FairPoint Communications 2006 Annual Report Download - page 108
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1. General Principals and Procedures
The compensation committee’s principal objective in designing compensation policies is to develop and administer a comprehensive program to attract,
motivate and retain outstanding managers who are likely to enhance our profitability and create value for our stockholders. Within this overall compensation
philosophy, the compensation committee seeks to: (1) recognize and reward sustained superior performance by individual officers and key employees; (2) pay
for performance on both an individual and corporate level; (3) align stockholder and executive interests by placing a significant portion of executive
compensation “at risk”; (4) tie executive compensation to the achievement of certain short-term and long-term performance objectives of FairPoint; and (5) offer
a total compensation program that takes into account the compensation practices of comparable companies.
In order to more closely align NEO compensation with the long-term interests of our stockholders, the intent of the compensation committee is to generally
provide less incentive compensation in the form of cash bonuses than it does in the form of stock-based compensation having service and performance based
future vesting requirements. The compensation committee used an independent consultant in 2006 to review its stock award levels and to benchmark the levels
of all components of compensation.
2Specific Principals for Determining Executive Compensation
The table below identifies and explains the reason for each component of NEO compensation. See “—Executive Compensation Decisions for 2006” for
amounts and further detail.
Salary Our career-oriented philosophy toward executive compensation requires a competitive base salary as a starting
point. The compensation committee establishes the base salaries for our NEOs as fixed amounts in order to
provide a reliable indication of the minimum amount of compensation that each NEO will receive in a given year.
Bonus We maintain an Annual Incentive Plan under which our NEOs and other key employees may earn annual cash
and/or restricted stock bonuses based on corporate and individual performance. The Annual Incentive Plan is
designed to provide an incentive for executives to attain goals. The compensation committee establishes and
approves the goals of the chief executive officer and the chief executive officer approves the goals of the other
NEOs and the compensation committee reviews them.
Restricted Stock Awards We maintain the 2005 Stock Incentive Plan, which allows for a variety of stock-based awards that are available to
link employee compensation to stockholders’ interest and encourage the creation of long-term value for our
stockholders by increasing the retention of qualified key employees. In 2006, the compensation committee relied
on restricted stock awards for this purpose.
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