Windstream 2008 Annual Report Download - page 19

Elements of Compensation. The compensation of Windstream’s executive officers consists of three
principal components:
• Base salary;
• Short-term (annual) cash incentive payments; and
• Long-term incentives in the form of equity-based compensation.
The compensation program for all executive officers also includes the Windstream 2007 Deferred
Compensation Plan, the Windstream 401(k) Plan, a change-in-control agreement, and other limited perquisites.
Windstream has also entered into an employment agreement with Mr. Gardner, and certain executive officers are
eligible to participate, on a grandfathered-basis, in the Windstream Pension Plan and the related Windstream
Benefit Restoration Plan.
2008 Compensation Philosophy. The Compensation Committee considers the total compensation of
each executive officer as well as the allocation of compensation among base salary, short-term incentive
compensation, and equity-based compensation for determining compensation levels. For 2008, the Compensation
Committee targeted base salary between the 50th and 75th percentile, and short and long-term incentives at the
75th percentile, of market compensations of officers in similar positions at comparable companies. The target
levels for compensation reflect a number of considerations including the desire to have flexibility in setting
compensation levels that reflect the strong financial and operating performance of the Company relative to other
rural local exchange carriers. The target levels also provide appropriate retention incentives for the management
team in light of the increasing competitive pressures faced by Windstream in its markets. The Compensation
Committee may set compensation above the targeted range for an individual executive officer based on a number
of factors including the executive’s experience and performance, retention considerations, and the scope of his or
her job responsibilities compared to officers at similar positions at comparable companies. The Compensation
Committee believes that a substantial portion of executive compensation should be at risk through allocation of
compensation to short-term cash incentives and long-term equity-based incentives. The following table illustrates
the allocation for each named executive officer for 2008:
Named Executive Officer
Percentage of Total Direct
Compensation Allocated to
Short-term Incentive and
Performance-Based Equity
Compensation (%)
Percentage of Total
Direct Compensation
Allocated to Equity-
Based Compensation
(%)
Jeffery R Gardner 84 56
Brent Whittington 53 44
John P. Fletcher 54 39
Richard J. Crane 48 39
Robert G. Clancy 45 34
Total direct compensation for these purposes equals base salary, short-term cash incentive payment at target
levels and the full up-front fair value of equity-based awards determined in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Compensation”.
2009 Compensation. For 2009, the Compensation Committee has determined to freeze the three
principal components of compensation for all named executive officers at the levels approved for 2008.
Accordingly, all named executive officers have been approved to receive in 2009 the same base salary, target
payout percentage for short-term incentive compensation, and annual grant value for equity compensation as
such persons received in 2008. Additionally, the Compensation Committee has eliminated beginning in 2009 the
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