Verizon Tossing Out Pension Income in Exec Compensation

February 21, 2003 ( - Verizon Communications' senior executives will no longer have pension income influencing their incentive compensation.

Verizon has adopted a restructured executive compensation package in response to shareholder pressure. The latest move comes after a proposal by a group representing retired employees was defeated in a proxy vote last year (See  Shareholders Hit Verizon, Raytheon Exec Comp Rules) , according to Dow Jones. A number of large companies includnig IBM and QWest Communications International also face similar shareholder proposals.

“Verizon has decided at the beginning of this year to exclude the impact of pensions and post-retirement benefits from our operating results for incentive compensation purposes,” Verizon spokesman Bob Varettoni told Dow Jones.The adjustments will be detailed in Verizon’s March 14 proxy filing.

“GE”nerating Change

The situation is very similar to another large company that will also be disregarding pension income in executive compensation: General Electric (See  GE Reworks Executive Compensation Structure ). Like GE, Verizon previously h ad calculated compensation for its top executives’ based on a number of factors including pension income.

The problem as various shareholder advocacy groups have pointed out is pension income is not actual income on the pension investments.  This figure instead is generated by accounting rules that let companies count as income the amount by which estimated investment returns on pension assets exceed a pension plan’s current costs.