"I defy anybody to say this guy's earned the money,"
AFL-CIO Secretary-Treasurer Richard Trumka told reporters on Thursday at
a meeting to outline a plan to vote against Verizon's compensation
committee. He called Verizon "the poster child for pay for pulse."
The organization, whose 54 labor-union affiliates hold
$400 billion in assets through pension plans, said that it plans to meet
with Glass Lewis & Co. and Institutional Shareholder Services, which
advise investors on voting in corporate elections. It has held talks
with the office of the New York State Comptroller and two of the
nation's largest public pension funds -- California Public Employees'
Retirement System and California State Teachers' Retirement System,
among others, and plans to meet with mutual funds that hold shares of
Verizon to win their support.
Verizon is already fighting back ahead of what may be a
showdown at its annual meeting, set for May 3 in Pittsburgh. Saying that
total shareholder return -- which combines dividends and stock-price
gains -- was 35% last year, Verizon spokesman Peter Thonis says that the
union's "arguments are unfounded." He notes that executive pay at
Verizon is "at risk" because it's largely tied to the company's stock.
Since so much of it is stock-based, "estimates by others of compensation
received typically turns out to be wrong."
Mr. Seidenberg earned more than $21.3 million last
year, including stock-based awards valued at $13.1 million, according to
a proxy filing. In 2005, his total pay increased more than 9%, despite a
21.7% decline in one-year total returns, according to a report from ISS.
Glass Lewis gave Verizon a "C" grade on pay for performance last year,
saying the company paid more than its peers in 2005, but also performed
about the same as its peers.
The unions are holding up Home Depot and Pfizer as
examples of shareholders' power to effect change. In January, Home Depot
ousted its chief executive, Robert Nardelli, after shareholders withheld
votes of more than 30% from some directors over pay for performance
concerns. Pfizer's former chairman, Hank McKinnell, was forced out last
year following a similar vote-no campaign, sparked by anger over the
company's poor share price and $83 million in estimated retirement
benefits for McKinnell.
"We singled out Home Depot and Pfizer last year and
those CEOs are no longer there," notes Daniel Pedrotty, the director of
the AFL-CIO's office of investment. He says that Verizon is "going to be
the poster child this year of shareholders raising their voice and
demanding board accountability."
The AFL-CIO's Mr. Trumka estimates that "we have a
shot" at getting a majority of investors to vote against Verizon's
compensation-committee directors, whose responsibilities involved making
recommendations about Mr. Seidenberg's pay. "If not this year, next
year, and if not then, we'll continue at it until they change their
ways, because they are not doing their job."
One frustration for investors involves the company's
former compensation consultant, Hewitt Associates Inc., which
also provides employee benefits and actuarial services to Verizon. The
AFL-CIO is also pushing shareholders to support a proposal that would
ask Verizon to inform shareholders if the board's compensation
consultant has been hired to do other work for the company. Critics say
that the dual roles conflict with a consultant's ability to offer
objective pay advice.
"There were all these conflicts with their compensation
consultant," says Pedrotty. "They were doing a significant amount of
business for the company itself, and that in our opinion really
undermined their recommendations to the board about what the CEO should
be paid."
Verizon changed compensation consultants last fall. The
new advisor, Pearl Meyer & Partners, currently provides no other
consulting services for Verizon, company officials have said.
Hewitt spokeswoman Suzanne Zagata-Meraz said in an
email that while the company doesn't comment on its clients, it has
"strict policies to ensure the independence and objectivity of all our
consultants, including executive compensation consultants."
AFL-CIO is also supporting two other proposals that
seek to alter Verizon's compensation practices, including one that would
give shareholders an advisory vote on executive pay.
The effort to unseat compensation committee members
comes amid sometimes tense relations between Verizon and its workers, of
whom 65,000 are represented by the labor union Communications Workers of
America. The AFL-CIO says that it isn't trying to use the director
election to make a larger point about Verizon's relationship with its
unionized workers.
"Clearly his lack of skill in labor relations is one of
the reasons why the company isn't doing well, but that's not the
triggering thing for him being the poster boy," Mr. Trumka said. "The
triggering thing for him being the poster boy is he took out $110
million dollars over five years and he cost everybody else minus 5%."
Write to Siobhan Hughes at
siobhan.hughes@dowjones.com1 and Kaja Whitehouse at
kaja.whitehouse@dowjones.com2
![[Ivan Seidenberg]](HC-GG887_Seiden_20070322131235.gif)