UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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| Preliminary Proxy Statement
| o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
☒ | Definitive Proxy Statement | |||||
o | Definitive Additional Materials | |||||
o | Soliciting Material Under Rule 14a-12 |
Frontier Communications Corporation
(Name of Registrant as Specified in Its Charter)
Frontier Communications Corporation |
(Name of Registrant as Specified in Its Charter) |
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| 401 Merritt 7, Norwalk, CT 06851
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
VIRTUAL MEETING OF STOCKHOLDERS VIA LIVE WEBCAST
| 10:00 a.m., Eastern Time, on May | |||
| • |
To elect 9 directors; | ||
• |
To consider and vote upon an advisory proposal to approve executive compensation; | |||
• |
To ratify the selection of KPMG LLP as our independent registered public accounting firm for | |||
• | To vote on a stockholder proposal on equity compensation, if properly brought before the meeting; and | |||
• | To transact any other business that may properly be brought before the meeting or any adjournment or postponement of the meeting. | |||
| Stockholders of record at the close of business on March | |||
Your vote is very important. On or about March 27, 2018,2019, we mailed a Notice of Internet Availability of Proxy Materials (the Notice). The Notice includes instructions on how to access our Proxy Statement and 20172018 Annual Report and vote online. Stockholders who received a printed copy of our proxy materials may also vote by mail by signing, dating and returning the proxy card in the envelope provided. Voting now will not limit your right to change your vote or participate in the meeting.
This year’s Annual Meeting will be a virtual meeting, which means that you will be able to participate in the Annual Meeting via live webcast by visitingwww.virtualshareholdermeeting.com/FTR2018FTR2019.Because theThe Annual Meeting is virtual and beingwill be conducted electronically,via the Internet; stockholders will not be able to attend the Annual Meeting in person.
By Order of the Board of Directors | |
 | |
Mark D. Nielsen | |
Executive Vice President, Chief Legal Officer and Secretary | |
March 27, 2019 |
By Order of the Board of Directors
Mark D. Nielsen
Executive Vice President, Chief Legal Officer and Secretary
March 27, 2018
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be held on May 9, 2018.7, 2019.
The Proxy Statement and 20172018 Annual Report are available atwww.proxyvote.com. You will need the control number provided on your Notice, proxy card or voting instructions to access these materials electronically.
PROXY SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement about Frontier Communications Corporation. You should read the entire Proxy Statement carefully before voting.
Date May 7, 2019 | ||
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Meeting Agenda and Voting Matters
Proposal | Board Vote Recommendation |
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Item 1 – Election of Directors | FOR each nominee | |
| FOR | |
Item 3 – Ratification of Selection of Independent Registered Public Accounting Firm | FOR | |
Item 4 – Vote on a Stockholder Proposal on Equity Compensation |
AGAINST |
Director Nominees
Name/Age* | Independent | Director Since | Occupation/Career Highlights | Committee Membership |
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| Yes | 2007 | Managing Director, Equity Group Investments | Compensation
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| Yes | 2014 | Chief Financial Officer, Cleveland Avenue LLC and Principal, Scarlett Investments, LLC | Audit
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| Yes | 2010 | Retired, Partner, Ernst & Young | Audit (Chair)
Finance | ||||
| No | 2014 | President and CEO, Frontier Communications | |||||
| Yes | 2018 | Chief Financial Officer, IQVIA | Finance | ||||
Pamela D.A. Reeve (Chairman), | Yes | 2010 | Retired, President and CEO, Lightbridge, Inc. | Nom. and Corp. Gov. | ||||
| Yes | 2013 | Retired, Executive Vice President, Verizon Communications | Compensation (Chair)
Finance | ||||
| Yes | 2018 | Chairman, Truax Partners LLC | Finance (Chair) | ||||
Howard L. Schrott, 64 | Yes | 2005 | Principal, Schrott Consulting | Audit
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* Age is as of the date of the Annual Meeting.
Mr. Wick,Barnes, who has served on the Board since 2005, isand Mr. Shapiro, who has served on the Board since 2010, are not standing forre-election at our Annual Meeting.
All of our directors attended over 75% of the meetings of the Board and committees
on which they served in 2017.2018.
Frontier Communications Corporation | 1 | 2019 Proxy Statement |
PROXY SUMMARY
Board Characteristics
We believe that diversity in its many forms, and the breadth of perspective that it brings, enhances the effectiveness of the Board. The background and qualifications of our nine director nominees as a group encompass the following characteristics:
Corporate Governance Highlights
The Board is committed to exercising good corporate governance practices. This includes:
All independent directors (except our CEO) |
An independent Chairman of the Board with extensive duties |
Each standing committee composed exclusively of independent directors |
Annual elections of all directors (not a staggered Board) |
Frequent executive sessions of independent directors |
Majority voting for our director elections |
Stock ownership guidelines for executive officers andnon-management directors |
Annual Board and committee self-evaluations |
A robust clawback policy |
2017 Review
2017 was a period of immense change and development for Frontier Communications. We ended the year in a much stronger position than we started, and in 2018 we are poised to achieve further improvements, most notably in California, Texas, and Florida (CTF). These markets have leading-edge,fiber-to-the-home networks that enablebest-in-class broadband, video and other communications services for consumers and businesses.
In 2017, we systematically addressed performance issues in CTF that negatively affected revenue, profitability, and our stock price. We achieved steady improvements in Frontier FiOS® customer trends. We also made the decision to suspend the common dividend effective with the first quarter of 2018. This action will free up $250 million of additional cash annually, following the conversion of the company’s mandatory convertible preferred stock in June 2018, to accelerate debt reduction.
We still have substantial work ahead, but we remain fully committed to increasing shareholder value.
Frontier Communications Corporation | 2 | 2019 Proxy Statement |
PROXY SUMMARY
Executive Compensation
Our Compensation Committee sets executive compensation each year based upon the following philosophy:
Establish clear alignment between the interests of our executives and those of our stockholders by rewarding performance measured by key financial metrics, strategic objectives and relative total stockholder return, and through the use of long-term incentive awards as a significant component of annual compensation. |
As a result of not paying a bonus for 2016 and 2017 performance, along with the decrease in our share price, the value realized from our executive compensation program over the past three years has been well below the target value, leading to an increase in executive turnover. Three (3) of nine (9) members of our executives and thosesenior leadership team left Frontier during 2018. As such, the Committee has been placing an increased emphasis on retention of our stockholders by rewardingsenior leadership team.
Accordingly, we have realigned our compensation structure both to incent strong performance measured byas we work towards our transformation goals and to retain key financial metrics, strategic objectivesexecutives. We introduced a quarterly incentive plan and relative total stockholder return, and through theredesigned our long-term incentive program in other ways, including use of equitycash-denominated awards as a significant componentin lieu of annual compensation.
Reinforce our performance culture for our Named Executive Officers (NEOs) by making a majority of their compensation at risk, i.e., contingent upon achievement of specified company and individual performance goals.
Hire and retain talented executives by having a compensation program that is competitive in relation to comparable companies based on size, overall complexity and the nature of our business.
Ensure company goals are fully aligned throughout the organization. Each year, we establish company-wide goals to achieve Frontier’s business plan for the year. Our NEOs are compensatedstock-denominated awards (refer to the extent they are successful“Changes to Our Program in leading2019” section). These changes recognize that retention of executives, despite the current stock price, is critical to on-going execution of efficiencies and synergies that will help Frontier to achieve these goals for each year.
In light of the challenges we faced in 2017 and the resulting decline in the price of our common stock, Frontier paid no annual cash bonuses for 2017 performance. The Compensation Committee elected to grant executives restricted stock awards, performance share awards and performance cash awards (but not as replacement for the annual cash bonus). We believe that these awards tie the interests of our executives and our stockholders.Communications regain its momentum.
For additional information about our executive compensation practices, see our “Compensation Discussion and Analysis.”
Frontier believes that our compensation program is a sound reflection of our compensation philosophy
and, as such, our Board recommends that stockholders voteFOR our 2018Say-On-Pay proposal.
Analysis” in this Proxy Statement.
Frontier believes that our compensation program is a sound reflection of our compensation philosophy and, as such, our Board recommends that stockholders vote FOR our 2019 Say-On-Pay proposal. |
Frontier Communications Corporation | 3 | 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Why did I receive these proxy materials?
This Proxy Statement is being furnished to you in connection with the Board’s solicitation of proxies to be voted at our 20182019 Annual Meeting of Stockholders, which is being held on May 9, 2018,7, 2019, at 10:00 a.m., Eastern Time, via the internet atwww.virtualshareholdermeeting.com/FTR2018FTR2019, and at any adjournments thereof (the Annual Meeting).
What is included in our proxy materials?
Our proxy materials whichinclude the following:
The Notice includes instructions on how to access our Proxy Statement and 2018 Annual Report and vote online. In addition, the proxy materials are available on the Investor Relations page of our website,www.frontier.com, include:
Our Notice of Annual Meeting of Stockholders;
Our Proxy Statement; and
Our 2017 Annual Report to Stockholders.
. If you received printed versions of these materials by mail (rather than through electronic delivery), these materials also included a proxy card or voting instruction form.
The information on our website is not incorporated herein by reference.
How is Frontier distributing proxy materials?
Under rules adopted by the Securities and Exchange Commission (the SEC), we have elected to furnish the proxy materials to many of our stockholders via the Internet. On or about March 27, 2018,2019, we began mailing to holders of our common stock (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials. If you received the Notice, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy materials. The Notice also instructs you on how you may submit your proxy via the Internet. Stockholders who do not receive the Notice will continue to receive either a paper or electronic copy of our Proxy Statement and 20172018 Annual Report, which will be sent on or about March 27, 2018.2019.
If you received a Notice by mail and would like to receive a copy of our proxy materials, follow the instructions (contained in the Notice) regarding how you may request to receive your materials electronically or in printed form on aone-time or ongoing basis. We encourage you to receive all future proxy materials electronically to help us save printing costs and postage fees, as well as natural resources, in producing and distributing these materials. If you wish to receive these materials electronically next year, please follow the instructions on the proxy card or on the Investor Relations page of our website,www.frontier.com.
Frontier Communications Corporation | 4 | 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Requests for printed copies of the proxy materials can be made via the Internet atwww.proxyvote.com, by telephone at1-800-579-1639 (or, for callers without touch-tone phones,1-866-232-3037) or by email atsendmaterial@proxyvote.comby sending a blank email with your control number (the 12 digit identifying number in the box on the Notice) in the subject line.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What matters will be voted on at the Annual Meeting?
The following matters are scheduled for vote by stockholders at the Annual Meeting:
Proposal 1 | ||
Elect the 9 nominees named in this Proxy Statement to serve as directors | ||
Proposal 2 | Approve, on an advisory basis, Frontier’s executive compensation (Say-on-Pay) | |
Proposal 3 | Ratify the selection of KPMG LLP as Frontier’s independent registered public accounting firm for | |
Proposal 4 | Vote on a stockholder proposal on equity compensation, if properly |
Who can vote at our Annual Meeting?
You can vote your shares of common stock at our Annual Meeting if you were a stockholder at the close of business on March 12, 2018,11, 2019, the record date for our Annual Meeting. As of March 12, 2018,11, 2019, there were 78,317,891105,318,646 shares of our common stock outstanding, with each share entitled to one vote.
How can I participate in the Annual Meeting?
We are excitedpleased to invite stockholders to participate in the Annual Meeting virtually via the internet atwww.virtualshareholdermeeting.com/FTR2018FTR2019. We believe hosting a virtual meeting will promote greater stockholder attendance, by enabling stockholders that might not otherwise be able to travel to a physical meeting to attend online, while also reducing the costs of the annual meeting.
We are committed to enhancing the stockholder experience at the annual meeting. We have engaged Broadridge Financial Solutions to host the virtual annual meeting. Annual Meeting virtually and our meeting will include the following features:
| • | On the day of the annual meeting, Broadridge Financial Solutions will open the portal in advance of the meeting so that you may have time prior to the meeting to submit questions you may have for the Company. In addition, you may submit questions in advance of the meeting at www.proxyvote.com. In order to vote or submit a question, you will need to follow the instructions posted at www.virtualshareholdermeeting.com/FTR2019 and will need the control number provided on your Notice, proxy card or voting instructions. |
| • | Following the Annual Meeting, we will provide a transcript of the questions and answers that were provided during the webcast. In addition, we will provide written responses on topics that we did not have time to address during the Annual Meeting webcast, if any. These will be available on the Investor Relations page of our website, www.frontier.com in the days following our Annual Meeting. |
What is the quorum requirement for our Annual Meeting?
Holders of a majority of the outstanding shares of common stock entitled to vote must be present or represented by proxy in order for action to be taken at the Annual Meeting. Abstentions and brokernon-votes are treated as present for quorum purposes.
Frontier Communications Corporation | 5 | 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
How do I vote my shares?
If you are a stockholder of record | If you hold your shares in street name | |||
By Internet* | www.proxyvote.com | www.proxyvote.com | ||
By Telephone* | 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 6, 2019, the day before the meeting date. | If your shares are held of record in the name of a bank, broker or other nominee, follow the voting instructions on the form you receive from your record holder. The availability of Internet and telephone voting will depend on their voting procedures. | ||
By Mail | Return a properly executed and dated proxy card in thepre-paid envelope we have provided. | If your shares are held of record in the name of a bank, broker or other nominee, follow the voting instructions on the form you receive from your record holder. The availability of Internet and telephone voting will depend on their voting procedures. | ||
During the Annual Meeting | To vote virtually via the internet at the meeting, please follow the instructions posted at www.virtualshareholdermeeting.com/ | To vote virtually via the internet at the meeting, please follow the instructions posted at www.virtualshareholdermeeting.com/ |
*Internet and telephone voting procedures are designed to authenticate stockholder identities, to allow stockholders to give voting instructions and to confirm that stockholders’ instructions have been recorded properly. A control number, located on the Notice and proxy card, will identify stockholders and allow them to vote their shares and confirm that their voting instructions have been properly recorded. Stockholders voting via the Internet or telephone should understand that there may be costs associated with voting via the Internet or telephone, such as usage charges from Internet access providers and telephone companies, which must be borne by the stockholder.
| * | Internet and telephone voting procedures are designed to authenticate stockholder identities, to allow stockholders to give voting instructions and to confirm that stockholders’ instructions have been recorded properly. A control number, located on the Notice and proxy card, will identify stockholders and allow them to vote their shares and confirm that their voting instructions have been properly recorded. Stockholders voting via the Internet or telephone should understand that there may be costs associated with voting via the Internet or telephone, such as usage charges from Internet access providers and telephone companies, which must be borne by the stockholder. |
If a stockholder neither returns a signed proxy card, votes via the Internet or by telephone, nor participates in the Annual Meeting and votes via the internet, his or her shares will not be voted.
Can I change my mind after I have voted?
You can revoke your proxy at any time before the Annual Meeting by giving written notice of revocation to our Secretary, at our address stated on the cover page of this Proxy Statement, by executing and delivering a later-dated proxy, either in writing, by telephone or via the Internet, or by participating in the Annual Meeting and voting virtually via the internetInternet at www.virtualshareholdermeeting.com/FTR2018.FTR2019. Participation in the Annual Meeting will not alone constitute revocation of a proxy.
Do I hold my shares as a registered stockholder or in street name?
If your shares of common stock are owned directly in your name, as shown in the records of our transfer agent, Computershare Investor Services, you are considered a registered holder of those shares.
If your shares of common stock are held by a broker, bank or other nominee, you hold those shares in street name. Your broker, bank or other nominee will vote your shares as you direct.
If I hold my shares in street name, does my broker need instructions in order to vote my shares?
If you hold shares of common stock in street name and you do not submit specific voting instructions to your broker, bank or other nominee, how your shares may be voted will depend on the type of proposal. Brokers, banks and other nominees generally will have discretion to vote your shares on routine matters, but will not have discretion to vote your
Frontier Communications Corporation | 6 | 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
shares onnon-routine matters. When the broker, bank or other nominee is unable to vote on a proposal because the proposal is not routine, and you do not provide voting instructions, a “brokernon-vote” occurs and, as a result, your shares will not be voted on these proposals.
| • | The ratification of the appointment of KPMG LLP as our independent registered public accountant for |
| • | All other matters to be voted on at the Annual Meeting are considerednon-routine under applicable rules. Your broker, bank or other nominee will not be able to vote without instruction from you. |
If I hold my shares as a registered stockholder but do not give specific voting instructions, how will my shares be voted?
If you sign, date and return a proxy card but do not give specific voting instructions, then the proxy holders will vote your shares in the manner recommended by our Board on all matters presented in this Proxy Statement, and the proxy holders may determine in their discretion how to vote your shares on any other matters properly presented for a vote at our Annual Meeting. Although our Board does not anticipate that any of the director nominees will be unable to stand for election as a director nominee at our Annual Meeting, if this occurs, proxies will be voted in favor of such other person or persons as may be nominated by our Board.
What vote is required for adoption or approval of each matter to be voted on, and how does the Board recommend that I vote?
Proposal | Vote Required | Board Recommendation |
| Majority of the shares present in person or represented by proxy (for each director nominee) | FOR all nominees
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| Majority of the shares present in person or represented by proxy | FOR
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| Majority of the shares present in person or represented by proxy | FOR
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Stockholder proposal on equity compensation | Majority of the shares present in person or represented by proxy | AGAINST Unless a contrary choice is specified, proxies received by our Board will be voted AGAINST the stockholder proposal on equity compensation |
We have adopted a policy under which, innon-contested elections, if a director fails to win a majority of votes, the director must immediately tender his or her resignation from the Board, and the Board then decides at its next regularly scheduled meeting, through a process managed by the Nominating and Corporate Governance Committee and excluding the nominee in question, whether to accept the resignation.
Frontier Communications Corporation | 7 | 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What are my choices for casting my vote on each matter to be voted on?
Proposal | ||||||||
Voting Options | Effect of Abstentions | Broker Discretionary Voting Allowed? | Effect of Broker Non-Votes |
| FOR, AGAINST OR ABSTAIN (for each director nominee) | Treated as a vote AGAINST the nominee | No | No effect | ||||
| FOR, AGAINST OR ABSTAIN | Treated as a vote AGAINST the proposal | No | No effect | ||||
| FOR, AGAINST OR ABSTAIN | Treated as a vote AGAINST the proposal | Yes | Not applicable | ||||
Stockholder proposal on equity compensation | FOR, AGAINST OR ABSTAIN | Treated as a vote AGAINST the proposal | No | No effect |
What is “Householding”?
We have adopted a procedure approved by the SEC called “householding.” Under this procedure, stockholders of record who have the same address and last name will receive only one copy of our Proxy Statement and Annual Report unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure will reduce our printing costs and postage fees. Stockholders who participate in householding will continue to receive separate proxy cards. Householding will not in any way affect dividend check mailings.
If your household received a single set of proxy materials, but you would prefer to receive a separate copy of this Proxy Statement and Annual Report, please contact our transfer agent, Computershare Investor Services (in writing: P.O. Box 43078, Providence, RI 02940-3078;505005, Louisville, KY 40233; or by telephone: in the U.S., Puerto Rico and Canada,1-877-770-0496; outside the U.S., Puerto Rico and Canada,1-781-575-2382).
Stockholders who hold their shares in street name can request information about householding from their banks, brokers or other nominees.
Who bears the cost of soliciting votes for the Annual Meeting?
We will bear the costs of solicitation of proxies for the Annual Meeting. In addition to solicitation by mail, directors, officers and our regular employees may solicit proxies from stockholders by telephone, personal interview or otherwise. These directors, officers and employees will not receive additional compensation, but may be reimbursed forout-of-pocket expenses in connection with this solicitation. In addition to solicitation by our directors, officers and employees, we have engaged Innisfree M&A Incorporated to assist in the solicitation of proxies and provide related advice and informational support, for a base fee of $15,000, plus customary disbursements. Banks, brokers, other nominees, fiduciaries and other custodians have been requested, with respect to shares of record held by them, to forward soliciting material to the beneficial owners of common stock, and these custodians will be reimbursed for their reasonable expenses.
Frontier Communications Corporation | 8 | 2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
How do I contact the Transfer Agent?
Our transfer agent is Computershare Investor Services. You should contact the transfer agent, at the phone number or addresses listed below, if you have questions concerning stock certificates, dividend checks, transfer of ownership or other matters pertaining to your stock account.
If by First Class Mail:
Computershare Investor Services
P.O. Box 43078505005
Louisville, KY 40233
Providence, RI 02940-3078
If by Overnight Courier:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Computershare Investor Serviceswebsite: www.computershare.com/investor
250 Royall Street
Canton, MA 02021-1011
website:www.computershare.com/investor
Telephone:(877) 770-0496 (in the U.S., Puerto Rico and Canada)
or(781) 575-2382 (outside the U.S., Puerto Rico and Canada)
Frontier Communications Corporation | 9 | 2019 Proxy Statement |
OWNERSHIP OF COMMON STOCK
Set forth below is certain information with respect to the beneficial ownership of our common stock (as determined under the rules of the SEC) by (1) each person who, to our knowledge, is the beneficial owner of more than 5% of our outstanding shares of common stock, which is our only class of voting securities, (2) each director and nominee for director, (3) each of the executive officers named in the Summary Compensation Table under “Executive Compensation” and (4) all of our directors and executive officers as a group. The information is as of March 12, 201811, 2019 unless otherwise indicated.indicated, and ownership percentages are based on 105,318,646 shares of common stock outstanding as of March 11, 2019. The business address of each person listed is c/o Frontier Communications Corporation, 401 Merritt 7, Norwalk, Connecticut 06851, unless stated otherwise. Except as otherwise described below, each of the persons named in the table has sole voting and investment power with respect to the common stock beneficially owned and has not pledged such common stock as security for any obligations.
| 5% Beneficial Owners | Number of Shares and Nature of Beneficial Ownership | Percent of Class | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||||
BlackRock, Inc.(a) | 15,219,684 | 19.4 | % | 16,360,108 | 15.5 | % | ||||||||
The Vanguard Group(b) | 10,263,864 | 13.1 | % | 10,678,036 | 10.1 | % | ||||||||
Non-Employee Directors & Director Nominees(c) | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||||
Leroy T. Barnes Jr. | 55,413.71 | (d) | * | |||||||||
Peter C.B. Bynoe | 54,823.39 | (e) | * | |||||||||
Diana S. Ferguson | 42,537.63 | (f) | * | |||||||||
Edward Fraioli | 56,481.82 | (g) | * | |||||||||
Michael R. McDonnell | 14,906.83 | (h) | * | |||||||||
Pamela D.A. Reeve | 92,378.52 | (i) | * | |||||||||
Virginia P. Ruesterholz | 48,433.51 | (j) | * | |||||||||
Robert A. Schriesheim | 14,906.83 | (k) | * | |||||||||
Howard L. Schrott | 59,036.53 | (l) | * | |||||||||
Mark Shapiro | 61,926.78 | (m) | * | |||||||||
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Named Executive Officers and Directors & Executive Officers as a Group | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||
Kenneth W. Arndt | 120,668 | (n) | * | |||
Sheldon L. Bruha | 10,771 | (o) | * | |||
Steve Gable | 147,700 | (p) | * | |||
John Maduri | 213,739 | (q) | * | |||
R. Perley McBride | 250,323 | (r) | * | |||
Daniel J. McCarthy | 540,465 | (s) | * | |||
All directors and executive officers as a group (16 persons) | 1,784,512 | (t) | 1.7 | % | ||
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| * | Less than 1%. |
| (a) | The number of shares is as of December 31, |
| (b) | The number of shares is as of December 31, |
Frontier Communications Corporation | 10 | 2019 Proxy Statement |
OWNERSHIP OF COMMON STOCK
10,581,790 shares and shared dispositive power over 92,246 shares and that, of the shares beneficially owned by The Vanguard Group, Inc., 101,227 shares are held by wholly-owned subsidiaries of The Vanguard Group, Inc.
| (c) |
| (d) |
| (e) | Consists of 54,567.39 shares that may be acquired upon the redemption of stock units and 256 shares held directly by Mr. Bynoe. |
| (f) | Consists of shares that may be acquired upon the redemption of stock units. |
| (g) | Consists of |
| (h) | Consists of shares that may be acquired upon the redemption of stock units. |
| Consists of 91,712.52 shares that may be acquired upon the redemption of stock units and 666 shares held directly by Ms. Reeve. |
| (j) | Consists of shares that may be acquired upon the redemption of stock units. |
| (k) | Consists of |
| Consists of 58,703.53 shares that may be acquired upon the redemption of stock |
| (m) | Includes 50,581.11 shares that may be acquired upon the redemption of stock units, 10,679 shares held directly by Mr. Shapiro and 666.67 shares that may be acquired upon the exercise of currently exercisable stock |
| Includes |
| (o) | Includes 8,263 restricted shares over which Mr. Bruha has sole voting power but no dispositive power. |
| (p) | Includes |
| (q) | Includes |
| (r) | Represents holdings as of March 12, 2018. Mr. McBride departed on August 31, 2018. |
| (s) | Includes |
| Includes |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and officers, and persons who beneficially own more than 10% of our common stock, to file reports of ownership and changes in ownership with the SEC. Such directors, officers and greater than 10% stockholders are also required to furnish us with copies of all such filed reports.
Based solely upon a review of the copies of such reports furnished to us, or representations that no reports were required, we believe that during the year ended December 31, 2017,2018, all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis.basis, other than Messrs. Nielsen and Shapiro, each of whom inadvertently missed the original filing deadline to report the mandatory conversion on June 29, 2018, of shares of our Series A Mandatory Convertible Preferred Stock held directly by them into shares of Frontier common stock.
Frontier Communications Corporation | 11 | 2019 Proxy Statement |
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS
Each director is elected at the annual stockholder meeting to hold office until the next annual stockholder meeting or until his or her successor has been elected and qualified. Directors are elected by a majority of the votes of the holders of shares of common stock present in person or represented by proxy at the meeting and entitled to vote at the meeting.Annual Meeting.
If any of the Board’s nominees becomes unavailable prior to the Annual Meeting to serve as a director, the Board may select a replacement nominee or reduce the number of directors to be elected. The proxy holders will vote the shares for which they serve as proxy for any replacement candidate nominated by the Board.
Our Nominating and Corporate Governance Committee evaluates and recommends to the Board candidates for nomination to the Board in accordance with our Corporate Governance Guidelines and membership guidelines adopted by our Board, as described under “Director Qualifications,” below.
Stockholders may propose director candidates for consideration by the Nominating and Corporate Governance Committee. Any such recommendation should include the nominee’s name and qualifications for membership on the Board and should be directed to our Secretary at the address of our principal executive offices. To nominate an individual for election at an annual stockholder meeting, the stockholder must give timely notice to our Secretary in accordance with our bylaws, which, in general, require that notice be received by our Secretary not less than 90 days nor more than 120 days before the anniversary date of the immediately prior annual stockholders meeting, unless the annual meeting is moved by more than 30 days before or after the anniversary of the prior year’s annual meeting, in which case the notice must be received not less than a reasonable time, as determined by our Board, prior to the printing and mailing of proxy materials for the applicable annual meeting. The notice should include a description of the qualifications of the suggested nominee and any information that is required by the regulations of the SEC concerning the suggested nominee and his or her direct or indirect securities holdings or other interests in Frontier. See “Proposals by Stockholders” for the deadline for nominating persons for election as directors for the 20192020 annual meeting of stockholders.
Decisions regarding the renomination of directors are made by the Board, upon the recommendation of the Nominating and Corporate Governance Committee, which annually evaluates each director’s performance and contribution to the Board. Under our Corporate Governance Guidelines, anon-employee director will not ordinarily be renominated if he or she has served on the Board for 15 years, but the Nominating and Corporate Governance Committee may recommend to the Board for renomination a director regardless of the length of his or her service if, in the judgment of the Nominating and Corporate Governance Committee, such renomination is in the best interests of Frontier and our stockholders.
Each candidate for nomination as a director, including each person recommended by stockholders, is evaluated in accordance with our Corporate Governance Guidelines and additional guidelines adopted by our Board. The additional guidelines set forth below include specific characteristics that each nominee must possess, set forth below.
A reputation for integrity, honesty, fairness, responsibility, good judgment and high ethical standards.
Broad experience at a senior, policy-making level in business, government, education, technology or public interest.
The ability to provide insights and practical wisdom based on the nominee’s experience and expertise.
An understanding of a basic financial statement.
Comprehension of the role of a public company director, particularly the fiduciary obligation owed to Frontier and our stockholders.
Commitment to understanding Frontier and its industry and to spending the time necessary to function effectively as a director.
An absence of a conflict of interest (or appearance of a conflict of interest) that will impair the nominee’s ability to fulfill his or her responsibilities as a director.
possess.
• | A reputation for integrity, honesty, fairness, responsibility, good judgment and high ethical standards. | |||
• | Broad experience at a senior, policy-making level in business, government, education, technology or public interest. | |||
• | The ability to provide insights and practical wisdom based on the nominee’s experience and expertise. | |||
• | An understanding of a basic financial statement. | |||
• | Comprehension of the role of a public company director, particularly the fiduciary obligation owed to Frontier and our stockholders. | |||
• | Commitment to understanding Frontier and its industry and to spending the time necessary to function effectively as a director. | |||
• | An absence of a conflict of interest (or appearance of a conflict of interest) that will impair the nominee’s ability to fulfill his or her responsibilities as a director. |
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PROPOSAL 1: ELECTION OF DIRECTORS
Under the additional guidelines, the Nominating and Corporate Governance Committee also evaluates whether the background and qualifications of the directors, as a group, is diverse, and whether each individual nominee possesses a depth of experience, knowledge and ability that will enable him or her to assist the other directors in fulfilling the Board’s responsibilities to Frontier and our stockholders. Each nominee must also be willing to commit that he or she will comply with our director stock ownership guidelines.
In addition, a nominee should be “independent,” as defined by the SEC and the Nasdaq Listing Rules. To the extent permitted by applicable law and our bylaws, nominees who do not qualify as independent may be nominated when, in the opinion of the Nominating and Corporate Governance Committee, such action is in the best interests of Frontier and our stockholders.
Although we do not have a formal policy regarding Board diversity, when evaluating candidates for nomination as a director, the Nominating and Corporate Governance Committee does consider diversity in its many forms, including among others, experience, skills, ethnicity, race and gender. We believe a diverse Board, as so defined, provides for different points of view and robust debate and enhances the effectiveness of the Board. Currently, the Board includes one or more current and/or former CEOs, CFOs, investment bankers, experts in communications, marketing and strategy, auditors and individuals of different race, gender, ethnicity and background.
Annual Board Evaluation Process
The Nominating and Corporate Governance Committee oversees the Board’s evaluation process to ensure an ongoing, rigorous assessment of the Board’s effectiveness, composition and priorities. The Board includes in its evaluation process individual one-on-one discussions led by outside counsel.
Component | Description |
Corporate Governance Review | The Nominating and Corporate Governance Committee performs an annual review of Frontier’s corporate governance policies with a focus on best practices, recent developments and trends. |
Director Questionnaires | Tailored questionnaires, covering a wide range of topics, are developed for the Board and its standing committees to use to help guide self-assessment. The Chairman leads a Board evaluation discussion in executive session and Committee chairs lead similar committee evaluations. The Board and committees identify areas of effectiveness and areas for improvement. |
Director Interviews | Confidential, in-depth and candid interviews are conducted by outside counsel with each director and certain members of management. A report on the results of this interview process is provided to the Nominating and Corporate Governance Committee and shared with the Board to inform priorities and action items. These interviews are conducted annually or as otherwise determined by the Nominating and Corporate Governance Committee. |
A key priority identified in the Board evaluation process is Board succession planning. In the interest of promoting diversity and new perspectives on the Board, the Board has adopted a policy in 2017 pursuant to which one long-standing director will elect not to stand forre-election at the Annual Meeting. This began at the 2017 Annual Meeting when Ms. Larraine Segil, who had served on theMr. Myron Wick and Mr. Barnes, each a Board member since 2005, elected not to stand forre-election to the Board at the 2017, 2018 and 2019 Annual Meeting.Meetings, respectively. Assuming Mr. Wick, a Board member since 2005, has elected not to stand forre-election at the 2018 Annual Meeting, and, assuming Mr. BarnesSchrott isre-elected at this year’s meeting, the Board currently expects Mr. Barnes,Schrott, a Board member since 2005, not to stand forre-election at the 20192020 Annual Meeting. Further, theIn addition, Mr. Shapiro has elected not to stand for re-election at this year’s meeting due to his increased responsibilities as CEO of Endeavor.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board has engaged an executive search firm to help it identify, evaluate and recruit potential director candidates. As a result of this ongoing search, Messrs. McDonnell and Schriesheim were elected to the Board in December 2018 and stand for re-election at this year’s meeting. The Board will continue to seek potential director candidates whose skills and perspectives will augment the Board.
At the Annual Meeting, nine nominees are to be elected and each will hold office until the next annual stockholder meetingAnnual Meeting or until his or her successor has been elected and qualified. The Board, upon the recommendation of the Nominating and Corporate Governance Committee, has nominated the nine individuals listed below, each of whom is currently serving as a director. Each nominee has agreed to be named in this Proxy Statement and to serve if elected.
As previously disclosed, Mr. WickBarnes will not seekre-election at the Annual Meeting. Mr. WickBarnes has served on the Board since 2005, and2005. In addition, Mr. Shapiro, who has served on the board since 2010, will not seek re-election at the Annual Meeting. Frontier thanks Mr. WickMessrs. Barnes and Shapiro for histheir many years of dedication and service to our stockholders and the Company.
The Board unanimously recommends that you voteFOR the election of the following director nominees:
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PROPOSAL 1: ELECTION OF DIRECTORS
Peter C.B. Bynoe
| Background | |
 Age: 68
| ||
Mr. Bynoe is a Managing Director of Equity Group Investments, a private investment fund. Prior to joining Equity Group Investments in October 2014, Mr. Bynoe served as Chief Executive Officer of Rewards Network, Inc., a merchant cash advance and marketing services company (September 2013 to October 2014), and in multiple capacities, including as a partner, with Loop Capital Markets LLP, an investment bank (February 2009 to September 2013). In addition, Mr. Bynoe was associated with the international law firm DLA Piper US LLP from March 1995 to December 2016. He is also Chairman of Telemat Ltd., a business consulting firm he founded in 1982. | ||
Qualifications | ||
Mr. Bynoe provides the Board with extensive business, legal and public policy expertise. Mr. Bynoe has experience serving on the boards of other public companies, including as a nominating and governance committee member and chair, and as a compensation committee member and chair. | ||
Other Directorships | ||
Covanta Holding Corporation | ||
Past Directorships | ||
Real Industry, Inc. (2013 – 2018) | ||
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PROPOSAL 1: ELECTION OF DIRECTORS
| Background | |
 Age: 55
| ||
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Qualifications | ||
Ms. Ferguson’s broad experience and executive leadership allow her to provide the Board with valuable perspectives on financial, corporate and strategic matters. | ||
Other Directorships | ||
Invacare Corp. | ||
Sally Beauty Holdings | ||
Past Directorships | ||
TreeHouse Foods, Inc. (2008 – 2016) | ||
Edward Fraioli | Background | |||
 Age: 72 Independent Director Director Since: July 2010 Board Committees: Audit (Chair) Finance |
PROPOSAL 1: ELECTION OF DIRECTORS
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Mr. Fraioli | |
Qualifications | ||
Mr. Fraioli’s over 35 years of accounting and business experience at Ernst & Young provide the Board with substantial expertise in the areas of public accounting, risk management and corporate finance. | ||
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PROPOSAL 1: ELECTION OF DIRECTORS
| Background | |
 Age: 54
| ||
Mr. McCarthy is the President and Chief Executive Officer of Frontier Communications Corporation and has been with Frontier since December 1990. Prior to becoming President and Chief Executive Officer in April 2015, Mr. McCarthy held other positions of responsibility at Frontier, including President and Chief Operating Officer (April 2012 to April 2015), Executive Vice President and Chief Operating Officer (January 2006 to April 2012) and Senior Vice President, Field Operations (December 2004 to December 2005). Mr. McCarthy serves | ||
Qualifications | ||
Mr. McCarthy has been with Frontier for over 25 years in positions of increasing responsibility and as such he is able to provide the Board with critical insight into our business, operations, history, industry and strategic opportunities. | ||
Other Directorships | ||
Constellation Brands, Inc. | ||
Michael R. McDonnell | Background | |||
 Age: 55 Independent Director Director Since: December 2018 Board Committees: Finance | ||||
Mr. McDonnell is Executive Vice President and Chief Financial Officer of IQVIA Holdings, Inc., a publicly traded leading global provider of advanced analytics, technology solutions and contract research services to the life sciences industry. From 2015, Mr. McDonnell was Executive Vice President and Chief Financial Officer of Quintiles Transnational Corp., a contract research services company that merged with IMS Health in 2016 to form IQVIA. Prior to joining Quintiles, Mr. McDonnell served as Executive Vice President and Chief Financial Officer of Intelstat, S.A., a leading global satellite service provider, from 2008 to 2015. Before that, he was Chief Financial Officer at both MCG Capital Corporation and EchoStar Communications (DishNetwork). Earlier in his career, he was a partner at PricewaterhouseCoopers, LLP. | ||||
Qualifications | ||||
Through his extensive experience as chief financial officer at public companies IQVIA, Quintiles and Intelstat, as well as his public board experience, Mr. McDonnell provides the board with valuable financial and leadership insight as well as understanding of the telecommunications industry. | ||||
Past Directorships | ||||
Catalyst Health Solutions, Inc. (2005 – 2012) |
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PROPOSAL 1: ELECTION OF DIRECTORS
| Background | |
 Age: 69
Board Committees: Nominating and Corporate Governance |
From November 1989 to August 2004, Ms. Reeve held various executive positions, including President and Chief Executive Officer, and was a director at Lightbridge, Inc., a global provider of mobile business software and technology solutions. Prior to joining Lightbridge, Ms. Reeve spent 11 years as a consultant and in a series of executive positions at the Boston Consulting Group, Inc. | |
Qualifications | ||
Ms. Reeve provides the Board with leadership, operational and financial expertise, particularly in the communications and technologies industries. In addition, her experience on the boards of other public companies provides the Board with important perspectives on corporate governance and risk management. | ||
Other Directorships | ||
American Tower Corporation | ||
Past Directorships | ||
Sonus Networks, Inc.
(2013 – 2018), LiveWire Mobile, Inc. (1997 | ||
Virginia P. Ruesterholz | Background | |
57 Committees: |
During her 28 year career with Verizon Communications, a broadband and telecommunications company, and its predecessors, Ms. Ruesterholz held various executive positions, including Executive Vice President of Verizon Communications (January to July 2012) and President of Verizon Services Operations (2009 to 2011). Earlier she served as President of Verizon Telecom, President of Verizon Partner Solutions and President of Verizon Wholesale Markets. She also serves as Chairman of the Board of Trustees of Stevens Institute of Technology. | |
Qualifications | ||
Through her substantial experience as a senior executive at Verizon, Ms. Ruesterholz provides the Board with valuable knowledge of the telecommunications industry, large scale operations, risk management and information technology. | ||
Other Directorships | ||
The Hartford Financial Services Group, Inc. | ||
Bed, Bath & Beyond | ||
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PROPOSAL 1: ELECTION OF DIRECTORS
Robert A. Schriesheim | Background |
 Age: 57 Independent Director Director Since: December 2018 Board Committees: Finance (Chair) | Mr. Schriesheim is Chairman of Truax Partners LLC, through which he partners with, and advises, boards and institutional investors while serving as a director of public and private companies undergoing strategic and financial transformations, with significant experience in the information services, software and communications sectors. Prior to forming Truax, from August 2011 to October 2016, Mr. Schriesheim served as Executive Vice President and Chief Financial Officer of Sears Holdings Corporation, a publicly traded retail company, and served as a Corporate Advisor until January 2017. From January 2010 to October 2010, Mr. Schriesheim was Senior Vice President and Chief Financial Officer of Hewitt Associates, a global human resources consulting and outsourcing company that was acquired by Aon in October 2010. From 2006 to 2009, he was Executive Vice President and Chief Financial Officer of Lawson Software, a publicly traded global ERP software provider. Prior to joining Lawson, Mr. Schriesheim was a Venture Partner with ARCH Development Partners, LLC, a seed stage venture capital fund, and earlier he held executive positions at Global TeleSystems, Inc., SBC Equity Partners, Inc., Ameritech, AC Nielsen Company, and Brooke Group, Ltd. |
Qualifications | |
Mr. Schriesheim brings extensive leadership and financial acumen to our board, through his experience as CFO of several public companies and service on numerous public and private company boards. His in-depth knowledge of capital markets transactions, expertise driving strategic transformations at public companies and broad investor relations experience, including with public shareholders, bond holders and hedge funds, are important assets to our Board. | |
Current Directorships | |
Skyworks Solutions, Inc. | |
Houlihan Lokey, Inc. | |
NII Holdings, Inc. | |
Past Directorships | |
Forest City Realty Trust, Inc. (April – December 2018); Lawson Software, Inc. (2006 – 2011); Georgia Gulf Corp. (2009 – 2010); MSC Software (2007 – 2009); Dobson Communications Corporation 2004 – 2007); Global TeleSystems, Inc. (2001 – 2002); Golden Telecom (1999 – 2001) |
| Background | |
 Age: 64
| ||
Mr. Schrott is a Principal in Schrott Consulting, a management consulting firm servicing broadcasting, telecommunications and technology companies, which he founded in February 2006. Prior to founding Schrott Consulting, he was Chief Financial Officer of the Liberty Corporation, a television broadcaster, from 2001 until Liberty’s sale in February 2006. Mr. Schrott also serves as a Trustee of Butler University, a | ||
Qualifications | ||
Mr. Schrott provides the Board with an extensive understanding of the telecommunications industry. In addition, his experience in executive and director roles provides the Board with important knowledge of financial and operational matters. | ||
Past Directorships | ||
Media General, Inc. (November 2013 to December 2014); Time Warner Telecom Holdings Inc. (2004 | ||
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Mr. Wick, who has served on the Frontier Board since 2005, is not standing forre-election at the Annual Meeting.
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DIRECTOR COMPENSATION
Frontier uses cash and stock-based compensation to attract and retain qualifiednon-employee members of our Board. Mr. McCarthy, the only employee director, receives no remuneration for service as a member of our Board.
Annual Retainer and Stipend – Paid in Cash or Stock Units
Eachnon-employee director is paid an annual $95,000 retainer. The Chairman of the Board is also paid an annual stipend of $175,000, 45% in cash and 55% in stock units, and each committee chair is paid a stipend ($25,000 for the Audit Committee, $25,000 for the Finance Committee, $20,000 for the Compensation Committee, $15,000 for the Retirement PlanNominating and Corporate Governance Committee and $15,000 for the Nominating and Corporate GovernanceRetirement Plan Committee). The Retirement Plan Committee was dissolved in December 2018, with the Board taking on its significant oversight responsibilities.
Directors may elect, by December 31 of the prior year, whether to receive the annual retainer and stipend, if any, in cash or stock units. Directors are also entitled to reimbursement for reasonable expenses they incur in connection with Board meetings they attend in person. The annual retainer isand stipends are payable in advance in equal quarterly installments on the first business day of each quarter. Stipends are payable in arrears in equal quarterly installments on the last business day of each quarter.
Annual Fee – Paid in Stock Units
Non-employee directors receive additional compensation in the form of stock units. In 2017, eachEach non-employee director receivedalso receives a $120,000 fee in the form of stock units. Stock units for fees are earned quarterly and credited to the director’s account on the lastfirst business day of the quarter in which the fees are earned.each quarter.
The number of stock units credited equals the amount of the retainer, stipend or fee (as appropriate) divided by the closing price of our common stock on the credit date of the stock units. We hold all stock units until a director’s termination of service, at which time the units are redeemable, at the director’s election, in either cash or in shares of our common stock.stock at a conversion rate of 1-for-1.
The following table sets forth compensation information earned for 20172018 by eachnon-employee director.
| Name | Director Compensation Paid in Cash ($) | Stock Unit Awards ($ value)1 | Total ($) | |||||||||
Leroy T. Barnes Jr. | $ | 110,000 | $ | 120,000 | $ | 230,000 | ||||||
Peter C.B. Bynoe | $ | 110,000 | $ | 120,000 | $ | 230,000 | ||||||
Diana S. Ferguson | $ | 95,000 | $ | 120,000 | $ | 215,000 | ||||||
Edward Fraioli | $ | 95,000 | $ | 145,000 | $ | 240,000 | ||||||
Pamela D.A. Reeve | $ | 173,750 | $ | 216,250 | $ | 390,000 | ||||||
Virginia P. Ruesterholz | $ | 115,000 | $ | 120,000 | $ | 235,000 | ||||||
Howard L. Schrott | $ | 95,000 | $ | 120,000 | $ | 215,000 | ||||||
Larraine D. Segil(2) | $ | 23,750 | $ | 60,000 | $ | 83,750 | ||||||
Mark Shapiro | $ | 95,000 | $ | 120,000 | $ | 215,000 | ||||||
Myron A. Wick, III | $ | 95,000 | $ | 120,000 | $ | 215,000 | ||||||
Name | Director Compensation Paid in Cash ($) | Stock Unit Awards ($ value)1 | Total ($) | ||||||
Leroy T. Barnes Jr. | $ | 110,000 | $ | 120,000 | $ | 230,000 | |||
Peter C.B. Bynoe | $ | 110,000 | $ | 120,000 | $ | 230,000 | |||
Diana S. Ferguson | $ | 95,000 | $ | 120,000 | $ | 215,000 | |||
Edward Fraioli | $ | 120,000 | $ | 120,000 | $ | 240,000 | |||
Michael R. McDonnell(2) | $ | 5,163 | $ | 6,522 | $ | 11,685 | |||
Pamela D.A. Reeve | $ | 173,750 | $ | 216,250 | $ | 390,000 | |||
Virginia P. Ruesterholz | $ | 115,000 | $ | 120,000 | $ | 235,000 | |||
Robert A. Schriesheim(3) | $ | 5,163 | $ | 6,522 | $ | 11,685 | |||
Howard L. Schrott | $ | 95,000 | $ | 120,000 | $ | 215,000 | |||
Mark Shapiro | $ | 95,000 | $ | 120,000 | $ | 215,000 | |||
Myron A. Wick, III(4) | $ | 95,000 | $ | 120,000 | $ | 215,000 | |||
| (1) | The amounts shown in this column represent the grant date fair value in accordance with Financial Accounting Standards Board ASC Topic 718 of the stock units granted to directors in |
| (2) | Mr. McDonnell was elected to the Board on December 12, 2018. Represents a pro rata portion of director compensation through December 31, 2018. |
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DIRECTOR COMPENSATION
| (3) | Mr. Schriesheim was elected to the Board on December 12, 2018. Represents a pro rata portion of director compensation through December 31, 2018. |
| (4) | Departed the Board after not standing for reelection at the |
At December 31, 2018, Mr. Fraioli and Mr. Shapiro each held 666.67 stock options. Such stock options were granted with an exercise price equal to the closing price of our common stock on the date each director was elected to the Board. The options became exercisable six months after the grant date and expire on the tenth anniversary of the grant date or, if earlier, on the first anniversary of the director’s termination of service. Since October 2010, directors are no longer eligible to receive stock option grants upon joining the Board.
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DIRECTOR COMPENSATION
In addition, our bylaws require us to indemnify our directors and officers to the fullest extent permitted by law, so that they may be free from undue concern about personal liability in connection with their service to the Company. We have also entered into indemnification agreements with our directors and officers that provide similar indemnification rights.
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CORPORATE GOVERNANCE
We maintain corporate governance policies and practices that reflectprovide what the Board believes provideto be appropriate oversight, leadership and independence, as well as those required byincluding compliance with applicable requirements under the Sarbanes-Oxley Act of 2002 and the rules of the SEC and the Nasdaq Stock Market (Nasdaq), on which our common stock is listed. A copy of our Corporate Governance Guidelines is available upon request to our Secretary, or may be viewed or downloaded from the Investor Relations page of our website,www.frontier.com.
Our Board is led by Pamela D.A. Reeve, who becamewas appointed non-executive Chairman of the Board of Directors in April 2016. Ms. Reeve had previously held the position of Lead Director and has been an independent member of our Board since 2010.
Our Board does not have a policy as to whether the roles of Chairman and CEO should be separate or combined. The Board has determined that it is in the best interests of our stockholders at this time to separate the roles of Chairman and CEO. In the event the roles are combined, the Board will appoint a Lead Director. The Board will continue to evaluate our leadership structure based on the best interests of Frontier and our stockholders.
The Role of the Chairman: | |
| Call meetings of the Board andnon-management directors (including those to be attended only by independent directors) when appropriate and preside at such meetings. Following each executive session, the Chairman will discuss with the CEO any issues arising in such executive session. |
• | Coordinate the flow of information to and among independent directors and, if any, othernon-management directors. |
• | Collaborate with the CEO to set Board meeting agendas and review and approve Board meeting schedules to ensure that there is sufficient time for discussion of all agenda items. All Board members are encouraged to communicate to the Chairman any additional agenda items that they deem necessary or appropriate in carrying out their duties. |
• | Periodically solicit from other independent andnon-management directors comments or suggestions related to Board operations, including the flow of information to directors, the setting of meeting agendas and the establishment of the schedule of Board meetings, and communicate those suggestions to the CEO. The Chairman shall also seek to ensure that there is: (a) an efficient and adequate flow of information to the independent andnon-management directors; (b) adequate time for the independent andnon-management directors to consider all matters presented to them for action; and (c) appropriate attention paid to all matters subject to oversight and actions by the independent andnon-management directors. |
• | Attend all committee meetings, as appropriate. The Chairman shall work with each committee chair to ensure that each committee is effectively functioning and providing ongoing reports to the Board. |
• | Serve as the liaison between the independent andnon-management directors, on the one hand, and the CEO, on the other, and as the representative of the independent andnon-management directors in communications with the CEO and management outside of regular Board meetings. |
• | Serve as liaison and provide direction to advisers and consultants retained by the independent directors. |
Our Board does not have a policy as to whether the roles of Chairman and CEO should be separate or combined. However, if the roles are combined, the Board will also have a Lead Director. Our Nominating and Corporate Governance Committee annually reviews our leadership structure to determine whether the existing structure is in the best interests of Frontier and its stockholders.
Chief Executive Officer Succession
The Board is actively engaged in managing executive talent and succession planning. The Nominating and Corporate GovernanceCompensation Committee reviews and considers succession development plans for the CEO and other members of the senior leadership team, and oversees the development of the CEO, senior leadership team candidates and other executive talent. The Board also evaluates the adequacy and effectiveness of Frontier’s succession plan for the CEO in connection with its annual assessment of the performance of the CEO.
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CORPORATE GOVERNANCE
Chief Executive Officer Pay Ratio
We determined that the 20172018 median annual total compensation of all our employees who were employed as of December 31, 2017,2018, other than our CEO, DanDaniel J. McCarthy, was $101,408; Dan$77,010; Mr. McCarthy’s 20172018 annual total compensation was $6,038,195;$7,135,383; and the ratio of these amounts was 93:1. The increase from the 2017 CEO pay ratio of 60:1.1 is attributable to the increase in CEO compensation due to Mr. McCarthy receiving a bonus in 2018, as well as a decrease in median compensated employee’s compensation due to an interest rate-driven decrease in pension accrual as well as a decrease in overtime earnings.
For 2018, we used the same median employee that was identified in 2017 since there has been no change in our employee workforce or employee compensation arrangements that we believe would significantly impact our pay ratio disclosure. As of December 31, 2017,2018, our total population consisted of 22,70021,200 employees. To identify the median compensated employee, we used a Consistently Applied Compensation Measure (CACM) defined as annual base salary as of December 31, 2017.2018. Our disclosed pay ratio is a reasonable estimate calculated in a manner consistent with S-K Item 402(u).
The Board is required to affirmatively determine that a majority of the directors qualify as independent under Nasdaq listing standards. The Board undertakes an annual review of director independence by reviewing relationships between Frontier and each director as well as Frontier and the organizations with which each director is affiliated.
After considering the relevant facts, the Board has determined that no director, other than Mr. McCarthy, has a material relationship with Frontier (either directly or as a partner, stockholder or officer of an organization that has a relationship with Frontier) that would impair the director’s ability to exercise independent judgment in carrying out his or her responsibilities as a director. Therefore, all of our directors, other than Mr. McCarthy, are independent under Nasdaq listing standards.
Mr. Shapiro, who servesserved on our Retirement Plan Committee, is theCo-President of WME/IMG. During 2017, Frontier engaged WME/IMG to assist in the negotiation and entry into certain sponsorship and content arrangements. The Nominating and Corporate Governance Committee and the Board reviewed this ongoing business relationship and determined that the value of the engagement was immaterial to WME/IMG, given the amount and WME/IMG’s gross revenues, and that Mr. Shapiro’s independence is not impaired.
The Board has determined that 8 of our 9 director nominees are independent |
Risk Management and Board Oversight
The Board is responsible for oversight of Frontier’s risk management process, and the full Board regularly discusses exposure to various potentially material risks. In accordance with our Corporate Governance Guidelines, the Audit Committee also reviews risk exposures and the guidelines and policies governing management’s assessment and management of exposure to risk, including the enterprise risk management (ERM) process.
Management is responsible for Frontier’s risk management activities, including the annual ERM process, which is jointly administered by the Chief Financial Officer and the Senior Vice President, Internal Audit. As part of the ERM process, each member of senior management and his or her direct reports participate in an annual identification, assessment and evaluation of risks. The individual risks are aggregated across Frontier to help management determine our enterprise level risks. For each such risk, one or more mitigation strategies are developed and implemented to minimize or manage that risk. During the course of the year, periodic monitoring, self-assessment and reporting to the Audit Committee are performed by senior management to:
Update the trending of each risk, compared to the latest annual ERM review;
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CORPORATE GOVERNANCE
In 2017,2018, the Board held 117 meetings. All of our directors attended over 75% of the meetings of the Board and committees on which they served in 2017.2018. In accordance with our policy, all members of the Board serving at that time attended last year’s annual meeting of stockholders.
CORPORATE GOVERNANCE
The Board has four standing committees: Audit, Compensation, Nominating and Corporate Governance and Finance. In December 2018, the Board established a Finance Committee and dissolved the Retirement Plan.Plan Committee. Consistent with peers and industry practice, the significant oversight responsibilities for retirement plans previously delegated to the Retirement Plan Committee will be carried out by the Board. Each committee is composed solely of independent directorsdirectors. Each of the Audit, Compensation, Nominating and Corporate Governance Committees operates under a written charter adopted by the Board (available on the Investor Relations page of our website,www.frontier.com.).
Audit Committee | Number of Meetings in | ||
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• | Selects, determines compensation for, and oversees our independent auditors | ||
• | Assists the Board in its oversight of our financial statements, compliance with legal and regulatory requirements, the independence, performance and qualifications of our independent auditors, the qualifications of our internal auditors and internal audit function performance | ||
• | Pre-approves all audit and permissiblenon-audit services, if any, provided by our independent auditors | ||
• | Prepares the Audit Committee Report | ||
• | Oversees risk assessment and risk management | ||
Each Audit Committee member is independent, meets the standard of an “audit committee financial expert” under SEC rules and meets the financial literacy requirements of the Nasdaq Listing Rules | |||
Mr. Barnes is on the audit committee of The McClatchy Company and each of the Principal Funds, Inc. investment companies of which he is a board member. We do not formally limit the number of audit committees on which our Audit Committee members may serve, but instead review on acase-by-case basis. After careful consideration, our Board determined that Mr. Barnes’ service on the other audit committees would not impair his ability to effectively serve on our Audit Committee.
| * | Through the date of the Annual Meeting. The Board expects to appoint Messrs. Schriesheim and McDonnell to serve as members of the Audit Committee following Mr. Barnes’ departure. The Board expects to appoint Ms. Ferguson to serve as Chair of the Nominating and Corporate Governance Committee and she will step down from the Audit Committee. |
Compensation Committee | Number of Meetings in | ||
| |||
| |||
• | Reviews our general compensation strategies and policy | ||
• | Evaluates, at least annually, the performance of the CEO and other senior executives against corporate goals and objectives and determines and approves executive compensation (including any discretionary incentive awards) based on this evaluation | ||
• | Engages in CEO succession planning efforts and executive talent development | ||
• | Reviews and makes recommendations to the Board regarding director compensation | ||
• | Prepares the Compensation Committee Report | ||
• | Oversees and approves incentive compensation plans and equity-based compensation plans | ||
Each Compensation Committee member is independent, an “outside director” under Section 162(m) of the Internal | |||
Frontier Communications Corporation | 23 | 2019 Proxy Statement |
CORPORATE GOVERNANCE
Compensation Committee | Number of Meetings in 2018: 9 | |
Revenue Code and a | ||
* Through the date of the Annual Meeting.
CORPORATE GOVERNANCE
Nominating and Corporate Governance Committee | Number of Meetings in |
| 2018: 3 | ||||
|
| |||
• | Conducts annual evaluation of the Board and its committees | |||
• | Recommends candidates for nomination, election or appointment to the Board and its committees | |||
•
| Takes a leadership role in shaping our corporate governance, including developing and recommending to the Board our Corporate Governance Guidelines | |||
Each Nominating and Corporate Governance committee member is independent | ||||
| * | Through the date of the Annual Meeting. The Board expects to appoint Ms. |
Finance Committee | |||
Number of Meetings in | |||
| 2018: n/a | ||
| Primary Responsibilities: | |
• | Evaluate the Company’s capital structure and consider, evaluate and negotiate capital market and/or financing transactions and/or strategic alternatives for the Company and its stakeholders | |
Each Finance Committee member is independent | ||
Retirement Plan Committee* | Number of Meetings in 2018: 3 | ||
Chair: Leroy T. Barnes Jr.
|
| ||
• | Oversees our retirement plans, which includes review of the investment strategies and asset performance of the plans, compliance with the plans and the overall quality of the asset managers, plan administrators and communications with employees | ||
Each Retirement Plan Committee member is independent | |||
| * | The Retirement Plan Committee was dissolved in December 2018, with the Board taking on its significant oversight responsibilities. |
Director Stock Ownership Guideline
Eachnon-management director is expected to own shares of our stock having a minimum value of five times the cash portion of the annualnon-management director retainer (which currently equates to $475,000) by the later of February 15, 2017 andor five years after joining the Board. Stock unit grants are counted for purposes of fulfilling this guideline. Eachnon-management director is required to hold 100% of all stock units granted as compensation for Board service until his or her termination of service, and compliance with such 100% retention is an alternative method of complying with the director stock ownership guideline.
Executive Sessions of the Board of Directors
Our independent directors have regularly scheduled executive sessions in which they meet outside the presence of management. Pamela D.A. Reeve, in her role as Chairman, presides at executive sessions of the Board. The applicable Chair presides at executive sessions of the Board’s standing committees.
Frontier Communications Corporation | 24 | 2019 Proxy Statement |
CORPORATE GOVERNANCE
Communications with the Board of Directors
Any stockholder or interested party who wishes to communicate with the Board or any specific director, anynon-management director, thenon-management directors as a group, any independent director or the independent directors as a group, may do so by writing to such director or directors at: Frontier Communications Corporation, 401 Merritt 7, Norwalk, Connecticut 06851. This communication will be forwarded to the director or directors to whom it is addressed. This information regarding contacting the Board is also posted on the Investor Relations page of our website,www.frontier.com.
Code of Business Conduct and Ethics
We have a Code of Business Conduct and Ethics (the Code of Conduct) to which all employees, executive officers and directors (which for purposes of the Code of Conduct we collectively refer to as “employees”) are required to adhere in addressing the legal and ethical issues encountered in conducting their work. The Code of Conduct requires that all
CORPORATE GOVERNANCE
employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner, and otherwise act with integrity. Employees are required to report any conduct that they believe is an actual or apparent violation of the Code of Conduct and may do so anonymously by using our Ethics Hotline. Specific provisions applicable to our principal executive officer and senior financial officers are in the Specific Code of Business Conduct and Ethics Provisions for Certain Officers (the Executive Code). We disclose on our website any amendment to, or waiver of, any provision of our Code of Conduct or Executive Code that is required to be disclosed pursuant to securities laws. Copies of the Code of Conduct and the Executive Code are available upon request to our Secretary, or may be viewed or downloaded from the Investor Relations page of our website,www.frontier.com.
Related Person Transactions Policy
The Board has adopted a written policy addressing our procedures with respect to the review, approval and ratification of “related person transactions” that are required to be disclosed pursuant to SEC regulations. The policy provides that any transaction, arrangement or relationship, or series of similar transactions, to which we are a party, that exceeds $120,000 in the aggregate, with a “related person” (as defined in the SEC regulations) who has or will have a direct or indirect material interest shall be subject to review, approval or ratification by the Nominating and Corporate Governance Committee. In its review of related person transactions, the Nominating and Corporate Governance Committee shall review the material facts and circumstances of the transaction and shall take into account specified factors, where appropriate, based on the particular facts and circumstances, including (i) the nature of the “related person’s” interest in the transaction, (ii) the significance of the transaction to us and to the “related person” and (iii) whether the transaction is likely to impair the judgment of the “related person” to act in the best interest of Frontier.
No member of the Nominating and Corporate Governance Committee may participate in the review, approval or ratification of a transaction with respect to which he or she is a “related person,” although such director can be counted for purposes of a quorum and shall provide such information with respect to the transaction as may be reasonably requested by other members of the Committee or the Board.
Frontier Communications Corporation | 25 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Named Executive Officers
Daniel J. McCarthy | President and Chief Executive Officer | |
Sheldon L. Bruha* | Interim Chief Financial Officer | |
R. Perley McBride | Former Executive Vice President, | |
John Maduri | Executive Vice President, | |
Steve Gable | Executive Vice President, | |
Kenneth W. Arndt | Executive Vice President, | |
|
| Mr. Bruha has served as |
Executive Summary
The purpose2018 Review
Our discussion of our executive compensation program is to align the goals and interests of our executives2018 Executive Compensation must begin with those ofcandor: Frontier and its stockholders by rewarding our leadership team for delivering on both short-term and long-term goals. Our program emphasizes stockholder value creation by using a mix of pay components, the majority of which are “at risk” and contingent upon performance against specified company and individual goals and tied to annual and sustained performance over a multi-year period.
2017 Review
2017 was a period of immense change and development for Frontier Communications. We ended the year in a much stronger position than we started, and in 2018 we are poised to achieve further improvements, most notably in California, Texas, and Florida (CTF). These markets have leading-edge,fiber-to-the-home networks that enablebest-in-class broadband, video and other communications services for consumers and businesses.
In 2017, we systematically addressed performance issues in CTF that negatively affected revenue, profitability, and our stock price. We achieved steady improvements in Frontier FiOS® customer trends. We also made the decision to suspend the common dividend effective with the first quarter of 2018. This action will free up $250 million of additional cash annually, following the conversion of the company’s mandatory convertible preferred stock in June 2018, to accelerate debt reduction.
We still have substantial work ahead, but we remain fully committed to increasing shareholder value.
Due to Frontier’s financial performance in 2017, Frontier did not pay annual performance-based cash bonuses to any management employees, including our NEOs, for the year. Additionally, the 2015-2017 performanceCommunications’ share awards were earned at 69.9% of target with a payout at 4.5% of the grant date target value when factoring the decline in the Frontier stock price.
As you will see in this CD&A, we have redesigned our compensation programs to ensure continued focus on rebuilding our Company and stockholder value.
Total Stockholder Return
Total stockholder return (TSR) is a measure of gains or losses realized by common stockholders over time. TSR combines price appreciation and dividends paid to show the total return to a common stockholder as an annualized percentage.has fallen considerably. Frontier had a one year TSRone-year Total Shareholder Return of-84% -65% for 20172018 and a three year TSRthree-year Total Shareholder Return of-90% -96%. We paid $266 million in common stock dividends and $214 million in preferred stock dividends in 2017 while continuing
While we will not avoid the issue of our underperformance, it is important to note that we have continued to invest in expanding and upgrading our network and product offerings. In addition, each member of the Company’s executive group is deeply committed to our transformation program, Journey Forward, that is systematically examining revenue generation, costs and processes to find efficiencies and synergies that will lead to enhanced customer service and in-demand products. We believe that Frontier Communications has strong potential to create significant value for our stakeholders. Meeting our EBITDA goals and exceeding our customer experience goals in 2018 were meaningful signs of progress in this regard. After two years of zero bonuses for 2016 and 2017, bonuses for 2018 were paid equal to about 97% of target. In addition, performance shares for the 2016-2018 performance period vested at 68.8% of target. Given the decline in our stock price, though, the value of the performance shares earned, including dividends on earned shares, was 13% of the grant date target value.
As a result of not paying a bonus for 2016 and 2017 performance, along with the decrease in our share price, the value realized from our executive compensation program over the past three years has been well below the target value, leading to an increase in executive turnover. Three (3) of nine (9) members of our senior leadership team left Frontier during 2018. As such, the Committee has been placing an increased emphasis on retention of our senior leadership team.
Accordingly, we have realigned our compensation structure both to incent strong performance and to retain key executives. We introduced a quarterly incentive plan and redesigned our long-term incentive program in other ways, including use of cash-denominated awards in lieu of stock-denominated awards (refer to the “Changes to Our Program in 2019” section). These changes recognize that retention of executives, despite the current stock price, is critical to on-going execution of efficiencies and synergies that will help Frontier Communications regain its momentum.
Frontier Communications Corporation | 26 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
CEO Pay at a Glance
Mr. McCarthy’s target total direct compensation (TDC) for 2017 and 2018 is set forth below. While Mr. McCarthy hasIn 2018, we redesigned our annual incentive program to provide 15% of the annual target in each quarter along with 40% based on annual results. During 2018, a bonus target of $1,500,000, as stated above, no bonus was paid for 2017 performance. A significant portion of his compensation iswas in the form of restricted stockshares and performance shares, the value of which is dependent on our stock price and the achievement of company targets along with an industry comparison. The Compensation Committee considered multiple factors to determine Mr. McCarthy’s target TDC, including:
Financial and stock performance of Frontier
Compensation Element | 2018 Target | Note | ||||
Base Salary | $ | 1,000,000 | ||||
Annual Cash Incentive | $ | 1,500,000 | Annual cash incentives in total of $1,460,175 were paid for 2018 performance | |||
Restricted Share Awards | $ | 3,600,000 | This represents the target value of restricted share awards granted in February 2018, which vest ratably over a three-year period. | |||
Performance Share/Cash Awards | $ | 2,400,000 | For 2018, this represents the value of the target number of performance shares granted in February 2018. The actual value Mr. McCarthy will earn will be based on Company performance over each of the three-year Measurement Periods, and Company three-year TSR | |||
Total Direct Compensation | $ | 8,500,000 | ||||
Survey data indicates the median total direct compensation for our CEO position is around $10,000,000 annually. Please see the section “Market and Peer Group Reviews” below for an explanation on how the Compensation Committee looks at survey data. As shown in the “2018 Realized Pay” section of this CD&A, Mr. McCarthy realized $2,942,332 in compensation for his leadership during 2018.
| Compensation Element | 2017 Target | 2018 Target | Note | |||||||||
Base Salary | $ | 1,000,000 | $ | 1,000,000 | ||||||||
Annual Cash Bonus | $ | 1,500,000 | $ | 1,500,000 | No annual cash bonuses were paid for 2017 performance | |||||||
Restricted Stock Awards | $ | 3,600,000 | $ | 3,600,000 | This represents the target value of restricted stock awards granted in February 2017 and 2018, which vest ratably over a three-year period | |||||||
Performance Share/Cash Awards | $ | 2,400,000 | $ | 2,400,000 | This represents the value of the target number of performance shares granted in February 2017 and February 2018. The actual value Mr. McCarthy will earn will be based on Company performance over each of the three-year Measurement Periods, and Company three-year TSR | |||||||
Total Direct Compensation | $ | 8,500,000 | $ | 8,500,000 | ||||||||
Mr. McCarthy’s realized pay for 2016-2018 of $9,367,845 represents 37% percent of his target pay opportunity over the same period.
Frontier Communications Corporation | 27 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Key Features of our Executive Compensation Program
Key executive compensation practices are summarized below. We believe these practices promote good governance and are inWhile the best interestsfollowing continue to be our guiding principles, the Compensation Committee has placed a greater emphasis on retention of Frontier and its stockholders:
our leadership team during 2018:
What We Do | |
| Employ apay-for-performance executive compensation program whereby over 80% of NEO compensation
|
✔ | Pay a majority of compensation in the form of long-term incentive awards to defer a portion of pay based on future company performance and tie compensation payout levels to our stock
|
✔ | Use multipliers to reward above-target performance and reduce short-term and long-term incentive payouts for below-target performance.
|
✔ | Require our executives to own Frontier stock equal to a multiple of base salary. For our CEO, this multiple is five times base salary.
|
✔ | Use double-triggerchange-in-control severance arrangements.
|
✔ | Hold an annual stockholder vote on our executive compensation program.
|
✔ | Have a recoupment, or “clawback,” policy to recover both cash and equity compensation from executives, including in the case of misconduct that results in a restatement of our financial statements.
|
✔ | Regularly analyze risks related to our compensation program and conduct a broad risk assessment annually.
|
✔ | Engage an independent compensation consultant to provide advice to our Compensation Committee. |
What We Don’t Do | |
| Permit our executives to hedge or pledge Frontier stock.
|
 | Reward our executives with perquisites or tenure-based benefits, such as retiree medical benefits, in the ordinary course.
|
| Pay dividends on unearned performance shares.
|
| Make tax |
Impact of 20172018 Say-on-Pay Vote
The Compensation Committee considers the results of the annual stockholder vote on our executive compensation program, in addition to other input from our stockholders, when evaluating and determining compensation policies and the compensation for our CEO and the other NEOs. The 20172018 stockholder vote affirmed the Compensation Committee’s decisions for 2016,2017, with a 79%an 83% stockholder approval of our executive compensation program. Despite this significant shareholder support, theThe Compensation Committee continues to review and modify our executive compensation program to better align pay with performance.performance while supporting executive retention as we continue to execute on our multi-year Transformation Program.
In 2018, the Committee made several changesAs part of our ongoing governance initiatives, we reach out to the executive compensation program, including:
Modifying the bonus payment scheduleour stockholders on a regular basis. We also have routine discussions with certain shareholder advocates. We reached out to include 60%holders and advocates representing about 38% of our shares in 2018. In the 2018 Frontier Bonus to be paid on a quarterly schedule with quarterly goals based on specific metrics. The remaining 40% of the bonus is based on full year results. These quarterly goals were established in the beginning of the year and add up to the full-year targets. This change is designed to focusdiscussions, our leaders on financials and customer experience by placing a greater emphasis onstockholders suggested our quarterly results that will lead to achievement of our full-year results.
For executives other than the CEO, we are delivering the long-term performance grant as Performance Cash based on the same metrics used in our Performance Share program in 2017. This was done to mitigate the share usage while continuing to provide aCEO’s long-term incentive tiedgrant be issued in shares, without regard to both Company performance and relative total shareholder return.any dilution concerns.
Frontier Communications Corporation | 28 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Increase the weight on performance awards from 33% to 40% of total LTI to enhance the performance orientation of the program.
Our Pay and Performance Alignment
A key tenet of our compensation philosophy is to link the interests of our executives and our stockholders.pay to performance. Approximately 88% of our CEO’s target compensation for 20172018 performance was at risk. For the other active NEOs as a group, approximately 80%78% of their target compensation for 20172018 performance was at risk. This directly links our executives’ pay to Frontier’s financial performance, execution of strategic initiatives and TSR.
To enhance transparency regarding the compensation received by each of our NEOs, we have included a Realized Pay Table to supplement the information provided in the Summary Compensation Table. See “2017“2018 Realized Pay” below.
Executive Compensation Program Structure
Philosophy
|
Compensation Program Design
To achieve the objectives described above, our executive compensation program rewards our executives for both annual and long-term performance. For 2017,2018, the primary components of executive compensation were base salary, bonus, restricted stockshare awards, performance share and performance sharecash awards under the 2013our Equity Incentive Plan. Of these components, only base salary represents fixed compensation. Each of the other components was variable and at risk.
EXECUTIVE COMPENSATION
At its January and February 2017 meeting,2018 meetings, the Compensation Committee set maximum individual payouts under our umbrella bonus poolquarterly and the Adjusted EBITDAannual performance goalgoals, quarterly and annual incentive targets as a percent of salary for each NEO, and annual targets for the year, the achievement of which would permit the funding of the payouts. The Company Performance Goalslong-term performance award program and financial targets used to determine bonuses under the Frontier Bonus Plan, and restricted stock awards and performance share awards under the 2013 Equity Incentive Plan, were also set at that meeting based on management’s estimate of consolidated financial performance for the full year.Restricted Share Awards.
Frontier Communications Corporation | 29 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
In order to determine the appropriate amount and mix of compensation components for each NEO, the Compensation Committee considers many factors, including experience, value provided to Frontier, scope of responsibility, company and individual performance, benchmark data based on our peer group and general industry survey data for comparably sized companies.
Component | Purpose | Performance Measures | ||
Base Salary (Fixed) | • | •
| ||
Annual Cash Bonus
| •
| •
| ||
Restricted
| •
| • adjustments | ||
Performance
| •
| • set annually
|
Frontier Communications Corporation | 30 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Market and Peer Group Reviews
The Compensation Committee, with input from its independent compensation consultant, establishes Frontier’s peer group for use in benchmarking and market comparison purposes. The peer group set forth below was used to set compensation for 2017. When comparing financial metrics of the peer group, Frontier was at the 24th percentile for market capitalization, 36thpercentile for enterprise value, 65th percentile for revenue, 55th percentile for employee count, 65th percentile for total assets and 80th percentile for EBITDA.
|
| |
In May 2017, the Compensation Committee determined that it was appropriate to revise Frontier’s peer group to better reflectreflects our size and scale and to includeincludes businesses that are asset intensive, have a technology focus, have subscription-based revenue, deliver content and typically have a bundled package service offering. The new peer group set forth below was used to set compensation for 2018. When comparing financial metrics of Frontier to our new peers on June 30, 2017,in September 2018, we were just above medianat the 39th percentile in revenue, just below the 7566th percentile in EBITDA, just above the 2549th percentile in total assets and 32nd percentile in enterprise value and in the lower quartile in market capitalization.
value.
2018 Peer Group | |||||
• | |||||
| • | Rogers Communications Inc. | |||
• | ADP, LLC | • | Sirius XM Holdings Inc. | ||
• | BCE Inc. | • | Sprint Corporation | ||
• | Booking Holdings Inc. (formerly Priceline Group Inc.) | • | Telephone & Data Systems | ||
• | CenturyLink, Inc. (acquired Level 3 Communications) | • | TELUS Corporation | ||
• | DISH Network Corporation | • | Thomson Reuters Corporation | ||
• | First Data Corporation | • | T-Mobile US, Inc. | ||
• | Juniper Networks, Inc.
| • |
Corporation | ||
• | News Corp. | • | Windstream Holdings, Inc. | ||
General industry survey data as described below, was also considered in determining the compensation levels of the NEOs and other executives. In the case of executives for whom there was no publicly available data or no comparable position at the peer group companies, the results from proprietary general industry executive compensation surveys were analyzed to assess competitiveness.
EXECUTIVE COMPENSATION
As an initial step in the consideration of the general industry survey data, the survey issize-adjusted based on our annual revenue. The 20162017 survey data used to determine 20172018 compensation wassize-adjusted to approximate Frontier’s 20162018 budgeted revenue. The analyses included examining how each executive’s target total direct compensation compared to the results in the surveys for base salary, target bonus and target long term incentives. Some of our NEOs have responsibilities that extend beyond the traditional scope indicated by their titles. As a result, directly comparable roles in the survey data were not always available. In these cases, the Compensation Committee took into accountconsidered data from these third-party surveys and the importance of the role to Frontier when determining the commensurate total compensation levels for the NEO. In considering the general industry survey data, the Compensation Committee did not review nor is it aware of the specific companies that are included in the surveys.
20172018 Realized Pay
The table below supplements the Summary Compensation Table that appears later in this Proxy Statement. The Realized Pay Table shows the compensation actually received by each NEO in 2018, 2017 2016 and 2015.2016. Realized pay for an NEO for any given year may be greater or less than the compensation reported in the Summary Compensation Table for that year depending on fluctuations in stock prices on the grant and vesting dates, differences in equity grant values from year to year and SEC reporting requirements, as described below.
The primary difference between the Realized Pay Table and the Summary Compensation Table is the method used to value restricted stockshare awards and performance share awards. SEC rules require that the grant date fair value of all restricted stockshare awards and performance share awards be reported in the Summary Compensation Table for the year in which they were granted. As a result, a significant portion of the total compensation amounts reported in the Summary Compensation Table relates to restricted stockshare awards and performance shares that have not vested or been earned, for which the value is therefore uncertain, and which may end up having no value at all. In contrast, the Realized Pay Table includes only restricted stockshares and performance shares that vested during the applicable year and shows the value of those awards as of the applicable vesting date.
Frontier Communications Corporation | 31 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
There is no assurance that the NEOs will actually realize the value attributed to these awards even in this Realized Pay Table, since the ultimate value of the restricted stockshares and performance shares will depend on the price of Frontier’s common stock when the vested and earned shares are sold by the executives. Our executives are subject to periodic stock sale restrictions and our stock ownership guidelines, which also limit their ability to sell Frontier stock received as compensation.
Name | Year | Salary (1) | Actual Cash Incentive Bonus(2) | Restricted Share Awards Vested(3) | Performance Shares Earned(4) | All Other Compensation(5) | Transaction Bonus (6) | Total | % of Summary Compensation Table Reported Pay | ||||||||||||||||||
Daniel J. McCarthy | 2018 | $ | 1,000,000 | $ | 1,460,175 | $ | 408,516 | $ | 64,100 | $ | 9,541 | — | $ | 2,942,332 | 41 | % | |||||||||||
2017 | $ | 1,000,000 | — | $ | 1,679,173 | $ | 378,313 | $ | 34,181 | — | $ | 3,091,667 | 51 | % | |||||||||||||
2016 | $ | 981,251 | — | $ | 1,934,451 | $ | 386,314 | $ | 31,830 | — | $ | 3,333,846 | 61 | % | |||||||||||||
Sheldon L. Bruha(7) | 2018 | $ | 341,818 | $ | 200,514 | — | — | $ | 8,605 | — | $ | 550,937 | 81 | % | |||||||||||||
John Maduri(8) | 2018 | $ | 610,417 | $ | 600,951 | — | — | $ | 65,111 | — | $ | 1,276,479 | 38 | % | |||||||||||||
Steve Gable | 2018 | $ | 496,250 | $ | 486,725 | $ | 64,033 | $ | 3,769 | $ | 12,055 | — | $ | 1,062,832 | 45 | % | |||||||||||
2017 | $ | 470,000 | — | $ | 125,775 | $ | 17,656 | $ | 9,717 | — | $ | 623,148 | 39 | % | |||||||||||||
2016 | $ | 458,700 | — | $ | 78,324 | $ | 18,029 | $ | 9,884 | $ | 1,000,000 | $ | 1,564,987 | 81 | % | ||||||||||||
Kenneth W. Arndt(9) | 2018 | $ | 553,125 | $ | 561,705 | $ | 73,082 | $ | 7,069 | $ | 5,980 | — | $ | 1,200,912 | 54 | % | |||||||||||
2017 | $ | 500,000 | — | $ | 171,348 | $ | 47,416 | $ | 10,270 | — | $ | 729,034 | 44 | % | |||||||||||||
EXECUTIVE COMPENSATION
2017 Realized Pay Table for Active NEOs
| Name | Year | Salary(1) | Transaction Bonus(2) | Actual Cash Incentive Bonus(3) | Restricted Stock Awards Vested(4) | Performance Shares Earned(5) | All Other Compensation(6) | Total | ||||||||||||||||||||||||||||||||
Daniel J. McCarthy | 2017 | $ | 1,000,000 | — | — | $ | 1,679,173 | $ | 378,313 | $ | 34,181 | $ | 3,091,667 | |||||||||||||||||||||||||||
| 2016 | $ | 981,251 | — | — | $ | 1,934,451 | $ | 386,314 | $ | 31,830 | $ | 3,333,846 | ||||||||||||||||||||||||||||
| 2015 | $ | 862,500 | — | $ | 1,165,500 | $ | 2,524,118 | $ | 557,668 | $ | 9,105 | $ | 5,118,891 | |||||||||||||||||||||||||||
R. Perley McBride(7) | 2017 | $ | 650,000 | — | — | $ | 16,717 | — | $ | 17,521 | $ | 684,238 | ||||||||||||||||||||||||||||
| 2016 | $ | 199,432 | — | — | — | — | $ | 109,663 | $ | 309,095 | ||||||||||||||||||||||||||||||
Kenneth W. Arndt(8) | 2017 | $ | 500,000 | — | — | $ | 171,348 | $ | 47,416 | $ | 10,270 | $ | 729,034 | |||||||||||||||||||||||||||
Steve Gable(9) | 2017 | $ | 470,000 | — | — | $ | 125,775 | $ | 17,656 | $ | 9,717 | $ | 623,148 | |||||||||||||||||||||||||||
| 2016 | $ | 458,750 | $ | 1,000,000 | — | $ | 78,324 | $ | 18,029 | $ | 9,884 | $ | 1,564,987 | |||||||||||||||||||||||||||
John J. Lass(10) | 2017 | $ | 439,875 | — | — | $ | 210,039 | $ | 47,416 | $ | 56,756 | $ | 754,086 | |||||||||||||||||||||||||||
| 2016 | $ | 436,156 | $ | 415,200 | — | $ | 318,947 | $ | 48,419 | $ | 9,836 | $ | 1,228,558 | |||||||||||||||||||||||||||
| (1) | Amounts |
| (2) | Amounts shown in this column equal the amounts reported in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table. |
| (3) | Amounts in this column represent the aggregate value of all restricted shares that vested during the applicable year. The value of restricted shares realized upon vesting is based on the average of the high and low price of our common stock on the vesting dates and does not take into account the NEO's tax liability upon vesting. |
| (4) | Amounts in this column represent the value of performance shares that were earned for the applicable three-year Measurement Period, based on the average of the high and low price of our common stock on the day of the payout in February following the completion of the Measurement Period. For example, the amounts shown for 2018 represent the 2015-2017 performance award payout made in February 2018. |
| (5) | Amounts shown in this column equal the amounts reported in the "All Other Compensation" column of the Summary Compensation Table. |
| (6) | Amounts shown in this column equal the amounts equal the amounts reported in “Bonus” column of the Summary Compensation Table and reflect bonuses granted in connection with the closing of the California, Texas and Florida Acquisition in April 2016. |
| (7) | Information for Mr. |
| (8) | Information for Mr. Maduri is not provided for 2016 and 2017 because he was not an NEO for those years. |
| (9) | Information for Mr. |
Frontier Communications Corporation | 32 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
20172018 Total Target Direct Compensation for NEOs
Cash Compensation
Base Salary. Base salaries for our executives, including our NEOs, are set by the Compensation Committee after consideration of various factors, including individual performance, executive experience and skill set, the ability to attract and retain talented executives and market data.
Executives are eligible for increases to their base salary if there is a change in responsibility or the individual’s base salary is not in line with desired market position. We generally target the median of our peers when setting base salary butwhile any increases or decreases are ultimately at the discretion of the Compensation Committee. The salaries for our NEOs were not adjusted in 2017.during 2018 as follows:
NEO | 1/1/2018 Salary | 12/31/2018 Salary | Notes | ||||
Daniel J. McCarthy | $ | 1,000,000 | $ | 1,000,000 | No Change | ||
Sheldon L. Bruha | $ | 310,000 | $ | 490,000 | Mr. Bruha was hired on February 5, 2018 as SVP Treasurer and has received a salary stipend of $15,000 per month since September 1, 2018 as part of his role as Interim CFO | ||
John Maduri | $ | 600,000 | $ | 625,000 | Mr. Maduri was promoted on August 1, 2018 to EVP, Chief Customer Officer, leading both the Consumer and Commercial lines of business | ||
Steve Gable | $ | 470,000 | $ | 500,000 | Mr. Gable received a salary increase effective February 13, 2018 | ||
Kenneth W. Arndt | $ | 500,000 | $ | 600,000 | Mr. Arndt was promoted on August 1, 2018 to EVP, Chief Operations Officer, shifting responsibilities from leading Commercial Sales to leading Field Operations | ||
Bonus. The Compensation Committee uses the Frontier Bonus Plan to provide cash incentives to executives, including the NEOs, based on the achievement of certain company metrics (Company Performance Goals) with adjustmentsthat may be adjusted for individual performance. The bonus pool is funded based solely on achievement of Company Performance Goals. An NEO’s “target bonus opportunity” is expressed as a percentage of his or her annual base salary and represents the amount the NEO would receive if performance metrics are achieved at target. For 2017,2018, each NEO, other than Mr. McCarthy,of Messrs. Maduri, Arndt, and Gable had a target bonus opportunity equal to 100% of his or her base salary;salary. Excluding his bonus stipend, Mr. Bruha had a target bonus opportunity of 60% of his base salary. Mr. McCarthy’s target bonus opportunity was 150% of his base salary. Potential bonus payouts could be from 0% for below-threshold performance, up to a maximum of 130% for outstanding performance, of each NEO’s target bonus opportunity. Achievement of threshold performance would result in a payout of 79%70% of the target bonus opportunity, subject to the discretion of the Compensation Committee.
For 2017,2018, the Compensation Committee revised the Companypayout schedule to provide for quarterly payments and an annual payment. For each quarter, the NEO’s target awards were 15% of the target award stated above and at the conclusion of the year, 40% of the target bonus could be earned as an annual incentive. This redesign was implemented to help retain our executives as well as to emphasize the importance of our short-term results. Because Mr. Bruha was SVP and Treasurer at the applicable time, he was eligible to receive quarterly incentives, consistent with our bonus plan below the senior leadership team (SLT). As part of his Interim CFO compensation package, Mr. Bruha is entitled to receive a target bonus stipend of $10,000 per month in addition to his typical annual incentive target of $186,000.
All payments under the Plan were based on Performance Goals from those used in prior years to align executive interests with Frontier’s business objectives.established at the Compensation Committee’s December 2017 and January 2018 meetings. The Company Performance Goals were weighted in relation to Frontier’s business plan (the Weighted Company Performance Goals). We include Net Experience Score in the Weighted Company Performance Goals because customer experience is a strong driver of our business success. The Net Experience Score provides an incentive to continually improve our customer experience.
Frontier Communications Corporation | 33 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
2018 Weighted Company Performance Goals | Weighting | ||||||
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| 50.0 | % | |||||
| 25.0 | % | |||||
| 12.5 | % | |||||
Net Experience Score Target (a measure of customer experience) | 12.5 | % | |||||
| 100 | % | |||||
The Compensation Committee also set a minimum performance threshold of 93% of the Adjusted EBITDA target and an overall threshold amount of 90% in order to achieve a payout under the 20172018 Frontier Bonus Plan. At its February 2018 meeting,Throughout the year, the Compensation Committee reviewed Frontier’s performance against each of the targets, for 2017, which was as follows:
| ($ in millions) | |||||||||||||||||||||||||
| Financial Target | Threshold (approx. 93% of Target) | Target | Outstanding (approx. 110% of Target) | Result | Percentage of Target | ||||||||||||||||||||
Revenue | $ | 9,317 | $ | 10,018 | $ | 11,020 | $ | 9,128 | 91 | % | |||||||||||||||
Adjusted EBITDA | $ | 3,793 | $ | 4,078 | $ | 4,486 | $ | 3,684 | 90 | % | |||||||||||||||
Operating Cash Flow | $ | 2,630 | $ | 2,828 | $ | 3,111 | $ | 2,530 | 89 | % | |||||||||||||||
Net Experience Score | 1.5 | 3.9 | 6.2 | 7.1 | 114 | % | |||||||||||||||||||
is shown below. Payout for 2018 performance between levels is determined using linear interpolation.an “S” curve where the further away from target performance the larger the performance adjustment.
After assessingBelow is a table showing the quarterly and annual goals, performance underand payouts for each of the Weighted Company Performance Goals, Frontier appliedNEOs along with a 3:1 power ratiocomparison to 2017 performance. Competition within the communications industry is intense. Technological advances as well as regulatory and legislative changes have enabled a wide range of historically non-traditional communications service providers to compete with traditional providers, including Frontier. More market participants are now competing to meet the telecommunications needs of the same customer base, thus increasing competitive pressures. Many of these service providers are not subject to the same regulations as traditional communications providers and have lower cost structures than we do. The industry has also experienced substantial consolidation in recent years. Many of our competitors are larger, have stronger brand recognition, and have more service offerings and greater financial resources than we currently do. All of these factors create downward pressure on the demand for results betweenand pricing of our services. While the threshold (93%) and maximum (110%), meaningannual 2018 revenue target is 2% below our actual 2017 revenue performance, due to the above factors we believe that for each one percent that performance is above or below the target (100%), the bonus increases or decreases by three percentage points.our 2018 goals were set at a significant stretch level.
($ in millions) | 2018 Q1 Target | 2018 Q2 Target | 2018 Q3 Target | 2018 Q4 Target | 2018 Annual Target | 2018 Annual Actual | 2017 Actual Perf | ||||||||||||||
Revenue | $ | 2,242.9 | $ | 2,235.7 | $ | 2,231.7 | $ | 2,237.8 | $ | 8,948.0 | $ | 8,611 | $ | 9,128 | |||||||
Adjusted EBITDA | $ | 914.3 | $ | 927.5 | $ | 931.7 | $ | 952.7 | $ | 3,726.2 | $ | 3,565 | $ | 3,684 | |||||||
Operating Cash Flow | $ | 687.3 | $ | 678.1 | $ | 654.1 | $ | 656.7 | $ | 2,676.2 | $ | 2,378 | $ | 2,530 | |||||||
Net Experience Score | 5.5 | 9.8 | 8.1 | 10.8 | 8.6 | 13.0 | 7.1 | ||||||||||||||
Overall Performance | 102.1 | % | 97.3 | % | 95.9 | % | 98.1 | % | 98.3 | % | |||||||||||
Payout Percent | 103.2 | % | 95.6 | % | 92.7 | % | 97.2 | % | 97.6 | % | 0% | ||||||||||
2018 Bonus Payouts | Q1 | Q2 | Q3 | Q4 | Annual | Total | 2018 Target | ||||||||||||||
Daniel J. McCarthy | $ | 232,200 | $ | 215,100 | $ | 208,575 | $ | 218,700 | $ | 585,600 | $ | 1,460,175 | $ | 1,500,000 | |||||||
Sheldon Bruha* | $ | 29,326 | $ | 44,454 | $ | 52,376 | $ | 74,358 | n/a | $ | 200,514 | $ | 305,000 | ||||||||
John Maduri | $ | 92,880 | $ | 86,040 | $ | 86,906 | $ | 91,125 | $ | 244,000 | $ | 600,951 | $ | 625,000 | |||||||
Steve Gable | $ | 77,400 | $ | 71,700 | $ | 69,525 | $ | 72,900 | $ | 195,200 | $ | 486,725 | $ | 500,000 | |||||||
Kenneth W. Arndt | $ | 81,270 | $ | 75,285 | $ | 83,430 | $ | 87,480 | $ | 234,000 | $ | 561,750 | $ | 600,000 | |||||||
| * | ||||
| Mr. Bruha’s bonus includes an additional target incentive of $10,000 per month while serving as Interim CFO, beginning September 1, 2018; his 2018 |
EXECUTIVE COMPENSATION
Because our performance did not meet the minimum performance threshold of 93% of our Adjusted EBITDA goal, no bonus was paid to our NEOs or any management employees for 2017 performance.
At its January 2018 meeting, the Compensation Committee set the 2018 Company Performance Goals for our Senior Leadership Team, including our NEOs, which are intended to focus senior leadership on driving financial goals and business results.
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The Compensation Committee also modified the payment schedule such that 60% of the 2018 Frontier Bonus would be paid on a quarterly schedule, with quarterly goals based on the above metrics for the NEOs. The remaining 40% of the bonus is based on full year results. These quarterly goals were established in the beginning of the year and represent the full-year targets. This change is designed to focus our leaders on financials and customer experience by placing a greater emphasis on our quarterly results that will lead to achievement of our full-year results.
Long-Term Incentive Compensation
The Compensation Committee typically provides long-term incentives to our employees,leadership, including our NEOs, through a combination of restricted stockshare and performance share awards granted under our 20132017 Equity Incentive Plan. Due to share constraints in our Equity Plan, the Compensation Committee granted Mr. McCarthy his entire long-term-incentive grant in shares in 2018 while the remainder to the NEOs received Performance Cash along with a Restricted Share Award.
Frontier Communications Corporation | 34 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
In February of each year, the Compensation Committee sets a target dollar value of total equity awards for each NEO for that year to fulfill the purposes described above under “Compensation Program Design.” In making this determination, the Compensation Committee considers peer group information and survey data as well as the need to align each NEO’s interests with those of our stockholders.
For 2017, the Compensation Committee continued its practice whereone-third ofThe long-term incentive awards was delivered in the form of performance shares andtwo-thirds in the form of restricted stock awards, except for Mr. McCarthy whose awards are delivered on a 40/60 mix. The Committee believes that thisgrant mix aligns stockholder value and executive interests by linking compensation to long-term performance and stockholder returns.returns, it further provides an incentive to remain with the Company. There is no minimum guaranteed level of equity awards. In February 2017,2018, the Compensation Committee set the following targets for equity awards for each NEO:
Name | 2018 Target Value of Restricted Share Awards | 2018 Target Value of Performance Share/Cash Awards | Performance Award Paid as Shares/Cash | 2018 Target Value of Long-Term Incentive Awards | ||||||
Daniel J. McCarthy | $ | 3,600,000 | $ | 2,400,000 | Shares | $ | 6,000,000 | |||
Sheldon Bruha | $ | 102,000 | $ | 68,000 | Cash | $ | 170,000 | |||
R. Perley McBride | $ | 1,800,000 | $ | 1,200,000 | Cash | $ | 3,000,000 | |||
John Maduri | $ | 1,200,000 | $ | 800,000 | Cash | $ | 2,000,000 | |||
Steve Gable | $ | 1,080,000 | $ | 720,000 | Cash | $ | 1,800,000 | |||
Kenneth W. Arndt | $ | 858,000 | $ | 572,000 | Cash | $ | 1,430,000 | |||
| Name | 2017 Target Value of Restricted Stock | 2017 Target Value of Performance Share | 2017 Target Value of Total Equity Awards | ||||||||||||
Daniel J. McCarthy | $ | 3,600,000 | $ | 2,400,000 | $ | 6,000,000 | |||||||||
R. Perley McBride | $ | 2,000,000 | $ | 1,000,000 | $ | 3,000,000 | |||||||||
Kenneth W. Arndt | $ | 960,000 | $ | 470,000 | $ | 1,430,000 | |||||||||
Steve Gable | $ | 1,200,000 | $ | 600,000 | $ | 1,800,000 | |||||||||
John J. Lass | $ | 850,000 | $ | 400,000 | $ | 1,250,000 | |||||||||
Restricted StockShare Awards. The Compensation Committee uses restricted stockshare awards (RSAs) as a component of compensation because RSAs encourage our NEOs to focus attention on decisions that emphasize long-term returns for stockholders. RSAs are granted based on performance and vest ratably over three years.
The Compensation Committee generally makes all RSA grants to our executives, including our NEOs, at its regularly scheduled meeting each February, with the exception of awards to eligible new hires, which are awarded as of the date of hire.
EXECUTIVE COMPENSATION
The Compensation Committee determines the dollar value of RSA grants based upon the target set at the beginning of the year, which can be adjusted based on the assessment of individual performance at the end of such year.performance. There is no guarantee that an NEO will receive a grant of restricted shares.
In February 2018, the Compensation Committee approved RSA grants as set forth below under “2018 NEO Compensation Actions.”
Performance ShareShare/Cash Awards. Performance shareshare/cash awards are an important component of compensation because they encourage a focus on long-term financial performance and TSR, further aligning the interests of our NEOs and stockholders.
NEOs are eligible to receive a target performance share award each year at a regularly scheduled Compensation Committee meeting. Performance share awards are then earned at the end of the three-year Measurement Period applicable to these awards based on the following:
• | ||||
|  |  | Important measure of Frontier’s underlying financial performance | |
• | ||||
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| Creates direct link to stockholder results | |
Frontier Communications Corporation | 35 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Annual Free Cash Flow per share targets are used because it is not feasible to set and calculate multi-year performance goals given significantrapidly evolving industry dynamics (as mentioned above) and changes in Frontier’s business.business as we execute our multi-year transformation efforts. A three-year relative TSR modifier is applied in order to measure Frontier’s execution on its strategic goals over a multi-year period relative to our industry peers. The Free Cash Flow per share and TSR results that fall in between levels are determined using straight line interpolation.
An executive must remain employed by Frontier throughout the three-year Measurement Period and also must maintain a satisfactory performance rating throughout the Measurement Period for the award to vest. Performance share awards, to the extent earned, will be paid out in the form of common stock on aone-to-one basis,or cash, plus accrued dividends on such earned shares, shortly following the end of the three-year Measurement Period.
EXECUTIVE COMPENSATION
In February 2017,2018, the Compensation Committee approved target performance share awards for each of the NEOs for the 2017-20192018-2020 Measurement Period. These awards are described in the Grants of Plan-Based Awards Table and the narrative that follows that table. Actual shares or cash earned will be determined by the Compensation Committee in February 20202021 and will be subject to adjustment (including forfeiture of the entire award for below threshold performance with respect to Free Cash Flow per share)Share) as set forth in the diagram above.
Frontier Communications Corporation | 36 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
In February 2018,2019, following the completion of the 2015-20172016-2018 Measurement Period, the Compensation Committee determined the number of shares of common stock earned for that period. The 2015-20172016-2018 Measurement Period results were as follows:
Operating Cash Flow Results (dollars in millions) | |||||||||||||||||
| Year | Target | Actual | Performance as % of Target | Target | Actual | Performance as % of Target | |||||||||||
2015 | $1,713 | $1,603 | 93.6% | ||||||||||||||
2016 | $2,342 | $2,266 | 96.8% | $ | 2,342 | $ | 2,266 | 96.8% | |||||||||
2017 | $2,828 | $2,530 | 89.5% | $ | 2,828 | $ | 2,530 | 89.5% | |||||||||
2018 | $ | 2,676 | $ | 2,378 | 88.1% | ||||||||||||
Average | 93.3% | 91.7% | |||||||||||||||
TSR Performance Modifier | 75% (Below 25th percentile) | 75% (Below 25th percentile) | |||||||||||||||
Number of shares earned as % of target performance share awards | 69.9% | 68.8% | |||||||||||||||
The number of shares of common stock earned by each of the NEOs for the 2015-20172016-2018 Measurement Period is set forth below under “2018“2019 NEO Compensation Actions.”
In February 2018, the Compensation Committee also granted target performance share awards to the CEO and target performance cash awards for the 2018-2020 Measurement Period to the other NEOs as set forth below under “2018 NEO Compensation Actions.” The performance cash awards replace the typical performance share awards and may be earned on the same metrics used in our Performance Share program in 2017. Further, the split in our long-term incentive awards between Restricted Stock and the Performance Shares/Cash award was modified from 66.7%/33.3% to 60%/40%. The purpose of these actions was to mitigate the share usage while continuing to provide a long-term incentive tied to both Company performance and relative total shareholder return.
In addition, the Compensation Committee modified the bonus payment schedule such that 60% of the 2018 Frontier Bonus will be considered on a quarterly schedule, with the remaining 40% of the bonus considered on full year results. The quarterly goals were established in the beginning of 2018 and add up to the full-year targets. This change is designed to focus our leaders on financials and customer experience by placing a greater emphasis on our quarterly results and leading to the achievement of our full-year results.
Perquisites and Other Benefits
There were no reportable perquisites in 20172018 for the CEO or the other NEOs.
We provide benefits to our NEOs on the same basis as all ournon-union, full-time employees. These benefits consist of medical, dental and vision insurance, basic life and disability insurance and matching contributions to our 401(k) plan for employees who participate in the plan. The Frontier-paid life insurance benefit for all employees, including the NEOs, is 100% of base salary, up to a maximum of $1,000,000.
Messrs. McCarthy, McBride and Lass are our only NEOs withArndt have vested benefits under the Frontier Pension Plan, which was frozen for allnon-union participants in 2003.
Executives, including our NEOs, are not eligible for retiree medical benefits.
EXECUTIVE COMPENSATION
Compensation for Ms. McKenney
Frontier and Ms. McKenney entered into a Separation Agreement and Release dated June 30, 2017, which was amended on July 20, 2017. As consideration for Ms. McKenney’s compliance with the terms of the Separation Agreement, the Company agreed to pay her $1,218,465 (in three installments) and to pay COBRA premiums for 15 months. This amount was based on her base salary, her 2017 target bonus and the value of her unvested restricted shares due to vest in February 2018. The compensation arrangements in place for Ms. McKenney prior to her departure were established in accordance with the general processes outlined above for our NEOs. Upon her departure, Ms. McKenney forfeited her other unvested equity incentive awards. See below under “Employment Arrangements; Potential Payments Upon Termination orChange-in-Control” for additional information.
20182019 NEO Compensation Actions Related to 2018
In January and February 2018,2019, the Compensation Committee met to evaluate the performance of our CEO and the other NEOs to determine the fourth quarter and annual cash bonusincentive payouts for 20172018 performance and performance share awards earned for the 2015-2017 Measurement Period. The Compensation Committee also approved 2018 base salaries, RSA grants, and target performance share/cash awards to be granted for the 2018-20202016-2018 Measurement Period. As part of its compensation determinations, the Compensation Committee considered competitive market data provided by its independent compensation consultant as well as potential dilution to shareholders. The Company also engaged with certain shareholders and shareholder advocates regardingstockholders.
Below is a table showing the 2018 compensation actions, including those concerning Mr. McCarthy’s equity grants.
The Compensation Committee evaluated Mr. McCarthy based upon Frontier’s 2017 financial performance (as measured by Revenue, Adjusted EBITDA, Operating Cash Flow and Net Experience Score), his leadership with respect to the achievementvalue of the Company Performance Goals2016-2018 Performance-Share Award performance and his 2017 individualpayout which was approved at the February 2019 Compensation Committee. NEO bonuses paid out at about 97% of the annual target and the value of earned performance goals, which included the executionshares (including dividends) was 13% of near-term and long-term strategic initiatives.target.
For the other NEOs, whose performance was evaluated based on the same Company Performance Goals as Mr. McCarthy, the Compensation Committee reviewed Mr. McCarthy’s performance assessments and compensation recommendations. The Committee then discussed its assessment of each NEO and approved RSA grants, performance share awards earned for the 2015-2017 Measurement Period and target performance cash awards granted for the 2018-2020 Measurement Period, in each case as set forth in the table below. The Compensation Committee, in order to mitigate share usage in 2018, moved the performance share portion of these long-term incentive awards to a performance cash program with the same metrics used in the 2017-2019 performance share program previously discussed. The Compensation Committee decided that no annual bonuses were to be awarded for 2017 performance as a result of not meeting the threshold performance level on the EBITDA target. The Compensation Committee also elected to increase base salaries for Mr. Arndt and Mr. Gable to reflect their current roles and responsibilities, with no change to their target bonus percentages or target LTI.
| Name | 2018 Incentive Bonus Payout ($) | Performance Share Awards Earned(1) (#) | 2018 Base Salary | Value of Restricted Stock Awarded In February 2018 | Value of Target Shares/Cash Awards Granted in February | ||||||||||||||||||||||||||||||||||||||||
Daniel J. McCarthy | $ | 0 | 7,943 | $ | 1,000,000 | $ | 3,600,008 | $ | 2,400,000 | ||||||||||||||||||||||||||||||||||||
R. Perley McBride | $ | 0 | 0 | $ | 650,000 | $ | 1,800,008 | $ | 1,200,000 | ||||||||||||||||||||||||||||||||||||
Kenneth W. Arndt | $ | 0 | 876 | $ | 525,000 | $ | 858,002 | $ | 572,000 | ||||||||||||||||||||||||||||||||||||
Steve Gable | $ | 0 | 467 | $ | 500,000 | $ | 1,080,006 | $ | 720,000 | ||||||||||||||||||||||||||||||||||||
John J. Lass | $ | 0 | 876 | $ | 440,000 | $ | 750,008 | $ | 500,000 | ||||||||||||||||||||||||||||||||||||
Name | Total of Quarterly and Annual Incentives for 2018 ($) | Performance Shares Awarded For the 2016-2018 Period(1) (#) | Value of Performance Shares Awarded for 2016-2018 Performance(2) ($) | ||||||
Daniel J. McCarthy | $ | 1,460,175 | 19,382 | $ | 45,548 | ||||
Sheldon Bruha | $ | 200,514 | n/a | n/a | |||||
R. Perley McBride | $ | 193,830 | n/a | n/a | |||||
John Maduri | $ | 600,951 | n/a | n/a | |||||
Steve Gable | $ | 486,725 | 4,406 | $ | 10,354 | ||||
Kenneth W. Arndt | $ | 561,705 | 1,652 | $ | 3,882 | ||||
| (1) | The amounts in this column represent the number of performance shares earned for the |
| (2) | Messrs. Bruha and Maduri were hired after the start of the 2016-2018 performance period and as such, were not eligible for that award payout. Mr. McBride departed on August 31, 2018. |
Frontier Communications Corporation | 37 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Changes to Our Program in 2019
The Compensation Committee continues to review our executive compensation program to ensure it meets the twin goals of retaining valuable executives and aligning their financial interests with the success of the Company. As noted above, three (3) of our nine (9) senior executives left Frontier during 2018. Based on this, the Compensation Committee has decided that our executive compensation program in its current form did not adequately meet these objectives. Accordingly, the Compensation Committee has modified our executive compensation program for 2019 in several important respects, including:
The Compensation Committee has implemented these changes with the expectation that these types of awards will only apply for 2019.
Additionally, Mr. McCarthy relinquished his enhanced severance rights under his 2015 employment letter and is now covered under the same severance arrangement as other SLT members.
Roles and Responsibilities
The Compensation Committee
The Compensation Committee is responsible for approving and overseeing our executive compensation philosophy and programs, as well as determining and approving the compensation for our senior executives, including our NEOs. Each year, at its February meeting, the Compensation Committee reviews the Company Performance Goals and the individual performance goals for the NEOs and approves the target levels for each of the compensation components that apply to the NEOs for the upcoming year. Also, the Compensation Committee assesses the performance of our NEOs for the prior year. With respect to CEO compensation, the Compensation Committee reviews its recommendations with the other independent directors and considers any additional input from them before finalizing its decision.
In making its compensation decisions, the Compensation Committee reviews tally sheets setting forth all components of compensation paid to the NEOs for the past five years, along with target compensation for those years, including base salary, bonus, grant date values of RSAs and performance share/cash awards and the value of dividends paid on unvested restricted shares and vested performance shares. These tally sheets also show the executives’ holdings of unvested RSAs and performance share awards from prior years and the current value of those awards. The Compensation Committee uses these tally sheets to (i) review the total annual compensation of the NEOs over the past five years, (ii) assess the executive officers’ compensation against their individual and company performance over that period and (iii) assure that the Compensation Committee has a comprehensive view of our compensation programs.
Frontier Communications Corporation | 38 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
The Compensation Committee reviews on a periodic basis management compensation programs, including any management incentive compensation plans, to determine whether they are appropriate, properly coordinated and achieve their intended purpose(s), and recommends to the Board any modifications or new plans or programs.
The Chief Executive Officer
Our CEO annually reviews the performance and contributions of our other senior executives, including our other NEOs, and presents to the Compensation Committee his performance assessments and compensation recommendations, including the proposed award for each component of the executive’s total compensation. Mr. McCarthy’s review consists of an assessment of the executive’s performance against company-level and individual goals and targets. The Compensation Committee then conducts a separate review process with respect to these executives and, after making any adjustments, approves the compensation for these executives.
The CEO has no involvement in setting his own compensation.
The Compensation Consultant
The Compensation Committee retains an independent executive compensation consultant that provides services solely to the Compensation Committee and not Frontier. Since 2010, the Compensation Committee has engaged Frederic W. Cook & Co., Inc. to assist the Committee in the development of compensation programs, evaluation of compensation practices and the determination of compensation awards. In addition, in 20172018 the compensation consultant provided advice and insights on additional compensation matters, including the peer group used, benchmarking of executive compensation and director compensation levels, incentive plan design review, and Compensation Discussion and Analysis disclosure.
The Compensation Committee considers the compensation consultant’s input and advice but reaches its own independent decisions on compensation matters. The Compensation Committee has sole authority to retain and terminate the compensation consultant.
The compensation consultant provides no other services to Frontier. The Compensation Committee has instituted policies to avoid conflicts of interest raised by the work of the compensation consultant. Pursuant to SEC rules, the Compensation Committee is required to consider any conflicts of interest raised by the work of the Compensation Committee’s compensation consultants. After considering the relevant factors, the Compensation Committee determined that no conflicts of interest were raised by the work of the compensation consultant in 2017.
EXECUTIVE COMPENSATION
2018.
Additional Compensation Features and Policies
Stock Ownership Guidelines
To further align our executives’ interests with those of our stockholders, our Board established stock ownership guidelines for the CEO and the other members of the Senior Leadership Team and reviews the guidelines annually. The CEO is expected to own shares of Frontier stock having a minimum value of five times (5x) base salary, the CFO is expected to own shares of Frontier stock having a minimum value of three andone-half times (3.5x) base salary and each other member of the Senior Leadership Team is expected to own shares of Frontier stock having a minimum value of two andone-half times (2.5x) base salary. Unvested restricted stockshare awards and unearned performance shares are not counted for purposes of fulfilling this requirement. At such times as a member of the Senior Leadership Team does not meet the applicable ownership guideline, the executive will be required to hold 50% of Frontier stock that the executive acquires after that date through the Frontier equity compensation programs, excluding shares sold to pay related taxes. The Compensation Committee administers these stock ownership guidelines. Other than withholding for tax purposes upon vesting of shares, none of our current NEOs sold any shares during 2018.
Hedging and Pledging Prohibition
Executives are prohibited from hedging or pledging their shares of Frontier stock.
Frontier Communications Corporation | 39 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Termination of Employment andChange-in-Control Arrangements
To attract talented executives, support retention objectives and ensure that executives perform their work with objectivity, we provide certain post-employment benefits to the NEOs. In addition, Frontier has a Senior Leadership Team Severance Plan (the Severance Plan), which covers, among others, our NEOs.
We also maintainchange-in-control arrangements with our NEOs to promote the unbiased efforts of our executives to maximize stockholder value before, during and after achange-in-control that may impact the employment status of the executives. The Compensation Committee set the severance amounts based on peer group reviews. Thechange-in-control arrangements are subject to “double-trigger” vesting and do not includegross-up payments for excise taxes imposed under Section 280G of the Internal Revenue Code as a result of severance payouts.
For further discussion of these severance arrangements, see “Employment Arrangements; Potential Payments Upon Termination orChange-in-Control” that follows this Compensation Discussion and Analysis.
Clawback Policies
Since 2010, Frontier has included in all of its equity compensation awards, including to the NEOs, a recoupment or “clawback” provision. This provision requires that unvested equity awards be forfeited if the Compensation Committee determines that the employee engaged in certain defined types of misconduct, including engaging in acts considered to be contrary to the best interests of Frontier, commission of felonies or other serious crimes, or engaging in any activity which constitutes gross misconduct. The provision also provides that the Compensation Committee may in its sole discretion require the employee to return all stock that vested within the twelve-month period immediately prior to the misconduct, or if no longer held by the employee, to pay to Frontier any and all gains realized from such stock.
Effective December 11, 2014, we adopted an enhanced clawback policy that is triggered if Frontier is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the securities laws that was contributed to by the fraud or intentional misconduct of an executive officer, including an NEO. If the policy is triggered, the Compensation Committee will require reimbursement or forfeiture of any cash and equity incentive compensation awarded to or received by the executive officer in question during the three-year period preceding the date on which Frontier is required to prepare the restatement. The amount to be recovered would be the excess of the incentive compensation obtained by the executive officer based on the erroneous data over the amount that would have been obtained by the executive officer had it been based on the restated results, as determined by the Compensation Committee. We will review the terms of this recovery policy in light of the requirements under the Dodd-Frank Act and will make any necessary changes to be in compliance with final regulations when issued.
EXECUTIVE COMPENSATION
As an enhancement to our executive pay programs, in 2019 the Compensation Committee implemented retention provisions for voluntary and involuntary termination for cause of varying lengths for any quarterly bonus, Performance-Retention Award and Retention Award payment granted for 2019.
Tax Implications—Deductibility of Executive Compensation
The Committee considers the limitation on deductibility of executive compensation for federal income tax purposes under Section 162(m) of the Internal Revenue Code in the design of our compensation programs. Section 162(m) places a limit of $1 million on the amount of compensation that we may deduct in any one year with respect to the NEOs (other than the Chief Financial Officer). There is an exception for performance-based compensation meeting certain requirements defined by the IRS. Annual incentive awards, performance-based stock and cash awards, performance-based restricted stock and unit awards generally meet those requirements, but no assurance can be given that any such compensation will be fully deductible under all circumstances. The Committee balances the desirability to qualify for such deductibility with the Company’s need to maintain flexibility in compensating executive officers in a manner designed to promote corporate goals and compensation objectives. As a result, portions of the total compensation program may not be deductible under Section 162(m), including the portion of base salary in excess of $1 million and any time-based restricted stock awards.
The exemption from 162(m)’s deduction limit for performance-based compensation has been repealed for tax years beginning after December 31, 2017. Consequently, compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.deductible.
Frontier Communications Corporation | 40 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee of our Board of Directors has submitted the following report for inclusion in this proxy statement:
Our Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management. Based on our Committee’s review of and the discussions with management with respect to the Compensation Discussion and Analysis, our Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form10-K.
The foregoing report is provided by the following directors, who constitute the Committee:
Submitted by:
Virginia P. Ruesterholz, Chair
Peter C.B. Bynoe
Diana S. Ferguson
Myron A. Wick, III
Submitted by: | ||||
Virginia P. Ruesterholz, Chair Peter C.B. Bynoe Diana S. Ferguson |
Frontier Communications Corporation | 41 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation awarded to, earned by, or paid to our CEO, CFO and the three other most highly compensated executive officers at fiscalyear-end, and one additional employee who would have been an NEO had she been an executive officer at fiscalyear-end.
Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | ||||||||||||||||||||||||||||
Daniel J. McCarthy President and CEO | 2017 | $ | 1,000,000 | — | $ | 5,004,014 | — | $ | 34,181 | $ | 6,038,195 | ||||||||||||||||||||||||
| 2016 | $ | 981,251 | — | $ | 4,455,065 | — | $ | 31,830 | $ | 5,468,146 | |||||||||||||||||||||||||
| 2015 | $ | 862,500 | — | $ | 4,170,022 | $ | 1,165,500 | $ | 9,105 | $ | 6,207,127 | ||||||||||||||||||||||||
R. Perley McBride EVP and CFO(5)(6) | 2017 | $ | 650,000 | — | $ | 1,733,033 | — | $ | 17,521 | $ | 2,400,554 | ||||||||||||||||||||||||
| 2016 | $ | 199,432 | — | $ | 253,553 | — | $ | 109,663 | $ | 562,648 | |||||||||||||||||||||||||
Kenneth W. Arndt EVP, Commercial Sales | 2017 | $ | 500,000 | — | $ | 1,134,299 | — | $ | 10,270 | $ | 1,644,569 | ||||||||||||||||||||||||
Steve Gable EVP and CTO(6) | 2017 | $ | 470,000 | — | $ | 1,130,644 | — | $ | 9,717 | $ | 1,610,361 | ||||||||||||||||||||||||
| 2016 | $ | 458,750 | $ | 1,000,000 | $ | 471,904 | — | $ | 9,884 | $ | 1,940,538 | ||||||||||||||||||||||||
John J. Lass EVP, Field Operations(6) | 2017 | $ | 439,875 | — | $ | 1,067,948 | — | $ | 56,756 | $ | 1,564,579 | ||||||||||||||||||||||||
| 2016 | $ | 436,156 | $ | 415,200 | $ | 629,257 | — | $ | 9,836 | $ | 1,490,449 | ||||||||||||||||||||||||
Cecilia K. McKenney EVP, Consumer Sales & Marketing | 2017 | $ | 243,438 | — | $ | 1,453,241 | — | $ | 1,273,202 | $ | 2,969,881 | ||||||||||||||||||||||||
| 2016 | $ | 483,906 | $ | 459,600 | $ | 1,660,754 | — | $ | 9,805 | $ | 2,614,065 | ||||||||||||||||||||||||
| 2015 | $ | 445,833 | — | $ | 1,755,945 | $ | 457,800 | $ | 9,105 | $ | 2,668,683 | ||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | ||||||||||||||
Daniel J. McCarthy President and CEO | 2018 | $ | 1,000,000 | — | $ | 4,665,667 | $ | 1,460,175 | $ | 9,541 | $ | 7,135,383 | |||||||||
2017 | $ | 1,000,000 | — | $ | 5,004,014 | — | $ | 34,181 | $ | 6,038,195 | |||||||||||
2016 | $ | 981,251 | — | $ | 4,455,065 | — | $ | 31,830 | $ | 5,468,146 | |||||||||||
Sheldon L. Bruha Interim Chief Financial Officer(5)(7) | 2018 | $ | 341,818 | — | $ | 128,296 | $ | 200,514 | $ | 8,605 | $ | 679,233 | |||||||||
R. Perley McBride(6) EVP & CFO | 2018 | $ | 433,334 | — | $ | 2,299,294 | $ | 193,830 | $ | 6,500 | $ | 2,932,958 | |||||||||
2017 | $ | 650,000 | — | $ | 1,733,033 | — | $ | 17,521 | $ | 2,400,554 | |||||||||||
2016 | $ | 199,432 | — | $ | 253,533 | — | $ | 109,663 | $ | 562,628 | |||||||||||
John Maduri EVP, Chief Customer Officer(7) | 2018 | $ | 610,417 | — | $ | 2,380,090 | $ | 600,951 | $ | 65,111 | $ | 3,656,569 | |||||||||
Steve Gable EVP, Chief Technology Officer | 2018 | $ | 496,250 | — | $ | 1,390,446 | $ | 486,725 | $ | 12,055 | $ | 2,385,476 | |||||||||
2017 | $ | 470,000 | — | $ | 1,130,644 | — | $ | 9,717 | $ | 1,610,361 | |||||||||||
2016 | $ | 458,750 | $ | 1,000,000 | $ | 471,904 | — | $ | 9,884 | $ | 1,940,538 | ||||||||||
Kenneth W. Arndt EVP, Chief Operations Officer(7) | 2018 | $ | 553,125 | — | $ | 1,099,836 | $ | 561,705 | $ | 5,980 | $ | 2,220,646 | |||||||||
2017 | $ | 500,000 | — | $ | 1,134,299 | — | $ | 10,270 | $ | 1,644,569 | |||||||||||
| (1) | Amounts in this column represent a specialnon-recurring |
| (2) | The stock awards referred to in this column consist of grants of restricted |
| (3) | The amounts shown in this column represent cash awards made under the Frontier Bonus Plan. Awards for |
| (4) | The All Other Compensation column includes premiums for life insurance coverage paid for by Frontier, a 401(k) match and change in actuarial value of the frozen pension. Other than as set forth below, all perquisites and personal benefits are below the threshold for disclosure in this column: |
Amount shown for Mr. Arndt includes $3,375 for the change in actuarial value of his frozen pension, in 2017, $5,625 in matching contributions, and $1,270 in imputed income for life insurance.
Frontier Communications Corporation | 42 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Amounts shown in 2017 for Ms. McKenney consist of payments for life insurance coverage of $1,153, a 401(k) match of $6,768 and $1,265,280 in severance and related payments in connection with her departure from Frontier in June 2017.
| (5) | Mr. |
| (6) | Mr. McBride resigned from the company on August 31, 2018. He assumed the role of EVP & CFO on November 4, 2016. |
| (7) | Information for Messrs. |
Frontier Communications Corporation | 43 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Grants of Plan-Based Awards
The following table sets forth information with respect to awards granted to each of our NEOs during 2017.2018.
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock Awards | |||||||||||||||||||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||
| Name | Grant Date | ($) | ($) | ($) | (#) | (#) | (#) | (#)(3) | ($)(4) | |||||||||||||||||||||||||||
Daniel J. McCarthy | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/16/2017 | $ | 1,050,000 | $ | 1,500,000 | $ | 1,950,000 | |||||||||||||||||||||||||||||
Performance share award (2017-2019) | 2/16/2017 | 8,421 | 16,040 | 26,065 | $ | 846,912 | ||||||||||||||||||||||||||||||
Performance share award (2016-2018) | 2/16/2017 | 4,930 | 9,390 | 15,259 | $ | 443,678 | ||||||||||||||||||||||||||||||
Performance share award (2015-2017) | 2/16/2017 | 1,989 | 3,788 | 6,156 | $ | 153,414 | ||||||||||||||||||||||||||||||
Restricted stock award | 2/16/2017 | 72,138 | $ | 3,560,010 | ||||||||||||||||||||||||||||||||
R. Perley McBride | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/16/2017 | $ | 455,000 | $ | 650,000 | $ | 845,000 | |||||||||||||||||||||||||||||
Performance share award (2017-2019) | 2/16/2017 | 3,509 | 6,683 | 10,860 | $ | 352,862 | ||||||||||||||||||||||||||||||
Restricted stock award | 2/16/2017 | 27,967 | $ | 1,380,171 | ||||||||||||||||||||||||||||||||
Kenneth W. Arndt | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/16/2017 | $ | 350,000 | $ | 500,000 | $ | 650,000 | |||||||||||||||||||||||||||||
Performance share award (2017-2019) | 2/16/2017 | 1,649 | 3,141 | 5,104 | $ | 165,845 | ||||||||||||||||||||||||||||||
Performance share award (2016-2018) | 2/16/2017 | 420 | 800 | 1,300 | $ | 37,800 | ||||||||||||||||||||||||||||||
Performance share award (2015-2017) | 2/16/2017 | 219 | 417 | 678 | $ | 16,889 | ||||||||||||||||||||||||||||||
Restricted stock award | 2/16/2017 | 18,516 | $ | 913,765 | ||||||||||||||||||||||||||||||||
John J. Lass | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/16/2017 | $ | 307,913 | $ | 439,875 | $ | 571,838 | |||||||||||||||||||||||||||||
Performance share award\(2017-2019) | 2/16/2017 | 1,403 | 2,673 | 4,344 | $ | 141,134 | ||||||||||||||||||||||||||||||
Performance share award (2016-2018) | 2/16/2017 | 1,120 | 2,134 | 3,468 | $ | 100,832 | ||||||||||||||||||||||||||||||
Performance share award (2015-2017) | 2/16/2017 | 219 | 417 | 678 | $ | 16,889 | ||||||||||||||||||||||||||||||
Restricted stock award | 2/16/2017 | 16,395 | $ | 809,093 | ||||||||||||||||||||||||||||||||
Steve Gable | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/16/2017 | $ | 329,000 | $ | 470,000 | $ | 611,000 | |||||||||||||||||||||||||||||
Performance share award (2017-2019) | 2/16/2017 | 2,105 | 4,010 | 6,516 | $ | 211,728 | ||||||||||||||||||||||||||||||
Performance share award (2016-2018) | 2/16/2017 | 1,120 | 2,134 | 3,468 | $ | 100,832 | ||||||||||||||||||||||||||||||
Performance share award (2015-2017) | 2/16/2017 | 117 | 222 | 361 | $ | 8,991 | ||||||||||||||||||||||||||||||
Restricted stock award | 2/16/2017 | 16,395 | $ | 809,093 | ||||||||||||||||||||||||||||||||
Cecilia McKenney | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/16/2017 | $ | 340,813 | $ | 486,875 | $ | 632,938 | |||||||||||||||||||||||||||||
Performance share award (2017-2019) | 2/16/2017 | 2,105 | 4,010 | 6,516 | $ | 211,728 | ||||||||||||||||||||||||||||||
Performance share award (2016-2018) | 2/16/2017 | 1,456 | 2,774 | 4,508 | $ | 131,072 | ||||||||||||||||||||||||||||||
Performance share award (2015-2017) | 2/16/2017 | 760 | 1,448 | 2,353 | $ | 58,644 | ||||||||||||||||||||||||||||||
Restricted stock award | 2/16/2017 | 21,313 | $ | 1,051,797 | ||||||||||||||||||||||||||||||||
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock Awards ($)(4) | ||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||
Daniel J. McCarthy | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/14/2018 | $ | 1,050,000 | $ | 1,500,000 | $ | 1,950,000 | |||||||||||||||||||||||||||||
Perf. share award (2018-2020) | 2/14/2018 | 51,033 | 97,205 | 157,958 | $ | 933,168 | ||||||||||||||||||||||||||||||
Perf. share award (2017-2019) | 2/14/2018 | 8,421 | 16,040 | 26,065 | $ | 84,691 | ||||||||||||||||||||||||||||||
Perf. share award (2016-2018) | 2/14/2018 | 4,930 | 9,391 | 15,260 | $ | 47,800 | ||||||||||||||||||||||||||||||
Restricted share award | 2/14/2018 | 437,425 | $ | 3,600,008 | ||||||||||||||||||||||||||||||||
Sheldon L. Bruha | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/14/2018 | 158,200 | 226,000 | 293,800 | ||||||||||||||||||||||||||||||||
Perf. cash award (2018-2020) | 2/14/2018 | 11,900 | 22,666 | 36,832 | $ | 26,293 | ||||||||||||||||||||||||||||||
Restricted share award | 2/14/2018 | 12,394 | $ | 102,003 | ||||||||||||||||||||||||||||||||
R. Perley McBride | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/14/2018 | 455,000 | 650,000 | 845,000 | ||||||||||||||||||||||||||||||||
Perf. cash award (2018-2020) | 2/14/2018 | 210,000 | 400,000 | 650,000 | $ | 464,000 | ||||||||||||||||||||||||||||||
Perf. share award (2017-2019) | 2/14/2018 | 3,509 | 6,683 | 10,860 | $ | 35,286 | ||||||||||||||||||||||||||||||
Restricted share award | 2/14/2018 | 218,713 | $ | 1,800,008 | ||||||||||||||||||||||||||||||||
John Maduri | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/14/2018 | 437,500 | 625,000 | 812,500 | ||||||||||||||||||||||||||||||||
Perf. cash award (2018-2020) | 2/14/2018 | 140,000 | 266,666 | 433,332 | $ | 309,333 | ||||||||||||||||||||||||||||||
Perf. share award (2017-2019) | 2/14/2018 | 7,933 | 15,110 | 24,554 | $ | 79,781 | ||||||||||||||||||||||||||||||
Restricted share award | 2/14/2018 | 145,809 | $ | 1,233,544 | ||||||||||||||||||||||||||||||||
Restricted share award | 5/8/2018 | 92,033 | $ | 757,432 | ||||||||||||||||||||||||||||||||
Steve Gable | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/14/2018 | 350,000 | 500,000 | 650,000 | ||||||||||||||||||||||||||||||||
Perf. cash award (2018-2020) | 2/14/2018 | 126,000 | 240,000 | 390,000 | $ | 278,400 | ||||||||||||||||||||||||||||||
Perf. share award (2017-2019) | 2/14/2018 | 2,105 | 4,010 | 6,516 | $ | 21,173 | ||||||||||||||||||||||||||||||
Perf. share award (2016-2018) | 2/14/2018 | 1,121 | 2,135 | 3,469 | $ | 10,867 | ||||||||||||||||||||||||||||||
Restricted share award | 2/14/2018 | 131,228 | $ | 1,080,006 | ||||||||||||||||||||||||||||||||
Kenneth W. Arndt | ||||||||||||||||||||||||||||||||||||
Cash bonus award | 2/14/2018 | 420,000 | 600,000 | 780,000 | ||||||||||||||||||||||||||||||||
Perf. cash award (2018-2020) | 2/14/2018 | 100,100 | 190,666 | 309,832 | $ | 221,173 | ||||||||||||||||||||||||||||||
Perf. share award (2017-2019) | 2/14/2018 | 1,649 | 3,141 | 5,104 | $ | 16,584 | ||||||||||||||||||||||||||||||
Perf. share award (2016-2018) | 2/14/2018 | 421 | 801 | 1,302 | $ | 4,077 | ||||||||||||||||||||||||||||||
Restricted share award | 2/14/2018 | 104,253 | $ | 858,002 | ||||||||||||||||||||||||||||||||
| (1) | Reflects the target payout amounts ofnon-equity incentive plan awards payable for service in |
| (2) | Reflects the number of shares of Common Stock that may be earned upon vesting of the LTIP awards granted in |
| (3) | Reflects awards of RSAs. |
| (4) | See footnote (2) to the Summary Compensation Table for Fiscal Year |
Frontier Communications Corporation | 44 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Cash awards under the Frontier Bonus Plan for 20172018 performance shown under the Estimated Possible Payouts UnderNon-Equity Incentive Plan Awards columns would have beenwere paid in March 2018shortly after the close of applicable quarter or year based on performance metrics set for 2017,each performance period, as described above under “Compensation Discussion and Analysis—20172018 Total Direct Compensation for NEOs—Cash Compensation—Annual Bonus.” Target awards under the Frontier Bonus Plan are set as a percentage of base salary. Targets awards were set at 100% of 20172018 base salary for each of the NEOs, other thanMessrs. Maduri, Gable and Arndt. Mr. McCarthy, whoseMcCarthy’s target award was set at 150% of 20172018 base salary. Mr. Bruha’s target award was set at 60% of 2018 base salary plus an additional $10,000 target bonus stipend for each month he was the Interim Chief Financial Officer. Payouts can be 0% of target for below-threshold performance, up to 70% of target for threshold performance and up to 130% of target for outstanding performance. The annual performance-based cash bonuses for 2017 were not paid to any Frontier Management employee, including the NEOs, due to the fact that the Company did not reach the threshold performance of 93% of Adjusted EBITDA, as reported above in the Summary Compensation Table in the column entitled“Non-Equity Incentive Plan Compensation.”
The awards shown under the Estimated Future Payouts Under Equity Incentive Plan Awards columns are performance shares or cash deemed to have been granted in 20172018 in accordance with Financial Accounting Standards Board ASC Topic 718 (i.e., the first tranche of the 2017-20192018-2020 Measurement Period, the second tranche of the 2016-20182017-2019 Measurement Period and the third tranche of the 2015-20172016-2018 Measurement Period). See footnote (2) to the Summary Compensation Table. The amounts shown represent the range of shares that may be issued at the end of the applicable Measurement Period for such grants assuming achievement of threshold, target or maximum performance. If our operating cash flow (for the 2015-20172016-2018 and the 2016-20182017-2019 periods and Free Cash Flow per share for the 2017-20192018-2020 period) performance is, on average, below threshold for the three-year Measurement Period, no shares will be issued at the end of the period. Dividends on performance shares will be accrued and paid out at the end of the three-year Measurement Period only with respect to shares that are earned and issued. See the discussion of performance share awards under “Compensation Discussion and Analysis—20172018 Total Direct Compensation for NEOs—EquityLong-Term Incentive Compensation—Performance ShareShare/Cash Awards.”
The stock awards shown under the All Other Stock Awards column in the above table are grants of restricted stock.shares. The grants represent annual restricted stockshare awards and vest in three equal annual installments commencing one year after the date of approval by the Compensation Committee. All such grants of restricted stockshares were made under our 20132017 Equity Incentive Plan based on 2015 performance. Each of the NEOs is entitled to receive dividends on shares of restricted stock at the same rate and at the same time we pay dividends on shares of our common stock. The post-split common stock dividends for 2017 were $1.575 for the first quarter and $0.60 for the following three quarters. No above-market or preferential dividends were paid with respect to any restricted shares.Plan. See the discussion of restricted stockshare awards under “Compensation Discussion and Analysis—20172018 Total Direct Compensation for NEOs—EquityLong-Term Incentive Compensation—Restricted StockShare Awards.”
Frontier Communications Corporation | 45 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Outstanding Equity Awards at FiscalYear-End
The following table sets forth information regarding outstanding equity awards held by each of the NEOs atyear-end.
| Stock Awards | |||||||||||||||||||||||||
| Name | Date of Grant | Number of Not | Market Value of Shares of Stock or Units That Have Not Vested(2) ($) | Equity Incentive (#) | Equity Incentive ($) | ||||||||||||||||||||
Daniel J. McCarthy | 2/25/2015 | 7,493 | $ | 50,653 | 11,362 | $ | 76,807 | ||||||||||||||||||
| 2/11/2016 | 36,081 | $ | 243,908 | 28,171 | $ | 190,436 | |||||||||||||||||||
| 2/16/2017 | 72,138 | $ | 487,653 | 48,120 | $ | 325,291 | |||||||||||||||||||
R. Perley McBride | 9/12/2016 | 2,429 | $ | 16,420 | — | $ | — | ||||||||||||||||||
| 2/16/2017 | 27,967 | $ | 189,057 | 20,050 | $ | 135,538 | |||||||||||||||||||
Kenneth W. Arndt | 2/25/2015 | 756 | $ | 5,111 | 1,253 | $ | 8,470 | ||||||||||||||||||
| 2/11/2016 | 3,025 | $ | 20,449 | 2,401 | $ | 16,231 | |||||||||||||||||||
| 2/16/2017 | 18,516 | $ | 125,168 | 9,424 | $ | 63,706 | |||||||||||||||||||
Steve Gable | 2/25/2015 | 323 | $ | 2,183 | 668 | $ | 4,516 | ||||||||||||||||||
| 2/11/2016 | 3,339 | $ | 22,572 | 6,403 | $ | 43,284 | |||||||||||||||||||
| 2/16/2017 | 16,395 | $ | 110,830 | 12,030 | $ | 81,323 | |||||||||||||||||||
John J. Lass | 2/25/2015 | 756 | $ | 5,111 | 1,253 | $ | 8,470 | ||||||||||||||||||
| 2/11/2016 | 4,681 | $ | 31,644 | 6,403 | $ | 43,284 | |||||||||||||||||||
| 2/16/2017 | 16,395 | $ | 110,830 | 8,020 | $ | 54,215 | |||||||||||||||||||
Cecilia K. McKenney(4) | 2/25/2015 | — | $ | — | — | $ | — | ||||||||||||||||||
| 2/11/2016 | — | $ | — | — | $ | — | |||||||||||||||||||
| 2/16/2017 | — | $ | — | — | $ | — | |||||||||||||||||||
Stock Awards | |||||||||||||||
Name | Date of Grant | Number of Shares of Stock or Units That Have Not Vested(1) (#) | Market Value of Shares of Stock or Units That Have Not Vested(2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares / Units That Have Not Vested(3) (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares That Have Not Vested(2) ($) | ||||||||||
Daniel J. McCarthy | 2/11/2016 | 18,041 | $ | 42,938 | 28,171 | $ | 67,047 | ||||||||
2/16/2017 | 48,092 | $ | 114,459 | 48,120 | $ | 48,120 | |||||||||
2/14/2018 | 437,424 | $ | 1,041,072 | 291,617 | $ | 694,048 | |||||||||
Sheldon L. Bruha | 2/14/2018 | 12,394 | $ | 29,498 | 68,000 | $ | 68,000 | ||||||||
R. Perley McBride(4) | 9/12/2016 | 0 | $ | 0 | 0 | $ | 0 | ||||||||
2/16/2017 | 0 | $ | 0 | 0 | $ | 0 | |||||||||
2/14/2018 | 0 | $ | 0 | 0 | $ | 0 | |||||||||
John Maduri | 7/24/2017 | 0 | $ | 0 | 45,330 | $ | 107,885 | ||||||||
2/14/2018 | 145,809 | $ | 347,025 | 800,000 | $ | 800,000 | |||||||||
5/8/2018 | 92,033 | $ | 219,039 | 0 | $ | 0 | |||||||||
Steve Gable | 2/11/2016 | 1,670 | $ | 3,975 | 6,403 | $ | 15,239 | ||||||||
2/16/2017 | 10,930 | $ | 26,013 | 12,030 | $ | 28,631 | |||||||||
2/14/2018 | 131,228 | $ | 312,323 | 720,000 | $ | 720,000 | |||||||||
Kenneth W. Arndt | 2/11/2016 | 1,513 | $ | 3,601 | 2,401 | $ | 5,714 | ||||||||
2/16/2017 | 12,334 | $ | 29,379 | 9,424 | $ | 22,429 | |||||||||
2/14/2018 | 104,253 | $ | 248,122 | 572,000 | $ | 572,000 | |||||||||
| (1) | The amounts shown in this column represent |
| (2) | The market value of shares of common stock reflected in the table is based upon the closing price of the common stock on December |
| (3) | The amounts shown in this column represent the number of performance shares or amounts that may be earned by the NEOs, as follows, in each case assuming achievement of target performance, in accordance with SEC regulations. |
| (4) | Unvested restricted |
Frontier Communications Corporation | 46 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Option Exercises and Stock Vested
The following table sets forth information regarding the shares of restricted stockshares and performance shares that vested for each of the NEOs in 2017.2018. No NEO acquired any shares upon the exercise of stock options in 2017.2018. The value of restricted stockshares realized upon vesting and performance shares earned is based on the closing price of the shares on the applicable vesting dates and the value of performance shares earned is based on the closing price of the shares on December 30, 2017, the last day of the three-year Measurement Period.dates.
| Stock Awards | ||||||||
| Name | Number of Shares Acquired on Vesting (#)(1)(2) | Value Realized ($)(3) | ||||||
Daniel J. McCarthy | 41,392 | $ | 2,057,486 | |||||
R. Perley McBride | 1,214 | $ | 16,717 | |||||
Kenneth W. Arndt | 4,405 | $ | 218,764 | |||||
Steve Gable | 2,892 | $ | 143,431 | |||||
John J. Lass | 5,186 | $ | 257,454 | |||||
Cecilia K. McKenney | 17,312 | $ | 860,310 | |||||
Stock Awards | ||||||
Name | Number of Shares Acquired on Vesting (#)(1)(2) | Value Realized on Vesting ($)(3) | ||||
Daniel J. McCarthy | 57,522 | $ | 472,616 | |||
Sheldon L. Bruha | 0 | $ | 0 | |||
R. Perley McBride | 9,322 | $ | 84,644 | |||
John Maduri | 0 | $ | 0 | |||
Steve Gable | 7,924 | $ | 67,802 | |||
Kenneth W. Arndt | 9,316 | $ | 80,151 | |||
| (1) | The RSA awards that vested in |
| (2) | The LTIP awards that vested in |
| (3) | The value realized from the vesting of the RSA and LTIP awards was calculated based on the average of the high and low sale price for awards granted under the 2013 Equity Incentive Plan, or closing sale price for awards granted under the 2017 Equity Incentive Plan, of Common Stock on the NYSE Composite Tape on the applicable vesting date or, if the vesting date occurred on anon-trading day, the last trading day preceding the applicable vesting date. |
Pension Benefits
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) |
Daniel J. McCarthy | Frontier Pension Plan | 11 | $192,205 | — |
Sheldon L. Bruha | — | — | — | — |
R. Perley McBride | Frontier Pension Plan | 5 years, 8 mo | $54,555 | — |
John Maduri | — | �� | — | — |
Steve Gable | — | — | — | — |
Kenneth W. Arndt | Frontier Pension Plan | 6 years, 2 mo | $28,046 | — |
| Name | Plan Name | Number of Years (#) | Present ($) | Payments During ($) | ||||
Daniel J. McCarthy | Frontier Pension Plan | 10 | $208 | — | ||||
R. Perley McBride | Frontier Pension Plan | 5 years, 8 mo | $59,677 | — | ||||
Kenneth W. Arndt | Frontier Pension Plan | 6 years, 2 mo | $30,482 | — | ||||
Steve Gable | — | — | — | — | ||||
John J. Lass | Frontier Pension Plan | 21 years, 1 mo | $537,314 | — | ||||
Cecilia K. McKenney | — | — | — | — |
We have a noncontributory, qualified retirement plan, the Frontier Pension Plan, covering certain of our employees. The plan provides benefits that, in most cases, are based on formulas related to base salary and years of service. The plan was amended to provide that, effective February 1, 2003, no further benefits will be accrued under the plan by mostnon-union participants (including all executive officers), and is considered “frozen.” Messrs. McCarthy, McBride Arndt, and LassArndt are the only NEOs with vested benefits under the plan. The estimated annual pension benefits (assumed to be paid in the normal form of an annuity) for Mr. McCarthy is $22,641, for Mr. McBride is $6,885 and for Mr. Arndt is $3,386 and for Mr. Lass is $45,438.$3,386. This amount is calculated under the plan based on Mr. McCarthy’s 1011 years of service, Mr. McBride’s five years, eight months of service and Mr. Arndt’s 6 years, two months of service and Mr. Lass’s 21 years, one month of service credit at the time the plan was frozen and the compensation limits established in accordance with
EXECUTIVE COMPENSATION
federal tax law in the computation of retirement benefits under qualified plans. Benefits
Frontier Communications Corporation | 47 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
are not subject to reduction for Social Security payments or other offset amounts. For a discussion of valuation assumptions, see Note 1718 to the Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended December 31, 2017.2018.
As previously discussed, Mr. McBride was named Executive Vice President and Chief Financial Officer in November 2016.resigned from the company on August 31, 2018. He also worked for Frontier before the Frontier Pension Plan was frozen.
Employment Arrangements; Potential Payments upon Termination orChange-in-Control
Employment Agreements and Arrangements
Frontier is party to an employment agreement with Mr. McCarthy, Mr. McBride, Mr. Arndt, andMaduri, Mr. Gable, and a separation agreement with Ms. McKenney,Mr. Arndt and each agreement has been publicly filed with the SEC. In accordance with best practices, the agreements do not provide for a set term of employment.
Each NEO receives a base salary and is entitled to participate in the Frontier Bonus Plan and our 2013 and 2017 Equity Incentive Plans. In addition, each NEO is entitled to severance benefits under theour Severance Plan.
The separation agreement for Ms. McKenney is discussed separately below.
Potential Payments upon Termination of Employment or Change-in-Control
The following summarizes potential payments that would be made under the Company’s Severance Plan or the NEO’s employment agreement, as applicable, upon a termination of employment or change-in-control.change-in-control as of December 31, 2018.
If Mr. McCarthy’s employment is terminated without “cause” or by Mr. McCarthy with “good reason,” we would be required to pay Mr. McCarthy an amount equal to the non-change in control severance factor applicable to Mr. McCarthy (as set forth below) multiplied by the sum of his base salary and target bonus. In addition, all his restricted stockshares would vest, and all performance share awards granted to him or any other performance incentive award pursuant to a performance-based vesting schedule would be vested with respect to any service requirement, but the number of shares earned would be based on actual performance against the pre-established goals. In addition, in such circumstances, Mr. McCarthy would be entitled to an amount equal to 18 times the monthly COBRA charge for the type of employer-provided health coverage in effect for him.
With respect to our other active NEOs, if the executive’s employment is terminated without “cause” or by the NEO with “good reason,” we would be required to pay the executive an amount equal to the non-change in control severance factor applicable to the executive (as set forth below) multiplied by his or her base salary. The executive would also be entitled to purchase from Frontier three months’months of subsidized COBRA coverage at the active employee rate.
If Mr. McCarthy’s employment is terminated due to his death or in connection with a disability, Mr. McCarthy or his estate would be entitled to payment of six months’ base salary (paid in installments as salary continuation pursuant to our standard payroll practices) and a prorated portion of his target bonus for the year of termination (paid in lump sum). In addition, all restricted stockshares would vest, and performance shares would vest pro-rata, based on time served through the date of termination at the target level of shares granted. Mr. McCarthy, or his spouse, in the event of Mr. McCarthy’s death, would also be entitled to an amount equal to 18 times the monthly COBRA charge for the type of employer-provided coverage in effect for Mr. McCarthy.
In the event Mr. McCarthy’s employment is terminated without “cause” or by Mr. McCarthy with “good reason” in connection with a “change in control,” Mr. McCarthy would be entitled to the amounts he would receive in connection with a termination by us without cause or by him with good reason in a non-change in control context, except that (a) the change in control severance factor would apply as set forth below and (b) the number of earned performance shares would be based on actual performance as of the date of the change in control (if determinable), otherwise based on target performance, and these earned shares would vest at the time of the qualifying termination. In addition, if the successor following a change in control declines to assume Frontier’s obligations with respect to Mr. McCarthy’s performance shares, the earned performance shares would vest upon the change in control, regardless of whether his employment was terminated.
Frontier Communications Corporation | 48 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
With respect to our other active NEOs, in the event the NEO’s employment is terminated without “cause” or by the executive with “good reason” in connection with a change in control, the executive would be entitled to the amounts he or she would receive in connection with a termination by us without cause in a non-change in control context, except that (a) the change in control severance factor would apply as set forth below and the executive’s target bonus would be included in the severance pay calculation, (b) the executive’s restricted stockshares would vest in full and (c) performance shares would be earned based on actual performance as of the date of the change in control (if determinable), otherwise based on target performance, and these earned shares would vest at the time of the qualifying termination. In addition, if the successor following a change in control declines to assume Frontier’s obligations with respect to the executive’s performance shares, the earned performance shares would vest upon the change in control, regardless of whether employment was terminated.
Notwithstanding any of the above disclosures, if Mr. Bruha is terminated by the Company other than for cause, he would be eligible to receive benefits under our standard severance program, along with two months of subsidized COBRA coverage at the active employee rate.
Mr. McBride voluntarily left the Company during 2018 and, as such, did not receive any severance amounts.
To the extent an active NEO would be subject to any excise taxes under Section 280G of the Internal Revenue Code, the amounts he or she would be entitled to receive would be “capped” to avoid any excise tax unless the total payments to be received by him or her without regard to a cap would result in a higher after-tax benefit. The executive would be responsible for paying any required excise tax.
The severance factors for our active NEOs areas of December 31, 2018 were as follows:
| Executive | Severance Factor in Non- Change in Control Situations | Severance Factor in | Severance Factor in Non- Change in Control Situations | Severance Factor in Change in Control Situations | ||||||||||||
Daniel J. McCarthy | 2.25 | 3.00 | 2.25 | 3.00 | ||||||||||||
R. Perley McBride | 1.25 | 2.00 | ||||||||||||||
Sheldon L. Bruha | 0.30 | 0.30 | ||||||||||||||
John Maduri | 1.00 | 2.00 | ||||||||||||||
Steve Gable | 1.00 | 2.00 | ||||||||||||||
Kenneth W. Arndt | 1.00 | 2.00 | 1.00 | 2.00 | ||||||||||||
Steve Gable | 1.00 | 2.00 | ||||||||||||||
John Lass | 1.00 | 1.50 | ||||||||||||||
Each NEO would be required to enter into a separateseparation agreement in which the NEO releases claims against Frontier in order to receive the severance payments.
The following table sets forth certain potential payments that would have been made to each NEO had his or her employment been terminated as of December 31, 20172018 under various scenarios, including a change in control. The information for Messrs. McCarthy, Arndt and Lass do not include their pension benefits, which are set forth under “Pension Benefits.”
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EXECUTIVE COMPENSATION
Because payments to be made to an NEO depend on several factors, actual amounts to be paid out upon an NEO’s termination of employment can only be determined at the time of separation from Frontier.
| Payment Type | D. McCarthy | R. P. McBride | K. Arndt | S. Gable | J. Lass | C. McKenney(1) | ||||||||||||||||||
Termination without Cause or Resignation for Good Reason (no | ||||||||||||||||||||||||
Base Salary(2) | $ | 2,250,000 | $ | 812,500 | $ | 500,000 | $ | 470,000 | $ | 439,875 | — | |||||||||||||
Bonus(2) | $ | 3,375,000 | — | — | — | — | — | |||||||||||||||||
Value of Accelerated Restricted Stock(3) | $ | 782,213 | — | — | — | — | — | |||||||||||||||||
Value of Accelerated Performance Shares(4) | $ | 515,727 | — | — | — | — | — | |||||||||||||||||
Other Benefits(5) | $ | 32,359 | $ | 17,528 | $ | 16,185 | $ | 16,185 | $ | 2,081 | — | |||||||||||||
Total | $ | 6,955,299 | $ | 830,028 | $ | 516,185 | $ | 486,185 | $ | 441,956 | — | |||||||||||||
Death or Disability | ||||||||||||||||||||||||
Base Salary | $ | 500,000 | — | — | — | — | — | |||||||||||||||||
Bonus | $ | 1,500,000 | — | — | — | — | — | |||||||||||||||||
Value of Accelerated Restricted Stock(3) | $ | 782,213 | — | — | — | — | — | |||||||||||||||||
Value of Accelerated Performance Shares(4) | $ | 515,727 | — | — | — | — | — | |||||||||||||||||
Other Benefits(5) | $ | 32,359 | — | — | — | — | — | |||||||||||||||||
Total | $ | 3,330,259 | — | — | — | — | — | |||||||||||||||||
Termination without Cause or Resignation for Good Reason (in connection with CIC) | ||||||||||||||||||||||||
Base Salary(6) | $ | 3,000,000 | $ | 1,300,000 | $ | 1,000,000 | $ | 940,000 | $ | 659,813 | — | |||||||||||||
Bonus(6) | $ | 4,500,000 | $ | 1,300,000 | $ | 1,000,000 | $ | 940,000 | $ | 659,813 | — | |||||||||||||
Value of Accelerated Restricted Stock(3) | $ | 782,213 | $ | 205,477 | $ | 150,728 | $ | 135,585 | $ | 147,584 | — | |||||||||||||
Value of Accelerated Performance Shares(7) | $ | 235,388 | $ | 45,179 | $ | 32,056 | $ | 55,964 | $ | 46,928 | — | |||||||||||||
Other Benefits(5) | $ | 32,359 | $ | 17,528 | $ | 16,185 | $ | 16,185 | $ | 2,081 | — | |||||||||||||
Total | $ | 8,549,960 | $ | 2,868,184 | $ | 2,198,969 | $ | 2,087,734 | $ | 1,516,218 | — | |||||||||||||
Payment Type | D. McCarthy | S. Bruha | J. Maduri | S. Gable | K. Arndt | ||||||||||
Termination without Cause or Resignation for Good Reason (no CIC) | |||||||||||||||
Base Salary(1) | $ | 2,250,000 | $ | 95,385 | $ | 625,000 | $ | 500,000 | $ | 600,000 | |||||
Bonus(1) | $ | 3,375,000 | — | — | — | — | |||||||||
Value of Accelerated Restricted Shares(2) | $ | 1,198,468 | — | — | — | — | |||||||||
Value of Accelerated Performance Shares(3) | $ | 808,574 | — | — | — | — | |||||||||
Other Benefits(4) | $ | 31,511 | $ | 1,738 | $ | 13,377 | $ | 16,721 | $ | 15,575 | |||||
Total | $ | 7,663,553 | $ | 97,123 | $ | 638,377 | $ | 516,721 | $ | 615,575 | |||||
Death or Disability | |||||||||||||||
Base Salary | $ | 500,000 | — | — | — | — | |||||||||
Bonus | $ | 1,500,000 | — | — | — | — | |||||||||
Value of Accelerated Restricted Shares(2) | $ | 1,198,468 | — | — | — | — | |||||||||
Value of Accelerated Performance Shares(3) | $ | 808,574 | — | — | — | — | |||||||||
Other Benefits(4) | $ | 31,511 | — | — | — | — | |||||||||
Total | $ | 4,038,553 | — | — | — | — | |||||||||
Termination without Cause or Resignation for Good Reason (in connection with CIC) | |||||||||||||||
Base Salary(5) | $ | 3,000,000 | $ | 95,385 | $ | 1,250,000 | $ | 1,000,000 | $ | 1,200,000 | |||||
Bonus(5) | $ | 4,500,000 | — | $ | 1,250,000 | $ | 1,000,000 | $ | 1,200,000 | ||||||
Value of Accelerated Restricted Shares(2) | $ | 1,198,468 | $ | 29,498 | $ | 566,064 | $ | 342,311 | $ | 281,102 | |||||
Value of Accelerated Performance Shares(6) | $ | 307,700 | $ | 22,667 | $ | 338,950 | $ | 259,088 | $ | 205,819 | |||||
Other Benefits(4) | $ | 31,511 | $ | 1,738 | $ | 13,377 | $ | 16,721 | $ | 15,575 | |||||
Total | $ | 9,037,679 | $ | 149,288 | $ | 3,418,031 | $ | 2,618,120 | $ | 2,302,296 | |||||
| For Mr. McCarthy, the amount shown is equal to 2.25 times his |
| (2) | For Mr. McCarthy, all restricted |
| (3) | Dollar value of the |
| (4) | Under the Severance Plan, Mr. McCarthy is entitled to an amount equal to 18 times the monthly COBRA charge for the type of employer-provided health coverage in effect for the CEO. This amount will be paid in lump sum within 60 days following termination. All other NEOs are entitled to purchase from Frontier up to |
| (5) | Amounts shown are payable in lump sum upon termination of the NEO without cause or by the NEO with good reason in connection with a change of |
EXECUTIVE COMPENSATION
| Amounts shown represent the dollar value of performance shares earned as of December 31, |
Compensation for Ms. McKenney
As previously discussed, Frontier and Ms. McKenney entered into a Separation Agreement and Release, originally dated June 30, 2017. As consideration for Ms. McKenney’s compliance with the terms of the Separation Agreement, the Compensation Committee agreed to pay her $1,218,465 (in three installments), COBRA premiums for 15 months along with $46,815 for unused accrued vacation. This amount was based on her base salary, her 2017 target bonus and the value of her unvested restricted shares due to vest in February 2018. The compensation arrangements in place for Ms. McKenney prior to her departure were established in accordance with the general processes outlined above for our NEOs. Upon her departure, Ms. McKenney forfeited her other unvested equity incentive awards.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Ms. Ruesterholz, as Chair, Messrs. Bynoe and Wick, and Ms. Ferguson. Mr. Wick is not standing for reelection at the Annual Meeting. None of our executive officers served as (i) a member of the compensation committee (or other committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our Compensation Committee; (ii) a director of another entity, one of whose executive officers served on our Compensation Committee; or (iii) a member of the compensation committee (or other committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as one of our directors.
Compensation Policy Risk Analysis
Management annually reviews our compensation policies and practices applicable to all of our employees, including the NEOs, for the purpose of evaluating the risks to Frontier arising from such policies and practices. Each component of our compensation program is evaluated for any risks to Frontier associated with such compensation. Included in these evaluations is an analysis of the likelihood that such compensation components would influence behaviors or decision-making and impact our risk profile. For 2017, risk controls, both entity-level and compensation-related, were identified and evaluated. These controls included:
Corporate governance and Enterprise Risk Management policies;
Oversight of our compensation practices and policies by the Compensation Committee, including the ability to reduce incentive payouts based on factors such as earnings and individual performance;
Frontier’s compensation program design, including the mix of cash and equity compensation, short- and long-term incentive compensation, “fixed” and “variable” compensation and company-wide and individual goals and targets, the use of multiple performance metrics based on the Company Performance Goals, which include financial and other quantitative and qualitative measurements, the use of modest multipliers, and maximum payout limits (in terms of dollars and percentages of base salary);
Performance goals that are set at levels that are sufficiently high to encourage strong performance and support the resulting compensation expense, but within reasonably attainable parameters to discourage pursuit of excessively risky business strategies; and
Meaningful risk mitigators, including substantial stock ownership guidelines, claw-back provisions, anti-hedging/pledging policies, independent Compensation Committee oversight and engagement of an independent consultant that does no other work for Frontier or management.
In February 2018, management reviewed its findings with the Compensation Committee at a meeting at which the Compensation Committee and management engaged in anin-depth discussion of the findings. Based on its review of management’s risk assessment of Frontier’s compensation policies, practices and controls and the Compensation Committee’s evaluation of management’s assessment, the Compensation Committee determined that such policies and practices are not reasonably likely to have a material adverse effect on Frontier.
Frontier Communications Corporation | 50 | 2019 Proxy Statement |
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
Frontier and its Board are committed to excellence in governance and recognize the interestsinterest that our stockholders have expressed in our executive compensation program. As part of our commitment, in 2009, the Board voluntarily adopted a Corporate Governance Guideline, commonly known as“Say-on-Pay, “Say-on-Pay,” to annually provide stockholders with the opportunity to endorse or not endorse compensation paid to the NEOs through consideration of the followingnon-binding advisory resolution:
“Resolved, that the compensation paid to Frontier’s named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and accompanying narrative discussion, is hereby approved.”
We believe that our executive compensation philosophy and programs reinforce our pay for performance culture and are strongly aligned with the long-term interests of our stockholders. The Compensation Committee, which oversees and approves the compensation philosophy and programs, engages in an extensive process to align executive pay, both short- and long-term, with Frontier’s performance and the interests of our stockholders. The Compensation Discussion and Analysis section of this Proxy Statement provides a comprehensive review of our executive compensation philosophy and programs and the rationale for executive compensation decisions, and the accompanying tables and narrative provide details on the compensation paid to our NEOs. We urge you to read this disclosure prior to voting on this proposal.
Our existingSay-on-Pay policy is consistent with Section 14A of the Securities Exchange Act of 1934 adopted in July 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. Stockholders who wish to communicate with our Board or any specific director, including the Chairman, anynon-management director, thenon-management directors as a group, any independent director or the independent directors as a group, on executive compensation or any other matter of stockholder concern, can do so by writing to such director or group of directors at: Frontier Communications Corporation, 401 Merritt 7, Norwalk, Connecticut 06851. Any communication will be forwarded to the director or directors to whom it is addressed.
In accordance with the wishes of our stockholders and best practices, we will provide a say on pay vote annually and the nextSay-on-Pay proposal will be included in our 20192020 proxy statement.
The Board unanimously recommends that you voteFOR this proposal.
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AUDIT COMMITTEE REPORT
The Audit Committee consists of four independent directors, each of whom has been determined by the Board to meet the heightened independence criteria applicable to Audit Committee members and to satisfy the financial literacy requirements of the Nasdaq Listing Rules and the applicable rules of the SEC. The Audit Committee is responsible, under its charter, for oversight of our independent registered public accounting firm, which reports directly to the Audit Committee. The Audit Committee has the authority to retain and terminate the independent registered public accounting firm, to review the scope and terms of the audit and to approve the fees to be charged. The Audit Committee monitors our system of internal control over financial reporting, and management’s certifications as to disclosure controls and procedures and internal controls for financial reporting. Our management and independent registered public accounting firm, not the Audit Committee, are responsible for the planning and conduct of the audit of our consolidated financial statements and determining that the consolidated financial statements are complete and accurate and prepared in accordance with U.S. generally accepted accounting principles.
The Audit Committee has met and held discussions with management, our senior internal auditor and our independent registered public accounting firm (with and without management and our senior internal auditor present) and has reviewed and discussed the audited consolidated financial statements and related internal control over financial reporting with management and our independent registered public accounting firm.
The Audit Committee has also discussed with our independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees.
Our independent registered public accounting firm also provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with our independent registered public accounting firm that firm’s independence.
Based upon the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form10-K for the fiscal year ended December 31, 20172018 for filing with the SEC. The Audit Committee selected KPMG LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2018,2019, which is being presented to stockholders at the meeting for ratification.
Submitted by:
Edward Fraioli, Chair
Leroy T. Barnes Jr.
Diana S. Ferguson
Howard L. Schrott
Submitted by: | ||||
Edward Fraioli, Chair | ||||
Leroy T. Barnes Jr. | ||||
Diana S. Ferguson | ||||
Howard L. Schrott |
Frontier Communications Corporation | 52 | 2019 Proxy Statement |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
In accordance with the Sarbanes-Oxley Act of 2002, the rules of the SEC and the Audit Committee Charter, thepre-approval of the Audit Committee is required for all audit and permissiblenon-audit services that will be provided by KPMG LLP, our independent registered public accounting firm. All of the services of KPMG LLP for 2018 and 2017 and 2016 werepre-approved by the Audit Committee.
The following table sets forth the fees for professional audit services paid by us to KPMG LLP, our independent registered public accounting firm:
2018 | 2017 | |||||
Audit Fees | $ | 6,299,000 | $ | 5,859,000 | ||
Audit-Related Fees | 10,000 | 20,000 | ||||
Tax Fees | 204,637 | 142,804 | ||||
All Other Fees | — | — | ||||
Total | $ | 6,513,637 | $ | 6,021,804 | ||
| 2017 | 2016 | |||||||||
Audit Fees | $ | 5,859,000 | $ | 5,955,000 | ||||||
Audit-Related Fees | 20,000 | 80,000 | ||||||||
Tax Fees | 142,804 | 123,400 | ||||||||
All Other Fees | — | — | ||||||||
Total | $ | 6,021,804 | $ | 6,158,400 | ||||||
Audit Fees
Audit fees relate to professional services rendered in connection with the audit of our annual consolidated financial statements included in our Annual Report on Form10-K and internal control over financial reporting, the review of our quarterly financial statements included in our Quarterly Reports on Form10-Q, the audit of our captive insurance company and audit services provided in connection with other subsidiary audit reports.reports and professional services rendered in connection with Frontier’s debt offerings.
Audit-Related Fees
For 2018 and 2017, audit-related fees primarily relate to professional services rendered in connection with agreed-upon procedure reports. For 2016, audit-related fees primarily relate to professional services rendered in connection with the review of pro forma financials and a registration statement filed.
Tax Fees
Tax fees for 20172018 and 20162017 primarily relate to professional services rendered in connection with the preparation of transactional tax filings. Tax fees for 2018 also include tax consulting services.
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PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The ratification of the selection of KPMG LLP as our independent registered public accounting firm for 20182019 is being submitted to stockholders because we believe that this action follows sound corporate practice and is in the best interests of the stockholders. If the stockholders do not ratify the selection by the affirmative vote of the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the meeting, the Audit Committee will reconsider the selection of the independent registered public accounting firm, but such a vote will not be binding on the Audit Committee. If the stockholders ratify the selection, the Audit Committee, in its discretion, may still direct the appointment of a new independent registered public accounting firm at any time during the year if the Audit Committee believes that this change would be in our and our stockholders’ best interests.
The Board recommends that the stockholders ratify the selection of KPMG LLP, registered public accounting firm, as the independent registered public accounting firm to audit our accounts and those of our subsidiaries for 2018.2019. KPMG has served as our independent registered public accounting firm since 1936, and the Audit Committee believes that the continued retention of KPMG as our independent registered public accounting firm is in the best interests of Frontier and our stockholders. The Audit Committee approved the selection of KPMG LLP as our independent registered public accounting firm for 2018.2019.
A representative of KPMG is expected to participate at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions.
The Board unanimously recommends that you voteFOR this proposal.
Frontier Communications Corporation | 54 | 2019 Proxy Statement |
PROPOSAL 4: STOCKHOLDER PROPOSAL ON EQUITY COMPENSATION
PROPOSAL 4: STOCKHOLDER PROPOSAL ON EQUITY COMPENSATION
The Proposal
To recommend to the Board of Directors to adopt a policy on making equity awards to senior executives, as follows:
No equity compensation grant may be made to a senior executive at a time when Frontier common stock has a market price that is lower than the grant date market price (taking into account stock dividends and stock splits) of any prior equity compensation grants to such individual. Compliance with this policy is excused if it would result in the violation of any existing contractual obligation or the terms of any existing compensation plan.
Proponent’s Statement in Support
Frontier’s 2017 proxy statement touts the company’s philosophy for awarding executive compensation. A key goal is to create a “clear alignment between the interests of our executives and those of our stockholders.” That goal has not been met. Reported compensation for directors and named executives was a whopping $18.5 million in 2017, the same year that the dividend was suspended, and the stock price declined 83.4%. This dramatic loss of shareholder value cannot be explained by general industry conditions; the S&P Telecom Services Index declined just 1%. Much of this exorbitant compensation consists of equity grants. These multi-million-dollar equity grants are dilutive and costly. It is irresponsible for the Board of Directors to in effect “print currency” indiscriminately at the shareholders’ expense through these equity grants. If the purpose of these grants is to create incentives for executives to work to increase share value, a benefit that would be shared with the owners of the company, that goal would be better accomplished if the executives were not so rewarded when the stock price declines under their management.
Board of Directors’ Statement in Opposition to the Stockholder Proposal on Equity Compensation
The Board of Directors unanimously recommends that you vote AGAINST this stockholder proposal because it would impose a broad and unnecessary restriction on the Board’s ability to determine the appropriate executive compensation program, including the appropriate mix of pay components, to align the goals and interests of our executives with those of Frontier and its stockholders. In addition, the proposal, if adopted, would impose a broad and indiscriminate restriction on equity grants to executive officers.
Executive pay decisions aligned to performance and long-term stockholder interests
The purpose of our executive compensation program is to align the goals and interests of our executives with those of Frontier and its stockholders by rewarding our leadership team for delivering on both short-term and long-term goals. The Compensation Committee continues to review and modify our executive compensation program to better align pay with performance. During 2019, we have realigned our compensation structure both to incent strong performance as we work towards our transformation goals and to retain key executives. In order to determine the appropriate amount and mix of compensation components for executive officers, the Compensation Committee considers many factors, including experience, value provided to Frontier, scope of responsibility, company and individual performance, benchmark data based on our peer group and general industry survey data for comparably sized companies.
Historically, a significant portion of the total compensation for executive officers has been granted in the form of restricted stock awards and performance share awards. There is no assurance that executive officers will actually realize the value attributed to these awards, since the ultimate value of restricted stock and performance shares will depend upon the price of Frontier’s common stock when the vested and earned shares are sold by the executives. In 2017, we reported that the
Frontier Communications Corporation | 55 | 2019 Proxy Statement |
PROPOSAL 4: STOCKHOLDER PROPOSAL ON EQUITY COMPENSATION
2015-2017 performance share awards were earned at 69.9% of target with a share payout at 4.5% of the grant date target value when factoring the decline in our stock price. As a result of not paying a bonus for 2016 and 2017 performance, along with the decrease in our share price, the value realized from our executive compensation program over the past three years has been well below the target value.
Proponent states that it is “irresponsible for the Board of Directors to in effect “print currency” indiscriminately at the shareholders’ expense through these equity grants,” however, the Board’s decisions on executive compensation are deliberate and carefully calibrated to reinforce the company’s performance culture and ensure company goals are aligned throughout the organization. Importantly, as the Company undertakes its transformation program, it is critical for the Company to have a compensation program that is competitive in relation to comparable companies based on size, overall complexity and the nature of our business, in order to attract and retain key executives.
Broad and indiscriminate restriction
The proposal, if adopted, would require that, when determining compensation for senior executives, the Compensation Committee be prohibited from making an equity grant to a senior executive at a time when Frontier common stock has a market price that is lower than the grant date market price of any prior equity compensation grant to such individual. By imposing a flat prohibition, the proposal would prevent equity grants under a range of scenarios in which it would not meet the stated objective of not rewarding executives when “the stock price declines under their management.” For example, the stock price could rise in each of the next four quarters and if the share price were to fall below a prior grant price, even though still holding significant gains, the Committee could not award a new equity grant, placing unnecessary and troublesome limitations on the Compensation Committee’s flexibility to hire, retain and compensate strategic leaders.
For the foregoing reasons,
The Board unanimously recommends that you vote AGAINST this stockholder proposal
Frontier Communications Corporation | 56 | 2019 Proxy Statement |
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table summarizes compensation plans under which our securities are authorized for issuance as of December 31, 2017.2018.
| (a) | (b) | (c) | ||||||||||
| Plan Category | Number of securities to be issued upon exercise of | Weighted-average exercise price of outstanding options, warrants and rights(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders | 511,351 | $ | 105.45 | 4,361,000 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 511,351 | $ | 105.45 | 4,361,000 | ||||||||
(a) | (b) | (c) | |||||||
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||
Equity compensation plans approved by security holders | 846,934 | $ | 105.45 | 2,607,000 | |||||
Equity compensation plans not approved by security holders | — | — | — | ||||||
Total | 846,934 | $ | 105.45 | 2,607,000 | |||||
| (1) | Reflects the number of outstanding performance shares (assuming achievement of target performance), phantom units and options. |
| (2) | The weighted-average exercise price excludes performance shares and phantom units, as they have no exercise price. |
Frontier Communications Corporation | 57 | 2019 Proxy Statement |
ANNUAL REPORT AND COMPANY INFORMATION
A copy of our 20172018 Annual Report to Stockholders is being furnished to stockholders concurrently herewith. Stockholders may request another free copy of our 20172018 Annual Report from:
Frontier Communications Corporation
Attn: Investor Relations Department
401 Merritt 7
Norwalk, Connecticut 06851
Telephone:(866) 491-5249
email: ir@ftr.com
Our proxy materials are also available on the Investor Relations page of our website,www.frontier.com. The information on our website is not incorporated herein by reference.
Frontier Communications Corporation | 58 | 2019 Proxy Statement |
PROPOSALS BY STOCKHOLDERS
Proposals that stockholders wish to include in our proxy statement and form of proxy for presentation at our 20192020 annual stockholders meeting must be received by us no later than November 27, 2018.26, 2019. Such proposals also must comply with SEC regulations under Rule14a-8 of the Securities Exchange Act of 1934, as amended, regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
Secretary
Frontier Communications Corporation
401 Merritt 7
Norwalk, Connecticut 06851
Fax:(203) 614-4651
For a stockholder proposal that is not intended to be included in our 20192020 proxy statement under Rule14a-8, our bylaws require that the stockholder’s written proposal be submitted to our Secretary at the address above:
On or after the close of business on January 9, 2019;8, 2020; and
In such a case, the notice of proposal must meet certain requirements set forth in our bylaws. Such proposals are not required to be included in our proxy materials.
Frontier Communications Corporation | 59 | 2019 Proxy Statement |
401 Merritt 7
Norwalk, Connecticut 06851
20182019 Annual Meeting of Stockholders
10:00 a.m., Eastern Time, May 9, 2018
7, 2019
Virtual Meeting, visit: www.virtualshareholdermeeting.com/FTR2018
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Information about Delivery of Stockholder Material
“Householding”FTR2019
In an effort to minimize costs and the amount of duplicate material a household receives, we are sending one annual report and proxy statement to accounts sharing the same last name and address. If you would like another copy, and/or wish to receive financial reports for each account in your household in the future, please contact our transfer agent, Computershare Investor Services (in writing: P.O. Box 505005, Louisville, KY 40233; by telephone: in the U.S., Puerto Rico and Canada,1-877-770-0496; outside the U.S., Puerto Rico and Canada,1-781-575-2382).
Vote Your Proxy Online
You can use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M., Eastern Time, the day before the meeting date. Have your proxy card in hand when you access the website (www. proxyvote.com), and follow the instructions to obtain your records and to create an electronic voting instruction form. There is no charge to you for this service, but there may be costs associated with access to the Internet, such as usage charges for your Internet service provider and/or telephone companies.
Electronic Delivery of Future Proxy Material
After submitting your proxy vote online, you may elect to receive future proxy material (annual report, proxy statement, etc.) from Frontier electronically. Before exitingwww.proxyvote.com, click the button for “Electronic Delivery” and enter your email address. Then click the button indicating your consent to receive future information in an electronic format. Next year, you will receive an email providing information about where to locate the annual report and proxy statement online.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Combined Document is available atwww.proxyvote.com.
E19370-P87973-Z69523
FRONTIER COMMUNICATIONS CORPORATIONTABLE OF CONTENTS
Proxy Solicited on Behalf of Board of Directors
The undersigned hereby appoints Leroy T. Barnes, Jr. and Howard L. Schrott or either of them with full power of substitution, as proxies to vote at the Annual Meeting of Stockholders of Frontier Communications Corporation (the “Company”) to be held on May 9, 2018, at 10:00 a.m. Eastern Time, via the Internet at www.virtualshareholdermeeting.com/FTR2018, and at any adjournments thereof, hereby revoking any proxies heretofore given, to vote all shares of common stock of the Company held or owned by the undersigned as directed, and in their discretion upon such other matters as may come before the meeting or any adjournment thereof.
If the undersigned holds shares of Frontier common stock under the Frontier 401(K) Savings Plan and/or the Frontier Communications Corporate Services Inc. Savings and Security Plan forMid-Atlantic Associates, this proxy represents the number of shares allocable to the undersigned under the Plans as well as other shares registered in the undersigned’s name. The undersigned hereby authorizes and directs Fidelity Investments, as the Trustee under the Plans, to vote all shares of stock allocated to the undersigned under the provisions of the Plans and appoints Leroy T. Barnes, Jr. and Howard L. Schrott or either of them, with full power of substitution, proxies to vote at the Annual Meeting of Stockholders of the Company to be held on May 9, 2018 at 10:00 a.m. Eastern Time, via the Internet at www.virtualshareholdermeeting.com/FTR2018, and at any adjournments thereof. Said Trustee is authorized and directed to execute and deliver a written proxy appointing such individuals to act as proxies as directed, and, in their discretion, upon such other matters as may come before the meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
