By Gretchen Morgenson
An effort by former Verizon Communications Inc. employees to
push for governance changes at the wireless carrier will face
another test this week, highlighting the retirees' reputation as
unlikely corporate activists.
Since 1998, the Association of BellTel Retirees, a group of
former Verizon employees and current shareholders, has used the
proxy voting process to effect 11 major changes in the company's
corporate-governance practices. These have included trimming the
use of so-called golden parachutes for executives, allowing holders
to nominate directors and putting pay practices to an annual
investor vote.
Now, Verizon shareholders will vote at the company's annual
meeting this Thursday on a group proposal that the retirees hope
will persuade Verizon to stop offering executives an investment
option in their company-sponsored savings plans that generates
above-market returns. Verizon doesn't offer this option to
rank-and-file workers.
This is the second year the retirees have asked shareholders to
vote against what it calls Verizon's above-market
retirement-savings plan. At last year's annual meeting, the
proposal won a respectable 28% of the votes cast.
"This is not a vendetta on the part of irate ex-employees," said
the association's chairman, Jack Cohen, 74 years old, who spent 26
years at Verizon. "We try to focus on what is beneficial to all
shareholders. We want the company to succeed."
Bob Varettoni, Verizon's director of corporate communications,
said of the BellTel retirees: "We value their input and appreciate
all that they do just as we value the input of all of our
shareholders."
Proposals aimed at bringing about change in a corporation's
governance practices are generally put forward by activist
investors or big institutional shareholders, such as public pension
funds. It is unusual for former employees of a company to band
together to force such shifts, said Ken Bertsch, executive director
at the Council of Institutional Investors, a nonprofit organization
that focuses on corporate governance and shareholder rights.
The practice of providing executives above-market earnings on
investment options is uncommon, according to Institutional
Shareholder Services, a proxy-advisory service. At Verizon, it
added $73,949 to the $13 million value of Chief Executive Lowell
McAdam's retirement-plan assets in 2017, the association said. The
company's proxy reported no above-market earnings for executives in
2018. Mr. McAdam retired from Verizon at the end of last year.
Verizon has urged shareholders to vote against the retirees'
proposal on above-market earnings, regulatory filings show. The
company says it is inaccurate to characterize the investing option
available to executives as "above-market" because it tracks the
long-term, high-grade corporate bond yield average. It also says
the investing option doesn't increase the cost of executives'
retirement plans.
The idea for the association grew out of Verizon's refusal to
increase pension payouts to retirees in the mid-1990s, said Robert
Rehm, a co-founder along with three other retirees. They formed a
corporation, wrote bylaws and received a nonprofit designation.
"We each threw in $350 of our own money," said Mr. Rehm, 78. "We
started going around to luncheons we knew people were having and
within about six to eight months we had 1,500 retiree names and
addresses. By the end of the second year we had 10,000."
The retiree association's more than 134,000 members are split
evenly between former high-ranking executives and lower-level union
workers; the group is overseen by a 10-person volunteer board that
keeps members up-to-date with quarterly newsletters.
The former union and management employees might have been
adversaries during their work years, but in retirement they "are
all rowing in the same direction," Mr. Cohen said. "We're a very
cohesive group, which was totally out of character when we were
active employees."
In the early days, Verizon executives ignored the association's
inquiries, Mr. Rehm said. Now, company officials respond quickly to
the association's representatives, he said, and meet with them each
fall to discuss issues.
The association's first big win came in 2003 when a proposal to
limit golden parachutes -- payouts for departing executives when
control of a company changes -- passed with 59% support. "This was
the first time in the history of the Bell System that any
shareholder proposal ever won by majority vote," Mr. Rehm said.
Securities and Exchange Commission rules allow any holder of at
least $2,000 worth of a company's stock or 1% of the company for
one year to submit a proposal to be included on its annual proxy
statement and put to a vote of shareholders. The SEC requires
companies to include such proposals on proxies unless it permits
the company to exclude them based on regulations.
Since 2005, Verizon has asked the SEC for permission to exclude
from its proxies 14 of the association's 26 proposals, said Cornish
Hitchcock, a lawyer for the association. The SEC ruled that 10
should be included on the proxies and two excluded. The association
withdrew the other two proposals.
At Verizon's annual meetings, representatives of the retiree
group present its proposals, often with support from outside
shareholders. Verizon agreed to make three of the 11 changes after
a majority of its shareholders favored the association's proposals.
Verizon made the other eight changes suggested by the association
before the proposals went to a shareholder vote.
Among the proposals that won majority support: one in 2007
called for a shareholder vote on pay practices and another in 2013
allowed shareholders to nominate company directors.
"Verizon certainly doesn't love us and they don't agree with us,
even though they've accepted 11 of our governance changes," Mr.
Rehm said. "But we've found they do respect us."
Write to Gretchen Morgenson at gretchen.morgenson@wsj.com
(END) Dow Jones Newswires
April 29, 2019 10:14 ET (14:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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