DEF 14A 1 so3463381-def14a.htm DEFINITIVE PROXY STATEMENT

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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. )

Filed by the Registrant Filed by a Party other than the Registrant      

CHECK THE APPROPRIATE BOX:
  Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
  Definitive Additional Materials
Soliciting Material Under Rule 14a-12

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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Southern Company at a Glance

Our Strategy

We are one of America’s premier energy companies, delivering clean, safe, reliable and affordable energy to our electric and natural gas customers through our state-regulated utilities.

Our strategy is to maximize long-term value to stockholders through a customer-, community- and relationship-focused business model that is designed to produce sustainable levels of return on energy infrastructure.

See the back cover of this Proxy Statement for our geographic footprint.

     

Our Customer Centric Business Model


Our Key Financial Objectives
Superior risk-adjusted total shareholder return
A high degree of financial integrity and strong investment grade credit ratings
Strong, sustainable returns on invested capital
Regular, predictable and sustainable earnings per share (EPS) and dividend growth*
*Future dividends are subject to the approval of the Board of Directors and dependent on earnings, financial condition and other factors
     

Our Low-Carbon Future

Southern Company is committed to providing clean, safe, reliable and affordable energy, while transitioning to low-to no-carbon operations by 2050. Since 2007, the percentage of energy generated from coal has decreased approximately 61%.

Energy Mix*        GHG Emission Reduction Goals

* Includes non-affiliate power purchase agreements

Cover: Southern Power Company’s Garland Solar Facility in Kern County, California


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Letter to Stockholders

Thomas A. Fanning
Chairman, President and
Chief Executive Officer


The foundation of our business remains strong. Our customer-focused business model, with an emphasis on outstanding reliability, best-in-class customer service and rates well below the national average, continues to be the cornerstone for delivering value to customers and stockholders alike.

     

Dear Fellow Stockholders:

You are invited to attend the 2019 Annual Meeting of Stockholders at 10:00 a.m., ET, on Wednesday, May 22, 2019, at The Lodge Conference Center at Callaway Gardens, Pine Mountain, Georgia, where we will discuss, among other things, Southern Company’s 2018 performance.

Overview of 2018 Performance

Southern Company made many significant accomplishments in 2018. On an adjusted basis, we exceeded our guidance for the year. We successfully completed more than $11 billion in strategic, value-accretive transactions, including closing on the sale of Gulf Power on January 1, 2019. These actions served to strengthen our balance sheet, substantially reduce our projected equity needs and remove significant risk from our financing plans. We believe these transactions also position us for future growth.

Tax reform was also a significant factor in 2018. We reached timely, innovative and constructive outcomes with regulators in multiple jurisdictions that have paved the way to deliver approximately $1.8 billion in benefits to customers while simultaneously preserving our credit quality and improving earnings per share.

At Georgia Power’s Plant Vogtle, the first new nuclear reactors to be built in the U.S. in three decades are under construction. In 2018, we saw significant progress in the construction of Vogtle units 3 and 4 and we achieved our principal year-end construction targets. Taking into consideration engineering, procurement and the initial test plan, the new Plant Vogtle units are approximately 75% complete.

This past summer, we announced that Southern Nuclear revised the estimated cost to complete the project and recalibrated site production expectations with a site-wide project reset. Since then, we have seen marked improvement in construction productivity at the site. Much hard work remains in order to sustain this momentum, but we are pleased with the project’s progress and remain confident that it will meet the in-service dates approved by regulators.

Valuing and Developing Our People

Diversity and inclusion continued to be key focus areas for us in 2018. Each of our operating companies is focused on cultivating a culture of inclusion that acknowledges and values the uniqueness of its employees. Their multi-pronged approach includes the formation of diversity and inclusion councils, employee resource groups, training and development, education and awareness, inclusive benefits and policies and diverse community partnerships. This great work has been validated by external observers as Southern Company was once again recognized as one of the “Top 50 Companies for Diversity” in 2018 by both DiversityInc and Black Enterprise.

We hope you can join us at the annual meeting. A webcast of the Annual Meeting will be available at investor.southerncompany.com, starting at 10:00 a.m., ET, on Wednesday, May 22, 2019. A replay will be available following the 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
Chairman, President and Chief Executive Officer
April 5, 2019

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Letter from the Independent Directors

Dear Fellow Stockholders:

As members of the Board of Directors, we want to thank you for your continued investment in Southern Company. As independent Directors, we strive to govern Southern Company in a prudent and transparent manner that helps the Company achieve long-term value for you, its stockholders. We proactively oversee business strategy, corporate governance and executive compensation, among other matters. We are pleased to share with you our progress on specific actions undertaken over the past year.

Oversight of Business Strategy

One of our Board’s key responsibilities is overseeing Southern Company’s strategy of maximizing long-term value to stockholders through a customer-, community- and relationship-focused business model anchored by our premier, state-regulated utilities in order to deliver strong and sustainable risk-adjusted returns over time. By focusing on our long-term outlook, we are best able to support our common goal of creating enduring value for customers, employees and stockholders alike.

At each Board meeting and during our strategy planning sessions, we contribute to management’s strategic plan by engaging senior leadership in robust discussions about overall strategy, business priorities and long-term risk and growth opportunities. In particular, in 2018, we focused considerable time on discussions about the construction of Plant Vogtle Units 3 and 4, strategic transactions, tax reform and the risks and opportunities of a low carbon future. Our Board has been and will continue to be committed to the oversight of long-term strategy for the enterprise.

Corporate Governance

In 2018, we continued our focus on Board governance, Board refreshment and Board succession planning. We have a nationally-recognized search firm engaged to assist our evergreen search for Board candidates with qualifications, attributes, skills and experiences aligned with our strategic imperatives that drive long-term value.

In December 2018, we elected two new independent Directors to our Board, Dr. Janaki Akella and Anthony F. Earley, Jr., effective January 2, 2019. We also had two directors retire in 2018. We remain committed to regular refreshment of our Board over the coming years.

Executive Compensation

Southern Company had an outstanding year in 2018, led by Thomas A. Fanning, the Chairman, President and Chief Executive Officer (CEO). In overseeing executive compensation, it is our responsibility to ensure that the CEO’s 2018 pay is aligned with financial performance and stockholder interests. Also in 2018, we worked to develop a new metric for the CEO’s compensation that is aligned with our greenhouse gas (GHG) emission reduction goals for 2030 and 2050. You can read about these decisions in the Compensation Discussion and Analysis that begins on page 40.

Thank you for the trust you place in us. We value your support, and we encourage you to share your opinions, suggestions and concerns with us. You can do so by writing to us at Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308, Attention: Corporate Secretary. You can also send an email to corpgov@southerncompany.com. The email address can also be accessed from the Corporate Governance webpage at investor.southerncompany.com under the link entitled Governance Inquiries.

We are grateful for the opportunity to serve Southern Company on your behalf.

Sincerely,

Dr. Janaki
Akella
      Juanita Powell
Baranco
      Jon A.
Boscia
      Henry A.
Clark III
      Anthony F.
Earley, Jr.
 
David J. Grain Veronica M. Hagen Donald M. James John D. Johns Dr. Dale E. Klein
 

Dr. Ernest J. Moniz

William G. Smith, Jr.

Dr. Steven R. Specker

Larry D. Thompson

E. Jenner Wood III

4     Southern Company 2019 Proxy Statement


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Our Values

For more than a century, Southern Company has been building the future of energy. We deliver the energy resources and solutions our customers and communities need to drive growth and prosperity.

How we do our work is just as important as what we do. Our uncompromising values are key to our sustained success. They guide our behavior and ensure we put the needs of those we serve at the center of all we do.

At Southern Company, Our Values will guide us to make every decision, every day, in the right way.

Safety First

We believe the safety of our employees and customers is paramount. We aim to perform and maintain every job, every day, safely.

We demonstrate safety first by meeting and exceeding the requirements of applicable laws and regulations and continually improve by investing in research and cutting-edge safety technologies and processes.
Our target is excellence, and to achieve this we pursue and sustain high standards, establish stretch goals, embrace benchmarking and aggressively identify and close gaps in performance.

Superior Performance

We are dedicated to superior performance throughout our business.

Financial Performance in 2018

Our adjusted EPS exceeded our guidance range for the year
We increased our dividend for the 17th consecutive year, with dividend yield as of year-end 2018 at 5.4%
Since 1948, quarterly dividends paid to stockholders have equaled or exceeded the previous quarter


* For a reconciliation of adjusted EPS to EPS under generally accepted accounting principles (GAAP), see page 93.

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Our Values

Operational Performance in 2018

We ranked in the top quartile on the Customer Value Benchmark Survey and were recognized among the most highly rated utilities for customer satisfaction by J.D. Power.
We produced top quartile generation availability performance.
We continued our commitment to employee safety by concentrating efforts on safety processes, safety culture and risk reduction to prevent injuries.
Our employees demonstrated their commitment to serving our communities during and after the multiple severe weather events experienced in 2018.

Unquestionable Trust

Honesty, respect, fairness and integrity drive our behavior. We keep our promises, and ethical behavior is our standard.

   

Our Code of Ethics can be reviewed at https://www.southerncompany.com/corporate-responsibility/committed-governance/values-and-ethics.html

A Code of Ethics guides the behavior of all employees and Board members, and covers subjects including relationships, environmental compliance, financial integrity, competitive practices and other subjects which apply to all employees, officers and Board members of Southern Company
A Concerns Program is a resource available to all Southern Company system employees and contractors to report any illegal or unethical behaviors by telephone or email


Total Commitment

We are committed to the success of our employees, our customers, our stockholders and our communities. We fully embrace, respect, and value our differences and diversity.

We believe that all our people should feel respected, valued, engaged and included. It's part of why we have been widely recognized as a best place to work, and why we have received several national awards for diversity.
We support our ongoing success by engaging a workforce that reflects our service territory's changing population and sustaining a culture of excellence in which every employee is valued, respected, productive and engaged.
We believe having an inclusive workplace that leverages the diversity of our people helps us achieve success in an ever-evolving energy landscape.



6     Southern Company 2019 Proxy Statement


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Notice of Annual Meeting of Stockholders of Southern Company

Date and Time
Wednesday, May 22, 2019 at 10:00 a.m., ET

 

Place
The Lodge Conference Center at Callaway Gardens, 4500 Southern Pine Drive, Pine Mountain, Georgia 31822

 

Record Date
Stockholders of record at the close of business on March 25, 2019 are entitled to attend and vote at the annual meeting. On that date, there were 1,040,833,078 shares of common stock of The Southern Company (Southern Company, the Company, we, us or our) outstanding and entitled to vote.

On or about April 5, 2019, these proxy materials and our annual report are being mailed or made available to stockholders.

     

Items of Business

Stockholders are being asked to vote on the four agenda items described below and to consider any other business properly brought before the 2019 annual meeting and any adjournment or postponement of the meeting.

   
  1 Elect 15 Directors
 
  2 Conduct an advisory vote to approve executive compensation, often referred to as a Say on Pay
   
  3 Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2019
 
  4 Approve an amendment to the Certificate of Incorporation to reduce the supermajority vote requirement to a majority vote
 
   
 

Every Vote is Important to Southern Company

We have created an annual meeting website to make it easy to access our 2019 annual meeting materials.

   
    

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.

     

    

 

Internet
www.proxyvote.com

24/7

     

Telephone
1-800-690-6903

24/7

    

Vote by Mail
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.

 

Vote by Internet or Telephone

Voting by internet or by telephone is fast and convenient, and your vote is immediately confirmed and tabulated.

By Order of the Board of Directors.

April 5, 2019



Important Notice Regarding the Availability of Proxy Materials for the 2019 Annual Meeting of Stockholders to be held on May 22, 2019: The proxy statement and the annual report are available at investor.southerncompany.com.

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Proxy Voting Roadmap

Item 1

The Board
recommends a vote

FOR
each nominee
for Director

Election of 15 Directors

The Board, acting upon the recommendation of the Nominating, Governance and Corporate Responsibility Committee, has nominated 15 of the Directors currently serving for re-election to the Southern Company Board of Directors.        
Janaki Akella
Thomas A. Fanning
Ernest J. Moniz
Juanita Powell Baranco
David J. Grain
William G. Smith, Jr.
Jon A. Boscia
Donald M. James
Steven R. Specker
Henry A. Clark Ill
John D. Johns
Larry D. Thompson
Anthony F. Earley, Jr.
Dale E. Klein
E. Jenner Wood Ill
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 and the Board.
Through their positions, responsibilities, skills and perspectives, which span various industries and organizations, these nominees represent a Board of Directors that is diverse and possesses appropriate collective qualifications, skills, knowledge and experience.

Item 2

       
The Board
recommends a vote

FOR
this proposal

Advisory Vote to Approve Executive Compensation (Say on Pay)

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 total shareholder return (TSR), encourages individual performance that is in line with our long-term strategy, is aligned with stockholder interests and remains competitive with our industry peers.



Item 3

       

The Board
recommends a vote

FOR
this proposal

Ratify the Independent Registered Public Accounting Firm for 2019

The Audit Committee has appointed Deloitte & Touche as our independent registered public accounting firm for 2019.
This appointment is being submitted to stockholders for ratification.




Item 4

       

The Board
recommends a vote
FOR this proposal

See page 88

Approve an Amendment to the Certificate of Incorporation to Reduce the Supermajority Vote Requirement to a Majority Vote

A supermajority vote requirement like the one contained in Article Eleventh of the Restated Certificate of Incorporation (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.
As corporate governance standards have evolved, many stockholders and commentators now view a supermajority requirement as limiting the Board’s accountability to stockholders and the ability of stockholders to effectively participate in corporate governance.

8     Southern Company 2019 Proxy Statement


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Table of Contents

02 Southern Company at a Glance
03 Letter to Stockholders
04 Letter from the Independent Directors
05 Our Values
07 Notice of Annual Meeting of Stockholders of Southern Company
08 Proxy Voting Roadmap
10 Southern Company Board of Directors
12 Board of Directors Qualifications, Attributes, Skills and Experience
13 Biographical Information about our Board of Directors
22 Item 1 Election of 15 Directors
23 Corporate Governance at Southern Company
23 Key Corporate Governance Practices
23 Recent Governance and Disclosure Highlights
24 Corporate Governance Website
24 Committees of the Board
27 Board and Governance Structure and Processes
27 Board Leadership Structure
29 Board and Committee Self-Evaluation Process
29 Majority Voting for Directors and Director Resignation Policy
30 Director Independence Standards
30 Director Independence Review Process
31 Diversity of our Board
31 Board Refreshment
32 Identifying Nominees for Election to the Board
32 Stockholder Recommendation of Board Candidates
33 Board Risk Oversight
34 Succession Planning and Talent Development
34 Proxy Access
34 Political Contributions Policy and Lobbying-Related Oversight and Disclosure
35 Alignment with Investor Stewardship Group Corporate Governance Principles
36 Engaging with our Stakeholders
37 Certain Relationships and Related Transactions
38 Director Compensation
40 Compensation Discussion and Analysis (CD&A)
41 2018 Company Performance Overview
43 Letter from the Compensation and Management Succession Committee
45 Report of the Compensation Committee
46 Stockholder Outreach and Say on Pay Response
47 CEO Pay for Performance Alignment
48 New GHG Reduction Metric for CEO’s 2019 Long-Term Incentive Award

New and Noteworthy in our 2019 Proxy Statement

Read about our two new Directors on pages 13 and 15
Read about how our governance practices are aligned with the Investor Stewardship Group Corporate Governance Principles on page 35
Read about our recent stockholder engagement efforts starting on page 36
Read about the new compensation metric for our CEO that is aligned with our GHG emission reduction goals for 2030 and 2050 on page 48

49 Executive Compensation Program
58 Compensation Governance Practices, Beliefs and Oversight
64 Executive Compensation Tables
64 Summary Compensation Table
66 Grants of Plan-Based Awards in 2018
68 Outstanding Equity Awards at 2018 Fiscal Year-End
69 Option Exercises and Stock Vested in 2018
70 Pension Benefits at 2018 Fiscal Year-End
73 Nonqualified Deferred Compensation as of 2018 Fiscal Year-End
75 Potential Payments Upon Termination or Change in Control
80 Equity Compensation Plan Information
81 Pay Ratio Disclosure
81 Our Human Capital Beliefs
83 Say on Pay Proposal
83 Item 2 Advisory Vote to Approve Executive Compensation (Say on Pay)
84 Audit Committee Matters
84 Audit Committee Report
85 Principal Independent Registered Public Accounting Firm Fees
85 Item 3 Ratify the Independent Registered Public Accounting Firm for 2019
86 Stock Ownership Information
88 Amendment to the Certificate of Incorporation
88 Item 4 Approve an Amendment to the Certificate of Incorporation to Reduce the Supermajority Vote Requirement to a Majority Vote
90 FAQs about Voting and the Annual Meeting
93 Reconciliation of Non-GAAP Information
94 Cautionary Note Regarding Forward-Looking Statements

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Southern Company Board of Directors

Board of Directors Qualifications, Attributes, Skills and Experience

We believe effective oversight comes from a Board that represents a diverse range of experience and perspectives that provides the collective qualifications, attributes, skills and experience necessary for sound governance. The Nominating, Governance and Corporate Responsibility Committee establishes and regularly reviews with the Board the qualifications, attributes, skills and experience that it believes are desirable to be represented on the Board to ensure that they align with the Company’s long-term strategy.

We believe our Directors possess a range and depth of expertise and experience to effectively oversee the Company’s operations, risks and long-term strategy. The most important of these are described below.

Audit, Finance and Transactional
Accurately and transparently reporting our financial performance and overseeing the auditing of our financial statements are important to us. Our Board includes Directors with experience in understanding complex public company financial statements and internal controls.

Effective allocation of capital, including our major capital projects, is a key part of our long-term strategic success. We believe Directors with experience in finance, accounting, banking and risk management are critical to overseeing these matters.

Directors with public company merger, acquisition and disposition experience are particularly important to the creation of stockholder value through the continued integration of the businesses we have acquired, the disposition of our former businesses and the consideration of potential future strategic opportunities.

     

CEO and Senior Executive Leadership
We believe Directors with relevant Chief Executive Officer or senior executive management experience bring the deep leadership qualifications and skills necessary to execute our strategic imperatives that drive long-term value. These Directors know how organizations work and understand how to effectively motivate and retain individual leaders. They also have the ability to recognize and develop leadership skills in others.

Corporate Governance and Service on Public Company Boards
Our Board includes Directors with significant experience in public company corporate governance matters and service on other public company Boards. These Directors bring knowledge about Board refreshment, independent Board leadership, Board agenda setting and Board and management succession planning that is critical to the governance of our complex business.

Governmental Affairs, Regulation and Policy
Our business is subject to extensive regulation by federal, state and local entities. Directors with experience working effectively with, or having leadership positions within, legislative and executive agencies at the local, state and federal levels, as well as other stakeholders relevant to our industry, are key to our ability to maintain respected regulatory relations and our reputation for doing the right thing.

Directors with a deep understanding of, or experience with, the oversight of environmental policy, regulation, risk and business operation matters permit us successfully to navigate these areas and to provide safe, reliable and responsible operations. In addition, Directors with an in-depth understanding of the risks and opportunities for our Company in a low-carbon future provide valuable insights to our Board.

Relevant Industry Operations
We are focused on providing clean, safe, reliable and affordable energy to customers. Directors with leadership and operational experience in the electric utility industry bring a practical understanding of the technical nature of the business operations as well as oversight in implementing our business plan. Directors who previously served on the Board of Directors of one of our operating companies have operations knowledge and experience about the Company that provide valuable insights to the Board.

We continue to work to advance our country’s capability to generate nuclear power. To do this, we need Directors on our Board with deep knowledge and experience in the development, generation and regulation of nuclear energy.

We acquired Southern Company Gas in 2016, and we continue to evaluate opportunities within the midstream through downstream business in the natural gas industry. We believe it is important to include Directors with natural gas industry and operations experience.

Major Projects
Directors with oversight or management experience for major capital projects aimed at driving long-term value are important in overseeing our commitment of resources, management of risk and timely execution on such projects.

Security and Resiliency of Operations
An understanding of and background and exposure to the asymmetrical cyber and physical threats facing our operations and our industry is critical to ensuring both reliability and resiliency of our services and the safety and satisfaction of our customers and employees. In addition, Directors with active national security clearances enable the Board to provide effective oversight of key security issues for our Company as an important component of U.S.-critical infrastructure.

Technology and New Economy
Our businesses are innovating and changing rapidly, and technological advances play a significant role in these changes. We believe Directors with experience related to relevant technology innovations, including clean energy and storage solutions, provide insights needed for us to continue to be successful. Directors with experience and understanding of the emerging digital economy and other potentially disruptive technologies provide valuable insights to the Board.

12   Southern Company 2019 Proxy Statement


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Southern Company Board of Directors

Biographical Information about our Board of Directors

 NEW 
Age: 58
Director since: 2019
Board committees: Operations, Environmental and Safety; Business Security Subcommittee
Other public company directorships: None
   
Janaki Akella Independent
Digital Transformation Leader, Google LLC, multinational technology company specializing in internet-related products
Director highlights
Dr. Akella’s qualifications include electrical engineering, global business technology and data analytics analysis expertise. Her experience with technology market disruptions is particularly valuable to the Board as the Southern Company system continues to develop innovative business strategies.
On December 11, 2018, we announced that the Board elected Dr. Akella as an independent Director, effective January 2, 2019.
Dr. Akella serves as the Digital Transformation Leader of Google LLC, a position she has held since 2017. At Google, Dr. Akella addresses challenges and complex technical issues arising from new technologies and new business models.
Prior to joining Google, Dr. Akella held a number of leadership positions during a 17-year career at McKinsey & Company where she most recently served as principal. She led and contributed to over 100 consulting engagements in North America, Europe, Asia and Latin America with multiple project teams and client executives. She began her career with Hewlett-Packard as a member of the system technology technical staff, engineer scientist and technical contributor.
She previously served on the Board of the Guindy College of Engineering North American Alumni and is active in the Churchill Club.

Age: 70
Director since: 2006
Board committee: Audit
Other public company directorships: None (formerly a Director of Cox Radio, Inc., John H. Harland Company and Georgia Power)
   
Juanita Powell Baranco Independent
Executive Vice President and Chief Operating Officer of Baranco Automotive Group, large retailer of new and used high-end automobiles
Director highlights
Ms. Baranco’s qualifications include senior leadership experience, governmental affairs knowledge and experience and risk management experience, as well as her operations experience as a successful business owner and operator. Her legal experience as a former assistant attorney general for the State of Georgia and her knowledge of our business from almost a decade of service on the Board of Directors of Georgia Power Company (Georgia Power or GPC) are also 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 cofounded 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 the Commerce Club, the Woodruff Arts Center and the Buckhead Coalition. She is past Chair of the Board of Regents for the University System of Georgia and past Board Chair for the Sickle Cell Foundation of Georgia, and she previously served on the Board of Trustees for Clark Atlanta University and on the Advisory Council for the Catholic Foundation of North Georgia.

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Southern Company Board of Directors

Age: 66
Director since: 2007
Board committees: Nominating, Governance and Corporate Responsibility; Operations, Environmental and Safety
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)
   
Jon A. Boscia Independent
Founder and President, Boardroom Advisors, LLC (retired), board governance consulting firm
Director highlights
Mr. Boscia’s qualifications include senior leadership experience, financial expertise, corporate governance expertise, capital allocation knowledge and experience and risk management experience. As a former president and chief executive officer of large companies, he contributes important operations management and strategic planning perspectives.
Mr. Boscia founded Boardroom Advisors, LLC in 2008. He served as President from 2008 until his retirement in February 2018.
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 company’s 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.

Age: 69
Director since: 2009
Board committee: Audit
Other public company directorships: None
   
Henry A. “Hal” Clark III Independent
Senior Advisor of Evercore Inc. (retired), global independent investment advisory firm
Director highlights
Mr. Clark’s qualifications include finance and capital allocation knowledge and experience, risk management experience, mergers and acquisitions experience and investment advisory experience specific to the power and utilities industries, which are all valuable to the Board. The skills Mr. Clark developed with his extensive experience in capital markets transactions are particularly valuable to the Board as the Southern Company system continues to finance major capital projects.
Mr. Clark was a Senior Advisor with Evercore Inc. (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, 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.

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Southern Company Board of Directors

 NEW 
Age: 69
Director since: 2019
Board committees: Compensation and Management Succession; Operations, Environmental and Safety
Other public company directorships: Ford Motor Company
   
Anthony F. “Tony” Earley, Jr. Independent
Chairman, President and Chief Executive Officer, PG&E Corporation (retired), public utility holding company providing natural gas and electric services
Director highlights
Mr. Earley’s qualifications include senior leadership experience, energy industry expertise including regulation, nuclear generation, technology, environmental matters and major capital projects. His experience as the president and chief executive officer of energy companies and his involvement in electric industry-wide research and development programs are valuable to the Board.
On December 11, 2018, we announced that the Board elected Mr. Earley as an independent Director, effective January 2, 2019.
Mr. Earley served as Chairman, President and Chief Executive Officer of PG&E Corporation from 2011 until February 2017, when he became Executive Chairman. He served as Executive Chairman until his retirement from PG&E in December 2017. On January 29, 2019, PG&E Corporation and its subsidiary Pacific Gas and Electric Company filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code.
Before joining PG&E Corporation, he served in several executive leadership roles during 17 years at DTE Energy, including Executive Chairman, President, Chief Executive Officer and Chief Operating Officer. He served in various executive roles at Long Island Lighting Company, including President and Chief Operating Officer. He was also a partner at the Hunton & Williams LLP law firm (now Hunton Andrews Kurth LLP) as a member of the energy and environmental team, where he participated in the licensing of both nuclear and non-nuclear generating plants and represented nuclear utilities in rulemaking actions before the U.S. Nuclear Regulatory Commission.
Prior to beginning his lengthy career in the utility industry, Mr. Earley earned a degree in physics and served in the U.S. Navy as the chief engineer officer of the nuclear submarine, USS Hawkbill.
Mr. Earley is a member of the Board of Directors of Ford Motor Company and serves on the Compensation (chairman), the Nominating and Governance and the Sustainability and Innovation Committees.
He previously served on the executive committees of the Edison Electric Institute and the Nuclear Energy Institute and served on the Board of the Electric Power Research Institute.

Age: 62
Director since: 2010
Board committee: None
Other public company directorships: Vulcan Materials Company (formerly a Director of The St. Joe Company)
   
Thomas A. Fanning
Chairman of the Board, President and Chief Executive Officer of the Company
Director highlights
Mr. Fanning’s qualifications include senior leadership experience, electric and natural gas industry knowledge and experience, nuclear and new technology experience, governmental affairs experience and financial expertise. His deep knowledge of the Company based on more than 30 years of service, as well as his civic participation on a local and national level, are valuable to 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 Company’s generation and transmission, engineering and construction services, research and environmental affairs, system planning and competitive generation business units. He served as the Company’s Executive Vice President and Chief Financial Officer from 2003 to 2008, where he was responsible for the Company’s 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.
He serves as the co-chair of the Electricity Subsector Coordinating Council, which serves as the principal liaison between the federal government and the electric power sector to protect the integrity of the national electric grid.
Mr. Fanning is a Director of Vulcan Materials Company, serving as a member of the Audit Committee and the Compensation Committee. He served on the Board of Directors of the Federal Reserve Bank of Atlanta from 2012 to 2018 and is a past chairman.
He also served on the Board of Directors for the St. Joe Company, a real estate developer and asset manager, from 2005 to 2011.

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Southern Company Board of Directors

Age: 56
Director since: 2012
Board committees: Compensation and Management Succession; Finance (Chair)
Other public company directorships: New Fortress Energy LLC
  
David J. Grain Independent
Chief Executive Officer and Managing Director, Grain Management, LLC (Grain Management), private equity firm specializing in the communications industry
Director highlights
Mr. Grain’s qualifications include capital allocation expertise, financial expertise, major capital projects knowledge and experience, technology innovations knowledge and experience and risk management experience. Mr. Grain’s extensive experience managing large and small businesses and raising and managing investor capital, particularly in a regulated industry, is also valuable to the Board.
Mr. Grain is the founding member and managing director of 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 country’s 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 Broadband’s 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 former Governor Charlie Crist, where he provided independent oversight of the state board's funds and major investment responsibilities, including investments for the Florida Retirement System programs.
Mr. Grain is a Director of New Fortress Energy LLC, serving as a member of the Audit Committee.
He is currently a member of the Advisory Board of the Amos Tuck School of Business Administration at Dartmouth College and serves on the Investment Committee of the United States Tennis Association.

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Southern Company Board of Directors

  
Veronica M. Hagen Independent
Chief Executive Officer, Polymer Group, Inc., now known as AVANTIV, Inc. (retired), global manufacturer of specialty materials
Director highlights
Ms. Hagen’s qualifications include senior leadership experience, corporate governance knowledge and experience, environmental matters experience and risk management experience. Ms. Hagen’s experience as the chief executive officer of two global companies allows her to contribute key valuable insights to the Board regarding operations management, customer service and strategic planning.
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 Audit Committee, 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 Leadership Development and Compensation Committee and a member of the Nominating and Governance Committee of the Board of Directors of Newmont Mining Corporation. She also serves on the Audit Committee of the Board of Directors of Stericycle, Inc.
Age: 73
Director since: 2008
Board committees: Compensation and Management Succession; Finance
Other public company directorships: American Water Works Company, Inc., Newmont Mining Corporation and Stericycle, Inc.

  
Donald M. James Independent
Chairman of the Board and Chief Executive Officer of Vulcan Materials Company (retired), producer of aggregate and aggregate-based construction materials
Director highlights
Mr. James’ qualifications include senior leadership experience, corporate governance experience, financial expertise, legal experience, risk management experience and environmental matters experience. Mr. James brings important perspectives on management, operations and strategy from his experience as the former chief executive officer of a public company.
Mr. James joined Vulcan Materials Company in 1992 as Senior Vice President and General Counsel and then became President of the Southern Division, then Senior Vice President of the Construction Materials Group and then President and Chief Executive Officer. 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.
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, the Governance and Nominating (Chair) and the Human Resources Committees of Wells Fargo & Company’s Board of Directors.
Mr. James is a Trustee of Children’s of Alabama, where he serves on the Executive Committee and the Compensation Committee.
Age: 70
Director since: 1999
Board committees: Compensation and Management Succession; Finance
Other public company directorships: Wells Fargo & Company (formerly a Director of Vulcan Materials Company and Protective Life Corporation)

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Southern Company Board of Directors

  
John D. Johns Independent
Executive Chairman of Protective Life Corporation (Protective Life), provider of financial services through insurance and investment products
Director highlights
Mr. Johns’ qualifications include senior leadership experience, financial expertise, capital allocation experience and risk management experience. His legal experience as the former general counsel of a large energy public holding company that included natural gas operations and his prior service for over a decade on the Board of Directors of Alabama Power Company (Alabama Power or APC) are also of significant value to the Board.
Mr. Johns served as Chairman and Chief Executive Officer of Protective Life from 2002 to 2017 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 Nominating and Executive Committees.
He is a member of the Board of Directors of Regions Financial Corporation, where he chairs the Risk Committee, and Genuine Parts Company, where he serves as Lead Independent Director and chairs 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 a 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, Alabama’s leading business and technology incubator.
Age: 67
Director since: 2015
Board committees: Compensation and Management Succession (Chair); Finance
Other public company directorships: Genuine Parts Company, Protective Life and Regions Financial Corporation (formerly a Director of Alabama Power)
 

  
Dale E. Klein Independent
Associate Vice Chancellor of Research of the University of Texas System and former Commissioner and Chairman, U.S. Nuclear Regulatory Commission, federal agency responsible for regulation of nuclear reactor materials and safety
Director highlights
Dr. Klein’s qualifications include nuclear energy research, regulation, technology and safety knowledge and experience, as well as experience in environmental matters and governmental affairs. His senior leadership experience demonstrated as the Chairman of the U.S. Nuclear Regulatory Commission is also important 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 40 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 university’s nuclear program. He spent 33 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 Corporation’s principal subsidiary, Arizona Public Service Company.
Age: 71
Director since: 2010
Board committees: Compensation and Management Succession; Operations, Environmental and Safety; Business Security Subcommittee
Other public company directorships: Pinnacle West Capital Corporation, Arizona Public Service Company

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Southern Company Board of Directors

Age: 74
Director since: 2018
Board committees: Nominating, Governance and Corporate Responsibility; Operations, Environmental and Safety; Business Security Subcommittee (Chair)
Other public company directorships: None
  
Ernest J. Moniz Independent
Cecil and Ida Green Professor of Physics and Engineering Systems Emeritus, Special Advisor to the President of Massachusetts Institute of Technology (MIT) and former U.S. Secretary of Energy
Director highlights
Dr. Moniz’s qualifications include senior leadership experience, energy industry experience, nuclear expertise and environmental matters knowledge. Having served as U.S. Secretary of Energy, Dr. Moniz brings key insights about energy regulation and policy and environmental matters. His current roles in academia and as the leader of non-profit energy industry organizations allow him to contribute up-to-date perspectives on clean energy, climate change and environmental matters.
Dr. Moniz is an American nuclear physicist and former U.S. Secretary of Energy who served from May 2013 until January 2017. Dr. Moniz engaged regularly with issues related to energy regulation and policy, environmental regulation and policy and GHG emissions.
He also serves as the President and Chief Executive Officer of The Energy Futures Initiative, Inc. (EFI) and Co-Chairman and Chief Executive Officer of the Nuclear Threat Initiative, positions he has held since June 2017. EFI is a non-profit organization providing analytically-based, unbiased policy options to advance a cleaner, safer, more affordable and more secure energy future. The Nuclear Threat Initiative is a non-profit, non-partisan organization working to protect lives, livelihoods and the environment from nuclear, biological, radiological, chemical and cyber dangers.
Dr. Moniz’s involvement in national energy policy began in 1995, when he served as Associate Director for Science in the Office of Science and Technology Policy in the Executive Office of the President.
He later oversaw the U.S. Department of Energy’s science, energy and security programs as Under Secretary from 1997 to 2001.
He was a member of the President’s Council of Advisors on Science and Technology from 2009 to 2013 and received the Department of Defense Distinguished Public Service Award in 2016.
Prior to his appointment as Secretary of Energy, he had a career spanning four decades at MIT, during which he was head of the MIT Department of Physics from 1991 to 1995 and in 1997, and was the Founding Director of the MIT Energy Initiative and Director of the Laboratory for Energy and the Environment. Since January 2017, Dr. Moniz has served as the Cecil and Ida Green Professor of Physics and Engineering Systems Emeritus and Special Advisor to the President of MIT.
Dr. Moniz is also a non-resident Senior Fellow at the Harvard Belfer Center and the inaugural Distinguished Fellow of the Emerson Collective.
Dr. Moniz served on the U.S. Department of Defense Threat Reduction Advisory Committee and the Blue Ribbon Commission on America’s Nuclear Future. He also is Chair of the Strategic Advisory Board of the Clean Energy Venture Fund, a member of the Council on Foreign Relations and a fellow of the American Association for the Advancement of Science, the American Academy of Arts and Sciences, the Humboldt Foundation and the American Physical Society.

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Southern Company Board of Directors

Age: 65
Director since: 2006
Board committee: Audit (Chair)
Other public company directorships: Capital City Bank Group, Inc.
  

William G. Smith, Jr. Independent

Chairman of the Board, President and Chief Executive Officer of Capital City Bank Group, Inc., publicly-traded financial holding company providing a full range of banking services
Director highlights
Mr. Smith’s qualifications include senior leadership experience, finance and capital allocation expertise, risk management expertise and audit and financial reporting experience. Mr. Smith contributes valuable perspectives on management, operations and regulatory compliance from his experience as the chief executive officer of a public company in a highly-regulated industry.
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.

Age: 73
Director since: 2010
Board committees: Compensation and Management Succession; Operations, Environmental and Safety (Chair)
Other public company directorships: None
  

Steven R. Specker Lead Independent Director

Chief Executive Officer, TAE Technologies, Inc. (retired), research and development company focused on creating new sources of clean energy
Director highlights
Dr. Specker’s qualifications include senior leadership, nuclear generation, regulation, technology and development of nuclear energy, environmental matters and major capital projects. His experience as the president and chief executive officer of a clean energy company and an electric industry-wide research and development program that spanned every aspect of generation, environmental protection, power delivery, retail use and power markets is valuable to our Board.
Dr. Specker served as Chief Executive Officer of TAE Technologies Inc. from October 2016 until his retirement in 2018. TAE Technologies Inc. is an international private 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. EPRI provides thought leadership, industry expertise and collaborative value to help the electricity sector identify issues, technology gaps and broader needs that can be addressed through effective research and development programs.
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 GE’s nuclear energy business, President of GE digital energy and Vice President of global marketing.
He is also a former member of the Boards of Trilliant Incorporated, a leading provider of Smart Grid communication solutions, and TAE Technologies, Inc.

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Southern Company Board of Directors

Age: 73
Director since: 2014 (previously served from 2010 to 2012)
Board committees: Finance; Nominating, Governance and Corporate Responsibility (Chair)
Other public company directorships: Franklin Templeton Series Mutual Funds, Graham Holdings Company (formerly a Director of Cbeyond, Inc.)
  

Larry D. Thompson

Counsel at Finch McCranie, LLP (law firm) and former Executive Vice President, Government Affairs, General Counsel and Corporate Secretary, PepsiCo Inc., global consumer products company in the food and beverage industry
Director highlights
Mr. Thompson’s qualifications include senior leadership experience, corporate governance knowledge and experience, risk management experience and governmental affairs and regulatory compliance knowledge and experience. His legal skills developed as the former general counsel of a global consumer products public company, as well as his knowledge and experience from his service as a former U.S. Attorney and as a former U.S. Deputy General Counsel, are valuable to the Board.
Mr. Thompson joined Finch McCranie, LLP as Counsel in 2015. Mr. Thompson has been on the faculty of The University of Georgia School of Law as the John A. Sibley Chair of Corporate and Business Law since 2011. He is currently on a leave of absence until 2020 while he serves as the Independent Corporate Compliance Monitor and Auditor for Volkswagen AG, a position for which he was appointed by the U.S. Department of Justice in 2017.
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 world’s 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 Justice’s 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 previously served as a Director of Cbeyond, Inc., a provider of technology and services to small and mid-sized companies, from 2010 to 2012.
Mr. Thompson served as a Director of Southern Company from 2010 to 2012 and was a member of the Audit Committee.

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Southern Company Board of Directors

Age: 67
Director since: 2012
Board committee: Audit
Other public company directorships: Genuine Parts Company, Oxford Industries, Inc. (formerly a Director of Crawford & Company and Georgia Power)
  

E. Jenner Wood III Independent

Corporate Executive Vice President – Wholesale Banking, SunTrust Banks, Inc. (retired), publicly-traded company providing a full range of financial services
Director highlights
Mr. Wood’s qualifications include senior leadership experience, finance and banking knowledge and experience and risk management experience. From the knowledge and experience he gained from 10 years of service as a former member of the Board of Directors of Georgia Power, he contributes key perspectives on our operations and strategic imperatives.
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 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 SunTrust’s 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. He also served as a Director of Crawford & Company, a large independent claims company, from 1997 to 2013.
Mr. Wood is a Director of Oxford Industries, Inc., where he serves 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.

Item 1
Election of 15 Directors

The Board, acting upon the recommendation of the Nominating, Governance and Corporate Responsibility Committee, has nominated 15 of the Directors currently serving for re-election to the Southern Company Board of Directors.
The Board recommends a vote FOR each nominee for Director
Janaki Akella
Thomas A. Fanning
Ernest J. Moniz
Juanita Powell Baranco
David J. Grain
William G. Smith, Jr.
Jon A. Boscia
Donald M. James
Steven R. Specker
Henry A. Clark Ill
John D. Johns
Larry D. Thompson
Anthony F. Earley, Jr.
Dale E. Klein
E. Jenner Wood Ill
Each nominee, if elected, will serve until the 2020 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.
Ms. Hagen will retire from our Board at the end of her term on the date of the annual meeting of stockholders. We sincerely thank Ms. Hagen for her many years of service on our Board, including serving as Lead Independent Director and as Chair of the Compensation and Management Succession and Nominating, Governance and Corporate Responsibility Committees.

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Corporate Governance at
Southern Company

Key Corporate Governance Practices

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:

22 Annual election of Directors
24 All Board committees are comprised of independent Directors
27 Annual review of Board leadership structure
28 Strong Lead Independent Director with clearly defined powers
28 Independent Directors meet in executive session at each regular Board meeting
29 Annual Board and committee self-evaluations
29 Majority voting for Directors, with a Director resignation policy
31 15 of 16 Directors are independent, with an average tenure of independent Directors of 6.2 years
31 Over 30% of our Directors are gender and ethnically diverse
31 Regular Board refreshment
34 Annual long-term and emergency management succession planning review
34 Proxy access bylaw provision
36 Proactive year-round stockholder engagement
59 Clawback policy for incentive awards
62 Anti-hedging and anti-pledging provisions
63 Strong stock ownership guidelines
10% threshold for stockholders to request a special meeting

Recent Governance and Disclosure Highlights

We are committed to enhancing our governance practices each year. Recent governance and disclosure highlights include:

Continued our stockholder engagement efforts with significant focus on institutional investor and environmental stakeholder outreach
Enhanced focus on evergreen Board refreshment and Board succession planning
Since March 2018, have added three new Directors to the Board and, as of the annual meeting, will have had three Directors retire over the same period

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Corporate Governance at Southern Company

Corporate Governance Website

Information relating to our corporate governance is available on our website at investor.southerncompany.com under the link entitled Corporate Governance.

Board of Directors — Background and Experience
Composition of Board Committees
Board Committee Charters
Corporate Governance Guidelines
Link for on-line communication with Board of Directors
Management Council — Background and Experience
Executive Stock Ownership Requirements
Code of Ethics
Restated Certificate of Incorporation
By-Laws
Securities and Exchange Commission (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.

Committees of the Board

Charters for each of the Board’s five standing committees can be found on our website at investor.southerncompany.com under the link entitled Corporate Governance. All members of the Board’s standing committees are independent Directors.

Audit Committee

Members Meetings in 2018 Attendance Report
William G. Smith, Jr., Chair
Juanita Powell Baranco
Henry A. Clark III
E. Jenner Wood III
10
The Audit Committee’s duties and responsibilities include the following:
Oversee the Company’s financial reporting, audit process, internal controls and legal, regulatory and ethical compliance.
Appoint the Company’s 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 Company’s 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 GAAP, 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 Company’s 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 New York Stock Exchange (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 William G. Smith, Jr. qualifies as an audit committee financial expert as defined by the SEC.

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Corporate Governance at Southern Company

Compensation and Management Succession Committee

Members Meetings in 2018 Attendance Letter and Report
John D. Johns,  Chair
Anthony F. Earley, Jr.
David J. Grain
Veronica M. Hagen
Donald M. James
Dale E. Klein
Steven R. Specker
10
The Compensation and Management Succession Committee’s 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 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 Committee’s requirements. Pay Governance also advises the Compensation and Management Succession Committee on executive compensation and related corporate governance trends.
Pay Governance is engaged directly by the Compensation and Management Succession Committee and does not provide any services to management unless authorized to do so by the Compensation and Management Succession Committee. The Compensation and Management Succession Committee reviewed Pay Governance’s 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.

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Corporate Governance at Southern Company

Finance Committee

Members Meetings in 2018 Attendance
David J. Grain, Chair
Veronica M. Hagen
Donald M. James
John D. Johns
Larry D. Thompson
7
The Finance Committee’s duties and responsibilities include the following:
Review the Company’s financial matters and recommend actions to the Board such as dividend philosophy and financial plan approval.
Provide input regarding the Company’s financial plan and associated financial goals.
Review the financial strategy of and the strategic deployment of capital by the Company.
Provide input to the Compensation and Management Succession Committee on financial goals and metrics for the Company’s annual and long-term incentive compensation programs.
The Board has determined that each member of the Finance Committee is independent.

Nominating, Governance and Corporate Responsibility Committee

Members Meetings in 2018 Attendance
Larry D. Thompson, Chair
Jon A. Boscia
Ernest J. Moniz
7
The Nominating, Governance and Corporate Responsibility Committee’s duties and responsibilities include the following:
Recommend Board size and membership criteria and identify, evaluate and recommend Director candidates.
Oversee and make recommendations regarding the composition of the Board and its committees.
Review and make recommendations regarding total compensation for non-employee Directors.
Periodically review and recommend updates to the Corporate Governance Guidelines and Board committee charters.
Coordinate the performance evaluations of the Board and its committees.
Oversee the Company’s practices and positions to advance its corporate citizenship, including environmental, sustainability and corporate social responsibility initiatives.
Oversee the Company’s stockholder engagement program.
The Board has determined that each member of the Nominating, Governance and Corporate Responsibility Committee is independent.

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Corporate Governance at Southern Company

Operations, Environmental and Safety Committee

Members Meetings in 2018 Attendance
Steven R. Specker, Chair
Janaki Akella
Jon A. Boscia
Anthony F. Earley, Jr.
Dale E. Klein
Ernest J. Moniz
5
The Operations, Environmental and Safety Committee’s 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, electric transmission and distribution, natural gas distribution and storage, fuel and information technology initiatives.
Oversee significant environmental and safety regulation, policy and operational matters.
Oversee the Southern Company system’s management of significant construction projects.
Provide input to the Compensation and Management Succession 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 Operations, Environmental and Safety Committee is independent.
Business Security Subcommittee (Cyber and Physical Resiliency)
In 2014, the Board established a Business Security Subcommittee of the Operations, Environmental and Safety Committee, currently comprised of Ernest J. Moniz, Chair, Janaki Akella and Dale E. Klein. The subcommittee held four meetings in 2018, and attendance was 100%.
The Business Security Subcommittee’s responsibilities include the following:
Oversee management’s efforts to establish and continuously improve enterprise-wide security policies, programs, standards and controls, including those related to cyber and physical security.
Oversee management’s efforts to monitor significant security events and operational and compliance activities.

Board and Governance Structure and Processes

Board Leadership Structure

Our Governance Guidelines allow the independent Directors flexibility to split or combine the Chairman and CEO responsibilities, and the independent Directors annually review our leadership structure to determine the structure that is in the best interest of Southern Company and its stockholders.

The Board continues to believe that its current leadership structure, which has a combined role of Chairman and CEO 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 CEO 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 CEO 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 CEO 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.

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Role of the Lead Independent Director

The Lead Independent Director is elected by the independent Directors of the Board. At the 2018 annual meeting, Dr. Specker was elected by the independent Directors to serve as Lead Independent Director effective May 23, 2018.

The Lead Independent Director has the following key powers and responsibilities:

Approving the agenda (with the ability to add agenda items) 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.

Dr. Steven R. Specker

Our Board is committed
to overseeing Southern
Company’s long-term
strategy on behalf of all
stockholders.

Meetings of Non-Management Directors

Non-management Directors (our independent Directors) meet in executive session without any members of the Company’s management present at each regularly-scheduled Board meeting. These executive sessions promote an open discussion of matters in a manner that is independent of the Chairman and CEO. The Lead Independent Director chairs each of these executive sessions.

Meetings and Attendance

The Board met 14 times in 2018. Our Directors are engaged, as demonstrated by the average Director attendance at all applicable Board and committee meetings in 2018 of 94%. All of our Directors attended at least 75% of applicable meetings in 2018.

All Director nominees are expected to attend the annual meeting of stockholders. All nominees for Director at the 2018 annual meeting attended the annual meeting in 2018.

          

Engaged Directors

2018 Board and Committee Meeting Attendance

Communicating with the Board

We encourage stockholders or interested parties to communicate directly with the 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 our principal executive offices, 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.

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Board and Committee Self-Evaluation Process

Our Board and each of its committees have a robust annual self-evaluation process. The Nominating, Governance and Corporate Responsibility Committee oversees the annual self-assessment process on behalf of the Board. To facilitate a robust self-evaluation process, the Board engaged the services of an independent third party to facilitate its annual self-assessment. The process involves an interview of each Director and a facilitated discussion with the full Board detailing the interviews and any follow up items. The objective is to allow the Directors to share their perspectives and consider necessary adjustments, if any, in response to the collective feedback.


Board Governance Enhancements from Recent Self-Evaluation Process
Restructured meeting schedules to allow more time at many committee meetings throughout the year
Evaluated Board materials to ensure an appropriate quantity of materials to facilitate a robust discussion
Reviewed and updated agenda items to be considered at each meeting to use the Directors’ time more effectively

Majority Voting for Directors and Director Resignation Policy

We have 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.

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.

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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 Director’s immediate family member was an executive officer of the Company.
The Director has received, or the Director’s 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 Director’s 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 Company’s audit.
The Director was employed, or the Director’s immediate family member was employed, as an executive officer of a company where any of the Company’s present executive officers at the same time served on that company’s compensation committee.
The Director is a current employee, or the Director’s 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 company’s consolidated gross revenues.
The Director or the Director’s 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 organization’s consolidated gross revenues.

These guidelines are in compliance with the NYSE corporate governance rules within its listing standards.

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 Director’s immediate family members have with the Company and its subsidiaries. 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 Company’s 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 system’s 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.

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As a result of its review process, the Board affirmatively determined that 15 of its 16 Directors are independent. The only member of the Board that is not independent is Thomas A. Fanning, Chairman, President and CEO of the Company.

Janaki Akella
Juanita Powell Baranco
Jon A. Boscia
Henry A. Clark III
Anthony F. Earley, Jr.
David J. Grain
Veronica M. Hagen
Donald M. James
John D. Johns
Dale E. Klein
Ernest J. Moniz
William G. Smith, Jr.
Steven R. Specker
Larry D. Thompson
E. Jenner Wood III

     

Director Independence

All Directors are independent except the CEO

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 believes that diversity is important, as a variety of points of view contributes to a more effective decision-making process.

The Nominating, Governance and Corporate Responsibility Committee regularly evaluates the expertise and needs of the Board to determine the Board’s proper membership and size.
As part of this evaluation, the Nominating, Governance and Corporate Responsibility Committee considers aspects of diversity, such as diversity of race, gender and ethnicity.
The Nominating, Governance and Corporate Responsibility Committee also considers diversity of age, education, industry, business background and experience in the selection of candidates to serve on the Board.

The Nominating, Governance and Corporate Responsibility Committee assesses the effectiveness of its efforts at pursuing diversity through its evaluations of the Board’s composition.
  Director Diversity
Board Refreshment  

The Nominating, Governance and Corporate Responsibility Committee regularly considers the long-term makeup 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 and the new experience and ideas that can come from adding Directors to the Board.

In 2018, the Nominating, Governance and Corporate Responsibility Committee continued its focus on Board refreshment to ensure alignment of the Board’s long-term composition with the Company’s long-term strategy and to effect meaningful Board succession planning. The Nominating, Governance and Corporate Responsibility Committee has an evergreen Board search process in place and has engaged a nationally-recognized Board search firm to assist in the search.

 

Independent Director Tenure

Years of consecutive service

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In 2018, Dr. Moniz joined the Board and two Directors retired.
In January 2019, Dr. Akella and Mr. Earley joined the Board.
Effective at the annual meeting, Ms. Hagen will retire from the Board.

The Board is committed to continuing its refreshment over the coming years.

The Board believes the average tenure for the independent Directors of approximately 6.2 years reflects the balance the Board seeks between different perspectives brought by longer-serving Directors and new Directors.

Identifying Nominees for Election to the Board

The Nominating, Governance and Corporate Responsibility 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 qualifications, skills, knowledge and experience beneficial to our Company and in line with our long-term strategic plans.

The Nominating, Governance and Corporate Responsibility Committee only considers candidates with the highest degree of integrity and ethical standards.
The Nominating, Governance and Corporate Responsibility Committee evaluates a candidate’s 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 Nominating, Governance and Corporate Responsibility 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.
In 2018, the Board engaged the services of a nationally-recognized Board search firm to assist with an evergreen candidate search based on a talent framework consistent with our leadership mission and aligned with our strategic imperatives that drive long-term value.

We recently added two new independent Directors to our Board. In December 2018, Dr. Akella and Mr. Earley were recommended by the Nominating, Governance and Corporate Responsibility Committee for election as independent Directors and were elected to the Board effective January 2, 2019. Dr. Akella was identified by the search firm engaged by the Nominating, Governance and Corporate Responsibility Committee. Mr. Earley was identified jointly by the Chairman, President and CEO and a stockholder.

Stockholder Recommendation of Board Candidates

Any stockholder may make recommendations for candidates for consideration by the Nominating, Governance and Corporate Responsibility Committee by sending a written statement describing the candidate’s qualifications, relevant biographical information and signed consent to serve.
These materials should be submitted in writing to our Corporate Secretary and received by December 7, 2019 for consideration by the Nominating, Governance and Corporate Responsibility Committee as a nominee for election at the 2020 annual meeting.
A stockholder recommendation is reviewed in the same manner as candidates identified by the Nominating, Governance and Corporate Responsibility Committee or recommended to the Nominating, Governance and Corporate Responsibility Committee.

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Board Risk Oversight

The Board and its committees have both general and specific risk oversight responsibilities. The Board has broad responsibility to provide oversight of significant risks primarily through direct engagement with 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 associated risk management activities related to financial reporting and ethics- and compliance-related matters.
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 risks associated with the Company’s 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 unit’s compensation practices are under consideration.
 
Finance Committee
Reviews risks and associated risk management activities related to financial matters of the Company such as financial integrity, major capital investments, dividend policy, financing programs and financial and capital allocation strategies.
 
Nominating, Governance and Corporate Responsibility Committee
Reviews risks and associated risk management activities related to state and federal regulatory and legislative environment, stockholder activism and environmental, sustainability and corporate social responsibility.
 
Operations, Environmental and Safety Committee
Reviews risks and associated risk management activities related to significant operations of the Southern Company system such as safety, system reliability, nuclear, gas and other operations, environmental regulation and policy, fuel cost and availability.
 
Business Security Subcommittee
Business Security Subcommittee of the Operations, Environmental and Safety Committee focuses on business strategies designed to prevent or address catastrophic business interruption due to physical or cyber attacks 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. Each committee has a designated member of executive management as the primary responsible officer for providing information and updates related to the significant risks for that committee. These officers ensure that all significant risks identified in the risk profile we develop are regularly reviewed with the Board and/or the appropriate committee(s).

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 in which risk governance and oversight are largely embedded in existing organizational and control structures. As a part of the governance structure, the Chief Financial Officer (CFO) serves as the Chief Risk Officer and is accountable to the CEO and the Board for ensuring that enterprise risk oversight and management processes are established and operating effectively.

All Directors are actively involved in the risk oversight function, and we believe that our leadership structure supports the Board’s risk oversight responsibility. Each committee is chaired by an independent Director, and the Chairman and CEO does not serve on any committee. There is regular, open communication between management and the Directors.

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Succession Planning and Talent Development

Valuing and developing our people is a strategic priority for our Company. To support this priority, we engage in detailed discussions around succession planning and talent development at all levels within our organization to achieve business results. We have robust discussions and actions that are ongoing throughout the year. The Board meets potential leaders at many levels across the organization through formal presentations and informal events 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 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 and inclusion, recruiting and development programs.

The Board annually reviews 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.

For a discussion of our human capital beliefs, see page 81.

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 Company’s proxy materials and on the Company’s proxy card.

At the 2016 annual meeting, the Board proposed for stockholder vote a proxy access amendment to our By-Laws. The proposed amendment received overwhelming support (over 95%) from our stockholders and was adopted in May 2016. The following are the key terms of our proxy access By-Law.

Political Contributions Policy and Lobbying-Related Oversight and Disclosure

We believe that we have a responsibility to customers and stockholders to participate in the political process and, where appropriate, to make political contributions or expenditures (as defined by applicable law). The Company and its subsidiaries comply with all laws governing the use of corporate funds in connection with elections for public office. All political contributions or independent expenditures must be approved in advance.

Engagement in legislative and regulatory proceedings at the federal, state and local levels of government is crucial to our success, and we devote substantial attention and resources to interaction with government officials as public policy is debated and laws and regulations are developed. We also work with trade associations and industry coalitions as part of our government relations activities.

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The Company’s political expenditures are reviewed at least annually by the full Board.

We provide on our website an overview of our policies and practices for political spending and annually disclose our political contributions. We also provide on our website an overview of our policies and practices for lobbying-related activities and annually disclose the trade associations and coalitions engaged in lobbying to which we make yearly contributions of $50,000 or more.

Alignment with Investor Stewardship Group Corporate Governance Principles

Below we identify each of the Investor Stewardship Group’s corporate governance principles and note how our specific actions, practices and beliefs are aligned with these principles.

Principle Boards are accountable to stockholders
All Directors stand for stockholder election annually
Majority voting standard in uncontested Director elections, and Directors not receiving majority support must tender their resignation for consideration by the Board
Adopted market-standard proxy access for stockholders
Fully disclose our corporate governance practices
Principle Stockholders should be entitled to voting rights in proportion to their economic interest
One class of common stock, with each share carrying equal voting rights (a “one-share, one-vote” standard)
Principle Boards should be responsive to stockholders and be proactive in order to understand their perspectives
Process in place for stockholders and interested parties to communicate with Lead Independent Director or other independent Directors
Proactive year-round stockholder outreach efforts that include participation of independent Directors, with feedback provided to the Board
Responded to a stockholder proposal that received significant support at the 2017 annual meeting by posting our Planning for a Low-Carbon Future report in April 2018 and setting GHG emission reduction goals for 2030 and 2050
Principle Boards should have a strong, independent leadership structure
Annual public disclosure of the Board’s reasoning underlying its leadership structure and affirmation that the current leadership structure is appropriate
Independent chairs of all Board committees
Strong Lead Independent Director with clearly defined duties that are disclosed to stockholders
Principle Boards should adopt structures and practices that enhance their effectiveness
15 of 16 Directors, or 94%, are independent
Directors reflect a diverse mix of qualifications, skills and experience relevant to our businesses and strategies
3 of our Directors are women and 4 of our Directors are ethnically diverse
All Board committees are fully independent
Annual Board and committee self-assessment
Board has full and free access to officers and employees
During 2018, each of the incumbent Directors attended 94% of the total of all meetings of the Board and its committees and each of the 15 nominees for election at the 2018 annual stockholder meeting attended the meeting
Active Board refreshment with 3 new Directors since March 2018
Principle Boards should develop management incentive structures that are aligned with the long-term strategy of the company 
Say on Pay vote received 95% stockholder support at 2018 annual meeting
Responsive to stockholder feedback in considering adjustments to earnings and holding key members of management accountable
Addition of new GHG reduction metric to CEO’s incentive compensation in 2019

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Engaging with our Stakeholders

We place great importance on consistent dialogue with all our stakeholders, including stockholders, employees, customers, and members of the communities that we serve. We regularly engage in discussions with, and provide comprehensive information for, constituents interested in Southern Company's governance, citizenship, stewardship and environmental compliance. We are receptive to stakeholder input, and we are committed to transparency and proactive interactions.

Stockholder Engagement

Our Board places great importance on regularly communicating with our stockholders to better understand their viewpoints and gather feedback regarding matters of investor interest. The Nominating, Governance and Corporate Responsibility Committee oversees our stockholder engagement efforts on behalf of the Board.

The graphic below represents elements of our ongoing stockholder engagement efforts, as well as certain items that take place before, during and after our annual meeting.

2018 and 2019 Stockholder Outreach    

In 2018 and early 2019, we reached out to our 100 largest stockholders representing more than 50% of our outstanding shares and offered to engage on ESG and executive compensation topics, as well as any other topics of interest. We also reached out to stockholders that are not among our 100 largest but expressed an interest in engaging with us.

We received positive responses from, and had more than 60 engagements with, 40 stockholders or stockholder advisors representing 35% of our outstanding shares. We engaged with a broad range of stockholders, including index funds, union and public pension funds, actively-managed funds and socially-responsible investment funds, as well as stockholder advisory firms.

Key topics for stockholder engagement included environmental matters, cybersecurity, executive compensation, leadership development, human capital management, corporate culture, Board leadership structure, on-boarding of new Directors and Board risk oversight, and how these topics tie to our long-term strategic thinking.

60+
engagements

40+
stockholders

35%
outstanding stock

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Participants in various calls and meetings with our stockholders include:
 
Independent Directors (Lead Independent Director, Chair of our Nominating, Governance and Corporate Responsibility Committee, Chair of our Compensation and Management Succession Committee and Chair of our Operations, Environmental and Safety Committee)
Chairman and CEO (only when the engagement did not include a discussion of his compensation)
   
CFO 
Chief Legal Officer 
Senior Vice President of Environmental and System Planning
Senior Vice President of Human Resources/Total Rewards
Vice President, Corporate Governance
Director, Investor Relations

Stockholder feedback is communicated to our Board and its committees throughout the year.

In addition, our investor relations group leads our management team in hundreds of investor meetings throughout the year to discuss our business, our strategy and our financial results. These meetings include in-person, telephone and webcast conferences.

Environmental Stakeholder Engagement

Since 2011, we have held regular 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 GHG matters. Members of senior management participate in these events.

At the annual environmental stakeholder forum in May 2018, topics included carbon reduction strategies, understanding global sustainability goals and advancing energy policy.
Webinars that followed the annual stakeholder meeting included one discussing natural gas in which the Southern Company Gas environmental team and the research and development team from the National Carbon Capture Center participated, and one discussing our CDP Climate Disclosure for 2018.

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, officers and Directors avoid conflicts of interest, defined as situations where the person’s 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 or one of its subsidiaries 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.

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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 2018, Ms. Alexia B. Borden, the daughter of Paul Bowers, an executive officer of the Company, was employed by Alabama Power as senior vice president and general counsel and received total compensation of $755,430.

We do not have any other related person transactions that meet the requirements for disclosure in this proxy statement.

In the ordinary course of the Southern Company system’s 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.

Director Compensation

Only non-employee Directors of the Company are compensated for service on the Board.

In October 2017, the Nominating, Governance and Corporate Responsibility Committee engaged Pay Governance to provide an independent assessment of the non-employee director compensation program to ensure continued alignment with comparable companies and sound governance practices. Pay Governance reported that the Company’s program provides total direct compensation (retainer plus equity) between the 50th and 75th percentile of utility peers and below the 50th percentile of a broad group of general industry companies. Based on this assessment, the Nominating, Governance and Corporate Responsibility Committee did not recommend any changes to the program for 2018.

For 2018, 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 Operations, $ 12,500
Environmental and Safety Committee
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

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Director Compensation Table

The following table reports compensation to the non-employee Directors during 2018. Mr. Hood retired from our Board in May 2018 and Ms. Hudson retired from our Board in July 2018.

Name     Fees Earned or
Paid in Cash
($)
(1)
    Stock Awards
($)
(2)
    All Other
Compensation
($)
(3)
    Total
($)
Juanita Powell Baranco 110,000 140,000 0 250,000
Jon A. Boscia 110,000 140,000 0 250,000
Henry A. Clark III 120,000 140,000 0 260,000
David J. Grain 130,000 140,000 0 270,000
Veronica M. Hagen 120,000 140,000 0 260,000
Warren A. Hood, Jr. 45,833 58,333 0 104,166
Linda P. Hudson 61,250 70,000 0 131,250
Donald M. James 110,000 140,000 0 250,000
John D. Johns 130,000 140,000 0 270,000
Dale E. Klein 122,500 140,000 0 262,500
Ernest J. Moniz 102,084 116,667 0 218,751
William G. Smith, Jr. 120,000 140,000 0 260,000
Steven R. Specker 145,000 140,000 0 285,000
Larry D. Thompson 135,000 140,000 0 275,000
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.

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 of the Company 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 to the independent Directors is required to be deferred in shares of common stock. The shares are not distributed until membership on the Board ends. The deferral is made 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 Director’s 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.

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Compensation Discussion and
Analysis (CD&A)

What you will find in this CD&A:
41 2018 Company Performance Overview
We start with an overview of our strong 2018 business performance
43 Letter from the Compensation and Management Succession Committee
The Compensation and Management Succession Committee (Compensation Committee or Committee), in its letter, describes its key focus areas for 2018, its performance review of the CEO and its key decisions with respect to payouts for the year
45 Report of the Compensation Committee
46 Stockholder Outreach and Say on Pay Response
We describe what we heard from investors on executive compensation topics from our outreach efforts and how the Committee responded to the input
47 CEO Pay for Performance Alignment
We demonstrate how CEO pay is aligned with our performance and stockholder interests
48 New GHG Reduction Metric
We describe the new metric that is aligned with our GHG emission reduction goals and part of the CEO’s long-term incentive award for 2019
49 Executive Compensation Program
We describe the details of our executive compensation program, including base salary, short- and long-term incentive awards and benefits
58 Compensation Governance Practices, Beliefs and Oversight
We describe our key compensation beliefs, the active compensation governance oversight by the Committee and the Board, peer groups and other compensation policies and practices

This CD&A focuses on the compensation for our CEO, CFO and retired CFO as well as our three other most highly compensated executive officers serving at the end of 2018. Collectively, these officers are referred to as the NEOs.

Name Title
Tom Fanning Chairman of the Board, President and CEO of the Company
Andrew Evans     Executive Vice President and CFO of the Company, effective June 1, 2018; previously served as Chairman, President and CEO of Southern Company Gas
Art Beattie Retired Executive Vice President and CFO of the Company (retired effective June 1, 2018)
Paul Bowers Chairman, President and CEO of Georgia Power (Georgia Power CEO)
Mark Crosswhite Chairman, President and CEO of Alabama Power (Alabama Power CEO)
Stephen Kuczynski Chairman, President and CEO of Southern Nuclear Operating Company (Southern Nuclear CEO)

40   Southern Company 2019 Proxy Statement


Table of Contents

Compensation Discussion and Analysis (CD&A)

2018 Company Performance Overview

We are one of America’s premier energy companies, delivering clean, safe, reliable and affordable energy to our electric and natural gas customers through our state regulated utilities. Our strategy is to maximize long-term value to stockholders through a customer-, community- and relationship-focused business model that is designed to produce sustainable levels of return on energy infrastructure.

Delivered Strong Financial Results and Created Value for Stockholders
We reported adjusted EPS above the top end of our original guidance range for 2018 (adjusted EPS results were about 7% greater than the mid-point of the original guidance range).
We increased our dividend for the 17th consecutive year, with dividend yield as of year-end 2018 at 5.4%.

Earnings Per Share                 Dividends Paid

*   For a reconciliation of adjusted EPS to EPS under GAAP, see page 93.

Investor-Friendly Funding (Planning for the Future)
We focused on investor-friendly transactions to efficiently raise capital and strengthen our credit profile. Recent divestiture activities strengthened our ability to drive value for stockholders by being a more effective source of funding than issuing new common shares (offsetting 6 cents of dilution compared to issuing new common shares in 2018).
We have demonstrated discipline as both a buyer and seller of assets. The Southern Company Gas and Southern Natural Gas transactions in 2016 delivered value for stockholders. Our recent divested entities represented a small percentage of our earnings, and we remain a company whose value proposition is rooted in state-regulated utilities.

Excelled at the Fundamentals
We ranked in the top quartile on the Customer Value Benchmark Survey and were recognized among the most highly rated utilities for customer satisfaction by J.D. Power.
We produced top quartile generation availability performance.
We continued our commitment to employee safety by concentrating efforts on safety processes, safety culture and risk reduction to prevent injuries.
Our employees demonstrated their commitment to serving our communities during and after the multiple severe weather events experienced in 2018.

Significant Progress at Plant Vogtle Units 3 and 4
We achieved our principal year-end construction targets for 2018.
We achieved more direct construction earned hours at the site in 2018 than any previous single year to date.

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Compensation Discussion and Analysis (CD&A)

Despite significant progress at the site, we announced a $1.1 billion charge against earnings associated with the construction at Plant Vogtle Units 3 and 4. As part of the process to continually review and assess cost and schedule, and to reflect the learnings gained over the first year of managing the project, we announced that Southern Nuclear revised its estimate of the project cost. The new estimate, which included no change in the project’s expected in-service dates (November 2021 for Unit 3 and November 2022 for Unit 4), reflects an increase in Georgia Power’s projected share of the total cost, with a base capital cost of about $700 million and a new construction contingency estimate of approximately $400 million. We determined that seeking recovery of the additional base capital costs from customers was not appropriate. Georgia Power may request the Georgia Public Service Commission to evaluate costs currently included in the construction contingency estimate for rate recovery as and when they are appropriately included in the base capital cost forecast.

Commitment to Low- to No-Carbon Emissions by 2050
Our energy strategy includes the continued development of a diverse portfolio of energy resources to reliably and affordably serve customers and communities with a focus on reducing GHG emissions, including a 2030 goal of reducing carbon emissions by 50% as compared to 2007 and a goal of low- to no-carbon emissions by 2050.
Since 2007, the percentage of energy generated from coal has decreased by approximately 61%, while the energy from our renewables and natural gas resources has almost quadrupled (from 16% to 58% of our energy portfolio).
We continue to invest in robust proprietary research and development. This commitment is evidenced by our leadership of the international carbon capture research center and the only research and development center engaged in minimizing water use for electric generation.

Successful Regulatory Outcomes for Customers and Stockholders
We executed a tax law strategy which improved our credit profile, increased earnings potential and generated savings for customers.
We demonstrated the constructive nature of our state and federal regulatory environments as we worked throughout the year to deliver significant benefits to our customers from federal tax reform. In the process, many regulators also acknowledged the impacts of tax reform on the Company by allowing our utilities to adjust their rates and/or capital structures to mitigate these impacts and preserve the financial integrity of our utilities and pipeline investments.

Significant Recognition for our Accomplishments
From innovating our industry to making strides in sustainable energy, cybersecurity, human capital management and corporate culture, we are recognized as a leader by customers, partners, investors, employees and the broader business, science and technology communities.
      2018 America’s Best Employers by Forbes Magazine, ranked 17th for the second year in a row
 
      Top military employer, named by G.I. Jobs magazine for the 12th consecutive year
Ranked among the top utilities in Fortune’s annual World’s Most Admired Electric and Gas Utility Among the Top 50 Companies for Diversity, listed by DiversityInc and Black Enterprise

Total Shareholder Return

Our goal is to deliver long-term value to our stockholders with appropriate risk-adjusted TSR. We have performed well compared to our peers and other key indices in 2019 and on a long-term basis of 25 years. However, our TSR has underperformed these indices in recent years. We believe performance relative to the Philadelphia Utility Index in recent years is largely attributable to investor sentiment regarding our major construction projects.

Total Shareholder Return (Annualized)

2019 YTD 1-Year 3-Year 5-Year 25-Year
Southern Company          21.1 %     (3.8 %)        2.7 %     6.3 %       10.2 %
Philadelphia Utility Index 13.0 % 3.5 %  11.1 %  10.6 % 8.2 %
S&P 500 Index 13.0 % (4.4 %) 9.2 % 8.5 % 9.1 %
Dow Jones Industrial Average 10.6 % (3.5 %) 12.9 % 9.7 % 10.1 %

*    Source: Bloomberg using quarterly compounding. 2019 year-to-date TSR is as of March 26, 2019. All other data as of December 31, 2018.

42 Southern Company 2019 Proxy Statement


Table of Contents

Compensation Discussion and Analysis (CD&A)

Letter from the Compensation and Management Succession Committee

To our Fellow Stockholders:

We are pleased to report to you on our continued focus on ensuring that our compensation programs are designed and implemented to drive long-term value creation for our stockholders and reflect feedback from our ongoing stockholder engagement program.

Compensation Committee Oversight and Engagement

We are actively engaged in our oversight responsibilities for executive compensation, leadership development and management succession planning. We met 10 times in 2018, with average Director attendance of 96%. The seven independent Directors serving on the Compensation Committee bring a diverse range of qualifications, attributes, skills, experiences and perspectives to our decision-making. We are committed to aligning pay with performance each year, hiring, developing and retaining top talent and ensuring alignment of our compensation program with the Company’s long-term strategy.

Throughout 2018 and into 2019, we continued our robust stockholder outreach program, which includes involvement by several of our Committee members in key engagements. In addition to direct participation, Directors receive regular updates from management on stockholder engagement and feedback. Our Committee also retained an independent compensation consultant to provide analysis on market practices, stockholder feedback and governance for the compensation programs.

Key Focus Areas

An overview of the key focus areas for our Committee over the past year are described below. Many of these were driven by the stockholder feedback process.

CEO Performance
Reviewed and approved the CEO’s performance goals for 2018 and engaged in ongoing performance assessment dialogue throughout the year
Engaged a third party to facilitate a review of CEO performance by the independent members of the Board

Human Capital Engagement
Gained insight at each regular Committee meeting about key talent at the local business unit/operating company level, including their specific human resources initiatives and actions on diversity and inclusion, culture and employee attraction, engagement and retention

Motivating and Retaining Key Talent and Thoughtful Succession Planning
Identified strategies and tools to motivate and retain key talent
Actively engaged in the identification and review of key talent throughout the organization
Conducted multiple detailed review sessions for CEO and senior management succession planning with the support of external consulting expertise

Goal Setting and Earnings Adjustments
Reviewed and continued our practice of setting financial goals consistent with earnings guidance and our financial plan
Remained actively engaged in reviewing any EPS adjustment by considering (1) management’s control over the earnings adjustment, (2) whether the item was contemplated in the financial plan, (3) alignment of pay outcome with stockholder impact and (4) alignment of pay outcome with management accountability

Compensation Goal for 2019 Aligned with GHG Reduction Efforts
Designed new compensation metric that links a portion of the CEO’s 2019 incentive pay to the Company’s GHG emission reduction goals for 2030 and 2050

Compensation Plan Design/Implementation and Alignment with Business Strategy and Stockholder Interests
Evaluated whether our incentive plan design is appropriate and strikes the right balance between short- and long-term results
Evaluated our plan design to ensure alignment with the business strategy and key financial objectives of superior risk-adjusted total shareholder return and regular, predictable, sustainable EPS and dividend growth, while maintaining financial integrity
Ensured our plan design is aligned with stockholder interests

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Compensation Discussion and Analysis (CD&A)

CEO Performance

The CEO’s performance throughout 2018 drove and delivered the strong results described at the beginning of the CD&A. Our Board believes that Mr. Fanning is among the best CEOs in the energy industry. Below are highlights of the CEO’s performance.

Industry Leadership and Credibility Created Long-Term Value for Stockholders

Industry leadership demonstrated through various roles and engagements on cyber and resiliency matters (e.g., Electricity Subsector Coordinating Council co-Chair, Tri-Sector Executive Working Group, expert Congressional testimony)

Leadership creating positive outcomes for stockholders, such as the extension of production tax credits for advanced nuclear and a premier position on cyber and physical security

Construction Oversight at Plant Vogtle Units 3 and 4

Critical involvement and engagement with co-owners, regulators and project’s oversight and governance committees

Successful attraction and retention of skilled craft labor, coupled with productivity improvements at the site, resulted in achievement of our principal year-end construction targets

Strategy for Long-Term GHG Reductions

Implementing long-term strategy to migrate generation fleet and power delivery infrastructure from “Big Iron” (i.e., traditional delivery model) to diversified infrastructure

Advancing ongoing engagement with stockholders and environmental stakeholder groups

Created Value and Mitigated Risks Through Accretive Transactions

Demonstrated deal discipline and industry credibility on M&A executions

Transactions created value for stockholders by offsetting over $5 billion of equity issuances and enhancing credit metrics

Expected equity needs through 2022 reduced from $7.0 billion to $2.4 billion

We believe that the transactions represent one of the highest valuation multiples for regulated electric and gas distribution transactions (creating 10 cents of EPS accretion, more than offsetting EPS dilution of 5 cents related to the revised estimate to complete the construction at Plant Vogtle Units 3 and 4, and also enhancing credit quality)

Successfully Executed Strategy in Response to Federal Tax Law Changes

Improved our credit profile, increased earnings potential and created savings for customers

Successfully raised equity ratios at operating companies to preserve credit quality of state-regulated subsidiaries

All three rating agencies removed negative watches and affirmed ratings with negative outlook

Delivered significant benefits to customers resulting from tax reform, while at the same time maintaining the credit metrics of our state-regulated businesses

Corporate Governance Enhancements

As Chairman of the Board, facilitated the Board’s commitment to regular Board refreshment (three new Directors added since March 2018)

Encouraged robust stockholder outreach efforts and participated in key stockholder engagements (except when discussing CEO pay)

Culture and Human Capital

Strong emphasis and engagement in culture, diversity and inclusion, equality and human capital matters

Continued to advance the workforce and Company culture through focus on safety, compensation and benefits, diversity and inclusion, succession planning and development for all employees

Notable Accolades

2018 Global Energy CEO of the year

Edison Electric Institute's Distinguished Leadership Award

CEO Coach of the Year (American Football Coaches Foundation) – past winners include CEOs from other well-respected companies such as AT&T, Honeywell, Hewlett-Packard and FedEx Corporation

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Compensation Discussion and Analysis (CD&A)

Pay Decisions

Our Committee believes that the compensation programs are appropriate and effectively align executive pay with the Company performance by:

Placing the majority of the CEO’s total compensation at risk (89% of pay is at risk)

Striking the right balance between short- and long-term incentives (significantly weighted to long-term with 74% of target incentives)

Appropriate use of performance metrics (e.g., market-based measures such as relative TSR and long-term value creation metrics such as EPS and return on equity (ROE) growth as well as safety, culture and operational goals)

Active evaluation of any adjustments to EPS or other goal performance

Every year, the Committee follows a robust and rigorous review process to ensure that the compensation programs as implemented are producing the desired outcomes that are aligned with stockholders’ long-term interests and overall Company performance.

2018 Incentive Compensation Pay Decisions

Despite the significant financial, operational and strategic successes of 2018 and the outstanding CEO performance and leadership, the Committee determined the charge against earnings related to the Vogtle construction project of 77 cents per share should be accounted for in the CEO incentive compensation payouts for 2018. We reduced the calculated 2018 CEO incentive payouts by approximately 52% ($6.1 million), which is equivalent to paying on GAAP for this item, resulting in the following reductions in the CEO’s annual and long-term incentive payouts:

2018 annual incentive award (PPP) was reduced 53% ($1.7 million)

2016-2018 long-term incentive award (PSP) was reduced 51% ($4.4 million).

We also reduced the calculated 2018 PPP payouts to other members of senior management who had accountability for the Vogtle project.

Our Board conducts an annual assessment of the CEO’s performance. The outcome of this year’s survey highlighted the CEO’s exemplary work and leadership in achieving outstanding financial and operational results. Furthermore, our Board strongly believes that our CEO and senior management team are the best leadership team in our industry. We believe Mr. Fanning’s leadership will continue to set Southern Company apart in creating significant value for stockholders for years to come. We intend to ensure that his pay is commensurate with his outstanding performance, depth of experience and his pivotal role in the industry on an ongoing basis.

Other Executive Pay Decisions

To ensure that we effectively motivate and retain key talent and critical leadership to successfully complete the construction of Plant Vogtle Units 3 and 4 in a timely and cost-effective manner, our Committee approved a special equity incentive award for Mr. Kuczynski, Southern Nuclear CEO, in early 2018. The award is designed to motivate and retain Mr. Kuczynski and link his compensation to the successful completion of the Plant Vogtle Units 3 and 4 construction project in accordance with the schedule approved by the Georgia Public Service Commission.

Based on feedback from stockholders during 2018 regarding retention of key talent to ensure successful implementation of our long-term business strategy, the Committee will continue to focus on motivating, retaining and compensating key talent in 2019.

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.

John D. Johns
Chair
Anthony F.
Earley, Jr.
David J. Grain Veronica M.
Hagen
Donald M. James Dale E. Klein Steven R. Specker

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Compensation Discussion and Analysis (CD&A)

Stockholder Outreach and Say on Pay Response

We are committed to engaging with our stockholders year-round. Feedback from our stockholders has resulted in changes to our executive compensation program over time.

At our 2018 annual meeting, we received 95% support of the votes cast on the Say-on-Pay vote, up from 62% in the prior year. Though our Say on Pay results for 2018 were very strong, we continued our stockholder outreach efforts in 2018 and early 2019, reaching out to the holders of 50% of our stock. Since January 2018, we have had over 60 engagements with 40 stockholders or stockholder advisors, representing 35% of our stock. An overview of what we heard from the engagements and how we have responded with respect to executive compensation matters is described below.

What We Heard
What We Did
Alignment between CEO pay and financial performance
Consistent with the 95% support for the 2018 Say on Pay vote, stockholders have expressed the following:
Satisfaction with the 2017 payout decisions
Support of the overall pay program designs
A better understanding of the process used by the Committee for the evaluation of EPS adjustments and final determination of incentive compensation payouts
Trust that the Committee will act to ensure pay for performance alignment
Committee continued to evaluate plan design to ensure that the programs are producing outcomes that are aligned with stockholders’ interests and overall Company performance
Committee continued to review all adjustments to earnings, whether positive or negative, to determine their appropriateness based on management control, materiality and overall impact to investors
After thoughtful consideration by the Committee and consultation with the independent compensation consultant, the Committee reduced the CEO’s 2018 incentive payouts by $6.1 million, reflecting a 52% reduction as compared to the calculated incentive award amounts
Reduction reflects the 2018 charge against earnings for the Vogtle construction project and is equivalent to paying on GAAP for this item
Linking CEO pay with GHG reduction goals
Stockholders applauded the GHG reduction goals we set in April 2018
Stockholders expressed interest in the Company linking GHG reduction goals with CEO pay
Committee added a new compensation metric for 2019 CEO compensation
Meaningful portion of CEO’s 2019 long-term equity incentive award is aligned with the Company’s GHG reduction goals, including quantitative measures consistent with our 2030 goal and qualitative measures to help us reach our 2050 goal
Motivate and retain key talent
Based on the Committee’s decision to reduce executive management’s 2017 incentive payouts, stockholders asked whether the Committee is concerned with being able to appropriately motivate, reward and retain key talent
Board believes that Mr. Fanning’s leadership is critical to the long-term success of the Company and the Committee will continue to ensure that his pay is commensurate with his contribution to the enterprise
Committee established a long-term incentive and retention program for Mr. Kuczynski, Southern Nuclear CEO, in early 2018 that links vesting of the award to successful completion of the Vogtle construction project on time with his continued leadership throughout construction and start-up
Committee will continue to focus on engaging, motivating, rewarding and retaining key talent in 2019

As we described last year, in response to stockholder engagement and feedback during 2017 and early 2018, the Committee reduced incentive compensation payouts for the CEO and other senior executives for 2017. The Committee also eliminated EPS as a financial performance measure in the 2018 long-term incentive award program, so that EPS is not duplicated as a financial performance measure in the annual and long-term incentive programs. Further, the Committee reduced the weighting of the CEO’s individual performance component in the 2018 annual incentive program from 30% to 25%.

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Table of Contents

Compensation Discussion and Analysis (CD&A)

CEO Pay for Performance Alignment

2018 CEO Incentive Payouts Demonstrate Pay for Performance Alignment

CEO Target Pay
We have strong alignment between CEO pay and performance based on three factors:
We place the majority of the CEO’s total compensation at risk
We have the appropriate metrics in place to align pay with long-term value creation for stockholders
We actively review earnings adjustments to ensure pay outcome is consistent with stockholder interests

Despite the significant financial, operational and strategic successes of 2018 and the CEO's outstanding performance and leadership, the Committee determined the 77 cents charge against earnings related to the Vogtle construction project should be accounted for in the CEO’s 2018 incentive payouts to ensure that the outcome is consistent with stockholder returns.

The chart below demonstrates the impact of the reduction to the 2018 CEO’s incentive pay for short- and long-term performance awards of $6.1 million or 52%.

2018 CEO Incentive Pay
($ millions)
$6.1 million total reduction on 2018 incentive payouts

Calculation Details

Target

Represents the 2018 target
PPP and the target value at
grant of the 2016-2018 PSP
award as approved by the
Committee

Calculated

Represents the payout
earned based on our goal
performance, including
adjusted EPS, prior to
reductions

Actual

Represents the actual
payout approved by the
Committee after reducing
calculated payout
 





The chart to the right compares CEO target incentive pay to actual incentive payouts for the five-year period from 2014 to 2018. Over these five years, actual payouts were 55% lower than target, demonstrating that actual CEO pay is aligned with stock price performance and stockholder interests and is consistent with our relative TSR performance as compared to our peers over the same time period.
Five Year CEO Incentive Pay
(as a % of Target Pay)

55% reduction in Incentive Pay versus Target


Calculation Details

Target

Represents the target PPP
and the target value at
grant of the PSP awards for
the 5-year period as
approved by the Committee

Actual

Represents the actual
payouts approved by the
Committee after reducing
calculated payouts
 
 


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Compensation Discussion and Analysis (CD&A)

New GHG Reduction Metric for CEO’s 2019 Long-Term Incentive Award

Our energy strategy includes the continued development of a diverse portfolio of energy resources to reliably and affordably serve customers and communities with a focus on reducing GHG emissions, including a 2030 goal of reducing carbon emissions by 50% as compared to 2007 and a goal of low- to no-carbon emissions by 2050.

To demonstrate our commitment to the GHG reduction goals, the Compensation Committee added a new metric to the CEO’s 2019 long-term equity incentive award. A meaningful portion of the CEO’s 2019 PSP award (10% or up to $2 million) is aligned with our GHG reduction goals.

The Compensation Committee worked closely with the Operations, Environmental and Safety Committee to design the new metric. The Committees shared a desire to implement a measurable, quantitative component that is aligned with our 2030 goal of 50% reduction in GHG emissions, as well as a qualitative component that incentivizes behaviors to get us to our goal of low- to no-carbon emissions by 2050.

Quantitative Metric: Performance over the period from 2019 through 2021 is aligned with a trajectory to our 2030 goal of 50% GHG emission reduction as compared to 2007. The metric is defined in terms of net megawatt change, which includes:

Adding zero-carbon megawatts
Placing coal in retirement status or inactive reserve (which means no longer available for routine economic commitment and dispatch but available for resiliency and reliability)

2019-2021
Net MW Change
(1)
    Payout % of Target     Estimated % Complete by 2021 of
GHG Emission Reduction Goal for 2030
< 2,204 MW 0% 42% of 50% GHG emission reduction goal, equivalent to 84% achievement of 2030 goal
2,641 MW 50% 43% of 50% GHG emission reduction goal, equivalent to 86% achievement of 2030 goal
3,080 MW 100% 44% of 50% GHG emission reduction goal, equivalent to 88% achievement of 2030 goal
3,518 MW 150% 45% of 50% GHG emission reduction goal, equivalent to 90% achievement of 2030 goal
(1) Goal is expressed in net megawatt change. Not all megawatts have the same GHG emissions.

Qualitative Metric: Creates incentives to achieve our goal of low- to no-carbon emissions by 2050 through a qualitative assessment by the Compensation Committee and the Board of the CEO’s leadership in advancing the energy portfolio of the future. The payout modifier, which is applied to the payout determined under the quantitative metric, is up to 30%.

Leadership in energy policy, nationally and within the industry
Research and development (R&D) investment, such as Electric Power Research Institute and Southern proprietary R&D
Investments, such as corporate venture capital spend and Energy Impact Partners
New business development, through Southern Power, PowerSecure, Sequent and liquefied natural gas (e.g., renewables, distributed generation, distributed infrastructure, Bloom Energy, Greener State)

Achievement     Modifier
Fails to meet 0%
Meets +15%
Exceeds +30%

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Table of Contents

Compensation Discussion and Analysis (CD&A)

Executive Compensation Program

Overview of Key Compensation Components

Base Salary

The CEO recommends base salary adjustments for each of the other executive officers for the Compensation Committee’s review and approval. The recommendations take into account competitive market data provided by the Committee’s independent compensation consultant, 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 individual’s relative contributions to the achievement of financial and operational goals in prior years.
Base salary adjustments are effective as of March 1 each year.
The Compensation Committee determines the CEO’s base salary based on its comprehensive review of his individual performance and taking into account competitive market data provided by the independent compensation consultant.

Name     March 1, 2017
Base Salary
($)
        March 1, 2018
Base Salary
($)
 
Tom Fanning 1,350,000   1,350,000  
Andrew Evans 800,000   800,000  
Art Beattie 760,000   798,000  
Paul Bowers 864,522   890,458  
Mark Crosswhite 775,000   806,000  
Stephen Kuczynski 751,644   774,193  

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Compensation Discussion and Analysis (CD&A)

Annual Incentive Compensation (At Risk)

2018 Performance Pay Program (PPP)

PPP is an annual cash incentive award program that provides the opportunity to receive an annual cash award based on the achievement of predetermined financial, operational and individual goals.
The formula for computing PPP payouts is as follows:

Base Salary x

Target Award Percentage
(% of Base Salary; varies by pay grade)

x

Performance Goal Achievement
(% of target level; payout ranges from 0% to 200%)

= PPP Award Earned
(ranges from 0% to 200%)

The Committee establishes the financial goals of EPS and net income based on the Company’s financial plan and value proposition, focusing on providing regular, predictable and sustainable EPS and dividend growth and strong returns on capital. Each year, the financial plan is revised to reflect the current economic and regulatory environment and expectations for investment opportunities. The Committee establishes threshold, target and stretch targets for the Company following review of the financial plan scenarios, industry comparisons and growth expectations from the prior year.
Our practice is to set the EPS target at the midpoint of our publicly announced EPS guidance range each year. For 2018, the EPS guidance range was $2.80 to $2.95 and the EPS target for PPP was set at $2.875. The 2018 guidance range reflected many changes from the prior year, including the December 2017 receipt of $1.7 billion in parent guarantee proceeds for Plant Vogtle Units 3 and 4 that was used to reduce costs for customers, changes in tax law that were effective in 2018 and the write-off of the Kemper IGCC gasifier during 2017. The result of these changes was that the 2018 guidance range and the 2018 EPS target for PPP were lower than the 2017 guidance range, the 2017 EPS target for PPP and the adjusted EPS result we reported for 2017. The 2018 guidance range and the impact of these changes on the guidance range were described to our investors during the earnings conference call in February 2018.
The Committee establishes operational goals that are primarily based on industry benchmarks, with an objective of delivering top quartile results compared to industry peers. For goals that do not have a comparable industry benchmark, the Committee sets stretch targets to motivate continuous improvement.
As part of its goal-setting process, the Committee reviews previous goals and performance along with input from the Finance Committee on financial goals (EPS and net income) and the Operations, Environmental and Safety Committee on operational goals to appropriately align the target and maximum goals with expected Company performance.
No payout can be made if events occur that impact the Company’s financial ability to fund the common stock dividends.

2018 PPP Goal Weighting

CEO and CFO
Other NEOs

For operational goals, weighting is generally 20% safety, 20% culture and 60% customer satisfaction, availability, reliability, nuclear plant operations, Plant Vogtle Units 3 and 4 and gas operations.

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Compensation Discussion and Analysis (CD&A)

2018 PPP Goal Details

Below is a summary of the PPP goals for 2018. Weighting varies based on position and business unit. Since Mr. Evans was the CEO of Southern Company Gas prior to assuming the role of CFO in June 2018, his PPP goals also include goals for Southern Company Gas.

Performance
Measures and Weighting
    Description of Measure and Goal Setting     Purpose/Objective of Measure
EPS

The Company’s net income from ongoing business activities divided by average shares outstanding during the year

EPS target is consistent with our business plan and aligned with the midpoint of our publicly-announced guidance range for the year

Supports commitment to provide stockholders solid, risk-adjusted returns and to support and grow the dividend

Business Unit Net Income

Net income after dividends on preferred and preference stock, if any

Overall corporate financial performance determined by the equity-weighted average of the business unit net income goal payouts

Target is consistent with our 2018 business plan

Supports delivery of stockholder value and contributes to the Company’s sound financial policies and stable credit ratings

Safety

Focuses the entire Company on continuous improvement in striving for a safe work environment

Specific metrics include critical risk controls, corrective actions, safety management framework, safety processes and procedures and serious injury occurrences

A safe work environment across all work locations is essential for the protection of employees, customers and communities

Culture

Seeks to improve the inclusive workplace, including measures for diversity and employee satisfaction

Target achievement requires top quartile diversity ranking, majority employee participation in wellness initiatives, spend with diverse suppliers and improvement in workforce representation

Company culture supports workforce development efforts and helps assure diversity of suppliers

Customer Satisfaction

Surveys used to evaluate performance for each traditional electric operating company and provide a ranking for each customer segment (residential, commercial and industrial); for gas operations, goals focus on call center service levels and appointment attainment

Target set at top quartile performance based on customer benchmark surveys or similar

Performance of all goals affects customer satisfaction
Availability

Measures peak season equivalent forced outage rate (EFOR) and indicates efficient operation of generation fleet during high-demand periods

Target peak season EFOR goal requires top quartile performance

Availability of sufficient power during peak season fulfills the obligation to serve and provide customers with power while effectively managing generation resources

Reliability

Measures transmission and distribution system reliability by frequency and duration of outages

Target set based on improving historical performance
Reliably delivering power is essential to operations

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Compensation Discussion and Analysis (CD&A)

Performance
Measures and Weighting
    Description of Measure and Goal Setting     Purpose/Objective of Measure

 
Nuclear Plant
Operations

Measures nuclear safety, reliability and availability of the nuclear fleet

Targets set utilizing nationally-recognized nuclear ratings to maintain nuclear safety and reliability

Safe and efficient operation of the nuclear fleet is important for delivering clean energy at a reasonable price
Plant Vogtle Units 3
and 4

A combination of objective and subjective measures is considered in assessing the degree of achievement by an executive review committee for the Vogtle project

Annual targets are established that are designed to achieve long-term project completion

Long-term construction projects are accomplished through achievement of annual targets over the life cycle of the project
Gas Operations

Measures pipeline safety and reliability, including miles of pipeline replaced and leak response time; added total damage ratio, which measures excavation damages

Targets for damage ratio and leak response set to maintain safety and reliability

Safe and reliable delivery of gas is essential to operations
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

2018 Financial Performance

Financial Goal Achievement for 2018 PPP

We exceeded the financial goals for the year set by the Compensation Committee.

Financial Goals     Threshold
($)
    Target
($)
    Maximum
($)
    Result
($)
    Calculated
Achievement
(%)
EPS* 2.725 2.875 3.025 3.07 200
Alabama Power Net Income* (millions) 827 871 916 926 200
Georgia Power Net Income* (millions) 1,305 1,405 1,505 1,529 200
Southern Company Gas Net Income* (millions) 420 450 470 475 200
* In determining EPS and net income for compensation goal achievement purposes, the Compensation Committee excluded acquisition, disposition and integration impacts, earnings from the Wholesale Gas Services business of Southern Company Gas, charges and an income tax credit related to plants under construction, additional net tax benefits as a result of implementing federal tax reform and settlement proceeds of Mississippi Power Company's claim for lost revenue resulting from the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. For a reconciliation of EPS, as adjusted, to EPS under GAAP, see page 93.

The Southern Nuclear net income goal result is based 50% on the Alabama Power net income goal result and 50% on the Georgia Power net income goal result. For 2018, the calculated achievement of the Southern Nuclear net income financial goal was 200%.

The corporate net income business unit financial goal payout is determined by the equity-weighted average payout of the Alabama Power, Georgia Power, Gulf Power Company (Gulf Power), Mississippi Power Company (Mississippi Power), Southern Power and Southern Company Gas net income goals. For 2018, the calculated achievement of the corporate net income financial goal was 197%.

52   Southern Company 2019 Proxy Statement


Table of Contents

Compensation Discussion and Analysis (CD&A)

2018 Operational Performance

Operational Goal Achievement for 2018 PPP

Operating performance was strong across the Southern Company system for 2018.

Operational Goals     Alabama
Power Result
    Georgia
Power Result
    Southern
Company
Gas Result
    Southern
Nuclear Result
    Corporate Result
Safety 130% 140% 200% 140% 120%
Culture 135% 121% 134% 107% 122%
Operations(1) 193% 131% 145% 88% 154%
Achievement % 169% 132% 154% 100% 141%
(1) Operations includes customer satisfaction, availability, reliability, nuclear plant operations, Plant Vogtle Units 3 and 4 and gas operations.

2018 Individual Performance

Individual Performance Results for 2018 PPP

2018 was a year of strong overall performance and many strategic advances for the Company, led by our team of executive officers. The Committee firmly believes that the overall individual performance for the executive officer team well exceeded target for the year, given the significant financial, operational and strategic successes.

Individual performance for executive officers was differentiated based on a review of actual achievement. The following areas were considered for assessing the executive team performance (each individual's performance was assessed separately):

Provided leadership to exceed financial targets, on an adjusted basis, and operational targets resulting in consistently paid stockholder dividends
Executed tax law strategy which improved our credit profile, increased earnings potential and generated savings for customers
Continuously excelled at the fundamentals of our business by achieving high customer satisfaction ratings relative to peers and internal customer satisfaction metrics
Strategic execution of transactions that support long-term stockholder returns, including investor-friendly transactions to efficiently raise capital and strengthen our credit profile
Made strides on expanding solar, wind and gas platforms as part of our commitment to reduce GHG emissions
Led extraordinary efforts and commitment to serve our communities during and after the multiple severe weather events experienced during 2018
Maintained pivotal national leadership roles in energy, economic and security advisory roles
Continued to advance the workforce and Company culture through focus on safety, compensation and benefits, diversity and inclusion, performance management, succession planning and development for all employees
Despite the $1.1 billion charge against earnings, we saw significant progress in the construction of Vogtle Units 3 and 4 and we achieved our principal year-end construction targets; the Committee determined the charge against earnings should be taken into account for members of senior management who had accountability for the project

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Table of Contents

Compensation Discussion and Analysis (CD&A)

2018 Actual PPP Payouts

Based on the feedback from stockholder engagement, thoughtful consideration by the Compensation Committee and consultation with its independent compensation consultant, the Compensation Committee reduced the calculated 2018 PPP payout to the CEO and certain other members of senior management.

Name     Target
2018 PPP
Opportunity
(% of salary)
    Target
2018 PPP
Opportunity
($)
    Total
Performance
Factor
(%)(1)
    Calculated
2018 PPP
Payout
($)
    Reduction to
Payout
(%)
          Actual
2018 PPP
Payout
($)
     
Tom Fanning 135% 1,822,500 176% 3,213,068 (53%) 1,522,699
Andrew Evans 80% 640,000 184% 1,177,078 —  1,177,078
Art Beattie(2) 85% 678,300 176% 679,504 —  679,504
Paul Bowers 80% 712,366 168% 1,196,776 (30%) 837,743
Mark Crosswhite 80% 644,800 190% 1,222,541 —  1,222,541
Stephen Kuczynski 75% 580,645 155% 902,322 (30%) 631,625
(1) Shown as rounded numbers.
(2) Payout for Mr. Beattie is prorated for the time that he was employed during 2018.

Long-Term Equity Incentive Compensation (At Risk)

Evolution of Long-Term Equity Incentive Program Over Time

Our long-term equity incentive program has evolved in response to stockholder feedback and our ongoing evaluation of best practices.


2018 Long-Term Equity Incentive Grants

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.
70% of the long-term equity incentive award is in performance share units that are earned solely based on achievement of pre-established performance goals of relative TSR and consolidated ROE over a three-year performance period from 2018 to 2020. Payouts can range from 0% to 200% of target, based on actual level goal achievement.
30% of the long-term equity incentive award is in PRSUs that are earned only if a pre-established performance goal of cash from operations is met. If the goal is not met, all PRSUs are forfeited. If the goal is met, the PRSUs vest one-third per year over a three-year period.
If earned, awards are paid in common stock. Accrued dividend equivalent units (DEUs) are received only if the underlying award is earned.

54   Southern Company 2019 Proxy Statement


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Compensation Discussion and Analysis (CD&A)

2018-2020 Performance Share Program Award

The PSP award includes financial and market-based performance goals over the three-year performance period from 2018 to 2020 and is further subject to a credit quality threshold requirement.

Goal     What it Measures     Why it’s Important
Relative TSR TSR relative to a utility peer group of companies that are believed to be most similar to the Company in both business model and investors. It measures investment gains arising from stock price appreciation and dividends received from that investment. The peer group is described on page 61 and is subject to change based on merger and acquisition activity. Aligns pay with investor returns relative to peers
Consolidated ROE Consolidated Southern Company ROE of the traditional electric operating companies, Southern Company Gas and Southern Power Aligns pay with Southern Company’s ability to maximize return on capital invested

The financial goals are also 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 ROE goal will be reduced to zero.

For each of the performance measures, a threshold, target and maximum goal was set at the beginning of 2018.

    Relative
TSR Performance
    Consolidated
ROE Performance
    Payout
Maximum 90th percentile or higher 13.0% 200%
Target 50th percentile 11.0% 100%
Threshold 10th percentile 9.5% 0%

2018 Performance Restricted Stock Units Award

The PRSU award includes a financial performance goal of cash from operations that must be met after the first year for any PRSUs to vest during the three-year period.
The Compensation Committee believes that allocating a portion of the long-term equity incentive program to PRSUs with a one-year performance goal related to our ability to pay regular dividends continues to provide alignment with stockholders and enhance retention.
PRSUs are earned only if Southern Company’s cash from operations in 2018 exceeds $2.3 billion, the amount of dividends paid in 2017. If earned, the PRSUs vest one-third each year over a three-year period.

2018 Long-Term Equity Incentive Grants

    Target as
Percent of
Base Salary
        PSP –
Relative
TSR
(40%)
    PSP –
Consolidated
ROE
(30%)
    PRSUs –
Cash From
Operations
(30%)
        Total
Long-Term
Grant
(100%)
   
Tom Fanning 675% $ 3,645,018 2,733,766 2,733,766 9,112,550
  # of units 83,563 62,990 62,990
Andrew Evans 275% $ 879,990 659,984 659,984 2,199,958
  # of units 20,174 15,207 15,207
Art Beattie 275% $ 877,809 658,335 658,335 2,194,479
  # of units 20,124 15,169 15,169
Paul Bowers 275% $ 979,487 734,632 734,632 2,448,751
  # of units 22,455 16,927 16,927
Mark Crosswhite 275% $ 886,620 664,931 664,931 2,216,483
  # of units 20,326 15,321 15,321
Stephen Kuczynski 200% $ 619,360 464,510 464,510 1,548,380
  # of units 14,199 10,703 10,703

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Compensation Discussion and Analysis (CD&A)

2016-2018 Performance Share Program Actual Payout

The calculated payout for the 2016-2018 PSP awards was 95% of target. Based on the feedback from stockholder engagement, thoughtful consideration by the Compensation Committee and consultation with its independent compensation consultant, the Compensation Committee reduced the calculated PSP payout to the CEO.

   Grant Date
Target Value
of PSUs
Granted
($)
   Calculated
Value of PSUs
Earned
($)
(1)
   Reduction to
Payout
(%)
      Value of
Actual PSU
Payout
($)(1)  
  
Tom Fanning 7,800,022 8,684,410 (51%)   4,236,610  
Art Beattie 1,984,033 2,208,956   2,208,956  
Paul Bowers 2,308,212 2,569,885   2,569,885  
Mark Crosswhite 1,905,557 2,121,604   2,121,604  
Steve Kuczynski 1,240,585 1,381,280   1,381,280  
(1) Based on the closing stock price of $49.24 on the date the Compensation Committee made its decisions. Includes accrued DEUs.

Mr. Evans was not an employee of the Southern Company system when the 2016-2018 PSP award was granted.

Payout Results for 2015 through 2018 Performance Share Program Awards

The chart below summarizes calculated payouts for the four most recent PSP award three-year performance cycles, including the recently completed 2016-2018 performance cycle. The chart does not reflect reductions, if any, determined by the Committee.

PSUs Earned Based on Performance to Date
Performance
Period
   Performance Measures    Weight    2013    2014    2015    2016    2017    2018    Total
Calculated
Payout
2016-2018 Relative TSR - Custom Peer Group 50% 23%
PSUs Cumulative EPS* 25% 160% 95%
Equity-weighted ROE* 25% 173%
2015-2017 Relative TSR - Custom Peer Group 50% 63%
PSUs Cumulative EPS 25% 158%  113%
Equity-weighted ROE 25% 167%
2014-2016
PSUs
Relative TSR - Custom Peer Group 100% 0% 0%
2013-2015 Relative TSR - Custom Peer Group 50% 0% 28%
PSUs Relative TSR - Philadelphia Utility Index 50% 55%
* In determining EPS and ROE for compensation goal achievement purposes for the 2016-2018 performance period, the Compensation Committee excluded acquisition, disposition and integration impacts (2016-2018), earnings from Southern Company Gas (2016), earnings from the Wholesale Gas Services business of Southern Company Gas (2017 and 2018), charges and an income tax credit related to plants under construction, including additional equity return related to the Kemper IGCC in 2016 and 2017 (2016-2018), the 2018 earnings impact of the Toshiba parent guarantee proceeds paid in 2017 (2018), charges for a write-down of Gulf Power's ownership of Plant Scherer Unit 3 (2017), settlement proceeds of Mississippi Power's claim for lost revenue resulting from the 2010 Deepwater Horizon oil spill in the Gulf of Mexico (2018) and additional net tax benefits as a result of implementing federal tax reform (2017 and 2018).

The equity-weighted ROE goal measured the returns of our traditional electric operating companies as well as the percentage of the capital structure that is financed with equity. The target is aligned with top quartile performance, and the maximum represents industry-leading performance, compared to electric operating company peers. The aggregate payout reflects above target performance by Alabama Power, Georgia Power and Gulf Power and zero payout contribution by Mississippi Power. The following table describes the results for each of the traditional electric operating companies.

    Return on Equity
(A)
    Equity ratio
(B)
    Equity-weighted ROE
(A x B)
    Weight     Weighted payout
Alabama Power 13.1% 46.3% 6.1% 29% 58%
Georgia Power 11.9% 51.5% 6.1% 54% 107%
Gulf Power 9.9% 51.7% 5.1% 7% 8%
Mississippi Power 6.5% 47.4% 3.0% 10% 0%
Total payout 100% 173%

56    Southern Company 2019 Proxy Statement


Table of Contents

Compensation Discussion and Analysis (CD&A)

Incentive and Retention Award to Mr. Kuczynski

In limited situations, special equity awards are granted to address specific needs, including motivating and retaining key talent. These awards are designed to further align the recipient’s interests with those of the Company’s stockholders.

In 2018, the Compensation Committee approved an equity award to Mr. Kuczynski in order to retain his critical leadership and expertise throughout the successful completion of the construction project at Plant Vogtle Units 3 and 4 in accordance with the schedule approved by the Georgia Public Service Commission in December 2017. With over 30 years in the nuclear industry, Mr. Kuczynski has been an active participant in the nation’s nuclear development. He has served on numerous academic, advisory and technical boards and committees, including the Nuclear Energy Institute, the Institute of Nuclear Operations National Nuclear Accrediting Board and the advisory boards of the Georgia Institute of Technology’s Nuclear and Radiological Engineering Program. Mr. Kuczynski received the Special Achievement Award from the U.S. Nuclear Infrastructure Council and the Presidential Citation from the American Nuclear Society. He currently oversees nuclear operations for the entire Southern Company system, including six nuclear reactors and construction of two new reactors at Plant Vogtle.

The award, effective May 23, 2018, consists of two parts totaling $3 million.

40% of the award consists of performance share units contingent upon the successful receipt of the fuel load authorization from the U.S. Nuclear Regulatory Commission for Plant Vogtle Unit 3 (50%) by December 31, 2021 and Unit 4 (50%) by December 31, 2022. Failure to meet the deadline for each unit will result in forfeiture of the award connected to that deadline, and the Compensation Committee must certify receipt of each fuel load authorization prior to vesting of the award.
60% of the award consists of time-based restricted stock units that vest 20% each year for five years on December 31 of each year, with the first tranche vesting on December 31, 2018. Vesting will be accelerated if the fuel load authorizations for Plant Vogtle Units 3 and 4 are received from the U.S. Nuclear Regulatory Commission before December 31, 2022.

In addition, the Compensation Committee reserved the right to modify, terminate or accelerate the performance-based award prior to vesting in the event of, but not limited to, the case of abandonment of the Vogtle project after an amendment to or revocation, withdrawal or cancellation of the Vogtle Certificate of Public Convenience and Necessity by the Georgia Public Service Commission.

See the Summary Compensation Table, Grants of Plan-Based Awards Table, the Outstanding Equity at Fiscal Year End Table and accompanying information for more information on this award.

Consulting Agreement for Mr. Beattie

On May 23, 2018, the Company entered into a consulting agreement with Mr. Beattie, effective as of August 1, 2018. Mr. Beattie retired from the Company effective June 1, 2018, and the Company requested that Mr. Beattie assist with an orderly transition of knowledge and expertise in the role after his retirement. The term of the agreement ended December 31, 2018. All amounts associated with the consulting agreement are disclosed in the Summary Compensation Table.

Benefits

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. These benefits vest after the employee completes five years of vesting service. The Company also provides unfunded benefits to certain employees, including the NEOs, 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.

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Compensation Discussion and Analysis (CD&A)

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 executive’s 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 Company’s goal of providing market-based compensation and benefits.
The Compensation Committee recognizes that permitting limited personal use of system aircraft for certain executives allows them to continue to perform their duties in a safe, secure environment and promotes safe and effective use of their time. For 2018, the Compensation Committee approved personal use of system aircraft for Mr. Fanning and Mr. Kuczynski. Amounts for the personal use of system aircraft for Mr. Fanning and Mr. Kuczynski are included in the Summary Compensation Table.
The personal safety and security of employees at home, at work and while traveling is of utmost importance to the Company. Given Mr. Fanning’s profile and high visibility, we believe that the costs of his security program are appropriate and a necessary business expense and that we can benefit from the added security measures for him. Costs reported in the Summary Compensation Table reflect the ongoing security services provided during 2018.
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.

Compensation Governance Practices, Beliefs and Oversight

Executive Compensation Best Practices

  What We Do
The Compensation Committee ensures that actual payouts align with performance and stockholder interest
100% of short- and long-term incentive awards are performance-based
Independent compensation consultant retained by the Compensation Committee
Policy against hedging and pledging of stock by Directors and executive officers
Executive officers receive limited ongoing perquisites that make up a small portion of total compensation
Strong stock ownership requirements for Directors and executive officers
Change-in-control severance payouts require double-trigger of change in control and termination of employment
Clawback provision for incentive compensation awards
89% of CEO target pay is at risk based on achievement of performance goals
Engagement in year-round stockholder outreach efforts
Dividends on stock awards received only if underlying award is earned

  What We Don’t Do
No tax gross ups for executive officers (except on certain relocation-related expenses)
No employment agreements with our executive officers
No stock option repricing without stockholder approval
No excise tax gross-ups on change-in-control severance arrangements

58   Southern Company 2019 Proxy Statement


Table of Contents

Compensation Discussion and Analysis (CD&A)

Key Compensation Beliefs and How They are Applied

We design our compensation program to:

Attract, engage, competitively compensate and retain our employees
Implement our pay for performance philosophy

We target the total direct compensation for our executives at market median and place a very 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.

Our Compensation Program is Designed to Further Our Long-Term Strategy

Operating premier state-regulated utilities and investing in energy infrastructure under long-term contracts are the focus of our customer-centric business model, which is designed to support regular, predictable and sustainable long-term earnings and dividend growth. We believe in several overarching principles in designing the compensation program to tie to our long-term strategy.

Alignment with Strategy
Metrics support long-term business strategy of superior risk-adjusted returns
Annual financial goals are aligned with investor guidance
Pay for Performance
Ensure a strong pay-for-performance relationship exists between business results, stockholder returns and payouts
Where appropriate, use individual performance metrics to enhance pay-for-performance relationship
Ensure appropriate pay mix (i.e., the % of total pay derived from annual and long-term incentives) accurately reflects the scope of responsibility of the role
The Compensation Committee exercises discretion when necessary to ensure actual payouts are appropriately aligned with business performance and stockholder returns
 
Balance and Sustainability
Designs balance achievement of short-term goals and long-term value creation
Designs balance operational goals and financial objectives (leading and lagging indicators)
Ensure programs reward behaviors that drive long-term sustainability for customers, stockholders, employees and the communities we serve

Clawback of Awards

We grant all incentive awards to our executive officers under our Omnibus Incentive Compensation Plan (Omnibus Plan). The Omnibus Plan includes a clawback provision that applies to annual and long-term incentive awards granted under the Omnibus Plan.

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.

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Compensation Discussion and Analysis (CD&A)

Compensation Governance Oversight by the Board and its Committees

The Board and its committees are actively engaged in the compensation process to ensure appropriate compensation governance oversight.

Principle     Description     Application
Collaboration
Obtain review and input into financial and operational goals from applicable Board committees
The Finance Committee reviews the Company’s financial plan and the proposed compensation program financial goals to ensure that the goals are aligned with the financial plan and are rigorous and provides its input to the Compensation Committee.
The Operations, Environmental and Safety Committee reviews the proposed operational goals compared to industry benchmarks and prior year results and provides its input to the Compensation Committee.
Alignment
The Compensation Committee ensures alignment of financial targets for compensation programs with financial plan and EPS guidance
The Compensation Committee approves an EPS goal that is aligned with the EPS guidance range established at the beginning of the year.
Analysis and Discretion
Active involvement by the Compensation Committee in ensuring alignment between calculated performance results and payouts under incentive compensation programs
The Compensation Committee receives updates on financial and operational progress against goals at each regular meeting and engages in regular dialogue regarding progress towards goals and impacts to at-risk compensation.
The CEO, assisted by Human Resources staff, reviews the individual performance results for the other executive officers with the Compensation Committee.
The Compensation Committee carefully considers all adjustments to financial goals in light of overall Company performance and retains discretion to adjust payouts up or down to ensure appropriate alignment between rewarding performance and holding management accountable for decisions that impact stockholders.
No decisions are made by the Compensation Committee with respect to payouts for the Company’s executive officers until after the end of the performance period.
Engagement
Ensure Board engagement in key compensation decisions
At every Board meeting, the Chair of the Compensation Committee reports to the full Board the key items discussed and any actions taken at each Compensation Committee meeting.
All independent Directors are engaged in setting the CEO’s annual individual performance goals and reviewing the performance of the CEO each year.
The Compensation Committee reviews all decisions about CEO compensation with the independent Directors for ratification by the independent Directors.

60   Southern Company 2019 Proxy Statement


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Compensation Discussion and Analysis (CD&A)

Peer Groups and Establishing Market-Based Compensation Levels

We strive for consistency in developing our peer groups while recognizing differences when appropriate.

Peer Group for 2018 Compensation Decisions

Used to determine the total direct compensation for our executives

Includes more companies than the peer group we use for relative TSR metric since we compete with a broader range of large utilities for top talent

We target the total direct compensation for our executives at market median of a peer group of publicly-traded utility companies.
Pay Governance, in conjunction with the Compensation Committee, uses market-based compensation levels from the Willis Towers Watson Energy Services Survey (Survey) focusing on regulated utilities with revenues above $6 billion and aligned with the scope of our business (one of the largest utility holding companies in the United States based on revenues and market capitalization).
The peer group stayed relatively the same from 2017 to 2018. Five new companies participated in the Survey, met the revenue guideline and were added to the group (AVANGRID, Berkshire Hathaway Energy, Eversource Energy, TransCanada and WEC Energy Group, Inc.). Three companies that were in the peer group in 2017 were eliminated in 2018 because they did not meet the revenue guideline or did not participate in the updated Survey (DTE Energy Company, GE Energy and UGI).
     

Peer Group for Relative TSR Metric for 2018-2020 Performance Period

Used to measure our relative TSR performance, which is one of the performance measures for the long-term incentive award

We identify companies that are believed to be most similar to Southern Company in both business model and investors.
Several companies in the relative TSR 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 Survey from which the data for the compensation peer group is derived.
Peer Group for 2018 Compensation Decisions
Peer Group for Relative
TSR Metric for 2018-2020
Performance Period
 
Unique Peers:
AVANGRID
Berkshire Hathaway
Energy
Calpine Corporation
Direct Energy, LP
Dominion
     Energy, Inc.
Energy Transfer
     Partners, L.P.
Exelon Corporation
FirstEnergy Corp.
Kinder Morgan, Inc.
National Grid plc
NextEra Energy, Inc.
NRG Energy, Inc.
ONEOK, Inc.
Public Service
     Enterprise
     Group Incorporated
Sempra Energy
Tennessee Valley
     Authority
TransCanada
     Corporation
The AES
     Corporation
The Williams
     Companies, Inc.
Common Peers:
Ameren Corporation
American Electric Power Company, Inc.
CenterPoint Energy, Inc.
CMS Energy Corporation
Duke Energy Corporation
Edison International
Entergy Corporation
Eversource Energy
PG&E Corporation
PPL Corporation
WEC Energy Group, Inc.
Xcel Energy Inc.
Unique Peers:
Alliant Energy Corporation
Consolidated Edison, Inc.
DTE Energy Company
Great Plains Energy
     Incorporated
OGE Energy Corp.
Pinnacle West Capital
     Corporation
 
 
For 2019, we have taken further steps to align our peer groups and improve consistency between the peer groups.
Changes to
Peer Group
for 2019
Compensation
Decisions
+
Additions
           
Changes to
Peer Group
for Relative
TSR Metric
for 2019-2021
Performance
Period
+
Additions
DTE Energy Company
Evergy, Inc.
     (formerly Westar)
-
Deletions
FirstEnergy Corp.
Calpine Corporation
TransCanada
Fortis Energy Services
Direct Energy, LP
     Corporation
Sempra Energy
Kinder Morgan, Inc.
The AES Corporation
 
NRG Energy, Inc.
The Williams
-
Deletions
ONEOK, Inc.
     Companies, Inc.
PG&E Corporation
Tennessee Valley
     Authority

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Compensation Discussion and Analysis (CD&A)

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 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 HR Department, the Finance Committee (financial goals), the Operations, Environmental and Safety Committee (operational goals) and the Compensation Committee’s independent compensation consultant.

Role of the CEO
The CEO makes recommendations to the Compensation Committee regarding other executive officers with respect to (1) base salary adjustments, (2) PPP targets and individual performance achievement payouts and (3) long-term incentive compensation program targets. These recommendations are based upon market data provided by the independent compensation consultant, the CEO’s assessment of each executive officer’s performance, the performance of the individual’s respective business or function and employee retention considerations.
The Compensation Committee considers the CEO’s recommendations in approving the compensation for the other executive officers. However, the Compensation Committee makes the final decisions with respect to compensation decisions for the executive officers.
The CEO does not play any role with respect to decisions impacting 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 relation to the executive’s performance.
In 2018, 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 2018.
The Compensation Committee retains authority to hire Pay Governance directly, 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 includes an “anti-hedging” provision that prohibits Directors and employees (including officers) and certain of their related persons (such as certain of their family members and entities they control) form purchasing or selling, or making any offer to purchase or sell, derivative securities relating to securities of the Company or its subsidiaries. The policy specifies examples of covered derivative securities, including exchange-traded options to purchase or sell securities of the Company or its subsidiaries (so-called “puts” and “calls”) or financial instruments that are designed to hedge or offset any decrease in the market value of securities of the Company or its subsidiaries (including but not limited to prepaid variable forward contracts, equity swaps, collars and exchange funds).

Our insider trading policy also includes a “no pledging” provision that prohibits pledging of our stock for all Southern Company executive officers and Directors.

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Compensation Discussion and Analysis (CD&A)

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 executive officers are subject to stock ownership requirements, expressed as a multiple of base salary. 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
CEO 5 Times 10 Times
Other NEOs 3 Times 6 Times

Because Mr. Beattie retired in 2018, he Is no longer subject to the stock ownership requirements.

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. Under our stock ownership guidelines, the ownership requirement is reduced by one-half at age 60.

Impact of Section 162(m) of the Tax Code on Compensation

Historically, Section 162(m) of the tax code limited the tax deductibility of the compensation of certain executive officers that exceeded $1 million per year unless the compensation was paid under a performance-based plan that has been approved by stockholders. However, due to the elimination of the performance-based compensation exception under Section 162(m) of the tax code as a result of the recent enactment of the Tax Cuts and Jobs Act of 2017, it is likely that some compensation paid after 2017 will no longer satisfy the requirements for tax deductibility under Section 162(m). Our compensation program historically was designed with the intention that compensation paid in various forms may be eligible to qualify for deductibility under Section 162(m) of the tax code, but there have been and may be other exceptions for administrative or other reasons, and the Compensation Committee retains the discretion to award compensation that may not be tax deductible.

Despite the changes to Section 162(m) of the tax code, the Compensation Committee continues to believe that a significant portion of our executive officers’ compensation should be performance based and tied to pre-approved performance measures.

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 2018, none of the Company’s executive officers served on the Board of Directors of any entities whose executive officers serve on the Compensation Committee.

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Summary Compensation Table

Name
(a)
    Year
(b)
    Salary
($)
(c)
    Stock
Awards
($)
(d)
    Non-Equity
Incentive Plan
Compensation
($)
(e)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(f)
    All Other
Compensation
($)
(g)
    Total
($)
(h)
Thomas A. Fanning
Chairman, President and
Chief Executive Officer
2018 1,350,000 9,112,550 1,522,699 880,693 231,749 13,097,691
2017 1,340,000 8,774,953 1,298,700 4,174,657 113,918 15,702,228
2016 1,290,192 7,800,022 2,725,125 3,894,646 119,667 15,829,652
Andrew W. Evans
Executive Vice President and
Chief Financial Officer
2018 800,000 2,199,958 1,177,078 105,985 104,703 4,387,724
2017 784,615 2,399,974 1,286,400 474,941 122,839 5,068,770
2016 399,231 4,390,418 569,207 404,923 135,450 5,899,228
Art P. Beattie
Former Executive Vice President
and Chief Financial Officer
2018 480,262 2,194,479 679,504 3,264,522 560,651 7,179,418
2017 752,290 2,089,986 1,039,608 2,209,080 46,804 6,137,768
2016 717,329 1,984,033 1,065,186 1,624,332 42,028 5,432,908
W. Paul Bowers
Chairman, President
and Chief Executive
Officer, Georgia Power
2018 885,171 2,448,751 837,743 1,153,981 51,642 5,377,288
2017 859,486 2,377,403 1,135,359 2,103,914 53,783 6,529,945
2016 834,547 2,308,212 1,133,448 1,527,952 51,057 5,855,216
Mark A. Crosswhite
Chairman, President
and Chief Executive
Officer, Alabama Power
2018 799,681 2,216,483 1,222,541 672,043 50,538 4,961,286
2017 758,588 2,131,235 996,588 1,328,591 46,466 5,261,468
2016 682,870 1,905,557 934,635 1,279,197 46,058 4,848,317
Stephen E. Kuczynski
Chairman, President and
Chief Executive Officer,
Southern Nuclear
2018 769,564 4,548,410 631,625 280,287 227,196 6,457,083

Column (a)

Compensation for Mr. Evans in 2016 reflects compensation paid on or after July 1, 2016 (subsequent to the completion of the merger of Southern Company Gas and Southern Company) through December 31, 2016.

Mr. Kuczynski was not an NEO in 2016 or 2017.

Column (d)

This column does not reflect the value of stock awards that were actually earned or received in 2018. Rather, as required by applicable rules of the SEC, this column reports the aggregate grant date fair value of performance shares and PRSUs granted in 2018.

The value reported for the performance shares is based on the probable outcome of the performance conditions as of the grant date, using a Monte Carlo simulation model (approximately 57% of the performance share grant value) and the closing price of common stock on the grant date (approximately 43% of the performance share grant value). No amounts will be earned until the end of the three-year performance period on December 31, 2020. The value then can be earned based on performance ranging from 0% to 200%, as established by the Compensation Committee.

The aggregate grant date fair value of the performance shares granted in 2018 assuming that the highest level of performance is achieved is as follows: Fanning — $12,757,568; Evans - $3,079,947; Beattie — $3,072,287; Bowers — $3,428,238; Crosswhite — $3,103,103; and Kuczynski — $2,167,741.

The amounts in column (d) also reflect the grant date fair value of PRSUs granted to all of the NEOs in 2018 as described in the CD&A. The aggregate grant date fair value of the PRSUs granted in 2018 and reported in column (d) is as follows: Fanning — $2,733,766; Evans — $659,984; Beattie — $658,335; Bowers — $734,632; Crosswhite — $664,931; and Kuczynski — $464,510.

The amount in column (d) also reflects the grant date fair value of the performance share units ($1,199,959, assuming the highest level of performance is achieved) and restricted stock

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units ($1,800,071) granted to Mr. Kuczynski on May 23, 2018 as described in the CD&A, based on the closing price of common stock on the grant date.

See Note 12 to the financial statements included in the 2018 annual report for a discussion of the assumptions used in calculating these amounts.

Column (e)

The amounts in this column reflect actual payouts under the annual PPP. The amount reported for 2018 is for the one-year performance period that ended on December 31, 2018.

Column (f)

This column reports the aggregate change in the actuarial present value of each NEO’s 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 NEO’s 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 2018, the discount rate assumption used to determine the actuarial present value of accumulated pension benefits, as required by SEC rules, was higher than in 2017. For Mr. Fanning, this higher discount rate assumption offset the increase in pension value due to passage of time (i.e., one more year of service and one more year closer to normal retirement as defined under the term of the plan).

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 Company’s 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 (g)

The amounts reported in this column for 2018 are itemized below.

    Perquisites
($)
    Tax
Reimbursements
($)
    Consulting
Agreement
($)
    Company
Contribution to
401(k) Plan
($)
    Company
Contribution to
Supplemental
Retirement
Plan
($)
    Total
($)
Tom Fanning 162,894 0 0 14,025 54,830 231,749
Andrew Evans 12,842 0 0 12,513 79,349 104,703
Art Beattie 38,007 0 500,000 12,170 10,474 560,651
Paul Bowers 6,820 0 0 13,704 31,119 51,642
Mark Crosswhite 10,025 0 0 13,754 26,759 50,538
Stephen Kuczynski 191,293 708 0 9,972 25,223 227,196

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.
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 and airport costs as well as any incidental costs for the crew. 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.

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The Compensation Committee recognizes that permitting limited personal use of system aircraft for certain executives allows the them to continue to perform their duties in a safe, secure environment and promotes safe and effective use of their time. For 2018, the Compensation Committee approved personal use of system air for Mr. Fanning and Mr. Kuczynski. The amount included for Mr. Fanning and Mr. Kuczynski includes $129,277 and $49,565, respectively, in 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 $20,577 related to personal security expenses. Given Mr. Fanning’s profile and high visibility, we believe that the costs of his security program are appropriate and a necessary business expense and that we can benefit from the added security measures for him. Costs reported reflect the ongoing security services provided during 2018.
Relocation benefits are provided to cover the costs associated with geographic relocation. In 2018, Mr. Kuczynski received relocation-related benefits in the amount of $123,091 in connection with his relocation from Birmingham, Alabama to be nearer to the Plant Vogtle 3 and 4 construction site. This amount was for the shipment of household goods, incidental expenses related to the move and home sale and home repurchase assistance. Also, as provided in the Company’s relocation policy, tax assistance is provided on the taxable relocation benefits.
Other miscellaneous perquisites include the full cost to the Company of providing the following items: personal use of Company-provided tickets for sporting and other entertainment events, spousal expenses related to business travel and gifts distributed to and activities provided to attendees at Company-sponsored events.

As described in the CD&A, the Company entered into a consulting agreement with Mr. Beattie on May 23, 2018. Amounts in this column included the amounts paid out under the agreement to Mr. Beattie during 2018. The term of the agreement expired December 31, 2018.

Grants of Plan-Based Awards in 2018

This table provides information on short-term and long-term incentive compensation awards made in 2018.




Estimated Possible
Payouts Under
Non-Equity Incentive
Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
(i)

Grant Date
Fair Value
of Stock
and Option
Awards
($)
(j)
Name
(a)
    Grant
Date
(b)
    Threshold
($)
(c)
    Target
($)
(d)
    Maximum
($)
(e)
    Threshold
(#)
(f)
    Target
(#)
(g)
    Maximum
(#)
(h)
       
Tom Fanning 18,225 1,822,500 3,645,000
2/27/2018 1,466 146,553 293,106 6,378,784
2/27/2018 62,990 2,733,766
Andrew Evans 6,400 640,000 1,280,000
2/27/2018 354 35,381 70,762 1,539,974
2/27/2018 15,207 659,984
Art Beattie 6,783 678,300 1,356,600
2/27/2018 353 35,293 70,586 1,536,143
2/27/2018 15,169 658,335
Paul Bowers 7,124 712,366 1,424,733
2/27/2018 394 39,382 78,764 1,714,119
2/27/2018 16,927 734,632
Mark Crosswhite 6,448 644,800 1,289,600
2/27/2018 356 35,647 71,294 1,551,552
2/27/2018 15,321 664,931
Stephen Kuczynski 5,806 580,645 1,161,290
2/27/2018 249 24,902 49,804 1,083,871
2/27/2018 10,703 464,510
5/23/2018 27,278 1,199,959
5/23/2018 40,920 1,800,071

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Columns (c), (d) and (e)

These columns reflect the annual PPP opportunity for the NEOs. The information shown as “Threshold,” “Target” and “Maximum” reflects the range of potential payouts established by the Compensation Committee. The actual amounts earned for 2018 are included in column (e) of the Summary Compensation Table.

Columns (f), (g) and (h)

These columns reflect the long-term PSP performance shares and PRSUs granted to the NEOs in 2018. The information shown as “Threshold,” “Target” and “Maximum” reflects the range of potential shares that can be earned as established by the Compensation Committee for the performance shares, while the information shown as “Target” for the PRSUs reflects the number of potential shares that can be earned if the performance condition is met. Earned performance shares and accrued DEUs will be paid out in common stock following the end of the 2018–2020 performance period, based on the extent to which the performance goals are achieved. Any shares not earned are forfeited. PRSUs vest 1/3 each year only if the performance goal is met for 2018. If the performance goal is met, PRSUs are paid out in common stock after vesting; accrued DEUs are received only if the underlying award is earned. If the performance goal is not met, then all PRSUs are forfeited.

Column (i)

Column (i) reflects the number of RSUs granted to Mr. Kuczynski on the grant date as described in the CD&A.

Column (j)

This column reflects the aggregate grant date fair value of the PSP performance shares, PRSUs and RSUs granted in 2018.

For the PSP performance shares, approximately 57% of the value of the performance shares is based on the probable outcome of the performance conditions as of the grant date using a Monte Carlo simulation model ($43.62), while the other approximately 43% is based on the closing price of common stock on the grant date ($43.40).
The value of the PRSUs is based on the closing price of common stock on the grant date ($43.40). The assumptions used in calculating these amounts are discussed in Note 12 to the financial statements included in the 2018 annual report.

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Outstanding Equity Awards at 2018 Fiscal Year-End

This table provides information about stock options and stock awards (performance shares, PRSUs and RSUs) as of December 31, 2018.

Option Awards Stock Awards
Name
(a)
    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)
    Option
Exercise
Price
($)
(c)
    Option
Expiration
Date
(d)
    Number of
Units of Stock
That Have
Not Vested
(#)
(e)
    Market
Value of
Units of Stock
That Have
Not Vested
($)
(f)
    Equity Incentive
Plan Awards:
Number of
Unearned Units
That Have
Not Vested
(#)
(g)
    Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned Units
That Have
Not Vested
($)
(h)
Tom Fanning 597,345 44.42 2/13/2022
714,297 44.06 2/11/2023
1,025,454 41.28 2/10/2024
39,255 1,724,080
65,543 2,878,649
137,433 6,036,057
152,493 6,697,493
Andrew Evans
10,737 471,569
15,823 694,946
37,588 1,650,865
36,815 1,616,915
47,900 2,103,768
Art Beattie 152,082 44.42 2/13/2022
121,239 44.06 2/11/2023
9,349 410,608
15,784 693,233
32,733 1,437,633
36,724 1,612,918
Paul Bowers 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
329,250 41.28 2/10/2024
10,636 467,133
17,613 733,563
37,235 1,635,361
40,978 1,799,754
Mark Crosswhite 63,125 44.42 2/13/2022
120,681 44.06 2/11/2023
83,636 41.28 2/10/2024
9,534 418,733
15,942 700,173
33,379 1,466,006
37,092 1,629,081
Stephen Kuczynski 121,533 44.42 2/13/2022
145,046 44.06 2/11/2023
33,593 1,475,405
6,725 295,362
11,137 489,137
23,544 1,034,052
25,912 1,138,055
27,992 1,229,409

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Columns (b), (c) and (d)

Stock options have not been granted since 2014. Stock options vest one-third per year on the anniversary of the grant date. Options granted from 2009 through 2014 with expiration dates from 2019 through 2024 were fully vested as of December 31, 2017.

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 (e) and (f)

These columns reflect the number of RSUs held by Mr. Kuczynski as of December 31, 2018, including associated DEUs. As previously described in the CD&A, Mr. Kuczynski was granted RSUs in 2018. The outstanding RSUs reflected in the table vest in equal installments on December 31, 2019, 2020, 2021 and 2022. Vesting will be accelerated if the fuel load authorizations for Plant Vogtle Units 3 and 4 are received from the U.S. Nuclear Regulatory Commission before December 31, 2022.

The value in column (f) is based on the common stock closing price on December 31, 2018 ($43.92).

Columns (g) and (h)

These columns reflect the remaining 2/3 of the PRSUs, including DEUs, granted to the NEOs in 2017. The achievement of the performance goal for these shares was certified by the Compensation Committee on February 12, 2018, and the PRSUs that vested, including the DEUs, are reflected in the Option Exercises and Stock Vested in 2018 table. The remaining PRSUs granted in 2017 will vest on the second and third anniversaries of the grant date.

These columns also reflect the full number and value of PRSUs granted to the NEOs in February 2018 that vest 1/3 each year for a three-year period subject to the achievement of a one-year financial performance goal (Southern Company’s 2018 cash from operations exceeds the amount paid in dividends in 2017) and associated DEUs on the PRSUs. DEUs only pay out if the underlying shares vest. The Compensation Committee certified the achievement of this goal on February 11, 2019, and the first 1/3 vested upon that certification. The remaining 2/3 will vest equally on the second and third anniversaries of the grant date.

Column (g) also reflects the target number of performance shares granted under the PSP that can be earned at the end of each three-year performance period (January 1, 2017 through December 31, 2019 and January 1, 2018 through December 31, 2020). The number of shares reflected in column (g) also reflects the DEUs on the target number of performance shares. DEUs 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, 2016 through December 31, 2018 performance period that vested as of December 31, 2018 are reported in the Option Exercises and Stock Vested in 2018 table.

For Mr. Evans, column (g) also reflects unvested shares from 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 of Southern Company and Southern Company Gas. 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 (g) also reflects the DEUs based on the remaining target number of performance share units.

The value in column (h) is derived by multiplying the number of shares in column (g) by the common stock closing price on December 31, 2018 ($43.92). 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 2018

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 104,684 4,611,891
Andrew Evans 74,054 3,311,058
Art Beattie 49,303 2,168,764
Paul Bowers 57,243 2,517,952
Mark Crosswhite 47,615 2,094,692
Stephen Kuczynski 39,645 1,743,636

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Columns (b) and (c)

Column (b) reflects the number of shares acquired upon the exercise of stock options during 2018 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. None of the NEOs exercised stock options during 2018.

Columns (d) and (e)

Performance share grants made in 2016 were subject to a three-year performance period that ended on December 31, 2018. The award was earned at 95% of target; however, the Compensation Committee exercised discretion to reduce Mr. Fanning's final payout by 51% as discussed in the CD&A. Column (d) includes the performance shares that were earned and associated DEUs, while column (e) reflects the value of the performance shares and associated DEUs, which is derived by multiplying the number of shares that vested by the market value of the underlying shares on December 31, 2018 ($43.92). The value shown in column (e) differs from the amounts shown in the CD&A, which reflects the market value on the date the Compensation Committee made its decisions about PSP payouts (February 11, 2019). Mr. Evans was not an employee at the time of the 2016 grants; thus the amounts shown in this column do not include performance shares from this grant.

These columns also reflect the value of the PRSUs that vested in 2018, including associated DEUs. The value of the PRSUs is derived by multiplying the number of shares that vested by the market value of the underlying shares on the vesting date ($44.68).

For Mr. Evans, column (d) represents vested Gas PSUs that were assumed and converted into time-vesting RSUs. 46,055 RSUs vested on December 31, 2018. The value realized included in column (e) is the number of RSUs that vested multiplied by the closing price on the vesting date ($43.92). For Mr. Evans, column (d) also represents vested performance share units that were granted in September 2016. 22,900 performance share units vested on July 1, 2018. The value realized included in column (e) is the number of performance share units that vested multiplied by the closing price on the vesting date ($46.31).

For Mr. Kuczynski, column (d) represents 8,399 RSUs that were granted on May 23, 2018 and vested on December 31, 2018, including associated DEUs. The value realized in column (e) is the number of RSUs that vested multiplied by the closing price on the vesting date ($43.92).

Pension Benefits at 2018 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 37.00 1,757,435
Supplemental Benefit Plan (Pension-Related) 37.00 18,811,723
Supplemental Executive Retirement Plan 37.00 5,996,599
Andrew Evans Pension Plan 17.00 501,279
Supplemental Benefit Plan (Pension-Related) 17.00 1,529,840
Art Beattie Pension Plan 41.58 2,223,392 58,681
Supplemental Benefit Plan (Pension-Related) 41.58 11,159,046 0
Supplemental Executive Retirement Plan 41.58 3,551,730 0
Paul Bowers Pension Plan 38.67 1,860,333
Supplemental Benefit Plan (Pension-Related) 38.67 9,582,296
Supplemental Executive Retirement Plan 38.67 2,962,740
Mark Crosswhite Pension Plan 13.92 519,387
Supplemental Benefit Plan (Pension-Related) 13.92 2,204,890
Supplemental Executive Retirement Plan 13.92 692,207
Supplemental Retirement Agreement 15.00 3,784,654
Stephen Kuczynski Pension Plan 6.58 251,733
Supplemental Benefit Plan (Pension-Related) 6.58 1,047,800
Supplemental Executive Retirement Plan 6.58 333,971

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Below is a description of Pension Benefits for persons employed by the Southern Company system other than PowerSecure.

Pension Plan

The Pension Plan is a tax-qualified, funded plan. It is the Company’s 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. Pension benefits are determined using various formulas based on date of hire. Benefits are limited to a statutory maximum. The statutory limit restricts eligible compensation under the pension plan; the limit for 2018 was $275,000.

Final Average Pay Formula – The description below applies to Mr. Fanning, Mr. Beattie, Mr. Bowers, Mr. Crosswhite and Mr. Kuczynski

The plan benefit equals the greater of amounts computed using a 1.7% offset formula and a 1.25% formula. The highest three rates of pay out of a participant’s last ten calendar years of service are averaged to derive a final average pay.
The 1.7% offset formula amount equals 1.7% of final average pay times years of credited service 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 1.25% formula amount equals 1.25% of final average pay times years of credited service. 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 credited service. 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 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, 2018, all of the NEOs employed on that date and covered under the Final Average Pay Formula were retirement-eligible except Mr. Kuczynski.
For NEOs covered under the Final Average Pay formula, the number of years of credited service is one year less than the number of years of employment.

Career Average Pay Formula: The description below applies to Mr. Evans.

The plan 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 and annual performance-based compensation.
Early retirement benefits become payable once plan participants have, during employment, attained age 55 and completed five years of vesting 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, 2018, Mr. Evans was not retirement-eligible.

The Pension Plan’s benefit formulas produce amounts payable monthly over a participant’s post-retirement lifetime. At retirement, plan participants can choose to receive their benefits from various 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 retiree’s life.

Participants vest in the Pension Plan after completing five years of vesting service. As of December 31, 2018, all of the NEOs were vested in their Pension Plan benefits. Participants who terminate employment after vesting can elect to have their pension benefits commence prior to age 65 provided they met the applicable early retirement age and service provisions. If such an election is made, the early retirement reductions that apply are actuarially determined factors.

If a participant dies while actively employed and is vested in the Pension Plan as of the date of death, the participant’s beneficiary is entitled to survivor benefits.

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 (a) commence retirement payments under the Final Average Pay Formula or (b) qualifies for unreduced benefits under the Career Average Pay Formula. Outside of this extra service crediting, the normal Pension Plan provisions apply to disabled participants.

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SBP-P

The SBP-P is an unfunded retirement plan that is not tax qualified. This plan provides highly-paid employees any benefits that the Pension Plan cannot pay due to statutory pay/benefit limits. The SBP-P’s vesting and early retirement provisions mirror those of the Pension Plan. Its disability provisions mirror those of the Pension Plan but cease upon a participant’s separation from service.

Final Average Pay Formula: For participants under the Final Average Pay Formula, 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 an 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 retiree’s 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 an SBP-P participant who is subject to the Final Average Pay Formula dies while active after becoming vested in the Pension Plan, the beneficiary of the deceased participant will receive the single sum value in installments as soon as possible following death. The single sum value is calculated as if the participant had survived to age 50 and discounted back to the payment date (if earlier). Spouse beneficiaries receive 100% and non-spouse beneficiaries receive 50% of the single sum value.

Career Average Pay Formula: Vested monthly benefits earned prior to January 1, 2018 are paid in the same forms of payments available under the Pension Plan and are distributed at the later of separation of service of age 62. Vested monthly benefits earned on or after January 1, 2018 are converted into a single sum value similar to the provisions described above.

The SBP-P value shown for Mr. Evans includes $1,259,550, which is the accumulated value earned prior to January 1, 2018 under the AGL Excess Benefit Plan. The AGL Excess Benefit Plan was merged into the SBP-P effective January 1, 2018, but benefits earned under the AGL Excess Benefit Plan still have separate payment features.

If an SBP-P participant who is subject to the Career Average Pay Formula dies while active after becoming vested in the Pension Plan, the beneficiary of the deceased participant is entitled to a survivor benefit. The survivor benefit earned prior to January 1, 2018 is equal to the benefit payable under the 50% Joint and Survivor annuity option and distributed at the later of age 62 or date of death. The survivor benefit earned on or after January 1, 2018 is equal to 50% of the single sum value and is payable following death.

SERP

The SERP is also an unfunded retirement plan that is not tax qualified. This plan provides highly-paid employees covered under the Final Average Pay Formula 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 SERP’s early retirement, survivor benefit and disability provisions mirror the SBP-P’s provisions. SERP benefits do not vest until participants become eligible to 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 in the SERP was closed to new hires and future promotions.

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 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 Company’s subsidiaries. His agreement provides an additional fifteen years of benefits. Mr. Crosswhite was vested in his benefits as of December 31, 2015.

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Pension Benefit Assumptions

The following assumptions were used in the present value calculations for all pension benefits:

Discount rate — 4.51% Pension Plan and 4.18% supplemental plans (SBP-P, SERP and SRA) as of December 31, 2018

Retirement date — Earliest unreduced retirement age (age 62 for Mr. Evans and age 65 for all other NEOs)

Mortality after normal retirement — adjusted RP-2014 mortality tables with generational projections (MP-2018)

Mortality, withdrawal, disability and retirement rates prior to normal retirement — None

Annual performance-based compensation earned but unpaid as of the measurement date – 100% of target opportunity percentages times base rate of pay for year amount is earned

Form of payment for pension benefits

Final Average Pay Formula:

Pension Plan

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

SBP-P, SERP and SRA
100% installment
Installment determination — 3.75% discount rate for single sum calculation and 4.75% prime rate during installment payment period

Career Average Pay Formula:

Pension Plan

60% life annuity; 40% join and 50% survivor annuity

Spouse ages – Wives three years younger than their husbands

SBP-P

Pre-2018 accruals – 100% single life annuity

2018 and beyond accruals – 100% installment

Installment determination – 2018 417(e) interest rates and mortality for single sum calculation and 4.75% prime rate during installment payment period

Nonqualified Deferred Compensation as of 2018 Fiscal Year-End

Name
(a)
      Executive
Contributions
in Last FY
($)
(b)
      Registrant
Contributions
in Last FY
($)
(c)
      Aggregate
Earnings
in Last FY
($)
(d)
      Aggregate
Withdrawals/
Distributions
($)
(e)
      Aggregate
Balance
at Last FYE
($)
(f)
Tom Fanning 394,745 54,830 136,455 0 6,080,481
Andrew Evans(1) 102,912 79,349 (112,589) 0 2,043,626
Art Beattie 152,343 10,474 26,331 25,393 1,121,612
Paul Bowers 567,680 31,119 (15,367) 0 7,059,829
Mark Crosswhite 249,147 26,759 4,555 0 843,835
Stephen Kuczynski 0 25,223 (6,255) 0 174,278
(1) The amounts shown for Mr. Evans include a 12/31/2018 balance of $2,020,132 under the AGL NSP, described below.

The Company provides the DCP (excluding 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. As of January 1, 2018, all of the NEOs were eligible to participate in the DCP. Prior to January 1, 2018, Mr. Evans was a participant in the AGL NSP, described below.

Under the DCP, participants make an annual election to choose how much compensation to defer, when those deferrals will be paid and how distributions will be paid (in one to ten annual installments).

DCP participants have various deemed investment options -the stock equivalent account, the prime equivalent account and three equivalent index fund accounts. 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 2018, the rate of return in the stock equivalent account was -3.75%.

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Participants may also 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 2018 in the prime equivalent account was 5.08%.

Participants may also elect to have their deferred compensation deemed invested in three index fund options. A deemed investment means the account is treated as if it is invested in a particular option, even though no investment is actually made. During 2018, the rate of returns under the equivalent index fund accounts were as follows:

Equivalent Vanguard institutional 500 Index Fund: -4.41%
Equivalent BlackRock Russell 2000 Index Fund: -10.87%
Equivalent BlackRock EAFE Equity Index Fund: -13.48%

Under the AGL NSP, each participant has an account which represents a bookkeeping entry reflecting contributions and earnings/losses on the actual performance of the participant’s notional investments. The notional investment options under the AGL NSP mirror the investment options offered under the DCP. 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 participant’s account with the remainder distributed in up to 10 equal annual installments; or between one to 10 equal annual installments.

Column (b)

This column reports the actual amounts of compensation deferred under the DCP by each NEO in 2018. 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 2018 were the amounts that were earned as of December 31, 2017 but were not payable until the first quarter of 2018. These amounts are not reflected in the Summary Compensation Table because that table reports performance-based compensation that was earned in 2018 but not payable until early 2019.

Column (c)

This column reflects contributions under the SBP. Under the tax code, employer-matching contributions are prohibited under the ESP on employee contributions above stated limits, and, if applicable, above legal limits set forth in the tax code.

The SBP is a nonqualified deferred compensation plan under which contributions are made that are prohibited from being made in the ESP. 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 the AGL NSP and contributions under the SBP or the AGL NSP in prior years. The following chart shows the amounts previously reported.

    Amounts Deferred
prior to 2018 and
previously reported
($)
    Employer Contributions
prior to 2018 and
previously reported
($)
    Total
($)
Tom Fanning 3,660,014 573,156 4,233,170
Andrew Evans 272,220 169,503 441,723
Art Beattie 288,313 151,778 440,091
Paul Bowers 3,376,252 225,724 3,035,252
Mark Crosswhite 163,354 65,024 228,378
Stephen Kuczynski 0 31,824 31,824

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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, 2018 under different termination and change-in-control events. The estimated payments would be made under the terms of Southern Company’s compensation and benefit program or the change-in-control severance program.

All of the NEOs are participants in Southern Company’s change-in-control severance program for officers. The amount of potential payments is calculated as if the triggering events occurred as of December 31, 2018 and assumes that the price of common stock is the closing market price on December 31, 2018. Because Mr. Beattie retired prior to the end of the year, he is not included in this section.

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 (for NEOs under the Final Average Pay Formula) or age 55 with at least 5 years of vesting service (for Mr. Evans, who is under the Career Average Pay Formula).
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 Company’s 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 Company’s 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 Company’s 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 Company’s subsidiaries, consummation of a merger with another entity and the Company’s subsidiary is not the surviving company, or the sale of substantially all the assets of any of the Company’s 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.

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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 Share Units No proration and paid on regular schedule, depending on amount actually earned Forfeit Forfeit Prorated based on number of months employed during performance period; paid on regular schedule depending on amount actually earned. Forfeit unpaid award, even if vested
PRSUs No proration and paid on regular schedule (pending achievement of performance goal) Forfeit unvested award Forfeit unvested award Vest; full payout of unvested amount; payable within 30 days Forfeit unpaid award, even if vested
RSUs 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 committee’s discretion Payable per prior elections (lump sum or up to 10 annual installments)
SBP–non-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 committee’s discretion Payable per prior elections (lump sum or up to 20 annual installments)

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The following chart describes the treatment of payments under compensation and benefit programs under different change-incontrol 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-incontrol 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 program is terminated, prorated at greater of target or three-year historical average payout at the applicable business unit If program is terminated, prorated at greater of target or three-year historical average payout at the applicable business unit Prorated at greater of target or three-year historical average payout at the applicable business unit 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 company’s securities; if cannot convert, pay spread in cash Vest
Performance Share Units Not affected Not affected Vest at target and convert to surviving company’s securities; if cannot convert, pay spread in cash Vest at target
PRSUs