CenturyLink 2015 Annual Report Download - page 32

• to approve an amendment to the Plan to add a dollar limit of $500,000 on the amount of equity-based
compensation payable to each non-employee director under the Plan in any given calendar year (the
“Director Limit”).
No changes have been made to the Plan since it was last approved by shareholders in 2011, and we are not
proposing any changes to the Plan other than the addition of the Director Limit. Specifically, approval of this
Plan Proposal by our shareholders will neither increase the number of shares available under the Plan nor
extend its current term.
A vote in favor of Item 3 on the proxy or voting instruction card will constitute a vote in favor of both of the
above-described elements of the Plan Proposal.
The principal features of the Plan and the terms of the Plan Proposal are summarized below. However, this
summary is qualified by the full text of the Plan, which is marked to show the addition of the Director Limit, as
attached to this proxy statement as Appendix A. Because this is a summary, it may not contain all the information
that you may consider to be important. Therefore, we recommend that you read Appendix A carefully before you
decide how to vote on the Plan Proposal.
Purpose of the Plan Proposal
We believe that providing officers, directors, employees, consultants and advisors with a proprietary interest
in the growth and performance of our Company is crucial to stimulating individual performance while at the
same time enhancing shareholder value. While we believe that employee equity ownership is a significant
contributing factor in achieving strong corporate performance, we recognize that increasing the number of
available shares under incentive plans may potentially dilute the equity ownership of our current shareholders.
Therefore, we are not proposing any increase in the number of shares issuable under the Plan, as we believe
we have sufficient shares available under the Plan to continue to provide equity-based incentives at current levels
to our directors, officers, and key employees for several more years. However, because the Plan was last
approved by our shareholders in 2011, we are seeking shareholder reapproval of the material terms of the
performance goals under the Plan in order to preserve our ability to take a federal income tax deduction for
certain compensation granted under the Plan.
Under Section 162(m) of the Code, we are not permitted to deduct more than $1 million per year for
compensation paid to our Chief Executive Officer or our next three most highly-compensated executive officers
(other than our Chief Financial Officer), subject to certain exceptions. Specifically, Section 162(m) provides an
exception for performance-based compensation that satisfies certain requirements, including shareholder
approval. For plans that permit a company’s compensation committee to select performance goals from a list of
previously-approved goals, Section 162(m) requires that the material terms of the performance goals be disclosed
to, and reapproved by, the company’s shareholders at least every five years.
Therefore, because the Plan permits the Committee to select performance goals from a list of previously-
approved goals and the material terms of those performance goals were last approved in 2011, our Board is
seeking shareholder reapproval of the material terms of the performance goals at this year’s meeting. The
material terms of the performance goals under the Plan are described below in the section entitled “Summary of
the Plan,” under the subsections “Eligibility,” “Limitation and Adjustments to Shares Issuable under the Plan,”
and “Performance Goals for Section 162(m) Awards.”
In addition to constituting shareholder reapproval of the Plan’s performance goals for purposes of
Section 162(m), shareholder approval of the Plan Proposal would also amend the Plan to add the Director Limit.
Currently, our non-employee directors are subject to the same limits on equity grants under the Plan that apply to
every other participant (described below under “Summary of the Plan — Limitations and Adjustments to Shares
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