Windstream 2007 Annual Report Download - page 17

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MANAGEMENT COMPENSATION
Compensation Discussion and Analysis
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.
The Compensation Committee has the sole authority to retain and terminate any executive compensation
consultant to be used in the evaluation of director, CEO or executive officer compensation and to approve the
consultant’s fees and other retention terms. The Compensation Committee currently engages Watson Wyatt &
Company to assist the Committee in the review and design of Windstream’s executive compensation program,
and to provide information on competitive market practices and survey data for both plan design and
compensation levels. During 2007, Watson Wyatt performed no other services for the Company outside of these
services and proxy reporting. The current comparator companies are: CenturyTel, Embarq, Citizens
Communications, Cincinnati Bell, Qwest, AT&T, Verizon, Alltel, Iowa Telecom, and Sprint/Nextel. Regression
analysis is used to normalize for differences in revenue between companies. The Compensation Committee
reviews and approves the peer group each year prior to obtaining the market study.
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. 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 Mr. Gardner’s compensation based on an
evaluation of a number of factors, including historical compensation and performance of Mr. Gardner,
discussions with Windstream management including Mr. Gardner, compensation survey data, and discussions
with the compensation consultant. The Windstream Board approves or, in the case of Mr. Gardner’s
compensation, ratifies the actions of the Compensation Committee.
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