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Wall Street Journal, April 6, 2007 article

 

The Wall Street Journal  

April 6, 2007

 
 

Labor Fights Verizon Board
Over CEO's Compensation

By SIOBHAN HUGHES and KAJA WHITEHOUSE
April 6, 2007
 

Hoping to repeat what it sees as successes at Home Depot Inc. and Pfizer Inc., the nation's largest labor-union group has begun a campaign to oust the Verizon Communications Inc. board members who oversaw what the union says is $110 million in pay for Chief Executive Ivan Seidenberg over a five-year period in which company shares have sagged.

"I defy anybody to say this guy's earned the money," AFL-CIO Secretary-Treasurer Richard Trumka said at a meeting to outline a plan to vote against Verizon's compensation committee. He called Verizon "the poster child for pay for pulse."

[Ivan Seidenberg]

The organization, whose 54 labor-union affiliates hold $400 billion in assets through pension plans, said it plans to meet with Glass, Lewis & Co. and Institutional Shareholder Services. 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 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 the union's "arguments are unfounded."

Another Verizon spokesman, Robert Varettoni, says, "The money that Mr. Seidenberg actually received over this five-year period was less than half the amount that the AFL-CIO cites." He said not all of the stock and options awards granted during the period have vested.

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.

The unions are holding up Home Depot and Pfizer as examples of shareholders' power. In January, Home Depot ousted its CEO, Robert Nardelli, after holders withheld votes of more than 30% from some directors over pay-for-performance concerns. Pfizer's former chairman, Henry McKinnell, was forced out last year following a similar vote-no campaign, sparked by anger over Pfizer's poor share price and $83 million in estimated retirement benefits for Mr. McKinnell.

Verizon says that there's a distinction between the telecommunications titan and Pfizer and Home Depot, whose executives were criticized partly over big severance packages. "Our CEO works without a severance agreement," said Mr. Thonis.

Write to Siobhan Hughes at siobhan.hughes@dowjones.com1 and Kaja Whitehouse at kaja.whitehouse@dowjones.com2

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