UNITED STATES
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WASHINGTON, D.C. 20549
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VERIZON COMMUNICATIONS INC.
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Sustainability at Verizon Verizon gives people the ability to do more through technology, investments and actions designed to educate the 21st century workforce and promote environmental sustainability. SUSTAINABLE DEVELOPMENT We are taking action in support of the United Nations' Sustainable Development Goals: Improving Global Resource Efficiency Reducing Environmental Impact: Verizon is committed to delivering a lasting, positive impact on the environment by cutting our own carbon intensity - the amount of carbon our business emits divided by the terabytes of data we transport over our networks - in half over the 2016 baseline by 2025. Weve also working towards sourcing renewable energy equivalent to 50% of our total electricity usage by 2025. Supporting Carbon Abatement: Verizons products and services - ranging from high speed internet that allows people to work remotely, smart grids that increase the efficiency of our power system, to telematics that improve fleet routing - help our customers use less energy, and therefore create fewer greenhouse gas emissions. Reducing Waste and Supporting Recycling We continue to work to reduce the environmental impact of our products through: Managing the materials we use in making them Reducing packaging volume Recycling, refurbishing and/or reusing our products, including the responsible management of out of service lead batteries Providing recycling information on product labels, and supporting public recycling Verizon received an on the Carbon Disclosure Projects 2018 evaluation and is ranked in CDPs Leadership scoring band. CDP runs a global voluntary disclosure system by which companies and cities disclose their environmental impacts to inform marketplace decision-making. Verizon chairs the Global e-Sustainability Initiative a consortium of ICT companies that collaborate to develop and share resources for achieving social and environmental sustainability through technology.Sustainability at Verizon Verizon gives people the ability to do more through technology, investments and actions designed to educate the 21st century workforce and promote environmental sustainability. SUSTAINABLE DEVELOPMENT We are taking action in support of the United Nations' Sustainable Development Goals: Improving Global Resource Efficiency Reducing Environmental Impact: Verizon is committed to delivering a lasting, positive impact on the environment by cutting our own carbon intensity - the amount of carbon our business emits divided by the terabytes of data we transport over our networks - in half over the 2016 baseline by 2025. Weve also working towards sourcing renewable energy equivalent to 50% of our total electricity usage by 2025. Supporting Carbon Abatement: Verizons products and services - ranging from high speed internet that allows people to work remotely, smart grids that increase the efficiency of our power system, to telematics that improve fleet routing - help our customers use less energy, and therefore create fewer greenhouse gas emissions. Reducing Waste and Supporting Recycling We continue to work to reduce the environmental impact of our products through: Managing the materials we use in making them Reducing packaging volume Recycling, refurbishing and/or reusing our products, including the responsible management of out of service lead batteries Providing recycling information on product labels, and supporting public recycling Verizon received an on the Carbon Disclosure Projects 2018 evaluation and is ranked in CDPs Leadership scoring band. CDP runs a global voluntary disclosure system by which companies and cities disclose their environmental impacts to inform marketplace decision-making. Verizon chairs the Global e-Sustainability Initiative a consortium of ICT companies that collaborate to develop and share resources for achieving social and environmental sustainability through technology. Supporting Quality Education Through the Verizon Innovation Learning initiative, we provide free technology, free internet access and hands-on immersive curricula in science, technology, engineering and math to students in need.
Q & A with our CEO
Hans Vestberg |
Our companys very purpose is to connect people and enable their creativity and vision. We believe we can help bring people together across cultures and continents to solve important problems. |
Notice of Annual
Meeting of Shareholders
How to Vote
Shareholders as of the close of business on March 4,
2019,
If you are a registered shareholder, you may
vote online at
Important Notice Regarding Availability of Proxy Materials for Verizons Shareholder Meeting to be Held on May 2, 2019
The 2019 Proxy Statement and 2018 Annual Report are available at www.edocumentview.com/vz.
Verizon Communications Inc. 1095 Avenue of the Americas New York, New York 10036
March 18, 2019 By Order of the Board of Directors, William L. Horton, Jr. Senior Vice President, Deputy General Counsel and Corporate Secretary |
Time and Date
Thursday, May 2, 2019 8:45 a.m., local time
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Place
Rosen Shingle Creek 9939 Universal Boulevard Orlando, Florida 32819
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Items of Business
Elect the 10 Directors identified in the accompanying proxy statement
Ratify the appointment of the independent registered public accounting firm
Approve, on an advisory basis, Verizons executive compensation
Act on the shareholder proposals described in the proxy statement that are properly presented at the meeting
Consider any other business that is properly brought before the meeting |
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, so you should read the entire proxy statement before voting. For information regarding Verizons 2018 performance, please review Verizons 2018 Annual Report to Shareholders.
Our Strategy |
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Continued Network Leadership |
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Customer Driven Models | |||
Network as a Service
5G & Intelligent Edge Network |
Operating Model Based on Customer Needs
Company-wide Assets for New Applications & Services
Ecosystem Partnerships | |||||
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Trusted Brand |
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Financial Discipline | |||
Customer Trust & Innovation
Responsible Business Practices |
Balanced Capital Allocation
Best-In-Class Cost Models | |||||
Meeting Information
Date and Time May 2, 2019 at 8:45 a.m., local time
Place Rosen Shingle Creek, 9939 Universal Boulevard, Orlando, Florida
Record Date March 4, 2019
Admission and Voting Information can be found beginning on page 83
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Verizon 2019 Proxy Statement i
Proxy Summary
Corporate Governance Highlights
Corporate Governance Highlights
Shareholder Rights | ||
Majority Voting in Director Elections |
Verizons bylaws provide for the election of Directors by a majority of the votes cast in an uncontested election. This provision can only be changed by a majority vote of the shareholders.
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Call a Special Meeting |
Any shareholder owning at least 10% (or any group of shareholders owning at least 25%) of Verizons outstanding common stock may call a special meeting of shareholders. Our bylaws include requirements relating to special meetings.
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Proxy Access |
Any shareholder (or any group of up to 20 shareholders) owning at least 3% of Verizons outstanding common stock for at least three years may include a specified number of director nominees in our proxy materials for the annual meeting of shareholders.
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No Poison Pill |
Verizon does not have a shareholder rights plan, commonly referred to as a poison pill. Any shareholder rights plan adopted by our Board must be approved by shareholders within one year and then re-approved every three years.
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Ratify Executive Severance Agreements |
Shareholders must ratify any employment or severance agreement with an executive officer that provides for severance benefits exceeding 2.99 times the sum of the executives base salary plus non-equity incentive plan opportunity. This policy is described on page 50.
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Board Governance | ||
Director Independence |
Currently, 10 of our 12 Directors are independent, and the standards that our Board uses to assess independence are more stringent than those of the New York Stock Exchange (NYSE) or The Nasdaq Stock Market (Nasdaq). For more information about the independence of these 10 Directors, see Independence on page 7.
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Board Leadership |
Currently, the CEO serves as Chairman of the Board, in consultation with an independent Lead Director. You can read about the respective roles and responsibilities of the Chairman and the Lead Director, and why our Board believes Verizons shareholders are best served by this leadership structure, under Board Leadership on page 14.
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Limits on Board Service |
To ensure that our Directors have sufficient time to devote to their responsibilities on Verizons Board, our Corporate Governance Guidelines provide that Directors with full-time roles in for-profit businesses should serve on no more than three public company boards, and other Directors should serve on no more than four public company boards. Members of our Audit Committee should serve on no more than two other public company audit committees.
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Stock Ownership |
Within three years of their election, Directors must hold Verizon stock with a value equal to three times the cash component of the annual Board retainer. Share equivalents held in any deferral plan are included when calculating the number of shares held. Directors may not divest the share equivalents they receive upon joining the Board or in connection with their annual equity grant while they are serving on the Board.
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Director Retirement |
Directors must retire from the Board the day before the annual meeting of shareholders that follows their 72nd birthday. The size of the Board will be reduced by one for each such retirement.
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ii Verizon 2019 Proxy Statement
Proxy Summary
Executive Compensation Program Highlights
Executive Compensation Program Highlights
Our executive compensation program reflects Verizons commitment to industry-leading compensation and governance practices. The program is discussed in detail in the Compensation Discussion and Analysis beginning on page 29.
Objectives | Pay-for-Performance | |||
Align executives and shareholders interests |
Extensive focus on variable, incentive-based pay
No defined benefit pension or supplemental retirement benefits
No executive employment agreements
No cash severance benefits for the CEO
No tax gross-ups | |||
Attract, retain and motivate high-performing executives |
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Governance Leader |
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Year-round shareholder outreach |
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Shareholder approval policy for severance benefits |
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Significant executive share ownership requirements |
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Clawback policies |
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Anti-hedging policy |
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Say-on-pay advisory vote every year |
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Independent compensation consultant |
2018 Compensation
The summary below shows the 2018 compensation for each of our named executive officers, as required to be reported in the Summary Compensation table pursuant to U.S. Securities and Exchange Commission (SEC) rules. Please see the notes accompanying the Summary Compensation table beginning on page 52 for more information.
Name and Principal Position | Salary $ |
Bonus $ |
Stock Awards $ |
Option Awards $ |
Non-Equity Incentive Plan Compensation $ |
Change in Pension Value and Nonqualified Deferred Earnings $ |
All Other Compensation $ |
Total $ |
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Hans Vestberg* |
1,235,385 | 1,000,000 | 16,600,082 | 0 | 2,752,250 | 0 | 618,369 | 22,206,086 | ||||||||||||||||||||||||
Chairman and Chief Executive
Officer |
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Matthew Ellis |
792,307 | 0 | 4,800,020 | 0 | 1,308,000 | 0 | 160,349 | 7,060,676 | ||||||||||||||||||||||||
Executive Vice President
and Chief Financial Officer |
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K. Guru Gowrappan** |
603,448 | 1,999,998 | 8,695,827 | 0 | 1,020,000 | 0 | 433,665 | 12,752,938 | ||||||||||||||||||||||||
Executive Vice President and CEO Verizon Media Group
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Marc Reed |
821,154 | 0 | 4,950,064 | 0 | 1,348,875 | 0 | 232,377 | 7,352,470 | ||||||||||||||||||||||||
Executive Vice President and
Chief Administrative Officer |
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Ronan Dunne |
846,154 | 0 | 4,250,008 | 0 | 1,389,750 | 0 | 228,214 | 6,714,126 | ||||||||||||||||||||||||
Executive Vice President and
President Verizon Consumer Group |
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Lowell McAdam* |
1,661,538 | 0 | 12,000,050 | 0 | 4,360,000 | 0 | 616,279 | 18,637,867 | ||||||||||||||||||||||||
Former Chairman and Chief
Executive Officer |
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John Stratton*** |
1,260,962 | 0 | 6,600,052 | 0 | 1,798,500 | 0 | 5,987,338 | 15,646,852 | ||||||||||||||||||||||||
Former Executive Vice President and President Global Operations
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Timothy Armstrong** |
1,193,750 | 0 | 3,150,081 | 0 | 1,680,000 | 0 | 6,465,111 | 12,488,942 | ||||||||||||||||||||||||
Former Executive Vice President and President and CEO Oath
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* | Mr. Vestberg became Chief Executive Officer of Verizon on August 1, 2018, and Chairman on March 8, 2019, when Mr. McAdam stepped down from those positions. Mr. McAdam retired from Verizon on December 31, 2018. |
** | Mr. Gowrappan was hired as President and COO of Verizons Media Group (formerly known as Oath) on April 9, 2018 and became Executive Vice President and CEO of the Media Group on October 1, 2018, when Mr. Armstrong stepped down from that position. Mr. Armstrong remained as strategic advisor to Verizon until he left the Company on December 31, 2018. |
*** | Mr. Stratton stepped down as Executive Vice President and President Global Operations on June 7, 2018 and remained as strategic advisor to Verizon until he retired from the Company on December 31, 2018. |
Verizon 2019 Proxy Statement iii
Proxy Summary
Board Diversity and Experience
The Verizon Board embodies a range of viewpoints, backgrounds and expertise because we believe that diversity is a critical element of a well-functioning board.
Board Diversity and Experience*
Current/Former CEO Public Board Service Accounting/Finance Risk Management Strategic Planning Operational Technology/IT/Telecoms Consumer/Customer Experience Women Hispanic/African American
Board Tenure*
* | As of March 18, 2019 |
Average Tenure: 7.7 years Median Tenure: 6.8 years Average Age* 62 1 50-55 years 3 56-60 years 5 61-65 years 3 66-72 years
iv Verizon 2019 Proxy Statement
Proxy Summary
Agenda and Voting Recommendations
Agenda and Voting Recommendations
Item 1 Election of Directors
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The Board of Directors recommends that you vote FOR the election of these Director candidates.
Shareholders are being asked to elect 10 Directors. Verizons Directors are elected for a term of one year by a majority of the votes cast in an uncontested election. Additional information about the Director candidates and their respective qualifications begins on page 5.
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Committee Membership* | ||||||||||||||||||||||
Name | Age* | Director Since |
Primary Occupation | Independent | Audit | Corporate Governance and Policy |
Finance | Human Resources | ||||||||||||||
Shellye L. Archambeau |
56 | 2013 |
Former Chief Executive Officer, MetricStream, Inc. |
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Mark T. Bertolini |
62 | 2015 | Former Chairman and Chief Executive Officer, Aetna Inc. |
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Vittorio Colao |
57 | | Former Chief Executive, Vodafone Group Plc |
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Melanie L. Healey |
57 | 2011 | Former Group President of The Procter & Gamble Company |
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Clarence Otis, Jr. Lead Director |
62 | 2006 | Former Chairman and Chief Executive Officer, Darden Restaurants, Inc. |
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Daniel H. Schulman |
61 | 2018 | President and Chief Executive Officer, PayPal Holdings, Inc. |
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Rodney E. Slater |
64 | 2010 | Partner, Squire Patton Boggs LLP |
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Kathryn A. Tesija |
56 | 2012 | Former Executive Vice President and Chief Merchandising and Supply Chain Officer, Target Corporation | |||||||||||||||||||
Hans Vestberg Chairman |
53 | 2018 | Chairman and Chief Executive Officer, Verizon Communications Inc. |
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Gregory G. Weaver |
67 | 2015 | Former Chairman and Chief Executive Officer, Deloitte & Touche LLP |
* | Ages and Committee memberships are as of March 18, 2019 |
Committee Chair Audit Committee Financial Expert |
Verizon 2019 Proxy Statement v
Proxy Summary
Agenda and Voting Recommendations
Item 2 Ratification of Auditors
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The Board of Directors recommends that you vote FOR ratification.
We are asking shareholders to ratify the Audit Committees appointment of Ernst & Young LLP as Verizons independent registered public accounting firm for 2019. Information on fees paid to Ernst & Young in 2018 and 2017 appears on page 26.
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Item 3 Advisory Vote to Approve Executive Compensation
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The Board of Directors recommends that you vote FOR this proposal.
We are asking shareholders to approve, on an advisory basis, the compensation of our named executive officers as described in the Compensation Discussion and Analysis and Compensation Tables beginning on page 29.
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Items 4-8 Shareholder Proposals
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The Board of Directors recommends that you vote AGAINST each of the shareholder proposals.
In accordance with SEC rules, we have included in this proxy statement proposals submitted by shareholders for consideration. The proposals can be found beginning on page 73.
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vi Verizon 2019 Proxy Statement
Proxy Statement
We are mailing this proxy statement to our shareholders beginning on March 18, 2019. It is also available online at www.edocumentview.com/vz or, if you are a registered holder, at www.envisionreports.com/vz. Our Board of Directors is soliciting proxies in connection with the 2019 Annual Meeting of Shareholders and encourages you to read this proxy statement and vote your shares promptly.
Our Board and Principles of Good Governance
We believe that good governance starts with independent, effective and diverse Board leadership. Our Board is one of Verizons most critical strategic assets. As such, the composition of the Board evolves along with our strategic needs for the future. We believe we are more likely to achieve sustainable shareholder value when our Board has the right mix of skills, expertise and tenure. In carrying out its responsibilities, the Board abides by certain guiding principles with regard to its own composition and most essential duties principles our shareholders have expressed to us that they believe are fundamental to our Companys success.
Diversity. A board with a diverse set of viewpoints, backgrounds and expertise is best positioned to provide broad perspectives to our management team as it assesses the challenges and opportunities impacting our business. A diverse board is more likely to consider a broader range of possibilities and help management achieve better outcomes. Diversity is one critical element of board composition that Verizon has focused on over the years in our refreshment and succession planning processes, as well as in our Board leadership structure. Women comprise one-third of our current Board.
Strategy and risk oversight. We recognize that our shareholders rely on our Directors to oversee Verizons strategy for realizing opportunities and mitigating risks. As management navigates a rapidly changing competitive landscape, it is the Boards duty to ensure that management is executing on the Companys strategic plan, addressing emerging challenges and disruptions, and promoting innovation. At the same time, Directors must satisfy themselves that the risk management policies and procedures designed and implemented by management are consistent with the Companys strategy and risk appetite, that these policies and procedures are functioning as intended, and that necessary steps are taken to create a culture of risk-aware decision making throughout the organization. Through its oversight role, the Board sends a message to management that risk management is not an impediment to the conduct of business, but is instead an integral component of strategy, culture and business operations.
Engagement. Our Board welcomes the opportunity to develop an understanding of shareholder perspectives on our Company and to foster long-term relationships with our shareholders. Our Directors understand that our investors want to hear from them on their thinking on a range of topics not just limited to the shareholder proposals we receive during proxy season. In 2018, our Board discussed with shareholders long-term strategy oversight, CEO succession, sustainability and corporate responsibility, Board composition and refreshment, the relationship between our compensation program and our long-term strategy, and transparency into Board practices and priorities.
Verizon 2019 Proxy Statement 1
Governance
Governance Framework
The Board conducts its oversight responsibilities through four standing committees: Audit, Corporate Governance and Policy, Finance, and Human Resources. Each committee has a written charter that defines its specific responsibilities. The committees are discussed beginning on page 16.
The Corporate Governance and Policy Committee ensures that the membership, structure, policies and practices of our Board and its committees promote the effective exercise of the Boards role in the governance of Verizon. In addition, our Corporate Governance Guidelines provide a framework for the Boards operations and address key governance practices. The Corporate Governance and Policy Committee monitors best practices and developments in corporate governance, considers the views of Verizons shareholders, and periodically recommends changes to the Boards policies and practices, including the Guidelines.
Where to Find More Information on Governance at Verizon |
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You can find Verizons Corporate Governance Guidelines, Code of Conduct and other corporate governance materials, including Verizons certificate of incorporation, bylaws, committee charters and policies, on the Corporate Governance section of our website at www.verizon.com/about/investors. You can request copies of these materials from the Assistant Corporate Secretary at the address given under Contacting Verizon.
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We are committed to operating with the highest level of integrity, responsibility and accountability. To that end, we have adopted a Code of Conduct that applies to all employees, including the CEO, the Chief Financial Officer and the Controller. The Code of Conduct describes each employees responsibility to conduct business with the highest ethical standards and provides guidance about preventing, reporting and remediating potential compliance violations in key areas. Directors are expected to act in the spirit of the Code of Conduct, and to comply with the specific ethical provisions of the Corporate Governance Guidelines. Our Board is strongly predisposed not to waive any of these business conduct and ethics provisions for executive officers or Directors. In the unlikely event of a waiver, we will promptly disclose the Boards action on our website.
The Board has adopted the Related Person Transaction Policy that is included in the Guidelines. The Corporate Governance and Policy Committee reviews transactions between Verizon and any of our Directors or executive officers or members of their immediate families to determine if any participants have a material interest in the transaction. If the Committee determines that a material interest exists, based on the facts and circumstances of each case, the Committee may approve, disapprove, ratify or cancel the transaction or recommend another course of action. Any Committee members who are involved in a transaction under review do not participate in the Committees deliberations.
From time to time Verizon has employees who are related to our executive officers or Directors. Mr. McAdam, who served as CEO until August 1, 2018 and as Executive Chairman from that time until December 31, 2018, has a child who is employed by a Verizon subsidiary and earned approximately $144,000 in 2018. Mr. Stratton, who served as Executive Vice President and President Global Operations until June 7, 2018 and as Executive Vice President from that time until December 31, 2018, has a child who is employed by a Verizon subsidiary and earned approximately $245,000 in 2018, and an in-law who is employed by a Verizon subsidiary and earned approximately $209,000 in 2018. In each case, the amount of compensation earned was comparable to that of other employees in similar positions. These employees also participate in Verizons welfare and benefit plans that are made available to all employees.
2 Verizon 2019 Proxy Statement
Governance
Corporate Responsibility and Board Oversight
Verizon is delivering the promise of the digital world by enabling people, businesses and society to
innovate
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and Board Oversight
At its core, our business connects people with each other and the world around them. Our technology powers connections that enable people to do amazing things. That is why we are committed to helping our customers turn innovative ideas into reality and help build a brighter future. Verizon is ever conscious of our global impact. Our Corporate Responsibility Report discusses our programs and practices designed to promote ethical business practices, good corporate governance, and the well-being and health of our environment, employees, customers and communities. The Report and other information on Verizons commitment to responsibility and sustainability are posted on our website at www.verizon.com/about/responsibility.
Our Board recognizes the importance of our corporate responsibility and sustainability policies and practices and the need to provide effective oversight in these areas. Our Corporate Governance and Policy Committee maintains formal oversight responsibilities by periodically reviewing Verizons position and engagement on important public policy issues that may affect our business and reputation, including those relating to corporate responsibility, sustainability, political contributions, lobbying activities and others, and reports to the full Board on these matters. The Committee also formally reviews the state of corporate responsibility at Verizon with our Chief Corporate Responsibility Officer each year.
In 2018, Verizon established a new management body called the Responsible Business Council, chaired by the CEO, to oversee the integration of responsible practices as a core operating principle. Mr. Vestberg believes that a corporation that is purposefully operating at the intersection of economic, environmental and societal accountability creates greater long-term value for its shareholders. The Chief Corporate Responsibility Officer reports on the Councils activities to the full Board at least annually. |
Diversity and Inclusion
At Verizon, we understand that our success as a company is grounded in a respect for and encouragement of diverse viewpoints. In order to connect people across the world, we know we need to tap into the diversity of thoughts, capabilities, background and cultures among our team members, suppliers and customers. We are committed to diversity and equality in all areas of our business, including hiring and compensation. Since Verizon was founded, our Human Resources Committee has included a diversity target as one of the performance measures for employees short-term incentive awards. As a company, we believe in pay equity. Toward that end, we have adopted a Pay Equity Commitment that can be found on our website at www.verizon.com/about/our-company/company-policies. As part of this commitment, Verizon pledges to identify and promote best practices in compensation, hiring, promotion and career development; to develop strategies to reduce unconscious bias; and to make hiring, promotion and compensation decisions that promote pay equity.
Verizon 2019 Proxy Statement 3
Governance
Corporate Responsibility and Board Oversight
Human Rights
Support for universal human rights has long been and will continue to be a core value and a significant part of the way in which Verizon conducts business. In 2009, Verizon committed to respecting human rights as defined in foundational instruments such as the Universal Declaration of Human Rights. Our commitments to human rights are formally expressed in our Credo, our Code of Conduct, our Human Rights Policy and our Supplier Code of Conduct. Verizon strives to create an environment of respect, integrity and fairness for our employees and customers wherever we do business, and we expect our business partners to operate the same way. Verizons Human Rights Policy is consistent with the spirit and intent of widely recognized international human rights principles, including those enshrined in the Universal Declaration of Human Rights. Our Supplier Code of Conduct mandates that our partners and suppliers, both locally and globally, conduct their operations not only in compliance with applicable laws but in an ethically responsible manner. Verizons Board of Directors oversees our policies relating to human rights as well as ethical issues with regard to our suppliers.
In order to support our efforts to operate in accordance with these standards, Verizon has launched a Business & Human Rights Program. This Program, which is based on an initiative created ten years ago at Yahoo prior to our acquisition of that company, strives to systematically embed human rights considerations into responsible business decision-making processes across the company. Critically, this work is informed by engagement with external networks and experts from around the globe.
Environmental
At every level of Verizon from the way we operate our business to how we develop our products and services to how we pay our employees we work to minimize our environmental impact. We measure our progress by tracking our carbon intensity the amount of carbon our business emits divided by the terabytes of data we transport over our networks. Our current goal is to reduce our carbon intensity by 50% over the 2016 baseline by 2025, even as we grow our business. We intend to accomplish this through network upgrades and investing in renewable sources of energy. We now generate over 22 megawatts of green energy in the United States every year, and our goal is to implement an additional 24 MW of green energy at on-site locations by 2025. We are working towards sourcing renewable energy equivalent to 50% of our total electricity usage by 2025. Verizon is one of the few companies in our peer group that includes a sustainability target as one of the performance measures for management employees short-term incentive compensation awards. The Human Resources Committee has used a sustainability metric for compensation purposes since 2014.
4 Verizon 2019 Proxy Statement
Verizons Directors are elected annually for a term of one year. We believe annual elections are consistent with good corporate governance because they foster director accountability and increase shareholder confidence. Verizons bylaws require Directors to be elected by a majority of the votes cast in an uncontested election.
The Corporate Governance and Policy Committee considers and recommends candidates for our Board. The Committee reviews all nominations submitted to Verizon, including individuals recommended by shareholders, Directors or members of management. The Committee also retains executive search firms from time to time to help identify and evaluate potential candidates.
Any shareholder who wishes to recommend a Director candidate to the Committee for its consideration should write to the Assistant Corporate Secretary at the address given under Contacting Verizon. A recommendation for a Director candidate should include the candidates name, biographical data and a description of the candidates qualifications in light of the requirements described below. If we make any material changes to the Committees procedure for considering and nominating candidates, we will file a report with the SEC and post the information on the Corporate Governance section of our website at www.verizon.com/about/investors.
The Committee specifically reviews the qualifications of each candidate for election or re-election. For incumbent Directors, this review includes the Directors understanding of Verizons businesses and the environment within which Verizon operates, attendance and participation at meetings, and independence. After the Committee evaluates all candidates for Director, it presents its recommendation to the Board. The Committee also discusses with the Board any candidates who were considered by the Committee but not recommended for election or re-election.
Before they are nominated, each candidate for election and each incumbent Director standing for re-election must consent to stand for election or re-election and provide certain representations required under Verizons bylaws. Each candidate who is standing for election must also submit an irrevocable resignation, which will only become effective if (i) our Board or any Committee determines that any of the required representations were untrue in any respect or (ii) the candidate does not receive a majority of the votes cast at the annual meeting of shareholders and the independent members of our Board decide to accept the resignation. Any decision about a resignation following an incumbent Directors failure to obtain a majority of the votes cast will be disclosed within 90 days after the election results are certified.
Shareholders wishing to nominate a Director should follow the procedures set forth in Verizons bylaws and summarized on page 87.
Director Criteria, Qualifications and Experience
To be eligible for consideration, any proposed candidate must:
| Be ethical |
| Have proven judgment and competence |
| Have professional skills and experience in dealing with a large, multi-faceted organization or in dealing with complex problems that complement the background and experience already represented on our Board and that meet Verizons needs |
Verizon 2019 Proxy Statement 5
Item 1: Election of Directors
Director Criteria, Qualifications and Experience
| Have demonstrated the ability to act independently and be willing to represent the interests of all shareholders and not just those of a particular philosophy or constituency |
| Be willing and able to devote sufficient time to fulfill responsibilities to Verizon and our shareholders |
Our Boards commitment to refreshment and succession planning is at the core of its ability to maintain independence of thought and action. Key factors the Committee considers when nominating Directors and refreshing the Board include:
| Diversity The Committee recognizes that a diverse set of viewpoints and practical experiences enhances the effectiveness of our Board. In evaluating candidates, the Committee considers how a candidates particular background, experience, qualifications, attributes and skills may complement, supplement or duplicate those of other prospective candidates. |
| Experience The Committee strives to maintain a Board with a wide range of leadership experience and skills relevant to Verizons strategic vision. |
| Age and tenure Under the Corporate Governance Guidelines, a Director must retire from the Board the day before the annual meeting of shareholders that follows his or her 72nd birthday. The Committee also considers the tenure of each incumbent Director and the average tenure of the Board in an effort to maintain a Board that balances the fresh perspective and ideas of newer Directors with the deep insight into the Company that longer tenured Directors have developed. |
| Board size The Committee periodically evaluates whether to change the size of the Board based on the Boards needs and the availability of qualified candidates. |
| Board dynamics The Committee considers each Director candidates individual contribution or potential contribution to the Board as a whole and strives to maintain one hundred percent active and collaborative participation. |
Board Diversity and Experience*
* | As of March 18, 2019 |
9 Current / Former CEO 11 Operational 11 Strategic Planning 5 Hispanic / African American 6 Risk Management 4 Women 5 Accounting / Finance 8 Consumer / Customer Experience 12 Public Board Service 4 Technology / IT / Telecoms
6 Verizon 2019 Proxy Statement
Item 1: Election of Directors
Independence
Board Tenure*
Average Tenure: 7.7 years Median Tenure: 6.8 years Average Age* 62 1 50-55 years 3 56-60 years 5 61-65 years 3 66-72 years
* | As of March 18, 2019 |
Verizons Corporate Governance Guidelines establish standards for evaluating Director independence and require that a substantial majority of the Directors be independent. The Board determines the independence of each Director under NYSE and Nasdaq governance standards, as well as the more stringent standards included in the Guidelines. These standards identify the types of relationships that, if material, could impair independence, and fix monetary thresholds at which the relationships are considered to be material. The Guidelines are available on the Corporate Governance section of our website at www.verizon.com/about/investors. The Corporate Governance and Policy Committee conducts an annual review of any relevant business relationships that each Director may have with Verizon and reports its findings to the full Board. Based on the Committees recommendation, the Board has determined that all of the non-employee Director candidates are independent: Ms. Archambeau, Mr. Bertolini, Mr. Colao, Ms. Healey, Mr. Otis, Mr. Schulman, Mr. Slater, Ms. Tesija and Mr. Weaver. The Board also determined that Mr. Carrión and Ms. Keeth, who are not standing for re-election, Dr. Kley, who served as a Director until May 3, 2018, and Mr. Wasson, who served as a Director until October 1, 2018, were independent.
The employers or former employers of Mr. Bertolini, Mr. Schulman and Mr. Slater all made payments to Verizon for telecommunications services and solutions during 2018. In addition, Verizon made payments to Mr. Schulmans employer for processing fees relating to payments to and from our customers in connection with Verizon Wireless services and devices, and to Mr. Bertolinis former employer under an administrative services contract for employee healthcare benefits. Applying the independence standards above, the Board considered the foregoing payments and determined that these general business transactions and relationships are not material and did not impair the ability of the applicable Directors to act independently.
Verizon 2019 Proxy Statement 7
Item 1: Election of Directors
Nominees for Election
Our Board has nominated the 10 candidates below for election as Directors. Except for Mr. Colao, who was known to the Company as a result of his tenure on the Verizon Wireless Board of Representatives, all of the candidates currently serve as Directors of Verizon. Mr. Schulman was appointed to the Board in September 2018 as an independent Director and was identified by an executive search firm retained by the Company. After completing the evaluation process described above, the Corporate Governance and Policy Committee and our Board concluded that these candidates should be nominated for election or re-election, as the case may be. We describe their respective experience, qualifications, attributes and skills below. The Committee and the Board assessed these factors in light of Verizons strategy and businesses, which provide a broad array of communications, information and entertainment products and services to individuals, businesses, governments and wholesale customers in the United States and around the world.
Each candidate has consented to stand for election, and we do not anticipate that any candidate will be unavailable to serve. If any candidate were to become unavailable before the election, the proxy committee could vote the shares it represents for a substitute named by the Board.
Each candidate has submitted an irrevocable, conditional letter of resignation that our Board will consider if that candidate fails to receive a majority of the votes cast.
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The Board of Directors recommends that you vote FOR the election of these Director candidates.
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8 Verizon 2019 Proxy Statement
Item 1: Election of Directors
Nominees for Election
Independent Director since: 2013
Age: 56
Committees: Audit Corporate Governance and Policy (Chair)
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Independent Director since: 2015
Age: 62
Committees: Finance (Chair) Human Resources
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Ms. Archambeau is the former Chief Executive Officer of MetricStream, Inc., a leading provider of governance, risk, compliance and quality management solutions to corporations across diverse industries. She served in this role from the time she joined MetricStream in 2002 until 2018. Prior to that, Ms. Archambeau served as Chief Marketing Officer and Executive Vice President of Sales for Loudcloud, Inc., Chief Marketing Officer of NorthPoint Communications, and President of Blockbuster Inc.s e-commerce division. Before she joined Blockbuster, she held domestic and international executive positions during a 15-year career at IBM. Ms. Archambeau has served as a director of Okta, Inc. since December 2018, Roper Technologies, Inc. since April 2018 and Nordstrom, Inc. since 2015. She also served as a director of Arbitron, Inc. from 2006 to 2013.
Qualifications: Ms. Archambeau provides the Board with valuable knowledge of technology, e-commerce, digital media and communications platforms. Her experiences in the Silicon Valley emerging company community, as well as her prior experience at IBM, provide her with global perspectives on developing and marketing emerging technology applications and solutions.
Other Public Company Boards: Nordstrom, Inc. Okta, Inc. Roper Technologies, Inc.
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Mr. Bertolini is the former Chairman and Chief Executive Officer of Aetna Inc., a Fortune 100 diversified healthcare benefits company. He served as Aetnas CEO from 2010 to 2018, as Chairman from 2011 to 2018, and as President from 2007 to 2010, where he was responsible for all of Aetnas businesses and operations across the companys range of healthcare products and related services. He also served as Executive Vice President and head of Aetnas regional businesses. Mr. Bertolini joined Aetna in 2003 as head of Aetnas Specialty Products after holding executive positions at Cigna, NYLCare Health Plans and SelectCare, Inc. Mr. Bertolini has served as a director of CVS Health Corporation since November 2018.
Qualifications: Mr. Bertolinis experience at a large, multinational corporation provides the Board with valuable operational and management expertise, as well as critical perspective on strategic planning. His experience as Chairman and CEO of Aetna provides the Board with additional insights into the healthcare industry.
Other Public Company Boards: CVS Health Corporation |
Verizon 2019 Proxy Statement 9
Item 1: Election of Directors
Nominees for Election
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Independent Director nominee
Age: 57
Mr. Colao is the former Chief Executive of Vodafone Group Plc, a global mobile communications company. He served in this role from 2008 to October 2018. During his long tenure with the Vodafone Group beginning in 1999, Mr. Colao held numerous executive positions, including serving as the Regional Chief Executive Officer for Southern Europe, Middle East and Africa. He left the company in 2004 to serve as Chief Executive Officer of RCS MediaGroup, a leading Italian publishing company. Mr. Colao rejoined the Vodafone Group in 2006 as Deputy Chief Executive and Chief Executive, Europe and was appointed to the Vodafone Board. Mr. Colao has served as a director of Unilever since 2015.
Qualifications: Mr. Colao provides the Board with a valuable global perspective on the telecommunications industry, as well as extensive related operational and capital allocation experience. He has unique insight into Verizons wireless business as a result of his five-year tenure on the Verizon Wireless Board of Representatives when Verizon Wireless was still a joint venture between Vodafone and the Company.
Other Public Company Boards: Unilever PLC and Unilever N.V.
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Independent Director since: 2011
Age: 57
Committees: Corporate Governance and Policy Human Resources
Ms. Healey is the former Group President of The Procter & Gamble Company, one of the leading providers of branded consumer packaged goods. She served in this role from 2007 to 2015. During her tenure at Procter & Gamble beginning in 1990, Ms. Healey held a number of positions of responsibility, including Group President and advisor to the Chairman and CEO, Group President of North America and Group President for the Global Feminine and Health Care Sector. Ms. Healey has served as a director of Hilton Worldwide Holdings Inc. since 2017, PPG Industries, Inc. since 2016 and Target Corporation since 2015.
Qualifications: Ms. Healey provides the Board with valuable strategic, branding, distribution and operating experience on a global scale obtained over her 32-year career in the consumer goods industry. Her deep experience in marketing and operations, including her 18 years outside the United States, provides the Board with strategic and operational leadership and critical insights into brand building and consumer marketing trends globally.
Other Public Company Boards: Hilton Worldwide Holdings Inc. PPG Industries, Inc. Target Corporation
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10 Verizon 2019 Proxy Statement
Item 1: Election of Directors
Nominees for Election
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Independent Director since: 2006
Age: 62
Committees: Audit Finance Human Resources
Mr. Otis is the former Chairman and Chief Executive Officer of Darden Restaurants, Inc., the largest company-owned and operated full-service restaurant company in the world. He served as CEO of Darden Restaurants from 2004 to 2014 and as Chairman from 2005 to 2014. After joining Darden in 1995 as Vice President and Treasurer, Mr. Otis served in a number of positions of responsibility, including Chief Financial Officer, Executive Vice President, and President of Smokey Bones Barbeque & Grill, a restaurant concept formerly owned and operated by Darden. Mr. Otis also served as a director of the Federal Reserve Bank of Atlanta from 2010 to 2015. He has served as a director of The Travelers Companies, Inc. since 2017 and VF Corporation since 2004. He has also been a director of 138 funds within the MFS Mutual Funds complex since 2017.
Qualifications: Mr. Otis provides the Board with valuable insight into consumer services, retail operations and financial oversight. His experience over his 20 years at Darden Restaurants provides him with critical perspectives on operations, strategy and management of a complex organization and a large-scale workforce, and his board service at the Federal Reserve Bank of Atlanta and The Travelers Companies provides extensive risk management expertise.
Other Public Company Boards: The Travelers Companies, Inc. VF Corporation MFS Mutual Funds
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Independent Director since: 2018
Age: 61
Committees: Human Resources (Chair)
Mr. Schulman is President and Chief Executive Officer of PayPal Holdings, Inc., a leading online payments company. He has served in this role since 2015, and served as President and CEO-Designee of PayPal from 2014 to 2015. Prior to this, Mr. Schulman was Group President of the Enterprise Group at American Express Company from 2010 to 2014. He was President of the Prepaid Group at Sprint Nextel Corporation from 2009 to 2010 following its acquisition of Virgin Mobile USA, Inc., where he was the companys founding CEO beginning in 2001. Earlier in his career, Mr. Schulman was President and CEO of Priceline Group, Inc., and held various positions of responsibility during an 18-year career at AT&T, Inc., including President of the Consumer Markets Division. He has served as a director of PayPal since 2015 and as a director and independent chairman of the board of Symantec Corporation since 2000 and 2013, respectively. He also served as a director of FLEX LTD. from 2009 to 2018.
Qualifications: Mr. Schulmans role as CEO of PayPal and as founding CEO of Virgin Mobile provide the Board with extensive experience in mobile technology and innovation, as well as critical perspectives on business development and strategy. In addition, his leadership experience in the wireless and telecommunications sectors and cybersecurity arena provides the Board with critical industry perspectives on Verizons business, challenges and opportunities.
Other Public Company Boards: PayPal Holdings, Inc. Symantec Corporation
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Verizon 2019 Proxy Statement 11
Item 1: Election of Directors
Nominees for Election
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Independent Director since: 2010
Age: 64
Committees: Corporate Governance and Policy Human Resources
Mr. Slater has been a Partner at the law firm Squire Patton Boggs LLP since 2001 practicing in the areas of transportation, infrastructure and public policy. Previously, Mr. Slater served as the U.S. Secretary of Transportation from 1997 to 2001 and as the Administrator of the Federal Highway Administration from 1993 to 1997. Mr. Slater has served as a director of Kansas City Southern since 2001. He also served as a director of Transurban Group from 2009 to 2018 and Atkins plc from 2011 to 2014.
Qualifications: Mr. Slater has substantial regulatory and public policy experience at the federal and state levels. Mr. Slater provides the Board with valuable insights on public policy issues and leadership on matters involving multiple stakeholders. He also provides the Board with perspectives on strategic partnerships and legal issues.
Other Public Company Boards: Kansas City Southern
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Independent Director since: 2012
Age: 56
Committees: Audit Corporate Governance and Policy
Ms. Tesija is the former Executive Vice President and Chief Merchandising and Supply Chain Officer of Target Corporation, the second largest discount retailer in the United States. She served in this role from 2008 to 2015. During her tenure at Target beginning in 1986, Ms. Tesija served in numerous positions of responsibility, including Director, Merchandise Planning, Senior Vice President, Hardlines Merchandising, and Strategic Advisor. Ms. Tesija has served on the board of Woolworths Group Limited since 2016.
Qualifications: Ms. Tesija provides the Board with valuable large-scale global merchandising and supply chain experience, as well as operational perspectives and strategic planning expertise. Her tenure as an executive at Target Corporation provides the Board with additional insights into the retail industry and consumer behavior.
Other Public Company Boards: Woolworths Group Limited
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12 Verizon 2019 Proxy Statement
Item 1: Election of Directors
Nominees for Election
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Director since: 2018
Age: 53
Mr. Vestberg is Chairman and Chief Executive Officer of Verizon Communications Inc. Prior to assuming the role of CEO in August 2018 and the role of Chairman in March 2019, Mr. Vestberg served as Executive Vice President, President Global Networks and Chief Technology Officer of Verizon from 2017, where he was responsible for developing the architecture for Verizons fiber-centric networks. Before joining Verizon in 2017, Mr. Vestberg served as President and Chief Executive Officer of Ericsson, a multinational networking and telecommunications equipment and services company, from 2009 and as Chief Financial Officer from 2007. He held various other positions of responsibility at Ericsson after joining the company in 1991. Mr. Vestberg also served as Vice Chairman of Hexagon AB from 2017 to 2018.
Qualifications: Mr. Vestberg provides the Board with extensive experience in numerous areas of the telecommunications industry, as well as critical global perspectives developed while holding leadership positions on four continents while at Ericsson. As CEO of Verizon, he provides the Board with in-depth knowledge of Verizons business and industry, as well as its challenges and opportunities.
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Independent Director since: 2015
Age: 67
Committees: Audit (Chair) Finance
Mr. Weaver was Chairman and Chief Executive Officer of Deloittes audit and enterprise risk services firm, Deloitte & Touche LLP, from 2012 to 2014 and from 2001 to 2005. From 2006 to 2012, he served on the board of directors of Deloittes U.S. organization and on its Governance, Compensation and Succession Committees. During Mr. Weavers 40 years of experience at Deloitte, including 30 years as a partner, he served as lead client service partner, audit partner and advisory partner for several of Deloitte & Touches largest clients. Mr. Weaver has served on the board of trustees of the Goldman Sachs Trust since 2015.
Qualifications: Mr. Weaver provides the Board with significant expertise in the areas of public accounting, risk management and related regulatory matters, which he developed over a long career with a leading audit firm. He also brings to the Board valuable experience with the operational and governance issues faced by a large, complex organization like Verizon.
Other Public Company Boards: Goldman Sachs Trust
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Verizon 2019 Proxy Statement 13
Verizons governance framework provides the Board with the flexibility to select the appropriate Board leadership structure for the Company. In making this leadership structure determination, the Board considers many factors, including the specific needs of the business and the long-term interests of our shareholders. We have historically combined the roles of Chairman and Chief Executive Officer, and our Board has been satisfied that a combined Chairman and CEO structure has served our shareowners well over time.
In June 2018, the Board elected Mr. Vestberg to succeed Mr. McAdam as CEO effective August 1, 2018, and appointed him to the Verizon Board. In order to facilitate an orderly succession plan, Mr. McAdam was appointed to continue to lead the Board as a non-independent Chairman. Given the dynamic and competitive environment in which Verizon operates, the Board believes that Verizon and our shareholders are best served by a Chairman who has broad and deep knowledge of our industry and the vision, energy and experience to position Verizon as the leader of transformational change in the communications ecosystem. Based on these considerations, when Mr. McAdam informed the Board of his decision to not stand for re-election, the Board determined that Mr. Vestberg was best qualified to serve in the role of Chairman.
To maintain an appropriate level of independent checks and balances in its governance, and consistent with the Corporate Governance Guidelines, the independent members of the Board have elected an independent Lead Director who has the authority to call Board meetings and executive sessions. Clarence Otis, Jr. currently serves as Lead Director. Any shareholder or interested party may communicate directly with the Lead Director.
All Directors play an active role in overseeing Verizons business at both the Board and committee level. Every Director may review the agenda for each Board and committee meeting in advance and can request changes. In addition, all Directors have unrestricted access to the Chairman and the senior leadership team at all times.
The Board believes that shareholders are best served by this current leadership structure because it features an independent Lead Director who provides independent and objective oversight and who can express the Boards positions in a forthright manner, as well as independent Directors who are fully involved in the Boards operations and decision making. |
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Lead Director Responsibilities
Chairs executive sessions, including those held to evaluate the CEOs performance and compensation
Chairs any meeting of the Board if the Chairman is not present
Calls Board meetings and executive sessions as needed
Approves the schedule and agenda for all Board meetings, in consultation with the Chairman
Acts as principal liaison with the Chairman
Leads the Boards annual self-evaluation
Acts as a primary point of contact for Board communication with major shareholders and other key constituents, as appropriate
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Board Meetings and Executive Sessions
In 2018, our Board of Directors held nine meetings, including seven regularly scheduled meetings and two special meetings. No incumbent Director attended fewer than 75% percent of the total number of meetings of our Board and the committees to which the Director was assigned. Directors standing for re-election are expected to attend the annual meeting of shareholders. In 2018, all Directors attended the annual meeting.
The Corporate Governance Guidelines require the independent Directors to meet in executive session without any members of management present at least twice a year to review and evaluate the performance of the Board and to evaluate the performance and approve the compensation of the CEO. In practice, our Board typically meets in executive session during each regular Board meeting.
14 Verizon 2019 Proxy Statement
Board and Committees
Annual Board and Committee Assessments
Annual Board and Committee Assessments
Our Board conducts an annual assessment aimed at enhancing its effectiveness. As part of the assessment, each Director completes a written questionnaire that is designed to gather suggestions for improving Board effectiveness and to solicit feedback on a range of issues, including Board operations, Board and committee structure and dynamics, the flow of information from management, and agenda topics. In addition, the Lead Director conducts individual interviews with each of the independent Directors to discuss these topics. The feedback received from the questionnaires and interviews is discussed during an evaluation session.
Each of the four standing committees also conducts its own annual assessment, which includes a written questionnaire and evaluation session. Evaluation sessions are led by the committee chairs and generally include a review of the committee charter, the annual agenda, and the committees overall effectiveness.
In addition to these annual assessments, the Board evaluates and modifies its oversight of Verizons operations on an ongoing basis. During their executive sessions, the independent Directors consider agenda topics that they believe deserve additional focus and raise new topics to be addressed in future meetings.
The Corporate Governance and Policy Committee annually appraises the framework for our Board and committee assessment processes.
The 2018 Board Assessment Process Questionnaire Written questionnaires for the Board and each committee solicit Director feedback on an unattributed basis One-on-One Discussions Candid, one-on-one discussions between the Lead Director and each independent Director elicit further color on the Director's observations and suggestions Private Sessions of Directors Closed session discussions of the Board assessment are facilitated by our Lead Director, and committee assessment discussions are facilitated by the independent committee chairs Reporting A summary of the assessment results are provided to the Board Feedback Incorporated Policies and practices are updated as appropriate per the self-assessment observations and suggestions Ongoing Director suggestions for improvements to the assessment questionnaire and process are incorporated the following year
Verizon 2019 Proxy Statement 15
Board and Committees
Board Committees
Our Board of Directors has established four standing committees: the Audit Committee, the Corporate Governance and Policy Committee, the Finance Committee, and the Human Resources Committee. Each committee has a written charter that defines its specific responsibilities. The chair of each committee approves the agenda and materials for each meeting. Each committee has the authority to retain independent advisors to assist it in carrying out its responsibilities.
Our committee meetings are not held concurrently, which enables our Directors to sit on multiple committees. Our newly appointed Directors also attend all committee meetings for a period prior to being appointed to any particular committee, which allows them to understand the inner workings of all committees.
Members*
Gregory Weaver (Chair)
Shellye Archambeau
M. Frances Keeth
Clarence Otis, Jr.
Kathryn Tesija
* Gregory Wasson served on the Audit Committee until October 1, 2018.
Meetings in 2018: 11 |
Audit Committee
Key Responsibilities
Assess and discuss with management Verizons significant business risk exposures (including those related to cybersecurity, data privacy, data security and bribery and corruption) and oversee managements programs and policies to monitor, assess and manage such exposures
Assess Verizons overall control environment, including controls related to financial reporting, disclosure, compliance and significant financial and business risks
Appoint, approve fees for, and oversee the work of the independent registered public accounting firm
Oversee financial reporting and disclosure matters
Oversee Verizons internal audit function
Assess Verizons compliance processes and programs
Review the Chief Compliance Officers annual report regarding anti-corruption compliance, compliance with significant regulatory obligations, export controls, and data protection
Assess policies and procedures for executive officer expense accounts and perquisites, including the use of corporate assets
Assess procedures for handling complaints relating to accounting, internal accounting controls or auditing matters
The Board has determined that each of Ms. Archambeau, Ms. Keeth, Mr. Otis and Mr. Weaver is an audit committee financial expert, and that each member of the Audit Committee meets the independence requirements of applicable law, the NYSE, Nasdaq and Verizons Corporate Governance Guidelines. Mr. Wasson was an audit committee financial expert and met the same independence requirements during his tenure on the Audit Committee in 2018.
The Audit Committee Report is included on page 28.
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16 Verizon 2019 Proxy Statement
Board and Committees
Board Committees
Members
Shellye Archambeau (Chair)
Richard Carrión
Melanie Healey
M. Frances Keeth
Rodney Slater
Kathryn Tesija
Meetings in 2018: 8 |
Corporate Governance and Policy Committee
Key Responsibilities
Evaluate the structure and practices of our Board and its committees, including size, composition, independence and operations
Recommend changes to our Boards policies or practices or the Corporate Governance Guidelines
Identify and evaluate the qualifications of Director candidates
Recommend Directors to serve as members of each committee and as committee chairs
Review potential related person transactions
Facilitate the annual assessment of the performance of the Board and its committees
Review Verizons position and engagement on important public policy issues that may affect our business and reputation, including direct and indirect political contributions, lobbying activities, corporate responsibility and sustainability
The Board has determined that each member of the Corporate Governance and Policy Committee meets the independence requirements of applicable law, the NYSE, Nasdaq and Verizons Corporate Governance Guidelines.
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Members*
Mark Bertolini (Chair)
Richard Carrión
M. Frances Keeth
Clarence Otis, Jr.
Gregory Weaver
* Karl-Ludwig Kley served on the Finance Committee until May 3, 2018.
Meetings in 2018: 4
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Finance Committee
Key Responsibilities
Monitor Verizons capital needs and financing arrangements and ability to access the capital markets
Monitor expenditures under the annual capital plan approved by our Board
Review and approve Verizons derivatives policy and monitor the use of derivatives
Review Verizons insurance and self-insurance programs
Oversee the investment of pension assets and the funding of pension and other postretirement benefit obligations
The Board has determined that each member of the Finance Committee meets the independence requirements of applicable law, the NYSE, Nasdaq and Verizons Corporate Governance Guidelines. The Board made the same determination for Dr. Kley in 2018.
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Verizon 2019 Proxy Statement 17
Board and Committees
Board Committees
Members*
Daniel Schulman (Chair)
Mark Bertolini
Richard Carrión Melanie Healey
Clarence Otis, Jr.
Rodney Slater
* Gregory Wasson served on the Human Resources Committee until October 1, 2018.
Meetings in 2018: 7 |
Human Resources Committee
Key Responsibilities
Oversee the development of Verizons executive compensation program and policies
Approve corporate goals relevant to the CEOs compensation
Evaluate the CEOs performance and recommend his compensation to the Board
Review and approve compensation and benefits for selected senior managers
Consult with the CEO on talent development
Oversee succession planning and assignments to key leadership positions
Review and make determinations under Verizons clawback policies
Review the impact of Verizons executive compensation policies and practices, and the performance metrics underlying the compensation program, on Verizons risk profile
Review and recommend non-employee Director compensation
The Board has determined that each member of the Human Resources Committee meets the independence requirements of applicable law, the NYSE, Nasdaq and Verizons Corporate Governance Guidelines. The Board made the same determination for Mr. Wasson in 2018.
The Compensation Committee Report is included on page 51.
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18 Verizon 2019 Proxy Statement
Board and Committees
Risk Oversight
Role of the Board
While senior management has primary responsibility for managing risk, our Board of Directors is responsible for risk oversight. The Board works with senior management to develop a comprehensive view of Verizons key short- and long-term business risks. Verizon has a formalized business risk management reporting process that is designed to provide visibility to the Board about critical risks and risk mitigation strategies.
The Board of Directors oversees the management of risks inherent in the operation of Verizons businesses and the implementation of its strategic plan by using several different levels of review. The Board addresses the primary risks associated with Verizons business units and corporate functions in its operations reviews of those units and functions. In addition, the Board reviews the risks associated with Verizons strategic plan throughout the year.
Role of the Committees
Each of our Board committees oversees the management of risks that fall within that committees areas of responsibility. In performing this function, each committee has full access to management and may engage advisors.
Audit Committee |
Oversees the operations of Verizons enterprise risk management program, which identifies the primary risks to Verizons business, including risks related to cybersecurity, data privacy and data security.
Periodically monitors and evaluates the primary risks associated with particular business units and functions.
Works with Verizons Senior Vice President of Internal Auditing, who helps identify, evaluate and implement risk management controls and methodologies to address identified risks and who functionally reports directly to the Committee.
Meets privately at each Audit Committee meeting with representatives from the independent registered public accounting firm, the Senior Vice President of Internal Auditing, and the Executive Vice President of Public Policy and General Counsel.
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Corporate Governance and Policy Committee |
Reviews business and reputational risks relating to Verizons position and engagement on important public policy issues, including political contributions, lobbying activities, corporate social responsibility and sustainability.
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Finance Committee |
Assists our Board in its oversight of financial risk management.
Monitors Verizons capital needs and financing plans and oversees the strategy for managing risk related to currency and interest rate exposure.
Reviews and approves Verizons derivatives policy and monitors the use of derivatives.
Reviews Verizons pension and other postretirement benefit obligations, as well as its insurance and self-insurance programs.
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Human Resources Committee |
Considers the impact of the executive compensation program and of the incentives created by the compensation awards on Verizons risk profile.
Oversees managements annual assessment of compensation risk arising from Verizons compensation policies and practices.
Based on managements review, Verizon has concluded that our compensation policies and procedures are not reasonably likely to have a material adverse effect on Verizon because they are appropriately structured and discourage employees from taking excessive risks. |
Verizon 2019 Proxy Statement 19
Board and Committees
Risk Oversight
What about data privacy and cybersecurity risk?
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Board and Committee Oversight. Protecting the privacy of our customers information and the security of our systems and networks has long been and will continue to be a priority at Verizon. The Board is committed to maintaining strong and meaningful privacy and security protections for our customers information. The Audit Committee has primary responsibility for overseeing Verizons risk management program relating to privacy and cybersecurity and monitors Verizons compliance in the areas of data and privacy protection. To this end, the Board and the Audit Committee receive regular updates on both privacy and cybersecurity matters. | ||||||||||
Data Privacy. Verizon has technical, administrative and physical safeguards in place to help protect against unauthorized access to, use or disclosure of customer information and data we collect and store. Verizon has a dedicated Chief Privacy Officer whose team advises the business on privacy risks and assesses the effectiveness of privacy controls. The Chief Privacy Officer annually briefs the Audit Committee on data privacy risks and mitigating actions. | Cybersecurity. To more effectively address the cybersecurity threats posed today, Verizon has a dedicated Chief Information Security Officer whose team is responsible for leading enterprise-wide information security strategy, policy, standards, architecture and processes. Verizons comprehensive information security program includes, among other aspects, vulnerability management, antivirus and malware protection, file integrity monitoring, encryption and access control. The Chief Information Security Officer leads an annual review and discussion with the full Board dedicated to Verizons cyber risks and threats and cyber protections and provides updates throughout the year, as warranted.
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20 Verizon 2019 Proxy Statement
Board and Committees
Risk Oversight
What about reputational risk?
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As our operating footprint expands, so does our responsibility to consider the impacts of our products and operations on society. New technologies and new markets present considerable opportunities, but also create new risks. Companies in our industry and beyond are facing challenges that have impacted their reputations and brought adverse attention and action by consumers, regulators, and shareholders. The Board is mindful of not only how the technologies we build will provide positive experiences for our customers, but also how they could otherwise have unintended consequences. In order to ensure that Verizon is doing everything possible to anticipate and plan for reputational risk, the Corporate Governance and Policy Committee oversees the Companys handling of business and reputational risks relating to Verizons position and engagement on important public policy issues, including political contributions, lobbying activities, corporate social responsibility and sustainability, as well as individual events and incidents that may affect the Companys reputation.
Strategic Crisis Management. In order to position Verizon leadership and the Board to respond to strategic risks and protect Verizons core assets in a potential crisis, the Company recently refined its Strategic Crisis Management Program. The Program defines clear roles and responsibilities in dealing with various potential crises and outlines a process to make decisions and implement appropriate actions on a timely basis. Through the Program, the Verizon Strategic Crisis Leadership Team is positioned to assume executive ownership of strategic crisis events through drills and scenario-based training. The Program also includes employee crisis awareness training in order to ensure that employees across the Company are prepared to quickly identify and report circumstances or events that could develop into a strategic crisis so that our leadership team can take appropriate steps in response. In addition, Verizons Board maintains a Board Crisis Response Plan, which is a structured plan to be used in connection with any crisis that could have a significant strategic impact on the Companys brand, reputation, finances or legal, political or regulatory positionproviding a framework for ensuring appropriate Board oversight and assessment of the response to a crisis, while allowing the necessary flexibility to address the different types of crises that might arise.
Committee Oversight of Current Policy Issues and Corporate Reputation. Each year, Verizons Executive Vice President of Public Policy and General Counsel updates the Corporate Governance and Policy Committee on the current policy issues facing the Company that may generate publicity and impact corporate reputation. Through this annual briefing, the Committee reviews and discusses with management the most pressing known reputational issues and the Companys policy on each issue, as well as the processes in place to anticipate potential developments in each of the identified areas and to quickly respond to any such developments in a timely manner.
Verizon 2019 Proxy Statement 21
Board and Committees
Management Succession Planning and Development
Management Succession Planning and Development
Verizons Board of Directors recognizes that one of its most important duties is to ensure continuity in our senior leadership by overseeing the development of executive talent and planning for the efficient succession of the CEO. Our Board has delegated primary oversight responsibility for succession planning to the Human Resources Committee, which oversees assignments to key leadership positions. The Human Resources Committee reports on its activities to the full Board, which addresses succession planning during executive sessions that typically occur in connection with each regularly scheduled meeting.
To ensure that the succession planning and management development process supports and enhances Verizons strategic objectives, the Board and Human Resources Committee regularly consult with the CEO on Verizons organizational needs and competitive challenges, the potential of key managers, and plans for future developments and emergency situations. As part of this process, the Board and the Human Resources Committee also seek input from the Chief Administrative Officer, as well as advice on related compensation issues from the Human Resources Committees independent compensation consultant.
Our Board generally conducts an in-depth review of senior leader development and succession planning at least once a year. Led by the CEO and the Chief Administrative Officer, this review addresses Verizons management development initiatives, assesses senior management resources, and identifies individuals who should be considered as potential future senior executives.
Our goal is to develop well-rounded and experienced senior leaders. High potential executives are challenged regularly with additional responsibilities, new positions or promotions to expose them to our diverse operations. These individuals are often positioned to interact more frequently with the Board, both in full Board meetings and in less formal settings and small groups, so the Directors can get to know and assess them.
In 2018, Verizon saw the culmination of a deliberate and comprehensive succession planning process conducted by the Board over the course of multiple years when Mr. Vestberg stepped into the role of CEO. Throughout the process, the Board focused on the strategic direction of the business and the vision for where the Company needed to be in five to ten years to form the basis of a talent profile and selection criteria for the next CEO. This comprehensive process underpins the Boards confidence that Mr. Vestberg has the right character, skills and global perspective to drive transformational change and lead the Company into the future. In addition, throughout the CEO succession planning process, the Board was actively focused on ensuring the smooth CEO transition critical to maintaining a well-functioning company while building on a track record of performance. In order to implement this successful transition, the Board appointed Mr. McAdam to remain as a non-independent Chairman, positioning him to provide leadership continuity as well as advice and guidance to Mr. Vestberg and the Board during a transition period.
22 Verizon 2019 Proxy Statement
Board and Committees
Shareholder Engagement
Ongoing communication with our shareholders helps the Board and senior management gain useful feedback on a wide range of subjects and understand the issues that matter most to our shareholders. Verizon views accountability to shareholders as both a mark of good governance and a critical component of our success. In 2018, management and our Directors met with our shareholders and engaged in discussions on a variety of issues, including Board oversight of Company strategy; CEO succession; the leadership structure of the Board; Board composition and refreshment; sustainability and corporate responsibility; and the relationship between our compensation program and our long-term strategy.
| Company strategy | | Board composition and refreshment | |||||
| CEO succession | | Sustainability and corporate responsibility | |||||
| Board leadership
|
| Executive compensation |
The information learned in these discussions serves as the foundation for our policies and informs our business strategy on an ongoing basis.
Our Board of Directors believes that communication with shareholders and other interested parties is an important part of the governance process, and has adopted the following procedure to facilitate this communication.
How to Contact the Board
Any shareholder or interested party may communicate directly with our Board, any committee of our Board, any individual Director (including the Lead Director and the committee chairs) or the non-employee Directors as a group, by writing to:
Verizon Communications Inc.
Board of Directors
(or committee name, individual Director, Lead
Director, committee chair or non-employee
Directors as a group, as appropriate)
1095 Avenue of the Americas
New York, New York 10036
Verizons Corporate Secretary reviews all correspondence addressed to our Directors and periodically provides the Board with copies of all communications that deal with the functions of our Board or its committees, or that otherwise require Board attention. Typically the Corporate Secretary will not forward communications that are of a personal nature or are unrelated to the duties and responsibilities of our Board, including business solicitations or advertisements, mass mailings, job-related inquiries, or other unsuitable communications. All communications involving substantive accounting or auditing matters are forwarded to the Chair of the Audit Committee.
Verizon 2019 Proxy Statement 23
Non-Employee Director Compensation
The Human Resources Committee, in consultation with its independent compensation consultant, reviews and recommends non-employee Director compensation. In 2018, each non-employee Director of Verizon received an annual cash retainer of $125,000. Through June 2018, the Chairs of the Corporate Governance and Policy Committee and the Finance Committee received an additional annual cash retainer of $15,000, and the Chairs of the Audit Committee and the Human Resources Committee, as well as the Lead Director, each received an additional annual cash retainer of $25,000. Effective July 2018, based on the recommendation of the Human Resources Committee after its review of the Verizon director compensation program and the programs of peer companies, and in consultation with its independent compensation consultant, the Board determined to increase the additional annual cash retainer paid to (i) the Chairs of the Corporate Governance and Policy Committee and the Finance Committee to $20,000, (ii) the Chairs of the Audit Committee and the Human Resources Committee to $30,000 and (iii) the Lead Director to $50,000. Based on the same process, the Board also approved the payment to any non-employee Chairman of the Board an annual cash retainer of $200,000, effective upon such person assuming that role.
In 2018, each non-employee Director also received a grant of Verizon share equivalents valued at $175,000 on the grant date. No meeting fees were paid if a non-employee Director attended a Board or Committee meeting on the day before or the day of a regularly scheduled Board meeting. Each non-employee Director who attended a Board or Committee meeting held on any other date received a meeting fee of $2,000.
Each non-employee Director who joins our Board receives a one-time grant of 3,000 Verizon share equivalents valued at the closing price on the date the new Director joins our Board.
All share equivalents that non-employee Directors receive are automatically credited to the Directors deferred compensation account under the Verizon Executive Deferral Plan, which is referred to as the Deferral Plan, and invested in a hypothetical Verizon stock fund. Share equivalents received in the one-time grant or the annual equity grant may not be sold while the Director serves on the Board. Amounts in a Directors deferred compensation account are paid in a cash lump sum in the year following the year the Director leaves our Board.
Non-employee Directors may choose to defer all or part of their annual cash retainer and meeting fees (if any) under the Deferral Plan. They may elect to invest these amounts in the hypothetical investment options available to participants in Verizons Management Savings Plan or in a hypothetical cash account that earns a return rate equal to the long-term, high-grade corporate bond yield average as published by Moodys Investor Services.
One of our non-employee Directors who served as a director of a predecessor company is a participant in a charitable giving program. Under this program, when a participant retires from the Board or attains age 65 (whichever occurs later) or dies, Verizon will make one or more charitable contributions in the aggregate amount of $1,000,000, payable in ten annual installments. This program, which is closed to future participants, is financed through the purchase of insurance on the life of each participant. In 2018, the aggregate cost of maintaining and administering this program was $15,000.
The non-employee Directors are eligible to participate in the Verizon Foundation Matching Gifts Program. Under this program, which is open to all Verizon employees, the Foundation matches up to $5,000 per year of charitable contributions to accredited colleges and universities, $1,000 per year of charitable contributions to any non-profit with 501(c)(3) status, and $1,000 per year of charitable donations to designated disaster relief campaigns.
24 Verizon 2019 Proxy Statement
Non-Employee Director Compensation
Non-Employee Director Compensation in 2018
Non-Employee Director Compensation in 2018
Name (a)
|
Fees Earned or Paid in Cash1 ($) (b)
|
Stock Awards2 ($) (c)
|
Option Awards ($) (d)
|
Non-Equity Incentive Plan Compensation ($) (e)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (f)
|
All Other Compensation3 ($) (g)
|
Total ($) (h)
|
|||||||||||||||||||||
Shellye Archambeau* |
|
138,667 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
313,667 |
| |||||||
Mark Bertolini |
|
131,000 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
306,000 |
| |||||||
Richard Carrión* |
|
148,500 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
323,500 |
| |||||||
Melanie Healey |
|
131,000 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
6,000 |
|
|
312,000 |
| |||||||
M. Frances Keeth* |
|
192,000 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
5,000 |
|
|
372,000 |
| |||||||
Karl-Ludwig Kley** |
|
62,500 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
237,500 |
| |||||||
Clarence Otis, Jr.* |
|
166,500 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
0 | 341,500 | |||||||||||
Daniel Schulman |
|
43,667 |
|
|
221,203 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
264,870 |
| |||||||
Rodney Slater |
|
129,000 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
304,000 |
| |||||||
Kathryn Tesija |
|
137,000 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
312,000 |
| |||||||
Gregory Wasson** |
|
103,750 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
278,750 |
| |||||||
Gregory Weaver* |
|
164,500 |
|
|
175,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
339,500 |
* | Denotes a chair of a standing committee during 2018. Ms. Keeth also served as Lead Director until March 8, 2019. |
** | Dr. Kley served on the Board until May 3, 2018 and Mr. Wasson served on the Board until October 1, 2018. |
1 | This column includes all fees earned in 2018, whether the fee was paid in 2018 or deferred. |
2 | For each non-employee Director, this column reflects the grant date fair value of the non-employee Directors 2018 annual stock award and, for Mr. Schulman, the one-time grant he received when joining the Board, in each case computed in accordance with FASB ASC Topic 718. The following reflects the aggregate number of share equivalent awards outstanding as of December 31, 2018 for each person who served as a non-employee Director during 2018: Ms. Archambeau, 22,520; Mr. Bertolini, 17,737; Mr. Carrión, 131,998; Ms. Healey, 32,264; Ms. Keeth, 66,689; Dr. Kley, 14,852; Mr. Otis, 74,978; Mr. Schulman, 4,118; Mr. Slater, 43,731; Ms. Tesija, 26,784; Mr. Wasson, 25,784; and Mr. Weaver, 15,543. |
3 | This column reflects matching contributions made on the non-employee Directors behalf under the Verizon Foundation Matching Gift Program. |
Verizon 2019 Proxy Statement 25
Item 2: Ratification of Appointment of
Independent Registered Public Accounting Firm
The Audit Committee considered the performance and qualifications of Ernst & Young LLP, and has reappointed that independent registered public accounting firm to examine the financial statements of Verizon for fiscal year 2019 and to examine the effectiveness of internal control over financial reporting. Ernst & Young has been retained as Verizons independent registered public accounting firm since 2000.
Verizon paid the following fees to Ernst & Young for services rendered during fiscal years 2018 and 2017.
Audit fees
|
Audit- related fees
|
Tax fees
|
All other fees
|
|||||||||||||
2018
|
$
|
35.5 million
|
|
$
|
10.3 million
|
|
$
|
4.4 million
|
|
|
|
| ||||
2017
|
$
|
39.2 million
|
|
$
|
12.0 million
|
|
$
|
4.1 million
|
|
|
|
|
Audit fees are attributable to services that include the financial statement audit, the audit of the effectiveness of Verizons internal control over financial reporting required by the Sarbanes-Oxley Act, and financial statement audits required by statute for our foreign subsidiaries. Audit-related fees are attributable to services that primarily include audits of other subsidiaries, reviews of controls over services provided to customers, and work related to the implementation of new accounting standards, as well as other audit and due diligence procedures performed in connection with acquisitions, dispositions or other financial transactions. Tax fees are attributable to services that primarily consist of federal, state, local and international tax planning and compliance. The Audit Committee considered, in consultation with management and the independent registered public accounting firm, whether Ernst & Young could provide these services while maintaining independence.
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm that performs audit services. In considering Ernst & Youngs appointment for the 2019 fiscal year, the Committee reviewed the firms qualifications and competencies, including the following factors:
| Ernst & Youngs historical performance and its recent performance during its engagement for the 2018 fiscal year; |
| Ernst & Youngs capability and expertise in handling the breadth and complexity of Verizons operations; |
| the qualifications and experience of key members of the engagement team, including the lead engagement partner, for the audit of Verizons financial statements; |
| the quality of Ernst & Youngs communications with the Committee regarding the conduct of the audit, and with management with respect to issues identified in the audit; |
| external data on audit quality and performance of, including recent Public Company Accounting Oversight Board reports on, Ernst & Young; |
| the appropriateness of Ernst & Youngs fees for audit and non-audit services, on both an absolute basis and as compared to its peer firms; and |
| Ernst & Youngs reputation for integrity and competence in the fields of accounting and auditing. |
In addition, in order to ensure continuing auditor independence, the Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm. The Committee ensures that the mandated rotation of Ernst & Youngs personnel occurs routinely and is directly involved in the selection of Ernst & Youngs lead engagement partner.
26 Verizon 2019 Proxy Statement
Audit Matters
Item 2: Ratification of Appointment of Independent Registered Public Accounting Firm
The Committee has established policies and procedures regarding pre-approval of services provided by the independent registered public accounting firm and is responsible for negotiating the audit fees associated with the engagement. At the beginning of the fiscal year, the Committee pre-approves the engagement of the independent registered public accounting firm to provide audit services based on fee estimates. The Committee also pre-approves proposed audit-related services, tax services and other permissible services based on specified project and service details, fee estimates, and aggregate fee limits. The Committee receives a report at each meeting on the status of services provided or to be provided by the independent registered public accounting firm and approves the related fees. The Committee pre-approved all of Ernst & Youngs 2018 fees and services.
The affirmative vote of a majority of the shares cast at the annual meeting is required to ratify the reappointment of Ernst & Young for the 2019 fiscal year. The Committee believes that continuing to retain Ernst & Young to serve as Verizons independent registered public accounting firm is in the best interests of Verizon and our shareholders. If this appointment is not ratified by the shareholders, the Committee will reconsider its decision. One or more representatives of Ernst & Young will be at the 2019 Annual Meeting of Shareholders. They will have an opportunity to make a statement and will be available to respond to appropriate questions.
|
|
|
The Board of Directors recommends that you vote FOR ratification.
|
Verizon 2019 Proxy Statement 27
In the performance of our oversight responsibilities, the Committee has reviewed and discussed with management and the independent registered public accounting firm Verizons audited financial statements for the year ended December 31, 2018, and the effectiveness of Verizons internal control over financial reporting as of December 31, 2018.
The Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the Securities and Exchange Commission, the New York Stock Exchange, The Nasdaq Stock Market and Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees.
The Committee has received written disclosures and a letter from the independent registered public accounting firm consistent with applicable Public Company Accounting Oversight Board requirements for independent registered public accounting firm communications with audit committees concerning independence, and has discussed with the independent registered public accounting firm its independence.
The Committee discussed with the internal auditors and the independent registered public accounting firm the overall scope and plans for their respective audits. The Committee met with the internal auditors and the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of Verizons internal controls and the overall quality of Verizons financial reporting.
The Committee has assessed and discussed with management Verizons significant business risk exposures and overseen managements programs and policies to monitor, assess and manage such exposures. The Committee also periodically monitored and evaluated the primary risks associated with particular business units and functions.
Based on the reviews and discussions referred to above, in reliance on management and the independent registered public accounting firm, and subject to the limitations of our role, the Committee recommended to the Board of Directors, and the Board has approved, the inclusion of the financial statements referred to above in Verizons Annual Report on Form 10-K for the year ended December 31, 2018.
The Committee reviewed the independent registered public accounting firms performance, qualifications and tenure, the qualifications of the lead engagement partner, managements recommendation regarding retention of the firm, and considerations related to audit firm rotation, as discussed further on page 26. Based on that review, the Committee reappointed the independent registered public accounting firm for fiscal year 2019.
Respectfully submitted,
The Audit Committee
Gregory Weaver, Chair
Shellye Archambeau
M. Frances Keeth
Clarence Otis, Jr.
Kathryn Tesija
March 8, 2019
28 Verizon 2019 Proxy Statement
Compensation
Compensation Discussion and Analysis
The Human Resources Committee of the Board of Directors oversees the development and implementation of the compensation program for Verizons named executive officers.
2018 named executive officers Hans Vestberg Chief Executive Officer Matthew Ellis Executive Vice President and Chief Financial Officer K. Guru Gowrappan Executive Vice President and CEO - Verizon Media Group Marc Reed Executive Vice President and Chief Administrative Officer Ronan Dunne Executive Vice President and President - Verizon Consumer Group Lowell McAdam Chairman and Former Chief Executive Officer John Stratton Former Executive Vice President and President - Global Operations Timothy Armstrong Former Executive Vice President and President and CEO - Oath
Key Management Changes in 2018
CEO Succession. Mr. Vestberg succeeded Mr. McAdam as Verizons Chief Executive Officer on August 1, 2018, and as Chairman of the Board on March 8, 2019, when Mr. McAdam stepped down from those positions. Mr. McAdam retired from Verizon on December 31, 2018. This transition was the culmination of a deliberate and comprehensive CEO succession planning process designed to ensure that Verizon is best positioned to deliver on our value proposition to all stakeholders. Prior to Mr. Vestbergs appointment as CEO, he served as Verizons Executive Vice President, President of Global Networks and Chief Technology Officer, a position he held since joining Verizon in early 2017.
Verizon Media Group CEO Succession. Effective October 1, 2018, Mr. Gowrappan succeeded Mr. Armstrong as Executive Vice President and CEO of Verizons Media Group (formerly known as Oath). Prior to this appointment, Mr. Gowrappan was the President and COO of the Media Group, a position he held since joining the Company in April 2018. Mr. Armstrong left the Company on December 31, 2018.
Retirement of Mr. Stratton. Mr. Stratton stepped down as Executive Vice President and President Global Operations on June 7, 2018 and remained as strategic advisor to Verizon until he retired from the Company on December 31, 2018.
Verizon 2019 Proxy Statement 29
Compensation Discussion and Analysis
Best Practices in Executive Compensation and Governance
New Operating Structure. In November 2018, Verizon announced the realignment of the Companys operating structure around three core segments Verizon Consumer Group, Verizon Business Group and Verizon Media Group effective for financial reporting purposes on April 1, 2019. Effective January 1, 2019, Mr. Dunne was named Executive Vice President and President of Verizons Consumer Group.
Compensation changes made in connection with these key management changes are described in this Compensation Discussion and Analysis.
Best Practices in Executive Compensation and Governance
Our compensation program reflects our commitment to industry-leading standards for compensation design and governance. The Human Resources Committee regularly reviews best practices in executive compensation and governance and revises our policies and practices when appropriate. The following table highlights some features of our executive compensation program that demonstrate the rigor of our policies.
Compensation Practice
|
Verizon Policy
|
More Information on Page
| ||||
Pay for performance |
|
Approximately 90% of named executive officers total compensation opportunity is variable, incentive-based pay.
|
34 | |||
Robust stock ownership guidelines |
|
We have stock ownership guidelines for the CEO of 7x base salary; for other named executive officers of 4x base salary; and for Directors of 3x the cash component of the annual Board retainer. While they serve on the Board, Directors may not divest share equivalents granted to them by Verizon.
|
49 | |||
Shareholder outreach |
|
Our outreach program gives institutional shareholders a regular opportunity to express their views about our executive compensation program and policies. Shareholder input is carefully considered by the Committee.
|
32 | |||
Clawback policies |
|
Our clawback policies give us the right to cancel or claw back incentive compensation from any senior executive who has engaged in misconduct that results in (i) significant reputational or financial harm to Verizon or (ii) a material financial restatement.
|
49 | |||
Anti-hedging policy |
|
Our anti-hedging policy prohibits Directors and executives who receive equity-based incentive awards from entering into transactions designed to hedge or offset any decrease in the market value of Verizon stock that they own.
|
49 | |||
Annual compensation risk assessment
|
|
We perform a risk assessment of our compensation program every year. |
19 | |||
Independent compensation consultant |
|
An independent compensation consultant advises the Committee on executive compensation. The consultant cannot do any work for the Company while it is engaged by the Committee.
|
31 | |||
Double-trigger change in control |
|
In the event of a change in control, our Long-Term Incentive Plan (Long-Term Plan) requires an involuntary termination for accelerated vesting of awards.
|
48 | |||
Annual shareholder say-on-pay |
|
We value our shareholders input on our executive compensation program, so our Board seeks a non-binding advisory vote from shareholders every year to approve the executive compensation disclosed in our CD&A and compensation tables.
|
70 | |||
Tax gross-ups |
|
We do not provide tax gross-ups to our executive officers. |
47 | |||
Dividends on unearned performance awards
|
|
We do not pay dividends on unearned Performance Stock Units (PSUs) or Restricted Stock Units (RSUs).
|
40 | |||
Employment contracts
|
|
None of our named executive officers has an employment contract.
|
48 | |||
Guaranteed benefits
|
|
Beginning in 2006, we froze our defined benefit pension and supplemental benefits.
|
48 |
30 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
Roles and Responsibilities
Roles and Responsibilities
Human Resources Committee
The Human Resources Committee of the Board of Directors oversees Verizons management succession planning and talent development, as well as the design and implementation of the compensation program for our named executive officers. The CEOs compensation is determined by the independent members of the Board after receiving the Committees recommendation. References to the Committee in this Compensation Discussion and Analysis with respect to the CEOs compensation reflect that process.
Management
The Committee may consult with the Executive Vice President and Chief Administrative Officer about the design, administration and operation of the compensation program. The Committee has delegated administrative responsibility for implementing its decisions on compensation and benefits matters to the Chief Administrative Officer, who reports to the Committee on the actions taken under this delegation.
The Committee seeks the CEOs views on whether the existing compensation policies and practices continue to support Verizons business and performance objectives, utilize appropriate performance targets, and appropriately reward the contributions of the other named executive officers. While the Committee values the CEOs insight, ultimately the Committee makes an independent determination on all matters related to the compensation of the named executive officers.
Independent Compensation Consultant
The Committee has the sole authority to retain and terminate a compensation consultant and to approve all terms of the engagement, including fees. The Committee has retained Pearl Meyer as its compensation consultant (Consultant) based on the firms independence and expertise in representing the compensation committees of large corporations. The Consultant advises the Committee on all matters related to the compensation of our named executive officers and our non-employee Directors. This includes conducting an annual survey to provide current benchmarking data for our peer group and other relevant market data in our industry. The Consultant helps the Committee interpret this data, as well as data provided by the Company. The Consultant participates in all Committee meetings and confers regularly with the Committee in executive session at those meetings.
Committee policy prohibits the Consultant from doing any work for the Company during its engagement.
The Committee has considered the independence of Pearl Meyer in light of SEC rules and NYSE and Nasdaq listing standards. At the Committees request, Pearl Meyer provided a letter addressing its independence, including the following factors:
| No other services provided to the Company by the Consultant; |
| Fees paid by the Committee as a percentage of the Consultants total revenue; |
| Any business or personal relationships between the individual consultants involved in the engagement and a member of the Committee; |
| Policies or procedures maintained by the Consultant that are designed to prevent a conflict of interest; |
| Any Company stock owned by the individual consultants involved in the engagement; and |
| Any business or personal relationships between our executive officers and the Consultant or the individual consultants involved in the engagement. |
The Committee has concluded that no conflict of interest exists that would prevent Pearl Meyer from serving as an independent consultant to the Committee.
Verizon 2019 Proxy Statement 31
Compensation Discussion and Analysis
Shareholder Feedback on Compensation
Shareholder Feedback on Compensation
Our Board, the Committee and our management team value shareholder perspectives on our executive compensation program. As part of the Committees annual review of the program, it considers the outcome of Verizons annual shareholder advisory vote on executive compensation the say-on-pay. At our Annual Meeting in May 2018, the compensation of our named executive officers was approved by approximately 92% of votes cast, demonstrating a high level of shareholder support for our compensation program and policies.
Management and Directors engage with our institutional shareholders in meetings and calls throughout the year. Topics of discussion typically include the Committees choice of performance measures for awards issued under our Short- and Long-Term Incentive Plans, the relationship between the performance measures and our long-term strategy, the payout terms of equity awards, compensation recoupment policies and shareholder proposals. Based on these discussions, the results of our 2018 say-on-pay vote, and the history of strong shareholder support in prior say-on-pay votes, the Committee believes our shareholders continue to strongly support Verizons executive compensation program.
Peer Group
The peer groups utilized for compensation benchmarking and for measuring Verizons relative stock performance are reviewed each year. No changes were made in 2018. The Committee benchmarks executives total compensation opportunities against the 29 companies (other than Verizon) in the Dow Jones Industrial Average, plus Verizons five largest industry competitors that are not included in the Dow Jones Industrial Average (the Related Dow Peers.) This peer group is self-adjusting so that changes in the companies included in the Dow Jones Industrial Average are also reflected in the Related Dow Peers over time. The Related Dow Peers group includes our five largest industry competitors, as well as other large companies that we compete against in the marketplace for executive talent and investment dollars, such as Apple, Disney, IBM and Microsoft. Although many of the companies included in the group are similar to us in market capitalization, net income, revenue and total employees, Verizon is considerably larger than the median size of the Related Dow Peers. The Committee takes this into consideration when reviewing the market compensation data. The Related Dow Peers are also used to evaluate Verizons relative stock performance under the Long-Term Plan, as described in Benchmarking Total Compensation Opportunity below. The Committee believes that use of the Related Dow Peers provides a consistent measure of Verizons performance and makes it easier for shareholders to understand, evaluate and monitor Verizons compensation program.
32 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
Peer Group
Related Dow Peer Information
The following chart shows the companies included in the Related Dow Peers, as constituted on March 6, 2018, the date of the 2018 PSU grant. The chart includes each companys market capitalization as of December 31, 2018, as reported by Bloomberg, as well as net income attributable to the company, revenue and total number of employees as of each companys most recent fiscal year-end as reported in SEC filings.
Company
|
Market Capitalization ($ Millions)
|
Net Income ($ Millions)
|
Revenue ($ Millions)
|
Total Employees
|
||||||||||||||||||
3M
|
|
$110,949
|
|
$5,349 | $32,765 | 93,516 | ||||||||||||||||
American Express
|
|
$81,428
|
|
|
$6,921
|
|
$43,281 | 59,000 | ||||||||||||||
Apple
|
|
$748,539
|
|
|
$59,531
|
|
|
$265,595
|
|
|
132,000
|
| ||||||||||
AT&T
|
|
$207,714
|
|
$19,370 | $170,756 | 268,220 | ||||||||||||||||
Boeing
|
|
$183,143
|
|
|
$10,460 |
|
|
$101,127 |
|
|
153,000 |
| ||||||||||
Caterpillar
|
|
$74,985
|
|
|
$6,147 |
|
|
$54,722 |
|
|
104,000 |
| ||||||||||
Charter Communications
|
|
$72,590
|
|
|
$1,230 |
|
|
$43,634 |
|
|
98,000 |
| ||||||||||
Chevron
|
|
$207,873
|
|
|
$14,824 |
|
|
$158,902 |
|
|
48,600 |
| ||||||||||
Cisco Systems
|
|
$194,810
|
|
|
$110
|
|
|
$49,330
|
|
|
74,200
|
| ||||||||||
Coca-Cola
|
|
$201,546
|
|
|
$6,434 |
|
|
$31,856 |
|
|
62,600 |
| ||||||||||
Comcast
|
|
$154,911
|
|
|
$11,731 |
|
|
$94,507 |
|
|
184,000 |
| ||||||||||
DowDuPont
|
|
$122,696
|
|
|
$3,844 |
|
|
$85,977 |
|
|
98,000 |
| ||||||||||
Exxon Mobil
|
|
$288,703
|
|
|
$20,840 |
|
|
$290,212 |
|
|
71,000 |
| ||||||||||
General Electric
|
|
$65,845
|
|
|
($22,355 |
) |
|
$121,615 |
|
|
283,000 |
| ||||||||||
Goldman Sachs Group
|
|
$64,577
|
|
|
$10,459 |
|
|
$52,528 |
|
|
36,600 |
| ||||||||||
Home Depot
|
|
$194,075
|
|
|
$11,121 |
|
|
$108,203 |
|
|
400,000 |
| ||||||||||
IBM
|
|
$103,303
|
|
|
$8,728 |
|
|
$79,591 |
|
|
350,600 |
| ||||||||||
Intel
|
|
$214,189
|
|
|
$21,053 |
|
|
$70,848 |
|
|
107,400 |
| ||||||||||
Johnson & Johnson
|
|
$346,109
|
|
|
$15,297 |
|
|
$81,581 |
|
|
135,100 |
| ||||||||||
JPMorgan Chase
|
|
$324,627
|
|
|
$32,474 |
|
|
$131,412 |
|
|
256,105 |
| ||||||||||
McDonalds
|
|
$136,891
|
|
|
$5,924 |
|
|
$21,025 |
|
|
210,000 |
| ||||||||||
Merck
|
|
$198,695
|
|
|
$6,220 |
|
|
$42,294 |
|
|
69,000 |
| ||||||||||
Microsoft
|
|
$785,026
|
|
|
$16,571
|
|
|
$110,360
|
|
|
131,000
|
| ||||||||||
Nike
|
|
$117,742
|
|
|
$1,933
|
|
|
$36,397
|
|
|
73,100
|
| ||||||||||
Pfizer
|
|
$252,318
|
|
|
$11,153 |
|
|
$53,647 |
|
|
92,400 |
| ||||||||||
Procter & Gamble
|
|
$229,010
|
|
|
$9,750
|
|
|
$66,832
|
|
|
92,000
|
| ||||||||||
Sprint Corporation
|
|
$23,731
|
|
|
$7,389
|
|
|
$32,406
|
|
|
30,000
|
| ||||||||||
T-Mobile US
|
|
$53,966
|
|
|
$2,888 |
|
|
$43,310 |
|
|
52,000 |
| ||||||||||
Travelers
|
|
$31,710
|
|
|
$2,523 |
|
|
$30,282 |
|
|
30,400 |
| ||||||||||
UnitedHealth Group
|
|
$239,662
|
|
|
$11,986 |
|
|
$226,247 |
|
|
300,000 |
| ||||||||||
United Technologies
|
|
$91,933
|
|
|
$5,269 |
|
|
$66,501 |
|
|
240,200 |
| ||||||||||
VISA
|
|
$290,823
|
|
|
$10,301
|
|
|
$20,609
|
|
|
17,000
|
| ||||||||||
Walmart
|
|
$270,625
|
|
|
$6,670 |
|
|
$514,405 |
|
|
2,200,000 |
| ||||||||||
Walt Disney
|
|
$163,233
|
|
|
$12,598
|
|
|
$59,434
|
|
|
201,000
|
| ||||||||||
Verizon
|
|
$232,302
|
|
$15,528 | $130,863 | 144,500 |
Verizon 2019 Proxy Statement 33
Compensation Discussion and Analysis
Compensation Objectives and Elements of Compensation
Benchmarking Total Compensation Opportunity
The Committee evaluates whether the compensation opportunities for our executives are appropriate and competitive by comparing each named executive officers total compensation opportunity which represents the sum of the executives base salary and target award amounts under the Short-Term Incentive Plan (Short-Term Plan) and the Long-Term Plan to the total compensation opportunities for executives in comparable positions at companies in the Related Dow Peers, referencing the 50th percentile when making this comparison. A named executive officers total compensation opportunity may be higher or lower depending upon the executives tenure and overall level of responsibility. Because the significant majority of an executives total compensation is performance-based, the total amount of compensation an executive actually receives may be less or more than the targeted opportunity based on Verizons annual and long-term performance results.
Compensation Objectives and Elements of Compensation
Compensation Objectives
Verizons executive compensation program supports the creation of shareholder value by pursuing four key objectives:
| Attract and retain high-performing executives with the leadership abilities and experience necessary to drive our customer-focused transformation of the digital market, within an enterprise of our scale, breadth and complexity; |
| Pay for superior results and sustainable growth by rewarding the achievement of challenging short- and long-term performance goals designed to build shareholder value; |
| Drive performance and create shareholder value by emphasizing variable, at-risk compensation with an appropriate balance of short-term and long-term objectives that align executive and shareholder interests; and |
| Manage risk through oversight and compensation design features, policies and practices that balance short-term and long-term incentives and cap maximum payments. |
Elements of Compensation
The Committee determines the appropriate balance between fixed and variable pay elements, short- and long-term pay elements, and cash and equity-based pay elements when setting total compensation opportunities at competitive levels.
Pay Element | Characteristics | Purpose | ||
Base Salary |
Annual fixed cash compensation |
Attract and retain high-performing and experienced executives
| ||
Short-Term Incentive Opportunity |
Annual variable cash compensation based on the achievement of predetermined annual performance measures
|
Motivate executives to achieve challenging short-term performance targets | ||
Long-Term Incentive Opportunity |
Long-term variable equity awards granted annually as a combination of performance-based stock units and time-based restricted stock units
|
Align executives interests with those of shareholders, encourage efforts to grow long-term value, and retain executives
|
While the Committee does not benchmark and target each individual element of compensation to a specified market level, it does review market data with respect to the mix of annual cash and long-term equity components for similarly situated executives among the Related Dow Peers.
Compensation Mix to Emphasize Long-Term Performance
The Committee believes that a substantial majority of each named executive officers total compensation opportunity should be variable and at risk in order to emphasize a performance-based culture. In establishing the mix of incentive pay for the named executive officers, the Committee balances the importance of meeting Verizons short-term business goals with the need to create shareholder value over the longer term. To that end, long-term target compensation opportunities are more than double the annual base salary and short-term incentive target compensation opportunities. Moreover, since the annual
34 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
2018 Annual Base Salary
Long-Term Plan awards feature three-year award cycles, with awards consisting of PSUs subject to both performance-based and time-based vesting requirements and RSUs subject to time-based vesting requirements, we reward sustained performance and also encourage high-performing executives to remain with Verizon.
For 2018, the Committee allocated approximately 10% of each executives total compensation opportunity in the form of base salary, 20% in the form of short-term incentive, and 70% in the form of long-term incentive. Mr. Armstrongs total compensation opportunity was allocated in a manner consistent with his legacy total compensation opportunity from AOL, Inc., which Verizon acquired in 2015, with approximately 17% in the form of base salary, 33% in the form of short-term incentive and 50% in the form of long-term incentive.
Performance Target Setting
The Committee takes a holistic approach to establishing performance targets under our incentive plans. Targets are set at the time of the Boards annual strategy session to ensure that our executives compensation opportunities are aligned with Verizons short- and long-term strategic goals. In establishing performance targets, the Committee recognizes the importance of achieving an appropriate balance between rewarding executives for strong performance over both the short- and long-term and establishing realistic goals that continue to motivate and retain executives. As a result, our Short-Term and Long-Term Plans provide for measurable, rigorous performance targets that are attainable, but challenge executives to drive business results that generate shareholder value.
In setting the performance targets, the Committee considered the following factors:
| Verizons short- and long-term strategy; |
| Economic, industry and competitive environments; |
| The creation of shareholder value; |
| The achievement level against performance targets in the prior year; |
| Financial analysts consensus estimates for the performance measures over future performance cycles; |
| The correlation among the performance measures and considerations of how Verizons operational performance will affect each measure differently; and |
| With regard to the diversity and sustainability metric in the Short-Term Plan, Verizons values and long-term commitment to being a responsible member of the communities we serve. |
2018 Annual Base Salary
To determine an executives base salary, the Committee, with assistance from the Consultant, considers the pay practices of the Related Dow Peers for comparable positions; the executives experience, tenure, scope of responsibility and performance; internal pay alignment; continuity planning and management development considerations; and for newly-hired executives, the Committee also considers the compensation required to attract the executive to the Company. In particular, the Committee focuses on how base salary levels may impact the market competitiveness of an executives total compensation opportunity. There is no specific weighting applied to any of these factors in setting annual salaries, and the process ultimately relies on the subjective exercise of the Committees judgment.
Taking into account these considerations, the Committee approved a base salary increase in 2018 of 22.22% for Mr. Vestberg in his prior role and a new base salary of $1,500,000 when he was promoted to CEO effective August 1, 2018. The Committee approved base salary increases of 6.67% for Mr. Ellis, 3.13% for Mr. Reed, 3.03% for Mr. Dunne, 15.79% for Mr. Stratton and 5% for Mr. Armstrong and a base salary for Mr. Gowrappan of $850,000. The Committee approved these base salary levels in order to create an appropriate total compensation opportunity for each officer in light of the Committees reference of the 50th percentile for comparable executives within the Related Dow Peers and the compensation mix considerations described above. Mr. McAdam did not receive a base salary increase in 2018.
Verizon 2019 Proxy Statement 35
Compensation Discussion and Analysis
2018 Short-Term Incentive Compensation
2018 Short-Term Incentive Compensation
The Verizon Short-Term Plan motivates executives to achieve challenging short-term performance targets. Each year, the Committee establishes the potential value of the awards under the Short-Term Plan, as well as the performance targets required to achieve these awards.
The Committee sets the values of the Short-Term Plan award opportunities as a percentage of an executives base salary based on both the scope of the executives responsibilities and the competitive pay practices of the Related Dow Peers. The Short-Term Plan award opportunities at the threshold, target and maximum levels for each of the named executive officers are shown in the Grants of Plan-based Awards table on page 54.
For the named executive officers, other than Mr. Vestberg, target award opportunities, expressed as a percentage of base salary, did not change for 2018. However, the dollar value of the 2018 target award opportunities for Messrs. Ellis, Reed, Dunne, Stratton and Armstrong increased from 2018 as a result of the base salary increases described above. Mr. McAdam did not receive a salary increase in 2018, so the dollar value of his 2018 target award opportunity was the same as it was for the past four years. When Mr. Vestberg was promoted to CEO in August 2018, his target Short-Term Plan award opportunity was increased from 150% to 250% on a prorated basis. When Mr. Gowrappan was hired in April 2018, he was eligible for a full year Short-Term Plan award for 2018, and his target award opportunity was set at 150% of his base salary, which is consistent with target award opportunities as a percentage of base salary that apply to Messrs. Ellis, Reed, Dunne and Stratton. Mr. Armstrongs target award opportunity is the same as a percentage of base salary as the one that applied under his legacy AOL compensation structure.
The following table shows the 2018 Short-Term Plan target award opportunity for each of the named executive officers.
2018 Short-Term Plan Target Award Opportunity
Named Executive Officer
|
As a Percentage of Base Salary
|
As a Dollar Value
|
||||||
|
||||||||
Mr. Vestberg*
|
|
250%
|
|
|
$2,525,000
|
*
| ||
|
||||||||
Mr. Ellis
|
|
150%
|
|
|
$1,200,000
|
| ||
|
||||||||
Mr. Gowrappan
|
|
150%
|
|
|
$1,275,000
|
| ||
|
||||||||
Mr. Reed
|
|
150%
|
|
|
$1,237,500
|
| ||
|
||||||||
Mr. Dunne
|
|
150%
|
|
|
$1,275,000
|
| ||
|
||||||||
Mr. McAdam
|
|
250%
|
|
|
$4,000,000
|
| ||
|
||||||||
Mr. Stratton
|
|
150%
|
|
|
$1,650,000
|
| ||
|
||||||||
Mr. Armstrong
|
|
200%
|
|
|
$2,100,000
|
| ||
|
* | Mr. Vestbergs target award opportunity was 150% of his base salary prior to August 2018. The dollar value shown here reflects Mr. Vestbergs total target award opportunity for 2018 after giving effect to the prorated increase to his target award percentage upon his promotion to CEO effective August 1, 2018. |
36 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
2018 Short-Term Incentive Compensation
Annual Performance Measures
In the first quarter of each year, the Committee establishes financial and operational performance measures for the Short-Term Plan that are consistent with Verizons strategic goals. For each such measure, the Committee sets a target that challenges executives to drive business results that generate shareholder value. Verizons performance with respect to these measures determines the amount of the short-term incentive awards earned by the named executive officers.
Why these performance measures? |
||||
The Committee selected adjusted earnings per share (EPS), free cash flow and total revenue to reflect Verizons strategic goals of encouraging profitable operations, efficient use of capital and overall growth. The Committee also selected diversity and sustainability metrics to reflect Verizons commitment to promoting diversity among our employees and our business partners, and to reducing the environmental impact of our operations.
|
The 2018 performance measures, along with the weighting ascribed to each, are shown below as a percentage of the total Short-Term Plan award opportunity at target level performance. The Committee believes that these performance measures are appropriate to motivate Verizons executives to achieve outstanding short-term results and, at the same time, help build long-term value for shareholders. The 2018 measures and related targets approved by the Committee are described in detail below. These performance measures and weights are unchanged from 2017.
2018 Short-Term Plan Performance Measures
Adjusted EPS Free Cash Flow Total Revenue Diversity and Sustainability
Verizon 2019 Proxy Statement 37
Compensation Discussion and Analysis
2018 Short-Term Incentive Compensation
|
Adjusted EPS
Target range: $4.49 $4.58
Verizons earnings are a function of the revenue earned from customers and the expenses incurred to serve those customers. As a result, adjusted EPS is a measure of the efficiency with which we are approaching the marketplace the effectiveness with which we are balancing encouraging customers to start and continue relationships with us and the costs we are incurring to do so. The Committee assigns the greatest weight to adjusted EPS in determining awards under the Short-Term Plan because this measure is broadly used and recognized by investors as a key indicator of ongoing operational performance and profitability. Adjusted EPS excludes special items, such as impairments and gains and losses from divestitures, business combinations, changes in accounting principles, the net impact of severance, pension and post-retirement benefit costs, extraordinary items and restructurings. As a result, the Committee believes this measure provides meaningful comparisons of our financial results from period to period and reflects the relative success of the ongoing business.
|
|
Free Cash Flow
Target range: $17.4 billion to $18.8 billion
Free cash flow is a measure of the cash we have left over after we have made the capital expenditures necessary to continue to provide high-quality services to our customers. As a result, it is an indication of the extent to which we are efficiently using capital. It is also an indication of the amount of cash Verizon has available to return to shareholders in the form of dividends or share repurchases and to increase our financial flexibility by reducing outstanding debt. Free cash flow is calculated by subtracting capital expenditures from the total of cash flow from operations and cash flow from financing and investing activities attributable to device payment plan receivable securitizations.
|
|
Total Revenue
Target range: $128.9 billion to $130.3 billion
Total Revenue reflects the extent to which we are able to attract and retain customers and the level of penetration of our products and services in key markets. The Committee views this measure as an important indicator of Verizons growth and success in realizing its strategic initiatives.
|
38 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
2018 Short-Term Incentive Compensation
|
Diversity and Sustainability
Targets: At least 58.9% of U.S.-based workforce comprised of minority and female employees; direct at least $4.6 billion of our overall supplier spending to minority- and female-owned firms; reduce our carbon intensity the amount of carbon our business emits divided by the terabytes of data we transport over our networks by at least 6.0% compared to the prior year
As a large, multinational company with a highly diverse customer and employee base, we know that our operations are strengthened when we leverage the diversity of thought and cultures of our workforce and suppliers. We are also committed to reducing the environmental impact of our operations, because we believe that it is important for us to be good stewards of our planet while we continue to serve our customers.
|
2018 Adjusted Company Results
The Short-Term Plan provides for performance measures to be adjusted to exclude the impact of certain types of events not contemplated at the time the performance measures were set, such as significant transactions, changes in legal or regulatory policy and other special items. In determining adjusted EPS and Total Revenue, the Committee made an adjustment for the impact of the revenue recognition standard adopted on January 1, 2018, as set forth in Appendix A, which was not contemplated at the time that the adjusted EPS and Total Revenue targets were set. In determining free cash flow, the Committee made adjustments for discretionary pension plan contributions and the impact of the Tax Cuts and Jobs Act enacted on December 22, 2017, which were not contemplated at the time the free cash flow target was set. No awards are paid under the Short-Term Plan if Verizons return on equity (ROE) for the plan year, based on adjusted net income, does not exceed 8% (even if some or all of the other performance measures are achieved).
2018 Adjusted Company Results1 Compared Against Target Performance Ranges Resulting in a XX% Payout ROE of 19.3%2 $4.61 Adjusted EPS $4.58 $4.49 $4.16 $19.7B Free cash flow target range $19.7B $18.8B $17.4B $XXX.XB Total revenue $130.5B $130.3B $128.9B 60% U.S.-based minority and female employees (above target performance) Over $5.2B of our overall supplier spending directed to minority- and female-owned firms (above target performance) 14.4% reduction in carbon intensity (above target performance)
1 | A reconciliation of non-GAAP measures to the most directly comparable GAAP measures may be found in Appendix A. |
2 | Adjusted from reported ROE of 29.6% in accordance with the terms of the Short-Term Plan to address the impact of the transaction to acquire sole ownership of Verizon Wireless, which was not contemplated at the time that the ROE threshold was established for the payment of awards under the Short-Term Plan. |
Verizon 2019 Proxy Statement 39
Compensation Discussion and Analysis
Long-Term Incentive Compensation
2018 Short-Term Plan award. After considering the level of performance with respect to each performance measure, and based on an assessment of the level of achievement of each goal individually and collectively, the Committee determines the final Short-Term Plan award as a percentage of the target level for the employees participating in the Short-Term Plan. For 2018, this payout percentage was determined to be 109% of the target level.
Employees of the Verizon Media Group, other than our named executive officers, receive a short-term incentive that is calculated based on results for that business unit. This year, based on the performance of that unit, it was determined that Verizon Media Group would receive a short-term incentive payment at 80% of target level. When determining the Short-Term Plan payout for Mr. Gowrappan, the Committee considered Mr. Gowrappans request that his Short-Term Plan award for 2018 be based on the same payout percentage applicable to the Verizon Media Group employee base. Based on that consideration and after considering the performance of the Verizon Media Group, the Committee approved a Short-Term Plan payout for each of Mr. Gowrappan and Mr. Armstrong at the same percentage that applied to all Verizon Media Group employees.
The following table shows the payout percentage and amount of the Short-Term Plan award paid to each named executive officer.
Named Executive Officer | Payout Percentage | As a Dollar Value | ||||||
Mr. Vestberg
|
109% | $ | 2,752,250 | |||||
Mr. Ellis
|
109% | $ | 1,308,000 | |||||
Mr. Gowrappan
|
80% | $ | 1,020,000 | |||||
Mr. Reed
|
109% | $ | 1,348,875 | |||||
Mr. Dunne
|
109% | $ | 1,389,750 | |||||
Mr. McAdam
|
109% | $ | 4,360,000 | |||||
Mr. Stratton
|
109% | $ | 1,798,500 | |||||
Mr. Armstrong
|
80% | $ | 1,680,000 |
Long-Term Incentive Compensation
The Long-Term Plan is intended to align executives and shareholders interests and to reward participants for creating long-term shareholder value.
Annual Long-Term Plan awards are made in PSUs and RSUs. The value of each PSU or RSU is equal to the value of one share of Verizon common stock. The Committee establishes an executives Long-Term Plan award opportunity as a percentage of base salary and determines the number of PSUs and RSUs to be awarded based on the stock price on the grant date. The Committee assumes each executive will earn 100% of the PSUs and RSUs awarded for purposes of determining the total compensation opportunity. PSUs and RSUs accrue dividend equivalents that are deemed to be reinvested in PSUs and RSUs, respectively. These dividend equivalents are paid when, and only to the extent that, the related PSUs and RSUs are actually earned. PSUs are earned over a three-year performance cycle, with cliff vesting at the end of the three-year period. The Committee believes that a three-year performance cycle is appropriate for the PSU awards because a multi-year performance cycle enables the Committee to meaningfully evaluate the execution of long-term strategies and the effect on shareholder value. Commencing with the 2017 annual grant, RSUs vest ratably over three years (as opposed to a single, longer cliff vesting schedule), with one-third of the award vesting on each annual anniversary of the grant date, which aligns with market practices and enables us to continue to attract and retain key executive talent.
The number of PSUs actually earned and paid is determined based upon Verizons achievement of pre-established performance targets over the three-year performance cycle, and the ultimate value of each PSU is based on the closing price of Verizons common stock on the last trading day of the performance cycle. Because the value of PSUs is linked to both stock price and performance targets, PSUs provide a strong incentive to executives to deliver value to Verizons shareholders. RSUs also provide a performance link as the value of the award depends on Verizons stock price. Both PSUs and RSUs provide a retention incentive by requiring the executive to remain employed with Verizon through the end of the applicable vesting period, subject to certain qualifying separations.
40 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
Long-Term Incentive Compensation
As in prior award cycles, the 2018 PSUs are payable in cash and the 2018 RSUs are payable in Verizon shares. The Committee generally seeks to balance the potential shareholder dilution from paying awards in shares and cash flow considerations. In addition, paying the 2018 RSU awards in shares is consistent with Verizons policy of requiring a significant level of equity ownership by our named executive officers.
Long-Term Incentive Program Structure |
||||
60% PSUs 40% RSUs 2/3 1/3 Eligible to vest based on relative Total Shareholder Return Eligible to vest based on Cumulative Free Cash Flow Eligible to vest based on continued employment through each applicable vesting date
|
2018 Long-Term Plan Award Opportunities
The Long-Term Plan award is intended to drive our executives to deliver superior total shareholder return (TSR) performance and create free cash flow (FCF), and to encourage retention among our highly-qualified team. To that end, consistent with past practice, each of the named executive officers, other than Mr. Gowrappan, received 60% of their 2018 Long-Term Plan award in the form of PSUs and 40% in the form of RSUs. Two-thirds of the PSUs are eligible to vest based on Verizons relative TSR, and one-third is eligible to vest based on Verizons cumulative free cash flow. The Committee reviews and sets the performance levels for vesting of the PSUs for each grant.
Mr. Gowrappan received 100% of his 2018 Long-Term Plan award in the form of cash-settled RSUs, which was negotiated with Mr. Gowrappan in connection with his offer to become President and COO of the Media Group in April 2018. Mr. Gowrappans future Long-Term Plan awards will have the same structure and terms and conditions as those of the other named executive officers. For additional information regarding Mr. Gowrappans compensation arrangements, see page 46.
Why these performance measures? |
||||
Relative TSR. The Committee understands that our investors have many different large-cap investment options. The Committee believes Verizons TSR compared to the TSR of the companies in the Related Dow Peers is a critical indicator of our success because it measures our performance in returning value to our shareholders in comparison to alternative investments our shareholders could have made. For this reason, the Committee chose relative TSR as a key metric for determining the extent to which our management team will earn the PSUs granted under the Long-Term Plan.
Free Cash Flow. The Committee views free cash flow as an important indicator of our success because it measures our ability to generate cash from operations, which may be reinvested in our business, used to make acquisitions or pay outstanding debt, or returned to shareholders in the form of dividends or through share repurchases.
|
The Committee establishes the annual target long-term incentive award opportunities for the named executive officers as a percentage of base salary and sets the award levels to provide a total compensation opportunity consistent with the Companys overall compensation philosophy and the compensation mix considerations described above.
In late 2017 and early 2018, the Committee, with the assistance of the Consultant, undertook a review of the methodology for establishing the annual long-term incentive award opportunities under the Long-Term Plan, taking into account Verizons business strategy and focus and market data on the competitive pay practices of the Related Dow Peers. As a result of that
Verizon 2019 Proxy Statement 41
Compensation Discussion and Analysis
Long-Term Incentive Compensation
review, the Committee determined that the annual target award opportunity for named executive officers, other than the CEO and Mr. Armstrong, will be determined by the Committee within a range of 400% to 600% of base salary. The target award opportunity for each named executive officer may vary within this range from year to year and will be determined on an individual basis taking into account the factors the Committee may consider relevant in the circumstances, such as market practices for different roles and responsibilities, individual performance, the strategic impact of the individuals role and internal pay alignment. Based on the Committees assessment, the Committee approved a 2018 target award opportunity of 600% for Messrs. Vestberg, Ellis, Reed and Stratton (representing an increase from the 2017 target award opportunities of 500% for Messrs. Vestberg, Ellis and Reed and 525% for Mr. Stratton) and a target award opportunity of 500% for Mr. Dunne, which was unchanged from 2017. When Mr. Gowrappan was hired in April 2018, he was eligible for a full year Long-Term Plan award for 2018, and the Committee approved a 2018 target award opportunity of 600% of his base salary. Mr. Armstrongs 2018 target award opportunity of 300% represents the target award opportunity level as a percentage of his base salary that applied under his legacy AOL compensation structure. Mr. McAdams 2018 target award opportunity did not change from 2017. Upon Mr. Vestbergs promotion to CEO, the Committee approved an increase in Mr. Vestbergs annual long-term target award opportunity to 800% of his base salary commencing with the 2019 annual long-term incentive award.
The 2018 target award opportunity for the named executive officers was allocated between PSUs and RSUs as noted above, and the target award opportunity allocated to each type of award was converted into a target number of units using the closing price of Verizons common stock on the grant date.
The following table shows the target value of the 2018 Long-Term Plan awards granted to the named executive officers.
2018 Long-Term Plan Target Award Opportunity
Named Executive Officer | As a Percentage of Base Salary | As a Dollar Value | ||||||
Mr. Vestberg*
|
|
600%
|
|
|
$6,600,000
|
| ||
Mr. Ellis
|
|
600%
|
|
|
$4,800,000
|
| ||
Mr. Gowrappan
|
|
600%
|
|
|
$5,100,000
|
| ||
Mr. Reed
|
|
600%
|
|
|
$4,950,000
|
| ||
Mr. Dunne
|
|
500%
|
|
|
$4,250,000
|
| ||
Mr. McAdam
|
|
750%
|
|
|
$12,000,000
|
| ||
Mr. Stratton
|
|
600%
|
|
|
$6,600,000
|
| ||
Mr. Armstrong
|
|
300%
|
|
|
$3,150,000
|
|
* | Mr. Vestbergs annual long-term target award opportunity for 2018 did not change due to his appointment as CEO effective August 1, 2018. The Committee recommended, and the independent members of the Board approved, an increase to Mr. Vestbergs annual long-term target award opportunity to 800% of his base salary commencing with the 2019 annual long-term incentive award. |
42 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
Long-Term Incentive Compensation
Terms of 2018 PSU Awards
Total Shareholder Return Metric
Two-thirds of the PSUs will vest based on Verizons TSR position compared with the companies in the Related Dow Peers as constituted on the date the awards were granted (TSR PSUs). Verizons TSR during the performance cycle must rank at least 16th (approximately the 56th percentile) among the Related Dow Peers for 100% of the target number of TSR PSUs to vest, meaning Verizon must achieve above median TSR PSU performance for target vesting. The TSR PSUs will vest at their maximum level (200% of target) only if Verizons TSR during the three-year performance cycle ranks among the top four companies in the Related Dow Peers the 91st percentile or higher. If Verizons TSR during the three-year performance cycle ranks below 26th (approximately the 26th percentile) of the companies in the Related Dow Peers, none of the TSR PSUs will vest. The number of TSR PSUs that will vest in between these performance levels is determined by linear interpolation between vesting percentage levels.
Free Cash Flow Metric
One-third of the PSUs will vest based on Verizons cumulative free cash flow (FCF PSUs). The percentage of the FCF PSUs awarded for the 2018-2020 performance cycle that will vest is based on the extent to which Verizons cumulative FCF over the performance cycle meets or exceeds the cumulative FCF performance levels set by the Committee at the beginning of the performance cycle. FCF is calculated by subtracting capital expenditures from the total of cash flow from operations and cash flow from financing and investing activities attributable to device payment plan receivable securitizations and is subject to adjustment to eliminate the financial impact of significant transactions, changes in legal or regulatory policy and other extraordinary items.
The cumulative FCF target for the 2018-2020 performance cycle was set at a level reflective of our three-year strategic plan, which the Committee believes is attainable, but challenging in light of the business environment. The number of FCF PSUs that will vest ranges from 0%, if actual performance is below the threshold level, to 200%, if actual performance is at or above the maximum cumulative FCF level. The number of FCF PSUs that will vest in between identified performance levels is determined by linear interpolation between vesting percentage levels.
Verizon 2019 Proxy Statement 43
Compensation Discussion and Analysis
Long-Term Incentive Compensation
44 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
Long-Term Incentive Compensation
2016-2018 FCF PSUs. One-third of the PSUs awarded was eligible to vest based on Verizons cumulative free cash flow over the 2016-2018 performance cycle compared to the performance targets set by the Committee at the beginning of the three-year cycle. The following shows the percentage of FCF PSUs awarded that would vest based on Verizons cumulative free cash flow over the 2016-2018 performance cycle at different performance levels.
Verizons Cumulative Free Cash Flow (in billions) | Percentage of Awarded FCF PSUs that Vest1 |
|||
Greater than $46.7
|
|
200%
|
| |
$43.6
|
|
150%
|
| |
$40.6
|
|
100%
|
| |
$33.7
|
|
50%
|
| |
Less than $33.7
|
|
0%
|
|
1 | For achievement between the stated levels, vesting is determined by linear interpolation. |
At the time the 2016-2018 award was granted, the Committee provided for free cash flow to be determined on an adjusted basis, reflecting reductions and/or increases, to preserve the intended incentives by excluding the impact of certain types of events not contemplated by our financial plan, such as significant transactions, changes in legal or regulatory policy and other special items. In determining Verizons free cash flow over the performance cycle, the Committee made an adjustment for discretionary pension plan contributions made in 2017 and 2018, which were not contemplated when the FCF PSU targets were set and made an adjustment to normalize the impacts of the 2017 Tax Cuts and Jobs Act on the free cash flow results. These adjustments are set forth in Appendix A. In accordance with this pre-established adjustment methodology, the Committee determined that Verizons cumulative free cash flow over the performance cycle was $40.8 billion, which resulted in a vesting percentage of 104% for the FCF PSUs.
2016-2018 PSU payout. Based on the results described above, in the first quarter of 2019 the Committee approved a payment to all participants in the Long-Term Plan, including the named executive officers, of 56% of the PSUs awarded for the 2016-2018 performance cycle, which represents the weighted average of the two vesting percentages described above, plus dividend equivalents credited on those vested PSUs.
Verizon 2019 Proxy Statement 45
Compensation Discussion and Analysis
Additional Compensation Actions in 2018
Additional Compensation Actions in 2018
Appointment of Mr. Vestberg as Verizons Chief Executive Officer
Effective August 1, 2018, Mr. Vestberg succeeded Mr. McAdam as Verizons Chief Executive Officer. In connection with Mr. Vestbergs appointment as CEO, the Committee recommended, and the independent members of the Board approved, increases to his base salary and target short-term incentive opportunity, effective upon his appointment, and an increase to his long-term incentive opportunity commencing in 2019. These changes are described on pages 35, 36 and 42. In addition, the Committee recommended, and the independent members of the Board approved, a special one-time equity award with a grant date of August 1, 2018 to Mr. Vestberg as an additional incentive to drive ROE over a five-year performance period. The award is entirely performance-based, with 100% of the award opportunity in the form of PSUs and a grant date value of approximately $10 million. The Committee chose ROE as the performance measure for this one-time award because it is a strong indicator of the extent to which the Company is able to generate profit with the money our shareholders have invested in the Company and provides a significant link to shareholder value creation. In determining the value of the award, the Committee and the independent members of the Board noted that while a one-time award such as this is substantial in the first year, the Committee believes the proper way to consider the award is as compensation for, and apportioned over, the five-year award period plus the two-year period during which Mr. Vestberg will be required to hold the shares he receives on vesting.
The special award was granted pursuant to the terms and conditions of the Long-Term Plan. The PSUs represent shares of Verizon stock that may become payable after the completion of a five-year performance period ending on July 31, 2023, provided that Mr. Vestberg remains actively employed throughout the period, subject to the terms of the grant agreement. The number of PSUs that vest at the end of the five-year performance period will be determined based on Verizons average annual ROE during the performance period. No PSUs will vest unless Verizons five-year average annual ROE meets a minimum threshold of 18%. If Verizons five-year average annual ROE at the end of the performance period meets the target percentage of 28%, 100% of the PSUs granted will vest. If Verizons five-year average annual ROE is at least 38%, a maximum of two times the PSUs granted will vest. If Verizons five-year average annual ROE is greater than 18%, but less than 28%, or is greater than 28%, but less than 38%, the percentage of PSUs granted that will vest will be determined on an interpolated basis. The value of each PSU is equal to the fair market value of a share of Verizons common stock on the date of the grant and will change as the value of Verizons common stock changes. All PSUs that vest at the end of the five-year performance period, including accrued dividend equivalents on the vested portion of the grant, will be settled in shares of Verizon common stock. To the extent any common stock is issued, the grant agreement requires that Mr. Vestberg hold such shares for two years following the vesting date.
Hiring and Promotion of Mr. Gowrappan
To strengthen the leadership team of Verizons Media Group and help build its global services platform, on April 9, 2018, Verizon hired Mr. Gowrappan as the President and COO. The Committee approved a compensation package for Mr. Gowrappan in that role that is competitive with industry practice, and includes a special performance-based RSU award (PRSU) and a signing bonus. The 2018 base salary, short-term and long-term incentive awards that were also part of his compensation package are described on pages 35, 36 and 42. The special PRSU award was granted to Mr. Gowrappan on April 9, 2018, with a grant date value of approximately $3 million. The PRSUs represent shares of Verizon stock that will become payable after the completion of a three-year award period ending on April 9, 2021, provided that Mr. Gowrappan remains actively employed throughout the award period, subject to the terms of the grant agreement. In addition, the grant agreement provided that if the Media Groups cumulative revenue over the three-year performance period commencing January 1, 2018 and ending December 31, 2020 met or exceeded the cumulative Media Group revenue performance level set by the Committee, two times the target number of shares subject to the award (plus accrued dividends) would vest. In granting the award, the Committee considered that the special PRSU award would enhance Mr. Gowrappans immediate financial stake in Verizon and was also intended to offset a portion of the compensation value that Mr. Gowrappan forfeited upon leaving his prior employer to join Verizon. In October 2018, in connection with Mr. Gowrappans promotion to Executive
46 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
Other Elements of the Compensation Program
Vice President and CEO of the Media Group, the Committee modified the special PRSU award to increase the multiplier for the achievement of the Media Groups cumulative revenue level from two times to three times the target number of shares subject to the award as an additional incentive to drive the Media Groups revenue, and to align the Media Groups cumulative revenue target level with its business plan as in effect when Mr. Gowrappan became CEO of the group. The cumulative revenue target was set at a level reflective of the Media Groups three-year strategic plan, which the Committee believes is attainable, but challenging in light of the business environment. The award, to the extent vested, will be settled in shares of Verizon common stock. In addition, Mr. Gowrappan received a $2 million signing bonus and a $400,000 cash payment to assist with the costs of his relocation from Hong Kong to Sunnyvale, CA. Mr. Gowrappan is required to repay the signing bonus and relocation payment if he voluntarily leaves Verizon or is terminated for cause at any time prior to the 18-month anniversary of his employment commencement date.
Appointment of Mr. Dunne as Executive Vice President and President of Verizons Consumer Group
In November 2018, Verizon announced the realignment of the Companys operating structure around three core segments Verizon Consumer Group, Verizon Business Group and Verizon Media Group effective April 1, 2019. Mr. Dunne was named leader of the Verizon Consumer Group effective January 1, 2019. In connection with this new role, in October 2018, the Committee increased Mr. Dunnes base salary to $1 million and approved his 2019 target long-term incentive opportunity at 600% of his base salary, in each case effective January 1, 2019.
2019 Base Pay Increase for Mr. Ellis
In December 2018, the Committee increased Mr. Ellis base salary to $950,000 effective January 1, 2019, based on its assessment of the market competitiveness of his total compensation opportunity, his tenure and experience and internal pay alignment considerations.
Other Elements of the Compensation Program
Verizon also provides the named executive officers with limited additional benefits as generally described below, which are subject to applicable taxes and not intended to be a significant portion of their overall pay package. No named executive officer is eligible for a tax gross-up payment in connection with any of these benefits, including with respect to excise tax liability arising from any Internal Revenue Code Section 280G excess parachute payments.
Personal Benefits
Transportation. Verizon provides limited aircraft and ground transportation benefits to enhance the safety and security of certain named executive officers. These transportation benefits also serve business purposes, such as allowing an executive to attend to confidential business matters while in transit.
Executive life insurance. Verizon offers the named executive officers and other executives the opportunity to participate in an executive life insurance program in lieu of participating in our basic and supplemental life insurance programs. The executives who elect to participate in the executive life insurance program own the life insurance policy, and Verizon provides an annual cash payment to defray a portion of the annual premiums. Effective April 1, 2018, this program was closed to new participants.
Financial planning. Verizon provides a voluntary Company-sponsored financial planning benefit program for the named executive officers and other executives. If an executive participates in the program, the cost of the financial planning benefit is included in the executives income. Effective April 1, 2018, this program was closed to new participants.
For additional information on these benefits, see footnote 6 to the Summary Compensation table on pages 53-54.
Verizon 2019 Proxy Statement 47
Compensation Discussion and Analysis
Other Elements of the Compensation Program
Retirement Benefits
Over ten years ago, the Committee determined that guaranteed pay in the form of defined benefit pension and supplemental executive retirement benefits was not consistent with Verizons pay-for-performance culture. Accordingly, effective June 30, 2006, Verizon froze all future pension accruals under its management tax-qualified and supplemental defined benefit retirement plans. These legacy retirement benefits that were previously provided to certain named executive officers are described in more detail under the section titled Pension plans beginning on page 57. In addition, effective June 30, 2006, the Committee froze eligibility for Verizon-subsidized retiree medical benefits under its legacy broad-based Wireline retiree medical plans, which provide a capped partial subsidy towards the cost of medical benefits to certain Verizon employees who met the eligibility requirements for the benefit. None of Verizons named executive officers, other than Mr. Reed, are eligible for Verizon-subsidized retiree medical benefits.
During 2018, all of Verizons named executive officers were eligible to participate in Verizons tax-qualified defined contribution savings plan, the Verizon Management Savings Plan, referred to as the Savings Plan, and Verizons nonqualified defined contribution savings plan, the Verizon Executive Deferral Plan, referred to as the Deferral Plan. The named executive officers participate in these plans on the same terms as other participants in the plans. Under the Savings Plan, participants may defer eligible pay, which includes base salary and short-term incentive, up to certain compensation limits imposed by the Internal Revenue Code, and Verizon provides a matching contribution equal to 100% of the first 6% of eligible pay deferred. The Deferral Plan is designed to restore benefits that are limited or cut back under the Savings Plan due to the Internal Revenue Code limits. Accordingly, under the Deferral Plan, a participant may elect to defer his or her base pay and short-term incentive that could not be deferred into the Savings Plan due to the Internal Revenue Code limits. Verizon provides the same matching contribution on these deferred amounts as the participant would have received if such amounts had been permitted to be deferred into the Savings Plan. Prior to 2018, the Deferral Plan also permitted participants to defer long-term incentive compensation, but these deferrals were not eligible for Company matching contributions. All participants in both the Savings Plan and the Deferral Plan are eligible for an additional discretionary profit-sharing contribution of up to 3% of eligible pay.
Severance and Change in Control Benefits
The Committee believes that maintaining a competitive level of separation benefits is appropriate as part of an overall program designed to attract, retain and motivate the highest-quality management team. However, the Committee does not believe that named executive officers should be entitled to receive cash severance benefits merely because a change in control occurs. Therefore, the payment of cash severance benefits is triggered only by an actual or constructive termination of employment.
Verizon was not a party to any employment agreement with any of the named executive officers in 2018. All senior managers (including all named executive officers except Mr. McAdam and Mr. Vestberg) are eligible to participate in the Verizon Senior Manager Severance Plan, which provides certain separation benefits to participants whose employment is involuntarily terminated without cause. As CEO, Mr. Vestberg is not eligible to participate in the Senior Manager Severance Plan and is not entitled to receive any cash severance benefits upon his separation from the Company. As CEO and then in his role as Executive Chairman, Mr. McAdam was not eligible to participate in the Senior Manager Severance Plan and was not entitled to receive any cash severance benefits upon his retirement from the Company on December 31, 2018.
The Senior Manager Severance Plan is generally consistent with the terms and conditions of Verizons broad-based severance plan for management employees other than senior managers. Under the Senior Manager Severance Plan, if a participant has been involuntarily terminated without cause (or, in the case of a named executive officer, if the independent members of the Board determine that there has been a qualifying separation), the participant is eligible to receive a lump-sum cash separation payment equal to a multiple of his or her base salary plus target short-term incentive opportunity, along with continuing medical coverage for the applicable severance period. To the extent that a senior manager is eligible for severance benefits under any other arrangement, that person may not receive any duplicative benefits under the Senior Manager Severance Plan. The Senior Manager Severance Plan does not provide for any severance benefits based upon a change in control of the Company.
48 Verizon 2019 Proxy Statement
Compensation Discussion and Analysis
Other Compensation Policies
Under the Senior Manager Severance Plan, each named executive officer, other than Mr. Vestberg and Mr. McAdam, is eligible to receive a cash separation payment equal to two times the sum of his or her base salary and target short-term incentive opportunity. To be eligible for any severance benefits, a participant must execute a release of claims against Verizon in the form satisfactory to Verizon and agree not to compete or interfere with any Verizon business for a period of one year after separation.
Mr. Stratton and Mr. Armstrong became entitled to separation benefits under the Senior Manager Severance Plan upon their separation from Verizon on December 31, 2018, which are described in more detail on pages 67 and 68. Neither Mr. Stratton nor Mr. Armstrong received any enhanced benefits upon their separation of service.
Consistent with the Committees belief that named executive officers should not receive cash severance benefits merely because a change in control occurs, the Long-Term Plan does not allow single-trigger accelerated vesting and payment of outstanding awards upon a change in control. Instead, the Long-Term Plan requires a double trigger. Specifically, if in the 12 months following a change in control a participants employment is terminated without cause, all of that participants then-unvested PSUs will fully vest at the target level performance, then-unvested RSUs will fully vest, and those PSUs and RSUs (including accrued dividend equivalents) will become payable on the regularly scheduled payment date after the end of the applicable award cycle.
Other Compensation Policies
Stock Ownership Guidelines
To further align the interests of Verizons management with those of our shareholders, the Committee has approved guidelines that require each named executive officer and other executives to maintain certain stock ownership levels within five years of assuming their leadership roles.
| The CEO is required to maintain share ownership equal to at least seven times base salary. |
| Other named executive officers are required to maintain share ownership equal to at least four times base salary. |
| Executives are prohibited from hedging, short-selling or engaging in any financial activity that would allow them to benefit from a decline in Verizons stock price. |
In determining whether an executive meets the required ownership level, the calculation includes any shares held by the executive directly or through a broker, shares held through the Verizon tax-qualified savings plan or the Verizon nonqualified savings plan and other deferred compensation plans and arrangements that are valued by reference to Verizons stock. The calculation does not include any unvested PSUs or RSUs. Each of the named executive officers is in compliance with the stock ownership guidelines. In addition, none of the named executive officers has engaged in any pledging transaction with respect to shares of Verizons stock.
Holding Executives Accountable Verizons Clawback Policies
The Committee believes it is appropriate to hold senior executives accountable for misconduct that results in significant reputational or financial harm to Verizon. Accordingly, the Committee has adopted the following policies:
| Senior Executive Clawback Policy. Verizon has the right to cancel or clawback the cash- and equity-based incentive compensation of senior executives who engage in willful misconduct in the performance of their duties that results in significant reputational or financial harm to Verizon. |
| Long-Term Plan Clawback Provisions. Annual equity grants under the Verizon Long-Term Plan give the Company the right to (i) require the recipient to forfeit or repay incentive-based compensation (both short-term and long-term) if Verizon is required to materially restate its financial results based on the individuals willful misconduct or gross negligence while employed by the Company (where such restatement would have resulted in a lower payment being made to the individual) and (ii) enforce any right or obligation that Verizon may have regarding the clawback of incentive-based compensation under federal securities or other applicable laws. |
Verizon 2019 Proxy Statement 49
Compensation Discussion and Analysis
Tax and Accounting Considerations
These policies do not limit any other rights or remedies Verizon may have in the circumstances, such as terminating the executive or initiating other disciplinary procedures.
Disclosure of any clawbacks will be made in accordance with applicable requirements, including, in the case of the named executive officers and if material, in the Compensation Discussion and Analysis section of the proxy statement for the year in which the clawback decision is made.
Shareholder Approval of Certain Severance Arrangements
The Committee has a policy of seeking shareholder approval or ratification of any new employment or severance agreement with an executive officer that provides for a total cash value severance payment exceeding 2.99 times the sum of the executives base salary plus Short-Term Plan target opportunity. The policy defines severance pay broadly to include payments for any consulting services, payments to secure a non-compete agreement, payments to settle any litigation or claim, payments to offset tax liabilities, payments or benefits that are not generally available to similarly situated management employees and payments in excess of, or outside, the terms of a Verizon plan or policy.
Tax and Accounting Considerations
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted. The TCJA significantly revised the income tax deductibility of executive compensation. Based on the changes introduced by the TCJA, a publicly-held company is generally prohibited from deducting compensation paid to a current or former named executive officer that exceeds $1 million during the tax year. Certain awards granted before November 2, 2017, which were based upon attaining pre-established performance measures set by the companys compensation committee under a plan approved by the companys shareholders, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit.
The Committee takes this deductibility limitation into account in its consideration of compensation matters. However, the Committee has the flexibility to take any compensation-related actions that it determines are in the best interests of Verizon and our shareholders, including awarding compensation that may not be deductible for tax purposes. There can be no assurance that any compensation in excess of $1 million will in fact be deductible.
The Committee also considers the effect of certain accounting rules that apply to the various aspects of the compensation program for our named executive officers. The Committee reviews potential accounting effects in determining whether its compensation actions are in the best interests of Verizon and our shareholders. The Committee has been advised by management that the impact of the variable accounting treatment required for long-term incentive awards payable in cash (as opposed to fixed accounting treatment for awards that are payable in shares) will depend on future stock performance.
50 Verizon 2019 Proxy Statement
The Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the Committee recommended to the Board of Directors, and the Board has approved, the inclusion of the Compensation Discussion and Analysis in this proxy statement and Verizons Annual Report on Form 10-K for the year ended December 31, 2018.
Respectfully submitted,
The Human Resources Committee
Daniel Schulman, Chair
Mark Bertolini
Richard Carrión
Melanie Healey
Clarence Otis, Jr.
Rodney Slater
March 8, 2019
Verizon 2019 Proxy Statement 51
Summary Compensation
The following table provides information about the compensation paid to each of our named executive officers in 2016, 2017 and 2018.
Name and Principal Position (a) |
Year (b) |
Salary1 ($) (c) |
Bonus2 ($) (d) |
Stock (e) |
Option (f) |
Non-Equity (g) |
Change in Value and |
All Other (i) |
Total ($) (j) |
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Hans Vestberg* | 2018 | 1,235,385 | 1,000,000 | 16,600,082 | 0 | 2,752,250 | 0 | 618,369 | 22,206,086 | |||||||||||||||||||||||||||
Chairman and Chief Executive Officer | 2017 | 807,497 | 0 | 7,500,069 | 0 | 1,255,500 | 0 | 254,353 | 9,817,419 | |||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Matthew Ellis | 2018 | 792,307 | 0 | 4,800,020 | 0 | 1,308,000 | 0 | 160,349 | 7,060,676 | |||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2017 | 742,308 | 0 | 3,750,088 | 0 | 1,046,250 | 2,998 | 107,724 | 5,649,368 | |||||||||||||||||||||||||||
2016 | 488,462 | 0 | 1,708,468 | 0 | 410,000 | 1,291 | 89,138 | 2,697,359 | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
K. Guru Gowrappan** | 2018 | 603,448 | 1,999,998 | 8,695,827 | 0 | 1,020,000 | 0 | 433,665 | 12,752,938 | |||||||||||||||||||||||||||
Executive Vice President and CEO Verizon Media Group | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Marc Reed7 | 2018 | 821,154 | 0 | 4,950,064 | 0 | 1,348,875 | 0 | 232,377 | 7,352,470 | |||||||||||||||||||||||||||
Executive Vice President and Chief Administrative Officer |
2017 | 800,000 | 0 | 4,000,037 | 0 | 1,116,000 | 150,984 | 200,087 | 6,267,108 | |||||||||||||||||||||||||||
2016 | 792,307 | 0 | 4,000,094 | 0 | 960,000 | 196,023 | 224,745 | 6,173,169 | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Ronan Dunne | 2018 | 846,154 | 0 | 4,250,008 | 0 | 1,389,750 | 0 | 228,214 | 6,714,126 | |||||||||||||||||||||||||||
Executive Vice President and President Verizon Consumer Group | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Lowell McAdam* | 2018 | 1,661,538 | 0 | 12,000,050 | 0 | 4,360,000 | 0 | 616,279 | 18,637,867 | |||||||||||||||||||||||||||
Former Chairman and Chief Executive Officer | 2017 | 1,600,000 | 0 | 12,000,062 | 0 | 3,720,000 | 73,949 | 543,570 | 17,937,581 | |||||||||||||||||||||||||||
2016 | 1,600,000 | 0 | 12,000,077 | 0 | 3,200,000 | 233,155 | 641,347 | 17,674,579 | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
John Stratton*** | 2018 | 1,260,962 | 0 | 6,600,052 | 0 | 1,798,500 | 0 | 5,987,338 | 15,646,852 | |||||||||||||||||||||||||||
Former Executive Vice President and President Global Operations | 2017 | 942,308 | 0 | 10,987,566 | 0 | 1,325,250 | 80,190 | 204,837 | 13,540,151 | |||||||||||||||||||||||||||
2016 | 896,154 | 0 | 4,725,072 | 0 | 1,080,000 | 101,959 | 237,424 | 7,040,609 | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Timothy Armstrong** | 2018 | 1,193,750 | 0 | 3,150,081 | 0 | 1,680,000 | 0 | 6,465,111 | 12,488,942 | |||||||||||||||||||||||||||
Former Executive Vice President and President and CEO Oath | ||||||||||||||||||||||||||||||||||||
|
* | Mr. Vestberg became Chief Executive Officer of Verizon on August 1, 2018 and Chairman on March 8, 2019, when Mr. McAdam stepped down from those positions. Mr. McAdam retired from Verizon on December 31, 2018. |
** | Mr. Gowrappan was hired as President and COO of Verizons Media Group (formerly known as Oath) on April 9, 2018 and became Executive Vice President and CEO of the Verizon Media Group on October 1, 2018, when Mr. Armstrong stepped down from that role. Mr. Armstrong remained as strategic advisor to Verizon until he left the Company on December 31, 2018. |
*** | Mr. Stratton stepped down as Executive Vice President and President Global Operations on June 7, 2018 and remained as strategic advisor to Verizon until he retired from the Company on December 31, 2018. |
1 | For Messrs. McAdam, Stratton and Armstrong, the amounts in this column also include cash paid in lieu of vacation. |
2 | For Mr. Vestberg, the amount in this column represents the signing bonus that became payable to him upon his relocation to the United States in January 2018, which was approved by the Committee in connection with the commencement of his employment with Verizon in April 2017. For Mr. Gowrappan, the amount in this column represents the signing bonus that was paid to him in connection with his commencement of employment with Verizon in 2018. |
3 | The amounts in this column reflect the aggregate grant date fair value of the PSUs and RSUs computed in accordance with FASB ASC Topic 718 based on the closing price of Verizons common stock on the grant date. For Mr. Gowrappan, the amount in this column with respect to his special PRSU award represents the sum of the grant date fair value of the PRSU award on the April 9, 2018 grant date plus the incremental fair value attributable to the modification of this award on October 5, 2018 as described in footnote 3 to the Grants of Plan-based Awards table on page 54, in each case computed in accordance with FASB ASC Topic 718 based on the closing price of Verizons common stock on the applicable date (the aggregate PRSU grant date fair value). The grant date fair value of each of the PSU awards granted to the named executive officers in the designated year as part of Verizons annual long-term incentive award program, the special PSU award granted to Mr. Vestberg in 2018, the Special PRSU award granted to Mr. Gowrappan in 2018, and the special PSU award granted to Mr. Stratton in 2017 has been determined based on the vesting of 100% of the nominal PSUs or PRSUs awarded, which is the performance threshold the Company believed was most likely to be achieved under the awards on the grant date. The following table reflects the grant date fair value of the PSU awards, as well as the maximum value of these awards based on the closing price of Verizons common stock on the grant date if, due to the Companys performance during the applicable performance cycle, the PSU awards vested at their maximum level. For Mr. Gowrappans PRSU award, the amount in the following table reflects the aggregate PRSU grant date fair value, as well as the maximum value of this award based on the closing price of Verizons common stock on October 5, 2018 (the date on which the award was modified as described in footnote 3 to the Grants of Plan-based Awards table) if, due to Verizon Media Groups performance during the applicable performance cycle, the PRSU award vested at its maximum level. |
52 Verizon 2019 Proxy Statement
Compensation Tables
Summary Compensation
Grant Date Fair Value of PSUs | Maximum Value of PSUs | |||||||||||||||||||||||||||||||||||||||
Name | 2016 ($) | 2017 ($) | 2017 Special Award ($) |
2018 ($) | 2018 Special Award ($) |
2016 ($) | 2017 ($) | 2017 Special Award ($) |
2018 ($) | 2018 Special Award ($) |
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. Vestberg
|
|
2,700,031
|
|
|
3,960,041
|
|
|
10,000,030
|
|
|
5,400,062
|
|
|
7,920,082
|
|
|
20,000,060
|
| ||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. Ellis
|
|
1,025,091
|
|
|
2,250,043
|
|
|
2,880,012
|
|
|
2,050,182
|
|
|
4,500,086
|
|
|
5,760,024
|
|
||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. Gowrappan
|
|
3,595,811
|
|
|
10,787,433
|
| ||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. Reed
|
|
2,400,046
|
|
|
2,400,012
|
|
|
2,970,019
|
|
|
4,800,092
|
|
|
4,800,024
|
|
|
5,940,038
|
|
||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. Dunne
|
|
2,550,005
|
|
|
5,100,010
|
|
||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. McAdam
|
|
7,200,036
|
|
|
7,200,037
|
|
|
7,200,030
|
|
|
14,400,072
|
|
|
14,400,074
|
|
|
14,400,060
|
|
||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. Stratton
|
|
2,835,043
|
|
|
2,992,527
|
|
|
6,000,004
|
|
|
3,960,041
|
|
|
5,670,086
|
|
|
5,985,054
|
|
|
9,000,006
|
|
|
7,920,082
|
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Mr. Armstrong
|
|
1,890,039
|
|
|
3,780,078
|
|
||||||||||||||||||||||||||||||||||
|
4 | The amounts in this column for 2018 reflect the 2018 Short-Term Plan award paid to the named executive officers in February 2019 as described beginning on page 36. |
5 | Verizons defined benefit plans were frozen as of June 30, 2006, and Verizon stopped all future benefit accruals under these plans as of that date. All accruals under the Verizon Wireless pension plan were frozen as of December 31, 2006. The named executive officers other than Messrs. Reed and McAdam are not eligible for pension benefits. For 2018 there was a reduction in pension value for Messrs. Reed and McAdam of $58,197 and $113,794, respectively, based on the applicable calculation formulas. In accordance with SEC rules, because the aggregate change in the actuarial present value of the accumulated benefit under the defined benefit plans was a negative number for 2018, the amount shown in this column for 2018 for Messrs. Reed and McAdam is zero. Verizons nonqualified deferred compensation plans did not provide a preferential or above market rate of interest in 2018. |
6 | The following table provides the detail for 2018 compensation reported in the All Other Compensation column. |
Name | Personal Use of Company Aircrafta ($) |
Personal Use of Company Vehicleb ($) |
Company Contributions to the Qualified Savings Plan ($) |
Company to the |
Company Contributions to the Life Insurance Benefitc ($) |
Separation/ Retirement Benefitsd ($) |
Othere ($) | All Other Compensation Total ($) |
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Mr. Vestberg
|
|
0
|
|
|
2,774
|
|
|
16,500
|
|
|
57,623
|
|
|
89,603
|
|
|
0
|
|
|
451,869
|
|
|
618,369
|
| ||||||||
|
||||||||||||||||||||||||||||||||
Mr. Ellis
|
|
0
|
|
|
0
|
|
|
20,550
|
|
|
107,048
|
|
|
21,751
|
|
|
0
|
|
|
11,000
|
|
|
160,349
|
| ||||||||
|
||||||||||||||||||||||||||||||||
Mr. Gowrappan
|
|
0
|
|
|
0
|
|
|
9,995
|
|
|
22,333
|
|
|
1,339
|
|
|
0
|
|
|
399,998
|
|
|
433,665
|
| ||||||||
|
||||||||||||||||||||||||||||||||
Mr. Reed
|
|
0
|
|
|
0
|
|
|
20,550
|
|
|
122,079
|
|
|
76,748
|
|
|
0
|
|
|
13,000
|
|
|
232,377
|
| ||||||||
|
||||||||||||||||||||||||||||||||
Mr. Dunne
|
|
0
|
|
|
0
|
|
|
20,550
|
|
|
129,589
|
|
|
65,075
|
|
|
0
|
|
|
13,000
|
|
|
228,214
|
| ||||||||
|
||||||||||||||||||||||||||||||||
Mr. McAdam
|
|
138,576
|
|
|
7,833
|
|
|
20,550
|
|
|
370,650
|
|
|
52,670
|
|
|
13,000
|
|
|
13,000
|
|
|
616,279
|
| ||||||||
|
||||||||||||||||||||||||||||||||
Mr. Stratton
|
|
0
|
|
|
0
|
|
|
20,550
|
|
|
153,915
|
|
|
68,907
|
|
|
5,730,966
|
|
|
13,000
|
|
|
5,987,338
|
| ||||||||
|
||||||||||||||||||||||||||||||||
Mr. Armstrong
|
|
0
|
|
|
0
|
|
|
20,550
|
|
|
|