BOSTON Verizon Communications Inc told activist investors on Wednesday that it might skip a vote on a shareholder proposal that seeks details on the company's cooperation with government surveillance efforts.
Verizon's law firm Jones Day said in a November 25 letter that the company would exclude the measure from its 2014 proxy statement unless the activists did more to verify their eligibility to file the proposal.
The company's response appears to be more aggressive than the stance AT&T Inc took against a similar proposal, said Jonas Kron, senior vice president for Trillium Asset Management, a co-filer of the measures at both telecommunications companies.
Kron said Trillium has provided more detail, but that Verizon's action suggests it will sidestep the usual process in which companies ask the U.S. Securities and Exchange Commission for permission to skip votes on shareholder proposals.
"If they are going to challenge the shareholder proposal, I hope they will work within the SEC process," Kron said.
Verizon spokesman Bob Varettoni said the company's response was routine.
"At this point, we have not taken any formal position on the proposal," he wrote. "The SEC requires shareholders to demonstrate their eligibility to submit a proposal. We've simply sought the information that we believe is necessary to determine the proponent's eligibility."
A spokesman for the SEC declined to comment.
PREPARING FOR SPRING
The dispute at Verizon is just one of many playing out this month ahead of the spring when shareholder meetings usually take place. Generally, corporate shareholders who own $2,000 worth of stock for a year may file proposals for a vote by all investors.
But the rise of proposals with a social agenda or those put forth by labor groups has prompted many companies to push back, often by seeking SEC permission to skip the measures. The agency grants such permission about half the time.
To back up their requests, companies typically argue that shareholders are putting forth ideas that should be treated as "ordinary business" rather than subject to a shareholder vote, or that, if passed, their proposals could hamper other company operations. AT&T made both of those arguments earlier this month and Verizon could seek SEC permission.
Both AT&T and Verizon shareholders, including Trillium and New York State Comptroller Thomas DiNapoli, who oversees the state's pension fund, had filed measures calling for details of their cooperation with U.S. and foreign spy agencies.
In the wake of revelations by former U.S. National Security Agency contractor Edward Snowden, the shareholders cited media reports of intelligence agencies' involvement with the companies and criticism from foreign leaders.
The activists asked both companies to schedule votes on a measure calling for the publication of semi-annual reports with details such as how often customer information was shared with government agencies.
In the November 25 letter, Verizon's attorney at Jones Day told Trillum's Kron the company intended to exclude the surveillance proposal from its proxy filing unless it corrected what it called "procedural deficiencies."
Among other things, the firm wrote that material Trillium submitted had not demonstrated an investor was a shareholder entitled to vote the shares. Trillium responded to Verizon on December 9 with additional material, but said the firm did not concede the extra proof was necessary.
(Reporting by Ross Kerber in Boston. Additional reporting by Sinead Carew in New York; Editing by Linda Stern, Leslie Gevirtz and Andre Grenon)