Verizon shareholders gathering in Huntsville, Alabama at the company’s annual meeting on May 3 will be greeted by large crowds of protesters. The nation’s second-largest telecom company became the latest target of the 99 Percent Power campaign — a national network of grassroots and national advocacy organizations — by demanding huge concessions from workers, avoiding state and federal taxes, and lavishing its CEOs with bloated pay packages.
With lines and cell phone towers that shape the landscape of many communities across America, few corporations are as visible as Verizon, which provides local phone service to a quarter of the nation and wireless service to about 100 million Americans. Last year, Verizon’s sales totaled $111 billion, and it ranks No. 15 on the Fortune 500 list. And yet it pays almost no taxes.
Between 2008 and 2011, Verizon reported $19.8 billion in U.S. profits and yet claimed an IRS refund on its federal taxes of $758 million. This amounts to an effective tax rate of negative 3.8 percent, according to the non-profit organization Citizens for Tax Justice.
Astoundingly, Verizon also contributed very little to state treasuries to fund schools, police, and other local infrastructure. Between 2008 and 2010, Verizon paid just 2.6 percent of its profits in state income taxes, well under the 6.2-percent average state tax rate, according to another Citizens for Tax Justice report co-authored by the Institute on Taxation and Economic Policy. This is because the company has aggressively pursued tax subsidies and actively protests property tax assessments of everything from buildings to telephone poles.
Over the last seven years, Verizon has also become one of the nation’s leading job destroyers, cutting nearly 40,000 jobs worldwide since 2004. (Unlike many corporations, Verizon doesn’t disclose its U.S. employment numbers, making it impossible for them to be tracked.) The extremely profitable company has demanded that remaining employees accept cuts to their pensions and other benefits, prompting 45,000 unionized employees to strike last fall. The company has told workers the cuts are necessary to respond to the competitive pressures of the marketplace.
But apparently those pressures don’t extend to the corner suite. When Verizon’s long-time CEO Ivan Seidenberg retired in August 2011, the company paid him $26.4 million for just eight months of service that year, a 45-percent increase over his haul for 12 months of work the previous year. The company greeted its new CEO Lowell McAdam with a compensation package that totaled $23 million last year. Seidenberg was the highest paid telecom CEO in 2011. McAdam was the second-highest paid that year.
Verizon executives get half their fat bonuses for simply performing better than one-third of the company’s competitors. “In school, that would be a D or an F,” said C. William Jones, a former managing director of corporate planning at Verizon about this laughingly low hurdle. “You certainly wouldn’t get a pat on the head for it.”
When the U.S. economy was healthier, corporations had multiple responsibilities. They provided their employees with good jobs, paid taxes that sustained their communities, and offered valued services to customers. Then, as now, they delivered dividends and profits to shareholders. Corporate leaders and managers understood that meeting these obligations were necessary for long-term success. They built their companies to last.
But Verizon and too many other large companies have rapidly moved to a new model, one built on the primacy of shareholder returns above all else. Built-to-last companies have given way to corporations that are built to loot.
The angry citizens who are raising their voices at annual shareholder meetings this spring understand that shifting the American business model back to “built-to-last” mode will require new rules that promote dignified work, fair taxes, and a smaller gap between CEO compensation and workers’ paychecks. Unless we change these rules, built-to-loot companies will be a national wrecking ball.