Several public pension funds and a foundation issued an open letter Monday to Southern Co. criticizing executive compensation at the Georgia-based utility and urging shareholders to vote against two board members because of the issue.
The investors, including the California State Teachers' Retirement System and the Nathan Cummings Foundation, argue executives are being rewarded despite severe problems at two flagship power projects.
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The Southern board excluded the impact of pretax charges on earnings in determining bonuses for Chief Executive Thomas Fanning and Chief Financial Officer Art Beattie. Using the "adjusted" earnings, the executives were awarded an extra $2 million in combined bonuses.
The board's decision "undermines the link between pay and performance and has led to higher pay during a time of subpar returns to shareholders," the letter said.
These board-adjusted earnings were also used, in part, to calculate long-term incentive compensation for Mr. Fanning and other Southern executives, in addition to the annual bonuses. Previously, long-term incentives were based entirely on total shareholder return relative to other power companies.
The letter asks shareholders to vote against the re-election of board members Steven R. Specker and Dale E. Klein. Both sit on the compensation committee and the panel that oversees operational issues.
A Southern spokesman didn't immediately comment on the letter.
Southern is struggling to complete two large construction projects, including a clean coal power plant in Mississippi and a nuclear power station expansion in Georgia.
The power plant in Kemper County, Miss., which is designed to burn coal and capture much of the carbon-dioxide emissions, is several years behind schedule and suffering from cost overruns. After seven years and $7.1 billion, the plant still isn't fully operational and Southern has taken $2.76 billion in charges against earnings over the past four years.
Southern is also over budget and behind schedule on two new nuclear-power generating units in Vogtle, Ga.
The contractor for these units, Westinghouse Electric Co., filed for bankruptcy protection earlier this year and said it would wind down work. Southern has agreed to temporarily step in to fund construction to keep it moving forward, but many analysts are now questioning whether it makes sense to complete the nuclear plants.
Laura Campos, director of corporate and political accountability at the Nathan Cummings Foundation, is spearheading the campaign against Southern. "We want to send a clear message to the board: we expect them to do their job and hold executives accountable for the performance they are achieving rather than an adjusted performance," she said.
In addition to the foundation and California pension fund, the Seattle City Employees' Retirement System and the U.K.-based Local Authority Pension Fund Forum have agreed to support the effort.
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(END) Dow Jones Newswires
April 24, 2017 14:02 ET (18:02 GMT)