Cincinnati Bell 2006 Annual Report Download - page 49

COMPENSATION DISCUSSION AND ANALYSIS
General
This Compensation Discussion and Analysis will focus on:
•The philosophy and objectives of the Company executive compensation program.
•An explanation of the goals that the executive compensation program is designed to reward.
•A description of each of the elements of the executive compensation program.
•An explanation of why the Compensation Committee selected the elements of compensation.
•An explanation of how the Compensation Committee determines the amounts and formulas for pay.
•How each compensation element and the Company’s decisions regarding that element fit into the
Company’s overall compensation objectives and affected decisions regarding other elements.
Compensation Program Objectives
The Company’s compensation program follows the following primary philosophy and objectives:
•Compensation must be competitive with other companies to attract and retain high-quality executives.
•A significant portion of total executive compensation should be “at risk” and tied to the achievement of
specific short-term and long-term performance objectives, principally the Company’s earnings and the
performance of the Company’s common shares, thereby linking executive compensation with the returns
realized by shareholders.
•Compensation should provide a balance across each executive’s base salary and short-term and long-term
incentive components appropriate to the current and long-term goals and strategy of the Company.
•Compensation should award achievement of the Company’s present and longer-term strategy, which is to
“de-lever, defend and grow:”
•De-lever — the Company’s generation of cash flow to repay and reduce its outstanding indebtedness.
•Defend — the Company’s defense from incursions by its competitors of its products and services
offerings in all of its market areas.
•Grow — the Company’s pursuit of new product and service offerings as well as expansion into new
markets.
Compensation Elements and General Principles
There are three elements to the Company’s executive compensation program:
•Fixed compensation — Base salary
•“At-risk” annual compensation — Annual incentives paid in cash
•“At-risk” long-term compensation — Long-term incentives that are equity awards delivered in the form of
stock options and performance units, which vest over time and represent a significant portion of the
executive’s total compensation
The Company provides these three forms of compensation to reflect competitive practices, to be consistent
with its business objectives and to provide an appropriate reward for achieving short and long-term goals related
to the Company’s current strategy to defend, de-lever and grow, which should lead to increased shareholder
value.
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Proxy Statement