DEF_SO_2013_Proxy_Statement
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
Filed by the Registrant x
 
Filed by a Party other than the Registrant ¨
 
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e) (2))
x
Definitive Proxy Statement
¨
Definitive Additional Materials
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Soliciting Materials Pursuant to §240.14a-12
THE SOUTHERN COMPANY
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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No fee required.
 
 
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Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
 
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Title of each class of securities to which transaction applies:
 
 
 
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2)
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Proposed maximum aggregate value of transaction:
 
 
 
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Total fee paid:
 
 
 
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Fee paid previously with preliminary materials.
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
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Letter to Stockholders
 
Thomas A. Fanning
Chairman, President, and
Chief Executive Officer
 
    
Dear Fellow Stockholder:
You are invited to attend the 2013 Annual Meeting of Stockholders at 10 a.m. ET on Wednesday, May 22, 2013, at The Lodge Conference Center at Callaway Gardens, Pine Mountain, Georgia.
Southern Company continues to make great strides in its efforts to provide clean, safe, reliable, affordable energy to our 4.4 million customers — building the nation's only fully diversified generation portfolio that includes new nuclear, 21st century coal, natural gas, renewables, and energy efficiency. We are harnessing the power of innovation to help make that goal a reality, while promoting the importance of long-term energy security throughout all of North America.
At the annual meeting, I will report on our accomplishments from 2012, as well as our plans for 2013 and beyond. We will also elect our Board of Directors and vote on the other matters set forth in the accompanying Notice.
Whether or not you plan to attend the meeting, your vote is important. Please review the proxy material and vote by internet, phone, or mail as soon as possible.
This Proxy Statement includes Appendix E, the 2012 Annual Report with Southern Company's audited financial statements and management's discussion and analysis of results of operation and financial condition.
We look forward to seeing you on May 22nd. Thank you for your continued support of Southern Company.

/s/ Thomas A. Fanning
Thomas A. Fanning



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Notice of Annual Meeting of Stockholders of The Southern Company
 
DATE:
Wednesday, May 22, 2013
 
 
TIME:
10:00 a.m., ET
 
 
PLACE:
The Lodge Conference Center at Callaway Gardens
Highway 18
Pine Mountain, Georgia 31822
 
 
DIRECTIONS:
From Atlanta, Georgia — Take I-85 south to I-185 (Exit 21). From I-185 south, take Exit 34, Georgia Highway 18. Take Georgia Highway 18 east to Callaway.
 
From Birmingham, Alabama — Take U.S. Highway 280 east to Opelika. Take I-85 north to Georgia Highway 18 (Exit 2). Take Georgia Highway 18 east to Callaway.
Items of Business
 
1.
To elect 13 directors;
2.
To ratify the appointment of Deloitte & Touche LLP as The Southern Company’s independent registered public accounting firm for 2013;
3.
To approve on a non-binding advisory basis The Southern Company’s named executive officers' compensation;
4.
To ratify a by-law amendment removing the mandatory retirement age provision for non-employee directors;
5.
To consider and vote on an amendment to The Southern Company's Certificate of Incorporation to reduce the two-thirds supermajority vote requirements in Article Eleventh to a majority vote;
6.
To consider and vote on an amendment to The Southern Company's Certificate of Incorporation to reduce the 75% supermajority vote requirements in Article Thirteenth to a two-thirds vote; and
7.
To transact any other business properly coming before the meeting or any adjournments thereof.

Record Date
 
Stockholders of record at the close of business on March 25, 2013 are entitled to attend and vote at the meeting.

 Annual Report to Stockholders
 
Appendix E to this Proxy Statement is Southern Company's 2012 Annual Report.
By Order of the Board of Directors, G. Edison Holland, Jr., Corporate Secretary, April 12, 2013



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Voting Information
 
Even if you plan to attend the meeting in person, please provide your voting instructions as soon as possible by internet, by phone using the toll-free number, or by mail by marking, signing, dating, and returning the proxy form in the enclosed, postage-paid envelope.
Voting by the internet or by phone is fast and convenient,
and your vote is immediately confirmed and tabulated.
PROXY VOTING OPTIONS
YOUR VOTE IS IMPORTANT!
Voting early will ensure the presence of a quorum at the meeting and will save The
Southern Company the expense and extra work of additional solicitation.
 
 
 
VOTE BY INTERNET
VOTE BY PHONE
www.proxyvote.com
1-800-690-6903
24 hours a day/7 days a week
Toll-free 24 hours a day/7 days a week
Instructions:
Instructions:
Read this Proxy Statement
Read this Proxy Statement
Go to the following website:
www.proxyvote.com
 
Have your proxy form or voting instruction
form in hand and follow the instructions.
Have your proxy form or voting instruction
form in hand and follow the instructions.
Please do not return the enclosed paper ballot if you are voting over the internet or by phone.





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Proxy Statement
 
Frequently Asked Questions
 
Q:
When will the Proxy Statement be mailed?
A:
The Proxy Statement will be mailed on or about April 12, 2013.
Q:
Who can vote?
A:
All stockholders of record at the close of business on the record date of March 25, 2013 may vote. On that date, there were 870,915,018 shares of The Southern Company (Southern Company or the Company) common stock (Common Stock) outstanding and entitled to vote.
Q:
How do I give voting instructions?
A:
You may attend the meeting and give instructions in person or, as mentioned previously, give instructions by the internet, by phone, or by mail. Information for giving instructions is on the form of proxy and trustee voting instruction form (proxy form). For those investors whose shares are held by a broker, bank, or other nominee, you must complete and return a voting instruction form provided by your broker, bank, or nominee to instruct your broker, bank, or nominee on how to vote. The Proxies, named on the enclosed proxy form, will vote all properly executed proxies that are delivered pursuant to this solicitation and not subsequently revoked in accordance with the instructions given by you.
Q:
Why is my vote important?
A:
It is the right of every investor to vote on certain matters that affect the Company.
Q:
Can I change my vote?
A:
Yes. If you are a holder of record, you may revoke your proxy by submitting a subsequent proxy, or by written request received by the Company’s corporate secretary prior to the meeting, or by attending the meeting and voting your shares. If your shares are held through a broker, bank, or other nominee, you must follow the instructions of your broker, bank, or other nominee to revoke your voting instructions.
Q:
How are votes counted?
A:
Each share counts as one vote. A quorum is required to transact business at the 2013 Annual Meeting. Stockholders of record holding shares of stock constituting a majority of the shares entitled to be cast shall constitute a quorum. Abstentions that are marked on the proxy form and broker non-votes are included for the purpose of determining a quorum, but shares that otherwise are not voted are not counted toward a quorum. Neither abstentions, broker non-votes, nor shares that otherwise are not voted are counted for or against the matters being considered in Item Nos. 1, 2, and 3 and thus will have no affect on the outcome of these items. However, abstentions will have the same effect as votes "against" the proposals being considered in Item Nos. 4, 5, and 6, and broker non-votes will have the same effect as votes "against" the proposals being considered in Item Nos. 5 and 6.
Q:
What are broker non-votes?
A:
Broker non-votes occur on a matter up for vote when a broker, bank, or other holder of shares you own in “street name” is not permitted to vote on that particular matter without instructions from you, you do not give such instructions, and the broker, bank, or other nominee indicates on its proxy form, or otherwise notifies the Company, that it does not have authority to vote its shares on that matter. Whether a broker has authority to vote its shares on uninstructed matters is determined by New York Stock Exchange (NYSE) rules.
Q:
What does it mean if I get more than one proxy form?
A:
You will receive a proxy form for each account that you have. Please vote proxies for all accounts to ensure that all of your shares are voted. If you wish to consolidate multiple registered accounts, please contact Shareowner Services at (800) 554-7626.

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Q:
Can the Proxy Statement be accessed from the internet?
A:
Yes. You can access the Company’s website at http://investor.southerncompany.com/proxy.cfm to view the 2013 Proxy Statement.
Q:
What should I bring if I plan to attend the Annual Meeting?
A:
You will be asked to present photo identification, such as a driver’s license. If you are a holder of record, the top half of your proxy card is your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. Examples of proof of ownership are a recent brokerage statement or a letter from your bank or broker. If you want to vote your shares held in street name, you must get a legal proxy in your name from the broker, bank, or other nominee that holds your shares.
Q:
Does the Company offer electronic delivery of proxy materials?
A:
Yes. Most stockholders can elect to receive an email that will provide an electronic link to the Proxy Statement, which includes the 2012 Annual Report as an appendix. Opting to receive your proxy materials on-line will save the Company the cost of producing and mailing documents and also will give you an electronic link to the proxy voting site.
    
You may sign up for electronic delivery when you vote your proxy via the internet or by visiting www.icsdelivery.com/so.
    
Once you enroll for electronic delivery, you will receive proxy materials electronically as long as your account remains active or until you cancel your enrollment. If you consent to electronic access, you will be responsible for your usual internet-related charges (e.g., on-line fees and telephone charges) in connection with electronic viewing and printing of the Proxy Statement, which includes the 2012 Annual Report as an appendix. The Company will continue to distribute printed materials to stockholders who do not consent to access these materials electronically.
Q:
What is “householding?”
A:
Stockholders sharing a single address may receive only one copy of the Proxy Statement, which includes the 2012 Annual Report as an appendix, unless the transfer agent, broker, bank, or other nominee has received contrary instructions from any owner at that address. This practice — known as householding — is designed to reduce printing and mailing costs. If a stockholder of record would like to either participate or cancel participation in householding, he or she may contact Shareowner Services at (800) 554-7626 or by mail at The Southern Company, c/o Computershare, P.O. Box 358035, Pittsburgh, PA 15252-8035. If you own indirectly through a broker, bank, or other nominee, please contact your financial institution.
Q:
What is the Board’s recommendation for the proposals?
A:
The Board of Directors recommends votes “FOR” each item described in this Proxy Statement.
Q:
How many votes are needed to approve each of the items of business?
A:
The affirmative vote of a majority of the votes cast is required for approval of each of Item No. 1 through 3. For Item No. 4, the affirmative vote of a majority of the shares present and entitled to vote at the 2013 Annual Meeting is required for approval. For Item No. 5, the affirmative vote of at least two-thirds of the issued and outstanding shares is required for approval. For Item No. 6, the affirmative vote of at least 75% of the issued and outstanding shares is required for approval.
Q:
When are stockholder proposals due for the 2014 Annual Meeting of Stockholders?
A:
The deadline for the receipt of stockholder proposals to be considered for inclusion in the Company’s proxy materials for the 2014 Annual Meeting of Stockholders is December 13, 2013. Proposals must be submitted in writing to Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308. Additionally, the proxy solicited by the Board of Directors for next year’s meeting will confer discretionary authority to vote on any stockholder proposal presented at that meeting that is not included in the Company’s proxy materials unless the Company is provided written notice of such proposal no later than February 26, 2014.

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Q:
Who is soliciting these proxies and who pays the expense of such solicitations?
A:
These proxies are being solicited on behalf of the Company’s Board of Directors. The Company pays the cost of soliciting proxies. The Company has retained Alliance Advisors LLC to assist with the solicitation of proxies for a fee of $8,500, plus reimbursement of out-of-pocket expenses and any agreed upon charges associated with additional solicitation. The officers or other employees of the Company or its subsidiaries may solicit proxies to have a larger representation at the meeting. None of these officers or other employees of the Company will receive any additional compensation for these services. Upon request, the Company will reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of the Company's common stock.
Important Notice Regarding the Availability of Proxy Materials for the 2013 Annual Meeting of Stockholders to be held on May 22, 2013:
The Company’s 2013 Proxy Statement, which includes the 2012 Annual Report as an appendix, is also available free of charge on the Company’s website at http://investor.southerncompany.com/proxy.cfm.
The Company’s 2012 Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K will be provided without charge upon written request to Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308.




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Corporate Governance
 

COMPANY ORGANIZATION
Southern Company is a holding company managed by a core group of officers and governed by a Board of Directors that is currently comprised of 13 members.
At the 2013 Annual Meeting, stockholders will elect 13 Directors. The nominees for election as Directors consist of 12 non-employees and one executive officer of the Company.
The Board of Directors has adopted and operates under a set of Corporate Governance Guidelines which are available on the Company’s website at www.southerncompany.com under Investors/Corporate Governance.

CORPORATE GOVERNANCE WEBSITE
In addition to the Company's Corporate Governance Guidelines (which include Board independence criteria), other information relating to corporate governance of the Company is available on the Company's Corporate Governance webpage at www.southerncompany.com under Investors/Corporate Governance or directly at http://investor.southerncompany.com/governance.cfm, including:
•
Code of Ethics
•
By-Laws of the Company
•
Executive Stock Ownership Requirements
•
Board Committee Charters
•
Board of Directors — Background and Experience
•
Management Council — Background and Experience
•
Composition of Board Committees
•
SEC filings
•
Link for on-line communication with Board of Directors
•
Political Spending and Lobbying-Related Activities
The Corporate Governance documents also may be obtained by requesting a copy from Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308.

DIRECTOR INDEPENDENCE
No Director will be deemed to be independent unless the Board of Directors 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 of Directors 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 received, or the Director’s immediate family member 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 member of the Company’s present executive officers at the same time served on that company’s compensation committee.

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•
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 of the last three fiscal years, exceeds the greater of $1,000,000 or two percent of that company’s consolidated gross revenues.
Additionally, a Director will not be deemed to be independent if the Director or the Director’s spouse serves as an executive officer of a charitable organization to which the Company made discretionary contributions exceeding the greater of $1,000,000 or two percent of the organization’s total annual charitable receipts.
In determining independence, the Board reviews and considers all commercial, consulting, legal, accounting, charitable, or other business relationships that a Director or the Director’s immediate family members have with the Company. This review specifically included all ordinary course transactions with entities with which the Directors are associated. In particular, the Board reviewed transactions between subsidiaries of the Company and Vulcan Materials Company or its affiliates and transactions between the Company or its subsidiaries and SunTrust Banks, Inc. or its affiliates, as described under Certain Relationships and Related Transactions in this Proxy Statement. Mr. Donald M. James is the Chairman and Chief Executive Officer of Vulcan Materials Company. Mr. E. Jenner Wood III is the Chairman, President, and Chief Executive Officer of the Georgia/North Florida Division of SunTrust Bank and Executive Vice President of SunTrust Banks, Inc. The Board determined that the Company and its subsidiaries followed the Company procurement policies and procedures, that the amounts were well under the thresholds contained in the Director independence requirements, and that Messrs. James and Wood, as applicable, did not have a direct or indirect material interest in the transactions.
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.
As a result of its annual review of Director independence, the Board affirmatively determined that none of the following persons who are currently serving as Directors or who served during 2012 or who are nominees for election as Directors has a material relationship with the Company and, as a result, such persons are determined to be independent: Juanita Powell Baranco, Jon A. Boscia, Henry A. Clark III, David J. Grain, H. William Habermeyer, Jr., Veronica M. Hagen, Warren A. Hood, Jr., Donald M. James, Dale E. Klein, J. Neal Purcell, William G. Smith, Jr., Steven R. Specker, Larry D. Thompson, and E. Jenner Wood III. Thomas A. Fanning, a current Director, is Chairman of the Board, President, and Chief Executive Officer of the Company and is not independent.

COMMUNICATING WITH THE BOARD
Interested parties may communicate directly with the Company’s Board or specified Directors, including the Presiding Director. Communications may be sent to the Company’s Board or to specified Directors, including the Presiding Director, by regular mail or electronic mail. Regular mail should be sent to the attention of Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308. The electronic mail address is CORPGOV@southerncompany.com. The electronic mail address also can be accessed from the Corporate Governance webpage located under Investors/Corporate Governance on the Company’s website at www.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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DIRECTOR COMPENSATION
Only non-employee Directors of the Company are compensated for service on the Board of Directors. The pay components for non-employee Directors are:
Annual retainers:
•
$100,000 cash retainer
•
Additional $12,500 cash retainer if serving as a chair of a committee of the Board
•
Additional $12,500 cash retainer if serving as the Presiding Director of the Board
Annual equity grant:
•
$105,000 in deferred Common Stock units until Board membership ends
Meeting fees:
•
Meeting fees are not paid for participation in the initial eight meetings of the Board in a calendar year. If more than eight meetings of the Board are held in a calendar year, $2,500 will be paid for participation in each meeting of the Board beginning with the ninth meeting.
•
Meeting fees are not paid for participation in a meeting of a committee of the Board.

DIRECTOR DEFERRED COMPENSATION PLAN
The annual equity grant is required to be deferred in shares of Common Stock under the Deferred Compensation Plan for Directors of The Southern Company (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.
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 upon leaving the Board; 
•
in Common Stock units which earn dividends as if invested in Common Stock and are distributed in 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. The Company has 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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DIRECTOR COMPENSATION TABLE
The following table reports all compensation to the Company’s non-employee Directors during 2012, including amounts deferred in the Director Deferred Compensation Plan. Non-employee Directors do not receive Non-Equity Incentive Plan Compensation or stock option awards, and there is no pension plan for non-employee Directors.
 
 
 
 
 
 
 
 
Name
Fees
Earned
or Paid
in Cash
($) (1)
Stock
Awards
($) (2)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings  ($)
All Other
Compensation
($) (3)
Total  ($)
Juanita Powell Baranco
112,500
105,000
0
0
892
218,392
Jon A. Boscia
107,291
105,000
0
0
962
213,253
Henry A. Clark III
112,500
105,000
0
0
826
218,326
David J. Grain (4)
5,914
6,210
0
0
227
12,351
H. William Habermeyer, Jr.
112,500
105,000
0
0
724
218,224
Veronica M. Hagen
107,291
105,000
0
0
959
213,250
Warren A. Hood, Jr.
100,000
105,000
0
0
896
205,896
Donald M. James
105,209
105,000
0
0
896
211,105
Dale E. Klein
100,000
105,000
0
0
724
205,724
J. Neal Purcell (5)
46,875
43,750
0
0
639
91,264
William G. Smith, Jr.
112,500
105,000
0
0
724
218,224
Steven R. Specker
100,000
105,000
0
0
879
205,879
Larry D. Thompson (6)
100,000
105,000
0
0
797
205,797
E. Jenner Wood III (7)
63,263
61,250
0
0
1,435
125,948
(1)
Includes amounts voluntarily deferred in the Director Deferred Compensation Plan.
(2)
Includes fair market value of equity grants on grant dates. All such stock awards are vested immediately upon grant.
(3)
Consists of reimbursements for taxes on imputed income associated with gifts and activities provided to attendees at Company-sponsored events.
(4)
Mr. Grain was elected to the Board effective December 10, 2012.
(5)
Mr. Purcell retired from the Board effective May 23, 2012.
(6)
Mr. Thompson resigned from the Board effective December 10, 2012.
(7)
Mr. Wood was elected to the Board effective May 23, 2012.

DIRECTOR STOCK OWNERSHIP GUIDELINES
Under the Company’s Corporate Governance Guidelines, non-employee Directors are required to beneficially own, within five years of their initial election to the Board, Common Stock equal to at least four times the annual Director cash retainer fee.

BOARD LEADERSHIP STRUCTURE
The Board believes that the combined role of Chief Executive Officer and Chairman is most suitable for the Company because Mr. Fanning is the Director most familiar with the Company’s 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 Chief Executive Officer brings Company-specific experience and expertise, while the Company’s independent Directors bring

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experience, oversight, and expertise from outside the Company and its industry. The Board believes that the combined role of Chief Executive Officer and Chairman promotes the development and execution of the Company’s strategy and facilitates the flow of information between management and the Board, which is essential to effective corporate governance.
The Board believes the combined role of Chief Executive Officer and Chairman, together with an independent Presiding Director having the duties described below, is in the best interest of stockholders because it provides the appropriate balance between independent oversight of management and the development of strategy.

PRESIDING DIRECTOR
Mr. Smith was appointed to serve as the Presiding Director effective May 23, 2012 until May 28, 2014. The Presiding Director is selected bi-annually by and from the independent Directors. Non-management Directors meet, without management, on each regularly-scheduled Board meeting date, and at other times as deemed appropriate by the Presiding Director or two or more other independent Directors. As the Presiding Director, Mr. Smith is responsible for chairing executive sessions and acting as the principal liaison between the Chairman and the non-management Directors. However, each Director is afforded direct and complete access to the Chairman at any time as such Director deems necessary or appropriate. The Presiding Director meets regularly with the Chairman and also serves as the primary contact Director for stockholders and other interested parties. The Presiding Director is also involved in communicating any sensitive issues to the Directors and chairing Board meetings in the absence of the Chairman.

MEETINGS OF NON-MANAGEMENT DIRECTORS
Non-management Directors meet in executive session without any members of the Company’s management present on each regularly-scheduled Board meeting date. These executive sessions promote an open discussion of matters in a manner that is independent of the Chairman and Chief Executive Officer. The Presiding Director chairs each of these executive sessions.

COMMITTEES OF THE BOARD

Committee Charters
Charters for each of the five standing committees can be found at the Company’s website — www.southerncompany.com under Investors/Corporate Governance.

Audit Committee:
•
Current members are Mr. Boscia (Chair), Mr. Grain, and Mr. Hood
•
Met 10 times in 2012
•
Oversees the Company’s financial reporting, audit processes, internal controls, and legal, regulatory, and ethical compliance; appoints the Company’s independent registered public accounting firm, approves its services and fees, and establishes and reviews the scope and timing of its audits; reviews and discusses the Company’s financial statements with management and the independent registered public accounting firm, including critical accounting policies and practices, material alternative financial treatments within generally accepted accounting principles, 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; and recommends the filing of the Company’s annual financial statements with the SEC.
The Board has determined that the members of the Audit Committee are independent as defined by the 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 Mr. Boscia qualifies as an “audit committee financial expert” as defined by the SEC.

Compensation and Management Succession Committee (Compensation Committee):
•
Current members are Ms. Hagen (Chair), Mr. Clark, Mr. Habermeyer, and Mr. Smith
•
Met seven times in 2012
•
Evaluates performance of executive officers and establishes their compensation, administers executive compensation plans, and reviews management succession plans. Annually reviews a tally sheet of all components of the executive officers’ compensation and takes actions required of it under the Pension Plan for employees of the Company’s subsidiaries.

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The Board has determined that each member of the Compensation Committee is independent.
Governance
During 2012, the Compensation Committee’s governance practices included:
•
Considering compensation for the named executive officers in the context of all of the components of total compensation;
•
Considering annual adjustments to pay over the course of two meetings and requiring more than one meeting to make other important decisions;
•
Receiving meeting materials several days in advance of meetings;
•
Having regular executive sessions of Compensation Committee members only;
•
Having direct access to independent compensation consultants;
•
Conducting a performance/payout analysis versus peer companies for the performance-based compensation program to provide a check on the Company’s goal-setting process; and
•
Reviewing a compensation risk assessment through a process developed by its independent compensation consultant.
Role of Executive Officers
The Chief Executive Officer, with input from the Company’s Human Resources staff, recommends to the Compensation Committee: base salary, target performance-based compensation levels, actual performance-based compensation payouts, and long-term performance-based grants for the Company’s executive officers (other than the Chief Executive Officer). The Compensation Committee considers, discusses, modifies as appropriate, and takes action on such recommendations.
Role of Compensation Consultant
The Compensation Committee which has authority to retain independent advisors, including compensation consultants, at the Company's expense, 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 Company management to ensure that the executive compensation program is designed and administered consistent with the Compensation Committee’s requirements. The Compensation Committee also expected Pay Governance to advise on executive compensation and related corporate governance trends.
Pay Governance is engaged solely by the Compensation Committee and does not provide any services directly to management unless authorized to do so by the Compensation Committee. In connection with its engagement of Pay Governance, the Compensation Committee reviewed Pay Governance's independence including (1) the amount of fees received by Pay Governance from the Company as a percentage of Pay Governance's total revenue; (2) its policies and procedures designed to prevent conflicts of interest; and (3) the existence of any business or personal relationships, including Common Stock ownership, that could impact independence. After reviewing these and other factors, the Compensation Committee 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 Committee.
During 2012, Pay Governance assisted the Compensation Committee with analyzing comprehensive market data and its implications for pay at the Company and its affiliates and various other governance, design, and compliance matters.

Finance Committee:
•
Current members are Mr. Clark (Chair), Mr. James, and Mr. Smith
•
Met seven times in 2012
•
Reviews the Company’s financial matters, recommends actions such as dividend philosophy to the Board, and approves certain capital expenditures.
•
Provides information to the Compensation Committee regarding the Company’s financial plan and goals.
The Board has determined that each member of the Finance Committee is independent.



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Governance Committee:
•
Current members are Ms. Baranco (Chair), Mr. James, Dr. Klein, Dr. Specker, and Mr. Wood
•
Met six times in 2012
•
Oversees the composition of the Board and its committees, determines non-management Directors’ compensation, maintains the Company’s Corporate Governance Guidelines, coordinates the performance evaluations of the Board and its committees, and reviews stock ownership of Directors annually to ensure compliance with the Company’s Director stock ownership guidelines.
The Board has determined that each member of the Governance Committee is independent.

Nominees for Election to the Board
The Governance Committee, comprised entirely of independent Directors, is responsible for identifying, evaluating, and recommending nominees for election to the Board. The Governance 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. Any stockholder may make recommendations to the Governance Committee by sending a written statement setting forth the candidate’s qualifications, relevant biographical information, and signed consent to serve. These materials should be submitted in writing to the Company’s Assistant Corporate Secretary and received by that office by December 13, 2013 for consideration by the Governance Committee as a nominee for election at the Annual Meeting of Stockholders to be held in 2014. Any stockholder recommendation is reviewed in the same manner as candidates identified by the Governance Committee or recommended to the Governance Committee.
While the Company’s Corporate Governance Guidelines do not prescribe diversity standards, such Guidelines mandate that the Board as a whole should be diverse. At least annually, the Governance Committee evaluates the expertise and needs of the Board to determine the proper membership and size. As part of this evaluation, the Governance Committee considers aspects of diversity, such as diversity of age, race, gender, education, industry, and public and private services, in the selection of candidates to serve on the Board. The Governance Committee only considers candidates with the highest degree of integrity and ethical standards. The Governance 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, 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, and number of other board memberships. The Board as a whole should also have collective knowledge and experience in accounting, finance, leadership, business operations, risk management, corporate governance, and the Company’s industry. The Governance Committee recommends candidates to the Board for consideration as nominees. Final selection of the nominees is within the sole discretion of the Board.
Mr. David J. Grain was identified by a third-party search firm and was recommended to members of the Governance Committee. Mr. Grain was recommended by the Governance Committee for election to the Board and was elected as a Director effective December 10, 2012.



Nuclear/Operations Committee:
•
Current members are Mr. Habermeyer (Chair), Ms. Baranco, Ms. Hagen, Dr. Klein, Dr. Specker, and Mr. Wood
•
Met five times in 2012
•
Oversees significant information, activities, and events relative to significant operations of the Southern Company system including nuclear and other generation facilities, transmission and distribution, fuel, and information technology initiatives.
•
Provides information to the Compensation Committee on the Southern Company system’s operational goals.
The Board has determined that each member of the Nuclear/Operations Committee is independent.

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 to the Company primarily through direct engagement with Company management and through delegation of ongoing risk oversight responsibilities to the committees. The charters of the committees as approved by the Board and the committees' checklists of agenda items define the areas of risk for which each committee is responsible for providing ongoing

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oversight. In addition, ongoing oversight responsibility for each of the Company’s most significant risks is designated to the applicable committees at least annually. Each committee provides oversight of the significant risks as described in its charter or otherwise assigned by the Board. The committees report to the Board on their oversight activities and elevate review of risk issues to the Board as appropriate. For each committee, the Chief Executive Officer of the Company has designated a member of management as the primary responsible officer for providing information and updates related to the significant risks. These officers ensure that all significant risks identified on the Company’s risk profile are reviewed with the Board and/or the appropriate committee(s) at least annually. In addition to oversight of its designated risks, the Audit Committee is also responsible for reviewing the adequacy of the risk oversight process and for reviewing documentation that appropriate risk management and oversight are occurring. In order to fulfill this duty, a report is made to the Audit Committee at least annually. This report documents 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. At least annually, the Board and the Audit Committee review the Company’s risk profile to ensure that oversight of each risk is properly designated to an appropriate committee or the full Board. The Audit Committee receives regular updates from Internal Auditing, as needed, and quarterly updates as part of the disclosure controls process.

DIRECTOR ATTENDANCE
The Board of Directors met seven times in 2012. Average Director attendance at all applicable Board and committee meetings was 99%. No nominee attended less than 75% of applicable meetings.
All Director nominees are expected to attend the Annual Meeting of Stockholders. Except for Mr. Boscia, all the members of the Board of Directors serving on May 23, 2012, the date of the 2012 Annual Meeting of Stockholders, attended the meeting.



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Stock Ownership Table
 
STOCK OWNERSHIP OF DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS
The following table shows the number of shares of Common Stock beneficially owned by Directors, nominees, and executive officers as of December 31, 2012. The shares owned by all Directors, nominees, and executive officers as a group constitute less than one percent of the total number of shares of Common Stock outstanding.
 
 
 
 
 
 
 
 
Shares Beneficially Owned Include:
Directors, Nominees, and Executive Officers
Shares
Beneficially
Owned (1)
Deferred Common
Stock Units (2)
Shares
Individuals
Have Rights to
Acquire within
60 days (3)
Shares Held by
Family Member(4)
Juanita Powell Baranco
42,663

42,063

0

0

Art P. Beattie
291,121

0

284,988

127

Jon A. Boscia
73,687

14,687

0

0

W. Paul Bowers
817,569

0

805,249

0

Henry A. Clark III
8,919

8,919

0

0

Thomas A. Fanning
1,129,160

0

1,116,222

0

David J. Grain
711

211

0

500

H. William Habermeyer, Jr.
16,581

16,581

0

0

Veronica M. Hagen
23,044

23,044

0

0

Warren A. Hood, Jr.
33,335

32,733

0

0

Donald M. James
79,561

79,561

0

0

Dale E. Klein
6,279

6,279

0

0

Stephen Kuczynski
155,529

0

151,253

4,276

Charles D. McCrary
492,305

0

485,898

0

William G. Smith, Jr.
47,571

41,630

0

662

Steven R. Specker
5,593

5,593

0

0

E. Jenner Wood III
12,083

10,984

0

0

Directors, Nominees, and Executive Officers as a Group (24 people)
4,728,004

282,285

4,306,741

60,565

(1)
“Beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or investment power with respect to a security, or any combination thereof.
(2)
Indicates the number of deferred Common Stock units held under the Director Deferred Compensation Plan. Shares indicated are included in the Shares Beneficially Owned column.
(3)
Indicates shares of Common Stock that certain executive officers have the right to acquire within 60 days. Shares indicated are included in the Shares Beneficially Owned column.
(4)
Each Director disclaims any interest in shares held by family members. Shares indicated are included in the Shares Beneficially Owned column.


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STOCK OWNERSHIP OF CERTAIN OTHER BENEFICIAL OWNERS
According to a Schedule 13G/A filed with the SEC on February 8, 2013, (the Ownership Report), the following reported beneficial ownership of more than 5% of the outstanding shares of Common Stock:
 
 
 
 
 
Title of Class
 
Name and Address
 
Shares Beneficially Owned
 
Percentage of Class Owned
 
Common Stock
Blackrock, Inc.
51,559,488
5.90
 
40 East 52nd Street
New York, NY 10022
 
 
According to the Ownership Report, Blackrock, Inc. held all of its shares as a parent holding company, or control person in accordance with Rule 13(d)-1(b)(1)(ii)(G). According to the Ownership Report, Blackrock, Inc. has sole voting power and sole investment power over its shares.





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Matters to be Voted Upon
 

ITEM NO. 1 — ELECTION OF DIRECTORS
Nominees for Election as Directors
The Proxies named on the proxy form will vote, unless otherwise instructed, each properly executed proxy form for the election of the following nominees as Directors. 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. Each nominee, if elected, will serve until the 2014 Annual Meeting of Stockholders.
The Board of Directors, acting upon the recommendation of the Governance Committee, nominates the following individuals for election to the Southern Company Board of Directors. 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. Through their positions, responsibilities, skills, and perspectives, which span various industries and organizations, these nominees represent a Board that is diverse and possessing the collective knowledge and experience in accounting, finance, leadership, business operations, risk management, corporate governance, and the Company's industry, as detailed below. The Governance Committee evaluated each nominee’s independence from management, ability to provide sound and informed judgment, history of achievement reflecting superior standards, willingness to commit sufficient time, financial literacy, and 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, as well as the number of other board memberships each holds.

 
 
 
 
Juanita Powell Baranco
Age: 64
Director since: 2006
Board committees: Governance (Chair), Nuclear/Operations
Principal occupation: Executive Vice President and Chief Operating Officer of Baranco Automotive Group, automobile sales
Other directorships: None (formerly a Director of Cox Radio, Inc. and Georgia Power Company)
Director qualifications:  Ms. Baranco had a successful legal career, which included serving as Assistant Attorney General for the State of Georgia, before she and her husband founded the first Baranco dealership in Atlanta in 1978. She served as a Director on the Board of Georgia Power Company (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 John H. Harland Company Board of Directors. An active leader in the Atlanta community, Ms. Baranco has served as a Director of Cox Radio, Inc. She serves as Chair of the Board of Trustees for Clark Atlanta University and as a Director of the Catholic Foundation of North Georgia, the DeKalb Chamber of Commerce, and the Commerce Club. She is also past Chair of the Board of Regents for the University System of Georgia and past Board Chair for the Sickle Cell Foundation of Georgia. The Board has benefited from Ms. Baranco’s particular expertise in business operations and her civic involvement.
 
 

 


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Jon A. Boscia

Age:  60

Director since:  2007

Board committee:  Audit (Chair)
Principal occupation:  Founder and President, Boardroom Advisors LLC, board governance consultancy firm, since March 2011

Other directorships:  PHH Corporation (formerly a Director of Sun Life Financial Inc., Armstrong World Industries, Lincoln Financial Group, Georgia Pacific Corporation, and The Hershey Company)
Director qualifications:  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 The Hershey Company, where he chaired the Corporate Governance Committee and served on the Executive Committee, and 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. In addition, Mr. Boscia has served in leadership positions on other public company boards as well as not-for-profit and industry boards. His extensive background in finance, investment management, information technology, and corporate governance are valuable to the Board.
 
 
 
 
Henry A. “Hal” Clark III
 
Age: 63
 
Director since: 2009
 
Board committees: Finance (Chair), Compensation and Management Succession
 
Principal occupation: Senior Advisor of Evercore Partners Inc. (formerly Lexicon Partners, LLC), corporate finance advisory firm, since July 2009
 
Other directorships: None
Director qualifications:  As a Senior Advisor with Evercore Partners Inc. (formerly Lexicon Partners, LLC), Mr. Clark is 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 Partners Inc., 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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Thomas A. Fanning
 
Age: 56
 
Director since: 2010
 
Principal occupation: Chairman of the Board, President, and Chief Executive Officer of the Company since December 2010
 
Other directorships: Federal Reserve Bank of Atlanta, Alabama Power Company, Georgia Power, and Southern Power Company
Director qualifications:  Mr. Fanning had 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 2007 to 2008 and Executive Vice President, Chief Financial Officer, and Treasurer from 2003 to 2007, 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. Mr. Fanning is on the Boards of a number of Southern Company’s subsidiaries. He is also a Director of the Federal Reserve Bank of Atlanta, serving on the Executive Committee and the Audit Committee. Mr. Fanning served on the Board of The St. Joe Company from 2005 through September 2011. Mr. Fanning’s knowledge of the day-to-day operations of an electric utility and the regulatory challenges of the industry uniquely qualify him to be a Director of the Company.
 
 
 
 
David J. Grain

Age:  50
Director since:  2012
Board committee:  Audit
Principal occupation:  Founder and Managing Partner, Grain Management, LLC, private equity firm
Other directorships:  Gateway Bank of Southwest Florida
Director qualifications: Mr. Grain is the Founder and Managing Partner of Grain Management, LLC, a private equity firm specializing in investments in wireless communications infrastructure throughout the United States, since 2006. He is also the Chief Executive Officer of Grain Communications Group, Inc. Grain Management, LLC’s flagship funds manage capital on behalf of domestic institutional investors including academic endowments, public pension funds, and foundations. Before forming the Grain entities, Mr. Grain served as President of Global Signal, Inc., where he was hired to lead Pinnacle Holdings, Inc. (Pinnacle) from bankruptcy through its successful operational turnaround. After Pinnacle was renamed Global Signal, Inc. in 2004, Mr. Grain grew the company into one of the largest independent wireless communications tower companies in North America. In 2011, Mr. Grain was appointed by President Obama to the National Infrastructure Advisory Council. He also serves as chairman of the Florida State Board of Administration Investment Advisory Council as an appointee of former Governor Charlie Crist. Additionally, he is a Director of the Gateway Bank of Southwest Florida and Trustee of College of the Holy Cross. Mr. Grain's background in finance, investment management, wireless communications infrastructure, leadership, and civic involvement are valuable to the Board.
 



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H. William Habermeyer, Jr.

Age: 70

Director since:  2007

Board committees: Nuclear/Operations (Chair), Compensation and Management Succession

Other directorships: Raymond James Financial, Inc., USEC Inc.
Director qualifications:  Mr. Habermeyer retired in 2006 from his position as President and Chief Executive Officer of Progress Energy Florida, Inc., a subsidiary of Progress Energy Inc., a diversified energy company. Mr. Habermeyer has a wealth of experience in utility business operations, with a focus on nuclear matters, which is valuable to the Board. He joined Progress Energy’s predecessor Carolina Power & Light in 1993 and served in various leadership roles including Vice President of Nuclear Services and Environmental Support, Vice President of Nuclear Engineering, and Vice President of Progress Energy’s Western Region. While overseeing the Western Region operations, Mr. Habermeyer was responsible for regional distribution management, customer support, and community relations. He serves on the Board of USEC Inc., a global energy company, where he is Chair of the Nomination and Governance Committee and a member of the Technology and Competition Committee. In addition, he is on the Audit Committee of Raymond James Financial Inc. Mr. Habermeyer is a retired Rear Admiral who served in the United States Navy for 28 years. His military medals include seven awards of the Legions of Merit, two Navy Commendation Medals, and service and campaign awards.
 
 
 
 
 
 
Veronica M. Hagen

Age: 67

Director since: 2008

Board committees: Compensation and Management Succession (Chair), Nuclear/Operations

Principal occupation: President and Chief Executive Officer of Polymer Group, Inc., engineered materials; Chief Executive Officer since April 2007; President since January 2011
 
Other directorships: Polymer Group, Inc., Newmont Mining Corporation
Director qualifications:  Ms. Hagen’s global operational management experience and commercial business leadership are valuable assets to the Board. Ms. Hagen has served as Director and Chief Executive Officer of Polymer Group, Inc. since April 2007 and as President since January 2011. 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 her resignation in 2007. She also has served as Vice President and Chief Customer Officer at Alcoa Inc. and owned and operated Metal Sales Associates, a privately-held metal business. Ms. Hagen also serves on the Environmental, Social Responsibility, Operations and Safety Committee and the Compensation Committee of the Board of Newmont Mining Corporation.
 

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Warren A. Hood, Jr.

Age: 61

Director since: 2007

Board committee: Audit

Principal occupation: Chairman of the Board and Chief Executive Officer of Hood Companies, Inc., packaging and construction products

Other directorships: Hood Companies, Inc., BancorpSouth, Inc. (formerly a Director of Mississippi Power Company)
Director qualifications:  Mr. Hood is the Chairman and Chief Executive Officer of Hood Companies Inc. which he established in 1978. Hood Companies Inc. consists of four separate corporations with 60 manufacturing and distribution sites throughout the United States, Canada, and Mexico. Mr. Hood previously served on the Board of the Company’s subsidiary, Mississippi Power Company (Mississippi Power), where he was also a member of the Compensation Committee. Mr. Hood has long been recognized for his leadership role in the State of Mississippi. He serves on numerous corporate, community, and philanthropic boards, including Boy Scouts of America and The Governor’s Commission on Rebuilding, Recovery and Renewal, which was formed following Hurricane Katrina in 2005. He serves on the Board of BancorpSouth, Inc. where he is a member of the Audit Committee. Mr. Hood’s business operations, risk management, financial experience, and civic involvement are valuable to the Board.
 
 
 
 
 
 
Donald M. James

Age: 64

Director since: 1999

Board committees: Finance, Governance

Principal occupation: Chairman of the Board and Chief Executive Officer of Vulcan Materials Company, construction materials

Other directorships: Vulcan Materials Company, Wells Fargo & Company (formerly a Director of Protective Life Corporation)
Director qualifications:  Mr. James joined Vulcan Materials Company in 1992 as Senior Vice President and General Counsel and then became President of the Southern Division and then Senior Vice President of the Construction Materials Group and President of the Southern Division. 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 is also a Director of the UAB Health System, Boy Scouts of Central Alabama, and the Economic Development Partnership of Alabama, Inc. In addition, he serves on the Finance and Human Resources Committees of Wells Fargo & Company’s Board of Directors. Mr. James’ leadership of a large, public company, his legal expertise, and his civic involvement are valuable assets to the Board.
 

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Dale E. Klein

Age: 65

Director since: 2010

Board committees: Governance, Nuclear/Operations

Principal occupation: Associate Vice Chancellor of Research of the University of Texas System since 2011 and Associate Director of the Energy Institute at The University of Texas at Austin since 2010, university system

Other directorships: Pinnacle West Capital Corporation, Arizona Public Service Company
Director qualifications:   Dr. Klein was Commissioner from 2009 to 2010 and Chairman from 2006 to 2009 of the U.S. Nuclear Regulatory Commission. Dr. Klein also served as Assistant to the Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs from 2001 to 2006. Dr. Klein has more than 30 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 nearly 25 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. Mr. Klein's expertise in nuclear energy regulation and operations, technology, and safety is valuable to the Board.
 
 
 
 
 
 
William G. Smith, Jr.

Age: 59

Director since: 2006, Presiding Director since May 23, 2012

Board committees: Compensation and Management Succession, Finance

Principal occupation: Chairman of the Board, President, and Chief Executive Officer of Capital City Bank Group, Inc., banking

Other directorships: Capital City Bank Group, Inc., Capital City Bank
Director qualifications:  Mr. Smith began his career at Capital City Bank in 1978, where he worked in a number of capacities 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 has also served on the Board of Directors of the Federal Reserve Bank of Atlanta. He is the former Federal Advisory Council Representative for the Sixth District of the Federal Reserve System and past Chair of both Tallahassee Memorial HealthCare and the Tallahassee Area Chamber of Commerce. Mr. Smith’s experience in finance, business operations, and risk management is valuable to the Board.
 


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Steven R. Specker
 
Age: 67
 
Director since: 2010
 
Board committees: Governance, Nuclear/Operations
 
Other directorships: Trilliant Incorporated
Director qualifications:  Dr. Specker served as President and Chief Executive Officer of the Electric Power Research Institute (EPRI) from 2004 until his retirement in 2010. 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 has 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. Dr. Specker is also a member of the Board of Trilliant Incorporated, a leading provider of Smart Grid communication solutions. Dr. Specker brings to the Board a keen understanding of the electric industry and valuable insight in innovation and technology development.
 
 
 
 
 
 
E. Jenner Wood III

Age: 61

Director since: 2012
Board committees: Governance, Nuclear/Operations

Principal occupation: Chairman, President, and Chief Executive Officer of the Georgia/North Florida Division of SunTrust Bank and Executive Vice President of SunTrust Banks, Inc., banking

Other directorships: Oxford Industries, Inc., Crawford & Company (formerly a Director of Georgia Power)
Director qualifications :  Mr. Wood is currently the Chairman, President, and Chief Executive Officer of the Georgia/North Florida Division of SunTrust Bank where he is responsible for managing retail, commercial, and private wealth banking in the Greater Atlanta region and throughout the State of Georgia and North Florida. He was elected to his current position in April 2010. He also has served as an Executive Vice President of SunTrust Banks, Inc. since July 2005. From 2002 to 2010, he served as Chairman, President, and Chief Executive Officer of SunTrust Bank Central Group with responsibility over Georgia and Tennessee. Mr. Wood has more than 37 years of experience in the banking industry and has served in numerous management positions in corporate and trust and investment management with SunTrust Banks, Inc. He served as a member of the Board of Georgia Power, the largest subsidiary of the Company 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. Mr. Wood is a director of Oxford Industries, Inc., where he serves as Presiding Director and as a member of the Executive Committee. He serves also as a Director of Crawford & Company, where he is a member of the Compensation Committee and the Audit Committee. He is active in numerous civic and community organizations serving as a Trustee of the Robert W. Woodruff Foundation, The Sartain Lanier Family Foundation, Camp-Younts Foundation, and the Jesse Parker Williams Foundation. Mr. Wood’s leadership experience and extensive background in finance as well as his involvement in the community are beneficial to the Board.
 
 
 

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Each nominee has served in his or her present position for at least the past five years, unless otherwise noted.
The affirmative vote of a majority of the votes cast is required for the election of Directors at any meeting for the election of Directors at which a quorum is present. A majority of the votes cast means that the number of shares voted “FOR” the election of a Director must exceed the number of votes cast “AGAINST” the election of that Director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE NOMINEES LISTED IN ITEM NO. 1.


ITEM NO. 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed Deloitte & Touche LLP (Deloitte & Touche) as the Company’s independent registered public accounting firm for 2013. This appointment is being submitted to stockholders for ratification. Representatives of Deloitte & Touche will be present at the Annual Meeting to respond to appropriate questions from stockholders and will have the opportunity to make a statement if they desire to do so.
The affirmative vote of a majority of the votes cast is required for ratification of the appointment of the independent registered public accounting firm.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM NO. 2.


ITEM NO. 3 — ADVISORY VOTE ON NAMED EXECUTIVE OFFICERS’ COMPENSATION
(the Say-on-Pay vote)
At the 2012 Annual Meeting of Stockholders, the Company provided stockholders with the opportunity to cast an advisory vote regarding the compensation of the named executive officers as disclosed in the 2012 Proxy Statement for the 2012 Annual Meeting of Stockholders. At the meeting, stockholders strongly approved the proposal, with more than 95% of the votes cast voting in favor of the proposal. At the 2011 Annual Meeting, stockholders were asked how frequently the Company should hold a say-on-pay vote - whether every one, two, or three years. Consistent with the recommendation of the Board of Directors, stockholders indicated their preference to hold a say-on-pay vote annually. In light of the Board of Directors’ recommendation and the strong support of the Company’s stockholders, the Board of Directors determined to hold a say-on-pay vote annually.
As described in the Compensation Discussion & Analysis (CD&A), the Compensation Committee has structured the Company’s executive compensation program based on the belief that executive compensation should:
•
Be competitive with the Company’s industry peers;
•
Motivate and reward achievement of the Company’s goals;
•
Be aligned with the interests of the Company’s stockholders and its subsidiaries’ customers; and
•
Not encourage excessive risk-taking.
The Company believes these objectives are accomplished through a compensation program that provides the appropriate mix of fixed and short- and long-term performance-based compensation that rewards achievement of the Company’s financial success, business unit financial and operational success, and total shareholder return. The Company’s financial and operational achievement was strong in 2012 and resulted in performance-based awards that were aligned with performance.
All decisions concerning the compensation of the Company’s named executive officers are made by the Compensation Committee, an independent Board committee, with the advice and counsel of an independent executive compensation consultant, Pay Governance.
The Company encourages stockholders to read the Executive Compensation section of this Proxy Statement which includes the CD&A, the Summary Compensation Table, and other related compensation tables, including the information accompanying these tables.
Although it is non-binding on the Board of Directors, the Compensation Committee will review and consider the vote results when making future decisions about the Company’s executive compensation program.

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The affirmative vote of a majority of the votes cast is required for approval of the following resolution:
"RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Proxy Statement for the 2013 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2012 Summary Compensation Table, and the other related tables and accompanying narrative set forth in this Proxy Statement."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM NO. 3.


ITEM NO. 4 - RATIFICATION OF AMENDMENT TO THE COMPANY'S BY-LAWS REMOVING THE MANDATORY RETIREMENT AGE PROVISION FOR NON-EMPLOYEE DIRECTORS

The Company's Board of Directors amended Section 15 of the Company's By-Laws, as amended (By-Laws), to remove the mandatory retirement age provision for non-employee directors effective as of February 11, 2013. This amendment is being submitted to stockholders for ratification as required by the By-Laws.

Background of This Item

Prior to this amendment, non-employee directors could not stand for election or re-election past their 70th birthday. This restriction was included in both the By-Laws and the Company's Corporate Governance Guidelines (Guidelines). Based on market trends of companies in the S&P 500, the Board determined that the Company's mandatory retirement age for non-employee directors should be increased. The Board also determined that the mandatory retirement age provision should only be set forth in the Guidelines in order to allow the Board to continue to monitor and more easily react to market trends and make timely changes to keep the Company current with best practices. Concurrently with its approval of the amendment to the By-Laws to remove the mandatory retirement age provision from the By-Laws, the Board approved an amendment to the Guidelines so that non-employee directors do not stand for re-election after reaching age 72.

Amendment

The amendment to Section 15 of the By-Laws includes the following:

•
Removal of the provision relating to the eligibility of a non-employee director to stand for election or re-election after reaching his or her 70th birthday.

•
Removal of the provision that references the eligibility of a non-employee director to stand for election or re-election in connection with service on the Independent Litigation Committee, which was dissolved effective March 9, 1992.

The text of the amendment, marked to show changes to prior Section 15 of the By-Laws, is included as Appendix A to this Proxy Statement.

The affirmative vote of a majority of the shares present and entitled to vote at the annual meeting is required for ratification of the amendment of the By-Laws as presented in this Item No. 4. In the event the amendment to the By-Laws is not ratified by stockholders, the amendment will cease to be effective following the 2013 Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM NO. 4.


ITEM NO. 5 - AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO REDUCE THE TWO-THIRDS SUPERMAJORITY VOTE REQUIREMENTS IN ARTICLE ELEVENTH TO A MAJORITY VOTE

The Board of Directors has determined that it would be in the best interest of the Company and its stockholders to reduce the current two-thirds supermajority vote requirements in Article Eleventh of the Company's Certificate of Incorporation, as amended (Certificate of Incorporation), to a majority vote.

Background of This Item

Article Eleventh of the Certificate of Incorporation currently requires the affirmative vote of the holders of at least two-thirds of the Company's issued and outstanding Common Stock in order to:


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•
authorize or create any class of stock preferred as to dividends or assets over the Common Stock or reclassify the Common Stock or change the issued shares of Common Stock into the same or a greater or less number of shares of Common Stock either with or without par value or reduce the par value of the Common Stock (collectively, Stock Changes); and

•
amend, alter, change, or repeal subdivision (2) of Article Ninth (with respect to working capital determinations), Article Twelfth (with respect to preemptive rights), Article Eleventh (with respect to Stock Changes and amendments to the Certificate of Incorporation), or in any amendment to the Certificate of Incorporation which provides for the vote of the holders of at least two-thirds of the issued and outstanding Common Stock.

Supermajority vote requirements like the ones contained in Article Eleventh of the Certificate of Incorporation are 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. While the Board recognizes these protections are important and in the best interests of stockholders, the Board also notes that many stockholders and commentators now view these provisions as limiting a board's accountability to stockholders and the ability of stockholders to effectively participate in corporate governance.

The Board is committed to implementing and maintaining effective corporate governance policies and practices which ensure that the Company is governed with high standards of ethics, integrity, and accountability and in the best interest of the Company's stockholders. After considering stockholder input, including a stockholder proposal, and the arguments in favor of and against the existing supermajority vote requirements in Article Eleventh, the Board has determined that reducing each of the two-thirds supermajority vote requirements in Article Eleventh to a majority vote requirement would preserve legitimate stockholder protections while enhancing the Board's accountability to the Company's stockholders and increasing the ability of stockholders to participate effectively in the Company's corporate governance.

As a result, the Board of Directors voted to approve, and to recommend to the Company's stockholders that they approve, a proposal to amend Article Eleventh to reduce the two-thirds supermajority vote requirement to a majority vote requirement to (1) effect any Stock Changes and (2) amend, alter, change, or repeal certain provisions of the Certificate of Incorporation.

Amendment

The amendment to Article Eleventh of the Certificate of Incorporation includes the following:

•
Replace the two-thirds supermajority vote requirement with a requirement that the affirmative vote of a majority of the issued and outstanding shares of the Company's Common Stock is required to approve any Stock Change; and

•
Remove the two-thirds supermajority vote requirement necessary to amend, alter, change, or repeal certain provisions of the Certificate of Incorporation as more fully described above so that all amendments, alteration, changes, or repeals of the Certificate of Incorporation require the affirmative vote of a majority of the issued and outstanding shares of the capital stock of the Company, which is the default voting standard for such actions under Delaware law.

The text of the proposed amendment to Article Eleventh of the Certificate of Incorporation, marked to show changes from the current Article Eleventh, is included as Appendix B to this Proxy Statement.

The affirmative vote of at least two-thirds of the issued and outstanding shares of the Common Stock is required for approval of the amendment to Article Eleventh of the Certificate of Incorporation as presented in this Item No. 5.

If the proposed amendment is approved by the Company's stockholders, it will become effective upon filing of a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware, which filing the Company would make promptly after the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM NO. 5.




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ITEM NO. 6 - AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO REDUCE THE 75% SUPERMAJORITY VOTE REQUIREMENTS IN ARTICLE THIRTEENTH TO A TWO-THIRDS VOTE

The Board of Directors has determined that it would be in the best interest of the Company and its stockholders to reduce the current 75% supermajority vote requirements in Article Thirteenth of the Certificate of Incorporation to a two-thirds vote.

Background of This Item

Article Thirteenth, known as the "fair price" provision, requires that certain minimum price and procedural requirements, intended for the protection of the Company and its stockholders as a whole, be observed by any person or group (Interested Stockholder) which acquires more than five percent of the issued and outstanding shares of capital stock of the Company having voting power (Voting Stock) and then seeks to accomplish a merger or other business combination or transaction which would eliminate or could significantly change the interests of the remaining stockholders (Business Combination), unless approved by a majority of disinterested Directors.

Article Thirteenth provides that the affirmative vote of the holders of at least (1) 75% of the issued and outstanding Voting Stock, voting together as a single class, and (2) a majority of the issued and outstanding Voting Stock beneficially owned by persons other than the Interested Stockholder, voting together as a single class, is required in order to:

•
approve a Business Combination with an Interested Stockholder if the minimum price and procedural requirements specified in Article Thirteenth are not followed; and

•
amend, alter, change, repeal, or adopt any provision inconsistent with Article Thirteenth of the Certificate of Incorporation.

As is the case in the supermajority vote requirements in Article Eleventh of the Certificate of Incorporation described above in Item No. 5, the supermajority vote requirements contained in Article Thirteenth of the Certificate of Incorporation are 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. Specifically, the supermajority vote requirements contained in Article Thirteenth, which were added to the Certificate of Incorporation following stockholder approval in 1987, are designed to deter an acquiring party from using two-tier pricing and similar inequitable tactics in an attempt to take over the Company and help assure fair treatment of all stockholders in the event of a takeover attempt. While the Board believes that the protection that the supermajority vote requirements in Article Thirteenth provide is important and is in the best interest of the Company and its stockholders, the Board also notes that many stockholders and commentators now view these provisions as limiting a board's accountability to stockholders and the ability of stockholders to effectively participate in corporate governance. In addition, others have argued that supermajority vote requirements for "fair price" provisions have the effect of discouraging legitimate offers for a company by making them more expensive.

The Board is committed to implementing and maintaining effective corporate governance policies and practices which ensure that the Company is governed with high standards of ethics, integrity, and accountability and in the best interest of the Company's stockholders. After considering stockholder input, including a stockholder proposal, and the arguments in favor of and against the existing supermajority vote requirements in Article Thirteenth, the Board has determined that lowering the voting requirements from 75% to 66-2/3% is more reflective of current practice and will enhance accountability to stockholders while preserving the legitimate protections afforded by the supermajority vote requirements in Article Thirteenth.

As a result, the Board of Directors voted to approve, and to recommend to the Company's stockholders that they approve, a proposal to amend Sections 1 and 6 of Article Thirteenth to reduce the 75% supermajority vote requirement to a 66-2/3% threshold to (a) approve certain Business Combinations with Interested Stockholders or (b) amend, alter, change, repeal, or adopt any provisions inconsistent with Article Thirteenth.

Amendment

The amendment to Sections 1 and 6 of Article Thirteenth of the Certificate of Incorporation will reduce the 75% supermajority vote requirement to a 66 2-3% vote requirement in order to:

•
approve a Business Combination with an Interested Stockholder if the minimum price and procedural requirements specified in Article Thirteenth are not followed; and

•
amend, alter, change, repeal, or adopt any provision inconsistent with Article Thirteenth of the Certificate of Incorporation.


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The text of the proposed amendment to Sections 1 and 6 of Article Thirteenth of the Certificate of Incorporation, marked to show changes from the current Sections 1 and 6 of Article Thirteenth, is included as Appendix C to this Proxy Statement.

The affirmative vote of at least 75% of the issued and outstanding shares of the Common Stock is required for approval of the amendment to Article Thirteenth of the Certificate of Incorporation as presented in this Item No. 6.

If the proposed amendment is approved by the Company's stockholders, it will become effective upon filing of a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware, which filing the Company would make promptly after the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM NO. 6.








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Audit Committee Report
 
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for establishing and maintaining adequate internal controls over financial reporting, including disclosure controls and procedures, and for preparing the Company’s consolidated financial statements. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited consolidated financial statements of the Company and its subsidiaries and management’s report on the Company’s internal control over financial reporting in the 2012 Annual Report to Stockholders attached hereto as Appendix E with management. The Audit Committee also reviews the Company’s quarterly and annual reporting on Forms 10-Q and 10-K prior to filing with the SEC. The Audit Committee’s review process includes discussions of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and estimates, and the clarity of disclosures in the financial statements.
The independent registered public accounting firm is responsible for expressing opinions on the conformity of the consolidated financial statements with accounting principles generally accepted in the United States and the effectiveness of the Company’s internal control over financial reporting with the criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Audit Committee has discussed with the independent registered public accounting firm the matters that are required to be discussed by Statement on Auditing Standards No. 61, as amended (American Institute of Certified Public Accountants, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T. In addition, the Audit Committee has discussed with the independent registered public accounting firm its independence from management and the Company as required under rules of the PCAOB and has received the written disclosures and letter from the independent registered public accounting firm required by the rules of the PCAOB. The Audit Committee also has considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with maintaining the firm’s independence.
The Audit Committee discussed the overall scope and plans with the Company’s internal auditors and independent registered public accounting firm for their respective audits. The Audit Committee meets with the internal auditors and the independent registered public accounting firm, with and without management present, to discuss the results of their audits, evaluations by management and the independent registered public accounting firm of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting. The Audit Committee also meets privately with the Company’s compliance officer. The Audit Committee held 10 meetings during 2012.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board approved) that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and filed with the SEC. The Audit Committee also reappointed Deloitte & Touche as the Company’s independent registered public accounting firm for 2013. Stockholders will be asked to ratify that selection at the Annual Meeting of Stockholders.
Members of the Audit Committee:

Jon A. Boscia, Chair
David J. Grain
Warren A. Hood, Jr.


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PRINCIPAL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The following represents the fees billed to the Company for the two most recent fiscal years by Deloitte & Touche — the Company’s principal independent registered public accounting firm for 2012 and 2011.
 
 
 
 
 
 
 
2012

2011
 
 
(in thousands)
 
 
 
 
 
Audit Fees (1)
$
11,695

$
10,970
 
 
Audit-Related Fees (2)
500

871
 
 
Tax Fees
0

0
 
 
All Other Fees (3)
31

24
 
 
Total
$
12,226

$
11,865
 
(1)
Includes services performed in connection with financing transactions.
(2)
Includes non-statutory audit services in both 2012 and 2011.
(3)
Represents registration fees for attendance at Deloitte & Touche-sponsored education seminars and subscription fees for Deloitte & Touche's technical accounting research tool.
The Audit Committee has adopted a Policy on Engagement of the Independent Auditor for Audit and Non-Audit Services (see Appendix D) that includes requirements for the Audit Committee to pre-approve services provided by Deloitte & Touche. This policy was initially adopted in July 2002 and, since that time, all services included in the chart above have been pre-approved by the Audit Committee.


 

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Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

This section describes the compensation program for the Company’s Chief Executive Officer and Chief Financial Officer in 2012, as well as each of the Company’s other three most highly compensated executive officers serving at the end of the year. Collectively, these officers are referred to as the named executive officers.

Thomas A. Fanning
Chairman of the Board, President, and Chief Executive Officer
Art P. Beattie
Executive Vice President and Chief Financial Officer
W. Paul Bowers
Executive Vice President of the Company and President and Chief Executive Officer of Georgia Power
Stephen E. Kuczynski
President and Chief Executive Officer of Southern Nuclear Operating Company, Inc. (Southern Nuclear)
Charles D. McCrary
Executive Vice President of the Company and President and Chief Executive Officer of Alabama Power Company (Alabama Power)

Executive Summary

Performance

Performance-based pay represents a substantial portion of the total direct compensation paid or granted to the named executive officers for 2012.


(1) Salary is the actual amount paid in 2012, Short-Term Performance Pay is the actual amount earned in 2012 based on performance, and Long-Term Performance Pay is the value on the grant date of stock options and performance shares granted in 2012. See the Summary Compensation Table for the amounts of all elements of reportable compensation described in this CD&A.

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Business unit financial and operational and Company earnings per share (EPS) goal results for 2012 are shown below:

Financial: 129% of Target
Operational: 169% of Target
EPS: 128% of Target

The Company’s total shareholder return has been:

1-Year: -3.4%
3-Year: 13.9%
5-Year: 7.1%

These levels of achievement resulted in payouts that were aligned with performance.

Compensation and Benefit Beliefs

The Company's compensation and benefit program is based on the following beliefs:

•
Employees' commitment and performance have a significant impact on achieving business results;
•
Compensation and benefits offered must attract, retain, and engage employees and must be financially sustainable;
•
Compensation should be consistent with performance: higher pay for higher performance and lower pay for lower performance; and
•
Both business drivers and culture should influence the compensation and benefit program.

Based on these beliefs, the Compensation Committee believes that the Company’s executive compensation program should:

•
Be competitive with the Company's industry peers;
•
Motivate and reward achievement of the Company’s goals;
•
Be aligned with the interests of the Company’s stockholders and its subsidiaries’ customers; and
•
Not encourage excessive risk-taking.

Executive compensation is targeted at the market median of industry peers, but actual compensation is primarily determined by achievement of the Company’s business goals. The Company believes that focusing on the customer drives achievement of financial objectives and delivery of a premium, risk-adjusted total shareholder return for the Company’s stockholders. Therefore, short-term performance pay is based on achievement of the Company’s operational and financial performance goals, with one-third determined by operational performance, such as safety, reliability, and customer satisfaction; one-third determined by business unit financial performance; and one-third determined by EPS performance. Long-term performance pay is tied to stockholder value with 40% of the target value awarded in stock options, which reward stock price appreciation, and 60% awarded in performance shares, which reward total shareholder return performance relative to that of industry peers and stock price appreciation.

Key Governance and Pay Practices

•    Annual pay risk assessment required by the Compensation Committee charter.
•
Retention by the Compensation Committee of an independent compensation consultant, Pay Governance, that provides no other services to the Company.
•
Inclusion of a claw-back provision that permits the Compensation Committee to recoup performance pay from any employee if determined to have been based on erroneous results, and requires recoupment from an executive officer in the event of a material financial restatement due to fraud or misconduct of the executive officer.
•    No excise tax gross-up on change-in-control severance arrangements.
•    Provision of limited perquisites with no income tax gross-ups, except on certain relocation-related benefits.
•    "No-hedging" provision in the Company’s insider trading policy that is applicable to all employees.
•    Strong stock ownership requirements that are being met by all named executive officers.

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ESTABLISHING EXECUTIVE COMPENSATION

The Compensation Committee establishes the executive compensation program. In doing so, the Compensation Committee uses information from others, principally Pay Governance. The Compensation Committee also relies on information from the Company’s Human Resources staff and, for individual executive officer performance, from the Company’s Chief Executive Officer. The role and information provided by each of these sources is described throughout this CD&A.

Consideration of Advisory Vote on Executive Compensation

The Compensation Committee considered the stockholder vote on the Company’s executive compensation at the 2012 Annual Meeting of Stockholders. In light of the significant support of the stockholders (95% of votes cast voting in favor of the proposal) and the actual payout levels of the performance-based compensation program, the Compensation Committee continues to believe that the Company’s executive compensation program is competitive and is aligned with the Company’s financial and operational performance and is in the best interests of the Company, its stockholders, and its subsidiaries' customers.

Executive Compensation Focus

The executive compensation program places significant focus on rewarding performance. The program is performance-based in several respects:

•
Business unit performance, which includes return on equity (ROE) or net income, and operational performance, compared to target performance levels established early in the year, and EPS determine the actual payouts under the short-term (annual) performance-based compensation program (Performance Pay Program).
•    Common Stock price changes result in higher or lower ultimate values of stock options.
•
Total shareholder return compared to those of industry peers leads to higher or lower payouts under the Performance Share Program (performance shares).

In support of this performance-based pay philosophy, the Company has no general employment contracts or guaranteed severance with the named executive officers, except upon a change in control.

The pay-for-performance principles apply not only to the named executive officers but to thousands of employees. The Performance Pay Program covers almost all of the 26,000 employees of the Southern Company system. Stock options and performance shares are granted to approximately 3,500 employees of the Southern Company system. These programs engage employees, which ultimately is good not only for them, but also for the Company and its stockholders.

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OVERVIEW OF EXECUTIVE COMPENSATION COMPONENTS

The primary components of the 2012 executive compensation program are shown below:
  
The Company’s executive compensation program consists of a combination of short-term and long-term components. Short-term compensation includes base salary and the Performance Pay Program. Long-term performance-based compensation includes stock options, performance shares, and, in some cases, restricted stock units. The performance-based compensation components are linked to the Company’s financial and operational performance, Common Stock performance, and total shareholder return. The executive compensation program is approved by the Compensation Committee, which consists entirely of independent directors. The Compensation Committee believes that the executive compensation program is a balanced program that provides market-based compensation and motivates and rewards performance.


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ESTABLISHING MARKET-BASED COMPENSATION LEVELS

For the named executive officers, the Compensation Committee reviews compensation data from large, publicly-owned electric and gas utilities. The data was developed and analyzed by Pay Governance. The companies included each year in the primary peer group are those whose data is available through the consultant’s database. Those companies are drawn from this list of primarily regulated utilities of $6 billion in revenues and up.

Ameren Corporation
Exelon Corporation
American Electric Power Company, Inc.
FirstEnergy Corp.
Bg US Services, Inc.
Kinder Morgan Energy Partners, L.P.
Calpine Corporation
MidAmerican Energy Company
CenterPoint Energy, Inc.
NextEra Energy, Inc.
CMS Energy Corporation
NRG Energy, Inc
Consolidated Edison, Inc.
Pepco Holdings, Inc
Constellation Energy Group, Inc.
PG&E Corporation
DCP Midstream LLC
PPL Corporation
Dominion Resources, Inc.
Progress Energy, Inc.
DTE Energy Company
Public Service Enterprise Group Inc.
Duke Energy Corporation
Sempra Energy
Edison International
Tennessee Valley Authority
Enbridge Energy Partners, LP
The Williams Companies, Inc.
Energy Future Holdings Corp.
Xcel Energy Inc.
Entergy Corporation


The Company is one of the largest utility holding companies in the United States based on revenues and market capitalization, and its largest business units are some of the largest in the industry as well. For that reason, Pay Governance uses size-appropriate survey market data in order to fit it to the scope of the Company’s business.

Market data for the chief executive officer position and other positions in terms of scope of responsibilities that most closely resemble the positions held by the named executive officers is reviewed. When appropriate, the market data is size-adjusted, up or down, to accurately reflect comparable scopes of responsibilities. Based on that data, a total target compensation opportunity is established for each named executive officer. Total target compensation opportunity is the sum of base salary, annual performance-based compensation at a target performance level, and long-term performance-based compensation (stock options and performance shares) at a target value. Actual compensation paid may be more or less than the total target compensation opportunity based on actual performance above or below target performance levels. As a result, the compensation program is designed to result in payouts that are market-appropriate given the Company’s performance for the year or period.

A specified weight was not targeted for base salary or annual or long-term performance-based compensation as a percentage of total target compensation opportunities, nor did amounts realized or realizable from prior compensation serve to increase or decrease 2012 compensation amounts. Total target compensation opportunities for senior management as a group, including the named executive officers, are managed to be at the median of the market for companies of similar size in the electric utility industry. Therefore, some executives may be paid above and others below market. This practice allows for differentiation based on time in the position, scope of responsibilities, and individual performance. The differences in the total pay opportunities for each named executive officer are based almost exclusively on the differences indicated by the market data for persons holding similar positions. Because of the use of market data from a large number of industry peer companies for positions that are not identical in terms of scope of responsibility from company to company, differences are not considered to be material and the compensation program is believed to be market-appropriate, as long as senior management as a group is within an appropriate range. Generally, compensation is considered to be within an appropriate range if it is not more or less than 15% of the applicable market data.


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The total target compensation opportunity was established in early 2012 for each named executive officer. As the chart below depicts, the fixed pay (base salary) for Mr. Fanning is 15% of his total target compensation opportunity and ranges from 25% to 31% for the other named executive officers. Variable (at risk) performance-based compensation is 85% for Mr. Fanning and 69% to 75% for the other named executive officers.
The salary levels shown above were not effective until March 2012. Therefore, the salary amounts reported in the Summary Compensation Table are different than the amounts shown above because that table reports actual amounts paid in 2012.

For purposes of comparing the value of the compensation program to the market data, stock options are valued at $3.39 per option and performance shares at $41.99 per unit. These values represent risk-adjusted present values on the date of grant and are consistent with the methodologies used to develop the market data. The mix of stock options and performance shares granted were 40% and 60%, respectively, of the long-term value shown above.

In 2011, Pay Governance analyzed the level of actual payouts for 2010 performance under the annual Performance Pay Program to the named executive officers relative to performance versus peer companies to provide a check on the goal-setting process, including goal levels and associated performance-based pay opportunities. The findings from the analysis were used in establishing performance goals and the associated range of payouts for goal achievement for 2012. That analysis was updated in 2012 by Pay Governance for 2011 performance, and those findings were used in establishing goals for 2013.

DESCRIPTION OF KEY COMPENSATION COMPONENTS

2012 Base Salary

Most employees, including all of the named executive officers, received base salary increases in 2012. Base salary increases for each of the named executive officers were recommended in 2012 for the Compensation Committee’s approval by Mr. Fanning, except for his own salary. Those recommendations took into account the market data provided by the Compensation Committee’s independent compensation consultant, as well as the need to retain an experienced team, internal equity, time in position, and individual performance. Individual performance includes the degree of competence and initiative exhibited and the individual’s relative contribution to the results of operations in prior years. The Compensation Committee approved the recommended salaries in 2012.

Base salaries were increased 3% for Messrs. Bowers, Kuczynski, and McCrary. Base salaries for Messrs. Beattie and Fanning were significantly below market and were increased 13% and 5%, respectively.

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2012 Performance-Based Compensation

This section describes performance-based compensation for 2012.

Achieving Operational and Financial Performance Goals — The Guiding Principle for Performance-Based Compensation
The Southern Company system's number one priority is to continue to provide customers outstanding reliability and superior service at reasonable prices while achieving a level of financial performance that benefits the Company’s stockholders in the short- and long- term. Operational excellence and business unit and Company financial performance are integral to the achievement of business results that benefit customers and stockholders.

Therefore, in 2012, the Company strove for and rewarded:

•    Continuing industry-leading reliability and customer satisfaction, while maintaining reasonable retail prices; and
•    Meeting energy demand with the best economic and environmental choices.

In 2012, the Company also focused on and rewarded:

•    EPS growth;
•    ROE – target performance level in the top quartile of comparable electric utilities;
•    Dividend growth;
•    Long-term, risk-adjusted total shareholder return; and
•    Financial integrity — an attractive risk-adjusted return, sound financial policy, and a stable "A" credit rating.

The performance-based compensation program is designed to encourage achievement of these goals.

Mr. Fanning, with the assistance of the Company's Human Resources staff, recommended to the Compensation Committee the program design and award amounts for senior management, including the named executive officers (other than Mr. Fanning).

2012 Annual Performance-Based Pay Program

Annual Performance Pay Program Highlights

•
Rewards achievement of annual goals:
•
EPS
•
Business unit financial performance (ROE or net income)
•
Business unit operational performance
•
Goals are weighted one-third each
•
Performance results range from 0% to 200% of target, based on level of goal achievement

Overview of Program Design

Almost all employees of the Southern Company system, including the named executive officers, are participants.

The performance goals are set at the beginning of each year by the Compensation Committee.

•
For the traditional operating companies (Alabama Power, Georgia Power, Gulf Power Company (Gulf Power), and Mississippi Power), operational goals are safety, customer satisfaction, plant availability, transmission and distribution system reliability, and culture. For the nuclear operating company, Southern Nuclear, operational goals are safety, plant operations, and culture. Each of these operational goals is explained in more detail under Goal Details below. The level of achievement for each operational goal is determined according to the respective performance schedule, and the total operational goal performance is determined by the weighted average result. Each business unit has its own operational goals.
•
EPS is defined as the Company’s earnings from continuing operations divided by average shares outstanding during the year. The EPS performance measure is applicable to all participants in the Performance Pay Program.

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•
For the traditional operating companies, the business unit financial performance goal is ROE, which is defined as the traditional operating company’s net income divided by average equity for the year. For Southern Power Company (Southern Power), the business unit financial performance goal is net income, excluding net income from acquisitions.

The Compensation Committee may make adjustments, both positive and negative, to goal achievement for purposes of determining payouts. For the financial performance goals, such adjustments could include the impact of items considered non-recurring or outside of normal operations or not anticipated in the business plan when the EPS goal was established and of sufficient magnitude to warrant recognition. The EPS goal results were decreased two cents per share to exclude the impact of an insurance recovery related to the MC Asset Recovery, LLC (MCAR) litigation settlement. This reduction decreased average payouts approximately seven percent. The Compensation Committee believed this adjustment was necessary because EPS goal results were increased in 2009 by the amount of the MCAR litigation settlement.

Under the terms of the program, no payout can be made if the Company’s current earnings are not sufficient to fund the Common Stock dividend at the same level or higher than the prior year.

Goal Details

Operational Goals
Description
Why It Is Important
Customer Satisfaction
Customer satisfaction surveys evaluate performance. The survey results provide an overall ranking for each traditional operating company, as well as a ranking for each customer segment: residential, commercial, and industrial.
Customer satisfaction is key to operations. Performance of all operational goals affect customer satisfaction.
Reliability
Transmission and distribution system reliability performance is measured by the frequency and duration of outages. Performance targets for reliability are set internally based on recent historical performance.
Reliably delivering power to customers is essential to operations.
Availability
Peak season equivalent forced outage rate is an indicator of availability and efficient generation fleet operations during the months when generation needs are greatest. Availability is measured as a percentage of the hours of forced outages out of the total generation hours.
Availability of sufficient power during peak season fulfills the obligation to serve and provide customers with the least cost generating resources.
Nuclear Plant Operations
Nuclear plant performance is evaluated by measuring nuclear safety as rated by independent industry evaluators, as well as by a quantitative score comprised of various plant performance indicators. Plant reliability and operational availability is measured as a percentage of time the nuclear plant is operating, and accommodates generation reductions associated with planned outages. In addition, a subjective assessment of progress on the construction and licensing of Georgia Power’s two new nuclear units, Plant Vogtle Units 3 and 4, is also in place.
Safe and efficient operation of the nuclear fleet is important for delivering clean energy at a reasonable price.

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Operational Goals (continued)
Description
Why It Is Important
Safety
The Company's Target Zero program is focused on continuous improvement in having a safe work environment. The performance is measured by the applicable company's ranking, as compared to peer utilities in the Southeastern Electric Exchange.
Essential for the protection of employees, customers, and communities.
Culture
The culture goal seeks to improve the Company's inclusive workplace. This goal includes measures for work environment (employee satisfaction survey), representation of minorities and females in leadership roles (subjectively assessed), and supplier diversity.
Supports workforce development efforts and helps to assure diversity of suppliers.

Financial Performance Goals
Description
Why It Is Important
EPS
The Company's earnings from continuing operations divided by average shares outstanding during the year.
Supports commitment to provide stockholders solid risk-adjusted returns.
Business Unit ROE/Net Income
For the traditional operating companies, the business unit financial performance goal is ROE, which is defined as the traditional operating company’s net income divided by average equity for the year. For Southern Power, the business unit financial performance goal is net income, excluding net income from acquisitions.
Supports delivery of stockholder value and contributes to the Company's sound financial policies and stable credit ratings.

The ranges of performance levels established for the primary operational goals are detailed below.

Level of
Performance
Customer
Satisfaction
Reliability
Availability
Nuclear Plant Operations
Safety
Culture
Maximum
Top quartile for all customer segments
and overall
Significantly
exceed targets
Industry best
Significantly
exceed targets
Greater than
top 10th
percentile and Company best
Significant
improvement
Target
Top quartile overall
Meet targets
Top quartile
Meet targets
Top 40th
percentile
Improvement
Threshold
2nd quartile overall
Significantly below targets
2nd quartile
Significantly
below targets
Top 60th
percentile
Significantly below expectations

The Compensation Committee approves specific objective performance schedules to calculate performance between the threshold, target, and maximum levels for each of the operational goals. If goal achievement is below threshold, there is no payout associated with the applicable goal.

EPS and Business Unit Financial Performance:

The range of EPS, ROE, and Southern Power net income goals for 2012 is shown below. ROE goals vary from the allowed retail ROE range due to state regulatory accounting requirements, wholesale activities, other non-jurisdictional revenues and expenses, and other activities not subject to state regulation.


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Level of Performance


EPS ($)


ROE (%)
Southern Power
Net Income ($)
(millions) (1)
Maximum
2.77
14.0
195
Target
2.64
12.0
155
Threshold
2.51
10.0
115
(1)
Excluding net income from acquisitions.

For 2012, the Compensation Committee established a minimum EPS performance threshold that must be achieved. If EPS was less than $2.38 (90% of Target), not only would there have been no payout associated with EPS performance, but overall payouts under the Performance Pay Program would have been reduced by 10% of target.

In setting the goals for pay purposes, the Compensation Committee relies on information on financial and operational goals from the Finance Committee and the Nuclear/Operations Committee of the Company’s Board of Directors, respectively. For more information on these committees’ responsibilities, see the committee descriptions in this Proxy Statement.

2012 Achievement

Actual payouts were determined by adding the payouts derived from EPS and applicable business unit operational and financial performance goal achievement for 2012 and dividing by three. EPS exceeded the minimum threshold established and therefore payouts were not affected. Actual 2012 goal achievement is shown in the following tables.

Operational Goal Results:

Corporate
Aggregate Operating Company Goal
Achievement Percentage
Customer Satisfaction
167
Reliability
174
Availability
170
Safety
200
Culture
138

Alabama Power
Goal
Achievement Percentage
Customer Satisfaction
200
Reliability
174
Availability
200
Safety
164
Culture
123

Georgia Power
Goal
Achievement Percentage
Customer Satisfaction
167
Reliability
171
Availability
77
Safety
163
Culture
141


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Southern Nuclear
Southern Nuclear Goal
Achievement Percentage
Nuclear Safety
162
Nuclear Reliability
200
Vogtle Units 3 and 4 Assessment
150
Culture
139

Overall, the levels of achievement shown above resulted in an operational goal performance factor for Corporate, Alabama Power, Georgia Power, and Southern Nuclear of 169%, 175%, 143%, and 171%, respectively.

Financial Performance Goal Results:
Goal
Result
Achievement Percentage
EPS (excluding MCAR insurance recovery)
$2.67
128
Alabama Power ROE
13.10%
155
Georgia Power ROE
12.76%
138
Average Alabama Power and Georgia Power ROE
12.93%
147
Aggregate ROE
12.55%
129
Southern Power net income (excluding $4.5 million from acquisitions)
$171 million
140

Calculating Payouts:

Each named executive officer had a target Performance Pay Program opportunity, based on his position, set by the Compensation Committee at the beginning of 2012. Targets are set as a percentage of base salary. Mr. Fanning’s target was set at 115%. For Messrs. Beattie, Bowers, and McCrary, the targets were set at 75% each and, for Mr. Kuczynski, it was set at 65%. All of the named executive officers are paid based on EPS performance. The business unit goals that determine payout levels vary based on the named executive officer’s leadership role. For Messrs. Bowers and McCrary, payout is based on achievement of the ROE and operational goals of Georgia Power and Alabama Power, respectively. For Mr. Kuczynski, payout is based on the average ROE for Alabama Power and Georgia Power and the nuclear operations goals. For Messrs. Fanning and Beattie, payout is based on the aggregate ROE goal performance results for the traditional operating companies (90%) and Southern Power net income (10%) and the traditional operating companies’ operational goal results (90%) and nuclear operations goal results (10%).

A total performance factor is determined by adding the EPS and applicable business unit financial and operational goal performance results and dividing by three. The total performance factor is multiplied by the target Performance Pay Program opportunity to determine the payout for each named executive officer.

The table below shows the pay opportunity at target-level performance and the actual payout based on the actual performance shown above.
 
Target Annual
Performance
Pay Program
Opportunity ($)

Total
Performance
Factor (%)
Actual Annual
Performance
Pay Program
Payout ($)
T. A. Fanning
1,293,750
142
1,837,125
A. P. Beattie
471,549
142
669,600
W. P. Bowers
557,689
136
758,457
S. E. Kuczynski
418,438
148
619,288
C. D. McCrary
586,027
152
890,761



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Long-Term Performance-Based Compensation

2012 Long-Term Pay Program Highlights
•
Stock Options:
•
Reward long-term Common Stock price appreciation
•
Represent 40% of long-term target value
•
Vest over three years
•
Ten-year term
•
Performance Shares:
•
Reward total shareholder return relative to industry peers and stock price appreciation
•
Represent 60% of long-term target value
•
Three-year performance period
•
Performance results can range from 0% to 200% of target
•
Paid in Common Stock at end of performance period
•
Restricted Stock Units
•
Used to promote retention of key employees or to attract key employees by replacing award values forfeited upon leaving a former employer
•
Continued employment until vesting date(s) is required
•
Paid in Common Stock upon vesting

Long-term performance-based awards are intended to promote long-term success and increase stockholder value by directly tying a substantial portion of the named executive officers’ total compensation to the interests of stockholders. The long-term awards provide an incentive to grow stockholder value.

Stock options represent 40% of the long-term performance target value and performance shares represent the remaining 60%. The Compensation Committee elected this mix because it concluded that doing so represented an appropriate balance between incentives. Stock options only generate value if the price of the stock appreciates after the grant date, and performance shares reward employees based on Southern Company's total shareholder return relative to industry peers, as well as Common Stock price. The Compensation Committee also awards Restricted Stock Units occasionally, typically as retention awards or to attract key employees by replacing the value of awards that are forfeited upon leaving a former employer.

The following table shows the grant date fair value of the long-term performance-based awards granted in 2012, except restricted stock units.

 
Value of
Options ($)
Value of
Performance Shares($)
Total Long-Term
Value ($) (1)
T. A. Fanning
2,025,000
3,037,473
5,062,473
A. P. Beattie
515,558
773,300
1,288,858
W. P. Bowers
669,227
1,003,813
1,673,040
S. E. Kuczynski
411,997
617,967
1,029,964
C. D. McCrary
703,232
1,054,831
1,758,063

(1) Mr. Fanning’s long-term value was adjusted upward by the Compensation Committee from 425% of base salary to 450% of base salary in recognition of his outstanding performance in 2011.

Stock Options

Stock options granted have a 10-year term, vest over a three-year period, fully vest upon retirement or termination of employment following a change in control, and expire at the earlier of five years from the date of retirement or the end of the 10-year term. For the grants made in 2012, unvested options are forfeited if the named executive officer retires from the Southern Company system and accepts a position with a peer company within two years of retirement. The value of each stock option was derived using the Black-Scholes stock option pricing model. The assumptions used in calculating that amount are discussed in Note 8 to the financial statements in the 2012 Annual Report attached as Appendix E to this Proxy Statement (Financial Statements). For 2012, the Black-Scholes value on the grant date was $3.39 per stock option.


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Performance Shares

2012-2014 Grant

Performance shares are denominated in units, meaning no actual shares are issued on the grant date. A grant date fair value per unit was determined. For the grant made in 2012, the value per unit was $41.99. See the Summary Compensation Table and the information accompanying it for more information on the grant date fair value. The total target value for performance share units is divided by the value per unit to determine the number of performance share units granted to each participant, including the named executive officers. Each performance share unit represents one share of Common Stock. At the end of the three-year performance period (January 1, 2012 through December 31, 2014), the number of units will be adjusted up or down (0% to 200%) based on the Company’s total shareholder return relative to that of its peers in the Philadelphia Utility Index and the custom peer group. The companies in the custom peer group are those that are believed to be most similar to the Company in both business model and investors. The Philadelphia Utility Index was chosen because it is a published index and, because it includes a larger number of peer companies, it can mitigate volatility in results over time, providing an appropriate level of balance. The peer groups vary from the Market Data peer group due to the timing and criteria of the peer selection process; however, there is significant overlap. The results of the two peer groups will be averaged. The number of performance share units earned will be paid in Common Stock at the end of the three-year performance period. No dividends or dividend equivalents will be paid or earned on the performance share units.

The companies in the Philadelphia Utility Index on the grant date are listed below.

Ameren Corporation
Entergy Corporation
American Electric Power Company, Inc.
Exelon Corporation
CenterPoint Energy, Inc.
FirstEnergy Corp.
Consolidated Edison, Inc.
NextEra Energy, Inc.
Covanta Holding Corporation
Northeast Utilities
Dominion Resources, Inc.
PG&E Corporation
DTE Energy Company
Public Service Enterprise Group Inc.
Duke Energy Corporation
The AES Corporation
Edison International
Xcel Energy Inc.
El Paso Electric Company
 

The companies in the custom peer group on the grant date are listed below.

Alliant Energy Corporation
NSTAR
American Electric Power Company, Inc.
PG&E Corporation
CMS Energy Corporation
Pinnacle West Capital Corporation
Consolidated Edison, Inc.
Progress Energy, Inc.
DTE Energy Company
SCANA Corporation
Duke Energy Corporation
Wisconsin Energy Corporation
Edison International
Xcel Energy Inc.
Northeast Utilities
 

The scale below will determine the number of units paid in Common Stock following the last year of the performance period, based on the 2012 through 2014 performance period. Payout for performance between points will be interpolated on a straight-line basis.


Performance vs. Peer Groups
Payout (% of Each
Performance Share Unit Paid)
90th percentile or higher (Maximum)
200
50th percentile (Target)
100
10th percentile (Threshold)
0

Performance shares are not earned until the end of the three-year performance period. A participant who terminates, other than due to retirement or death, forfeits all unearned performance shares. Participants who retire or die during the performance period only earn a prorated number of units, based on the number of months they were employed during the performance period.

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2010-2012 Payouts

The first performance share grants were made in 2010 with a three-year performance period that ended on December 31, 2012. Based on the Company’s total shareholder return achievement relative to that of the Philadelphia Utility Index (152.5%) and the custom peer group (117.5%), the payout percentage was 135% of target. The following table shows the target and actual awards of performance shares for the named executive officers.

 
Target
Performance Shares (#)

Performance Shares Earned (#)
T. A. Fanning
25,956
35,041
A. P. Beattie
4,150
5,603
W. P. Bowers
25,920
34,992
S. E. Kuczynski (1)
0
0
C. D. McCrary
25,861
34,912
(1) Mr. Kuczynski was not an employee of the Southern Company system until 2011.

Performance Dividends

The Compensation Committee terminated the Performance Dividend Program in 2010. The value of performance dividends represented a significant portion of long-term performance-based compensation that was awarded prior to 2010. At target performance levels, performance dividends represented up to 65% of the total long-term value granted over the 10-year term of stock options. Therefore, because performance dividends were awarded for years prior to 2010, in fairness to participants, the outstanding performance dividend awards were not cancelled. The Compensation Committee approved a three-year transition period, beginning with the 2007 through 2010 performance-measurement period, to continue to pay performance dividends, if earned, on stock options that were granted prior to 2010. The grant of performance shares, described above, replaced performance dividend awards beginning in 2010. Therefore, the final payout of performance dividends was made on stock options granted prior to 2010 that were outstanding at the end of the four-year performance-measurement period that ended on December 31, 2012, as reported in the Summary Compensation Table. Because performance shares are earned at the end of a three-year performance period, both the last award of performance dividends and the first award of performance shares were earned at the end of 2012.

Performance dividends ranged from 0% to 100% of the Common Stock dividend paid during the year per eligible stock option held at the end of the performance-measurement period. Actual payout depended on the Company’s total shareholder return over a four-year performance-measurement period compared to a group of other electric and gas utility companies, as selected at the beginning of the performance-measurement period. The Compensation Committee selected a custom peer group and the Philadelphia Utility Index for the 2009 through 2012 grant. Total shareholder return is calculated by measuring the ending value of a hypothetical $100 invested in each custom peer group company’s common stock and in the Philadelphia Utility Index at the beginning of each of 16 quarters. In the final year of the performance-measurement period, the Company’s ranking in the peer groups was determined at the end of each quarter and the percentile ranking was multiplied by the actual Common Stock dividend paid in that quarter. To determine the total payout per stock option held at the end of the performance-measurement period, the four quarterly amounts earned were added together.

No performance dividends are paid if the Company’s earnings are not sufficient to fund a Common Stock dividend at least equal to that paid in the prior year.

2012 Payout

The peer groups used to determine the 2012 payout for the 2009 through 2012 performance-measurement period consisted of the Philadelphia Utility Index and a custom peer group. See the discussion of performance shares in this CD&A for more information about the peer groups.

The scale below determined the percentage of each quarter’s dividend paid in the last year of the performance-measurement period to be paid on each eligible stock option held at December 31, 2012, based on performance during the 2009 through 2012 performance-measurement period. Payout for performance between points was interpolated on a straight-line basis.


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Performance vs. Peer Group
Payout (% of Each
Quarterly Dividend Paid)
90th percentile or higher
100
50th percentile (Target)
50
10th percentile or lower
0

The Company’s relative total shareholder return performance, as measured at the end of each quarter of the final year of the four-year performance-measurement period, resulted in a total payout of 70% of the target level (35% of the full year’s Common Stock dividend), or $0.68. This amount was multiplied by each named executive officer’s eligible outstanding stock options as of December 31, 2012 to calculate the payout under the program. The amount paid is included in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table.

Restricted Stock Units

In limited situations, restricted stock units are granted to address specific needs, including retention. If the recipient voluntarily terminates or is involuntarily terminated for cause, restricted stock units are forfeited. If the recipient remains employed with the Southern Company system or is involuntarily terminated not for cause, the restricted stock units will vest and be paid in Common Stock. These awards serve two primary purposes. They further align the recipient’s interests with those of the Company's stockholders and they provide strong retention value. The Compensation Committee granted Mr. McCrary 43,908 restricted stock units that will vest on December 31, 2014 if he remains employed with the Southern Company system through the vesting date. On the grant date, the units were valued at $2,000,009. The Compensation Committee believes that given Mr. McCrary’s expertise and age there is a retention risk and therefore providing a retention award was in the best interest of the Company. The Compensation Committee also sought advice from Pay Governance in determining market practice and the appropriate value of the award. See the Summary Compensation Table and Grants of Plan-Based Awards table and accompanying information for more information on this award of restricted stock units. Restricted stock units were granted to Messrs. Bowers and Kuczynski in 2010 and 2011, respectively, which are described in the Outstanding Equity Awards table and accompanying information.

Timing of Performance-Based Compensation

As discussed above, the 2012 annual Performance Pay Program goals and the total shareholder return goals applicable to performance shares were established early in the year by the Compensation Committee. Annual stock option grants also were made by the Compensation Committee. The establishment of performance-based compensation goals and the granting of stock options were not timed with the release of material, non-public information. This procedure is consistent with prior practices. Stock option grants are made to new hires or newly-eligible participants on preset, regular quarterly dates that were approved by the Compensation Committee. The exercise price of options granted to employees in 2012 was the closing price of the Common Stock on the grant date or the last trading day before the grant date, if the grant date was not a trading day.

Retirement and Severance Benefits

Certain post-employment compensation is provided to employees, including the named executive officers.

Retirement Benefits

Generally, all full-time employees of the Southern Company system participate in the funded Pension Plan after completing one year of service. Normal retirement benefits become payable when participants attain age 65 and complete five years of participation. The Company also provides unfunded benefits that count salary and annual Performance Pay Program payouts that are ineligible to be counted under the Pension Plan. See the Pension Benefits table and accompanying information for more pension-related benefits information.

The Company also provides the Deferred Compensation Plan 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. 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. All of the named executive officers are eligible to participate in the Deferred Compensation Plan. See the Nonqualified Deferred Compensation table and accompanying information for more information about the Deferred Compensation Plan.

Change-in-Control Protections

Change-in-control protections, including severance pay and, in some situations, vesting or payment of long-term performance-based awards, are provided upon a change in control of the Company coupled with an involuntary termination not for cause or a voluntary

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termination for "Good Reason." This means there is a "double trigger" before severance benefits are paid; i.e., there must be both a change in control and a termination of employment. Severance payment amounts are two times salary plus target Performance Pay Program opportunity for the named executive officers, except for Mr. Fanning whose severance payment amount is three times salary plus Performance Pay Program opportunity. No excise tax gross-up would be provided. More information about severance arrangements is included in the section entitled Potential Payments upon Termination or Change-in-Control.

Perquisites

The Company provides limited perquisites to its executive officers, including the named executive officers. The perquisites provided in 2012, including amounts, are described in detail in the information accompanying the Summary Compensation Table. No tax assistance is provided on perquisites, except on certain relocation-related benefits.

EXECUTIVE STOCK OWNERSHIP REQUIREMENTS

Officers of the Company and its subsidiaries that are in a position of Vice President or above are subject to stock ownership requirements. All of the named executive officers are covered by the requirements. Ownership requirements further align the interest of officers and stockholders by promoting a long-term focus and long-term share ownership.

The types of ownership arrangements counted toward the requirements are shares owned outright, those held in Company-sponsored plans, and Common Stock accounts in the Deferred Compensation Plan and the Supplemental Benefit Plan. One-third of vested stock options may be counted, but, if so, the ownership requirement is doubled. The ownership requirement is reduced by one-half at age 60. Mr. McCrary is over age 60.

The requirements are expressed as a multiple of base salary as shown below.

 
Multiple of Salary without
Counting Stock Options
Multiple of Salary Counting
1/3 of Vested Options
T. A. Fanning
5 Times
10 Times
A. P. Beattie
3 Times
6 Times
W. P. Bowers
3 Times
6 Times
S. E. Kuczynski
3 Times
6 Times
C. D. McCrary
1.5 Times
3 Times
Newly-elected officers have approximately five years from the date of their election to meet the applicable ownership requirement and newly-promoted officers, including Messrs. Fanning, Beattie, and Kuczynski, have approximately five years from the date of their promotion to meet the increased ownership requirements. All of the named executive officers are meeting their respective ownership requirements.

IMPACT OF ACCOUNTING AND TAX TREATMENTS ON COMPENSATION

Section 162(m) of the Internal Revenue Code of 1986, as amended (Code), limits the tax deductibility of the compensation of the named executive officers that exceeds $1 million per year unless the compensation is paid under a performance-based plan as defined in the Code that has been approved by stockholders. The Company has obtained stockholder approval of the Omnibus Incentive Compensation Plan, under which most of the performance-based compensation is paid. For tax purposes, in order to ensure that annual performance-based compensation is fully deductible under Section 162(m) of the Code, in February 2012, the Compensation Committee approved a formula that represented a maximum annual performance-based compensation amount payable. For 2012 performance, the Compensation Committee used (for annual performance-based compensation) negative discretion from the formula amount to determine the actual payouts pursuant to the methodologies described above. Because the Company’s policy is to maximize long-term stockholder value, as described fully in this CD&A, tax deductibility is not the only factor considered in setting compensation.

POLICY ON RECOVERY OF AWARDS

The Company’s Omnibus Incentive Compensation Plan provides that, if the Company is required to prepare an accounting restatement due to material noncompliance as a result of misconduct, and if an executive officer of the Company knowingly or grossly negligently

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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 the Company 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.

POLICY REGARDING HEDGING THE ECONOMIC RISK OF STOCK OWNERSHIP

The Company’s policy is that employees and outside Directors will not trade Company options on the options market and will not engage in short sales.

COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE REPORT

The Compensation Committee met with management to review and discuss the CD&A. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the CD&A be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and in this Proxy Statement. The Board of Directors approved that recommendation.

Members of the Compensation Committee:

Veronica M. Hagen, Chair
Henry A. Clark III
H. William Habermeyer, Jr.
William G. Smith, Jr.




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SUMMARY COMPENSATION TABLE
 
The Summary Compensation Table shows the amount and type of compensation received or earned in 2010, 2011, and 2012 by the named executive officers, except as noted below.

 Name and
Principal
Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)
Stock
Awards
($)
(e)
Option
Awards
($)
(f)
Non-Equity
Incentive
Plan
Compensation
($)
(g)
Change in Pension Value and Nonqualified
Deferred
Compensation
Earnings
($)
(h)
All Other
Compensation
($)
(i)
Total
($)
(j)
Thomas A. Fanning
Chairman,
President,
and Chief
Executive
Officer
2012
1,114,846

—

3,037,473

2,025,000

2,078,158

4,712,413

67,458

13,035,348

2011
1,064,399

—

2,246,974

1,498,000

2,459,181

2,423,524

62,164

9,754,242

2010
809,892

—

782,054

521,378

1,951,986

1,902,932

50,909

6,019,151

Art P. Beattie
Executive Vice
President and Chief
Financial Officer
2012
615,378

—

773,330

515,558

737,382

2,747,374

34,352

5,423,374

2011
552,614

—

684,365

456,248

772,343

1,523,479

83,471

4,072,520

2010
385,211

53,500

125,040

83,366

635,909

1,135,073

530,681

2,948,780

W. Paul Bowers
President and Chief Executive Officer, Georgia Power
2012
739,587

42

1,003,813

669,227

1,013,366

2,024,578

50,830

5,501,443

2011
715,845

—

801,340

534,225

1,232,850

1,317,429

42,052

4,643,741

2010
652,189

—

1,948,515

520,654

1,276,879

884,674

43,636

5,326,547

Stephen E. Kuczynski
President and Chief Executive Officer, Southern Nuclear
2012
640,289

—

617,967

411,997

619,288

77,727

101,886

2,469,154

2011
312,500

75,000

799,990

999,997

328,067

—

218,811

2,734,365

Charles D. McCrary
President and Chief
Executive Officer,
Alabama Power
2012
777,167

—

3,054,840

703,232

1,028,204

2,437,448

44,722

8,045,613

2011
752,219

—

842,058

561,369

1,424,219

1,733,395

44,676

5,357,936

2010
704,520

—

779,192

519,461

1,534,615

919,066

42,285

4,499,139


Column (a)

Mr. Kuczynski was not an executive officer of the Company prior to 2011.

Column (d)

This column reports the value of a non-cash safety award. All employees of Georgia Power, including Mr. Bowers, with a perfect individual safety record in the prior year, earned a safety award.

Column (e)

This column does not reflect the value of stock awards that were actually earned or received in 2012. Rather, as required by applicable rules of the SEC, this column reports the aggregate grant date fair value of performance shares granted in 2012. The value reported is based on the probable outcome of the performance conditions as of the grant date, using a Monte Carlo simulation model. No amounts will be earned until the end of the three-year performance period on December 31, 2014. 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 2012 to Messrs. Fanning, Beattie, Bowers, McCrary, and Kuczynski, assuming that the highest level of performance is achieved, is $6,074,946, $1,546,660, $2,007,626, $2,109,662, and $1,235,934, respectively (200% of the amount shown in the table). For Mr. McCrary, the amount in column (e) also includes the grant date fair value ($2,000,009) of restricted stock units granted in 2012 as described in the CD&A. See Note 8 to the Financial Statements for a discussion of the assumptions used in calculating these amounts.

Column (f)

This column reports the aggregate grant date fair value of stock options granted in the applicable year. See Note 8 to the Financial Statements for a discussion of the assumptions used in calculating these amounts.


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Column (g)

The amounts in this column are the aggregate of the payouts under the annual Performance Pay Program and the Performance Dividend Program. The amount reported for the Performance Pay Program is for the one-year performance period that ended on December 31, 2012. The amount reported for performance dividends is the amount earned at the end of the four-year performance-measurement period of January 1, 2009 through December 31, 2012. These awards were granted by the Compensation Committee in 2009 and were paid on stock options granted prior to 2010 that were outstanding at the end of 2012. As described in the CD&A, the Performance Dividend Program was eliminated by the Compensation Committee in 2010 and replaced with performance shares. The payout reported in column (g) is the third and final payout in the three-year transition period as described in the CD&A. The Performance Pay Program, the Performance Dividend Program, and performance shares are described in detail in the CD&A.

The amounts paid under each program to the named executive officers are shown below.

 
Annual Performance-Based Compensation ($)
Performance Dividends ($)
Total ($)
T. A. Fanning
1,837,125

241,033

2,078,158

A. P. Beattie
669,600

67,782

737,382

W. P. Bowers
758,457

254,909

1,013,366

S. E. Kuczynski
619,288

—

619,288

C. D. McCrary
890,761

137,443

1,028,204



Column (h)

This column reports the aggregate change in the actuarial present value of each named executive officer's accumulated benefit under the Pension Plan and the supplemental pension plans (collectively, Pension Benefits) as of December 31, 2010, 2011, and 2012. The Pension Benefits as of each measurement date are based on the named executive officer'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 named executive officers were assumed to remain employed at the Company or any Company subsidiary until their benefits commence at the pension plans' stated normal retirement date, generally age 65. As a result, the amounts in column (h) related to Pension Benefits represent the combined impact of several factors: growth in the named executive officer's Pension Benefits over the measurement year; impact on the total present values of one year shorter discounting period due to the named executive officer being one year closer to normal retirement; impact on the total present values attributable to changes in assumptions from measurement date to measurement date; and impact on the total present values attributable to plan changes between measurement dates.

For more information about the Pension Benefits and the assumptions used to calculate the actuarial present value of accumulated benefits as of December 31, 2012, see the information following the Pension Benefits table. The key differences between assumptions used for the actuarial present values of accumulated benefits calculations as of December 31, 2011 and December 31, 2012 are:

•
Discount rate for the Pension Plan was decreased to 4.30% as of December 31, 2012 from 5.00% as of December 31, 2011, and
•
Discount rate for the supplemental pension plans was decreased to 3.70% as of December 31, 2012 from 4.65% as of December 31, 2011.

This column also reports above-market earnings on deferred compensation under the Deferred Compensation Plan (DCP). However, there were no above-market earnings on deferred compensation in the years reported.

Column (i)

This column reports the following items: perquisites; tax reimbursements on certain relocation-related benefits and the Georgia Power safety award; employer contributions in 2012 to the Southern Company Employee Savings Plan (ESP), which is a tax-qualified defined contribution plan, intended to meet requirements of Section 401(k) of the Code; and contributions in 2012 under the Southern Company Supplemental Benefit Plan (Non-Pension Related) (SBP). The SBP is described more fully in the information following the Nonqualified Deferred Compensation table.


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The amounts reported for 2012 are itemized below.

  
Perquisites
($)
Tax
Reimbursements
($)
ESP
($)
SBP
($)
Total
($)
T. A. Fanning
10,593

—
12,750

44,115

67,458

A. P. Beattie
4,741

—
10,977

18,634

34,352

W. P. Bowers
13,291

31
12,539

24,969

50,830

S. E. Kuczynski
62,588

10,694
8,699

19,905

101,886

C. D. McCrary
6,891

—
10,945

26,886

44,722


Description of Perquisites

Personal Financial Planning is provided for most officers of the Company, including all of the named executive officers. The Company pays for the services of the financial planner on behalf of the officers, up to a maximum amount of $8,700 per year, after the initial year that the benefit is provided. In the initial year, the allowed amount is $15,000. The Company also provides a five-year allowance of $6,000 for estate planning and tax return preparation fees.

Relocation Benefits are provided to cover the costs associated with geographic relocation. In 2012, Mr. Kuczynski received relocation-related benefits in the amount of $51,797 in connection with his 2011 relocation from St. Charles, Illinois to Birmingham, Alabama. This amount was for the shipment of household goods, incidental expenses related to his 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. If Mr. Kuczynski terminates within two years of his relocation, these amounts must be repaid.

Personal Use of Corporate-Owned Aircraft.  The Company owns 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. 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.

Other Miscellaneous Perquisites.  The amount included reflects the full cost to the Company of providing the following items: personal use of Company-provided tickets for sporting and other entertainment events and gifts distributed to and activities provided to attendees at Company-sponsored events.


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GRANTS OF PLAN-BASED AWARDS IN 2012
 

This table provides information on stock option grants made and goals established for future payouts under the performance-based compensation programs during 2012 by the Compensation Committee.
Name
(a)
Grant
Date
(b)
Estimated Future 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)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(k)
Grant Date
Fair
Value of
Stock and
Option
Awards
($)
(l)
Threshold
($)
(c)
Target
($)
(d)
Maximum
($)
(e)
Threshold(#) (f)
Target
(#)
(g)
Maximum
(#)
(h)
T. A.
Fanning
 
 
12,938

1,293,750

2,587,500

 
 
 

 
 
 
 

2/13/2012
 

 

 

723
72,338
144,676

 
 
 
3,037,473

2/13/2012
 
 
 
 
 
 
 
597,345
44.42
2,025,000

A. P.
Beattie
 
 
4,715

471,549

943,098

 
 
 

 
 
 
 

2/13/2012
 

 

 

184
18,417
36,834

 
 
 
773,330

2/13/2012
 
 
 
 
 
 
 
152,082
44.42
515,558

W. P.
Bowers
 
 
5,577

557,689

1,115,378

 
 
 

 
 
 
 

2/13/2012
 

 

 

239
23,906
47,812

 
 
 
1,003,813

2/13/2012
 
 
 
 
 
 
 
197,412
44.42
669,227

S. E.
Kuczynski
 
 
4,184

418,438

836,876

 
 
 

 
 
 
 

2/13/2012
 

 

 

147
14,717
29,434

 
 
 
617,967

2/13/2012
 
 
 
 
 
 
 
121,533
44.42
411,997

C. D.
McCrary
 
 
5,860

586,027

1,172,054

 
 
 

 
 
 
 

2/13/2012
 

 

 
251
25,121
50,242

 
 
 
1,054,831

2/13/2012
 
 
 
 
 
 
 
207,443
44.42
703,232

5/22/2012
 
 
 
 
 
 
43,908

 
 
2,000,009

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

These columns reflect the annual Performance Pay Program opportunity granted to the named executive officers in 2012 as described in the CD&A. The information shown as “Threshold,” “Target,” and “Maximum” reflects the range of potential payouts established by the Compensation Committee. The actual amounts earned are disclosed in the Summary Compensation Table.

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

These columns reflect the performance shares granted to the named executive officers in 2012, as described in the CD&A. The information shown as “Threshold,” “Target,” and “Maximum” reflects the range of potential payouts established by the Compensation Committee. Earned performance shares will be paid out in Common Stock following the end of the 2012 through 2014 performance period, based on the extent to which the performance goals are achieved. Any shares not earned are forfeited.

Column (i)

This column reflects the number of restricted stock units granted to Mr. McCrary on the grant date as described in the CD&A.

Columns (j) and (k)

Column (j) reflects the number of stock options granted to the named executive officers in 2012, as described in the CD&A, and column (k) reflects the exercise price of the stock options, which was the closing price on the grant date.

Column (l)

This column reflects the aggregate grant date fair value of the performance shares, stock options, and restricted stock units granted in 2012. For performance shares, the value is based on the probable outcome of the performance conditions as of the grant date using a Monte Carlo simulation model. For stock options, the value is derived using the Black-Scholes stock option pricing model. For restricted stock units, the value is based on the closing price of Common Stock on the grant date. The assumptions used in calculating these amounts are discussed in Note 8 to the Financial Statements.

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OUTSTANDING EQUITY AWARDS AT 2012 FISCAL YEAR-END
 
This table provides information pertaining to all outstanding stock options and stock awards (performance shares and restricted stock units) held by or granted to the named executive officers as of December 31, 2012.
 
Option Awards
Stock Awards
Name
(a)
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
Option
Exercise
Price
($)
(d)
Option
Expiration
Date
(e)
Number of
Shares or
Units of
Stock
That
Have Not
Vested
(#)
(f)
Market
Value
of Shares
or Units
of Stock
That Have
Not
Vested
($)
(g)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units, or
Other Rights
That Have
Not Vested
(#)
(h)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units,
or Other
Rights
That Have
Not
Vested
($)
(i)
T. A. Fanning
100,158
—
35.78
2/18/2018
 
 
 
 
 
254,302
—
31.39
2/16/2019
 
 
 
 
 
155,868
77,934
31.17
2/15/2020
 
 
 
 
 
153,641
307,282
37.97
2/14/2021
 
 
 
 
 
—
597,345
44.42
2/13/2022
 
 
 
 
 
 
 
 
 
 
 
124,936
5,348,510
 
 
 
 
 
 
 
144,676
6,193,580
A. P. Beattie
21,558
—
32.70
2/18/2015
 
 
 
 
 
20,138
—
33.81
2/20/2016
 
 
 
 
 
22,550
—
36.42
2/19/2017
 
 
 
 
 
21,779
—
35.78
2/18/2018
 
 
 
 
 
13,654
—
31.39
2/16/2019
 
 
 
 
 
24,923
12,461
31.17
2/15/2020
 
 
 
 
 
46,795
93,589
37.97
2/14/2021
 
 
 
 
 
—
152,082
44.42
2/13/2022
 
 
 
 
 
 
 
 
 
 
 
38,052
1,629,006
 
 
 
 
 
 
 
36,834
1,576,864
W. P. Bowers
60,576
—
32.70
2/18/2015
 
 
 
 
 
67,517
—
33.81
2/20/2016
 
 
 
 
 
70,680
—
36.42
2/19/2017
 
 
 
 
 
85,151
—
35.78
2/18/2018
 
 
 
 
 
90,942
—
31.39
2/16/2019
 
 
 
 
 
155,651
77,826
31.17
2/15/2020
 
 
 
 
 
54,793
109,584
37.97
2/14/2021
 
 
 
 
 
—
197,412
44.42
2/13/2022
 
 
 
 
 
 
 
 
 
 
 
44,556
1,907,442
 
 
 
 
 
 
 
47,812
2,046,832
 
 
 
 
 
36,257
1,552,162
 
 



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OUTSTANDING EQUITY AWARDS AT 2012 FISCAL YEAR-END (continued)

 
Option Awards
Stock Awards
Name
(a)
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
Option
Exercise
Price
($)
(d)
Option
Expiration
Date
(e)
Number of
Shares or
Units of
Stock
That
Have Not
Vested
(#)
(f)
Market
Value
of Shares
or Units
of Stock
That Have
Not
Vested
($)
(g)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units, or
Other Rights
That Have
Not Vested
(#)
(h)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units,
or Other
Rights
That Have
Not
Vested
($)
(i)
S. E. Kuczynski
110,742
221,483
40.14
7/11/2021
 
 
 
 
 
—
121,533
44.42
2/13/2022
 
 
 
 
 
 
 
 
 
 
 
29,434
1,260,070
 
 
 
 
 
14,880
637,013
 
 
C. D. McCrary
102,333
—
36.42
2/19/2017
 
 
 
 
 
99,789
—
35.78
2/18/2018
 
 
 
 
 
—
77,647
31.17
2/15/2020
 
 
 
 
 
57,577
115,152
37.97
2/14/2021
 
 
 
 
 
—
207,443
44.42
2/13/2022
 
 
 
 
 
 
 
 
 
 
 
46,820
2,004,364
 
 
 
 
 
 
 
50,242
2,150,860
 
 
 
 
 
44,872
1,920,970
 
 
 
Columns (b), (c), (d), and (e)

Stock options vest one-third per year on the anniversary of the grant date. Options granted from 2005 through 2009 with expiration dates from 2015 through 2019 were fully vested as of December 31, 2012. The options granted in 2010, 2011, and 2012 become fully vested as shown below.

 
Year Option Granted
Expiration Date
Date Fully Vested
2010
February 15, 2020
February 15, 2013
2011
February 14, 2021
February 14, 2014
2012
February 13, 2022
February 13, 2015

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. Please see Potential Payments upon Termination or Change in Control for more information about the treatment of stock options under different termination and change-in-control events.

Columns (f) and (g)

These columns reflect the number of restricted stock units, including the deemed reinvestment of dividends, held as of December 31, 2012. The value in column (g) is based on the Common Stock closing price on December 31, 2012 ($42.81). The restricted stock units for Messrs. Bowers and McCrary vest on July 27, 2013 and December 31, 2014, respectively. The restricted stock units for Mr. Kuczynski vest in part on July 11, 2013, with the remainder vesting on July 11, 2015. See further discussion of restricted stock in the CD&A.

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Columns (h) and (i)

In accordance with SEC rules, column (h) reflects the maximum number of performance shares that can be earned at the end of each three-year performance period (December 31, 2013 and 2014) that were granted in 2011 and 2012, respectively.

The performance shares granted for the 2010 through 2012 performance period vested on December 31, 2012 and are shown in the Option Exercises and Stock Vested in 2012 table below. The value in column (i) is derived by multiplying the number of shares in column (h) by the Common Stock closing price on December 31, 2012 ($42.81). The ultimate number of shares earned, if any, will be based on the actual performance results at the end of each respective performance period. See further discussion of performance shares in the CD&A.

OPTION EXERCISES AND STOCK VESTED IN 2012
 
 
 
 
 
 
 
 
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)
T. A. Fanning
275,617
2,933,605
35,041

1,500,105

A. P. Beattie
—
—
5,603

239,864

W. P. Bowers
—
—
34,992

1,498,008

S. E. Kuczynski
—
—
6,240

294,466

C. D. McCrary
343,266
4,836,619
34,912

1,494,583


Columns (b) and (c)

Column (b) reflects the number of shares acquired upon the exercise of stock options during 2012 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.

Columns (d) and (e)

Column (d) includes the performance shares awarded for the 2010 through 2012 performance period that vested on December 31, 2012. The value reflected in column (e) is derived by multiplying the number of shares in column (d) by the market value of the underlying shares on the vesting date ($42.81).

Because Mr. Kuczynski was not an employee of the Southern Company system when performance shares were awarded in 2010, column (d) does not reflect any vested performance shares for Mr. Kuczynski. Certain restricted stock units vested on July 11, 2012 and are reflected in column (d) for Mr. Kuczynski. The value of the restricted stock units as shown in column (e) is derived by multiplying the number of shares in column (d) by the market value of the underlying shares on the vesting date ($47.19).


 

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PENSION BENEFITS AT 2012 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)
T. A. Fanning
Pension Plan
31.0

1,063,266

—
 
Supplemental Benefit Plan (Pension-Related)
31.0

7,694,320

—
 
Supplemental Executive Retirement Plan
31.0

4,312,702

—
A. P. Beattie
Pension Plan
35.92

1,371,551

—
 
Supplemental Benefit Plan (Pension-Related)
35.92

3,600,142

—
 
Supplemental Executive Retirement Plan
35.92

2,184,426

—
W. P. Bowers
Pension Plan
32.67

1,133,147

—
 
Supplemental Benefit Plan (Pension-Related)
32.67

4,680,876

—
 
Supplemental Executive Retirement Plan
32.67

1,803,155

—
S. E. Kuczynski
Pension Plan
0.58

17,155

—
 
Supplemental Benefit Plan (Pension-Related)
0.58

32,201

—
 
Supplemental Executive Retirement Plan
0.58

28,371

—
C. D. McCrary
Pension Plan
38.0

1,628,741

—
 
Supplemental Benefit Plan (Pension-Related)
38.0

7,637,668

—
 
Supplemental Executive Retirement Plan
38.0

2,538,824

—

Pension Plan

The Pension Plan is a tax-qualified, funded plan. It is the Company's primary retirement plan. Generally, all full-time 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. The plan benefit equals the greater of amounts computed using a "1.7% offset formula" and a "1.25% formula," as described below. Benefits are limited to a statutory maximum.

The 1.7% offset formula amount equals 1.7% of final average pay times years of participation 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 highest three rates of pay out of a participant's last 10 calendar years of service are averaged to derive final average pay. The rates of pay considered for this formula are the base salary rates with no adjustments for voluntary deferrals after 2008. A statutory limit restricts the amount considered each year; the limit for 2012 was $250,000.

The 1.25% formula amount equals 1.25% of final average pay times years of participation. 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 participation. 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, 2012, all of the named executive officers are retirement-eligible except Mr. Kuczynski.

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 in one of seven alternative forms of payment. All forms pay benefits monthly over the lifetime of the retiree or the joint lifetimes of the retiree and a spouse. 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 service. As of December 31, 2012, all of the named executive officers are vested in their Pension Plan benefits except Mr. Kuczynski. Participants who terminate employment after vesting can elect to have their pension benefits commence at age 50 if they participated in the Pension Plan for 10 years. If such an election is made, the early retirement reductions that apply are actuarially determined factors and are larger than 0.3% per month.


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If a participant dies while actively employed and is either age 50 or vested in the Pension Plan as of date of death, benefits will be paid to a surviving spouse. A survivor's benefit equals 45% of the monthly benefit that the participant had earned before his or her death. Payments to a surviving spouse of a participant who could have retired will begin immediately. Payments to a survivor of a participant who was not retirement-eligible will begin when the deceased participant would have attained age 50. After commencing, survivor benefits are payable monthly for the remainder of a survivor's life. Participants who are eligible for early retirement may opt to have an 80% survivor benefit paid if they die; however, there is a charge associated with this election.

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 commence retirement payments. Outside of this extra service crediting, the normal Pension Plan provisions apply to disabled participants.

The Southern Company Supplemental Benefit Plan (Pension-Related) (SBP-P)

The SBP-P is an unfunded retirement plan that is not tax qualified. This plan provides high-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.

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 a 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 Code, the first installment will be delayed for six months after the date of separation.

If a SBP-P participant dies after becoming vested in the Pension Plan, the spouse of the deceased participant will receive the installments the participant would have been paid upon retirement. If a vested participant's death occurs prior to age 50, the installments will be paid to a spouse as if the participant had survived to age 50.

The Southern Company Supplemental Executive Retirement Plan (SERP)

The SERP is also an unfunded retirement plan that is not tax qualified. This plan provides high-paid employees 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, disability, and form of payment provisions mirror the SBP-P's provisions. However, except upon a change in control, SERP benefits do not vest until participants 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 in the section entitled "Potential Payments upon Termination or Change in Control."

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The following assumptions were used in the present value calculations:

•
Discount rate - 4.30% Pension Plan and 3.70% supplemental plans as of December 31, 2012,
•
Retirement date - Normal retirement age (65 for all named executive officers),
•
Mortality after normal retirement - RP2000 Combined Healthy with generational projections,
•
Mortality, withdrawal, disability, and retirement rates prior to normal retirement - None,
•
Form of payment for Pension Benefits:
•
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: 40% single life annuity; 40% level income annuity; 10% joint and 50% survivor annuity; and 10% joint and 100% survivor annuity
•
Spouse ages - Wives two years younger than their husbands,
•
Annual performance-based compensation earned but unpaid as of the measurement date - 130% of target opportunity percentages times base rate of pay for year amount is earned, and
•
Installment determination - 3.75% discount rate for single sum calculation and 4.50% prime rate during installment payment period.

For all of the named executive officers, the number of years of credited service is one year less than the number of years of employment.

 
 
NONQUALIFIED DEFERRED COMPENSATION AS OF 2012 FISCAL YEAR-END
 
 
Name
(a)
Executive
Contributions
in Last FY
($)
(b)
Employer
Contributions
in Last FY
($)
(c)
Aggregate
Earnings
in Last FY
($)
(d)
Aggregate
Withdrawals/
Distributions
($)
(e)
Aggregate
Balance
at Last FYE
($)
(f)
T. A. Fanning
363,276
44,115
43,645

—
2,312,749

A. P. Beattie
—
18,634
9,526

—
449,549

W. P. Bowers
—
24,969
97,939

—
3,174,152

S. E. Kuczynski
—
19,905
(1,026
)
—
18,879

C. D. McCrary
—
26,886
3,602