COLD SPRING HARBOR, NY--(Marketwire - Mar 19, 2013) - In its Proxy statement, Verizon Communications (NYSE: [ VZ ]) disclosed that it has substantially reduced the payouts of performance-based stock that its senior executives can earn for below-average stock returns. The Association of BellTel Retirees Inc. ([ www.BellTelRetirees.org ]) agreed to withdraw their shareholder resolution urging an even higher performance bar after Verizon's Board of Directors agreed to change the company's Performance Stock Unit payout thresholds consistent with the retirees' proposal.

The shareholder resolution submitted by the Association proposed that multi-million dollar awards of Performance Shares (PSUs) should not vest or pay out unless Verizon's total shareholder return is at least equal to or above the median for the Dow peer index selected by the Board. The proposal received the support of more than 30 percent of the shares voted at each of the past three Verizon Annual Meetings.

This year, after the Association's proposal had qualified for the 2013 Proxy, the Verizon Board agreed to change its PSU policy to move toward the retirees' proposal.

"Although Verizon's new hurdles for paying out huge performance stock awards to top executives does not align executive pay and performance to the degree we proposed, the Board's changes are a big step in the right direction and so the Association agreed to withdraw our more demanding proposal," stated C. William Jones, president of the Association of BellTel Retirees Inc.

"We argued for years that large Performance Stock payouts for negative stock price performance, or for total shareholder returns as low as the bottom 26^th percentile among the Dow Peer group, did not adequately align pay with performance," Mr. Jones added. "We are pleased that the Board finally agreed that a higher performance bar promotes shareholder interests."

Each year Verizon's senior executives receive Long-Term Incentive Plan awards with a potential payout between 10 and 13 times base salary. These grants are divided between PSUs (60%) and Restricted Stock Units (40%).

The problem is that prior to Verizon's policy change, PSUs paid out at 50% of Target for relative shareholder return (TSR) as low as the bottom 26^th percentile -- that is, if Verizon performs as low as 25^th among its 34 Related Dow Peers.

Last year ISS Proxy Advisory Services recommended a vote in favor of the Association of BellTel Retirees' proposal, stating that Verizon's long-term equity plan "provides for a 50 percent payout for performance just above the 25^th percentile of the company's peer group... Further, payouts may be generated even though the company's three-year TSR is negative but performs above the 25^th percentile of the peer group."

For example, CEO Lowell McAdam's PSU Target Award for the 2011-2013 grant cycle is $8.75 million. At the end of this year he will receive 50% of Target ($4.375 million) even if Verizon's TSR is outperformed by 74% of the Related Dow Peers -- nearly bottom quartile performance. At the high end, McAdam can receive 200% of Target ($17.5 million) if Verizon ranks among the top four (above the 90^th percentile).

Verizon's reformed PSU payout schedule, disclosed in their Proxy Statement, reduces the payout at the low end to 32% of Target, which for CEO McAdams represents a $1.4 million reduction compared to the previous policy. In addition, Verizon's new policy adopts the Association's proposal in last year's Proxy that it scale the PSU award in proportion to relative performance compared to the Dow Peers index.

Verizon's Board made an additional change not included in the retirees' proposal. For the 2012-2014 PSU cycle it adds a free cash-flow metric as an additional measuring stick that the Board stated would focus the executives more on the company's overall business strategy (and not only on total shareholder return).

Jones noted that Verizon has changed its executive compensation and governance policies a half-dozen times in reaction to substantial votes in favor of Association of BellTel Retirees shareholder proposals over the past decade. These included a majority vote in favor of an annual "say on pay" advisory vote for shareholders (first implemented by Verizon, but now required by statute) and a majority vote in favor of shareholder approval of excessive 'golden parachute' severance agreements, a policy that Mr. Jones has proposed strengthening in a proposal pending a vote at the 2013 Annual Meeting.

"The BellTel Retirees have demonstrated over and over again that a group of small but very engaged shareholders can reshape the compensation and governance policies of a corporate giant in a manner that benefits all company owners," Mr. Jones added.