Windstream 2014 Annual Report Download - page 33

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Stockholder Outreach. Our Board recognizes the fundamental interest our stockholders have in the
compensation of our executive officers. At our 2014 Annual Meeting, 76% of shares cast (excluding abstentions
and broker non-votes) voted in favor of the advisory vote on executive compensation. For the 2012 and 2013 annual
meetings of stockholders, approval percentages were 93% and 95%, respectively (excluding abstentions and broker
non-votes). While it was clear that the majority of stockholders supported our executive 2014 compensation practices,
the approval percentage was not as high as it had been in past years. Given the fiscal 2014 say-on-pay results,
Windstream management reached out to stockholders representing approximately 32% of our outstanding shares
to ensure that we understand and, to the extent possible, address our stockholders’ concerns and observations with
respect to our compensation policies. The following two themes emerged from these discussions:
 Consideration of moving from a 1-year to 3-year measurement period in the Company’s long-term
incentive performance share program
 Consideration of either (a) aligning performance goals when the same measures are used within the
short-term and long-term incentive program or (b) using different performance measures in the short-term
and long-term incentive program
The Compensation Committee has reviewed and assessed these views and has determined to change, beginning
in the 2016 plan year, the long-term incentive program to (a) use a different measure or measures than are used in the
short-term incentive plan and (b) to measure the company’s performance over a multi-year period. The Compensation
Committee is not implementing these changes for the 2015 plan year due to the recent management transition in
December 2014 and the pending closing of the REIT spin-off scheduled for the second quarter of 2015.
Our Leadership Transition
Since Windstream was formed in 2006, we have executed a focused strategy to expand our business into a
national provider of advanced communications and technology solutions to businesses, while continuing to provide
voice and broadband services to consumers. Windstream has executed on this strategy by, among other things,
successfully completing nine acquisitions, adding more than $4 billion in revenue and creating approximately
$300 million in operating and capital synergies.
Focused on Windstream’s growth agenda for 2015 and beyond, the Board determined that a new perspective
was needed in order to accelerate the pace of change within the Company and to more effectively respond to the
rapidly evolving needs of our customers. The Board believes it found the right leadership team to accomplish these
goals in Messrs. Thomas and Gunderman. Mr. Thomas succeeded Jeffery R. Gardner, who, after serving as President
and CEO of Windstream since its inception, resigned his position effective December 11, 2014. Mr. Thomas had
previously served as Windstream’s Chief Financial Officer and, most recently, as President-REIT Operations. The
Board chose Mr. Thomas to serve as Windstream’s CEO because it believes Mr. Thomas, through his telecom
experience and his in-depth knowledge of Windstream gained through years of dedicated service, is the right
executive to lead Windstream, position the consumer, carrier, and enterprise businesses for long-term success and
drive revenue growth. Prior to his appointment as CFO, Mr. Gunderman was serving as interim CFO and Treasurer,
a position he held since October 1, 2014 following Mr. Thomas’s transition from CFO to President-REIT Operations.
The Board determined that because of his skills as a finance leader and intimate knowledge of Windstream’s
business and the opportunities lying before it, Mr. Gunderman was the right executive to lead Windstream’s
finance organization.
Mr. Thomas’s Employment Agreement. We entered into an employment agreement with Mr. Thomas in
connection with his appointment as President and Chief Executive Officer. The employment agreement provides
for an annual base salary of not less than $1,000,000 and a target annual bonus opportunity, commencing with the
2015 fiscal year, of not less than 125% of his base salary. Under the terms of the agreement, Mr. Thomas received
a time-based restricted share award with a grant date value of $1,000,000, which award will vest in full on the
third anniversary of the date of grant. The agreement also provides Mr. Thomas with certain severance benefits in
the event he is terminated without “cause” or leaves the Company for “good reason”. The terms of Mr. Thomas’s
employment contract were determined by the Compensation Committee after considering the advice and comparative
market analyses provided by Pearl Meyer & Partners, LLC. A more detailed discussion of Mr. Thomas’s employment
agreement is included below in the Section titled “Employment Agreements and Severance Arrangements.”