Windstream 2013 Annual Report Download - page 71

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PROPOSAL NO. 8
STOCKHOLDER PROPOSAL TITLED:
Prohibition of Accelerated Vesting of Equity Awards
The stockholder proposal, which follows, is a verbatim submission by the Trust for the International
Brotherhood of Electrical Workers’ Pension Benefit Fund (who has notified Windstream that it is the beneficial
owner of Windstream Common Stock valued at more than $2,000), whose address is 900 Seventh Street, N.W.,
Washington, D.C. 20001, for consideration by Windstream stockholders. All statements contained in the proposal
are the sole responsibility of the Fund.
Stockholder Proposal
Resolved: The shareholders ask the board of directors to adopt a policy that in the event of a change in control
(as defined under any applicable employment agreement, equity incentive plan or other plan), there shall be no
acceleration of vesting of any equity award granted to any senior executive, provided, however, that the board’s
Compensation Committee may provide in an applicable grant or purchase agreement that any unvested award will
vest on a partial, pro rata basis up to the time of the senior executive’s termination, with such qualifications for an
award as the Committee may determine.
For purposes of this Policy, “equity award” means an award granted under an equity incentive plan as defined
in Item 402 of the SEC’s Regulation S-K, which addresses executive compensation. This resolution shall be
implemented so as not affect any contractual rights in existence on the date this proposal is adopted.
Supporting Statement
Windstream Corporation (the “Company”) allows senior executives to receive an accelerated award of unearned
equity under certain conditions after a change of control of the Company. We do not question that some form of
severance payments may be appropriate in that situation. We are concerned, however, that current practices at the
Company may permit windfall awards that have nothing to do with a senior executive’s performance.
According to last year’s proxy statement, a termination without cause or an voluntary termination with good
reason at the end of the 2011 fiscal year could have accelerated the vesting of $17.5 million worth of long-term equity
to Windstream’s five senior executives, with Mr. Gardner, the President and CEO, entitled to $9.3 million out of a
total personal severance package worth $17.4 million.
In this regard, we note that Windstream uses a “double trigger” mechanism to determine eligibility for
accelerated vesting: (1) There must a change of control, which can occur as defined in the plan or agreement, and (2)
Employment is terminated without cause or voluntarily for “good reason” as defined in the plan.
We are unpersuaded by the argument that executives somehow “deserve” to receive unvested awards. To
accelerate the vesting of unearned equity on the theory that an executive was denied the opportunity to earn those
shares seems inconsistent with a “pay for performance” philosophy worthy of the name.
We do believe, however, that an affected executive should be eligible to receive an accelerated vesting of equity
awards on a pro rata basis as of his or her termination date, with the details of any pro rata award to be determined
by the Compensation Committee.
Other major corporations, including Apple, Chevron, Dell, ExxonMobil, IBM, Intel, Microsoft, and Occidental
Petroleum, have limitations on accelerated vesting of unearned equity, such as providing pro rata awards or simply
forfeiting unearned awards.
We urge you to vote FOR this proposal.
Board of Directors’ Statement In Opposition
This proposal seeks to eliminate acceleration of vesting of any equity award upon a change in control of the
Company. Windstream stockholders rejected a similar stockholder proposal from this proponent at each of the 2013
and 2012 Annual Meetings.