As the cost overruns increase, so does the pay of Southern Co. execs

[private]The executives of Southern Co., the utility holding company headquartered in Atlanta, have been involved in two of the biggest boondoggles in U.S. industrial history.

Georgia Power, the largest Southern subsidiary, is bogged down with the construction of two nuclear reactors at Plant Vogtle that are about $3.6 billion over budget and nearly four years behind schedule — the first unit was supposed to have started providing electricity to Georgia Power customers by April 2016, but nary a kilowatt has been generated.

Mississippi Power, a smaller subsidiary of the Southern Co., can top that.

The company started construction of an experimental coal gasification plant in Kemper County seven years ago that was supposed to cost $2.9 billion and be able to start generating electricity by the end of 2015.

The Mississippi Power facility instead is clocking in at $7.3 billion in construction costs – and counting – and, like the nuclear units at Vogtle, has yet to begin operations as originally planned.

In many businesses, project failures of that scale would result in dismissals or pay cuts. But not at Southern Co. – their top executives saw their annual compensation increase by millions of dollars this year.

According to the company’s proxy statement filed with the SEC, here is how the three top corporate officials were rewarded:

  • Southern Co. CEO Tom Fanning saw his total compensation increase by nearly 34 percent to $15.8 million. That included a $50,000 hike in his base salary, stock awards worth $7.8 million, and $2,725,125 in incentive plan compensation.
  • Art Beattie, the executive vice president of Southern Co., enjoyed an even heftier 37 percent increase in his compensation to $5.4 million, thanks to a $22,072 increase in his base pay, stock awards worth $1.98 million, and $1,065,186 in incentive plan compensation.
  • Georgia Power President Paul Bowers ended up with a 36 percent boost in his compensation package to $5.8 million. That included a $24,952 increase in his base salary, stock awards valued at $2.3 million, and $1,133,448 worth of incentive pay.

These compensation increases were all proposed by Southern’s board of directors and approved by stockholders at the corporation’s May 24 annual meeting.

Southern Co. spokesmen declined to answer a reporter’s questions about the rationale for awarding such large compensation increases in the face of mounting financial and operational problems at the corporation’s two largest projects.

They referred a reporter to the verbiage contained in the SEC filing, which included this statement: “Our Performance Pay Program rewards annual financial and operational performance as well as individual NEO [named executive officer] performance. We had strong financial and operational performance for 2016, exceeding our overall targets for the year.”

The company’s executives “demonstrated significant progress in the major construction projects, Kemper IGCC and Vogtle Units 3 and 4,” according to the proxy statement.

The lucrative increases in executive compensation did not sit well with a significant percentage of Southern Co. stockholders.

At the corporation’s annual meeting, nearly 39 percent of Southern’s stockholders voted against approving the executive pay package, an unusually high number for what is normally a routine corporate matter.

“The shareholder opposition to the executive compensation plan is a vote of no confidence in the board’s failure to hold executives accountable for the Kemper and Vogtle project failures in 2015 and 2016,” said Edward Kamonjoh, executive director of the 50/50 Climate Project.

When the proposed compensation increases were first filed in April, several public pension funds drafted an open letter to Southern Co. shareholders urging them to vote against two board members because of the issue.

The investors said the executives were being rewarded despite the severe problems at the Vogtle and Kemper projects.

© 2017 by The Georgia Report

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Tags: executive compensation , Georgia Power , Kemper cost overruns , Southern Co. , Vogtle cost overruns