The Director Compensation Project: Verizon Communications Inc.

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation.  We are for the most part including companies from 2011’s Fortune 500 and using information found in their 2011 proxy statements.

Nasdaq and the NYSE have similar rules with respect to director independence.  NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors.  A director does not qualify as “independent” if he or she has a “material relationship with the company.”  NYSE Rule 303A.02(a).  In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years.  NYSE Rule 303A.06 imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3).

 Independent directors are compensated for their service on the board.  The amount of compensation can be seen from examining the director compensation table from the Verizon Communications Inc. (NYSE: VZ) 2011 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Change in Pension Value and Non-qualified Deferred Compen-sation Earnings ($)	All Other Compensation ($)	Total ($)
Richard L. Carrión	95,000	130,000	5,493	0	230,493
Melanie L. Healey	9,083	124,143	0	0	133,226
M. Frances Keeth	103,000	130,000	0	0	233,000
Robert W. Lane	99,000	130,000	2,192	0	231,192
Sandra O. Moose	118,000	130,000	3,821	0	251,821
Joseph Neubauer	112,000	130,000	0	0	242,000
Donald T. Nicolaisen	128,000	130,000	0	0	258,000
Thomas H. O’Brien*	50,500	130,000	0	0	180,500
Clarence Otis, Jr.	103,000	130,000	3,758	0	236,758
Hugh B. Price	97,000	130,000	318	0	227,318
Rodney E. Slater	97,000	130,000	0	0	227,000
John W. Snow	95,000	130,000	0	0	225,000
John R. Stafford*	46,500	130,000	0	100,000**	276,500

* Mr. O’Brien and Mr. Stafford retired from the board in May 2011.

** This amount reflects the 2011 installment of a charitable contribution made on Mr. Stafford’s behalf through the NYNEX Charitable Giving Program that is discussed below.

Director Compensation.  During the 2011 fiscal year, Verizon Communications held thirteen board of directors meetings, including seven scheduled meetings and six special meetings. Each director attended at least 75% of the aggregate number of meetings of the board of directors, with an average attendance of 97%. The cash retainer awarded to the directors began at a flat fee of $85,000. In addition, Committee Chairpersons were awarded fees from $15,000 to $25,000, based on position held. Meeting fees of $2,000 were awarded for attendance of each board meeting or committee meeting not occurring the day before or the day of a regularly scheduled board meeting. Directors elected before 1992 were invited to participate in one of several charitable giving programs. The programs were contingent on either retirement or death, and resulted in contributions by either Verizon, NYNEX, or GTE of installment-based amounts ranging from maximums of $500,000 to $1,000,000. The GTE and NYNEX programs were funded by life insurance policies taken out for each participant.

Director Tenure. In 2011, Mr. Neubauer, a member of the board of directors since 1995, held the longest tenure. Mr. O’Brien and Mr. Stafford retired from the board in May of 2011. Mr. Carrión has served as a director at Verizon since 1997 and was a director at NYNEX from 1995-1997. The Corporate Governance and Policy Committee recommended each of the incumbent directors for re-election. Several directors also sit on other boards. For example, Mr. Lane is a director of the General Electric Company and Northern Trust Corporation, and a supervisory board member at BMW AG. Dr. Moose has served as a director at Verizon since 2000 and at GTE from 1978-2000. She is Chairperson of the Board of Trustees of Natixis Advisor Funds and Loomis Sayles Funds, and a director of the AES Corporation.

CEO Compensation.  Ivan G. Seidenberg, Verizon’s former Chairman and Chief Executive Officer, earned $26,455,107 in total compensation prior to stepping down August 1, 2011. He did not formally resign and retire until December 31, 2011. Lowell C. McAdam, Verizon’s current Chairman and Chief Executive Officer, earned $23,120,499 in total compensation in 2011. Mr. McAdam and Mr. Seidenberg were compensated an aggregate total of $339,695 in personal use of company vehicles and aircraft. The board approved a special one-time equity award to Mr. McAdam of a $7,000,000 Performance Share Unit and a $3,000,000 Restricted Stock Unit, in connection with his succession of Mr. Seidenberg as CEO. Daniel S. Mead, Executive Vice President, received $5,660,641 in total compensation in 2011. Mr. Mead was awarded $17,295 in financial planning services and personal travel expenses related to his spouse’s attendance at a business event.