on the watch
By Steven Syre, Columnist
Thursday, April 6, 2006
Which investor gives giant Verizon Communications Inc. the
toughest time when it comes to executive pay and corporate
It isn't Fidelity Investments, the Vanguard Group, or any
hard-nosed hedge fund ready to flex its financial muscles.
It's the company's own retirees.
The Association of BellTel Retirees has pushed pointed
questions about compensation and governance onto Verizon
proxies for shareholder votes since 1997. More remarkably,
it has scored victories and changed the way the company does
business, especially when it comes to rewarding top
The association, a creation of just a few Nynex employees 11
years ago, now counts 111,500 members, including 12,463 from
Massachusetts. Though it proposes proxy questions at every
Verizon annual meeting, the BellTel retirees group owns just
214 shares. The group's commitment to raise uncomfortable
questions to shareholder votes does not always endear it to
''Companies don't like having others tell them how to run
the business but, frankly, corporate executives haven't
really handled things as well as they could have, and they
deserve to have someone looking over their shoulder," says
Bill Jones, one of the association's founders and its
current president. ''Every one of the proposals we put up
is good for shareholders, employees, and the company."
The association learned over time how to pack a bigger proxy
punch. It found a consultant to help craft questions in
forms more likely to be supported by institutions. It hired
a firm that mailed out thousands of solicitations to Verizon
shareholders seeking their proxy votes.
The BellTel retirees won a Verizon shareholder vote in 2003
when it suggested ''golden parachute" agreements for top
managers were too generous. Its resolution urging the board
to seek stockholder approval for severance agreements
exceeding 2.99 times an executive's base salary and bonus
was approved by a 59 percent vote. Although the vote was
nonbinding, Verizon agreed to the proposition.
The next year, the association prepared to challenge a
supplemental retirement plan for top executives. Verizon
contributed amounts equal to nearly a third of salary and
bonus for those executives, compared with 4 to 7 percent for
plans covering lower-ranking managers.
Verizon changed the more lucrative plan for top executives,
so it became entitled to the same smaller percentage
contributions as the plan for other managers, before a
vote. The retirees claimed another victory. A Verizon
spokesman said tax law changes made the old system
prohibitive, and the timing of the proxy question was a
The BellTel retirees are back again this year, though the
most interesting proxy question was filed by Jones
personally. It challenges another big perk for top Verizon
executives: performance-based stock awards. Top managers
get some or all of their award, based on how Verizon
performs compared with the other stocks in the Standard &
Poor's 500 index.
The retirees' position: The bar is set pathetically low.
They say executives get more than 76 percent of their award
if Verizon performs slightly below average, or worse than 54
percent of the S&P 500 stocks. The executives get 34
percent of their shares if Verizon stock finishes way in the
back of the pack, worse than 79.9 percent of those stocks,
''What's that about?" asks Jones, who retired in 1990. ''As
a manager, I had incentive compensation, and if I was below
the top 10 percent in my peer group, I got nothing."
Verizon urges shareholders to vote against the Jones
proposal in its proxy. It says the stock awards ''are in
fact performance-based with challenging performance
metrics." The votes will be counted May 4.
Retirees on fixed incomes have good reasons to question the
kind of pay lavished on executives at big public companies.
Shareholders should be happy to have them around.
Steven Syre is a Globe
columnist. He can be reached at