Verizon Vote on Pay Too Close to Call
Friday, May 4, 2007
NEW YORK, May 3 -- Shareholders of Verizon Communications voted on a proposal Thursday that would give them an annual vote on pay packages of top executives, but the result is too close to call.
A final tabulation will determine the outcome, which will not be known for about a week, Verizon said after its annual meeting in Pittsburgh.
The possibility that such a measure could receive majority support for the first time at a major company encouraged activist shareholders, who are pushing the pay issue at about 40 corporations this year.
"I think shareholders have spoken pretty clearly," said Richard Ferlauto, director of pension policy for the American Federation of State, County and Municipal Employees. "We've accomplished what we set out to do. . . . It's only a matter of time before the advisory vote gets instituted at companies in the U.S."
If the measure passes, it would give shareholders an up-or-down advisory vote on executive pay. While the vote would not be binding, corporate governance experts said, it would be hard for companies to ignore a significant number of "no" votes.
Verizon chief executive Ivan G. Seidenberg received $21.3 million in compensation last year, according to Securities and Exchange Commission filings. The amount is not "excessively out of line with the peer companies," according to Institutional Shareholder Services, a proxy advisory firm in Rockville.
The "say on pay" proxy has gained momentum after public criticism of the $210 million exit package for Home Depot chief executive Robert L. Nardelli. Congress is debating similar proposals, and a consortium of shareholders and companies is studying how a shareholder vote on pay might be implemented.
"We're going to continue to closely monitor the discussions," Verizon spokesman Peter Thonis said. "We'll make a determination and do what we think is the right thing to do from a corporate governance point of view, taking in all of those factors, including the shareholders' point of view."
Verizon instituted a majority-vote standard for electing board members last year after a shareholder proposal got significant support.
Critics of the "say on pay" proposal argue that the marketplace for executive talent, not shareholders, should determine how executives are compensated. A yes-or-no vote is not meaningful feedback, the opponents say, and investors have other ways of registering their dissatisfaction, such as withholding votes from directors or selling stock.
Shareholders at more than a dozen companies have voted on the pay measure during the spring proxy season. The proposal has failed each time, though it has come close to receiving a majority vote at several companies. At Merck, the measure received 49.2 percent support. At Bank of New York, 47.3 percent of votes cast were in favor.
Verizon said the measure received more than 49 percent of votes, though it is unclear if it reached the majority threshold needed for the resolution to pass.
Other proposals related to executive pay were defeated at Verizon: A measure calling for greater shareholder say on future severance agreements received about 47 percent support, while another to eliminate stock options got 9 percent.
A campaign lead by the AFL-CIO to unseat six members of the board's executive compensation committee also failed. Every director received at least 90 percent of the votes, the company said.
Verizon shares rose $1.47, or 3.7 percent, to $41.07, a 52-week high.