Windstream 2009 Annual Report Download - page 20

position, general economic conditions, and discussions with the compensation consultant. The Windstream Board
approves or, in the case of Mr. Gardner’s compensation, ratifies the actions of the Compensation Committee.
Elements of Compensation. The compensation of Windstream’s executive officers consists of three
principal components:
• Base salary;
• Short-term (annual) cash incentive payments; and
• Long-term incentives in the form of equity-based compensation.
The compensation program for all executive officers also includes the Windstream 2007 Deferred
Compensation Plan, the Windstream 401(k) Plan, a change-in-control agreement, and other limited perquisites.
Windstream has also entered into an employment agreement with Mr. Gardner, and certain executive officers are
eligible to participate, on a grandfathered-basis, in the Windstream Pension Plan and the related Windstream
Benefit Restoration Plan.
2009 Compensation Philosophy. The Compensation Committee considers the total compensation of each
executive officer as well as the allocation of compensation among base salary, short-term incentive
compensation, and equity-based compensation for determining compensation levels. In 2008 and prior years, the
Compensation Committee pursued a philosophy of targeting each element of total compensation at levels
between 50th and 75th percentile of comparative market survey data. As part of its annual compensation review in
February 2009, the Compensation Committee froze the compensation for all named executive officers at the
levels approved for 2008. While consideration was given to the comparative market survey data, the
Compensation Committee implemented these actions for 2009 based upon the recommendation of management
in response to the difficult economic conditions that were expected to be experienced as a result of the general
economy. This decision, coupled with the elimination of reimbursement for country club memberships and
financial planning expenses, resulted in a reduction in total direct compensation for all named executive officers.
The Compensation Committee believes that a substantial portion of executive compensation should be at
risk through allocation of compensation to short-term cash incentives and long-term equity-based incentives. The
following table illustrates the allocation for each named executive officer for 2009:
Named Executive Officer
Percentage of Total Direct
Compensation Allocated to
Short-term Incentive and
Performance-Based Equity
Compensation (%)
Percentage of Total
Direct Compensation
Allocated to Equity-
Based Compensation
(%)
Jeffery R. Gardner 82% 65%
Anthony W. Thomas 37% 33%
Brent Whittington 45% 50%
John P. Fletcher 44% 47%
Richard J. Crane 40% 45%
Total direct compensation for these purposes equals base salary, short-term cash incentive payment at target
levels and the full up-front fair value of equity-based awards determined in accordance with authoritative
guidance on share-based compensation.
Management Changes During 2009. In August 2009, Windstream appointed Brent Whittington to the
position of Chief Operating Officer and Anthony W. Thomas to the position of Chief Financial Officer. Prior to
these appointments, the Compensation Committee reviewed the compensation of each of the affected executive
officers and made recommendations to the Board of Directors to change their compensation. Based on a number
of factors including the increased responsibilities involved in each promotion and the higher compensation levels
for each new position as demonstrated by comparative market survey data, the Compensation Committee
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