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Following the lead of Aflac, Verizon is the second company to let investors approve executive-pay packages.
Stephen Taub, CFO.com | US
November 2, 2007
On Thursday Verizon Communications became the second company to announce a policy that gives shareholders a nonbinding, advisory vote on executive compensation, a measure widely called Say on Pay.
The first to do so, last February, was insurance company Aflac. Both companies will begin the new policy in 2009.
Verizon notes that the decision, which allows shareholders to give a thumbs-up or -down on overall pay packages for top executives, came in response to a shareholder resolution calling for the new authority. And since the announcement came so early in the preproxy season, it could inspire other companies to follow Verizon's lead.
Congress authorized Say on Pay policies earlier this year. Dozens of companies already have held shareholder votes, but typically only about 40 percent have supported the measure. Verizon's passed by a thin margin, winning 50.18 percent of the votes.
Meanwhile, Verizon also amended its executive-severance policy to define more specifically the types of payments included in the calculation of severance payments. "The board believes that these actions further strengthen Verizon's corporate-governance practices," says Sandra Moose, presiding director of the company's board of directors. "We believe that it is important to engage in an ongoing dialogue with shareholders and others."
Since 2004 Verizon has had a policy in place requiring shareholder approval of any new agreement with a senior executive officer that provides for a total cash-severance payment exceeding 2.99 times the sum of the executive's base salary plus bonus.
In November 2006, the board adopted a majority voting standard for the election of directors.