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 6, 2011

 

Dear Stockholder:

 

We cordially invite you to attend Time Warner Cable Inc.’s annual meeting of stockholders. The meeting will be held on Thursday, May 19, 2011, at 9:30 a.m. in the Ballantyne Ballroom A at The Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277. 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, 2, 3 and 4 and for an annual non-binding vote on executive compensation in proposal 5.

 

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 17, 2011. 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 and
Chief Executive Officer

 

PLEASE PROMPTLY SUBMIT YOUR PROXY

 

Time Warner Cable Inc.

60 Columbus Circle

New York, New York 10023

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The Annual Meeting (the “Annual Meeting”) of Stockholders of Time Warner Cable Inc. (the “Company”) will be held on Thursday, May 19, 2011, at 9:30 a.m. (local time). The meeting will take place at:

 

Ballantyne Ballroom A
The Ballantyne Hotel
10000 Ballantyne Commons Parkway
Charlotte, North Carolina 28277

 

The purposes of the meeting are:

 

 

The close of business on March 24, 2011 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 9:30 a.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 6, 2011

 

TABLE OF CONTENTS

 

 

TIME WARNER CABLE INC.

 

60 Columbus Circle

New York, New York 10023

 

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) 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 Thursday, May 19, 2011, at the Ballantyne Ballroom A at The Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277 commencing at 9:30 a.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 7, 2011. 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 7, 2011.

 

At the close of business on March 24, 2011, 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 340,240,533 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.

 

Voting Shares in Your Brokerage Account

 

If you hold your TWC shares through a broker, bank or other financial institution, your broker is not permitted to vote on your behalf on most of the matters presented at the Annual Meeting, including the election of directors, unless you provide specific instructions by completing and returning the Voting Form or following the instructions provided to you to vote your shares via telephone or the Internet. For your vote to be counted, you will need to communicate your voting decisions to your broker, bank or other financial institution before the date of the Annual Meeting.

 

If you have any questions about this rule or the proxy voting process in general, please contact the broker, bank or other financial institution where you hold your shares. The SEC also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a shareowner.

 

A copy of the Company’s Annual Report to Stockholders for the year 2010 is available on the Company’s website at www.timewarnercable.com/annualmeetingmaterials.

 

The Board of Directors recommends a vote:

 

 

Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be Held on Thursday, May 19, 2011:

 

This Proxy Statement and the Company’s 2010 Annual Report to Stockholders are available at www.timewarnercable.com/annualmeetingmaterials.

 

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 Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules of the SEC, and the rules and listing standards of the New York Stock Exchange (“NYSE”) on which the Common Stock is listed for trading.

 

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 five 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 has 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 2012 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.

 

 

 

 

Independent Judgment.  Finally, in addition to the foregoing independence criteria, which relate to a director’s relationship with the Company, the Board also requires that independent directors be free of any other affiliation—whether with the Company or another entity—that would interfere with the exercise of independent judgment.

 

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—Majority Vote.  The Company’s by-laws 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 2010, the Board of Directors met ten 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 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 Company’s separation from Time Warner in March 2009 (the “Separation”), the Board named Glenn A. Britt, the Company’s Chief Executive Officer, to the additional position of Chairman and named Peter R. Haje to serve as the independent lead director. Each of them has served in those roles since the Separation.

 

As lead director, 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 five standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Finance Committee and the Marketing and Customer Care 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.

 

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.

 

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.

 

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

 

Marketing and Customer Care Committee.  The Marketing and Customer Care Committee is responsible for (i) assisting the Board in overseeing the Company’s marketing and customer care activities, including strategies, programs, spending, execution and related technical operation matters, and (ii) providing feedback to the Company’s management regarding such matters.

 

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 “Director Compensation.”)

 

All directors who are not actively employed by the Company are required, within five years of joining the Board, to own stock or stock-based equivalents (whether as a result of receipt of shares from the Company or the purchase of shares) with a value of at least five times the annual cash retainer paid for Board service.

 

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. As former executive officers of Time Warner, which was the Company’s parent company prior to the Separation, Messrs. Logan and Pace do not yet satisfy the three-year “cooling off” post-employment period required under the NYSE independence rules described above. This period will expire in March 2012. 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 2010. Set forth below are the principal occupation and certain other information, as of February 28, 2011, for the twelve nominees, each of whom currently serves as a director.

 

 

During 2010, the Board of Directors met ten times. Each incumbent director attended over 85% 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 2010 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 seven times during 2010, 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 six times during 2010, 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 four times during 2010, 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 four times during 2010, 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.

 

Marketing and Customer Care Committee.  The members of the Marketing and Customer Care Committee are Carole Black, who serves as the Chair, Don Logan, Edward Shirley and John Sununu. The members of the Marketing and Customer Care Committee who are Independent Directors are Ms. Black and Messrs. Shirley and Sununu. The authority and responsibility of the Marketing and Customer Care Committee, which met three times during 2010, 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.

 

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. 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”). 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 Spin-Off Dividend and the Reverse Stock Split. As a result of the Separation, the Company is no longer considered a “controlled company” under NYSE governance requirements.

 

The following table sets forth information as of the close of business on February 1, 2011 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 Common Stock as of December 31, 2010.

 

 

 

 

In accordance with its charter, the Audit Committee of the Company’s Board of Directors 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 registered public accounting firm (“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 2010, 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 2011, 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, 2010.  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, 2010. 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, 2010 (the “2010 Form 10-K”) for filing with the SEC.

 

Members of the Audit Committee.  The members of the Audit Committee are as follows:

 

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, 2010 and 2009 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.

 

Summary: Key Compensation Principles, Design and Determination

 

The Company’s executive compensation program is designed to attract, retain, motivate and reward leaders who create value for the Company and its stockholders. The Company seeks to:

 

 

The Company believes that its compensation programs have played a key role in the Company’s operating and financial success, which in turn have helped drive strong stock price performance since the Company’s Separation from Time Warner in March 2009.

 

This section of the Proxy Statement describes the Company’s compensation philosophy, principles and practices for those of its executive officers named in the Summary Compensation Table in this Proxy Statement (the “named executive officers”), and explains how they were applied to determine these executives’ 2010 compensation.

 

The Company’s Performance

 

The Company’s strong operating and financial results continued in 2010 despite challenging economic conditions, a robust competitive environment, rapid technological change and regulatory uncertainty. The Company believes that its executive officers have created significant shareholder value over the past several years.

 

 

 

 

This chart compares the performance of the Company’s Common Stock with the performance of the S&P 500 Index and an index comprised of the companies included in the Primary Peer Group (as defined and listed below) over the last three fiscal years. The chart reflects the Special Dividend, the Reverse Stock Split and the Recapitalization. The chart assumes $100 was invested on December 31, 2007 and reflects reinvestment of regular dividends and distributions on a monthly basis and quarterly market capitalization weighting. Source: Capital IQ, a Standard & Poor’s business.

 

The Company’s Compensation Structure Reflects its Key Compensation Principles

 

The core elements of the Company’s compensation program are intended to focus the Company’s named executive officers on different but complementary aspects of the Company’s economic and strategic goals:

 

In establishing its executive compensation programs, the Company is guided by the following key principles:

 

 

2010 Changes in Compensation Practices

 

The Company and the Compensation Committee regularly monitor best practices and emerging trends in executive compensation and the Company, from time to time, communicates with significant institutional stockholders to discuss the design and operation of its executive compensation and governance programs. During 2010, the Company made numerous enhancements to its compensation practices that it believes will further strengthen the relationship between its compensation practices and its philosophy. The Company:

 

 

 

 

 

Compensation Practices Checklist

 

The listing below identifies compensation practices that are (and, where noteworthy, are not) incorporated into the Company’s compensation programs as of the date of this Proxy Statement and identifies, to the extent relevant, the discussion of the practice in this Proxy Statement.

 

 

 

2010 Compensation Levels

 

The Compensation Committee generally reviews each named executive officer’s target compensation annually or at the time an executive’s role or responsibilities change. In each case, Management (as defined below under “Role of Management and Compensation Consultants”) 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:

 

 

2010 Base Salary and Target Incentive Compensation Determinations

 

Each named executive officer’s 2010 base salary and target short-term cash and long-term equity incentive compensation (along with comparative 2009 data) is set out below. As discussed below, each of the named executive officers received an increase in target compensation for 2010. Executive officers’ base salaries and short-term and long-term incentive target levels had been frozen for 2009 and, prior to the changes identified below, the Compensation Committee had not changed these levels since 2008.

 

As noted below, the Compensation Committee, working with its independent consultant, reviewed a wide range of information regarding compensation structures, and pay and governance practices in deciding on these compensation packages.

 

Mr. Britt.  Mr. Britt’s 2010 annual base salary and incentive compensation targets were established in August 2009 in connection with his entry into a new fixed-term agreement that extended his employment term through December 31, 2012. See “—Employment Agreements—Glenn A. Britt.” The new arrangement-which provided Mr. Britt with a 25% increase in total target direct compensation (i.e., base salary, target annual bonus and target LTI award value) (“TDC”) during 2010-was intended to reflect Mr. Britt’s increased responsibilities as a result of the Company’s Separation from Time Warner, his and the Company’s performance during the period leading up to his employment agreement renewal, the importance of his position within the Company and of retaining him in that position during a period of significant change in the

Company’s industry (occasioned by the downturn in the U.S. economy, increased competition and new technological and consumer trends), and to ensure the integrity of the Board of Directors’ long-term succession planning strategy. The Compensation Committee also noted that Mr. Britt’s salary had not changed since 2002 and that—even after this increase—his TDC was below the 2009 median of chief executive officers in the Primary Peer Group (as defined below).

 

 

The Compensation Committee also determined that it was appropriate to continue to weight Mr. Britt’s compensation most heavily toward performance-based compensation in the belief that this compensation structure would best focus Mr. Britt on achieving the Company’s strategic and business objectives. During 2010, as in 2009, Mr. Britt’s TDC was approximately 92% performance-based.

 

Mr. Marcus.  The Compensation Committee reviewed Mr. Marcus’s 2010 compensation in December 2009 in connection with his entry into a new fixed-term agreement that extended his employment term through December 31, 2012. See “—Employment Agreements—Robert D. Marcus.” The new arrangement—which provided Mr. Marcus with a 37.5% increase in TDC—was intended to reflect the increase in Mr. Marcus’s responsibilities following the Separation, his performance, the importance of his position as Chief Financial Officer and of retaining him in that role while the Company developed and executed on its long-term financial plan, and the importance of retaining Mr. Marcus in light of the Board of Directors’ long-term succession planning strategy. In setting Mr. Marcus’s compensation, the Compensation Committee noted that Mr. Marcus’s new TDC was at the 2009 median for TDC for chief financial officers in the Primary Peer Group.

 

 

The Compensation Committee also determined that it was appropriate to weight Mr. Marcus’s compensation most heavily (84% for 2010 as compared with 80% for 2009) toward performance-based compensation in the belief that this compensation structure would best focus Mr. Marcus on achieving the Company’s strategic and business objectives. To achieve this result, and to ensure that Mr. Marcus would actively focus on the Company’s long term strategic and business objectives, his 2010 TDC increase was principally driven by a higher LTI target ($1.3 million of the $1.5 million TDC increase).

The charts and discussion above reflect Mr. Marcus’s compensation prior to December 14, 2010, when he was appointed President and Chief Operating Officer. As of the date of his appointment, Mr. Marcus’s base salary was increased to $1 million and his annual bonus target was increased to $2.5 million.

 

Other Named Executive Officers.  The following table sets out the 2010 base salary and target short-term cash and long-term equity incentive compensation, effective in February 2010 (along with the same information for 2009), for each of the other named executive officers.

 

TDC Changes
2009 to 2010

 

 

Messrs. LaJoie, Lawrence-Apfelbaum and Rossetti.  In February 2010, the Compensation Committee reviewed 2010 compensation for Messrs. LaJoie, Lawrence-Apfelbaum and Rossetti and increased their TDC to reflect:

 

 

In setting compensation for these executives, the Compensation Committee noted that each of their 2010 TDC was below the 2009 median of the most comparable positions within the Primary Peer Group. The Compensation Committee also determined that it was appropriate to continue to weight their compensation most heavily toward performance-based compensation since the Company believes that such compensation focuses the executive on achieving the Company’s strategic and business objectives. During 2010, as in 2009, each of them had TDC that was 72% or 73% performance-based.

 

Mr. Hobbs. Mr. Hobbs served as the Company’s Chief Operating Officer until December 14, 2010. Following the Board of Directors’ determination on that date, as part of its long-term succession planning strategy, that Mr. Marcus should assume responsibility for the Company’s operations, Mr. Hobbs’s employment was terminated without cause.

 

The Compensation Committee had reviewed Mr. Hobbs’s 2010 compensation in December 2009 in connection with his entry into a new fixed-term agreement which extended his employment through January 31, 2011. See “—Employment Agreements—Landel C. Hobbs.” The new arrangement—which provided Mr. Hobbs with a 12.5% increase in TDC—was intended to reflect the scope of his responsibilities, his performance, the importance of his position within the organization, the importance of retaining him in light of the competitive environment in which the Company operates and the Company’s executive succession considerations and organizational restructuring efforts. For 2010, as in 2009, Mr. Hobbs’s TDC was approximately 85% performance-based.

 

The Company believes that its compensation philosophy and key principles, and the other factors noted above, were properly reflected in the 2010 target and actual compensation for each named executive officer,

including base salary, short-term and long-term incentives, and the mix of compensation elements. As noted above, the TDC for each of the named executive officers is generally below or consistent with 2009 compensation for the most comparable executive positions within the Primary Peer Group.

 

The Role of Competitive Comparisons

 

The Compensation Committee reviewed information about compensation practices and values from two groups of companies to assist it in establishing 2010 compensation for the named executive officers. These groups include other cable and media companies as well as other comparable public companies. The Compensation Committee used this data to assist it in evaluating general competitiveness and comparability of compensation design, mix and levels but does not target any particular pay range within the data sets in setting compensation. Information on the Primary and Secondary Peer Groups are presented in the table below.

 

 

 

 

Market Surveys.  In addition to the 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 revenues of approximately $16 billion) to the Company from a broad range of industries, including the cable/satellite, telecommunications and media industries.

 

2010 Short-Term Incentive Program—Annual Cash Awards

 

The Company’s short-term cash incentive payments to the named executive officers for 2010 were made under the 2007 Annual Bonus Plan (the “162(m) Bonus Plan”), which is intended to comply with Section 162(m) of the Internal Revenue Code (“Section 162(m)”). The awards were made by a subcommittee of the Compensation Committee, whose members are “outside directors” as defined in Section 162(m) (the “Subcommittee”). However, in determining the awards, the Subcommittee was guided by the Company’s financial performance results under the 2010 Time Warner Cable Incentive Plan (the “2010 TWCIP”), which served as the annual cash bonus plan for all other bonus-eligible Company employees.

 

2010 TWCIP Financial Goals and Results.  Management proposed the use of three metrics to determine 2010 Company financial performance for the named executive officers. The most heavily weighted metric was the same as the sole metric used for 2009—Operating Income (Loss) before depreciation of tangible assets and amortization of intangible assets (“OIBDA” and, after certain mandatory adjustments, “OIBDA (as adjusted)”) less capital expenditures. The two new performance metrics were: (i) commercial revenues (i.e., revenues from sales of the Company’s products and services to businesses) and (ii) Company-wide revenues.

 

In adopting Management’s proposal for the 2010 TWCIP, the Compensation Committee believed that OIBDA (as adjusted) minus capital expenditures would be an important indicator of the operational strength and performance of the Company’s business in 2010, including the ability to provide cash flows to service debt. This metric also captures the Company’s ability to adjust expenses and capital spending as necessary to ensure its financial health in challenging economic environments. At the same time, the Compensation Committee believed that it was appropriate to establish a total revenue target to encourage across-the-board growth in the face of strong competition and a commercial revenue target in light of the importance of building the Company’s commercial operations as its residential product lines continue to mature.

 

The following financial threshold and maximum goals were established based upon a review of the prior year’s results in these areas, the Company’s 2010 budget and other factors. The Compensation Committee chose not to use individual performance under the 2010 TWCIP as a factor in establishing bonuses for the named executive officers and, therefore, the Company’s performance against financial goals accounted for 100% of the 2010 TWCIP calculation for these executives.

 

2010 TWCIP Performance Criteria
for Executive Officers

 

 

The Compensation Committee determined that each threshold set an appropriate level of performance to earn an annual bonus award. If the Company failed to meet a threshold level of financial performance for a given metric, no bonus payment would be made with respect to that financial performance component. Similarly, the maximum goals were considered to present very significant challenges and were not likely to be

attained. As a result, if a 2010 financial metric exceeded its maximum goal, the Company financial performance “score” with respect to that metric would be 175%.

 

If the Company’s result for a 2010 financial metric was above the threshold but below the maximum goal, the Compensation Committee would determine the financial performance score for that metric in its discretion, but using as its starting point the “straight line interpolation” of the Company’s performance against the threshold and maximum goals. For example, if the Company’s results were exactly at the midpoint between the threshold and maximum goals for that metric, the straight line interpolation would be 112.5%, the midpoint between 50% and 175%. In no event would the Compensation Committee be able to assign a score outside of the 50% and 175% parameters established by the 2010 TWCIP. The payouts under the 2010 TWCIP were also capped so that no participant could receive a payout of more than 150% of his target annual bonus.

 

2010 TWCIP Determination.  In early 2011, the Compensation Committee reviewed the Company’s 2010 OIBDA (as adjusted) less capital expenditures for 2010 TWCIP purposes as well as the Company’s revenues and commercial revenues. As mandated by the terms of the 2010 TWCIP, reported OIBDA less capital expenditures was adjusted to reflect identified items, such as accounting changes, and other items that affect reported OIBDA and capital expenditures but that are beyond the control of management or otherwise not indicative of management’s performance. For 2010, these mandatory adjustments had the net impact of increasing OIBDA less capital expenditures for compensation purposes by $24 million in aggregate.

 

The Company’s 2010 total revenues, commercial revenues and OIBDA (as adjusted) less capital expenditures for 2010 TWCIP purposes of $18.868 billion, $1.108 billion and $3.912 billion, respectively, each exceeded the threshold goal but was below the maximum goal. The Compensation Committee noted the straight-line interpolation between each set of threshold and maximum target levels and used these interpolations as the starting point for its final determination of performance for 2010 TWCIP purposes.

 

Pursuant to the 2010 TWCIP, in evaluating performance, the Compensation Committee was able to consider, among other factors:

 

 

After deliberation, the Compensation Committee determined that the interpolated scores appropriately reflected the Company’s performance under the 2010 TWCIP. This determination, which resulted in a weighted average Company performance score of approximately 133%, reflected the Compensation Committee’s very positive view of the Company’s accomplishments during the year (as outlined above under “The Company’s Performance”) in a difficult economic and competitive environment.

 

 

In recent years, the Compensation Committee has similarly considered the straight-line interpolation of the results as compared with the relevant TWCIP’s threshold and maximum results as a starting point in assessing Company performance under the TWCIP. In prior years, however, in light of various considerations, the Committee has reduced the Company performance score below the interpolated level in making its final determination.

 

 

162(m) 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 162(m) Bonus Plan. The Company’s stockholders approved the 162(m) Bonus Plan for the named executive officers in May 2007. Pursuant to the 162(m) Bonus Plan, 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 2010 maximum bonus pool was established equal to 7.5% of the amount by which the Company’s 2010 OIBDA (as adjusted) of $6.842 billion exceeded $6.0 billion. The table below sets out how this maximum pool was allocated among the named executive officers. Each annual bonus was subject in all cases to a 162(m) Bonus Plan cap equal to the lesser of 200% of the officer’s target short-term incentive compensation and $10 million, in addition to the TWCIP maximum bonus of 150% of the individual’s target annual bonus.

 

In awarding 2010 bonuses to each named executive officer, the Subcommittee exercised its discretion to reduce the maximum amount available for each executive officer under the 162(m) Bonus Plan’s pool. The basis for this exercise of negative discretion was the Company’s performance score under the 2010 TWCIP (which, for executive officers, averaged to approximately 133%), subject, in the case of Mr. LaJoie, to a further negative adjustment related to compliance with workplace policies. Mr. Hobbs’s annual bonus was determined in accordance with the severance terms of his employment agreement based on the Company score and his target annual bonus. The table below indicates the final 2010 annual bonus paid to each named executive officer.

 

 

 

 

2010 Long-Term Incentive Program—Equity-Based Awards

 

The Company’s 2010 LTI program consisted of a combination of RSUs and stock options awarded under the Time Warner Cable Inc. 2006 Stock Incentive Plan, as amended (the “2006 Stock Plan”).

 

2010 Target Long-Term Incentive Mix.  Executives with a high level of strategic impact on the Company’s success receive a greater relative proportion of their LTI compensation in the form of stock options (as compared with RSUs) than other employees. The Company and the Compensation Committee believe this is appropriate because the ultimate value of stock options is more performance-dependent than RSUs. Under the 2010 LTI program (like the 2008 and 2009 programs), the Company’s executive officers, including the

named executive officers, received their LTI compensation 60% in the form of stock options and 40% in the form of RSUs.

 

2010 Equity Awards—Determinations.  The number of stock options awarded to each named executive officer was determined by reference to the target stock option value for such executive and the Black-Scholes valuation for the Company’s stock options over a ten-day period selected in advance by the Compensation Committee. The number of RSUs awarded to each named executive officer was determined by reference to the target RSU value for such executive and the average closing price of the Company’s Common Stock over the same ten-day period.

 

2010 Equity Awards—Terms.  The 2010 annual LTI awards were made on February 12, 2010. The stock options were granted with an exercise price equal to the closing price of the Company’s 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 and the Compensation Committee believe 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.

 

Performance-Based LTI Awards.  In developing the 2010 LTI program, the Compensation Committee carefully considered the inclusion of equity awards that would vest upon the satisfaction of specified performance goals but determined that the available vehicles were not appropriate in light of the Company’s goals at that time. However, in 2011, the Company included such “performance-based” vesting conditions in a portion (60%) of its grants (including all RSU grants) to the Company’s executive officers, and currently expects to continue this practice.

 

Ownership and Retention Requirements.  Beginning in 2011, the Company adopted stock ownership requirements that, following a five-year phase-in period, require that covered officers hold stock (including in the form of unvested RSUs (other than those then subject to satisfaction of performance criteria)) in an amount equal to or exceeding a multiple of their annual base salary:

 

 

Although not yet applicable because of the phase-in period, as of January 31, 2011, each of the currently serving named executive officers would have met his ownership requirement.

 

Under the ownership requirements, the Company will review covered officers’ compliance on January 31 of each calendar year. If an officer is not in compliance with the requirement by January 31, 2016, he or she will be required to retain at least 50% of any stock received upon exercise of stock options or vesting of RSUs (after shares used to cover exercise costs, taxes, etc.). Prior to the full implementation of the requirements, the executive officers must obtain consent from the Chief Executive Officer if a sale of Common Stock would cause the executive to no longer satisfy the ownership requirement. The Compensation Committee will also consider the executive officers’ compliance with the ownership and retention requirements in determining compensation.

 

Prior to adopting the new ownership requirements, the Compensation Committee felt that, in light of the Company’s relatively short history with a publicly traded security, 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 did, however, monitor executive officers’ transactions and holdings in the Company’s Common Stock throughout 2010.

 

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 A. Britt, Chairman and Chief Executive Officer (and President through December 14, 2010), Paul Gilles, Senior Vice President, Compensation, Benefits and Human Capital, Robert D. Marcus, Senior Executive Vice President and Chief Financial Officer (and President and Chief Operating Officer as of December 14, 2010), and Tomas Mathews, Executive Vice President, Human Resources (collectively, “Management”), provide recommendations for the Compensation Committee’s consideration (other than with respect to the Company’s Chairman and CEO), 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.

 

During 2010, the Compensation Committee retained ClearBridge Compensation Group (“ClearBridge”) as its sole compensation advisor. The Company paid ClearBridge an annual retainer, plus additional amounts for special projects that the Compensation Committee requested. In connection with the retention, the Compensation Committee determined that ClearBridge had the necessary experience, skill and independence to advise the Committee. The Compensation Committee plans to review its determination annually.

 

During 2010, ClearBridge reported directly to the Compensation Committee, providing assistance and advice to it in carrying out its principal responsibilities. The Compensation Committee consulted with ClearBridge with respect to all significant 2010 compensation decisions and determinations. In this advisory role, ClearBridge attended and participated in all Compensation Committee meetings, including executive sessions when appropriate. In connection with ClearBridge’s role as advisor to the Compensation Committee, Management from time to time seeks input from ClearBridge 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.

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 termination scenarios, including 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 2010 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) continues to be appropriate in light of the Company’s compensation philosophy and guiding principles, and is consistent with relevant competitive marketplace data.

 

Risk Assessment

 

During 2010, 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 2010 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 decision-making. Among the factors giving rise to the Compensation Committee’s determination were the following:

 

 

Perquisites

 

The Company provides a limited number of perquisites to the named executive officers. Where provided, 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 2010 included, in the case of Mr. Britt, a Company-provided car and specially-trained driver in light of security concerns. All the named executive officers were also eligible for reimbursement for certain financial services (e.g., tax and estate planning). 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, the Company’s other executive officers (including their family members) are permitted to join an otherwise scheduled business-purpose Company flight for personal purposes. The Company imputes income to executive officers who make personal use of Company aircraft as and when required under applicable tax rules. The perquisites provided to the named executive officers are noted in the Summary Compensation Table, below.

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 imposed by the tax laws, which limit the benefit under the plan for certain participants. 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 a cap of $350,000 per year and determined without regard to the maximum annual benefit under 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.”

 

The Role of 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, and, in some cases, “clawback” rights (i.e., rights to recover compensation paid to an executive if the Company subsequently determines that the compensation was not properly earned). The employment agreements provide for severance pay in the event of the involuntary 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.

 

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 162(m) Bonus Plan and the 2006 Stock 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 2010, 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 Mr. Britt’s annual salary to the extent it exceeded $1 million. RSUs that vested in 2010 are not considered performance-based for tax purposes and will be subject to the deduction limitations of Section 162(m). However, in 2011, the Company granted RSUs with performance-based vesting criteria to the named executive officers. When these RSUs vest (scheduled to occur in 2014 and 2015), the Company believes they will be exempt from the deduction limitations of Section 162(m).

 

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, 2010 and Landel C. Hobbs, who served as the Company’s Chief Operating Officer until December 14, 2010 (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 2010 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, Lawrence-Apfelbaum and Hobbs 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 2010, this cash payment was $52,896 for Mr. Britt, $3,504 for Mr. Marcus, $7,485 for Mr. Lawrence-Apfelbaum and $2,826 for Mr. Hobbs. Messrs. LaJoie and Rossetti 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 were taxed on the imputed income. For 2010, the Company paid $6,045 and $13,119 for Mr. LaJoie’s and Mr. Rossetti’s respective 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 2010 consist of the aggregate incremental cost to the Company: for Mr. Britt, reimbursement of fees for financial services of $40,250 and transportation-related benefits of $192,734 related to personal use of corporate-owned aircraft ($186,224) (based on fuel, landing, repositioning and catering costs and crew travel expenses related to the personal use), 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); for Mr. Marcus, reimbursement of fees for financial services of $16,468 and the incremental cost of his spouse accompanying him on a business trip; and for Mr. Hobbs, reimbursement of fees for financial services of $22,905. 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. Each of Messrs. LaJoie and Rossetti and his respective spouse accompanied Mr. Britt on the corporate aircraft on one combined business and personal trip. The incremental cost to TWC for the use of the aircraft under these circumstances is limited to catering, crew expenses and TWC’s portion of employment taxes attributable to the income imputed to Mr. Britt and the others for tax purposes.

 

 

The following table presents information with respect to each award of plan-based compensation to each named executive officer in 2010, including (a) annual cash awards under the 162(m) Bonus Plan and 2010

TWCIP and (b) awards of stock options to purchase Common Stock and RSUs granted under the 2006 Stock Plan.

 

GRANTS OF PLAN-BASED AWARDS DURING 2010

 

 

 

 

The stock options granted in 2010 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. 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 2010 vest in equal installments on each of the third and fourth anniversaries of the date of grant. Holders of these 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—2010 Long-Term Incentive Program—Equity-Based 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 RSUs held by each named executive officer on December 31, 2010.

 

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 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.

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2010