DEF 14A of Lumen Technologies, Inc.

Filed Apr 5, 2024 · FY20230000018926-24-000046

Open on EDGAR

Director Nominees
Director Nominees
Director Nominees
| Quincy L. Allen Martha Helena Bejar Peter C. Brown | Kevin P. Chilton Steven T. “Terry” Clontz James Fowler | T. Michael Glenn Kate Johnson Hal Stanley Jones | Diankha Linear Laurie Siegel |
Director Nominees
| | The Board unanimously recommends a vote FOR each of the above named nominees for director. |
Director Nominees
| | | 19 | | 2023 ANNUAL REPORT | 2024 PROXY STATEMENT | |
Director Nominees
| Board of Directors and Governance |
Skills and Relevance to Lumen’s Strategy
Skills and Relevance to Lumen’s Strategy Lumen’s NCG Committee uses a skills matrix as part of the Board’s annual evaluation, succession planning and director nomination process. The goal is to ensure our director nominees collectively possess the relevant skills and backgrounds for the Board to effectively discharge its responsibilities. The skills listed in this matrix only indicate the most prominent skills that our Board relies upon. This matrix is not a comprehensive reflection of the wide variety of skills that our director nominees possess and routinely contribute to Lumen.
Skills and Relevance to Lumen’s Strategy
| Board Skills Matrix | | | | | | | | | | | | | | | Skills and Qualifications | | | | | | | | | | | | | | | | Secure the base | Customer Experience Experience in retail and/or consumer services and products. Knowledge of customer segmentation models and influencing behavior in a digital world. | | | | | | | | | | | | | | | Industry Experience Prior experience working in the telecommunications or technology sectors. | | | | | | | | | | | | | | Drive commercial excellence | Global Business Experience Broad leadership experience with multinational companies or in international markets. | | | | | | | | | | | | | | | M&A Experience Experience navigating growth opportunities, analyzing strategic transactions and negotiating complex transactions. | | | | | | | | | | | | | | Innovating for growth | Digital Transformation Driving and implementing transformation enterprise-wide with a focus on simplification and automation. | | | | | | | | | | | | | | | Technology & Innovation Managing technological change and driving technological innovation within an organization. | | | | | | | | | | | | | | Strategy Developing and implementing plans to help achieve long-term objectives. | | | | | | | | | | | | | | | ESG Assessing business operations in conjunction with evolving corporate governance and ESG principles. | | | | | | | | | | | | | | | Finance Significant expertise in corporate finance or financial accounting. | | | | | | | | | | | | | | | HR Leadership Insight into workforce management, diversity and inclusion, compensation design, and culture management. | | | | | | | | | | | | | | | Risk Management/Cybersecurity Knowledge of the evolving landscape of data security, information technology and enterprise risk management programs. | | | | | | | | | | | | | | | Black or African American | | | | | | | | | | | | | | | Hispanic or Latino | | | | | | | | | | | | | | | White | | | | | | | | | | | | | | | Gender (Male/Female) | | M | F | M | M | M | M | M | F | M | F | F | | | Tenure | | 3 | 8 | 15 | 7 | 7 | 1 | 7 | 2 | 4 | 0 | 15 |
Skills and Relevance to Lumen’s Strategy
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Refreshment
Refreshment Board and committee refreshment are regularly reviewed by our NCG Committee. Our Board periodically receives recommendations from the NCG Committee about possible changes designed to staff the Board and its committees with individuals who have the skills, experiences and perspectives necessary to make meaningful contributions to shaping and implementing Lumen’s business strategies. Given the significant change the Company is undergoing, the NCG Committee has adopted an evergreen approach to board refreshment. As such, the ongoing search for candidates whose skills are aligned to the evolving strategic direction of the Company could result in the addition of new board members or the resignation of current board members prior to next year’s annual meeting. In 2023 and for our 2024 slate of nominees, the NCG Committee and Board considered a wide range of factors in assessing the composition of the Board, including: •shareholder input on important elements of Board composition; •skill sets necessary to oversee the successful development and implementation of our business strategies, including our continued evolution to a digital technology company offering a simpler and improved customer experience; •balancing fresh, diverse perspectives with institutional and industry knowledge; •current and long-term needs of the Board; and
Recent Board Changes
Recent Board Changes We have made a concerted effort over the past couple years to refresh and refocus our Board.
Recent Board Changes
| | | | | | | 2021 | 2022 | 2023 | 2024 | | | | | | | | | Quincy L. Allen | Kate Johnson | James Fowler | Diankha Linear | |
Recent Board Changes
At the 2024 annual meeting, Michael Roberts, will retire from the Board. Mr. Roberts has served as a director since 2011. Effective February 21, 2024, we added Diankha Linear to the Board following a vigorous national search. At the 2023 annual meeting, W. Bruce Hanks retired from the Board. Mr. Hanks had served as a director since 1992. Effective August 7, 2023, we added James Fowler to the Board following a robust national search. In November 2022, Jeffrey K. Storey retired from the Board, and our new President and CEO Kate Johnson joined the Board. At the 2021 annual meeting, Virginia Boulet retired from the Board, capping 26 years of service as a director. Effective February 25, 2021, we added Quincy L. Allen to the Board following an extensive national search. We remain actively focused on taking additional steps designed to ensure that our Board continues to be staffed with a collection of individuals meeting our objectives.
Recent Board Changes
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Our Director Nominees
Our Director Nominees The first item for consideration at the meeting will be the election of the following 11 nominees:
Our Director Nominees
| Director since: 2021 Independent 64 years old Committees: •Audit Committee •Human Resources and Compensation Committee(1) | | Quincy L. Allen Experience Quincy L. Allen has over 35 years of leadership experience in the technology services industry. IBM Corporation •Go-To-Market Leader of Cognitive Process Services and Chief Marketing Officer for IBM Cloud (2015 to 2018) Unisys Corporation, a global information technology company •Chief Marketing and Strategy Officer (2012 to 2015) Vertis Communications, a direct marketing and advertising company •Chief Executive Officer (2009 to 2010) Xerox Corporation (1982-2009) •President of the Global Services and Strategic Marketing Group •President of Production Systems Group Other Public Company Directorships •Office Depot •ABM Industries, Inc. | | | | | | Skills: | | | | | | | | | | | | | | | | Customer Experience | Digital Transformation | | Finance | Global Business Experience | Strategy | Technology & Innovation |
Our Director Nominees
(1)Service on this committee to commence May 2024; previously served on the Risk and Security Committee from May 2023 through the effective date of the change.
Our Director Nominees
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Our Director Nominees
| Director since: 2016 Independent 61 years old Committees: •Human Resources and Compensation Committee •Nominating and Corporate Governance Committee (Chair) | | Martha Helena Bejar Experience Martha Helena Bejar is a telecommunications expert with innovative experience. DaGrosa Capital Partners LLC, a private equity firm •Senior Partner/Advisor (2022 to Present) Red Bison Advisory Group, LLC, which provides business advisory services •Co-founder and principal (2014 to 2019) Unium, Inc., a Wi-Fi technology provider •Chief Executive Officer (2016 to 2018) Flow Mobile, Inc., a broadband wireless company •Chief Executive Officer (2012 to 2015) Infocrossing, Inc. (a U.S.-based cloud services affiliate of Wipro Limited) •Chief Executive Officer and Chairperson (2011 to 2012) Wipro’s Information Technology Services affiliate •President of Worldwide Sales and Operations (2009 to 2011) Microsoft Corporation •Corporate Vice President for the communications sector (2007 to 2009) Other •Prior to 2007, Ms. Bejar held diverse executive sales, operations, engineering and R&D positions at Nortel and Bellsouth/AT&T. Other Public Company Directorships •CommVault Systems •Sportsman’s Warehouse Holdings, Inc. •Quadient SA (formerly Neopost) Previous Public Company Directorships •Mitel Networks Corporation •Polycom, Inc. | | | | | | | Skills: | | | | | | | | | | | | | | | | | | Customer Experience | ESG | | Finance | Global Business Experience | Industry Experience | Strategy | Technology & Innovation |
Our Director Nominees
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Our Director Nominees
| Director since: 2009 Independent 65 years old Committees: •Audit Committee •Risk and Security Committee | | Peter C. Brown Experience Peter C. Brown is a business leader with significant, finance, strategy, corporate development, and management experience. Grassmere Partners, LLC, a private investment firm •Chairman (2009-present) AMC Entertainment Inc. •Chairman and Chief Executive Officer (1999 to 2009) •Chief Financial Officer (1991 to 1999) EPR Properties, a NYSE-listed real estate investment trust •Founder and Chairman of the Board (1997-2000) •Member of the Audit Committee and Chairman of the Finance Committee (2010 to present) Other Public Company Directorships Cineverse Corporation (Chairman of the Audit Committee, and serves on the Compensation and Nominating Committees) | | | | | | Skills: | | | | | | | | | | | | | | | | Customer Experience | Digital Transformation | | Finance | Global Business Experience | M&A Experience/ Legal | Strategy |
Our Director Nominees
| Director since: 2017 Independent 69 years old Committees: •Audit Committee •Risk and Security Committee (Chair) | | Kevin P. Chilton Experience Kevin P. Chilton is retired from the U.S. Air Force as a four-star general and contributes considerable cybersecurity, risk management and scientific leadership experience to our Board. Chilton & Associates, LLC, a consulting company •President (2011-present) 34-year military career •Commander, U.S. Strategic Command (2007 to 2011), overseeing the U.S. Department of Defense’s nuclear, space and cyberspace operations; •Commander, U.S. Air Force, Space Command (2006 to 2007) •NASA astronaut (1987 to 1996), including three space shuttle flights; •Deputy Program Manager of the International Space Station (1996 to 1998) Previous Public Company Directorships •AeroJet Rocketdyne •Orbital Sciences Corporation •Orbital ATK, Inc. | | | | | | Skills: | | | | | | | | | | | | | | | | ESG | Finance | | HR Leadership | M&A Experience/Legal | Risk Management/Cybersecurity | Strategy |
Our Director Nominees
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Our Director Nominees
| Director since: 2017 Independent 73 years old Committees: •Human Resources and Compensation Committee •Nominating and Corporate Governance Committee | | Steven T. “Terry” Clontz Experience Steven T. “Terry” Clontz is an innovative technology leader with global telecommunications experience developed throughout his career in several executive roles in the telecommunications industry. StarHub, Ltd., a Singaporean telecommunications company •Chairman of the Board (2016 to 2022) •Chief Executive Officer (1999 to 2010) ST Telemedia Pte. Ltd., a Singaporean investment company specializing in investing in the communications industry •Senior Executive Vice President (International) (2010 to 2017) •Corporate Advisor (2018 to present) IPC Information Systems, a global technology services company headquartered in New York •Chief Executive Officer, President and Director (1995 to 1998) BellSouth International, Inc. •President, Asia-Pacific (1987 to 1995) Temasek International Advisors Pte. Ltd., a Singaporean investment company •Corporate Advisor (2010 to 2022) Other Mr. Clontz’s governance experience includes various positions with other communications companies, including serving as a Board Director of Armor (USA) and chairing the Executive Committee of UMobile (Malaysia). Previous Public Company Directorships •StarHub Ltd. | | | | | | Skills: | | | | | | | | | | | | | | | | Global Business Experience | Industry Experience | | M&A Experience/ Legal | Risk Management/ Cybersecurity | Strategy | Technology & Innovation |
Our Director Nominees
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Our Director Nominees
| Director since: 2023 Independent 52 years old Committees: •Audit Committee •Risk and Security Committee | | James Fowler Experience James Fowler has more than 25 years of leadership experience driving leading digital technology innovation at two Fortune 100 companies. Nationwide Mutual Insurance Company •Chief Technology Officer (2018 to present) General Electric •Group Chief Information Officer (2015 to 2018) •Business Unit Chief Information Officer (2003 to 2015) •Business Unit Six Sigma Blackbelt and Infrastructure Architect (2000 to 2003) Accenture •Technology Manager (1996 to 2000) AT&T •Systems Analyst (1993 to 1996) Other Public Company Directorships •None | | | | | | | | Skills: | | | | | | | | | | | | | | | | | | | | Customer Experience | Digital Transformation | | Global Business Experience | HR Leadership | Industry Experience | Risk Management/ Cybersecurity | Strategy | Technology & Innovation |
Our Director Nominees
| Director since: 2017 Independent 68 years old Chairman of the Board Committees: •Human Resources and Compensation Committee | | T. Michael Glenn Experience T. Michael Glenn’s executive leadership roles bring significant market development, customer, communications, strategic development and operational experience to our Board. FedEx Corp. (1981 to 2016) •President and Chief Executive Officer of FedEx Corporate Services and a member of its five-person Executive Committee responsible for developing and implementing strategic business activities •Executive Vice President of Market Development and Corporate Communications •Senior Vice President, Worldwide Marketing, Customer Service and Corporate Communications for FedEx Express Oak Hill Capital Partners, a private equity firm (2017 to 2020) •Senior Advisor Other Public Company Directorships •Pentair PLC | | | | | | Skills: | | | | | | | | | | | | | | | | Customer Experience | Digital Transformation | | Finance | Global Business Experience | M&A Experience/Legal | Strategy |
Our Director Nominees
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Our Director Nominees
| Director since: 2022 56 years old Committees: •None | | Kate Johnson Experience Kate Johnson is a seasoned technology innovator with a proven track record of driving business transformation success at several of the world’s top Fortune 100 technology companies. Lumen •President and Chief Executive Officer (November 2022 to present) Microsoft Corporation •President of Microsoft U.S., a division of Microsoft Corporation (2017 to 2021) GE Digital •Executive Vice President of GE Digital and Corporate Vice President (2013 to 2017) Oracle •Senior Vice President for North America Technology and Government Consulting (2007 to 2013) Red Hat, a provider of enterprise open source software products •Vice President of Global Services and Strategic Accounts (2004 to 2007) Other Public Company Directorships •United Parcel Service | | | | | | Skills: | | | | | | | | | | | | | | | | Customer Experience | Digital Transformation | | Global Business Experience | Industry Experience | Strategy | Technology & Innovation |
Our Director Nominees
| Director since: 2020 Independent 71 years old Committees: •Audit Committee (Chair) •Risk and Security Committee | | Hal Stanley Jones Experience Hal Stanley Jones brings significant financial, public accounting and controls experience to our Board. Graham Holdings (formerly known as the Washington Post Company) •Chief Financial Officer (2009 to 2017) •Held various senior level positions at The Washington Post Company (1989 to 2008) Kaplan Professional, a subsidiary of The Washington Post •Chief Executive Officer and President (2007 to 2008) PricewaterhouseCoopers •Certified Public Accountant (1977 to 1988) Other Public Company Directorships •Playa Hotels and Resorts, N.V. since 2013, and it became publicly traded in 2017 | | | | | | Skills: | | | | | | | | | | | | | | | | Digital Transformation | Finance | | Global Business Experience | M&A Experience/Legal | Risk Management/ Cybersecurity | Strategy |
Our Director Nominees
| | | 27 | | 2023 ANNUAL REPORT | 2024 PROXY STATEMENT | |
Our Director Nominees
| Director since: 2024 Independent 50 years old Committees: •Nominating and Corporate Governance Committee •Risk and Security Committee | | Diankha Linear Experience Diankha Linear is a senior executive and proven operator with more than 20 years of experience leading across highly regulated technology, logistics, and retail industries. Community, Inc., one of the world’s most trusted customer engagement and communications channels •President & Chief Executive Officer (2021 to present) Convoy, Inc., an American technology and logistics company •General Counsel & Corporate Secretary (2017 to 2021) Nordstrom, an American luxury specialty fashion retailer •Senior Director, Legal (2013 to 2017) Expeditors International of Washington, a United States based global logistics company •Director, Legal (2008 to 2013) Perkins Coie •Legal Counsel (1999 to 2004) 16-year military career (1991 to 2007) •US Army Reserve – Paratrooper/Airborne, Logistics & Transportation •Civil Affairs – Special Operations Forces Unit •Judge Advocate General (JAG) Officer Other Public Company Directorships •None | | | | | Skills: | | | | | | | | | | | | | | Customer Experience | Global Business Experience | | Digital Transformation | Finance | HR Leadership | | | | | | | | | Industry Experience | Strategy | | Risk Management/Cybersecurity | M&A Experience/Legal | Technology & Innovation |
Our Director Nominees
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Our Director Nominees
| Director since: 2009 Independent 68 years old Committees: •Human Resources and Compensation Committee (Chair) •Nominating and Corporate Governance Committee | | Laurie Siegel Experience Laurie Siegel is a business advisor with extensive expertise in human capital and executive compensation. Tyco International •Senior Vice President of Human Resources and Internal Communication (2003 to 2012) Honeywell International, Inc. •Held various senior level positions (1994 to 2002) LAS Advisory Services, a business and human resources consultancy •Founder and Principal since 2012 G100 •Chairman (Talent Consortium) (2013 to 2023) •Senior Advisor Other Public Company Directorships •CECO Environmental Corp. •FactSet Research Systems, Inc. Previous Public Company Directorships •California Resources Corporation •Volt Information Sciences, Inc. | | | | | Skills: | | | | | | | | | | | | | | ESG | Global Business Experience | | HR Leadership | M&A Experience/ Legal | Strategy |
Our Director Nominees
| | | 29 | | 2023 ANNUAL REPORT | 2024 PROXY STATEMENT | |
Director Compensation
Director Compensation
Cash and Stock Payments
| Annual Outside Director Compensation | Additional Annual Cash Compensation Supplemental Board Fee •Non-Executive Chairman of the Board - $200,000 •Non-Executive Vice Chairman of the Board - $100,000(1) | | | | Audit Committee •Chair - $35,000 •Member - $17,500 Nominating and Corporate Governance Committee •Chair - $30,000 •Member - $15,000 | Compensation Committee •Chair - $35,000 •Member - $17,500 Risk and Security Committee •Chair - $30,000 •Member - $15,000 |
2023 Compensation of Outside Directors
2023 Compensation of Outside Directors
Directors’ Compensation
| Name | Fees Earned or Paid In Cash | Stock Awards(1)(2)(3) | All Other Compensation(4) | Total | | Continuing Directors(5): | | | | | | Quincy L. Allen | $132,500 | $201,172 | $2,000 | $335,672 | | Martha H. Bejar | 147,500 | 201,172 | — | 348,672 | | Peter C. Brown | 132,500 | 201,172 | — | 333,672 | | Kevin P. Chilton | 147,500 | 201,172 | — | 348,672 | | Steven T. Clontz | 132,500 | 201,172 | — | 333,672 | | James Fowler(6) | 66,250 | 144,486 | — | 210,736 | | T. Michael Glenn | 317,500 | 201,172 | — | 518,672 | | Hal S. Jones | 145,625 | 201,172 | — | 346,797 | | Laurie A. Siegel | 150,000 | 201,172 | — | 351,172 | | Retiring Director: | | | | | | Michael J. Roberts(7) | 132,500 | 201,172 | — | 333,672 | | Former Director: | | | | | | W. Bruce Hanks(8) | 88,125 | — | 5,652 | 88,131 |
Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN – In March 2019, the Board adopted a deferred compensation plan for our non-employee directors. Under this plan, our non-employee directors may defer up to 100% of their cash and equity compensation. Participants in the Non-Employee Director Deferred Compensation Plan may elect to receive payment of their account balances in either two to five annual installments or a lump sum upon a fixed date, separation from service, or up to five years following separation from service, subject to any federal tax rules governing deferred compensation. All cash amounts deferred under this plan by non-employee directors are allocated among deemed investments that follow the performance of a broad array of funds and are reflected in the market value of each participant’s account. Distribution amounts will include investment returns (positive or negative).
Non-Qualified Deferred Compensation
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Non-Qualified Deferred Compensation
If a non-employee director elects to defer all or a portion of the director’s annual equity award under this plan, as noted above, the portion of the award subject to the deferral election will be issued as restricted stock units instead of shares of restricted stock. Five of our current directors, Ms. Bejar and Messrs. Allen, Chilton, Glenn and Roberts, participate in this plan. LEGACY QWEST DEFERRED COMPENSATION PLAN – CLOSED TO NEW PARTICIPANTS AND CONTRIBUTIONS – In connection with our 2011 merger with Qwest, we assumed the Qwest Deferred Compensation Plan for Non-Employee Directors. Under this plan, Qwest outside directors could elect to defer all or a portion of their cash directors’ fees, which were then converted to a number of “phantom units” based on the value of a share of Qwest stock, with credit for dividends paid to shareholders “reinvested” in additional phantom units. Plan balances attributable to amounts deferred on or after January 1, 2005, by Qwest directors who joined our Board following the merger were converted, based on the merger exchange ratio, to phantom units based on the value of one of our Common Shares. Other than the crediting and “reinvestment” of dividends for outstanding phantom units, the Company does not make any contributions to and no additional elective deferrals are permitted under this plan. As of December 31, 2023, Michael J. Roberts was the only remaining participant in this plan, with a balance of 9,569 phantom units with an aggregate value of approximately $17,511. Subject to the terms of the plan, Mr. Roberts’ account will be distributed as a lump sum in cash as soon as practicable following the end of his service as a director at the 2024 annual shareholders meeting.
Short-Term Incentive Bonus
Short-Term Incentive Bonus
Short-Term Incentive Bonus
| 2023 STI Payout of 83.2% | | | Adjusted EBITDA: As we continued to focus on profitable revenue growth while executing on cost transformation initiatives, we generated Adjusted EBITDA of $4,631 million, which was below our target. | | | Revenue: Improving the revenue trajectory of our business is critical to achieving our strategy. In 2023, we achieved $14,526 million of Revenue, which was below our target. | | | Customer experience: During 2023, we achieved slight gains for most of our Customer Experience categories and outperformed the average for our industry. | |
Short-Term Incentive Bonus
The chart below shows our overall level of achievement and company performance funding for the financial and qualitative metrics in our 2023 STI plan:
Dollars in Millions
| Performance Metrics | Threshold | Target(1) | Maximum | Actual vs. Target | Payout % | Weighting | Weighted Payout % | | Adjusted EBITDA | | | | 97.9% | 73.5% | | 36.7% | | Revenue | | | | 98.0% | 89.9% | | 31.5% | | Customer Experience | | | | Met Expectations | 100.0% | | 15.0% | | | Weighted Payout Percentage of Company Performance Funding | | | | | | 83.2% |
Long-Term Incentive Compensation
Long-Term Incentive Compensation
Long-Term Incentive Compensation
| 2021 LTI Payout of 0% | | | Cumulative Adjusted EBITDA: We generated Cumulative Adjusted EBITDA of $21,492 million for 2021, 2022 and 2023, which was below our threshold of $22,300 million. | | | Relative TSR Modifier: Our stock performance for three-year period ending December 31, 2023 was -81.18%, which was the 0th percentile relative to our peers. | |
Dollars in Millions
| Performance Metrics | Threshold | Target(1) | Maximum | Actual vs. Target | Payout % | Weighting | Weighted Payout % | | Cumulative Adjusted EBITDA | | | | 91.8% | 0.0% | | 0.0% | | Relative TSR(2) | | | | n/a | 0.0% | | 0.0% | | | Weighted Payout Percentage | | | | | | 0.0% |
Our Compensation Best Practices
| | What We Do | | What We Don’t Do | | Focus on performance-based compensation weighted heavily towards long-term incentive awards Benchmark generally against 50th percentile peer compensation levels Maintain robust stock ownership guidelines applicable to our executive officers and outside directors Annually review our compensation programs to avoid encouraging excessive risk taking Conduct an annual succession planning process for our CEO Conduct an annual “say-on-pay” vote Discuss our executive compensation program during shareholder engagement Impose compensation forfeiture covenants “clawback” broader than and in addition to those mandated by law (such as, fraud and reputational harm) Review the composition of our peer groups at least annually Conduct independent and intensive performance reviews of our senior officers Cap the number of relative TSR performance-based shares that may vest if our own absolute TSR is negative Review realizable pay of our senior officers and total compensation “tally” sheets Require shareholders to approve any future severance agreements valued at more than 2.99 times the executive’s target cash compensation | | Maintain a supplemental executive retirement plan Permit our directors or any employee to hedge our stock, or our directors or senior officers to pledge our stock Permit the HRCC’s compensation consultant to provide other services to Lumen Pay, provide or permit: (i)excessive perquisites, (ii)excise tax “gross-up” payments, or (iii)single-trigger change of control equity acceleration benefits, or (iv)dividend payments on unvested restricted stock or RSUs | |
2023 Shareholder Engagement Highlights
2023 Shareholder Engagement Highlights Each year we solicit shareholder feedback from holders of a majority of our shares, generally in the spring and fall, on a wide range of topics (discussed in greater detail in “ITEM 1 Election of Directors - Our Board’s Responsibilities & Engagement”). Our shareholder engagement related to our executive compensation programs is summarized below. Our Chairman of the Board (who is also a member of the HRCC), HRCC Chair, NCG Committee Chair and, as appropriate, members of management typically participate in these engagements. These conversations have enabled us to receive input from our shareholders on how best to align the interests of management and the shareholders and have enabled many of our shareholders to gain a better understanding of the challenges of recruiting, retaining and motivating top executive talent in a complex, rapidly changing industry that continues to face the challenges of replacing high-margin declining legacy services with lower-margin growing digital services. During our shareholder engagement in 2022, discussions with our investors helped to inform our 2023 executive compensation decisions, which included continued inclusion of relative TSR in our LTI program, elimination of Free Cash Flow as a metric in our STI program and review of our compensation benchmarking and TSR peer groups following the completion of three major divestitures. The table below summarizes our compensation-focused shareholder engagement efforts during 2023, including the feedback we heard, say-on-pay results and actions our HRCC has taken.
Aligning Performance Objectives with Strategy
| Key Considerations/Objectives | Pay for Performance Alignment | More Detail | | Aligned With Our Strategy | Ensuring that performance-based metrics in our executive compensation programs reward performance over multiple time horizons and are aligned with our short- and long-term strategies, including individual contribution and Company performance, and the goal of creating long-term shareholder value while discouraging excessive risk taking | See “Our Pay Elements” in this section | | Challenging Goals | Setting short-and long-term targets at challenging but reasonably achievable levels that reflect priorities and drive progress toward our long-term vision | See “Section Four - Compensation Design, Awards and Payouts for 2023” | | Formulaic | Maintaining STI and LTI programs with formulaic payouts that are determined based on actual performance against challenging financial and operational goals; with limited adjustments, positive or negative, as permitted and outlined in our Incentive Program Guidelines described herein. | See “Section Four - Compensation Design, Awards and Payouts for 2023” and “Incentive Program Guidelines” in this section | | Pay and Performance Alignment | Assessing effectiveness of prior year(s) incentive designs and targets on a quarterly basis | See “Section Three - Pay and Performance Alignment - Realized and Realizable Pay for Our NEOs” | | Peer Benchmarked | Utilizing an objective set of criteria to determine companies for our compensation benchmarking peer group and TSR peer group | See “Section Five - HRCC Engagement and Compensation Governance - Role of Peer Companies” | | Pay Mix | Allocating a significant portion of our NEOs target compensation to performance-based; components, with a balance between cash and equity and short- and long-term incentives | See “Section Three - Pay and Performance Alignment - Pay Mix” | | Monitor Equity Usage | Monitoring share expense, burn rate and dilution against peer benchmarks | See “Section Four - Compensation Design, Awards and Payouts for 2023 - 2023 Long-Term Incentive Compensation” | | Shareholder Feedback | Incorporating shareholder views, including results of our annual say-on-pay vote and our shareholder engagement initiatives | See “Section One - Executive Summary - 2023 Shareholder Engagement Highlights” |
Rigorous Design and Target Goal Setting Process
Rigorous Design and Target Goal Setting Process As described in more detail below, based on information available at the time, the HRCC establishes rigorous threshold, target and maximum performance levels for the selected objectives under our incentive programs. These objectives are reevaluated annually and rooted in our annual budget, public guidance and long-range strategic plan. Aligned with Company’s Publicly Disseminated Outlook. For 2023, the Board approved annual and long-range financial and operational plans that the HRCC considered in its goal setting process, including: •Detailed financial and operational goals and timelines •Anticipated timing for execution of our strategic initiatives, new product launches and completion of our then pending divestitures •Cash flow plan to execute on our capital allocation priorities The HRCC also considered the following: •Prior year strategic goals and actual financial performance •Industry and competitive trends •Other Company-specific and external factors that influence our business Challenging and Sufficiently Rigorous. The HRCC establishes challenging threshold, target and maximum performance levels that are appropriately tailored to our current business conditions as well as the prevailing business environment more broadly. For 2023, while the targets for the STI and LTI objectives were set at lower levels than prior year targets and results, the HRCC believes these 2023 performance targets were set at challenging levels, based in part on the impact of the following: •Operational Trends: Traditional telecom services’ margins are significantly greater and demand for our legacy copper-based wireline mass market services is in a prolonged systemic decline. We are also experiencing a weaker demand for certain older enterprise services, changing customer preferences, increased competitive and pricing pressures and higher inflation. These services are declining at a faster pace than demand is growing for our newer technology services at lower margins, which exerts significant pressure on achieving the same or higher year-over-year performance – requiring us to simultaneously (i) expand our customer base and services portfolio, (ii) protect the ability of our declining residual legacy voice and copper-based wireline operations to generate high-margin revenue and (iii) adapt and adjust our cost structure in response to the pace our revenue declines – which puts increased pressure on both revenue and adjusted EBITDA in both our short- and long-term incentive plans. •Divestitures: We have completed three substantial divestitures in the last two years. Our 2022 results included operations for our LATAM and ILEC businesses, until their sales were completed in August and October 2022, respectively, and dis-synergies related to those transactions. Our 2023 results included operations for our EMEA business, until its sale was completed in November 2023, and dis-synergies related to that transaction. •Macroeconomic Environment: Continued inflationary pressures, supply constraints or macroeconomic uncertainties could continue to impact our financial performance, as described further in our periodic reports filed with the U.S. Securities and Exchange Commission. •Uncertainties: Uncertainties regarding our financial performance, leverage and debt covenant compliance could continue to cause certain of our customers to reduce or cease doing business with us. Aligned with Shareholder Interests. The HRCC also considers shareholder feedback and observations from its independent compensation consultant.
Incentive Program Guidelines
Incentive Program Guidelines While the performance objectives and targets under our incentive programs are designed to measure objective performance over a specified period of time, the HRCC may make certain adjustments to our performance calculations. To provide structure and promote consistency in addressing such situations, the HRCC has adopted Guidelines on Administering Incentive Plans (the Guidelines) to aid its goal of reaching equitable STI and LTI payout decisions that align performance with our targets and corporate strategy. As described in the table below, the Guidelines provide three types of potential adjustments to our STI or LTI metrics that can affect the overall payout.
Incentive Program Guidelines
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Incentive Program Guidelines
| Types of Adjustments Under Our Guidelines | STI | LTI | Adjustments Under Our Guidelines For Performance Periods Ending December 31, 2023 | | Mandatory Adjustments. The first type of adjustment occurs after completion of each performance period in conjunction with the HRCC’s review of the financial results and assumptions, and requires the HRCC to make adjustments to eliminate the effects of acquisitions or divestitures and certain other unanticipated events specified in the Guidelines that correspond closely, but not exactly, with the “Non-GAAP Special Items” supplemental schedule included in our earnings release for the corresponding performance period. These adjustments are necessary to measure our performance results in the same manner the targets were set and requires the HRCC to adjust (i) our STI targets or performance results, as appropriate, (ii) our three-year cumulative adjusted EBITDA performance results for the performance-based portion of our annual LTI grants before 2022, and (iii) beginning in 2022, our three-year cumulative adjusted EBITDA targets established under to the performance-based portion of our annual LTI grants. | | | For our 2023 STI Plan and 2021 LTI Awards: •See Appendix A - Non-GAAP Reconciliation” for details on the Non-GAAP Special Items previously reported in our February 6, 2024 earnings release •We adjusted the revenue and adjusted EBITDA targets in our 2023 STI Plan to reflect the net impact of charges and credits related to closing our EMEA divestiture earlier than estimated when targets were set and the sale of select CDN contracts, which was not anticipated when the targets were set. •We adjusted our three-year cumulative Adjusted EBITDA performance results for our 2021 LTI Awards to reflect the net impact of charges and credits related to the sale of our Latin American, 20-state ILEC, EMEA and CDN businesses, which were not anticipated when targets were set, and to eliminate the CAF II and RDOF revenue that was not included when the targets were set. | | Discretionary Adjustments. The second type of adjustment provides the HRCC with discretionary authority to adjust STI and LTI performance results based on any other “extraordinary, unusual, or non-recurring transactions or items” to prevent award payouts from being unfairly impacted by such items. The adjustments may be positive or negative and will only be made if the events were not known on the date the performance goals were established or were not reflected in the forward-looking financial information used to set such goals. Traditionally the HRCC has used this discretionary authority infrequently and principally to adjust for foreign currency fluctuations necessary to measure our performance results in the same manner the targets were set. | | | For our 2023 STI Plan and 2021 LTI Awards: •We adjusted the performance results to eliminate the effect of foreign currency fluctuations and true-up of bonus accruals for revenue and adjusted EBITDA in our 2023 STI Plan and three-year cumulative adjusted EBITDA in our 2021 LTI Awards. •We adjusted the performance results to eliminate the CAF II and RDOF revenue that was not included in original targets for the three-year cumulative adjusted EBITDA in our 2021 LTI Awards. | | Discretionary Adjustments to STI Payout Percentages. The third type of adjustment, as discussed in greater detail below under “Short Term Incentive Bonuses,” provides the HRCC with discretionary authority to adjust STI payouts. These discretionary adjustments may be made as either a specific feature of a given year’s STI plan established in advance (for example, the capped individual performance modifier included in our 2023 plan design) or as equitable adjustments made in arrears in connection with the HRCC’s approval of final STI payouts. | | | No discretionary adjustments were made to the payout percentages for our 2023 STI Plan |
Incentive Program Guidelines
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Our Pay Elements
Our Pay Elements The three core elements of our executive compensation program are base salary, annual STI bonus opportunity (typically paid in cash); and annual LTI grants (historically consisting of equity awards), comprising total direct compensation for our NEOs. For 2023, our LTI awards were structured as a mix of performance-based restricted stock (PBRS) and time-based restricted stock (TBRS), with a heavier use of PBRSs for our senior leadership team. Each element is described below and includes the performance metrics selected for our 2023 incentive programs.
Realized and Realizable Pay for Our NEOs
| | Realized Pay(1) | | | Realizable Pay(2) | | | | 2019 | 2020 | 2021 | 2022 | 2023 | | Company Performance | | | | | | | STI Company Funding %(3) | 97% | 91% | 100% | 97% | 83.2% | | LTI (TBRS + PBRS) | 107% | 25% | 17% | 8% | 23% | | 60% PBRS(4) | | | | | | | Performance Period | 2019-2020 | 2020-2022 | 2021-2023 | 2022-2024 | 2023-2025 | | Adjusted EBITDA Run Rate | 149.9% | n/a | n/a | n/a | n/a | | Cumulative Adjusted EBITDA | n/a | 0% | 0% | TBD | TBD | | Relative TSR | n/a | 0% | 0% | TBD | TBD | | Realized and Realizable Pay for Our NEOs | | | | | | | Our CEO | n/a | n/a | n/a | 31% | 37% | | Average for Our Longer-Tenured NEOs | 104% | 57% | 52% | 43% | 46% |
Section Four - Compensation Design, Awards and Payouts for 2023
Section Four - Compensation Design, Awards and Payouts for 2023 Our fiscal 2023 executive compensation program was generally similar to our 2022 program, except for the elimination of free cash flow metric from our STI program metrics and increases to the 2023 target LTI awards granted to two of our NEOs.
Total 2023 Target Compensation as of December 31, 2023(1)
| NEO | Base Salary | STI Target Bonus % | STI Target Bonus Opportunity | Total Target Cash | LTI Target(2) | Total Target Compensation(3) | | Ms. Johnson | $1,200,000 | 200% | $2,400,000 | $3,600,000 | $14,250,000 | $17,850,000 | | Mr. Stansbury | 800,000 | 125% | 1,000,000 | 1,800,000 | 5,000,000 | 6,800,000 | | Mr. Goff | 700,000 | 120% | 840,000 | 1,540,000 | 2,250,000 | 3,790,000 | | Ms. Haynes-Gaspar | 575,000 | 100% | 575,000 | 1,150,000 | 2,000,000 | 3,150,000 |
Total 2023 Target Compensation as of December 31, 2023(1)
(1)For more complete information presented in accordance with the SEC’s rules, see the Summary Compensation Table below. (2)The LTI target in this table represents the target levels of equity awards as of December 31, 2023, except Mr. Stansbury’s LTI target does not include a one-time increase of $2.5 million for his 2023 equity grant. As discussed further below, these amounts differ materially from the amounts reported in “Compensation Tables—Summary Compensation Table”, which are calculated in accordance with FASB ASC Topic 718 and reflect significantly lower grant date values ($0.92-$2.39) as compared to the stock price used to calculate the number of time-based and performance-based equity awards granted ($3.90), which was based on a 15-day volume-weighted average closing price. (3)Based on our compensation benchmarking data, the Total Target Compensation for Messrs. Goff and Stansbury and Ms. Haynes-Gaspar was near the 50th percentile of compensation paid to comparable executives, and near the 25th percentile for Ms. Johnson. On an annual basis, we review the competitive market analyses of the total direct compensation for our NEOs and senior officers. We target the median of our compensation peer group, while taking into consideration all relevant factors, including (i) the need to attract and retain employees with essential expertise and skill, (ii) internal equity for employees who make similar contributions and have comparable skill sets and expertise and (iii) individual performance. For more information on how we determined specific pay levels in 2023, see further discussion in “Section Four - Compensation Design, Awards and Payouts for 2023” and under the heading “—Compensation Benchmarking Peer Group.” Each of these elements is discussed in greater detail below. For more information on how we determined specific pay levels in 2023, see further discussion under the heading “—Compensation Benchmarking Peer Group.”
Base Salary
Base Salary Early each year, the HRCC takes a number of steps in connection with setting annual base salaries, including the review of (i) compensation tally sheets and benchmarking data, (ii) each senior officer’s pay and performance relative to other senior officers, (iii) the scope and complexity of the officer’s role, (iv) the officer’s experience and proficiency and the criticality of the skill set needed to execute the officer’s role and (v) when the officer last received a pay increase. Annual Review Process (February 2023). During its annual review of executive compensation in February 2023, the HRCC reviewed the compensation benchmarking data for each senior officer, comparing the officer’s pay to our peer group. Following this review and discussion, the HRCC increased Ms. Haynes-Gaspar’s annual base salary to $575,000 and left unchanged the base salaries for our other NEOs employed at the time. The base salary for Ms. Johnson remained unchanged and the amount reported in the Summary Compensation Table reflects a full year of employment during 2023; whereas, the amount reported for 2022 was pro-rated based on 55 days of employment (from hire date of November 7, 2022). Mid-Year Actions. As described elsewhere herein, in April 2023, Mr. Trezise ceased serving as EVP, Human Resources and the HRCC decreased his salary from $575,000 to $535,000 commensurate with the reduction of his responsibilities.
2023 Short-Term Incentive Program
2023 Short-Term Incentive Program As described below, the 2023 STI design incorporates three components in determining the calculated STI bonus amount (payout) for our NEOs:
2023 Short-Term Incentive Program
| TARGET BONUS OPPORTUNITY | × | COMPANY PERFORMANCE FUNDING | × | INDIVIDUAL PERFORMANCE MODIFIER | = | STI Bonus Amount | | (Base Salary x STI Target Bonus %) | | (Ranges from 0% to 200%) | | (20% cap on upward adjustments for NEOs) | | |
2023 STI Performance and Results
2023 STI Performance and Results As discussed in detail below, for 2023, the HRCC, after consultation with our CEO and its independent compensation consultant Semler Brossy, revised our STI design and metrics from prior year and increased Revenue weighting by 10%, increased the Customer Experience weighting by 5% and eliminated the Free Cash Flow metric, which was weighted 15% the prior year. Due to the uncertainty associated with the restructuring of our triple C debt, the HRCC eliminated Free Cash Flow from our 2023 STI Plan. This further aligns with our strategy of pursuing profitable growth.
Alignment to Strategy
| | Target Amount of Adjusted EBITDA(1),(2) | Payout as a % of Target Award | Results(3): | | | Maximum | ≥ $4,933 million | 200% | $4,631 million (Below Target) | ACHIEVED PAYOUT OF 73.5%(4) | | Target | $4,733 million | 100% | | | | Threshold | $4,576 million | 50% | | | | Below Threshold | < $4,576 million | 0% | | |
Alignment to Strategy
(1)In February 2023, we projected earning Adjusted EBITDA of $4.6 to $4.8 billion for 2023, which assumed the sale of our EMEA business after 2023 and did not contemplate the sale of our CDN business. (2)As mandated under our Guidelines, the HRCC decreased our Adjusted EBITDA target by $34 million to reflect the net impact of (i) the EMEA divestiture closing approximately two months earlier than originally projected in our 2023 budget and (ii) the sale of our CDN business which was not contemplated in our budget. See “Section Two - Incentive Program Guidelines” for more information. (3)As permitted under our Guidelines, the HRCC increased our actual Adjusted EBITDA by $3 million to reflect the net effect of certain charges or credits to eliminate the impact of certain unanticipated, extraordinary, unusual, or non-recurring transactions or items not reflected in our 2023 budget. These net charges and credits include the elimination of the effect of foreign currency fluctuations and true-up of bonus accruals for 2023. See “Section Two - Incentive Program Guidelines” for more information. (4)The achieved payout percentage is calculated for each financial performance objective based on a corresponding payout scale approved by the HRCC. If the threshold performance level with respect to any particular financial performance objective under our STI program is not attained, the bonus payable to the participating officer with respect to that portion of his or her targeted bonus opportunity will be calculated as zero. If threshold performance is met on any particular metric, each participating officer will earn a reduced portion of his or her target bonus amount for that portion of the award. If the maximum performance level with respect to any particular metric is met or exceeded, each participating officer will earn a maximum of 200% of his or her target bonus amount for that portion of the award. Measurement of the attainment of any particular metric is interpolated if actual performance is between (i) the “threshold” and the “target” performance levels or (ii) the “target” and the “maximum” performance levels.
Alignment to Strategy
| | Target Amount of Revenue(1) | Payout as a % of Target Award | Results(2): | | | Maximum | ≥ $15,417 million | 200% | $14,526 million (Below Target) | ACHIEVED PAYOUT OF 89.9% | | Target | $14,824 million | 100% | | | | Threshold | $14,231 million | 50% | | | | Below Threshold | < $14,231 million | 0% | | |
3) Bonus Amounts
3) Bonus Amounts The HRCC approved each NEO’s STI bonus as summarized in the table below.
2023 STI Bonus Amounts
2023 STI Bonus Amounts
2023 STI Bonus Amounts
| NEO | STI Target Bonus Opportunity(1) | Company Performance Funding(2) | Individual Performance Modifier(3) | | Calculated STI Bonus Amount | | Current NEOs | | | | | | | Ms. Johnson | $2,400,000X | 83.2%X | 100% | = | $1,996,800 | | Mr. Stansbury | 1,000,000X | 83.2%X | 110% | = | 915,200 | | Mr. Goff | 840,000X | 83.2%X | 100% | = | 698,880 | | Ms. Haynes-Gaspar | 553,972X | 83.2%X | 105% | = | 483,950 | | Former NEO | | | | | | | Mr. Trezise | $548,041X | 83.2%X | 90% | = | $410,372 |
2023 STI Bonus Amounts
(1)Determined based on earned salary and applicable STI target bonus percentage during 2023. The amount for Ms. Haynes-Gaspar reflects a pro–rated amount based on 357 days of employment during 2023 (from hire date of January 9, 2023) and also an increase in salary (from $500,000 to $575,000), effective as of February 19, 2023 and an STI target bonus percentage of 100%. The amount for Mr. Trezise reflects a pro-rated amount based on decrease in salary (from $575,000 to $535,000), effective as of April 30, 2023 and an STI target bonus percentage of 100%. For more information on amounts for Ms. Johnson and Messrs. Stansbury and Goff, see “Section Four — Target Compensation” above. (2)Calculated and adjusted as discussed in “Company Performance Funding” above. (3)See “Individual Performance Modifier” above.
2023 STI Bonus Amounts
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2023 Long-Term Incentive Compensation
2023 Long-Term Incentive Compensation For 2023, our annual LTI grants consisted of a mix of time- and performance-based equity awards, as described below.
2023 LTI Design
2023 LTI Design Annual Review Process (February 2023). During its annual review of executive compensation in February 2023, the HRCC reviewed the compensation benchmarking data for each senior officer, comparing the officer’s pay to our peer group. Following this review and discussion, the HRCC increased the annual LTI target opportunity for Mr. Stansbury to $5,000,000, Ms. Haynes-Gaspar to $2,000,000 and Mr. Trezise to $2,000,000 and left unchanged the LTI target opportunities for Ms. Johnson and Mr. Goff. See further discussion under the heading “Role of Peer Companies” below.
2023 Annual LTI Grants
2023 Annual LTI Grants The HRCC also approved one-time increases and awarded the annual LTI awards for Messrs. Stansbury and Trezise at 150% of their respective annual LTI target opportunity, as described in the footnotes to the table below. The HRCC granted annual LTI awards to our then-current NEOs effective March 1, 2023, except that the PBRS awards to Ms. Johnson and Mr. Stansbury were effective May 18, 2023 following approval of our equity plan proposal at the 2023 Annual Shareholders’ Meeting (the “2023 Annual LTI Awards”).
2023 Annual LTI Grants
2023 Annual LTI Grants
2023 Annual LTI Grants
| | Time-Vested Restricted Shares or RSUs | | Performance-Based Restricted Shares or RSUs | | Total Target Grant Value(4) | | Named Officer | No. of Shares(1)(3) | Target Grant Value(4) | No. of Shares(2)(3) | Target Grant Value(4) | | | Current NEOs | | | | | | | Ms. Johnson(5) | 1,459,854 | $5,700,000 | 2,189,781 | $8,550,000 | $14,250,000 | | Mr. Stansbury(5)(6) | 768,344 | 3,000,000 | 1,152,517 | 4,500,000 | 7,500,000 | | Mr. Goff | 230,503 | 900,000 | 345,755 | 1,350,000 | 2,250,000 | | Ms. Haynes-Gaspar(7) | 204,891 | 800,000 | 307,338 | 1,200,000 | 2,000,000 | | Former NEO | | | | | | | Mr. Trezise(8) | 307,337 | 1,200,000 | 461,007 | 1,800,000 | 3,000,000 |
2023 Annual LTI Grants
(1)Represents the number of restricted shares granted on March 1, 2023 with graded-vesting on March 1, 2024, 2025 and 2026. (2)Represents the target number of performance-based restricted shares granted on March 1, 2023 for Ms. Haynes-Gaspar and Messrs. Goff and Trezise and granted on May 18, 2023 for Ms. Johnson and Mr. Stansbury, all with three-year cliff vesting on March 1, 2026. As discussed under “2023 LTI Performance Metrics” below, the actual number of shares that vest in the future may be lower or higher (between 0-200%), depending on the level of performance achieved. (3)Any dividends on the shares of restricted stock would not be paid on unvested awards but would accrue and be paid or be forfeited in tandem with the vesting of the related shares or RSUs. (4)For purposes of these grants, we determined both the number of time-vested and target performance-based restricted shares granted by dividing the total grant value approved for the executive by $3.90, which was the volume-weighted average closing price of a share of our common stock over the 15-trading-day period ending one trading day prior to the grant date (March 1, 2023). However, as noted previously,
2023 Annual LTI Grants
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2023 Annual LTI Grants
for purposes of reporting these awards in the Summary Compensation Table, our shares of time-vested restricted stock are valued based on the closing price of our common stock on the date of grant and our shares of performance-based restricted stock are valued as of the grant date based on probable outcomes, as required by applicable accounting and SEC disclosure rules. For 2023, this resulted in the values reported in the Summary Compensation Table being materially lower than those show above for most of our NEOs. See footnote 2 to the Summary Compensation Table for more information. (5)Ms. Johnson and Mr. Stansbury’s 2023 annual LTI awards were approved by the HRCC on February 24, 2023 with a mix of 40% TBRS and 60% PBRS shares determined as described in Footnote 4 above. However, the PBRS awards were subject to shareholder approval of our Amended and Restated 2018 Equity Plan at the 2023 Annual Shareholders’ Meeting in May 2023. (6)In recognition of his performance demonstrated in 2022 and to incentivize Mr. Stansbury’s retention during our Company’s transformation and execution against our long-term strategy, the HRCC approved a one-time increase to his 2023 equity grant value of $2.5 million, which is included in the table above. (7)Excludes the on-boarding equity grant awarded to Ms. Haynes-Gaspar in early January 2023, as described under “2023 On-Boarding Equity Grant.” (8)On March 1, 2023, the HRCC approved a one-time increase to the 2023 equity grant value of $1.0 million (included in the table above) for Mr. Trezise in recognition for the trusted advice he provided to the HRCC and our CEO and in connection with building a new senior leadership team over the preceding year and early 2023. As discussed elsewhere herein, Mr. Trezise’s employment was involuntarily terminated on April 5, 2024 and the outstanding TBRS and PBRS related to this one-time increase were forfeited. See discussion under “Severance Compensation to Be Paid to Scott Trezise, our former EVP, Human Resources” below for how his termination impacted these awards.
2023 LTI Performance Metrics
2023 LTI Performance Metrics The 2023 metrics approved by the HRCC in early 2023 were consistent to those used in 2022 and, as described further below, align with our corporate strategy and are designed to strike the right balance between performance incentives and long-term shareholder interests. •Cumulative Adjusted EBITDA – Weighted at 50%. Adjusted EBITDA measures the operational performance and profitability of our businesses as we continue to transition from a telecommunications to technology company. •Relative TSR – Weighted at 50%. We believe this metric most directly aligns the interests of our shareholders with those of our executives. Following the end of the three-year performance period, January 1, 2023 to December 31, 2025, the number of shares vesting under the PBRS granted in 2023 will be calculated by: (i) determining achievement of the three-year Cumulative Adjusted EBITDA target and (ii) determining achievement of Lumen’s TSR performance relative to our TSR Peer Group, each of which is described further below. Each metric is calculated independently with the ultimate payout ranging between zero to 200% of the target number granted. Any shares earned under the PBRS will vest in full on March 1, 2026, subject to the holder’s continued employment through that date (except as otherwise provided in the applicable award agreement).
Rigor of Goal Setting
| Performance Level Attainment | Target Amount of Cumulative Adjusted EBITDA(1) | Payout as a % of this Component of Target Award(2) | | Maximum | ≥ Maximum Amount(4) | 200% | | Target | $13,700 million(3) | 100% | | Threshold | Threshold Amount(4) | 50% | | Below Threshold | < Threshold | 0% |
Relative TSR Metric (Weighted 50%)
Relative TSR Metric (Weighted 50%)
Rigor of Goal Setting
Rigor of Goal Setting With the aid of its compensation consultant, the HRCC set a TSR peer group that is focused principally on broader universe of companies we believe investors are considering when they decide whether to invest in us or our industry. As a result, our TSR peer group is comprised of telecommunications, cable and other communications companies that are generally comparable to us in terms of size, markets and operations. For information regarding our TSR peer group, see further discussion under the heading “— TSR Peer Group” below.
Rigor of Goal Setting
| | Target | Payout as a % of this Component of Target Award(1) | | Maximum | ≥ 75th Percentile | 200% | | Target | 50th Percentile | 100% | | Threshold | 25th Percentile | 50% | | Below Threshold | < 25th Percentile | 0% |
2023 On-Boarding Equity Grant
2023 On-Boarding Equity Grant As part of negotiating her offer package, Ms. Haynes-Gaspar received an on-boarding equity award. The HRCC’s independent compensation consultant advised that this award was customary in connection with recruiting new executives, and the HRCC Committee determined that such a grant was necessary to induce her to accept. The HRCC further believed that Ms. Haynes-Gaspar’s on-boarding grant was appropriate to partially offset equity that she forfeited upon her departure from her then prior employer and also served to align her interest with shareholders by giving her an immediate equity stake in the Company.
2023 On-Boarding Equity Grant
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2023 On-Boarding Equity Grant
2023 On-Boarding Equity Grant
2023 On-Boarding Equity Grant
| | Time-Vested Restricted Shares | | | Named Officer | No. of Shares(1)(2) | Grant Value(3) | | Ms. Haynes-Gaspar | 224,022 | $1,200,000 |
2023 On-Boarding Equity Grant
(1)Represents the number of time-based restricted shares granted to Ms. Haynes-Gaspar on January 9, 2023 which have graded-vesting on January 9, 2024, 2025 and 2026. (2)Any dividends on the shares of restricted stock would not be paid on unvested awards but would accrue and be paid or be forfeited in tandem with the vesting or forfeiture of the related shares. (3)For purposes of this grant, we determined the number of time-vested restricted shares by dividing the total grant value granted to Ms. Haynes-Gaspar by the volume-weighted average closing price of a share of our common stock over the 15-trading-day period ending one trading day prior to the grant date, rounding to the nearest whole share. However, as noted previously, for purposes of reporting these awards in the Summary Compensation Table, our shares of time-vested restricted stock are valued based on the closing price of our common stock on the date of grant. See footnote 1 to the Summary Compensation Table for more information.
Outstanding Performance-Based LTI Awards
Outstanding Performance-Based LTI Awards As of December 31, 2023 and illustrated in the table below, we had three outstanding tranches of LTI awards, granted in 2021, 2022 and 2023, with overlapping three-year performance periods and performances metrics of Cumulative Adjusted EBITDA and Relative TSR.
Outstanding Performance-Based LTI Awards
| Grant Year | Performance Period | Metric Weighting | 2021 | 2022(1) | 2023(2) | 2024 | 2025 | | 2021(6) | 2021-2023 | 50% | 3-YR Cumulative Adjusted EBITDA(3) | | | | | | | | | | | | | | | | | 50% | 3-YR Relative TSR Modifier | | | | | | | | | | | | | | | 2022 | 2022-2024 | 50% | | 3-YR Cumulative Adjusted EBITDA(4) | | | | | | | 50% | | 3-YR Relative TSR | | | | | | | | | | | | | | 2023 | 2023-2025 | 50% | | | 3-YR Cumulative Adjusted EBITDA(5) | | | | | | 50% | | | 3-YR Relative TSR | | | | | | | | | | | |
Outstanding Performance-Based LTI Awards
(1)The sale our Latin American and 20-state ILEC business, which were completed in August 2022 and October 2022, respectively, occurred during the second and first year of each three-year performance period for our outstanding 2021 and 2022 LTI awards, respectively. (2)The sale our CDN and EMEA business, which was completed in October and November 2023, respectively occurred during the third, second and first year of each three-year performance period for our outstanding 2021, 2022 and 2023 LTI awards, respectively. (3)For 2021 PBRS, when the three-year Cumulative Adjusted EBITDA target was set in the first quarter of 2021, we had not yet entered into definitive agreements for these divestitures. As such, the targets assumed our continued operations of those businesses throughout the full three-year performance period. As discussed in further detail below (under the heading “LTI Linkage to Performance”), in February 2023 and February 2024, the HRCC approved adjustments to measure our performance results to prevent holders of PBRS Awards from being penalized by the impact of these transactions. (4)For 2022 PBRS, when the three-year Cumulative Adjusted EBITDA target was set in the first quarter of 2022, the Company expected its pending divestitures of both its Latin American and 20-state ILEC business to close in 2022, but did not know the actual closing date. For purposes of setting this target, the HRCC assumed both divestitures would close on July 1, 2022. The sale our Latin American and 20-state ILEC business were actually completed in August 2022 and October 2022, respectively. The Company had not yet entered into definitive agreement for the EMEA divestiture; as such, the targets assumed continued operations of that business throughout the full three-year performance period. The HRCC approved adjustments to targets to prevent holders of PBRS from receiving an unintended benefit from the delayed closing of its Latin American and 20-state ILEC business or an unintended penalty from the accelerated sale of our EMEA business. (5)For 2023 PBRS, when the three-year Cumulative Adjusted EBITDA target was set in the first quarter of 2023, the Company expected its pending divestitures of its EMEA business to close in 2023, but did not know the actual closing date. For purposes of setting this target, the HRCC assumed the divestiture would close on January 1, 2024. The sale our EMEA business was actually completed in November 2023. The HRCC approved adjustments to targets to prevent holders of PBRS from receiving an unintended penalty from the accelerated closing. (6)For more information on below threshold 0% payout for our 2021 PBRS, see “LTI Linkage to Performance” below.
Outstanding Performance-Based LTI Awards
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LTI Linkage to Performance - No Payouts Under 2021 PBRS Awards
LTI Linkage to Performance - No Payouts Under 2021 PBRS Awards In early 2021, the HRCC approved 2021 PBRS awards(1) to approximately 1,580 employees, senior and executive officers based on two equally-weighted metrics (Cumulative Adjusted EBITDA and Relative TSR) over a three-year period ending December 31, 2023. As described in greater detail below, we achieved below threshold performance against targets for both metrics, resulting in 0% payout and forfeiture of all PBRS on March 1, 2024. (1)For further discussion on our 2021 LTI Awards, see our 2022 proxy statement.
Cumulative Adjusted EBITDA Metric (weighted 50%)
| | Target Amount of Adjusted EBITDA(1) | Payout as a % of Target Award | Results: | | | Maximum | ≥ $25,700 million | 200% | $21,492 million(2) (Below threshold) | ACHIEVED PAYOUT OF 0% | | Target | $23,400 million | 100% | | | | Threshold | $22,300 million | 50% | | | | Below Threshold | < $22,300 million | 0% | | |
Relative TSR Metric (Weighted 50%)
Relative TSR Metric (Weighted 50%) We achieved TSR of -81.18% for the three-year period ending December 31, 2023, which was below the 25th percentile of -27.23% and threshold performance for our peer group.
Relative TSR Metric (Weighted 50%)
| | Relative TSR Performance(1) | Payout as a % of Target Award | Results: | | | Maximum | ≥ 75th Percentile | 200% | -81.18%(2) (Below Threshold) | ACHIEVED PAYOUT OF 0%(3) | | Target | 50th Percentile | 100% | | | | Threshold | 25th Percentile | 50% | | | | Below Threshold | < 25th Percentile | 0% | | |
No Earned 2021 PBRS Payout
No Earned 2021 PBRS Payout On March 1, 2024, the holders of our outstanding 2021 PBRS awards, including two of our NEOs, forfeited a total of 3,071,700 performance-based restricted shares or RSUs, and related accrued dividends, as set forth in the table below.
No Earned 2021 PBRS Payout
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Outstanding 2021 PBRS Forfeited in Their Entirety
| | Performance-Based Restricted Shares or RSUs | | | Named Officer | No. of Shares(1)(2) | Grant Value | | Current and Former NEOs | | | | Mr. Goff | 100,728 | $1,200,000 | | Mr. Trezise | 60,437 | $720,000 | | All other executive officers and employees as a group (1,005 persons)(3) | 2,910,535 | $34,674,084 | | Overall Total | 3,071,700 | $36,594,084 |
Outstanding 2021 PBRS Forfeited in Their Entirety
(1)Represents the target number of performance-based restricted shares granted on February 24, 2021 (2)Dividends on the shares of restricted stock were not be paid on unvested awards; the related accrued dividends were forfeited in tandem with the forfeiture of the related performance-based restricted shares or RSUs. (3)Includes any former executive or senior officers and employees who retained any 2021 PBRS, subject to performance criteria, as part of their severance or retirement packages.
LTI Governance and Oversight
LTI Governance and Oversight In addition to our senior leadership team, approximately 1,200 employees in the upper management of our Company are eligible for annual LTI awards, which has declined from approximately 1,600 eligible employees in 2021. Historically, their awards have been awarded in the form of equity. The decline in our stock price has put increased pressure on our ability to incentivize our senior leadership team and employees through equity awards.
Year Over Year LTI Award Structure Changes
Year Over Year LTI Award Structure Changes
2023 LTI Award Structure
2023 LTI Award Structure In an effort to manage our share usage, burn rate, dilution and overhang levels, the HRCC approved a modified approach for our 2023 LTI awards, as follows: •Senior Leadership Team: we continued our historical practice and granted the 2023 annual LTI awards for our senior leadership team in equity (60% performance-based restricted shares and 40% time-based restricted shares).(1) During 2023, as part of the continued leadership transitions, we offered any sign-on LTI awards included with offer packages in a mix of cash and equity. •Employees below the executive level: for approximately 1,400 employees below the executive level, the HRCC changed the structure of their 2023 annual LTI award and granted it in the form of time-based cash awards (which, subject to continued employment, will vest over three years) instead of a mix of time- and performance-based equity. From time to time, we offer sign-on LTI awards as part of offer packages for critical talent below the executive level and, during 2023, we awarded nearly all of these on-boarding LTI awards in cash rather than equity in order to manage our share usage throughout 2023. (1)Discussed in greater detail in “2023 Long-Term Incentive Compensation”,
2024 LTI Award Structure
2024 LTI Award Structure In the second half of 2023, given our continued decline in stock price and the expected low number of shares available for grant in 2024, the HRCC worked closely with management and the HRCC’s compensation consultant to (i) monitor our share usage and projected awards for 2023 and 2024, (ii) listen to feedback from our investors and proxy advisory firms during our fall shareholder engagement, (iii) carefully weigh the pros and cons of various modifications for our 2024 LTI awards and (iv) develop a strategy for 2024 LTI awards.
2024 LTI Award Structure
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2024 LTI Award Structure
In early 2024, based on the extensive analysis performed in the second half of 2023, the HRCC further modified our grant practices for 2024: •Senior Leadership Team: the HRCC recalibrated our 2024 LTI program and modified the structure of the awards to our senior leadership team as follows: –Maintained 40% time-based restricted stock –Shifted the 60% performance-based portion from equity to cash –Maintained our two equally-weighted metrics of Relative TSR and Cumulative Adjusted EBITDA –Added a +/-20% revenue modifier to the cumulative adjusted EBITDA metric •Employees below the executive level: we granted annual LTI awards to approximately 1,200 employees below the executive level, and for the second consecutive year, their 2024 LTI awards were granted in the form of time-based cash (which, subject to continued employment, will vest over three years) instead of a mix of time- and performance-based equity.
2024 LTI Design for Our Senior Leadership Team
2024 LTI Design for Our Senior Leadership Team
Compensation for Ashley Haynes-Gaspar, our New EVP Chief Customer Experience Officer
•Equity award valued at $1,200,000 consisting of time-based restricted stock, which will vest in one-third annual installments, subject to continued service and other customary terms(1). This equity award offsets equity that Ms. Haynes-Gaspar forfeited upon termination from her prior employer and aligned her interests with shareholders by providing immediate equity stake in the Company. (1)For more information see “Section Four - 2023 Long-Term Incentive Compensation” above.
Severance Compensation to Be Paid to Scott Trezise, our former EVP, Human Resources
Severance Compensation to Be Paid to Scott Trezise, our former EVP, Human Resources As described further below, we reduced the responsibilities of Mr. Trezise in 2023 and he was involuntarily terminated on April 5, 2024. Mr. Trezise joined as an executive officer in 2013, and over the past decade played a key role in facilitating several critical executive transitions and re-shaping our workforce to address the rapidly evolving digital needs of our customers. After our current CEO joined us in November 2022, Mr. Trezise collaborated with her on building a new senior leadership team, including the successful recruitment of Ms. Haynes-Gaspar and several other new senior leaders. On March 1, 2023, the HRCC granted Mr. Trezise, in his capacity as Executive Vice President, Human Resources, an LTI award valued at $3,000,000.(1) In April 2023, our CEO elected to initiate a search to replace Mr. Trezise, while retaining him in a non-executive capacity to assist with key initiatives. In connection with these changes, the HRCC decreased Mr. Trezise’s base annual salary to $535,000, effective April 30, 2023, and maintained his STI target opportunity at 100% of salary. Following the hiring of his successor on September 1, 2023, Mr. Trezise assisted his successor in completing additional executive transitions that ultimately resulted in the replacement of substantially all of the prior senior leadership team that reported to our former CEO. In exchange for Mr. Trezise’s delivery of a release of claims in connection with his termination, he will receive the following compensation and benefits payments under our pre-existing executive severance plan and broad-based programs that apply to our employees: •Cash severance payment of $1,150,000(2), •COBRA benefits for 52 weeks(2), and •Pro-rated annual bonus for 2024 based on actual company performance payout(3). In addition to these prior arrangements, the HRCC exercised its discretion to approve the following treatment for a pro-rated portion of his outstanding equity, effective upon his termination and also conditioned on his delivery of a release of claims, and the remaining portion of his outstanding equity were forfeited: •Accelerated vesting of a pro-rated portion, 155,370 shares, of the outstanding time-based restricted stock granted to him in 2022 and 2023, with the remaining (68,298 shares) being forfeited. •Continuation of a pro-rated portion, 191,425 target shares, of his outstanding performance-based restricted stock granted to him in 2022 and 2023, subject to their original performance conditions and vesting dates as disclosed elsewhere herein in the “Outstanding Equity Awards” table, with the remaining 354,071 shares of these target stock awards being forfeited. (1)For more information see “Section Four - 2023 Long-Term Incentive Compensation” above. (2)For more information see “-Other Benefits - Severance Benefits” below. (3)For more information see “Section Four - 2023 Short-Term Incentive Program” above.
Change of Control Arrangements
Change of Control Arrangements We have agreed to provide cash and other severance benefits to each of our executive officers who is terminated under certain specified circumstances following a change of control of Lumen. Ms. Johnson entered into a change of control agreement which entitles her to receive, in connection with certain qualifying terminations following a change of control of Lumen, (i) a lump sum payment equal to two and one-half times the sum of (1) her base salary in effect at the date of termination plus (2) her target STI amount for the year in which the date of termination occurs; (ii) a pro-rata bonus for the year of termination paid in the ordinary course based on actual performance; (iii) two years of continued life insurance, disability, medical, dental and hospitalization benefits (or an equivalent lump-sum payment where necessary to comply with plan terms); and (iv) outplacement assistance for one year. For each of our other NEOs, if triggered, the benefits under these change of control agreements include payment of (i) a lump sum cash severance payment equal to a multiple of the officer’s annual cash compensation, (ii) the officer’s STI bonus, based on actual performance and the portion of the year served, (iii) certain welfare benefits for a limited period and (iv) the value or benefit of any LTI compensation, if and to the extent that the exercisability, vesting or payment thereof is accelerated or otherwise enhanced upon a change of control pursuant to the terms of any applicable long-term equity incentive compensation plan or agreement. Under these agreements, change of control benefits are payable to our executive officers if within a certain specified period following a change in control (referred to as the “protected period”), the officer is terminated without cause or resigns with “good reason,” which is defined to include a diminution of responsibilities, an assignment of inappropriate duties and a transfer of the officer exceeding 50 miles. The table below shows (i) the length of the “protected period” afforded to officers following a change of control and (ii) the multiple of salary and bonus payment and years of welfare benefits to which officers will be entitled if change of control benefits become payable under our agreements and related policies:
Change of Control Arrangements
| | Protected Period | Multiple of Annual Cash Compensation | Years of Welfare Benefits | | CEO | 2 years | 2.5 times | 2.5 years | | Other Executives | 1.5 years | 2 times | 2 years | | Other Officers | 1 year | 1 time | 1 year |
Change of Control Arrangements
For more information on change of control arrangements applicable to our executives, including our rationale for providing these benefits, see “Compensation Tables — Potential Termination Payments — Payments Made Upon a Change of Control.” For information on change of control severance benefits payable to our junior officers and managers, see “— Severance Benefits” in the next subsection below.
Change of Control Arrangements
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Severance Benefits
Severance Benefits Our executive severance plan provides cash severance payments equal to two years of total targeted cash compensation (defined as salary plus the targeted amount of annual incentive bonus) for our CEO or one year of total targeted cash compensation for any other senior officer in the event that the senior officer is involuntarily terminated by us without cause in the absence of a change of control. The table below shows (i) the multiple of salary and bonus payment and (ii) years of welfare benefits to which officers will be entitled if a senior officer is involuntarily terminated by us without cause in the absence of a change of control:
Severance Benefits
| | Multiple of Annual Cash Compensation | Years of Welfare Benefits | | CEO | 2 times | 2 years | | Other Executives and Senior Officers | 1 time | 1 year |
Severance Benefits
Under our executive severance plan, subject to certain conditions and exclusions, more junior officers or managers receive certain specified cash payments and other benefits if they are either (i) involuntarily terminated without cause in the absence of a change of control or (ii) involuntarily terminated without cause or resign with good reason in connection with a change of control. Our full-time non-represented employees not covered by our executive severance plan may, subject to certain conditions, be entitled to certain specified cash severance payments in connection with certain qualifying terminations. Under a policy that we adopted in 2012, we have committed to seek shareholder approval of any future senior executive severance agreements providing for cash payments, perquisites and accelerated health or welfare benefits with a value greater than 2.99 times the sum of the executive’s base salary plus target bonus.
HRCC Executive Compensation Review Process
| Performance objectives align with strategy HRCC selects STI and LTI performance objectives designed to drive execution of our overall business strategy. This includes engaging an independent compensation consultant and discussing compensation trends, our performance against peers and market influences throughout the year, as well as considering feedback from shareholder engagement regarding executive compensation and incentive design. | Application of guidelines to administer incentive awards After the end of the performance period, initial payout projections, as adjusted under the HRCC’s long-standing Guidelines, are compared against Company performance for the entirety of the performance period. The HRCC reviews award values in light of the Guidelines and determines if positive or negative adjustments are necessary to mitigate the impact of extraordinary events. | | Rigorous design and target setting process The HRCC establishes rigorous threshold, target and maximum performance levels for the selected objectives that are rooted in our annual budget, public guidance and long-range strategic plan. The HRCC takes into consideration various factors influencing our business, including but not limited to, the decline in our legacy wireline revenues, the pace at which revenues are growing for digital services and new products, and the continuous need to adjust our cost structure. | Performance results and calculated payouts Upon completion of each fiscal year, after our actual financial performance results are determined, including any adjustments or discretion applied under our Guidelines, the incentive payouts are calculated and reviewed by Lumen’s Internal Audit. Then, individual bonus and equity payouts are determined for our officers based on our LTI and STI programs and the related performance and relevant individual performance considerations. | | Monitor interim performance On a quarterly basis, the HRCC monitors actual performance and projected payouts under our outstanding incentive awards. | |
Role of Compensation Consultants
Role of Compensation Consultants The HRCC engages an independent compensation consultant to assist in the design and review of executive compensation programs, to determine whether the HRCC’s philosophy and practices are reasonable and compatible with prevailing practices and to provide guidance on specific compensation levels based on industry trends and practices. Since July 2021, Semler Brossy has served as the HRCC’s independent compensation consultant and actively participated in the design and development of our 2023 executive compensation programs. During 2023, Semler Brossy supported the HRCC in developing the compensation packages for the incoming and outgoing members of our senior leadership team and partnered with management on monitoring our share usage, burn rate, dilution and overhang levels, review of industry trends and practices and evaluating changes to our 2024 LTI program. Semler Brossy does not provide any other services to the Company and does not have a prior relationship with any of our NEOs. As required by SEC rules and NYSE listing standards, the HRCC assessed the independence of Semler Brossy and concluded that their work has not raised any conflicts of interest.
Role of Peer Companies
Role of Peer Companies In the second half of each year, with assistance from its independent consultant, the HRCC reviews “peer groups” of other companies comparable to Lumen for purposes of assessing the compensation for our senior officers (Compensation Benchmarking Peer Group) and our total shareholder return performance (TSR Peer Group) which will inform decisions regarding our executive pay programs and compensation decisions for the upcoming year. The HRCC’s deliberate approach to setting pay, as described under “Role of Peer Companies,” is intended to ensure that our executive compensation program is appropriately calibrated to achieving the complementary goals of delivering value to shareholders and attracting, rewarding and retaining the talent necessary to lead us through our ongoing corporate evolution.
Compensation Benchmarking Peer Group
Compensation Benchmarking Peer Group Annually, with the assistance of its compensation consultant and management, the HRCC reviews and approves the Compensation Benchmarking Peer Group – a list of peer companies we use in the competitive market analyses of compensation for our NEOs and senior officers. We believe that our Compensation Benchmarking Peer Group should reflect Lumen’s industry, organizational complexity and market for executive talent. However, we believe the list of direct peers is limited because few, if any, other communications companies are similarly sized and similarly configured in terms of their lines of business, markets and customers. Further, as we continue to evolve into a technology-focused company, our employee base, peer group, and compensation programs are also evolving. Although in the past we had considerable success in attracting and retaining talent with fiscally prudent market-based pay packages, we now compete with software and other technology-focused companies for a more limited pool of executive talent. As a result, the individuals in that limited candidate pool, who frequently have unique talents and expertise, are able to command much higher levels of compensation than what we have paid historically, making executive recruitment and retention more challenging. To address these challenges, the HRCC reviews and approves the list of companies that compose our Compensation Benchmarking Peer Group during a two-step process.
Compensation Benchmarking Peer Group
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Compensation Benchmarking Peer Group
In the first step, we have used the framework below to capture companies that are comparable in size, have similar business strategies and financial models, recognizing that there are very few, if any direct peers. The following attributes were reviewed and screened in order of importance:
Compensation Benchmarking Peer Group
| Screening Process | Analysis of Screening Process | Outcomes from Screening Process | | Primary Screen •Revenues (target between one-half and two times our revenue); •Market capitalization (target between one-third and three times our market cap); Secondary Screen •Assets (target between one-third and three times our assets); and •Enterprise value (target between one-third and three times our enterprise value). Qualitative Screen •Focus on companies with a growth strategy similar to Lumen as it transitions away from its traditional telecom business to its enterprise technology business. •Disclosed peer of peers; •Reverse peers; and •Peer group disclosed by proxy advisors. | •There are a limited number of potential peer companies with comparable revenues, so the annual revenue for some of our peers are more or less than our targeted multiple. Our revenue is well positioned at the 47th percentile compared to the peer company revenue. Additionally, each company in our Compensation Benchmarking Peer Group is engaged in a line of business conducted by us, and are included in the peer of peers and proxy advisor peer screens, which further supports their inclusion in such group. •There are very few peers with market capitalization similar to ours. The HRCC, in agreement from its independent consultant, believe revenue is a more appropriate, stable and common metric for sizing and selecting peer groups and is a better measure for assessing organizational complexity. •The HRCC believes the use of the median and not the average, for competitive market data mitigates the inclusion of both larger and smaller peer companies. | 2023 Compensation Benchmarking Peer Group In August 2022, as a result of the screening process and based on input from HRCC’s independent consultant, the HRCC reviewed the 2022 Compensation Benchmarking Peer Group of 18 companies and approved the following changes and approval of the 14 peer companies in our 2023 Compensation Benchmarking Peer Group listed below. •Remove 4 companies: –Verizon Communications Inc. is a direct competitor in the cloud solutions business, but the other aspects of their business deviate from our business. Verizon Communications Inc. is considerably larger than us for all four financial screens. –Comcast Corporation is a direct competitor in broadband business, but the other aspects of their business deviate from our business. Comcast Corporation lists us as one of their peers, but is considerably larger than us for all four financial screens. –BCE Inc. is a direct competitor in the traditional fiber and telecommunications business in Canada, but the other aspects of their business deviate from our business. BCE Inc. meets our revenue, assets and enterprise value screens, but fails to meet our market cap screen. –TELUS Corporation is a direct competitor in the traditional fiber and telecommunications business in Canada, but the other aspects their business deviate from our business. TELUS Corporation meets all four financial screens. 2024 Compensation Benchmarking Peer Group In August 2023, as a result of the screening process and based on input from HRCC’s independent consultant, the HRCC reviewed the 2023 Compensation Benchmarking Peer Group of 14 companies and approved no changes to our 2024 Compensation Benchmarking Peer Group. |
Compensation Benchmarking Peer Group
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Compensation Benchmarking Peer Group
Compared to the 2023 Compensation Benchmarking Peer Group, Lumen’s 2024 Compensation Benchmarking Peer Group is positioned at the 47th percentile in terms of revenue and the 2nd percentile in terms of market capitalization. These statistics represent a slight downwards shift compared to last year’s analysis, where Lumen was positioned at the 54th and 16th percentiles, respectively. In the second step, the HRCC’s compensation consultant calculates median salaries for our senior officer positions using compensation data publicly disclosed by members of the Compensation Benchmarking Peer Group and, for executive positions with no publicly disclosed compensation data, the HRCC reviews compensation survey data for companies in the telecommunications industry and general industry that are generally similar to us in size. Then, the HRCC compares the compensation of each of our senior officers to the median compensation of comparable officers derived from such market analysis to determine if our senior officers are being paid below, at or above “market” rates. The HRCC used median compensation data derived from its analysis of pay by members of our 2023 Compensation Benchmarking Peer Group to inform its compensation decisions and offer packages for our senior officers throughout 2023. For more information see “Section One - Executive Summary - Continued Leadership Transition” and “Section Four - Compensation, Design, Awards and Payouts for 2023” above. Once established, we believe that a well-selected peer group for compensation benchmarking should remain fairly stable for several years to help inform reliable and consistent market positioning, longer-term pay trends and market practices. Our Compensation Benchmarking Peer Group is summarized in the table following discussion of our TSR Peer Group below.
TSR Peer Group
TSR Peer Group We separately maintain a TSR Peer Group for purposes of measuring our relative stock price performance, which impacts payouts under our most recent LTI grants. As discussed above, our Compensation Benchmarking Peer Group is somewhat constrained by the number of companies based on revenue, enterprise value and market cap size. However, our TSR Peer Group is composed of a broader universe of companies we believe investors are considering when evaluating whether to invest in Lumen or our industry because profiles of investment opportunity and risk are likely to be more important to an investor than company size.
TSR Peer Group
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TSR Peer Group
During the second half of 2022 and early 2023, in preparation for the 2023 LTI grant, the HRCC’s independent consultant collaborated with management as part of an evaluation process to identify and screen relevant public companies to determine our TSR Peer Group, with the desired result of at least 15 to 20 peer companies, as follows:
TSR Peer Group
| Screening Process | Analysis of Screening Process | Outcomes from Screening Process | | Primary Screen •The primary consideration when selecting our TSR Peer Group for 2023 was the need to have peers with similar industry, business and risk profiles as ours. •Start with a universe of potential similar industry peers with technology, telecommunications, cable and satellite services and various technology industries within our GICS industry and sub-industry; Secondary Screen •Conduct a historical stock price correlation between Lumen and a potential peer universe based on the industry sectors identified; and •Perform back-testing on historical stock performance (including TSR and Beta and impacts of macroeconomic factors that would impact all companies similarly). Qualitative Screen •Focus on companies with a growth strategy similar to Lumen as it transitions away from its traditional Telecom business to Enterprise Technology. •Disclosed peer of peers; •Reverse peers; and •Disclosed compensation peer group by proxy advisors. | •The analysis of our 2023 TSR Peer Group started with a review of our 2022 TSR Peer Group, which was comprised of: –12 TSR peers from U.S. technology and telecom industry; and –3 large international integrated telco companies based outside the U.S. (BT Group plc, Orange S.A. and Telefonica S.A.). •The three non-U.S. companies were recommended for removal due to the recently completed divestitures of our Latin American and EMEA business that make their inclusion less relevant going forward. •In the next step, management and the HRCC’s independent consultant reviewed companies in the S&P 1500 Communications Services sector and selected five additional companies to maintain a robust sample of peers (of at least 15 to 20 peer companies) and because they are large, complex and provide services similar to ours. | 2023 TSR Peer Group In January 2023, as a result of the screening process and based on input from HRCC’s independent consultant, the HRCC reviewed and approved the following changes: •Remove 1 US and 4 non-US companies: –BT Group, plc –Orange S.A. –Telefonica S.A. –TELUS Corporation –United States Cellular Corporation •Add 5 companies in the Communications Services sector: –4 of the 5 were highly correlated for historical stock price and Beta screens ◦Cable One, Inc. ◦Charter Communications, Inc. ◦Cogent Communications Holding, Inc. ◦Consolidated Communications Holding, Inc. –Frontier Communications Parent, Inc., which recently emerged from bankruptcy •Therefore, the HRCC approved the 15 peer companies in our 2023 TSR Peer Group listed below. 2024 TSR Peer Group In August 2023, as a result of the screening process and based on input from HRCC’s independent consultant, the HRCC reviewed the 2023 TSR Peer Group of 15 companies and approved no changes to our 2024 TSR Peer Group. In December 2023, DISH Network Corp was acquired by EchoStar Corporation and will be excluded from our 2024 TSR peer group and 2024 annual LTI awards. |
TSR Peer Group
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TSR Peer Group
Compared to the 2023 TSR Peer Groups, Lumen’s 2024 TSR Peer Group is positioned at the 5th percentile in terms of three-year TSR and the 23rd percentile in terms of market cap. These statistics represent a downwards shift compared to last year’s analysis, where Lumen was positioned at the 31st and 46th percentiles, respectively. The 2023 Compensation Benchmarking and TSR Peer Groups are summarized in the table below.
TSR Peer Group
| Our Compensation Benchmarking Peer Group | Common to both peer groups | Our TSR Peer Group | | Cognizant Technology Solutions Corp DXC Technology Corp Hewlett Packard Enterprise Oracle Corp QUALCOMM Inc. Seagate Technology plc T-Mobile US, Inc. VMWare Western Digital Corp | Charter Communications CISCO Systems Inc. DISH Network Corp. Liberty Global plc Motorola Solutions, Inc. | AT&T, Inc. Cable One, Inc. Cogent Communications Holdings, Inc. Comcast Corporation Consolidated Communications EchoStar Corporation Frontier Communications Parent, Inc. Telephone & Data Systems Inc. Verizon Communications Inc. Viasat, Inc. | | 14 Compensation Benchmarking peers | | 15 TSR peers |
Summary Compensation Table
Summary Compensation Table The following table sets forth the compensation paid to each of our NEOs in all capacities in which they served for fiscal years 2021, 2022 and 2023.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Non-equity Incentive Plan Compensation(3) | Change in Pension Value(4) | All Other Compensation(5) | Total | | Current NEOs | | | | | | | | | | Kate Johnson President and CEO | 2023 | $1,200,000 | $— | $6,215,329 | $1,996,800 | $— | $180,834 | $9,592,963 | | | 2022 | 180,840 | 1,000,000 | 3,013,700 | 329,129 | — | 254,461 | 4,778,130 | | Chris Stansbury EVP and CFO | 2023 | $800,000 | $— | $3,271,226 | $915,200 | $— | $10,354 | $4,996,780 | | | 2022 | 565,200 | 150,000 | 8,792,466 | 642,915 | — | 10,854 | 10,161,435 | | Ashley Haynes-Gaspar EVP, Customer Experience Officer | 2023 | $553,972 | $250,000 | $2,160,675 | $483,950 | $— | $9,000 | $3,457,597 | | Stacey W. Goff EVP, General Counsel and Secretary | 2023 | $700,000 | $— | $1,079,907 | $698,880 | $176,563 | $63,999 | $2,719,349 | | | 2022 | 656,338 | — | 2,336,539 | 716,721 | — | 44,653 | 3,754,251 | | | 2021 | 600,018 | — | 2,444,501 | 720,021 | — | 22,557 | 3,787,097 | | Former NEO | | | | | | | | | | Scott A. Trezise(6) Former EVP, Human Resources | 2023 | $548,041 | $— | $1,439,876 | $410,372 | $— | $12,200 | $2,410,489 | | | 2022 | 531,293 | — | 1,557,694 | 483,477 | — | 14,150 | 2,586,614 | | | 2021 | 503,091 | — | 1,466,698 | 495,694 | — | 11,600 | 2,477,083 |
Summary Compensation Table
(1)Represents on-boarding bonuses paid following start date and subject to 2-year clawback if the NEO resigns or is terminated for Cause before the 2-year anniversary of their start date. (2)For 2023, the amounts shown in this column reflect the fair value of annual grants of restricted stock or restricted stock unit awards made to our named executives under our LTI program. For additional information about these equity grants, see the section entitled, “Long-Term Incentive Compensation” in our CD&A. The fair value of the time-vested and performance-based awards presented in the table above has been determined in accordance with FASB ASC Topic 718, based on the closing trading price of our Common Shares on the day of grant, as well as certain adjustments and assumptions set forth in Note 12 titled “Stock-based Compensation” of the notes to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The aggregate value of the LTI awards granted to each named executive in 2023, assuming maximum payout of his or her performance-based award, would be as follows: Ms. Johnson, $6,927,009, Mr. Stansbury, $4,706,110, Ms. Haynes-Gaspar, $2,630,902, Mr. Goff, $1,608,913 and Mr. Trezise, $2,145,217. As noted in the Compensation Discussion and Analysis, the grant date values of the equity awards reflect significantly lower grant date values ($0.92-$2.39) as compared to the stock price used to calculate the number of time-based and performance-based equity awards granted ($3.90), which was based on a 15-day volume-weighted average closing price. As a result, the values reported in this column are significantly below the NEOs’ LTI target grant values for 2023. (3)The amounts shown in this column reflect cash payments made under our short-term incentive program for actual performance in the respective years. For additional information, see the section entitled, “2023 STI Program” in our CD&A. (4)Reflects the net change during each of the years reflected in the present value of Mr. Goff’s accumulated benefits under the defined benefit plan discussed below under the heading “— Pension Benefits.” (5)For fiscal 2023, the amounts shown in this column are comprised of (i) personal use of our aircraft; (ii) Company contributions or other allocations to our defined contribution plans; (iii) payments of life insurance premiums under a legacy reimbursement plan; and (iv) personal identity theft protection service, in each case for and on behalf of the named executives as follows:
Summary Compensation Table
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Grant of Plan Based Awards
Grant of Plan Based Awards The following table presents additional information regarding all equity and non-equity incentive plan awards granted to our NEOs in fiscal 2023.
Grants of Plan-Based Awards
Grants of Plan-Based Awards
Grants of Plan-Based Awards
| NEO | Type of Award and Grant Date(3) | Range of Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Share Payouts Under Equity Incentive Plan Awards(2) | | | All other Stock Awards: Unvested Shares(4) (#) | Grant Date Fair Value Awards(5) | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Current NEOs | | | | | | | | | | | Ms. Johnson | Bonus | $1,200,000 | $2,400,000 | $4,800,000 | — | — | — | — | — | | | TBRS - Annual | — | — | — | — | — | — | 1,459,854 | $3,489,051 | | | PBRS - EBITDA | — | — | — | 547,446 | 1,094,891 | 2,189,782 | — | 1,718,979 | | | PBRS - Relative TSR | — | — | — | 547,445 | 1,094,890 | 2,189,780 | — | 1,007,299 | | Mr. Stansbury | Bonus | $500,000 | $1,000,000 | $2,000,000 | — | — | — | — | — | | | TBRS - Annual | — | — | — | — | — | — | 768,344 | $1,836,342 | | | PBRS - EBITDA | — | — | — | 288,130 | 576,259 | 1,152,518 | — | 904,727 | | | PBRS - Relative TSR | — | — | — | 288,129 | 576,258 | 1,152,516 | — | 530,157 | | Ms. Haynes- Gasper | Bonus | $276,986 | $553,972 | $1,107,944 | — | — | — | — | — | | | TBRS - Initial | — | — | — | — | — | — | 224,022 | $1,200,758 | | | TBRS - Annual | — | — | — | — | — | — | 204,891 | 489,689 | | | PBRS - EBITDA | — | — | — | 76,835 | 153,669 | 307,338 | — | 241,260 | | | PBRS - Relative TSR | — | — | — | 76,835 | 153,669 | 307,338 | | 228,967 | | Mr. Goff | Bonus | $420,000 | $840,000 | $1,680,000 | — | — | — | — | — | | | TBRS - Annual | — | — | — | — | — | — | 230,503 | $550,902 | | | PBRS - EBITDA | — | — | — | 86,439 | 172,878 | 345,756 | — | 271,418 | | | PBRS - Relative TSR | — | — | — | 86,439 | 172,877 | 345,754 | — | 257,587 |
Grants of Plan-Based Awards
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Grants of Plan-Based Awards
| NEO | Type of Award and Grant Date(3) | Range of Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Share Payouts Under Equity Incentive Plan Awards(2) | | | All other Stock Awards: Unvested Shares(4) (#) | Grant Date Fair Value Awards(5) | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Former NEO | | | | | | | | | | | Mr. Trezise(6) | Bonus | $274,021 | $548,041 | $1,096,082 | — | — | — | — | — | | | TBRS - Annual | — | — | — | — | — | — | 307,337 | $734,535 | | | PBRS - EBITDA | — | — | — | 115,252 | 230,504 | 461,008 | — | 361,891 | | | PBRS - Relative TSR | — | — | — | 115,252 | 230,503 | 461,006 | — | 343,449 |
Grants of Plan-Based Awards
(1)Represents potential payouts under the annual STI bonus program for 2023 for our named executives. The actual amounts paid for 2023 performance are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. Failure to meet the “threshold” level of performance would result in no payout to the executive. (2)Represents the performance-based portion of our annual LTI grants, which were issued on May 18, 2023 to Ms. Johnson and Mr. Stansbury, and on March 1, 2023 to all other NEOs. Payout under these awards (restricted stock or RSUs) may range between zero to 200%. For information regarding the performance metrics on which vesting is contingent, please see note 6 to the “Outstanding Equity Awards” table. (3)Definitions of these terms and information on the grant dates appear elsewhere in these footnotes. (4)Represents the time-based portion of our annual LTI awards granted to our NEOs on March 1, 2023 (restricted stock or RSUs). One-third of these annual LTI grants vested on March 1, 2024 and the remainder will vest on March 1 of 2025 and 2026. For Ms. Haynes-Gaspar, also includes an initial on-boarding award granted on January 9, 2023, one-third of which vested on January 9, 2024 and the remainder of which will vest in two equal installments on January 9 of 2025 and 2026, as described in more detail under “Compensation Discussion & Analysis — Part Four — Compensation Arrangements Related to Leadership Transition — Compensation for Ashley Haynes-Gaspar, our new EVP, Customer Experience Officer.” Vesting of all of the aforementioned time-based restricted stock or RSUs is subject to the executive’s continued employment through the vesting date or as otherwise provided in the executive’s award agreement. (5)Calculated in accordance with FASB ASC Topic 718 in the manner described in Note 1 to the Summary Compensation Table above. (6)Mr. Trezise’s employment was involuntarily terminated on April 5, 2024, and in exchange for delivering of a release of claims, the HRCC accelerated vesting of a pro-rated portion of his outstanding time-based restricted stock awards and permitted him to retain a portion of his outstanding performance-based restricted stock awards, subject to their original performance conditions and vesting dates, with the remainder of his equity grants forfeited, all as described in more detail under “Compensation Discussion & Analysis — Part Four — Compensation Arrangements Related to Leadership Transition — Severance Compensation to be Paid to Scott Trezise, our former EVP, Human Resources.” For more information, see Compensation Discussion & Analysis—Section Four—Compensation Design, Awards and Payouts for 2023” and “—Potential Termination Payments.”
Grants of Plan-Based Awards
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Outstanding Equity Awards
Outstanding Equity Awards The following table summarizes information about all outstanding unvested equity awards held by our named executives as of December 31, 2023.
Stock Vested During 2023
Stock Vested During 2023
Stock Vested During 2023
| Name | Number of Shares Acquired on Vesting(1) | Value Realized on Vesting(2) | | Current NEOs | | | | Ms. Johnson | 264,878 | $344,341 | | Mr. Stansbury | 75,187 | 182,704 | | Mr. Haynes-Gasper | — | — | | Mr. Goff | 69,529 | 224,579 | | Former NEO | | | | Mr. Trezise | 41,697 | 134,681 |
Stock Vested During 2023
(1)Represents time-vested equity awards that vested during 2023. (2)Based on the closing trading price of the Common Shares on the applicable vesting date. The following table and discussion summarize pension benefits payable to one of our named executives under (i) the Lumen Combined Pension Plan, a qualified retirement plan under Code Section 401(a), which permits eligible participants (including officers) who have completed at least five years of service to receive a pension benefit upon attaining early or normal retirement age and (ii) our non-qualified supplemental defined benefit plan, which is designed to pay supplemental retirement benefits to certain officers in amounts equal to the benefits such officers would otherwise forego due to Code limitations on compensation and benefits under qualified plans. We refer to these particular defined benefit plans below as our “Qualified Plan” and our “Supplemental Plan,” respectively and as our “Pension Plans,” collectively.
Stock Vested During 2023
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Stock Vested During 2023
| Participating NEO(1) | Plan Name | Number of Years of Credited Service | Present Value of Accumulated Benefit as of 12/31/23(2) | Payments During Last Fiscal Year | | Mr. Goff | Qualified Plan | 25 | $861,841 | $— | | | Supplemental Plan | 25 | 506,506 | — |
Stock Vested During 2023
(1)None of Messes. Johnson or Haynes-Gaspar or Messrs. Stansbury or Trezise are eligible to participate in these plans since they joined the company after both of our Pension Plans were closed to new participants. (2)These figures represent accumulated benefits as of December 31, 2023 based on several assumptions, including the assumption that the executive remains employed by us and begins receiving retirement benefits at the normal retirement age of 65, with such accumulated benefits being discounted from the normal retirement age to December 31, 2023 using discount rates ranging between 5.20% and 5.21%. See Note 11 titled “Employee Benefits” of the notes to our audited financial statements included in Appendix B for additional information. PENSION PLANS. With limited exceptions specified in the Pension Plans, we “froze” our Qualified Plan and Supplemental Plan as of December 31, 2010, which means that no additional monthly pension benefits have accrued under such plans since that date (although service after that date continues to count towards vesting and benefit eligibility and a limited transitional benefit for eligible participants continued to accrue through 2015). Prior to this freezing of benefit accruals, the aggregate amount of each senior officer’s total monthly pension benefit under the Qualified Plan and Supplemental Plan was equal to his or her years of service since 1999 (up to a maximum of 30 years) multiplied by the sum of (i) 0.5% of his or her final average pay plus (ii) 0.5% of his or her final average pay in excess of his or her Social Security covered compensation, where “final average pay” was defined as his or her average monthly compensation during the 60 consecutive month period within his or her last ten years of employment in which he received his or her highest compensation. Effective December 31, 2010, the Pension Plans were amended to cease all future benefit accruals under the above formula (except where a collective bargaining agreement provides otherwise). In lieu of additional accruals under the above-described formula, each affected participant’s accrued benefit as of December 31, 2010 were increased 4% per year, compounded annually through the earlier of December 31, 2015 or the termination of the participant’s employment. Under both Pension Plans, “average monthly compensation” is determined based on the participant’s salary plus annual cash incentive bonus. Although the retirement benefits described above are provided through separate plans, we have in the past transferred benefits from the Supplemental Plan to the Qualified Plan and reserve the right to make further similar transfers to the extent allowed under applicable law. The value of benefits transferred to the Qualified Plan, which directly offset the value of benefits in the Supplemental Plan, will be payable to the recipients in the form of enhanced annuities or supplemental benefits and are reflected in the table above under the “Present Value of Accumulated Benefits as of 12/31/23” column. The normal form of benefit payment under both of our Pension Plans is (i) in the case of unmarried participants, a monthly annuity payable for the life of the participant and (ii) in the case of married participants, an actuarially equivalent monthly annuity payable for the lifetime of the participant and a survivor annuity payable for the lifetime of the spouse upon the participant’s death. Participants may elect optional forms of annuity benefits under each Pension Plan and, in the case of the Qualified Plan, an annuity that guarantees ten years of benefits, all of which are actuarially equivalent in value to the normal form of benefit. The enhanced annuities described in the prior paragraph may be paid in the form of a lump sum, at the participant’s election. The normal retirement age is 65 under both of the Pension Plans. Participants may receive benefits under both of these plans upon “early retirement,” which is defined as attaining age 55 with five years of service. Under both of these plans, the benefit payable upon early termination is calculated under formulas that pay between 60% to 100% of the base plan benefit and 48% to 92% of the excess plan benefit, in each case with the lowest percentage applying to early retirement at age 55 and proportionately higher percentages applying to early retirement after age 55. For additional information on early retirement benefits, please see the applicable early retirement provisions of the Qualified Plan, a copy of which we have filed with the SEC.
Stock Vested During 2023
| | | 123 | | 2023 ANNUAL REPORT | 2024 PROXY STATEMENT | |
CEO Pay Ratio Disclosure
CEO Pay Ratio Disclosure As mandated by federal law and related SEC rules, we are required to disclose a ratio of the pay of our CEO to that of our median employee. For 2023, the total compensation of our CEO, Ms. Johnson (as reported in the Summary Compensation Table) was $9,592,963, while the annual total compensation for our median employee was $84,804. As a result, the ratio of CEO pay to median employee pay was approximately 113 to 1. We calculated our 2023 pay ratio using the following assumptions: •Median employee determination. The median employee was determined by reviewing the annual total target compensation (the sum of base salary, target short-term incentive and target long-term incentive awards) as of December 31, 2023 for approximately 28,000 active employees employed on that date, excluding our CEO. •Median employee identification. The median employee was identified as a Operations Technician II, employed by us in the U.S. for 7 years. •Median employee total compensation calculation. To determine the median pay ratio, we calculated the median employee’s pay using the same pay elements and calculation methodology as used in determining the CEO’s pay for purposes of disclosure in the Summary Compensation Table. The SEC rules permit companies to choose between different methodologies for median pay calculations. Other public companies may calculate their pay ratio using a different methodology than ours, and you should not assume our ratio data is comparable to that of other companies.
CEO Pay Ratio Disclosure
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Pay Versus Performance Disclosure
Pay Versus Performance Disclosure In accordance with rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEOs”) and Non-PEO NEOs and Company performance for the fiscal years listed below. The Human Resources and Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
Pay Versus Performance Disclosure
| Year | Summary Compensation Table Total for PEO 1(1) ($) | Summary Compensation Table Total for PEO 2(1) ($) | Compensation Actually Paid to PEO 1(1),(2),(3) ($) | Compensation Actually Paid to PEO 2(1),(2),(3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(1) ($) | Average Compensation Actually Paid to Non-PEO NEOs(1),(2),(3) ($) | Value of Initial Fixed $100 Investment based on:(4) | | Net Income ($ Millions) | Adjusted EBITDA(5) ($ Millions) | | | | | | | | | TSR ($) | Peer Group TSR ($) | | | | 2023 | $— | $9,592,963 | $— | $7,258,427 | $3,396,054 | $1,846,687 | $17.52 | $140.75 | $(10,298) | $4,146 | | 2022 | 19,816,806 | 4,778,130 | (5,200,491) | 4,368,986 | 5,145,256 | 511,978 | 49.96 | 90.34 | (1,548) | 6,703 | | 2021 | 22,654,781 | — | 32,390,881 | — | 4,057,947 | 5,127,580 | 112.34 | 150.28 | 2,033 | 8,424 | | 2020 | 16,959,233 | — | 10,189,461 | — | 3,162,186 | 2,308,534 | 80.91 | 123.61 | (1,232) | 8,489 |
Pay Versus Performance Disclosure
(1)Jeffery K. Storey was our PEO from May 24, 2018 to November 7, 2022 (“PEO 1”). Kathleen Johnson has been our PEO since November 7, 2022 (“PEO 2”). The individuals comprising the Non-PEO NEOs for each year presented are listed below.
Pay Versus Performance Disclosure
| 2020 | 2021 | 2022 | 2023 | | Indraneel Dev | Indraneel Dev | Stacey W. Goff | Stacey W. Goff | | Stacey W. Goff | Stacey W. Goff | Chris Stansbury | Chris Stansbury | | Shaun C. Andrews | Shaun C. Andrews | Shaun C. Andrews | Ashley Haynes-Gaspar | | Scott A. Trezise | Scott A. Trezise | Scott A. Trezise | Scott A. Trezise | | | | Indraneel Dev | |
Pay Versus Performance Disclosure
(2)The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote 3 below. (3)For 2023, compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEOs and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards column are the totals from the Stock Awards column set forth in the Summary Compensation Table. Amounts in the Exclusion of Change in Pension Value column reflect the amounts, if any, attributable to the Change in Pension Value reported in the Summary Compensation Table. There are no amounts reported in the Inclusion of Pension Service Cost because with limited exceptions specified in the Pension Plans, we “froze” our defined benefit pension plans as of December 31, 2010, as described under the heading “ – Pension Benefits”.
Pay Versus Performance Disclosure
| Year | Summary Compensation Table Total for PEO 2 ($) | Exclusion of Change in Pension Value for PEO 2 ($) | Exclusion of Stock Awards for PEO 2 ($) | Inclusion of Pension Service Cost for PEO 2 ($) | Inclusion of Equity Values for PEO 2 ($) | Compensation Actually Paid to PEO 2 ($) | | 2023 | $9,592,963 | $— | $(6,215,329) | $— | $3,880,793 | $7,258,427 |
Pay Versus Performance Disclosure
| Year | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Exclusion of Change in Pension Value for Non-PEO NEOs ($) | Average Exclusion of Stock Awards for Non-PEO NEOs ($) | Average Inclusion of Pension Service Cost for Non-PEO NEOs ($) | Average Inclusion of Equity Values for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2023 | $3,396,054 | $(44,141) | $(1,987,921) | $— | $482,695 | $1,846,687 |
Pay Versus Performance Disclosure
| | | 129 | | 2023 ANNUAL REPORT | 2024 PROXY STATEMENT | |
Pay Versus Performance Disclosure
The amounts in the “Inclusion of Equity Values” columns in the tables above are derived from adding or deducting the amounts set forth in the following tables:
Pay Versus Performance Disclosure
| Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO 2 ($) | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO 2 ($) | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for PEO 2 ($) | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for PEO 2 ($) | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for PEO 2 ($) | Total - Inclusion of Equity Values for PEO 2 ($) | | 2023 | $5,712,642 | $(793,527) | $— | $(1,038,322) | $— | $3,880,793 |
Pay Versus Performance Disclosure
| Year | Average Year- End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non- PEO NEOs ($) | Average Vesting- Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs ($) | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs ($) | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) | | 2023 | $1,580,761 | $(990,288) | $— | $(107,778) | $— | $482,695 |
Pay Versus Performance Disclosure
(4)The Peer Group TSR set forth in this table utilizes the S&P 500 Communication Services Sector Index, which we also utilize in the stock performance graph appearing herein under the heading “Other Items-Lumen Performance History”. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the S&P 500 Communication Services Sector Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. (5)We determined Adjusted EBITDA to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO 2 and Non-PEO NEOs in 2023. Adjusted EBITDA measures the operational performance and profitability of our businesses, and we use this measure in our compensation programs to incentivize and reward our senior officers to focus on the combination of cost savings and profitable revenue growth. Adjusted EBITDA, which is described in further detail in Appendix A – Non-GAAP Reconciliations, is a non-GAAP metric. This performance measure may not have been the most important financial performance measure for prior years and we may determine a different financial performance measure to be the most important financial performance measure in future years.
Pay Versus Performance Disclosure
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Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company Total Shareholder Return (“TSR”) and Peer Group TSR
Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company Total Shareholder Return (“TSR”) and Peer Group TSR The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and the Company’s cumulative TSR and S&P 500 Communication Services Sector Index TSR over the four most recently completed fiscal years.
PEO and Average Non-PEO NEO Compensation Actually Paid Versus TSR
PEO and Average Non-PEO NEO Compensation Actually Paid Versus TSR
Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income
Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Net Income during the four most recently completed fiscal years.
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Net Income
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Net Income
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Net Income
| | | 131 | | 2023 ANNUAL REPORT | 2024 PROXY STATEMENT | |
Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Adjusted EBITDA
Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Adjusted EBITDA The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Adjusted EBITDA during the four most recently completed fiscal years.
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Adjusted EBITDA
PEO and Average Non-PEO NEO Compensation Actually Paid Versus Adjusted EBITDA
Pension Benefits
Pension Benefits United States funding laws require a company with a pension shortfall to fund the annual cost of benefits earned in addition to a seven-year amortization of the shortfall. Our funding policy for our Combined Pension Plan is to make contributions with the objective of accumulating ample assets to pay all qualified pension benefits when due under the terms of the plan. The accounting unfunded status of the Combined Pension Plan was $736 million and $580 million as of December 31, 2023 and 2022, respectively. We made no voluntary cash contributions to the Combined Pension Plan in 2023 or 2022. As discussed above, we contributed approximately $319 million of cash to the Lumen Pension Plan trust to fully fund the pension plan in September 2022 in preparation for the closing of the sale of the ILEC business. We paid $5 million of benefits directly to participants of our non-qualified pension plans in both 2023 and 2022. Benefits paid by the Combined Pension Plan are paid through a trust that holds all of the Plan's assets. The amount of required contributions to the Combined Pension Plan in 2024 and beyond will depend on a variety of factors, most of which are beyond our control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations. Based on current laws and circumstances, we do not believe we are required to make any contributions to the Combined Pension Plan in 2024 and we do not expect to make voluntary contributions to the trust for the Combined Pension Plan in 2024. We estimate that in 2024 we will pay $4 million of benefits directly to participants of our non-qualified pension plans.
Pension Benefits
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Pension Benefits
We recognize in our consolidated balance sheets the funded status of the legacy Level 3 defined benefit post-retirement plans. These plans were fully funded as of December 31, 2023 and 2022. Additionally, as previously mentioned, we sponsor unfunded non-qualified pension plans for certain current and former highly-compensated employees. The net unfunded status of our non-qualified pension plans was $33 million and $35 million for the years ended December 31, 2023 and 2022, respectively. Due to the insignificant impact of these pension plans on our consolidated financial statements, we have predominantly excluded them from the remaining employee benefit disclosures in this Note, unless otherwise specifically stated.

DEF 14A of Lumen Technologies, Inc.

Director Nominees

Director Nominees

Director Nominees

Director Nominees

Director Nominees

Skills and Relevance to Lumen’s Strategy

Skills and Relevance to Lumen’s Strategy

Skills and Relevance to Lumen’s Strategy

Refreshment

Recent Board Changes

Recent Board Changes

Recent Board Changes

Recent Board Changes

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Our Director Nominees

Director Compensation

Cash and Stock Payments

2023 Compensation of Outside Directors

Directors’ Compensation

Non-Qualified Deferred Compensation

Non-Qualified Deferred Compensation

Non-Qualified Deferred Compensation

Short-Term Incentive Bonus

Short-Term Incentive Bonus

Short-Term Incentive Bonus

Dollars in Millions

Long-Term Incentive Compensation

Long-Term Incentive Compensation

Dollars in Millions

Our Compensation Best Practices

2023 Shareholder Engagement Highlights

Aligning Performance Objectives with Strategy

Rigorous Design and Target Goal Setting Process

Incentive Program Guidelines

Incentive Program Guidelines

Incentive Program Guidelines

Incentive Program Guidelines

Our Pay Elements

Realized and Realizable Pay for Our NEOs

Section Four - Compensation Design, Awards and Payouts for 2023

Total 2023 Target Compensation as of December 31, 2023(1)

Total 2023 Target Compensation as of December 31, 2023(1)

Base Salary

2023 Short-Term Incentive Program

2023 Short-Term Incentive Program

2023 STI Performance and Results

Alignment to Strategy

Alignment to Strategy

Alignment to Strategy

3) Bonus Amounts

2023 STI Bonus Amounts

2023 STI Bonus Amounts

2023 STI Bonus Amounts

2023 STI Bonus Amounts

2023 Long-Term Incentive Compensation

2023 LTI Design

2023 Annual LTI Grants

2023 Annual LTI Grants

2023 Annual LTI Grants

2023 Annual LTI Grants