Sprint - Nextel 2012 Annual Report Download - page 84

Table of Contents
two six - month performance periods as were used in 2010 and 2011. Based on performance against stated objectives, our named executive officers must
have been employed through December 31, 2012 in order to be eligible to receive full or prorated compensation for the performance period unless their
termination during the year was the result of death, disability, retirement, or involuntary termination without cause.
In February 2012, the Compensation Committee established financial and operational objectives and their respective weightings and targets
for the performance period, continuing to balance our senior management team's and other plan participants' focus among our most critical financial
and strategic objectives, which remained as growing revenue and earnings while increasing subscriber growth and reducing churn. To that end, the
Compensation Committee established the following objectives and weightings for our 2012 STIC plan:
• adjusted OIBDA, 40%;
• postpaid churn, 30%; and
• total net additions, 30%.
To further our goal of tying a significant portion of each named executive officer's total annual compensation to our business performance,
the STIC plan provides for a payment equal to the named executive officer's targeted opportunity (set at a percentage of his base salary) only if our
actual results meet the targets. Similarly, a payment in excess of a named executive officer's targeted opportunity may be made if our actual
performance exceeds the targeted objectives (capped at 200%), a payment below targeted opportunity may be made if our actual performance is below
the target objectives but exceeded the minimum threshold level, and no payout would be made if our actual performance does not exceed the minimum
threshold level.
Long
- Term Incentive Compensation Plan
Our LTIC plan serves our compensation objectives by linking payment to achievement of financial and operational objectives, and by
linking executive interests with those of our shareholders.
Following evaluation of our recent LTIC plans and assessment of the near
- term factors critical to driving long - term shareholder value, in
February 2012, following the board's approval of the 2012 budget, the Compensation Committee established the terms of the 2012 LTIC plan. This plan
continued granting an executive's targeted 2012 LTIC opportunity in the form of performance
- based opportunities: 50% in performance units
(approximately 72% for Mr. Hesse), 30% in performance
- based RSUs (approximately 19% for Mr. Hesse) and 20% in non - qualified stock options
(approximately 9% for Mr. Hesse). In determining the weightings among the LTIC components, the Compensation Committee balanced the desire to
provide incentives to achieve critical financial and operational objectives, stock price appreciation considerations, and affordability of the LTIC plan
from both a share usage and aggregate cost perspective. In particular, placing less weight on the stock option component of the 2012 LTIC plan as
compared to the other two components was intended to mitigate a potential windfall associated with possible significant increases in our stock price
that were not tied to our performance but to rising equity markets generally.
For Mr. Hesse, the mix of LTIC plan awards was more heavily weighted by the Compensation Committee toward the components in which
vesting is dependent on achievement of specific financial objectives. In particular, the number of shares underlying Mr. Hesse's awards that are
subject to performance
- based vesting exceeds the number of shares underlying the awards that are subject to time - based vesting. This approach is
intended to ensure that long - term compensation earned by our CEO, who is the executive most accountable to
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•
Performance units—Each unit has a value of $1.00, and executives earn a cash payout that vests on December 31, 2014 and would be
paid in the 1
st
Quarter of 2015, with cash payouts ranging from 0 to 150% based on achievement of predetermined performance objectives
during a single three
- year performance period of 2012 - 2014.
•
Performance - based RSUs—RSUs vest on the third anniversary of the grant date, with vesting conditioned on achievement of
predetermined performance objectives during a single three - year performance period of 2012 - 2014.
•
Stock options—Nonqualified stock options vest ratably on each of the three anniversaries of the grant date, with an exercise price equal
to the fair market value (closing price on the NYSE) of our stock on the grant date. To determine the number of stock options to be
delivered under the 2012 LTIC plan, we used a Black
- Scholes valuation model discussed below in footnote 3 to the 2012 Summary
Compensation Table.