TheCorporateCounsel.net Blog

The Practical Corporate & Securities Law Blog

Broc Romanek and Dave Lynn are Editors of TheCorporateCounsel.net

Verizon's Say on Pay: A Take-Away

Feeling the heat of a majority vote on a "say-on-pay" proposal, Verizon Communications became the second company to adopt a policy to put its compensation plans to an annual vote by shareholders in 2009. AFLAC became the first company to adopt such a policy earlier this year. Notably Verizon's “say-on-pay” proposal barely received majority support with 50.18% votes cast supporting it. RiskMetrics reports that a majority vote has been achieved at 7 companies so far this year for "say-on-pay" proposals (e.g. 69% at Activision).

So why is Verizon the first of these 7 companies to adopt a "say-on-pay" policy? I have no inside scoop, but one reason might be that they want to abide by the will of the majority, even if it's barely a majority. Another reason might be that the company's executive pay practices have been widely criticized - and publicly so, ranging from being on The Corporate Library's short "pay-for-failure" list to this Union press release (also see this letter from a group of institutional investors).

And of course, you shouldn't forget the novel Electronic Shareholder Forum that I blogged about a few months ago. The Forum’s Verizon program was organized with the support of the Association of BellTel Retirees, the source of the Verizon shareholder proposal - and clearly, this Forum had some role in obtaining the majority vote given how close the vote was. Gary Lutin, who is responsible for conducting the Forum (with rigorous standards of independence), speculates that the higher vote may have been attributable to the broader range of investors involved in an open program - that had previously established principles based on shared management and shareholder interests - rather than the confrontational approach of the “say on pay” campaigns currently being waged by others.

So the lesson learned is that companies are really gonna need to learn to leverage - and monitor - the Web better, which ties into the subject of our upcoming November 15th webcast, "Annual Reports: How to Create Them for an Online World."

[By the way, Verizon also approved a revised policy that more specifically defines the types of payments that will be included in the calculation of a severance payment - and adopted a policy that addresses the independence of its compensation consultant.]

***

- Broc Romanek

Posted by broc at 06:14 AM
Permalink: Verizon's Say on Pay: A Take-Away

This Forum program is open, free of charge, to all shareholders of the invited corporate participants, and to any fiduciaries or professionals concerned with the investment decisions of those shareholders, according to the posted Conditions of Participation.  The Forum's purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their investment interests described in the Forum Summary.  As stated in the Conditions, all Forum participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program has been organized with the support of Hermes Equity Ownership Services, Ltd.  It is the first in an expected series that will be managed by a not-for-profit “Institute” to be established for the purpose of continuing the Forum programs conducted by Gary Lutin.