Verizon to Give Shareholders Say on Pay

Verizon’s board of directors yesterday adopted a policy that will give the company’s shareholders an annual non-binding vote on top executives’ pay packages, making it the second U.S. public company to institute the so-called “say on pay” vote.

The New York-based company said the first advisory vote will be held at Verizon’s 2009 annual meeting. In February, insurer AFLAC became the first company to adopt such a proposal, though its shareholders must also wait until 2009 to begin voting on executive pay.

The decision by Verizon’s directors, who have been criticized by shareholders over executive pay practices, came after a vote by Verizon shareholders last May in support of a “say on pay” proposal put forward by the Association of BellTel Retirees, a shareholder group. Some 50.18 percent of Verizon shares cast at the annual meeting favored giving investors the right to vote up or down on pay practices each year.

In a statement announcing the change yesterday, Sandra O. Moose, presiding director of the Verizon board, said, “We believe that it is important to engage in an ongoing dialogue with shareholders and others.”

As executive compensation has rocketed in recent years, proposals that would give shareholders the right to vote on pay packages have gained in popularity. During 2007, according to RiskMetrics Group, a majority of shareholders at seven companies has voted in favor of such proposals. In September, for example, 69 percent of shares cast at the annual meeting of Activision, a video game maker in Santa Monica, Calif., supported a say on pay proposal.

Last year, Ivan G. Seidenberg, Verizon’s chief executive, received a pay package worth $20 million, 11 percent more than in 2005, according to Equilar Inc., a compensation research firm in San Mateo, Calif. In earlier years, Seidenberg received sizable pay increases even when the company’s performance was lackluster.

James F. Reda, an independent executive pay consultant in New York City, told The New York Times, that most United States and foreign investors he talks to favor say on pay proposals. “I don’t really see any investors who don’t like them,” he said. “But most directors hate say on pay because it undermines them.”

Such proposals clearly state that investor votes on pay are merely advisory, meaning that the company can ignore the view of shareholders.