Southern Challenged Over Executive Pay Amid Power Plant DelaysBy
Pension funds issue open letter attacking top executive pay
Shareholders urged to vote against board members at meeting
Executives at Southern Co. have been paid at levels that fail to account for delays in completing projects such as its groundbreaking “clean coal” power plant in Mississippi and two nuclear reactors in Georgia, according to a some investors.
Top pay at Southern “has become increasingly decoupled from performance,” investors including the California State Teachers’ Retirement System and the Nathan Cummings Foundation wrote in an open letter on Monday. They urged shareholders to reject pay awards at an annual meeting next month and to vote against the re-election of two board members.
Southern’s $7.2 billion Kemper coal gasification power plant has been beset by years of delays and billions in cost overruns. Its Vogtle nuclear project in Georgia remains unfinished with builder Westinghouse Electric Co. filing for bankruptcy last month. Meanwhile, Southern Chief Executive Officer Thomas Fanning earned $16 million last year, putting him among the top five highest paid utility CEOs, according to the Bloomberg Pay Index, which values equity awards at fiscal year-end.
“It is important to communicate that shareholders do not support the compensation committee using its discretion to shield senior executive pay from the negative impact of projects that are central to Southern’s strategy,” according to the letter. The committee failed “to exercise its discretion to reduce incentive pay for executives to hold them accountable for strategy execution missteps.”
The pension funds urged shareholders to vote directors Steven Specker and Dale Klein off the compensation committee. Neither were immediately available for comment. A spokesman for Southern had no immediate comment.
The compensation committee’s decision to use an earnings figure that excluded the negative impact of the Kemper project and other items led to higher executive bonuses in 2015 and 2016 than would otherwise have been the case, the letter showed.
The Seattle City Employees’ Retirement System and U.K.-based Local Authority Pension Fund Forum also signed the letter.
— With assistance by Alicia Ritcey