2018 Guide to Effective Proxies

2.17.4 Compensation mix | 343 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES Compensation Discussion and Analysis | Compensationobjectivesandelementsofcompensation than double the annual base salary and short-term incentive target compensation opportunities. Moreover, since the Long- Term Plan features three-year award cycles, with awards consisting of PSUs subject to both performance-based and time- based vesting requirements and RSUs subject to time-based vesting requirements, we reward sustained performance and also encourage high-performing executives to remain with Verizon. For 2017, the Committee allocated approximately 10% of each executive’s total compensation opportunity in the form of base salary, 20% in the form of short-term incentive, and 70% in the form of long-term incentive. The following chart illustrates the approximate allocation of the named executive officers’ 2017 total compensation opportunity between variable, performance-based elements and fixed pay. 2017 variable vs. fixed paymix Fixed pay Base salary Incentive-based pay 70% long-term incentives 20% short-term incentives 90% 10% Performance target setting The Committee takes a holistic approach to establishing performance targets under our incentive plans. Targets are set at the time of the Board’s annual strategy session to ensure that our executives’ compensation opportunities are aligned with Verizon’s short- and long-term strategic goals. In establishing performance targets, the Committee recognizes the importance of achieving an appropriate balance between rewarding executives for strong performance over both the short- and long-term and establishing realistic goals that continue to motivate and retain executives. As a result, our Short-Term and Long-Term Plans provide for measurable, rigorous performance targets that are attainable, but challenge executives to drive business results that generate shareholder value. In setting the performance targets, the Committee considered the following factors: • Verizon’s short- and long-term strategy; • Economic, industry and competitive environments; • The creation of shareholder value; • The achievement level against performance targets in the prior year; • Financial analysts’ consensus estimates for the performance measures over future performance cycles; • The correlation among the performance measures and considerations of how Verizon’s operational performance will affect each measure differently; and • With regard to the diversity and sustainability metric in the Short-Term Plan, Verizon’s values and long- term commitment to being a responsible member of the communities we serve. 2017 annual base salary To determine an executive’s base salary, the Committee, with assistance from the Consultant, considers the pay practices of the Related Dow Peers for comparable positions; the executive’s experience, tenure, scope of responsibility and performance; internal pay alignment; continuity planning and management development considerations; and for newly-hired executives, the Committee also considers the compensation required to attract the executive to the Company. In particular, the Committee focuses on how base salary levels may impact the market competitiveness of an executive’s total compensation opportunity. There is no specific weighting applied to any of these factors in setting annual salaries, and the process ultimately relies on the subjective exercise of the Committee’s judgment. 32 | Verizon 2018 Proxy Statement 2017variablevs.fixedpaymix VERIZON COMMUNICATIONS INC.