UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT of
1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ]Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
THE SOUTHERN COMPANY
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
(SOUTHERN COMPANY LOGO)
NOTICE OF
ANNUAL MEETING
2002
& PROXY STATEMENT
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PROXY STATEMENT
CONTENTS
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General Information 1
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Corporate Governance 3
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Nominees for Election as Directors 4
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Stockholder Proposal on Renewable Energy Sources 6
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Audit Committee Report 8
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Compensation & Management Succession Committee Report 10
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Executive Compensation 12
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Stock Ownership Table 13
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Summary Compensation Table 14
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Stock Options 15
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Option Exercises 16
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Pension Plan Table 17
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Five-Year Performance Graph 18
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Appendix A - Audit Committee Charter A1
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LETTER TO STOCKHOLDERS
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ALLEN FRANKLIN
Chairman, President and
Chief Executive Officer
(SOUTHERN COMPANY LOGO)
Dear Fellow Stockholder:
You are invited to attend the 2002 Annual Meeting of Stockholders at
10:00 a.m. EDT on Wednesday, May 22, 2002 at the Ritz-Carlton Lodge, 1
Lake Oconee Trail, Greensboro, Georgia.
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
return your proxy form as soon as possible.
We look forward to seeing you on May 22.
Sincerely,
/s/ Allen Franklin
Allen Franklin (PHOTO)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS - MAY 22, 2002
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TIME
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10:00 a.m. EDT, on Wednesday, May 22, 2002
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PLACE
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Ritz-Carlton Lodge
1 Lake Oconee Trail
Greensboro, Georgia
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BUSINESS
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(1) Elect nine members of the Board of Directors;
(2) Consider and vote upon a stockholder proposal, if presented at the meeting,
as described in Item 2 of the Proxy Statement; and
(3) Transact other business properly coming before the meeting or any
adjournments thereof.
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RECORD DATE
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Stockholders owning Company shares at the close of business on March 25, 2002,
are entitled to attend and vote at the meeting.
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DOCUMENTS
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The Proxy Statement, proxy form, and Southern Company Annual Report are included
in this mailing.
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VOTING
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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:
(1) Internet -- use the Internet address on the proxy form (2) Telephone -- use
the toll-free number on the proxy form (3) Mail -- mark, sign, and date the
proxy form and return in the enclosed postage-paid envelope
By Order of the Board of Directors, Tommy Chisholm, Secretary, April 10, 2002
PROXY STATEMENT
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GENERAL INFORMATION
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Q: WHY AM I RECEIVING THIS PROXY STATEMENT?
A:The Board of Directors of Southern Company is soliciting your proxy for the
2002 Annual Meeting of Stockholders and any adjournments thereof. The meeting
will be held at 10:00 a.m., EDT, on Wednesday, May 22, 2002, at the
Ritz-Carlton Lodge, 1 Lake Oconee Trail, Greensboro, Georgia. This Proxy
Statement and proxy form are initially being provided to stockholders on or
about April 10, 2002.
Q: WHAT'S BEING VOTED UPON AT THE MEETING?
A:The election of nine directors, and the consideration of a stockholder
proposal as set forth in Item 2, if presented at the meeting. We are not aware
of any other matters to be presented to the meeting; however, the holders of
the proxies will vote in their discretion on any other matters properly
presented.
Q: HOW DO I GIVE VOTING INSTRUCTIONS?
A:You may attend the meeting and give instructions in person or by the Internet,
by telephone, or by mail. Instructions are on the proxy form. The proxy
committee, named on the enclosed proxy form, will vote all properly executed
proxies that are delivered pursuant to this solicitation and not subsequently
revoked in accordance with the instructions given by you.
Q: CAN I CHANGE MY VOTE?
A:Yes, you may revoke your proxy by submitting a subsequent proxy or by written
request received by the Company's secretary before the meeting.
Q: WHO CAN VOTE?
A:All stockholders of record on the record date of March 25, 2002. On that date,
there were 703,237,379 shares of Southern Company common stock outstanding and
entitled to vote.
Q: HOW MUCH DOES EACH SHARE COUNT?
A:Each share counts as one vote, except votes for directors may be cumulative.
Abstentions that are marked on the proxy form are included for the purpose of
determining a quorum, but shares that a broker fails to vote are not counted
toward a quorum. Neither is counted for or against the matters being
considered.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY FORM?
A:You will receive a proxy form for each account that you have. Please vote
proxies for all accounts to ensure that all your shares are voted. If you wish
to consolidate multiple accounts, please contact Stockholder Services at (800)
554-7626.
Q: CAN THE COMPANY'S PROXY STATEMENT AND ANNUAL REPORT BE ACCESSED FROM THE
INTERNET?
A:Stockholders may view the Proxy Statement and Annual Report on the Internet
instead of receiving them by U.S. mail, each year. This choice will save the
Company money by reducing printing and postage costs, and is friendlier to our
environment. If you choose to access future Proxy Statements and Annual
Reports online, you will continue to receive a proxy form in the mail. Future
proxy forms will contain the website address and other necessary information
to view the proxy materials and to submit your vote. Whether you receive your
proxy materials in the mail or view them on the Internet, you will continue to
have the option to vote on the Internet, by telephone, by mail, or at the
Annual Meeting. If you wish to take advantage of this option, you may make
this election when voting your proxy. If you vote on the Internet, simply
respond to the question when prompted. If you vote by mail,
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please mark the appropriate box on your proxy form. You may also consent to
suppressing the mailing of future Proxy Statements and Annual Reports by
marking the appropriate box on a registered account statement or dividend
check stub and mailing it to Stockholder Services.
If you elect to view the proxy materials on the Internet and then change your
mind, please contact Stockholder Services at (800) 554-7626.
Q: WHEN ARE STOCKHOLDER PROPOSALS DUE FOR THE 2003 ANNUAL MEETING OF
STOCKHOLDERS?
A:The deadline for the receipt of stockholder proposals to be considered for
inclusion in the Company's proxy materials is December 11, 2002. They must be
submitted in writing to Tommy Chisholm, Corporate Secretary, Bin 912, Southern
Company, 270 Peachtree Street NW, Atlanta, Georgia 30303. Additionally, the
proxy solicited by the Board of Directors for next year's meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting that is not included in the Company's proxy materials unless the
Company is provided written notice of such proposal no later than February 24,
2003.
Q: WHO PAYS THE EXPENSE OF SOLICITING PROXIES?
A:The Company pays the cost of soliciting proxies. The officers or other
employees of the Company or its subsidiaries may solicit proxies to have a
larger representation at the meeting.
The Company's 2001 Annual Report to the Securities and Exchange Commission on
Form 10-K will be provided without charge upon written request to Tommy
Chisholm, Corporate Secretary, Bin 912, Southern Company, 270 Peachtree Street
NW, Atlanta, Georgia 30303.
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CORPORATE GOVERNANCE
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HOW IS THE COMPANY ORGANIZED?
Southern Company is a holding company managed by a core group of officers and
governed by a Board of Directors that has been set at nine members. The nominees
for election as directors consist of eight non-employees and one executive
officer of the Company.
WHAT ARE DIRECTORS PAID FOR THEIR SERVICES?
Only non-employee directors are compensated for Board service. The pay
components are:
ANNUAL RETAINERS:
- $40,000 if first elected as a director before 1997, of which $10,000 is
deferred in shares of Company common stock until Board membership ends
- $49,000 if first elected as a director in 1997 or later, of which $19,000 is
deferred in shares of Company common stock until Board membership ends
- $5,000 if serving as chairman of a Board committee
EQUITY GRANTS:
- 1,000 additional shares of Company common stock in quarterly grants of 250
shares are deferred until Board membership ends
MEETING FEES:
- $1,250 for each Board meeting attended
- $1,000 for each committee meeting attended
Directors may elect to defer up to 100 percent of their compensation until
membership on the Board ends.
There is no pension plan for non-employee directors.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE:
- Members are Mr. Hardman, Chairman, Ms. Bern, Dr. Pate, and Mr. St. Pe
- Met nine times in 2001
- Oversees the Company's auditing, accounting, financial reporting, legal
compliance, and internal control functions
- Reviews independent public accountant's reports on the Company's financial
statements, significant changes in accounting principles and practices,
significant proposed adjustments, and any unresolved disagreements with
management concerning accounting or disclosure matters
- Recommends independent public accountants and reviews their services, fees,
and the scope and timing of audits
The four members of the Audit Committee are independent as defined by rules of
the New York Stock Exchange. The Board of Directors has adopted an Audit
Committee Charter (see Appendix A).
COMPENSATION & MANAGEMENT SUCCESSION COMMITTEE:
- Members are Mr. St. Pe, Chairman, Mr. Amos, Mr. Chapman, and Mr. Hardman
- Met four times in 2001
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- Evaluates performance of executive officers and recommends their compensation
- Administers executive compensation plans
- Reviews management succession plans
FINANCE COMMITTEE:
- Members are Mr. James, Chairman, Mr. Amos, and Mr. Gordon
- Met six times in 2001
- Reviews Southern's financial matters, recommends actions such as dividend
philosophy to the Board, and approves certain capital expenditures
GOVERNANCE COMMITTEE:
- Members are Mr. Gordon, Chairman, Ms. Bern, Mr. Chapman, and Mr. James
- Met three times in 2001
- Reviews corporate governance issues
- Considers and recommends nominees for election as directors
- Considers and recommends membership of committees of the Board
- Reviews and recommends director compensation
The Governance Committee expects to identify from its own resources qualified
nominees but will accept from stockholders recommendations of individuals to be
considered as nominees. Stockholder recommendations, together with a description
of the proposed nominee's qualifications, relevant biographical information, and
signed consent to serve, should be submitted in writing to the Company's
secretary and received by that office by December 11, 2002. Stockholder
recommendations will be considered by the Governance Committee in determining
nominees to recommend to the Board. The final selection of the Board's nominees
is within the sole discretion of the Board of Directors.
NUCLEAR OVERSIGHT COMMITTEE:
Membership consists of Dr. Pate, Chairman
- Reviews nuclear operations activities
The Board of Directors met six times in 2001. The average attendance for
directors at all Board and committee meetings was 94 percent. No nominee
attended less than 75 percent of applicable meetings.
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NOMINEES FOR ELECTION AS DIRECTORS
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ITEM NO. 1 -- ELECTION OF DIRECTORS
The persons named on the enclosed proxy form will vote, unless otherwise
instructed, each properly executed form of proxy 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.
DANIEL P. AMOS -- Director since 2000
Mr. Amos, 50, is chairman of the board and chief executive officer of AFLAC
Incorporated, insurance. He is a director of Synovus Financial Corporation.
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DORRIT J. BERN -- Director since 1999
Ms. Bern, 51, is chairman of the board, president, and chief executive officer
of Charming Shoppes, Inc., retail apparel stores. She served as group vice
president of Sears, Roebuck and Co. from 1993 to August 1995, and as vice
chairman of the board, president, and chief executive officer of Charming
Shoppes from August 1995 until January 1997, when she was appointed to her
current position.
THOMAS F. CHAPMAN -- Director since 1999
Mr. Chapman, 58, is chairman of the board and chief executive officer of
Equifax, Inc., information services and transaction processing. He served as
executive vice president and group executive from 1993 to August 1997, president
from August 1997 to June 1999, and chief operating officer of Equifax from
August 1997 to January 1998. He was appointed chief executive officer in January
1998 and chairman of the board of Equifax in May 1999.
ALLEN FRANKLIN -- Director since 1988
Mr. Franklin, 57, is chairman, president and chief executive officer of the
Company. He served as president and chief executive officer of Georgia Power
Company and executive vice president of the Company from 1994 until June 1999.
He served as president and chief operating officer of the Company from June 1999
to March 2001 and president and chief executive officer from March 1 to April 1
when he assumed his current position. He is a director of SouthTrust
Corporation, Vulcan Materials Company, and Southern system companies -- Alabama
Power Company, Georgia Power Company, and Gulf Power Company.
BRUCE S. GORDON -- Director since 1994
Mr. Gordon, 55, is president of retail markets group of Verizon Communications,
Inc., telecommunications. He served as group president -- consumer and small
business of Verizon from 1993 to August 1997, as group president retail services
of Verizon from August 1997 until December 1998, and group president of
enterprise business group of Verizon from December 1998 to July 2000, when he
was appointed to his current position. He is a director of Barfield Companies.
L. G. HARDMAN III -- Director since 1986
Mr. Hardman, 62, is chairman of the board and chief executive officer of
nBank.Corp.; chairman of the board of The First National Bank of Commerce,
Georgia; and chairman of the board, president, and treasurer of Harmony Grove
Mills, Inc. He is a director of Georgia Power Company.
DONALD M. JAMES -- Director since 1999
Mr. James, 53, chairman and chief executive officer of Vulcan Materials Company,
construction materials and industrial chemicals. He served as president of the
Southern Division of Vulcan Materials Company from 1994 to 1996; senior vice
president from 1995 to 1996; president and chief operating officer from February
1996 until February 1997; and president and chief executive officer of Vulcan
Materials Company from February 1997 until May 1997, when he was appointed to
his current position. He is a director of Protective Life Corporation and
SouthTrust Corporation.
ZACK T. PATE -- Director since 1998
Dr. Pate, 65, is chairman of the World Association of Nuclear Operators and
chairman emeritus of the Institute of Nuclear Power Operations (INPO), an
independent, nonprofit organization promoting safety, reliability, and
excellence in the operation of nuclear electric generating plants. Prior to
1998, he was president and chief executive officer of INPO.
GERALD J. ST. PE -- Director since 1995
Mr. St. Pe, 62, is co-founder, co-owner, and managing partner of Delta Health
Group, Inc., health care. He served as president, Ingalls Shipbuilding from 1985
to August 1999 and as chief operating officer of Northrop-Grumman Ship Systems
from August 1999 to November 2001.
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.
The Board of Directors recommends a vote "For" the nominees listed in Item No.
1.
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STOCKHOLDER PROPOSAL ON RENEWABLE ENERGY SOURCES
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ITEM NO. 2 -- STOCKHOLDER PROPOSAL ON RENEWABLE ENERGY SOURCES
The Company has been advised that Mr. Robert B. Mills, 1233 12th Street, NW,
Washington, DC 20005, holder of 90 shares of common stock, proposes to submit
the following resolution at the 2002 Annual Meeting of Stockholders:
INVEST IN CLEAN ENERGY (ICE) PROPOSAL
"Be it resolved: that the shareholders recommend that Southern Company should
invest sufficient resources to build new electrical generation from solar and
wind power sources to replace approximately one percent (1%) of system capacity
yearly for the next twenty years with the goal of having the company producing
twenty percent (20%) of generation capacity from clean renewable sources in 20
years."
STATEMENT OF SECURITY HOLDER
"Utility deregulation demands the company present a good public image, and the
public is demanding progress towards clean energy.
"Efforts must be made to slow down changes in global climate so that we can
continue to survive on planet earth.
"The proposal allows flexibility in schedule for the Board of Directors to
implement this proposal. The 20% figure is just a reasonable and conservative
goal to aim for.
"A one percent yearly addition to generation capacity allows for small pilot
plants to be built and tried as the program advances.
"Although initial building costs might be larger, solar and solar power sources
do not require the purchase of fuel, which can make these additions to
generation capacity very attractive economically over the long term, especially
if the cost of fossil fuels rises. The company should look to building
facilities that are made to last a long time.
"Solar power towers, wind farms, solar photovoltaic arrays and parabolic solar
thermal collectors already exist in other places in this range of power
production, proving that Southern could realistically build such facilities in
Georgia and elsewhere."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM NO. 2 FOR THE FOLLOWING
REASONS:
The Company has long recognized that clean renewable energy resources, such as
solar, wind, biomass, and hydroelectricity, could potentially play a role in
increasing the diversity of our fuel mix and in meeting our environmental goals.
In recent years, renewable energy sources have received particular attention
because of their low net emissions of greenhouse gases to the atmosphere.
Renewable energy and advanced fossil technologies are among an assortment of
generation options that continue to be considered by the Company. As with other
generation technologies, renewable energy resources must meet economic
parameters as well as be technically proven. Although renewable energy
generation technologies offer environmental advantages, they unfortunately have
the drawbacks of being more expensive than traditional energy sources. In
addition, because wind and solar only produce usable energy when wind or
sunshine are available, these technologies require large energy storage systems
or backup generation to maintain sufficient capacity to meet customer demand.
In contrast to what the proposal would require, the Company has been seeking
ways to incorporate renewable generation into the Southern electric system
without adversely affecting cost and reliability. The Company has put
significant effort into research and demonstration programs to advance and find
applications for technologies such as solar, wind, and biomass. We believe that
the proper approach to adding new sustainable, renewable resources to our
generating mix is through partnerships with our customers. The Company,
therefore, is in the process of developing EarthCents(TM) "green power" programs
to allow customers to purchase green energy. Through these green power
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programs, customers can choose to pay the additional generating costs for
supplying some of their electricity from renewable sources without affecting the
costs of other customers. In Florida and Alabama, the program allows customers
to invest monthly toward the construction of up to 1000 kilowatts of solar
electric systems. Georgia Power Company has been working with the local
environmental community to develop mutually acceptable criteria for accredited
green pricing programs. These programs will enable customers to support the
development of a mix of renewable generation sources. The final criteria was
approved in February of 2002. Georgia Power Company plans to develop a green
pricing program in accordance with the criteria and file it with the Georgia
Public Service Commission.
The Company opposes this proposal because it would call for the Company to put
in place a restrictive and costly plan in regard to its future operations. The
Company's objective is to utilize the market and our customers' needs to propel
the growth of renewable energy technologies through a voluntary green power
program. The Company believes that this approach of encouraging and facilitating
the introduction of renewable energy is preferable to the proposal that would
have the Company arbitrarily pursue designated renewal generation technologies
without regard to our customers' demands, economic factors, technological
feasibility, or practicality.
The vote needed to pass the proposed stockholder 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. 2.
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AUDIT COMMITTEE REPORT
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The Audit Committee (the "Committee") oversees the Company's financial reporting
process on behalf of the Board of Directors. The Committee members are not
professionally engaged in the practice of accounting or auditing and are not
experts in these fields. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Committee reviewed
the audited consolidated financial statements of the Company and its
subsidiaries in the Annual Report with management. The Committee's review
process included discussions of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The independent public accountants are responsible for expressing an opinion on
the conformity of those audited financial statements with accounting principles
generally accepted in the United States. The Committee reviewed with the
independent public accountants their judgments as to the quality, not just the
acceptability, of the Company's accounting principles and such other matters as
are required to be discussed with the Committee under generally accepted
auditing standards. In addition, the Committee has discussed with the
independent public accountants their independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board. The Committee has also considered whether the
independent public accountants' provision of non-audit services to the Company
is compatible with maintaining their independence.
The Committee discussed the overall scopes and plans with the Company's internal
and independent public accountants for their respective audits. The Committee
meets with the internal auditors and the independent public accountants, with
and without management present, to discuss the results of their audits, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The Committee held nine meetings during 2001.
In reliance on the reviews and discussions referred to above, the 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 for
the year ended December 31, 2001 and filed with the Securities and Exchange
Commission. The Committee also recommended to the Board of Directors (and the
Board approved) the selection of the Company's independent public accountants.
Members of the Committee:
L. G. Hardman III, Chairman
Dorrit J. Bern
Zack T. Pate
Gerald J. St. Pe
PRINCIPAL PUBLIC ACCOUNTING FIRM FEES
The following represents the fees billed to the Company for the last fiscal year
by Arthur Andersen LLP -- the Company's principal public accountant for 2001:
Audit Fees.................................................. $2,408,000
Financial Information Systems Design and Implementation
Fees...................................................... --
All Other Audit-Related Fees................................ 733,300(a)
Other Fees.................................................. 2,783,600
Total............................................. $5,924,900
(a) Audit-related fees include statutory audits of subsidiaries, benefit plan
audits, acquisition due diligence, accounting consultations, various attest
services under professional standards, assistance with registration
statements, comfort letters, and consents.
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CHANGE IN PRINCIPAL PUBLIC ACCOUNTING FIRM
On March 28, 2002, the Board of Directors of the Company, upon recommendation of
the Committee, decided not to engage Arthur Andersen LLP ("Arthur Andersen") as
the Company's principal public accountants and engaged Deloitte & Touche LLP
("Deloitte & Touche") to serve as the Company's principal public accountants for
fiscal year, 2002.
Arthur Andersen's reports on the consolidated financial statements of the
Company and its subsidiaries for the two most recent fiscal years ended December
31, 2001, did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope, or accounting
principles.
During the Company's two most recent fiscal years ended December 31, 2001, and
the subsequent interim period through March 28, 2002:
- there were no disagreements between the Company and Arthur Andersen on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to Arthur
Andersen's satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with their reports;
- there were no reportable events as described in Item 304(a)(1)(v) of
Regulation S-K; and
- the Company did not consult Deloitte & Touche with respect to the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or reportable events
as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
Representatives from Deloitte & Touche will be present at the Annual Meeting of
Stockholders and will be given the opportunity to make a statement, if they
desire, and to respond to questions. Representatives from Arthur Andersen will
not be present.
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COMPENSATION & MANAGEMENT SUCCESSION COMMITTEE REPORT
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WHAT IS THE EXECUTIVE COMPENSATION PHILOSOPHY?
Our intent is to provide a competitive compensation program that is linked
directly to the Company's strategic business objectives and its short- and
long-term operating performance. With the objective of maximizing stockholder
value over time, this policy serves to align the interests of executives and
stockholders.
WHAT COMPRISES TOTAL EXECUTIVE COMPENSATION?
- Base pay,
- Short-term incentives (annual performance bonuses), and
- Long-term incentives.
TOTAL EXECUTIVE COMPENSATION
Total executive compensation targets are set at the size-adjusted median of the
marketplace. With the exception of Mr. Dahlberg, the marketplace for all named
executives is defined as a group of large companies in the electric and gas
utility industries. 14 of these companies are included in the 28 companies that
comprise the Standard & Poor's Electric Utility Index - the peer group used in
the five-year performance graph.
The marketplace for Mr. Dahlberg's total compensation was determined by using a
weighting of:
- 70 percent by comparison to the mentioned electric and gas utility companies,
and
- 30 percent by comparison to a group of heavy industrial and durable goods
manufacturing companies within a comparable size range.
BASE PAY
A range for base pay is determined for each executive by comparing the base pay
at the appropriate peer group of companies described previously. Base pay is set
at a level that is at or below the size-adjusted median paid at those companies
because of our emphasis on incentive compensation in our executive compensation
program.
ANNUAL PERFORMANCE BONUSES
Annual bonuses are paid through the Omnibus Incentive Compensation Plan. All
named executives participated in this plan in 2001.
PERFORMANCE GOALS
Annual performance bonus levels are based on a percentage of net income from
operations. In addition, the annual performance bonuses are reviewed in
comparison to the attainment of corporate performance and short-term business
unit goals, individual goals, and new products and services goals. All
performance goals were set at the beginning of the year.
For 2001, the corporate performance goals included specific targets for:
- Company earnings -- earnings per share from operations ("EPS") and
- Subsidiary companies' net income and return on equity ("ROE")
We believe that accomplishing the corporate goals is essential for the Company's
continued success and sustained financial performance. A target performance
level is set for each corporate performance goal. Performance above or below the
targets results in proportionately higher or lower bonus payments. The bonus
amount is then adjusted, up or down, based on the degree of achievement of the
short-term business unit goals related to capital expenditures, cash flow,
customer service, plant availability, and diversity, and individual goals.
A target percentage of base pay is established for each executive officer based
on position level for target-level performance. Annual performance bonuses based
on the achievement of the corporate performance goals, as adjusted for the
short-term
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business unit goals and individual performance, may range from 0 percent of the
target to 240 percent. An additional amount of up to 10 percent of the
executive's annual performance bonus may be paid for achievement of the new
products and services goal at his or her business unit.
No bonuses are paid if performance is below a threshold level or if a minimum
earnings level is not reached. Also, no bonuses are paid if the Company's
current earnings are not sufficient to fund the common stock dividend at the
same level as the prior year. We also capped the maximum amount for the annual
performance bonus for each named executive officer at 0.6 percent of net income
from operations.
ANNUAL BONUS PAYMENTS
Performance met or exceeded the target levels in all areas in 2001, resulting in
bonuses that exceeded the target levels.
Messrs. Dahlberg's and Franklin's annual performance bonuses under the Plan for
target-level performance were 100 percent of their base pay. Their bonuses paid
for 2001 performance were based entirely on the degree of achievement of the
Company's EPS goal as adjusted for achievement of the short-term business unit
goals, and resulted in bonuses that exceeded the target. Messrs. Dahlberg and
Franklin were not eligible to receive a new products and services goal
adjustment.
LONG-TERM INCENTIVES
We based a significant portion of our total compensation program on long-term
incentives including Company stock options and performance dividend equivalents.
STOCK OPTIONS
Executives are granted options with ten-year terms to purchase the Company's
common stock at the market price on the date of the grant under the terms of the
Omnibus Incentive Compensation Plan. The estimated annualized value represented
approximately 45 percent of Mr. Dahlberg's total compensation, approximately 40
percent of Mr. Franklin's, and 30 to 40 percent for the other executives. The
size of prior grants was not considered in determining the size of the grants
made in 2001. These options vest over a three-year period.
PERFORMANCE DIVIDENDS
Executives also are paid performance-based dividend equivalents on most stock
options held at the end of the year. Dividend equivalents can range from 25
percent of the common stock dividend rate if total shareholder return, compared
to a group of other utility companies, is at the 30th percentile to 100 percent
of the dividend rate if it reaches the 90th percentile. Mr. Dahlberg received
twice the amount per share paid to the other executives.
For eligible stock options held on December 31, 2001, Mr. Dahlberg received
$2.68 per share and the other executives, including Mr. Franklin, received $1.34
per share.
POLICY ON INCOME TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits the deductibility of certain
executives' compensation that exceeds $1 million per year unless the
compensation is paid under a performance-based plan as defined in the Code and
that has been approved by stockholders. The Company has obtained stockholder
approval of the Omnibus Incentive Compensation Plan. However, our policy is to
maximize long-term stockholder value, and tax deductibility is only one factor
considered in setting compensation.
SUMMARY
We believe that the policies and programs described in this report link pay and
performance and serve the best interest of stockholders. We frequently review
the various pay plans and policies and modify them as we deem necessary to
continue to attract, retain, and motivate talented executives.
Members of the Committee:
G. J. St. Pe, Chairman
D. P. Amos
T. F. Chapman
L. G. Hardman III
11
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
EMPLOYMENT, CHANGE IN CONTROL, AND SEPARATION AGREEMENTS
The Company has Change in Control Agreements with each of its executive
officers, including those shown on the Summary Compensation Table on page 14. If
an executive is involuntarily terminated, other than for cause, within two years
following a change in control of the Company, the Agreements provide for:
- lump sum payment of three times annual compensation,
- up to five years' coverage under group health and life insurance plans,
- immediate vesting of all stock options previously granted,
- payment of any accrued long-term and short-term bonuses and dividend
equivalents, and
- payment of any excise tax liability incurred as a result of payments made
under the Agreement.
A change in control is defined under the Agreements as:
- acquisition of at least 20 percent of the Company's stock,
- a change in the majority of the members of the Company's Board of Directors,
- a merger or other business combination that results in the Company's
stockholders immediately before the merger owning less than 65 percent of the
voting power after the merger, or
- a sale of substantially all the assets of the Company.
If a change in control affects only a subsidiary of the Company, these payments
would only be made to executives of the affected subsidiary who are
involuntarily terminated as a result of that change in control.
The Company also has amended its short- and long-term incentive programs to
provide for pro-rata payments at not less than target-level performance if a
change in control occurs and the programs are not continued or replaced with
comparable programs.
On February 28, 1998, the Company and Southern Nuclear Operating Company entered
into a Deferred Compensation Agreement with Mr. Hairston which provides that on
the fifth anniversary of the Agreement, if still employed by the Company or one
of its subsidiaries, Mr. Hairston would receive the cash value of the number of
shares of common stock that could have been purchased for $250,000 on February
28, 1998, and on which dividends were reinvested throughout the five-year
period. If certain performance goals are met, Mr. Hairston also will receive the
estimated income tax expense on the compensation.
Mr. Dahlberg retired from the Company on April 1, 2001. In connection with his
retirement, the Company entered into an agreement with him. This agreement
provides for a severance payment of $200,000 and supplemental pension payments.
Mr. Dahlberg's pension payment will be calculated as if he has an additional 13
months of accredited service, there is no early retirement reduction, and he
receives regular base salary increases and incentive awards of at least 150
percent of the target established by the Compensation and Management Succession
Committee, for the additional 13 months. He also will receive one additional
payment of performance dividend awards based on actual performance under the
Performance Dividend Plan, or similar plan, under the terms of the Plan in
effect on his retirement date. He will receive the difference, if any, between
the awards he actually receives under the Performance Dividend Plan as a retired
Plan participant (three annual awards) and the awards he would have received
under the Plan based on the Plan terms in effect on his retirement date and the
size of his awards as approved by the Compensation and Management Committee in
2001 (payout percentage increased by a factor of two). The Agreement also
contains customary releases by the Company and Mr. Dahlberg and an agreement by
Mr. Dahlberg to not engage in specified competitive activities for two years.
12
Mr. Harris retired on January 11, 2002. In connection with his retirement,
Alabama Power Company entered into an agreement with Mr. Harris. This agreement
provides for a severance payment payable in a lump sum of $2,500,000 and 87
payments of $17,640 per month. The Agreement also contains customary releases by
Alabama Power Company and Mr. Harris and an agreement by Mr. Harris to not
engage in specified competitive activities for two years.
--------------------------------------------------------------------------------
STOCK OWNERSHIP TABLE
--------------------------------------------------------------------------------
Section 16(a) Beneficial Ownership Reporting Compliance: Messrs. Amos and Evans
filed amended reports with the Securities and Exchange Commission amending their
initial holdings of the securities of the Company and its subsidiaries.
This table shows the number of shares of the Company's common stock owned by
directors, nominees, and executive officers as of December 31, 2001. 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.
SHARES BENEFICIALLY OWNED INCLUDE:
----------------------------------
SHARES
INDIVIDUALS
SHARES HAVE RIGHTS TO
BENEFICIALLY ACQUIRE WITHIN SHARES HELD BY
TITLE OF SECURITY OWNED(1) 60 DAYS(2) FAMILY MEMBERS(3)
-------------------------------------------------------------------------------------------------------------
DANIEL P. AMOS Southern Common Stock 15,288
-------------------------------------------------------------------------------------------------------------
DORRIT J. BERN Southern Common Stock 10,165
-------------------------------------------------------------------------------------------------------------
THOMAS F. CHAPMAN Southern Common Stock 3,360
-------------------------------------------------------------------------------------------------------------
A. W. DAHLBERG Southern Common Stock 2,427,062 2,353,539
-------------------------------------------------------------------------------------------------------------
H. ALLEN FRANKLIN Southern Common Stock 489,080 451,840
-------------------------------------------------------------------------------------------------------------
BRUCE S. GORDON Southern Common Stock 11,595
-------------------------------------------------------------------------------------------------------------
W. GEORGE HAIRSTON, III Southern Common Stock 117,334 108,557
-------------------------------------------------------------------------------------------------------------
L. G. HARDMAN III Southern Common Stock 22,234 100
-------------------------------------------------------------------------------------------------------------
ELMER B. HARRIS Southern Common Stock 464,433 418,743 310
-------------------------------------------------------------------------------------------------------------
DONALD M. JAMES Southern Common Stock 8,839
-------------------------------------------------------------------------------------------------------------
CHARLES D. MCCRARY Southern Common Stock 112,440 109,823
-------------------------------------------------------------------------------------------------------------
ZACK T. PATE Southern Common Stock 18,250
-------------------------------------------------------------------------------------------------------------
D. M. RATCLIFFE Southern Common Stock 194,402 182,791
-------------------------------------------------------------------------------------------------------------
GERALD J. ST. PE Southern Common Stock 43,928 1,750
-------------------------------------------------------------------------------------------------------------
DIRECTORS, NOMINEES, AND Southern Common Stock 4,401,366 4,019,460 2,160
EXECUTIVE OFFICERS AS A
GROUP (19 PEOPLE)
-------------------------------------------------------------------------------------------------------------
---------------
(1) "Beneficial ownership" means the sole or shared power to vote, or to direct
the voting of, a security, or investment power with respect to a security,
or any combination thereof.
(2) Indicates shares of the Company's common stock that certain executive
officers have the right to acquire within 60 days. Shares indicated are
included in the Shares Beneficially Owned column.
(3) Each director disclaims any interest in shares held by family members.
Shares indicated are included in the Shares Beneficially Owned column.
13
--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------
This table shows information concerning the Company's chief executive officers
serving during 2001 and each of the other four most highly compensated executive
officers of the Company serving during 2001.(1)
LONG-TERM COMPENSATION
-----------------------------------
NUMBER OF LONG-
ANNUAL COMPENSATION SECURITIES TERM
---------------------------------- RESTRICTED UNDERLYING INCENTIVE
OTHER ANNUAL STOCK STOCK PLAN ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS($) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) (2) (#) ($)(3) ($)(4)
---------------------------------------------------------------------------------------------------------------------------------
A. W. DAHLBERG(5) 2001 246,279 2,040,981 190,228 -- 902,722 -- 593,984
Chairman 2000 939,287 2,318,377 272,551 -- 215,616 302,612 52,267
Southern Company 1999 903,426 181,896 23,755 -- 201,196 579,392 49,283
---------------------------------------------------------------------------------------------------------------------------------
H. A. FRANKLIN 2001 855,969 1,867,320 2,770 648,863 497,790 -- 44,786
Chairman, President & CEO 2000 655,806 1,014,696 8,305 -- 85,354 201,760 34,902
Southern Company 1999 603,658 126,000 31,023 -- 71,153 375,137 32,654
---------------------------------------------------------------------------------------------------------------------------------
W. G. HAIRSTON, III 2001 414,594 370,798 1,583 -- 96,135 -- 22,523
President & CEO 2000 388,195 366,074 11,581 -- 42,172 -- 21,179
Southern Nuclear Operating
Company 1999 366,897 66,601 1,615 -- 20,895 311,562 20,285
---------------------------------------------------------------------------------------------------------------------------------
E. B. HARRIS(6) 2001 596,026 522,206 21,371 -- 257,098 -- 29,182
Chairman 2000 573,187 643,046 129,834 167,476 62,064 -- 27,858
Alabama Power Company 1999 550,674 97,125 15,301 -- 31,341 330,618 29,800
---------------------------------------------------------------------------------------------------------------------------------
C. D. MCCRARY 2001 391,647 438,652 91,403 -- 92,338 -- 118,975
President & CEO 2000 335,995 335,247 8,515 -- 29,201 -- 16,342
Alabama Power Company 1999 317,616 57,646 10,701 -- 13,865 226,439 15,698
---------------------------------------------------------------------------------------------------------------------------------
D. M. RATCLIFFE 2001 483,324 865,280 3,134 -- 155,694 -- 26,000
President & CEO 2000 447,934 626,654 14,320 -- 48,662 -- 25,675
Georgia Power Company 1999 388,819 85,389 16,051 -- 24,110 321,983 20,885
---------------------------------------------------------------------------------------------------------------------------------
(1) This table does not include the following performance dividend equivalents
paid in 2002, for the performance period ended December 31, 2001, on stock
options outstanding on December 31, 2001: Dahlberg, $5,893,130; Franklin,
$1,249,890; Hairston, $294,360; Harris, $800,210; McCrary, $284,529; and
Ratcliffe, $476,734.
(2) The amount for Mr. Franklin reflects the value of the grant of restricted
stock units on the date granted. The restricted stock units vested on April
2, 2001 and were transferred to the Company's Deferred Compensation Plan.
The amount for Mr. Harris reflects the value on the date of grant, July 17,
2000, of restricted stock. The restricted stock vested on July 17, 2001. The
only named executive officer holding restricted stock units or restricted
stock as of December 31, 2001, was Mr. Hairston. He received a grant of
restricted stock units on February 28, 1998, valued at $250,000 on that
date. Dividends are reinvested and the number of units was adjusted after
the spin off of Mirant Corporation under the anti-dilution provisions of the
agreement with Mr. Hairston. The units vest on his continued employment and
the value is payable in cash. (See page 12 for a description of the
agreement with Mr. Hairston.) On December 31, 2001, Mr. Hairston held
19,932.8 units valued at $490,086.
(3) Payouts made in 2000 and 2001 for the four-year performance periods ending
December 31, 1999 and 2000, respectively.
14
(4) Company contributions in 2001 to the Employee Savings Plan and Employee
Stock Ownership Plan, non-pension related accruals under the Supplemental
Benefit Plan, and tax sharing benefits paid to participants who elected
receipt of dividends on Company common stock held in the Employee Saving
Plan are provided in the following table:
ESP TAX
SHARING
BENEFIT ESP ($) ESOP ($) SBP ($)
------------------------------------------------------------------------
A. W. Dahlberg -- 2,231 764 22,065
------------------------------------------------------------------------
H. A. Franklin 2,620 6,853 764 37,168
------------------------------------------------------------------------
W. G. Hairston, III -- 6,853 764 14,905
------------------------------------------------------------------------
E. B. Harris -- 5,958 764 22,460
------------------------------------------------------------------------
C. D. McCrary -- 5,958 764 12,253
------------------------------------------------------------------------
D. M. Ratcliffe 2,076 6,853 764 18,383
------------------------------------------------------------------------
For Mr. Dahlberg, also includes the following payments in connection with
his retirement: supplemental pension payments of $267,716; severance payment
of $200,000; and unused vacation pay of $101,208. For more information on
these payments, see the description of his agreement with the Company on
page 12. For Mr. McCrary, also includes additional incentive compensation of
$100,000.
(5) Mr. Dahlberg retired as Chairman of the Company on April 1, 2001.
(6) Mr. Harris retired as Chairman of Alabama Power Company on January 11, 2002.
--------------------------------------------------------------------------------
STOCK OPTIONS
--------------------------------------------------------------------------------
OPTION GRANTS IN 2001
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED (1) FISCAL YEAR (2) ($/SH)(1) DATE (1) VALUE ($)(3)
------------------------------------------------------------------------------------------------------------
A. W. DAHLBERG(4) 902,722 6.7 19.08 4/01/2006 6,721,852
------------------------------------------------------------------------------------------------------------
H. A. FRANKLIN 298,644 2.2 19.08 2/16/2011 1,583,019
199,146 1.5 22.43 4/16/2011 1,055,474
------------------------------------------------------------------------------------------------------------
W. G. HAIRSTON, III 54,998 .04 19.08 2/16/2011 291,527
41,137 .03 22.43 4/16/2011 218,026
------------------------------------------------------------------------------------------------------------
E. B. HARRIS 78,669 .06 19.08 1/11/2007 417,000
178,429 1.3 22.43 1/11/2007 945,674
------------------------------------------------------------------------------------------------------------
C. D. MCCRARY 37,725 .03 19.08 2/16/2011 199,968
54,613 .04 22.43 4/16/2011 289,449
------------------------------------------------------------------------------------------------------------
D. M. RATCLIFFE 63,462 .05 19.08 2/16/2011 336,392
92,232 .07 22.43 4/16/2011 488,830
------------------------------------------------------------------------------------------------------------
(1) Stock option grants were made on February 16, 2001 and April 16, 2001, and
vest annually at a rate of one-third on the anniversary date of the grant.
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.
Exercise price is the average of the high and low price of the Company's
common stock on the date granted. Options may be transferred to certain
family members, family trusts, and family limited partnerships. The number
of options granted on February 16, 2001, and the exercise price thereof were
adjusted
15
after the spin off of Mirant Corporation under the anti-dilution provisions
of the plan such that the options had the same aggregate intrinsic value on
the day of the spin off as the day before.
(2) A total of 13,623,507 stock options were granted in 2001.
(3) Value was calculated using the Black-Scholes option valuation model. The
actual value, if any, ultimately realized depends on the market value of the
Company's common stock at a future date. Significant assumptions are shown
below:
-------------------------------------------------------------------------------------------------------------
DISCOUNT FOR FORFEITURE RISK:
GRANT RISK-FREE RATE DIVIDEND BEFORE BEFORE
DATE VOLATILITY OF RETURN OPPORTUNITY TERM VESTING EXPIRATION
------------------------------------------------------------------------------------------------------------------------------------
DAHLBERG 2/16/2001 27.34% 5.10% 100% 10 7.79% 15.80%
------------------------------------------------------------------------------------------------------------------------------------
OTHERS 2/16/2001 27.34% 5.10% 50% 10 7.79% 12.45%
------------------------------------------------------------------------------------------------------------------------------------
4/16/2001 26.11% 5.14% 50% 10 7.79% 11.77%
------------------------------------------------------------------------------------------------------------------------------------
These assumptions reflect the effects of cash dividend equivalents paid to
participants under the Omnibus Incentive Compensation Plan assuming targets are
met.
(4) For Mr. Dahlberg, options were granted on February 16, 2001, only.
--------------------------------------------------------------------------------
OPTION EXERCISES
--------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF VALUE OPTIONS AT YEAR-END (#) YEAR-END ($)(2)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------
A. W. DAHLBERG 212,965 2,472,963 2,353,539 0 20,312,101 0
------------------------------------------------------------------------------------------------------------------
H. A. FRANKLIN 163,074 2,035,273 307,206 625,548 3,208,190 3,741,835
------------------------------------------------------------------------------------------------------------------
W. G. HAIRSTON, III Not Exercised 0 67,948 151,724 623,137 1,035,909
------------------------------------------------------------------------------------------------------------------
E. B. HARRIS 195,751 2,323,161 257,951 160,792 2,795,645 1,335,899
------------------------------------------------------------------------------------------------------------------
C. D. MCCRARY 44,007 511,851 81,824 130,511 833,171 788,743
------------------------------------------------------------------------------------------------------------------
D. M. RATCLIFFE 76,896 931,908 135,933 220,019 1,433,854 1,328,696
------------------------------------------------------------------------------------------------------------------
(1) The "Value Realized" is ordinary income, before taxes, and represents the
amount equal to the excess of the fair market value of the shares at the
time of exercise above the exercise price.
(2) These columns represent the excess of the fair market value of the Company's
common stock of $25.35 per share, as of December 31, 2001, above the
exercise price of the options. The amounts under the Exercisable column
report the "value" of options that are vested and therefore could be
exercised. The Unexercisable column reports the "value" of options that are
not vested and therefore could not be exercised as of December 31, 2001.
16
--------------------------------------------------------------------------------
PENSION PLAN TABLE
--------------------------------------------------------------------------------
YEARS OF ACCREDITED SERVICE
---------------------------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40 45
---------------------------------------------------------------------------------------------------------
$ 100,000 $ 25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 68,000 $ 76,500
---------------------------------------------------------------------------------------------------------
300,000 76,500 102,000 127,500 153,000 178,500 204,000 229,500
---------------------------------------------------------------------------------------------------------
500,000 127,500 170,000 212,500 255,000 297,500 340,000 382,500
---------------------------------------------------------------------------------------------------------
700,000 178,500 238,000 297,500 357,000 416,500 476,000 535,500
---------------------------------------------------------------------------------------------------------
900,000 229,500 306,000 382,500 459,000 535,500 612,000 688,500
---------------------------------------------------------------------------------------------------------
1,100,000 280,500 374,000 467,500 561,000 654,500 748,000 841,500
---------------------------------------------------------------------------------------------------------
1,300,000 331,500 442,000 552,500 663,000 773,500 884,000 994,500
---------------------------------------------------------------------------------------------------------
1,500,000 382,500 510,000 637,500 765,000 892,500 1,020,000 1,147,500
---------------------------------------------------------------------------------------------------------
1,700,000 433,500 578,000 722,500 867,000 1,011,500 1,156,000 1,300,500
---------------------------------------------------------------------------------------------------------
1,800,000 459,000 612,000 765,000 918,000 1,071,000 1,224,000 1,377,000
---------------------------------------------------------------------------------------------------------
2,000,000 510,000 680,000 850,000 1,020,000 1,190,000 1,360,000 1,530,000
---------------------------------------------------------------------------------------------------------
2,600,000 663,000 884,000 1,105,000 1,326,000 1,547,000 1,768,000 1,989,000
---------------------------------------------------------------------------------------------------------
This table shows the estimated annual pension benefits payable at normal
retirement age under Southern's qualified Pension Plan, as well as non-qualified
supplemental benefits, based on the stated compensation and years of service
with Southern's subsidiaries. Compensation for pension purposes is limited to
the average of the highest three of the final 10 years' compensation.
Compensation is base salary plus the excess of annual incentive compensation
over 15 percent of base salary. These compensation components are reported under
the columns titled "Salary" and "Bonus" in the Summary Compensation Table on
page 14.
As of December 31, 2001, the applicable compensation levels and accredited
service for determination of pension benefits would have been:
ACCREDITED
COMPENSATION SERVICE
------------------------------------------------
H. A. Franklin 1,748,640 30
------------------------------------------------
W. G. Hairston, III 706,544 32
------------------------------------------------
E. B. Harris 1,042,992 42
------------------------------------------------
C. D. McCrary 663,248 27
------------------------------------------------
D. M. Ratcliffe 1,007,852 29
------------------------------------------------
Mr. Dahlberg retired on April 1, 2001, with 40 years of accredited service under
the plan and with a compensation level for determination of pension benefits, as
described above, of $2,542,036.
The amounts shown in the table were calculated according to the final average
pay formula and are based on a single life annuity without reduction for joint
and survivor annuities or computation of Social Security offset that would apply
in most cases. (See page 12 for a description of the additional supplemental
pension payable to Mr. Dahlberg under an agreement with the Company and page 13
for a description of the additional supplemental pension payable to Mr. Harris
under an agreement with Alabama Power Company.)
17
--------------------------------------------------------------------------------
FIVE-YEAR 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, 1996, in the Company's common stock and each of the
above indices, and that all dividends are reinvested. The distribution of shares
of Mirant Corporation stock to Company shareholders effective April 2, 2001, is
treated as a special dividend for purposes of calculating shareholder return.
The shareholder return shown below for the five-year historical period may not
be indicative of future performance.
(PERFORMANCE GRAPH)
1996 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
Southern Company $ 100 $ 121 $ 143 $ 122 $ 181 $ 240
-------------------------------------------------------------------------------------
S & P Electric Utility
Index 100 133 171 207 189 166
-------------------------------------------------------------------------------------
S & P 500 Index 100 126 146 118 180 165
-------------------------------------------------------------------------------------
18
APPENDIX A
SOUTHERN COMPANY
AUDIT COMMITTEE CHARTER
This Charter identifies the composition, purpose, authority, meeting
requirements and responsibilities of the Southern Company Audit Committee (the
"Committee") as approved by the Southern Company Board of Directors.
Composition of the Audit Committee
The Audit Committee will be comprised of at least three independent directors,
each of whom will have a basic understanding of financial statements and at
least one of whom will have prior accounting and related financial management
expertise. Such requirements, for independence and financial literacy, are
interpreted by the Board of Directors in its best business judgement in
accordance with the rules of the Securities Exchange Commission (SEC) and the
New York Stock Exchange.
Purpose of the Audit Committee
The purpose of the Audit Committee is to provide, on behalf of the Southern
Company Board of Directors, oversight of:
- The Southern Company's accounting and financial reporting practices and
policies and internal audit activities and procedures, including the
assessment of the adequacy of internal accounting, compliance and controls
systems.
- The Southern Company's financial statements and the independent audit thereof,
including quarterly and annual reporting. This includes financial information
for all Southern Company first-tier, consolidated subsidiaries.
- The independent public accountants, including their selection or nomination
for Board of Directors, their performance evaluation and, where appropriate,
their replacement.
- The independence of the external public accountants through evaluation and
discussion of their annual written "Statement as to Independence" and
consideration of non-audit services provided.
Authority of the Audit Committee
The Committee reports to the Board of Directors and has unrestricted access and
authorization to obtain assistance from Southern Company personnel to accomplish
its purpose. In addition, the Committee has the discretion to initiate and
supervise investigations within the scope of its duties, as it may deem
appropriate and to employ whatever additional advisors and consultants it deems
necessary for the fulfillment of its duties.
Meeting Requirements
The Audit Committee shall meet a minimum of four times each year, or more often
if warranted, to receive reports from and discuss the quarterly and annual
financial statements, including disclosures and other related information. The
Audit Committee shall meet separately, at least annually, with the Director of
Internal Auditing, the Compliance Officer, and the external auditor to discuss
matters that the Audit Committee or any of these persons believe should be
discussed privately. Meetings of the Audit Committee may utilize conference
call, Internet or other similar electronic communication technology.
Responsibilities of the Audit Committee
1. Financial Reporting and Accounting Practices
The oversight responsibility of the Audit Committee in the area of
financial reporting and accounting practices is to provide reasonable
assurances that financial disclosures made by management accurately portray
the financial condition, results of operations, cash flows, plans and
long-term commitments of the Company on a consolidated
A1
basis, as well as on a separate company basis for each first-tier,
consolidated subsidiary that has publicly traded securities. To accomplish
this, the Committee will:
- Provide oversight of the external audit coverage, including:
Annual nomination or selection of independent public accountants.
Evaluation of the independent public accountants' performance.
Evaluation of policies covering when or whether to engage the independent
public accountants to provide non-audit services.
Review of the independent public accountants' quarterly and annual work
plans, results of the audit engagements and proposed and actual fees for
services rendered. This includes audit and non-audit work plans and fees.
Coordination with the Internal Auditing and Accounting functions.
Assessment of the external auditors' annual "Statement as to
Independence."
- Review and discuss the quarterly and annual consolidated earnings
announcements with management.
- Review and discuss with management and the independent public accountants
the quarterly and annual financial statements and recommend them for
filing with the SEC. The financial statements include the Southern
Company consolidated financial statements as well as the separate
financial statements for all first-tier, consolidated subsidiaries with
publicly traded securities. The review and discussion includes:
Significant accounting policies and policy decisions.
Significant judgements and estimates made by management.
Significant reporting or operational issues identified during the
reporting period, including how they were resolved.
Issues on which management sought second accounting opinions.
Adjustments to the financial statements proposed by the external auditors.
Significant regulatory changes and accounting and reporting developments
proposed by Financial Accounting Standards Board, SEC or other regulatory
agency.
- Review the letters of management representation given to the independent
public accountants in connection with the audits of the annual financial
statements.
2. Internal Control
The responsibility of the Audit Committee in the area of internal control
in addition to the actions described in section (1) is to:
- Provide oversight of the internal audit functions by:
Reviewing audit plans, budgets and staffing levels.
Reviewing audit results.
Reviewing management's appointment, appraisal of, and/or removal of the
Company's Director of Internal Auditing. At least every two years,
regardless of the performance of the incumbent, the President and Chief
Executive Officer will review with the Committee the merits of reassigning
the Director of Auditing.
- Assess the extent to which the planned audit scopes of the internal
auditors and the independent public accountants can be relied on to
detect fraud or weaknesses in internal controls.
- Assess management's response to any reported weaknesses or compliance
deficiencies.
A2
- Provide oversight of the Company's Compliance and Ethics Programs by:
Reviewing the plans and activities of the Company's Corporate Compliance
Officer.
Reviewing results of auditing or other monitoring programs designed to
prevent or detect violations of laws or regulations.
Reviewing corporate policies relating to compliance with laws and
regulations, ethics, conflict of interest and the investigation of
misconduct or fraud.
Reviewing significant cases of employee conflict of interest, unethical or
illegal conduct.
- Review the quality assurance practices of the internal auditing function
and the independent public accountants.
- Review and discuss significant risks facing the Company and the steps
taken to monitor and minimize such risks.
- Review different aspects of the Company's business on a planned basis to
ensure a general understanding of the significant operations and
functional areas and to assess the impact of these operations and
functional areas on the internal control environment.
3. Other
- Report Committee activities and findings to the Board of Directors on a
regular basis.
- Report Committee activities in the Company's annual proxy statement to
shareholders.
- Review this charter at least annually and recommend appropriate changes.
A3
(SOUTHERN COMPANY LOGO)
Recycle Logo
For Information Only
Appendix B
Admission Ticket [GRAPHIC OMITTED]
(Not Transferable)
2002 Annual Meeting Of Stockholders
10 a.m. (EDT), May 22, 2002
Ritz -Carlton Lodge
1 Lake Oconee Trail
Greensboro, GA 30642 706/467-0600
Please present this Admission Ticket in order to gain admittance to the meeting.
Ticket admits only the stockholder(s) listed on reverse side and is not
transferable.
Directions to Meeting Site: From Atlanta, take I-20 East towards Augusta.
Continue on I-20 for approximately 60 miles. Take the Greensboro/Eatonton Exit
(Exit 130). Turn right and follow Highway 44 South for approximately eight
miles. Turn left onto Linger Longer Road and continue for approximately one
mile. Turn left onto Lake Oconee Trail.
From Augusta, take I-20 West towards Atlanta. Turn left at Exit 130 and follow
the directions above.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of The Southern Company will be held on
Wednesday, May 22, 2002, at 10:00 a.m. (EDT), at the Ritz-Carlton Lodge,
Greensboro, Georgia. Stockholders owning shares at the close of business on
March 25, 2002, are entitled to attend and vote at the meeting. Stockholders
will act on the election of nine members of the board of directors, and transact
such other business as may properly come before the meeting.
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FORM OF PROXY AND FORM OF PROXY
TRUSTEE VOTING [GRAPHIC OMITTED] AND
INSTRUCTION FORM TRUSTEE VOTING
INSTRUCTION FORM
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS AND TRUSTEE VOTING INSTRUCTION
FORM
The undersigned hereby appoints H. A. Franklin, G. E. Klappa, T. Chisholm, or
any of them, proxies with full power of substitution in each, to vote all shares
the undersigned is entitled to vote at the Annual Meeting of Stockholders of THE
SOUTHERN COMPANY, to be held at the Ritz-Carlton Lodge, Greensboro, Georgia, on
May 22, 2002, at 10:00 a.m. (EDT), and any adjournments thereof, on all matters
properly coming before the meeting, including, without limitation, the proposals
listed on the reverse side of this form.
This form also provides voting instructions for shares held by the Trustees of
the Employee Savings Plan and Employee Stock Ownership Plan and directs such
Trustees to vote as indicated on all matters properly coming before the meeting,
including, without limitation, the proposals listed on the reverse side of this
form.
This Form of Proxy/Voting Instruction Form is solicited jointly by the Board of
Directors of The Southern Company and the Trustees of the Employee Savings Plan
and Employee Stock Ownership Plan pursuant to a separate Notice of Annual
Meeting and Proxy Statement. If not voted electronically, this form should be
mailed in the enclosed envelope in time to reach the Company's proxy tabulator
at 51 Mercedes Way, Edgewood, NY 11717 by 9:00 a.m. on Wednesday, May 22, 2002
for common shares to be voted and by 5:00 p.m. on Monday, May 20, 2002 for the
Trustees to vote Plan shares. The proxy tabulator will report separately to the
Proxy Committee and to the Trustees as to proxies received and voting
instructions provided, respectively.
THIS FORM OF PROXY/VOTING INSTRUCTION FORM WILL BE VOTED AS SPECIFIED
BY THE UNDERSIGNED. IF NO CHOICE IS INDICATED, THE SHARES WILL BE
VOTED AS THE BOARD OF DIRECTORS RECOMMENDS.
Continued on reverse side.
[GRAPHIC OMITTED] THREE WAYS TO VOTE
Proxy Services Please consider voting electronically - Internet
P. O. Box 9112 or Phone - and save the Company money.
Farmingdale, NY 11735
INTERNET - www.proxyvote.com
Use the Internet to transmit
your voting instructions. Have
this form in hand when you
access the web site. You will be
prompted to enter your 12-digit
Control Number that is located
below to create an electronic
voting instruction form.
TELEPHONE - 1-800-690-6903
Toll-Free Use any touch-tone
telephone to transmit your
voting instructions. Have this
form in hand when you call. You
will be prompted to enter your
12-digit Control Number that is
located below, then follow the
simple instructions provided to
record your vote.
MAIL
Mark, sign and date your Form of
Proxy and return it in the
postage-paid envelope we've
provided or return to Southern
Company, C/O ADP, 51 Mercedes
Way, Edgewood, NY 11717
If you vote by Internet or phone, please
do not mail this form.
THANK YOU
VIEW ANNUAL REPORT AND PROXY STATEMENT ON THE
INTERNET - www.southerncompany.com
NOTE: The last instruction
received, either paper or
electronic, will be the last
tabulated.
TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS: SOUTH 1 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS FORM OF PROXY/TRUSTEE VOTING INSTRUCTION FORM IS VALID ONLY WHEN
SIGNED AND DATED.
THE SOUTHERN COMPANY
1. ELECTION OF DIRECTORS:
For Withhold For All To withhold authority to
01) D. P. Amos All All Except vote, mark "For All Except"
02) D. J. Bern ( ) ( ) ( ) and write the nominee's
03) T. F. Chapman number on the line below.
04) H. A. Franklin _________________________
05) B. S. Gordon
06) L. G. Hardman III
07) D. M. James
08) Z. T. Pate
09) G. J. St.Pe
Vote On Item
For Against Abstain
2. STOCKHOLDER PROPOSAL ON RENEWABLE ENERGY SOURCES ( ) ( ) ( )
UNLESS OTHERWISE SPECIFIED ABOVE, YOUR SHARES WILL BE VOTED "FOR" ITEM 1 AND
"AGAINST" ITEM 2.
Mark here if you plan to attend the Annual Meeting. ( )
I (we) consent to suspending future mailings of the Annual Report and Proxy
Statement on this account. I (we) have access to copies ( ) of the documents or
can access them electronically through the Internet. I (we) can revoke this
consent at any time by notifying Stockholder Services.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date