise
to a conflict of interest and all transactions in which the Company is
involved and in which the executive officer, a Director or a related
person has a direct or indirect material interest.
|
|
We
have a Contract Manual and other formal written procurement policies and
procedures that guide the purchase of goods and services, including
requiring competitive bids for most transactions above $10,000 or approval
based on documented business needs for sole sourcing
arrangements.
|
The approval and ratification
of any related person transaction would be subject to these written policies and
procedures which include:
|
a determination of the need for the goods and
services;
|
|
preparation and evaluation of requests for
proposals by supply chain management;
|
|
the writing of contracts;
|
|
controls and guidance regarding the evaluation
of the proposals; and
|
|
negotiation of contract terms and
conditions.
|
As appropriate, these
contracts are also reviewed by individuals in the legal, accounting and/or risk
management/services departments prior to being approved by the responsible
individual. The responsible individual will vary depending on the department
requiring the goods and services, the dollar amount of the contract and the
appropriate individual within that department who has the authority to approve a
contract of the applicable dollar amount.
We do not have a written
policy pertaining solely to the approval or ratification of related person
transactions.
In 2016, Ms. Alexia B. Borden,
the daughter of Paul Bowers, an executive officer of the Company, was employed
by Alabama Power Company as vice president with responsibility for Governmental
Affairs and received compensation of $312,109, as calculated in accordance with
SEC rules and regulations.
We do not have any other
related person transactions that meet the requirements for disclosure in this
proxy statement.
Jenner Wood, a Director since
2012, served as Corporate Executive Vice President Wholesale Banking of
SunTrust Banks, Inc. until December 31, 2016. During 2016, we continued our
long-standing relationship with SunTrust and used the banks services in the
ordinary course of business. Our relationship with SunTrust has existed for more
than 20 years. The payments made and received by the Company and SunTrust
represented an immaterial amount and percentage of the Companys and SunTrusts
revenues in 2016. We believe that the relationship during 2016 was
non-preferential and that Mr. Wood did not personally participate in or benefit
from this relationship.
In the ordinary course of the
Southern Company systems business, electricity and natural gas are provided to
some Directors and entities with which the Directors are associated on the same
terms and conditions as provided to other customers of the Southern Company
system.
investor.southerncompany.com
31
Table of Contents
|
|
Corporate Governance
at Southern Company
|
Proxy
Access
Proxy access generally refers
to the right of stockholders who meet certain ownership thresholds to nominate
one or more directors to the Board and have the nominees included in the
Companys proxy materials and on the Companys proxy card.
In 2015, a stockholder
submitted a proposal to adopt proxy access. The proposal was not approved by
stockholders at the 2015 annual meeting. Given the level of stockholder support for the proposal and the
Boards ongoing review of best corporate governance practices, the Board
continued to discuss the possibility of adopting proxy access after the 2015
annual meeting.
At the 2016 annual meeting,
the Board proposed for stockholder vote a proxy access amendment to our By-Laws.
The Boards decision was the result
of feedback from stockholder outreach, including the proponent of the proxy
access proposal, consideration of evolving corporate governance trends and
continuous review of our corporate governance practices. The Board believed that
the By-Law amendment provided meaningful rights to stockholders while promoting
responsible use of these rights by stockholders.
The proposed amendment
received overwhelming support (over 95%) from our stockholders at the 2016
annual meeting and was adopted in May 2016. The following are the key terms of
the proxy access By-Law amendment:
|
Any stockholder or group of up 20
stockholders
|
|
Have maintained continuous qualifying ownership
of at least 3% of our outstanding shares for at least three years
|
|
Can nominate and include in our proxy materials
Director nominees constituting the greater of two nominees or 20% (rounded
down) of the number of Directors in our proxy materials for the next
annual meeting
|
Nominating stockholder(s) and
the nominee(s) must also meet the eligibility requirements in Section 47 of our
By-Laws.
Stockholder Engagement
We place great importance on
consistent dialogue with all of our stakeholders, including customers, employees
and stockholders. We regularly engage in discussions with, and provide
comprehensive information for, constituents interested in the Southern Company
systems citizenship, stewardship and environmental compliance.
As part of these efforts, we
began a more systematic approach to investor outreach in 2014 and involved
members of our senior management. We are receptive to stakeholder concerns, and
we are committed to transparency and proactive interactions with our
investors.
Our management team
participates in numerous investor meetings each year to discuss our business,
our strategy and our financial results. These meetings include in-person,
telephone and webcast conferences.
Members of our management team
also participate in investor meetings that focus on key governance,
compensation, and environmental topics. Since 2011, we have held environmental
stakeholder forums, webinars, calls and
meetings covering a range of topics including regulatory and policy issues,
system risk and planning related to renewables, energy efficiency and greenhouse
gas matters.
Over the last year, our
management team contacted institutions holding over 30% of our common stock,
including every institutional investor that held at least 0.3% of our common
stock, and offered to engage with these investors to discuss topics including
corporate governance, executive compensation and environmental
practices.
32
Southern Company
2017 Proxy
Statement
Table of Contents
Corporate Governance at Southern Company
|
|
|
Political
Contributions Policy
We believe that we have a
responsibility to customers and stockholders to participate in the political
process and, where appropriate, to make expenditures in connection with
elections for public office and in connection with non-candidate state and local
ballot initiatives such as referendums and constitutional amendments.
The Company and its
subsidiaries comply with all laws governing the making of political
contributions or expenditures, including independent expenditures and using
corporate funds in connection with elections for public office. All political
contributions or independent expenditures must be approved in advance by the
Chief Executive Officer, the senior External Affairs Officer and the General
Counsel (if applicable) of the Southern Company entity making the
disbursement.
The Board reviews the
Companys political contributions and its policies and procedures regarding
political contributions. Any corporate political contributions or independent
expenditures made by the Company and its subsidiaries in connection with
elections for public office, as well as any payments made by the Company and its
subsidiaries to other organizations that are designated for their use in making
political contributions or independent expenditures, are reviewed at least
annually with the Board. Any corporate contributions to ballot initiative
campaign committees also are reviewed annually with the Board.
Our
Responsibility
The Southern Company system is
committed to developing the full portfolio of generation resources natural
gas, 21
st
century coal, nuclear and renewables such as wind and solar
together with an emphasis on energy efficiency, while designing and deploying
advanced technologies to provide clean, safe, reliable and affordable energy to
customers and communities. An industry leader in robust, proprietary research
and development, we have managed approximately $2 billion in research and
development investments since the 1960s, leading to the creation of new,
innovative technologies that are improving the way America produces and uses
energy.
Our greatest asset in this
effort is our employees. Our workforce is engaged in cultivating and leveraging
this inventive mindset. We are collaborating with forward-looking companies and
seeking partnerships with the brightest minds, leading universities and
cutting-edge research organizations.
We continually strive to
reduce the environmental impact of our operations, help customers use energy
more wisely and conserve natural resources. The Southern Company system has
reduced sulfur dioxide and nitrogen oxides emissions nearly 80% since 1990 and
mercury emissions by more than 70% since 2005, while electricity generation has
increased. Through 2016, the Southern Company system has also invested
approximately $11.4 billion to put environmental control technologies to work
for customers.
We are active members of the
communities we serve. As evidence of this commitment, employees consistently
give more than 200,000 hours of volunteer community service annually and help
lead economic development efforts.
To learn more about the
Companys corporate responsibility efforts, please view our Corporate
Responsibility Report by visiting
http://www.southerncompany.com/what-doing/corporate-responsibility/home.cshtml
, and our
environmental reports by visiting
www.southerncompany.com/what-doing/environmental-reports.cshtml
.
Corporate
Governance Website
In addition to our Corporate
Governance Guidelines (which include Board independence criteria), other
information relating to our corporate governance is available on our website
at
investor.southerncompany.com
under Corporate Governance.
|
Board of Directors Background and
Experience
|
|
Composition of Board Committees
|
|
Board Committee Charters
|
|
Link for on-line communication with Board of
Directors
|
|
Management Council Background and
Experience
|
|
Executive Stock Ownership Requirements
|
|
Code of Ethics
|
|
By-Laws
|
|
SEC filings
|
|
Policies and Practices for Political Spending
and Lobbying-Related Activities
|
|
Anti-Hedging and Anti-Pledging
Provision
|
These documents also may be
obtained by requesting a copy from the Corporate Secretary, Southern Company, 30
Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308.
investor.southerncompany.com
33
Table of
Contents
|
|
Corporate Governance
at Southern Company
|
Committees of the Board
Charters for each of the five
standing committees can be found at our website at
investor.southerncompany.com
under Corporate Governance.
Audit Committee
|
|
|
|
|
|
|
John D.
Johns
|
|
Juanita
Powell Baranco
|
|
Jon A.
Boscia
|
|
Warren
A. Hood, Jr.
|
Chair
|
|
|
|
|
|
|
The Audit
Committees duties and responsibilities include the following:
|
Oversee the Companys financial reporting,
audit process, internal controls and legal, regulatory and ethical
compliance.
|
|
Appoint the Companys independent registered
public accounting firm, approve its services and fees and establish and
review the scope and timing of its audits.
|
|
Review and discuss the Companys financial statements with management,
the internal auditors and the independent registered public accounting
firm, including critical accounting policies and practices, material
alternative financial treatments within generally accepted accounting
principles, proposed adjustments, control recommendations, significant
management judgments and accounting estimates, new accounting policies,
changes in accounting principles, any disagreements with management and
other material written communications between the internal auditors and/or
the independent registered public accounting firm and
management.
|
|
Recommend the filing of the Companys and its
registrant subsidiaries annual financial statements with the
SEC.
|
The Board has determined that all members
of the Audit Committee are independent as defined by the NYSE corporate
governance rules within its listing standards and rules of the SEC promulgated
pursuant to the Sarbanes-Oxley Act of 2002.
The Board has determined that all members
of the Audit Committee are financially literate under NYSE corporate governance
rules and that each of Jon A. Boscia and John D. Johns qualify as an audit
committee financial expert as defined by the SEC.
34
Southern Company
2017 Proxy Statement
Table of
Contents
Corporate Governance
at Southern Company
|
|
|
Compensation and Management Succession
Committee
|
|
|
|
|
|
|
|
|
Henry A.
Clark III
|
|
David
J. Grain
|
|
Donald
M. James
|
|
Dale E.
Klein
|
|
Steven R. Specker
|
Chair
|
|
|
|
|
|
|
|
|
The Compensation
and Management Succession Committees duties and responsibilities include the
following:
|
Evaluate the performance of the CEO at least
annually, review the evaluation with the independent Directors of the
Board and approve the compensation level of the CEO for ratification by
the independent Directors of the Board based on this evaluation.
|
|
Oversee the evaluation of the other executive
officers and review and approve the compensation level of the other
executive officers.
|
|
Review and approve compensation plans and
programs, including performance-based compensation, equity-based
compensation programs and perquisites.
|
|
Review CEO and other management succession
plans with the CEO and the full Board, including succession of the CEO in
the event of an emergency.
|
|
Review risks and associated risk management
activities related to workforce issues.
|
|
Review the assessment of risk associated with
employee compensation policies and practices, particularly
performance-based compensation, as they relate to risk management
practices and/or risk-taking incentives.
|
|
Review and discuss with management the
Compensation Discussion and Analysis (CD&A).
|
The Board has determined that all members
of the Compensation and Management Succession Committee are independent as
defined by the NYSE corporate governance rules within its listing
standards.
The Compensation and Management Succession
Committee engaged Pay Governance LLC (Pay Governance) to provide an independent
assessment of the current executive compensation program and any
management-recommended changes to that program and to work with management to
ensure that the executive compensation program is designed and administered
consistent with the Compensation and Management Succession Committees
requirements. Pay Governance also advises the Compensation and Management
Succession Committee on executive compensation and related corporate governance
trends.
Pay Governance is engaged solely by the
Compensation and Management Succession Committee and does not provide any
services directly to management unless authorized to do so by the Compensation
and Management Succession Committee. The Compensation and Management Succession
Committee reviewed Pay Governances independence and determined that Pay
Governance is independent and the engagement did not present any conflicts of
interest. Pay Governance also determined that it was independent from
management, which was confirmed in a written statement delivered to the
Compensation and Management Succession Committee.
investor.southerncompany.com
35
Table of
Contents
|
|
Corporate Governance
at Southern Company
|
Nuclear/Operations Committee
|
|
|
|
|
|
|
|
|
Steven R.
Specker
|
|
Veronica M. Hagen
|
|
Linda
P. Hudson
|
|
Dale E.
Klein
|
|
E. Jenner Wood III
|
Chair
|
|
|
|
|
|
|
|
|
The
Nuclear/Operations Committees duties and responsibilities include the
following:
|
Oversee information, activities and events
relative to significant operations of the Southern Company system
including nuclear and other power generation facilities, transmission and
distribution, fuel and information technology initiatives.
|
|
Oversee the Southern Company systems
management of significant construction projects.
|
|
Provide input to the Compensation Committee on
the key operational goals and metrics for the annual short-term incentive
compensation program.
|
The Board has determined that each member
of the Nuclear/Operations Committee is independent.
Business Security
Subcommittee
In 2014, the Board established a Business
Security Subcommittee of the Nuclear/Operations Committee, currently comprised
of Linda P. Hudson (Chair) and Dale E. Klein. The subcommittee held four
meetings in 2016.
The Business Security Subcommittees
responsibilities include the following:
|
Oversee managements efforts to
establish and continuously improve enterprise-wide security policies,
programs, standards and controls.
|
|
Oversee managements efforts to
monitor significant security events and operational and compliance
activities.
|
36
Southern Company
2017 Proxy Statement
Table of
Contents
Corporate Governance at Southern Company
|
|
|
Director Compensation
Only non-employee Directors of the Company
are compensated for service on the Board. For 2016, the pay components for
non-employee Directors were:
Annual cash retainers
|
|
Cash retainer
|
$110,000
|
Additional cash retainer if serving as the Lead Independent
Director of the Board
|
$30,000
|
Additional cash retainer if serving as a chair of a committee
of the Board
|
$20,000
|
Additional cash retainer if serving on the Business Security
Subcommittee of the Nuclear/Operations Committee
|
$12,500
|
Annual equity grant
|
|
In
deferred common stock units until Board membership ends
|
$140,000
|
Meeting fees
|
|
Meeting fees are not paid for participation in a meeting of
the Board
|
-
|
Meeting fees are not paid for participation in a meeting of a
committee or subcommittee of the Board
|
-
|
Director Compensation
Table
|
The following table reports compensation
to the non-employee Directors during 2016.
Name
|
|
Fees Earned or
Paid in
Cash
($)
(1)
|
|
Stock
Awards
($)
(2)
|
|
All
Other
Compen-
sation
($)
(3)
|
|
Total
($)
|
Juanita Powell
Baranco
|
|
110,000
|
|
140,000
|
|
0
|
|
250,000
|
Jon A.
Boscia
|
|
118,334
|
|
140,000
|
|
0
|
|
258,334
|
Henry A. Clark
III
|
|
130,000
|
|
140,000
|
|
0
|
|
270,000
|
David J.
Grain
|
|
121,666
|
|
140,000
|
|
0
|
|
261,666
|
Veronica M.
Hagen
|
|
132,500
|
|
140,000
|
|
0
|
|
272,500
|
Warren A. Hood,
Jr.
|
|
110,000
|
|
140,000
|
|
0
|
|
250,000
|
Linda P.
Hudson
|
|
122,500
|
|
140,000
|
|
0
|
|
262,500
|
Donald M.
James
|
|
118,334
|
|
140,000
|
|
0
|
|
258,334
|
John D.
Johns
|
|
121,666
|
|
140,000
|
|
0
|
|
261,666
|
Dale E.
Klein
|
|
122,500
|
|
140,000
|
|
0
|
|
262,500
|
William G. Smith,
Jr.
|
|
118,334
|
|
140,000
|
|
0
|
|
258,334
|
Steven R.
Specker
|
|
130,000
|
|
140,000
|
|
0
|
|
270,000
|
Larry D.
Thompson
|
|
127,500
|
|
140,000
|
|
0
|
|
267,500
|
E. Jenner Wood
III
|
|
110,000
|
|
140,000
|
|
0
|
|
250,000
|
(1)
|
Includes amounts voluntarily
deferred in the Director Deferred Compensation Plan.
|
(2)
|
Represents the grant date fair
market value of deferred common stock units.
|
(3)
|
No non-employee Director of the
Company received perquisites in an amount above the reporting
threshold.
|
investor.southerncompany.com
37
Table of
Contents
|
|
Corporate Governance
at Southern Company
|
Director Stock Ownership
Guidelines
|
Under our Corporate Governance Guidelines,
non-employee Directors are required to beneficially own, within five years of
their initial election to the Board, common stock equal to at least five times
the annual cash retainer. The annual equity grant for non-employee
Directors is required to be deferred until Board membership
ends. All non-employee Directors either meet the stock ownership guideline or
are expected to meet the guideline within the allowed timeframe.
Director Deferred Compensation
Plan
|
The annual equity grant is required to be
deferred in shares of common stock under the Deferred Compensation Plan for
Outside Directors of The Southern Company, as amended and restated effective
January 1, 2008 (Director Deferred Compensation Plan), and invested in common
stock units which earn dividends as if invested in common stock. Earnings are
reinvested in additional stock units. Upon leaving the Board, distributions are
made in common stock or cash.
In addition, Directors may elect to defer
up to 100% of their remaining compensation in the Director Deferred Compensation
Plan until membership on the Board ends. Such deferred compensation may be
invested as follows, at the Directors election:
|
in common stock units which earn
dividends as if invested in common stock and are distributed
in shares of common stock or cash upon leaving the Board; or
|
|
|
|
at the prime
interest rate which is paid in cash upon leaving the
Board.
|
All investments and earnings in the
Director Deferred Compensation Plan are fully vested and, at the election of the
Director, may be distributed in a lump-sum payment, or in up to 10 annual
distributions after leaving the Board. We have established a grantor trust that
primarily holds common stock that funds the common stock units that are
distributed in shares of common stock. Directors have voting rights in the
shares held in the trust attributable to these units.
38
Southern Company
2017 Proxy Statement
Table of Contents
|
|
Governance Related Company
Proposal
|
Item
2
|
Approve
an
Amendment
to the
Certificate of
Incorporation
to Reduce
the
Supermajority
Vote
Requirement
to a
Majority
Vote
|
|
|
|
|
The Board has determined that it is
in the best interest of the Company and its stockholders to reduce the
current two-thirds supermajority vote requirement in Article Eleventh of
the Certificate to a majority vote.
|
|
|
|
|
|
|
The Board recommends a vote
FOR
approval of an amendment to the
Certificate to reduce the supermajority vote requirement to a majority
vote.
|
|
|
|
|
Article Eleventh of our Certificate
currently requires the affirmative vote of the holders of at least two-thirds of
our issued and outstanding common stock in order to:
|
Authorize or create any class of
stock preferred as to dividends or assets over the common stock or
reclassify the common stock or change the issued shares of common stock
into the same or a greater or less number of shares of common stock either
with or without par value or reduce the par value of the common stock
(collectively, Stock Changes); and
|
|
Amend, alter, change or repeal
subdivision (2) of Article Ninth (with respect to working capital
determinations), Article Twelfth (with respect to preemptive rights),
Article Eleventh (with respect to Stock Changes and amendments to the
Certificate) or any provision contained in the Certificate or in any
amendment thereto which provides for the vote of the holders of at least
two-thirds of the issued and outstanding common
stock.
|
The proposed amendment is the result of
the Boards ongoing review of the Companys corporate governance principles,
including consideration of a stockholder proposal on this topic.
A supermajority vote requirement like the
one contained in this
article of the Certificate
is intended to facilitate corporate governance stability and provide protection
against self-interested action by large stockholders by requiring broad
stockholder consensus to make certain fundamental changes. However, while such
protection can be beneficial to stockholders, as corporate governance standards
have evolved, many stockholders and commentators now view this provision as
limiting the Boards accountability to stockholders and the ability of
stockholders to effectively participate in corporate governance.
After considering the arguments in favor
of and against the existing supermajority vote requirement, the Board voted to
propose and declare advisable, and to recommend to stockholders that they
approve, an amendment to Article Eleventh of the Certificate to reduce the
two-thirds supermajority vote requirement to a majority vote requirement to (1)
effect any Stock Changes and (2) amend, alter, change or repeal certain
provisions of the Certificate.
Our Board proposed similar amendments to
the Certificate in 2013 and 2016 and recommended that stockholders vote for the
proposal. In 2016, the proposal received 97% support of the votes that were
cast, representing 57% of the issued and outstanding shares. Despite the strong
support, the proposal did not achieve the stockholder vote necessary to pass
(affirmative vote of at least two-thirds of the issued and outstanding
shares).
The proposed amendment to Article Eleventh
of the Certificate includes the following:
|
Replace the two-thirds supermajority
vote requirement with a requirement that the affirmative vote of a
majority of the issued and outstanding shares of common stock is required
to approve any Stock Change; and
|
|
Remove the two-thirds supermajority
vote requirement necessary to amend, alter, change or repeal certain
provisions of the Certificate, as more fully described above, so that all
amendments, alterations, changes or repeals of the Certificate require the
affirmative vote of a majority of the issued and outstanding shares of the
capital stock of the Company, which is the default voting standard for
such actions under Delaware law.
|
The text of the proposed amendment to
Article Eleventh of the Certificate, marked to show changes from the current
Article Eleventh, is included as Appendix A to this proxy statement.
If the proposal is approved, it will
become effective upon filing of a Certificate of Amendment with the Secretary of
State of the State of Delaware, which we would make promptly after the annual
meeting.
The Board recommends a vote
FOR
approval of an amendment to the Certificate to reduce the supermajority vote
requirement to a majority vote.
investor.southerncompany.com
39
Table of Contents
|
|
Compensation Discussion and
Analysis
|
Letter from the Compensation and Management Succession Committee
(Compensation Committee)
Dear Southern
Company Stockholder,
2016 was a successful year for Southern
Company with strong financial and operational performance.
|
Our adjusted EPS for 2016 was above
the top of the guidance range we established at the beginning of the
year.
|
|
We increased our dividend by seven
cents per share, effective as of the second quarter of
2016.
|
|
We completed acquisitions of
Southern Company Gas and PowerSecure, acquired a 50% equity interest in
Southern Natural Gas and announced a strategic alliance with Bloom
Energy.
|
|
Alabama Power, Georgia Power, Gulf
Power Company (Gulf Power), Mississippi Power and Southern Company
continued to achieve the top five rankings on the Customer Value Benchmark
Survey.
|
|
Southern Power announced the
acquisition of 11 renewable facilities, expanding its total renewable
energy portfolio to over 3,500 megawatts, including capacity announced,
acquired or under construction at the end of 2016.
|
|
We made significant progress with
construction at Georgia Powers Plant Vogtle Units 3 and 4 and
construction and startup of Mississippi Powers Kemper County energy
facility.
|
In 2016, Southern Company delivered a 9.9%
annualized return to stockholders, and over the period from 2014 to 2016
Southern Company delivered an 11.2% annualized return to stockholders. However,
in recent years Southern Companys TSR underperformed as compared to other
utility company peers and as compared to the S&P 500. We believe this level
of performance is largely attributable to investor sentiment regarding our major
construction projects, the implications of actual and potential federal tax law
changes and the high correlation of our stock to interest rates. The
underperformance of our TSR as compared to utility peers has significantly
impacted the pay realized by our executive officers over the past few
years.
We continue to provide clean, safe,
reliable and affordable energy to millions of customers. We believe that
focusing on the customer, operating premier state-regulated utilities and
investing in energy infrastructure projects under long-term contracts will
continue to support regular, predictable and sustainable long-term earnings and
dividend growth. We believe that achieving these objectives will deliver
superior risk-adjusted TSR for our investors.
What You
will Find in this CD&A
This CD&A describes what we pay, why
we pay it and how we made our pay decisions for 2016. It also demonstrates how
our executive pay program reflects our compensation philosophy, including the
importance of linking performance and compensation.
We target the total direct compensation
for our executives at market median and place a significant portion of that
target compensation at risk subject to achieving both short-term and
long-term performance goals. In fact, only the base salary portion of executive
compensation is fixed.
|
|
|
|
CEO
Target Pay
|
|
|
|
89%
At Risk-Subject to Performance Goals
|
|
|
|
|
|
|
Salary
11%
|
Annual
Cash
Incentive Award
16%
|
Long-Term Equity
Incentive Award
73%
|
|
|
|
|
|
|
We have
received strong support for our executive compensation program
At the 2016
annual meeting, the advisory vote on 2015 executive compensation was
overwhelmingly supported by our stockholders, receiving support of 93% of the
votes cast.
40
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
We have continued
with the same compensation program structure for 2016, tying a significant
majority of executive compensation to performance. The key performance based
elements are the annual cash incentive award and the long-term equity incentive
award.
Annual
Cash Incentive Award
|
Awards under our Performance Pay
Program are earned based on the achievement of performance goals over a
one-year performance period.
|
|
Performance goals for 2016 include
financial goals (EPS and business unit net income), operational goals and
individual performance goals intended to drive performance that we believe
will lead to long-term success for the Company.
|
|
Payout is made in cash after the end
of the performance period.
|
Long-Term
Equity Incentive Award
|
Awards under our Performance Share
Program are granted in the form of performance share units that are earned
based on the achievement of performance goals over a three-year
performance period.
|
|
Performance goals for the 2016 to
2018 performance period include a cumulative three-year EPS goal (25%
weighting), an equity-weighted ROE goal (25% weighting) and a relative TSR
performance goal (50% weighting).
|
|
Payout is made in shares of common
stock after the end of the three-year performance
period.
|
Our compensation
program is designed to be consistent with our business strategy
The customer is at the center of
everything we do at Southern Company, and this business model serves as our
guiding principle. Our goal is to sustain long-term financial and operational
success and to create long-term value for our stockholders by keeping customers
first and providing them with outstanding customer service and clean, safe,
reliable and affordable energy.
Our compensation program is designed to be
consistent with our business strategy. By linking pay and performance, we align
our executive officers with both stockholder and customer interests. We design
our program to attract, engage, competitively compensate and retain our
employees.
Valuing and
developing our people is a strategic priority
We focus on talent development at all
levels within our organization to drive performance and engagement and foster
professional growth. We believe this leads to a deep bench of talent that is
important to management succession planning.
Our Committee
members are engaged and focused on our top priorities
We held ten Compensation Committee
meetings during 2016, and the average Director attendance at our meetings in
2016 was 94%. We are engaged and take our responsibilities very seriously in
establishing and overseeing the Southern Company executive compensation program
and overseeing management succession planning.
We thank you for your continued
support.
Report of the
Compensation Committee
|
We met with management to review and
discuss the CD&A. Based on that review and discussion, we recommended to the
Board that the CD&A be included in this proxy statement.
|
|
|
|
|
|
|
|
|
Henry A. Clark III
Chair
|
|
David J. Grain
|
|
Donald M. James
|
|
Dale E. Klein
|
|
Steven R.
Specker
|
investor.southerncompany.com
41
Table of Contents
|
|
Compensation Discussion and Analysis
|
Named Executive Officers for
2016
This CD&A focuses on the compensation
for our Chief Executive Officer and Chief Financial Officer as well as our three
other most highly compensated executive officers serving at the end of the year.
Collectively, these officers are referred to as the NEOs.
Name
|
|
Title
|
Tom
Fanning
|
|
Chairman of the Board, President and Chief Executive Officer
of the Company
|
Art
Beattie
|
|
Executive Vice President and Chief Financial Officer of the
Company (CFO)
|
Paul
Bowers
|
|
Executive Vice President of the Company and Chairman,
President and Chief Executive Officer of Georgia Power (Georgia Power
CEO)
|
Mark
Crosswhite
|
|
Executive Vice President of the Company and Chairman,
President and Chief Executive Officer of Alabama Power (Alabama Power
CEO)
|
Drew
Evans
|
|
Executive Vice President of the Company and Chairman,
President and Chief Executive Officer of Southern Company Gas (Gas
CEO)
|
Drew Evans became an employee of the
Southern Company system as of July 1, 2016 in connection with our acquisition of
Southern Company Gas. Mr. Evans did not participate in the same compensation
programs as the NEOs that were employed by us throughout 2016. A description of
Mr. Evans compensation begins on page 56.
Compensation Governance Overview
What We Do
|
89% of CEO target pay is at-risk
based on achievement of performance goals
|
|
Performance shares subject to
achievement of three performance measures over a three-year period:
cumulative EPS, ROE and relative TSR
|
|
Clawback provision for
performance-based pay
|
|
Independent compensation
consultant
|
|
Policy against hedging and
pledging
|
|
Dividends on stock awards received
only if underlying award is earned
|
|
Annual charter review and
self-evaluation by the Compensation Committee
|
|
Strong stock ownership
requirements
|
|
Annual pay risk
assessment
|
|
Change-in-control severance payouts
require double-trigger of change in control and termination of
employment
|
|
Annual review of tally
sheets
|
|
Ongoing stockholder
engagement
|
|
Regular updates on best
practices to the Compensation Committee from the independent compensation
consultant
|
What We Dont Do
|
No tax gross ups for NEOs (except on
certain relocation-related expenses)
|
|
NEOs receive limited ongoing
perquisites that make up a small portion of total
compensation
|
|
No employment agreements with our
executives
|
|
No stock option repricing without
stockholder approval
|
|
No excise tax gross-ups on
change-in-control severance arrangements
|
|
Granting of equity
awards are not timed to coincide with the release of material, non-public
information
|
|
|
|
|
|
|
Changes
to Long-Term Equity Incentive Program
Based on feedback from investors
and input from our independent compensation consultant, along with our
ongoing evaluation of best practices, the makeup of our long-term equity
incentive program has changed over the past five years.
|
|
|
|
|
|
|
|
|
|
|
|
60% performance
shares with a relative TSR performance measure over a three-year
performance period and 40% stock options
|
|
|
|
|
|
|
|
|
|
|
100% performance
shares with three performance measures over a three-year performance
period: cumulative EPS, equity-weighted ROE and relative TSR
|
|
|
|
|
|
|
42
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
Business
Overview
We are one of Americas premier energy
companies, serving over nine million electric and natural gas customers through
our state regulated utilities. We are developing a platform of solutions to meet
customers needs, including a portfolio of generation resources natural gas,
21st century coal, nuclear and renewables such as wind and solar generation
infrastructure for energy transportation and delivery, as well as customized
solutions for distributed infrastructure and energy efficiency.
Our strategy is to maximize long-term
value to stockholders through a customer, community and relationship-focused
business model that provides clean, safe, reliable and affordable energy to millions of customers.
Key
2016 Acquisitions and Alliances
2016 was an important year for
Southern Company as we continue to enhance energy offerings for
customers
Acquired PowerSecure on May 9, 2016
Acquired Southern Company Gas on July 1,
2016
Acquired a 50% equity interest in Southern Natural Gas
on September 1, 2016
Entered into a strategic alliance with Bloom Energy for
the deployment of fuel cell and battery storage
technologies
|
Key
2016 Financial Results
Reported strong adjusted EPS*, significantly exceeding
the target EPS goal of $2.82 set under our annual incentive compensation
program
Each of Alabama Power, Georgia Power, Gulf Power,
Mississippi Power and Southern Power exceeded its net income goal set
under our annual incentive compensation program
Increased our dividend for the 15th consecutive year
with dividend yield as of year-end 2016 at 4.5%
Since 1948, quarterly dividends paid to stockholders
have equaled or exceeded the previous
quarter
|
Earnings Per Share
|
|
Dividends Paid
|
|
|
Over
$2.1
Billion
paid to
stockholders
in
2016
|
Key 2016
Operational Results
Achieved top five positions in
customer satisfaction survey results
Industry-leading generation
availability performance
Nuclear operations continued to
perform among industry leaders
Continued to deliver excellent
transmission and distribution reliability
Continued Southern Company Gas
history of safely and reliably delivering natural
gas
|
*
|
Adjusted EPS results approved by
the Compensation Committee exclude the impact of charges related to the
Kemper County integrated coal gasification combined cycle facility (Kemper IGCC); equity return
related to the Kemper IGCC schedule extension; and earnings, acquisition
costs, integration costs and financing costs related to Southern Company
Gas and Southern Natural Gas. These adjustments are consistent with the
earnings results publicly communicated to investors. For a reconciliation
of adjusted EPS, see page 88.
|
investor.southerncompany.com
43
Table of Contents
|
|
Compensation
Discussion and Analysis
|
Major Projects
Update
|
|
|
We
made significant progress with construction at Plant Vogtle Units 3 and
4
|
|
Georgia Public Service Commission (PSC) approved the
Vogtle 3 and 4 prudence settlement agreement that deemed or presumed
prudent costs aggregating $5.68 billion while providing contingencies for
both cost and schedule
|
|
Kemper IGCC facility achieved integrated operations for
both gasifier trains and combustion turbines in 2017
|
|
Though we recorded estimated losses of $428 million in
2016 associated with the Kemper IGCC, we made significant progress with
construction and startup
|
Total Shareholder
Return
|
We
have created long-term value for our stockholders, reflected in our
outperformance against the S&P 500 and the Philadelphia Utilities
Index over the long term. In 2016 we delivered a 9.9% annualized return to
stockholders, and over a three-year period we delivered an 11.2%
annualized return to stockholders. However, our TSR has underperformed the
Philadelphia Utility Index over the past one-, three- and five-years
periods and has underperformed the S&P 500 for the one- and five-year
periods. We believe this is largely attributable to investor sentiment
regarding our major construction projects, the implications of actual and
potential federal tax law changes and the high correlation of our stock to
interest rates.
|
|
Analysis of CEO
Pay
Reported, Realizable
and Realized Compensation
|
The Summary Compensation Table shows
reported pay. However, because a significant majority of reported pay represents
the target value of long-term equity incentive compensation that is at risk
and subject to the achievement of performance goals, much of the reported pay
may or may not ultimately be received by the CEO.
To illustrate the link between pay and
performance for our CEO, the following chart compares reported, realizable and
realized compensation for 2014, 2015 and 2016 by type of
compensation.
Reported:
The Summary
Compensation Table reported pay (excluding the change in pension value) for
2014, 2015 and 2016.
Realizable:
The
potential value of the reported pay for 2014, 2015
and 2016 as of December 31, 2016, based upon our closing stock price
($49.19) and the estimated payout value for each outstanding Performance Share
Program award.
Realized:
The actual pay
received by the CEO in 2014, 2015 and 2016.
44
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
We believe the chart demonstrates that the
CEOs realizable and realized compensation is aligned with stockholder value
creation, including stock price appreciation and relative TSR
performance.
|
The realizable value of the CEOs compensation
decreased from 2014 to 2015 and from 2015 to 2016, primarily due to our
relative TSR underperformance over that time period.
|
|
The realized value of the CEOs compensation
decreased
significantly from 2014 to 2015 and
again decreased from
2015 to 2016. The 2014
realized value was positively
impacted by
the CEOs exercise of stock options that had
been granted from 2009 to 2012, reflecting the value earned as a
result of our stock price appreciation over time. However, the Performance
Share Program results were at 28%, 14% and 0% of target for 2014, 2015 and
2016, respectively. The Performance Share Program results reflect our
relative TSR performance for each performance
period.
|
The realizable and realized values that
the CEO may ultimately earn for the Performance Share Program awards granted in
2015 and 2016 will change in line with our relative TSR performance and our EPS
and ROE performance over each performance period.
Reported,
Realizable and Realized CEO Compensation ($ millions)
Reported
(Summary
Compensation Table) pay is calculated as (1) base salary and all other
compensation, (2) actual PPP earned and (3) the target value of the 2014 stock
option grant and the 2014, 2015 and 2016 PSP award grants, each as reported in
the Summary Compensation Table on page 62.
Realizable
(potential)
pay is calculated as (1) base salary and all other compensation, (2) actual PPP
award earned and (3) the estimated payout value of the 2014 stock option grant
and the 2014, 2015 and 2016 PSP award grants as of December 31, 2016.
|
2014: For the 2014 PSP award, no amount is
realizable
by the CEO because our relative TSR
performance
was below threshold performance
and payout was
at 0%. The 2014 stock option
grant had an exercise
price of $41.28 per
share. We calculate the realizable
value by
subtracting the exercise price of the stock
option from our closing stock price on December 31, 2016
and multiplying by the number of options granted.
The CEO
has not yet realized this value,
and the realizable value will
fluctuate
with our stock price.
|
|
2015 and 2016: The 2015 and 2016 PSP award
grants are
partially through their three-year
performance cycle. The PSP
value represents
the estimated payout value for the 2015 and
2016 PSP award grants calculated as of December 31, 2016,
multiplied by the target number of performance
share units
and the closing stock price on
December 31, 2016.
|
Realized
(actual) pay is
calculated as (1) base salary and all other compensation, (2) actual PPP earned
and (3) the value of stock options exercised or PSP awards earned in 2014, 2015
or 2016.
|
2014: The PSP award for the 2012 to 2014
performance
period, which had a relative TSR
performance goal, was
earned at 14% of
target. The CEO exercised stock options
granted in 2009 to 2012 for which the CEO received a value
on exercise of $10.3 million (before
taxes).
|
|
2015: The PSP award for the 2013 to 2015
performance
period, which had a relative TSR
performance goal, was
earned at 28% of
target.
|
|
2016: The PSP award for the 2014 to 2016
performance
period, which had a relative TSR
performance goal, was
earned at 0% of
target.
|
investor.southerncompany.com
45
Table of Contents
|
|
Compensation
Discussion and Analysis
|
2016 Pay for
Performance Analysis
2016 Financial
Performance
|
2016 was a successful year for us, with
our adjusted EPS exceeding our guidance range for the year. We expanded our
reach while continuing the strong financial performance of our traditional
electric operating companies and our electric wholesale subsidiary, Southern
Power.
Financial Goals and
Achievement for 2016 Performance Pay Program
We exceeded the financial goals for the
year set by the Compensation Committee under our 2016 Performance Pay Program.
Financial measures tied to compensation performance goals included EPS for
Southern Company and net income for our various business units.
Financial Goals
and Achievement
*
|
In determining EPS for
compensation goal achievement purposes, the Compensation Committee
excluded the impact of charges related to the Kemper IGCC; equity return
related to the Kemper IGCC schedule extension; and earnings, acquisition
costs, integration costs and financing costs related to Southern Company
Gas and Southern Natural Gas.
|
**
|
In determining net income for
compensation goal achievement purposes, the Compensation Committee
excluded certain integration costs. In addition, in determining
Mississippi Powers net income for compensation goal achievement purposes,
the Compensation Committee excluded the impact of charges related to the
Kemper IGCC and the equity return related to the Kemper IGCC schedule
extension.
|
46
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
2016 Operational
Performance
|
We demonstrated strong operational
performance for the year.
Operational Goal
Achievement for 2016 Performance Pay Program
Operating performance was strong across
the Southern Company system for 2016. Operational measures for the 2016
Performance Pay Program included customer satisfaction, reliability,
availability, nuclear plant operations, major projects, safety and culture.
Measures and weightings vary among the operating companies.
Operational Goal Achievement
Customer
Service
In 2016, our companies
continued to outrank the average utility score for residential customer
satisfaction on the American Customer Service Satisfaction Index, and most of
our electric subsidiaries were ranked among the best in the nation by the J.D.
Power and Associates Customer Satisfaction Study. For the 18th consecutive year,
Southern Company and its four
traditional electric operating companies ranked in the top quartile overall on
the Customer Value Benchmark Survey, our annual peer comparison of U.S. electric
utilities based on residential, general business and large business customer
value scores.
Reliability, Availability and Nuclear Plant
Operations
Our continuous investment in
new technology, maintenance and upgrades enables us to provide a high level of
reliability to the customers and communities we are privileged to serve. We are
able to achieve our customer satisfaction success by continuing to focus on the
fundamentals and delivering clean, safe, reliable and affordable energy to
customers.
The generation fleet and
nuclear operations provided industry leading performance, which helps to ensure
that affordable energy is available to meet demand when it is needed the most.
Peak season equivalent forced outage
rate (Peak Season EFOR) is an indicator of fossil/ hydro plant reliability
during the months when generation needs are greatest. Our fossil/hydro Peak
Season EFOR performance and our performance on nuclear operations goals for 2016
were above target.
Transmission and distribution system reliability performance
is measured by the frequency and duration of outages, with performance targets
set based on historical performances. For 2016, our performance was above target
for both transmission reliability and distribution reliability.
investor.southerncompany.com
47
Table of Contents
|
|
Compensation
Discussion and Analysis
|
Major
Projects
At Plant Vogtle, Georgia Power
and the other project co-owners have contracted to build the first new nuclear
reactors in the U.S. in more than three decades. Georgia Power achieved
significant milestones for construction and operational readiness during the
year. The Georgia PSC voted to approve a prudence settlement agreement that
either deemed or presumed prudent costs aggregating $5.68 billion while
providing contingencies for both cost and schedule.
The Kemper IGCC energy
facility achieved integrated operations producing electricity from syngas using both combustion turbines, as well
as production of saleable chemical byproducts. The project is approaching the
final milestones to place the remainder of the facility into service. However,
the expected in-service date was extended and the project cost estimate further
increased during 2016 as improvements and modifications were identified during
startup and testing.
Safety and
Culture
Safety performance for 2016
was just below target, due to an increase in the recordable incidents compared
to the prior year. We performed well on our culture goals, which are focused on
developing a diverse workforce,
engaging our employees in health and wellness initiatives and developing diverse
suppliers for each of our business units.
Incentive
Compensation Earned for Performance Periods Ended in
2016
|
The compensation earned by our
NEOs demonstrates our commitment to pay for performance.
Annual
Cash Incentive Plan 2016 Performance Pay Program
Our Performance Pay Program
rewards annual financial and operational performance as well as individual NEO
performance. As noted above, we had strong financial and operational performance
for 2016, exceeding our overall targets for the year. The Compensation
Committee also believed the 2016
individual performance contributions by our NEOs were strong. Accordingly,
payouts for all participants in the program, including the NEOs, were above
target. For the NEOs, payouts ranged from 167% to 174% of target.
Long-Term
Equity Incentive Program 2014-2016 Performance Share Program
In 2014, 60% of the target
value of our long-term equity incentive program was granted in the form of
performance shares under our Performance Share Program. For the three year
performance period of 2014 through 2016, performance shares could be earned
based on a relative TSR performance goal. As noted above, our TSR underperformed
as compared to the Philadelphia Utility Index. Our
three-year TSR performance relative to the utility
peer group was below the threshold performance level, resulting in a payout at
0% for the Performance Share Program awards for all participants, including the
NEOs. The utility peer group used to measure relative TSR performance for the
2014 to 2016 performance period was selected by the Compensation Committee and
is described on page 55.
48
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
Our Executive Compensation
Philosophy
Key Compensation
Beliefs and How They are Applied
|
Linking pay to performance
efficiently and economically aligns employee, customer and stockholder
interests
Our executive compensation
program consists of three key elements.
Fixed
|
|
At Risk-Subject to Achievement of
Performance Goals
|
|
|
Base
Salary
|
|
|
|
Annual Cash Incentive
Award
(Performance Pay Program)
|
|
|
|
Long-Term Equity Incentive
Award
(Performance Share
Program)
|
|
We target the total direct compensation for
our executives at market median of a peer group of publicly-traded utility
companies that we describe later in this CD&A.
|
|
In determining the mix of the three key
elements, we emphasize at risk pay that ties to performance and is
designed to align the interests of employees with both our stockholders
and customers. The only element that is fixed is base salary. Both the annual cash incentive award and the
long-term equity incentive award are earned solely on the basis of
achievement of performance goals.
|
|
For our CEO, fixed compensation represented
only 11% of his 2016 total direct compensation, while 89% was variable and
at risk based on achievement of Company and individual performance goals.
For our other NEOs, fixed compensation represented on average 29% of their
2016 total direct compensation, while 71% was variable and at risk.
|
|
The Compensation Committee, working with its
independent consultant, annually reviews the mix of key compensation
components to assess the effectiveness of our executive compensation
program, with the goal of providing appropriate levels of fixed and at risk performance-based pay in
alignment with our short-term and long-term business strategies. Based on
this assessment, the Compensation Committee established the total target
compensation opportunity in early 2016 for each of the NEOs, with a strong
emphasis on at risk compensation. At risk compensation directly affects
the ultimate payout each NEO receives with Company and individual
performance and links the pay of each NEO to both short-term and long-term
stockholder and customer interests.
|
|
The Compensation Committee believes that
placing a significant portion of executive compensation at risk earned
only upon achievement of performance goals drives our executives to
achieve higher levels of performance, customer satisfaction and
productivity. Performance directly impacts the at risk portion of the
NEOs compensation above target achievement of performance goals
translates to above target pay, while below target achievement of
performance goals translates to below target
pay.
|
Long-term value is created
through retaining employees
|
We gain superior organizational performance
through attracting talent for the long term and placing value on the
knowledge, skills and experience gained through longevity.
Many of our members of senior management
have spent their entire career with our Company. Tom Fanning, Art Beattie
and Paul Bowers each have over 35 years of service to Southern
Company.
|
|
The continued evolution of our culture is a
priority for us. This includes recruitment, engagement, diversity and
inclusion and innovation. Our diversity representation has improved over
the past several years, and we were named to the DiversityInc Corporate
Top 50 list in 2016. Our employee engagement index rose in 2016 and is
stronger than utility benchmark, signaling a strong commitment to
performance and culture by employees at all levels.
|
|
We have a low turnover rate, with average
employee tenure of approximately 16 years. Achieving low levels of
turnover lessens the impact of decreased productivity, lost knowledge
and skills and overall costs
associated with recruiting and training new employees.
|
|
We focus on talent
development at all levels within our organization to drive performance and
engagement and foster professional growth. As part of our talent
development, we initiate movement of key talent across business units and
through
|
investor.southerncompany.com
49
Table of Contents
|
|
Compensation
Discussion and Analysis
|
|
different positions. We
believe this leads to a deep bench of talent that is important to
management succession planning.
|
|
We have focused on
hiring for the future, in particular, military veterans, guardsmen and
reservists constituted over 16% of our hires in 2016. We were recognized
by G.I. Jobs, Military Times and
CivilianJobs.com and as a DiversityInc Top 10 Company for
Veterans.
|
Compensation and benefits
program competitiveness is critical
|
We continuously evaluate
our compensation and benefits programs to ensure they are market
competitive to attract, engage and retain employees. The Compensation
Committee works closely with Pay Governance, its independent consultant,
the Companys Human Resources staff and the CEO to establish our
compensation programs.
|
|
Total target compensation levels for senior
management as a whole, including the NEOs, are designed to be at the
median of the market for companies of similar size in the electric utility
industry. We also provide benefits that are necessary to compete in our
industry.
|
Prioritizing the overall
well-being of our workforce enhances productivity
|
Investing in the total well-being of our
workforce and their families positively impacts our ability to attract,
engage and retain the critical talent needed to serve
customers.
|
|
We define overall well-being in three
distinct categories: physical wellness, financial wellness and emotional
wellness.
Our objective is to
provide employees with comprehensive
benefit programs, decision making tools and resources and
educational materials to make informed decisions regarding their families
overall well-being.
|
|
Our comprehensive and
market competitive programs include retirement vehicles (401(k) and
pension), health and welfare benefits, insurance offerings and well-being
incentives.
|
Peer Group and
Establishing Market-Based Compensation
Levels
|
|
The Compensation
Committee reviews market data for the CEO and other positions. Based on
that data, as well as the other inputs described above, a total target
compensation opportunity is established for each NEO. Total target
compensation opportunity is the sum of base salary, the annual cash
incentive award at target performance level and the long-term equity
incentive award at target performance level.
|
|
Pay Governance develops
and presents to the Compensation Committee competitive market-based
compensation levels for each of the NEOs. The market-based compensation
levels are developed from the Towers Watson Energy Services Survey
focusing on regulated utilities with revenues above $6
billion.
|
|
We are one of the largest utility holding
companies in the United States based on revenues and market
capitalization, and our largest business units are some of the largest in
the industry as well. For that reason, Pay Governance uses
size-appropriate survey market data in order to fit it to the scope of our
business.
|
|
The compensation peer group stayed
relatively the same from 2015 to 2016. Three new companies participated in
the survey, met the revenue guidelines and were added to the group (Ameren
Corporation, Berkshire Hathaway Energy and NiSource
Inc.).
|
Peer Group for 2016
Compensation Decisions
Ameren
Corporation
|
Duke Energy Corporation
|
NRG Energy, Inc.
|
American
Electric Power Company, Inc.
|
Edison International
|
PG&E Corporation
|
Berkshire
Hathaway Energy Company
|
Energy Transfer Partners,
L.P.
|
PPL Corporation
|
Calpine
Corporation
|
Entergy Corporation
|
Public Service Enterprise Group
Inc.
|
CenterPoint
Energy, Inc.
|
Exelon Corporation
|
Sempra Energy
|
CMS Energy
Corporation
|
First Energy Corp.
|
Tennessee Valley Authority
|
Consolidated
Edison, Inc.
|
Kinder Morgan, Inc.
|
The AES Corporation
|
Direct
Energy
|
Monroe Energy LLC
|
The Williams Companies, Inc.
|
Dominion
Resources, Inc.
|
NextEra Energy, Inc.
|
UGI Corporation
|
DTE Energy Company
|
NiSource
Inc.
|
Xcel Energy
Inc.
|
50
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
Our Executive Compensation
Program
Overview of Key
Compensation Components
|
|
|
Element
|
Vehicle
|
|
Purpose
|
|
Objectives
|
Fixed
|
|
Base Salary
|
Cash
|
|
Provide a fixed amount of compensation for service to
attract, engage and retain the right talent
|
|
Reward scope of responsibility, experience and
individual performance
|
|
|
|
|
|
|
|
|
|
|
At Risk
|
|
Performance Pay
Program
(Annual)
|
Cash
|
|
Short-term incentive performance pay, dependent on
Company and business unit financial and operational performance and, for
the executive officers, individual performance
|
|
Promote strong short-term business results by rewarding
value drivers, without creating an incentive to take excessive
risk
Serve as key compensation vehicle for rewarding annual
results and differentiating performance each year
|
|
|
Performance
Share
Program
(Long-Term)
|
Performance
share
units
|
|
Award values are granted based on market
competitiveness
Performance shares are earned after a three-year
performance cycle
If earned, performance share units are paid in shares of
common stock upon vesting
|
|
Reward executives for outperforming utility peers and
achieving financial goals over a long-term period
Reward long-term value creation by providing a
significant stake in the long-term financial success of the Company that
is aligned with stockholders
Promote long-term retention
|
|
|
|
|
|
|
|
|
Benefits
|
|
Employee
Savings
Plan
|
401(k)
match
|
|
Provide a retirement benefit in which the employee can
actively participate
|
|
Allow all employees to contribute a percentage of their
annual salary and receive a matching contribution to build towards
retirement
|
|
|
Pension
|
Annuity
|
|
Provide a retirement benefit that encourages retention
for the totality of the employees career
|
|
Encourage career employment as the pension value grows
with additional years of service
|
|
|
|
|
|
|
|
|
Name
|
March 1, 2015
Base
Salary ($)
|
March 1, 2016
Base
Salary ($)
|
Tom Fanning
|
1,250,000
|
1,300,000
|
Art Beattie
|
700,438
|
721,451
|
Paul Bowers
|
814,895
|
839,342
|
Mark Crosswhite
|
641,609
|
692,938
|
|
Tom Fanning recommends
base salary adjustments for each of the other executive officers for the
Compensation Committees review and approval. The recommendations take
into account competitive market data provided by Pay Governance, the need
to retain an experienced team, internal equity, time in position, recent
base salary adjustments and individual performance. Individual performance
includes, among other things, the individuals relative contributions to
the achievement of financial and operational goals in prior
years.
|
|
The Compensation
Committee determines Tom Fannings base salary based on its comprehensive
review of his individual performance and taking into account competitive
market data provided by Pay Governance.
|
|
Base salary adjustments
are effective as of March 1 each year.
|
investor.southerncompany.com
51
Table of Contents
|
|
Compensation Discussion and
Analysis
|
Annual Incentive
Compensation Program (At Risk)
|
2016 Performance Pay
Program
|
PPP is a broad-based
annual cash incentive award program designed to reward annual financial
and operational performance.
|
|
For the executive
officers, the program also rewards individual performance designed to
drive long-term strategy by encouraging short-term (annual) behaviors that
the Compensation Committee believes will create long-term stockholder
value.
|
|
The target award amount
is determined as a percentage of base salary, with the percentage varying
by pay grade.
|
|
Payouts can range from
0% to 200% of target, based on actual level of goal
achievement.
|
Establishing the
Performance Goals and Weighting
|
The Compensation
Committee sets goals for all participants at the beginning of each
year.
|
|
As part of its
goal-setting process, the Compensation
Committee reviews previous goals and performance along with input
from the Finance Committee on EPS and net income goals and the
Nuclear/Operations Committee on operational goals to appropriately align
the target and maximum goals with expected Company
performance.
|
|
|
|
|
2016
PPP Goal Weighting for CEO and CFO
|
|
|
|
|
|
|
EPS
40%
|
Operational
30%
|
Individual
30%
|
|
|
|
|
|
|
|
|
|
|
|
2016
PPP Goal Weighting for the other NEOs
|
|
|
|
|
|
|
|
|
EPS
30%
|
Net
Income
30%
|
Operational
30%
|
Individual
10%
|
|
|
|
|
|
|
|
Financial Performance
Results
|
Southern Companys
adjusted EPS result was $2.89, exceeding the $2.82 EPS target. Adjusted
EPS results approved by the Compensation Committee exclude the impact of
charges related to the Kemper IGCC; equity return related to the Kemper
IGCC schedule extension; and earnings, acquisition costs, integration
costs and financing costs related to Southern Company Gas and Southern
Natural Gas. These adjustments are consistent with the earnings results
publicly communicated to investors. For a reconciliation of adjusted EPS,
see page 88.
|
|
Alabama Powers adjusted
net income result was $821 million, exceeding the $774 million target. The
adjustment approved by the Compensation Committee excludes the impact of
integration costs.
|
|
Georgia Powers adjusted
net income result was $1,333 million, exceeding the $1,235 million target.
The adjustment approved by the Compensation Committee excludes the impact
of integration costs.
|
Operational Performance
Results
|
The operational goal payouts were at or near
the maximum
performance level
for customer satisfaction, generation availability and transmission
reliability.
|
|
The operational goal
payouts were at or above target for nuclear plant operations, distribution
reliability, major projects and culture.
|
|
The operational goal
payout for safety was slightly below
target.
|
52
Southern Company
2017 Proxy Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
Individual Performance
Results
2016 saw strong overall
performance and many strategic advances in the Company, led by our team of
executive officers. Overall, the Compensation Committee believed that individual
performance well exceeded target for the year, given the financial and
operational achievements across the Company and the key acquisitions completed
in 2016. The Compensation Committee considered the factors described below and
other individual performance factors in determining payouts for the individual
performance element of the award for the NEOs.
|
Provided leadership to
drive the strong and continued improvements in our financial success,
including adjusted EPS results and increased stockholder
dividends
|
|
Broadened opportunities
to leverage our customer-focused business model, which has long supported
constructive regulatory relationships, world-class customer satisfaction
and regular, predictable and sustainable returns on investment with the
acquisition and integration of Southern Company
Gas
|
|
Added to our portfolio
of contracted energy infrastructure assets with the acquisitions of wind
and solar assets, a 50% equity interest in Southern Natural Gas and
PowerSecure, as well as the execution of a strategic partnership with
Bloom Energy
|
|
Demonstrated significant
progress in the major construction projects, Kemper IGCC and Vogtle Units
3 and 4
|
|
Maintained national
leadership in energy, economic and security advisory
roles
|
|
Evolved our culture
through the integration of Southern Company Gas and built upon our
exceptional performance in customer service, safety and operating
efficiencies, and expanded our excellence in innovation, diversity and
inclusion and communications
|
|
Completed over $20
billion of financing activities at attractive rates in support of executing the
Companys strategy
|
|
Further strengthened
external relationships with investors and analysts, including a five-year
strategy and value proposition plan
|
2016 Actual PPP
Payout
Name
|
|
Target 2016
PPP
Opportunity
(Percent of
salary)
|
|
Target 2016
PPP
Opportunity
($)
|
|
Total
Performance
Factor
|
|
Actual 2016
PPP
Payout
($)
|
Tom Fanning
|
|
125%
|
|
1,625,000
|
|
168%
|
|
2,725,125
|
Art Beattie
|
|
85%
|
|
613,233
|
|
174%
|
|
1,065,186
|
Paul Bowers
|
|
80%
|
|
671,474
|
|
169%
|
|
1,133,448
|
Mark Crosswhite
|
|
80%
|
|
554,350
|
|
169%
|
|
934,635
|
Other Details about the
Program
|
Under the terms of the program, no payout
can be made if events occur that impact the Companys financial ability to
fund the common stock dividend.
|
|
The Compensation
Committee may make adjustments, both positive and negative, to goal
achievement for purposes of determining payouts.
|
|
For additional
information about the goals and a further breakdown of the overall award
payout calculation by NEO, see page 60.
|
Long-Term Equity Incentive
Compensation (At Risk)
|
2016-2018 Performance Share
Program
|
Long-term performance-based awards are
intended to promote long-term success and increase stockholder value by
directly tying a substantial portion of the NEOs total compensation to
the interests of stockholders.
|
|
100% of award is in performance share units
that are earned solely based on achievement of pre-established performance
goals over a three-year performance period from 2016 to
2018.
|
|
Payouts can range from 0% to 200% of target,
based on actual level of goal achievement.
|
|
Paid in common stock at the end of the
performance period; accrued dividends are received only if underlying
award is earned.
|
investor.southerncompany.com
53
Table of Contents
|
|
Compensation
Discussion and Analysis
|
Establishing the Performance Goals
The PSP award includes three performance goals for the 2016 to 2018 performance period, as well as a credit quality threshold requirement.
Goal
|
|
What it
Measures
|
|
Why its
Important
|
Relative TSR
(50% weighting)
|
|
TSR relative to peer companies
|
|
Aligns employee pay with investor returns relative to
peers
|
Cumulative EPS
(25% weighting)
|
|
Cumulative EPS over the three-year performance
period
|
|
Aligns employee pay with Southern Companys earnings
growth
|
Equity-Weighted ROE
(25%
weighting)
|
|
Equity-weighted ROE of the traditional electric operating
companies
|
|
Aligns employee pay with Southern Companys ability to
maximize return on capital invested
|
The EPS and ROE goals are also both
subject to a credit quality threshold requirement that encourages the
maintenance of adequate credit ratings to provide an attractive return to
investors. If the primary credit rating falls below investment grade at the end
of the three-year performance period, the payout for the EPS and ROE goals will
be reduced to zero.
For each of the performance measures, a
threshold, target and maximum goal was set at the beginning of 2016.
|
|
Relative
TSR
Performance
(50% weighting)
|
|
Cumulative
EPS
Performance
(25% weighting)
|
|
Equity Weighted
ROE
Performance
(25% weighting)
|
|
Payout
(Target
Performance
Share Units Paid)
|
Maximum
|
|
90th percentile or higher
|
|
$9.37
|
|
6.1%
|
|
200%
|
Target
|
|
50th percentile
|
|
$8.85
|
|
4.9%
|
|
100%
|
Threshold
|
|
10th percentile
|
|
$8.34
|
|
4.5%
|
|
0
|
|
The Compensation
Committee retains the discretion to approve adjustments in determining
actual performance goal achievement.
|
|
Our TSR is measured
relative to a utility peer group of companies that are believed to be most
similar to the Company in both business model and investors. There is
significant overlap between the peer group used to determine relative TSR
performance for the 2016 PSP and the peer group used for compensation
benchmarking purposes.
However, several of
the companies in the 2016 PSP peer group do not meet the size requirement
to be included in the compensation peer group (+$6 billion in revenues),
and one company did not participate in the Towers Watson survey from which
the data for the compensation peer group is derived.
|
|
The 2016 PSP peer group
is subject to change based on merger and acquisition
activity.
|
TSR Performance Share Program Peer Group for
2016 2018 Performance Period
|
Alliant Energy Corp.
|
Duke
Energy Corporation
|
Pinnacle West Capital Corporation
|
Ameren Corporation
|
Edison
International
|
PPL
Corporation
|
American Electric Power Company,
Inc.
|
Entergy Corporation
|
SCANA
Corporation
|
CMS Energy
Corporation
|
Eversource Energy
|
Westar
Energy Inc.
|
Consolidated Edison,
Inc.
|
OGE
Energy Corp.
|
Wisconsin Energy Corporation
|
DTE
Energy Company
|
PG&E Corporation
|
Xcel Energy
Inc.
|
54
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
Determining the Number of
Performance Shares Granted
|
The Compensation Committee approved an increase
in the total target value of the long-term incentive award for the CEO
from 575% of base salary in 2015 to 600% of base salary in 2016. The
increase reflected the CEOs strong individual performance as well as the
Compensation Committees desire to position the CEOs total direct
compensation close to market median and to position that increase in the
long-term equity incentive portion of his compensation.
|
|
A target number of performance share
units are granted to a participant, based on the total target value
determined as a percentage of a participants base salary. Target
percentages vary by grade level.
|
|
No actual shares are issued on the
grant date. Each performance share unit represents one share of common
stock.
|
|
The total target value for
performance share units is divided by the value per unit on the grant date
to determine the number of performance share units granted to each
participant.
|
|
|
Target as
Percent
of Base Salary
|
|
Grant Date Value and Number of Performance Shares Granted in
2016
|
Relative
TSR
(50%)
|
|
Cumulative
EPS
(25%)
|
|
Equity-Weighted
ROE
(25%)
|
|
Total
(100%)
|
Tom Fanning
|
|
600%
|
|
$3,899,987
|
|
$1,950,017
|
|
$1,950,017
|
|
$7,800,022
|
|
|
|
|
86,302
|
|
39,943
|
|
39,943
|
|
166,188
|
Art Beattie
|
|
275%
|
|
$992,011
|
|
$496,011
|
|
$496,011
|
|
$1,984,033
|
|
|
|
|
21,952
|
|
10,160
|
|
10,160
|
|
42,272
|
Paul Bowers
|
|
275%
|
|
$1,154,107
|
|
$577,052
|
|
$577,052
|
|
$2,308,212
|
|
|
|
|
25,539
|
|
11,820
|
|
11,820
|
|
49,179
|
Mark Crosswhite
|
|
275%
|
|
$952,786
|
|
$476,386
|
|
$476,386
|
|
$1,905,557
|
|
|
|
|
21,084
|
|
9,758
|
|
9,758
|
|
40,600
|
Other Details about the
Program
|
A participant can earn from 0% to
200% of the target number of performance shares granted at the beginning
of the performance period based solely on achievement of the performance
goals over the three-year performance period.
Payout for performance between points will be interpolated on a
straight-line basis.
|
|
Performance shares are not earned
until the end of the three-year performance period and after certification
of the results by the Compensation Committee.
|
|
Dividend equivalents are credited
during the three-year performance period but are only paid out if and when
the award is earned. If no performance shares are earned, then no
dividends are paid out.
|
|
Participants who retire during the
performance period will receive the full amount of performance shares
actually earned at the end of the three-year period. Participants who
become disabled or die during the performance period will receive a
prorated number of performance shares based on the performance shares
actually earned at the end of the three-year period. A participant who
terminates employment other than due to retirement, death or disability
forfeits all unearned performance
shares.
|
Timing of Performance-Based
Compensation
|
The establishment of
performance-based compensation goals and the granting of equity awards are
not timed to coincide with the release of material, non-public
information.
|
Results of
2014-2016 Performance Share Program
2014-2016 PSP
Payouts
Performance share grants made in 2014 were
subject to a three-year performance period that ended on December 31, 2016. Our
relative TSR performance compared to the peer group was below the threshold
performance level. As a result, no performance shares were earned by any
participant.
Peer Group and Payouts for 2014 2016
PSP
|
Alliant Energy Corp.
|
DTE Energy
Company
|
Pinnacle West Capital
Corporation
|
Ameren Corporation
|
Duke Energy
Corporation
|
PPL
Corporation
|
American Electric Power Company, Inc.
|
Edison
International
|
SCANA
Corporation
|
CMS Energy Corporation
|
Eversource
Energy
|
Wisconsin Energy
Corporation
|
Consolidated Edison,
Inc.
|
PG&E Corporation
|
Xcel Energy Inc.
|
investor.southerncompany.com
55
Table of Contents
|
|
Compensation
Discussion and Analysis
|
|
|
Target
Performance
Shares Granted (#)
|
|
Grant Date
Target
Value of Performance
Shares Granted ($)
|
|
Performance
Shares Earned
(#)
|
|
Value of
Performance
Shares Earned ($)
|
Tom Fanning
|
|
90,143
|
|
3,383,968
|
|
-
|
|
0
|
Art Beattie
|
|
24,758
|
|
929,415
|
|
-
|
|
0
|
Paul Bowers
|
|
28,943
|
|
1,086,520
|
|
-
|
|
0
|
Mark Crosswhite
|
|
22,056
|
|
827,982
|
|
-
|
|
0
|
Retirement
Benefits
|
Employee Savings Plan:
Substantially all employees are eligible to participate in the Employee
Savings Plan (ESP), our 401(k) plan. The NEOs are also eligible to
participate in the Supplemental Benefit Plan (SBP), which is a
nonqualified deferred compensation plan where we can make contributions
that are prohibited to be made under the ESP due to limits prescribed for
401(k) plans under the Internal Revenue Code of 1986, as amended (tax
code).
|
|
Pension Benefits:
Substantially all employees participate in a funded Pension Plan. Normal
retirement benefits become payable when participants attain age 65.
Employees vest after completing five years of vesting service. The Company
also
provides unfunded benefits to certain
employees, including the named executive officers, under two nonqualified
plans: the Supplemental Benefit Plan (Pension-Related) (SBP-P) and the
Supplemental Executive Retirement Plan (SERP). The SBP-P and the SERP
provide additional benefits the Pension Plan cannot pay due to limits
applicable to the Pension Plan.
|
|
Deferred Compensation
Benefits:
We offer a Deferred Compensation Plan (DCP), which is an
unfunded plan that permits participants to defer income as well as certain
federal, state and local taxes until a specified date or their retirement,
disability, death or other separation from
service.
|
Change-in-Control Protections
|
We believe that change-in-control
protections allow management to focus on potential transactions that are
in the best interest of our stockholders.
|
|
Change-in-control protections
include severance pay and, in some situations, vesting or payment of
incentive awards.
|
|
We provide certain severance
payments if there is a change in control of the Company and a termination
of the executives
employment (either
involuntary termination not for cause or voluntary termination for good
reason), often called a double trigger.
|
|
Severance payment for the CEO is
three times salary plus target PPP opportunity. For the other NEOs,
severance is two times salary plus target PPP opportunity. No excise tax
gross-up would be provided.
|
Perquisites
|
We provide limited perquisites to
our executive officers, consistent with the Companys goal of providing
market-based compensation and benefits.
|
|
No
tax assistance is provided on perquisites to executive officers of the
Company, except on certain relocation-related benefits that are generally
available to all employees.
|
2016 Compensation for
Drew Evans
|
Drew Evans has served as Chairman and CEO
of AGL Resources Inc., now Southern Company Gas, since January 1, 2016, and he
has continued to serve in that role following the completion of the merger
on July 1, 2016.
|
Prior to the completion of the
acquisition, Mr. Evans compensation was recommended by the Southern
Company Gas Compensation Committee and approved by the independent members
of the Board of Directors of Southern Company Gas.
|
|
The merger agreement governed the
treatment of certain equity compensation held by all Southern Company
Gas
employees, including Mr. Evans, at the
time of the merger and established certain limits on changes to
compensation of all Southern Company Gas employees, including Mr. Evans,
for one year after the merger.
|
|
Mr.
Evans and other senior executives of Southern Company Gas were parties to
change-in-control severance agreements (each, a Continuity Agreement) that
provided for certain payments and benefits in connection with a change in
control of Southern Company Gas and a termination without cause of the
employment of the executive or the termination by the executive for good
reason within a period of time following the change in
control.
|
56
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
Base
Salary
On December 9, 2015, the independent members of the Board of
Directors of Southern Company Gas set Mr. Evans base salary for 2016 at
$800,000, which remained in effect throughout 2016.
Annual
Incentive Program
In early 2016, the Southern Company Gas Compensation Committee
established performance goals for participants in its annual cash incentive
program, the AGL Resources Inc. Annual Incentive Plan (Gas AIP).
|
Mr. Evans target award opportunity
was set at 100% of base salary by the independent members of the Board of
Directors of Southern Company Gas.
|
|
The Southern Company Gas
Compensation Committee established a corporate performance measure (60%
weighting) related to the net income of Southern Company Gas and various
performance measures, including but not limited to earnings before
interest and taxes, of certain Southern Company Gas business units (40%
weighting) for the year.
|
|
The Southern Company Gas
Compensation Committee determined performance under the Gas AIP from
January 1, 2016 through June 30, 2016, and Southern Company Gas paid to
all participants the portion of their GAS AIP award in July 2016 that had
been earned for the first half of the year.
|
Subsequent to the completion of the
acquisition, the Compensation Committee of Southern Company continued the GAS
AIP for all Southern Company Gas participants, approving updated corporate
performance measures for the year.
|
The Compensation Committee approved
2016 net income goals for Southern Company Gas as follows: $400.1 million
maximum), $375.9 million (target) and $363.8 million
(threshold).
|
|
The total payout under the GAS AIP
was determined by measuring actual 2016 calendar year performance against
the annual goals, with final payout reflecting the total payout amount
determined based on annual goal achievement less the payout received for
the first half of 2016.
|
|
The corporate performance measure
was achieved at a level of 183% of target and the business unit
performance measures were achieved at an aggregate level of 143% of
target, resulting in an overall payout at 167% of target. There were no
individual performance measures applicable to Mr. Evans as part of the Gas
AIP for 2016.
|
|
The Gas AIP payout to Mr. Evans for
the period from July 1, 2016 through December 31, 2016 was
$569,207.
|
Long-Term
Equity Incentive Awards
In accordance with the terms of the merger
agreement:
|
The outstanding vested and unvested
Southern Company Gas equity awards (other than the Southern Company Gas
performance stock units (Gas PSUs)) were settled in cash at the merger
price.
|
|
The outstanding Gas PSUs were
assumed by Southern Company and converted, pursuant to a ratio set forth
in the merger agreement, into Southern Company time-vesting RSUs with the
same vesting schedule as set forth in the original Gas PSUs. As a result,
Mr. Evans holds certain time-vesting RSUs that were granted in connection
with the assumption and conversion of the Gas
PSUs.
|
Subsequent to the merger, Mr. Evans
entered into a letter agreement with Southern Company pursuant to which he
agreed to waive his right to receive the change-in-control benefits set forth in
the Continuity Agreement and we agreed to grant Mr. Evans a performance share unit award based on 1.5 times the dollar
value of Mr. Evans change-in-control severance payment provided for under the
Continuity Agreement.
|
A portion of the performance share
units vests on each of July 1, 2017, July 1, 2018 and July 1, 2019, the
first, second and third anniversaries of the completion of the
merger.
|
|
The remaining performance share
units may be earned based solely on Southern Company Gas achievement of a
cumulative net income performance goal over a three-year performance
period from 2017 through 2019 as follows: $1.336 billion (threshold) and
$1.402 billion (target). The number of units earned between each level of
achievement will be calculated on a linear basis. The maximum payout is
100% of target.
|
|
Dividend equivalents are credited
during the vesting and performance period, but are only paid when the
applicable portion of the award vests and the stock is
issued.
|
Benefits
Mr. Evans participates in a number of
Southern Company Gas retirement plans that continue to operate subsequent to the
completion of the merger on the same basis as other Southern Company Gas
employees, including the:
|
AGL Resources Inc. Retirement
Savings Plus Plan (RSP), a 401(k) plan;
|
|
AGL Resources Inc. Nonqualified
Savings Plan (AGL NSP), a nonqualified defined contribution retirement
plan;
|
|
AGL Resources Inc. Retirement Plan (AGL Pension Plan),
a tax-qualified defined benefit pension plan; and
|
|
AGL Resources Inc. Excess Benefit
Plan (AGL Excess Benefit Plan), a nonqualified defined benefit retirement
plan.
|
investor.southerncompany.com
57
Table of Contents
|
|
Compensation
Discussion and Analysis
|
Other Compensation and Governance Inputs,
Policies and Practices
|
Role of the
Compensation Committee
|
|
|
|
|
|
|
The Compensation Committee is
responsible for overseeing the development and administration of all of
our compensation and benefits policies and programs as well as the review
and approval of all aspects of our executive compensation
programs.
|
|
|
|
The Compensation Committee is
supported in its work by the Chief Human Resources Officer, her staff, the
Finance Committee (financial goals), the Nuclear/Operations Committee
(operational goals) and the Compensation Committees independent
compensation consultant.
|
|
|
Role of the
CEO
|
|
|
|
|
|
|
Our CEO makes recommendations to the
Compensation Committee for other executive officers with respect to (1)
base salary adjustments, (2) Performance Pay Program targets and
individual performance achievement payouts and (3) Performance Share
Program targets. These recommendations are based upon market data provided
by the independent compensation consultant, the CEOs assessment of each
executive officers performance, the performance of the individuals
respective business or function and employee retention
considerations
|
|
|
|
The Compensation Committee considers
the CEOs recommendations in approving the compensation for the executive
officers. However, the Compensation Committee makes the final decisions
with respect to all compensation for Southern Company executive
officers.
|
|
|
|
Our CEO does not play any role with
respect to any matter affecting his own compensation.
|
|
|
Role of the
Independent Compensation Consultant
|
|
|
|
|
|
|
The Compensation Committee has
retained Pay Governance as its independent executive compensation
consultant. Pay Governance reports directly to the Compensation Committee.
A representative of Pay Governance attends meetings of the Compensation
Committee, as requested, and communicates with the Compensation Committee
Chair between meetings.
|
|
|
|
Pay Governance provides various
executive compensation services to the Compensation Committee pursuant to
a written consulting agreement with the Compensation Committee. Generally,
these services include advising the Compensation Committee on the
principal aspects of our executive compensation program and evolving
industry practices and providing market information and analysis regarding
the competitiveness of our program design and our award values in
relationship to the executives performance.
|
|
|
|
In 2016, Pay Governance provided an
annual competitive evaluation of total compensation for the NEOs, as well
as overall compensation program share usage, dilution and fair value
expense. Additionally, the Compensation Committee relies on Pay Governance
to provide information and advice on executive compensation and related
corporate governance trends throughout the year. Pay Governance provided
no services to Company management during 2016.
|
|
|
|
The Compensation Committee retains
sole authority to hire Pay Governance, approve its compensation, determine
the nature and scope of its services, evaluate its performance and
terminate its engagement. The Compensation Committee has assessed the
independence of Pay Governance pursuant to the listing standards of the
NYSE and SEC rules and concluded that Pay Governance is independent and
that no conflict of interest exists that would prevent Pay Governance from
serving as an independent consultant to the Compensation
Committee.
|
|
Prohibition on
Hedging and Pledging of Common Stock
|
Our insider trading policy provides that
employees, officers and Directors will not trade Company options on the options
market and will not engage in short sales. It also includes a no pledging
provision that prohibits pledging of our stock for all Southern Company
executive officers and Directors.
58
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
Stock Ownership
Requirements
|
We believe ownership requirements align
the interest of officers and stockholders by promoting a long-term focus and
long-term share ownership. All of our NEOs are subject to stock ownership
requirements, expressed as a multiple of base salary. Under our
stock ownership guidelines, the ownership requirement is
reduced by one-half at age 60. All of the NEOs are meeting their applicable
ownership requirements.
|
|
Multiple of Salary without
Counting Stock
Options
|
|
Multiple of Salary Counting
Portion of
Vested Stock Options
|
Chief Executive
Officer
|
|
5
Times
|
|
10
Times
|
Other
NEOs
|
|
3
Times
|
|
6
Times
|
Ownership arrangements counted toward the
requirements include shares owned outright, those held in Company-sponsored
plans and common stock accounts in the DCP and the SBP. A portion of vested
stock options may be counted, but then the ownership requirement is
doubled.
Newly-elected and newly-promoted officers
have approximately six years from the date of their election or promotion to
meet the applicable ownership requirement. We measure compliance with the stock
ownership requirements as of September 30 each year.
Consideration of 2016 Advisory
Vote on Executive Compensation
|
At the 2016 annual meeting, an advisory
vote on the Companys executive compensation program received a favorable vote
of 93% of the votes cast. In light of this significant support and the payout
levels under our performance-based program, the Compensation Committee
continues to believe that the compensation
program is competitive, aligned with our financial and operational performance
and in the best interests of the Company, stockholders and customers.
Our Omnibus Incentive Compensation Plan
provides that if we are required to prepare an accounting restatement due to
material noncompliance as a result of misconduct, and an executive officer of
the Company knowingly or grossly negligently engaged in or failed to prevent the
misconduct or is subject to automatic forfeiture under
the Sarbanes-Oxley Act of 2002, the executive officer must repay us the
amount of any payment in settlement of awards earned or accrued during the
12-month period following the first public issuance or filing that was
restated.
Impact of Section 162(m) of the
Tax Code on Compensation
|
Section 162(m) of the tax code limits the
tax deductibility of the compensation of certain NEOs that exceeds $1 million
per year unless the compensation is paid under a performance-based plan that has
been approved by stockholders. At the 2016 annual meeting, stockholders
re-approved the material terms for qualified performance-based compensation
under the Omnibus Incentive Compensation Plan to ensure continued availability
of the performance-based compensation deduction in accordance with the
requirements of Section 162(m) of the tax code.
Because our policy is to maximize
long-term stockholder value, tax deductibility is not the only factor considered
in setting compensation. The Compensation Committee has the discretion to award
compensation that may not be tax deductible.
The Compensation Committee approved a
formula in 2016 to calculate the annual performance-based compensation amount
payable to the affected NEOs. For 2016 performance, the Compensation Committee
used negative discretion from the approved formula amount to determine the
actual payouts for the NEOs under the annual performance-based compensation
program.
Compensation Committee
Interlocks and Insider Participation
|
The Compensation Committee is made up of
independent Directors of the Company who have never served as executive officers
of the Company. During 2016, none of the Companys executive officers
served on the Board of Directors of any entities
whose executive officers serve on the Compensation Committee.
investor.southerncompany.com
59
Table of Contents
|
|
Compensation
Discussion and Analysis
|
Supplemental
Information on 2016 PPP Goal Achievement and
Payout
|
2016 PPP Goal
Results and Payouts by NEO
Tom
Fanning
|
|
|
|
|
|
|
|
|
Goal
|
|
Weight
|
|
Performance
|
|
Achievement %
|
EPS
|
|
40%
|
|
|
Exceeded target
|
|
171%
|
Operational
|
|
30%
|
|
|
Exceeded or met targets on customer satisfaction,
transmission and distribution reliability, major projects, culture,
generation availability and nuclear plant operations
|
|
151%
|
|
|
|
|
|
Results were slightly below target for safety
|
|
|
Individual
|
|
30%
|
|
|
Exceeded target
|
|
180%
|
Total Performance Factor
|
|
|
|
|
|
|
168%
|
|
Art
Beattie
|
|
|
|
|
|
|
|
|
Goal
|
|
Weight
|
|
Performance
|
|
Achievement %
|
EPS
|
|
40%
|
|
|
Exceeded target
|
|
171%
|
Operational
|
|
30%
|
|
|
Exceeded or met targets on customer satisfaction,
transmission and distribution reliability, major projects, culture,
generation availability and nuclear plant operations
|
|
151%
|
|
|
|
|
|
Results were slightly below target for safety
|
|
|
Individual
|
|
30%
|
|
|
Maximum
|
|
200%
|
Total Performance Factor
|
|
|
|
|
|
|
174%
|
|
Paul
Bowers
|
|
|
|
|
|
|
|
|
Goal
|
|
Weight
|
|
Performance
|
|
Achievement %
|
EPS
|
|
30%
|
|
|
Exceeded target
|
|
171%
|
Net Income
|
|
30%
|
|
|
Exceeded target (GPC)
|
|
173%
|
Operational
|
|
30%
|
|
|
Exceeded targets on customer satisfaction, transmission
and distribution reliability, Plant Vogtle Units 3 and 4 annual
objectives, culture, generation availability and nuclear plant
operations
|
|
152%
|
|
|
|
|
|
Results were slightly below target for safety
|
|
|
Individual
|
|
10%
|
|
|
Maximum
|
|
200%
|
Total Performance Factor
|
|
|
|
|
|
|
169%
|
|
Mark
Crosswhite
|
|
|
|
|
|
|
|
|
Goal
|
|
Weight
|
|
Performance
|
|
Achievement %
|
EPS
|
|
30%
|
|
|
Exceeded target
|
|
171%
|
Net Income
|
|
30%
|
|
|
Exceeded target (APC)
|
|
177%
|
Operational
|
|
30%
|
|
|
Exceeded targets on customer satisfaction, transmission
and distribution reliability, culture and generation
availability
|
|
164%
|
|
|
|
|
|
Results were slightly below
target for safety
|
|
|
Individual
|
|
10%
|
|
|
Exceeded target
|
|
150%
|
Total Performance Factor
|
|
|
|
|
|
|
169%
|
60
Southern Company
2017 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
|
|
|
2016 PPP Goal
Details
|
Category
|
|
Performance
Measures
|
|
Description
|
|
Purpose/Objective
|
|
Applicability
|
|
Financial
|
|
EPS
|
|
The Companys net
income from ongoing business activities divided by average shares
outstanding during the year
For 2016, threshold was set at $2.68, target at
$2.82, and maximum at $2.96
|
|
Supports commitment to provide
stockholders solid, risk-adjusted returns and to support and grow the
dividend
|
|
All employees
|
|
|
|
|
|
Business Unit Net Income
|
|
For the traditional
electric operating companies and Southern Power: net income after
dividends on preferred and preference stock
Overall corporate performance determined by the
equity-weighted average of the business unit net income goal
payouts
|
|
Supports delivery of stockholder value and contributes
to the Companys sound financial policies and stable credit
ratings
|
|
All employees, based on business unit, except CEO and
CFO
|
|
|
|
|
|
|
|
|
|
|
|
Operational
|
|
Customer Satisfaction
|
|
Surveys evaluate performance for each
traditional electric operating company and provide a ranking for each
customer segment (residential, commercial and industrial)
|
|
Performance of all goals affects
customer satisfaction
|
|
All employees, based on business
unit
|
|
|
|
|
|
Safety
|
|
Focuses the entire Company on continuous improvement in
striving for a safe work environment
|
|
A safe work environment across all work locations is
essential for the protection of employees, customers and
communities
|
|
All employees, based on business unit
|
|
|
|
Major Projects (Plant Vogtle Units 3 and 4; Kemper
IGCC)
|
|
A combination of
objective and subjective measures is considered in assessing the degree of
achievement by separate executive review committees for each
project
For major projects,
annual goals are established that are designed to achieve long-term
project completion and with a focus on validating technology and providing
clean, reliable operation
|
|
Strategic projects
enable the Southern Company system to expand its capacity to provide
clean, safe, reliable and affordable energy to customers across the region
Long-term projects are accomplished through
achievement of annual goals over the life cycle of the
project
|
|
Certain employees, based on business unit, including
CEO, CFO and Georgia Power CEO
|
|
|
|
Culture
|
|
Seeks to improve the inclusive workplace, including
measures for diversity and employee satisfaction
|
|
Company culture supports workforce development efforts
and helps assure diversity of suppliers
|
|
All employees, based on business unit
|
|
|
|
Reliability
|
|
Measures transmission and distribution system
reliability by frequency and duration of outages
|
|
Reliability delivering power is essential to
operations
|
|
All employees, based on business unit
|
|
|
|
Availability
|
|
Measures peak season equivalent forced outage rate and
indicates efficient operation of generation fleet during high-demand
periods
|
|
Availability of sufficient power during peak season
fulfills the obligation to serve and provide customers with power while
effectively managing generation resources
|
|
All employees, based on business unit
|
|
|
|
Nuclear Plant Operations
|
|
Measures nuclear safety, reliability and availability of
the nuclear fleet
|
|
Safe and efficient operation of the nuclear fleet is
important for delivering clean energy at a reasonable price
|
|
Certain employees, based on business unit
|
|
|
|
|
|
|
|
|
|
|
|
Individual
|
|
Individual Factors
|
|
Focus on overall business performance as
well as factors including leadership
development,
succession planning and
fostering the
culture and diversity of the organization
|
|
Individual goals provide the
Compensation Committee the ability to balance quantitative results with
qualitative inputs by focusing on both business performance and behavioral
aspects of leadership that are designed to lead to sustainable long-term
growth
|
|
All executive officers of Southern
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
investor.southerncompany.com
61
Table of Contents
|
|
Executive Compensation
Tables
|
Summary Compensation
Table
|
Name
(a)
|
|
Year
(b)
|
|
Salary
($)(c)
|
|
Bonus
($)(d)
|
|
Stock
Awards
($)(e)
|
|
Option
Awards
($)(f)
|
|
Non-Equity
Incentive
Plan
Compensation
($)(g)
|
|
Change in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(h)
|
|
All Other
Compensation
($)(i)
|
|
Total
($)(j)
|
Thomas A.
Fanning
|
|
2016
|
|
1,290,192
|
|
-
|
|
7,800,022
|
|
-
|
|
2,725,125
|
|
3,894,646
|
|
119,667
|
|
15,829,652
|
Chairman, President
|
|
2015
|
|
1,240,385
|
|
-
|
|
7,187,441
|
|
-
|
|
2,499,125
|
|
840,198
|
|
78,002
|
|
11,845,151
|
and
Chief Executive
|
|
2014
|
|
1,192,067
|
|
-
|
|
3,383,968
|
|
2,255,999
|
|
1,713,600
|
|
2,899,537
|
|
70,822
|
|
11,515,993
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Art P.
Beattie
|
|
2016
|
|
717,329
|
|
-
|
|
1,984,033
|
|
-
|
|
1,065,186
|
|
1,624,332
|
|
42,028
|
|
5,432,908
|
Executive Vice President
|
|
2015
|
|
695,257
|
|
-
|
|
1,611,062
|
|
-
|
|
741,398
|
|
881,172
|
|
41,640
|
|
3,970,529
|
and Chief Financial
|
|
2014
|
|
668,516
|
|
-
|
|
929,415
|
|
619,617
|
|
772,839
|
|
1,396,842
|
|
37,293
|
|
4,424,522
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Paul
Bowers
|
|
2016
|
|
834,547
|
|
-
|
|
2,308,212
|
|
-
|
|
1,133,448
|
|
1,527,952
|
|
51,057
|
|
5,855,216
|
Chairman, President and
|
|
2015
|
|
809,595
|
|
-
|
|
1,874,305
|
|
-
|
|
910,865
|
|
642,042
|
|
50,827
|
|
4,287,634
|
Chief Executive
|
|
2014
|
|
782,928
|
|
45
|
|
1,086,520
|
|
724,350
|
|
892,841
|
|
1,504,316
|
|
46,986
|
|
5,037,986
|
Officer, Georgia Power
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A.
Crosswhite
|
|
2016
|
|
682,870
|
|
-
|
|
1,905,557
|
|
-
|
|
934,635
|
|
1,279,197
|
|
46,058
|
|
4,848,317
|
Chairman, President
|
|
2015
|
|
633,537
|
|
-
|
|
1,475,743
|
|
-
|
|
698,899
|
|
698,803
|
|
45,102
|
|
3,552,084
|
and
Chief Executive
|
|
2014
|
|
581,327
|
|
-
|
|
827,982
|
|
552,000
|
|
701,001
|
|
996,216
|
|
36,963
|
|
3,695,489
|
Officer, Alabama Power
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew W.
Evans
|
|
2016
|
|
399,231
|
|
-
|
|
4,390,418
|
|
-
|
|
569,207
|
|
404,923
|
|
135,450
|
|
5,899,228
|
Chairman, President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern Company Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Column
(a)
For Mr. Evans, reflects compensation paid
on or after July 1, 2016 (subsequent to the completion of the merger) except as otherwise noted.
Column
(e)
This column does not reflect the value of
stock awards that were actually earned or received in 2016. Rather, as required
by applicable rules of the SEC, this column reports the aggregate grant date
fair value of performance shares granted in 2016.
The value reported for the stock awards to
Mr. Fanning, Mr. Beattie, Mr. Bowers and Mr. Crosswhite is based on the probable
outcome of the performance conditions as of the grant date, using a Monte Carlo
simulation model (50% of grant value) and the closing price of common stock on
the grant date (50% of grant value). No amounts will be earned until the end of
the three-year performance period on December 31, 2018. The value then can be
earned based on performance ranging from 0% to 200%, as established by the
Compensation Committee.
The value reported for the stock award to
Mr. Evans is based on the probable outcome of the performance conditions as of
the grant date using the closing price of common stock on the grant
date. A portion vests on each of the first three anniversaries of July 1, 2016,
the completion of the merger. The remainder may be
earned solely based on achievement of a three-year cumulative net income
goal for Southern Company Gas.
The aggregate grant date fair value of the
performance shares granted in 2016 assuming that the highest level of
performance is achieved is as follows: Fanning $15,600,044; Beattie
$3,968,067; Bowers $4,616,424; Crosswhite $3,811,114; and Evans
$4,390,418. See Note 8 to the financial statements included in the 2016 annual
report for a discussion of the assumptions used in calculating these
amounts.
62
Southern Company
2017 Proxy
Statement
Table of Contents
Executive Compensation Tables
|
|
|
Column
(f)
The Compensation Committee moved away from
granting stock options as part of the long-term incentive program in 2015.
No stock options were granted in 2015 or 2016.
This column reports the aggregate grant date fair value of stock options granted
in 2014.
Column
(g)
The amounts in this column reflect actual
payouts under the annual Performance Pay Program for Mr. Fanning, Mr. Beattie,
Mr. Bowers and Mr. Crosswhite. The amount reported for 2016 is for the
one-
year performance period that ended on
December 31, 2016. For Mr. Evans, reflects actual payout under the Annual
Incentive Plan for the performance period from July 1, 2016 to December 31,
2016.
Column
(h)
This column reports the aggregate change
in the actuarial present value of each NEOs accumulated benefit under the
applicable Pension Plan and supplemental pension plans (collectively, Pension
Benefits) as of December 31 of the applicable year.
The Pension Benefits as of each
measurement date are based on the NEOs age, pay, and service accruals and the
plan provisions applicable as of the measurement date. The actuarial present
values as of each measurement date reflect the assumptions the Company selected for cost purposes as of that measurement date;
however, the NEOs were assumed to remain employed at any Company subsidiary
until their benefits commence at the pension plans stated normal retirement
date, generally age 65.
Pension values may fluctuate significantly from year to year depending on a number of factors,
including age, years of service, annual earnings and the assumptions used to determine the present value,
such as the discount rate. For 2016, the discount rate assumption used to determine the actuarial present value
of accumulated pension benefits, as required by SEC rules, was lower than in 2015. For Mr. Fanning,
this lower discount rate assumption was one of the primary reasons for the increase in pension value.
The other key reasons were an additional year of service and the increase in annual pensionable earnings from 2015 to 2016.
This column also reports any above-market
earnings on deferred compensation under the DCP. However, there were no
above-market earnings on deferred compensation in the years reported.
The values reported in this column are calculated pursuant to SEC requirements and are based on assumptions
used in preparing the Companys audited financial statements for the applicable fiscal years. The plans
utilize a different method of calculating actuarial present value for the purpose of determining a lump sum payment,
if any. The change in pension value from year to year as reported in the table is subject to market volatility
and may not represent the value that an NEO will actually accrue or receive under the plans during any given year.
Column
(i)
The amounts reported in this column for
2016 are itemized below.
|
|
Perquisites
($)
|
|
Company
Contribution to
401(k) Plan
($)
|
|
Company
Contribution
to
Supplemental
Retirement
Plan ($)
|
|
Total ($)
|
Tom
Fanning
|
|
56,161
|
|
13,515
|
|
49,991
|
|
119,667
|
Art
Beattie
|
|
7,406
|
|
11,542
|
|
23,079
|
|
42,028
|
Paul
Bowers
|
|
9,923
|
|
13,146
|
|
27,989
|
|
51,057
|
Mark
Crosswhite
|
|
11,627
|
|
13,120
|
|
21,311
|
|
46,058
|
Drew Evans
|
|
7,629
|
|
13,780
|
|
114,041
|
|
135,450
|
Perquisites
includes financial planning, personal use of corporate aircraft, and
other miscellaneous perquisites.
|
Financial planning is provided for
most officers of the Company, including all of the NEOs. The Company
provides an annual subsidy of up to $8,200 to be used for financial
planning, tax preparation fees and estate planning. In the initial year,
the allowed amount is $13,200. Mr. Evans was covered by a separate policy for Southern Company Gas with an annual subsidy of up to $18,000.
|
investor.southerncompany.com
63
Table of Contents
|
|
Executive Compensation
Tables
|
|
The Southern Company system has
aircraft that are used to facilitate business travel. All flights on these
aircraft must have a business purpose, except limited personal use that is
associated with business travel is permitted. The amount reported for such
personal use is the incremental cost of providing the benefit, primarily
fuel costs. Also, if seating is available, the Company permits a spouse or
other family member to accompany an employee on a flight. However, because
in such cases the aircraft is being used for a business purpose, there is
no incremental cost associated with the family travel, and no amounts are
included for such travel.
Any additional
expenses incurred that are related to family travel are included. The
amount for Mr. Bowers includes $491 for approved personal use of corporate
aircraft.
|
|
The personal safety and security of
employees at home, at work and while traveling is of utmost importance to
us. The
amount reported for Mr. Fanning
includes $48,590 related to personal security expenses. Given Mr.
Fannings profile and high visibility, we believe that the costs of his
security program are appropriate and necessary business expenses and that
we benefit from the added security measures for him. Costs reported
reflect the initial procurement, installation and maintenance of security
measures during 2016.
|
|
Other miscellaneous perquisites
reflects the full cost to the Company of providing the following items:
personal use of Company-provided tickets for sporting and other
entertainment events and gifts distributed to and activities provided to
attendees at Company-sponsored events.
|
Grants of Plan-Based Awards
in 2016
|
This table provides information on
short-term and long-term incentive compensation awards made in 2016.
|
|
Grant
Date
(b)
|
|
Potential Payouts Under
Non-Equity Incentive Plan
Awards
|
|
Estimated Future Payouts
Under
Equity Incentive Plan Awards
|
|
Grant
Date Fair
Value
of
Stock and
Option
Awards ($)
(i)
|
Name
(a)
|
|
Threshold
($)
(c)
|
|
Target
($)
(d)
|
|
Maximum
($)
(e)
|
|
Threshold
(#)
(f)
|
|
Target
(#)
(g)
|
|
Maximum
(#)
(h)
|
Tom
Fanning
|
|
|
|
16,250
|
|
1,625,000
|
|
3,250,000
|
|
|
|
|
|
|
|
|
|
|
2/8/2016
|
|
|
|
|
|
|
|
1,662
|
|
166,188
|
|
332,376
|
|
7,800,022
|
Art
Beattie
|
|
|
|
6,132
|
|
613,233
|
|
1,226,466
|
|
|
|
|
|
|
|
|
|
|
2/8/2016
|
|
|
|
|
|
|
|
423
|
|
42,272
|
|
84,544
|
|
1,984,033
|
Paul
Bowers
|
|
|
|
6,715
|
|
671,474
|
|
1,342,948
|
|
|
|
|
|
|
|
|
|
|
2/8/2016
|
|
|
|
|
|
|
|
492
|
|
49,179
|
|
98,358
|
|
2,308,212
|
Mark
Crosswhite
|
|
|
|
5,544
|
|
554,350
|
|
1,108,700
|
|
|
|
|
|
|
|
|
|
|
2/8/2016
|
|
|
|
|
|
|
|
406
|
|
40,600
|
|
81,200
|
|
1,905,557
|
Drew Evans
|
|
|
|
4,000
|
|
400,000
|
|
800,000
|
|
|
|
|
|
|
|
|
|
|
9/29/2016
|
|
|
|
|
|
|
|
-
|
|
84,350
|
|
84,350
|
|
4,390,418
|
Columns (c), (d), and
(e)
These columns reflect the annual Performance Pay Program opportunity for Mr.
Fanning,Mr. Beattie, Mr. Bowers and Mr. Crosswhite for 2016 and the Annual Incentive Plan opportunity for Mr. Evans for July
1, 2016 through December 31, 2016. The information shown as Threshold, Target and
Maximum reflects the range of potential
payouts established by the Compensation
Committee. The actual amounts earned for 2016 are included in column (g) of the Summary Compensation Table.
Columns (f), (g) and
(h)
These columns reflect the long-term
Performance Share Program performance shares granted to the NEOs in 2016. The
information shown as Threshold, Target and Maximum reflects the range of
potential shares that can be earned as established by the Compensation
Committee. Earned performance shares and accrued dividends will be paid out in
common stock following the end of the 20162018 performance period, based on the
extent to which the performance goals are achieved. Any shares not earned are
forfeited.
For Mr. Evans, represents a performance
share unit award granted in September 2016. A portion vests on each of the first
three anniversaries of the completion of the merger. The remainder may be earned
solely based on the achievement of a cumulative net income target for Southern
Company Gas for the 2017-2019 performance period. The maximum payout is 100% of
target. Earned performance share units and accrued dividends will be paid out in
common stock.
64
Southern Company
2017 Proxy
Statement
Table of Contents
Executive
Compensation Tables
|
|
|
Column
(i)
This column reflects the aggregate grant
date fair value of the Performance Share Program performance shares granted in
2016. 50% of the value is based on the probable outcome of the performance
conditions as of the grant date using a Monte Carlo simulation
model ($45.19), while the other 50% is based on the closing
price of common stock on the grant date ($48.82). The assumptions used in
calculating these amounts are discussed in Note 8 to the financial statements
included in the 2016 annual report.
Outstanding Equity Awards at
2016 Fiscal Year-End
|
This table provides information about
stock options and stock awards (performance shares and restricted stock units)
as of December 31, 2016.
|
|
Option Awards
|
|
Stock Awards
|
Name
(a)
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
|
|
Option
Exercise
Price
($)
(d)
|
|
Option
Expiration
Date
(e)
|
|
Number of
Shares
or
Units of
Stock That
Have Not
Vested
(#)
(f)
|
|
Market
Value
of
Shares
or Units
of Stock
That
Have
Not
Vested ($)
(g)
|
|
Equity
Incentive
Plan Awards:
Number
of
Unearned
Shares,
Units, or
Other Rights
That Have
Not
Vested (#)
(h)
|
|
Equity
Incentive
Plan Awards:
Market
or
Payout
Value of
Unearned
Shares, Units,
or
Other
Rights
That Have
Not Vested
($)
(i)
|
Tom
Fanning
|
|
597,345
|
|
-
|
|
44.42
|
|
2/13/2022
|
|
|
|
|
|
|
|
|
|
|
714,297
|
|
-
|
|
44.06
|
|
2/11/2023
|
|
|
|
|
|
|
|
|
|
|
683,636
|
|
341,818
|
|
41.28
|
|
2/10/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,663
|
|
8,247,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,799
|
|
8,549,173
|
Art
Beattie
|
|
152,082
|
|
-
|
|
44.42
|
|
2/13/2022
|
|
|
|
|
|
|
|
|
|
|
121,239
|
|
-
|
|
44.06
|
|
2/11/2023
|
|
|
|
|
|
|
|
|
|
|
-
|
|
93,881
|
|
41.28
|
|
2/10/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,582
|
|
1,848,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,208
|
|
2,174,592
|
Paul
Bowers
|
|
70,680
|
|
-
|
|
36.42
|
|
2/19/2017
|
|
|
|
|
|
|
|
|
|
|
85,151
|
|
-
|
|
35.78
|
|
2/18/2018
|
|
|
|
|
|
|
|
|
|
|
90,942
|
|
-
|
|
31.39
|
|
2/16/2019
|
|
|
|
|
|
|
|
|
|
|
233,477
|
|
-
|
|
31.17
|
|
2/15/2020
|
|
|
|
|
|
|
|
|
|
|
164,377
|
|
-
|
|
37.97
|
|
2/14/2021
|
|
|
|
|
|
|
|
|
|
|
197,412
|
|
-
|
|
44.42
|
|
2/13/2022
|
|
|
|
|
|
|
|
|
|
|
235,604
|
|
-
|
|
44.06
|
|
2/11/2023
|
|
|
|
|
|
|
|
|
|
|
219,500
|
|
109,750
|
|
41.28
|
|
2/10/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,722
|
|
2,150,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,431
|
|
2,529,891
|
Mark
Crosswhite
|
|
63,125
|
|
-
|
|
44.42
|
|
2/13/2022
|
|
|
|
|
|
|
|
|
|
|
120,681
|
|
-
|
|
44.06
|
|
2/11/2023
|
|
|
|
|
|
|
|
|
|
|
-
|
|
83,636
|
|
41.28
|
|
2/10/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,425
|
|
1,693,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,459
|
|
2,088,558
|
Drew
Evans
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,035
|
|
4,133,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,357
|
|
4,198,711
|
investor.southerncompany.com
65
Table of Contents
|
|
Executive
Compensation Tables
|
Columns
(b), (c), (d) and (e)
Stock options were not granted in 2015 or
2016. Stock options vest one-third per year on the anniversary of the grant
date. Options granted from 2007 through 2013 with expiration dates from 2017
through 2023 were fully vested as of December 31, 2016. The options granted in
2014 become fully vested on February 10, 2017 and will expire on February 10,
2024.
Options also fully vest upon death, total
disability or retirement and expire three years following death or total
disability or five years following retirement, or on the original expiration
date if earlier.
Columns
(f) and (g)
These columns reflect the number of RSUs
held by Mr. Evans as of December 31, 2016. His Gas PSUs were assumed and
converted into RSUs. Dividends do not accrue on the RSUs. The value in column
(g) is based on the common stock closing price on December 30, 2016 ($49.19).
Columns
(h) and (i)
In accordance with SEC rules, column (h) reflects the target number of performance shares granted under the Performance
Share Program that can be earned at the end of the three-year performance period (January 1, 2015 through December 31,
2017 and January 1, 2016 through December 31, 2018). The number of shares reflected in column (h) also reflects the deemed
reinvestment of dividends on the target number of performance shares. Dividends are credited over the performance period
but are only received at the end of the performance period if the underlying performance shares are earned.
The performance shares granted for the
January 1, 2014 through December 31, 2016 performance period vested on December
31, 2016 at 0% of target.
For Mr. Evans, reflects a grant of
performance share units in September 2016. A portion vests on each of the first three
anniversaries of July 1, 2016, the completion of the merger. The remainder may
be earned solely based on achievement of a cumulative net income goal for Southern
Company Gas over a three-year performance period. The number of shares reflected in column (h) also reflects the
deemed reinvestment of dividends based on the target number of performance share
units.
The value in column (i) is derived by
multiplying the number of shares in column (h) by the common stock closing price
on December 30, 2016 ($49.19). The ultimate number of shares earned, if any,
will be based on the actual performance results at the end of each respective
performance period.
Option Exercises and Stock
Vested in 2016
|
|
|
Option Awards
|
|
Stock Awards
|
Name
(a)
|
|
Number
of
Shares
Acquired on
Exercise
(#)
(b)
|
|
Value Realized
on
Exercise ($)
(c)
|
|
Number
of
Shares
Acquired on
Vesting
(#)
(d)
|
|
Value Realized
on
Vesting ($)
(e)
|
Tom
Fanning
|
|
-
|
|
-
|
|
-
|
|
-
|
Art
Beattie
|
|
388,766
|
|
4,366,725
|
|
-
|
|
-
|
Paul
Bowers
|
|
-
|
|
-
|
|
-
|
|
-
|
Mark
Crosswhite
|
|
231,199
|
|
2,645,737
|
|
-
|
|
-
|
Drew Evans
|
|
-
|
|
-
|
|
28,704
|
|
1,411,950
|
Columns (b)
and (c)
Column (b) reflects the number of shares
acquired upon the exercise of stock options during 2016, and column (c) reflects
the value realized. The value realized is the difference in the market price
over the exercise price on the exercise date.
66
Southern Company
2017 Proxy
Statement
Table of Contents
Executive Compensation Tables
|
|
|
Columns (d) and
(e)
Performance share grants made in 2014 were subject to a three-year
performance period that ended on December 31, 2016. Our relative TSR performance
compared to the peer group was below the threshold performance level. As a
result, no performance shares were earned by any participant.
For Mr. Evans, represents the Gas PSUs
that were assumed and converted into time-vesting RSUs. A portion of the RSUs
vested on December 31, 2016. The value realized is the number of RSUs that
vested multiplied by the closing price on the vesting date ($49.19).
Pension
Benefits at 2016 Fiscal
Year-End
|
Name
(a)
|
|
Plan
Name
(b)
|
|
Number
of
Years
Credited
Service (#)
(c)
|
|
Present Value
of
Accumulated
Benefit ($)
(d)
|
|
Payments
During
Last
Fiscal Year ($)
(e)
|
Tom
Fanning
|
|
Pension Plan
|
|
35.00
|
|
1,514,010
|
|
-
|
|
|
Supplemental Benefit Plan (Pension-Related)
|
|
35.00
|
|
14,667,738
|
|
-
|
|
|
Supplemental Executive Retirement Plan
|
|
35.00
|
|
5,328,659
|
|
-
|
Art
Beattie
|
|
Pension Plan
|
|
39.92
|
|
1,936,054
|
|
-
|
|
|
Supplemental Benefit Plan (Pension-Related)
|
|
39.92
|
|
6,903,309
|
|
-
|
|
|
Supplemental Executive Retirement Plan
|
|
39.92
|
|
2,621,203
|
|
-
|
Paul
Bowers
|
|
Pension Plan
|
|
36.67
|
|
1,606,550
|
|
-
|
|
|
Supplemental Benefit Plan (Pension-Related)
|
|
36.67
|
|
7,156,352
|
|
-
|
|
|
Supplemental Executive Retirement Plan
|
|
36.67
|
|
2,384,572
|
|
-
|
Mark
Crosswhite
|
|
Pension Plan
|
|
11.92
|
|
410,073
|
|
-
|
|
|
Supplemental Benefit Plan (Pension-Related)
|
|
11.92
|
|
1,210,590
|
|
-
|
|
|
Supplemental Executive Retirement Plan
|
|
11.92
|
|
641,220
|
|
-
|
|
|
Supplemental Retirement Agreement
|
|
15.00
|
|
2,938,621
|
|
-
|
Drew Evans
|
|
AGL
Pension Plan
|
|
15.00
|
|
405,688
|
|
-
|
|
|
AGL
Excess Benefit Plan
|
|
15.00
|
|
1,044,505
|
|
-
|
Below is a description of pension benefits
for persons employed by the Southern Company system other than Southern Company
Gas and PowerSecure.
Pension
Plan
The Pension Plan is a tax-qualified,
funded plan. It is the Companys primary retirement plan. Substantially all
Southern Company system employees participate in this plan after one year of
service. Normal retirement benefits become payable when participants attain age
65 and complete five years of participation. The plan benefit equals the greater
of amounts computed using a 1.7% offset formula and a 1.25% formula, as
described below. Benefits are limited to a statutory maximum.
The 1.7% offset formula amount equals 1.7%
of final average pay times years of participation less an offset related to
Social Security benefits. The offset equals a service ratio times 50% of the
anticipated Social Security benefits in excess of $4,200. The service ratio
adjusts the offset for the portion of a full career that a participant has
worked. The highest three rates of payout of a participants last 10 calendar
years of service are averaged to derive final average pay. The rates of pay
considered for this formula are the base salary rates with no adjustments for
voluntary deferrals after 2008. A statutory limit restricts the amount
considered each year; the limit for 2016 was $265,000.
The 1.25% formula amount equals 1.25% of
final average pay
times years of participation.
For this formula, the final average pay computation is the same as above, but
annual performance-based compensation earned each year is added to the base
salary rates.
Early retirement benefits become payable
once plan participants have, during employment, attained age 50 and completed 10
years of participation. Participants who retire early from active service
receive benefits equal to the amounts computed using the same formulas employed
at normal retirement. However, a 0.3% reduction applies for each month (3.6% for
each year) prior to normal retirement
investor.southerncompany.com
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Table of Contents
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Executive Compensation
Tables
|
that participants elect to have their
benefit payments commence. For example, 64% of the formula benefits are payable
starting at age 55. As of December 31, 2016, all of the NEOs (other than Mr. Evans) are
retirement-eligible.
The Pension Plans benefit formulas
produce amounts payable monthly over a participants post-retirement lifetime.
At retirement, plan participants can choose to receive their benefits in one of
seven alternative forms of payment. All forms pay benefits monthly over the
lifetime of the retiree or the joint lifetimes of the retiree and a beneficiary.
A reduction applies if a retiring participant chooses a payment form other than
a single life annuity. The reduction makes the value of the benefits paid in the
form chosen comparable to what it would have been if benefits were paid as a
single life annuity over the retirees life.
Participants vest in the Pension Plan
after completing five years of service. As of December 31, 2016, all of the NEOs
are vested in their Pension Plan benefits. Participants who terminate employment
after vesting can elect to have their pension benefits commence at age 50 if
they participated in the Pension Plan for 10 years. If such an election is made,
the early retirement reductions that apply are actuarially determined factors
and are larger than 0.3% per month.
Prior to January 1, 2017, if a participant
died while actively employed and was either age 50 or vested in the Pension Plan
as of date of death,
benefits would have been
paid to a beneficiary. For deaths occurring on or after January 1, 2017, a
participant must be vested in the Pension Plan as of the date of death. After
commencing, survivor benefits are payable monthly for the remainder of a
survivors life.
If participants become totally disabled,
periods that Social Security or employer-provided disability income benefits are
paid will count as service for benefit calculation purposes. The crediting of
this additional service ceases at the point a disabled participant elects to
commence retirement payments. Outside of this extra service crediting, the
normal Pension Plan provisions apply to disabled participants.
SBP-P
The SBP-P is an unfunded retirement plan
that is not tax qualified. This plan provides high-paid employees any benefits
that the Pension Plan cannot pay due to statutory pay/benefit limits. The
SBP-Ps vesting and early retirement provisions mirror those of the Pension
Plan. Its disability provisions mirror those of the Pension Plan but cease upon
a participants separation from service.
The amounts paid by the SBP-P are based on
the additional monthly benefit that the Pension Plan would pay if the statutory
limits and pay deferrals were ignored. When a SBP-P participant separates from
service, vested monthly benefits provided by the benefit formulas are converted
into a single sum value. It equals the present value of what would have been
paid monthly for an actuarially determined average post-retirement lifetime. The
discount rate used in the calculation is based on the 30-year U.S. Treasury
yields for the September preceding the calendar year of separation, but not more
than six percent.
Vested participants terminating prior to
becoming eligible to retire will be paid their single sum value as of September
1 following the calendar year of separation. If the terminating participant is
retirement-eligible, the single sum value will be paid in 10 annual installments
starting shortly after separation. The unpaid balance of a retirees single sum
will be credited with interest at the prime rate published in The Wall Street
Journal. If the separating participant is a key man under Section 409A of the
tax code, the first installment will be delayed for six months after the date of
separation.
If a SBP-P participant dies after becoming
vested in the Pension Plan, the beneficiary of the deceased participant will
receive the installments the participant would have been paid upon
retirement.
SERP
The SERP is also an unfunded retirement
plan that is not tax qualified. This plan provides high-paid employees
additional benefits that the Pension Plan and the SBP-P would pay if the 1.7%
offset formula calculations reflected a portion of annual performance-based
compensation. To derive the SERP benefits, a final average pay is determined
reflecting participants base rates of pay and their annual performance-based
compensation amounts, whether or not deferred, to the extent they exceed 15% of
those base rates (ignoring statutory limits). This final average pay is used in
the 1.7% offset formula to derive a gross benefit. The Pension Plan and the
SBP-P benefits are
subtracted from the gross
benefit to calculate the SERP benefit. The SERPs early retirement, survivor
benefit, disability, and form of payment provisions mirror the SBP-Ps
provisions. However, except upon a change in control, SERP benefits do not vest
until participants retire, so no benefits are paid if a participant terminates
prior to becoming retirement-eligible. More information about vesting and
payment of SERP benefits following a change in control is included under
Potential Payments upon Termination or Change in Control. Effective January 1,
2016, participation on the SERP was closed to new hires and future
promotions.
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Southern Company
2017 Proxy
Statement
Table of Contents
Executive Compensation Tables
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|
|
Supplemental Retirement Agreements (SRA)
The Company also provides
supplemental retirement benefits to certain employees that were first employed
by an affiliate of the Company in the middle of their careers. These SRAs
provide for additional retirement benefits by giving credit for years of
employment prior to employment with the Company or one of its affiliates. These
agreements provide a benefit which recognizes the expertise both brought to the
Southern Company system, and they provide a strong retention incentive to remain
with the Company, or one of its affiliates, for the vesting period and beyond.
These supplemental retirement benefits are also unfunded and not
tax-qualified.
The Company has an SRA with
Mr. Crosswhite. Prior to his employment with the Southern Company system, Mr.
Crosswhite provided legal services to Southern Companys subsidiaries. His
agreement provides an additional fifteen years of benefits. Mr. Crosswhite was
vested in his benefits as of December 31, 2015.
Pension
Benefit Assumptions
The following assumptions were
used in the present value calculations for all pension benefits:
|
Discount rate 4.46% Pension Plan and 3.89%
supplemental plans as of December 31, 2016
|
|
Retirement date Normal retirement age (65 for
all NEOs)
|
|
Mortality after normal retirement RP-2014
mortality tables with generational projections
|
|
Mortality, withdrawal, disability and
retirement rates prior to normal retirement None
|
|
Form of payment for pension
benefits
|
|
Male retirees: 25% single life annuity; 25%
level income annuity; 25% joint and 50% survivor annuity; and 25% joint
and 100% survivor annuity
|
|
Female retirees: 50% single life annuity; 30%
level income annuity; 15% joint and 50% survivor annuity; and 5% joint and
100% survivor annuity
|
|
Spouse ages Wives two years younger than
their husbands
|
|
Annual performance-based compensation earned
but unpaid as of the measurement date 130% of target opportunity
percentages times base rate of pay for year amount is earned
|
|
Installment determination 3.75 % discount
rate for single sum calculation and 4.25% prime rate during installment
payment period.
|
For all of the NEOs, the
number of years of credited service is one year less than the number of years of
employment.
Below is a description of
pension benefits for persons employed by Southern Company Gas, including Mr. Evans.
AGL
Pension Plan
The AGL Pension Plan is the pension plan for Southern Company Gas
employees. The AGL Pension Plan is a tax-qualified, funded plan. Generally all
non-union employees who have a hire date on or before December 31, 2011 and all
union employees who have a hire date on or before December 31, 2012 are eligible
to participate in the AGL Pension Plan, upon completion of one year of service
and attainment of age 21. Normal retirement benefits become payable when
participants attain age 65. AGL Pension Plan benefits are determined by a career
average pay formula. The benefit equals 1% of career average pay plus 0.5% of
career average pay in excess of 50% of the Social Security Taxable Wage Base.
Eligible compensation includes base pay, overtime and short-term incentives.
Benefits are limited to a statutory maximum. A statutory limit restricts the
amount considered each year; the limit for 2016 was $265,000.
Early retirement benefits
become payable once plan participants have, during employment, attained age 55
and completed five years of service. Participants who retire early from active
service receive reduced benefits. However, the reduced amount is subsidized so
that the reduction from the normal retirement benefit is less severe than a full
actuarial reduction. Employees who retire after age 62 with at least 25 years of
service are eligible for an unreduced early retirement benefit. As of December
31, 2016, Mr. Evans was not retirement-eligible.
At retirement, plan
participants can choose to receive their benefits from various forms of payment.
Most forms pay benefits monthly over the lifetime of the retiree or the joint
lifetimes of the retiree and a spouse. A reduction applies if a retiring
participant chooses a payment form other than a single life annuity. The
reduction makes the value of the benefits paid in the form chosen comparable to
what it would have been if benefits were paid as a single life annuity over the
retirees life. The AGL Pension Plan offers a single lump sum payment if the
participants single lump sum amount is less than $10,000.
Participants vest in the AGL
Pension Plan after completing five years of service. As of December 31, 2016,
Mr. Evans is vested in his AGL Pension Plan benefit. If a participant dies while
actively employed and vested in the AGL Pension Plan as of date of death,
benefits will be paid to a spouse. After commencing, survivor benefits are
payable monthly for the remainder of a survivors life depending on the form of
payment selected.
If participants become totally
disabled with ten years of service, periods that Social Security or
employer-provided disability income benefits are paid will count as service for
benefit calculation purposes. The crediting of this additional service ceases at
the time the participant qualifies for unreduced benefits. Outside of this extra
service crediting, the normal AGL Pension Plan provisions apply to disabled participants.
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Executive
Compensation Tables
|
AGL Excess
Benefit Plan
The AGL Excess
Benefit Plan is an unfunded retirement plan that is
not tax qualified. This plan provides highly-paid employees any benefits that
the AGL Pension Plan cannot pay due to statutory pay/benefit limits. The AGL
Excess Benefit Plans provisions
mirror those of the AGL Pension Plan. Benefits under the AGL Excess Benefit Plan
are paid in the same forms available under the AGL Pension Plan, and are
distributed at the later of separation from service or age 62.
Pension
Benefit Assumptions
The following assumptions were
used in the present value calculations for pension benefits related to pension
benefits for Southern Company Gas employees:
|
Discount rate 4.39% as of December 31,
2016
|
|
Retirement age earliest unreduced for AGL
Pension Plan and age 62 for AGL Excess Benefit Plan
|
|
Mortality after normal retirement RP-2014
mortality tables backed up to 2006 by Scale MP2014 and projected forward
with MP-2015 (Amount weighted total employee and total annuitant)
|
|
Salary scale none
|
|
Mortality, withdrawal, disability, and
retirement rates prior to normal retirement none
|
|
Form of payment for pension benefits life
annuity
|
Nonqualified Deferred
Compensation as of 2016 Fiscal Year-End
|
Name
(a)
|
|
Executive
Contributions
in Last
FY
($)
(b)
|
|
Employer
Contributions
in Last
FY
($)
(c)
|
|
Aggregate
Earnings
in Last
FY
($)
(d)
|
|
Aggregate
Withdrawals/
Distributions
($)
(e)
|
|
Aggregate
Balance
at Last
FYE
($)
(f)
|
Tom
Fanning
|
|
503,909
|
|
49,991
|
|
240,932
|
|
0
|
|
4,575,978
|
Art
Beattie
|
|
71,745
|
|
23,079
|
|
38,015
|
|
0
|
|
721,677
|
Paul
Bowers
|
|
455,433
|
|
27,989
|
|
387,986
|
|
0
|
|
5,700,298
|
Mark
Crosswhite
|
|
69,890
|
|
21,311
|
|
32,245
|
|
0
|
|
430,896
|
Drew
Evans
(1)
|
|
180,679
|
|
114,041
|
|
90,180
|
|
0
|
|
1,507,348
|
(1)
|
The
amounts shown for Mr. Evans include contributions made and earnings for
the full year under the AGL NSP.
|
The Company provides the DCP
(excluding Southern Company Gas and PowerSecure employees), which is designed to
permit participants to defer income as well as certain federal, state and local
taxes until a specified date or their retirement or other separation from
service. Up to 50% of base salary and up to 100% of performance-based non-equity
compensation may be deferred at the election of eligible employees. All of the
NEOs, except Mr. Evans, are eligible to participate in the DCP. Mr. Evans is a
participant in the AGL NSP, described below.
DCP participants have two
options for the deemed investments of the amounts deferred the stock
equivalent account and the prime equivalent account. Under the terms of the DCP,
participants are permitted to transfer between investments at any
time.
The amounts deferred in the
stock equivalent account are treated as if invested at an equivalent rate of
return to that of an actual investment in common stock, including the crediting
of dividend equivalents as such are paid by Southern Company from time to time.
It provides participants with an equivalent opportunity for the capital
appreciation (or loss) and income of that of a Company stockholder. During 2016,
the rate of return in the stock equivalent account was 9.99%.
Alternatively, participants
may elect to have their deferred compensation deemed invested in the prime
equivalent account, which is treated as if invested at a prime interest rate
compounded monthly, as published in
The Wall Street Journal
as
the base rate on corporate loans posted as of the last business day of each
month by at least 75% of the United States largest banks. The interest rate
earned on amounts deferred during 2016 in the prime equivalent account was 3.59%.
70
Southern Company
2017 Proxy
Statement
Table of Contents
Executive Compensation Tables
|
|
|
Under the AGL NSP, eligible
employees, including Mr. Evans, are allowed to defer up to 75% of base salary
and 100% of annual incentive pay as before-tax contributions. The timing
restrictions for contribution deferral elections are intended to comply with
Section 409A of the tax code, as well as other applicable tax code provisions.
Under the AGL NSP, the amount of matching contributions is offset by the maximum
matching contributions the participant could receive under the tax-qualified RSP. Southern Company Gas matches 65% of participant contributions, up to the
first 8% of the participants covered compensation. Each participant in the AGL
NSP has an account, which represents a bookkeeping entry reflecting
contributions and earnings/losses on the actual performance of the participants
notional investments. The notional investment options under the AGL NSP mirror
the investment options offered under the RSP. Participants are 100% vested
in their own contributions and vest in employer-matching contributions over a
three-year period according to a vesting schedule. Mr. Evans has met the vesting
requirements under the AGL NSP.
Distributions under the AGL
NSP occur in the year following the year of termination of employment.
Participants have the option of taking distributions, following termination of
employment, in the following forms: a single lump sum cash payment; a lump sum
cash payment of a portion of the participants account with the remainder
distributed in up to ten equal annual installments; or between one to ten
equal annual installments.
Column
(b)
This column reports the actual
amounts of compensation deferred under the DCP or AGL NSP, as applicable, by
each NEO in 2016. The amount of salary deferred by the NEOs, if any, is included
in the Salary column in the Summary Compensation Table. The amounts of
performance-based compensation deferred in 2016 were the amounts that were
earned as of December 31, 2015 but were not payable until the first quarter of 2016. These amounts are
not reflected in the Summary Compensation Table because that table reports
performance-based compensation that was earned in 2016 but not payable until
early 2017. Amounts under the DCP may be distributed in a lump sum or in up to
10 annual installments at termination of employment or in a lump sum at a
specified date, at the election of the participant.
Column
(c)
This column reflects
contributions under the SBP and, for Mr. Evans, the AGL NSP. Under the tax code,
employer-matching contributions are prohibited under the ESP and the RSP on
employee contributions above stated limits, and, if applicable, above legal
limits set forth in the tax code.
Each of the SBP and the AGL
NSP is a nonqualified deferred compensation plan under which contributions are
made that are prohibited from being made in the ESP or RSP. The
contributions are treated as if invested in common stock and are payable in cash
upon termination of employment in a lump sum or in up to 20 annual installments,
at the election of the participant. The amounts reported in this column also
were reported in the All Other Compensation column in the Summary Compensation
Table.
Column
(d)
This column reports earnings
or losses on compensation the NEOs elected to defer and on employer
contributions under the SBP.
Column
(f)
This column includes amounts
that were deferred under the DCP or AGL NSP and contributions under the SBP or
AGL NSP in prior years. The following chart shows the amounts previously
reported.
|
|
Amounts
Deferred
prior to 2016 and
previously
reported
($)
|
|
Employer
Contributions
prior to 2016 and
previously
reported
($)
|
|
Total
($)
|
Tom
Fanning
|
|
2,477,037
|
|
466,190
|
|
2,943,227
|
Art
Beattie
|
|
34,781
|
|
104,091
|
|
138,872
|
Paul
Bowers
|
|
2,354,095
|
|
197,735
|
|
2,551,830
|
Mark
Crosswhite
|
|
0
|
|
18,795
|
|
18,795
|
Drew
Evans
|
|
0
|
|
0
|
|
0
|
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71
Table of Contents
|
|
Executive
Compensation Tables
|
Potential Payments
Upon Termination or Change in Control
|
This section describes and
estimates payments that could be made to the NEOs serving as of December 31,
2016 under different termination and change-in-control events. The estimated
payments would be made under the terms of Southern Companys compensation and
benefit program, the Southern Company Gas program or the change-in-control
severance program.
All of the NEOs are
participants in Southern Companys change-in-control severance program for
officers. The amount of potential payments is calculated as if the triggering
events occurred as of December 31, 2016 and assumes that the price of common
stock is the closing market price on December 31, 2016.
Description of Termination and Change-in-Control
Events
The following charts list
different types of termination and change-in-control events that can affect the
treatment of payments under the compensation and benefit programs. No payments
are made under the change-in-control
severance program unless, within two years of the change in control, the NEO is
involuntarily terminated or voluntarily terminates for good reason.
Traditional Termination Events
|
Retirement or Retirement-Eligible Termination
of NEO who is at least 50 years old and has at least 10 years of credited
service.
|
|
Resignation Voluntary termination of NEO who
is not retirement-eligible.
|
|
Lay Off Involuntary termination of NEO who is
not retirement-eligible not for cause.
|
|
Involuntary Termination Involuntary
termination of NEO for cause. Cause includes individual performance below
minimum performance standards and misconduct, such as violation of the
Companys Drug and Alcohol Policy.
|
|
Death or Disability Termination of NEO due to
death or disability.
|
Change-in-Control-Related Events
At the Company or the
subsidiary company level:
|
Company Change in Control I Consummation of
an acquisition by another entity of 20% or more of common stock or,
following consummation of a merger with another entity, the Companys
stockholders own 65% or less of the entity surviving the merger.
|
|
Company Change in Control II Consummation of
an acquisition by another entity of 35% or more of common stock or,
following consummation of a merger with another entity, the Companys
stockholders own less than 50% of the Company surviving the merger.
|
|
Company Does not Survive Merger Consummation
of a merger or other event and the Company is not the surviving company or
the common stock is no longer publicly traded.
|
|
Subsidiary Company Change in Control
Consummation of an acquisition by another entity, other than another
subsidiary of the Company, of 50% or more of the stock of any of the
Companys subsidiaries, consummation of a merger with another entity and
the Companys subsidiary is not the surviving company, or the sale of
substantially all the assets of any of the Companys
subsidiaries.
|
At the employee
level:
|
Involuntary Change-in-Control Termination or
Voluntary Change-in-Control Termination for Good Reason Employment is
terminated within two years of a change in control, other than for cause,
or the employee voluntarily terminates for good reason. Good reason for
voluntary termination within two years of a change in control generally is
satisfied when there is a material reduction in salary, performance-based
compensation opportunity or benefits, relocation of over 50 miles, or a
diminution in duties and responsibilities.
|
72
Southern Company
2017 Proxy
Statement
Table of Contents
Executive Compensation Tables
|
|
|
The following chart describes
the treatment of different pay and benefit elements in connection with the
Traditional Termination Events as described above.
Program
|
|
Retirement/
Retirement-
Eligible
|
|
Lay
Off
(Involuntary
Termination
Not For
Cause)
|
|
Resignation
|
|
Death
or
Disability
|
|
Involuntary
Termination
(For
Cause)
|
Pension Benefits
Plans
|
|
Benefits payable as
described in the notes following the Pension Benefits table
|
|
Benefits payable as
described in the notes following the Pension Benefits table
|
|
Benefits payable as
described in the notes following the Pension Benefits table
|
|
Benefits payable as
described in the notes following the Pension Benefits table
|
|
Benefits payable as
described in the notes following the Pension Benefits
table
|
Short-Term Incentive
Award
|
|
Prorated if before
12/31
|
|
Prorated if before
12/31
|
|
Forfeit
|
|
Prorated if before
12/31
|
|
Forfeit
|
Stock
Options
|
|
Vest; expire earlier of
original expiration date or five years
|
|
Vested options expire in
90 days; unvested are forfeited
|
|
Vested options expire in
90 days; unvested are forfeited
|
|
Vest; expire earlier of
original expiration date or three years
|
|
Forfeit
|
Performance
Shares
|
|
No proration if
retirement prior to end of performance period; will receive full amount
actually earned.
|
|
Forfeit
|
|
Forfeit
|
|
Death prorated based
on number of months employed during performance period
Disability not
affected; will receive full amount actually earned
|
|
Forfeit
|
Restricted Stock
Units
|
|
Forfeit
|
|
Prorated
vesting
|
|
Forfeit
|
|
Prorated
vesting
|
|
Forfeit
|
Financial Planning
Perquisite
|
|
Continues for one
year
|
|
Terminates
|
|
Terminates
|
|
Continues for one
year
|
|
Terminates
|
DCP
|
|
Payable per prior
elections (lump sum or up to 10 annual installments)
|
|
Payable per prior
elections (lump sum or up to 10 annual installments)
|
|
Payable per prior
elections (lump sum or up to 10 annual installments)
|
|
Payable to beneficiary
or participant per prior elections; amounts deferred prior to 2005 can be
paid as a lump sum per the benefit administration committees
discretion
|
|
Payable per prior
elections (lump sum or up to 10 annual installments)
|
SBPnon- pension
related
|
|
Payable per prior
elections (lump sum or up to 20 annual installments)
|
|
Payable per prior
elections (lump sum or up to 20 annual installments)
|
|
Payable per prior
elections (lump sum or up to 20 annual installments)
|
|
Payable to beneficiary
or participant per prior elections; amounts deferred prior to 2005 can be
paid as a lump sum per the benefit administration committees
discretion
|
|
Payable per prior
elections (lump sum or up to 20 annual installments)
|
AGL
NSP
|
|
Payable in the year
following the year of termination
|
|
Payable in the year
following the year of termination
|
|
Payable in the year
following the year of termination
|
|
Payable to beneficiary
on participant in the year following the year of termination
|
|
Payable in the year
following the year of termination
|
investor.southerncompany.com
73
Table of Contents
|
|
Executive Compensation
Tables
|
The following chart describes the
treatment of payments under compensation and benefit programs under different
change-in-control events, except the pension plans. The pension plans are not
affected by change-in-control events.
Program
|
|
Company Change in
Control
I
|
|
Company Change in
Control
II
|
|
Company Does Not
Survive Merger
or
Subsidiary
Company Change in
Control
|
|
Involuntary
Change-in-
Control-Related
Termination
or
Voluntary Change-
in-Control-Related
Termination for
Good
Reason
|
Nonqualified Pension Benefits (except
SRA)
|
|
All SERP-related
benefits vest if participants vested in
tax-qualified pension benefits;
otherwise, no impact
SBP-P benefits vest for all participants
and single sum value of benefits earned to change-in-control date paid following termination or retirement
|
|
Benefits vest for all participants and single
sum value of benefits
earned to the
change-
in-control date paid
following termination or
retirement
|
|
Benefits vest for all participants and single sum
value of benefits earned
to
the
change-in-control date
paid following termination
or retirement
|
|
Based on type of change-in-control event
|
SRA
|
|
Not affected
|
|
Not affected
|
|
Not affected
|
|
Vest
|
Short-Term Incentive Award
|
|
If no program termination, paid at greater of target or
actual performance;
if program
terminated within two years of
change in control, prorated at
target
performance level
|
|
If no program termination, paid at greater of target
or actual
performance; if
program terminated within
two years of change in
control, prorated at
target
performance level
|
|
Prorated at target performance level
|
|
If not otherwise eligible for payment, if the program is
still in effect, prorated at target performance level
|
Stock Options
|
|
Not affected
|
|
Not affected
|
|
Vest and convert to
surviving companys securities; if cannot convert, pay spread in
cash
|
|
Vest
|
Performance Shares
|
|
Not affected
|
|
Not affected
|
|
Vest and convert to
surviving companys securities; if cannot convert, pay spread in
cash
|
|
Vest
|
Restricted Stock Units
|
|
Not affected
|
|
Not affected
|
|
Vest and convert to surviving companys securities; if
cannot convert, pay spread in cash
|
|
Vest
|
DCP
|
|
Not affected
|
|
Not affected
|
|
Not affected
|
|
Not affected
|
SBP
|
|
Not affected
|
|
Not affected
|
|
Not affected
|
|
Not affected
|
Severance Benefits
|
|
Not applicable
|
|
Not applicable
|
|
Not applicable
|
|
Two or three times base salary plus target annual
performance-based pay
|
Healthcare Benefits
|
|
Not applicable
|
|
Not applicable
|
|
Not applicable
|
|
Up to five years participation in group healthcare plan
plus payment of two or three years premium amounts
|
Outplacement Services
|
|
Not applicable
|
|
Not applicable
|
|
Not applicable
|
|
Six months
|
74
Southern Company
2017 Proxy
Statement
Table of Contents
Executive
Compensation Tables
|
|
|
Potential Payments
This section describes and estimates
payments that would become payable to the NEOs upon a termination or change in
control as of December 31, 2016.
Pension
Benefits
The amounts that would have become payable
to the NEOs if the Traditional Termination Events occurred as of December 31,
2016 under the Pension Plan, the SBP-P, the SERP, the AGL Pension Plan and the
AGL Excess Pension Plan are itemized in the following chart. The amounts shown
under the Retirement and Resignation or Involuntary Termination columns are amounts that would have become payable to the
NEOs that were retirement-eligible on December 31, 2016 and are the monthly
Pension Plan benefits and the first of 10 annual installments from the SBP-P and
the SERP.
Mr. Evans was not retirement-eligible on December 31, 2016. For Mr. Evans, the amounts shown under the
Resignation or Involuntary Termination column are the amounts that would have
become payable as a monthly annuity.
The amounts shown that are payable to a
beneficiary in the event of the death of the NEO are the monthly amounts payable
to a beneficiary under the Pension Plan and the first of 10 annual installments
from the SBP-P and the SERP. The amounts shown for Mr. Evans are the amounts
that would have become payable to his spouse on a monthly basis under the AGL Pension Plan and the
AGL Excess Benefit Plan.
The amounts in this chart are very different from the
pension values shown in the Summary Compensation Table and the Pension Benefits
table. Those tables show the present values of all the benefit amounts
anticipated to be paid over the lifetimes of the NEOs and their beneficiaries.
Those plans are described in the notes following the Pension Benefits table.
|
|
Plan
|
|
Retirement
($)
|
|
Resignation
or
Involuntary
Termination
($)
|
|
Death
Benefits
($)
|
Tom Fanning
|
|
Pension Plan
|
|
9,829
|
|
9,829
|
|
5,466
|
|
|
SBP-P
|
|
1,786,053
|
|
1,786,053
|
|
1,786,053
|
|
|
SERP
|
|
648,857
|
|
648,857
|
|
648,857
|
Art Beattie
|
|
Pension Plan
|
|
12,587
|
|
12,587
|
|
6,238
|
|
|
SBP-P
|
|
788,997
|
|
788,997
|
|
788,997
|
|
|
SERP
|
|
299,584
|
|
299,584
|
|
299,584
|
Paul Bowers
|
|
Pension Plan
|
|
10,431
|
|
10,431
|
|
5,737
|
|
|
SBP-P
|
|
866,279
|
|
866,279
|
|
866,279
|
|
|
SERP
|
|
288,653
|
|
288,653
|
|
288,653
|
Mark Crosswhite
|
|
Pension Plan
|
|
2,516
|
|
2,516
|
|
1,879
|
|
|
SBP-P
|
|
156,092
|
|
156,092
|
|
156,092
|
|
|
SERP
|
|
82,678
|
|
82,678
|
|
82,678
|
|
|
SRA
|
|
378,901
|
|
378,901
|
|
378,901
|
Drew Evans
|
|
AGL Pension Plan
|
|
-
|
|
1,417
|
|
422
|
|
|
AGL Excess Benefit Plan
|
|
-
|
|
7,323
|
|
1,087
|
As described in the change-in-control
chart, the only change in the form of payment, acceleration or enhancement of
the pension benefits is that the single sum value of benefits earned up to the
change-in-control date under the SBP-P, the SERP, the SRA and the AGL Excess Benefit Plan could be paid as a
single payment rather than in 10 annual installments. Also, the SERP benefits
vest for participants who are not retirement-eligible upon a change in control.
Estimates of the single sum payment that would
have been made to the NEOs, assuming termination as of December 31, 2016
following a change-in-control-related event, other than a Company Change in
Control I (which does not impact how pension benefits are paid), are itemized
below. These amounts would be paid instead of the benefits shown in the
Traditional Termination Events chart above; they are not paid in addition to
those amounts.
investor.southerncompany.com
75
Table of Contents
|
|
Executive
Compensation Tables
|
|
|
SBP-P
($)
|
|
SERP
($)
|
|
SRA
($)
|
|
AGL Excess
Benefit Plan
($)
|
|
Total
($)
|
Tom Fanning
|
|
17,860,526
|
|
6,488,571
|
|
0
|
|
0
|
|
24,349,096
|
Art Beattie
|
|
7,889,974
|
|
2,995,842
|
|
0
|
|
0
|
|
10,885,817
|
Paul Bowers
|
|
8,662,795
|
|
2,886,534
|
|
0
|
|
0
|
|
11,549,329
|
Mark
Crosswhite
|
|
1,560,916
|
|
826,779
|
|
3,789,012
|
|
0
|
|
6,176,706
|
Drew Evans
|
|
0
|
|
0
|
|
0
|
|
1,044,505
|
|
1,044,505
|
The pension benefit amounts in the tables
above were calculated as of December 31, 2016 assuming payments would begin as
soon as possible under the terms of the plans. Accordingly, appropriate early
retirement reductions were applied. Any unpaid annual performance-based
compensation was assumed to be paid at 1.30 times the target level. Pension Plan and AGL Pension Plan
benefits were calculated assuming each NEO chose a single life annuity form of
payment, because that results in the greatest monthly benefit. The single sum
values were based on a 2.95% discount rate for the Pension Plan and a 4.39% discount rate for the AGL Pension Plan.
Annual
Performance Pay Program and Southern Plan Company Gas Annual Incentive
Plan
The amount payable if a change in control
had occurred on December 31, 2016 is the greater of target or actual
performance. Because actual payouts for 2016 performance were above the target
level for all of the NEOs, the amount that would have been payable was the
actual amount paid as reported in the Summary Compensation Table. There is no
enhancement or acceleration of payments upon a change in control under the
Southern Company Gas Annual Incentive Plan.
Stock
Options, Performance Shares and Restricted Stock Units (Equity
Awards)
Equity Awards would be treated as
described in the Termination and Change-in-Control charts above. If Southern
Company consummates a merger and is not the surviving company, all Equity Awards
vest. However, there is no payment associated with Equity Awards in that
situation unless the participants Equity Awards cannot be converted into
surviving company awards. In that event, the value of outstanding Equity Awards
would be paid to the NEOs. In addition, if there is an Involuntary
Change-in-Control Termination or Voluntary Change-in-Control Termination for Good
Reason, Equity Awards vest.
For stock options, the value is the excess
of the exercise price and the closing price of common stock on December 31,
2016. The value of performance shares and restricted stock units is calculated
using the closing price of common stock on December 31, 2016.
The chart below shows the number of stock
options for which vesting would be accelerated and the amount that would be
payable if there were no conversion to the surviving companys stock options. It
also shows the number and value of performance shares and restricted stock units
that would be paid.
|
|
Number of Equity Awards with
Accelerated Vesting
(#)
|
|
Total
Number of Equity Awards
Following Accelerated Vesting
(#)
|
|
Total Payable in
Cash
without
Conversion of
Equity
Awards
($)
|
|
|
Stock
Options
|
|
Performance
Shares
|
|
Restricted
Stock
Units
|
|
Stock
Options
|
|
Performance
Shares
|
|
Restricted
Stock
Units
|
Tom
Fanning
|
|
341,818
|
|
341,462
|
|
-
|
|
2,337,146
|
|
341,462
|
|
-
|
|
31,421,932
|
Art
Beattie
|
|
93,881
|
|
81,790
|
|
-
|
|
367,202
|
|
81,790
|
|
-
|
|
6,113,236
|
Paul
Bowers
|
|
109,750
|
|
95,153
|
|
-
|
|
1,406,893
|
|
95,153
|
|
-
|
|
19,150,039
|
Mark
Crosswhite
|
|
83,636
|
|
76,884
|
|
-
|
|
267,442
|
|
76,884
|
|
-
|
|
5,363,685
|
Drew
Evans
|
|
-
|
|
85,357
|
|
84,035
|
|
-
|
|
85,357
|
|
84,035
|
|
8,332,392
|
DCP, SBP and AGL NSP
The aggregate balances reported in the
Nonqualified Deferred Compensation table would be payable to the NEOs as
described in the Traditional Termination and Change-in-Control-Related Events
charts above. There is no enhancement or acceleration of payments under these
plans associated with termination or change-in-control events, other than the
lump-sum payment opportunity described in the above charts. The lump sums that
would be payable are those that are reported in the Nonqualified Deferred
Compensation table.