Cincinnati Bell 2007 Annual Report Download - page 58

Since the personal situation of each executive may vary, the Compensation Committee has not set a specific
period of time in which the ownership level must be achieved, but does expect each executive to make
measurable progress on a year-over-year basis as evidenced by the number of shares owned multiplied by the fair
market value of the Company’s stock. Aside from the Company’s actual performance from one year to the next,
the price of the Company’s stock may vary due to the general condition of the economy and the stock market.
Therefore, the Compensation Committee may measure an executive’s progress more on the basis of the year-
over-year increase in the number of shares owned than the overall market value of the shares owned in relation to
the executive’s ownership goal. For purposes of measuring ownership, only shares owned outright by the
executive (including shares owned by the executive’s spouse or dependent children and shares owned through the
Company’s savings plan or deferred compensation plan) are included. Shares represented by unvested stock
options or any other form of equity for which some condition remains to be completed before the executive earns
a right to and receives the shares (except for shares that have been electively deferred to a future date) are not
counted in determining the executive’s level of ownership.
As of February 29, 2008, Mr. Cassidy owned shares valued at approximately 147% of his ownership target;
Mr. Ross achieved approximately 122% of his ownership goal; Mr. Freyberger, who first became a named
executive officer in 2007, achieved approximately 10% of his ownership goal; Mr. Keating achieved
approximately 58% of his ownership goal and Mr. Wilson achieved approximately 60% of his ownership goal.
Employment Agreements and Severance and Change-in-Control Payments and Benefits
The Company generally enters into employment agreements with the named executive officers for several
reasons. Employment agreements give the Company the flexibility to make changes in key executive positions
with or without a showing of cause, if terminating the executive is determined by the Company or the Board to
be in the best interests of the Company. The agreements also minimize the potential for litigation by establishing
separation terms in advance and requiring that any dispute be resolved through an arbitration process. The
severance and change-in-control payments and benefits provided under the employment agreements and
described in more detail beginning on page 60 were important to ensure the retention of Mr. Cassidy and the
other named executive officers at the time they were promoted to their present positions and are important to
their continued retention. The payments and benefits are comparable to the payments and benefits to which the
executives’ predecessors in office were entitled and to the payments and benefits provided by other companies to
employees in similar positions. The Company considers the employment agreements to be especially important
in situations involving a possible change in control because they provide the executives with sufficient
compensation and clarity of terms in such a situation. Thus, the executives are able to devote their full attention
to fairly evaluate the potential transaction and its benefit to the Company and its shareholders rather than being
distracted by the transaction’s possible effect on their personal employment situations. Because these potential
payments are triggered under very specific circumstances, such payments are not considered in setting pay for
other elements of executive compensation.
Adjustments and Recovery of Award Payments
The Company is subject to the requirements of Section 304 of the Sarbanes Oxley Act. Therefore, if the
Company were required to restate its financial results due to any material noncompliance of the Company, as a
result of misconduct, with any financial reporting requirement under the securities laws, it would act promptly to
recover from the Chief Executive Officer and Chief Financial Officer any bonus or other incentive-based or
equity-based compensation received during the 12-month period following the date the applicable financial
statements were issued and any profits from any sale of securities of the Company during that 12-month period.
Compensation Limitation
Section 162(m) of the Internal Revenue Code generally limits to $1,000,000 the available deduction to the
Company for compensation paid to any of the Company’s named executive officers, except for performance-
based compensation that meets certain technical requirements. Although the Compensation Committee considers
the anticipated tax treatment to the Company of its compensation payments, the Compensation Committee has
determined that it will not necessarily seek to limit executive compensation to that deductible under
Section 162(m) of the Internal Revenue Code.
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