Windstream 2013 Annual Report Download - page 34

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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 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 in part on discussions with Windstream management, including
Mr. Gardner, and discussions with the compensation consultant. The Windstream Board approves or, in the case of
Mr. Gardner’s compensation, ratifies the actions of the Compensation Committee.
Stockholder Outreach. Windstream management also reviewed the proxy advisory reports issued by
Institutional Shareholder Services, Inc. (ISS) and Glass Lewis & Co. regarding our executive compensation policies
and practices. Windstream management contacted ISS and Glass Lewis and two large institutional stockholders of
Windstream to discuss any concerns identified during the 2013 proxy season. The results of these discussions were
reported to the Compensation Committee.
Elements of 2013 Compensation. For 2013, the Compensation Committee approved compensation for named
executive officers after considering individual performance, Windstream’s performance, strategic importance of an
individual’s role, retention risk, and current compensation compared to competitive market data. The Committee also
considered the significant demands imposed on the senior leadership team by Windstream’s difficult financial and
operational targets, its high volume of strategic initiatives and the success that the management team has achieved
in a consolidating industry with intense competition. For 2013, the compensation of Windstream’s named 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 the named executive officers also includes the Windstream 2007 Deferred
Compensation Plan, the Windstream 401(k) Plan, change-in-control agreements, and limited perquisites. In addition,
Windstream has an employment agreement with Mr. Gardner, and certain named executive officers have benefits in
the Windstream Pension Plan and the related Windstream Benefit Restoration Plan.
2013 Total Compensation. Base salaries and short-term incentive opportunities remained flat year-over-year
for all named executive officers. Long-term incentives remained flat for all NEOs except for Mr. Works, who received
an increased amount due to his new tenure and modest restricted stock outstanding.
Base Salary. Base salary is designed primarily to provide competitive compensation that reflects the
contributions and skill levels of each executive. Base salary for 2013 for the NEOs remained flat over 2012.
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 believes these short-term incentive plans are
a key part of its goal to make a substantial portion of total direct compensation at-risk.
During 2013, the named executive officers participated in a short-term cash incentive plan based on
Windstream’s achievement of certain Adjusted OIBDA, total revenue and payout ratio levels. Adjusted OIBDA,
which is operating income before it is reduced by depreciation and amortization, is a non-GAAP financial measure
and is one of the principal measures used by Windstream to communicate its financial performance in its quarterly