Sprint - Nextel 2012 Annual Report Download - page 83

Table of Contents
Use of Benchmarking Data
To assist in setting total compensation levels that are reasonably competitive, the Compensation Committee annually reviews market trends
in executive compensation and a competitive analysis prepared by Cook. This information is derived from the most recent proxy statement data of
companies in a peer group of telecommunications and high
- technology companies and, where limited in its functional position match to our
executives, is supplemented with data on our peer group from a published compensation survey prepared by Towers Watson of approximately 80
participating all industry companies with revenues exceeding $4 billion.
Taking into consideration the recommendation of Cook, the Compensation Committee determines companies for our peer group based on
similarity of their business model and product offerings as well as comparability from a size perspective, including annual revenue, market
capitalization, net income, enterprise value and number of employees. For example, our revenue is above the median of our peer group while our
enterprise value is below the median. The Compensation Committee approved the use of the following 12 companies for its 2012 executive
compensation benchmarking analysis:
AT&T, Inc., CenturyLink, Inc., Comcast Corporation, Computer Sciences Corporation, Dell Inc., DIRECTV, Motorola Solutions, Inc.,
Qualcomm Incorporated, Texas Instruments Incorporated, Time Warner Cable, Inc., Verizon Communications Inc., and Xerox Corporation.
In August of 2011, we made the following changes to our peer group that was used in our 2012 executive compensation decisions: removed
Hewlett
- Packard Company from our peer group given its dissimilarity of operations and size to Sprint; replaced Motorola with Motorola Solutions,
Inc.; and replaced Time Warner, Inc. with Time Warner Cable, Inc. as the latters' operations are more similar to Sprint's.
The Compensation Committee does not follow a specific formula in making its pay decisions, but rather uses benchmarks as a frame of
reference and generally targets total compensation at the median of our peer group to reflect our relative position within it. Based on performance
against predetermined goals and changes in total shareholder return over time, this approach results in an opportunity to earn total payouts above
median market rates for over
- achievement and below the median for under - achievement relative to the peer group. The Compensation Committee
exercises its judgment by taking into consideration a multitude of other important factors such as experience, individual performance, and internal pay
equity in setting target compensation levels, but actual payouts under our variable incentive plans are primarily determined based on formulaic
outcomes. With respect to our named executive officers' total targeted compensation for 2012, Messrs. Elfman and Euteneuer were above the median,
and the remaining named executive officers, including our CEO, were below the median.
Primary Components of Executive Compensation
What follows is a discussion and analysis of the primary elements of our 2012 named executive officer compensation program.
Base Salary
Base salary is designed to attract and retain executives. Our named executive officers' salaries are based on a number of factors, including
the nature, responsibilities and reporting relationships of the position, individual performance of the executive, salary levels for incumbents in
comparable positions at peer companies, as well as other executives within our organization, and experience and tenure of the executive. To minimize
fixed costs during our turnaround and emphasize variable, performance
- based compensation, the Compensation Committee did not make increases to
base salary levels for our named executive officers, except in the case of Mr. Johnson, whose base salary was increased to $540,000, effective June 30,
2012, in recognition of his performance while assuming additional responsibilities. See “—2012 Summary Compensation Table.”
Short
- Term Incentive Compensation Plan
Our STIC plan is our annual cash bonus plan, which we believe will ultimately result in an increase in shareholder value because our
incentives under it are linked to business objectives that we believe will deliver our long - term success.
For the 2012 STIC plan, the Compensation Committee approved a change to one annual performance period for determining the amount of
plan payments from January 1, 2012 through December 31, 2012, rather than
78