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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 Robert A. Rehm, 5
Erie Court, Jericho, New York 11753, who owns 4,955 shares
of the Company’s common stock, proposes the following:
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 or an immediate family member
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 a senior
executive 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:
- Joseph Neubauer is CEO of ARAMARK,
where Verizon President and Vice Chairman Babbio is a director
and previously determined Neubauer’s compensation as
a member of the board compensation committee.
- Thomas O’Brien is former
CEO of PNC Financial Services, where Verizon Wireless CEO
Dennis Strigl has participated in boosting his retirement
benefits as a member of PNC’s compensation committee.
- Richard Carrion is CEO of a bank
that is Verizon’s co-investor in Puerto Rico Telephone
(Verizon owns a controlling 52% interest).
- Robert Storey recently retired
as a partner in a firm providing legal services to Verizon.
- 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.
In addition, prior to 2003, CEO Seidenberg had an interlocking
directorship with former Wyeth CEO John Stafford.
We believe an independent board is particularly needed at
Verizon. The Corporate Library, an independent research firm,
rated Verizon’s Board as one of the "ten worst"
among large U.S. companies in 2003, citing its "interlocked
and interconnected board" and excessive compensation policies.
The Board’s average tenure of 16 years is another
indicator of the Board’s insularity, in our view. Four
directors (Barker, Moose, Shipley and Storey) have served
more than 20 years each. Only one new director has been elected
since 1995.
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 relationships with the Company,
or its Officers, different from Verizon shareholders generally.
Please vote FOR this important proposal.
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.
The Board strongly believes that the proponents have inaccurately
characterized the Board’s independence and propose a
definition of independence that is unduly rigid. The Company’s
shareholders have consistently rejected a similar proposal
relating to the Board’s composition by a substantial
margin, most recently at the 2005 annual meeting, and should
continue to do so.
The New York Stock Exchange listing standards specify detailed
criteria for independence which provide a common standard
that enables shareholders to evaluate the independence of
directors at all listed companies. The NYSE listing standards
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. The Guidelines provide
for an independent Presiding Director at meetings of the non-management
directors, and provide that any director is able to call a
Board meeting or executive session.
In addition, the Board strongly disagrees with the proponent’s
characterization of the independence of certain directors.
The Board has carefully considered the qualifications, affiliations
and relationships of each director and, as stated on page
4 of this Proxy Statement, has determined that all of the
non-employee directors are independent. The Board is confident
that the relationships cited by the proponents, many of which
ceased to exist more than three years ago, have not impaired
the independence of the individual directors. Given the high
standards of governance and independence to which the directors
and committees are held, 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. |
