Shareholder Proposals (Item 8 on Proxy Card)
Kenneth Steiner, 14 Stoner Avenue, Apt. 2M, Great Neck, New York 11021, owner of 1,809 shares of the Company’s common stock, proposes the following:
8 – Special Shareowner Meetings
RESOLVED, Shareowners ask our board to take the steps necessary unilaterally (to the fullest extent permitted by law) to amend our bylaws and each appropriate governing document to give holders of 15% of our outstanding common stock (or the lowest percentage permitted by law above 15%) the power to call a special shareowner meeting.
This includes that such bylaw and/or charter text will not have any exception or exclusion conditions (to the fullest extent permitted by law) in regard to calling a special meeting that apply only to shareowners but not to management and/or the board.
Special meetings allow shareowners to vote on important matters, such as electing new directors, that can arise between annual meetings. If shareowners cannot call special meetings, management may become insulated and investor returns may suffer. Shareowner input on the timing of shareowner meetings is especially important during a major restructuring – when events unfold quickly and issues may become moot by the next annual meeting. This proposal does not impact our board’s current power to call a special meeting.
This proposal topic won more than 60% support at the following companies: CVS Caremark, Sprint Nextel, Safeway, Motorola and R.R. Donnelley.
The merit of this Special Shareowner Meeting proposal should also be considered in the context of the need for additional improvement in our company’s 2010 reported corporate governance status:
The Corporate Library, www.thecorporatelibrary.com, an independent investment research firm rated our company “D” with “High Governance Risk” and “Very High Concern” in executive pay – $29 million for Dennis Strigl, $17 million for Ivan Seidenberg and $10 million for Lowell McAdam.
Our company gave special performance stock units (PSUs) and restricted stock units outside the scope of our company’s long-term incentive plan. Our Executive Pay Committee had discretion to increase our CEO’s long-term incentive pay due to subjective criteria. The PSU’s covered a three-year performance period, which was not long-term. CEO ownership guideline of 5-times base salary should be 10-times.
Six of our 13 directors had 13 to 23 years long-tenure. Independence tends to decline as tenure goes up. Joseph Neubauer was our highest negative vote-getter and was allowed to continue as Chairman of our Executive Pay Committee. Our newest director, Rodney Slater, was already our second highest negative vote-getter.
Our management deleted the title of the proposal on this topic in our 2010 voting materials without the authorization of the Securities and Exchange Commission which is the rule. I believe management’s motivation for this stunt was to understate the high level of support for this topic.
Please encourage our board to respond positively to this proposal in order to initiate improved governance and turnaround the above type practices: Special Shareowner Meetings – Yes on 8.
BOARD OF DIRECTORS’ POSITION
Verizon’s Board of Directors believes that this proposal is unnecessary because Verizon’s shareholders already have a meaningful right to call a special meeting. Under Verizon’s bylaws, any shareholder who owns at least 10%, or multiple shareholders who together own at least 25%, of Verizon’s stock may call a special meeting of shareholders. There are only limited circumstances under which a special meeting requested in accordance with the Bylaws would not occur, each of which is designed to prevent costly meetings that are unnecessary because they cannot result in legal action or because shareholders have recently had or will soon have an opportunity to address issues. These circumstances are:
- the stated business of the special meeting is not a proper subject for shareholder action under Delaware law;
- the stated business either will be taken up at a shareholder meeting called by the Board to be held within 90 days or was already taken up at a shareholder meeting held within the past 90 days; or
- the request is made during the period beginning when shareholders may propose business for the Company’s annual meeting and ending at the annual meeting (in this case shareholders already have an opportunity to propose business for the annual meeting without forcing the Company to incur the expense of a special meeting).
A special meeting of shareholders is an extraordinary event that is both expensive and time-consuming. The proponent has submitted a proposal addressing this topic in each of the past four years. Last year the shareholders rejected a proposal that specified a 10% ownership threshold. Now the proponent has requested that Verizon implement a 15% ownership threshold without providing any explanation as to why the higher threshold would be more appropriate for Verizon. The Board has carefully considered this issue in each of the past four years and firmly believes that the ownership thresholds and the common sense safeguards contained in Verizon’s current bylaw provision strike an appropriate balance between the right of shareholders to call a special meeting and the interests of Verizon and its shareholders in promoting the appropriate use of company resources.
The Board of Directors recommends that you vote AGAINST this proposal.