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Verizon Shareholders Vote for ‘Say on Pay.’ Will Management Listen? |
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Tuesday, 22 May 2007 |
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For the first time, a “say on pay” proposal won majority support at a publicly owned U.S. company. A recount showed 50.18 percent of Verizon shareholders voted for a proposal to require Verizon to submit future executive compensation packages to a non-binding shareholder vote. Verizon’s top management opposed the move. Verizon CEO Ivan Seidenberg has raked in more than $109 million in the past five years, despite a total shareholder return of negative 5 percent.
As AFL-CIO Secretary-Treasurer Richard Trumka says:
The record vote by Verizon shareholders reflects the growing dissatisfaction by shareholders over unregulated and excessive CEO compensation. The question remains: Will Verizon listen, respond and reach out to investors, or will it continue the status quo despite the record shareholder vote demanding change?
(To read the full AFL-CIO statement, click here.)
The recount by independent election officials was necessary because the vote was too close to call at the company’s annual meeting in Pittsburgh on May 3. A shareholder voice in the executive compensation process will encourage boards of directors to consider shareholder interests before approving questionable compensation plans.
A CEO of a Standard & Poor’s 500 company on average made $14.78 million in total compensation in 2006, according to a preliminary analysis by The Corporate Library. The AFL-CIO Executive PayWatch website points out that problems with executive compensation came to a head in 2006 with large severance packages given to departing CEOs who performed poorly. Other CEOs left in connection with stock options backdating scandals at their companies.
The “say on pay” resolution, submitted by C. William Jones, president of the Association of BellTel Retirees, was one of three shareholder resolutions designed to hold Verizon executives accountable. Other resolutions by the AFL-CIO Reserve Fund on “Golden Parachutes” and the Communications Workers of America Members’ Relief Fund on “Compensation Consultants” also received very strong support from shareholders.
In April, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, introduced the Shareholder Vote on Executive Compensation Act (H.R. 1257). The bill would require public companies to submit executive pay plans to a nonbinding shareholder vote, giving shareholders a “say on pay.”
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