Bonuses at Southern Draw Investors' Fire -- WSJ
25 April 2017 - 5:03PM
Dow Jones News
By Russell Gold
Several public pension funds and a foundation issued an open
letter Monday to Southern Co. criticizing executive compensation at
the Georgia-based utility and urging shareholders to vote against
two board members because of the issue.
The investors, including the California State Teachers'
Retirement System and the Nathan Cummings Foundation, argue
executives are being rewarded despite severe problems at two
flagship power projects.
The Southern board excluded the impact of pretax charges on
earnings in determining bonuses for Chief Executive Thomas Fanning
and Chief Financial Officer Art Beattie. Using the "adjusted"
earnings, the executives were awarded an extra $2 million in
combined bonuses.
The board's decision "undermines the link between pay and
performance and has led to higher pay during a time of subpar
returns to shareholders," the letter said.
These board-adjusted earnings were also used, in part, to
calculate long-term incentive compensation for Mr. Fanning and
other Southern executives, in addition to the annual bonuses.
Previously, long-term incentives were based entirely on total
shareholder return relative to other power companies.
The letter asks shareholders to vote against the re-election of
board members Steven R. Specker and Dale E. Klein. Both sit on the
compensation committee and the panel that oversees operational
issues.
A Southern spokesman didn't immediately comment on the
letter.
Southern is struggling to complete two large construction
projects, including a clean coal power plant in Mississippi and a
nuclear power station expansion in Georgia.
The power plant in Kemper County, Miss., which is designed to
burn coal and capture much of the carbon-dioxide emissions, is
several years behind schedule and suffering from cost overruns.
After seven years and $7.1 billion, the plant still isn't fully
operational and Southern has taken $2.76 billion in charges against
earnings over the past four years.
Southern is also over budget and behind schedule on two new
nuclear-power generating units in Vogtle, Ga.
The contractor for these units, Westinghouse Electric Co., filed
for bankruptcy protection earlier this year and said it would wind
down work. Southern has agreed to temporarily step in to fund
construction to keep it moving forward, but many analysts are now
questioning whether it makes sense to complete the nuclear
plants.
Laura Campos, director of corporate and political accountability
at the Nathan Cummings Foundation, is spearheading the campaign
against Southern. "We want to send a clear message to the board: we
expect them to do their job and hold executives accountable for the
performance they are achieving rather than an adjusted
performance," she said.
In addition to the foundation and California pension fund, the
Seattle City Employees' Retirement System and the U.K.-based Local
Authority Pension Fund Forum have agreed to support the effort.
Write to Russell Gold at russell.gold@wsj.com
(END) Dow Jones Newswires
April 25, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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