Windstream 2006 Annual Report Download - page 17

Alltel also maintained a non-qualified supplemental executive retirement plan (“SERP”) in which Messrs.
Frantz and Gardner participated prior to the spin-off in their capacities as executive officers of Alltel. Each of
Messrs. Frantz and Gardner was fully vested in the SERP as of the date of the spin-off and therefore was entitled
to a lump sum payment in the amount of $7,615,028 and $9,256,645, respectively, under the SERP upon the
closing of the spin-off. These payments were to discharge a liability of Alltel for retirement benefits that were
earned by Messrs. Frantz and Gardner in accordance with the SERP during their tenure with Alltel. Alltel funded
and made these payments to Messrs. Frantz and Gardner in July 2006 following the closing of the spin-off.
The following discussion and analysis does not address the amounts received during 2006 by Windstream
executive officers under Alltel’s long-term performance incentive plan, equity incentive awards or SERP because
they reflect the long-term compensation discussions and philosophy of Alltel and because these payments were
required under the terms of the spin-off transaction documents. The following discussion of the general
principles used by the Compensation Committee to determine and evaluate the compensation of Windstream
executive officers does not apply to the compensation received by Mr. Frantz during 2006. The compensation of
Mr. Frantz for his service as Chairman of Windstream during 2006 was determined by the Alltel Compensation
Committee as part of the spin-off transaction. The different components of Mr. Frantz’s compensation for 2006
were set at levels that were designed to maintain the same total compensation that he received from Alltel in
2005 and to reflect the significant activities required for the business separation and integration process in 2006.
Compensation Philosophy. Windstream’s executive compensation program is designed to achieve the
following objectives:
• Align management’s interests with the long-term interests of Windstream’s stockholders;
• Provide competitive compensation and incentives to attract and retain key executives; and
• Provide total compensation to Windstream’s executives that is fair and consistent with the interests
of Windstream’s stockholders.
Compensation Committee. Windstream’s Compensation Committee is presently comprised of William
A. Montgomery, Chair, Dennis E. Foster and Samuel E. Beall, III. The Windstream Board has determined that
each member of the Compensation Committee is an independent director under NYSE listing standards, a “non-
employee director” for purposes of Section 16 of the Securities Exchange Act of 1934, and an “outside director”
as defined in Section 162(m) of the Internal Revenue Code.
The Compensation Committee assists the Board in fulfilling its oversight responsibility related to the
compensation programs, plans, and awards for Windstream’s directors and principal officers. The Compensation
Committee annually reviews and approves goals relevant to Mr. Gardner’s compensation and, based on an annual
evaluation of these performance goals, determines and approves Mr. Gardner’s compensation. The Committee
conducts this review using a survey of compensation data of comparable employers that is prepared by the
Committee’s outside compensation consultant based on criteria specified by the Committee. In determining
compensation for 2007, the Compensation Committee reviewed survey data based on a group of national
telecommunications companies of comparable size in terms of revenue.
Windstream’s management assists the consultant in the preparation of these surveys by providing
historical compensation information and by reviewing and commenting on preliminary drafts of the survey
reports. At the first Compensation Committee meeting of each year (which is expected to be held in early
February of each year), the Compensation Committee reviews and approves executive compensation for such
year, except that compensation during 2006 was determined as described above in connection with the spin-off
and merger. Based on the compensation surveys and compensation principles previously specified by the
Compensation Committee, Mr. Gardner and members of Windstream’s Human Resources department prepare
recommendations for compensation levels for executive officers in consultation with the Compensation
Committee’s consultant, except that no recommendation is made for Mr. Gardner’s compensation. The
Compensation Committee then meets to review and determine Mr. Gardner’s compensation and reviews and
recommends the compensation for all other executive officers. The Compensation Committee determines
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