Windstream 2010 Annual Report Download - page 22

MANAGEMENT COMPENSATION
Compensation Discussion and Analysis
Executive Summary
Compensation Philosophy. Windstream’s executive compensation program is designed to achieve the
following objectives:
• Provide a high correlation between pay and performance;
• Align management’s interests with the long-term interests of Windstream’s stockholders; and
• Provide competitive compensation and incentives to attract and retain key executives.
Our core program consists of base salary, annual cash incentives and long-term equity incentives.
The following is a summary of key considerations that stockholders should take into account when
assessing our executive compensation program:
• During 2010, we delivered industry-leading financial and operational performance while successfully
executing on a wide range of key strategic initiatives. Those initiatives were designed to grow and
transform the Company into a next-generation communications company. As a result of these efforts,
58% of 2010 revenues (pro forma to reflect all acquisitions as if they closed prior to January 1, 2010)
come from broadband and business, the growth segments of the Company. Our annual (short-term)
incentive plan recognized these results with a payout of 181% of target levels and our performance-
based equity awards were earned at target level. These payouts demonstrate our desired correlation
between pay and performance.
• Our dividend is a key component of our total shareholder return and we believe Adjusted Operating
Income Before Depreciation and Amortization (Adjusted OIBDA) is the right performance metric to
motivate management to maintain and increase the cash flows of the business to support the dividend.
For 2011, the short-term incentive program will be based 100% on Adjusted OIBDA.
• We seek to align management with the long-term interests of our shareholders and in 2011, the
performance-based restricted stock units were modified to raise the performance bar five hundred basis
points over 2010 goals, and a three-year revenue goal has been added to the program. These changes,
along with our robust stock ownership guidelines, including ten times base salary for the CEO, and
clawback policy that allows Windstream to recover both incentive and non-incentive based
compensation in certain situations, strengthen our executive compensation program without creating
incentives for excessive risk taking.
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.
Independent Consultant
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
16