Windstream 2012 Annual Report Download - page 25

conducted a competitive review of Windstream’s executive pay levels and executive pay program designs, with such data and
information being used by the Committee, along with all other relevant information, to inform the Committee’s decisions
regarding the executive compensation program. PM&P provided a self-assessment to the Compensation Committee in 2012
relative to the independence standards required by the stock exchanges. The self-assessment included the following
information:
xPM&P performs no other services for Windstream, other than the engagement with the Compensation
Committee;
xFees paid by Windstream to PM&P are less than .5% of the firm’s total revenue;
xPM&P has policies and procedures to prevent conflicts of interest;
xThe individual advisor to the Compensation Committee does not own any Windstream stock;
xThere is no business or personal relationship between the individual advisor and a Committee member;
xThere is no business or personal relationship between the individual advisor or PM&P and an executive
officer of Windstream.
Competitive Market Analysis. As part of the process of approving executive compensation levels and plan designs,
the Compensation Committee regularly reviews and considers competitive market data. This competitive market analysis
generally takes place in the fall of each year and is used as part of the decision-making process for the following year.
During 2011, PM&P provided, and the Compensation Committee reviewed, competitive market data as part of its process for
approving 2012 executive compensation levels and plan designs.
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 2011 market analysis used compensation surveys from Watson Wyatt, Mercer, and PM&P, and all
data was size-adjusted to reflect annual revenues of $6 billion. In considering the survey data, the Committee does not
request the identity of or review the specific companies that are included in any of the surveys reference above.
In addition to compensation levels, the Committee often requests that PM&P provide proxy data with respect to
compensation plan designs and company performance. Because these elements are less impacted by company size, PM&P’s
2011 market analysis included plan design and company performance data from a specific group of companies which
included DISH Network Corp., ADP, VISA, Cablevision, Charter Communications, CenturyLink, Mastercard, NII Holdings,
Western Union, Fidelity Information Services, TDS, Metro PCS, Frontier, and Level 3. The peer group was changed for
2012 following the acquisition of PAETEC, which increased the size and complexity of our business. 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. Examples of plan design
include the number and weighting of performance metrics and the types of performance metrics used in incentive plans, the
allocation of cash and equity in total direct compensation and the allocation of fixed compared to performance based
compensation. This group of companies represents a broad group of Fortune 500 companies in telecom, technology and
services industry.
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 an individual’s 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.
Windstream Management.
General. Windstream’s management assists the Compensation Committee’s consultant in its survey of executive
compensation 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
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