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VZ » Topics » Payment of 2005 PSU Awards

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

Payment of 2005 PSU Awards

Named Executive Officers and All Other Plan Participants.  Over the three-year performance period ending on December 31, 2007, Verizon’s TSR ranked in the 44th percentile when compared to the S&P 500 companies and in the 46th percentile when compared to the Industry Peers. As a result of this relative performance, the Committee approved in 2008 a payment of 76% of the target number of PSUs awarded for the 2005-2007 performance cycle to all participants, including the named executive officers. Because Verizon’s relative TSR was below the 55th percentile when compared to the Industry Peers and below the 50th percentile when compared to the companies in the S&P 500, participants were paid less than 100% of the target award opportunity.

 

Mr. Seidenberg.  As a participant in the Long-Term Plan, Mr. Seidenberg received a payment of 76% of the target number of PSUs for the three-year performance period ending on December 31, 2007. In addition, the Committee had the discretion to recommend that the Board increase his payout for the 2005-2007 performance cycle based on performance with respect to the following strategic initiatives: synergy savings goals relating to the launch of Verizon Business; Wireless growth; passage of key legislation and FiOS and broadband growth. The Committee did not assign any specific weighting to these initiatives. Mr. Seidenberg’s award provided that the total payout for the 2005-2007 performance cycle, including the payment relating to the strategic initiatives, could not exceed his maximum award opportunity. In assessing whether an increased payment was appropriate, the Committee and the Board considered Mr. Seidenberg’s leadership, guidance and contribution to achieving the following industry leading results and accomplishments.

 

  · The Company completed its merger with MCI in January 2006. During 2006 and 2007, Verizon’s Wireline business generated operating benefits from combining its sales force with MCI’s and from product and systems integration programs. As a result of the acquisition of MCI, Verizon achieved productivity improvements and merger synergies that contributed to a savings that was 30% above the synergy savings goal announced at the time of the MCI merger. In addition, Verizon expanded its Ethernet and VoIP offerings in the U.S. and abroad, opened the new Government Network Operations and Security Center and launched a fully-integrated Customer Center.
 

·

Verizon realized an average consolidated pro forma6 revenue growth of 5% during 2006 and 2007 and 17% average revenue growth at Verizon Wireless during 2006 and 2007, which led the wireless industry. In addition, Verizon Wireless added a market leading total of 14.6 million retail customers for 2006 and 2007.

  · In connection with key legislative initiatives, Verizon has obtained over 1,000 video franchises covering 12.5 million households in 17 states, including California, Florida, Massachusetts, New Jersey, New York, Texas and Virginia.
  · At the end of 2007, Verizon’s FiOS video service was available for sale at 5.9 million premises and Verizon added a total of 3.1 million broadband connections for 2006 and 2007.

 

After evaluating the Company’s performance relating to these strategic initiatives, the Committee recommended and the Board approved paying Mr. Seidenberg’s 2005 PSU award at 104% of target. This represented an

 

6 Revenues on a pro forma basis are calculated as if Verizon and MCI had merged on January 1, 2005.

 

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increase of $4.6 million over the amount that was payable to Mr. Seidenberg based solely on Verizon's relative TSR performance over the 2005-2007 performance cycle.

 

As previously noted, the Committee encourages a pay-for-performance environment by linking long-term compensation opportunities to the creation of sustained shareholder value. The Committee reviews the potential payouts for varying levels of performance under the Long-Term Plan to ensure that they are consistent with aligning executive compensation with the creation of shareholder value. During the three-year period through 2007, under Mr. Seidenberg’s leadership, Verizon delivered a 28% return to shareholders. In addition, during this period Verizon made significant capital investments in its business to help ensure future growth opportunities in its most strategic areas. The Committee recommended and the Board concluded that the total payment to Mr. Seidenberg of $17 million for the 2005-2007 performance period was consistent with the level of value created for shareholders over this three-year period.

 

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