8-KLeadership ChangesExhibits & Filings

SOUTHERN CO 8-K Report, Executive Changes (Aug 17, 2022)

Filed August 17, 2022For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

Southern Company (SO) has filed an 8-K to announce amendments and restatements to its Change in Control Benefits Protection Plan (BPP) and Senior Executive Change in Control Severance Plan, both effective August 15, 2022. These changes primarily impact how equity compensation awards and severance benefits are handled in the event of a change in control, aiming to provide clarity and potentially enhanced protections for executives and key employees. The amendments refine definitions of change-in-control events and adjust the vesting and payout calculations for equity awards and severance packages, particularly in scenarios involving mergers, asset sales, or dissolution. For investors, the key takeaway is the modification of change-in-control triggers and the resulting implications for executive compensation acceleration. Specifically, the plans now clarify how equity awards will be treated if a replacement award is not offered following a change in control, with a focus on vesting at either target or projected performance levels. Severance benefits for executives have also been updated, ensuring payouts are based on the greater of target or a recent average of actual incentive awards, and a pro-rated incentive award for the termination year. These adjustments are typical in executive compensation governance and signal a proactive approach by the company in managing potential change-in-control scenarios.

Key Highlights

  • 1Southern Company amended and restated its Change in Control Benefits Protection Plan (BPP) and Senior Executive Change in Control Severance Plan, effective August 15, 2022.
  • 2The BPP has updated definitions for change-in-control events, consolidating certain categories and adding stockhoder approval of liquidation or significant asset sale as triggering events.
  • 3Equity compensation awards granted on or after August 15, 2022, will have modified vesting terms upon a change in control if replacement awards are not provided.
  • 4Performance-based equity awards will vest at the greater of target or projected actual performance levels in the event of a Company Change in Control I without a replacement award.
  • 5The Severance Plan updates benefits for qualifying terminations within two years post-change in control, providing cash severance based on salary plus target incentive, and a pro-rated incentive award.
  • 6Severance payout calculations for cash and incentive awards will use the greater of the participant's target award or the average of actual payouts over the preceding three fiscal years.
  • 7Performance Share Units will vest at the greater of target or projected actual performance upon a qualifying termination after a change in control.

Frequently Asked Questions

The main purpose of these amendments is to update and clarify the definitions of change-in-control events and the associated benefits payable to participants, primarily senior executives, under specific termination scenarios following a change in control. This includes adjustments to how equity awards vest and how severance benefits are calculated.

For equity awards granted on or after August 15, 2022, in the event of a 'Company Change in Control I' where no replacement award is provided, the awards will fully vest. Performance-based awards will vest at the greater of the target level or the projected actual level of performance. For 'Subsidiary Change in Control' events, awards vest fully unless the participant's employment is transferred.

Upon a qualifying termination within two years after a change in control, executives will receive cash severance equal to two times (or three times for the CEO) their annual base salary plus target short-term cash incentive award. They will also receive a pro-rated payout of their target Annual Incentive Award for the year of termination. The incentive award amounts used in these calculations are based on the greater of target or the average of actual payouts from the prior three fiscal years.

Yes, the BPP has been updated to include additional triggering events for a 'Company Change in Control I'. These now include the approval by the company's stockholders of a complete liquidation or dissolution of the Company, and a sale or other disposition of substantially all of the Company's assets. Events previously covered under a 'Company Does Not Survive Merger' category will now fall under 'Company Change in Control I'.