Verizon Communications (VZ)

BOARD OF DIRECTORS’ POSITION

The Human Resources Committee of the Board of Directors is committed to performance-based compensation programs that attract and retain executives and also serve the best interests of Verizon’s shareholders. The Committee believes that the benefits Verizon provides upon the death of an executive are reasonable within the overall structure of the Company’s compensation programs and are competitive with those that are offered by its peer companies.

The Board disagrees with the proponents’ assertion that Verizon’s compensation programs “saddle shareholders with payments made without receiving any services in return.” Under the terms of Verizon’s long-term incentive awards, if an employee dies while still employed at Verizon, the awards remain outstanding. This applies equally to all Verizon employees who participate in the long-term incentive plan and is not only available to senior executives. These terms are designed to recognize the contributions that the employee made toward achieving Verizon’s performance goals prior to his or her death. It is important to note that the award payments are not a windfall – they are not accelerated or increased when an employee dies. An award is payable on the regularly scheduled date and is only paid if and to the extent that the applicable performance criteria are satisfied.

In addition, the Verizon executive life insurance plan provides a valuable recruiting and retention tool and is a component of Verizon’s overall compensation program. The total costs of the plan associated with the company-subsidized premiums make up a very small percentage of an executive’s overall compensation package and the death benefit is ultimately paid by the insurance company, not by Verizon. The Committee has determined that the value of the plan far outweighs the relatively small cost to the Company.

The Board believes that the Committee should continue to retain the flexibility to provide and administer competitive compensation programs and that the proposed policy would be unduly restrictive.

BOARD OF DIRECTORS’ POSITION

The Board of Directors already has in place a governance structure which permits it to consider and select as its Chairperson the Director who is best qualified to lead the Board. In making its decision, the Board considers the current needs and composition of the Board, the skills and experience required in an effective Chairperson and other relevant factors. The Board’s governance structure provides for an independent and empowered Presiding Director, who is elected annually by the independent directors and who works closely with the Chairperson. The Presiding Director has the authority to approve Board schedules, agendas and materials. The Presiding Director also has the right to call an executive session of the Board.

Verizon’s Corporate Governance Guidelines also ensure that the other independent members of the Board of Directors are involved in key aspects of governance. For example, all meeting schedules and agendas are provided in advance to the Directors so that they have the opportunity for review and input into the final schedule and agenda. In addition, all Directors have access to the Company’s management and any Director may request that the Presiding Director call an executive session of the Board.

The independent Directors have determined that, at the present time, the Chief Executive Officer is the Director best qualified to serve as Chairperson of the Board. The Board believes that shareholders are best served by allowing it to determine who is best qualified to lead the Board and by not limiting its discretion to select the best candidate.