Proxy Statement
Shareholder Proposals (Item 6 on Proxy Card)

The Association of BellTel Retirees Inc., 181 Main Street/PO Box 33, Cold Spring Harbor, New York 11724, owner of 214 shares of the Company’s common stock, proposes the following:

RESOLVED, the stockholders of Verizon hereby urge the Board to adopt a policy whereby future grants of long-term incentive awards to senior executive officers in the form of Performance Share Units will vest and become payable only if Total Shareholder Return equals or exceeds the median performance of the Related Dow Peers, or whatever peer index the Board deems most appropriate.


Performance Share Units (PSUs) should not vest or pay out, we believe, unless Verizon’s stock performance (TSR) is at least equal to or above the median relative to the company peer index selected by the Board.

Each year the Company’s executive officers receive long-term equity awards with a potential cash payout between six and ten times base salary. These equity performance grants are divided between PSUs (60%) and Restricted Stock Units (40%). CEO Ivan Seidenberg is an exception, as he receives 100% of long-term equity in the form of PSUs.

While we commend the Board for tying the majority of equity compensation to the relative performance of Verizon’s stock, we believe large pay-outs for below-median performance as low as the bottom 26th percentile does not adequately align pay with performance.

The problem is that PSUs pay out at 50% of Target for relative Total Shareholder Return (TSR) at the bottom 26th percentile (that is, if Verizon performs as low as 25th among the 34 Related Dow Peers). Last year ISS Proxy Advisory Services recommended a vote for this resolution, stating: “the design of the [PSU] program will provide a significant 50% payment for performance that approximates the 25th percentile.”

The Corporate Library’s 2008 update on “Pay for Failure” companies reported that for the performance cycles ending in 2008 and 2009, Verizon “would have to perform below the 20th percentile for executives to receive nothing.”

For example, the CEO’s Target Award for the 2009-2011 PSU grant is $11 million. He receives 50% of Target ($5.5 million) if Verizon’s TSR ranks as low as 25th among the 34 Dow Peers – nearly bottom quartile performance. At the high end, Seidenberg receives 200% of Target ($22 million) if Verizon ranks among the top four (88th percentile or better).

The low performance bar for PSUs seems particularly unjustified because senior executives (except Mr. Seidenberg) receive 40% of their long-term “performance pay” in restricted stock (RSUs). RSUs vest after three years regardless of performance. And although the Board justifies RSUs as a “retention-oriented award,” RSUs vest immediately and pay out if the executive retires or is terminated without cause or within 12 months after a change in control (10Q April 2010).

The “Board of Directors’ Position” in the 2010 Proxy acknowledges that “to earn 100% of the target number of PSUs,” Verizon’s “TSR over the three-year performance cycle must rank at least 16th” among the 34 Dow Peers, which is barely above the median. The Board also fails to mention that senior executives can still receive 50% of the target award for relatively poor performance as low as the 26th percentile.

Please vote FOR this proposal.


The Human Resources Committee of the Board of Directors believes that the compensation opportunities provided to Verizon’s senior executives should be competitive with Verizon’s peer companies and reward executives for achieving short-term business goals and creating sustainable shareholder value. Verizon’s executive compensation program focuses extensively on variable, performance-based compensation. Incentive-based pay represents approximately 90% of a Verizon senior executive’s total compensation opportunity each year, with about 70% tied to Verizon’s equity performance over a three-year period and the remaining 20% tied to the achievement of challenging annual performance metrics.

The performance goals established for the performance stock units (PSUs), which constituted 100% of the CEO’s, and 60% of the other senior executives’, 2010 long-term incentive compensation, are designed so that, when combined with an executive’s base salary and target short-term incentive payment, above-median stock performance relative to our peer companies is required in order to achieve median pay. The Committee has conducted rigorous design testing intended to ensure that the threshold and maximum opportunities available under the PSUs are appropriately correlated with resulting total compensation to align pay and performance. By focusing on a single component of Verizon’s executive compensation program – the performance goals established for the PSUs – without considering the long-term incentive award’s role in the total compensation opportunity provided by the program, the proposal would, in the Committee’s opinion, have the effect of severing the link between pay and performance and delivering compensation that is not competitive with Verizon’s peer companies.

In addition, the proposal appears to suggest an all-or-nothing approach to the vesting of PSUs, with no vesting below median performance and 100% or more vesting at or above median performance. In other words, whether an executive receives no payment with respect to an award or receives 100% of the award would in some cases depend on whether the Company improved by a single place in the total shareholder return ranking of 34 companies. Because so much of Verizon’s total compensation program is performance based, the program design suggested by the proposal could significantly increase the incentives to engage in risky behavior to increase total shareholder return at the end of an award cycle.

The Human Resources Committee believes that Verizon’s overall compensation program is well-designed to achieve the objectives of aligning the interests of management and shareholders, promoting short-term and long-term growth and attracting, retaining and motivating high-performing executives. Imposing arbitrary and subjective limitations on the Committee’s discretion to structure the terms of the long-term incentive portion of the overall compensation program, as the proposal suggests, would unduly restrict the Committee’s ability to design and administer a competitive compensation program to best address the interests of Verizon and its shareholders.

The Board of Directors recommends that you vote AGAINST this proposal.