Windstream 2011 Annual Report Download - page 25

Given the limited number of direct industry peers with a similar business model and of comparable size,
the competitive market analysis focuses on compensation survey data from reputable surveys that are size-
adjusted using regression formulas. The 2010 market analysis used compensation surveys from Watson Wyatt,
Mercer, and PM&P, and all data was size-adjusted to reflect annual revenues of $4 billion. In considering the
survey data, the Committee did not review and is not aware of the specific companies that are included in any of
the surveys reference above. However, in order to have some reference to specific industry competitors, the
Committee requested and PM&P provided executive pay data from the proxy statements of CenturyLink and
Frontier Communications. The Committee believes that the consideration of both size-adjusted survey data and
proxy data from two direct industry competitors provides a sufficient market reference point for executive
compensation levels.
In addition to compensation levels, the Committee often requests that PM&P provide competitive market
data with respect to compensation plan designs and company performance. Because these elements are less
impacted by company size, PM&P’s 2010 market analysis included plan design and company performance data
from a broader group of companies which included CenturyLink, Frontier Communications, AT&T, Verizon
Communications, Comcast, Sprint Nextel, DirecTV, Time Warner Cable, Cablevision Systems, Charter
Communications, Clear Channel, and Scripps Networks. The Committee believes that the consideration of plan
designs and performance levels among these companies provides an additional useful reference point for the plan
designs and degree of pay and performance alignment at Windstream.
While consideration is given to the competitive market data, the Compensation Committee uses it
primarily as a reference point and does not specifically target compensation to any market percentile. In addition
to competitive market data, the Committee reviews and considers factors such as company performance,
individual executive performance, the critical nature of the role to organizational success, internal pay equity
among colleagues, and retention risks. Only after careful consideration of all relevant facts and circumstances
does the Committee exercise judgment and make compensation decisions.
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 limited perquisites.
Windstream has also entered into an employment agreement with Mr. Gardner, and certain executive officers
have benefits in the Windstream Pension Plan and the related Windstream Benefit Restoration Plan.
2011 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 2011, the Compensation
Committee approved increases in elements of total direct compensation for named executive officers after
considering individual performance, Windstream’s performance, strategic importance of the role, retention risk,
and current compensation compared to competitive market data.
Retention remains a key driver of the equity compensation program. Significant demands are imposed on
the senior leadership team by the Company’s difficult financial and operational targets and high volume of
strategic initiatives. The Company has achieved tremendous success in a consolidating industry with intense
competition. After reviewing the unvested equity values and considering the significance of retaining his
leadership, the Compensation Committee approved an additional retention grant of time-based restricted stock to
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