Resolution to Require Independent
Board Chairman

The Association of BellTel Retirees Inc., 181 Main Street/ PO Box 33, Cold Spring Harbor, NY 11724, which owns 214 shares of the Company’s common stock,  hereby notifies the Company that they intend to introduce the following resolution at the 2008 Annual Meeting for action by the stockholders:

RESOLVED: The shareholders of Verizon hereby urge our Board of Directors to adopt a policy, amending the Governance Guidelines and Bylaws if feasible, such that the Board will select its Chairman from among the independent directors who have not served as an executive officer of our Company. This policy would separate the roles of Board Chairman and CEO, but should be implemented without abrogating any employment contract.

SUPPORTING STATEMENT

We believe that the separation of the roles of Chairman and CEO is fundamental to sound corporate governance. 

How can the CEO be his own boss?  Directors are responsible for protecting the shareholders’ interests – and they must do so primarily by monitoring and evaluating the CEO’s performance. When the CEO is chairman of the board, there is an ambiguity about who is working for whom – and a built-in barrier to replacing a poorly-performing CEO.

Multiple studies have found that shareholder returns are substantially higher on average at firms with non-executive chairmen.

A 2006 Booz Allen Hamilton study of the world’s 2,500 largest public companies concluded: “Non-chairman CEOs are now the best performers. . . . In North America over the last three years, non-chairman CEOs produced shareholder returns three times as high as those of CEO/chairmen.” (“CEO Succession 2005: The Crest of the Wave,” May 2006).

The Booz Allen study showed that among both American and European companies, firms  that separated the roles of chairman and CEO produced shareholder returns 5 percentage points higher on average over 2002-05 than companies with CEO/chairmen.

A 2006 report from Moody’s concluded that the presence of an independent chair improves board effectiveness:  “We believe arguments against independent board leadership are outweighed by advantages offered by clarity of accountability and the strengthened ability of independent directors to respond quickly in a crisis.”

An independent chairman is particularly needed at Verizon. A study by the Corporate Library singled out Verizon for the second straight year as one of 12 “Pay for Failure Companies” with the worst combination of excessive CEO pay and negative shareholder returns over the most recent five-year period. (“Pay for Failure II: The Compensation Committees Responsible,” May 2007).

The study notes that over the five fiscal years through 2006, CEO Ivan Seidenberg received $68.6 million in compensation, while total shareholder return was negative 5%.

The Wall Street Journal reported that after Verizon’s stock declined 25% during 2005, in 2006 the Board decided to decouple its Chairman/CEO’s incentive compensation from stock price appreciation. (“Verizon Ties CEO Pay to Project Success Instead of Company Stock Performance,” October 18, 2006).

“I haven’t come across any other companies who have moved from specific and easily measurable financial metrics to a set of more subjective, strategic achievements,” Corporate Library analyst Paul Hodgson told the Journal.
 
The accountability problem is compounded by our Board’s lack of independence, in our view.  The Corporate Library considers half the Board non-independent because the CEO and six “outside related” directors have recently had a financial relationship with Verizon other than their directorship.

Please vote FOR this proposal.