Windstream 2008 Annual Report Download - page 18

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 (“Watson Wyatt”) 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 2008, Watson Wyatt performed no other services for the Company
outside of these services. For 2008, the Compensation Committee used market benchmark surveys compiled by
Watson Wyatt from published survey data. Regression analysis was used to normalize for differences in revenue
between companies. In addition, data was summarized from the proxy filings of the following companies:
CenturyTel, Embarq, Frontier (formerly Citizens Communications), Qwest, AT&T, Verizon, Alltel, Sprint/
Nextel, Comcast, DirectTV, Time Warner Cable, Dish Network Corp., Clear Channel, Cablevision, Charter and
Scripps. The summary of compensation from proxy filings is prepared at the Compensation Committee’s request,
and it serves as an additional reference to assist the Compensation Committee in its assessment and use of the
primary market data.
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, and
recommends the compensation of all other executive officers, based on an evaluation of a number of factors,
including historical compensation and performance, retention considerations, 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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