UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(A) of the

Securities Exchange Act Of 1934

 

Check the appropriate box:

 

 

THE SOUTHERN COMPANY

(Name of Registrant as Specified In Its Charter)

 

N/A

(Name of Person(s) Filing Proxy Statement if other than Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notice of

Annual Meeting

2009

& Proxy Statement

 

 

PROXY STATEMENT

Contents

 

 

 

PROXY STATEMENT

Contents (continued)

 

 

 

Letter to Stockholders

 

 

David M. Ratcliffe

Chairman, President and

Chief Executive Officer

 

Dear Fellow Stockholder:

 

You are invited to attend the 2009 Annual Meeting of Stockholders at 10:00 a.m., ET, on Wednesday, May 27, 2009 at The Lodge Conference Center at Callaway Gardens, Pine Mountain, Georgia.

 

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At the meeting, I will report on our business and our plans for the future. Also, we will elect our Board of Directors and vote on the other matters set forth in the accompanying Notice.

 

Your vote is important. Please review the proxy material and vote your proxy as soon as possible.

 

In other matters, you will notice that your proxy package does not include the 2008 Southern Company Annual Report this year. Your proxy statement contains most of the financial information you normally receive. However, because of the economic and financial challenges affecting us all, we made the decision to eliminate the expense of printing thousands of annual reports. This decision not only reduces our costs, but also adds environmental benefits. Our 2008 Summary Annual Report is posted on our Web site, www.southerncompany.com, and we invite you to read it there.

 

As always, we are managing the costs in our business to ensure reliable service at competitive prices for our customers, while achieving greater efficiency. We are also continuing to invest capital where it’s needed.

 

We remain focused on our proven business strategy of making conservative, informed, and balanced decisions based on common sense.

 

Thank you for your confidence in our company. We look forward to seeing you May 27.

 

 

David M. Ratcliffe

 

 

Notice of Annual Meeting of Stockholders — May 27, 2009

 

TIME AND DATE

 

10:00 a.m., ET, on Wednesday, May 27, 2009

 

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

 

 

RECORD DATE

 

Stockholders of record at the close of business on March 30, 2009 are entitled to attend and vote at the meeting.

 

ANNUAL REPORT TO STOCKHOLDERS

 

Appendix C to this Proxy Statement is Southern Company’s 2008 Annual Report.

 

VOTING

 

Even if you plan to attend the meeting in person, please provide your voting instructions in one of the following ways as soon as possible:

 

 

By Order of the Board of Directors, G. Edison Holland, Jr., Corporate Secretary, April 10, 2009

 

Proxy Statement

 

General Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company’s 2008 Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K will be provided without charge upon written request to Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308.

 

Important notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on May 27, 2009:

 

This Proxy Statement, which includes the 2008 Annual Report as an appendix, is also available at http://investor.southerncompany.com/proxy.cfm.

 

 

 

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 12 members.

 

The nominees for election as Directors consist of eleven non-employees and one executive officer of the Company.

 

The Board of Directors has adopted and operates under a set of Corporate Governance Guidelines which are available on the Company’s website at www.southerncompany.com under Investors/Corporate Governance.

 

CORPORATE GOVERNANCE WEBSITE

 

In addition to the Corporate Governance Guidelines, other information relating to corporate governance of the Company is available on the Company’s Corporate Governance webpage at www.southerncompany.com under Investors/Corporate Governance or directly at http://investor.southerncompany.com/governance.cfm, including:

 

 

 

 

 

 

 

 

 

 

 

The Corporate Governance documents also may be obtained by requesting a copy from Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308.

 

DIRECTOR INDEPENDENCE

 

No Director will be deemed to be independent unless the Board of Directors affirmatively determines that the Director has no material relationship with the Company, directly, or as an officer, shareowner, 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:

 

 

 

 

 

 

 

 

Additionally, a Director will be deemed not to be independent if the Director or the Director’s spouse serves as an executive officer of a charitable organization to which the Company made discretionary contributions exceeding the greater of $1,000,000 or two percent of the organization’s total annual charitable receipts.

 

In determining independence, the Board reviews and considers all commercial, consulting, legal, accounting, charitable, or other business relationships that a Director or the Director’s immediate family members have with the Company. This review specifically included all ordinary course transactions with entities with which the Directors are associated. In particular, the Board reviewed transactions between subsidiaries of the Company and The Home Depot, Inc. and Vulcan Materials Company. Messrs. Francis S. Blake and Donald M. James are the chief executive officers of The Home Depot, Inc. and Vulcan Materials Company, respectively. Throughout 2008, subsidiaries of the Company purchased goods and services in the amount of $607,800 from The Home Depot, Inc. and $538,004 from Vulcan Materials Company. These amounts represented numerous individual purchases from The Home Depot, Inc. and several individual transactions with Vulcan Materials Company. The Board determined that its subsidiaries followed the Company procurement policies and procedures, that the amounts were well under the thresholds contained in the Director independence requirements, and that neither Mr. Blake nor Mr. James had a direct or indirect material interest in the transactions.

 

Ms. Elizabeth Blake, the wife of Mr. Francis S. Blake, a Director of the Company, is a senior vice president of government relations and advocacy, and general counsel for Habitat for Humanity International. In 2008, the Company, primarily through its foundation and the foundations of its subsidiaries, supported Habitat for Humanity International through charitable contributions of approximately $348,000. No other Director or immediate family member serves in an executive capacity for a charitable organization. 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 similar contributions and none were approved outside the Company’s normal procedures.

 

As a result of its annual review of Director independence, the Board affirmatively determined that none of the following persons who are currently serving as Directors or 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, Francis S. Blake, Jon A. Boscia, Thomas F. Chapman, H. William Habermeyer, Jr., Veronica M. Hagen, Warren A. Hood, Jr., Donald M. James, J. Neal Purcell, William G. Smith, Jr., and Gerald J. St. Pé. Also, Dorrit J. Bern, who served as a Director during 2008 until her resignation date of July 21, 2008, was determined not to have a material relationship with the Company and to be independent. David M. Ratcliffe, a current Director, is Chairman of the Board, President, and Chief Executive Officer of the Company and is not independent.

 

COMMUNICATING WITH THE BOARD

 

Communications may be sent to the Company’s Board or to specified Directors by regular mail or electronic mail. Regular mail should be sent to the attention of Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308. The electronic mail address is CORPGOV@southerncompany.com. The electronic mail address also can be accessed from the Corporate Governance webpage located under “Investors” on the Southern Company website at www.southerncompany.com, under the link entitled “Governance Inquiries.” With the exception of commercial solicitations, all stockholder communications directed to the Board or to specified Directors will be relayed to them.

 

DIRECTOR COMPENSATION

 

Only non-employee Directors are compensated for Board service.

 

Effective January 1, 2008, the director compensation program was amended with pay components being as follows:

 

 

 

Annual retainers:

 

 

 

 

Annual equity grant:

 

 

Meeting fees:

 

 

 

DIRECTOR DEFERRED COMPENSATION PLAN

 

The $90,000 equity grant is required to be deferred in shares of Common Stock under the Deferred Compensation Plan for Directors of The Southern Company (Director Deferred Compensation Plan) and invested in Common Stock units which earn dividends as if invested in Common Stock. Earnings are reinvested in additional stock units. Upon leaving the Board, distributions are made in Common Stock.

 

In addition, Directors may elect to defer up to 100% of their remaining compensation in the Director Deferred Compensation Plan until membership on the Board ends. Such deferred compensation may be invested as follows, at the Director’s election:

 

 

 

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 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 2008, including amounts deferred in the Director Deferred Compensation Plan. Non-employee Directors do not receive Option Awards or Non-Equity Incentive Plan compensation, and there is no pension plan for non-employee Directors.

 

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DIRECTOR STOCK OWNERSHIP GUIDELINES

 

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

 

MEETINGS OF NON-EMPLOYEE DIRECTORS

 

Non-employee Directors meet in executive session with no member of management present on each regularly-scheduled Board meeting date. There is a Presiding Director at each of these executive sessions. Mr. Thomas F. Chapman became the Presiding Director on May 23, 2007 and will serve until December 31, 2009 or until a successor is named by the non-employee Directors.

 

COMMITTEES OF THE BOARD

 

Committee Charters

 

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

 

Audit Committee:

 

 

 

 

The Board has determined that the members of the Audit Committee are independent as defined by the New York Stock Exchange 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. Smith qualifies as an “audit committee financial expert” as defined by the SEC.

 

(1)  Mr. Smith was appointed Chair and Ms. Bern and Mr. Hood were appointed as members of the Audit Committee on January 21, 2008. On July 21, 2008, Ms. Bern resigned from the Board.

 

Compensation and Management Succession Committee (Compensation Committee):

 

 

 

 

 

The Board has determined that each member of the Compensation Committee is independent.

 

(1) Mr. Purcell was appointed Chair and Messrs. Boscia and Habermeyer were appointed as members of the Compensation Committee on January 21, 2008.

 

Governance

 

During 2007 and 2008, the Compensation Committee’s governance practices included:

 

 

 

 

 

 

 

Role of Executive Officers

 

The Chief Executive Officer, with input from the Human Resources staff, recommends to the Compensation Committee base salary, target bonus levels, actual bonus payouts, and long-term incentive 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 proposals.

 

Role of Compensation Consultant

 

In 2008, the Compensation Committee directly retained Towers Perrin as its outside compensation consultant. The Compensation Committee informed Towers Perrin in writing that the Compensation Committee expected Towers Perrin 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 program is designed and administered consistent with the Compensation Committee’s requirements. The Compensation Committee also expected Towers Perrin to recommend changes to the executive and related corporate governance trends.

 

During 2008, Towers Perrin assisted the Compensation Committee with comprehensive market data and its implications for pay at the Company and various other governance, design, and compliance matters.

 

 

 

Compensation Committee Interlocks and Insider Participation

 

None of the persons who served as members of the Compensation Committee during 2008 was an officer or employee of the Company during 2008 or at any time in the past nor had reportable transactions with the Company.

 

Finance Committee:

 

 

 

 

The Board has determined that each member of the Finance Committee is independent.

 

(1)  Mr. James was appointed Chair and Messrs. Boscia and Purcell were appointed members of the Finance Committee on January 21, 2008. Ms. Bern served as Chair of the Finance Committee until her resignation on July 21, 2008.

 

Governance Committee:

 

 

 

 

The Board has determined that each member of the Governance Committee is independent.

 

(1) Ms. Baranco was appointed a member and Chair of the Governance Committee on January 21, 2008. Mr. Chapman served as Chair of the Governance Committee until January 21, 2008. Ms. Hagen was appointed to the Governance Committee on February 16, 2009.

 

Nominees for Election to the Board

 

The Governance Committee, comprised entirely of independent Directors, is responsible for identifying, evaluating and recommending nominees for election to the Board. The Governance Committee solicits recommendations for candidates for consideration from its current Directors and is authorized to engage third party advisers to assist in the identification and evaluation of candidates for consideration. Any stockholder may make recommendations to the Governance Committee by sending a written statement setting forth the candidate’s qualifications, relevant biographical information, and signed consent to serve. These materials should be submitted in writing to the Company’s assistant corporate secretary and received by that office by December 10, 2009 for consideration by the Governance Committee as a nominee for election at the Annual Meeting of Stockholders to be held in 2010. Any stockholder recommendation is reviewed in the same manner as candidates identified by the Governance Committee or recommended to the Governance Committee.

 

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, and number of other board memberships. The Board as a whole should be diverse and have collective knowledge and experience in accounting, finance, leadership, business operations, risk management, corporate governance, and the Company’s industry. During 2008, the Governance Committee engaged the services of a third-party search firm to aid in identifying prospective candidates and evaluating their qualifications. The

 

 

Governance Committee recommends candidates to the Board of Directors for consideration as nominees. Final selection of the nominees is within the sole discretion of the Board of Directors.

 

Ms. Veronica M. Hagen was recommended by the Governance Committee for election to the Board and was elected as a Director effective December 8, 2008. Ms. Hagen was identified jointly by the members of the Governance Committee and the third-party search firm referenced above.

 

Nuclear/Operations Committee: (1)

 

 

 

 

(1) Effective January 21, 2008, the Committee’s name was changed from the Nuclear Committee to the Nuclear/Operations Committee.

 

(2)  Mr. Habermeyer was appointed Chair and Ms. Baranco and Mr. St. Pé were appointed members of the Committee on January 21, 2008. Ms. Hagen was appointed to the Nuclear/Operations Committee on February 16, 2009.

 

DIRECTOR ATTENDANCE

 

The Board of Directors met eight times in 2008. The average attendance for Directors at all Board and Committee meetings was 98 percent. No nominee attended less than 75 percent of applicable meetings.

 

Directors are expected to attend the Annual Meeting of Stockholders. All of the members of the Board of Directors serving on May 28, 2008, the date of the 2008 Annual Meeting of Stockholders, attended the meeting.

 

 

 

Stock Ownership Table

 

STOCK OWNERSHIP OF DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS

 

The following table shows the number of shares of Common Stock owned by Directors, nominees and executive officers as of December 31, 2008. 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 the class outstanding.

 

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Matters to be Voted Upon

 

ITEM NO. 1 — ELECTION OF DIRECTORS

 

Nominees for Election as Directors

 

The Proxies named on the proxy form will vote, unless otherwise instructed, each properly executed proxy form for the election of the following nominees as Directors. If any named nominee becomes unavailable for election, the Board may substitute another nominee. In that event, the proxy would be voted for the substitute nominee unless instructed otherwise on the proxy form. Each nominee, if elected, will serve until the 2010 Annual Meeting of Stockholders.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 plurality of shares present and entitled to vote is required for the election of Directors. Stockholders are entitled to cumulative voting in the election of directors. See Item No. 3 below for a discussion of cumulative voting.

 

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 2009. 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 shares present and entitled to vote 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 — TO AMEND THE COMPANY’S BY-LAWS TO (1) IMPLEMENT A MAJORITY VOTE STANDARD FOR THE ELECTION OF DIRECTORS IN UNCONTESTED ELECTIONS, RETAINING A PLURALITY VOTE STANDARD IN CONTESTED ELECTIONS, AND (2) ELIMINATE CUMULATIVE VOTING IN UNCONTESTED ELECTIONS, EACH CONDITIONED ON THE ELIMINATION OF CUMULATIVE VOTING IN THE CERTIFICATE OF INCORPORATION

 

The Company’s Board of Directors determined that it would be in the best interest of the Company and its stockholders to allow for majority voting and to eliminate cumulative voting in uncontested elections of Directors. The Board recommends that the stockholders approve an amendment to the By-Laws to change the standard for the election of directors in uncontested elections from a plurality voting standard to a majority voting standard and also to eliminate cumulative voting in uncontested elections, subject to the elimination of cumulative voting in the Certificate of Incorporation, as described more fully in Item No. 4 below.

 

Under the current plurality vote standard, a nominee for Director in an election can be elected or re-elected with as little as a single affirmative vote, even while a substantial majority of the votes cast are “withheld” from that nominee. The proposed majority vote standard would require that a nominee for Director in an uncontested election receive a “for” vote from a majority of the votes present and voting at a stockholder meeting to be elected to the Board. Additionally, the By-Laws currently provide that when electing Directors, stockholders may exercise cumulative voting rights. Under cumulative voting, in voting for Directors each holder of Common Stock is entitled to cast a number of votes equal to the number of votes he or she would be entitled to cast with respect to his or her shares of Common Stock multiplied by the number of Directors to be elected. A stockholder may give one candidate all the votes such stockholder is entitled to cast or may distribute such votes among as many candidates as such stockholder chooses. The Board feels that cumulative voting and a majority vote standard are incompatible, and is recommending the elimination of cumulative voting in uncontested elections in conjunction with the adoption of a majority vote standard.

 

The Board is seeking to eliminate cumulative voting and to implement a majority vote standard in uncontested elections because it believes that such changes are in the best interest of stockholders at this time. The Board recommends retaining cumulative voting in the By-Laws for any contested election of Directors, to which a plurality standard would apply. Please see Item No. 4 below for additional information regarding the proposed elimination of cumulative voting as contained in the Certificate of Incorporation.

 

Background of This Item

 

The proposed majority vote standard would require that a nominee for Director in an uncontested election receive a majority of the votes cast at a stockholder meeting in order to be elected to the Board. The Board believes that the proposed majority vote standard for uncontested elections is a more equitable standard. At present, a plurality vote standard guarantees the election of a Director in an uncontested election; however, a majority vote standard would mean that nominees in uncontested elections are only elected if a majority of the votes cast are voted in their favor. The Board believes that this majority vote standard in uncontested director elections will strengthen the director nomination process and enhance director accountability.

 

Additionally, the Board will add appropriate provisions to its Corporate Governance Guidelines to require any nominee for election as a Director of the Company to submit an irrevocable letter of resignation as a condition to being named as such nominee, which would be tendered in the event that nominee fails to receive the affirmative

 

 

vote of a majority of the votes cast in an uncontested election at a meeting of stockholders. Such resignation would be considered by the Board, and the Board would be required to either accept or reject such resignation within 90 days from the certification of the election results.

 

The By-Laws also currently provide for cumulative voting in the election of Directors. The proposed amendment would eliminate cumulative voting in uncontested elections of Directors, but retain cumulative voting in contested elections of Directors.

 

The Board does not believe that it should amend the By-Laws to establish a majority vote standard and to eliminate cumulative voting while the Company’s Certificate of Incorporation still provides for cumulative voting. The elimination of cumulative voting is desirable in connection with the adoption of the majority vote standard with respect to uncontested elections. Because both the Certificate of Incorporation and the By-Laws currently provide for cumulative voting, the Board recommends that the provisions in the Certificate of Incorporation relating to cumulative voting be eliminated. The Board believes that less confusion will result if both the majority vote standard and cumulative voting provisions are contained only in the By-Laws rather than in both the By-Laws and the Certificate of Incorporation. This proposed amendment does not provide any less protection to stockholders because under the Company’s By-Laws, stockholders are required to ratify any amendment to the By-Laws, and any further change in either the majority vote standard or cumulative voting would be subject to the stockholder ratification requirement.

 

Amendments

 

The proposed By-Law amendment would include the following:

 

 

 

A complete text of the amendment is set forth in Appendix A.

 

The affirmative vote of a majority of shares present and entitled to vote is required for amendment of the By-Laws as presented in this Item No. 3.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM NO. 3.

 

ADOPTION OF THIS ITEM NO. 3 IS CONDITIONED ON THE APPROVAL BY STOCKHOLDERS OF ITEM NO. 4 BELOW. NEITHER ITEM NO. 3 NOR ITEM NO. 4 WILL BE IMPLEMENTED UNLESS BOTH ITEMS ARE APPROVED.

 

ITEM NO. 4 — TO AMEND THE CERTIFICATE OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING IN ELECTIONS OF DIRECTORS, CONDITIONED UPON ADOPTION OF THE MAJORITY VOTE STANDARD AND THE ELIMINATION OF CUMULATIVE VOTING IN CONTESTED ELECTIONS IN THE BY-LAWS

 

The Board has determined that it would be in the best interest of the Company and its stockholders to require that a nominee or Director in an uncontested election receive a majority of the votes cast at a stockholders meeting to be elected to the Board (see Item No. 3 above). The Board is seeking to eliminate cumulative voting in uncontested elections because it believes that a change to a majority vote standard in uncontested elections is in the best interest of stockholders at this time, and it views cumulative voting as inconsistent with a majority vote standard for the election of Directors.

 

The elimination of cumulative voting in uncontested elections requires an amendment to the By-Laws as discussed in Item No. 3 above and also requires an amendment to the Certificate of Incorporation, which would remove

 

 

subdivision (2) of Article Ninth (the cumulative voting provision). The Board feels it is appropriate to remove cumulative voting entirely from the Certificate of Incorporation and to amend the cumulative voting provisions discussed above in the By-Laws so that all of the provisions pertaining to voting in director elections are contained in the By-Laws. As discussed above, cumulative voting will be permitted in a contested election, to which the plurality voting standard applies.

 

This amendment to the Certificate of Incorporation has been approved and declared advisable by the Board but requires adoption by the Company’s stockholders. This elimination would facilitate adoption of the majority vote standard for the election of Directors in the manner described above in Item No. 3.

 

This item would not change the present number of Directors, and the Board would retain the authority to change that number and to fill any vacancies or newly created directorships.

 

Background of This Item

 

The Board is seeking to eliminate cumulative voting because it believes that a change to a majority vote standard in uncontested elections would be in the best interest of stockholders at this time and it views cumulative voting as incompatible with a majority vote standard for election.

 

Amendment

 

The proposed amendment would eliminate subdivision (2) of Article Ninth of the Certificate of Incorporation in its entirety.

 

Approval of this item requires the affirmative vote of at least two-thirds of the outstanding shares of the Company’s common stock.

 

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

 

ADOPTION OF THIS ITEM NO. 4 IS CONDITIONED ON THE APPROVAL BY STOCKHOLDERS OF ITEM NO. 3 ABOVE. NEITHER ITEM NO. 3 NOR ITEM NO. 4 WILL BE IMPLEMENTED UNLESS BOTH ITEMS ARE APPROVED.

 

ITEM NO. 5 — STOCKHOLDER PROPOSAL ON ENVIRONMENTAL REPORT

 

The Company has been advised that The Sisters of Charity of Saint Elizabeth, P. O. Box 476, Convent Station, New Jersey 07961-0476, holder of 100 shares of Common Stock; Benedictine Sisters of Boerne, Texas, 285 Oblate Drive, San Antonio, Texas 78216, holder of 200 shares of Common Stock; Benedictine Sisters of Virginia, Saint Benedict Monastery, 9535 Linton Hall Road, Bristow, Virginia 20136-1217, holder of 2,000 shares of Common Stock; Board of Pensions of the Evangelical Lutheran Church in America, 800 Marquette Avenue, Suite 1050, Minneapolis, Minnesota 55402-2892, holder of 12,871 shares of Common Stock; Congregation of Benedictine Sisters of Perpetual Adoration, Benedictine Monastery, 31970 State Highway P, Clyde, Missouri 64432-8100, holder of 1,050 shares of Common Stock; State of Connecticut Retirement Plans & Trust Funds, 55 Elm Street, Hartford, Connecticut 06106-1773, holder of 317,925 shares of Common Stock; Providence Trust, 515 SW 24^th Street, San Antonio, Texas, 78207-4619, holder of 158 shares of Common Stock; and Sisters of St. Dominic of Caldwell New Jersey, 40 South Fullerton Avenue, Montclair, New Jersey 07042, holder of 100 shares of Common Stock, propose to submit the following resolution at the 2009 Annual Meeting of Stockholders.

 

“Whereas: The International Energy Agency warned in its 2007 World Energy Outlook that ‘urgent action is needed if greenhouse gas (GHG) concentrations are to be stabilized at a level that would prevent dangerous interference with the climate system.’

 

“In October 2006, a report authored by former chief economist of The World Bank, Sir Nicolas Stern, estimated that climate change will cost between 5% and 20% of GDP if emissions are not reduced, and that GHGs can be reduced at a cost of approximately 1% of global economic growth.

 

 

“U.S. power plants are responsible for nearly 40% of the country’s carbon dioxide emissions, and 10% of global carbon dioxide emissions.

 

“Carbon dioxide emissions from electric power generation rose by 2.9% in 2007 according to the U.S. Energy Information Administration, the largest single year since 1998.

 

“Coal-burning power plants are responsible for 80% of carbon dioxide emissions from all U.S. power plants and Southern Co. is the second-largest emitter of CO₂, the principal GHG linked to climate change, among U.S. power generators.

 

“Levels of carbon dioxide, which persist in the atmosphere for over 100 years, are now higher than anytime in the past 400,000 years and they will continue to rise as long as emissions from human activities continue.

 

“President Obama and many members of Congress plan to limit greenhouse gas emissions; this will surely impact the business of our Company regardless of the mechanisms.

 

“AEP, the nation’s largest carbon dioxide emitter, Entergy and Exelon have set total greenhouse gas emissions reduction targets. Duke, Exelon, FPL, NRG, and others, through their participation in the U.S. Climate Action Partnership, have also publicly stated that the U.S. should reduce its GHG footprint by 60% to 80% from current levels by 2050. They have endorsed adoption of mandatory federal policy to limit CO₂ emissions as a way to provide economic and regulatory certainty needed for major investments in our energy future.

 

“Southern, however, opposes mandatory regulation of CO₂ and other GHG emissions in favor of voluntary action. While our company has added cleaner natural gas capacity, is investing in renewable energy, and has reduced the intensity of its CO₂ emissions, it has yet to adopt a voluntary reduction goal for its total CO₂ emissions. (Southern Co. Response to CDP5)

 

“RESOLVED: Shareholders request that the Board of Directors report to shareholders actions the company would need to take to reduce total CO₂ emissions, including quantitative goals for existing and proposed plants based on current and emerging technologies, by September 30, 2009. Such report shall omit proprietary information and be prepared at reasonable cost.”

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” ITEM NO. 5 FOR THE FOLLOWING REASONS:

 

In January 2009, the Company signed onto principles developed by members of the Edison Electric Institute that outline a legislative approach to addressing greenhouse gas emissions. These principles support near-term and mid-term (10–20 years) reductions in emissions based on the availability of technology and the use of energy efficiency, renewable energy, and new nuclear, and support a reduction target of 80% below current emissions levels by 2050. In addition, the Company is updating its report, Climate Change – A Summary of Southern Company Actions, on specific current and long-term activities to address carbon dioxide emissions. This report is one of several produced by the Company, including, in 2005, the Environmental Assessment: Report to Shareholders, outlining options and actions the Company is taking with regard to carbon dioxide and other emissions, including an extensive review of carbon dioxide price scenarios; in 2006, its Corporate Responsibility Report, which included data on emissions and actions being undertaken to address those emissions; and in 2008, Energy Efficiency Regulatory Structures, discussing the need for and the impacts of energy efficiency efforts as a resource to meet growth and regulatory structures. All these reports are available either through the Company’s external website at www.southerncompany.com or by contacting Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308 and requesting a copy.

 

The vote needed to pass the proposed stockholders’ resolution is a majority of the shares represented at the meeting and entitled to vote.

 

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

 

 

ITEM NO. 6 - STOCKHOLDER PROPOSAL ON PENSION POLICY

 

The Company has been advised that the United Brotherhood of Carpenters and Joiners of America, 101 Constitution Avenue, N.W., Washington, D.C. 20001, holder of 12,317 shares of Common Stock, proposes to submit the following resolution at the 2009 Annual Meeting of Stockholders.

 

“Be It Resolved: That the shareholders of The Southern Company (“Company”) hereby urge that the Board of Director’s Compensation and Management Succession Committee establish an Excess Executive Pension Policy (“Excess Pension Policy”) that limits the retirement benefits to senior executives under the Company’s Supplemental Benefit Plan (Pension-Related) (“SBP-P”) and the Company’s Supplemental Executive Retirement Plan (“SERP”). The Excess Pension Policy should provide that compensation levels used to determine retirement benefits under both supplemental plans be limited to a senior executive’s annual salary, excluding all incentive pay or voluntarily deferred pay from inclusion in the plans’ definition of covered compensation used to establish benefits. The Excess Pension Policy should be implemented in a manner so as not to interfere with existing contractual rights of any participant in either supplemental plan.

 

“Supporting Statement: We believe that one of the most troubling aspects of the sharp rise in executive compensation is the excessive pension benefits provided to senior corporate executives through the use of supplemental executive retirement plans. The Southern Company has established two supplemental executive retirement plans, the SBP-P and the SERP. These supplemental plans provide the Company’s chief executive officer and other senior executives retirement benefits far greater than those permitted under the Company’s tax-qualified Pension Plan. Our proposal seeks to change these generous supplemental pension benefit plans by limiting the type and amount of compensation that can be used to calculate pension benefits under the plans.

 

“At present, U.S. tax law maintains a $225,000 limit on the level of compensation used to determine a participant’s retirement benefit under a tax-qualified pension plan. The SBP-P and SERP were established to provide senior executives increased retirement benefits by raising the level of compensation used in the pension formula to calculate retirement benefits. The plans allow the inclusion of an executive’s full base pay in excess of the statutory limit, voluntarily deferred compensation, and incentive or bonus pay to calculate the executive’s full retirement benefit. The Company’s executive compensation disclosure indicates that the senior executives’ salary and annual incentive awards are typically well in excess of the $225,000 compensation limit in the Company’s tax-qualified pension plan.

 

“Our position is that the inclusion of voluntarily deferred compensation and incentive pay in calculating the level of retirement benefit is overly generous and unjustifiable. The only type of compensation used in the supplemental plans for establishing the level of additional pension benefits should be an executive’s annual salary, minus deferred compensation. No incentive pay or deferred compensation should be included in a senior executive’s pension calculation under the supplemental plans. The inclusion of annual incentive pay in senior executive pension benefit calculations can dramatically increase the pension benefit afforded senior executives and has the additional undesirable effect of converting one-time incentive compensation into guaranteed lifetime pension income. We believe the proposed limitations are necessary and reasonable restrictions on the excessiveness of supplemental retirement benefits.”

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” ITEM NO. 6 FOR THE FOLLOWING REASONS:

 

As described in the Compensation Discussion and Analysis herein, the Company has a comprehensive compensation and benefits program for all employees. In addition to base salary, almost all of the Company’s full-time employees, including members of collective bargaining units, participate in both the incentive compensation program and the retirement program. The Company’s pay philosophy is that total compensation, including post-employment benefits, should be at the size-adjusted median of the market. This philosophy applies to all employees, including senior executives.

 

The Compensation Committee is responsible for the oversight and administration of the Company’s executive compensation and benefits program. It has retained an independent compensation consultant that provides advice and counsel on appropriate executive compensation levels based on sound market data. The Company believes that

 

 

if compensation is deemed appropriate for the senior executive’s job level, benefits, including pension benefits, will be commensurate with that compensation.

 

Retirement benefits for all employees are based on years of service and final average rate of pay. Averaging pay over the three highest years out of the last 10 years of service mitigates the pension benefit being determined solely because of a single year’s high pay. The proponent’s view is that including voluntary deferred compensation and annual incentive pay in the calculation of final average pay results in “overly generous and unjustifiable” retirement benefits. To the contrary, pension benefits for senior executives are structured to make executive benefits comparable, as a percentage of final average pay, to the benefits provided non-executive employees. Senior executives’ retirement benefits are NOT higher than those of other employees, relative to their rates of pay. The pension plans, both tax-qualified and non-qualified, recognize incentive pay for all employees, not just senior executives. Recognizing voluntary deferred compensation is necessary for providing a consistent level of retirement benefits based on final average rate of pay under our pay-replacement philosophy. In fact, for example, an executive employee who retires from the Company at age 62 with 30 years of service will receive over 15% less in pension benefits, relative to final average pay, than a similarly-situated non-management employee. The Company’s pension program is described in detail in the information following the Pension Benefits Table in this Proxy Statement.

 

The vote needed to pass the proposed stockholder’s resolution is a majority of the shares represented at the meeting and entitled to vote.

 

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

 

 

 

 

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 2008 Annual Report to Stockholders attached hereto as Appendix C 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 on the conformity of management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the effectiveness of the Company’s internal control over financial reporting with the criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Audit Committee has discussed with the independent registered public accounting firm the matters that are required to be discussed by Statement on Auditing Standards No. 61, as amended (American Institute of Certified Public Accountants, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T. In addition, the Audit Committee has discussed with the independent registered public accounting firm its independence from management and the Company as required under rules of the PCAOB and has received the written disclosures and letter from the independent registered public accounting firm required by the rules of the PCAOB. The Audit Committee also has considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with maintaining the firm’s independence.

 

The Audit Committee discussed the overall scopes 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 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 Committee held nine meetings during 2008.

 

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, 2008 and filed with the SEC. The Audit Committee also reappointed Deloitte & Touche as the Company’s independent registered public accounting firm for 2009. Stockholders will be asked to ratify that selection at the Annual Meeting of Stockholders.

 

Members of the Audit Committee:

 

William G. Smith, Jr., Chair

Francis S. Blake

Warren A. Hood, Jr.

 

 

PRINCIPAL ACCOUNTING FIRM FEES

 

The following represents the fees billed to the Company for the last two fiscal years by Deloitte & Touche — the Company’s principal independent registered public accounting firm:

 

 

 

The Audit Committee has adopted a Policy on Engagement of the Independent Auditor for Audit and Non-Audit Services (see Appendix B) 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Compensation

 

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

 

GUIDING PRINCIPLES AND POLICIES

 

The Company’s executive compensation program is based on a philosophy that total executive compensation must be competitive with the companies in our industry, must be tied to and motivate our executives to meet our short- and long-term performance goals, and must foster and encourage alignment of executive interests with the interests of our stockholders and our customers. The program generally is designed to motivate all employees, including executives, to achieve operational excellence and financial goals while maintaining a safe work environment.

 

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

 

 

 

 

In support of our performance-based pay philosophy, we have no general employment contracts with our named executive officers or guaranteed severance, except upon a change in control.

 

Our pay-for-performance principles apply not only to the named executive officers, but to thousands of employees. Our short-term incentive program covers almost all of our nearly 27,000 employees and our change-in-control protection program covers all employees not part of a collective bargaining unit. Our stock options and performance dividends cover approximately 6,300 employees. These programs engage our people in our business, which ultimately is good not only for them, but for our customers and our stockholders.

 

OVERVIEW OF EXECUTIVE COMPENSATION COMPONENTS

 

Our executive compensation program is composed of several components, each of which plays a different role. The table below discusses the intended role of each material pay component, what it rewards, and why we use it. Following the table is additional information that describes how we made 2008 pay decisions.

 

 

 

 

 

 

 

 

 

Pay Element

Intended Role and What the Element Rewards

Why We Use the Element

 

MARKET DATA

 

For the named executive officers, the Compensation Committee reviews compensation data from large, publicly-owned electric and gas utilities. The data was developed and analyzed by Towers Perrin, the compensation consultant retained by the Compensation Committee. The companies included each year in the primary peer group are those whose data is available through the consultant’s database. Those companies are drawn from this list of regulated utilities of $2 billion in revenues and up. Proxy data for this entire list of companies below also is used. No other companies’ data are used in our market-pay comparisons.

 

 

The Company is one of the largest U.S. utility companies based on revenues and market capitalization, and its largest business units are some of the largest in the industry as well. For that reason, the consultant size-adjusts the market data in order to fit it to the scope of our business.

 

In using this market data, market is defined as the size-adjusted 50th percentile of the data, with a focus on pay opportunities at target performance (rather than actual plan payouts). The Company specifically looks at the market data for chief executive officer positions and other positions in terms of scope of responsibilities that most closely resemble the positions held by our named executive officers. Based on that data, the Company recommends to the Compensation Committee a total target compensation opportunity for each named executive officer. Total target compensation opportunity is the sum of base salary, annual incentive payout (at the target performance level), stock option awards at a target value, and performance dividend payout 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, our compensation program is designed to result in payouts that are market-appropriate given our performance for the year or period.

 

 

The Company did not target a specified weight for base salary or annual or long-term incentives as a percentage of total target compensation opportunities, nor did amounts realized or realizable from prior compensation serve to increase or decrease 2008 compensation amounts. Total target compensation opportunities for senior management as a group are managed to be at the median of the market for companies our size and in our industry. The total target compensation opportunities established in 2008 for each named executive officer are shown below.

 

 

As is our long-standing practice, the salary levels shown above were not effective until March 2008. Therefore, the amounts reported in the Summary Compensation Table are lower because that table reports actual amounts paid in 2008. For purposes of comparing the value of our compensation program to the market data, stock options are valued at 12%, and performance dividend targets at 10%, of the average daily Common Stock price for the year preceding the grant, both of which represent risk-adjusted present values on the date of grant and are consistent with the methodologies used to develop the market data. For the 2008 grant of stock options and the performance dividend targets established for the 2008 - 2011 performance period, this value was $8.03 per stock option granted. In the long-term incentive column, 55% of the value shown is attributable to stock options and 45% is attributable to performance dividends. The stock option value used for market data comparisons exceeds the value reported in the Grants of Plan-Based Awards Table because the value above is calculated assuming that the options are held for their full 10-year terms. The calculation of the Black-Scholes value reported in the Grants of Plan-Based Awards Table uses historical holding period averages of approximately five years. The value of stock options, with the associated performance dividends, declined from 2007. In 2007, the value of the dividend equivalents was 10% of the average daily Common Stock price for the year preceding the grant as in 2008, but the value of the stock option was 15% rather than 12%. In 2007, the performance dividends represented 40% of the long-term incentive target value and stock options represented 60% of that value.

 

As discussed above, the Compensation Committee targets total target compensation opportunities for senior executives as a group at market. Therefore, some executives may be paid somewhat above and others somewhat below market. This practice allows for minor 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. The average total target compensation opportunities for the named executive officers for 2008 were below the market data described above. However, because of the use of market data from a large number of peer companies for positions that are not identical in terms of scope of responsibility from company to company, we do not consider this difference material and we continue to believe that our compensation program is market-appropriate. Generally, we consider compensation to be within an appropriate range if it is not more or less than 10% of the applicable market data. Only the total opportunity for Mr. Bowers was more than 10% under the market data described above, which the Compensation Committee considered appropriate because he was new to the Chief Financial Officer position in 2008.

 

In 2007, Towers Perrin analyzed the level of actual payouts, for 2006 performance, under the annual incentive program to the named executive officers relative to performance versus our peer companies to provide a check on the Company’s goal-setting process. The findings from the analyses were used in establishing performance goals and the associated range of payouts for goal achievement for 2008. That analysis was updated in 2008, for 2007 performance, and those findings were used in establishing goals for 2009.

 

In 2008, the Compensation Committee received a detailed comparison of the Company’s executive benefits program to the benefits of a group of other large utilities and general industry companies. The results indicated that the Company’s executive benefits program was at market with retirement-related benefits slightly above market and other benefits slightly below market.

 

 

DESCRIPTION OF KEY COMPENSATION COMPONENTS

 

2008 Base Salary

 

Base salaries for each of the named executive officers for 2008 were recommended for the Compensation Committee’s approval by Mr. Ratcliffe, except for his own salary. Those recommendations took the market data into account, as well as the need to retain an experienced team, time in position, and individual performance which included the degree of competence and initiative exhibited and the individual’s relative contribution to the results of operations in prior years. The Compensation Committee approved the recommended salaries in 2008.

 

Mr. Ratcliffe’s 2008 base salary was set by the Compensation Committee and was influenced by the above-described market data and Mr. Ratcliffe’s performance and time in the position.

 

2008 Incentive Compensation

 

Achieving Operational and Financial Goals — Our Guiding Principle for Incentive Compensation

 

Our number one priority is to provide our customers outstanding reliability and superior service at low prices while achieving a level of financial performance that benefits our stockholders in the short and long term.

 

In 2008, we strove for and rewarded:

 

 

 

In 2008, we also focused on and rewarded:

 

• EPS growth;

 

• ROE in the top quartile of comparable electric utilities;

 

• Dividend growth;

 

• Long-term total shareholder return; and

 

• Financial integrity — an attractive risk-adjusted return, sound financial policy, and a stable “A” credit rating.

 

The incentive compensation program is designed to encourage achievement of these goals.

 

Mr. Ratcliffe, with the assistance of our Human Resources staff, recommended to the Compensation Committee program design and award amounts for senior executives, including the named executive officers.

 

2008 Annual Incentive Program

 

Program Design

 

The Performance Pay Program is the Company’s annual incentive program. Most employees of the Company are participants, including the named executive officers, for a total of almost 27,000 participants.

 

The performance measured by the program uses goals set at the beginning of each year by the Compensation Committee.

 

 

An illustration of the annual incentive goal structure for 2008 is provided below.

 

 

• Operational goals for 2008 were safety, customer service, plant availability, transmission and distribution system reliability, and inclusion. Each of these operational goals is explained in more detail under Goal Details below. The result of all operational goals is averaged and multiplied by the bonus impact of the EPS and business unit financial goals. The amount for each goal can range from 0.90 to 1.10 or can be 0.00 if a threshold performance level is not achieved as more fully described below. The level of achievement for each operational goal is determined and the results are averaged. Each of our business units has operational goals. For Messrs. Garrett and McCrary, the payout is adjusted up or down based on the operational goal results for Georgia Power Company and Alabama Power Company, respectively. For Messrs. Ratcliffe, Bowers, and Fanning, it is calculated using the corporate-wide weighted average of the operational goal results.

 

 

 

For Messrs. Garrett and McCrary, the annual incentive payout is calculated using the ROE for Georgia Power Company and Alabama Power Company, respectively. For Messrs. Ratcliffe, Bowers, and Fanning, it is calculated using a corporate-wide weighted average of all the business unit financial performance goals, including primarily each traditional operating company’s ROE.

 

The Compensation Committee may make adjustments, both positive and negative, to goal achievement for purposes of determining payouts. Such adjustments include the impact of items considered one-time or outside of normal operations or not anticipated in the business plan when the earnings goal was established and of sufficient magnitude to warrant recognition. The Compensation Committee made an adjustment in 2008 to eliminate the effect of an $83 million, or 11 cents per share, after-tax charge to earnings taken in 2008. The charge related to a position the Company took concerning the timing of tax deductions associated with sale-in-lease-out (SILO) transactions that was challenged by the Internal Revenue Service. In making this decision, the Compensation Committee considered that the charge only affected the timing of deductions taken by the Company related to the SILO transactions, that the future tax benefits due to the timing change are expected to be minimal in future years and will likely have no impact on future Performance Pay Program award sizes, and that the impact of the tax benefits in earlier years was minimal – an average of just over two percent in 2002 through 2007. This adjustment increased the average payout for 2008 performance by approximately 30%.

 

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

 

 

Goal Details

 

Operational Goals:

 

Customer Service — The Company uses customer satisfaction surveys to evaluate the Company’s 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.

 

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 historical performance, expected weather conditions, and expected capital expenditures.

 

Availability — Peak season equivalent forced outage rate is an indicator of plant availability and efficient generation fleet operations during the months when generation needs are greatest. The rate is calculated by dividing the number of hours of forced outages by total generation hours.

 

Safety — The Company’s Target Zero program is focused on continuous improvement in having a safe work environment. The performance is measured by the Occupational Safety and Health Administration recordable incident rate.

 

Inclusion/Diversity — The inclusion program seeks to improve our inclusive workplace. This goal includes measures for work environment (employee satisfaction survey), representation of minorities and females in leadership roles, and supplier diversity.

 

Southern Company capital expenditures “gate” or threshold goal — We strive to manage total capital expenditures, excluding nuclear fuel, for the participating business units at or below a specified level for 2008. For 2008, the capital expenditure target, excluding nuclear fuel, was $4.135 billion. If the capital expenditure target is exceeded, total operational goal performance is capped at 0.90 for all business units, regardless of the actual operational goal results. Adjustments to the goal may occur due to significant events not anticipated in the business plan established early in the year, such as acquisitions or disposition of assets, new capital projects, and other events.

 

The range of performance levels established for the operational goals is detailed below.

 

 

EPS and Business Unit Financial Performance:

 

The range of EPS and ROE goals for 2008 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.

 

 

 

2008 Achievement

 

Each named executive officer had a target annual incentive opportunity set by the Compensation Committee at the beginning of 2008. Targets are set as a percentage of base salary. Mr. Ratcliffe’s target was set at 100%. For the other named executive officers, it was set at 75%. Actual payouts were determined by adding the payouts derived from EPS and business unit financial performance goal achievement for 2008 and multiplying that sum by the result of the operational goal achievement. The gate goal target was not exceeded and therefore did not affect payouts. Actual 2008 goal achievement is shown in the following table. The EPS result shown in the table is adjusted for the after-tax charges taken in 2008 as described above. Therefore, payouts were determined using EPS performance results that differ from the results reported in the Company’s financial statements in the 2008 Annual Report attached as Appendix C to this Proxy Statement (Financial Statements). EPS, as determined in accordance with generally accepted accounting principles and as reported in the Financial Statements, was $2.26 per share.

 

 

Note that the Total Payout Factor may vary from the Total Weighted Financial Performance Factor multiplied by the Operational Goal Multiplier due to rounding. To calculate an annual incentive payout amount, the target opportunity (annual incentive target times base salary) is multiplied by the Total Payout Factor.

 

Actual performance, as adjusted, exceeded the target performance levels established by the Compensation Committee in early 2008; therefore, the payout levels also exceeded the target pay opportunities that were established. More information on how the target pay opportunities are established is provided under the Market Data section in this CD&A.

 

The table below shows the pay opportunity set in early 2008 for the annual incentive payout at target-level performance and the actual payout based on the actual performance shown above. The actual target reported in the Grants of Plan-Based Awards Table may differ due to rounding.

 

 

 

 

 

Stock Options

 

Stock options are granted annually and were granted in 2008 to the named executive officers and about 6,300 other employees. Options 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.

 

Stock option award sizes for 2008 were calculated using guidelines set by the Compensation Committee as a percentage of base salary as shown in the table below. The number of options granted is the guideline amount divided by the average daily Common Stock price for the 12 months preceding the grant. The guideline percentage was set by the Compensation Committee to deliver target long-term incentive compensation assuming a stock option value, with associated performance dividends, of approximately 25% of the average daily Common Stock price. As discussed in the Market Data section in this CD&A, in 2008 the target value of the stock options, with the associated performance dividends, was only 22% of that average Common Stock price. Therefore, while the guideline as a percentage of salary was not increased for 2008 stock option awards, the target value of long-term incentive compensation was less in 2008 than in 2007 - $8.03 per share in 2008 and $8.515 per share in 2007.

 

The calculation of the 2008 stock option grants for the named executive officers is shown below.

 

 

For Mr. Ratcliffe, based on the market data, long-term incentive compensation pay opportunity was re-determined in 2008 and therefore the guideline, which as described above is a percentage of salary, was increased accordingly. In 2007, the guideline percentage was 1,703%. More information about the stock option program is contained in the Grants of Plan-Based Awards Table and the information accompanying it.

 

Performance Dividends

 

All option holders, including the named executive officers, can receive performance-based dividend equivalents on stock options held at the end of the year. Performance dividends can range from 0% to 100% of the Common Stock dividend paid during the year per option held at the end of the year. Actual payout will depend on our total shareholder return over a four-year performance-measurement period compared to a group of other electric and gas utility companies. The peer group is determined at the beginning of each four-year performance-measurement period. The peer group varies from the Market Data peer group due to the timing and criteria of the peer selection process. The peer group for performance dividends is set by the Compensation Committee at the beginning of the four-year performance-measurement period. However, despite these timing differences, there is substantial overlap in the companies included.

 

Total shareholder return is calculated by measuring the ending value of a hypothetical $100 invested in each company’s common stock at the beginning of each of 16 quarters. In the final year of the performance-measurement period, the Company’s ranking in the peer group is determined at the end of each quarter and the percentile ranking is multiplied by the actual Common Stock dividend paid in that quarter. To determine the total payout per stock option held at the end of the performance–measurement period, the four quarterly amounts earned are added together.

 

 

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

 

2008 Payout

 

The peer group used to determine the 2008 payout for the 2005-2008 performance-measurement period consisted of utilities with revenues of $2 billion or more with regulated revenues of 70% or more. Those companies are listed below.

 

 

The scale below determined the percentage of the full year’s dividend paid on each option held at December 31, 2008 based on performance during the 2005-2008 performance-measurement period. Payout for performance between points was interpolated on a straight-line basis.

 

 

The above payout scale, when established in 2005, paid 25% of the dividend at the 30th percentile and zero below that. The scale was extended to the 10th percentile on a straight-line basis by the Compensation Committee in October 2005 in order to avoid the earnings volatility and employee relations issues that the payout cliff created.

 

For tax purposes, the Compensation Committee approved a payout for the named executive officers of up to 0.6% of the Company’s average net income over the performance-measurement period and used negative discretion to arrive at a payout commensurate with the scale shown.

 

The Company’s total shareholder return performance, as measured at the end of each quarter of the final year of the four-year period ending with 2008, was the 61^st, 48^th, 91^st, and 91^st percentile, respectively, resulting in a total payout of 78% of the full year’s dividend, or $1.30. This figure was multiplied by each named executive officer’s outstanding stock options at December 31, 2008 to calculate the payout under the program. The amount paid is included in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table.

 

2011 Opportunity

 

The peer group for the 2008-2011 performance-measurement period (which will be used to determine the 2011 payout amount) consists of utility companies with revenues of $1.2 billion or more with regulated revenues of approximately 60% or more. Those companies are listed below.

 

The guideline used to establish the peer group for the 2005-2008 performance-measurement period was somewhat different from that used in 2008 to establish the peer group for the 2008-2011 performance-measurement period. The guideline for inclusion in the peer group is reevaluated annually as needed to assist in identifying an appropriate number of companies similar to the Company. While the guideline does vary somewhat, 20 of the 24 companies in

 

 

the peer group for the 2005-2008 performance-measurement period also are in the peer group established for the 2008-2011 period.

 

 

 

The scale below will determine the percentage of each quarter’s dividend paid in the last year of the performance-measurement period to be paid on each option held at December 31, 2011, based on the 2008-2011 performance-measurement period. Payout for performance between points will be interpolated on a straight-line basis.

 

 

See the Grants of Plan-Based Awards Table and the accompanying information for more information about threshold, target, and maximum payout opportunities for the 2008-2011 Performance Dividend Program.

 

Timing of Incentive Compensation

As discussed above, EPS and business unit financial performance goals for the 2008 annual incentive program were established at the February 2008 Compensation Committee meeting. Annual stock option grants also were made at that meeting. The establishment of incentive compensation goals and the granting of stock options were not timed with the release of non-public material information. This procedure was 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 2008 was the closing price of the Common Stock on the date of grant.

 

Post-Employment Compensation

As mentioned above, we provide certain post-employment compensation to employees, including the named executive officers.

 

Retirement Benefits

 

Generally, all full-time employees of the Company, including the named executive officers, participate in our funded Pension Plan after completing one year of service. Normal retirement benefits become payable when participants both attain age 65 and complete five years of participation. We also provide unfunded benefits that count salary and short-term incentive pay that is ineligible to be counted under the Pension Plan. (These plans are the Supplemental Benefit Plan and the Supplemental Executive Retirement Plan that are mentioned in the chart on page 26 of this CD&A.) See the Pension Benefits Table and the information accompanying it for more information about pension-related benefits.

 

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 the annual incentive and

 

 

performance dividends may be deferred, at the election of eligible employees. All of the named executive officers are eligible to participate in the Deferred Compensation Plan. See the Nonqualified Deferred Compensation Table and the information accompanying it for more information about the Deferred Compensation Plan.

 

Change-in-Control Protections

 

The Compensation Committee approved the change-in-control protection program in 1998. The program provides some level of severance benefits to all employees who are not part of a collective bargaining unit, if the conditions of the program are met, as described below. The Compensation Committee established this program and the levels of severance amount in order to provide certain compensatory protections to executives upon a change in control and thereby allow them to negotiate aggressively with a prospective purchaser. Providing such protections to our employees in general minimizes disruption during a pending or anticipated change in control. For all participants, payment and vesting occur only upon the occurrence of both an actual change in control and loss of the individual’s position.

 

Change-in-control protections, including severance pay and, in some situations, vesting or payment of long-term incentive 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.

 

If the conditions described above are met, the named executive officers are entitled to severance payments equal to three times their base salary plus the annual incentive amount assuming target-level performance. Less than 15 officers of the Company and its subsidiaries are entitled to this level of severance payment. Most officers of the Company and its subsidiaries are entitled to severance payments equal to two times their base salary plus the annual incentive amount assuming target-level performance. These amounts are consistent with that provided by other companies of our size and in our industry and were established based on market data provided to the Compensation Committee from its compensation consultant.

 

More information about post-employment compensation, including severance arrangements under our change-in-control program, is included in the section entitled Potential Payments upon Termination or Change in Control.

 

Relocation Benefits

Mr. Bowers was named Chief Financial Officer of the Company in early 2008 and relocated from Birmingham, Alabama to Atlanta, Georgia at the Company’s request. The Company has a relocation program that generally provides the same level of benefits to all employees that relocate at the request of the Company. One benefit is a geographic relocation bonus of 10% of base salary. For Mr. Bowers, this amount is reported in the Bonus column in the Summary Compensation Table. Other standard benefits are provided such as movement of household goods, assistance with real estate closing costs, and loss on sale of a home. The standard program limits the loss on sale amount unless approved by the relocating employee’s executive management. For Mr. Bowers, the Compensation Committee approved the loss on sale of his home in Birmingham that was due to the downturn in the real estate market in Birmingham. The amount approved was approximately $300,000 plus tax reimbursement of approximately $153,000. These amounts, as well as all other relocation perquisites, are reported in the All Other Compensation column in the Summary Compensation Table and the information accompanying it.

 

Executive Stock Ownership Requirements

 

Effective January 1, 2006, the Compensation Committee adopted Common Stock ownership requirements for officers of the Company and its subsidiaries that are in a position of vice president or above. All of the named executive officers are covered by the requirements. The guidelines were implemented to 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 target is doubled.

 

The requirements are expressed as a multiple of base salary as shown in the table as follows.

 

 

 

 

 

Current officers have until September 30, 2011 to meet the applicable ownership requirement. Newly-elected officers will have five years from the date of election to meet the applicable ownership requirement.

 

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 each named executive officer’s compensation 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 all of our incentive compensation is paid. For tax purposes, in order to ensure that the annual incentive and performance dividend payouts are fully deductible under Section 162(m) of the Code, in February 2008, the Compensation Committee approved a formula that represented a maximum annual incentive amount payable (defined as 0.6% of the Company’s net income) and the maximum performance dividend amount payable for the 2008-2011 performance-measurement period (0.6% of the Company’s average net income during 2008-2011). In 2008, the Compensation Committee used (for annual incentive), or will use (for performance dividends), negative discretion from those amounts to determine the actual payouts pursuant to the methodologies described above.

 

Because our policy is to maximize long-term stockholder value, as described fully in this CD&A, tax deductibility is not the only factor considered in setting compensation.

 

Policy on Recovery of Awards

 

The Company’s Omnibus Incentive Compensation Plan provides that, if the Company is required to prepare an accounting restatement due to material noncompliance as a result of misconduct, and if an executive 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 will reimburse 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.

 

Company Policy Regarding Hedging the Economic Risk of Stock Ownership

 

The Company’s policy is that insiders, including outside directors, will not trade in Company options on the options market and will not engage in short sales.

 

2009 Executive Compensation Program Changes

 

In early 2009, the Compensation Committee made certain key changes to the executive compensation program that affect all executive officers of the Company, including the named executive officers.

 

Perquisites

As described in the chart on page 41 of this CD&A, the Company provides limited perquisites for its executive officers, including the named executive officers. The principal perquisites provided are a financial planning benefit and club memberships. Other perquisites provided are described in the notes following the Summary Compensation Table and include: security system monitoring, spousal travel expenses when a business purpose for the travel exists, and other miscellaneous items. The value of the perquisites provided is considered personal income and the Company has provided tax gross-ups to cover the taxes owed on that income. Beginning in 2009, the Compensation Committee eliminated the tax gross-ups on perquisites, except relocation benefits, for all executive officers of the Company, including the named executive officers.

 

 

Stock Option Vesting

The Compensation Committee changed the stock option vesting provisions associated with retirement for the stock options granted to the executive officers of the Company, including the named executive officers, made in early 2009. Grants prior to 2009 vest ratably over a three year period, but vesting is accelerated upon retirement. For the grants made in 2009, unvested options are forfeited if the executive retires from the Company and accepts a position with a peer company within two years of retirement. The Compensation Committee made this change to provide more retention value to the stock option awards, to provide an inducement to not seek a position with a peer company, and to limit the post-termination compensation of any executives who do accept positions with a peer company.

 

Base Salary Adjustments

Consistent with the broad-based compensation program, the Compensation Committee did not make any base salary adjustments in early 2009 for the named executive officers, except for Mr. Bowers. His base salary was adjusted because he was below the median of the market data.

 

Change-in-Control Program

The Compensation Committee has directed Towers Perrin to review best practices for change-in-control programs and has directed management to recommend any necessary changes to the program to meet those best practices. The review and any changes to the program will be completed in 2009 and effective in 2010.

 

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, 2008 and in this Proxy Statement. The Board of Directors approved that recommendation.

 

Members of the Compensation Committee:

 

J. Neal Purcell, Chair

Jon A. Boscia

H. William Habermeyer, Jr.

Donald M. James

 

 

SUMMARY COMPENSATION TABLE FOR 2008

 

The Summary Compensation Table shows the amount and type of compensation received or earned in 2006, 2007, and 2008 for the Chief Executive Officer, the Chief Financial Officer, and the next three most highly-paid executive officers of the Company who served in 2008. Collectively, these five officers are referred to as the “named executive officers.”

 

 

Column (d)

 

The amount shown for 2008 is a geographic relocation incentive as described in the CD&A. The amounts shown for 2006 were individual performance bonuses not based on pre-determined goals.

 

Column (e)

 

No equity-based compensation has been awarded to the named executive officers, other than stock options awards which are reported in column (f).

 

Column (f)

 

This column reports the dollar amounts recognized for financial statement reporting purposes with respect to 2008 in accordance with Financial Accounting Standards Board (FASB) Statement No. 123 (revised 2004), “Share Based Payments,” disregarding any estimates of forfeitures relating to service-based vesting conditions. See Note 8 to the Financial Statements for a discussion of the assumptions used in calculating these amounts.

 

Column (g)

 

The amounts in this column are the aggregate of the payouts under the annual incentive program and the performance dividend program attributable to performance periods ended December 31, 2008 that are discussed in the CD&A. The amounts paid under each program to the named executive officers are shown as follows:

 

 

 

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”) during 2006, 2007 and 2008. The amount included for 2006 is the difference between the actuarial present values of the Pension Benefits measured as of September 30, 2005 and September 30, 2006 and the 2007 amount is the difference in the actuarial present values of the Pension Benefits measured as of September 30, 2006 and September 30, 2007. However, the amount for 2008 is the difference between the actuarial values of the Pension Benefits measured as of September 30, 2007 and December 31, 2008 - 15 months rather than one year. September 30 was used as the measurement date prior to 2008, because it was the date as of which the Company measured its retirement benefit obligations for accounting purposes. Starting in 2008, the Company changed its measurement date to December 31 to comply with FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” 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 FASB Statement No. 87, “Employers’ Accounting for Pensions” cost purposes as of that measurement date; however, the named executive officers were assumed to remain employed at any subsidiary of the Company 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.

 

The pension plans’ provisions were substantively the same as of September 30, 2005 and September 30, 2006. However, the present values of accumulated Pension Benefits as of September 30, 2007 reflect provisions that were made in 2007 regarding the form and timing of payments from the supplemental pension plans. The changes brought those plans into compliance with Section 409A of the Code. The key change was to the form of payment. Instead of providing monthly payments for the lifetime of each named executive officer and his spouse, these plans will pay the single sum value of those benefits for an average lifetime in 10 annual installments. Calculations of the present value of accumulated benefits shown prior to September 30, 2007 reflect supplemental pension benefits being paid monthly for the lifetimes of the named executive officers and their spouses. The 2007 change in pension value reported in column (h) for each named executive officer is greater than what it otherwise would have been due to the conversion to the change in the form of payment. The conversion necessitated a one-time adjustment in the value of accumulated benefits to reflect the installment form of payment.

 

For more information about the Pension Benefits and the assumptions used to calculate the actuarial present value of accumulated benefits as of December 31, 2008, 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 September 30, 2007 and December 31, 2008 follow:

 

 

 

 

This column also reports above-market earnings on deferred compensation. Above-market earnings are defined by the SEC as any amount above 120% of the applicable federal long-term rate as prescribed under Section 1274(d) of the Code. There were no above-market earnings in 2008. For more information about deferred compensation, see the Nonqualified Deferred Compensation Table and the information following it.

 

The table below itemizes the amounts reported in this column. As described above, the change in pension value for 2008 reflects the change over a 15-month period rather than one year.

 

 

Column (i)

 

This column reports the following items: perquisites; tax reimbursements by the Company on certain perquisites; Company contributions in 2008 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 2008 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.

 

The amounts reported for 2008 are itemized below.

 

 

As discussed in the CD&A, the Compensation Committee eliminated tax reimbursements on all perquisities, except relocation benefits, effective January 1, 2009.

 

 

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 $9,780 per year, after the initial year that the benefit is first provided. The Company also provides a five-year allowance of $6,000 for estate planning and tax return preparation fees.

 

Home Security Monitoring is provided by or under the direction of the Company’s security personnel. The amount of the benefit reported here represents the incremental cost of the Company-provided monitoring. The incremental cost is the full cost of providing security monitoring at Company-owned facilities and covered employees’ residences divided by the number of security systems monitored.

 

Personal Use of Company-Provided Club Memberships.  The Company provides club memberships to certain officers, including all of the named executive officers. The memberships are provided for business use; however, personal use is permitted. The amount included reflects the pro-rata portion of the membership fees paid by the Company that are attributable to the named executive officers’ personal use. Direct costs associated with any personal use, such as meals, are paid for or reimbursed by the employee and therefore are not included.

 

Relocation Benefits. These benefits are provided to cover the costs associated with geographic relocation. In 2008, Mr. Bowers received relocation-related benefits of $426,991. See the CD&A for more information about relocation benefits.

 

Personal Use of Corporate-Owned Aircraft.  The Company owns aircraft that are used to facilitate business travel. All flights on these aircraft must have a business purpose, except under very limited circumstances. There was no such personal use during 2008. If seating is available, the Company permits a spouse or other family member to accompany an employee on a flight. However, because in such cases the aircraft is being used for a business purpose, there is no incremental cost associated with the family travel and no amounts are included for such travel. Any additional expenses incurred that are related to family travel are included.

 

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

 

 

GRANTS OF PLAN-BASED AWARDS IN 2008

 

The Grants of Plan-Based Awards Table provides information on stock option grants made and goals established for future payouts under the Company’s incentive compensation programs during 2008 by the Compensation Committee. In this table, the annual incentive and the performance dividend amounts are referred to as PPP and PDP, respectively.

 

 

 

 

Columns (c), (d), and (e)

 

The amounts reported as PPP reflect the amounts established by the Compensation Committee in early 2008 to be paid for certain levels of performance as of December 31, 2008 under the Company’s annual incentive program. The Compensation Committee assigns each named executive officer a target incentive opportunity, expressed as a percentage of base salary, that is paid for target-level performance under the annual incentive program. The target incentive opportunities established for the named executive officers for 2008 performance was 100% for Mr. Ratcliffe and 75% for Messrs. Bowers, Fanning, Garrett, and McCrary. The payout for threshold performance was set at 0.45 times the target incentive opportunity and the maximum amount payable was set at 2.20 times the target. The amount paid to each named executive officer under the annual incentive program for actual 2008 performance is included in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table and is itemized in the notes following that table. More information about the annual incentive program, including the applicable performance criteria established by the Compensation Committee, is provided in the CD&A.

 

The Company also has a long-term incentive program, the performance dividend program, that pays performance-based dividend equivalents based on the Company’s total shareholder return compared with the total shareholder return of its peer companies over a four-year performance-measurement period. The Compensation Committee establishes the level of payout for prescribed levels of performance over the performance-measurement period.

 

In February 2008, the Compensation Committee established the performance dividend program goal for the four-year performance-measurement period beginning on January 1, 2008 and ending on December 31, 2011. The amount earned in 2011 based on performance over that four-year performance-measurement period will be paid

 

 

following the end of the period. However, no amount is earned and paid unless the Compensation Committee approves the payment at the beginning of the final year of the performance-measurement period. Also, nothing is earned unless the Company’s earnings are sufficient to fund a Common Stock dividend at the same level or higher than the prior year.

 

The performance dividend program pays to all option holders a percentage of the Common Stock dividend paid to stockholders in the last year of the performance-measurement period. It can range from less than five percent for performance above the 10th percentile compared with the performance of the peer companies to 100% of the dividend if the Company’s total shareholder return is at or above the 90th percentile. That amount is then paid per option held at the end of the four-year period. The amount, if any, ultimately paid to the option holders, including the named executive officers, at the end of the last year of the 2008 – 2011 performance-measurement period will be based on (1) the Company’s total shareholder return compared to that of its peer companies as of December 31, 2011, (2) the actual dividend, if any, paid in 2011 to our stockholders, and (3) the number of options held by the named executive officers on December 31, 2011.

 

The number of options held on December 31, 2011 will be affected by the number of additional options, if any, granted to the named executive officers prior to December 31, 2011, and the number of options exercised by the named executive officers prior to December 31, 2011, if any. None of these components necessary to calculate the range of payout under the performance dividend program for the 2008 – 2011 performance-measurement period is known at the time the goal is established.

 

The amounts reported as PDP in columns (c), (d), and (e) were calculated based on the number of options held by the named executive officers on December 31, 2008, as reported in columns (b) and (c) of the Outstanding Equity Awards at Fiscal Year-End Table, and the Common Stock dividend of $1.6625 per share paid to stockholders in 2008. These factors are itemized below.

 

 

More information about the performance dividend program is provided in the CD&A.

 

Columns (f) and (g)

 

The stock options vest at the rate of one-third per year on the anniversary date of the grant. Also, grants fully vest upon termination as a result of death, total disability, or retirement and expire five years after retirement, three years after death or total disability, or their normal expiration date if earlier. See Potential Payments upon Termination or Change in Control below for more information about the treatment of stock options under different termination and change-in-control events.

 

The Compensation Committee granted these stock options to the named executive officers at its regularly-scheduled meeting on February 18, 2008. Under the terms of the Omnibus Incentive Compensation Plan, the exercise price was set at the closing price ($35.78 per share) on the last trading day prior to the grant date, which was February 15, 2008.

 

Column (h)

 

The value of stock options granted in 2008 was derived using the Black-Scholes stock option pricing model. The assumptions used in calculating these amounts are discussed in Note 8 to the Financial Statements.

 

 

 

OUTSTANDING EQUITY AWARDS AT 2008 FISCAL YEAR-END

 

This table provides information pertaining to all outstanding stock options held by the named executive officers as of December 31, 2008.

 

 

 

Stock options vest one-third per year on the anniversary of the grant date. Options granted from 2002 through 2005, with an expiration date from 2012 through 2015, were fully vested as of December 31, 2008. The options granted in 2006, 2007, and 2008 become fully vested as shown below.

 

 

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. See the section entitled 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.

 

 

 

OPTION EXERCISES AND STOCK VESTED IN FISCAL 2008

 

This table reports the number of shares acquired upon the exercise of stock options during 2008 and the value realized based on the difference in the market price over the exercise price on the exercise date. None of the named executive officers received Stock Awards.

 

 

 

PENSION BENEFITS AND VALUES AT 2008 FISCAL YEAR-END

 

 

 

 

 

 

 

The named executive officers earn employer-paid pension benefits from three coordinated retirement plans. More information about pension benefits is described in the CD&A.

 

The Pension Plan

The Pension Plan is a tax-qualified, funded plan. It is the Company’s primary retirement plan. Generally, all full-time employees participate in this plan. Normal retirement benefits become payable when participants both 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 pay considered for this formula is the base rate of pay reduced for any voluntary deferrals. A statutory limit restricts the amount considered each year. The limit for 2008 was $230,000.

 

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 cash incentives paid during each year are added to the base rates of pay.

 

Early retirement benefits become payable once plan participants have during employment both 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. All of the named executive officers are eligible to retire immediately.

 

The Pension Plan’s benefit formulas produce amounts payable monthly over a participant’s post-retirement lifetime. At retirement, plan participants can choose to receive their benefits in one of seven alternative forms of payment. All forms pay benefits monthly over the lifetime of the retiree or the joint lifetimes of the retiree and a spouse. A reduction applies if a retiring participant chooses a payment form other than a single life annuity. The reduction makes the value of the benefits paid in the form chosen comparable to what it would have been if benefits were paid as a single life annuity over the retiree’s life.

 

Participants vest in the Pension Plan after completing five years of service. All the named executive officers are vested in their Pension Plan benefits. Participants who terminate employment after vesting can elect to have their pension benefits commencing 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, 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 the extra service crediting, the normal 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 and voluntary pay deferrals. The SBP-P’s vesting, early retirement, and disability provisions mirror those of the Pension Plan.

 

The amounts paid by the SBP-P are based on the additional monthly benefit that the Pension Plan would pay if the statutory limits and pay deferrals were ignored. When an SBP-P participant separates from service, vested monthly benefits provided by the benefit formulas are converted into a single sum value. It equals the present value of what would have been paid monthly for an actuarially determined average post-retirement lifetime. The discount rate used in the calculation is based on the 30-year 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 an 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 survivor 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 to 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 cash incentives. To derive the SERP benefits, a final average pay is determined reflecting participants’ base rates of pay and their incentives to the extent they exceed 15% of those base rates (ignoring statutory limits and pay deferrals). This final average pay is used in the 1.7% offset formula to derive a gross benefit. The Pension Plan and the SBP-P benefits are subtracted from the gross benefit to calculate the SERP benefit. The SERP’s early retirement, survivor benefit, and disability provisions mirror the SBP-P’s provisions. 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 eligible to retire.

 

The following assumptions were used in the present value calculations:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

NONQUALIFIED DEFERRED COMPENSATION AS OF 2008 FISCAL YEAR-END

 

 

The Company provides the Deferred Compensation Plan (DCP) which is designed to permit participants to defer income as well as certain federal, state and local taxes until a specified date or their retirement, disability, death or other separation from service. Up to 50% of base salary and up to 100% of the annual incentive and the performance dividends may be deferred, at the election of eligible employees. All of the named executive officers are eligible to participate in the DCP.

 

Participants have two options for the deemed investments of the amounts deferred — the Stock Equivalent Account and the Prime Equivalent Account. Under the terms of the DCP, participants are permitted to transfer between investments at any time.

 

The amounts deferred in the Stock Equivalent Account are treated as if invested at an equivalent rate of return to that of an actual investment in Common Stock, including the crediting of dividend equivalents as such are paid by the Company from time to time. It provides participants with an equivalent opportunity for the capital appreciation (or loss) and income held by a Company stockholder. During 2008, the rate of return in the Stock Equivalent Account was 0.03%, which was the Company’s total shareholder return for 2008.

 

Alternatively, participants may elect to have their deferred compensation deemed invested in the Prime Equivalent Account which is treated as if invested at a prime interest rate compounded monthly, as published in the Wall Street Journal as the base rate on corporate loans posted as of the last business day of each month by at least 75% of the United States’ largest banks. The range of interest rates earned on amounts deferred during 2008 in the Prime Equivalent Account was 3.25% to 6.00%.

 

Column (b)

 

This column reports the actual amounts of compensation deferred under the DCP by each named executive officer in 2008. The amount of salary deferred by the named executive officers, if any, was included in the Salary column in the Summary Compensation Table. The amount of incentive compensation deferred in 2008 was the amount paid for performance under the annual incentive plan and the performance dividend program earned as of December 31, 2007. Therefore, this is not the amount reported in the Summary Compensation Table for 2008 which reports incentive compensation earned in 2008 but not paid until early 2009. These deferred amounts may be distributed in a lump-sum or in up to 10 annual installments at termination of employment or in a lump-sum at a specified date, at the election of the participant.

 

Column (c)

 

This column reflects contributions under the Supplemental Benefit Plan (SBP). Under the Code, the Company is prohibited from making employer matching contributions under the Employee Savings Plan on employee contributions above stated limits in that plan and, if applicable, above legal limits set forth in the Code. The SBP is a nonqualified deferred compensation plan under which the Company contributes the amount of Company contributions that it is prohibited from making in the Employee Savings Plan. The contributions are treated as if invested in Common Stock and are payable in cash upon termination of employment in a lump-sum or in up to 20

 

 

annual installments, at the election of the participant. The amounts reported in this column also were reported in the All Other Compensation column in the Summary Compensation Table.

 

Column (d)

 

This column reports earnings on both compensation the named executive officers elected to defer and earnings on employer contributions under the SBP. See the notes to column (h) of the Summary Compensation Table for a discussion of amounts of nonqualified deferred compensation earnings included in the Summary Compensation Table in 2006 and 2007. In 2008, there were no above-market earnings on deferred compensation.

 

Column (e)

 

There were no aggregate withdrawals or distributions.

 

Column (f)

 

This column includes amounts that were deferred under the DCP and contributions under the SBP in prior years and reported in prior years’ Proxy Statements. The chart below shows the amounts reported in prior years’ Proxy Statements.

 

 

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

This section describes and estimates payments that could be made to the named executive officers under different termination and change-in-control events. The estimated payments would be made under the terms of the Company’s compensation and benefit programs or the change-in-control severance agreements with each of the named executive officers. The amount of potential payments is calculated as if the triggering events occurred as of December 31, 2008 and assumes that the price of Common Stock is the closing market price as of December 31, 2008.

 

Description of Termination and Change-in-Control Events

 

The following charts list different types of termination and change-in-control events that can affect the treatment of payments under the Company’s compensation and benefit programs. These events also affect payments to the named executive officers under their change-in-control severance agreements. No payments are made under the severance agreements unless within two years of the change in control, the named executive officer is involuntarily terminated or voluntarily terminates for Good Reason. (See the description of Good Reason below.)

 

Traditional Termination Events

 

 

 

 

 

 

 

 

Change-in-Control-Related Events

 

At the Company or subsidiary level:

 

 

 

 

 

At the employee level:

 

 

 

The following chart describes the treatment of different compensation and benefit elements in connection with the Traditional Termination Events described previously. All of the named executive officers are eligible to retire under the terms of our pension plans and therefore any termination of employment also would be a retirement.

 

 

 

 

The chart below describes the treatment of payments under compensation and benefit programs under different change-in-control events, except the Pension Plan (Change-in-Control Chart). The Pension Plan is not affected by change-in-control events.

 

 

 

 

 

 

 

Potential Payments

 

This section describes and estimates payments that would become payable to the named executive officers upon a termination or change in control as of December 31, 2008.

 

Pension Benefits

The amounts that would have become payable to the named executive officers if the Traditional Termination Events occurred as of December 31, 2008 under the Pension Plan, the SBP-P, and the SERP are itemized in the chart below. The amounts shown under the column “Retirement” are amounts that would have become payable to the named executive officers since all were retirement eligible on December 31, 2008 and are the monthly Pension Plan benefits and the first of 10 annual installments from the SBP-P and the SERP. The amounts shown that are payable to a spouse in the event of the death of the named executive officer are the monthly amounts payable to a spouse under the Pension Plan and the first of 10 annual installments from the SBP-P and the SERP. The amounts in this chart are very different from the pension values shown in the Summary Compensation Table and the Pension Benefits Table. Those tables show the present values of all the benefit amounts anticipated to be paid over the lifetimes of the named executive officers and their spouses. Those plans are described in the notes following the Pension Benefits Table.

 

 

 

As described in the Change-in-Control Chart, the only change in the form of payment, acceleration, or enhancement of the Pension Benefits is that the single sum value of benefits earned up to the change-in-control date under the SBP-P and the SERP could be paid as a single payment rather than in 10 annual installments. Also, the SERP benefits vest for participants who are not retirement eligible upon a change in control. Estimates of the single sum payment that would have been made to the named executive officers, assuming termination as of December 31, 2008 following a change-in-control event, other than a Southern Change in Control I (which does not impact how pension benefits are paid), are itemized as follows. These amounts would be paid instead of the benefits shown in the Traditional Termination Events table above; they are not paid in addition to those amounts.

 

 

 

The pension benefit amounts in the tables above were calculated as of December 31, 2008 assuming payments would begin as soon as possible under the terms of the plans. Accordingly, appropriate early retirement reductions were applied. Any unpaid incentives were assumed to be paid at 1.35 times the target level. Pension Plan benefits were calculated assuming named executive officers chose a single life annuity form of payment, because that results in the greatest monthly benefit. The single sum values of the SBP-P and the SERP benefits were based on a 4.75% discount rate as prescribed by the terms of the plan.

 

Annual Incentive Program

Because this section assumes that a termination or change-in-control event occurred on December 31, 2008, there is no amount that would be payable other than what was reported and described in the Summary Compensation Table because actual performance in 2008 exceeded target performance.

 

Performance Dividend Program

Because the assumed termination date is December 31, 2008, there is no additional amount that would be payable other than the amount reported in the Summary Compensation Table. As described in the Traditional Termination Events Chart, there is some continuation of benefits under the performance dividend program for retirees.

 

Stock Options

Stock options would be treated as described in the Termination and Change-in-Control charts above. Under a Southern Termination, all stock options vest. In addition, if there is an Involuntary Change-in-Control Termination or Voluntary Change-in-Control Termination for Good Reason, stock options vest. There is no payment associated with stock options unless there is a Southern Termination and the participants’ stock options cannot be converted into surviving company stock options. In that event, the excess of the exercise price and the closing price of Common Stock on December 31, 2008 would have been paid in cash for all stock options held by the named executive officers. The chart below shows the number of stock options for which vesting would be accelerated under a Southern Termination and the amount that would be payable under a Southern Termination if there were no conversion to the surviving entity’s stock options.

 

 

 

 

DCP and SBP

The aggregate balances reported in the Nonqualified Deferred Compensation Table would be payable to the named executive officers as described in the Traditional Termination and Change-in-Control-Related Events charts above. There is no enhancement or acceleration of payments under these plans associated with termination or change-in-control events, other than the lump-sum payment opportunity described in the above charts. The lump-sums that would be payable are those that are reported in the Nonqualified Deferred Compensation Table.

 

Health Benefits

Because all of the named executive officers are retirement eligible and health care benefits are provided to retirees, there is no incremental payment associated with the termination or change-in-control events.

 

Financial Planning Perquisite

All of the named executive officers are retirement eligible; therefore, an additional year of the Financial Planning perquisite would be provided. That amount is set at a maximum of $9,780 per year.

 

There are no other perquisites provided to the named executive officers under any of the traditional termination or change-in-control-related events.

 

Severance Benefits

The Company has entered into individual Change-in-Control Severance Agreements with each of the named executive officers. In addition to the treatment of health benefits, the annual incentive program, and the performance dividend program described above, the named executive officers are entitled to a severance benefit, including outplacement services, if within two years of a change in control they are involuntarily terminated, not for Cause, or they voluntarily terminate for Good Reason. The severance benefits are not paid unless the named executive officer releases the Company from any claims he may have against the Company.

 

The estimated cost of providing the six months of outplacement services is $6,000 per named executive officer. The severance payment is three times the named executive officer’s base salary and target payout under the annual incentive program. If any portion of the severance payment is an “excess parachute payment” as defined under Section 280G of the Code, the Company will pay the named executive officer an additional amount to cover the taxes that would be due on the excess parachute payment — a “tax gross-up.” However, that additional amount will not be paid unless the severance amount plus all other amounts that are considered parachute payments under the Code exceed 110% of the severance payment.

 

The table below estimates the severance payments that would be made to the named executive officers if they were terminated as of December 31, 2008 in connection with a change in control. There is no estimated tax gross-up included for any of the named executive officers because their respective estimated severance amounts payable are below the amounts considered excess parachute payments under the Code.

 

 

 

 

 

 

OTHER INFORMATION

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

No reporting person failed to file, on a timely basis, the reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

During 2008, Mr. David M. Huddleston, a son-in-law of Mr. Michael D. Garrett, an executive officer of the Company, was employed by a subsidiary of the Company. Mr. Huddleston was employed by Alabama Power Company as an Engineering Supervisor and received compensation in 2008 of $127,220. Ms. Donna D. Smith, sister of Mr. Andrew J. Dearman, III, who was an executive officer of the Company during 2008, was employed at Southern Company Services, Inc. as a Human Resources Director and received compensation in 2008 of $350,449.

 

The Company does not have a written policy pertaining solely to the approval or ratification of “related party transactions.” However, the Company has a Code of Ethics as well as employment and compensation policies that govern the hiring and compensating of all employees, including those named above. The Company also has a Contract Guidance Manual and other formal written procurement policies and procedures that guide the purchase of goods and services, including requiring competitive bids for most transactions above $10,000 or approval based on documented business needs for sole sourcing arrangements.

 

 

APPENDIX A

 

PROPOSED AMENDMENT TO THE COMPANY’S BY-LAWS

 

6. Each stockholder entitled to vote in accordance with the Certificate of Incorporation or any amendment thereof and in accordance with the provisions of these By-Laws or of any action taken pursuant thereto shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted on after three years from its date unless such proxy provides for a longer period. Except where the transfer books of the Corporation shall have been closed or a date shall have been fixed as a record date for the determination of its stockholders entitled to vote, as hereinafter provided, no share of stock shall be voted on at any election for directors which shall have been transferred on the books of the Corporation within 20 days next preceding such election of directors. The vote for directors, and, upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. Each director shall be elected by the vote of the majority of the votes cast with respect to the director at any meeting for the election of directors at which a quorum is present; provided that if the number of nominees exceeds the number of directors to be elected, directors shall be elected by a plurality vote and each stockholder shall be entitled to as many votes as shall equal the number of his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them as he may see fit, which right when exercised, shall be termed cumulative voting. All other questions shall be decided by plurality vote except as otherwise provided by the Certificate of Incorporation and/or by the laws of the State of Delaware. For purposes of this Section 6, 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.

 

 

APPENDIX B

 

POLICY ON ENGAGEMENT OF THE INDEPENDENT AUDITOR

FOR AUDIT AND NON-AUDIT SERVICES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Approved by the Southern Company Audit Committee

December 9, 2002

 

 

APPENDIX C

 

 

 

2008 ANNUAL REPORT

 

 

 

 

Table of Contents

 

 

 

 

 

SOUTHERN COMPANY COMMON STOCK AND DIVIDEND INFORMATION

 

The common stock of Southern Company is listed and traded on the New York Stock Exchange. The common stock is also traded on regional exchanges across the United States. The high and low stock prices as reported on the New York Stock Exchange for each quarter of the past two years were as follows:

 

 

On March 31, 2009, Southern Company had approximately ________ registered stockholders.

 

FIVE-YEAR CUMULATIVE PERFORMANCE GRAPH

 

This performance graph compares the cumulative total shareholder return on the Company’s common stock with the Standard & Poor’s Electric Utility Index and the Standard & Poor’s 500 index for the past five years. The graph assumes that $100 was invested on December 31, 2003 in the Company’s common stock and each of the above indices and that all dividends were reinvested. The stockholder return shown below for the five-year historical period may not be indicative of future performance.

 

 

 

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