Windstream 2014 Annual Report Download - page 31

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 In 2014, we announced a ground-breaking strategic initiative to create an independent publicly traded
real estate investment trust (REIT), Communications Sales & Leasing, Inc. (CS&L). The proposed
transaction is expected to close in the second quarter of 2015 and will enable Windstream to significantly
reduce debt, accelerate network investments, provide enhanced services to customers, and maximize
stockholder value.
 Our 2014 financial and operating results were below expectations, and the low compensation payouts
received under our executive compensation programs reflect the rigorous performance objectives
contained in our at-risk compensation programs and the achievement of a high correlation between pay
and performance under our executive compensation plans.
How We Determine Compensation
Compensation Committee. Windstream’s Compensation Committee is presently comprised of Samuel E.
Beall, III, Chairman, William G. LaPerch, and William A. Montgomery. The Windstream Board has determined
that each member of the Compensation Committee is an independent director under NASDAQ listing standards
and a “non-employee director” for purposes of Section 16 of the Exchange Act and Messrs. Beall, LaPerch and
Montgomery are considered “outside directors” as defined in Section 162(m) of the Internal Revenue Code and
comprise the 162(m) subcommittee.
The Compensation Committee assists the Board in fulfilling its oversight responsibility related to the
compensation programs, plans, and awards for Windstream’s directors and principal officers. The Compensation
Committee annually reviews and approves goals relevant to our CEO’s compensation and, based on an annual
evaluation of these performance goals, determines and approves our CEO’s compensation. The Committee conducts
this review using a survey of compensation data of comparable employers that is prepared by the Committee’s
outside compensation consultant based on criteria specified by the Committee.
Independent Consultant. The Compensation Committee has the authority to retain and terminate any
executive compensation consultant to be used in the evaluation of director, CEO or executive officer compensation
and to approve the consultant’s fees and other retention terms. It is the policy of the Compensation Committee
that the compensation consultant should perform no services for Windstream other than services as consultant to
the Compensation Committee. During 2014, the Compensation Committee engaged Pearl Meyer & Partners, LLC
(“PM&P”) to assist the Committee in the review and design of Windstream’s executive compensation program.
PM&P reports directly to the Compensation Committee. During 2014, PM&P 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 2014 relative to the
independence standards required by the stock exchanges. The self-assessment included the following information:
 PM&P performs no other services for Windstream, other than the engagement with the Compensation
Committee;
 Fees paid by Windstream to PM&P are less than 0.5% of PM&P’s total revenue;
 PM&P has policies and procedures to prevent conflicts of interest;
 The individual advisor to the Compensation Committee does not own any Windstream stock;
 There is no business or personal relationship between the individual advisor and a Committee member; and
 There 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 2013, PM&P provided, and the Compensation Committee reviewed, competitive market
data as part of its process for approving 2014 executive compensation levels and plan designs.