The Director Compensation Project: Verizon Communications, Inc.

The Director Compensation Project: Verizon Communications, Inc.

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010’s Fortune 500 and using information found in their most recent proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence.  While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting. 

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards.  Directors are not independent if they received over $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii).  This is a looser restriction than the equivalent NASDAQ Rule, 5605(a)(2), which includes "any compensation."  Rules 303A.06 and 5605 also require that, in addition to the general independence standards, audit committee members must comport with the requirements of  Rule 10A-3 (C.F.R. §240.10A-3).  See also IM-5605-4. Audit Committee Composition.

The director compensation table from Verizon Communications Inc.’s (NYSE:VZ) 2011 proxy statement is listed below. According to the proxy statement, the company paid the directors the following amounts: 

Director Compensation Table.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Richard L. Carrión	91,000	130,000	0	0	225,318
M. Frances Keeth	111,000	130,000	0	0	241,000
Robert W. Lane	97,000	130,000	0	0	228,947
Sandra O. Moose	114,000	130,000	0	0	247,398
Joseph Neubauer	106,000	130,000	0	0	236,000
Donald T. Nicolaisen	122,000	130,000	0	0	252,000
Thomas H. O'Brien	99,000	130,000	0	0	229,671
Clarence Otis, Jr.	99,000	130,000	0	0	231,728
Hugh B. Price	103,000	130,000	0	0	233,047
Rodney E. Slater	74,833	196,023	0	0	270,856
John W. Snow	89,000	130,000	0	0	219,000
John R. Stafford	103,000	130,000	0	0	241,772

Director Compensation.  Verizon’s board met 10 times in 2010, seven meetings were regularly scheduled and three were special meetings.  Every director proposed for election in 2011 attended at least 75% of the total board and committee meetings to which the director was assigned.  Overall, the board and committee meeting attendance average was 98%.  All directors received $130,000 as an annual stock award, except for Mr. Slater.  Mr. Slater received a stock award of $108,333, which was prorated to reflect the portion of the year that he served on the board.  Mr. Slater also received a one-time grant of 3,000 Verizon share equivalents with a fair value of $87,690.  Directors who were elected to the board before 1992 and directors who served as directors for NYNEX Corporation participate in a charitable giving program that provides an aggregate contribution of $1,000,000 payable in ten annual installments and commences when a director retires or turns 65 years of age.

Director Tenure.   The tenure of Verizon directors ranges from over fifteen years to only a couples of months, but the majority of the board members have served for several years.  Three directors served as directors of NYNEX Corporation and they are eligible for the retirement program.  Joseph Neubauer is Verizon’s longest tenured director and has been a director of Macy’s, Inc since 1992. Within the past five years, Mr. Neubauer has served as director of both Wachovia Corporation and CIGNA Corporation. He has also served as the chairman of the board of ARAMARK Corporation.  The director with the shortest tenure is Lowell C. McAdam.  He does not serve on any other boards, but is Verizon’s President and Chief Operating Officer.

Executive Compensation.  Ivan G. Seidenberg, Chairman and CEO of Verizon, the highest paid executive in 2010, earned a $2,100,000 salary and total compensation worth $18,166,006.  The second highest paid executive was John F. Killian, the former Executive Vice President and CFO of Verizon, earning an $825,000 salary and total compensation worth $7,404,755 in 2010.  President and COO, . Mr. McAdam, Executive Vice President and President and CEO of Verizon Wireless Joint Venture Mr. Mead, and Executive Vice President and Chief Financial Officer Mr. Shammo all received increases in base pay due to promotions in 2010. None of the salaries’ of other executive members increased in 2010.  Mr. Seidenberg and Mr. McAdam were the only executives that used the company aircraft in 2010.