Verizon Communications (VZ)

SUPPORTING STATEMENT

We support a compensation philosophy that motivates and retains talented executives and ties their pay to the long-term performance of the Company. We believe that such an approach is needed to align the interests of executives with those of shareholders.

“Golden coffin” agreements, however, provide payment without performance, after an executive is dead. Companies claim that these agreements are designed to retain executives. In our opinion, death defeats this argument. “If the executive is dead, you’re certainly not retaining them,” said Steven Hall, a compensation consultant.” (“Companies Promise CEOs Lavish Posthumous Pay-outs,” The Wall Street Journal, June 10, 2008.)

Senior executives have ample opportunities to provide for their estate by contributing to a pension fund, purchasing life insurance, voluntarily deferring compensation, or through other estate planning strategies. Often, these services are provided by or subsidized by the company even though, in our opinion, the senior executives could afford to pay for these benefits themselves out of their other compensation. We see no reason to saddle shareholders with payments made without receiving any services in return. Peter Gleason, chief financial officer of the National Association of Corporate Directors, calls “golden coffin” arrangements a “bad idea.” (“Making Peace Between Boards and Investors,” Financial Week, June 16, 2008.)

The “Golden Coffin” problem is illustrated by the Company’s 2008 proxy statement. According to the Compensation Table on page 30, the Company’s most highly compensated executives received total compensation in 2007 of $26,553,576, $18,460,140, $9,690,614, $9,465,325 and $18,089,163. According to the Severance and Change in Control Benefits table on pages 37-39, if these same executives would have died on December 31, 2007, they would also have received $43,375,476, $53,758,828, $29,349,211, $20,370,621, and $19,012,650 respectively. These additional payments would have been generated by incentive plans,

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employment agreements (where applicable), financial planning and executive life insurance. Footnotes e) and f) on page 31 explain the Company’s payments on premiums and tax gross-ups for the insurance.

Consequently, we requested that the Company adopt a policy of providing shareholders with a vote on agreements that would provide payments or awards after a senior executive’s death and are unrelated to services rendered to the Company. We believe this may induce restraint when parties negotiate such agreements.

Prior shareholder approval may not always be practical to obtain, and this proposal provides the flexibility to seek approval or ratification after the material terms are agreed upon.

SUPPORTING STATEMENT

We believe that the separation of the roles of Chairman and CEO is fundamental to sound corporate governance.

How can the CEO be his own boss? Directors are responsible for protecting the shareholders’ interests – and they must do so primarily by monitoring and evaluating the CEO’s performance. When the CEO is chairman of the board, there is an ambiguity about who is working for whom – and a built-in barrier to replacing a poorly-performing CEO.

Multiple studies have found that shareholder returns are substantially higher on average at firms with non-executive chairmen.

A 2006 Booz Allen Hamilton study of the world’s 2,500 largest public companies concluded: “Non-chairman CEOs are now the best performers. . . . In North America over the last three years, non-chairman CEOs produced shareholder returns three times as high as those of CEO/chairmen.” (“CEO Succession 2005: The Crest of the Wave,” May 2006).

The Booz Allen study showed that among both American and European companies, firms that separated the roles of chairman and CEO produced shareholder returns 5 percentage points higher on average over 2002-05 than companies with CEO/chairmen.

A 2006 report from Moody’s concluded that the presence of an independent chair improves board effectiveness: “We believe arguments against independent board leadership are outweighed by advantages offered by clarity of accountability and the strengthened ability of independent directors to respond quickly in a crisis.”

An independent chairman is particularly needed at Verizon. A study by the Corporate Library singled out Verizon for the second straight year as one of 12 “Pay for Failure Companies” with the worst combination of excessive CEO pay and negative shareholder returns over the most recent five-year period. (“Pay for Failure II: The Compensation Committees Responsible,” May 2007).

The study notes that over the five fiscal years through 2006, CEO Ivan Seidenberg received $68.6 million in compensation, while total shareholder return was negative 5%.

The Wall Street Journal reported that after Verizon’s stock declined 25% during 2005, in 2006 the Board decided to decouple its Chairman/CEO’s incentive compensation from stock price appreciation. (“Verizon Ties CEO Pay to Project Success Instead of Company Stock Performance,” October 18, 2006).

“I haven’t come across any other companies who have moved from specific and easily measurable financial metrics to a set of more subjective, strategic achievements,” Corporate Library analyst Paul Hodgson told the Journal.

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The accountability problem is compounded by our Board’s lack of independence, in our view. The Corporate Library considers half the Board non-independent because the CEO and six “outside related” directors have recently had a financial relationship with Verizon other than their directorship.

Please vote FOR this proposal.