In recent years, Verizon Communications Inc.'s top executives boosted their pay and bonuses by tying them to the company's operating income, which was boosted in turn by high investment returns racked up by the company's $40 billion pension fund. When Verizon stopped doling out regular cost-of-living pension adjustments to retirees, 90,000 of them organized a vote last year on a shareholder proposal demanding that executives stop using the pension fund in their bonus computations. They proposed the measure again this year, and the company agreed last month to separate the executive compensation structure from the pension fund.
"The workers of America deserve better pension-law oversight and protection from their government," Janet Krueger, a 23-year International Business Machines Corp. employee from Rochester, Minn., testified at a pension hearing. She said her prospective pension eroded sharply after IBM converted it to a "cash balance" plan in 1999. In a later interview, she complained about the generous pension IBM had constructed for chief executive Louis V. Gerstner Jr. during the same period.
The pension gap is "the utmost in hypocrisy," said Karen Friedman, director of policy strategies at the Pension Rights Center, a nonprofit pension-advocacy center that counsels workers who have seen their plans cut back or terminated. "Companies that are cutting back on pension benefits are giving huge benefit packages to CEOs at these companies. There's a basic element of unfairness."
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