Verizon’s activist retirees have launched two proxy proposals on this year’s ballot for the annual shareholders' meeting in an effort to keep the telco’s executive management team more accountable.
One of the proposals calls to claw back earnings from executives whose conduct harms shareholders, while another prohibits above-market earnings for senior executives on certain retirement and deferred income accounts.
Verizon’s 2018 shareholders meeting will take place on May 3 in Seattle.
The Clawback Proposal, which was introduced by BellTel chairman Jack Cohen, focuses on conduct by an executive harmful to the company, including failure to prevent corporate reputational damage. The proposal seeks to hold company leaders accountable by clawing back compensation if they violate laws, regulations or company policy that results in financial penalties ultimately paid by shareholders.
According to the Association of BellTel Retirees, Verizon ties a large majority of senior executive compensation to financial performance, making it necessary to disincentivize harmful actions that favor short-term gain at the expense of reputation or long-term interests.
The second proposal addresses serious concerns about the Verizon board paying above-market earnings on the multimillion-dollar balances in nonqualified senior executive retirement accounts (SERPs). Above-market earnings are not performance-based and fail to align management incentives with long-term shareholder interests.
“We can’t allow special deals and sweetheart packages for executives that run counter to the interests of the corporation as a whole,” said Cohen, who spent his 26-year career with the company and its predecessors, in a release. “We need to ensure that decisions made at Verizon are in the best interest of the company, including all shareholders, retirees, and employees.”
In 2017, Verizon’s practice of granting above-market earnings was flagged by Institutional Investor Services (IIS). The organization said that “this non-performance-based benefit creates additional costs to shareholders.”
Additionally, IIS noted that payment of “above market or preferential earnings to executives … increases the ultimate expense of the plan to shareholders and is not considered a best practice.”
Verizon paid CEO Lowell McAdam $17.4 million in 2016. Besides his regular compensation, Verizon granted him $100,855 in “above market earnings” on his nonqualified plan assets, which totaled just under $12 million at year-end. These above-market earnings came on top of $424,000 in company matching contributions to his Deferral Plan account and $21,200 to his Management Savings Plan account.
The Association of BellTel Retirees has continued to find success in driving Verizon to improve its corporate policies. Since 1998, the association helped drive 11 changes, which included three by majority shareholder vote and eight negotiated off the ballot.
In 2015, BellTell asked Verizon to get shareholder approval for any new or renewed "golden parachute" severance payments for executive officers exceeding three times the sum of the executive's base salary plus target short-term bonus.