Verizon Shareholders Still Waiting to Have a ‘Say on Pay’

Patrick O’Meara, corporate finance specialist in the AFL-CIO Office of Investment, updates us on the effort by Verizon shareholders to hold the company accountable for its excessive executive compensation.

When even chief executive officers acknowledge that most of them are overpaid, it’s clear something is amiss in board rooms when it comes to making decisions on executive compensation. As owners, the shareholders of a company have the responsibility and the self-interest to find a way to correct this problem, because excessive executive compensation depletes the company’s coffers.

At the Verizon Communications annual meeting this year, a majority of shareholders sought to address this problem by urging the board of directors to submit executive pay packages to a nonbinding vote by shareholders. This practice, already common in the United Kingdom, provides a check on the decisions the board members have made. It’s a simple way to make sure pay packages do not get out of hand.

Shortly after the vote in May, AFL-CIO Secretary-Treasurer Richard Trumka said: 

The question remains: Will Verizon listen, respond and reach out to investors, or will it continue the status quo despite the record shareholder vote demanding change?

More than five months later, Verizon still has not indicated it will comply with the wishes of its shareholders.

In a report to the U.S. Securities and Exchange Commission (SEC) earlier this month, the AFL-CIO expressed concerns about widespread conflicts of interest by directors from the health care industry on the boards of the largest U.S. corporations.

In an Oct. 4 letter to SEC Chairman Christopher Cox, the AFL-CIO said the presence of these directors on the boards of as many as 21 of the largest U.S. companies, including Verizon, raised serious concerns about conflicts of interest. In many cases, the equity holdings of these directors in pharmaceutical and health insurance companies far exceeds their ownership of the companies where they serve as directors.

Large institutional shareholders representing nearly $800 million in Verizon shares now have written to board member Joseph Neubauer, who serves as chairman of the Human Resources Committee, to ask that the board adopt the “say on pay” policy that shareholders have already approved.

Shareholders have shown they want their company to be better governed. We still don’t know if the board of directors is ready to listen to them.

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