SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

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o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to § 240.14a-12

 

TIME WARNER CABLE INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 12, 2010

 

Dear Stockholder:

 

We cordially invite you to attend Time Warner Cable Inc.’s annual meeting of stockholders. The meeting will be held on Monday, May 24, 2010, at 2:00 p.m. at the Portland Harbor Hotel, 468 Fore Street, Portland, Maine 04101. A map with directions to the meeting is provided on the back cover of the Proxy Statement.

 

As a stockholder, you will be asked to vote on a number of important matters, which are listed in the Notice of Annual Meeting of Stockholders. The Board of Directors recommends a vote FOR the proposals listed as items 1 and 2 in the Notice.

 

We are again this year taking advantage of Securities and Exchange Commission rules that allow companies to furnish proxy materials to their stockholders on the Internet. We believe that these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of producing and distributing materials for our annual meeting. Under these rules, you can vote in one of several ways. Instructions are provided in our communications to you. If you received a Notice of Internet Availability of Proxy Materials in the mail, you can vote over the Internet, or, if you request printed copies of the proxy materials by mail, you also can vote by mail or by telephone.

 

If you are planning to attend the annual meeting in person, because of security procedures, you will need to register in advance to gain admission to the meeting. You can register by calling 1-866-892-8925 by May 22, 2010. In addition to registering in advance, you will be required to present government-issued identification (e.g., driver’s license or passport) to enter the meeting. The meeting also will be audiocast live on the Internet at www.timewarnercable.com/investors.

 

I look forward to greeting those of you who are able to attend the annual meeting.

 

 

Sincerely,

 

 

Glenn A. Britt
Chairman, President and
Chief Executive Officer

 

 

PLEASE PROMPTLY SUBMIT YOUR PROXY

 

Time Warner Cable Inc.

60 Columbus Circle

New York, NY 10023

 

The Annual Meeting (the “Annual Meeting”) of Stockholders of Time Warner Cable Inc. (the “Company”) will be held on Monday, May 24, 2010 at 2:00 p.m. (local time). The meeting will take place at:

 

Portland Harbor Hotel
468 Fore Street
Portland, Maine 04101

 

The purposes of the meeting are:

 

 

3.  To transact such other business as may properly come before the Annual Meeting.

 

The close of business on March 29, 2010 is the record date for determining stockholders entitled to vote at the Annual Meeting. Only holders of the Company’s common stock, par value $0.01 per share (the “Common Stock”), as of the record date are entitled to vote on the matters listed in this Notice of Annual Meeting.

 

Your vote is important. Whether or not you plan to attend the Annual Meeting in person, it is important that your shares be represented. Please follow the instructions in the Notice you received by mail or e-mail and vote as soon as possible. Any stockholder of record who is present at the meeting may vote in person instead of by proxy, thereby canceling any previous proxy. You may not appoint more than three persons to act as your proxy at the meeting.

 

Please note that, if you plan to attend the Annual Meeting in person, you will need to register in advance to be admitted. You may register in advance by telephone at 1-866-892-8925. The Annual Meeting will start promptly at 2:00 p.m. To avoid disruption, admission may be limited once the meeting begins.

 

Time Warner Cable Inc.

 

Marc Lawrence-Apfelbaum
Executive Vice President, General
Counsel and Secretary

 

April 12, 2010

TABLE OF CONTENTS

 

 

TIME WARNER CABLE INC.

 

60 Columbus Circle

New York, NY 10023

 

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Time Warner Cable Inc., a Delaware corporation (“TWC” or the “Company”), for use at the Annual Meeting of the Company’s stockholders (the “Annual Meeting”) to be held on Monday, May 24, 2010, at the Portland Harbor Hotel, 468 Fore Street, Portland, Maine 04101 commencing at 2:00 p.m., local time, and at any adjournment or postponement, for the purpose of considering and acting upon the matters set forth in the accompanying Notice of Annual Meeting of Stockholders. Stockholders attending the Annual Meeting in person should refer to the driving directions provided on the back cover of the Proxy Statement.

 

The Company is again taking advantage of Securities and Exchange Commission (“SEC”) rules that allow companies to furnish proxy materials to stockholders via the Internet. Accordingly, the Company is sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to its stockholders of record and beneficial owners, unless they have directed the Company to provide the materials in a different manner. The Notice provides instructions on how to access and review all of the important information contained in the Company’s Proxy Statement and Annual Report to Stockholders, as well as how to submit a proxy over the Internet. If a stockholder receives the Notice and would still like to receive a printed copy of the Company’s proxy materials, instructions for requesting these materials are included in the Notice. The Company plans to mail the Notice to stockholders by April 13, 2010. The Company will continue to mail a printed copy of this Proxy Statement and form of proxy to certain stockholders, and it expects that mailing to begin on or about April 13, 2010.

 

At the close of business on March 29, 2010, the record date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting, there were outstanding and entitled to vote 353,859,706 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”). For information about stockholders’ eligibility to vote at the Annual Meeting, shares outstanding on the record date and the ways to submit and revoke a proxy, please see “Voting at the Annual Meeting,” below. Each issued and outstanding share of Common Stock has one vote on any matter submitted to a vote of stockholders.

 

 

 

A copy of the Company’s Annual Report to Stockholders for the year 2009 is available on the Company’s website at www.timewarnercable.com/annualmeetingmaterials.

 

The Board of Directors recommends a vote FOR the election of each of the twelve nominees for election as directors and FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent auditor for 2010.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on Monday, May 24, 2010:

 

This Proxy Statement and the Company’s 2009 Annual Report to Stockholders are available at www.timewarnercable.com/annualmeetingmaterials.

 

On March 12, 2009, the Company’s separation (the “Separation”) from Time Warner Inc. (“Time Warner”) was completed pursuant to a Separation Agreement between TWC and Time Warner and certain of their subsidiaries dated as of May 20, 2008. In connection with the Separation, on March 12, 2009, TWC paid a special cash dividend of $10.27 per share ($30.81 per share after giving effect to the 1-for-3 reverse stock split discussed below, aggregating $10.856 billion) to holders of record on March 11, 2009 of its outstanding Class A common stock and Class B common stock (the “Special Dividend”). Following the payment of the Special Dividend, each outstanding share of Class A common stock and Class B common stock was automatically converted (the “Recapitalization”) into one share of common stock, par value $0.01 per share (the “Common Stock”). Effective immediately after the Recapitalization, the Company implemented a reverse stock split of the Common Stock at a 1-for-3 ratio (the “Reverse Stock Split”). TWC’s separation from Time Warner was effected as a pro rata dividend of all shares of TWC Common Stock held by Time Warner to holders of record of Time Warner’s common stock (“Time Warner Common Stock”) (the “Spin-Off Dividend” or the “Distribution”). The shares of Common Stock distributed in the Spin-off Dividend reflected both the Recapitalization and the Reverse Stock Split.

 

Unless otherwise indicated in this Proxy Statement, information about TWC’s equity securities prior to March 12, 2009 has been adjusted to reflect the Separation, the Distribution and the Reverse Stock Split. The Company’s Common Stock is listed for trading on the New York Stock Exchange (the “NYSE”). As a result of the Separation, the Company is no longer considered a “controlled company” under NYSE governance requirements.

 

The Company is committed to maintaining strong corporate governance practices that allocate rights and responsibilities among stockholders, the Board of Directors and management in a manner that benefits the long-term interests of the Company’s stockholders. Accordingly, the Company’s corporate governance practices are designed not merely to satisfy regulatory requirements, but to provide for effective oversight and management of the Company.

 

The Board has devoted substantial attention to the subject of corporate governance. Among other things, the Board has established a Nominating and Governance Committee and has developed a Corporate Governance Policy. The Board refines this Policy from time to time as it deems necessary. The Corporate Governance Policy sets forth the basic “rules of the road” to guide how the Board and its committees operate.

 

The Board of Directors also regularly holds executive sessions without management present, conducts examinations of management’s and the Board’s performance, has adopted a code of conduct for employees and has enacted a set of ethics guidelines specifically for outside directors. The Board of Directors engages in a regular process of reviewing its corporate governance practices, including comparing its practices with those recommended by various corporate governance groups, the expectations of the Company’s stockholders, and the practices of other leading public companies. The Company also regularly reviews its practices in light of

proposed and adopted laws and regulations, including the Sarbanes-Oxley Act of 2002, the rules of the SEC, and the rules and listing standards of the NYSE.

 

Information on the Company’s corporate governance is available to the public under “Corporate Governance” at www.timewarnercable.com/investors on the Company’s website. The information on the website includes: the Company’s by-laws, its Corporate Governance Policy (which includes the Board’s categorical standards for determining director independence), the charters of the Board’s four standing committees, the Company’s codes of conduct, and information regarding the process by which shareholders may communicate with members of the Board of Directors. These documents are also available in print by writing to the Company’s Corporate Secretary at the following address: Time Warner Cable Inc., 60 Columbus Circle, New York, New York 10023, Attn: General Counsel.

 

The remainder of this section of the Proxy Statement summarizes the key features of the Company’s corporate governance practices:

 

The number of directors constituting the full Board is currently set at twelve. The Board of Directors has adopted a policy, consistent with the Company’s Certificate of Incorporation and by-laws, that it may determine the size of the Board from time to time. In establishing its size, the Board considers a number of factors, including (i) resignations and retirements from the current Board, (ii) the availability of appropriate and qualified candidates and (iii) balancing the desire of having a small enough Board to facilitate deliberations with, at the same time, having a large enough Board to have the diversity of backgrounds, professional experience and skills so that the Board and its committees can effectively perform their responsibilities in overseeing the Company’s businesses.

 

While a significant amount of public attention has been focused on the need for directors to be “independent,” independence is just one of the important factors that the Board and its Nominating and Governance Committee take into consideration in selecting nominees for director. The Nominating and Governance Committee and the Board of Directors apply the same criteria to all candidates, regardless of whether the candidate is proposed by a stockholder or is identified through some other source.

 

Overall Composition.  As a threshold matter, the Board of Directors believes it is important for the Board as a whole to reflect an appropriate combination of skills, professional experience, and diversity of backgrounds in light of the Company’s current and future business needs.

 

Personal Qualities.  Each director must possess certain personal qualities, including financial literacy and a demonstrated reputation for integrity, judgment, business acumen, and high personal and professional ethics. In addition, each director must be at least 21 years of age at the commencement of service as a director.

 

Commitment to the Company and its Stockholders.  Each director must have the time and ability to make a constructive contribution to the Board, as well as a clear commitment to fulfilling the director’s fiduciary duties and serving the interests of all the Company’s stockholders.

 

Other Commitments.  Each director must satisfy the requirements of antitrust laws that limit service as an officer or director of a significant competitor of the Company. In addition, in order to ensure that directors have sufficient time to devote to their responsibilities, the Board determined that directors should generally serve on no more than four other public company boards.

 

Additional Criteria for Incumbent Directors.  During their terms, all incumbent directors on the Company’s Board are expected to attend the meetings of the Board and committees on which they serve and the annual meetings of stockholders; to stay informed about the Company and its business; to participate in discussions; to comply with applicable Company policies; and to provide advice and counsel to the Company’s management.

Additional Criteria for New Directors.  As part of its annual assessment of the Board’s composition in light of the Company’s current and expected business needs, the Nominating and Governance Committee has identified additional criteria for new members of the Board. The following attributes may evolve over time depending on changes in the Board and the Company’s business needs and environment, and may be changed before the proxy statement for the 2011 annual meeting of stockholders is furnished to stockholders.

 

 

Independence.  Under NYSE rules, a majority of the directors on the Board must be independent. The Board has determined that nine of the twelve current directors, each of whom is also a nominee for director (or 75% of the Board), are independent in accordance with the Company’s criteria. The Board applies the following NYSE criteria in making its independence determinations:

 

 

 

 

 

 

There are a number of different ways in which an individual may be nominated for election to the Board of Directors.

 

Nominations Developed by the Nominating and Governance Committee.  The Nominating and Governance Committee may identify and propose an individual for election to the Board. This involves the following steps:

 

 

Stockholder Nominations Submitted to the Committee.  Stockholders may also submit names of director candidates, including their own, to the Nominating and Governance Committee for its consideration. The process for stockholders to use in submitting suggestions to the Nominating and Governance Committee is set forth below at “Other Procedural Matters—Procedures for Submitting Director Recommendations and Nominations.”

Stockholder Nominations Submitted to Stockholders.  Stockholders may choose to submit nominations directly to the Company’s stockholders. The Company’s by-laws set forth the process that stockholders may use if they choose this approach, which is described below at “Other Procedural Matters—Procedures for Submitting Director Recommendations and Nominations.”

 

Director Elections.  In connection with the Separation, the Company’s by-laws were amended to provide, among other things, that in any uncontested election of directors, each person receiving a majority of the votes cast will be deemed elected. Any abstentions or broker non-votes will not be counted as a vote cast. Accordingly, any new director nominee in an uncontested election who receives more “against” votes than “for” votes will not be elected to the Board. If any incumbent director receives more “against” votes than “for” votes, he or she must submit an offer to resign from the Board no later than two weeks after the certification by the Company of the voting results. The Board will then consider the resignation offer and may either (i) accept the resignation offer or (ii) reject the resignation offer and seek to address the underlying cause(s) of the “against” votes. The Board is required to make its determination within 90 days following the certification of the stockholder vote and make a public announcement of its decision, including a statement regarding the reasons for its decision if the Board rejects the resignation offer. This procedure also provides that the Chairman of the Nominating and Governance Committee has the authority to manage the Board’s review of the resignation offer, unless it is the Chairman of the Nominating and Governance Committee who has received the majority-withheld vote, in which case, the remaining independent directors who received a majority of the votes cast will select a director, which director will have the authority otherwise delegated to the Chairman of the Nominating and Governance Committee, to manage the process. In any contested election of directors, the election will be subject to a plurality vote standard, where the persons receiving the highest numbers of the votes cast, up to the number of directors to be elected in such election, will be deemed elected. A contested election is generally one in which the number of persons nominated exceeds the number of directors to be elected.

 

The Board’s primary responsibility is to seek to maximize long-term stockholder value. The Board selects senior management of the Company, monitors management’s and the Company’s performance, and provides advice and counsel to management. Among other things, the Board at least annually reviews the Company’s long-term strategy and longer-term business plan and also approves an annual budget for the Company. The Board also reviews and approves transactions in accordance with guidelines that the Board may adopt from time to time. In fulfilling the Board’s responsibilities, directors have full access to the Company’s management, internal and external auditors, and outside advisors.

 

The Board of Directors holds at least five meetings each year, including at least four quarterly meetings and generally one meeting devoted to addressing the Company’s strategy. In 2009, the Board of Directors met six times. The meeting schedule is normally established in the summer of the previous year. The Board of Directors also communicates informally with management on a regular basis.

 

Non-employee directors meet by themselves, without management or employee directors present, at every regularly scheduled Board meeting. Additionally, the Independent Directors (as defined below) meet together without any other directors or management present at least once a year. Any director may request additional executive sessions. The lead director generally presides at these executive sessions with the Chair of the committee that is responsible for the subject matter at issue (e.g., the Audit Committee Chair would lead a discussion of audit-related matters) leading the discussion, if appropriate.

 

The Company’s Corporate Governance Policy provides that the Nominating and Governance Committee may from time to time make recommendations to the Board regarding the leadership structure of the Board, including whether to combine or separate the positions of Chairman and Chief Executive Officer (“CEO”), or

to establish the position of “lead” or “presiding” director. In making the leadership structure determination, the Board considers many factors, including the specific needs of the business and what is in the best interests of the Company’s stockholders. In connection with the Separation, the Board named Glenn A. Britt, the Company’s President and Chief Executive Officer, to the additional position of Chairman and named Peter R. Haje to serve as the independent lead director. In this role, Mr. Haje chairs the Board’s executive sessions, serves as a liaison between the Chairman of the Board and the independent directors, approves Board meeting schedules and agenda items, has the authority to call meetings of the independent directors and organizes the Board evaluation of the CEO. The Board believes that it is in the best interest of the Company and its stockholders to have Mr. Britt, who is responsible for the Company’s operations and strategy, chair the Board’s discussions. The combined position enhances Mr. Britt’s ability to provide insight and direction on important strategic initiatives to both management and the Board, and to ensure that they act with a common purpose. The Company believes that its overall corporate governance policies and practices combined with the presence of a lead director, whose role closely parallels that of an independent Chairman, adequately addresses any governance concerns raised by the dual CEO and Chairman role. The lead director, along with the other non-employee directors, provides independent oversight of management and the Company’s strategy. The Company believes that separating the roles would potentially result in less effective management and governance processes through undesirable duplication of work and, in worst case, lead to a blurring of the current clear lines of accountability and responsibility.

 

While risk management is primarily the responsibility of the Company’s management, the Board provides overall risk oversight with a focus on the most significant risks facing the Company. Throughout the year, in conjunction with its regular business presentations to the Board and its committees, management highlights any significant related risks. In addition, annually a meeting of the Board is dedicated to reviewing the company’s short- and long-term strategies, including consideration of significant risks facing the Company.

 

The Board has delegated responsibility for the oversight of specific risks to the Board committees as follows:

 

 

The Board’s risk oversight process builds upon the Company’s enterprise risk management processes. The description, assessment, mitigation plan and status for each enterprise risk are developed and monitored by management, including management “risk owners” and an oversight enterprise risk management committee. Management identifies and monitors the Company’s risks. In addition to the Company’s enterprise risk management processes, it has regular management disclosure committee meetings, a strong compliance office, Codes of Business Conduct and a comprehensive internal and external audit process.

 

The Board has four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Finance Committee. The Board may eliminate or create additional committees as it deems appropriate.

 

Each of the Audit Committee, the Nominating and Governance Committee and the Compensation Committee is composed entirely of Independent Directors. The Chair of each committee is elected by the Board, generally upon the recommendation of the Nominating and Governance Committee, and is expected to be rotated periodically. Each committee also holds regular executive sessions at which only committee members are present. Each committee is also authorized to retain its own outside counsel and other advisors as it desires.

 

As noted above, charters for each standing committee are available on the Company’s website, but a brief summary of the committees’ responsibilities follows:

 

Audit Committee.  The Audit Committee assists the Board of Directors in fulfilling its responsibilities in connection with the Company’s (i) independent auditors, (ii) internal auditors, (iii) financial statements, (iv) earnings releases and guidance, as well as (v) the Company’s compliance program, internal controls, and risk management. The Board has determined that each member of the Audit Committee qualifies as an audit committee financial expert under the rules of the SEC implementing section 407 of the Sarbanes-Oxley Act and meets the independence and experience requirements of the NYSE and the federal securities laws.

 

Nominating and Governance Committee.  The Nominating and Governance Committee is responsible for assisting the Board in relation to (i) corporate governance, (ii) director nominations, (iii) committee structure and appointments, (iv) CEO performance evaluations and succession planning, (v) Board performance evaluations, (vi) director compensation, (vii) regulatory matters relating to corporate governance, (viii) stockholder proposals and communications, and (ix) related person transactions.

 

Compensation Committee.  The Compensation Committee is responsible for (i) approving compensation and employment agreements for, and reviewing benefits provided to, certain of the Company’s senior executives, (ii) overseeing the Company’s disclosure regarding executive compensation, (iii) administering the Company’s equity-based compensation plans and (iv) reviewing the Company’s overall compensation structure, practices, risks and benefit plans. A sub-committee of the Compensation Committee is responsible for certain executive compensation matters, including (i) reviewing and approving corporate goals and objectives relevant to the compensation of the CEO, each of the other executive officers and each of the other employees whose annual total compensation has a target value of $2 million or more (the “Senior Executives”), (ii) evaluating the performance of the CEO and the Senior Executives, and (iii) setting the compensation level of the CEO and the Senior Executives.

 

Finance Committee.  The Finance Committee is responsible for (i) reviewing and approving the Company’s financing activity and (ii) assisting the Board in overseeing the Company’s (x) capital structure and financing strategies, including the related risks, (y) insurance program, and (z) management of its retirement plans, including the defined benefit pension plan trust.

 

The Board of Directors conducts a self-evaluation of its performance annually, which includes a review of the Board’s composition, responsibilities, structure, processes and effectiveness. Each standing committee of the Board also conducts a similar self-evaluation with respect to such committee.

 

Each individual, upon joining the Board of Directors, is provided with an orientation regarding the role and responsibilities of the Board and the Company’s operations. As part of this orientation, new directors have opportunities to meet with members of the Company’s senior management. The Company is also committed to the ongoing education of its directors. From time to time, the Company’s executives make presentations to the Board regarding their respective areas. In addition, the Company reimburses directors for reasonable expenses relating to ongoing director education.

 

The Board of Directors is responsible for establishing compensation for the Company’s non-employee directors who are not active employees of the Company. At least every two years, the Nominating and Governance Committee reviews the compensation for non-employee directors, including compensation provided to non-employee directors at other companies, and makes a recommendation to the Board for its approval. (For details on the compensation currently provided to non-employee directors, please see “Compensation—Director Compensation.”)

 

It is also the Board’s policy that all directors who are not actively employed by the Company are required to own the Company’s stock (whether as a result of receipt of shares from the Company or the purchase of shares). It is expected that, within three years of joining the Board, each director will own at least the number of shares of the Company’s stock, or stock-based equivalents, that have been awarded to him or her pursuant to the Company’s compensation plans for directors, less any shares sold by the director for the purpose of paying taxes related to such awards.

 

The Company also expects all directors to comply with all federal, state and local laws regarding trading in securities of the Company and disclosing material, non-public information regarding the Company, and the Company has procedures in place to assist directors in complying with these laws.

 

In order to help assure the highest levels of business ethics at the Company, the Board of Directors has adopted the following three codes of conduct, which are posted on the Company’s website at www.timewarnercable.com/investors.

 

Standards of Business Conduct.  The Company’s Standards of Business Conduct apply to the Company’s employees, including any employee directors. The Standards of Business Conduct establish policies pertaining to employee conduct in the workplace, electronic communications and information security, accuracy of books, records and financial statements, securities trading, confidentiality, conflicts of interest, fairness in business practices, the Foreign Corrupt Practices Act, antitrust laws and political activities and solicitations.

 

Code of Ethics for Principal Executive and Senior Financial Officers.  The Company’s Code of Ethics for Principal Executive and Senior Financial Officers applies to certain officers of the Company, including the Company’s Chief Executive Officer, Chief Financial Officer, Controller, and other senior executives performing senior financial officer functions. The code serves as a supplement to the Standards of Business Conduct. Among other things, the code mandates that the designated officers engage in honest and ethical conduct, avoid conflicts of interest and disclose any material transaction or relationship that could give rise to a conflict, protect the confidentiality of non-public information about the Company, work to achieve responsible use of the Company’s assets and resources, comply with all applicable governmental rules and regulations and promptly report any possible violation of the code. Additionally, the code requires that these individuals promote full, fair, understandable and accurate disclosure in the Company’s publicly filed reports and other public communications and sets forth standards for accounting practices and records. Individuals to whom the code applies are held accountable for their adherence to it. Failure to observe the terms of this code or the Standards of Business Conduct can result in disciplinary action (including termination of employment).

 

Guidelines for Non-Employee Directors.  The Guidelines for Non-Employee Directors assist the Company’s non-employee directors in fulfilling their fiduciary and other duties to the Company. In addition to affirming the directors’ duties of care and loyalty, the guidelines set forth specific policies addressing, among other things, securities trading and reporting obligations, gifts, the Foreign Corrupt Practices Act, political contributions and antitrust laws.

 

The Company’s Independent Directors have approved a process for stockholders to communicate with directors. This process is described below at “Other Procedural Matters—Communicating with the Board of Directors.”

 

The Company’s directors are elected annually by the holders of Common Stock. The nominees for director at the Annual Meeting will be elected to serve for a one-year term until the next annual meeting of stockholders and until their successors have been duly elected and qualified or until their earlier death, resignation or retirement.

 

As set forth in the Company’s Corporate Governance Policy, in selecting its slate of nominees for election to the Board, the Nominating and Governance Committee and the Board have evaluated, among other things, each nominee’s independence, satisfaction of regulatory requirements, financial literacy, personal and professional accomplishments and experience in light of the needs of the Company and, with respect to incumbent directors, past performance on the Board. See “Corporate Governance—Criteria for Membership on the Board.” Each of the nominees is currently a director of the Company. The Board has determined that nine of the twelve current and incumbent directors (or 75% of the Board) have no material relationship with the Company either directly or indirectly and are “independent” within the meaning of the listing requirements of the NYSE and the Company’s more rigorous independence standards (such directors, the “Independent Directors”). Specifically, the Board has identified Mses. Black and James and Messrs. Castro, Chang, Copeland, Haje, Nicholas, Shirley and Sununu as Independent Directors as independence is defined in the NYSE Listed Company Manual and as defined by Rule 10A-3 of the Securities Exchange Act of 1934 (the “Exchange Act”). Additionally, each of these directors meets the categorical standards for independence established by the Board, as set forth in the Company’s Corporate Governance Policy and discussed elsewhere in this Proxy Statement. Messrs. Logan and Pace are former executive officers of Time Warner, which was the Company’s parent company prior to the Separation. The Company believes that if it were not for this past employment, the Board could determine that each of Messrs. Logan and Pace is independent under these criteria. In addition, the Board has determined that each director nominee is financially literate and possesses the high level of skill, experience, reputation and commitment that is mandated by the Board.

 

In selecting its slate of nominees for election to the Board, the Nominating and Governance Committee and the Board of Directors consider the appropriate combination of skills, professional experience, and diversity of backgrounds for the Board as a whole. The Board of Directors believes that each of the nominees possesses integrity, good judgment, business acumen and high personal and professional ethics. More detailed information about their experience is provided below with their biographical information.

 

Several of the directors have substantial experience in the cable, media and entertainment industries, including Messrs. Britt, Castro, Chang, Haje, Logan, Nicholas and Pace and Ms. Black. Messrs. Britt, Haje, Logan, Nicholas and Pace all share a deep understanding of the Company’s business developed through their long service at Time Warner. Ms. Black served as the President and Chief Executive Officer of Lifetime Entertainment Services, a multi-media brand for women, for six years, where she oversaw all aspects of programming and marketing. Mr. Castro co-founded a radio broadcasting company that primarily targets the Hispanic community, an increasingly important focus for distributing the Company’s services. In addition to Dr. Chang’s technological and management experience, he has a long history serving as a director of the Company and its predecessors.

 

Each of the directors has significant experience as a senior officer of a major corporation or a comparable position in government or academia. Mr. Shirley, with his long service history with The Procter & Gamble Company and The Gillette Company, brings his marketing and managerial experience to the Board. Several of the directors also have extensive finance and accounting experience, including Messrs. Britt, Copeland, Nicholas and Pace, Senator Sununu, and Ms. James. Messrs. Britt, Copeland and Pace and Ms. James also have valuable experience serving on the audit committees of other public companies. Several of the directors have extensive legislative or regulatory experience, including Senator Sununu and Messrs. Britt, Castro and Copeland and Ms. James, through their experience in highly-regulated industries.

While backgrounds of all of the directors contribute a diversity of experience and opinion to the Board, Messrs. Castro and Chang and Mses. Black and James also bring ethnic and gender diversity.

 

The Board has set the number of directors at twelve. Each of the current directors has been nominated for election at the Annual Meeting and was elected by the Company’s stockholders at the annual meeting in 2009. Set forth below are the principal occupation and certain other information, as of February 28, 2010, for the twelve nominees, each of whom currently serves as a director.

 

 

During 2009, the Board of Directors met six times. Each incumbent director attended over 90% of the total number of meetings of the Board of Directors and the committees of which he or she was a member. In addition, the directors are encouraged to attend the Company’s annual meetings of stockholders. All of the Company’s twelve directors attended the 2009 annual meeting of the Company’s stockholders.

 

The current members of the Board’s standing committees are as follows:

 

Audit Committee.  The members of the Audit Committee are James Copeland, Jr., who serves as the Chair, David Chang, Donna James and Edward Shirley. Among other things, the Audit Committee complies with all NYSE and legal requirements and consists entirely of Independent Directors. The authority and responsibility of the Audit Committee, which met ten times during 2009, are described above (see “Corporate Governance—Committees of the Board”) and set forth in detail in its Charter, which is posted on the Company’s website at www.timewarnercable.com/investors.

 

Compensation Committee.  The members of the Compensation Committee are Peter Haje, who serves as the Chair, Carole Black, Thomas Castro and N.J. Nicholas, Jr. All of the members of the Compensation Committee are Independent Directors. The Compensation Committee has a sub-committee consisting of three Independent Directors who are also considered “outside directors” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), Ms. Black and Messrs. Castro and Nicholas, to which it may delegate executive compensation matters. The authority and responsibility of the Compensation Committee, which met eight times during 2009, are described above (see “Corporate Governance—Committees of the Board”) and set forth in detail in its Charter, which is posted on the Company’s website at www.timewarnercable.com/investors.

 

Nominating and Governance Committee.  The members of the Nominating and Governance Committee are N.J. Nicholas, Jr., who serves as the Chair, Carole Black, David Chang, Edward Shirley and John Sununu. All of the members of the Nominating and Governance Committee are Independent Directors. The authority and responsibility of the Nominating and Governance Committee, which met three times during 2009, are described above (see “Corporate Governance—Committees of the Board”) and set forth in detail in its Charter, which is posted on the Company’s website at www.timewarnercable.com/investors.

Finance Committee.  The members of the Finance Committee are Wayne Pace, who serves as the Chair, Thomas Castro, Donna James, Don Logan and John Sununu. The members of the Finance Committee who are Independent Directors are Ms. James and Messrs. Castro and Sununu. The authority and responsibility of the Finance Committee, which met three times during 2009, are described above (see “Corporate Governance—Committees of the Board”) and set forth in detail in its Charter, which is posted on the Company’s website at www.timewarnercable.com/investors.

 

During 2008, a Special Committee of the independent members of the Board of Directors (the “Special Committee”) consisting of Ms. Black and Messrs. Castro, Chang, Copeland (who served as the Chair), Haje and Nicholas was formed to consider the Company’s Separation from Time Warner and the related transactions. The Special Committee met twice during 2009.

 

The following table sets forth information as of the close of business on January 31, 2010 as to the number of shares of the Company’s Common Stock beneficially owned by:

 

 

 

 

 

 

 

 

Based on a review of filings with the SEC, the Company has determined that each of the persons listed below is a beneficial holder of more than 5% of the outstanding shares of Time Warner Cable Common Stock as of December 31, 2009.

 

 

 

 

In accordance with its charter, the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) assists the Board of Directors in fulfilling responsibilities in a number of areas. These responsibilities include, among others: (i) the appointment and oversight of the Company’s independent auditor, as well as the evaluation of the independent auditor’s qualifications, performance and independence; (ii) oversight of the Company’s internal audit function; (iii) the review of the Company’s financial statements and the results of each external audit; (iv) the review of other matters with respect to the Company’s accounting, auditing and financial reporting practices and procedures as the Audit Committee may find appropriate or may be brought to its attention; and (v) the oversight of the Company’s compliance program. To assist it in fulfilling its oversight and other duties, the Audit Committee regularly meets separately with the internal auditor, the independent auditor and management.

 

Independent Auditor and Internal Audit Matters.  The Audit Committee discusses with the Company’s independent auditor its plan for the audit of the Company’s annual consolidated financial statements and the independent auditor’s evaluation of the effectiveness of the Company’s internal control over financial reporting, as well as reviews of the Company’s quarterly financial statements. During 2009, the Audit Committee met regularly with the independent auditor, with and without management present, to discuss the results of its audits and quarterly reviews of the Company’s financial statements, as well as its evaluations of the Company’s internal controls and the overall quality of the Company’s accounting principles. The Audit Committee has also appointed, subject to stockholder ratification, Ernst & Young LLP (“E&Y”) as the Company’s independent auditor for 2010, and the Board concurred in its appointment.

 

The Audit Committee reviews and approves the annual internal audit plan and meets regularly with the representatives of the Company’s internal audit group, with and without management present, to review and discuss the internal audit reports, including reports relating to operational, financial and compliance matters.

 

Financial Statements as of December 31, 2009.  Management has the primary responsibility for the financial statements and the reporting process, including its systems of internal and disclosure controls (including internal control over financial reporting). The independent auditor is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing opinions on the conformity of the consolidated financial statements with U.S. generally accepted accounting principles and on the Company’s internal control over financial reporting.

 

In this context, the Audit Committee has met and held discussions with management and the independent auditor with respect to the Company’s audited financial statements for the fiscal year ended December 31, 2009. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles.

 

In connection with its review of the Company’s year-end financial statements, the Audit Committee has reviewed and discussed with management and the independent auditor the consolidated financial statements and the independent auditor’s evaluation of the Company’s internal control over financial reporting. The Audit

Committee also discussed with the independent auditor the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended, as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T, including the quality and acceptability of the Company’s accounting policies, financial reporting processes and controls. The Audit Committee also received from the independent auditor the written disclosures regarding the auditor’s independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and the Audit Committee discussed with E&Y its independence. The Audit Committee further considered whether the provision by the independent auditor of any non-audit services described elsewhere in this Proxy Statement is compatible with maintaining auditor independence and determined that the provision of those services does not impair the independent auditor’s independence.

 

In performing its functions, the Audit Committee acts only in an oversight capacity and necessarily relies on the work and assurances of the Company’s management, internal audit and independent auditor, which, in their reports, express opinions on the conformity of the Company’s annual financial statements with U.S. generally accepted accounting principles and the Company’s internal control over financial reporting. In reliance on the reviews and discussions referred to in this Report and in light of its role and responsibilities, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 for filing with the SEC.

 

Members of the Audit Committee

 

James E. Copeland, Jr. (Chair)
David C. Chang
Donna A. James
Edward D. Shirley

 

The Audit Committee has established a policy (the “Policy”) requiring its pre-approval of all audit services and permissible non-audit services provided by the independent auditor, along with the associated fees for those services. The Policy provides for the annual pre-approval of specific types of services pursuant to policies and procedures adopted by the Audit Committee, and gives detailed guidance to management as to the specific services that are eligible for such annual pre-approval. The Policy requires the specific pre-approval of all other permitted services. For both types of pre-approval, the Audit Committee considers whether the provision of a non-audit service is consistent with the SEC’s rules on auditor independence, including whether provision of the service (i) would create a mutual or conflicting interest between the independent auditor and the Company; (ii) would place the independent auditor in the position of auditing its own work; (iii) would result in the independent auditor acting in the role of management or as an employee of the Company; or (iv) would place the independent auditor in a position of acting as an advocate for the Company. Additionally, the Audit Committee considers whether the independent auditor is best positioned and qualified to provide the most effective and efficient service, based on factors such as the independent auditor’s familiarity with the Company’s business, personnel, systems or risk profile and whether provision of the service by the independent auditor would enhance the Company’s ability to manage or control risk or improve audit quality or would otherwise be beneficial to the Company.

 

The Audit Committee has delegated to its Chair the authority to address certain requests for pre-approval of services between meetings of the Audit Committee, and the Chair must report his pre-approval decisions to the Audit Committee at its next regular meeting. The Policy is designed to ensure that there is no delegation by the Audit Committee of authority or responsibility for pre-approval decisions to management of the Company. The Audit Committee monitors compliance by management with the Policy by requiring management, pursuant to the Policy, to report to the Audit Committee on a regular basis regarding the pre-approved services rendered by the independent auditor. Management has also implemented internal procedures to ensure compliance with the Policy.

 

As described above, the Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of the independent auditor. Accordingly, the Audit Committee has appointed E&Y to perform audit and other permissible non-audit services for the Company and its subsidiaries. The aggregate fees billed by E&Y to the Company for the years ended December 31, 2009 and 2008 are as follows:

 

Fees of the Independent Auditor

 

 

 

 

None of the services related to Audit-Related Fees or Tax Fees presented above was approved by the Audit Committee pursuant to a waiver of the pre-approval provisions as set forth in the applicable rules of the SEC.

 

Introduction

 

The Company’s executive compensation program is designed to attract, retain, motivate and reward leaders who create value for the Company’s stockholders. Generally, the Company’s compensation program is intended to reward sustained financial and operating performance and leadership excellence, and align executives’ interests and risk orientation with those of the Company’s stockholders. This Compensation Discussion and Analysis reviews the Company’s compensation philosophy, principles and practices for the named executive officers, and describes how they were applied to determine 2009 compensation for the named executive officers.

 

Oversight and Authority for Executive Compensation

 

Under its charter, the Compensation Committee has authority and oversight over all elements of the Company’s executive compensation program, including:

 

 

The Compensation Committee’s charter states that in determining compensation levels for each named executive officer, the Compensation Committee should consider, among other factors, the Company’s overall performance, stockholder return, the achievement of specific performance objectives established by the Compensation Committee on an annual basis, compensation previously provided to the executive, the value of compensation provided to individuals in similar positions at peer companies and the Company’s general compensation policy.

 

Role of Management and Compensation Consultants

 

Although the Compensation Committee has authority and oversight over compensation for the named executive officers, members of management, including Glenn Britt, President and Chief Executive Officer (and Chairman, as of March 12, 2009), Paul Gilles, Group Vice President, Compensation, Benefits and Human Capital, Robert Marcus, Senior Executive Vice President and Chief Financial Officer, and Tomas Mathews, Executive Vice President, Human Resources (collectively, “Management”), provide recommendations for the Compensation Committee’s consideration, and provide ongoing assistance to the Compensation Committee with respect to its review of the effectiveness of the Company’s executive compensation programs. The Company also, from time to time, engages consulting firms (independent of those engaged by the Compensation Committee) to assist Management in evaluating the Company’s executive compensation policies and practices.

 

Through September 2009, Executive Compensation Advisors, a Korn/Ferry company (“ECA”), acted as the Compensation Committee’s independent compensation consultant. During 2009, the Committee’s primary ECA advisor established ClearBridge Compensation Group (“ClearBridge”) and, effective October 1, 2009, the Committee terminated its ECA relationship and retained ClearBridge in this role. In connection with this

change, the Committee determined that ClearBridge had the necessary experience, skill and independence to advise the Committee. The Compensation Committee plans to review its determination annually. As used in this document, the “independent compensation consultant” or “ICC” means, for all periods through September 2009, ECA and, for all periods thereafter, ClearBridge, in each case in its capacity as the Compensation Committee’s independent compensation consultant.

 

During 2009, the Company paid the ICC an annual retainer, plus additional amounts for special projects that the Compensation Committee requested. The ICC reported directly to the Compensation Committee, providing assistance and advice to it in carrying out its principal responsibilities. The Compensation Committee consulted with the ICC with respect to all significant 2009 compensation decisions and determinations. In this advisory role, the ICC attended and participated in all Compensation Committee meetings, including executive sessions when appropriate. In connection with the ICC’s role as advisor to the Compensation Committee, Management (as defined below) from time to time seeks input from the ICC about compensation proposals it is considering for presentation to the Compensation Committee. ClearBridge does not provide services to the Company other than under its engagement by the Compensation Committee related to executive compensation.

 

Compensation Philosophy and Key Principles

 

The Company’s compensation philosophy is to attract, retain, motivate and reward executives who create value for the Company’s stockholders. In establishing compensation programs consistent with its philosophy, the Company is guided by the following key principles:

 

 

Compensation Program Design Overview

 

The core elements of the Company’s compensation program—base salary, short-term incentives and long-term incentives—are intended to focus the Company’s named executive officers on different but complementary aspects of the Company’s goals. The program is designed to deliver compensation at levels and in a manner consistent with the Company’s compensation philosophy and key principles.

 

Annual Base Salary:  The base salary paid to the Company’s named executive officers and other employees is intended to focus the recipient on his or her day-to-day duties.

 

Short-Term Incentive:  The Company’s short-term incentive program—an annual cash bonus plan—is designed to motivate the Company’s named executive officers and other corporate employees to help meet and exceed annual financial and non-financial goals established annually by the Compensation Committee. For

additional information regarding the structure of the 2009 short-term incentive program, see “—2009 Short-Term Incentive Program and Awards.”

 

Long-Term Incentive:  The Company’s long-term incentive (“LTI”) program is designed to retain the named executive officers and other participants and motivate them to meet and exceed those of the Company’s goals that are likely to result in long-term value creation. Since 2007, the LTI program has consisted of Company stock options and restricted stock units (“RSUs”), which vest over a period of time. For additional information regarding the structure of the 2009 LTI program, see “—2009 Long-Term Incentive Program and Awards.”

 

The Company believes the compensation provided to its named executive officers, including the mix of compensation elements, is consistent with the Company’s compensation philosophy and key principles. The LTI program drives alignment with stockholders. The mix of base salary and “variable” or performance-based incentives supports pay for performance. The mix of short-term and long-term incentives is consistent with balanced incentives and encourages appropriate risk-taking. For 2009, each of the named executive officers had more target incentive compensation in the form of long-term (as compared with short-term) incentives. The Company believes this encourages the named executive officers to focus at least as much on achieving long-term strategic objectives as on achieving shorter-term business objectives. Total target and actual compensation, as well as each compensation element, are established to compensate competitively and foster internal equity.

 

During 2009, the Compensation Committee considered introducing equity awards that would vest upon the satisfaction of specified performance goals. The Compensation Committee determined that the existing equity program already accomplishes the Company’s objectives of retaining executives and motivating them to meet and exceed Company goals that are likely to result in long-term value creation. The Company expects that the Compensation Committee will review this determination periodically.

 

2009 Compensation Levels

 

Generally, the Compensation Committee reviews each named executive officer’s target compensation annually. In addition, the Compensation Committee may review a named executive officer’s compensation in connection with the renewal of his or her employment agreement or if the executive’s role or responsibilities change. In each case, Management conducts an initial review and makes a recommendation to the Compensation Committee. Management considers the following factors, among others, in making these recommendations, and the Compensation Committee considers these factors in determining whether to accept such recommendations:

 

 

The Company generally reviews senior executive base salary and target short-term and long-term incentives each year in light of changes in responsibilities, performance and competitive factors. In the Company’s recent history, this review has resulted in increased salary and in some cases changes in short- and long-term target compensation for the named executive officers (other than for Mr. Britt). However, in light of prevailing uncertainty about the U.S. economy in late 2008 and its impact on the Company’s business, Management recommended to the Compensation Committee that, for 2009, the Company freeze base salaries and short- and long-term compensation targets at 2008 levels for the named executive officers and nearly all other Company employees with the title of Vice President or above. The Compensation Committee accepted this recommendation after considering the factors noted above and reviewing market compensation data for

similarly situated executives at peer group companies. The sources for this data are discussed immediately below.

 

Competitive Comparisons.  In late 2008 and early 2009, Management and the Compensation Committee considered the appropriate competitive compensation comparisons for the Company’s executive officers for 2009. They determined that, in addition to the 2009 Primary Peer Group (as defined below) representing the Company’s principal competitors for executive talent, they would also consider a group of companies with similar revenue characteristics (the “2009 Secondary Peer Group” and, together with the 2009 Primary Peer Group, the “2009 Peer Groups”), as well as general market surveys. The Compensation Committee would review compensation data for executive officers with similar roles and responsibilities at companies within the 2009 Peer Groups and market compensation survey data to validate its 2009 compensation decisions.

 

2009 Primary Peer Group.  Management proposed a primary peer group of 14 cable/satellite, telecommunications and media companies (the “2009 Primary Peer Group”):

 

AT&T Inc.
Cablevision Systems Corporation
CBS Corporation
Charter Communications Inc.
Comcast Corporation
DirecTV Group, Inc.
DISH Network Corporation
Liberty Media Corporation
News Corporation
QWEST Communications International, Inc.
Sprint Nextel Corporation
The Walt Disney Company
Verizon Communications, Inc.
Viacom Inc.

 

These were the same companies considered in 2008, except for the elimination of two companies due to their changed circumstances.

 

Although the median 2008 annual revenues for the 2009 Primary Peer Group was approximately equal to the Company’s 2008 annual revenues ($17.2 billion), the companies were not selected solely based on their size. The cable/satellite and telecommunications firms are direct business competitors to the Company and the media companies are all in supplier relationships with the Company. The Compensation Committee concluded that the group represents the Company’s principal competition for executive talent.

 

Because the 2009 Primary Peer Group was the principal basis of comparison in considering the competitiveness of the named executive officers’ compensation, to assist the Committee, Management “aged” the 2009 Primary Peer Group data, which was based upon 2008 proxy statements (i.e., 2007 compensation information), to approximate its value as of early 2009. The Company believes that each named executive officer’s 2009 total direct compensation (base salary and target short- and long-term incentives) was generally consistent with comparably situated executives at companies within the 2009 Primary Peer Group.

2009 Secondary Peer Group.  The Compensation Committee also approved a Secondary Peer Group of 20 companies from a broad range of industries (except the financial services, healthcare, cable/satellite, telecommunications and media industries) with 2008 annual revenues of $7.5 billion to $32.5 billion (approximately 50% to 200% of the Company’s 2008 annual revenues) and median 2008 annual revenues of $17.7 billion. The Secondary Peer Group consists of the following companies:

 

Amgen Inc.
Burlington Northern Santa Fe Corporation
Dominion Resources, Inc.
Eli Lilly & Company
EMC Corporation
Exelon Corporation
Freeport-McMoRan Copper & Gold Inc.
General Mills, Inc.
Google Inc.
Kimberly-Clark Corporation

 

Medtronic, Inc.
Occidental Petroleum Corporation
Raytheon Company
Schering-Plough Corporation
Textron Inc.
The Southern Company
Union Pacific Corporation
Waste Management, Inc.
Weyerhaeuser Company
Xerox Corporation

 

Market Surveys.  In addition to the 2009 Peer Groups, Management and the Compensation Committee considered, as a general reference, market compensation survey data available through a number of nationally-recognized compensation consulting firms. This data covers companies roughly comparable in size (median annual 2008 revenues of approximately $16 billion) to the Company from a broad range of industries, including the cable/satellite, telecommunications and media industries.

 

The Use of Pay Tallies.  The Compensation Committee periodically reviews “pay tallies” for the named executive officers (i.e., analyses of the executives’ annual pay and long-term compensation with potential severance payments under various involuntary termination scenarios pursuant to the negotiated employment agreements) to help ensure that the design of the compensation program is consistent with the Company’s compensation philosophy and key principles, and that the amount of compensation is within appropriate competitive parameters.

 

Based on the Compensation Committee’s review of 2009 pay tallies, the Compensation Committee has concluded that the total compensation of the named executive officers (and, in the case of involuntary termination or change-in-control scenarios, potential payouts) is appropriate and competitive, and, therefore, did not make any adjustments based on this review.

 

2009 Base Salary and Target Incentive Compensation Determinations

 

As noted above, as a result of the prevailing uncertainty about the U.S. economy and its impact on the Company’s business, the Compensation Committee did not increase the named executive officers’ base salaries or short-term or long-term incentive target levels for 2009. Any change in the total cash compensation ultimately paid to each named executive officer for 2009 was dependent upon payouts under the Company’s annual bonus plan, which were determined in part based on the achievement of certain Company financial performance goals, and in part based on each executive’s performance against individual goals. The ultimate value of the named executive officers’ 2009 long-term incentive awards will depend on future stock performance. The Company believes that its compensation philosophy and key principles, and the other factors noted above, were properly reflected in the 2009 target and actual compensation for each named executive officer, including base salary, short-term and long-term incentives, and the mix of compensation elements.

 

Each named executive officer’s 2009 base salary and target short-term and long-term incentive compensation were as follows:

 

Mr. Britt.  The Compensation Committee reviewed Mr. Britt’s 2009 compensation in January 2009. Under Mr. Britt’s then-current employment agreement, he was to receive a minimum annual salary of $1 million, the right to participate in the Company’s annual bonus plan with a target award of $5 million (500% of base salary) and long-term incentives valued at $6 million (600% of base salary).

Effective August 3, 2009, Mr. Britt’s employment agreement with the Company, which had been slated to expire on December 31, 2009, was renewed through December 31, 2012. In part to ensure the competitiveness of his total compensation under the renewal agreement, and to induce him to enter into the agreement, the Compensation Committee authorized a stock option grant to Mr. Britt valued at $2 million, which award was made on August 3, 2009 and was in addition to the regular annual stock option grant he had received earlier in the year. Under his prior agreement, Mr. Britt’s annual bonus had been capped at $6.25 million but under his new agreement, such cap was eliminated, subject to the limits imposed under the Company’s annual bonus plan. The Company believes that by making this change, Mr. Britt’s maximum bonus opportunity expressed as a percentage of his target bonus became consistent with the bonus structure of the other named executive officers as well as the maximum general bonus opportunity (as a percentage of the target) for chief executive officers of companies within the 2009 Primary Peer Group. This change was made retroactive to January 1, 2009. The other compensation elements contemplated by Mr. Britt’s new employment agreement generally became effective January 1, 2010. See “—Employment Agreements—Glenn A. Britt.”

 

Mr. Hobbs.  The Compensation Committee reviewed Mr. Hobbs’s 2009 compensation in January 2009. Under Mr. Hobbs’s then-current employment agreement, he was to receive a minimum annual salary of $900,000, the right to participate in the Company’s annual bonus plan with a target award of $2.1 million and long-term incentives valued at $3 million.

 

On December 31, 2009, Mr. Hobbs entered into a new employment agreement, effective January 1, 2010. See “—Employment Agreements—Landel C. Hobbs.”

 

Mr. Marcus.  The Compensation Committee reviewed Mr. Marcus’s 2009 compensation in January 2009. Under Mr. Marcus’s then-current employment agreement, he was to receive a minimum annual salary of $800,000, the right to participate in the Company’s annual bonus plan with a target award of $1.4 million and long-term incentives with a value of $1.8 million.

 

On December 31, 2009, Mr. Marcus entered into a new employment agreement, effective January 1, 2010. See “—Employment Agreements—Robert D. Marcus.”

 

Mr. LaJoie.  The Compensation Committee reviewed Mr. LaJoie’s 2009 compensation in January 2009. Mr. LaJoie’s then-current employment agreement provided for a minimum annual salary of $525,000 and the right to participate in the Company’s annual bonus plan with a target award of $525,000. The Compensation Committee had established his 2009 long-term incentive target value at $918,750.

 

Mr. Lawrence-Apfelbaum.  The Compensation Committee reviewed Mr. Lawrence-Apfelbaum’s 2009 compensation in January 2009. Mr. Lawrence-Apfelbaum’s then-current employment agreement provided for a minimum annual salary of $550,000 and the right to participate in the Company’s annual bonus plan with a target award of $550,000. The Compensation committee had established his long-term incentive target value at $880,000.

 

2009 Short-Term Incentive Program and Awards

 

The Company’s short-term incentive payments to the named executive officers for 2009 were made under the 2009 Time Warner Cable Incentive Plan (the “2009 TWCIP”). Although the 2009 TWCIP guides the Compensation Committee in determining the amount of the awards to the named executive officers, the awards were also subject to the conditions and limitations imposed under the Time Warner Cable Inc. 2007 Annual Bonus Plan (the “Bonus Plan”), which is intended to comply with Section 162(m) of the Internal Revenue Code.

 

2009 TWCIP

 

In early 2009, Management recommended that the Compensation Committee establish Company-wide financial goals, and individual goals, that would be used to determine payments under the 2009 TWCIP and to guide the Compensation Committee’s determinations with respect to cash bonuses for executive officers under the Bonus Plan, as described below. Management proposed that the 2009 TWCIP performance goals for the named executive officers be based 70% on Company-wide financial performance and 30% based on each

executive officer’s personal goals (based 15% on each named executive officer’s efforts to further the Company’s “mission and values,” and 15% on each named executive officer’s other individual goals). As used in this document, unless the context otherwise requires, the term “individual goals” refers to the named executive officers’ mission and values goals and their other individual goals. These goals are discussed below.

 

The Compensation Committee approved the 2009 TWCIP structure recommended by Management in February 2009 and established the following funding ranges for the Company-wide financial goals and individual goals:

 

 

2009 TWCIP Financial Goals.  The Compensation Committee determined that, for purposes of the 2009 TWCIP, the Company’s financial performance would be measured by reference to the Company’s Operating Income (Loss) before depreciation of tangible assets and amortization of intangible assets for the year ended December 31, 2009 (after certain non-discretionary adjustments) (“2009 adjusted OIBDA”) less capital expenditures. Management and the Compensation Committee determined that, for 2009, adjusted OIBDA less capital expenditures would be an important indicator of the operational strength and performance of the Company’s business, including the ability to provide cash flows to service debt. This metric would also capture the Company’s ability to adjust expenses and capital spending as appropriate in an economic environment in which revenue was expected to be more unpredictable than usual.

 

If, following all non-discretionary adjustments made by the Compensation Committee, the Company did not meet a threshold level of financial performance ($2.700 billion in 2009 adjusted OIBDA less capital expenditures), no bonus payment would be made with respect to the financial performance component. If 2009 adjusted OIBDA less capital expenditures exceeded a maximum goal ($3.600 billion), the Company financial performance “score” would be 175%. However, if 2009 adjusted OIBDA less capital expenditures was above the threshold but below the maximum goal, the Compensation Committee would determine the financial performance score in its sole discretion (but within the 50% and 175% parameters established by the 2009 TWCIP (and the limits established by the Bonus Plan)).

 

2009 TWCIP “Mission and Values” and other Individual Goals.  In an effort to establish a unique company culture following the Company’s separation from Time Warner, and to enhance its competitiveness in the marketplace, the Company in 2009 defined a new “mission” and enunciated a set of values for the Company and its employees (the “mission and values”). The Company’s mission is to “connect people and businesses with information, entertainment and each other...and to give customers control in ways that are simple and easy.” The Company’s values are “initiative, innovation, excellence, inclusion, teamwork, integrity and community.”

 

In light of the importance of the mission and values effort, the Compensation Committee determined that each named executive officer should be assessed in part on the concrete, demonstrable steps he took during 2009 to further the Company’s mission and values. One half of each named executive officer’s individual assessment was based on this goal (i.e., 15% of the overall 2009 TWCIP) and the remaining half on the officer’s other individual goals, which are described below.

 

Mr. Britt’s 2009 individual goals reflected the Company’s strategic objectives and included completing the transition to a standalone public company following the separation from Time Warner; focusing the organization on growth of its commercial business; better defining the Company’s wireless strategy and

products and beginning to roll out wireless products; exploring new business opportunities; developing and implementing a 2009 diversity plan; and enhancing TWC’s brand and marketing efforts.

 

The individual goals for each of the other named executive officers were intended to support the Company’s strategic objectives and Mr. Britt’s individual goals, but were tailored to the executive’s particular role and areas of responsibility.

 

Mr. Hobbs’s 2009 individual goals included continuing an ongoing operational reorganization effort; refining the goals and organization of the Company’s commercial business; more effective marketing; furthering the Company’s advanced advertising initiatives; overseeing a process to identify and, where appropriate, mitigate risks facing the Company; improving operating results; and supporting the Company’s diversity efforts.

 

Mr. Marcus’s 2009 individual goals included effective management of the departments reporting to him (finance, tax, treasury, investments, investor relations, programming and human resources); completing the transition to a standalone public company following the Company’s separation from Time Warner; managing the Company’s capital structure; ensuring strong internal controls; and supporting the Company’s diversity efforts.

 

Mr. LaJoie’s 2009 individual goals included developing long-term technology strategies; supporting the Company’s new business initiatives; managing technology changes, including the digital television transition; continuing to develop and support the Company’s set-top box guides; talent planning for key roles within the Company’s technology group; and supporting the Company’s diversity efforts.

 

Mr. Lawrence-Apfelbaum’s 2009 individual goals included overseeing the Law and Business Affairs departments; ensuring that the Company’s policies and procedures reflect the highest business and ethical standards; providing leadership in the areas of public policy and strategy; ensuring compliance with applicable laws and regulations; and supporting the Company’s diversity efforts.

 

In light of their qualitative and subjective nature, the individual goals established for the named executive officers did not have a minimum threshold performance level. Other than weighting the individual performance assessment half on mission and values efforts and half on the other individual goals, no specific weighting was assigned to any individual goal.

 

2009 Short-Term Incentive Program Award Determination.  In early 2010, the Compensation Committee determined the Company’s 2009 adjusted OIBDA less capital expenditures for TWCIP purposes based on the Company’s publicly reported OIBDA less capital expenditures and certain non-discretionary adjustments thereto. The Company’s adjusted OIBDA less capital expenditures for TWCIP purposes of $3.295 billion exceeded the threshold goal but was below the maximum goal. As a result, the Compensation Committee exercised its discretion in determining the Company’s overall financial performance under the 2009 TWCIP. Pursuant to the 2009 TWCIP, in exercising this discretion, the Compensation Committee was able to consider, among other factors:

 

 

After deliberation, which included consideration of the factors described above, among others, the Compensation Committee established a 2009 Company performance score of 125%, which was consistent with Management’s recommendation.

In connection with the Compensation Committee’s assessment of the named executive officers’ individual performances, Mr. Britt completed a self-assessment and discussed it with the Compensation Committee. Based in part on this assessment and the Compensation Committee’s deliberations, which were conducted in executive session without Management, the Compensation Committee determined that Mr. Britt’s performance against his mission and values goal merited an assessment of 125% and that his performance against his other individual goals also merited an assessment of 125%. A summary of each assessment follows:

 

 

In addition, Mr. Britt discussed with the Compensation Committee his assessment of the individual performances of each of the other named executive officers. Based in part on this assessment and the Compensation Committee’s deliberations, which were conducted in executive session without Management, the Compensation Committee determined that each of other named executive officers had fulfilled his mission and values goal (and that each named executive officer’s performance in this area merited an assessment of 125%) and his other individual goals (and that each named executive officer’s individual performance merited an assessment of 125%, except for Mr. LaJoie who received an assessment of 130%).

 

Based on the Compensation Committee’s determinations with respect to the Company’s financial performance, and its generally positive assessment of Mr. Britt’s and each of the other named executive officers’ individual performances, the Subcommittee exercised its discretion under the Bonus Plan to award the following 2009 annual bonuses to the named executive officers:

 

 

Bonus Plan

 

In order to ensure that the short-term incentive awards are deductible under Section 162(m), additional conditions and limitations on awards are imposed under the Bonus Plan. The Bonus Plan for the named executive officers was approved by the Company’s stockholders in May 2007. Pursuant to the Bonus Plan, a subcommittee of the Compensation Committee, whose members are “outside directors” as defined in Section 162(m) (the “Subcommittee”), annually establishes objective performance criteria that determine the maximum bonus pool from which the named executive officers’ bonuses can be paid and a maximum allocation for each named executive officer.

 

Under the objective criteria established by the Subcommittee, an aggregate 2009 maximum bonus pool was established equal to 7.5% of the amount by which the Company’s 2009 adjusted OIBDA of $6.526 billion

exceeded $5.8 billion. This maximum pool was to be allocated among Mr. Britt (40%), Mr. Hobbs (12%), Mr. Marcus (8%), Mr. LaJoie (4%), Mr. Lawrence-Apfelbaum (4%) and four other executive officers (4% each) with the remainder of the maximum pool (16%) not available for any executive officer. However, under the objective criteria adopted by the Subcommittee, the amount available for each executive officer could not exceed 200% of the officer’s target short-term incentive compensation. As a result, for 2009, the maximum aggregate amount available for bonuses to the named executive officers under the Bonus Plan was approximately $19.1 million ($10.0 million for Mr. Britt; $4.2 million for Mr. Hobbs; $2.8 million for Mr. Marcus; $1.05 million for Mr. LaJoie; and $1.1 million for Mr. Lawrence-Apfelbaum) and approximately $3.2 million was available for bonuses to other of the Company’s executive officers.

 

As discussed above, in awarding 2009 bonuses to each named executive officer, the Subcommittee exercised its discretion to reduce the maximum amount available for each executive officer under the Bonus Plan’s pool. The basis for this exercise of negative discretion was the criteria established under the 2009 TWCIP.

 

2009 Long-Term Incentive Program and Awards

 

The Company’s LTI program consists of a combination of RSUs and stock options awarded under the Time Warner Cable Inc. 2006 Stock Incentive Plan, as amended (the “TWC Stock Incentive Plan”).

 

2009 Target Long-Term Incentive Mix.  Consistent with the Company’s compensation philosophy and principles, executives with a high level of strategic impact on the Company’s success receive a greater relative proportion of their long-term compensation in the form of stock options (as compared with RSUs) than other employees. The Company believes this is appropriate because the ultimate value of stock options is more performance-dependent than RSUs. For the 2009 LTI program (like the 2008 program), the Compensation Committee elected to provide LTI compensation to executive officers 60% as stock options and 40% as RSUs. For approximately 85 other senior, non-executive officers, the 2009 LTI target mix was 50% stock options and 50% RSUs, and for the balance of the roughly 1,250 employees who received 2009 LTI grants under the TWC Stock Incentive Plan, the target mix was one-third stock options and two-thirds RSUs.

 

2009 Equity Awards.  Each named executive officer received an annual award of stock options and RSUs with an aggregate value equal to the target LTI compensation previously established by the Compensation Committee. The number of stock options awarded was determined by reference to the average Black-Scholes valuation for the Company’s stock options over a ten-day period selected by the Compensation Committee. The number of RSUs awarded was determined by reference to the average closing price of the Company’s Common Stock over the same ten-day period.

 

The 2009 annual LTI awards were made on February 13, 2009, pursuant to Compensation Committee authorization. The stock options were granted with an exercise price equal to the closing price of the Company’s Class A common stock on the grant date. The stock options vest in four equal installments on each of the first four anniversaries of the date of grant and have a ten-year term from the date of grant. The RSUs vest in two equal installments on the third and fourth anniversaries of the date of grant. The Company believes that the multi-year vesting schedules for stock options and RSUs encourage executive retention and emphasize a longer-term perspective. The stock options and RSUs provide for accelerated vesting upon a termination of employment after reaching a specified age and years of service and upon certain involuntary terminations of employment.

 

All of the named executive officers received stock options and some received RSU awards to offset the loss of economic value associated with forfeitures or shortened exercise periods of Time Warner equity awards as a result of the Separation. See “—Separation from Time Warner—‘Make-up’ Awards.”

 

Risk Assessment

 

During 2009, the Compensation Committee conducted a risk assessment of the named executive officers’ compensation. As part of the risk assessment, the Compensation Committee reviewed the key design features

of the Company’s 2009 incentive programs, the nature of the risks that these features might give rise to and certain mitigating factors.

 

The Compensation Committee concluded that the Company’s executive incentive programs do not incentivize excessive risk taking or inappropriate conservatism in behavior and decisionmaking. Among the factors giving rise to the Compensation Committee’s determination were the following:

 

 

Although not a direct result of the 2009 risk assessment, the Company is instituting certain changes to its compensation programs and practices for 2010. See “—Looking Forward.”

 

Ownership and Retention Guidelines

 

During 2009, the Compensation Committee considered imposing a requirement that certain senior officers hold designated levels of Company stock and/or RSUs (“ownership guidelines”). The Compensation Committee declined to adopt such guidelines, determining that the named executive officers’ holdings of Company stock options and unvested RSUs provided a sufficient level of personal exposure to the value of the Company’s stock to support alignment with the interests of the Company’s stockholders.

 

The Compensation Committee also was concerned, under current circumstances, that ownership guidelines would result in the Company’s executive officers having an excessive proportion of their personal wealth in the Company’s stock, limiting diversification and prudent personal wealth management, and thereby potentially resulting in inappropriately conservative behavior and decisionmaking in an effort to preserve the value of their holdings.

 

The Company expects that the Compensation Committee will monitor the named executive officers’ Company stock holdings and review its ownership guidelines determination annually.

 

Perquisites

 

The Company provides some limited perquisites to the named executive officers. The Company believes these perquisites facilitate the operation of its business, allow named executive officers to better focus their time, attention and capabilities on their Company activities, address safety and security concerns, and assist the Company in recruiting and retaining key executives.

 

The Company’s perquisites for its named executive officers in 2009 included reimbursement for financial services and, in the case of Mr. Britt, a car allowance (eliminated in 2010) as well as a Company-provided car and specially-trained driver in light of security concerns. At the request of the Company’s Board, Mr. Britt uses Company-owned or leased aircraft for business and personal travel under most circumstances. With CEO approval, personal use of the aircraft is occasionally permitted by the Company’s other executive officers (including for their family members) on flights that are or would be scheduled for business purposes. The Company imputes income to executive officers who make personal use of Company aircraft as and when required under applicable tax rules.

Benefits

 

The Company maintains defined benefit and defined contribution retirement programs for its employees in which the Company’s named executive officers participate. The objective of these programs is to help provide financial security into retirement, reward and motivate tenure and recruit and retain talent in a competitive market. In addition to the Company’s tax-qualified defined benefit plan, the Company maintains a nonqualified defined benefit plan in which the named executive officers participate. The tax-qualified defined benefit plan has a maximum compensation limit and a maximum annual benefit, which limit the benefit to participants whose compensation exceeds these limits. In order to provide retirement benefits commensurate with salary levels, the nonqualified defined benefit plan provides benefits to key salaried employees, including the named executive officers, using the same formula for calculating benefits as is used under the tax-qualified defined benefit plan but taking into account compensation in excess of the compensation limitations for the tax-qualified defined benefit plan (up to an aggregate limit of $350,000 per year) and maximum benefit accruals for the tax-qualified plan. See “—Pension Plans.”

 

The Company sponsors other nonqualified deferred compensation plans to which contributions by the Company or employees are no longer permitted. See “—Nonqualified Deferred Compensation.”

 

Employment Agreements

 

Each of the named executive officers is employed pursuant to a multi-year employment agreement that reflects the individual negotiations with the relevant named executive officer. The Company has long used such agreements to foster retention, to be competitive and to protect the business with restrictive covenants, such as non-competition, non-solicitation and confidentiality provisions. The employment agreements provide for severance pay in the event of the termination of the executive’s employment without cause, which serves as consideration for the restrictive covenants, provides financial security to the executive, and allows the executive to remain focused on the Company’s interests at all times.

 

During 2009, the Company’s CEO, Chief Operating Officer and Senior Executive Vice President and Chief Financial Officer entered into new employment agreements. The Company’s other two named executive officers entered into amendments to their respective employment agreements during 2009. The employment agreement for each named executive officer is described in detail in this Proxy Statement under “—Employment Agreements” and “—Potential Payments upon Termination or Change in Control.”

 

Tax Deductibility of Compensation

 

Section 162(m) generally disallows a tax deduction to public corporations for compensation in excess of $1,000,000 in any one year with respect to each of its Chief Executive Officer and three most highly paid executive officers (other than the Chief Financial Officer) with the exception of compensation that qualifies as performance-based compensation. The Compensation Committee considers Section 162(m) implications in making compensation recommendations and in designing compensation programs for the executives. In this regard, the Bonus Plan and the TWC Stock Incentive Plan were submitted and approved by stockholders in May 2007 so that compensation paid under those plans may qualify as performance-based compensation under Section 162(m). However, the Compensation Committee retains the discretion to pay compensation that is not deductible when it determines that to be in the best interests of the Company and its stockholders. For 2009, the Company believes that the salary and cash bonuses paid to the named executive officers subject to Section 162(m) will be deductible, except for certain amounts primarily related to payments under the 2006-2008 Cash Long-Term Incentive Plan, which were fully paid out in early 2009, and the vesting of RSUs in 2009.

 

Separation from Time Warner

 

In connection with the Separation, in March 2009, the Company paid the Special Dividend on its Common Stock and effectuated a 1-for-3 Reverse Stock Split. The Special Dividend was $10.27 per share ($30.81 per share after adjustment for the Reverse Stock Split). The impact of these events on the Company’s LTI program is discussed below.

Company RSUs.  As required under the TWC Stock Incentive Plan, the number of RSUs held by each holder was adjusted to reflect the Reverse Stock Split. In connection with the payment of the Special Dividend, under the Company’s award agreements, RSU holders were to be credited with a deferred cash payment of $10.27 for each share of Company Common Stock underlying their RSUs (without interest) until the vesting of the related RSUs. Based on Management’s recommendation, the award agreements were amended to give holders the option of receiving additional RSUs (the “Special Dividend RSUs”) in lieu of this retained cash distribution (the “Special Dividend retained cash distribution”). The Compensation Committee determined that providing this option would enable employees to maintain their equity interest in the Company and thus facilitate the alignment of their interests with those of stockholders.

 

RSU holders wishing to receive the additional Special Dividend RSUs in lieu of the Special Dividend retained cash distribution were required to make such election by December 22, 2008. The number of Special Dividend RSUs awarded on March 12, 2009, the Special Dividend payment date, to those holders who made such an election was equal to the product of the Special Dividend and their outstanding RSUs divided by the Common Stock closing price on the Special Dividend payment date ($8.33 per share ($24.99 after adjustment for the Reverse Stock Split)). The Special Dividend RSUs and the Special Dividend retained cash distribution have the same vesting dates as the related RSUs.

 

Company Stock Options.  In connection with the payment of the Special Dividend and the Reverse Stock Split, the Compensation Committee authorized equitable adjustments (the “antidilution adjustments”) to the number of shares covered by, and the exercise prices of, outstanding Company stock options, to maintain the fair value of those awards. These antidilution adjustments were made pursuant to the existing antidilution provisions of the TWC Stock Incentive Plan and the related award agreements. As an example of the operation of these adjustments, an employee holding stock options representing the right to purchase 1,000 shares of Common Stock at $37.05 per share before the Special Dividend payment, the Reverse Stock Split and the antidilution adjustments described above, would have stock options to purchase 772 shares of Common Stock at $47.95 per share after the antidilution adjustment.

 

“Make-up” Awards.  As a result of the Separation, under the terms of Time Warner’s equity plans and related award agreements, Company employees with outstanding Time Warner equity awards, including the named executive officers, were treated as if their employment with Time Warner was terminated without cause as of March 12, 2009. This resulted in most of the Company’s employees forfeiting their unvested Time Warner stock options and in the truncation of the exercise periods for their vested Time Warner stock options (to one year after the Separation in most cases). Most Company employees holding Time Warner RSUs vested in these RSUs pro rata upon Separation (i.e., based on the number of days elapsed between the original grant date and the original vesting date) and forfeited the remainder of their RSUs awards.

 

Company employees who qualified as “retirement eligible” under the Time Warner equity plans at the time of Separation received different treatment. Among the named executive officers, Mr. Britt qualified as retirement eligible under the Time Warner plans and, as a result, his Time Warner stock options and RSUs vested upon the Separation. Under the terms of Mr. Marcus’s then-current employment agreement, his Time Warner stock options and RSUs also vested upon Separation. Mr. Britt’s and Mr. Marcus’s Time Warner stock options remain exercisable for five years and three years, respectively, following the Separation (but not beyond their original expiration dates).

 

Pursuant to a plan approved by the Compensation Committee in August 2008, in March 2009, the Compensation Committee approved “make-up” grants of Company stock options and RSUs (the “Separation-related make-up awards”), or in certain instances, cash payments, to Company employees intended to offset the loss of economic value in Time Warner equity awards as a result of the Separation. The Separation-related make-up awards were designed to offset the loss of economic value in Time Warner equity awards as a result of the Separation. The specific terms of the named executive officers’ Separation-related make-up awards were approved by the Compensation Committee on May 8, 2009 with a grant date of May 11, 2009.

Looking Forward

 

The Company’s Management and the Compensation Committee have evaluated the structure of the short-term and long-term incentive programs. While the Company believes that the philosophy, key principles and compensation elements in place for 2009 are still generally appropriate for 2010, the Company has instituted a number of changes to its compensation practices that will generally become effective in 2010:

 

 

 

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K (by reference).

 

Members of the Compensation Committee

 

 

The following table presents information concerning total compensation paid to the Company’s Chief Executive Officer, Chief Financial Officer and each of its three other most highly compensated executive officers who served in such capacities on December 31, 2009 (collectively, the “named executive officers”). Additional information regarding salary, incentive compensation and other components of the named executive officers’ total compensation is provided under “—Compensation Discussion and Analysis.”

 

SUMMARY COMPENSATION TABLE

 

 

 

 

 

 

(a) Pursuant to the TWC Savings Plan, a tax-qualified defined contribution plan available generally to TWC employees, for the 2009 plan year, each of the named executive officers deferred a portion of his annual compensation and TWC contributed $11,000 as a matching contribution on the amount deferred by each named executive officer.

 

(b) The Company maintains a program of life and disability insurance generally available to all salaried employees on the same basis. This group term life insurance coverage was reduced to $50,000 for each of Messrs. Britt, Marcus, Hobbs and Lawrence-Apfelbaum who were each given a cash payment to cover the cost of specified coverage under a voluntary group program available to employees generally (“GUL insurance”). For 2009, this cash payment was $25,152 for Mr. Britt, $2,592 for Mr. Marcus, $2,160 for Mr. Hobbs and $5,490 for Mr. Lawrence-Apfelbaum. Mr. LaJoie elected to receive group term life insurance available generally to employees as well as supplemental group term life insurance coverage provided by the Company and was taxed on the imputed income. For 2009, the Company paid $5,635 for Mr. LaJoie’s supplemental life insurance coverage. For a description of life insurance coverage for certain executive officers provided pursuant to the terms of their employment agreements, see “—Employment Agreements.”

 

(c) The amounts of personal benefits shown in this column for 2009 consist of the aggregate incremental cost to the Company of: for Mr. Britt, reimbursement of fees for financial services of $71,323 and transportation-related benefits of $157,146 related to personal use of corporate-owned aircraft ($128,305) (based on fuel, landing, repositioning and catering costs and crew travel expenses related to the personal use), an automobile allowance and personal use of a Company-provided car and specially trained driver provided for security reasons (based on the cost of the car, the driver’s compensation, fuel and parking and the portion of usage that was personal); and for Messrs. Marcus and Hobbs, reimbursement of fees for financial services of $10,855 and $19,177, respectively. The Board has encouraged Mr. Britt to use corporate-owned or leased aircraft for security reasons. Mr. Britt’s transportation-related benefits also include the incremental cost of his spouse accompanying him on certain business and personal trips on corporate aircraft. Mr. Hobbs and his spouse accompanied Mr. Britt on the corporate aircraft on one personal trip. There is no incremental cost to TWC for the use of the aircraft by Mr. Hobbs, his spouse or Mr. Britt’s spouse under these circumstances, except for catering and TWC’s portion of employment taxes attributable to the income imputed to Mr. Britt and Mr. Hobbs for tax purposes.

 

The following table presents information with respect to each award of plan-based compensation to each named executive officer in 2009, including (a) annual cash awards under the Bonus Plan and TWCIP and (b) awards of stock options to purchase Common Stock and TWC RSUs granted under the TWC Stock Incentive Plan.

 

The following table reflects (a) the antidilution adjustments to the TWC stock option exercise prices and number and class of shares underlying TWC stock options and RSUs and (b) the Separation-related make-up awards granted in May 2009. These antidilution adjustments were made in March 2009 in connection with the Separation and were intended to maintain the awards’ values following the payment of the Special Dividend,

the Reverse Stock Split and the Recapitalization. See “—Compensation Discussion and Analysis—Separation from Time Warner.”

 

GRANTS OF PLAN-BASED AWARDS
DURING 2009

 

 

 

 

The stock options granted in February and August 2009 shown in the table become exercisable, or vest, in installments of 25% on the anniversary of each grant date over a four-year period, assuming continued employment, and expire ten years from the grant date. The dates on which the Separation-related make-up stock option awards become exercisable vary. The Separation-related make-up stock options awarded to (a) Mr. Marcus become exercisable three years after the Separation (March 12, 2012); (b) Mr. Britt, who is retirement eligible under the terms of the award agreement, become exercisable five years after the grant date of the related Time Warner stock option; (c) others whose Time Warner stock options were forfeited become exercisable on the schedule of the related forfeited Time Warner stock options; and (d) others whose Time Warner stock options experienced a shortened term become exercisable one year after the Separation (March 12, 2010). The stock options are subject to accelerated vesting upon the occurrence of certain events such as retirement, death or disability. The exercise price of the stock options equaled the fair market value of the Common Stock on the date of grant as adjusted pursuant to the antidilution adjustments. In addition, holders of the stock options do not receive dividends or dividend equivalents or have any voting rights with respect to the shares of Common Stock underlying the stock options.

 

The awards of TWC RSUs granted in February 2009 vest in equal installments on each of the third and fourth anniversaries of the date of grant, and the Separation-related make-up awards vest on the original vesting date of the related Time Warner equity award assuming continued employment and subject to accelerated vesting upon the occurrence of certain events such as retirement, death or disability. Holders of the RSUs are entitled to receive dividend equivalents on unvested RSUs, if and when regular cash dividends are paid on outstanding shares of Common Stock and at the same rate. The awards of RSUs confer no voting rights on holders and are subject to restrictions on transfer and forfeiture prior to vesting. See “—Compensation Discussion and Analysis—2009 Long-Term Incentive Program and Awards.”

 

The following table provides information about the outstanding awards of options to purchase the Company’s Common Stock and Time Warner Common Stock and the aggregate TWC and Time Warner RSUs held by each named executive officer on December 31, 2009.

 

The information in this table reflects (1) antidilution adjustments to the stock option exercise prices of and number and kind of shares underlying (a) TWC stock options and RSUs, as applicable, as a result of the payment of the Special Dividend, the Reverse Stock Split and the Recapitalization and (b) Time Warner stock options and RSUs as a result of Time Warner’s Spin-Off Dividend, one-for-three reverse stock split and spin-off distribution of its interest in AOL Inc. and (2) the forfeiture and vesting of Time Warner stock options and RSUs and the shortened exercise periods of certain Time Warner stock options as a result of the Separation. General information about the impact of the Separation on the awards is provided in certain footnotes. See “—Compensation Discussion and Analysis—Separation from Time Warner.”

 

OUTSTANDING EQUITY AWARDS AT
DECEMBER 31, 2009