Retiree Shareholders Seek to Cut Back Verizon’s Golden Parachutes and “Above Market” Payouts
COLD SPRING HARBOR, N.Y., March 26, 2019 (GLOBE NEWSWIRE) -- Verizon (NYSE: VZ) retiree shareholders are seeking to hold top executives more accountable with two proxy proposals this year asking to prohibit “above-market earnings” for senior executive retirement savings (“SERPs”), and seeking shareholder approval of “Golden Parachute” payouts exceeding three times salary and bonus. The 2019 Verizon Shareholders meeting is May 2nd in Orlando.
Proposals introduced by the 134,000-member Association of BellTel Retirees, Inc. (www.BellTelRetirees.Org) or its leaders have led to major reforms in Verizon’s governance and compensation practices multiple times over the past two decades.
The SERP, or “Above-Market Returns on Nonqualified Executive Savings Plans” proposal (#4), seeks to prohibit paying above-market earnings on non-tax-qualified retirement savings or deferred income account balances of senior executives in the company’s Senior Executive Retirement Plan, or “SERP.”
The Golden Parachute proposal, “Shareholder Ratification of Executive Severance Packages” (#8), introduced by BellTel chairman Jack Cohen, would require shareowner approval of senior executive officers’ compensation packages that provide “Golden Parachute” severance or termination payments more than 2.99 times base salary, plus target short-term bonus.
It seeks to amend current policy by counting unvested equity awards in deciding that a payout could trigger a vote. These stock awards can be significantly greater than an executive’s base pay and annual bonus.
Verizon’s 2019 Proxy estimates that former CEO Lowell McAdam will receive $27 million in separation payments due to retirement, nearly five times his 2019 base salary plus short-term bonus. These payments represent the estimated value of performance-based equity grants that cover periods ending December 31, 2020 – two years after his departure. McAdam would have been eligible for this payout for any termination without cause, including after a change in control.
“There is a historic and massive disparity between upper management and rank-and-file employees when it comes to compensation and benefits,” said BellTel Retiree chairman Jack Cohen, a 26-year company veteran. “Executive pay should be based on company performance. Serious pay inequities raise questions as to whether the link between pay and performance has been broken. What’s good for a few executives, personally, may not be in the corporation’s best interest or the interest of shareholders.”
Existing gross disparities between retirement benefits for senior executives and most other employees risk morale problems and damage long-term stock value.
Last year, proxy advisory firm Institutional Shareholder Services (ISS) recommended shareholders vote for the SERP proposal, explaining that above-market earnings are “not common market practice” with “no basis in executive performance.”
While many companies have upper management SERPs that can be more generous than the retirement plans offered to regular employees, Verizon additionally offers top executives an investment option that is not performance-based but pays out above-market earnings on the sum invested.