Company Name: Verizon Communications Inc.
Public Availability Date: February 8, 2007
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
STAFF REPLY LETTER
[INQUIRY LETTER]
December 22, 2006
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Verizon Communications Inc. 2007 Annual Meeting Shareholder Proposal of the
Trust for the International Brotherhood of Electrical Workers' Pension Benefit
Fund
Ladies and Gentlemen:
This letter is submitted on behalf of Verizon Communications Inc., a Delaware
corporation ("Verizon"), pursuant to Rule 14a-8(j) under the Securities Exchange
Act of 1934, as amended. Verizon has received a shareholder proposal and
supporting statement (the "Proposal") from the Trust for the International
Brotherhood of Electrical Workers' Pension Benefit Fund (the "Proponent"), for
inclusion in the proxy materials to be distributed by Verizon in connection with
its 2007 annual meeting of shareholders (the "2007 proxy materials"). Copies of
the Proposal and all of the correspondence relating to the Proposal are attached
as Exhibit A. For the reasons stated below, Verizon intends to omit the Proposal
from its 2007 proxy materials.
Pursuant to Rule 14a-8(j)(2), enclosed are six copies of this letter and the
accompanying attachments. A copy of this letter is also being sent to the
Proponent, as notice of Verizon's intent to omit the Proposal from Verizon's
2007 proxy materials.
I. Introduction.
On October 19, 2006, Verizon received a letter from the Proponent containing the
following proposal:
RESOLVED: The shareholders of Verizon Communications Inc. ("Company") urge the
Board of Directors to amend the Company's by laws, effective upon the expiration
of current employment contacts, to require that an independent director - as
defined by the rules of the New York Stock Exchange ("NYSE") - be its Chairman
of the Board of Directors.
Verizon believes that the Proposal may be properly omitted from its 2007 proxy
materials under Rule 14a-8(i)(6) because Verizon lacks the power and authority
to implement the Proposal.
II. The Proposal May Be Omitted Under Rule 14a-8(i)(6), Because Verizon Lacks
the Power and Authority to Implement the Proposal.
Rule 14a-8(1)(6) permits a company to exclude a shareholder proposal if the
company would lack the power or authority to implement the proposal. To
implement the Proposal, Verizon would be required to amend its Bylaws to require
that the Chairman of the Board of Directors be an independent director. As
discussed below, Verizon believes that the Proposal is clearly within the scope
of the exclusion provided by Rule 14a-8(i)(6).
In numerous instances, the Staff has permitted the exclusion of similar
shareholder proposals requesting that a company's bylaws be amended to require
that an independent director serve as chairman of the board. See Allied Waste
Industries Inc. (March 21, 2005); Exxon Mobil Corporation (March 13, 2005); LSB
Bancshares, Inc. (February 7, 2005); Cintas Corporation (August 27, 2004); H. J.
Heinz Company (June 14, 2004); Bank of America Corporation (February 24,2004);
Wachovia Corporation (February 24, 2004), AmSouth Bancorporation (February 24,
2004); and SouthTrust Corporation (January 16, 2004). In each case the Staff
noted that "it does not appear to be within the board's power to ensure that an
individual meeting the specified criteria would be elected as director and serve
as Chairman of the Board." The Division of Corporation Finance expanded on this
analysis in Staff Legal Bulletin No. 14C (June 28, 2005), stating,
"we would agree with the argument that a board of directors lacks the power to
ensure that its chairman or any other director will retain his or her
independence at all times. As such, when a proposal is drafted in a manner that
would require a director to maintain his or her independence at all times, we
permit the company to exclude the proposal under rule 14a-8(i)(6) on the basis
that the proposal does not provide the board with an opportunity or mechanism to
cure a violation of the standard requested in the proposal."
In that Bulletin, the Staff provided a chart to illustrate its analysis of the
application of Rule 14a-8(i)(6) to proposals calling for director independence.
The chart indicates that proposals that are framed like the proposal in Allied
Waste Industries, Inc, supra, (i.e, "the shareholders ... urge the Board of
Directors ... to amend the by-laws to require that an independent director who
has not served as the chief executive of the Company serve as Board Chair") can
be excluded under Rule 14a-8(i)(6). The language of the Proposal is
substantially the same as the language quoted by the Staff in the chart.
Significantly, like the Allied Waste proposal, the Proposal does not provide the
board with an opportunity or mechanism to cure a violation of the independence
standard requested in the proposal.
III. Conclusion.
Verizon believes that the Proposal may be omitted from its 2007 proxy materials
under Rule 14a-8(i)(6) because Verizon lacks the power and authority to
implement the Proposal. Accordingly, Verizon respectfully requests the
concurrence of the Staff that it will not recommend enforcement action against
Verizon if Verizon omits the Proposal in its entirety from Verizon's 2007 proxy
materials.
Verizon requests that the Staff fax a copy of its determination of this matter
to the undersigned at (908) 696-2068 and to the Proponent at (202) 728-6138.
Kindly acknowledge receipt of this letter by stamping and returning the extra
enclosed copy of this letter in the enclosed self-addressed, stamped envelope.
If you have any questions with respect to this matter, please telephone me at
(908) 559-5636.
Very truly yours,
/s/
Mary Louise Weber
Assistant General Counsel
Enclosures
cc: Jon F. Walters, Trustee
Trust for the International Brotherhood of Electrical Workers' Pension Benefit
Fund
900 Seventh Street
Washington, D.C. 20001
[APPENDIX 1]
October 19, 2006
VIA FACSIMILE (908-766-3813) AND U.S. MAIL
Ms. Marianne Drost
Senior Vice President - Deputy General Counsel & Corporate Secretary
Verizon Communications Inc.
1095 Avenue of the Americas
New York, NY 10036
Dear Ms. Drost:
On behalf of the Board of Trustees of the International Brotherhood of
Electrical Workers Pension Benefit Fund (IBEW PBF) ("Fund"), I hereby submit the
enclosed shareholder proposal for inclusion in Verizon Communications Inc.
("Company") proxy statement to be circulated to Corporation Shareholders in
conjunction with the next Annual Meeting of Shareholders in 2007.
The proposal relates to an "Independent Chairman of the Board" and is submitted
under Rule 14(a)-8 (Proposals of Security Holders) of the U.S. Securities and
Exchange Commission's Proxy Guidelines.
The Fund is a beneficial holder of 66,450 shares of Verizon Communications Inc.
common stock and has held the requisite number of shares required under Rule
14a-8(a)(1) for more than a year. The Fund intends to hold the shares through
the date of the company's 2007 Annual Meeting of Shareholders. The record holder
of the stock will provide the appropriate verification of the Fund's beneficial
ownership by separate letter.
Should you decide to adopt the provisions of the proposal as corporate policy,
we will ask that the proposal be withdrawn from consideration at the annual
meeting.
Either the undersigned or a designated representative will present the proposal
for consideration at the Annual Meeting of the Shareholders.
Sincerely yours,
/s/
Jon F. Walters
Trustee
[APPENDIX 2]
RESOLVED: The shareholders of Verizon Communications Inc. ("Company") urge the
Board of Directors to amend the Company's by laws, effective upon the expiration
of current employment contracts, to require that an independent directoras
defined by the rules of the New York Stock Exchange ("NYSE")be its Chairman of
the Board of Directors.
SUPPORTING STATEMENT
It is the responsibility of the Board of Directors to protect shareholders'
long-term interests by providing independent oversight of management, including
the Chief Executive Officer (CEO), in directing the corporation's business and
affairs. Currently, Ivan Seidenberg is both chairman of the Board and chief
executive officer for Verizon. We believe that this current governance structure
may not be in the best interests of shareholders.
Both the NYSE and the NASDAQ have adopted rules that require corporations that
wish to be traded on them to have a majority of independent directors.
Unfortunately, having a majority of independent directors alone is clearly not
enough to prevent the type of scandals that have afflicted Enron, WorldCom and
Tyco. All of these corporations had a majority of independent directors on their
boards when the scandals occurred.
An academic study published in the September/October 2006 edition of
Organization Science and titled Overpaid CEOs and Underpaid Managers: Fairness
and Executive Compensation, found that in cases in which the CEO was also
chairman of the board, both CEO and his or her staff were more likely to be
overpaid. In our view, no matter how many independent directors there are on a
board, that board is less likely to protect shareholder interests by providing
independent oversight of the officers if the Chairman of that board is also the
CEO, former CEO or some other officer or insider of the company.
We urge stockholders to vote for this proposal
[STAFF REPLY LETTER]
February 8, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Verizon Communications Inc. Incoming letter dated December 22, 2006
The proposal urges the board to amend the bylaws to require that an independent
director, as defined by the rules of the New York Stock Exchange, be its
chairman.
There appears to be some basis for your view that Verizon may exclude the
proposal under rule 14a-8(i)(6). Accordingly, we will not recommend enforcement
action to the Commission if Verizon omits the proposal from its proxy materials
in reliance on rule 14a-8(i)(6).
Sincerely,
/s/
Tamara M. Brightwell
Special Counsel
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