Proxy Statement
Shareholder Proposals (Item 6 on Proxy Card)

The Association of BellTel Retirees Inc., 181 Main Street, 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 (PSUs) will vest and become payable only if Total Shareholder Return (TSR) equals or exceeds the median performance of the Related Dow Peers, or whatever peer index the Board deems appropriate.


While we commend the Board for tying the majority of long-term compensation to the relative performance of Verizon’s stock, we believe the performance bar is set too low. Large Performance Stock Unit (PSU) payouts for performance as low as the bottom 26th percentile do not adequately align pay with performance, in our view.

PSUs should not vest or pay out, we believe, unless Verizon’s shareholder return (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 named executive officers receive long-term equity awards with a potential payout between eight and ten times base salary. These equity performance grants are divided between PSUs (60%) and Restricted Stock Units (40%). Chairman and former CEO Ivan Seidenberg is an exception, as 100% of his long-term grants are PSUs.

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

For example, Mr. Seidenberg’s Target Award for the 2010-2012 PSU grant is $11.1 million. Although this grant vested at Target upon his retirement, had he remained CEO he would have received 50% of Target ($5.5 million) even if Verizon’s TSR was outperformed by 74% of the Related Dow Peers – nearly bottom quartile performance. At the high end, Seidenberg could have received 200% of Target ($22.2 million) if Verizon ranked among the top four (above 90th percentile).

Verizon’s low performance bar for a 50% payout seems particularly unjustified because senior executives (except Seidenberg) receive 40% of their long-term “performance pay” in restricted stock. RSUs vest after three years regardless of performance. Although the Board justifies RSUs as a “retention incentive,” RSUs pay out even if the executive retires or is terminated without cause, or terminates without cause or for “good reason” within 12 months after a change in control.

In the 2011 Proxy, the Board argued that this proposal “appears to suggest an all-or-nothing approach …with no vesting below median performance, and 100% or more vesting at or above median performance.” In fact, proponents presume the Board will continue to scale the PSU award in proportion to relative performance. We simply propose that the bottom rung of that ladder be performance no worse than median.

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 60% of the senior executives’ 2011 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.

The Human Resources Committee also believes that the proposal, which would require the Committee to use relative total shareholder return as the sole performance measure for all future awards of PSUs, is overly prescriptive and would unduly restrict the Committee’s ability to establish different types of performance measures for these awards. Although the outstanding PSU grants use relative total shareholder return as the performance measure, the Long-Term Incentive Plan, approved by shareholders in 2009, provides the Committee with the ability to establish other performance measures. Indeed, each year prior to establishing the performance measures for the PSUs, the Committee considers not only the performance measures used by its peers in designing their compensation programs, but also assesses which performance measures are most likely to promote Verizon’s business objective of producing value for shareholders over the long-term.

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.