TheCorporateCounsel.net

November 5, 2007

Verizon’s Say on Pay: A Take-Away

Feeling the heat of a majority vote on a “say-on-pay” proposal, Verizon Communications became the second company to adopt a policy to put its compensation plans to an annual vote by shareholders in 2009. AFLAC became the first company to adopt such a policy earlier this year. Notably Verizon’s “say-on-pay” proposal barely received majority support with 50.18% votes cast supporting it. RiskMetrics reports that a majority vote has been achieved at 7 companies so far this year for “say-on-pay” proposals (e.g. 69% at Activision).

So why is Verizon the first of these 7 companies to adopt a “say-on-pay” policy? I have no inside scoop, but one reason might be that they want to abide by the will of the majority, even if it’s barely a majority. Another reason might be that the company’s executive pay practices have been widely criticized – and publicly so, ranging from being on The Corporate Library’s short “pay-for-failure” list to this Union press release (also see this letter from a group of institutional investors).

And of course, you shouldn’t forget the novel Electronic Shareholder Forum that I blogged about a few months ago. The Forum’s Verizon program was organized with the support of the Association of BellTel Retirees, the source of the Verizon shareholder proposal – and clearly, this Forum had some role in obtaining the majority vote given how close the vote was. Gary Lutin, who is responsible for conducting the Forum (with rigorous standards of independence), speculates that the higher vote may have been attributable to the broader range of investors involved in an open program – that had previously established principles based on shared management and shareholder interests – rather than the confrontational approach of the “say on pay” campaigns currently being waged by others.

So the lesson learned is that companies are really gonna need to learn to leverage – and monitor – the Web better, which ties into the subject of our upcoming November 15th webcast, “Annual Reports: How to Create Them for an Online World.”

[By the way, Verizon also approved a revised policy that more specifically defines the types of payments that will be included in the calculation of a severance payment – and adopted a policy that addresses the independence of its compensation consultant.]

The “Pink Sheets” Speak

Over the past few years, there have been a lot of changes in the pink sheets. In this lengthy podcast, Cromwell Coulson, CEO of the Pink Sheets, describes the latest upgrades to his market, including:

– How have the Pink Sheets gone electronic?
– What are your OTCQX market tiers?
– What are the new Pink Sheets disclosure categories?
– What is the role of securities counsel in the OTCQX market tiers and Pink Sheets disclosure categories?
– What are your thoughts on the SEC’s Rule 144 proposals?

Cromwell is always colorful – and we have more information about what is happening with the Pink Sheets in our “Pink Sheets” Practice Area.

BRIBEline

You may want to check out BRIBEline, which is a secure, multi-lingual site through which companies and individuals can anonymously report bribe demands by answering 9 multiple-choice questions. The site is operated by TRACE, a non-profit membership association of multinationals.

Here is some info from the BRIBEline website: No names are requested or collected, and reports made to BRIBEline are not used for investigations or prosecutions. Instead, the information is aggregated and publicly reported by country and by sector (the customs service, the judiciary, etc.), shining a spotlight on the worst offenders, providing companies with an additional risk mitigation tool, encouraging governments to reduce corruption in their ranks and helping those working to increase transparency and reduce bribery more effectively target their efforts.

– Broc Romanek