Shareholders Hit Verizon, Raytheon Exec Comp Rules

April 25, 2002 ( - Shareholders at two prominent US companies have turned away efforts to keep pension gains from further boosting executive pay and bonuses, but the fight at one firm appears to be getting much closer to its goal.

According to a Dow Jones news report, supporters of the executive compensation initiative at Verizon Communications walked away with 42.7% of the vote – up sharply from the 18.7% of supporting votes they won last year. The BellTel Retirees’ Associates, an activist retiree group, sponsored the proposal

Meanwhile, retirees at the Lexington, Massachusetts-based Raytheon Co. also lost their bid to calculate executive compensation without pension income – in Raytheon’s case, the formula for awarding stock options.

According to the Boston Globe, a few dozen Raytheon retirees demonstrated at the defense contractor’s Wednesday’s annual meeting. The Raytheon retirees haven’t received a pension increase since 1993, the Globe said.

Verizon’s Pension Fund Posted a Gain

Currently, pension fund gains are included in Verizon’s annual income and are among several factors used to determine executive compensation.

Although Verizon’s pension fund actually lost money last year, the fund posted a gain in keeping with the accounting rules that made Verizon profitable for the year, Dow Jones said.

The retirees argued that pension income should be separated from income generated by the company’s operating performance. Once separated, the retirees argued, it should be kept out of financial metrics used to figure out how much top executives get.

In its proxy statement, Verizon countered that the proposal would arbitrarily limit the discretion of the board, and the proposal is “contrary to generally established compensation practices.”

That the proposal was defeated this week “shows that most shareholders want to evaluate executive performance using the same measures that Wall Street uses,” Verizon spokesman Peter Thonis told Dow Jones.

However, C. William Jones, president of the retirees’ association, was optimistic that most shareholders will vote with his association next year. “That was a tremendous increase,” he said. “We’re looking forward to winning it next year. I think we’re getting close.”

Raytheon Pension Overfunded

Meanwhile, in the Raytheon controversy, protestors contended that the company had used pension plan gains to fund a new generous executive pension as well as stock option payouts for executives. The Raytheon plan was overfunded for much of the 1990s, according to the Globe.

“We’re all hurting … while they’re taking care of themselves,” retiree Charles Eliot, said at the shareholders meeting, according to the Globe.

Raytheon, which says it has 42,000 retirees, reiterated that the requested retiree pension increases would cost too much, about $50 million a year. Raytheon chief executive Daniel Burnham  noted the company had no obligation to increase pension payments and said competitors haven’t done so for their own retirees.