The Association of U S West Retirees



Retirees on the watch
By Steven Syre, Columnist
Boston Globe
Thursday, April 6, 2006

Which investor gives giant Verizon Communications Inc. the toughest time when it comes to executive pay and corporate governance?

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 management.

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 Verizon's managers.

''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 coincidence.

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, they say.

''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