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The following is an excerpt from a DEF 14A SEC Filing, filed by FRONTIER COMMUNICATIONS CORP on 3/26/2012.
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FRONTIER COMMUNICATIONS CORP - DEF 14A - 20120326 - STOCKHOLDER_PROPOSALS

STOCKHOLDER PROPOSALS

We have received two stockholder proposals for inclusion in this proxy statement. The proponents of these proposals have requested that we include the following proposals and supporting statements in our proxy statement for the meeting, and if properly presented at the meeting, these proposals will be voted on at the meeting. The stockholder proposals and supporting statements are quoted verbatim in italics below. Our management does not support the adoption of the resolutions proposed below and asks stockholders to consider management’s response, which follows each stockholder proposal. The board of directors recommends a vote AGAINST these proposals.

Stockholder Proposal Regarding Independent Chairman
(Item 3 on the Proxy Card)

We have received a stockholder proposal from the AFL-CIO Reserve Fund, or “AFL-CIO,” 815 Sixteenth Street, N.W. Washington, DC 20006. The AFL-CIO has requested that we include the following proposal and supporting statement in our proxy statement for the meeting, and if properly presented at the meeting, this proposal will be voted on at the meeting. The AFL-CIO owned 726 shares of our common stock as of the date they submitted their proposal. The stockholder proposal and supporting statement are quoted verbatim in italics below.

Our management does not support the adoption of the resolution proposed below and asks stockholders to consider management’s response, which follows the stockholder proposal. The board of directors recommends a vote AGAINST this proposal.

RESOLVED: Shareholders of Frontier Communications Corporation (the “Company”) urge the Board of Directors (the “Board”) to take the steps necessary to modify the Company’s Corporate Governance Guidelines to require that an independent director (as defined by the rules of the New York Stock Exchange) be its Chairman. The policy should be implemented so as not to violate any contractual obligations. The policy should also specify the process for selecting a new independent Chairman if the current Chairman ceases to be independent between annual meetings of shareholders; or if no independent director is available and willing to serve as Chairman.

Supporting Statement

We believe that it is the responsibility of the Board to protect shareholders’ long-term interest by providing independent oversight of management in directing the Company’s business and affairs. In our opinion, the designation of a lead independent director is not an adequate substitution for an independent Board Chairman. We believe an independent Chairman can enhance investor confidence in our Company and strengthen the independent leadership of the Board.

Company President and CEO Maggie Wilderotter has also served as Chairman of the Board since December 20, 2005. During the six year period that she has served as Chairman of the Board, our Company’s stock price has declined over 50 percent as of the date that this proposal was submitted to the Company. We believe that our Company could have benefited from having an independent director rather than Ms. Wilderotter serve as Chairman during this period.

The Chairmen’s Forum, an organization of non-executive board chairmen, has called on North American public companies to voluntarily adopt independent chairmanship as the default model. An independent chairman “curbs conflicts of interest, promotes oversight of risk, manages the relationship between the board and the CEO, serves as a conduit for regular communication with shareowners, and is a logical next step in the development of an independent board.” (Millstein Center for Corporate Governance and Performance, Yale School of Management, Chairing the Board: The Case of Independent Leadership in Corporate North America, 2009).

In our view, when the CEO serves as Chairman, this arrangement may hinder the ability of the Board to monitor the CEO’s performance and to provide the CEO with objective feedback and guidance. Andrew Grove, former Chairman and CEO of Intel Corporation, has stated: “The separation of the two jobs goes to the heart of the conception of a corporation. Is a company a sandbox for the CEO, or is the CEO an employee.” If he’s an employee, he needs a boss, and that boss is the board. The chairman runs the board. How can the CEO be

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his own boss?” (Jeffrey E. Garten, Don’t Let the CEO Run the Board, Too , Business Week, November 11, 2002.)

For these reasons, we urge you to vote FOR this resolution.

Management Statement in Opposition to Stockholder Proposal

The board of directors recommends that you vote AGAINST this stockholder proposal for the following reasons:

 

 

 

 

Our super-majority independent board of directors provides for strong independent leadership and accountability to stockholders;

 

 

 

 

Our Lead Director structure, as described under “Corporate Governance-Leadership Structure” earlier in this proxy statement, is a recognized viable corporate governance structure having benefits very similar to the proposal;

 

 

 

 

Our independent directors have regularly scheduled executive sessions in which they meet outside the presence of management; and

 

 

 

 

If adopted, the proposal would unnecessarily reduce the board’s flexibility in corporate governance matters.

The board strongly disagrees with the proposal because it believes that its existing corporate governance practices already provide for strong independent leadership on the board, as well as direct accountability to stockholders. As provided in our Corporate Governance Guidelines, the board believes that a substantial majority of the board should consist of independent directors and that at least 75% of the members of the board should be independent at any time. As determined by the board, in accordance with NASDAQ rules, approximately 91% of the members of the board are currently independent directors ( i.e ., all directors other than the Chairman). Each of the members of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is an independent director. In addition, our independent directors meet regularly outside the presence of management.

The board’s independent leadership is further enhanced by the existence of a Lead Director. The Lead Director is selected by the independent directors and has clearly delineated duties. As set forth in the Corporate Governance Guidelines, the Lead Director, among other things, works independently to assist the Chairman of the Board in setting the agenda for Board meetings, acts as liaison between the Chairman and the independent and non-management directors and serves as the chair for executive sessions of the board. A list of the Lead Director’s responsibilities is set forth above under “Corporate Governance—Lead Director Structure.” The board understands that corporate governance experts recognize that having a Lead Director is a viable corporate governance structure, providing independent board decision-making and oversight.

The board believes that it should maintain the flexibility to determine the board leadership of Frontier. As provided in our Corporate Governance Guidelines, the Chairman and the Chief Executive Officer may be separated if the board deems it in the best interests of the company and the stockholders. The stockholder proposal would unnecessarily eliminate the flexibility of the board to consider whether a current or former member of management is best suited to serve as Chairman of the Board at a given time. The board believes that our company and our stockholders benefit from the board’s current ability to freely select the Chairman of the Board based on criteria it deems to be in the best interests of the company and the stockholders.

The board believes that a board comprised of a super-majority of independent directors and the existence of the Lead Director ensures the independent exchange of information among our independent directors and provides the company and our stockholders with the same benefits that the proposal suggests may only be obtained by requiring that an independent director serve as Chairman of the Board. In the board’s view, our stockholders have benefited from the board of directors’ current sound corporate governance practices and strong independent board leadership, and there is no need to require that an independent director serve as Chairman of the Board.

For the reasons described above, the board of directors recommends a vote AGAINST the stockholder proposal.

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Stockholder Proposal Regarding Arbitration of Stockholder Suits
(Item 4 on the Proxy Card)

We have received a stockholder proposal from Donald and Susan Vuchetich, 2525 Hickory Road, Ann Arbor, Michigan 48103-2174. The Vuchetich’s have requested that we include the following proposal and supporting statement in our proxy statement for the meeting, and if properly presented at the meeting, this proposal will be voted on at the meeting. The Vuchetich’s owned 2,850 shares of our common stock as of the date they submitted their proposal. The stockholder proposal and supporting statement are quoted verbatim in italics below.

Our management does not support the adoption of the resolution proposed below and asks stockholders to consider management’s response, which follows the stockholder proposal. The board of directors recommends a vote AGAINST this proposal.

Shareholder Arbitration Proposal

Resolved, that the bylaws are amended to add the following article:

(a) Any controversy or claim brought directly or derivatively by any present or former shareholder of the Corporation as a present or former stockholder, whether against the Corporation, in the name of the Corporation or otherwise, arising out of or relating to any acts or omissions of the Corporation or any of its officers, directors, agents, affiliates, associates, employees or controlling persons, shall be settled by arbitration under the Federal Arbitration Act in accordance with the commercial arbitration rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. In the arbitration proceedings, the parties shall be entitled to all remedies that would be available in the absence of this Article and the arbitrators, in rendering their decision, shall follow the substantive laws that would otherwise be applicable and shall state the basis of their decision. This Article shall apply, without limitation, to an action arising under any federal or state securities law.

(b) The arbitration of any dispute pursuant to this Article shall be held in Stamford, Connecticut, except that arbitration of disputes involving an amount in controversy of less than $25,000 shall be held in the jurisdiction in which the claimant stockholder resides.

(c) This Article shall not apply to appraisal proceedings or to a claim for damages in excess of $3,000,000. Any claim brought derivatively will be subject to requirements and procedures applicable to derivative proceedings in Delaware.

(d) Any party, upon submitting a matter to arbitration as required by this Article, may seek a temporary restraining order or preliminary injunction on an individual basis from a court of competent jurisdiction pending the outcome of the arbitration.

(e) No controversy or claim subject to arbitration under this Article may be brought in a representative capacity on behalf of a class of stockholders or former stockholders,

(f) The parties to any proceeding may agree not to arbitrate all or part of any controversy or claim, on the selection of arbitrators, and the location and procedures applicable to any proceeding.

(g) This Article shall be effective 30 days after it is adopted (the ‘Effective Date”). This Article shall not apply to controversies or claims relating to (i) shares acquired by the claimant prior to the Effective Date or (ii) claims arising out of actions or omissions occurring prior to the Effective Date.

(h) The board of directors may adopt reasonable alternative methods of selecting arbitrators or arbitration procedures with respect to future controversies or claims.

Supporting Statement

Lawyer driven class actions impose large burdens on corporations without meaningful benefits to shareholders. Suits commonly are filed soon after merger announcements or stock price changes to generate legal fees in settlements. Shareholders bear the ultimate costs of defending court class actions, funding settlements, and indemnifying officers and directors. Requiring arbitration on an individual basis should reduce such abuses. The proposed bylaw would affect only future purchasers of shares.

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Management Statement in Opposition to Stockholder Proposal

The board of directors recommends that you vote AGAINST this stockholder proposal.

The board of directors recognizes that class action lawsuits can be abusive. However, at this time the board does not believe that a bylaw arbitration provision of the type proposed (the “Arbitration Provision”) is the proper way to deal with class action suits for the following reasons:

1. No Other Company has an Arbitration Provision and the Board of Directors Believes such a Provision Could Negatively Impact our Stock Price.

No other U.S. public company has adopted an Arbitration Provision. If adopted, it is possible that such a provision could have a negative impact on the price of our stock if investors perceive the Arbitration Provision as a limit on their rights. Investors have many options to choose from when making an investment. They may choose not to invest in our stock if they believe their rights as a Frontier stockholder are more limited than at other companies, none of which have such limits.

2. The Arbitration Provision Would Reduce the Flexibility of the Company.

While there are many instances where arbitrating claims would be in the best interests of the company and its stockholders, there are cases where it may to the company’s benefit to defend a claim in court. Taking that decision out of the company’s hands would reduce its flexibility and could subject the company to more extensive and costly proceedings, which would ultimately be paid for by the company’s stockholders.

3. The SEC has Stated that an Arbitration Provision Would be Contrary to the Public Interest.

The Staff of the Securities and Exchange Commission has in the past stated that “it would be contrary to the public interest to require investors who want to participate in the nation’s equity markets to waive access to a judicial forum for vindication of federal or state law rights, where such a waiver is made through a corporate charter rather than through an individual investor’s decision....” Riesenberg, INSIGHTS, August, 1990 Vol. 4, No. 8 at 31. If the Arbitration Provision is adopted, it is possible that the SEC may not declare registration statements that we file effective and, as a result, we would not be able to issue stock or debt in the public markets.

For these reasons, the company believes this proposal is undesirable at this time and could have adverse consequences for stockholders. Accordingly, the board of directors recommends a vote AGAINST the stockholder proposal.

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