Cincinnati Bell 2009 Annual Report Download - page 44

Determination of Amounts for Each Compensation Element
Base Salary
An executive’s base salary is determined based on an assessment of his or her performance as compared to
his or her individual job responsibilities, the executive’s effectiveness in identifying and developing future
management talent, such other factors as the Chief Executive Officer or the Compensation Committee deems
relevant for such executive, and the predicted market 50th percentile base salary data for such position.
Generally, no one factor is given more weight than another, nor does the Company use a formulaic approach in
setting executive pay. Additionally, the Company does not look at total compensation of the peer group. Instead,
the various factors are considered as a whole in determining executive pay adjustments.
For all executive officers other than himself, the Chief Executive Officer recommends base salaries, which
the Compensation Committee takes into consideration when making its determinations.
Similarly, the Company’s Chairman of the Board solicits input from each of the other directors regarding
the Chief Executive Officer’s performance during the year. In executive session, the Chairman of the Board
provides the Compensation Committee with a summary of the input received for further discussion. The
Compensation Committee’s independent consultant reviews the annual executive compensation study for the
Chief Executive Officer’s position. Based on these factors, the Compensation Committee determines the
adjustments in the Chief Executive Officer’s base salary to recommend for approval by the full Board.
Annual Incentive
Payments under the Company’s annual incentive plan are tied to:
•the Company’s level of achievement of (a) earnings before interest, taxes, depreciation and amortization
(“EBITDA”) and (b) revenues, and
•the executive’s individual performance.
The Company has selected the EBITDA and revenue measures because it believes that investors use them to
evaluate the financial performance of the Company and because they also indicate the level of success of the
Company’s strategy to de-lever, defend and grow. EBITDA is a common measure of profitability employed in
the telecommunications and other capital-intensive industries. The Compensation Committee and the Board
review and approve the calculations of EBITDA and revenues. In conjunction with such review, they may adjust
the calculated result or goal amount to reflect a change in business direction, reallocation of Company resources
or an unanticipated event.
For 2009, the Compensation Committee allocated the annual incentive targets as follows:
•50% for attainment of the EBITDA goal
•30% for attainment of the revenue goal
•20% for individual performance
The EBITDA and revenue goals are assessed independently of each other and are scaled above and below
their respective targets in the manner set out below.
Percentage of
Criterion Achieved
EBITDA Goal Revenue Goal
Percentage of
Target Incentive
Goal
Percentage of
Total Annual
Incentive
Paid
Percentage of
Target Incentive
Goal
Percentage of
Total Annual
Incentive
Paid
Below 95% ................................ 0% 0% 0% 0%
95% ...................................... 50% 25% 50% 15%
100% ..................................... 100% 50% 100% 30%
105% ..................................... 150% 75% 150% 45%
120% or greater ............................. 200% 100% 200% 60%
30