Windstream 2015 Annual Report Download - page 36

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Base Salary. Base salary represents a stable means of cash compensation to our executive officers. Our goal
in setting base salary amounts is to provide competitive compensation that reflects the contributions and skill levels
of each executive. However, consistent with our philosophy of tying pay to performance, our executives receive a
relatively small percentage of their overall compensation in the form of base salary.
◦ We generally implement any base pay increases on a calendar year basis, with occasional mid-year
increases to reflect a promotion or additional experience or responsibilities. The table below includes each
NEO’s base salary as of December 31, 2015 in comparison to his base salary as of December 31, 2014.
Mr. Redmond is not included because he is no longer employed by Windstream. As illustrated, the
Compensation Committee elected to make no base salary adjustments for the NEOs in 2015.
NEO Base Salary at December 31, 2014 Base Salary at December 31, 2015 % Increase
Tony Thomas $1,000,000 $1,000,000 0%
Robert E. Gunderman $ 450,000 $ 450,000 0%
John P. Fletcher $ 515,000 $ 515,000 0%
J. David Works, Jr. $ 465,000 $ 465,000 0%
John C. Eichler $ 290,000 $ 290,000 0%
Short-Term Cash Incentive Payments. Windstream maintains short-term cash incentive plans 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 2015, the NEOs participated in a short-term cash incentive plan based on Windstream’s achievement of
certain Adjusted OIBDAR, Total Service Revenue and Business Unit Contribution Margin levels. The Compensation
Committee selected these financial measures because they provide strong alignment with the Company’s focused
operational strategy and our capital allocation policy. The Compensation Committee previously established Adjusted
OIBDA as a performance metric in first quarter 2015. Following the Company’s spin-off of CS&L in April 2015,
however, this metric was revised to Adjusted OIBDAR—which excludes the lease payment made to CS&L—in order
to retain comparability and consistency with the external financial presentation of the Company. References in this
Proxy Statement to Adjusted OIBDA include Adjusted OIBDAR, unless otherwise noted. Set forth below is more
detail regarding these financial measures:
Performance Measure Description Reason Selected by Compensation Committee
Adjusted OIBDAR • Operating income before it is
reduced by depreciation and
amortization
• Excludes merger and
integration expense, pension
(income) expense, share-based
compensation, restructuring
charges and the annual rent
payment due under the lease with
CS&L
• Adjusted OIBDAR is a
Non-GAAP measure
• Is the key indicator of profitability that
ensures Windstream’s ability to generate
sustainable cash flows over a long period
of time
• Is one of the principal measures used by
Windstream to communicate its financial
performance in its quarterly earnings
releases
Total service revenue • GAAP measure included in our
audited financial statements • Is a strong indicator of the Company’s performance year-over-year and overall
financial condition
• Places emphasis on higher margin revenues,
by excluding product sales
Business unit
contribution margin • Business unit contribution margin
is a Non-GAAP measure • Is the key indicator of profitability for a specific business unit
• Places emphasis on margin growth