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Forum Report: Results of March 27, 2008 Open Meeting

(April 2, 2008)

Agenda and Reference Material

Panel Members




Forum Report


Results of March 27, 2008 Open Meeting

            The conclusion of participants in the Verizon Forum’s open meeting on March 27, 2008 was that the company’s SEC filings, while  generally meeting high standards for public company reporting, did not provide the kind of information needed to understand either the financial commitment or incentives of management to make a success of Verizon’s $20+ billion investment in its fiber optics (“FiOS”) strategy,[1] and that the Forum should therefore develop a request for the company’s provision of information that would allow the desired analysis.

            The meeting began with explanations by panel members Rick Klugman and Barry Sine of analyst views regarding Verizon’s FiOS strategy and its relevance to investment valuation.  Rick Smith followed with a review of what could be found in the company’s reports about compensation of the top executives, and where it could be found, and provided context in relation to general corporate practice.  Bill Jones then explained how the information applied to Verizon’s actual management practices, including implications to divisional operations and multiple layers of management responsibility.

            Much of the meeting discussion focused on a reported allocation of incentive compensation that was based specifically on “FiOS net customer additions.”  (See page 24 of Verizon’s proxy statement.)  As shown in charts presented at the meeting, however, the amount of the specified FiOS allocation was insignificant relative to the mix of elements in the program for top executives, calculated to be only 0.1260% of their potential total compensation.[2]  It was also determined that the success of FiOS might actually have a much greater indirect effect on compensation, either positively or negatively, through its influence of other performance metrics such as revenue or income that are given much more significant weightings. Information needed to understand these indirect effects could not be found in the company’s reports.

            At the end of the meeting, it was agreed that panel members would participate in a Forum “workshop” process to prepare an information request for the Forum’s submission to Verizon, with the understanding that the company’s management would be encouraged to suggest practical responses consistent with competitive sensitivity and administrative convenience.  Meeting attendees as well as other Forum participants are invited to offer further suggestions of information needs for workshop consideration during the next week.

            GL – April 2, 2008


Gary Lutin

Lutin & Company

575 Madison Avenue, 10th Floor

New York, New York 10022

Tel: 212-605-0335





Panel Members:

C. William Jones, President of the Association of BellTel Retirees, is familiar with Verizon strategies and management practices as a retiree who had served the company for 30 years, starting as a trainee in its NYNEX predecessor’s commercial department and progressing to corporate executive positions, and as a founder and current president of the 110,000 member association for former employees of all the companies that are now part of Verizon.[3]  He had been a member of the recent Forum program’s Advisory Panel which defined principles of shared management and investor interests concerning compensation policies that are a foundation for the Verizon Forum.

Richard Klugman, CFA and NYSSA member, has been a senior telecom analyst for 15 years at Prudential, Jefferies, Donaldson Lufkin & Jenrette, Goldman Sachs, PaineWebber and Merrill Lynch, with high rankings by Institutional Investor, Greenwich Associates, Reuters and other surveys.  In relation to Verizon, he has previously expressed skeptical views of its investment in the FiOS strategy.

Barry M. Sine, CFA, CMT and NYSSA member, has been a senior telecom analyst for 16 years at Oppenheimer, Kaufman Bros. and Swiss Bank Corporation, with high rankings including Wall Street Journal first place in 2007 for fixed line telecom.  In relation to Verizon, he has previously expressed positive views of its investment in the FiOS strategy.

Richard V. Smith, Senior Vice President and Executive Compensation Practice Leader of Sibson Consulting, has been an executive compensation consultant for 23 years at Sibson, KPMG, The Hay Group, and Mercer, and is recognized as a leading authority on the development of reward strategies to relate annual and long-term incentives to a company’s strategic objectives.  He has not previously commented on Verizon’s practices, and his firm does not provide compensation consulting services to Verizon.






[1] Most of the information about executive compensation was presented in Verizon’s proxy statement on Form DEF 14A, filed March 17, 2008, section titled “Executive Compensation” on pages 18-42.

[2] The weighting of “FiOS net customer additions” is 5% of performance measures for the Verizon Wireline business segment, which is in turn weighted at 28% of the “Business Segment Performance Measures,” which are weighted at 45% of the “Annual cash incentive opportunity,” which is given a relative weight at 20% of the top executives’ compensation program. (See pages 19 and 24 of Verizon’s proxy statement.)

[3] As indicated in the inset at the bottom of this page, the Association supported the organization of the Verizon Forum program.







This Forum program is open, free of charge, to all Verizon Communications, Inc. ("VZ") shareholders and to any fiduciaries or professionals concerned with their investment decisions.  Its purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their evaluations of alternatives, addressing issues described in the Forum Summary.

As stated in the posted Conditions of Participation, all Forum participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The Verizon Forum program has been organized with the support of the Association of BellTel Retirees Inc., believed to be the world’s largest such organization with over 110,000 members who are retired employees of Verizon and its predecessor companies.

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