Windstream 2009 Annual Report Download - page 19

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 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 NASDAQ 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 engaged Watson Wyatt & Company
(“Watson Wyatt”) to assist the Committee in the review and design of Windstream’s executive compensation
program for 2009 and 2010, and to provide information on competitive market practices and survey data for both
plan design and compensation levels. During 2009, Watson Wyatt performed no other services for the Company
outside of these services. For 2009, the Compensation Committee used market benchmark surveys compiled by
Watson Wyatt from published survey data, and attached to this proxy statement as Appendix B is the list of
companies who were included by Watson Wyatt in the benchmark survey. Regression analysis was used to
normalize for differences in revenue between companies. In addition, data was summarized from the proxy
statement filings of the following companies: CenturyTel, Embarq, Frontier, Qwest, AT&T, Verizon, Alltel,
Sprint/Nextel, Comcast, DirecTV, Time Warner Cable, Dish Network Corp., Clear Channel, Cablevision, Charter
and Scripps. The summary of compensation from proxy statement 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, individual performance, retention considerations, discussions with
Windstream management including Mr. Gardner, compensation survey data, the strategic importance of each
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