July 14, 2017 Read More →

Executive Pay Practices Rile Southern Company Shareholders in Wake of Giant Losses

Peter Maloney in Utility Dive:

The problems stemming Southern Co.’s troubled investments in its Kemper integrated gasification combined-cycle (IGCC) project in Mississippi and its Vogtle nuclear project in Georgia just continue to grow.

In addition to the Southern’s recent decision to end work on the gasification units at Kemper and run the plant as a natural gas generator, Westinghouse Electric, the main contractor for the Vogtle project, filed for bankruptcy in March, throwing the future of the project into question

Now, some shareholders are up in arms over Southern’s executive pay practices.

Despite sizeable losses, total compensation for Southern CEO Thomas Fanning rose nearly 34% to $15.8 million. The company’s executive vice president, Art Beattie, saw his compensation rise by 37% to $5.4 million.

In a Securities and Exchange Commission filing, Southern reported probable losses from Kemper of $428 million, $365 million, and $868 million in 2016, 2015, and 2014, respectively.

The losses reflect revisions of estimated costs incurred for the construction of the Kemper project in excess of the $2.88 billion cost cap established by the Mississippi PSC and net of $245 million of grants awarded from the Department of Energy.

The gap between performance and pay has attracted the attention of several large institutional shareholders, who in April filed a letter with the SEC in advance of Southern’s May annual shareholder meeting.

The letter, among other things, noted that the “driver for higher executive compensation” in both 2015 and 2016 was the result of Southern’s compensation committee’s shift from a total return to shareholders metric to an earnings per share metric that was “adjusted” to exclude the negative earnings impact of the Kemper project.

The letter, which was signed by executives from the California State Teachers’ Retirement System, the Local Authority Pension Fund Forum, The Nathan Cummings Foundation and the Seattle City Employees’ Retirement System, cited proxy statements that showed that in 2013 there was no adjustment made to a $1.14 billion pre-tax charge related to Kemper and compensation payouts were reduced significantly for that year.

Full article: Add shareholder discontent to the list of problems facing Southern Co.



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