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VZ » Topics » Developments in Compensation Policy

This excerpt taken from the VZ DEF 14A filed Mar 17, 2008.

Developments in Compensation Policy

The Committee regularly monitors emerging trends and best practices in executive compensation and evaluates whether they are appropriate and relevant for Verizon. In recent years, the Committee has eliminated:

 

  · An employment agreement for the CEO. Mr. Seidenberg does not have an employment, severance or change-in-control agreement;
  · Tax-qualified and supplemental defined benefit retirement plan benefits; and
  · Executive perquisite allowances.

 

During 2007 the Committee asked management to discuss Verizon's executive compensation programs and certain potential program design changes with large institutional investors. After taking into account these

 

1 Total shareholder return, which is referred to as TSR, is defined as the change in Verizon’s stock price plus the value of dividends reinvested in Verizon's stock over the three-year performance period.

 

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discussions, the opinions of shareholders as reflected in the votes on compensation-related proposals presented at the 2007 annual meeting and developments in executive compensation, the following changes were made:

 

  · Upon the Committee’s recommendation and to further strengthen Verizon’s corporate governance practices, the Board amended the Company’s Corporate Governance Guidelines to initiate an annual shareholders’ advisory vote regarding executive compensation, beginning at the 2009 annual meeting.
  · The Committee revised its existing policy requiring shareholder approval of certain executive severance arrangements, to better define the elements of severance pay.
  · The Committee adopted a formal policy confirming that the Consultant is not permitted to perform any work for the Company, to ensure the continued independence of the Consultant.
  · The Committee adopted a policy that enables the Company to recapture incentive payments received by an executive who has engaged in financial misconduct, to ensure that executives do not benefit from engaging in such misconduct.

 

Recognizing the dual objectives of improving the clarity of the Company's compensation program and more closely linking total compensation and shareholder value, the Committee has also made the following changes:

 

  · Annual Incentive Award Targets.  To make the plan easier to understand, beginning in 2007, annual incentive award levels are expressed at threshold, target and maximum dollar values. If the performance measures are achieved at 100%, the target award is earned.
  · Single Peer Group.  In order to simplify the pay-for-performance comparison group, the Committee decided that it will use a single peer group for benchmarking both compensation opportunities and long-term stock performance beginning in 2008 (see discussion of Related Dow Peer Group on page 22). In 2007 and prior years, the Committee looked at data from two peer groups (see discussion of Market and Industry Peer Groups on page 21) to benchmark compensation opportunities. The Committee determined long-term incentive award payments based on Verizon’s TSR, compared to the Standard and Poor's 500 Index, referred to as the S&P 500 Index, and the Industry Peer Group.
  · Total Compensation.  Instead of benchmarking each element of compensation separately against two peer groups, beginning in 2008 the Committee will evaluate total compensation opportunities as compared to a single peer group. In addition, the Committee will target total compensation opportunities for 2008 to fall within the 60th to 65th percentile in the single peer group described below. As a result of this change, shareholders will be able to more easily compare Verizon’s compensation program to that of companies of similar size and business complexity. Focusing on total compensation provides a framework that allows the Committee to vary individual pay elements for executives in a manner that addresses retention needs and individual experience.
  · Stock Ownership Guidelines.  To further emphasize the importance of executive share ownership, the Committee revised Verizon’s stock ownership guidelines. Beginning in 2008, all previously granted and future long-term incentive awards that are linked to stock value but payable in cash will no longer count towards meeting the stock ownership guidelines (see discussion of Stock Ownership Guidelines on page 29).

 

Since these changes will be fully implemented for 2008 and discussed in next year’s proxy statement, the Committee determined that it would be appropriate to hold Verizon’s first shareholders’ advisory vote regarding executive compensation at the 2009 annual meeting.

 

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