While a narrow majority of Verizon shareholders have expressed their desire for a say in determining executive compensation – the company provided $21.3 million of such compensation to CEO Ivan Seidenberg last year without their input – it doesn’t appear likely that their voices will be heard without first putting up more of a fight.
Verizon yesterday announced that 50.18 percent of shareholders had voted in favor of providing themselves with the right to express a non-binding opinion regarding executive pay, a strategy that is gaining favor among investors as public ire grows over increasingly obscene CEO pay packages.
The trouble for Verizon shareholders is that the proposal to grant them their non-binding say in the matter is also non-binding. And based on this mealy-mouthed statement from Verizon, shareholders shouldn’t be betting their holdings on the company complying with the majority’s wishes any time soon:
“The board is committed to continuous review of the company’s compensation practices and will further consider its policies in light of the high level of shareholder interest and the active discussion taking place with respect to the advisory vote issue in a variety of forums, including in the U.S. Congress.”
“Further consider its policies” is corporate-speak for don’t hold your breath.
Backers of the shareholder measure told The New York Times that they will likely turn to a binding version next time around if the company fails to do the right thing. And while momentum for such measures is building elsewhere, they have also met resistance, according to the article:
Shareholder dismay over executive pay has been a common theme at annual meetings this year. At yesterday’s meeting for owners of J. C. Penney, a proposal to limit executive severance payments won majority support.
Advisory votes on executive pay are an annual event at public companies in Britain and Australia but most United States companies that have received such proposals from their owners have lined up against them. An exception was Aflac Inc., an insurance company that changed its policy this year, giving shareholders a say on its pay beginning in 2009.
Stockholders at several companies have come close to passing such resolutions; at Merck, for example, 49.2 percent voted in support of an advisory vote on pay.
This issue isn’t going away any time soon, as evidenced by the intense reader interest in Network World’s recent accounting of “How much do network chiefs make?” That coverage was among the most highly trafficked on this site over the past six weeks.
Negative shareholder reactions and press attention have prompted some company’s and their executives – John Chambers at Cisco; Eric Schmidt, Larry Page and Sergey Brin at Google, to site just four examples – to adopt creative executive compensation strategies that deemphasize salary in favor of stock rewards and perks that may be more difficult for outsiders to fully comprehend.
As evidenced by the Verizon vote, more and more shareholders are getting tired with playing these games – and paying these outrageous sums.
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