The proposal, passed by 59% of Verizon’s shareholders, advises the telecommunications company to seek shareholder approval in the future for severance packages to top executives when the value of those packages exceeds their salary plus bonus totals by 2.99 times, according to a Boston Globe report.
Under the current severance policy at Verizon, if chief executive Ivan Seidenberg is forced out, he will receive three years’ total compensation: $28.5 million by 2002’s benchmark. While nonbinding, Verizon’s severance resolution prompted its board to agree to ”look at it seriously” at its next regular meeting this summer, spokeswoman Sharon Cohen told the Globe.
However, shareholders did not approve another resolution seeking to cap Seidenberg’s pay, after research firm Institutional Shareholder Services (ISS) recommended against it, saying Verizon’s board ”should have the flexibility to determine the CEO’s pay.” ISS had suggested voting in favor of the severance resolution.
While former employees initiated the resolution, it was pension funds, mutual funds and institutional investors, who control 52% of Verizon’s stock, that passed the resolution. One of the major players was the $130-billion California Public Employees’ Retirement System (CalPERS). CalPERS was spurred by current board member and current state Treasurer Phil Angelides’ calls for active ownership: “We, as investors, are the owners of these companies. We have the rights to run dissident board members, replace corrupt board members…But, to make those rights real, you have to be prepared to do the real work of democracy” (See A Call To Action ).
This is not the first step that Verizon has taken in the current proxy season to curb executive compensation. In February, the company announced pension income would no longer influence incentive compensation. (See Verizon Tossing Out Pension Income in Exec Compensation). Therestructured executive compensation package was adopted in response to shareholder pressure and came less than a year after a similar proposal was defeated in a 2002 proxy vote (See Shareholders Hit Verizon, Raytheon Exec Comp Rules ).