2014 Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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Securities Exchange Act of 1934
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THE SOUTHERN COMPANY
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Table of Contents
 
 
 
 
 
 




Letter to Stockholders
Thomas A. Fanning
Chairman, President, and
Chief Executive Officer


Dear Fellow Stockholder:
You are invited to attend the 2014 Annual Meeting of Stockholders at 10 a.m. ET on Wednesday, May 28, 2014, at The Lodge Conference Center at Callaway Gardens, Pine Mountain, Georgia.
Your vote is important. Whether or not you plan to attend the meeting, please review the proxy material and vote by internet, phone, or mail as soon as possible.
At the annual meeting, I will report on our accomplishments from 2013, as well as our plans for 2014 and beyond. We will also elect our Board of Directors and vote on the other matters set forth in this Proxy Statement.
Throughout the entire history of Southern Company — 102 years and counting — we have been defined by a single unifying characteristic: Our relentless focus on the customer. Every action we take, every decision we make, is arrived at by asking one simple question: How does it benefit the families, businesses, and communities we serve?
This approach — more than any other component — has been the foundation of our success. Even during those times when our business faces issues and uncertainties, our customer-first philosophy enables us to succeed at what we do.
This Proxy Statement includes Appendix B, the 2013 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 28th. Thank you for your continued support of Southern Company.

/s/ Thomas A. Fanning
Thomas A. Fanning









Notice of Annual Meeting of Stockholders of The Southern Company
 
DATE:
Wednesday, May 28, 2014
 
 
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 2014;
3.
To approve on a non-binding advisory basis The Southern Company’s named executive officers' compensation;
4.
To consider a stockholder proposal on an independent board chair, if properly presented at the meeting; and
5.
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 31, 2014 are entitled to attend and vote at the meeting.

 Annual Report to Stockholders
 
Appendix B to this Proxy Statement is The Southern Company's 2013 Annual Report.
By Order of the Board of Directors, Melissa K. Caen, Corporate Secretary, April 11, 2014




 
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 by internet or phone.




Proxy Statement

 
Frequently Asked Questions
 
Q:
When will the Proxy Statement be mailed?
A:
The Proxy Statement will be mailed on or about April 11, 2014.
Q:
Who is entitled to vote?
A:
All stockholders of record at the close of business on the record date of March 31, 2014 may vote. On that date, there were 891,480,510 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 give instructions by 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 the voting instruction form provided by your broker, bank, or nominee in order 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 2014 Annual Meeting of Stockholders (2014 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 each of the matters being considered at the 2014 Annual Meeting and thus will not affect the outcome of the vote for these items.
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 Shareholder Services at Computershare Inc. 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 2014 Proxy Statement.
Q:
How do I attend the 2014 Annual Meeting in person?
A:
All attendees need to bring photo identification, such as a driver's license, to gain admission to the 2014 Annual Meeting. 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. Please note that cameras, sound or video recording equipment, cellular telephones, smartphones or other similar equipment, and electronic devices are not permitted to be used during the 2014 Annual Meeting.
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 2013 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 2013 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 2013 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 30170, College Station, TX 77842-3170. 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 of Item Nos. 1, 2 and 3 and a vote "AGAINST" Item No. 4 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 the items presented in this Proxy Statement.
Q:
When are stockholder proposals due for the 2015 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 2015 Annual Meeting of Stockholders is December 12, 2014. Proposals must be submitted in writing to Melissa K. Caen, 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 25, 2015.

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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 up to $70,000 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 2014 Annual Meeting to be held on May 28, 2014:
The Company's 2014 Proxy Statement, which includes the 2013 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 2013 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, 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 14 members.
At the 2014 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 Information for 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 Information for 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
•
Anti-Hedging Provision
The Corporate Governance documents also may be obtained by requesting a copy from Melissa K. Caen, 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 has received, or the Director's immediate family member has received, during any 12-month period, direct compensation from the Company of more than $120,000, other than Director and committee fees. (Compensation received by an immediate family member for service as a non-executive employee of the Company need not be considered.)
•
The Director was affiliated with or employed by, or the Director's immediate family member was affiliated with or employed in a professional capacity by, a present or former external auditor of the Company and personally worked on the Company's audit.

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•
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.
•
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.
At least annually, the Board receives a report on all commercial, consulting, legal, accounting, charitable, or other business relationships that a Director or the Director's immediate family members have with the Company. This report specifically includes all ordinary course transactions with entities with which the Directors are associated. The Board determined that the Company and its subsidiaries followed the Company's procurement policies and procedures, that the amounts reported were well under the thresholds contained in the Director independence requirements, and that no Director had a direct or indirect material interest in the transactions. See Other Information - Certain Relationships and Related Transactions for a discussion of related party transactions identified by the Company.
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.
At least annually, the Board also reviews Director independence. The Board considers transactions, if any, identified in the review of the report discussed above that affect Director independence, including any transactions in which the amounts reported were above the threshold contained in the Director independence requirements and in which a Director had a direct or indirect material interest. No such transactions were identified and, as a result, no such transactions were considered by the Board. In determining independence, the Board also considered that, in the ordinary course of the Southern Company system's business, electricity is provided to some Directors and entities with which the Directors are associated on the same terms and conditions as provided to other customers of the Southern Company system.
As a result of its review of Director independence, the Board affirmatively determined that none of the following persons who are currently serving as Directors or who served during 2013 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., Linda P. Hudson, Donald M. James, Dale E. Klein, William G. Smith, Jr., Steven R. Specker, 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, 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 Information for 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. During 2013, the pay components for non-employee Directors were:
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.
In accordance with the Company's Corporate Governance Guidelines and the Governance Committee's Charter, the Governance Committee periodically reviews the level and form of Director compensation and recommends any changes to the Board for approval to assure that the level of compensation is reasonable and competitive for an entity of the Company's size and scope. In 2013, the Governance Committee engaged an independent consultant, Frederic W. Cook & Co., to assist in an evaluation of non-employee Director compensation. As a result of the evaluation, the Board approved increases in certain components of non-employee Director compensation. Effective January 1, 2014, the pay components for non-employee Directors are:
Annual retainers:
•
$100,000 cash retainer
•
Additional $20,000 cash retainer if serving as a chair of a committee of the Board
•
Additional $20,000 cash retainer if serving as the Presiding Director of the Board
Annual equity grant:
•
$120,000 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 Outside Directors of The Southern Company, as amended and restated effective January 1, 2008 (Director Deferred Compensation Plan), and invested in Common Stock units which earn dividends as if invested in Common Stock. Earnings are reinvested in additional stock units. Upon leaving the Board, distributions are made in Common Stock.
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.

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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.

DIRECTOR COMPENSATION TABLE
The following table reports all compensation to the Company's non-employee Directors during 2013, 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. Ms. Linda P. Hudson, who was elected to the Board effective March 1, 2014, is not included in this table.
 
 
 
 
 
 
 
 
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
115,000
105,000
—
—
1,025

221,025

Jon A. Boscia
115,000
105,000
—
—
920

220,920

Henry A. Clark III
112,500
105,000
—
—
1,065

218,565

David J. Grain
102,500
105,000
—
—
810

208,310

H. William Habermeyer, Jr.
112,500
105,000
—
—
810

218,310

Veronica M. Hagen
115,000
105,000
—
—
1,099

221,099

Warren A. Hood, Jr.
100,000
105,000
—
—
879

205,879

Donald M. James
102,500
105,000
—
—
995

208,495

Dale E. Klein
100,000
105,000
—
—
810

205,810

William G. Smith, Jr.
115,000
105,000
—
—
810

220,810

Steven R. Specker
102,500
105,000
—
—
999

208,499

E. Jenner Wood III
102,500
105,000
—
—
1,025

208,525

(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.

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 five times the annual Director cash retainer fee. Also, as described in the Director Compensation section above, the annual equity grant received as a part of the annual compensation for non-employee Directors is required to be deferred until Board membership ends. All non-employee Directors either meet the stock ownership guideline or are expected to meet the guideline within the allowed timeframe.

BOARD LEADERSHIP STRUCTURE
The Board believes that its current leadership structure, which has a combined role of Chief Executive Officer and Chairman counterbalanced by a strong independent Board led by a Presiding Director, is most suitable for the Company at this time. The combined role of Chief Executive Officer and Chairman is held by Mr. Fanning who 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

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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 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 a strong independent Presiding Director having the duties described below, is in the best interest of stockholders because it provides the optimal balance between independent oversight of management and unified leadership.
PRESIDING DIRECTOR
Mr. William G. Smith, Jr. was appointed to serve as the Presiding Director effective May 23, 2012 until May 28, 2014. In February 2014, Ms. Veronica M. Hagen was appointed to serve as the Presiding Director effective May 28, 2014 until the Company's 2016 Annual Meeting of Stockholders. 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. The Presiding Director 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 Information for Investors/Corporate Governance.
Audit Committee:
•
Current members are Mr. Boscia (Chair), Mr. Grain, Mr. Hood, and Ms. Hudson (1)
•
Met 10 times in 2013
•
The Audit Committee's duties and responsibilities, which are described in its charter, include the following:
•
Oversee the Company's financial reporting, audit processes, internal controls, and legal, regulatory, and ethical compliance.
•
Appoint the Company's independent registered public accounting firm, approve its services and fees, and establish and review the scope and timing of its audits.
•
Review and discuss the Company's financial statements with management, the internal auditors, and the independent registered public accounting firm, including critical accounting policies and practices, material alternative financial treatments within 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.
•
Recommend the filing of the Company's and its registrant subsidiaries' 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.
(1) Ms. Hudson was appointed a member of the Audit Committee effective March 1, 2014.

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Compensation and Management Succession Committee (Compensation Committee):
•
Current members are Ms. Hagen (Chair), Mr. Clark, Mr. Habermeyer, and Mr. Smith
•
Met nine times in 2013
•
The Compensation Committee's duties and responsibilities, which are described in its charter, include the following:
•
Evaluate performance of executive officers and establish their compensation, administer executive compensation plans, and review management succession plans.
•
Annually review a tally sheet of all components of the executive officers' compensation and take actions required of it under the Pension Plan for employees of the Company's subsidiaries.
The Board has determined that each member of the Compensation Committee is independent.
Governance
During 2013, 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 2013, 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.



9


Finance Committee:
•
Current members are Mr. Clark (Chair), Mr. James, and Mr. Smith
•
Met seven times in 2013
•
The Finance Committee's duties and responsibilities, which are described in its charter, include the following:
•
Review the Company's financial matters and recommend actions such as dividend philosophy and financial plan approval to the Board.
•
Provide input to the Compensation Committee regarding the Company's financial plan and associated financial goals.
The Board has determined that each member of the Finance Committee is independent.

Governance Committee:
•
Current members are Ms. Baranco (Chair), Mr. James, Dr. Klein, Dr. Specker, and Mr. Wood
•
Met six times in 2013
•
The Governance Committee's duties and responsibilities, which are described in its charter, include the following:
•
Review Board size, composition, and membership criteria and identify and recommend Director candidates.
•
Oversee and make recommendations regarding the composition of the Board and its committees.
•
Review and make recommendations regarding total compensation for non-employee Directors.
•
Periodically review and recommend updates to the Corporate Governance Guidelines and Board committee charters.
•
Coordinate the performance evaluations of the Board and its committees.
•
Review stock ownership of non-employee 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 Corporate Secretary and received by that office by December 12, 2014 for consideration by the Governance Committee as a nominee for election at the Annual Meeting of Stockholders to be held in 2015. 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, business background, and civic service, 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, number of other board memberships, genuine interest in the Company and a recognition that, as a member of the Board, one is accountable to the stockholders of the Company, not to any particular interest group. The 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.
Ms. Linda P. Hudson was recommended by the Governance Committee for election to the Board and was elected as a Director effective March 1, 2014. Ms. Hudson was identified jointly by members of the Board and management.


10


Nuclear/Operations Committee:
•
Current members are Mr. Habermeyer (Chair), Ms. Baranco, Ms. Hagen, Dr. Klein, Dr. Specker, and Mr. Wood
•
Met six times in 2013
•
The Nuclear/Operations Committee's duties and responsibilities, which are described in its charter, include the following:
•
Oversee information, activities, and events relative to significant operations of the Southern Company system including nuclear and other power generation facilities, transmission and distribution, fuel, and information technology initiatives.
•
Oversee the Southern Company system's management of significant construction projects.
•
Provide input to the Compensation Committee on the Southern Company system's key operational goals and metrics.
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 oversight.
Each committee annually provides ongoing oversight for each of the Company's most significant risks designated to it as described in its charter or otherwise assigned by the Board, reports to the Board on their oversight activities, and elevates 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. Additionally, the Audit Committee receives regular updates from Internal Auditing, as needed, and quarterly updates as part of the disclosure controls process.
The Company believes that its leadership structure supports the risk oversight function of the Board.  While the Company has a combined role of Chairman and Chief Executive Officer, an independent Director chairs each committee responsible for providing ongoing oversight of certain areas of risk. Also, there is open communication between the Company's management and the Directors and all Directors are actively involved in the risk oversight function.

DIRECTOR ATTENDANCE
The Board of Directors met nine times in 2013. Average Director attendance at all applicable Board and committee meetings was 97%. No nominee attended less than 75% of applicable meetings.
All Director nominees are expected to attend the Annual Meeting of Stockholders. All the members of the Board of Directors serving on May 23, 2013, the date of the 2013 Annual Meeting of Stockholders, attended the meeting.


11



RETIRING DIRECTOR
Mr. H. William Habermeyer, Jr., who has served as a Director of the Company since 2007, is retiring from the Board effective May 27, 2014. During his time on the Board, Mr. Habermeyer has chaired the Nuclear/Operations Committee and has been a member of the Compensation Committee and the Finance Committee. Mr. Habermeyer retired in 2006 from his position as President and Chief Executive Officer of Progress Energy Florida, Inc., which was a subsidiary of Progress Energy Inc., a diversified energy company. Mr. Habermeyer is a retired Rear Admiral who served in the United States Navy for 28 years. Mr. Habermeyer is currently a Director of Raymond James Financial Inc., where he serves on the Audit Committee. He served on the Board of USEC Inc., a global energy company, from 2008 until 2013. Mr. Habermeyer has a wealth of experience in utility business operations, with a focus on nuclear matters, which have been valuable to the Board.

12



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 February 28, 2014. 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
49,885

49,256

—

—

Art P. Beattie
374,139

—

360,375

127

Jon A. Boscia
76,863

17,863

—

—

W. Paul Bowers
1,040,935

—

982,863

—

Henry A. Clark III
11,819

11,819

—

—

Thomas A. Fanning
1,723,999

—

1,685,514

—

David J. Grain
14,438

3,938

—

—

Kimberly S. Greene
109,705

—

109,705

—

H. William Habermeyer, Jr.
19,847

19,847

—

—

Veronica M. Hagen
29,332

29,332

—

—

Warren A. Hood, Jr.
39,756

39,125

—

—

Linda P. Hudson (5)
—

—

—

—

Donald M. James
88,244

88,244

—

—

Dale E. Klein
9,054

9,054

—

—

Charles D. McCrary
707,555

—

673,319

—

William G. Smith, Jr.
54,523

48,803

—

862

Steven R. Specker
8,335

8,335

—

—

E. Jenner Wood III
18,786

14,634

—

—

Directors, Nominees, and Executive Officers as a Group (23 people) (6)
6,056,248

340,250

5,414,190

989

(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.
(5)
Ms. Hudson was elected to the Board effective March 1, 2014.
(6)
This list includes all executive officers serving as of February 28, 2014.

13


STOCK OWNERSHIP OF CERTAIN OTHER BENEFICIAL OWNERS
According to a Schedule 13G/A filed with the SEC on January 30, 2014 by Blackrock Inc. and a Schedule 13G filed with the SEC on February 11, 2014 by The Vanguard Group (collectively, the Ownership Reports), 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.
45,777,102
5.20
 
40 East 52nd Street
 
 
 
New York, NY 10022
 
 
Common Stock
The Vanguard Group
44,207,445
5.01
 
100 Vanguard Blvd.
 
 
 
Malvern, PA 19355
 
 
According to the Ownership Reports, Blackrock Inc. and The Vanguard Group each of which held all of their respective shares as a parent holding company or control person in accordance with Rule 13(d)-1(b)(1)(ii)(G). According to the Ownership Reports, both Blackrock Inc. and The Vanguard Group each have sole voting power and sole investment power over their respective shares.

14




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 2015 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 possesses the collective knowledge and experience in accounting, finance, leadership, business operations, risk management, corporate governance, and the Company's industry, as detailed below.

 
 
 
 
Juanita Powell Baranco
Age: 65
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 Boards of Directors of John H. Harland Company and Cox Radio, Inc. An active leader in the Atlanta community, she serves as Chair of the Board of Trustees for Clark Atlanta University and as a Director of the Catholic Foundation of North Georgia 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.

15


 
 
Jon A. Boscia
Age:  61

Director since:  2007

Board committee:  Audit (Chair)
   Principal occupation:  Founder and President, Boardroom Advisors LLC, board governance consulting firm

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. He serves on the Board of PHH Corporation, where he is currently Chair of the Audit Committee and a member of the Regulatory Oversight Committee. Mr. Boscia will retire as a member of the Board of Directors of PHH Corporation on May 22, 2014. 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: 64
 
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.

16


 
 
 
 
Thomas A. Fanning
 
Age: 57
 
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 as Deputy Chair of the Board, Chair of the Audit Committee, and as a member of the Executive Committee. Mr. Fanning served on the Board of The St. Joe Company from 2005 through September 2011. Mr. Fanning's knowledge of the Company's business and the electric utility industry, understanding of the complex regulatory structure of the industry, and experience in strategy development and execution uniquely qualify him to be the Chairman of the Board.
 
 
 
 
David J. Grain
Age:  51
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 previously served as chairman of the Florida State Board of Administration Investment Advisory Council as an appointee of former Governor Charlie Crist. He is a Director of the Gateway Bank of Southwest Florida and a 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.

17



  
 
 
Veronica M. Hagen
Age:  68
Director since:  2008; Presiding Director effective May 28, 2014
Board committees:  Compensation and Management Succession (Chair), Nuclear/Operations
   Other directorships:  Polymer Group, Inc., Newmont Mining Corporation
Director qualifications:  Ms. Hagen retired in August 2013 from her position as President and Chief Executive Officer of Polymer Group, Inc. She continues to serve as a Director of Polymer Group, Inc. Ms. Hagen had 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, and Safety Committee and the Compensation Committee of the Board of Newmont Mining Corporation. Ms. Hagen's global operational management experience and commercial business leadership are valuable assets to the Board.

 
 
 
Warren A. Hood, Jr.

Age: 62

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. Hood Companies, Inc.'s products are currently marketed in North America, the Caribbean, and Western Europe. 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 or has served on numerous corporate, community, and philanthropic boards, including Boy Scouts of America Pine Burr Area Council, Governor Phil Bryant's Mississippi Works Committee, 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.
 


 

18


 
 
Linda P. Hudson

Age: 63

Director since: 2014

Board committee: Audit
 
Other directorships: BAE Systems, Inc., Bank of America Corporation
Director qualifications:  From October 2009 through February 2014, Ms. Hudson served as the President and Chief Executive Officer of BAE Systems, Inc., a U.S.-based global defense, aerospace, and security company. BAE Systems, Inc. is a wholly-owned subsidiary of London-based BAE Systems plc. Previously, Ms. Hudson served as President of BAE Systems' Land & Armaments operating group, the world's largest military vehicle and equipment business. Before joining BAE Systems in 2006, she served as Vice President of the General Dynamics Corporation and President of General Dynamics Armament and Technical Products. She currently serves as an adviser and outside Director for BAE Systems, Inc. She is also a member of Bank of America Corporation's Board of Directors where she serves on the Compensation and Benefits Committee and the Credit Committee. Ms. Hudson's experience leading a large, highly-regulated, complex business and expertise in engineering, technology, operations, and risk management are valuable to the Board.
 
 
 
 
Donald M. James

Age: 65

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.

19



 
 
 
Dale E. Klein

Age: 66

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 through 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 through 2006. Dr. Klein has more than 35 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. Dr. Klein's expertise in nuclear energy regulation and operations, technology, and safety is valuable to the Board.
 
 
 
 
 
 
William G. Smith, Jr.

Age: 60

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 positions of increasing responsibility before being elected President and Chief Executive Officer of Capital City Bank Group, Inc. in January 1989. He was elected Chairman of the Board of the Capital City Bank Group, Inc. in 2003. He is also the Chairman and Chief Executive Officer of Capital City Bank. He 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.
 


20


 
 
 
Steven R. Specker
 
Age: 68
 
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 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: 62

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

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

Other directorships: Oxford Industries, Inc. (formerly a Director of Crawford & Company and Georgia Power)
Director qualifications:  Mr. Wood is currently the Chairman, President, and Chief Executive Officer of the Atlanta Division of SunTrust Bank, a position he has held since April 2014, where he is responsible for managing retail, commercial, and private wealth banking in the Greater Atlanta area. He also has served as an Executive Vice President of SunTrust Banks, Inc. since July 2005. From April 2010 through January 2013, he was Chairman of the Board, President, and Chief Executive Officer of the Atlanta/Georgia Division of SunTrust Bank and from January 2013 through March 2014 he was Chairman of the Board, President, and Chief Executive Officer of the Georgia/North Florida Division of SunTrust Bank. From 2002 through 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 38 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 is a past member of the Board of Crawford & Company, where he served as 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.

21


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 2014. 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 2013 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 2013 Proxy Statement for the 2013 Annual Meeting of Stockholders. At the meeting, stockholders strongly approved the proposal, with more than 94% 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) in this Proxy Statement, 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 in 2013 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 2014 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2013 Summary Compensation Table, and the other related tables and accompanying narrative set forth in the Proxy Statement."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM NO. 3.


ITEM NO. 4 - STOCKHOLDER PROPOSAL ON AN INDEPENDENT BOARD CHAIR

The Company has been advised that John C. Liu, Comptroller, City of New York, on behalf of the New York City Employees' Retirement System, the New York City Fire Department Pension Fund, the New York City Teachers' Retirement System, the New York City Police Pension Fund, and the New York City Board of Education Retirement System (collectively, the Systems), 1 Centre Street, New York, New York 10007-2341, collectively holders of 1,693,034 shares of Common Stock, proposes to submit the following resolution at the 2014 Annual Meeting.

"RESOLVED: Shareholders of Southern Company request that the Board of Directors adopt a policy that the Chair of the Board of Directors shall be an independent director who is not a current or former employee of the company, and whose only nontrivial professional, familial or financial connection to the corporation or its CEO is the directorship. The policy should be implemented so as not to violate existing agreements and should allow for departure under extraordinary circumstances such as the unexpected resignation of the chair."
Supporting Statement
"The role of the CEO is to run the company. The role of the board of directors is to provide independent oversight of management and the CEO.
"At present, the Company's CEO also serves as chairman of the board, a conflict of interest that we believe can result in excessive management influence on the board and weaken the board's independent oversight of management. The consequences can include higher executive compensation, lower shareholder returns, more aggressive risk-taking, and ultimately less sustainable companies for the long-term.
"According to a June 2012 study of 180 North American companies with market capitalization over $20 billion ("The Costs of a Combined Chair/CEO," GMI Ratings), shareholders pay out more when there is a non-independent chair at the helm. The median total compensation paid to a combined chair/CEO was $16.1 million, 73% more than the $9.3 million paid in total to the positions of CEO and an independent chair.
"Companies with a separate chair (independent or non-independent) and CEO also appear to perform better and to be more sustainable over the longer term, according to the GMI study. The 5-year total shareholder return was found to be 28% higher, and the GMI risk ratings lower, at these companies.
"Board leadership structure in the U.S. is trending towards an independent chair. Twenty-one percent of S&P 500 companies now have an independent chair compared to 9% in 2003 (Spencer Stuart Board Index). Approximately 73% of directors on boards with an independent chair believe that their companies benefited from the split (Survey, 2008 Public US National Associate of Corporate Directors) and more than 88% of senior financial executives believe the positions should be separated (Grant Thornton, 2009 Survey).
"Despite these strides, the U.S. lags the rest of the world in adopting this best practice. Companies with independent board chairs comprise 76% of FTSE 100 index in the United Kingdom, 55% of the Toronto Stock Exchange 60, and 50% for German DAX 30 index, according to findings by Deloitte (Board Leadership: A Global Perspective, 2011).
"We urge shareholders to support this proposal for an independent board chairman."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM NO. 4 FOR THE FOLLOWING REASONS:
Overview. Part of the Directors' fiduciary duties is to determine that the Board's leadership structure is appropriate given the Company's specific characteristics or circumstances at the time. The Company's Bylaws provide the Board with maximum

23


flexibility to determine the most appropriate leadership structure of the Company, including, when appropriate, separating the positions of the Chairman of the Board and the Chief Executive Officer. The Board believes that the Company and its stockholders benefit from this flexibility and that the Board is best positioned to lead this evaluation since the Board has extensive knowledge of the Company's strategic goals, opportunities, and challenges. The Company has reviewed current practices and trends in this area and has not found persuasive evidence that separating the positions results in better corporate performance or board effectiveness. Thus, the Board believes that it is important for the Board to continue to determine on a case-by-case basis the most effective leadership structure for the Company, rather than take the "one-size-fits-all" approach to Board leadership requested by this stockholder proposal.
Board Structure. The Board believes that its current leadership structure, which has a combined role of Chief Executive Officer and Chairman counterbalanced by a strong independent Board led by a Presiding Director, is most suitable for the Company at this time. The combined role of Chief Executive Officer and Chairman is held by Mr. Fanning who is the Director most familiar with the Company's business and industry, including the regulatory structure and other industry-specific matters, and therefore, most capable of effectively identifying strategic priorities and leading discussion and execution of strategy.
With the exception of Mr. Fanning, all Directors are independent based on the independence standards of the NYSE. Each of the committees of the Board is comprised only of independent Directors. The Board believes that at the present time this leadership structure strikes the optimal balance between unified leadership and effective independent oversight of management.
Strong Presiding Director. The Company's Corporate Governance Guidelines provide for a Presiding Director that is selected by and from the independent Directors bi-annually. This structure has been in place for over a decade. Mr. Smith has served as the Presiding Director since the 2012 Annual Meeting of Stockholders. In February 2014, the independent Directors appointed Ms. Hagen to serve as the Presiding Director effective May 28, 2014 until the Company's 2016 Annual Meeting of Stockholders.
With respect to the roles and responsibilities of the Presiding Director, the Company's Corporate Governance Guidelines provide that:
•
independent Directors meet in executive session, without management, at least quarterly, and at other times deemed appropriate by the Presiding Director or two or more other independent Directors;

•
the Presiding Director chairs executive sessions and serves as the principal liaison between the Chairman and the independent Directors; however, each Director has direct and complete access to the Chairman at any time;

•
the Presiding Director meets regularly with the Chairman;

•
the Presiding Director serves as the primary contact Director for stockholders and other interested parties;

•
the Presiding Director is involved in communicating any sensitive issues to the Directors; and

•
the Presiding Director chairs Board meetings in the absence of the Chairman.

Corporate Governance Practices. The Company's existing corporate governance practices provide for strong independent leadership on the Board with effective oversight of management of the Company's business. As stated in the Company's Corporate Governance Guidelines, it is the duty of the Board to serve as a prudent fiduciary for stockholders and to oversee the management of the Company's business. Additionally, the Board has broad responsibility to provide oversight of significant risks to the Company, primarily through direct engagement with Company management and delegation of ongoing risk oversight responsibilities to the applicable committee.
The Board currently has 13 non-employee Directors, all of whom, including the Presiding Director, are independent based on NYSE independence standards. Other than Mr. Fanning, none of the Directors is a current or former employee of the Company or any of its subsidiaries.
The Board meets regularly in executive session without the Chief Executive Officer present. In 2013, the Board held six regularly scheduled meetings, all of which included an executive session chaired by the Presiding Director. Topics discussed include strategic matters, management succession, board evaluation, Chief Executive Officer performance, and other topical matters. Additionally, the Presiding Director meets regularly with the Chairman and Chief Executive Officer outside of Board meetings to discuss various matters.
The Company's Corporate Governance Guidelines provide that the Chairman of the Board and the Corporate Secretary will solicit input from all independent Directors, including the Presiding Director, in establishing the agenda for Board meetings. Additionally, committee chairs, all of whom are independent, provide significant input in establishing the agendas for their

24


committee meetings. All Directors are encouraged to request agenda items, additional information, and/or modifications to schedules as they deem appropriate.
These existing corporate governance practices ensure that the Board maintains strong independent leadership to oversee the management of the Company's business and best serve the Company's stockholders.
Oversight of Chief Executive Officer Performance. The stockholder proposal attempts to justify imposing a "one-size-fits-all" approach to Board leadership in part by criticizing compensation practices for the combined Chief Executive Officer and Chairman position. The Compensation Committee Charter provides that the Compensation Committee, comprised entirely of independent Directors, evaluate the performance of the Chief Executive Officer at least annually and review it with the independent Directors, annually review a tally sheet of all components of the Chief Executive Officer's total compensation, and recommend the compensation level of the Chief Executive Officer for approval by the independent Directors. Additionally, Pay Governance, an independent executive compensation consultant, provides advice and counsel concerning the compensation of the Chief Executive Officer to the Compensation Committee, including benchmarking analysis, and meets with the members in executive session at every regular meeting of the Compensation Committee. Further, at the Company's 2013 and 2012 Annual Meetings of Stockholders, more than 94% and 95%, respectively, of the votes cast voted to approve the compensation provided to the Company's named executive officers, including the Chief Executive Officer. The Company's process provides effective, independent oversight of the Chief Executive Officer's performance.
Conclusion. Given the Board's structure and its oversight of the management of the Company's business discussed above, the Board believes that adopting a "one-size-fits-all" standard that the Chairman of the Board must be an independent Director is not necessary for effective independent Board leadership. The Board believes that the Company and its stockholders benefit from the flexibility that currently exists in determining whether to separate or combine the roles of Chairman and Chief Executive Officer.
The vote needed to pass the proponent's resolution is the affirmative vote of a majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM NO. 4.


25



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 2013 Annual Report to Stockholders attached hereto as Appendix B 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 (1992)" 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 the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16, Communications with Audit Committees and SEC Rule 2-07 of Regulation S-X, Communications with Audit Committees. 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 2013.
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, 2013 and filed with the SEC. The Audit Committee also reappointed Deloitte & Touche as the Company's independent registered public accounting firm for 2014. Stockholders will be asked to ratify that selection at the 2014 Annual Meeting.
Members of the Audit Committee as of December 31, 2013:

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 2013 and 2012.
 
 
 
 
 
2013
2012
 
(in thousands)
 
 
 
Audit Fees (1)
$
11,704

$
11,695

Audit-Related Fees (2)
110

500

Tax Fees
50

0

All Other Fees (3)
29

31

Total
$
11,893

$
12,226

(1)
Includes services performed in connection with financing transactions.
(2)
Includes non-statutory audit services in both 2013 and 2012.
(3)
Represents registration fees for attendance at Deloitte & Touche-sponsored education seminars, subscription fees for Deloitte & Touche's technical accounting research tool, and travel expenses for Deloitte & Touche's training facilitator.
The Audit Committee has adopted a Policy on Engagement of the Independent Auditor for Audit and Non-Audit Services (see Appendix A) 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.


27


Executive Compensation
Index to Executive Compensation


 
Page
Compensation Discussion and Analysis
Compensation and Management Succession Committee Report
Summary Compensation Table
Grants of Plan-Based Awards in 2013
Outstanding Equity Awards at 2013 Fiscal Year-End
Option Exercises and Stock Vested in 2013
Pension Benefits at 2013 Fiscal Year-End
Nonqualified Deferred Compensation as of 2013 Fiscal Year-End
Potential Payments upon Termination or Change in Control
Compensation Risk Assessment
Compensation Committee Interlocks and Insider Participation



28


COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

This section describes the compensation program for the Company's Chief Executive Officer and Chief Financial Officer in 2013, 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
Kimberly S. Greene (1)
Executive Vice President of the Company and President and Chief Executive Officer of Southern Company Services, Inc. (SCS)
Charles D. McCrary (2)
Executive Vice President of the Company and President and Chief Executive Officer of Alabama Power Company (Alabama Power)

(1) Effective March 1, 2014, Ms. Greene resigned the roles of President and Chief Executive Officer of SCS and was elected Executive Vice President and Chief Operating Officer of the Company.

(2) Effective March 1, 2014, Mr. McCrary resigned the roles of President and Chief Executive Officer of Alabama Power and was elected Chairman of Alabama Power's Board of Directors until his retirement on May 1, 2014.

Executive Summary

Performance

Performance-based pay represents a substantial portion of the total direct compensation paid or granted to the named executive officers for 2013.
(1) Salary is the actual amount paid in 2013, Short-Term Performance Pay is the actual amount earned in 2013 based on performance, and Long-Term Performance Pay is the value on the grant date of stock options and performance shares granted in 2013. See the Summary Compensation Table for the amounts of all elements of reportable compensation described in this CD&A.

29


Business unit financial and operational and Company earnings per share (EPS) goal results for 2013 are shown below:

EPS: 0% of Target
Financial: 110% of Target
Operational: 161% of Target

The Company's annualized total shareholder return has been:

1-Year: 0.49%
3-Year: 7.22%
5-Year: 7.22%

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 ongoing 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.

30


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 2013 Annual Meeting of Stockholders. In light of the significant support of the stockholders (94% 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, aligned with the Company's financial and operational performance, and 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:

•
Company EPS and business unit financial and operational performance, based on actual results compared to target performance levels established early in the year, 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 more than 26,000 employees of the Southern Company system. Stock options and performance shares are granted to approximately 3,300 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.

31


OVERVIEW OF EXECUTIVE COMPENSATION COMPONENTS

The primary components of the 2013 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.

32


ESTABLISHING MARKET-BASED COMPENSATION LEVELS

Pay Governance develops and presents to the Compensation Committee competitive market-based compensation levels for each of the named executive officers. The market-based compensation levels are developed from a size-appropriate energy services executive compensation survey database. The survey participants are utilities with revenues of $6 billion or more. The Compensation Committee reviews the data and uses it in establishing market-based compensation levels for the named executive officers.

Ameren Corporation
GDF SUEZ North America
American Electric Power Company, Inc.
Kinder Morgan, Inc.
Bg US Services, Inc.
MidAmerican Energy Company
CenterPoint Energy, Inc.
Next Era Energy, Inc.
CMS Energy Corporation
NRG Energy, Inc.
Consolidated Edison, Inc.
PG&E Corporation
Dominion Resources, Inc.
PPL Corporation
DTE Energy Company
Progress Energy, Inc.
Duke Energy Corporation
Public Service Enterprise Group Inc.
Edison International
Sempra Energy
Enbridge Energy Partners, LP
Targa Resources Corp.
Energy Future Holdings Corp.
Tennessee Valley Authority
Entergy Corporation
UGI Corporation
Enterprise Products Partners L.P.
The AES Corporation
Exelon Corporation
The Williams Companies, Inc
First Energy Corp.
Xcel Energy Inc.

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 2013 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.

33


The total target compensation opportunity was established in early 2013 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 30% for the other named executive officers. Variable (at risk) performance-based compensation is 85% for Mr. Fanning and 70% to 75% for the other named executive officers.
The salary levels shown above were not effective until March 2013. 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 2013. For Ms. Greene, the salary level shown is the amount approved by the Compensation Committee effective on her date of employment (April 1, 2013). The target annual performance-based compensation amount shown for Ms. Greene is the full year target amount that would have been granted to her had she been employed the entire year by the Southern Company system.

For purposes of comparing the value of the compensation program to the market data, stock options are valued at $2.92 per option and performance shares at $40.50 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, except for Ms. Greene. For 2013, Ms. Greene received stock options only because she was hired after performance shares were granted.

In 2012, Pay Governance analyzed the level of actual payouts for 2011 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 2013. That analysis was updated in 2013 by Pay Governance for 2012 performance, and those findings were used in establishing goals for 2014.

DESCRIPTION OF KEY COMPENSATION COMPONENTS

2013 Base Salary

Most employees, including all of the named executive officers except Ms. Greene (who was hired in 2013), received base salary increases in 2013. Base salary increases for each of the named executive officers, except Ms. Greene, were recommended in 2013 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 achievement of financial and operational goals in prior years. The Compensation Committee approved the recommended salaries in 2013.

Base salaries were increased 3% for Messrs. Fanning and Beattie. Base salaries for Messrs. Bowers and McCrary were increased 2.8%.

34


2013 Performance-Based Compensation

This section describes performance-based compensation for 2013.

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 2013, the Company strove for and rewarded:

•    Continuing industry-leading reliability and customer satisfaction, while maintaining reasonable retail prices;
•    Meeting energy demand with the best economic and environmental choices;
•    Return on equity (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 and sound financial policy.

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).

2013 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.

•
EPS is defined as the Company's net income from ongoing business activities divided by average shares outstanding during the year. The EPS performance measure is applicable to all participants in the Performance Pay Program.
•
For the traditional operating companies (Alabama Power, Georgia Power, Gulf Power Company (Gulf Power), and Mississippi Power), 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.
•
For the traditional operating companies, operational goals are safety, customer satisfaction, plant availability, transmission and distribution system reliability, and culture. For the nuclear operating company, Southern Nuclear Operating Company, Inc. (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.

35



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. In 2013, the Company recorded pre-tax charges to earnings of $1.14 billion due to estimated probable losses relating to Mississippi Power's construction of the integrated coal gasification combined cycle facility in Kemper County, Mississippi (Kemper IGCC). Although these charges are not expected to occur with regularity in the future, the Compensation Committee did not exclude the charges with respect to the EPS goal, and, consequently the EPS result was under the threshold performance level that was established at the beginning of the year. As a result, no payout associated with EPS was made to any employee in the Southern Company system, including the named executive officers.

There are over 4,000 Southern Company system employees that provide professional and technical support to all of the Company's subsidiaries. For that reason, the business unit financial goal component for these employees is based largely on corporate-level ROE. Due to the charges described above, Mississippi Power's net income was negative $477 million and, therefore, its ROE was below the threshold performance level established, which resulted in a zero payout on the business unit financial goal for Mississippi Power employees. Additionally, the impact of Mississippi Power's negative net income also resulted in a corporate-level ROE that was below the threshold performance level established by the Compensation Committee. Therefore, for employees paid based on corporate-level ROE, including Ms. Greene and Messrs. Fanning and Beattie, this would have resulted in no payout for corporate-level ROE, despite above-threshold achievement at the other business units supported by these employees. For that reason, the Compensation Committee believed that a zero payout on the corporate-level ROE component was not an equitable result for those employees and amended the methodology for calculating corporate-level ROE from an aggregate ROE to a weighted average payout, which is the methodology that was used under the annual performance-based pay program prior to 2010. See Calculating Payouts in this CD&A for a full description of how payouts were calculated for Ms. Greene and Messrs. Fanning and Beattie.

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 (dividend funding mechanism). In 2013, the Compensation Committee clarified that the dividend funding mechanism was not intended to apply when earnings are insufficient due to items not expected to occur with regularity that do not impact the Company's financial ability to fund the Common Stock dividend, such as the Kemper IGCC charges described above.

Goal Details
Financial Performance Goals
Description
Why It Is Important
EPS
The Company's net income from ongoing business activities 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.
Supports delivery of stockholder value and contributes to the Company's sound financial policies and stable credit ratings.


36


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 affects 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 are measured as a percentage of time the nuclear plant is operating. The reliability and availability metrics take generation reductions associated with planned outages into consideration.
Safe and efficient operation of the nuclear fleet is important for delivering clean energy at a reasonable price.
Major Projects - Plant Vogtle Units 3 and 4 and Kemper IGCC
To help ensure construction and licensing of two new nuclear generating units under construction at Georgia Power's Plant Vogtle (Plant Vogtle Units 3 and 4) and the Kemper IGCC are on time, on budget, and in full compliance with all pertinent safety and quality requirements, the Southern Company system has an executive review committee in place for each project to assess progress towards these goals. Each committee may consider a combination of subjective and objective measures to determine their evaluation. Final assessments for each project are approved by the Southern Company Chief Executive Officer and confirmed by the Nuclear/Operations Committee.
Strategic projects enable the Southern Company system to expand capacity to provide clean, affordable energy to customers across the region.
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.

The range of EPS, ROE, and Southern Power net income goals for 2013 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.

Level of Performance
 
EPS ($)
ROE (%)
Southern Power Net Income ($) (millions)
Maximum
 
2.87
14.0
215
Target
 
2.74
12.0
175
Threshold
 
2.61
9.0
135


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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, respectively. For more information on these committees' responsibilities, see the committee descriptions in this Proxy Statement.

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
Plant Vogtle Units 3 and 4 and Kemper IGCC
Culture
Maximum
Top quartile for all customer segments
and overall
Significantly
exceed targets
Industry best
Significantly
exceed targets
Greater than
90th
percentile or 5-year Company best
Significantly exceed targets
Significant
improvement
Target
Top quartile overall
Meet targets
Top quartile
Meet targets
60th
percentile
Meet targets
Improvement
Threshold
2nd quartile overall
Significantly below targets
2nd quartile
Significantly
below targets
40th
percentile
Significantly below targets
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.

2013 Achievement

Actual 2013 goal achievement is shown in the following tables.

Financial Performance Goal Results
Goal
Result
Achievement Percentage
EPS (from ongoing business activities)
$1.88
0
Alabama Power ROE
13.07%
154
Georgia Power ROE
12.45%
123
Corporate ROE
Weighted Average
113
Southern Power Net Income
$165.5 million
76

Due to the pre-tax charges to earnings related to Mississippi Power's construction of the Kemper IGCC, Southern Company's EPS for 2013 fell below the threshold necessary for payment under the performance pay program. As a result, no payout was associated with the EPS goal.


38


Operational Goal Results

Corporate (Ms. Greene and Messrs. Fanning and Beattie)
Company Corporate/Aggregate Goal
Achievement Percentage
Customer Satisfaction
200
Reliability
200
Availability
100
Safety
200
Culture
138
Major Projects - Plant Vogtle Units 3 & 4
175
Major Projects - Kemper IGCC
0
Total Operational Goal Performance Factor
161

Alabama Power (Mr. McCrary)
Goal
Achievement Percentage
Customer Satisfaction
200
Reliability
190
Availability
176
Safety
145
Culture
141
Total Operational Goal Performance Factor
171

Georgia Power (Mr. Bowers)
Goal
Achievement Percentage
Customer Satisfaction
167
Reliability
200
Availability
0
Safety
200
Culture
140
Total Operational Goal Performance Factor
138

Calculating Payouts

Each named executive officer had a target Performance Pay Program opportunity, based on his or her position, set by the Compensation Committee at the beginning of 2013. Targets are set as a percentage of base salary.

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 Ms. Greene and Messrs. Fanning and Beattie, payout is based on the weighted average ROE payout results for the traditional operating companies (90%) and Southern Power net income (10%) and the system-wide operational goal results, which includes Southern Nuclear's operational goal results. For Messrs. Bowers and McCrary, payout is based on achievement of the ROE and operational goals of Georgia Power and Alabama Power, respectively.

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 calculation of the total performance factor for each of the named executive officers, based on results shown above.


39


 
Southern Company EPS Result (%)
1/3 weight
Business Unit Financial Goal
Result (%)
1/3 weight
Business Unit Operational Goal Result (%)
1/3 weight
Total Performance Factor (%)
T. A. Fanning
0
110
161
90
A. P. Beattie
0
110
161
90
W. P. Bowers
0
123
138
87
K. S. Greene
0
110
161
90
C. D. McCrary
0
154
171
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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 (%)
Target Annual
Performance
Pay Program
Opportunity ($)

Total
Performance
Factor (%)
Actual Annual
Performance
Pay Program
Payout ($)
T. A. Fanning
115
1,332,563
90
1,199,307
A. P. Beattie
75
485,695
90
437,126
W. P. Bowers
75
573,304
87
498,775
K. S. Greene (1)
70
345,345
90
310,811
C. D. McCrary
75
602,435
108
650,630

(1) Ms. Greene joined the Company in April 2013; therefore, her target Performance Pay Program opportunity was prorated based on the amount of time she was employed in 2013. Her target opportunity would have been $455,000 if she had been employed by the Southern Company system for the entire year.

Long-Term Performance-Based Compensation

2013 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. Long-term performance-based awards also benefit the Southern Company system's customers by providing competitive compensation that allows the Southern Company system to attract, retain, and engage employees who provide focus on serving customers and

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delivering safe and reliable electric service.

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 2013, except restricted stock units.

 
Value of
Options ($)
Value of
Performance Shares ($)
Total Long-Term
Value ($)
T. A. Fanning
2,085,747
3,128,625
5,214,372
A. P. Beattie
531,025
796,514
1,327,539
W. P. Bowers
687,964
1,031,940
1,719,904
K. S. Greene (1)
1,039,997
0
1,039,997
C. D. McCrary
722,922
1,084,347
1,807,269

(1) Ms. Greene was not employed by the Southern Company system when the Compensation Committee granted performance shares and, therefore, her full long-term target value for 2013 was granted in stock options.

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 2013, 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 2013 Annual Report attached as Appendix B to this Proxy Statement (Financial Statements). For 2013, the Black-Scholes value on the grant date was $2.92 per stock option, except for those options granted to Ms Greene. The Black-Scholes value on the grant date for Ms. Greene was $3.16 per stock option.

Performance Shares

2013-2015 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 2013, the value per unit was $40.50. 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, except Ms. Greene. Each performance share unit represents one share of Common Stock.

At the end of the three-year performance period (January 1, 2013 through December 31, 2015), 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 discussed previously 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.


41


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

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

The scale below will determine the number of units paid in Common Stock following the last year of the performance period, based on the 2013 through 2015 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.

2011-2013 Payouts

Performance share grants were made in 2011 with a three-year performance period that ended on December 31, 2013. Based on the Company's total shareholder return achievement relative to that of the Philadelphia Utility Index (50% payout) and the custom peer group (10% payout), the payout percentage was 30% of target, which is the average of the two peer groups. The following table shows the target and actual awards of performance shares for the named executive officers.


42


 
Target
Performance Shares (#)
Target Value of Performance Shares
($)

Performance Shares Earned (#)
Value of Performance Shares Earned
($)
T. A. Fanning
62,468
2,246,974
18,740
770,401
A. P. Beattie
19,026
684,365
5,707
234,615
W. P. Bowers
22,278
801,340
6,683
274,738
K. S. Greene (1) 
0
0
0
0
C. D. McCrary
23,410
842,058
7,023
288,716
(1) Ms. Greene was not employed by the Southern Company system when the Compensation Committee granted performance shares and, therefore, her full long-term target value for 2013 was granted in stock options.

Restricted Stock Units

In limited situations, restricted stock units are granted to address specific needs, including retention. 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. For information on treatment upon termination or change in control, see Potential Payments Upon Termination or Change in Control after the Summary Compensation Table.

Due to benefits Ms. Greene forfeited upon leaving her former employer, the Compensation Committee granted her restricted stock units valued at $2,000,005 on the grant date. The restricted stock units will vest incrementally each year starting April 1, 2015 and ending April 1, 2018 if she remains employed with the Southern Company system. The Compensation Committee also sought advice from Pay Governance in determining market practice and the appropriate value of the award.

Restricted stock units were granted to Mr. McCrary in 2012 with a vesting date of December 31, 2014 in order to retain Mr. McCrary until his successor was named and expiration of an appropriate transition period. Mr. McCrary's successor was announced in February 2014, and Mr. McCrary is retiring effective May 1, 2014. The Compensation Committee modified the vesting date to April 30, 2014.

See the Summary Compensation Table, the Grants of Plan-Based Awards table, the Outstanding Equity Awards at 2013 Fiscal Year End table, and accompanying information for more information on these awards of restricted stock units.

Timing of Performance-Based Compensation

As discussed above, the 2013 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 equity awards 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 2013 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

43


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 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 Potential Payments upon Termination or Change in Control.

Perquisites

The Company provides limited ongoing perquisites to its executive officers, including the named executive officers. The perquisites provided in 2013, 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. Ms. Greene received relocation-related benefits and related tax assistance in 2013.

In 2013, the Compensation Committee approved payment of a country club initiation fee for Mr. Beattie in the amount of $85,000. This benefit was provided primarily for his business use, and the Company will not be responsible for any ongoing dues or other fees associated with this membership. The amount was taxable compensation to Mr. Beattie, and no tax gross-up was provided.
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
K. S. Greene
3 Times
6 Times
C. D. McCrary
1.5 Times
3 Times

Newly-elected officers, including Ms. Greene, have approximately five years from the date of their election to meet the applicable ownership requirement. Newly-promoted officers, including Messrs. Fanning and Beattie, 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.

44



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, except Mr. Beattie, 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. 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. The Compensation Committee has the discretion to award compensation that may not be tax deductible.

The Compensation Committee approved a formula in February 2013 that represented a maximum annual performance-based compensation amount payable to the affected named executive officers. However, as described previously in this CD&A, the Compensation Committee later modified the methodology for calculating the business unit financial goal performance for over 4,000 Southern Company system employees, including Mr. Fanning and Ms. Greene, whose payouts exceeded the amounts calculated under the formula established in February. For Messrs. Bowers and McCrary, the Compensation Committee reduced their payments based on the results of the formula established in February 2013 to determine the actual payout amounts pursuant to the methodologies described in this CD&A.
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 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.

45



REALIZABLE PERFORMANCE-BASED COMPENSATION ANALYSIS

The SEC has promulgated rules regarding how total compensation is calculated in the Summary Compensation Table. These rules include accounting assumptions that affect the value reported for equity grants. However, as the Company's performance changes over time, the Common Stock price can fluctuate, affecting the value of equity grants made to the named executive officers. The Compensation Committee believes it is important to look at those changes to fully understand the value of the compensation received because the reported value is only realized if the Company meets certain performance criteria. In order to supplement the SEC-required disclosure, the table below compares the target or grant date value of performance-based compensation granted to Mr. Fanning in 2011, 2012, and 2013 with the value actually received or as measured on December 31, 2013.

 
Performance Pay Program
Performance Shares
Stock Options
Grant Date
Target
 ($)
Value Received
($)
Grant Date Value
($)
Value Received/Projected
($)
Grant Date Value
($)
Value as of December 31, 2013
($)
2011
1,123,500
1,797,600
2,246,974
770,401(1)
1,498,000
1,447,298
2012
1,293,750
1,837,125
3,037,473
237,904 (2)
2,025,000
--(3)
2013
1,332,563
1,199,307
3,128,625
254,060 (2)
2,085,747
-- (3)

(1)
The amount shown for performance shares in 2011 is the value Mr. Fanning received based on the payout of the performance shares granted in 2011 for the 2011-2013 performance period.

(2)
The amounts shown for performance shares granted in 2012 and 2013 are the projected amounts based on performance levels relative to peers as of December 31, 2013. This amount is subject to change based on the Company's performance relative to its peers at the end of the applicable three-year performance period. See Performance Shares in this CD&A for a description of the Company's performance share peer group.

(3)
The exercise price for the stock options granted to Mr. Fanning in both 2012 and 2013 is below the closing stock price on December 31, 2013.

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, 2013 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.


46




SUMMARY COMPENSATION TABLE
 
The Summary Compensation Table shows the amount and type of compensation received or earned in 2011, 2012, and 2013 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
2013
1,152,389

—

3,128,625

2,085,747

1,199,307

805,738

66,485

8,438,291

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

Art P. Beattie
Executive Vice
President and Chief
Financial Officer
2013
644,039

—

796,514

531,025

437,126

402,101

122,037

2,932,842

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

W. Paul Bowers
President and Chief Executive Officer,
Georgia Power
2013
760,482

—

1,031,940

687,964

498,775

—
44,375

3,023,536

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

Kimberly S. Greene
President and Chief Executive Officer, SCS
2013
475,000

—

2,000,005

1,039,997

310,811

212,666

656,035

4,694,514

 
 
 
 
 
 
 
 
 
Charles D. McCrary
President and Chief
Executive Officer,
Alabama Power
2013
799,124

—

1,084,347

722,922

650,630

414,103

45,396

3,716,522

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


Column (a)

Ms. Greene was not an executive officer of the Company prior to 2013.

Column (e)

This column does not reflect the value of stock awards that were actually earned or received in 2013. Rather, as required by applicable rules of the SEC, this column reports the aggregate grant date fair value of performance shares granted in 2013. 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, 2015. 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 2013 to Messrs. Fanning, Beattie, Bowers, and McCrary, assuming that the highest level of performance is achieved, is $6,257,250, $1,593,028, $2,063,880, and $2,168,694, respectively (200% of the amount shown in the table). Ms. Greene was not employed by the Southern Company system when the Compensation Committee granted performance shares in 2013; therefore, her full long-term target value for 2013 was granted in stock options. For Ms. Greene, the amount in column (e) reflects the grant date fair value ($2,000,005) of restricted stock units granted in 2013 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.

47



Column (g)

The amounts in this column are the payouts under the annual Performance Pay Program. The amount reported for the Performance Pay Program is for the one-year performance period that ended on December 31, 2013. The Performance Pay Program is described in detail in the CD&A.

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, 2011, 2012, and 2013. 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, 2013, 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, 2012 and December 31, 2013 are:

•
Discount rate for the Pension Plan was increased to 5.05% as of December 31, 2013 from 4.30% as of December 31, 2012, and
•
Discount rate for the supplemental pension plans was increased to 4.50% as of December 31, 2013 from 3.70% as of December 31, 2012.

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.

In 2013, the pension value for Mr. Bowers decreased primarily due to the change in discount rate. Pursuant to SEC rules, the negative amount for the change in pension value was not included in the column (h) total. The actual change in pension value for Mr. Bowers was negative $144,014.

Column (i)

This column reports the following items: perquisites; tax reimbursements on certain relocation-related benefits; employer contributions in 2013 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 2013 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.

48



The amounts reported for 2013 are itemized below.

  
Perquisites
($)
Tax
Reimbursements
($)
ESP
($)
SBP
($)
Total
($)
T. A. Fanning
7,708

—
13,005

45,772

66,485

A. P. Beattie
90,945

—
11,251

19,841

122,037

W. P. Bowers
5,686

—
12,909

25,780

44,375

K. S. Greene
444,989

199,826
—

11,220

656,035

C. D. McCrary
6,377

—
11,269

27,750

45,396


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 2013, Ms. Greene received relocation-related benefits in the amount of $423,950 in connection with her 2013 relocation from Knoxville, Tennessee to Atlanta, Georgia. This amount was for the shipment of household goods, incidental expenses related to her 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 Ms. Greene terminates within two years of her relocation, these amounts must be repaid.

Personal Use of Corporate Aircraft.  The Southern Company system has aircraft that are used to facilitate business travel. All flights on these aircraft must have a business purpose, except limited personal use that is associated with business travel is permitted. The amount reported for such personal use is the incremental cost of providing the benefit, primarily fuel costs. 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. In connection with Ms. Greene's relocation, the Compensation Committee approved personal use of the corporate aircraft for weekly round-trip flights between Atlanta and Knoxville for the first six months following her relocation to Atlanta. The perquisite amount shown above for Ms. Greene includes $20,825 for this approved personal use of corporate aircraft.

Country Club Initiation Fee. As discussed previously in the CD&A, the Compensation Committee approved payment of a country club initiation fee for Mr. Beattie in the amount of $85,000, which is included in Mr. Beattie's perquisite amount shown above. The benefit was provided primarily for his business use, and the Company will not be responsible for any ongoing dues or other fees associated with this membership. No tax assistance was provided.

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.


49


GRANTS OF PLAN-BASED AWARDS IN 2013

This table provides information on stock option grants made and goals established for future payouts under the performance-based compensation programs during 2013 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
 
 
13,326

1,332,563

2,665,126

 
 
 

 
 
 
 

2/11/2013
 

 

 

773
77,250
154,500

 
 
 
3,128,625

2/11/2013
 
 
 
 
 
 
 
714,297
44.06
2,085,747

A. P.
Beattie
 
 
4,857

485,695

971,390

 
 
 

 
 
 
 

2/11/2013
 

 

 

197
19,667
39,334

 
 
 
796,514

2/11/2013
 
 
 
 
 
 
 
181,858
44.06
531,025

W. P.
Bowers
 
 
5,733

573,304

1,146,608

 
 
 

 
 
 
 

2/11/2013
 

 

 

255
25,480
50,960

 
 
 
1,031,940

2/11/2013
 
 
 
 
 
 
 
235,604
44.06
687,964

K. S.
Greene
 
 
3,453

345,345

690,690

 
 
 

 
 
 
 

4/1/2013
 

 

 

—
—
—
 
 
 
 
4/1/2013
 
 
 
 
 
 
 
329,113
46.74
1,039,997

4/1/2013
 
 
 
 
 
 
42,790

 
 
2,000,005

C. D.
McCrary
 
 
6,024

602,435

1,204,870

 
 
 

 
 
 
 

2/11/2013
 

 

 
267
26,774
53,548

 
 
 
1,084,347

2/11/2013
 
 
 
 
 
 
 
247,576
44.06
722,922

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

These columns reflect the annual Performance Pay Program opportunity granted to the named executive officers in 2013 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 2013, 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 2013 through 2015 performance period, based on the extent to which the performance goals are achieved. Any shares not earned are forfeited. Ms. Greene was not employed by the Southern Company system at the time performance shares were awarded.

Column (i)

This column reflects the number of restricted stock units granted to Ms. Greene 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 2013, 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 2013. 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.

50


OUTSTANDING EQUITY AWARDS AT 2013 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, 2013.
 
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
 
 
 
 

 
233,802

—
31.17
2/15/2020
 
 
 
 

 
307,282

153,641

37.97
2/14/2021
 
 
 
 

 
199,115

398,230

44.42
2/13/2022
 
 
 
 

 
—
714,297

44.06
2/11/2023
 
 
 
 
 
 
 
 
 
 
 
72,338
2,973,815

 
 
 
 
 
 
 
77,250
3,175,748

A. P. Beattie
22,550

—
36.42
2/19/2017
 
 
 
 

 
21,779

—
35.78
2/18/2018
 
 
 
 

 
13,654

—
31.39
2/16/2019
 
 
 
 

 
93,589

46,795

37.97
2/14/2021
 
 
 
 

 
50,694

101,388

44.42
2/13/2022
 
 
 
 
 
—
181,858

44.06
2/11/2023
 
 
 
 
 
 
 
 
 
 
 
18,417
757,123

 
 
 
 
 
 
 
19,667
808,510

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
 
 
 
 

 
233,477

—
31.17
2/15/2020
 
 
 
 

 
109,585

54,792

37.97
2/14/2021
 
 
 
 

 
65,804

131,608

44.42
2/13/2022
 
 
 
 
 
—
235,604

44.06
2/11/2023
 
 
 
 
 
 
 
 
 
 
 
23,906
982,776

 
 
 
 
 
 
 
25,480
1,047,483


51


OUTSTANDING EQUITY AWARDS AT 2013 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)
K. S. Greene
—
329,113
46.74
4/1/2023
 
 
 
 
 
 
 
 
 
 
 
—
—
 
 
 
 
 
43,811
1,801,070
 
 
C. D. McCrary
102,333

—
36.42
2/19/2017
 
 
 
 
 
99,789

—
35.78
2/18/2018
 
 
 
 
 
77,647

—
31.17
2/15/2020
 
 
 
 
 
115,153

57,576

37.97
2/14/2021
 
 
 
 
 
69,148

138,295

44.42
2/13/2022
 
 
 
 
 
—
247,576

44.06
2/11/2023
 
 
 
 
 
 
 
 
 
 
 
25,121
1,032,724

 
 
 
 
 
 
 
26,774
1,100,679

 
 
 
 
 
46,439
1,909,107
 
 
 
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 2010 with expiration dates from 2015 through 2020 were fully vested as of December 31, 2013. The options granted in 2011, 2012, and 2013 become fully vested as shown below.

 
Year Option Granted
Expiration Date
Date Fully Vested
2011
February 14, 2021
February 14, 2014
2012
February 13, 2022
February 13, 2015
2013
February 11, 2023
February 11, 2016

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, 2013. The value in column (g) is based on the Common Stock closing price on December 31, 2013 ($41.11). The restricted stock units for Ms. Greene vest incrementally each year starting April 1, 2015 and ending April 1, 2018 if she remains employed with the Southern Company system. The restricted stock units for Mr. McCrary vest on April 30, 2014 if he remains employed with the Southern Company system on the vesting date. See further discussion of restricted stock in the CD&A.

52


Columns (h) and (i)

In accordance with SEC rules, column (h) reflects the target number of performance shares that can be earned at the end of each three-year performance period (December 31, 2014 and 2015) that were granted in 2012 and 2013, respectively.

The performance shares granted for the 2011 through 2013 performance period vested on December 31, 2013 and are shown in the Option Exercises and Stock Vested in 2013 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, 2013 ($41.11). 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 2013
 
 
 
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
—
—
18,740

770,401

A. P. Beattie
79,080
1,074,611
5,707

234,615

W. P. Bowers
—
—
43,748

1,955,265

K. S. Greene
—
—
—

—

C. D. McCrary
—
—
7,023

288,716


Columns (b) and (c)

Column (b) reflects the number of shares acquired upon the exercise of stock options during 2013, 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 2011 through 2013 performance period that vested on December 31, 2013. 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 ($41.11).

Because Ms. Greene was not an employee of the Southern Company system when performance shares were awarded in 2011, column (d) does not reflect any vested performance shares for her.

Certain restricted stock units vested on July 27, 2013 and are reflected in column (d) for Mr. Bowers. 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 ($45.34).

53



PENSION BENEFITS AT 2013 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
32.0

1,015,959

—
 
Supplemental Benefit Plan (Pension-Related)
32.0

9,348,613

—
 
Supplemental Executive Retirement Plan
32.0

3,511,454

—
A. P. Beattie
Pension Plan
36.92

1,332,438

—
 
Supplemental Benefit Plan (Pension-Related)
36.92

4,505,487

—
 
Supplemental Executive Retirement Plan
36.92

1,720,295

—
W. P. Bowers
Pension Plan
33.67

1,082,996

—
 
Supplemental Benefit Plan (Pension-Related)
33.67

4,871,361

—
 
Supplemental Executive Retirement Plan
33.67

1,518,807

—
K. S. Greene
Pension Plan
6.17

116,214

—
 
Supplemental Benefit Plan (Pension-Related)
6.17

50,685

—
 
Supplemental Executive Retirement Plan
6.17

158,385

—
C. D. McCrary
Pension Plan
39.0

1,609,199

—
 
Supplemental Benefit Plan (Pension-Related)
39.0

8,070,928

—
 
Supplemental Executive Retirement Plan
39.0

2,539,209

—

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 2013 was $255,000.

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, 2013, all of the named executive officers are retirement-eligible except Ms. Greene.

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.


54


Participants vest in the Pension Plan after completing five years of service. As of December 31, 2013, all of the named executive officers are vested in their Pension Plan benefits. Ms. Greene received years of credited service for her previous employment with the Southern Company system. 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.

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 under Potential Payments upon Termination or Change in Control.

55



Pension Benefit Assumptions

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

•
Discount rate - 5.05% Pension Plan and 4.50% supplemental plans as of December 31, 2013,
•
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: 75% single life annuity; 15% level income annuity; 5% joint and 50% survivor annuity; and 5% 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 4.25% 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. The number of years of credited service for Ms. Greene reflects her previous employment with the Southern Company system.

56



NONQUALIFIED DEFERRED COMPENSATION AS OF 2013 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
323,178
45,772
54,119

—
2,735,819

A. P. Beattie
—
19,841
10,634

—
480,024

W. P. Bowers
444,523
25,780
39,127

—
3,683,582

K. S. Greene
—
11,220
39

—
11,259

C. D. McCrary