`Company man' wins fray over bosses' pay

May 23, 2007|By Jay Hancock | Jay Hancock,Sun Columnist

What in the world happened to corporate America to make somebody like Bill Jones, a registered Republican and former senior manager for what's now Verizon Communications, turn on the system that gave him a career and a life?

The answer is complicated. But if you guessed it has something to do with the $20 million that Verizon CEO Ivan Seidenberg pocketed last year for driving Verizon profits down 16 percent, you're onto something.

At this month's Verizon shareholders meeting, Jones introduced and won one of the most radical proposals yet to make corporate boards answerable for runaway executive pay. By a narrow majority, Verizon owners urged directors to give shareholders a nonbinding, annual vote - thumbs up or thumbs down - on pay for the top five bosses.

Even though the measure didn't require Verizon to seek this noncommittal "say on pay," the company fought it hard, assuring everybody that Seidenberg gets what he's worth. Shareholders, it added, lack the "informed judgment" of the board's compensation committee - composed entirely of present or retired CEOs - in designing bigwig emoluments.

But, in part of a tide of resentment lapping at Wall Street's curbstones, the company lost. And the person it lost to used to be one of its biggest boosters.

"I was a company man all the way," says Jones, 68, who lives in Easton. "I loved the company to death. I worked for the company the summer between my junior and senior year in college. I was offered a job when I graduated. I never interviewed at another company."

He became part of the telephone establishment, graduating from Lehigh University, joining the customer service department at New York Telephone and rising to managing director for corporate planning before retiring in 1990.

By that time the Ma Bell monopoly had been broken up, and New York Telephone was part of the Nynex "Baby Bell" corporation.

Over a career of 30 years, Jones said, he never second-guessed top management, never worried that their interests and the company's weren't identical.

But starting in the mid-1990s Nynex and its successors - Bell Atlantic and Verizon, including what was once Chesapeake & Potomac Telephone - began chipping away at retiree benefits. They delayed cost-of-living increases (traditionally half of inflation) for pensions. They increased out-of-pocket costs for retiree health plans. They limited new participants.

Some of the changes might have made sense. On a deregulated landscape, traditional phone companies such as Verizon had to fight for every customer. The cash to finance future retiree benefits could be at risk. It might be necessary for all Verizon stakeholders to make sacrifices to help the company.

Any former chief of corporate planning could see that. What stuck in Jones' gullet, however, was that there was no sign of sacrifice in the executive suite.

"If they're making current employees as well as retirees tighten their belts for the good of the corporation - which is something I don't object to - I think the top of the house ought to be doing the same thing," Jones said. "They ought to lead by example. It's absurd to see somebody getting $20 million when the stock price has gone down" by 35 percent since 1999.

Stirred by anger, he helped found the Association of BellTel Retirees a decade ago and remains its president. The group monitors Verizon benefits and seeks to change executive pay via the proxy system, which lets shareholders introduce and vote on governance proposals.

The retirees seemed just another band of oldsters hogging the mike at annual meetings. Until they began getting proposals on the ballot. Until they inspired similar initiatives at other companies. Until they gained a united, blue- and white-collar membership of more than 100,000. Until they began persuading big pension and mutual funds to vote their way, breaking the rubber stamp that had ruled corporate governance and lobbing the equivalent of a stink bomb in the boardroom.

Their first victory - urging the company to limit golden parachutes without shareholder approval, in 2003 - was the first time any Bell company had lost any proxy vote in a century. When Verizon balked, they threatened to make the vote binding, upon which the company backed down and implemented their idea.

Now they're eyeing the core of executive pay - annual compensation - and demanding that shareholders be able to signal disapproval every year. After announcing vote results last week, Verizon said it "will further consider its policies." Which means it will do nothing. Which means Jones will be back, threatening to introduce a proposal that requires a nonbinding "say on pay," not merely recommends it.

"Management sees this - and so does the board - as a fundamental incursion into their jobs," says Paul Hodgson, an executive pay expert with the Corporate Library. "Deciding on compensation issues is ordinarily the business of the board."

Too bad. When the board goes clueless, somebody has to do the right thing, and who better than one who used to help run the company? "Seidenberg hasn't invited me to play golf with him recently," said Jones. Good. Seidenberg's golf buddies on the board still don't get it.

jay.hancock@baltsun.com

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