Verizon Retirees Almost Force a Change in Pay


By: Shawn Young
 The Wall Street Journal, April 28, 2002



Retired Verizon Communications Inc. workers came unusually close this week to forcing the regional Bell phone giant to stop including income generated by its pension plan in its formula for setting executive pay.

The same issue has been raised at several large companies this year, including General Electric Corp. and International Business Machines Corp, as scandals like the one at Enron Corp. put the spotlight on workers who lost their retirement savings while executives profited.

Despite management opposition, an item proposed by the Association of BellTel Retirees Inc. won 43% of the vote at Verizon's annual meeting in Minneapolis, up from 19% the year before. Both the company and the 71,000-member group's president attributed the jump to the support of Institutional Shareholder Services, an influential proxy adviser among institutional investors.

Many companies, including the regional Bells, have significant pension plans that contribute substantially to their net income. A Credit Suisse First Boston study in 2001 said 30% of the companies in the Standard & Poor's 500-stock index reported pension income that added an average of 12% to pretax earnings.

In February, McDermott International Inc., an energy company based in New Orleans, set a precedent when it excluded pension gains from its executive compensation formula in response to a shareholder proposal from Amalgamated Bank of New York.

Verizon retirees object to pension gains being part of the calculation for tallying bonuses and incentive pay because they don't reflect management's skill or operating performance and can, in fact, compensate for operating losses. Verizon would have posted a loss in 2001 if it hadn't been for $1.8 billion in pension income, according to the Institutional Shareholder Services analysis. Verizon spokesman Peter Thonis said that 2001 results included substantial noncash charges that also weren't related to operating performance.

Despite the increased show of support from shareholders, Verizon has "no plans to change our policy at the present time," Mr. Thonis said.

Including pension gains in executive compensation formulas "does provide a disincentive for the executives to give pension increases to the retirees," said Bill Jones, president of BellTel Retirees. The less a company spends on workers' benefits, the more the pension fund adds to the bottom line.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Action on Aging distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.