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June 10, 2002
Retirees Up in Arms Over Exec Pay
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ndals like the one at Enron Corp. have riled retirees who lost their retirement savings while executives profited, the Wall Street Journal reports.

Most recently, retired Verizon Communications Inc. workers came unusually close to forcing the regional Bell phone giant to stop including income generated by its pension plan in its formula for setting executive pay.

Despite management opposition, an item proposed by the Association of BellTel Retirees Inc. won 43 percent of the vote at Verizon's annual meeting in Minneapolis, up from 19 percent the year before.

Both the company and the 71,000-member group's president attributed the jump to the support of Institutional Shareholder Services, an influential proxy adviser among institutional investors.

The Journal notes that many companies, including the regional Bells, have significant pension plans that contribute substantially to their net income. A Credit Suisse First Boston study in 2001 said 30 percent of the companies in the Standard & Poor's 500-stock index reported pension income that added an average of 12 percent to pretax earnings.

In February, McDermott International Inc., an energy company based in New Orleans, set a precedent when it excluded pension gains from its executive compensation formula. The move came in response to a shareholder proposal from Amalgamated Bank of New York.

Verizon retirees object to pension gains being part of the calculation for tallying bonuses and incentive pay because they don't reflect management's skill or operating performance; in fact, the retirees say, they can camouflage operating losses.

Verizon would have posted a loss in 2001 if it hadn't been for $1.8 billion in pension income, according to the Institutional Shareholder Services analysis.

Verizon spokesman Peter Thonis said that 2001 results included substantial noncash charges that also weren't related to operating performance.

Despite the increased show of support from shareholders, Verizon has "no plans to change our policy at the present time," Thonis told the Wall Street Journal.

To view the Wall Street Journal article, via, click here.

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