Windstream 2007 Annual Report Download - page 19

positions at comparable companies. During 2007, the target payout percentage for the short-term incentives to
each executive officer was set at approximately the median level of percentages for officers in similar positions
at comparable companies.
During 2007, the executive officers participated in a cash short-term incentive plan based on
Windstream’s achievement of annual performance goals of operating income before depreciation and
amortization (“OIBDA”) and net additions of broadband subscribers. OIBDA is a non-GAAP financial measure
that can be calculated from Windstream’s consolidated financial statements by taking operating income and
adding depreciation and amortization.
Under the Windstream short-term incentive plan, executive officers were eligible to receive payments in
proportion to Windstream’s achievement of performance goals that were set at minimum (or threshold), target
and maximum levels. Mr. Gardner was eligible to receive 100% of base salary if target levels of performance
objectives were achieved, and the other named executive officers had target payout percentages ranging from
40% to 70% of base salary. The executive officers were eligible to receive 50% to 200% of these target payout
amounts if threshold or maximum levels, respectively, were achieved. No payout would be made if performance
was below the threshold level. During 2007, the target performance goal was the achievement of OIBDA of
$1,586 million and net additions of broadband subscribers of 220,000. Each of these performance measures was
determined on a pro forma basis to exclude the results of operations of CT Communications, Inc., which were
acquired in August 2007, and to exclude the results of Windstream’s directory publishing business, which was
disposed in November 2007. The OIBDA component was weighted at 60% and the broadband component at
40% and no payouts were to be made unless the threshold level of performance was achieved for the OIBDA
performance measure. Windstream met the target performance goal for OIBDA and the threshold for broadband,
and Mr. Gardner received $774,474 in annual incentive compensation or approximately 86% of the target payout
award for 2007.
Equity-Incentive Awards. Windstream maintains an equity-based compensation program for executive
officers to provide long-term incentives, to better align the interests of executives with stockholders and to
provide a retention incentive. The Compensation Committee has implemented its equity-compensation program
as part of its goal to make a substantial portion of total direct compensation at risk. The Compensation
Committee also prefers equity incentives over cash as a method of providing long-term compensation incentives.
Each officer receives a portion of his or her total direct annual compensation for a given year in the form of long-
term equity-based incentive compensation.
All Windstream equity compensation awards have been issued as either restricted stock or performance-
based restricted stock under the Windstream 2006 Equity Incentive Plan. Windstream has not issued any stock
options or other forms of equity compensation to its directors, executive officers or other employees. The
Compensation Committee believes that restricted stock or performance-based restricted stock awards are a
preferred mechanism of equity compensation compared to stock options or other devices that derive value from
future stock price appreciation due to the high-dividend,low-growth profile of Windstream. During the vesting
period, the executives have the rights of a stockholder to vote the restricted stock and to receive any cash
dividends paid with respect to the restricted shares.
The Windstream Board of Directors has delegated responsibility for administration of the 2006 Equity
Incentive Plan, including the authority to approve awards, to the Compensation Committee. It is the
Compensation Committee’s policy to review and approve all equity compensation awards to directors, executive
officers and all other eligible employees at its first regularly scheduled meeting of each year, which is expected
to occur each February. In determining the number of shares of restricted stock or performance-based restricted
stock to award to any individual under the 2006 Equity Incentive Plan, the Compensation Committee divides the
approved grant value for such individual by the closing stock price of Windstream common stock on the date that
the Compensation Committee approves the award (rounded down to the nearest whole share). As a matter of
policy, the Compensation Committee does not approve awards of equity compensation through the adoption of a
unanimous written consent in lieu of a meeting.
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