By Eddie Curran
As you would expect of a publicly traded company its size, the Southern Company, and by extension, Alabama Power, has a code of ethics. It’s called, “Ethics Southern Style.” A bit ham and eggsy, but that is the name. Not me making it up, in other words.
The five page guide, which is on the company’s website, includes a letter from CEO Tom Fanning. He writes:
“Each day Southern Company employees model Southern Style in everything we do. That kind of performance has earned us a high level of trust among our customers, shareholders and regulators.
“I expect everyone in Southern Company, especially me, and all our subsidiaries to (follow the code.) Any director, officer, employee or vendor who violates the Code puts his or her relationship with the company in jeopardy.”
As Fanning put it in his letter, “adherence to Southern Style and ethical behavior are as critical to our business as our plants and power lines. Southern Style drives our behavior, and ethical behavior is our standard.”
“Ethics Southern Style” forcefully declares that company employees, officers and board members are “required to report promptly to management any activities that may be in violation of this Code, other company policies, or any applicable laws or regulations.”
As regards the activities against Dunn, complying with that provision would seemingly require upper management to report itself to itself. Something like:
“Self, I and others in positions of the highest leadership at Alabama Power and the Southern Company determined that positions taken by Terry Dunn, while clearly within the purview of his official duties, could cost us and our shareholders money. As such, I and others, to include people we do business with, decided to engage in a multi-faceted, lengthy and ongoing campaign to spread lies about him, tarnish his reputation and put him up to ridicule.
“Were even a mild, limited telling of our actions against Dunn appear in a newspaper, it would bring shame to us and all those who work at Alabama Power and Southern Company. Needless to say, it would be most difficult to explain our actions to our children, parents, and all who look up to us.”
Role of Boards of Southern Company and Alabama Power
Maintaining the Southern Company’s code of ethics is ultimately the responsibility of the boards of directors of the company and its subsidiaries. As stated on the Southern Company web-site, to serve as a director one must have various qualifications and personal qualities, including:
Highest degree of integrity and ethical standards
Independence from management
Ability to provide sound and informed judgment
The portion of the company’s web-site devoted to its directors also contains the “Ethics Southern Style” publication. The board, as stated here, is required to both follow the code and seek to assure that the company complies:
The Board of Directors of Southern Company (the “Company”) sets high standards for the Company’s employees, officers and directors. Implicit in this philosophy is the importance of sound corporate governance. It is the duty of the Board of Directors to serve as a prudent fiduciary for shareholders and to oversee the management of the Company’s business. To fulfill its responsibilities and to discharge its duty, the Board of Directors follows the procedures and standards that are set forth in these guidelines.
As I suppose is clear, I believe that:
A) The activities against Dunn have involved and continue to involve grave breaches of the company’s code of ethics by people at the highest levels of Alabama Power, Southern Company, and by political consultants and others who provide services or materials to the company; and,
B) The boards of directors of Alabama Power and the Southern Company have failed to uphold their duties to assure that the companies they govern abide by the code,
Conclusion: “Ethics Southern Style” is a public relations tool not adhered to by those at the very top of Alabama Power and the Southern Company. It’s a feel-good document, nothing more.
Interlocking Directors/The Club
Alabama Power’s board contains several directors who are or have served as directors of each other’s companies. While not illegal, “interlocking directorships” are considered a red flag for potential conflicts of interests for corporate boards. The existence of such relationships raises questions about the ability for directors to truly be independent. Consider the following:
Charles McCrary is a director or Regions Financial Corporation, and serves on the bank’s governance committee. He is also a director of the insurance company, Protective Life Corp.
John D. Johns is the CEO of Protective. He is also a board member of Alabama Power and Regions.
Dowd Ritter was until 2010 the CEO of Regions. He has been a board member of Alabama Power since 1997, and is also on the board of Protective Life.
Malcolm Portera is not a current or former CEO. He is the retired Chancellor of the University of Alabama System. But he is very much in the club. He’s a director of Alabama Power, Regions, and Protective.
Those four get together frequently, and the pay is excellent. They — and other Alabama Power directors — also serve on the boards of numerous other state associations.
I do not know them, and believe that all are esteemed for their good character and business acumen. But considering the clubby nature of their interlocking directorships in publicly traded companies and a host of other non-corporate boards, I think it most unlikely that they would engage in the sort of boat-rocking that would be required by a serious inquiry into Alabama Power’s role in the acts against Terry Dunn.
The company’s board is also notable for lack of turnover. Most of the outside directors have been on the board for more than 10 years, and most for far longer.
Here are the boards of directors of Alabama Power and Southern Company:
Board of Directors of Alabama Power
“Nothing is financially right if it’s morally wrong. You have to start by running your business with honesty, integrity and by telling the truth. Once you do that, you can then start focusing on results.”
— Charles McCrary, president and CEO of Alabama Power from the time the attacks on Dunn began and until stepping down on March 1, 2014.
Thomas A. Fanning, Chairman, President and CEO, Southern Company
Whit Armstrong: Managing Member, Creeke Capital Investments LLC
John Cox Webb, IV: President, Webb Lumber Company Inc.
Patricia M. King: President and CEO, Sunny King Automotive Group
Board of Directors of the Southern Company
Thomas A. Fanning : Chairman of the Board, President and Chief Executive Officer, Southern Company
Juanita Powell Baranco: Executive Vice President and Chief Operating Officer, Baranco Automotive Group (automobile sales)
Jon A. Boscia: Founder and President, Boardroom Advisors, LLC (board governance consulting)
Henry A. Clark III: Senior Advisor, Evercore Partners Inc. (corporate finance advisory)
David J. Grain: Founder and Managing Partner, Grain Management, LLC (private equity firm)
H. William Habermeyer, Jr.: Retired President and Chief Executive Officer, Progress Energy Florida, Inc. (energy)
Veronica M. Hagen: Retired Chief Executive Officer, Polymer Group, Inc. (engineered materials)
Warren A. Hood, Jr. : Chairman and Chief Executive Officer, Hood Companies Inc. (packaging and construction products)
Linda P. Hudson: Retired, Chief Executive Officer and President, BAE Systems, Inc. (defense, security, aerospace)
Donald M. James: Chairman and Chief Executive Officer, Vulcan Materials Company (construction materials)
Dale E. Klein: Associate Vice Chancellor of Research, University of Texas System and Associate Director The Energy Institute at University of Texas at Austin (energy)
William G. Smith, Jr.: Presiding Director, Southern Company Board, Chairman, President and Chief Executive Officer, Capital City Bank Group Inc. (banking)
Steven R. Specker: Retired President and Chief Executive Officer, Electric Power Research Institute (energy)
E. Jenner Wood III: Chairman, President and Chief Executive Officer, SunTrust Bank Georgia/North Florida Division (banking)
Here are the members of the Southern Company board, starting with Fanning at top left, then left to right and to the next row.