Shareholder Proposals (Item 3 on Proxy Card)
We have been advised that the shareholders submitting the proposals or their representatives intend to present the following proposals at the annual meeting. The Board of Directors has concluded that it cannot support these proposals for the reasons given.
Item 3 on Proxy Card:
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037, owner of 424 shares of the Company's common stock, proposes the following:
RESOLVED: “That the Board of Directors take the necessary steps so that NO future NEW stock options are awarded to senior executive officers, nor that any current stock options are repriced or renewed (unless there was a contract to do so on some).”
REASONS: “Stock option awards have gotten out of hand in recent years, and some analysts MIGHT inflate earnings estimates, because earnings affect stock prices and stock options.”
“There are other ways to “reward” senior executive officers, including giving them actual STOCK instead of options.
“Recent scandals involving CERTAIN financial institutions have pointed out how analysts can manipulate earnings estimates and stock prices.” Last year the owners of 181,485,997 shares, representing approximately 9% of shares voting, voted FOR my similar Resolution.
“If you AGREE, please vote YOUR proxy FOR this resolution.”
BOARD OF DIRECTORS’ POSITION
The Board believes that a complete ban on any future stock options is too restrictive. The Verizon Long-Term Incentive Plan already addresses many of the concerns raised by the proposal. The Plan prohibits:
- Stock option grants below fair market value;
- Re-pricing of options; and
- “Reloading” options in future grants.
Since 2004, the Human Resources Committee of the Board of Directors has not granted any stock options and has no plans to grant stock options in 2008 or in the future. The Board believes that the Committee should continue to have the flexibility to grant stock options because this form of compensation may be appropriate under certain circumstances to attract and retain executive talent.
The Board of Directors recommends a vote AGAINST this proposal.