Management motivation

The progress Verizon has made lately deploying fiber to the premises brings to mind the executive compensation package the company's board approved in March, which referred to the FTTP project in particular.

A stock award initially worth about $11 million will be granted to CEO Ivan Seidenberg if he meets stock price and dividend goals. But he gets an equal number of shares for reaching milestones in the FTTP project, wireless expansion and merger integration as well as for achieving legislative objectives (that last one included, lest anyone forget, Verizon's other core business in the Washington market.).

The new pay policy is an attempt to reward Verizon's leaders for long-term rather than short-term thinking. As Verizon poured money into its FTTP plans in 2005, investors nervous about the project's return took their anxiety out on the stock, which lost about a fourth of its value. As analysts fretted over how much Verizon was spending on fiber, the industry more or less unanimously agreed that FTTP is an inexorable eventuality for such carriers.

Some have questioned whether AT&T's Project Lightspeed would be experiencing its current delays if the company's executive compensation were tied more closely to the initiative. But does anyone really think AT&T's management doesn't already have plenty of motivation to get Lightspeed out the door? Whatever you think of AT&T's chosen triple-play strategy, it wasn't formulated based on calculations of stock option values. And its shortcomings, whatever they are, cannot be attributed to its management team not being personally invested enough in its success. Does AT&T's exec comp plan do enough to reward long-term thinking? Some might say Verizon's approach to access network architecture is more hyperopic than AT&T's, but AT&T also chose IPTV, a bolder, more forward-looking video platform than Verizon's.

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