April 24, 2007

AFL-CIO’s “Just Vote No” Campaign: Targeting Verizon’s CEO Pay

On Friday, this Washington Post article outlined the AFL-CIO’s campaign against six directors of Verizon (all on the company’s compensation committee) to vote “no” due to the CEO’s pay package. This vote on May 3rd should be interesting because Verizon is one of the companies that switched to a pure majority vote standard recently (and Verizon also has a “say on pay” proposal on the ballot). However, ISS has recommended a vote for all the director nominees – so it’s unlikely that this campaign will “win” the day and result in a “failed” election (ie. more votes “against” a director than “for”).

When it comes to determing who “won” in these battles with investors, it depends on one’s definition of “winning.” From the perspective of investors, this “limit CEO pay” movement is just getting off the ground – when you realize the tactic of directly confronting directors by challenging their board seats is truly in its infancy. I would consider support for a campaign of this sort in the 20% range to be a win for the AFL-CIO.

According to the Post article, a few weeks ago, “shareholders of Toll Brothers registered their dissatisfaction by withholding votes for the director who chairs its compensation committee. The luxury-home builder has yet to release vote tallies, but the Laborers’ International Union of North America, which led the protest, said a quarter of shareholders withheld support.” To me, that’s a win and you can bet the Toll Brothers board is nervous as that level of “against” votes should rattle the average director. And remember that the support for these types of investor campaigns typically builds each year.

E-mails to Employees Explaining a CEO’s Pay Package: A Proxy Solicitation?

For us securities law junkies, an interesting sidenote is that the AFL-CIO has sent this letter to the SEC’s Division of Enforcement to complain about an e-mail that the Verizon’s CEO sent to employees last week about the AFL-CIO campaign. The AFL-CIO contends that the e-mail should have been filed with the SEC as additional soliciting material (as most employees are also shareholders). The Post article notes that a Verizon spokesperson said that the e-mail was not a solicitation for votes.

You be the judge; it’s a tough call as “proxy solicitation” has a broad definition, yet the e-mail doesn’t specifically mention a solicitation, the targeted directors or the shareholders’ meeting. In our “Investor Demands for Reasonable Pay” Practice Area on, we have posted copies of the AFL-CIO’s letter to the SEC as well as a copy of the email from Verizon’s CEO to employees. Take a gander and e-mail your analysis to me (which I shall keep confidential if you wish).

We’re Number #3!

Congrats to the SEC for landing the #3 spot in a “Top Places to Work in the Federal Government” survey for large federal agencies for the 2nd year in a row (albeit its score dropped from last year). This ranking is conducted by the Partnership for Public Service and the Institute for the Study of Public Policy Implementation, based on a Office of Personnel Management’s Federal Human Capital Survey.

What’s surprising to me is not that the SEC fared so well – it’s that the #1 ranked Nuclear Regulatory Commission is deemed to be a large agency. I’m a long-time DC resident and have never met a soul who worked there – but apparently it has 3500 employees, according to this report. Thus, the NRC is roughly the same size as the SEC. So what do I know about anything…