TABLE OF CONTENTS
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 for
out-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,$20,000, 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.
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Frontier Communications Corporation | | 8 | | 2018 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
How do I contactIt is important that proxies be returned promptly. Whether or not you plan to attend the Transfer Agent?
Our transfer agent is Computershare Investor Services. You should contactvirtual annual meeting, we urge you to vote your shares via the transfer agent, at the phonetoll-free telephone 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 43078
Providence, RI 02940-3078
If by Overnight Courier:
Computershare Investor Services
250 Royall Street
Canton, MA 02021-1011
website:www.computershare.com/investor
Telephone:(877) 770-0496 (inover the U.S., Puerto Rico and Canada)
or(781) 575-2382 (outside the U.S., Puerto Rico and Canada)
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Frontier Communications Corporation | | 9 | | 2018 Proxy Statement |
OWNERSHIP OF COMMON STOCK
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 officersInternet, as a group. The information is as of March 12, 2018 unless otherwise indicated. 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.
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| 5% Beneficial Owners | | Number of Shares
and Nature of
Beneficial Ownership | | | Percent
of Class | |
BlackRock, Inc.(a) | | | 15,219,684 | | | | 19.4 | % |
The Vanguard Group(b) | | | 10,263,864 | | | | 13.1 | % |
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Non-Employee Directors & Director Nominees | | Number of Shares
and Nature of
Beneficial Ownership | | | Percent
of Class | |
Leroy T. Barnes Jr.
| | | 28,065.22 | (c) | | | * | |
Peter C.B. Bynoe
| | | 27,474.90 | (d) | | | * | |
Diana S. Ferguson
| | | 15,189.14 | (e) | | | * | |
Edward Fraioli
| | | 29,133.33 | (f) | | | * | |
Pamela D.A. Reeve
| | | 33,658.49 | (g) | | | * | |
Virginia P. Ruesterholz
| | | 21,085.02 | (h) | | | * | |
Howard L. Schrott
| | | 31,688.04 | (i) | | | * | |
Mark Shapiro
| | | 34,578.29 | (j) | | | * | |
Myron A. Wick, III
| | | 38,046.22 | (k) | | | * | |
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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
| | | 134,930 | (l) | | | * | |
Steve Gable
| | | 158,693 | (m) | | | * | |
John L. Lass
| | | 130,503 | (n) | | | * | |
R. Perley McBride
| | | 250,323 | (o) | | | * | |
Daniel J. McCarthy
| | | 617,565 | (p) | | | * | |
Cecilia K. McKenney
| | | 91,856 | (q) | | | * | |
All directors and executive officers as a group (16 persons)
| | | 1,811,277.64 | (r) | | | 2.3 | % |
(a) | The number of shares is as of December 31, 2017 and based on a Schedule 13G filed on January 9, 2018 by BlackRock, Inc. The business address of this beneficial owner is 55 East 52nd Street, New York, NY 10055. Such Schedule 13G discloses that BlackRock, Inc. has sole voting power over 14,970,822 shares and sole dispositive power over 15,219,684 shares and that the shares beneficially owned by BlackRock, Inc. are held by subsidiaries of BlackRock, Inc. |
(b) | The number of shares is as of December 31, 2017 and based on a Schedule 13G filed on February 9, 2018 by The Vanguard Group, Inc. The business address of this beneficial owner is 100 Vanguard Blvd., Malvern, PA 19355. Such Schedule 13G discloses that The Vanguard Group, Inc. has sole voting power over 86,357 shares, shared voting power over 8,999 shares, sole dispositive power over 10,174,023 shares and shared dispositive power over 89,841 shares and that, of the shares beneficially owned by The Vanguard Group, Inc., 95,356 shares are held by wholly-owned subsidiaries of The Vanguard Group, Inc. |
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Frontier Communications Corporation | | 10 | | 2018 Proxy Statement |
OWNERSHIP OF COMMON STOCK
(c) | Consists of 27,507.22 shares that may be acquired upon the redemption of stock units and 558 shares held by family trust. Directors may elect to redeem stock units upon termination of service in the form of cash or shares of our common stock. See “Director Compensation,” below. |
(d) | Includes 27,218.90 shares that may be acquired upon the redemption of stock units. |
(e) | Consists of 15,189.14 shares that may be acquired upon the redemption of stock units. |
(f) | Includes 666.67 shares that may be acquired upon the exercise of currently exercisable stock options and 27,133.66 shares that may be acquired upon the redemption of stock units. |
(g) | Includes 32,992.49 shares that may be acquired upon the redemption of stock units. |
(h) | Consists of 21,085.02 shares that may be acquired upon the redemption of stock units. |
(i) | Includes 31,355.04 shares that may be acquired upon the redemption of stock units. |
(j) | Includes 666.67 shares that may be acquired upon the exercise of currently exercisable stock options, 23,232.62 shares that may be acquired upon the redemption of stock units and 3,999 shares that may be acquired upon the conversion of Series A Mandatory Convertible Preferred Stock (assuming the maximum conversion rate). |
(k) | Consists of 35,380.22 shares that may be acquired upon the redemption of stock units and 2,666 shares held by family trusts. As previously disclosed, Mr. Wick will not stand forre-election at the Annual Meeting. |
(l) | Includes 118,110 restricted shares over which Mr. Arndt has sole voting power but no dispositive power. |
(m) | Includes 143,828 restricted shares over which Mr. Gable has sole voting power but no dispositive power. |
(n) | Includes 104,402 restricted shares over which Mr. Lass has sole voting power but no dispositive power. |
(o) | Includes 239,787 restricted shares over which Mr. McBride has sole voting power but no dispositive power. |
(p) | Includes 503,558 restricted shares over which Mr. McCarthy has sole voting power but no dispositive power and 1,259 shares held in a 401(k) plan. |
(q) | Based on a Form 4 filed by Ms. McKenney on February 27, 2017. Ms. McKenney’s employment with the Company ended on June 30, 2017. |
(r) | Includes 1,381,561 restricted shares over which executive officers have sole voting power but no dispositive power, 1,333.33 shares that may be acquired pursuant to the exercise of currently exercisable stock options by independent directors, 242,427.64 shares that may be acquired upon the redemption of stock units by independent directors and 5,332 shares that may be acquired by an independent director and executive officer upon the conversion of Series A Mandatory Convertible Preferred Stock (assuming the maximum conversion rate). |
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, all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis.
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Frontier Communications Corporation | | 11 | | 2018 Proxy Statement |
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS
Election Process
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.
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.
Nominations
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 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 2019 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.
Director Qualifications
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 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.
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Frontier Communications Corporation | | 12 | | 2018 Proxy Statement |
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.
In the interest of promoting diversity and new perspectives on the Board, the Board has adopted a policy 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 the Board since 2005, elected not to stand forre-election at the 2017 Annual Meeting. Mr. Wick, a Board member since 2005, has elected not to stand forre-election at the 2018 Annual Meeting, and, assuming Mr. Barnes isre-elected at this year’s meeting, the Board expects Mr. Barnes, a Board member since 2005, not to stand forre-election at the 2019 Annual Meeting. Further, the Board has engaged an executive search firm to help it identify, evaluate and recruit potential director candidates.
Director Nominees
At the Annual Meeting, nine nominees are to be elected and each will hold office until the next annual stockholder 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. Wick will not seekre-election at the Annual Meeting. Mr. Wick has served on the Board since 2005, and Frontier thanks Mr. Wick for his many years of dedication and service to the Company.
The Board unanimously recommends that you voteFOR the election of the following director nominees:
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Leroy T. Barnes Jr.
Age: 66
Independent Director
Director Since:
May 2005
Board Committees:
Audit
Retirement Plan (Chair)
| | Background
Prior to his retirement, Mr. Barnes was Vice President and Treasurer of PG&E Corp., a holding company for energy-based businesses (2001 to 2005), and Vice President and Treasurer of Gap Inc., a clothing retailer (1997 to 2001). Before joining Gap, he held various executive positions with Pacific Telesis Group/SBC Communications, a Regional Bell Operating Company.
Qualifications
Mr. Barnes’ experience as an executive at PG&E, Gap and Pacific Telesis, as well as his service on the boards of other public companies, allows him to contribute valuable insight in the areas of corporate finance and risk management.
Other Directorships
The McClatchy Company
Principal Funds, Inc. (three investment company directorships)
Past Directorships
Herbalife Ltd. (December 2004 to February 2015)
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Frontier Communications Corporation | | 13 | | 2018 Proxy Statement |
PROPOSAL 1: ELECTION OF DIRECTORS
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Peter C.B. Bynoe
Age:67
Independent Director
Director Since:
October 2007
Board Committees:
Compensation
Nominating and Corporate Governance (Chair)
| | Background
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 Real Industry, Inc.
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Diana S. Ferguson
Age: 54
Independent Director
Director Since:
October 2014
Board Committees:
Audit
Compensation
| | Background
Ms. Ferguson has been Principal of Scarlett Investments, LLC, a firm that invests in and advises middle market businesses, since August 2013. Ms. Ferguson served as Chief Financial Officer of the Chicago Board of Education (February 2010 to May 2011) and as Senior Vice President and Chief Financial Officer of The Folgers Coffee Company, a maker of coffee products (April 2008 to November 2008), until Folgers was sold in 2008. Prior to joining Folgers, Ms. Ferguson was Executive Vice President and Chief Financial Officer of Merisant Worldwide, Inc., a maker oftable-top sweeteners and sweetened food products (April 2007 to March 2008). Ms. Ferguson also served as Chief Financial Officer of Sara Lee Foodservice, a division of Sara Lee Corporation (June 2006 to March 2007), and in a number of leadership positions at Sara Lee Corporation including Senior Vice President of Strategy and Corporate Development and Treasurer.
Qualifications
Ms. Ferguson’s broad experience and executive leadership allow her to provide the Board with valuable perspectives on financial, corporate and strategic matters.
Past Directorships
TreeHouse Foods, Inc. (2008 – 2016)
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Frontier Communications Corporation | | 14 | | 2018 Proxy Statement |
PROPOSAL 1: ELECTION OF DIRECTORS
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Edward Fraioli
Age: 71
Independent Director
Director Since:
July 2010
Board Committees:
Audit (Chair)
Retirement Plan
| | Background
Mr. Fraioli currently acts as a business consultant, which he has done since his retirement in July 2010. Prior to his retirement, Mr. Fraioli was a partner at Ernst & Young, a public accounting firm, since 1983. During his tenure at Ernst & Young, he served as Professional Practice Director for Ernst & Young’s Private Equity practice (2008 to July 2010), Global Vice Chairman for Independence Matters within Global Quality and Risk Management (2005 to 2008) and as lead audit partner on a number of public and global companies.
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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Daniel J. McCarthy
Age: 53
Director Since:
May 2014
| | Background
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 as a Trustee of Sacred Heart University in Fairfield, Connecticut for the Diocese of Bridgeport, Connecticut. He is a member of the Board of Directors of the Western Connecticut Health Network, the Board of Directors of the Business Council of Fairfield County, and a member of the Business Roundtable.
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.
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Frontier Communications Corporation | | 15 | | 2018 Proxy Statement |
PROPOSAL 1: ELECTION OF DIRECTORS
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Pamela D.A. Reeve
(Chairman)
Age:68
Independent Director
Director Since:
July 2010
| | Background
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 Sonus Networks, Inc.
Past Directorships
LiveWire Mobile, Inc. (1997 to November 2009)
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Virginia P. Ruesterholz
Age: 56
Independent Director
Director Since:
August 2013
Board Committee:
Compensation (Chair)
Retirement Plan
| | Background
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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Frontier Communications Corporation | | 16 | | 2018 Proxy Statement |
PROPOSAL 1: ELECTION OF DIRECTORS
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Howard L. Schrott
Age: 63
Independent Director
Director Since:
July 2005
Board Committees:
Audit
Nominating and
Corporate Governance
| | Background
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 Governor of the Indianapolis Museum of Art and on the Board of Directors of Metropolitan Indianapolis Public Media, Inc.
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 to 2006)
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Mark Shapiro
Age: 48
Independent Director
Director Since:
July 2010
Board Committee:
Retirement Plan
| | Background
Mr. Shapiro is theCo-President of WME/IMG, a global leader in sports, fashion, entertainment and media. Prior to joining WME/IMG in September 2014, he served as Chief Executive Officer and an Executive Producer of Dick Clark Productions, an independent producer of television programming (May 2010 to September 2014), and as a Director, President and Chief Executive Officer of Six Flags, Inc., a family-oriented entertainment company (December 2005 to May 2010). Prior to joining Six Flags, Mr. Shapiro spent 12 years at ESPN, Inc., where he served in various capacities, including Executive Vice President, Programming and Production.
Qualifications
Mr. Shapiro provides the Board with valuable knowledge of operations, strategy and consumer services. His experience as a senior-level executive at WME/IMG, Dick Clark Productions and Six Flags provides him with important perspectives on content creation, marketing and branding.
Other Directorships
Live Nation Entertainment, Inc.
Equity Residential
Papa John’s International, Inc.
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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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Frontier Communications Corporation | | 17 | | 2018 Proxy Statement |
DIRECTOR COMPENSATION
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, $20,000 for the Compensation Committee, $15,000 for the Retirement Plan Committee and $15,000 for the Nominating and Corporate Governance Committee).
Directors may elect, by December 31 of the prior year, whether to receive the 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 is 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, eachnon-employee director received a $120,000 fee in the form of stock units. Stock units for fees are earned quarterly and credited to the director’s account on the last business day of the quarter in which the fees are earned.
The number of stock units credited equals the amount of the retainer, stipend or fee (as appropriate) divided by the closing price of our common stock on the credit date of the stock units. We hold all stock units until a director’s termination of service, at which time the units are redeemable, at the director’s election, in either cash or in shares of our common stock.
The following table sets forth compensation information earned for 2017 by eachnon-employee director.
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| Name | | Director
Compensation
Paid in Cash ($) | | | 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 | |
(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 2017. For a discussion of valuation assumptions, see Note 11 to the Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended December 31, 2017. Dividends are paid on stock units held by directors at the same rate and at the same time as we pay dividends on shares of our common stock. No above-market or preferential dividends were paid with respect to any stock units. Dividends on stock units are paid in the form of additional stock units. |
(2) | Departed the Board after not standing for reelection at the 2017 Annual Meeting. |
| At December 31, 2017, 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
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Frontier Communications Corporation | | 18 | | 2018 Proxy Statement |
DIRECTOR COMPENSATION
| 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. |
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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Frontier Communications Corporation | | 19 | | 2018 Proxy Statement |
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
We maintain corporate governance policies and practices that reflect what the Board believes provide appropriate oversight, leadership and independence as well as those required by 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.
Leadership Structure
Our Board is led by Pamela D.A. Reeve, who becamenon-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. 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. The Board will continue to evaluate our leadership structure based on the best interests of Frontier and our stockholders.
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The Role of the Chairman: |
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• 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.
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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 Governance Committee reviews and considers succession development plans for the CEO and the development of 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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Frontier Communications Corporation | | 20 | | 2018 Proxy Statement |
CORPORATE GOVERNANCE
Chief Executive Officer Pay Ratio
We determined that the 2017 median annual total compensation of all our employees who were employed as of December 31, 2017, other than our CEO, Dan McCarthy, was $101,408; Dan McCarthy’s 2017 annual total compensation was $6,038,195; and the ratio of these amounts was 60:1. As of December 31, 2017, our total population consisted of 22,700 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.
Director Independence
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 serves 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 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.
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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;
Identify/consider new and emerging risks;
Assess the implementation status/effectiveness of each mitigation strategy; and
Identify changes to mitigation strategies, if necessary.
Attendance at Meetings
In 2017, the Board held 11 meetings. All of our directors attended over 75% of the meetings of the Board and committees on which they served in 2017. In accordance with our policy, all members of the Board attended last year’s annual meeting of stockholders.
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CORPORATE GOVERNANCE
Committees of the Board
The Board has four standing committees: Audit, Compensation, Nominating and Corporate Governance, and Retirement Plan. Each committee is composed solely of independent directors and 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 2017: 6 |
Chair:
Edward Fraioli
Other Committee Members:
Leroy T. Barnes Jr.
Diana S. Ferguson
Howard L. Schrott
| | Primary Responsibilities:
• 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
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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.
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Compensation Committee | | Number of Meetings in 2017: 8 |
Chair:
Virginia P. Ruesterholz
Other Committee Members:
Peter C.B. Bynoe
Diana S. Ferguson
Myron A. Wick, III*
| | Primary Responsibilities:
• 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
• 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
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Each Compensation Committee member is independent, an “outside director” under Section 162(m) of the Internal Revenue Code and a“non-employee director” for purposes of Rule16b-3 of the Exchange Act |
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* Through the date of the Annual Meeting.
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CORPORATE GOVERNANCE
| | |
Nominating and Corporate Governance Committee | | Number of Meetings in 2017: 4 |
| | |
Chair:
Peter C.B. Bynoe
Other Committee Members:
Howard L. Schrott
Myron A. Wick, III*
| | Primary Responsibilities:
• Conducts annual evaluation of the Board and its committees
• Recommends candidates for nomination, election or appointment to the Board and its committees
• Engages in CEO succession planning efforts and executive talent development
• Takes a leadership role in shaping our corporate governance, including developing and recommending to the Board our Corporate Governance Guidelines
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Each Nominating and Corporate Governance committee member is independent |
* | Through the date of the Annual Meeting. The Board expects to appoint Ms. Reeve to serve as a member of the Nominating and Corporate Governance Committee following Mr. Wick’s departure from the Nominating and Corporate Governance Committee. |
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Retirement Plan Committee | | Number of Meetings in 2017: 3 |
| | |
Chair:
Leroy T. Barnes Jr.
Other Committee Members:
Edward Fraioli
Virginia P. Ruesterholz
Mark Shapiro
| | Primary Responsibilities:
• 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
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Each Retirement Plan Committee member is independent |
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 and 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.
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
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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 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.
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EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Named Executive Officers
| | |
Daniel J. McCarthy
| | President and Chief Executive Officer |
R. Perley McBride
| | Executive Vice President and Chief Financial Officer |
Kenneth W. Arndt
| | Executive Vice President, Commercial Sales |
Steve Gable
| | Executive Vice President and Chief Technology Officer |
John J. Lass
| | Executive Vice President, Customer Operations |
Cecilia K. McKenney*
| | Executive Vice President, Consumer Sales and Marketing |
Ms. | McKenney stepped down as Frontier’s Executive Vice President, Consumer Sales and Marketing on June 30, 2017. |
Executive Summary
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. 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 performance 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. Frontier had a one year TSR of-84% for 2017 and a three year TSR of-90%. We paid $266 million in common stock dividends and $214 million in preferred stock dividends in 2017 while continuing to invest in expanding and upgrading our network and product offerings.
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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 has a bonus target of $1,500,000, as stated above, no bonus was paid for 2017 performance. A significant portion of his compensation is in the form of restricted stock 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 TDC, including:
Financial and stock performance of Frontier
The implementation of a new organizational structure that allows Frontier to better serve its consumer and business customers
His overall leadership of Frontier
| | | | | | | | | | | | |
| 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 | | | |
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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 in the best interests of Frontier and its stockholders:
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What We Do |
✓ Employ apay-for-performance executive compensation program whereby over 80% of NEO compensation is at risk.
✓ 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 performance.
✓ 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.
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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“gross-ups” for severance payments.
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Impact of 2017Say-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 2017 stockholder vote affirmed the Compensation Committee’s decisions for 2016, with a 79% stockholder approval of our executive compensation program. Despite this significant shareholder support, the Compensation Committee continues to review and modify our executive compensation program to better align pay with performance.
In 2018, the Committee made several changes to the executive compensation program, including:
Modifying the bonus payment schedule to include 60% of 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 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.
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 a long-term incentive tied to both Company performance and relative total shareholder return.
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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. Approximately 88% of our CEO’s target compensation for 2017 performance was at risk. For the other active NEOs as a group, approximately 80% of their target compensation for 2017 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 Realized Pay” below.
Executive Compensation Program Structure
Philosophy
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Maintain 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 TSR and through the use of long-term incentive awards as a significant component of compensation.
Reinforce our performance culture for our NEOs by making a majority of their compensation at risk, i.e., contingent upon relative, specified company and individual performance.
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 that align with Frontier’s business plan for the year. Our NEOs are compensated to the extent they are successful in leading Frontier to achieve these goals for each year.
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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, the primary components of executive compensation were base salary, bonus, restricted stock awards and performance share awards under the 2013 Equity Incentive Plan. Of these components, only base salary represents fixed compensation. Each of the other components was variable and at risk.
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EXECUTIVE COMPENSATION
At its February 2017 meeting, the Compensation Committee set maximum individual payouts under our umbrella bonus pool and the Adjusted EBITDA performance goal for the year, the achievement of which would permit the funding of the payouts. The Company Performance Goals 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.
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.
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Component | | Purpose | | Performance Measures |
Base Salary
(Fixed)
| | • Attract and retain executives
| | • Job scope and experience
• Market pay (we target the median of market using peer group and survey data)
|
Annual Cash Bonus
(At Risk)
| | • Attract and retain executives
• Incentivize and reward executives for achievement ofpre-established, measurable annual performance goals
• Align award with business financials and customer surveys
| | • Company Performance Goals:
• Financial targets (revenue, Adjusted EBITDA, Operating Cash Flow)
• Customer experience targets
• Individual targets and performance adjustments
|
Restricted Stock Awards
(At Risk)
| | • Attract and retain executives
• Align value with stock price because vest ratably over three years
| | • Individual targets and performance adjustments
|
Performance Share Awards
(At Risk)
| | • Attract and retain executives
• Align executive pay with financial performance and TSR over three-year Measurement Period
| | • Free Cash Flow per share targets set annually
• Three-year TSR “modifier” (Frontier TSR as compared to industry peers)
• Individual must maintain satisfactory performance rating throughout period
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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.
| | |
2017 Peer Group |
• Anixter International Inc.
• ADP, LLC
• Cablevision Systems Corporation
• CenturyLink, Inc.
• Charter Communications, Inc.
• DISH Network Corporation
• First Data Corporation
• Harris Corporation
• Juniper Networks, Inc.
• Level 3 Communications, Inc.
| | • Priceline Group Inc.
• Rogers Communications Inc.
• R. R. Donnelley & Sons Company
• Sprint Corporation
• TELUS Corporation
• Thomson Reuters Corporation
• Time Warner Cable Inc.
• T-Mobile US, Inc.
• Windstream Holdings, Inc.
• Xerox Corporation
|
In May 2017, the Compensation Committee determined that it was appropriate to revise Frontier’s peer group to better reflect our size and scale and to include 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, we were just above median in revenue, just below the 75th percentile in EBITDA, just above the 25th percentile in enterprise value and in the lower quartile in market capitalization.
| | |
2018 Peer Group |
Companies listed in bold were added to the peer group. The following companies were removed from the peer group due to relative size or M&A activity: Cablevision Systems Corporation, Charter Communications, Inc., Harris Corporation, R. R. Donnelley & Sons Company, Time Warner Cable Inc. and Xerox Corporation.
|
• Anixter International Inc.
• ADP, LLC
•BCE
• CenturyLink, Inc.
• DISH Network Corporation
• First Data Corporation
• Juniper Networks, Inc.
• Level 3 Communications, Inc.
•News Corp.
• Priceline Group Inc.
| | • Rogers Communications Inc.
•Sirius Corp.
• Sprint Corporation
•Telephone & Data Systems
• TELUS Corporation
• Thomson Reuters Corporation
• T-Mobile US, Inc.
•United States Cellular
• 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.
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EXECUTIVE COMPENSATION
As an initial step in the consideration of survey data, the survey issize-adjusted based on our annual revenue. The 2016 survey data used to determine 2017 compensation wassize-adjusted to approximate Frontier’s 2016 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 account 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 survey data, the Compensation Committee did not review nor is it aware of the specific companies that are included in the surveys.
2017 Realized Pay
The table below supplements the Summary Compensation Table that appears later in this Proxy Statement. The Realized Pay Table showsIf you received a copy of the proxy card by mail, you may return your vote via mail.
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Frontier Communications 
