AFL-CIO Pushes Shareholder Actions at Verizon

Chris Huang from the AFL-CIO Office of Investment reports on shareholder actions to hold Verizon’s CEO and board accountable.
 
Verizon CEO Ivan Seidenberg was paid nearly $110 million in compensation over the past five years, while Verizon’s total shareholder return dropped by 5 percent.  The company underperformed not only its industry peers, but companies on the broader S&P 500 during that period.

Union-sponsored pension funds are significant shareholders of Verizon. 

In an effort to address Verizon’s excessive CEO pay, the AFL-CIO is supporting a number of shareholder proposals at the company’s annual meeting May 3.  The federation is joining other Verizon shareholders to vote “no” on the re-election of directors who are members of the human resources committee, which sets executive compensation at Verizon.

How was Seidenberg able to get so much money, despite his poor performance?  Verizon claims 89 percent of his compensation is based on performance.  However, the targets for his performance “incentives” are so low that they require minimal performance.

According to The New York Times, Verizon investor returns were slightly above the median for its industry over the past three years, but two out of every three big companies in the S&P 500 index performed better than Verizon.  The company’s incentive performance program still paid out 82 percent of the amount the company actually expects to award annually.

Questions regarding the independence of Verizon’s human resources committee members have raised concerns about whether they can objectively determine Seidenberg’s pay.  Moreover, questions also have been raised regarding the independence of Verizon’s compensation consultant.

Hewitt Associates was the compensation consultant during most of the five-year period in which Seidenberg was awarded nearly $110 million. But Hewitt also provides administration and employee benefits advice to the company. This means Hewitt recommended Seidenberg’s pay at the same time it received hundreds of millions of dollars in other consulting work from his management team. The human resources committee replaced Hewitt in August 2006.   

One of the proposals the AFL-CIO is supporting calls for Verizon’s board to submit executive compensation packages to an advisory shareholder vote, giving shareholders a “Say on Pay.”  This proposal would encourage the board of directors to consider shareholder interests before approving a questionable compensation plan. 

The Say on Pay proposal at Verizon is similar to the Shareholder Vote on Executive Compensation Act recently passed by the House of Representatives, despite opposition from the White House. More than 8,400 visitors to the AFL-CIO’s PayWatch website wrote to their representatives, expressing outrage at excessive CEO compensation and urging them to support the bill.

Now that the bill has passed the House, it must get through the Senate. Take action now. Urge your senators to support Say on Pay and vote for the Shareholder Vote on Executive Compensation Act (S. 1181).    

 

 

 

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