PROXY STATEMENT SUMMARY
This summary highlights certain information
contained elsewhere in the accompanying proxy statement, but does not contain all of the information you should consider before
voting your shares. For more complete information regarding the proposals to be voted upon at the 2021 annual meeting of shareholders
and our fiscal year 2020 performance, please review the entire proxy statement and our Annual Report on Form 10-K for the
fiscal year ended December 31, 2020. We use the terms “Shentel,” the “Company,” “we,”
“our” and “us” in this summary to refer to Shenandoah Telecommunications Company.
Annual Meeting
|
|
Date:
|
April 20, 2021
|
Time:
|
11:00 a.m. (Eastern time)
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Location:
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www.virtualshareholdermeeting.com/SHEN2021
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Record Date:
|
Shareholders of record at the close of business on February 24,
2021
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Voting Matters
Proposals
|
Required
Approval
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Board
Recommendation
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Page
Reference
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1.
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Election of directors
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Majority of Votes Cast
for Each Nominee
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FOR each
nominee
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9
|
2.
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Ratification of auditors
|
Majority of Votes Cast
|
FOR
|
33
|
3.
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Advisory vote to approve executive compensation
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Majority of Votes Cast
|
FOR
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38
|
Corporate Governance Highlights
Shentel is committed to strong corporate
governance practices and policies, which promote both the long-term interests of our shareholders and the accountability of the
Board of Directors and management. The following table summarizes certain of our corporate governance practices and policies:
|
Majority voting for director elections
|
|
Active shareholder engagement
|
|
Independent directors regularly meet without management present
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Policies prohibiting hedging of Company shares
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Board regularly assesses its performance through board and committee self-evaluations
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Board is 87.5% independent (CEO is only management director) and 25% female
|
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Board committees consist solely of independent directors
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No poison pill
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Robust stock ownership guidelines
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|
|
We value an open and active dialogue with
our shareholders and we believe that regular communication with our shareholders is vital to our long-term success. We strive to
foster strong shareholder relationships that lead to a mutual understanding of issues and approaches. During 2020, members of our
management team found new ways to safely meet and communicate with many of our shareholders to ensure that we fully understand
our shareholders’ concerns with respect to governance and compensation-related matters.
Board of Directors
The following table contains information
about each member of the Board of Directors of Shentel, including the three incumbent directors —Thomas A. Becket, Richard
L. Koontz, Jr., and Leigh Ann Schultz — whose terms are set to expire at the 2021 annual meeting of shareholders and have
been nominated for reelection to the Board to serve three-year terms expiring at the annual meeting of shareholders in 2024.
|
|
|
|
|
Committee Memberships
|
Name
|
Age
|
Director
Since
|
Principal
Occupation
|
Financial
Expert
|
Audit
|
Compensation
|
Nominating & Corporate Governance
|
Thomas A. Beckett
|
53
|
2018
|
SVP, GC and Secretary of American Public Education, Inc.
|
—
|
—
|
—
|
|
Tracy Fitzsimmons
|
54
|
2005
|
President of Shenandoah University
|
—
|
—
|
|
|
John W. Flora
|
66
|
2008
|
Attorney and Shareholder of Flora Pettit PC
|
—
|
—
|
|
—
|
Christopher E. French
|
63
|
1996
|
President and CEO
of Shentel
|
—
|
—
|
—
|
—
|
Richard L. Koontz, Jr.
|
63
|
2006
|
Vice President of Holtzman Oil Corporation
|
—
|
—
|
|
—
|
Dale S. Lam
|
58
|
2004
|
President of Strategent Financial, LLC
|
|
|
—
|
|
Kenneth L. Quaglio
|
62
|
2017
|
CEO and President of Celerity IT, LLC
|
|
|
—
|
—
|
Leigh Ann Schultz
|
47
|
2016
|
CFO of Harvest Host Inc.
|
|
|
—
|
—
|
|
Member
|
|
Chairperson
|
|
Financial Expert
|
2020 Executive Compensation
(see page 18)
Compensation decisions regarding executive
compensation are made by the Compensation Committee or, with respect to the Company’s Chief Executive Officer or Chief Operating
Officer, the Board of Directors. The Compensation Committee believes that a sensibly-structured, incentive-aligning compensation
program is critical to the creation of long-term stockholder value. The following table summarizes certain highlights of our compensation
practices:
What We Do:
|
What We Don’t Do:
|
|
Align pay with performance by linking a substantial portion of compensation to the achievement of predefined performance metrics and share price
|
|
Do NOT provide tax gross-ups in any circumstance
|
|
Retain an independent compensation consultant
|
|
Do NOT provide excessive perquisites for executives
|
|
Require compliance with stock ownership guidelines for directors and executive officers
|
|
Do NOT provide guaranteed bonuses
|
|
Place caps on incentive award opportunities
|
|
Do NOT provide discount stock options or stock appreciation rights
|
|
Maintain a clawback policy
|
|
Do NOT pay dividends on performance units prior to vesting
|
|
Prohibit hedging of Company shares and option trading
|
|
Do NOT permit unapproved pledging of our common stock
|
|
|
|
Do NOT add back to our equity compensation plan reserves any shares tendered as payment for shares withheld for taxes
|
At the 2018, 2019 and 2020 annual meetings
of shareholders, approximately 92%, 99% and 98% of votes cast in the annual “say-on-pay” vote, respectively, were in
favor of the compensation of the Company’s named executive officers. In light of this strong support, the Compensation Committee
decided to maintain the core design of our compensation program for 2020 and 2021.
Corporate Social Responsibility
Shentel is committed to growing its business
in a sustainable and socially responsible manner, and our Board of Directors and management team are committed to Shentel’s
vision to make a positive difference in the communities we serve. This commitment is supported at all levels of the Company. Through
our actions, our goal is to make a positive difference in the communities we serve through our dedication to providing high quality
and reliable services, our sincere commitment to being a good employer, our efforts to minimize our impact on the environment,
our ongoing engagement and support for the communities where we operate and our unwavering and strict adherence to the highest
ethical standards.
SHENANDOAH TELECOMMUNICATIONS COMPANY
500 Shentel Way
Edinburg, Virginia 22824
Annual Meeting of Shareholders
April 20, 2021
GENERAL INFORMATION
Proxy Solicitation
This proxy statement is furnished in connection
with the solicitation of proxies by the Board of Directors of Shenandoah Telecommunications Company for use at Shenandoah Telecommunications
Company’s 2021 annual meeting of shareholders to be held via live webcast on Tuesday, April 20, 2021, at 11:00 a.m. Eastern
Standard Time on www.virtualshareholdermeeting.com/SHEN2021. The purpose of the annual meeting and the matters to be acted upon
are set forth in the accompanying notice of annual meeting.
The Company will pay the cost of this proxy
solicitation. In addition to the solicitation of proxies by electronic delivery, officers and other employees of the Company may
solicit proxies by personal interview, telephone and e-mail. None of these individuals will receive compensation for such services,
which will be performed in addition to their regular duties. The Company also has made arrangements with brokerage firms, banks,
nominees and other fiduciaries to forward proxy solicitation material for shares held of record by them to the beneficial owners
of such shares. The Company will reimburse such persons for their reasonable out-of-pocket expenses in forwarding such material.
A list of shareholders entitled to vote
at the annual meeting will be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary
business hours for a period of ten days before the meeting and during the meeting. The list will be available by following the
instructions on www.virtualshareholdermeeting.com/SHEN2021.
This proxy statement is first being delivered
to the Company’s shareholders on or about March 5, 2021. In accordance with the rules of the Securities and Exchange Commission
(the “SEC”), we are furnishing certain proxy materials (Proxy Statement, Proxy Card, Annual Report on Form 10-K) and
letter to shareholders by providing access to these materials electronically on the Internet. As such, we are not mailing a printed
copy of these proxy materials to each shareholder of record or beneficial owner, and our shareholders will not receive printed
copies of these proxy materials unless they request this form of delivery. Printed copies will be provided upon request at no charge.
We are delivering a Notice of Meeting and a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”)
to our shareholders on or about March 5, 2021. The Notice of Internet Availability is in lieu of mailing the printed proxy materials,
and contains instructions for our shareholders as to how they may: (1) access and review our proxy materials on the Internet; (2)
submit their proxy; and (3) request printed proxy materials. Shareholders may request to receive printed proxy materials by mail
or electronically by e-mail on an ongoing basis by following the instructions in the Notice of Internet Availability. We believe
that providing proxy materials electronically will enable us to save costs associated with printing and delivering the materials
and reduce the environmental impact of our annual meetings. A request to receive proxy materials in printed form will remain in
effect until such time as the shareholder elects to terminate it.
Voting and Revocability of Proxies
Shares of the Company’s common stock
represented by a properly executed proxy, if such proxy is received in time and not revoked, will be voted at the annual meeting
in accordance with the instructions indicated in such proxy. If no instructions are indicated, such shares will be voted FOR:
(1) the election of the three director nominees to the Company’s Board of Directors for a term expiring in 2024; (2) auditor
ratification; and (3) the approval, in a non-binding vote, of the Company’s named executive officer compensation. Discretionary
authority is provided in the proxy as to any matters not specifically referred to in the proxy. Management is not aware of any
other matters that are likely to be brought before the annual meeting. If any other matter is properly presented at the annual
meeting for action, including a proposal to adjourn or postpone the annual meeting to permit the Company to solicit additional
proxies in favor of any proposal, the persons named in the proxy will vote on such matter in their own discretion.
A shareholder executing a proxy may revoke
the proxy at any time before it is exercised by giving written notice revoking the proxy to the Company’s Secretary, by subsequently
filing another proxy bearing a later date or by attending the annual meeting and voting in person. Attending the annual meeting
will not automatically revoke the shareholder’s proxy. All written notices of revocation or other communications with respect
to revocation of proxies should be addressed to Shenandoah Telecommunications Company, 500 Shentel Way, P.O. Box 459, Edinburg,
Virginia 22824, Attention: Corporate Secretary.
Voting Procedure
Record Date. All holders of record
of the common stock at the close of business on February 24, 2021, will be eligible to vote at the annual meeting. Each holder
of common stock is entitled to one vote at the annual meeting for each share held by such shareholder. As of February 24, 2021,
there were 49,932,051 shares of common stock outstanding.
Quorum. A majority of the
shares of common stock issued and outstanding and entitled to vote at the annual meeting, virtually present or represented by
proxy, will constitute a quorum at the annual meeting. Votes cast in person or by proxy at the annual meeting will be
tabulated by the inspectors of election appointed for the annual meeting, who will determine whether or not a quorum is
present. Abstentions (which occur when a shareholder chooses to abstain from voting on any or all proposals) and any broker
non-votes (which are described below) will be counted for purposes of determining the presence of a quorum at the annual
meeting but will have no effect on the outcome of the proposals presented in this proxy statement as discussed below.
When broker-dealers who hold their customers’
shares in street name do not receive specific voting instructions from their customers, the broker-dealers may, under the applicable
rules of the exchanges and other self-regulatory organizations of which the broker-dealers are members, vote the shares of their
customers on “routine” proposals, which under such rules typically include the ratification of auditors, but cannot
vote on “non-routine” matters. A “broker non-vote” occurs with respect to any non-routine proposal when
a broker is not permitted to vote on that proposal without instruction from the beneficial owner of the shares. The ratification
of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2021 (Proposal No. 2) is
considered a routine matter under applicable rules, and no broker non-votes will occur in connection with this proposal. The election
of directors (Proposal No. 1) and the approval of the Company’s named executive officer compensation (Proposal No. 3) are
considered non-routine matters under applicable rules, and therefore broker non-votes may exist in connection with these proposals.
Approval Standards. The shareholder
vote required to approve each proposal is set forth below.
|
·
|
The election of directors (Proposal No. 1) requires the affirmative
vote of a majority of the votes cast for the election of directors. This means that a director nominee must receive more votes
cast “for” than “against” his or her election in order to be elected.
|
|
·
|
The proposal to ratify the Audit Committee’s selection of KPMG
LLP as the Company’s independent registered public accounting firm for 2021 (Proposal No. 2) requires the affirmative vote
of a majority of the votes cast and will be approved if the number of votes cast “for” the proposal exceeds the number
of votes cast “against” the proposal.
|
|
·
|
The proposal to approve, in a non-binding vote, the Company’s
named executive officer compensation (Proposal No. 3) requires the affirmative vote of a majority of the votes cast and will be
approved if the number of votes cast “for” the proposal exceeds the number of votes cast “against” the
proposal.
|
With respect to each of the proposals presented in this proxy
statement, abstentions and broker non-votes will have no effect on the outcome of the proposals because they are not considered
“votes cast” under the majority-of-votes-cast voting standard.
Annual Report on Form 10-K
The Company is required to file an Annual
Report on Form 10-K for the year ended December 31, 2020 with the SEC. Shareholders may obtain, free of charge, an additional copy
of the 2020 Annual Report on Form 10-K, without exhibits, by following the instructions in the Notice of Internet Availability
or by writing to Shenandoah Telecommunications Company, 500 Shentel Way, P.O. Box 459, Edinburg, Virginia 22824, Attention: Shareholder
Services. The Annual Report on Form 10-K is also available through the Company’s website at www.shentel.com. The Annual
Report on Form 10-K and letter to shareholders are not part of the proxy-soliciting materials.
Important Notice Regarding Delivery of Shareholder Documents
The Company has taken advantage of the “householding”
rules of the SEC. For shareholders requesting to receive our Notice of Internet Availability or a full paper set of our proxy materials
in printed form, the householding rules permit the delivery of one set of the printed proxy materials to shareholders who have
the same address to conserve resources and achieve the benefit of reduced printing and mailing costs. If you wish to receive an
additional copy of our Annual Report on Form 10-K, this proxy statement, or the letter to shareholders, you may follow the instructions
on the Notice of Internet Availability or make a written request to Shenandoah Telecommunications Company, 500 Shentel Way, P.O.
Box 459, Edinburg, Virginia 22824, Attention: Shareholder Services, or call us at 540-984-5200. If you are receiving multiple copies
of our Annual Report on Form 10-K, proxy statement or letter to shareholders and would like to receive only one copy per household
in the future, or are receiving one copy and would like to receive separate copies, you can request householding or electronic
delivery by contacting Shareholder Services in the same manner.
SECURITY OWNERSHIP
Management Ownership of Common Stock
The following table presents, as of February
24, 2021, information based upon the Company’s records and filings with the SEC regarding beneficial ownership of the common
stock by the following persons:
|
·
|
each director and each nominee to the Board of Directors;
|
|
·
|
each executive officer of the Company named in the summary compensation table under the “Executive Compensation”
section of this proxy statement; and
|
|
·
|
all directors and executive officers of the Company as a group.
|
As of February 24, 2021, there were 49,932,051 shares of common
stock outstanding.
The information presented below regarding
beneficial ownership of the Company’s common stock has been presented in accordance with rules of the SEC and is not necessarily
indicative of beneficial ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner”
of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct
the disposition of the security. A person is also deemed to be the beneficial owner of any security as to which a person has the
right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible
security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities.
Name of Beneficial Owner
(Directors, Nominees and Executive Officers)
|
|
Amount and Nature of
Beneficial
Ownership
|
|
Percent of
Class (%)
|
Thomas A. Beckett
|
|
|
3,141
|
|
|
|
*
|
|
Tracy Fitzsimmons
|
|
|
21,721
|
|
|
|
*
|
|
John W. Flora
|
|
|
23,838
|
|
|
|
*
|
|
Christopher E. French
|
|
|
1,818,616
|
(a)
|
|
|
3.64
|
|
Richard L. Koontz, Jr.
|
|
|
30,507
|
(b)
|
|
|
*
|
|
Dale S. Lam
|
|
|
27,600
|
|
|
|
*
|
|
Kenneth L. Quaglio
|
|
|
6,004
|
|
|
|
*
|
|
Leigh Ann Schultz
|
|
|
6,475
|
(c)
|
|
|
*
|
|
David L. Heimbach
|
|
|
4,627
|
|
|
|
*
|
|
James J. Volk
|
|
|
2,343
|
|
|
|
*
|
|
William L. Pirtle
|
|
|
52,771
|
(d)
|
|
|
*
|
|
Edward H. McKay
|
|
|
37,126
|
(e)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All directors, nominees and executive officers as a group (16 persons)
|
|
|
2,064,712
|
(f)
|
|
|
4.13
|
|
*Less than 1%.
|
|
|
|
|
|
|
|
|
The percentage of beneficial ownership as
to any person as of February 24, 2021, is calculated by dividing the number of shares beneficially owned by such person, which
includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the
sum of the number of shares outstanding as of February 24, 2021, plus the number of shares as to which such person has the right
to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be
different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, the Company
believes that the beneficial owners of the Company’s common stock listed in the table have sole voting and investment power
with respect to the shares shown.
|
(a)
|
The shares of common stock shown as beneficially owned by Mr. French include 64,296 shares of common stock owned by his wife,
37,272 shares owned by one of his adult children, 854,945 shares owned of record by seven trusts for the benefit of Mr. French’s
family members for which Mr. French serves as trustee, and 345,000 shares of common stock owned of record by a trust for the benefit
of his family members for which one of his adult children serves as trustee. Mr. French disclaims beneficial ownership of the shares
owned of record by spouse, his child and the trust for which his child serves as trustee. Of the shares shown as beneficially owned
by Mr. French, 23,000 shares are pledged as security for personal indebtedness.
|
|
(b)
|
The shares of common stock shown as beneficially owned by Mr. Koontz include 52 shares owned of record by his son. Mr. Koontz
disclaims beneficial ownership of such shares.
|
|
(c)
|
The shares of common stock shown as beneficially owned by Ms. Schultz include 38 shares owned of record by her spouse. Ms.
Schultz disclaims beneficial ownership of such shares.
|
|
(d)
|
The shares of common stock shown as beneficially owned by Mr. Pirtle include options exercisable within 60 days of February
24, 2021 to purchase 6,792 shares of common stock.
|
|
(e)
|
The shares of common stock shown as beneficially owned by Mr. McKay include options exercisable within 60 days of February
24, 2021 to purchase 8,082 shares of common stock.
|
|
(f)
|
The shares of common stock shown as beneficially owned by all directors, nominees and executive officers as a group include
options exercisable within 60 days of February 24, 2021 to purchase 14,874 shares of common stock.
|
Principal Shareholders
The following table presents, as of February
24, 2021, information based upon the Company’s records and filings with the SEC regarding beneficial ownership of the common
stock by each person known to the Company to be the beneficial owner of more than 5% of the common stock. The information is based
on the most recent Schedule 13G filed with the SEC on behalf of such persons.
Name and Address
|
|
Amount
and Nature of
Beneficial Ownership
|
|
Percent
of
Class
(%)
|
BlackRock,
Inc.
55
East 52nd Street
New
York, NY 10055
|
|
|
7,737,351
|
|
|
|
15.50
|
|
|
|
|
|
|
|
|
|
|
The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355
|
|
|
5,051,903
|
|
|
|
10.12
|
|
The shares of common stock shown as beneficially
owned by BlackRock, Inc. were reported on Schedule 13G/A filed with the SEC on January 25, 2021. BlackRock, Inc. reported sole
power to vote 7,671,072 shares and sole power to dispose of all 7,737,351 shares shown.
The shares of common stock shown as beneficially
owned by The Vanguard Group, Inc. were reported on Schedule 13G/A filed with the SEC on February 10, 2021. The Vanguard Group,
Inc. reported sole voting power of 0 shares, shared voting power of 110,768 shares, sole dispositive power of 4,901,968 shares,
and shared dispositive power of 149,935 shares.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees for Election as Directors for Terms Expiring in
2024
The Company’s articles of incorporation
provide that the Board of Directors is to be divided into three classes of directors, with the classes to be as nearly equal in
number as possible. The terms of office of the three current classes of directors expire at this annual meeting, at the annual
meeting of shareholders in 2022 and at the annual meeting of shareholders in 2023, respectively. Upon the expiration of the term
of office of each class, the nominees for such class will be elected for a term of three years to succeed the directors whose terms
of office expire.
Thomas A. Beckett; Richard L. Koontz, Jr.;
and Leigh Ann Schultz have been nominated for election to the class with a three-year term that will expire at the annual meeting
of shareholders in 2024. Mr. Beckett, Mr. Koontz, and Ms. Schultz are incumbent directors who have served on the Board of Directors
since 2018, 2006 and 2016, respectively, whose terms are set to expire at this annual meeting. Biographical information regarding
each of the nominees is available below under “Board and Board Committee Matters—Information About Nominees and Continuing
Directors.”
Director Nomination Process
The Board of Directors has, by resolution,
adopted a director nomination policy. The purpose of the nomination policy is to describe the process by which candidates for possible
inclusion in the Company’s recommended slate of director nominees are selected. The nomination policy is administered by
the Nominating and Corporate Governance Committee of the Board of Directors.
The Nominating and Corporate Governance
Committee takes a variety of factors into account in selecting candidates for nomination as directors, including the Company’s
current needs and the qualities needed for Board service; experience and achievement in business, finance, technology or other
areas relevant to the Company’s activities; the candidate’s reputation, ethical character and maturity of judgment;
the desirability of establishing a diversity of viewpoints, backgrounds and experiences among Board members; the candidate’s
independence under SEC and Nasdaq listing rules; the candidate’s service on other Boards of Directors; the absence of conflicts
of interest that might impede the proper performance of the candidate’s responsibilities as a director; the candidate’s
ability to devote sufficient time to Board matters; and the candidate’s ability to work effectively and collegially with
other Board members. The Committee does not give particular weight to any one factor, but instead considers how the attributes
of a candidate or nominee would enhance the Board’s overall qualifications and effectiveness. In the case of an incumbent
director whose term of office is set to expire, the Nominating and Corporate Governance Committee will review such director’s
overall service to the Company during his or her term, including the number of meetings attended, level of participation, quality
of performance, and any transactions of such directors with the Company during the term. For those potential new director candidates
who appear upon first consideration to meet the Board’s selection criteria, the Nominating and Corporate Governance Committee
will conduct appropriate inquiries into their background and qualifications and, depending on the result of such inquiries, arrange
for in-person meetings with the potential candidates. The effectiveness of the Nominating and Corporate Governance Committee’s
candidate selection criteria is assessed through the Committee’s annual review of policies regarding Board and committee
membership.
The Nominating and Corporate Governance
Committee may use multiple sources for identifying director candidates, including its own contacts and referrals from other directors,
members of management, the Company’s advisors, and executive search firms. The Nominating and Corporate Governance Committee
will consider director candidates recommended by shareholders and will evaluate such director candidates in the same manner in
which it evaluates candidates recommended by other sources. In making recommendations for director nominees for the annual meeting
of shareholders, the Nominating and Corporate Governance Committee will consider any written recommendations of director candidates
by shareholders received by the Secretary of the Company not later than 120 days before the anniversary of the previous year’s
annual meeting of shareholders. Recommendations must include the candidate’s name and contact information and a statement
of the candidate’s background and qualifications, and must be mailed to Shenandoah Telecommunications Company, 500 Shentel
Way, P.O. Box 459, Edinburg, Virginia 22824, Attention: Corporate Secretary.
The nomination policy is intended to provide
a flexible set of guidelines for the effective functioning of the Company’s director nomination process. The Nominating and
Corporate Governance Committee intends to review the nomination policy at least annually and anticipates that modifications may
be necessary from time to time as the Company’s needs and circumstances evolve, and as applicable legal or listing standards
change. The Nominating and Corporate Governance Committee may amend the nomination policy at any time, in which case the most current
version will be available on the Company’s website at www.shentel.com.
Approval of Nominees
Approval of the nominees requires the affirmative
vote of a majority of the votes cast at the annual meeting. Unless authority to do so is withheld, it is the intention of the persons
named in the proxy to vote such proxy FOR the election of each of the nominees. In the event that any nominee should become
unable or unwilling to serve as a director, the persons named in the proxy intend to vote for the election of such substitute nominee
for director as the Board of Directors may recommend. It is not anticipated that any nominee will be unable or unwilling to serve
as a director.
The Board of Directors unanimously recommends
that the shareholders of the Company vote FOR the election of the nominees to serve as directors.
BOARD AND BOARD COMMITTEE MATTERS
Information About Nominees and Continuing Directors
Biographical information concerning each
of the nominees and each of the directors continuing in office is presented below.
Nominees for Terms Expiring in 2024
Name
|
Age
|
Director Since
|
Thomas A. Beckett
|
53
|
2018
|
Richard L. Koontz, Jr.
|
63
|
2006
|
Leigh Ann Schultz
|
47
|
2016
|
Thomas A. Beckett has served as the
Senior Vice President, General Counsel and Secretary of American Public Education, Inc. (APEI), a publicly-traded provider of online
and on-campus postsecondary education headquartered in Charles Town, West Virginia since 2016. Mr. Beckett also serves as the General
Counsel and Secretary of American Public University System, Inc. (APUS), a wholly owned subsidiary of APEI, and has held various
other positions with APUS since joining the company in 2011. From 2007 to 2010, Mr. Beckett was the General Counsel and Chief Operating
Officer of InnoZen, Inc. (now CURE Pharmaceutical) and HealthSport, Inc., pharmaceutical and dietary supplement technology companies
located in California. Mr. Beckett also held various other leadership positions at these companies. Prior to this work, Mr. Beckett
was an attorney at the international law firms King & Spalding LLP and Holland & Knight LLP. Mr. Beckett began his career
as a banking officer with First Union National Bank. Mr. Beckett brings to the Board additional qualifications, including his significant
experience providing advice and guidance to Boards of Directors and executive management, his expertise in corporate governance,
and his experience as an executive officer of a public company.
Richard L. Koontz, Jr. has served
as Vice President of Holtzman Oil Corporation, a supplier and distributor of petroleum products located in Mt. Jackson, Virginia,
since 1988. Mr. Koontz brings to the Board additional qualifications, including his experience as a member of senior management
of a successful regional business, with substantial budget authority and finance responsibilities, his community service through
membership on the Shenandoah County Public Schools Board, and his knowledge of the Company’s extensive local shareholder
base.
Leigh Ann Schultz is the CFO of Harvest
Hosts Inc., a membership-based travel and recreation company; she has held this position since March of 2021. Ms. Schultz was previously
the CFO of Streetsense, LLC, a strategy and design consultancy, from May 2017 to February 2021. From 2016 to May 2017, she was
founder and CEO of Vintage Advisory, LLC, a strategic advisory firm supporting private equity firms with performance improvement,
financial advisory and strategic planning support for their portfolio companies. From 2014 through 2016, she was Managing Director
for MorganFranklin Consulting, a strategy and execution-focused business consulting firm. Ms. Schultz brings to the Board
additional qualifications including leadership roles in the telecommunications industry, service in the Division of
Corporation Finance of the Securities and Exchange Commission, and public accounting experience with Ernst & Young. Ms.
Schultz is a National Association of Corporate Director Board Leadership Fellow. Ms. Schultz also serves as an
audit committee financial expert.
Directors Whose Terms Expire in 2022
Name
|
Age
|
Director Since
|
Christopher E. French
|
63
|
1996
|
Dale S. Lam
|
58
|
2004
|
Christopher E. French has served
as President and Chief Executive Officer of the Company and its subsidiaries since 1988 and has served as Chairman of the Board
of Directors since 1996. Prior to his appointment as President, he held a variety of positions with the Company, including Executive
Vice President and Vice President - Network Service. Mr. French served on the Board of Directors of First National Corporation
until May of 2018. Mr. French brings to the Board additional qualifications, including his engineering and business education,
telecommunications industry experience, knowledge of and history with the Company, and public company knowledge, including knowledge
gained from his past service as a director of First National Corporation. In addition, his substantial ownership of the Company’s
common stock serves to align his interests with the Company’s shareholders.
Dale S. Lam has served as President
of Strategent Financial, LLC, a financial advisory firm, since November 2008. Mr. Lam previously served as Chief Financial Officer
and member of the Board of Directors of ComSonics, Inc., a cable television equipment manufacturer and repair operation headquartered
in Harrisonburg, Virginia, from April 2001 through October 2008. He is also a Certified Public Accountant. Mr. Lam brings to the
Board additional qualifications, including his industry knowledge gained through his prior employment in a business related to
the telecommunications industry, his prior experience serving as a chief financial officer of a public company (WLR Foods, Inc.
from 1997 to 2001), his financial education, and his work experience and qualification as a Certified Public Accountant. Mr. Lam
also serves as an audit committee financial expert.
Directors Whose Terms Expire in 2023
Name
|
Age
|
Director Since
|
Tracy Fitzsimmons
|
54
|
2005
|
John W. Flora
|
66
|
2008
|
Kenneth L. Quaglio
|
62
|
2017
|
Tracy Fitzsimmons is President of
Shenandoah University, located in Winchester, Virginia, a position she has held since July 2008. She previously served as Senior
Vice President for Academic Affairs of Shenandoah University since October 2006 and Vice President of Academic Affairs from July
2002 to October 2006. Dr. Fitzsimmons received Ph.D. and M.A. degrees from Stanford University and a B.A. degree from Princeton
University. Dr. Fitzsimmons brings to the Board additional qualifications, including her educational background, budgeting and
financial experience with a large diverse educational organization, overall leadership experience and responsibilities as president
of a university that offers undergraduate, masters and professional doctorate degrees and is considered a technology leader among
higher education institutions.
John W. Flora has been an attorney-at-law
since 1980, and currently is a shareholder of Flora Pettit PC in Harrisonburg, Virginia. Mr. Flora’s business and tax practice
has ranged from serving as lead counsel of a publicly-held Fortune 500 company to representing private companies and their owners
from business formation through succession. Mr. Flora brings to the Board additional qualifications, including his career as an
attorney with a regional law firm and his substantial experience in advising public companies, as well as his experience in assisting
businesses with a wide variety of legal and regulatory issues.
Kenneth L. Quaglio is currently CEO
and President of Celerity IT, LLC, a business acceleration consulting group that specializes in developing digital business solutions,
including mobile applications, which he joined in 2017. From 2014 through 2017, Mr. Quaglio was CEO and President of Siteworx,
LLC, a leading digital marketing consultancy. From 2012 through 2014, Mr. Quaglio served as Chief Operating Officer of 3Pillar
Global, Inc., a global software product development company. From 2009 through 2012 he was Partner/Principal, Advisory Services
Performance Improvement for Ernst and Young, LLP. Mr. Quaglio brings to the Board additional qualifications, including his experience
as a CEO, and his expertise in strategy, planning and execution, leadership and management, new business development, and technology
services. Mr. Quaglio also serves as an audit committee financial expert.
Director Independence
The Board of Directors has determined that,
with the exception of Christopher E. French, each of the directors and director nominees is an “independent director,”
as that term is defined in Nasdaq Listing Rule 5605(a)(2).
Shareholder Communications with the Board of Directors
The Board of Directors welcomes communications
from its shareholders, and has adopted a procedure for receiving and addressing those communications. Shareholders may send written
communications to either the full Board of Directors or the non-management directors as a group by writing to the Board of Directors
or the non-management directors at the following address: Board of Directors/Non-Management Directors, Shenandoah Telecommunications
Company, 500 Shentel Way, P.O. Box 459, Edinburg, Virginia 22824, Attention: Corporate Secretary. Communications by e-mail should
be addressed to corpsec@shentel.net and marked “Attention: Corporate Secretary” in the “Subject” field.
The secretary will review and forward all shareholder communications to the intended recipient, except for those shareholder communications
that are outside the scope of Board matters or duplicative of other communications by the applicable shareholder previously forwarded
to the intended recipient.
Meetings of the Board of Directors
The Board of Directors held thirteen meetings
during 2020. During 2020 each director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors
and of each committee of the Board of Directors on which such director served. In addition, the independent directors, under the
leadership of the Lead Independent Director, met without management present thirteen times during 2020.
All of the Company’s directors attended
the Company’s annual meeting of shareholders in 2020, which was held virtually. The Board of Directors has adopted a policy
that all directors should attend the annual meeting of shareholders.
Committees of the Board of Directors
The Board of Directors currently has a standing
Audit Committee, a standing Compensation Committee, and a standing Nominating and Corporate Governance Committee. Each committee
has a written charter that is available on our website at www.shentel.com.
Audit Committee. The Audit Committee,
which held ten meetings during 2020, consists of Ms. Schultz, who is the Chair, Mr. Lam and Mr. Quaglio. The Board of Directors
has determined that each current Audit Committee member meets the independence requirements applicable to audit committee members
under the Nasdaq listing rules and rules of the SEC. The Board of Directors has also determined that Ms. Schultz , Mr. Lam, and
Mr. Quaglio are “audit committee financial experts,” as such term is defined in Item 407(d)(5) of Regulation S-K promulgated
by the SEC, and are independent of management. The Audit Committee is responsible, among its other duties, for engaging, overseeing,
evaluating and replacing the Company’s independent auditors; pre-approving all audit and non-audit services by the independent
auditors; reviewing the scope of the audit plan and the results of each audit with management and the independent auditors; reviewing
the adequacy of the Company’s system of internal accounting controls and disclosure controls and procedures; reviewing the
performance of the Company’s internal audit department; reviewing the financial statements and other financial information
included in the Company’s annual and quarterly reports filed with the SEC; and, providing oversight of the Company’s
enterprise risk management process, including cybersecurity risk.
Compensation Committee. The Compensation
Committee, which held four meetings during 2020, consists of Mr. Flora, who is the chair, Dr. Fitzsimmons and Mr. Koontz, all of
whom meet the independence requirements prescribed by the Nasdaq listing rules. The Compensation Committee is responsible, among
its other duties, for establishing compensation philosophy, considering and making recommendations to the Board of Directors concerning
the salaries and incentive compensation awards for the top levels of management of the Company (including the Chief Executive Officer),
considering and making recommendations to the Board of Directors with respect to programs for human resource development and management
organization and succession, overseeing the Company’s handling of human capital management matters and related disclosures,
overseeing the Company’s employee benefit and incentive plans (including the Company’s stock incentive plans) and for
administering such plans, as well as overseeing the Company’s stock ownership guidelines for officers and directors.
Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee, which held three meetings during 2020, presently consists of Dr. Fitzsimmons,
who is Chair, Mr. Beckett and Mr. Lam. The Board of Directors has determined each Nominating and Corporate Governance Committee
member meets the independence requirements prescribed by the Nasdaq listing rules. The Committee is responsible for recommending
candidates for election to the Board of Directors for approval and nomination by the Board of Directors. The Committee is also
responsible for making recommendations to the Board of Directors or otherwise acting with respect to corporate governance matters,
including Board size, director independence and membership qualifications. In addition, the Committee is responsible for new director
orientation; committee structure and membership; communications with shareholders; Board and committee self-evaluations; and exercising
oversight with respect to the Company’s code of conduct, insider trading policy, corporate governance guidelines and other
policies and procedures regarding adherence with legal requirements.
Leadership Structure
Leadership of the Board of Directors consists
of two positions, the Board’s Chairman and the Board’s Lead Independent Director. Mr. French serves as Chairman and
Dr. Fitzsimmons serves as Lead Independent Director.
The Company combines the roles of Chairman
and Chief Executive Officer. The Board has given careful consideration to the merits of separating the roles of Chairman and Chief
Executive Officer and has determined that the Company and its shareholders are best served by having Mr. French serve as both
Chairman of the Board of Directors and Chief Executive Officer. Mr. French’s combined role as Chairman and Chief Executive
Officer promotes unified leadership and direction for the Board and executive management and it allows for a single, clear focus
for the chain of command to execute the Company’s strategic initiatives and business plans. Mr. French receives assistance
with his Board and executive management responsibilities from the Lead Independent Director and the Chief Operating Officer, respectively.
Requiring that the Chairman of the Board be an independent director is not necessary to ensure that our Board provides independent
and effective oversight of the Company’s business and affairs. Such oversight is maintained through the composition of our
Board, the strong leadership of our independent directors and Board committees, and our corporate governance structures and processes.
The Board of Directors is composed of independent,
active and effective directors. Seven out of our current eight directors meet the independence requirements of the Nasdaq listing
rules. Mr. French is the only member of executive management who is also a director.
The Board of Directors and its committees
vigorously oversee the effectiveness of the Company’s policies and management’s decisions, including the execution
of key strategic initiatives. Each of the Board’s committees is composed entirely of independent directors. Consequently,
independent directors directly oversee such critical matters as the integrity of the Company’s financial statements, the
compensation of executive management, including Mr. French’s compensation, the selection and evaluation of directors,
and the development and implementation of corporate governance programs. The Compensation Committee, together with the other independent
directors, conducts an annual performance review of the Chief Executive Officer, assessing the Company’s financial and non-financial
performance and the quality and effectiveness of Mr. French’s leadership.
The Board designated Dr. Fitzsimmons as
Lead Independent Director in September 2016. The Lead Independent Director leads all meetings of independent directors, assists
with ensuring the proper functioning of the Board such as maintaining the Board’s focus on strategic issues, and ensures
appropriate participation in discussions and meetings by all Board members. In addition to their reliance upon the Lead Independent
Director, the Board and each Board committee have complete and open access to any member of management and the authority to retain
independent legal, financial and other advisors as they deem appropriate.
Board Size and Diversity
As set forth in
the Company’s Corporate Governance Guidelines, the Board considers its present size of eight members to be appropriate; however,
it may consider expanding or reducing its size if the Board determines a change is appropriate. The Nominating and Corporate Governance
Committee periodically reviews the size of the Board and recommends any proposed changes to the Board.
We believe the
Board is most effective when it embodies a diverse range of views, backgrounds and experience. Diversity is considered in the broadest
sense, including, among other attributes, age, leadership, experience, skills, perspectives, and gender. While the Nominating and
Corporate Governance Committee does not have a formal policy on diversity with regard to consideration of director nominees, the
Nominating and Corporate Governance Committee considers diversity in its selection of nominees and proactively seeks diverse director
candidates to ensure a representation of varied perspectives and experience in the boardroom.
We presently have
two female directors which, given the size of our board, represents 25% of the full Board and 29% of the non-employee directors.
The current Board members’ ages range from 47 to 66. In addition, the current Board members represent a broad range of skills
and experience:
Based on the foregoing,
the Nominating and Corporate Governance Committee concluded that our current Board members represent a broad range of viewpoints,
backgrounds and relevant expertise that aligns with the Company’s long-term strategy.
Board and Committee Self-Evaluations
As set forth in
the Company’s Corporate Governance Guidelines, the Board, led by the Nominating and Corporate Governance Committee, conducts
an annual self-evaluation to determine whether the Board and committees are functioning effectively. This process includes annual
self-assessments by the full Board and each Board committee with performance criteria for each committee established on the basis
of its charter as well as periodic performance evaluations of the directors at the direction of the Nominating and Corporate Governance
Committee. The Board believes that this self-evaluation process is fundamental in supporting continued improvement through thoughtful
and comprehensive discussions.
Role of the Board of Directors in Risk Oversight
The Board discharges its risk oversight
primarily through its committees, each of which reports its activities to the Board. The Audit Committee has responsibility to
monitor that the Company’s risk management process is followed. The additional risk oversight responsibilities of the committees
include:
Audit Committee. The Audit Committee
has primary responsibility for the integrity of the Company’s financial statements and financial reporting process and the
Company’s systems of internal accounting and financial controls; the performance of the Company’s internal audit department;
the performance of the third parties engaged to perform internal control testing to support management’s assessment of internal
control; the annual independent audit of the Company’s financial statements, including the engagement of, and the evaluation
of the qualifications, independence and performance of, the independent auditors; and the Company’s compliance with legal
and regulatory requirements, including the Company’s disclosure controls and procedures. As part of its duties, the Audit
Committee discusses with management the Company’s risk management process, including cybersecurity risk, and the steps management
has taken to monitor and control risk exposures. The Committee also reviews the Company’s risk assessment and risk management
policies.
Compensation Committee. The Compensation
Committee is responsible for exercising oversight with respect to potential compensation-related risks, including management’s
assessment of risks related to employee compensation programs.
Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee receives periodic reports with respect to compliance with the Company’s
Code of Business Conduct and Ethics, and acts upon any request by executive officers for waivers under the Code of Business Conduct
and Ethics, Insider Trading Policy and Corporate Governance Guidelines. The Committee periodically reviews and assesses the adequacy
of the Code of Business Conduct and Ethics, Insider Trading Policy and Corporate Governance Guidelines, and makes recommendations
to the Board regarding any desirable revisions.
Director Compensation
The Board believes that director fees paid
by the Company should be competitive with other similarly situated companies. During 2020, each director who is not an employee
of the Company received a cash retainer fee of $5,000 per month. Members of the Audit, Compensation and Nominating and Corporate
Governance Committees each received additional cash retainer fees of $625, $417 and $208 per month, respectively. Directors who
served as committee chairs for the Audit, Compensation, and Nominating and Corporate Governance Committees, and the Lead Independent
Director received additional monthly cash retainer fees of $1,041, $625, $417, and $1,417, respectively. It is the Company’s
policy that directors will not receive per-meeting fees unless the number of committee meetings in any given year exceeds a preset
number of committee meetings expected to be held during the year. If such a circumstance occurs, directors who are members of the
Audit, Compensation and Nominating and Corporate Governance committees would be paid $1,071, $1,000 and $833, respectively, per
additional meeting. Additional meeting fees were paid for three Audit Committee meetings during 2020. All directors’ fees
are paid in arrears on a monthly basis. In addition to cash compensation, the Board may determine, from time to time, to award
stock options or restricted stock as compensation to non-employee directors. On February 25, 2020, each non-employee director then
serving on the Board was awarded a grant of 2,063 restricted stock units with a fair value of $48.47 per share. All of such shares
vest fully on the first anniversary of the grant date.
In lieu of receiving their fees in cash,
each director can elect to have some or all of his or her fees paid in unrestricted shares of the Company’s common stock,
with such shares being issued to the director out of the shares reserved for issuance under the Company’s 2014 Equity Incentive
Plan. The award of shares in lieu of cash uses the closing price as of the last trading day of the month for which the fees are
being paid and the shares are held in book entry. Any cash in lieu of fractional shares resulting from the transfer of whole shares
is paid out in accordance with the same methodology used in the Company’s Dividend Reinvestment Plan. A director’s
election to receive shares in lieu of cash must have been made by July 1 of each year, and may only be changed on an annual basis.
All directors are reimbursed for the out-of-pocket
expenses they incur in attending director education programs. Additionally, directors are reimbursed for documented mileage and
other related expenses incurred for travel to and from Board and committee meetings.
The following table sets forth the compensation
paid to the non-employee directors of the Company for their service in 2020.
2020 Director Compensation
Table
Name
|
|
Fees Earned
or Paid In
Cash ($)
|
|
Stock
Awards
($)(a)
|
|
Total ($)
|
Thomas A Beckett
|
|
62,500
|
(b)
|
|
99,994
|
|
162,494
|
Tracy Fitzsimmons
|
|
89,500
|
(b)
|
|
99,994
|
|
189,494
|
John W. Flora
|
|
72,500
|
|
|
99,994
|
|
172,494
|
Richard L. Koontz, Jr.
|
|
65,000
|
(b)
|
|
99,994
|
|
164,994
|
Dale S. Lam
|
|
73,214
|
|
|
99,994
|
|
173,208
|
Kenneth L. Quaglio
|
|
70,714
|
(b)
|
|
99,994
|
|
170,708
|
Leigh Ann Schultz
|
|
83,214
|
|
|
99,994
|
|
183,208
|
|
|
|
|
|
|
|
|
|
(a)
|
On February 25, 2020, each then serving director was awarded a grant of 2,063 shares with a fair value of $48.47 per share.
All the shares awarded in 2020 vested fully on February 25, 2021.
|
|
(b)
|
For 2020 service, Mr. Beckett, Dr. Fitzsimmons, Mr. Koontz, and Mr. Quaglio elected to receive $4,800, $12,500, $6,000, and
$7,500, respectively, of his or her cash compensation in the form of unrestricted shares of common stock, which were valued at
the closing price as of the last trading day of the service month.
|
CORPORATE SOCIAL AND ENVIRONMENTAL RESPONSIBILITY
Our
Company. The Board of Directors of Shentel recognizes the importance of our corporate responsibility and sustainability
policies and practices and the need to provide effective oversight in these areas. Shentel strives to make a positive difference
in the communities we serve through our dedication to providing high quality and reliable services, our sincere commitment to being
a good employer, our efforts to minimize our impact on the environment, our ongoing engagement and support for the communities
where we operate and our unwavering and strict adherence to the highest ethical standards.
We specialize
in providing state of the art services to rural and underserved markets, and our vision is to ensure that the communities we serve
have access to the same level of telecommunications services as those found anywhere in the United States. Our mission is
to enrich the lives of the customers we serve with the highest quality telecommunications services by making investments in technology,
using innovative thinking and delivering high-quality local customer service that makes using technology easy.
Our
Communities. Shentel is committed to developing partnerships with the communities we serve. We seek to strengthen
the communities where our customers, business partners and employees live and work through philanthropy, volunteerism and support
of local community initiatives. Shentel strives to be a good neighbor and encourages our employees to do the same by volunteering
time and talent to support causes. We support the philanthropic interests of our employees and empower them to be a positive influence
in their community, including through our Summer Backpack program (our summer food service program for local children) and The
Big Give during the holiday months. Shentel has a charitable contribution matching program, in which the Shentel Foundation matches
employees’ charitable contributions dollar for dollar up to a specified amount to non-profit organizations of the employees’
choosing. Significant donations of funds, time and materials are given to the communities we serve and are evidence of Shentel’s
desire and commitment to create deeper connections with our communities and between our team members.
Our
Employees. Shentel believes that the key to building a stronger company rests firmly with our employees. We are
committed to creating a diverse and inclusive workplace where our employees feel valued, respected and safe. We respect and encourage
diverse viewpoints and we are committed to diversity and equality in all areas of our business, including hiring, compensation,
promotion and career development. The Company does not tolerate or condone any type of discrimination prohibited by
law, including harassment. We seek to create a work environment in which our employees can grow their careers and offer
continuous training and development at all employee levels and career stages, including offering a tuition assistance program for
full-time employees. Shentel supports its employees’ well-being by hiring experienced and motivated personnel dedicated
to the safety and wellness of its employees and empowering its Safety Committee to continuously discuss and implement ways to improve
safety conditions and programs. Shentel also offers benefits programs that promote wellness, safety and a healthy work/life balance.
Our
Environment. Shentel is committed to minimizing our impact on the environment through thoughtful action. We strive
to minimize our impact by balancing environmental sustainability initiatives intended to reduce energy, waste and materials consumption
with the needs of our employees, customers, shareholders and the communities we serve. We pursue this balance by ensuring
that our efforts support the financial health of Shentel, the health and wellness of our employees, the quality and reliability
of service we offer our customers, our mission to ensure access to the same level of telecommunications for rural and underserved
markets and the value we create for our shareholders. In furtherance of this commitment, Shentel adopted an official Environmental
Policy, which was distributed to every employee of the Company.
Our
Ethics. Our Code of Business Conduct and Ethics lays the foundation of our ethics and compliance programs.
Shentel has always subscribed to the highest ethical standards, and our employees, officers and directors are expected to conduct
business legally and ethically and insist that our vendors and business associates do the same. Obeying the law, both in
letter and in spirit, is one of the foundations on which Shentel’s ethical policies are built. Our commitment to promoting
the highest ethical standards includes a responsibility to foster an environment that allows employees to report violations without
the fear of retaliation or retribution. We maintain a firm no-retaliation policy. To learn more about our commitment
to ethical and responsible business practices, please see our Code of Business Conduct and Ethics posted in the “Corporate
Governance” section of our website at www.shentel.com.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation
Discussion and Analysis describes the Company’s compensation program for its executive officers, including its Chief Executive
Officer and other “named executive officers” identified in the 2020 Summary Compensation Table below, and explains
how the Company’s independent directors determined the levels and forms of the compensation that was earned by or paid to
the executive officers for 2020. In addition to the matters described below, the independent directors considered the results of
the advisory vote by shareholders on the “say-on-pay” proposal presented to shareholders at the April 16, 2019 Annual
Meeting of Shareholders in determining the levels and forms of compensation that were earned by or paid to the named executive
officers in 2020. As reported in the Company’s Current Report on Form 8-K, filed with the SEC on April 16, 2019, more than
98% of the votes cast on the say-on-pay proposal were in favor of our named executive officer compensation. Accordingly, the Company
did not make any changes to its executive compensation program as a result of the vote.
For 2020, the Board of Directors did not
delegate to the Compensation Committee the authority to determine the overall compensation of the Company’s Chief Executive
Officer or Chief Operating Officer. Instead, in accordance with the Nasdaq listing rules, the compensation of the Chief Executive
Officer and Chief Operating Officer was determined by the Board of Directors upon the recommendation of the Compensation Committee.
Compensation of all other executive officers was determined in accordance with the Nasdaq listing rules by the Compensation Committee
in consideration of the advice and recommendations of the Chief Executive Officer.
Since 2015, the Compensation Committee has
engaged Frederic W. Cook & Co., Inc. (“Frederic Cook”), a company that consults on employee benefits and compensation
issues, to provide a review and assessment of the Company’s executive compensation practices and to recommend possible changes
that should be considered to those practices. Frederic Cook was also asked to make recommendations regarding the structure of executive
compensation, including the relative levels of base salaries, short-term incentive compensation, and long-term equity-based compensation.
Frederic Cook also provided advice regarding the composition of the peer group used in evaluating the Company’s executive
compensation practices. The Compensation Committee continues to consult with Frederic Cook from time to time, as appropriate, and
did so in 2020.
The Company’s Chief Executive Officer
is responsible for reviewing the performance of the executive officers, which includes each of the Company’s named executive
officers identified in this proxy statement, and bringing individual recommendations for those officers to the Compensation Committee,
which then sends its recommendations to the independent directors of the full Board for their review, consideration and approval.
In addition, the Chief Executive Officer is responsible for recommending to the Compensation Committee individual performance objectives
for the payment of annual incentive bonuses to the other executive officers.
The Company’s executive compensation
program serves to attract and retain the management talent needed to successfully lead our Company and increase shareholder value.
It rewards executives for using their knowledge and skill to meet defined objectives set by the Board, and motivates their behavior
by rewarding desired performance or the meeting of established corporate objectives.
The Company’s executive compensation
program primarily consists of base salary, annual incentive bonuses, long-term incentives in the form of equity-based compensation,
and retirement compensation. Base salary represents the fixed component of the Company’s executive compensation program and
is designed to provide compensation to executives based upon their experience, duties and scope of responsibilities. Annual incentive
bonuses represent a variable component of compensation, and are intended to compensate executives for specific achievements or
improvements in the Company’s performance and individual accomplishments toward specific objectives. Long-term, equity-based
incentive compensation represents a variable component which seeks to reward executives for performance that maximizes long-term
shareholder value, while further aligning the executives’ financial interests with those of our shareholders, and also serves
as a retention tool. Retirement compensation is a variable component of compensation and is designed to allow the participants
to accumulate assets that will assist in meeting their post-retirement needs.
All incentive compensation (both cash and
equity compensation) received by executive officers and certain other employees of the Company (“Senior Management”)
is subject to reduction, cancellation, forfeiture and recoupment under the Company’s Executive Compensation Recovery Policy
(the “Recovery Policy”). Currently, individual compensation is subject to recovery from a member of Senior Management
who, as a result of his or her misconduct, received incentive compensation in excess of compensation that would have been paid
had such misconduct not occurred. For purposes of the Recovery Policy, “misconduct” includes gross negligence, willful
misconduct, fraudulent or deceitful activity, as well as any failure to act (including a failure to adequately supervise other
employees) in circumstances where such employee knew, or reasonably should have known, that action was required. Excess compensation
is subject to recovery by the Company if the misconduct is identified or alleged within a period of three years from the later
of the date of receipt of the subject compensation, or the most recent date of misconduct. The Board of Directors has full discretion
whether to seek recovery of incentive compensation and to determine the amount of such compensation that is subject to recovery.
The Recovery Policy is intended to supplement, but not limit or constrain, any statutory or regulatory right or obligation of the
Company to recover compensation from its employees (including, without limitation, the requirements of the Sarbanes-Oxley Act of
2002 and Section 16(b) of the Securities Exchange Act of 1934, as amended).
The Company also provides various benefit
programs to executive officers and to other employees. The following table generally identifies such benefit plans and identifies
those employees who may be eligible to participate:
Benefit Plan
|
Executive
Officers
|
Full-time
Employees
|
401(k) Plan (a)
|
X
|
X
|
Medical/Dental/Vision Plans (a)
|
X
|
X
|
Life and Disability Insurance (a)
|
X
|
X
|
Annual Incentive Plan (Bonus)
|
X
|
X
|
Equity Incentive Plan (Stock Awards)
|
X
|
X
|
Severance Arrangements
|
X
|
X
|
Deferred Compensation Plan (b)
|
X
|
Not offered
|
Defined Benefit Pension Plan
|
Not offered
|
Not offered
|
Defined Benefit Executive Supplemental Retirement Plan
|
Not offered
|
Not offered
|
Employee Stock Purchase Plan
|
Not offered
|
Not offered
|
Employment Contracts
|
Not offered
|
Not offered
|
|
(a)
|
All full-time employees meeting certain eligibility requirements are eligible to participate in these plans on essentially
the same terms (except for certain differences resulting from differences in annual base compensation).
|
|
(b)
|
The Company maintains an Executive Supplemental Retirement Plan for certain of its executive officers, but discontinued contributions
to the Plan as of June 2010.
|
The Company further believes that perquisites
for executive officers should be extremely limited in scope and value, and has historically provided few perquisites. The following
table lists the perquisites offered, and which employees are eligible to receive them:
Type of Perquisites
|
Executive
Officers
|
Full-time
Employees
|
Employee Discounts (a)
|
X
|
X
|
Spousal Travel Reimbursements (b)
|
X
|
X
|
Automobile Allowance
|
Not offered
|
X
|
Financial Planning Allowances
|
Not offered
|
Not offered
|
Country Club Memberships
|
Not offered
|
Not offered
|
Personal Use of Company Aircraft (c)
|
Not offered
|
Not offered
|
Security Services
|
Not offered
|
Not offered
|
Dwellings for Personal Use (d)
|
Not offered
|
Not offered
|
|
(a)
|
All employees are eligible for discounts on Company services.
|
|
(b)
|
The Company encourages the spouses of executive officers and certain employees to accompany them to certain Company-sponsored
events (such as industry association conventions and conferences). The Company reimburses the executive or employee for the cost
of the spouse’s travel and expenses, and adds such reimbursements to taxable pay for W-2 purposes. The Company does not gross
up pay to cover the taxes on such reimbursements.
|
|
(c)
|
The Company does not own, lease, or use private aircraft.
|
|
(d)
|
The Company does, under certain circumstances, provide hiring/relocation bonuses to newly hired employees and executive officers
that may, in whole or in part, be used for temporary living expenses.
|
Base Salaries
Base salaries reflect the scope of an executive’s
responsibilities and his or her performance in directing and managing the efforts of the Company or the business unit for which
the executive is responsible. Base salaries are initially determined by evaluating the responsibilities of the position, the experience
and knowledge of the executive, and the competitive marketplace for recruiting executive talent. Base salaries are reviewed annually
by the Compensation Committee, taking into consideration such factors as individual performance and responsibilities, changes to
cost of living, the executive’s potential overall compensation package and general economic conditions. Comparisons to base
salaries for comparable positions at public companies considered to be peers of the Company are also taken into consideration.
For decisions made regarding changes to executive compensation in 2020, the Compensation Committee reviewed compensation data disclosed
in the proxy filings of the following companies: ATN International, Inc.; Boingo Wireless, Inc.; Cable One, Inc.; Cincinnati Bell,
Inc.; Cogent Communications Holdings, Inc.; Consolidated Communications Holdings Inc.; GCI Liberty, Inc.; GTT Communications Holdings,
Inc.; IDT Corp; Iridium Communications Inc.; NII Holdings, Inc.; Viasat, Inc.; Vonage Holdings Corp.; WideOpenWest, Inc.; and Zayo
Group Holdings, Inc. These companies were selected for comparison because they reflect similar company attributes and core competencies
for executive talent, and reflect the labor market for the Company’s executive talent, in terms of both industry and organizational
complexity. Although the Compensation Committee generally believes that the target total compensation should be at the median of
the peer group, the Company does not specifically “benchmark” compensation for specific executives or strive to pay
our executive officers, including the named executive officers, at a particular level of compensation. Instead, the Compensation
Committee used the information to understand the range of compensation among these comparison companies and to obtain a general
understanding of compensation practices.
Annual Incentive Bonuses
Annual bonuses are intended to focus the
executive’s energy into improving corporate performance based on priorities set by the Board, and to reward the executives
for the achievement of specific objectives that are deemed to be important to the ongoing success of the Company. Annual bonuses
are calculated as a percentage of base pay. Target bonuses for named executives were 80%, 70%, 60%, 60%, and 60% for Christopher
E. French, the Chief Executive Officer; David L. Heimbach, Chief Operating Officer; James J. Volk, Chief Financial Officer; William
L. Pirtle, Senior Vice President – Sales and Marketing; Edward H. McKay, Senior Vice President – Engineering and Operations,
respectively. In order to be eligible to receive the annual incentive bonus, every eligible employee of the Company, including
named executive officers, must remain employed through December 31 of the performance year except in the case of retirement, death,
or disability.
Annual bonuses for salaried employees, including
the named executive officers, have been based upon the achievement of a combination of company-wide financial and service performance
goals and achievement of individual objectives. For 2020, the company-wide objectives represented 80% of the total target, and
individual objectives represented 20% of the total target, for each of the named executive officers. Individual objectives for
the Chief Executive Officer and Chief Operating Officer were established by the Board of Directors, based on recommendation by
the Compensation Committee. The annual bonus targets for the Chief Financial Officer and other named executive officers were approved
by the Compensation Committee, based on recommendations from our Chief Executive Officer. Each officer’s actual bonus can
range up to 150% of the target bonus for exceeding all of the goals and objectives reflected in a given year’s plan. The
actual bonus can also range as low as zero in the event there is a failure to achieve any of the goals or objectives in a given
year’s plan.
For 2020, company-wide performance goals
consisted of three components for salaried Company employees, including the named executive officers. The first component, representing
70% of the total target for the Chief Executive Officer and the Chief Operating Officer, and 60% of the total target for the Chief
Financial Officer, the Senior Vice President - Sales and Marketing, and the Senior Vice President – Engineering & Operations,
was a financial objective based on adjusted operating income, which the Company believes is a key driver to creating long-term
shareholder value. Adjusted operating income was defined as operating income before depreciation and amortization (OIBDA), excluding
accrued expenses for the current year’s incentive plan, expenses relating to the Executive Supplemental Retirement Plan,
and revenue or expense from the results of an arbitration proceeding.
Achievement levels for the adjusted operating
income Company-wide performance goal were a minimum of approximately $241.7 million (below which no bonus would be earned on this
component); a target of approximately $254.5 million (which represented 100% achievement toward this component); and a high of
approximately $279.9 million (which represented 150% achievement, and beyond which no additional bonus would be earned on this
component). The maximum threshold of $279.9 million represented 110% of budgeted adjusted operating income for 2020, and was viewed
as evidencing high achievement.
Calculated with the exclusions described
above, the 2020 adjusted operating income was approximately $274.7 million. Based upon these results and after considering whether
any unusual items impacted the financial accomplishments in 2020, the Company’s independent directors determined that the
$254.5 million goal threshold had been exceeded, resulting in a 140.1% achievement for the financial objective.
The other two company-wide performance goals
for 2020 were: 1) growth in the number of revenue generating units (RGUs) subscribing to a data plan in the Cable segment (Cable
Data RGU), and 2) continued progress in the Company’s emerging fiber to the home (FTTH) business evidenced by FTTH RGU net
additions. These metrics were chosen as performance objectives to align with the Company’s focus on continued customer growth
as a measure of performance against alternative providers.
The Cable Data RGU growth component represented
5% of the total target bonus for the Chief Executive Officer and the Chief Operating Officer, and 10% of the total target bonus
for each of the Chief Financial Officer, the Senior Vice President – Sales and Marketing, and the Senior Vice President –
Engineering and Operations. Achievement levels for the Cable Data RGU growth component were: a minimum of 5,817 net additional
Cable Data RGUs (below which no bonus would be earned), a target of approximately 6,463 net additional RGUs (which represented
100% achievement toward this component), and a high of approximately 7,109 net additional RGUS (which represented 150% achievement,
and beyond which no additional bonus would be earned on this component). In 2020, the Company exceeded the maximum threshold for
this component, resulting in a 150.0% achievement for this portion of the Company-wide objectives.
The FTTH RGU net additions objective represented
5% of the total target bonus for the Chief Executive Officer and Chief Operating Officer, and 10.0% of the total target bonus for
each of the Chief Financial Officer, the Senior Vice President – Sales and Marketing, and the Senior Vice President –
Engineering and Operations. Achievement levels for the FTTH net additions component were: a minimum of 3,101 net additional FTTH
RGUs (below which no bonus would be earned), a target goal of approximately 3,648 net additional RGUs (which represented 100% achievement
toward this component), and a high of approximately 4,013 net additional RGUS (which represented 150% achievement, and beyond which
no additional bonus would be earned on this component). In 2020, the Company exceeded the maximum threshold for this component,
resulting in a 150.0% achievement for this portion of the Company-wide objectives.
For 2020, individual objectives represented
20% of the total potential achievement toward the incentive bonuses of the each of the named executive officers. The individual
objectives of the Chief Executive Officer were to maximize the Company’s strategic positioning and outcome in relation
to the combination of Sprint and T-Mobile and the strategic and competitive positioning of the Company’s non-wireless business
segments. As a result of exceeding expectations with respect to those goals, the Compensation Committee determined the Chief Executive
Officer achieved a weighted performance of 150% of his individual goal.
The Executive Vice President – Chief
Operating Officer’s individual performance objective was originally made up of four components: 1) maximize the Company’s
strategic positioning and outcome in relation to the combination of Sprint and T-Mobile and the strategic and competitive positioning
of the Company’s non-wireless business segments, weighted 60%; 2) improvement of the accounting and internal control environment,
weighted 20%; 3) mobile wireless segment net postpaid subscriber additions, weighted 10%; and, 4) mobile wireless segment prepaid
net subscriber additions, weighted 10%. As a result of two significant changes in circumstance that were beyond the control of
the Company – the onset of the global COVID-19 pandemic in early March, and the initiation by T-Mobile of activities to convert
Sprint’s brands to T-Mobile brands following its acquisition of Sprint on April 1, 2020 – it was determined that the
Executive Vice President – Chief Operating Officer’s two original goals related to wireless net subscriber additions
would no longer accurately measure his performance in helping the Company achieve its priorities. Accordingly, effective April
1, 2020, these two objectives were replaced with a combined wireless objective focused on enabling the company’s employees
to safely work while remaining open and providing services to its wireless customers during the pandemic, weighted 20%. As a result,
the Executive Vice President - Chief Operating Officer’s individual performance objective was made up of three components.
Achievement of the first component, maximizing the Company’s strategic positioning and outcome in relation to the combination
of Sprint and T-Mobile and the strategic and competitive positioning of the Company’s non-wireless business segments, exceeded
expectations, resulting in a performance of 150.0% of target. Achievement of the second component, improvement of the accounting
and internal control environment, met expectations, resulted in a weighted performance of 100% of target. Achievement of the combined
third component, focused on enabling the Company’s employees to safely work while remaining open and providing services to
its wireless customers during the pandemic, resulted in a weighted performance of 100% of target. As a result of his achievement
on all components, the Executive Vice President – Chief Operating Officer achieved a weighted performance of 130% of his
individual performance objective.
The individual performance objective of
the Chief Financial Officer was made up of two components: 1) maximize the Company’s strategic positioning and outcome
in relation to the combination of Sprint and T-Mobile and the strategic and competitive positioning of the Company’s non-wireless
business segments, weighted 60%; and, 2) improvement of the accounting and internal control environment, weighted 40%. As a result
of exceeding expectations with respect to those goals, the Chief Financial Officer achieved a weighted performance of 139% of his
individual goal.
The individual performance objective for
the Senior Vice President – Sales and Marketing was originally made up of four components: 1) wholesale revenue in the Company’s
Broadband segment weighted 25%; 2) improvement of the accounting and internal control environment, weighted 25%; 3) mobile wireless
segment net postpaid subscriber additions, weighted 25%; and, 4) mobile wireless segment prepaid net subscriber additions, weighted
25%. As a result of two significant changes in circumstance that were beyond the control of the Company – the onset of the
global COVID-19 pandemic in early March, and the initiation by T-Mobile of activities to convert Sprint’s brands to T-Mobile
brands following its acquisition of Sprint on April 1, 2020 – it was determined that the Senior Vice President – Sales
and Marketing’s two original goals related to wireless net subscriber additions would no longer accurately measure his performance
in helping the Company achieve its priorities. Accordingly, effective April 1, 2020, these two objectives were replaced with a
combined wireless objective focused on enabling the company’s employees to safely work while remaining open and providing
services to its wireless customers during the pandemic, weighted 50%. As a result, the Senior Vice President – Sales and
Marketing’s individual performance objective was made up of three components. Target levels for the first component, wholesale
revenue in the Company’s Broadband segment, were: $40.1 million (below which no bonus would be earned on this component),
a goal of $44.5 million (which represented 100% achievement toward this component), and a high of $46.8 million (which represented
150% achievement, and beyond which no additional bonus would be earned on this component). Revenue was $46.1 million in 2020, resulting
in 135% achievement for this component. Achievement of the second component, improvement of the accounting and internal control
environment, met expectations which resulted in a weighted performance of 100% of target. Achievement of the combined third component,
focused on enabling the Company’s employees to safely work while remaining open and providing services to its wireless customers
during the pandemic, resulted in a weighted performance of 100% of target. As a result of his achievement on all components, the
Senior Vice President – Sales and Marketing achieved a weighted performance of 109% of his individual goal.
The individual performance objective for
the Senior Vice President – Engineering and Operations was originally made up of five components: 1) new single family unit
homes (SFUs) and businesses passed in the Company’s Fiber to the Home (FTTH) business branded as Glo Fiber, weighted 25%;
2) Glo Fiber SFU cost per unit passed, weighted 25%; 3) improvement of the accounting and internal control environment, weighted
25%; 4) mobile wireless segment net postpaid subscriber additions, weighted 12.5%; and, 5) mobile wireless segment prepaid net
subscriber additions, weighted 12.5%. As a result of two significant changes in circumstance that were beyond the control of the
Company – the onset of the global COVID-19 pandemic in early March, and the initiation by T-Mobile of activities to convert
Sprint’s brands to T-Mobile brands following its acquisition of Sprint on April 1, 2020 – it was determined that the
Senior Vice President – Engineering and Operations’ two original goals related to wireless net subscriber additions
would no longer accurately measure his performance in helping the Company achieve its priorities. Accordingly, effective April
1, 2020, these two objectives were replaced with a combined wireless objective focused on enabling the company’s employees
to safely work while remaining open and providing services to its wireless customers during the pandemic, weighted 25%. As a result,
the Senior Vice President – Engineering and Operations’ individual performance objective was made up of four components.
Target levels for the first two components, Glo Fiber new units passed and Glo Fiber SFU cost per unit passed, were determined
by analyzing national and regional averages and historical Company performance. The Company considers specific targets and achievement
levels for each of these components confidential and proprietary, and therefore does not disclose such figures publicly. The target
goals (representing 100% achievement) were set at a challenging level without certainty of achievement when established and required
rigorous effort by management to accomplish. Achievement of the first and second components were 146% and 57% of targets, respectively.
Achievement of the third component, improvement of the accounting and internal control environment, met expectations, resulted
in a weighted performance of 100% of target. Achievement of the combined fourth component, focused on enabling the Company’s
employees to safely work while remaining open and providing services to its wireless customers during the pandemic, resulted in
a weighted performance of 100% of target. As a result of his achievement in these components, the Senior Vice President –
Engineering and Operations achieved a weighted performance of 98% of his individual goal.
Based on these assessments and results the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Senior Vice President – Sales and Marketing, Senior
Vice President – Engineering and Operations achieved 150%, 130%, 139%, 109% and 98% of target, respectively, for their individual
performance objectives. Along with the combined performance on the company-wide objectives, the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, Senior Vice President – Sales and Marketing, and Senior Vice President –
Engineering and Operations achieved 143%, 139%, 142%, 136%, and 134%, respectively, of their total targeted bonus.
Long-Term Equity-Based Compensation
Equity-based compensation is intended to
focus each of the executives on the long-term, overall impact of their decisions on the Company as a whole, as opposed to the shorter,
annual time frame associated with the annual incentive bonuses. Equity-based compensation also aligns the executives’ interests
more closely to those of the Company’s shareholders by generally rewarding executives in proportion to increases in value
seen by the entire shareholder base. Due to the long-term nature of this component of compensation, it also serves as a retention
tool, helping the Company retain desired management talent.
As part of their overall review of executive
compensation, and based on the history of prior equity grants, the Compensation Committee recommended, and the Board of Directors
approved, a grant made up of a 50/50 combination of restricted stock units and Relative Total Shareholder Return (“RTSR”)
performance units in February 2020 to the named executive officers and other management employees. Details relating to the long-term
equity grants can be found in the “Grants of Plan-Based Awards” table located on page 24 of this proxy statement.
The Company does not have a program, plan
or practice to time equity awards, including option grants, to its executive officers or employees in coordination with the release
of material non-public information. The grant date of long-term equity awards for our executive officers is the date of the Board
of Directors meeting at which the award determinations are made. The exercise price of stock options issuable under the Company’s
2014 Equity Incentive Plan is the last closing price of the common stock as reported on the Nasdaq Global Select Market prior to
the grant.
Retirement Compensation
The Company maintains a defined contribution
Executive Supplemental Retirement Plan. Vesting in the Executive Supplemental Retirement Plan is subject to a ten-year service
requirement. The Company discontinued contributions to the Executive Supplemental Retirement Plan during 2010.
Summary Compensation Table
The following table presents details about
compensation paid or earned by the Company’s Chief Executive Officer, Chief Financial Officer, and the next three most highly
compensated executive officers serving with the Company at December 31, 2020.
|
Year
|
Salary
|
Stock
Awards
(a)
|
Non-Equity
Incentive
Plan Comp
(b)
|
All Other
Compensation
(c)
|
Total
|
|
|
|
|
|
|
|
Christopher E. French
President and CEO
|
2020
|
$715,373
|
$1,316,267
|
$818,627
|
$24,800
|
$2,875,067
|
2019
|
$663,565
|
$1,245,759
|
$590,642
|
$24,500
|
$2,524,467
|
2018
|
631,134
|
712,009
|
591,941
|
$24,000
|
1,959,084
|
|
|
|
|
|
|
|
David L. Heimbach
EVP & COO
|
2020
|
456,000
|
705,341
|
443,822
|
24,800
|
1,629,964
|
2019
|
404,884
|
629,420
|
255,274
|
16,100
|
1,305,678
|
2018
|
238,462
|
250,000
|
164,918
|
312,686
|
966,066
|
|
|
|
|
|
|
|
James J. Volk
SVP–Finance & CFO
|
2020
|
400,962
|
569,114
|
341,172
|
19,111
|
1,330,359
|
2019
|
189,289
|
389,795
|
101,012
|
56,415
|
727,511
|
2018
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
William L. Pirtle
SVP–Sales and Marketing
|
2020
|
337,500
|
244,056
|
270,086
|
24,800
|
876,442
|
2019
|
309,660
|
230,880
|
146,109
|
25,215
|
711,864
|
2018
|
296,224
|
179,170
|
122,654
|
25,162
|
623,210
|
|
|
|
|
|
|
|
Edward H. McKay
SVP–Engineering and Operations
|
2020
|
325,385
|
245,942
|
260,797
|
23,557
|
855,686
|
2019
|
276,053
|
208,485
|
131,673
|
22,222
|
638,432
|
2018
|
259,032
|
160,419
|
107,687
|
20,376
|
548,352
|
|
(a)
|
For all periods shown, amounts represent grant date fair values for awards of share-based compensation.
See Note 12, Stock Compensation, included with the Company’s consolidated financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2020, for additional details.
|
|
(b)
|
Amounts for each year were earned for performance in that year and were paid in the first fiscal
quarter of the following year.
|
|
(c)
|
Amounts for all years include employer and matching contributions to the Company’s 401(k)
plan and employer contributions to health spending accounts for each named officer. The tax-deferred 401(k) contributions for the
Company’s named executive officers were as follows for 2020: $22,800 to Mr. French, $22,800 to Mr. Heimbach, $17,112 for
Mr. Volk, $22,800 for Mr. Pirtle, and $21,557 for Mr. McKay.
|
The Company’s executive officers do
not have employment agreements, and thus are not entitled to any additional benefits upon separation from the Company or following
a change in control except as set forth in the sections below titled “Severance Arrangements with our Named Executive Officers”
and “Potential Payments Upon Termination or Change in Control.” Vested stock options must be exercised before separation
from the Company (except in the case of retirement) and unvested stock and options at separation are forfeited upon separation
(except in the case of retirement). If an employee reaches retirement, his or her award will continue to vest according to the
vesting schedule set forth in the award. For awards granted prior to 2019, an employee reaches retirement when such employee is
at least fifty-five years of age with not less than ten years of continuous service with the Company. For awards granted in 2019
and 2020, retirement is reached when an employee voluntarily resigns from active employment with the Company after completing ten
years of continuous service, and the sum of the employee’s age and years of service is greater than seventy-five.
Grants of Plan-Based Awards
The following table presents information
with respect to the grants of plan-based awards by the Company to the named executive officers during 2020.
All executive officers were granted RTSR
awards on February 25, 2020. Pursuant to the terms of the RTSR awards, the Company’s stock performance over a three-year
period ended December 31, 2022 will be compared to a group of 33 peer companies, and the actual number of shares to be issued will
be determined based upon the performance of the company’s stock as compared with that of the peer group. A target number
of performance units (as shown in the 2020 Grants of Plan-Based Awards Table, below) was established for each executive officer
at the time of the grant. The actual number of shares to be issued ranges from 0 shares (if the Company’s stock performance
is in the bottom 25% of the peer group) to 150% of the target shares (if the Company’s stock performance is in the top 25%
of the peer group). Subject to requirements relating to continued employment with the Company through the performance period (ending
on December 31, 2022), and to special vesting provisions in case of a change of control, death, disability or retirement, the shares
will be delivered on the date (which will be no earlier than January 1, 2023 and no later than March 15, 2023) that the Compensation
Committee makes the determination of the Company’s performance relative to the peer group.
All executive officers were also granted
restricted stock unit awards (“RSU Awards”) in the amounts reflected in the “2020 Grants of Plan-Based Awards
Table” under the 2014 Equity Incentive Plan. The RSU Awards vest ratably on each anniversary of the grant date over a period
of four years. The RSU Awards are subject to forfeiture in the case of death, termination (for any reason), or resignation, but
will continue to vest along the normal vesting schedule in the case of retirement.
The performance goals and targets for the
Non-Equity Incentive Plan Awards, which the Company also refers to as “Incentive Bonuses” is more fully described in
the Compensation Discussion and Analysis.
2020 Grants of Plan-Based Awards Table
|
|
|
|
Estimated Future Payouts Under Non-Equity
Incentive Plan Awards
|
|
Estimated Future Payouts Under Equity
Incentive Plan Awards
|
|
All Other Stock Awards: Number
of Shares of Stock
|
|
All other option awards: Number
of securities underlying
|
|
Exercise or base price of
option
|
|
Grant Date Fair Value of Stock and
Option
|
Name
|
|
Grant
Date
|
|
Threshold ($)
|
|
Target ($)
|
|
Maximum ($)
|
|
Threshold (#)
|
|
Target (#)
|
|
Maximum (#)
|
|
or Units
(#)
|
|
options
(#)
|
|
awards
($/Sh)
|
|
Awards
($)
|
Christopher E. French
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
6,280
|
|
12,561
|
|
18,841
|
|
--
|
|
--
|
|
--
|
|
707,436
|
(a)
|
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
12,561
|
|
--
|
|
--
|
|
608,832
|
(b)
|
|
|
2/25/2020
|
|
0
|
|
556,640
|
|
834,960
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Heimbach
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
3,365
|
|
6,731
|
|
10,096
|
|
--
|
|
--
|
|
--
|
|
379,090
|
(a)
|
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
6,731
|
|
--
|
|
--
|
|
326,252
|
(b)
|
|
|
2/25/2020
|
|
0
|
|
315,000
|
|
472,500
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Volk
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
2,715
|
|
5,431
|
|
8,146
|
|
--
|
|
--
|
|
--
|
|
305,874
|
(a)
|
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
5,431
|
|
--
|
|
--
|
|
263,241
|
(b)
|
|
|
2/25/2020
|
|
0
|
|
234,000
|
|
351,000
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William L. Pirtle
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
1,164
|
|
2,329
|
|
3,493
|
|
--
|
|
--
|
|
|
|
131,169
|
(a)
|
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,329
|
|
--
|
|
--
|
|
112,887
|
(b)
|
|
|
2/25/2020
|
|
0
|
|
193,500
|
|
290,250
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward H. McKay
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
1,173
|
|
2,347
|
|
3,520
|
|
--
|
|
--
|
|
--
|
|
132,183
|
(a)
|
|
|
2/25/2020
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,347
|
|
--
|
|
--
|
|
113,759
|
(b)
|
|
|
2/25/2020
|
|
0
|
|
195,000
|
|
292,500
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
(a)
|
The fair value of the RTSRs was calculated using a combination of a Monte Carlo simulation
model and the closing stock price as of the day before the grant which resulted in a grant date fair value of approximately $56.32
per unit.
|
|
(b)
|
The closing stock price as of the day before the grant of the RSU Awards, which also
represents the fair value of a share of restricted stock units, was $48.47 per share
|
Outstanding Equity Awards at Fiscal Year-End
The following table presents information
with respect to the outstanding equity awards at 2020 fiscal year-end for the named executive officers.
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number
of Shares or Units of Stock That Have Not
Vested (#)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested (a)($)
|
|
Equity Incentive Plan Awards: Number of Unearned Units That Have
Not Vested (#)
|
|
Equity Incentive Plan Awards: Market Value of Unearned Units That
Have Not
Vested ($) (b)
|
|
Christopher E. French
|
|
--
|
|
--
|
|
--
|
|
--
|
|
12,561 (c)
|
|
543,263
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
9,429 (d)
|
|
407,804
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
5,334 (e)
|
|
230,696
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,371 (f)
|
|
102,546
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
12,561 (g)
|
|
543,263
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
12,572 (h)
|
|
543,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Heimbach
|
|
--
|
|
6,864(i)
|
|
31.05
|
|
5/15/2028
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
6,731 (c)
|
|
291,116
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
4,764 (j)
|
|
206,043
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,013 (j)
|
|
87,062
|
|
|
|
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
6,731 (g)
|
|
291,116
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
6,352 (h)
|
|
274,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Volk
|
|
--
|
|
--
|
|
--
|
|
--
|
|
5,431 (c)
|
|
234,891
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
3,157 (k)
|
|
136,540
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
5,431 (g)
|
|
234,891
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
4,209 (l)
|
|
182,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William L. Pirtle
|
|
3,998
|
|
--
|
|
6.92
|
|
2/18/2023
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
2,794
|
|
--
|
|
5.41
|
|
2/19/2022
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,329 (c)
|
|
100,729
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
1,748 (d)
|
|
75,601
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
1,343 (e)
|
|
58,085
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
722 (f)
|
|
31,227
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,329 (g)
|
|
100,729
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,330 (h)
|
|
100,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward H. McKay
|
|
8,082
|
|
--
|
|
6.92
|
|
2/18/2023
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,347 (c)
|
|
101,508
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
1,578 (d)
|
|
68,249
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
1,202 (e)
|
|
51,987
|
|
--
|
|
--
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
647 (f)
|
|
27,983
|
|
|
|
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,347 (g)
|
|
101,508
|
|
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
2,104 (h)
|
|
90,998
|
|
|
(a)
|
The market value of the RSU Awards is based on the closing price of the Company’s common stock ($43.25) as of December
31, 2020.
|
|
(b)
|
The market value of the RTSR awards is based on the target number of shares under the award times the closing price of the
Company’s stock ($43.25) on December 31, 2020.
|
|
(c)
|
The RSU Awards granted on February 25, 2020 vest ratably each year for four years.
|
|
(d)
|
The RSU Awards granted on February 26, 2019 vest ratably each year for four years.
|
|
(e)
|
The RSU Awards granted on February 20, 2018 vest ratably each year for four years.
|
|
(f)
|
The RSU Awards granted on February 22, 2017 vest ratably each year for four years.
|
|
(g)
|
The RTSR awards granted February 25, 2020 will vest as of December 31, 2022; provided, however, that the actual number of shares
that vest will be certified by the Compensation Committee after review of the Company’s stock price performance relative
to the peer group. The table above represents payout at the target amount for these performance-based awards.
|
|
(h)
|
The RTSR awards granted February 26, 2019 will vest as of December 31, 2021; provided, however, that the actual number of shares
that vest will be certified by the Compensation Committee after review of the Company’s stock price performance relative
to the peer group. The table above represents payout at the target amount for these performance-based awards.
|
|
(i)
|
The option award granted to Mr. Heimbach on May 15, 2018 will vest ratably on each of the third through seventh anniversaries
of the grant date.
|
|
(j)
|
The RSU award granted to Mr. Heimbach on May 15, 2018 will vest ratably each year for four years.
|
|
(k)
|
The RSU award granted to Mr. Volk on June 24, 2019 will vest ratably each year for four years
|
|
(l)
|
The RTSR awards granted to Mr. Volk on June 24, 2019 will vest as of December 31, 2021; provided, however, that the actual
number of shares that vest will be certified by the Compensation Committee after review of the Company’s stock price performance
relative to the peer group. The table above represents payout at the target amount for these performance-based awards
|
Option Exercises and Stock Vested
The following table presents information
with respect to the options exercised and stock awards vested during the 2020 fiscal year for the named executive officers.
|
Option Awards
|
|
Stock Awards
|
|
Name
|
Number of Shares
Acquired Upon
Exercise
|
Value
Realized
Upon Exercise
|
|
Number of Shares
Acquired Upon
Vesting
|
Value Realized
Upon Vesting
|
|
|
|
|
|
|
Christopher E. French
|
--
|
--
|
|
24,882
|
$1,115,540
|
David L. Heimbach
|
--
|
--
|
|
2,595
|
124,505
|
James J. Volk
|
--
|
--
|
|
1,052
|
52,000
|
William L. Pirtle
|
--
|
--
|
|
7,217
|
321,883
|
Edward H. McKay
|
4,290
|
$201,115
|
|
6,463
|
288,295
|
|
|
|
|
|
|
|
Nonqualified Deferred Compensation
In March 2007, effective January 1, 2007,
the Company amended the Executive Supplemental Retirement Plan to convert it from a defined benefit plan to a defined contribution
plan. The Company discontinued contributions to the plan effective June 2010. Participants may direct their balances to a variety
of investment options, and returns on these investment options will be reflected as gains or losses in the participants’
accounts under this plan. The Company will also reflect those gains or losses as investment gains or losses on its financial statements.
The Company elected to establish a rabbi trust and to contribute amounts to the rabbi trust equal to the participants’ opening
balances in the plan, as well as Company contributions required under the plan, and to make investments under the rabbi trust as
directed by the participants’ election choices.
|
|
Aggregate
Earnings
|
|
Aggregate
Balance at
|
Name
|
|
in Last FY
|
|
Last FY
|
|
|
|
|
|
Christopher E. French
|
|
$300,679
|
|
$1,899,381
|
David L. Heimbach
|
|
--
|
|
--
|
James J. Volk
|
|
--
|
|
--
|
William L. Pirtle
|
|
94,719
|
|
707,278
|
Edward H. McKay
|
|
--
|
|
--
|
Severance Arrangements with our Named Executive Officers
On February 7, 2020, we entered into severance
agreements with Mr. French, Mr. Heimbach, Mr. Pirtle and Mr. McKay (the “Severance Agreements”), each of which terminate
on the earlier of (i) prior to a change in control, December 31, 2021 (which will be extended automatically by additional one-year
periods unless either party gives written notice that that the Severance Agreement will not be extended) or (ii) after a change
in control, the date that is 18 months after such change in control (or, if more than one change in control occurs during the term,
the date of the last change in control).
Each Severance Agreement provides that should
the executive officer’s employment be terminated for any reason, the executive officer is entitled to each of the following
as of the date the executive officer’s employment ends: (i) payment of any compensation (including base salary and cash bonus
for the year immediately preceding the year of termination) that is earned but unpaid, (ii) payment for any vacation or paid time
off that is earned but unused, (iii) reimbursement of expenses in accordance with the Company’s expense reimbursement policy
for expenses incurred and unpaid, and (iv) the rights, if any, under any outstanding stock options or other equity awards. The
benefits described in clauses (i) through (iii) shall be paid in a single cash payment within 30 days after the date the executive
officer’s employment ends.
In the event of an involuntary termination
of the executive officer’s employment by the Company for a reason other than “cause” (as defined in the Severance
Agreements) or, on or after a change in control, the executive officer’s resignation with “good reason” (as defined
in the Severance Agreements), the executive officer is entitled to receive (a) if a change in control has not occurred before the
date of termination, (i) an amount equal to one times the executive officer’s annual base salary as in effect on the date
the executive officer’s employment ends (but disregarding any reduction in base salary that constitutes “good reason”),
payable in installments in accordance with the Company’s regular payroll policy, and (ii) if the executive officer elects
to continue coverage under the Company’s health insurance plan under COBRA, reimbursement in an amount equal to the monthly
premium that the Company pays for active employees for the same type and level of such coverage for up to 12 months, unless such
obligation terminates earlier in accordance with the terms of the Severance Agreement, payable in the month after the month in
which the executive officer paid the COBRA premium, or (b) if a change in control has occurred on or before the date of termination,
(1) the benefits described in clauses (a)(i) and (ii) above and (2) an amount equal to one times the executive officer’s
“target” annual incentive bonus for the year in which the executive officer’s employment ends (the benefits described
in (a) and (b) of this paragraph are the “Severance Benefits”). Notwithstanding the foregoing, the Severance Benefits
are not applicable in the event of a termination (a) in the event of death or disability or (b) (i) if such employment ends in
connection with, or related to, a “transaction” (as defined in the Severance Agreements) and (ii) the executive officer
accepts an offer of employment or becomes an employee or otherwise provides services to a purchaser or acquirer in a “transaction.”
The Severance Benefits will be provided
to the executive officer only if (i) the executive officer remains continuously employed until the date of termination, (ii) the
date of termination is during the term of the Severance Agreement, (iii) the executive officer provides the Company the general
release and waiver of claims contemplated by the Severance Agreement, and (iv) the executive officer complies with the covenants
in the Severance Agreement, including with respect to non-competition, non-solicitation, confidentiality and non-disparagement.
No further Severance Benefits will be provided to the executive officer after the date that the executive officer becomes employed
by, or provides services to, a purchaser or acquirer in a “transaction.” In the event that the executive officer breaches
certain covenants in the Severance Agreement, the executive officer is obligated to repay to the Company the Severance Benefits
previously paid to the executive officer on or after the date of the breach.
If the benefits or payments payable under
the Severance Agreement would subject the executive officer to tax under Section 4999 of the Internal Revenue Code, as amended,
such payments will be reduced as provided in, and to the extent required by, Section 14.04 of the Shenandoah Telecommunications
Company 2014 Equity Incentive Plan. If any provision of the Severance Agreement is found not to comply with, or otherwise not be
exempt from, Section 409A of the Internal Revenue Code, such provision shall be modified, in the sole discretion of the Company,
to comply with, or to effectuate an exemption from, Section 409A of the Internal Revenue Code.
Potential Payments Upon Termination or Change in Control
As discussed in the section above titled
“Severance Arrangements with Our Named Executive Officers,” the Company is required to pay or provide certain compensation
and benefits to each of the named executive officers in the event of certain terminations of employment or a change in control
of the Company. In addition to such compensation and benefits, our named executive officers are eligible (i) to receive lump-sum
distributions of their vested accumulated benefits under the Executive Supplemental Retirement Plan upon termination of employment,
whether by resignation, change of control, severance, retirement, or other reason and (ii) for accelerated vesting of certain equity
awards upon certain terminations of employment or a change in control of the Company.
Pursuant to certain equity award agreements
under the 2014 Equity Incentive Plan, our named executive officers are eligible for accelerated vesting in the amounts and under
the circumstances discussed below:
|
·
|
Death or Disability. Outstanding awards vest on a pro-rated
basis based on the amount of time the named executive officer was employed during the vesting or measurement period and, with respect
to RTSR Awards, in accordance with the achievement levels determined as of the date of termination.
|
|
·
|
Retirement. In the event of retirement, vesting of equity awards
will not accelerate, but rather will continue to vest in accordance with the original vesting schedule determined at the date of
grant. For outstanding equity awards granted in 2017 and 2018, named executive officers are eligible for retirement at 55 years
of age with 10 years of continuous service. For outstanding equity awards granted in 2019 and 2020, named executive officers are
eligible for retirement after completing 10 years of continuous service as long as the sum of the named executive officer’s
age and years of service is not less than 75.
|
|
·
|
Change in Control. In the event a change in control occurs
during their respective vesting periods, certain equity awards provide for accelerated vesting. Unless the surviving entity in
a change in control substitutes the awards with a grant of equivalent value, the RSU Awards granted in 2019 and 2020 vest automatically
upon a change in control, but RSU Awards granted in 2017 and 2018 do not provide for acceleration in the event of a change in control.
With respect to RTSR Awards, the named executive officer will be entitled to compensation equal to the lesser of the maximum payout
for such award or the fair market value of the earned shares on the date of the change of control.
|
In consideration for the foregoing compensation,
our named executive officers generally agree to certain restrictive covenants, including non-competition, non-solicitation, confidentiality,
and non-disparagement.
The following tables describe estimated
amounts of compensation and benefits that could be payable to each named executive officer upon certain terminations or a change
in control. All amounts assume the named executive officers terminated employment as of December 31, 2020 and, where applicable,
elected to continue COBRA coverage under the Company’s health insurance plan for 12 months (with reimbursement levels equal
to the 2020 Company-paid portion of the officer’s health insurance premium); the value of the accelerated vesting is based
on the closing price of our common stock as reported on NASDAQ on December 31, 2020, which was $43.25. The actual amounts that
would be paid to each named executive officer upon termination of employment or a change in control can only be determined at the
time the actual triggering event occurs. The estimated amounts of compensation and benefits described below do not include certain
equity-based compensation, which does not accelerate but continues to vest following retirement for executive officers who are
eligible, or amounts payable under the Executive Supplemental Retirement Plan, which are set forth in the section above titled
“Nonqualified Deferred Compensation.” This section identifies and quantifies the extent to which those retirement benefits
are enhanced or accelerated upon the triggering events described below.
The following table shows the potential
payments upon a hypothetical termination or change in control of the Company effective as of December 31, 2020 for Christopher
E. French.
Type of
Payment
|
|
Termination
without
Cause prior to
a Change in
Control
|
|
Resignation
for Good
Reason prior to
a Change in
Control
|
|
Termination
without
Cause or Resignation for Good Reason after
a Change in
Control
|
|
Change in
Control
with no
Termination
|
|
Termination
with
Cause or
Resignation
without Good
Reason
|
|
Death or
Disability
|
Severance Benefit
|
|
$
|
695,800
|
|
|
|
-
|
|
|
$
|
1,252,440
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Healthcare continuation
|
|
|
9,552
|
|
|
|
-
|
|
|
|
9,552
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accelerated Vesting of RSU Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
951,068
|
|
|
|
951,068
|
|
|
|
-
|
|
|
|
803,780
|
|
Accelerated Vesting of RTSR Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
1,108,752
|
|
|
|
1,108,752
|
|
|
|
-
|
|
|
|
543,422
|
|
Total
|
|
$
|
705,352
|
|
|
|
-
|
|
|
$
|
3,321,811
|
|
|
$
|
2,059,819
|
|
|
|
-
|
|
|
$
|
1,347,238
|
|
The following table shows the potential
payments upon a hypothetical termination or change in control of the Company effective as of December 31, 2020 for David L.
Heimbach.
Type of
Payment
|
|
Termination
without
Cause prior to
a Change in
Control
|
|
Resignation
for Good
Reason prior to
a Change in
Control
|
|
Termination
without
Cause or Resignation for Good Reason after
a Change in
Control
|
|
Change in
Control
with no
Termination
|
|
Termination
with
Cause or
Resignation
without Good
Reason
|
|
Death or
Disability
|
Severance Benefit
|
|
$
|
450,000
|
|
|
|
-
|
|
|
$
|
765,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Healthcare continuation
|
|
|
12,838
|
|
|
|
-
|
|
|
|
12,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accelerated Vesting of RSU Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
497,159
|
|
|
|
497,159
|
|
|
|
-
|
|
|
|
333,026
|
|
Accelerated Vesting of RTSR Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
576,829
|
|
|
|
576,829
|
|
|
|
-
|
|
|
|
285,652
|
|
Accelerated Vesting of Option Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
170,706
|
|
Total
|
|
$
|
462,838
|
|
|
|
-
|
|
|
$
|
1,851,825
|
|
|
$
|
1,073,987
|
|
|
|
-
|
|
|
$
|
789,384
|
|
The following table shows the potential
payments upon a hypothetical termination or change in control of the Company effective as of December 31, 2020 for William
L. Pirtle.
Type of
Payment
|
|
Termination
without
Cause prior to
a Change in
Control
|
|
Resignation
for Good
Reason prior to
a Change in
Control
|
|
Termination
without
Cause or Resignation for Good Reason after
a Change in
Control
|
|
Change in
Control
with no
Termination
|
|
Termination
with
Cause or
Resignation
without Good
Reason
|
|
Death or
Disability
|
Severance Benefit
|
|
$
|
322,500
|
|
|
|
-
|
|
|
$
|
516,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Healthcare continuation
|
|
|
12,838
|
|
|
|
-
|
|
|
|
12,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accelerated Vesting of RSU Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
176,330
|
|
|
|
176,330
|
|
|
|
-
|
|
|
|
173,576
|
|
Accelerated Vesting of RTSR Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
205,533
|
|
|
|
205,533
|
|
|
|
-
|
|
|
|
100,744
|
|
Total
|
|
$
|
335,338
|
|
|
|
-
|
|
|
$
|
910,701
|
|
|
$
|
381,863
|
|
|
|
-
|
|
|
$
|
274,320
|
|
The following table shows the potential
payments upon a hypothetical termination or change in control of the Company effective as of December 31, 2020 for Edward
H. McKay.
Type of
Payment
|
|
Termination
without
Cause prior to
a Change in
Control
|
|
Resignation
for Good
Reason prior to
a Change in
Control
|
|
Termination
without
Cause or Resignation for Good Reason after
a Change in
Control
|
|
Change in
Control
with no
Termination
|
|
Termination
with
Cause or
Resignation
without Good
Reason
|
|
Death or
Disability
|
Severance Benefit
|
|
$
|
325,000
|
|
|
|
-
|
|
|
$
|
520,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Healthcare continuation
|
|
|
12,838
|
|
|
|
-
|
|
|
|
12,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accelerated Vesting of RSU Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
169,756
|
|
|
|
169,756
|
|
|
|
-
|
|
|
|
160,777
|
|
Accelerated Vesting of RTSR Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
196,146
|
|
|
|
196,146
|
|
|
|
-
|
|
|
|
98,005
|
|
Total
|
|
$
|
337,838
|
|
|
|
-
|
|
|
$
|
898,740
|
|
|
$
|
365,902
|
|
|
|
-
|
|
|
$
|
258,782
|
|
The Company’s Chief Financial Officer,
James. J. Volk, has severance benefits with the Company as outlined in his offer letter and which went into effect on June 24,
2019. If Mr. Volk is terminated without cause, or he resigns for good reason, within the second year of Mr. Volk’s employment,
the Company will pay to him an amount equal to one-half of the sum of his annual base salary and target annual cash bonus. If such
termination occurs after the second year of Mr. Volk’s employment, the Company will pay to him a severance payment in accordance
with the Company’s then-current policy or practice.
The following table shows the potential
payments upon a hypothetical termination or change in control of the Company effective as of December 31, 2020 for James J.
Volk.
Type of
Payment
|
|
Termination
without
Cause prior to
a Change in
Control
|
|
Resignation
for Good
Reason prior to
a Change in
Control
|
|
Termination
without
Cause or Resignation for Good Reason after
a Change in
Control
|
|
Change in
Control
with no
Termination
|
|
Termination
with
Cause or
Resignation
without Good
Reason
|
|
Death or
Disability
|
Severance Benefit
|
|
$
|
312,000
|
|
|
$
|
312,000
|
|
|
$
|
312,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Healthcare continuation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accelerated Vesting of RSU Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
371,431
|
|
|
|
371,431
|
|
|
|
-
|
|
|
|
179,006
|
|
Accelerated Vesting of RTSR Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
424,212
|
|
|
|
424,212
|
|
|
|
-
|
|
|
|
217,274
|
|
Total
|
|
$
|
312,000
|
|
|
$
|
312,000
|
|
|
$
|
1,107,643
|
|
|
$
|
795,643
|
|
|
|
-
|
|
|
$
|
274,320
|
|
Stock Ownership Guidelines and Anti-Hedging Policy
The Compensation Committee has implemented
stock ownership guidelines for the Company’s directors and executive officers in order to reinforce the importance of stock
ownership and long-term focus. The guidelines apply to all members of the Board of Directors and executive officers of the Company.
Stock ownership is the sum of the shares of the Company’s stock beneficially owned in addition to unvested restricted stock
units. Pledged shares and shares from awards of stock options that are unvested or vested but unexercised are not included in the
ownership amount. Expected ownership levels are: (i) five times base salary for the Chief Executive Officer; (ii) three times base
salary for the Chief Operating Officer and Chief Financial Officer; (iii) two times base salary for all other executive officers;
and (iv) 60 times the monthly retainer fee for members of the Board. Additionally, to emphasize the importance of sharing the same
objectives as all shareholders of the Company, the Company’s Insider Trading policy prohibits directors, senior executives,
and other designated employees from engaging in hedging transactions.
Pay Ratio Disclosure
In 2015, the SEC adopted rules (as required
by the Dodd-Frank Act) requiring disclosure of: (i) the annual total compensation of our median employee (excluding our Chief Executive
Officer) (ii) the annual total compensation of our Chief Executive Officer; and (iii) the ratio of the annual total compensation
of our median employee to the annual total compensation of our Chief Executive Officer. The annual total compensation of our Chief
Executive Officer for fiscal year 2020, as reported in the Summary Compensation Table included in this Proxy Statement, was $2,873,786.
The median of the annual total compensation of all employees, excluding our Chief Executive Officer, for fiscal year 2020 was $60,831.
As a result, we estimate that the annual total compensation of our CEO was 47.2 times that of the annual total compensation of
the median employee for fiscal year 2020.
We identified the median employee by using
the actual compensation paid during 2020, as reported on IRS Form W-2, to our employees as of December 29, 2020. Compensation for
employees who joined the Company after January 1, 2020 was annualized for purposes of identifying the median employee. After identifying
the median employee, we calculated annual total compensation for such employee using the same methodology used for calculating
the total compensation of our Chief Executive Officer as set forth in the Summary Compensation Table.
Compensation Committee Report
We have reviewed and discussed with management
the Compensation Discussion and Analysis for the year ended December 31, 2020 to be included in the proxy statement for the Company’s
2020 annual meeting of shareholders (the “Proxy”). Based on the reviews and discussions referred to above, we have
recommended to the Board of Directors, and the Board of Directors has approved, that the Compensation Discussion and Analysis referred
to above be included in the Company’s Proxy and incorporated by reference into the Company’s Annual Report on Form
10-K.
|
Respectfully submitted,
|
|
|
|
THE COMPENSATION COMMITTEE
|
|
|
|
John W. Flora, Chair
|
|
Tracy Fitzsimmons
|
|
Richard L. Koontz, Jr.
|
Compensation
Committee Interlocks and Insider Participation
The members of the Compensation Committee
for the 2020 fiscal year were Mr. Flora, who is the Chair, Dr. Fitzsimmons and Mr. Koontz. During 2020, none of our executive officers
served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served
on either our Compensation Committee or our Board of Directors. No member of the Compensation Committee serving during 2020 had
any relationship requiring disclosure under the section titled “Certain Relationships and Related Transactions” set
forth below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As set forth in the Audit Committee charter,
the Audit Committee is responsible for reviewing and approving all related party transactions required to be disclosed pursuant
to Item 404 of Regulation S-K of the SEC. Accordingly, the Audit Committee does not approve any related party transaction unless
it is (a) deemed commercially reasonable, fair and in, or not inconsistent with, the best interest of the Company, and (b) determined
to have terms comparable to those that could be obtained in an arm's-length transaction with an unrelated third party.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors
has appointed KPMG LLP (“KPMG”), as the Company’s independent registered public accounting firm for the Company’s
fiscal year ending December 31, 2021. Our shareholders are asked to ratify that appointment at
the annual meeting. In accordance with its charter, the Audit Committee will periodically assess the suitability of our incumbent
independent registered public accounting firm taking into account all relevant facts and circumstances, including the possible
consideration of the qualifications of other accounting firms. If the shareholders do not ratify the appointment of KPMG, the Audit
Committee will reconsider whether or not to retain KPMG as the Company’s independent registered public accounting firm. Even
if the appointment of KPMG is ratified by the shareholders, the Audit Committee may change the appointment at any time if it determines
that a change would be in the best interests of the Company and its shareholders.
Representatives of KPMG are expected to
attend the annual meeting, will have the opportunity to make a statement, if they so desire, and will be available to respond to
appropriate questions from shareholders.
KPMG served as the Company’s independent
registered public accounting firm for the Company’s fiscal years ended December 31, 2019 and 2020. The following sets forth
the aggregate fees billed by KPMG to the Company for the audit of our annual financial statements for the years ended December
31, 2019 and 2020, and fees billed for other services rendered by KPMG during those periods (in thousands).
|
|
2019
|
|
2020
|
Audit fee (1)
|
|
$
|
5,200
|
|
|
|
4,326
|
|
Audit-related fee (2)
|
|
|
--
|
|
|
|
--
|
|
Tax fee (3)
|
|
|
--
|
|
|
|
--
|
|
All other fee (4)
|
|
|
--
|
|
|
|
--
|
|
Total
|
|
$
|
5,200
|
|
|
|
4,326
|
|
|
(1)
|
Fees for services in connection with the audit of our financial statements and review of our quarterly
financial statements.
|
|
(2)
|
Fees for services provided in connection with financial due diligence.
|
|
(3)
|
Fees for tax compliance, tax planning, and tax advice, including tax return preparation and requests
for rulings or technical advice from tax authorities.
|
|
(4)
|
Fees for services provided, excluding the services described above, if any.
|
In making its appointment of KPMG as the
Company’s independent registered public accounting firm for the Company’s
fiscal year ending December 31, 2021, the Audit Committee considered whether KPMG’s
provision of non-audit services is compatible with maintaining KPMG’s independence. KPMG does not presently provide any non-audit
services to the Company.
Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee is responsible for appointing,
setting compensation for and overseeing the work of the independent registered public accounting
firm. The Audit Committee pre-approves all audit and permissible non-audit services provided by such
firm. For both types of pre-approval, the Audit Committee considers whether such services are consistent with the SEC’s
rules on auditor independence.
The Board of Directors unanimously recommends
that the shareholders of the Company vote FOR the ratification of the appointment of KPMG LLP.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Company’s
Board of Directors is a standing committee composed of three non-employee directors who meet the independence and expertise requirements
of the listing standards of the Nasdaq Stock Market.
During the fiscal year ended December 31,
2020, the Audit Committee reviewed with the Company’s management, internal audit department, and KPMG (the Company’s
independent registered public accounting firm), the scope of the annual audit and audit plans, the results of internal control
testing and external audit examinations, the evaluation of the Company’s system of internal controls, the quality of the
Company’s financial reporting, and the Company’s process for legal and regulatory compliance. The Audit Committee also
monitored the progress and results of the testing of internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, as described in greater detail in the section titled “Review of Internal Control Over Financial
Reporting” in the proxy statement for the 2021 annual meeting of shareholders.
Management is responsible for the Company’s
system of internal controls, the financial statements and the financial reporting process, and the assessment of the effectiveness
of internal control over financial reporting. KPMG is responsible for performing an integrated audit and issuing reports on the
following: (1) the Company’s consolidated financial statements; and (2) the Company’s internal controls over financial
reporting. As provided in its charter, the Audit Committee’s responsibilities include monitoring and overseeing these processes.
Consistent with this oversight responsibility,
KPMG reports directly to the Audit Committee. The Audit Committee appointed KPMG as the Company’s independent registered
public accounting firm and approved the firm’s fees. The Audit Committee has the authority to obtain advice and assistance
from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties and receives appropriate
funding, as determined by the Audit Committee, from the Company for such advice and assistance.
In the performance of its oversight function,
the Audit Committee has reviewed and discussed with management and KPMG the audited financial statements for the year ended December
31, 2020, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2020, and KPMG’s evaluation of the Company’s internal control over financial reporting as of that
date. The Committee has also discussed with KPMG the matters that the independent public accountants must communicate to the Committee
under applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”).
With respect to the Company’s independent
public accountants, the Audit Committee discussed with KPMG, among other things, matters relating to its independence and has received
the written disclosures and the letter from KPMG required by applicable provisions of the PCAOB regarding the independent public
accountants’ communications with the Audit Committee concerning independence. The Audit Committee reviews and approves the
annual audit fees in advance. The Audit Committee or its Chairman, to whom authority has been delegated by the Committee, reviews
and approves in advance all non-audit services provided to the Company by KPMG, as well as any changes in annual audit
fees. Any fee approvals made by the Chairman pursuant to such delegation of authority are subsequently ratified by the full Audit
Committee at its next meeting.
The Audit Committee annually reviews the
independence and performance of KPMG, including its lead audit partner and engagement team, in connection with the Committee’s
responsibility for the appointment and oversight of the Company’s independent public accountants and determines whether to re-engage KPMG
or consider other audit firms. In doing so, the Committee considers, among other things, the quality and efficiency of KPMG’s
historical and recent performance on the Company’s audit, KPMG’s capability and expertise, the quality and candor of
communications and discussions with KPMG, the ability of KPMG to remain independent, external data relating to audit quality and
performance (including recent PCAOB reports on KPMG and its peer firms), and the appropriateness of fees charged. The Committee
also considers KPMG’s tenure as the Company’s independent public accountant and its representatives’ familiarity
with our operations, businesses, accounting policies and practices, and internal control over financial reporting. KPMG has been
the Company’s independent public accountant since fiscal year 2001, during which time several lead engagement partners have
served on the Company’s account. In conjunction with the rotation of the public accountants’ lead engagement partner,
which occurs at least every five years, the Audit Committee is involved in the selection of KPMG’s lead engagement partner.
Based upon the foregoing considerations, the Audit Committee believes that the continued retention of KPMG to serve as the Company’s
independent public accountants is in the best interests of the Company and its shareholders.
In reliance on the review and discussions
referred to above, the Audit Committee recommended to the Board of Directors, and the Board of Directors has approved, the inclusion
of the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December
31, 2020, for filing with the Securities and Exchange Commission.
|
Respectfully submitted,
|
|
|
|
THE AUDIT COMMITTEE
|
|
|
|
Leigh Ann Schultz, Chair
|
|
Dale S. Lam
|
|
Kenneth L. Quaglio
|
REVIEW OF INTERNAL CONTROL OVER FINANCIAL
REPORTING
The
Audit Committee, the other members of the Board of Directors and the Company’s management are committed to maintaining a
strong and sustainable internal control environment. In this section, we would like to share facts about the material weaknesses
in the Company’s internal control over financial reporting, our plan for remediation and our progress to date and the Audit
Committee’s oversight role over the Company’s financial reporting process generally and the remediation process specifically.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis.
Changes in Internal Control over
Financial Reporting
As disclosed in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, the Company is pursuing a phased approach to remediate its material weaknesses, and management believes
that a remediation effort of this magnitude will most likely extend over multiple years. We implemented the following changes and
improvements during 2020, including in the fourth quarter, under this phased approach:
|
·
|
We added resources with skills and expertise
in technical accounting and internal control over financial reporting to establish a resource complement that is commensurate with
our baseline accounting, reporting, and information technology maintenance requirements.
|
|
·
|
We successfully executed our remediation strategy on the treasury
process, which includes cash, debt, interest expense, derivatives, and benefit obligations.
|
|
·
|
We made significant progress towards remediation
of the property, plant, and equipment and depreciation expense process, including:
|
|
o
|
Completion of risk assessment procedures and initiation of control design activities over property, plant, and equipment and
depreciation expense.
|
|
o
|
Implementation of a redesigned process and various software tools to account for projects under construction. We have designed
and are implementing internal controls over this new process.
|
When the sale of
our Wireless operations became probable late in the third quarter of 2020, we began to revise our risk assessment process and recalibrate
ongoing control activities in relation to our smaller continuing operations. The significant and incremental effort required by
this recalibration, potential strategic transactions, and a volume of ongoing software development projects have led us to conclude
that it is no longer feasible to complete our remediation plan by the end of 2021, as we had previously targeted. Further, we need
to complete scheduled updates to our enterprise resource planning (ERP) system over the next two years, which also places significant
demands on our available resources. While we have established a resource complement that
is commensurate with our baseline accounting, reporting, and information technology maintenance requirements, such resource complement
is not adequate to absorb the significant and incremental effort associated with these efforts while simultaneously continuing
our phased remediation approach. Accordingly, we will prioritize the recalibration of controls over our continuing operations and
our ERP upgrade as we continue our phased remediation approach.
As a result of
the changes described above, management identified various immaterial errors, some of which were corrected during 2020. Other than
the changes and improvements that occurred in the fourth quarter, which are included among the items discussed above, there have
been no other changes in the Company’s internal control over financial reporting that occurred during the quarter ended December
31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Management’s Report on Internal Control Over Financial
Reporting
In order to evaluate the effectiveness of
internal control over financial reporting, under the direction of our Chief Executive Officer, Chief Financial Officer, and Chief
Accounting Officer (the “certifying officers”), we conducted an assessment using the criteria established in Internal
Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, our certifying
officers concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2020
due to a material weakness in our control environment whereby the Company did not have a sufficient number of trained resources
with expertise in technical accounting, internal control over financial reporting, and the design and implementation of information
technology solutions to complete its remediation efforts.
As a result, we
were unable to maintain effective information and communication processes, and did not have effective process-level control activities
over the following areas:
|
·
|
Property, plant, and equipment and depreciation
expense
|
|
·
|
Purchasing (current liabilities and operating
expenses)
|
The control deficiencies
described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not
be prevented or detected on a timely basis and therefore we concluded that the deficiencies represent material weaknesses in the
Company’s internal control over financial reporting and our internal control over financial reporting was not effective as
of December 31, 2020.
Management’s Remediation Plan
The Company is
committed to making further progress in its remediation efforts during 2021. The following steps will continue to be executed until
remediation of the material weaknesses is achieved:
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Retain and train individuals with the appropriate skills and experience
related to technical accounting, internal control over financial reporting, and the design and implementation of information technology
solutions. Monitor and adjust resourcing as further assessments are completed.
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Enhance information and communication processes through information
technology solutions to ensure that information needed for financial reporting is accurate, complete, relevant and reliable, and
communicated in a timely manner.
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Strengthen project management over the design and implementation of
information technology solutions to improve throughput.
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Extend the successful implementation of our phased approach to remediation
of control activities to property, plant, and equipment and depreciation expense and purchasing.
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Report regularly to the audit committee on the progress and results
of the remediation plan, including the identification, status, and resolution of internal control deficiencies.
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Reports of the Independent Registered
Public Accounting Firm
Our independent registered public accounting
firm, KPMG LLP, audited the Company’s internal control over financial reporting as of December 31, 2020 based on the criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. KPMG evaluated and concurred with our disclosure of “Controls and Procedures” on Item 9A
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, including Management’s Report on Internal
Control over Financial Reporting in which we assess and define our material weakness in internal control over financial reporting.
Accordingly, and based upon its audit, KPMG expressed an adverse opinion on the effectiveness of the Company’s internal control
over financial reporting.
KPMG LLP also audited, in accordance with
the standards of the Public Company Accounting Oversight Board (PCAOB), the consolidated balance sheets of the Company as of December
31, 2020 and 2019, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for
each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement Schedule II –
Valuation and Qualifying Accounts (collectively, the consolidated financial statements). KPMG’s report expressed an unqualified
opinion on those consolidated financial statements.
Fair Presentation Not Affected
A material weakness
is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely
basis. While hypothetical material misstatements could arise under our current control environment, no such material misstatements
have, in fact arisen. As a result, it has not been necessary to restate our financial reports since December 31, 2016, when the
Company’s ineffective internal control over financial reporting was first identified and reported.
Accordingly, notwithstanding
our ineffective internal control over financial reporting, our consolidated financial statements as of and for the three year period
ended December 31, 2020 are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles
(“GAAP”).
Audit Committee Member Qualifications
Each of our director
nominees standing for election at the annual meeting is eminently qualified and warrants reelection. This proxy statement contains
detailed information about the qualifications of all of our directors and director nominees, including the members of our Audit
Committee.
The Audit Committee
members are Ms. Schultz, who is the Chair, Mr. Lam and Mr. Quaglio. Ms. Schultz is standing for reelection at the annual meeting.
The Board of Directors has determined that all members of the Audit Committee are able to read and understand financial statements
in accordance with Nasdaq listing rules and are “financially literate” in accordance with the Nasdaq listing rules
and that all Audit Committee members are “audit committee financial experts” within the meaning of the SEC regulations
and have financial sophistication in accordance with Nasdaq listing rules.
Audit Committee Oversight
The Audit Committee
has been vigilant in its oversight of the Company’s financial reporting process generally and the remediation process specifically.
This proxy statement discloses that the Audit Committee met ten times during 2020. During these meetings, the Audit Committee devoted
considerable time to oversight of the Company’s ongoing financial reporting process, including review of the Company’s
quarterly earnings reports and regular quarterly and annual SEC filings.
Because of the
importance that the Audit Committee places on effective and sustainable remediation of the material weakness, the Audit Committee
devotes a portion of its meeting agendas to discussions with management of our accounting function regarding remediation. During
those meetings, management and the Audit Committee discuss, among other topics, the accounting function’s resources and structure,
processes, information management systems, and priorities, and their impact on the remediation timeline. The remediation timeline
is dependent upon the internal control impacts of the pending sale of our Wireless segment, potential strategic transactions, and
necessary enterprise resource planning (ERP) system upgrades. While subject to change based on the outcomes of these events, and
other potential unforeseen events, the Audit Committee supports management’s plan to target full remediation by the end of
2023.
PROPOSAL NO. 3
NON-BINDING VOTE ON NAMED EXECUTIVE OFFICER
COMPENSATION
In accordance with Section 14A of the Securities
Exchange Act of 1934, as amended, and the SEC’s rules thereunder, the Board of Directors is asking shareholders to approve,
in a non-binding vote, the Company’s named executive officer compensation as disclosed in this proxy statement. This proposal,
commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our named
executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the
overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement.
As described above in the “Compensation
Discussion and Analysis” section of this proxy statement, the Compensation Committee has structured our executive compensation
program to attract and retain the management talent needed to successfully lead our Company and increase shareholder value.
The Board urges shareholders to read the
Compensation Discussion and Analysis beginning on page 18 of this proxy statement, which describes in more detail how the Company’s
executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the
Summary Compensation Table appearing on page 23 and other related compensation tables and narratives of this proxy statement, which
provide detailed information on the compensation of our named executive officers. The Compensation Committee and the Board of Directors
believe that the policies and procedures articulated in the Compensation Discussion and Analysis are effective in achieving our
goals and that the compensation of our named executive officers reported in this proxy statement reflects and supports these compensation
policies and procedures.
A vote on this resolution, commonly referred
to as a “say-on-pay” resolution, is not binding on the Board of Directors or the Company, nor will it create or imply
any change in the fiduciary duties of the Board or the Compensation Committee. Although the vote is non-binding, the Board and
the Compensation Committee will review and consider the voting results when evaluating our executive compensation program.
This proposal will be approved if the number
of votes cast in favor of the proposal exceeds the number of votes cast against the proposal.
The Company's current
policy is to provide shareholders with an opportunity to approve the compensation of the Company’s named executive officers
each year at the annual meeting of shareholders. Accordingly, the next such vote is expected to occur at the 2022 annual meeting
of shareholders.
The Board of Directors unanimously recommends
that shareholders vote FOR the approval of the compensation of the Company’s named executive officers.
SHAREHOLDER PROPOSALS FOR THE ANNUAL
MEETING OF 2022
Shareholders who intend to present proposals
at the 2022 annual meeting of shareholders (the “2022 Annual Meeting”), and who wish to have those proposals included
in the Company’s proxy statement for the 2022 Annual Meeting, must ensure that those proposals are received at the Company’s
principal executive offices located at 500 Shentel Way, P.O. Box 459, Edinburg, Virginia 22824, Attention: Corporate Secretary,
no later than November 3, 2021. Such proposals must meet the requirements set forth in the rules and regulations of the SEC in
order to be eligible for inclusion in the proxy statement for the 2021 Annual Meeting.
In addition, the Company’s bylaws
require that notice of proposals by shareholders to be brought before any annual meeting (other than matters properly brought under
Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and included in the company’s
notice of meeting) must be received by the Company’s Corporate Secretary at the address set forth above no more than 150
days prior to, and not fewer than 120 days before, the first anniversary of the 2021 annual meeting. The shareholder notice must
comply with the information requirements set forth in the Company's bylaws. The provisions in the Company’s bylaws concerning
notice of proposals by shareholders are not intended to affect any rights of shareholders to request inclusion of proposals in
the Company’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.
OTHER MATTERS
The Board of Directors does not intend to
present to the meeting any other matters not referred to above and does not presently know of any matters that may be presented
to the meeting by others. If other matters are properly brought before the meeting, the persons named in the enclosed proxy will
vote on such matters in their own discretion.
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By Order of the Board of Directors,
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Raymond B. Ostroski
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Secretary
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Dated: March 5, 2021
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