Windstream 2010 Annual Report Download - page 25

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 2010:
Named Executive Officer
Percentage of Annual Total
Direct Compensation
Allocated to Short-term
Incentive and Performance-
Based Equity
Compensation (%)
Percentage of Annual
Total Direct
Compensation
Allocated to Equity-Based
Compensation (%)
Jeffery R. Gardner 83% 62%
Anthony W. Thomas 45% 42%
Brent Whittington 47% 45%
John P. Fletcher 47% 45%
Cynthia B. Nash 41% 39%
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 the annual equity-based awards determined in accordance with
authoritative guidance on share-based compensation. The August 2010 grants are excluded from the calculations
because they were special equity grants designed for long-term retention and are not part of the Company’s
ongoing annual compensation program.
2011 Compensation. The Compensation Committee has approved an executive compensation program
for 2011 that is consistent with past practice subject to the following principal changes in program design. For
2011, the Compensation Committee has established the performance objective for its annual cash incentive plan
based on achievement of Windstream’s adjusted operating income before depreciation and amortization
(“Adjusted OIBDA”). As in prior years, the performance measure for Adjusted OIBDA is set at levels that are
difficult but achievable and designed to drive industry leading results. The Compensation Committee also
replaced the grants of performance-based restricted stock with performance-based restricted stock units
(“PBRSUs”), which will accrue dividend equivalents to be paid if performance-based conditions have been
satisfied. The performance threshold for vesting of all outstanding performance-based equity awards has been
increased five hundred basis points over previous years. The PBRSUs will provide for additional shares (which
will not accrue dividends) for achievement of revenue performance over a three-year period, as well as reduced
amounts if adjusted OIBDA performance falls between threshold and target criteria. In addition to his annual
PBRSU grant as part of our long-term incentive program, Mr. Gardner received a grant of time-based restricted
stock subject to three-year cliff vesting in 2014. This special award was intended to recognize Mr. Gardner’s
continued leadership in transforming our company, reward him for our strong financial results relative to industry
peers, and provide additional retention incentives for him to remain at Windstream during this period of industry
consolidation. In determining the size and structure of the grant, the Committee also reviewed and considered
peer company practices, broader market pay data, and the fact that Mr. Gardner did not participate in our latest
retention grant program in August 2010; at which time other key executives, including the other NEOs, received
grants of time-based restricted stock.
Base Salary. Base salary is designed primarily to provide competitive compensation that reflects the
contributions and skill levels of each executive.
Short-Term Cash Incentive Payments. Windstream maintains short-term cash incentive plans which are
designed primarily to motivate executives to achieve Company-wide performance goals over annual or quarterly
periods. Under these plans, the Compensation Committee sets different target payout amounts (as a percentage of
base salary) for all executive officers in order to reflect such individual’s contributions to Windstream and the
market level of compensation for such position. The Compensation Committee has adopted short-term incentive
plans as part of its goal to make a substantial portion of total direct compensation at risk.
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