March 21, 2005 — For the third consecutive year, leaders of the Association of BellTel Retirees (www.BellTelRetitrees.org) — an advocacy group made up of retirees from Verizon Communications (NYSE:VZ) and its subsidiaries, have succeeded in altering the company’s corporate policies through the proposal of shareholder proxies.
Verizon has agreed to change its corporate policy and adhere to the proxy resolution’s requirement to rein-in Supplemental Executive Retirement Plan (SERP) income for senior executives. In return, the retirees agreed to withdraw the proxy proposal, which in 2004 gained 37 percent of the shareholder vote and won support from groups including CALPERS.
Currently, Verizon senior executives receive SERP contributions equal to 32 percent of their combined base salary plus bonus for every dollar above $210,000 during their first 20 years in the plan. After the first 20 years, the SERP contribution rate is reduced to 7 percent. Retirees say this is an excessive expense for shareholders, as last year Verizon projected a $161 million contribution to its nonqualified pension plans for 2004 alone and more than $400 million over three years.
The recently negotiated SERP agreement reduces the accrual of future senior executive benefits, including the 32 percent retirement contribution credit on eligible compensation down to a range of 4 to 7 percent, as of the close of business on December 31, 2004 (See reference note at bottom of page 17 in Verizon’s SEC filing of March 21, 2005).
The measure received the widest support of any 2004 Verizon proxy proposal and the concession by the company may have been to avoid shareholders forcing another change to the way Verizon compensates its most senior executives.
Three Other Proxy Victories for Retirees vs. Verizon:
For the retiree association and its board members, this marks the third consecutive year they have been victorious in proposing corporate governance policies that Verizon either has been forced to or chosen to adopt.
In 2003, Verizon agreed to implement a retiree proposal prior to its annual shareholders meeting to exclude pension credits from the calculation of executive compensation, which gained 43 percent of shareholder votes the previous year. The retirees then went on to shock the company when Verizon shareholders overwhelmingly voted to support another retiree-sponsored Executive Severance Agreement Proposal by a margin of 59 to 41 percent, also in 2003. The non-binding proposal was to limit what retirees call overly-generous executive compensation packages and golden parachutes. It was the first proxy loss by Verizon or any other Bell company in its more than 125-year history.
In 2004, the retirees came back at the company on the previous year’s proposal after Verizon executives and its Board of Directors failed to follow shareholders’ mandate to limit overly-generous executive compensation packages and golden parachutes. This time, when the retirees authored a binding proxy proposal mandating the board to implement the change, Verizon relented, agreeing that the company will seek shareholder approval for any future Executive Severance Agreement more than 2.99 times an executive’s base salary and bonus.
2005 Proxy Proposal by Retirees:
At the 2005 Verizon shareholders meeting on May 5 in Houston, Association of BellTel Retiree leaders have proposed another measure to modify Verizon’s Corporate Governance Guidelines to ensure that two-thirds of the company’s Board of Directors remains “independent,” as defined by the Council of Institutional Investors (CII).
The non-profit retiree group, which works for the protection of the pension and benefits for the company’s retirees, was formed in 1996 by a handful of former NYNEX employees. Today, its retiree membership surpasses 100,000 representing all retirees of Verizon. The group was among the first retiree groups in the nation to tap into the power of the shareholder proxy proposal when it began its effort seven years ago to galvanize support from thousands of retiree shareholders and institutional investors.
“The recent SERP victory is yet another example of how, with perseverance, the little shareholder can achieve a grand victory,” said BellTel President C. William Jones. “In the case of Verizon, the ‘little guy’ just so happened to be a group of retirees who helped build the company. Still, we have one proxy resolution that will go before shareholders in May and a long way to go to ensure that retirees continue to have a seat at the table of the company they helped grow through a lifetime of dedicated service.”