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Item 5 on Proxy Card:
The Association of BellTel Retirees Inc., 181 Main Street/PO
Box 33, Cold Spring Harbor, NY 11724, which owns 214
shares of the Company’s common stock and John
Sellen 235 Demarest Ave. (Box 457), New Milford, NJ
07646-0457, who owns 1,350 shares of the Company’s
common stock, hereby notify the Company that they intend
to reintroduce the following resolution at the 2005
Annual Meeting for action by the stockholders:
RESOLVED: The shareholders urge our
Board of Directors to amend Verizon’s Corporate
Governance Guidelines to provide that the Board shall
nominate director candidates such that, if elected,
a two-thirds majority would be independent.
For this purpose, the definition of “independent”
should be no less strict than the standard adopted by
the Council of Institutional Investors, an association
of pension funds with assets over $1 trillion.
Generally, the CII does not consider a director as
“independent” if, during the past five years,
the director has been employed by:
- the company or an affiliate;
- a company-paid advisor or consultant;
- a significant supplier or customer;
- a nonprofit that receives significant grants from
the company;
- a firm whose board includes an executive officer
of the company.
SUPPORTING STATEMENT: At least 7 of
Verizon’s 11 directors (64%) have, or recently
had, material financial relationships with the Company,
or its officers, either directly or through their firms.
We believe that ensuring a substantial majority of truly
independent directors is the best way to ensure that
the Board will at all times be more accountable to stockholders
than they are beholden to management.
Verizon's 11-member board includes one insider, Chairman and CEO Seidenberg, and at least six outside directors who are non-independent, in our view, according to SEC disclosures:
- Richard Carrion is CEO of a bank that co-invests
with Verizon’s in Puerto Rico Telephone (Verizon
owns a majority interest).
- Robert Storey is partner in a firm providing legal
services to Verizon.
- Joseph Neubauer is former CEO and Executive Chairman
of ARAMARK, where Verizon President Babbio participated
in setting his compensation until 2003 as a member
of the board compensation committee.
- Hugh Price was, until 2003, CEO of a nonprofit receiving
millions of dollars in grants from Verizon during
a period Seidenberg served on its governing board.
- Sandra Moose, until year-end 2003, was Senior Vice
President of a firm paid at least $3.5 million for
consulting services since 2000.
- Thomas O’Brien is former CEO of PNC Financial
Services, where Verizon Wireless CEO Dennis Strigl
has participated in boosting his retirement benefits
and perks as a member of PNC’s Compensation
Committee.
In addition, prior to 2003, CEO Seidenberg had an interlocking
directorship with John Stafford, the former CEO of Wyeth.
We believe an independent board is particularly needed
at Verizon. The Corporate Library, an independent corporate
governance research firm, rated Verizon’s Board
as one of the “ten worst” among 1,700 companies
analyzed in its 2003 Board Effectiveness Ratings.
According to Corporate Library, while Verizon “is
no longer the most interlocked and interconnected board
in our database, the independence of several directors
remain in question. And the contracts and compensation
policy for both Seidenberg and former co-CEO Lee contain
virtually every example of excess and lack of control
that could be found at a US corporation.…”
Although Verizon claims it complies with the NYSE’s
minimum listing standard for board independence, we
believe outside directors are not truly “independent”
when they have significant financial interests different
from Verizon shareholders generally.
BOARD OF DIRECTORS’ POSITION
The Board has adopted Corporate Governance Guidelines
requiring that a substantial majority of the directors
be independent. In fact, the Board has consisted of
a majority of independent directors at all times since
the Company was founded in 1983. While the Board agrees
that the Board should consist of a majority of independent
directors, it strongly believes that the proponents
inaccurately characterize the Board’s independence
and propose a definition of independence that is unduly
rigid.
The New York Stock Exchange listing standards provide
criteria for independence and require the Board to make
a finding as to each director’s independence.
The Verizon Corporate Governance Guidelines specify
objective standards for making that determination, which
in several instances go beyond the NYSE requirements
and the applicable laws and regulations. In addition,
Verizon has other governance provisions that ensure
that directors are able to function independently. Non-management
directors meet at regularly scheduled executive sessions
without management and any director is able to call
a Board meeting or executive session. All members of
the audit, compensation and governance committees are
independent directors, and the Guidelines now provide
for a rotating presiding director at meetings of the
non-management directors. The Board believes that, given
the high standards of governance and independence to
which its directors and committees are held, the proposal
is unnecessary. The Company’s shareholders, at
the 2004 annual meeting, rejected a similar proposal
relating to the Board’s composition by a substantial
margin, and should continue to do so.
The Board strongly disagrees with the proponent’s
characterization of the independence of certain of its
members. The Board has carefully considered the qualifications,
affiliations and relationships of each director and,
as stated on page 3 of this Proxy Statement, has determined
that a substantial majority of the directors are independent.
Accordingly, it is confident that the relationships
cited by the proponents do not impair the independence
of the individual directors. Furthermore, given the
Board’s history of independence and its continuing
commitment to being held to higher standards, the Board
is concerned that the proposed change to the Corporate
Governance Guidelines would arbitrarily restrict the
composition of the Board and inappropriately limit its
ability to adapt to changing business circumstances.
Accordingly, the Board believes that this proposal is
not in the best interests of the Company and its shareholders.
The Board of Directors recommends a vote AGAINST
this proposal. |
