USM US Cellular Corp

EXPLANATORY NOTE

United States Cellular Corporation ("U.S. Cellular") filed its Annual Report on Form 10-K for the year ended December 31, 2015 on February 24, 2016 (“Original Form 10-K”).  General Instruction G. (3) of Form 10-K provides that the information required by Part III (Items 10, 11, 12, 13 and 14) may be incorporated by reference from the registrant’s definitive proxy statement (filed or required to be filed pursuant to Regulation 14A) which  involves the election of directors, if such  definitive proxy statement is filed with the SEC not later than 120 days after the end of the fiscal year covered by the Form 10-K.  However, General Instruction G. (3) of Form 10-K also provides that the Items comprising the Part III information may be filed as part of the Form 10-K, or as an amendment to the Form 10-K and, in such case, must be filed no later than the end of such 120-day period.  In U.S. Cellular’s Original Form 10-K, U.S. Cellular had disclosed that it intended to incorporate such information from its Notice of Annual Meeting of Shareholders and Proxy Statement (“Proxy Statement”) for the 2016 Annual Meeting of Shareholders scheduled to be held May 24, 2016.  However, pursuant to General Instruction G. (3) of Form 10-K, U.S. Cellular has instead determined to file the information required by Part III, Items 10 through 14 in this Amendment No. 1 to U.S. Cellular's 2015 Form 10-K.  Accordingly, this Amendment No. 1 is being filed for the sole purpose of filing the information required by Part III, Items 10 through 14.  In addition, Item 15 is included to identify the Exhibits being filed with this Form 10-K/A. 

This Amendment No. 1 consists solely of the preceding cover page, this explanatory note, Items 10, 11, 12, 13 and 14 of Part III of Form 10-K, Item 15 identifying the additional exhibits filed herewith, a signature page, Exhibit 99.1, which includes the information required by Items 10 through 14 of Part III, and certifications required to be filed as exhibits hereto.  Except for the foregoing, U.S. Cellular has not modified or updated disclosures presented in the Original Form 10-K in this Form 10-K/A.  Accordingly, this Form 10-K/A does not modify or update the disclosures in the Original Form 10-K to reflect subsequent events, results or developments or facts that have become known after the date of the Original Form 10-K.  Therefore, this Form 10-K/A should be read in conjunction with any documents incorporated by reference in the Original Form 10-K and our filings made with the SEC subsequent to the Original Form 10-K. 

CROSS REFERENCE SHEET

AND

TABLE OF CONTENTS

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Incorporated by reference from Proxy Statement sections attached hereto as Exhibit 99.1 entitled “Election of Directors,” “Corporate Governance,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

Item 11.  Executive Compensation

Incorporated by reference from Proxy Statement section attached hereto as Exhibit 99.1 entitled “Executive and Director Compensation.”

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference from Proxy Statement sections attached hereto as Exhibit 99.1 entitled “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans.”

Item 13.  Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference from Proxy Statement sections attached hereto as Exhibit 99.1 entitled “Corporate Governance” and “Certain Relationships and Related Transactions.”

Item 14.  Principal Accountant Fees and Services

Incorporated by reference from Proxy Statement section attached hereto as Exhibit 99.1 entitled “Fees Paid to Principal Accountants.”

PART IV

Item 15. Exhibits

The exhibits listed in the accompanying exhibit index are filed as part of this Form 10-K/A.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 21, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

INDEX TO EXHIBITS

The above-listed exhibits include only the exhibits required to be refiled as part of this amendment. All other exhibits have been filed with the original filing of the Annual Report on Form 10-K for the year ended December 31, 2015, or incorporated by reference therein.

Exhibit 31.1

Certification of principal executive officer

I, Kenneth R. Meyers, certify that:

1. I have reviewed this annual report on Form 10-K/A of United States Cellular Corporation; and
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Date:  March 21, 2016

Exhibit 31.2

Certification of principal financial officer

I, Steven T. Campbell, certify that:

1. I have reviewed this annual report on Form 10-K/A of United States Cellular Corporation; and
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Date:  March 21, 2016

EXHIBIT 99.1

The following are sections of the Notice of Annual Meeting of Shareholders and Proxy Statement (“Proxy Statement”), for the 2016 Annual Meeting of Shareholders scheduled to be held May 24, 2016, in the form they are expected to be included in the definitive Proxy Statement, responsive to Items 10, 11, 12, 13 and 14 of Part III of Form 10-K.  To the extent applicable, the following includes the exact language expected to be included in the Proxy Statement as of its expected filing date, and has not been modified for purposes of this filing.  This information is being provided solely for the purpose of filing the information required by Part III, Items 10 through 14 on Form 10-K/A.  The solicitation of proxies will only be made pursuant to the definitive Proxy Statement.  In addition, certain other information expected to be included in the definitive Proxy Statement is also included below for context.

ELECTION OF DIRECTORS

The nominees for election as directors are identified in the table below. Each of the nominees has consented to be named in the 2016 Proxy Statement and to serve if elected.  The age of the following persons is as of the date of this 2016 Proxy Statement.

To be Elected by Holders of Common Shares

To be Elected by Holder of Series A Common Shares

Your board of directors unanimously recommends a vote "FOR" the above nominees.

Background of Board of Directors’ Nominees

The following briefly describes the business experience during at least the past five years of each of the nominees, including each person's principal occupation(s) and employment during at least the past five years; the name and principal business of any corporation or other organization in which such occupation(s) and employment were carried on; and whether such corporation or organization is a parent, subsidiary or other affiliate of U.S. Cellular.  The following also indicates any other directorships held, including any other directorships held during at least the past five years, by each nominee, in any SEC registered company or any investment company, and the identity of such company.

In addition, the following also briefly discusses the specific experience, qualifications, attributes or skills that led to the conclusion that each such person should serve as a director of U.S. Cellular, in light of U.S. Cellular’s business and structure, including information about the person's particular areas of expertise or other relevant qualifications.  As discussed below under “Director Nomination Process”, the U.S. Cellular board of directors does not have any specific, minimum qualifications that the board believes must be met by a nominee for a position on the U.S. Cellular board of directors, or any specific qualities or skills that the board believes are necessary for one or more of the U.S. Cellular directors to possess.  The U.S. Cellular board believes that substantial judgment, diligence and care are required to identify and select qualified persons as directors and does not believe that it would be appropriate to place limitations on its own discretion.  The U.S. Cellular board of directors has consistently sought to nominate to the board of directors eminently qualified individuals whom the board believes would provide substantial benefit and guidance to U.S. Cellular.  Also, as discussed below under “Director Nomination Process”, U.S. Cellular believes that it is desirable for directors to have diverse backgrounds, experience, skills and other characteristics.  In addition, the conclusion of which persons should serve as directors of U.S. Cellular is based in part on the fact that U.S. Cellular is a controlled company with a capital structure in which different classes of stock vote for different directorships.  In particular, as discussed under “Director Nomination Process”, because TDS owns 100% of the Series A Common Shares, nominations of directors for election by the holder of the Series A Common Shares are based on the recommendation of TDS.  In addition, the board of directors may consider the recommendations of large shareholders, including TDS, in nominating persons for election as directors by the holders of Common Shares.

Nominees for Election by Holders of Commons Shares 
 

J. Samuel Crowley.   J. Samuel Crowley was last elected as a director by the holders of Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Crowley, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular. 

J. Samuel Crowley has significant experience with U.S. Cellular and the wireless industry as a director of U.S. Cellular since 1998.  Also, he has been a member and chairperson of the U.S. Cellular Audit Committee since 2001 and a member of the U.S. Cellular Long-Term Incentive Compensation Committee since 2001.

Mr. Crowley is currently a private investor. 

Between 2005 and 2007, Mr. Crowley was the chief operating officer of Gold’s Gym International, Inc., a private company which operates fitness facilities.  

Between 2002 and 2003, Mr. Crowley was senior vice president - new ventures, at Michaels Stores, Inc., a national specialty retail company (formerly NYSE:  MIK). 

Between 2000 and 2002, he was a business strategy consultant with Insider Marketing, a high tech marketing consulting firm. 

Prior to that, Mr. Crowley was employed for more than five years by CompUSA, Inc. which, before it was acquired, was a national retailer and reseller of personal computers and had been listed on the NYSE (formerly NYSE: CPU).  Mr. Crowley was part of the team that founded CompUSA and took the company public on the NYSE in 1992.  He served in several roles as vice president and then was named executive vice president of operations in 1995, a position that he held until the company was acquired in 2000.

In 2014, Mr. Crowley was appointed as a director and a member and chairman of the audit committee of Goodman Networks, which provides network products and services to wireless companies.  Goodman Networks does not have any publicly traded common stock but, as a result of its registration with the SEC of notes in 2013, files periodic reports with the SEC.  Goodman Networks provides network products and services on a regular basis to U.S. Cellular and/or its affiliates.  In 2015, U.S. Cellular made purchases of approximately $7,000 from Goodman Networks.  The purchases in 2015 of $7,000 were less than .01% of Goodman Networks’ gross revenues.  All transactions with Goodman Networks were made in the ordinary course of business, at arms-length, and at prices and on terms customarily available.  Mr. Crowley is not an executive officer of Goodman Networks and, as a director thereof, had no involvement in, nor received any personal benefit from, Goodman Networks’ transactions with U.S. Cellular.  Considering the foregoing, the U.S. Cellular board of directors does not believe that Mr. Crowley has any material direct or indirect relationships with U.S. Cellular or its affiliates unrelated to his service on the U.S. Cellular board of directors and is independent under NYSE listing standards.  Even though the foregoing interests were not considered to be direct or indirect material interests to Mr. Crowley, they are disclosed voluntarily for purposes of full disclosure.

In 2013, the National Association of Corporate Directors (NACD) named Mr. Crowley a NACD Fellow recognizing his commitment to the highest standards of boardroom leadership.

In 2010 and 2011, Mr. Crowley was a director of Vois, Inc., a public (over-the-counter: VOIS.PK) development-stage company that is focused on the development and marketing of an Internet social networking site. 

Mr. Crowley has an MBA from the University of Texas at Dallas.

Mr. Crowley brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications in management and operations as a result of having been the chief operating officer of Gold’s Gym International, Inc., a senior vice president at Michaels Stores, Inc. and a vice president and the executive vice president of operations at CompUSA, Inc.  In addition, Mr. Crowley brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his service as a director of U.S. Cellular since 1998 and as a result of his service as the chairperson of the U.S. Cellular Audit Committee since 2001, as well as membership on the U.S. Cellular Long-Term Incentive Compensation Committee since 2001. 

Paul-Henri Denuit.  Paul-Henri Denuit was last elected as a director by the holders of Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Denuit, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular. 

Paul-Henri Denuit has extensive experience with U.S. Cellular and the wireless industry as a director of U.S. Cellular since 1988, before U.S. Cellular became a public company.  He has also been a member of the U.S. Cellular Audit Committee and of the U.S. Cellular Long-Term Incentive Compensation Committee for many years.  Mr. Denuit has been the chairperson of the U.S. Cellular Long-Term Incentive Compensation Committee since 1997.

Mr. Denuit is currently a private investor. 

Prior to retiring in 2001, Mr. Denuit had been employed by S.A. Coditel for over 30 years in various capacities, including as chief executive officer, managing director and chairman of its board of directors.  S.A. Coditel provides cable and television service in certain European countries.  S.A. Coditel became a shareholder of U.S. Cellular before U.S. Cellular became a public company in 1988 and continued to be a principal shareholder of U.S. Cellular for several years after it became a public company.

Mr. Denuit was originally appointed as a director of U.S. Cellular pursuant to the terms of a Common Stock Purchase Agreement in 1987, between U.S. Cellular and S.A. Coditel.  Although the terms of this agreement expired many years ago, the U.S. Cellular board of directors has continued to renominate Mr. Denuit as a director as a result of his background and the board’s observations of his performance as a director. 

Mr. Denuit was also previously a member of the management team of Prime Cable, Inc., a privately-held U.S. corporation based in Austin, Texas that was involved in the operation of cable television systems in the United States.

Mr. Denuit was also previously a director and member of the general management committee of S.A. Tractebel, a Belgian holding company with interests in electricity, gas, consulting, engineering, industrial services and communications.  He was also previously a director of Société Française du Radiotéléphone (S.F.R.) S.A., a French wireless telephone operator, and Société Européenne des Satellites, S.A., a Luxembourg-based operator of direct-to-home (DTH) satellite television services.

Mr. Denuit holds a degree in admiralty law and a doctorate of law from the Université Libre de Bruxelles.

Mr. Denuit brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications in management and operations as a result of his background as the chief executive officer, managing director and chairman of S.A. Coditel.  He also brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his many years as a director of U.S. Cellular and as a result of his service as the chairperson of the U.S. Cellular Long-Term Incentive Compensation Committee since 1997, and as a result of membership on the U.S. Cellular Audit Committee since 1992.  As a result of his experience with the wireless, cable and television industry in Europe, and because he is a foreign national, he also brings diversity of background to the U.S. Cellular board. 

Harry J. Harczak, Jr.  Harry J. Harczak, Jr. was last elected as a director by the holders of Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Harczak, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular. 

Harry J. Harczak, Jr. has significant experience with U.S. Cellular and the wireless industry as a director of U.S. Cellular since 2003.  He also has been a member of and has served as an “audit committee financial expert” on U.S. Cellular’s Audit Committee since 2003. 

Mr. Harczak is a private investor and has been a managing director of Sawdust Capital, LLC, a privately-owned investment management company, since 2008.

Mr. Harczak was an officer of CDW Corporation, a provider of technology products and services, between 1994 and 2007, where he was successively the chief financial officer and the executive vice president of sales, marketing and business development.  During that period, CDW was publicly-traded and listed on the NASDAQ under the symbol: CDWC.  CDW became privately-held in 2007 and in 2013 resumed public-trading on the NASDAQ under the symbol: CDW.

Prior to that, Mr. Harczak was a partner at PricewaterhouseCoopers LLP, an international public accounting firm and, prior to that, was employed by PricewaterhouseCoopers LLP in managing and senior-level auditing capacities.    

Mr. Harczak is a director and member of the audit committee and governance and nominating committee of Tech Data Corporation (NASDAQ: TECD), a distributor of technology products from information technology hardware and software producers. 

Mr. Harczak is a director of Jail Education Solutions, Inc., a private company doing business as Edovo, which provides education services to correctional facilities.

Mr. Harczak is also a board member of several private and non-profit entities.

Mr. Harczak is a Certified Public Accountant (inactive). 

Mr. Harczak has an undergraduate degree in accounting from DePaul University and an MBA from the University of Chicago.

Mr. Harczak brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications in finance, sales, operations and management as a result of his prior positions at CDW Corporation.  In addition, Mr. Harczak brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his service as a director of U.S. Cellular for many years.  In addition, Mr. Harczak has substantial experience, expertise and qualifications in accounting and auditing as a Certified Public Accountant, as a former chief financial officer of CDW Corporation and as a former partner and employee of PricewaterhouseCoopers LLP.  As a result, he has been designated as an audit committee financial expert on U.S. Cellular’s Audit Committee.

Gregory P. Josefowicz. Gregory P. Josefowicz was last elected as a director by the holders of Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Josefowicz, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular. 

Gregory P. Josefowicz has significant experience with U.S. Cellular and the wireless industry, having served as a director of U.S. Cellular since 2009 and a member of its Audit Committee from 2010 to 2015 and a member of its Long-Term Incentive Compensation Committee since 2015.  Mr. Josefowicz was a director of TDS between 2007 and 2009.

Gregory P. Josefowicz is currently a private investor.  He previously served as a non-exclusive, senior level consultant to Borders Group, Inc. (NYSE: BGP), a global retailer of books, music and movies, between 2006 and 2008. 

From 1999 until his retirement in 2006, Mr. Josefowicz served as a director and president and chief executive officer, and was named chairman of the board in 2002, of Borders Group which, at the time, had over 14,000 employees worldwide. 

Prior to that, he was chief executive officer of the Jewel-Osco division of American Stores Company, which operated food and drug stores in the greater Chicago, Illinois and Milwaukee, Wisconsin areas, from 1997 until 1999 when American Stores merged into Albertson’s Inc., a national retail food-drug chain.  At that time, Mr. Josefowicz became president of Albertson’s Midwest region.  Mr. Josefowicz joined Jewel in 1974, and was elected senior vice president of marketing and advertising in 1993. 

Mr. Josefowicz has been a member of the board of directors of True Value Company, a retailer-owned cooperative that operates hardware stores, since 2010.

Mr. Josefowicz is a member of the board of directors of KeHE Distributors, LLC, an employee-owned company which distributes food products to retailers in North America.

Mr. Josefowicz was formerly a director of Roundy’s, Inc. (formerly NYSE: RNDY), a leading grocer in the Midwest, between 2012 and 2015.  He was the “lead director” of Roundy’s, a member and chairperson of its nominating and corporate governance committee, and a member of its audit committee and of its compensation committee.  Roundy’s, Inc. was acquired by and became a wholly-owned subsidiary of The Kroger Company in 2015. 

Mr. Josefowicz was formerly the non-executive chairman of the board of directors of PetSmart, Inc. (formerly NASDAQ: PETM), a leading pet supply and services retailer, between 2013 and 2015.  Before that, he was the “lead director” of PetSmart and had been a member of its board of directors between 2004 and 2015.  He was a member and the chairperson of its nomination and governance committee and a member of its compensation committee.  PetSmart effected a merger in 2015 pursuant to which it became privately held. 

Mr. Josefowicz was formerly a member of the board of directors of Tops Holding Corporation, the parent of Tops Markets, LLC, which operates and franchises supermarkets, between 2008 and 2013.  Tops Holding Corporation does not have any publicly traded common stock but, as a result of its registration with the SEC of debt securities, Tops Holding Corporation files periodic reports with the SEC.

Mr. Josefowicz was formerly a director of Winn-Dixie Stores, Inc. (formerly NASDAQ: WINN), one of the nation’s largest food retailers, between 2006 and 2012, when it was acquired by Bi-Lo Holdings, Inc.  He was also a member and an “audit committee financial expert” of its audit committee and the “lead director” of Winn-Dixie Stores.

Mr. Josefowicz was formerly a director of Ryerson Inc. (formerly NYSE: RYI), a leading distributor and processor of metals in North America, between 1999 and 2006, when it was acquired by Rhombus Holding Corp.   Mr. Josefowicz had been a member and the chairperson of the audit committee of Ryerson. 

Mr. Josefowicz also was formerly a director of Spartan Stores (NASDAQ: SPTN), a U.S. grocery distributor, between 2001 and 2005.  Mr. Josefowicz had been a member of the compensation committee of Spartan Stores.

Mr. Josefowicz had been a director of TDS between 2007 and 2009. 

As a result of the settlement of a proxy contest by TDS in 2009, Mr. Josefowicz ceased to be a director of TDS at its 2009 annual meeting.  However, because TDS believed that Mr. Josefowicz was an outstanding director, TDS requested that the U.S. Cellular board of directors consider nominating Mr. Josefowicz to the U.S. Cellular board in 2009 in order to permit U.S. Cellular to benefit from his experience and insights.  After consideration of the background and experience of Mr. Josefowicz, the U.S. Cellular board of directors nominated him for election as a director at the 2009 annual meeting and Mr. Josefowicz has been a director since that annual meeting.   

Mr. Josefowicz has an MBA from Northwestern University’s J. L. Kellogg Graduate School of Management.

Mr. Josefowicz brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications in retail marketing and management.  He has over 20 years of management experience, including senior management experience leading large retail organizations.  Because of the retail nature of the U.S. Cellular business, the U.S. Cellular board believes that it is highly desirable to have a director with significant knowledge and experience in retail marketing and management of retail businesses. 

Nominees for Election by Holder of Series A Commons Shares

James Barr III.  James Barr III was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Barr, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular. 

James Barr III has extensive experience with U.S. Cellular and the wireless industry, having served as a director of U.S. Cellular since 2009, and as a director of TDS between 1990 and 2009.  Mr. Barr has also been a member of U.S. Cellular’s Audit Committee since 2014.

Mr. Barr is currently a private investor. 

James Barr III had been the President and Chief Executive Officer of TDS Telecommunications Corporation (“TDS Telecom”), a wholly-owned subsidiary of TDS, which operates TDS’ Wireline, Hosted and Managed Services (HMS) and Cable segments,  between 1990 when he joined TDS Telecom and his retirement from TDS Telecom in 2007.  Mr. Barr stepped down as the President and Chief Executive Officer of TDS Telecom and retired as an employee in 2007. 

After his retirement, Mr. Barr served as a consultant to TDS until 2009. 

As a result of the settlement of a proxy contest by TDS in 2009, James Barr III ceased to be a director of TDS at its 2009 annual meeting.  However, because TDS believed that Mr. Barr was an outstanding director, TDS requested that the U.S. Cellular board of directors consider nominating Mr. Barr to the U.S. Cellular board in 2009 in order to permit U.S. Cellular to benefit from his experience and insights.  After consideration of the background and experience of Mr. Barr, the U.S. Cellular board of directors nominated him for election as a director at the 2009 annual meeting and Mr. Barr has been a director since that annual meeting.   

Prior to his employment with TDS Telecom in 1990, Mr. Barr served as a Sales Vice President for American Telephone and Telegraph Company (“AT&T”), an international telecommunications company (NYSE: T), from 1985 through 1989.

Mr. Barr was previously a director of former TDS subsidiaries Aerial Communications, Inc. (formerly NASDAQ: AERL), which developed and operated wireless personal communications services, and American Paging, Inc. (formerly AMEX: APP), which operated wireless paging services.

Mr. Barr has an undergraduate degree in Mechanical Engineering from Iowa State University and an MBA from the University of Chicago.

Mr. Barr brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to the telecommunications industry as a result of his many years as a director of TDS and as President and Chief Executive Officer of TDS Telecom, and as an executive with AT&T.  In addition, Mr. Barr’s background in wireline telecommunications brings diversity of experience to the U.S. Cellular board in operating its wireless business.
 

Steven T. Campbell.  Steven T. Campbell was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Campbell, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular.

Steven T. Campbell has significant experience with U.S. Cellular and the wireless industry, having served as an executive officer of U.S. Cellular since 2005 and as a director of U.S. Cellular since 2014.

Steven T. Campbell has been the Executive Vice President – Finance, Chief Financial Officer and Treasurer of U.S. Cellular since 2007. Mr. Campbell is responsible for all financial matters for U.S. Cellular, including accounting, financial reporting and transparency, financial planning and analysis, and treasury functions.  In addition, his team leads long-term business strategies, risk management, intercarrier business, legal and regulatory affairs, real estate leasing and site services, and supply chain activities.

Mr. Campbell joined U.S. Cellular as Vice President and Controller in 2005.  Prior to joining U.S. Cellular, Mr. Campbell held senior finance and accounting positions at 3Com Corporation (formerly NASDAQ:  COMS), which was a digital electronics manufacturer, U.S. Robotics Corporation (formerly NASDAQ: USRX), a data communications company that manufactured modems and related products prior to its acquisition by 3Com in 1997, and Amoco Corporation (formerly NYSE:  AN), which was an integrated petroleum company.  He began his finance and accounting career with PricewaterhouseCoopers LLP. 

Mr. Campbell is a Certified Public Accountant (inactive), has an MBA from Northwestern University’s J. L. Kellogg Graduate School of Management and has a bachelor's degree in accounting from Quincy University.

Mr. Campbell brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his employment with U.S. Cellular since 2005.   He also brings substantial experience, expertise and qualifications with respect to finance and accounting as a result of his extensive experience at U.S. Cellular, 3Com Corporation, U.S. Robotics Corporation, Amoco Corporation and PricewaterhouseCoopers LLP.

LeRoy T. Carlson, Jr.  LeRoy T. Carlson, Jr. was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Carlson, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular. 

LeRoy T. Carlson, Jr. has extensive experience with U.S. Cellular and the wireless industry as a director of U.S. Cellular since the time that U.S. Cellular was founded in 1984.  He has also been a member of the U.S. Cellular Pricing Committee for many years.

LeRoy T. Carlson, Jr. has been the Chairman (an executive officer) of U.S. Cellular since 1989.

LeRoy T. Carlson, Jr. is also TDS’ President and Chief Executive Officer (an executive officer of TDS).  He has been TDS’ President since 1981 and its Chief Executive Officer since 1986. 

Mr. Carlson has also served on the board of directors of TDS since the time that TDS was founded in 1968.

He has been a director of TDS Telecom since 1988 and the Chairman (an executive officer) of TDS Telecom since 1990. 

Mr. Carlson was previously a director of former TDS subsidiaries Aerial Communications, Inc. (formerly NASDAQ: AERL), which developed and operated wireless personal communications services, and American Paging, Inc. (formerly AMEX: APP), which operated wireless paging services.

Mr. Carlson has an MBA from Harvard University.

Mr. Carlson brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his many years as a director and President and Chief Executive Officer of TDS, as a director and Chairman of U.S. Cellular and as a director and Chairman of TDS Telecom.  As the senior executive officer of U.S. Cellular and of its parent, TDS, the board of directors considers it essential that Mr. Carlson serve on the U.S. Cellular board.   Also, because he is a director and officer of TDS, the largest shareholder of U.S. Cellular, his participation on the U.S. Cellular board of directors permits him to represent the long-term interests of U.S. Cellular shareholders.

LeRoy T. Carlson, Jr. is the son of LeRoy T. Carlson and the brother of Walter C. D. Carlson.

Walter C.D. Carlson.  Walter C. D. Carlson was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Carlson, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular.

Walter C. D. Carlson has extensive experience with U.S. Cellular and the wireless industry as a director of U.S. Cellular since 1989.

Walter C. D. Carlson has been a partner of the law firm of Sidley Austin LLP since 1986 and is a member of its executive committee.  Mr. Carlson is an experienced litigator, and has represented clients in a variety of types of specialized and general commercial litigation. The law firm of Sidley Austin LLP provides legal services to U.S. Cellular, TDS and their subsidiaries on a regular basis.  See “Certain Relationships and Related Transactions” below.  Mr. Carlson does not provide legal services to U.S. Cellular, TDS or their subsidiaries. 

Mr. Carlson has served on the board of directors of TDS since 1981 and has been TDS’ non-executive Chairman of the Board since 2002. 

Mr. Carlson was a director of former TDS subsidiary Aerial Communications, Inc. (formerly NASDAQ: AERL), which developed and operated wireless personal communications services.

Mr. Carlson has a J.D. from Harvard University.

Mr. Carlson brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his many years as a director of U.S. Cellular and TDS, and as Chairman of the Board of TDS. He also has substantial experience, expertise and qualifications as a result of having represented many corporate clients as a lawyer.  Also, because he is a director of TDS, the largest shareholder of U.S. Cellular, his participation on the U.S. Cellular board of directors permits him to represent the long-term interests of U.S. Cellular shareholders.

Walter C. D. Carlson is the son of LeRoy T. Carlson and the brother of LeRoy T. Carlson, Jr.

Ronald E. Daly.   Ronald E. Daly was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Daly, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular.

Ronald E. Daly has significant experience with U.S. Cellular and the wireless industry, having served as a director of U.S. Cellular since 2004.  He is also a member of the U.S. Cellular Long-Term Incentive Compensation Committee. 

Mr. Daly is currently a private investor.

Mr. Daly was the president and chief executive officer of Océ-USA Holding, Inc. between 2002 and 2004. Océ-USA Holding is the North American operations of Netherlands based Océ-N.V., a publicly-held global supplier of high-technology, digital document management and delivery solutions.

Prior to that, Mr. Daly worked for R.R. Donnelley, Inc. (NASDAQ: RRD), a global provider of printing and communications services, for 38 years, most recently as president of R.R. Donnelley Printing Solutions.  His career at R.R. Donnelley included seven years as president of its telecom group, the customers of which included major telecommunications companies.

Between 2003 and 2013, Mr. Daly served as a director of SuperValu, Inc. (NYSE: SVU), a major distributor, wholesaler and retailer in the food service industry.  He also served as a member of the compensation committee, governance committee and finance committee of SuperValu.

Mr. Daly was a Trustee of Loyola University Chicago until 2014 and served as an Adjunct Professor of Strategy and Leadership thereof between 2004 and 2010.  During this period, he taught strategy for MBA students and also taught a course on the subject of guiding transformational change.

Mr. Daly is also a member of the board of directors and vice chair of the AARP, Inc. and had previously served as a member of the board of directors of the AARP Foundation.

In addition, Mr. Daly has served as vice chairman of the Environmental Law and Policy Center board, president of the Leadership Greater Chicago Board, member of the Board of Trustees for the Chicago Symphony Orchestra, member of the Conference Board Council of Operating Executives and member of the National Black MBA Association.

Mr. Daly has an MBA from the Loyola University School of Business. 

Mr. Daly brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications in management as a result of having been the president and chief executive officer of Océ-USA Holding and president of R.R. Donnelley Printing Solutions.  In addition, Mr. Daly has experience and knowledge with respect to the telecommunications industry as a result of his service as a director of U.S. Cellular since 2004 and his service as the president of the R.R. Donnelley telecom group for seven years.   Further, his background and attributes bring diversity to the board.

Kenneth R. Meyers.  Kenneth R. Meyers was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting.  The following provides information on the background of Mr. Meyers, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular.

Kenneth R. Meyers has extensive experience with U.S. Cellular and the wireless industry, including as a director of U.S. Cellular since 1999.  He has also been a member of the U.S. Cellular Pricing Committee for many years.

In 2013, Kenneth R. Meyers was appointed President and Chief Executive Officer (an executive officer) of U.S. Cellular. 

Mr. Meyers has been a director of TDS since 2007. Mr. Meyers was Executive Vice President and Chief Financial Officer (an executive officer) of TDS between 2007 and 2013, and also had been Vice President and Assistant Treasurer (an executive officer) of U.S. Cellular between 2011 and  2013.  He was Chief Accounting Officer (an executive officer) of U.S. Cellular and Chief Accounting Officer (an executive officer) of TDS Telecom between 2007 and 2011.   

Prior to that, he was Executive Vice President—Finance, Chief Financial Officer and Treasurer (an executive officer) of U.S. Cellular since 1999 and Senior Vice President-Finance (Chief Financial Officer) and Treasurer of U.S. Cellular from 1997 to 1999.  Prior to that, he was the Vice President-Finance (Chief Financial Officer) and Treasurer of U.S. Cellular for more than five years.  Mr. Meyers had been employed by U.S. Cellular in accounting and financial capacities since 1987. 

Mr. Meyers is a Certified Public Accountant (inactive) and has an MBA from Northwestern University’s J. L. Kellogg Graduate School of Management.

Mr. Meyers was a director of TDS Telecom between 2007 and 2014.

Mr. Meyers brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his many years as a director of U.S. Cellular, TDS and TDS Telecom, as a result of his many years as Executive Vice President – Finance, Chief Financial Officer and Treasurer of U.S. Cellular and his other prior positions at U.S. Cellular and as a result of having served as Executive Vice President and Chief Financial Officer of TDS.  He also brings substantial experience, expertise and qualifications in management, finance and accounting as a result of such background.  As the current President and Chief Executive Officer of U.S. Cellular, the board of directors considers it necessary that Mr. Meyers serve on the U.S. Cellular board to provide the board with his views on strategy and operations of U.S. Cellular. 

Peter L. Sereda.  Peter L. Sereda was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting. The following provides information on the background of Mr. Sereda, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular.

Peter L. Sereda has extensive experience with U.S. Cellular and the wireless industry, having served as an executive officer of TDS since 1998 and as a director of U.S. Cellular since 2014.

Peter L. Sereda was appointed Senior Vice President—Finance and Treasurer of TDS in 2011.  Mr. Sereda is responsible for long- and short-term financing, cash and investment management, commercial and investment bank relationships, risk and pension asset management, and stock repurchases and other equity capital markets transactions for TDS and its subsidiaries, including U.S. Cellular.

Mr. Sereda joined TDS in 1998 as Vice President and Treasurer. Prior to joining TDS, Mr. Sereda held senior finance positions with Specialty Foods Corporation, a private producer of meat products, and Duchossois Industries, a private manufacturer of security, lighting and other products. 

Mr. Sereda has an MBA in finance and statistics from the University of Chicago Graduate School of Business and a BS in civil engineering and economics from the Massachusetts Institute of Technology.

Mr. Sereda brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his employment with TDS since 1998.  He also brings substantial experience, expertise and qualifications with respect to finance and capital markets as a result of his extensive experience at TDS and U.S. Cellular, Specialty Foods Corporation and Duchossois Industries.

Douglas D. Shuma.  Douglas D. Shuma was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting. The following provides information on the background of Mr. Shuma, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular. 

Douglas D. Shuma has significant experience with U.S. Cellular and the wireless industry, having served as an executive officer of TDS since 2007 and as a director of U.S. Cellular since 2014.

Douglas D. Shuma was appointed Chief Accounting Officer of U.S. Cellular, and also of TDS Telecom, in 2011.  Mr. Shuma was appointed Senior Vice President – Finance and Chief Accounting Officer of TDS in 2015.  Prior to that, he was the Senior Vice President and Controller of TDS since 2007.  Pursuant to the TDS Bylaws, Mr. Shuma has been chief accounting officer of TDS since 2007 and has been the chief financial officer of TDS since 2013.   Pursuant to the TDS Bylaws, Mr. Shuma is responsible for financial reporting; accounting policy and internal controls; tax functions; and budgeting, planning and analysis for TDS and its subsidiaries.

Prior to joining TDS, Mr. Shuma owned an accounting consulting company.  Prior to that, he held senior accounting and finance positions with Baxter International and Caremark International. He began his career with PricewaterhouseCoopers LLP.

Mr. Shuma is a Certified Public Accountant (inactive), has an MBA from Northwestern University’s J. L. Kellogg Graduate School of Management and a BS in accounting science from the University of Illinois at Urbana-Champaign.

Mr. Shuma brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular and the telecommunications industry as a result of his employment with TDS since 2007.  He also brings substantial experience, expertise and qualifications with respect to accounting and finance as a result of his extensive experience at TDS, Baxter International, Caremark International and PricewaterhouseCoopers LLP and as Chief Accounting Officer of U.S. Cellular and of TDS Telecom.

Cecelia D. Stewart. Cecelia D. Stewart was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting.  The following provides information on the background of Ms. Stewart, including the specific factors that led to the conclusion that she should serve as a director of U.S. Cellular. 

Cecelia D. Stewart has experience with U.S. Cellular and the wireless industry by having served as a director of U.S. Cellular since 2013.

Before her retirement in 2014, Ms. Stewart had been the president of U.S. Consumer and Commercial Banking of Citigroup Inc. (NYSE: C), a global bank which provides a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management, since 2011. 

Prior to that, Ms. Stewart was the president of the retail banking group and chief executive officer of the private bank division of Morgan Stanley (NYSE: MS), a global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services,  between 2009 and 2011.

Prior to that, Ms. Stewart served as executive vice president and head of retail and small business banking at Wachovia Corporation, which at the time was a publicly-held diversified financial services company (formerly NYSE: WB), from 2003 to 2008. Prior to that, she had been employed by Wachovia Corporation since 1978 in a variety of regional banking positions.

Ms. Stewart has been a director of First Horizon National Corporation (NYSE: FHN), a bank holding company providing regional banking and other financial services primarily in Tennessee and surrounding markets, since 2014.  She also serves as a member of this company’s audit committee and trust committee and is chairperson of its information technology committee.

Ms. Stewart attended the University of South Carolina and graduated from Winthrop University's Executive Master of Business Administration program with honors in 1993.

Ms. Stewart is on the Foundation Board for Winthrop University and was also previously on the board of directors and the prior Chair of the Consumer Bankers Association.

Ms. Stewart brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications as a member of senior management of large, public companies and in financial services as a result of having been the president of U.S. Consumer and Commercial Banking of Citigroup, the president of the retail banking group and chief executive officer of the private bank division of Morgan Stanley and an executive vice president and head of retail and small business banking at Wachovia Corporation.  Further, Ms. Stewart’s background and attributes bring diversity to the board.

Kurt B. Thaus.  Kurt B. Thaus was last elected as a director by the holder of Series A Common Shares at the 2015 annual meeting. The following provides information on the background of Mr. Thaus, including the specific factors that led to the conclusion that he should serve as a director of U.S. Cellular.

Kurt B. Thaus has significant experience with U.S. Cellular and the wireless industry, having served as an executive officer of TDS since 2004 and as a director of U.S. Cellular since 2014.

Kurt B. Thaus has been the Senior Vice President and Chief Information Officer of TDS since 2004.  He is responsible for all elements of TDS’ information technology function, including cybersecurity, data management, and financial and operational applications.

Prior to joining TDS, Mr. Thaus held senior leadership positions with T-Systems North America, Inc., a subsidiary of T-Systems International, a private information and communication technology company that is wholly-owned by Deutsche Telekom, AG, and Waste Management, Inc. (NYSE: WM), a provider of waste management and environmental services.

Earlier in his career, Mr. Thaus assessed mechanical systems for  nuclear power plants as an Engineering Analyst for Commonwealth Edison, an electric utility in Illinois that is wholly-owned by Exelon Corp. (NYSE:  EXC) and then was a Senior Systems Engineer for Sargent & Lundy Engineers, a private company that provides consulting to power plants.

Mr. Thaus holds an MS in engineering management from Northwestern University and a BS in mechanical engineering from the University of Illinois at Urbana-Champaign.

Mr. Thaus brings to the U.S. Cellular board of directors substantial experience, expertise and qualifications with respect to U.S. Cellular, the telecommunications industry, technology and IT security as a result of his many years as TDS’s Senior Vice President and Chief Information Officer.  He also brings substantial experience, expertise and qualifications with respect to technology, IT security and related matters as a result of his more than 30 years of successive experience in information technology, mechanical, environmental, and systems engineering, and operations leadership.

Director Emeritus

LeRoy T. Carlson.  LeRoy T. Carlson was a director of U.S. Cellular between 1987 and 2012.  Mr. Carlson did not stand for re-election at the 2012 annual meeting and was appointed director emeritus of U.S. Cellular at that time.  LeRoy T. Carlson founded TDS in 1968, and TDS founded U.S. Cellular in 1984.  Mr. Carlson was a director of TDS from its founding in 1968 until 2008, at which time he became a director emeritus of TDS.  He has been the Chairman Emeritus (an executive officer) of TDS for more than five years.  Mr. Carlson is the father of LeRoy T. Carlson, Jr. and Walter C. D. Carlson.

CORPORATE GOVERNANCE

Board of Directors

The business and affairs of U.S. Cellular are managed by or under the direction of the board of directors.  The board of directors consists of fourteen members.  Holders of Common Shares elect 25% of the directors rounded up to the nearest whole number, or four directors based on a board size of fourteen directors.  TDS, as the sole holder of Series A Common Shares, elects the remaining ten directors.  As of February 29, 2016, TDS had 100% of the voting power in the election of such ten directors, approximately 73.6% of the voting power in the election of the remaining four directors and approximately 96.5% of the voting power in all other matters. 

Board Leadership Structure

Under the leadership structure selected for U.S. Cellular, the same person does not serve as both the chairman and chief executive officer.  LeRoy T. Carlson, Jr. serves as Chairman and, in that capacity, sets the agenda and presides over board of directors meetings, and assesses the performance of U.S. Cellular.  Kenneth R. Meyers serves as President and Chief Executive Officer and is responsible for day-to-day leadership and performance of U.S. Cellular and, in that capacity, regularly confers and consults with the Chairman with respect to important strategic, operating and financial activities and decisions.  This leadership structure is set forth in U.S. Cellular’s Bylaws.  U.S. Cellular has determined that this leadership structure is appropriate given the specific characteristics and circumstances of U.S. Cellular.  In particular, U.S. Cellular is a subsidiary of, and controlled by, TDS.  As a result, it is considered appropriate that LeRoy T. Carlson, Jr. (who is the President and Chief Executive Officer of TDS), should serve as the Chairman of U.S. Cellular, and that the President and Chief Executive Officer of U.S. Cellular should report to the Chairman.  This permits the President and Chief Executive Officer of U.S. Cellular’s largest shareholder to provide oversight with respect to the President and Chief Executive Officer who has operating authority over U.S. Cellular.  In addition, this leadership structure separates the executive who is primarily responsible for the performance of the company from the person who sets the agenda for and presides over board of directors meetings at which performance of U.S. Cellular is evaluated.

Board Role in Risk Oversight

The following discloses the extent of the board of directors’ role in the risk oversight of U.S. Cellular, including how the board administers its oversight function, and the effect of the board’s leadership structure discussed above on risk oversight. 

The U.S. Cellular board of directors is primarily responsible for oversight of the risk assessment and risk management process of U.S. Cellular.  Although the U.S. Cellular board of directors can delegate this responsibility to board committees, including the Audit Committee, the U.S. Cellular board of directors has not done so, and continues to have full responsibility relating to risk oversight.  Although the U.S. Cellular board of directors has oversight responsibilities, the actual risk assessment and risk management is carried out by the President and Chief Executive Officer and other officers of U.S. Cellular and reported to the board of directors.

As part of its oversight responsibilities, the U.S. Cellular board of directors reviews the Enterprise Risk Management (ERM) program which applies to TDS and all of its business units, including U.S. Cellular.  This program was designed with the assistance of an outside consultant and was integrated into TDS’ existing management and strategic planning processes, including such processes of U.S. Cellular.  The ERM program provides a common enterprise-wide language and discipline around risk identification, quantification and mitigation. 

Although the U.S. Cellular board of directors has ultimate oversight authority over risk and has not delegated such responsibility to any committees, certain U.S. Cellular committees also have certain responsibilities relating to risk. 

Under NYSE listing standards, and as set forth in its charter, the Audit Committee is required to “discuss policies with respect to risk assessment and risk management.”  NYSE listing standards further provide that, “while it is the job of the CEO and senior management to assess and manage the listed company’s exposure to risk, the audit committee must discuss guidelines and policies to govern the process by which this is handled.  The audit committee should discuss the listed company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.  The audit committee is not required to be the sole body responsible for risk assessment and management, but, as stated above, the committee must discuss guidelines and policies to govern the process by which risk assessment and management is undertaken.”

Accordingly, pursuant to the foregoing requirements, the Audit Committee discusses U.S. Cellular’s major financial risk exposures and the steps management has taken to monitor and control such exposures in connection with its review of financial statements and related matters on a quarterly basis. 

In addition, as part of the ERM program, the Audit Committee discusses guidelines and policies to govern the process by which risk assessment and risk management are handled.  The Audit Committee receives updates and discusses policies with respect to risk assessment and risk management on a regular basis.  The Audit Committee is not solely responsible for ERM, but the committee discusses guidelines and policies to govern the process by which ERM is undertaken.

In addition, the Long-Term Incentive Compensation Committee, which has responsibilities relating to the equity compensation of the executive officers of U.S. Cellular, and the Chairman of U.S. Cellular, who in effect functions as the compensation committee for non-equity compensation for the executive officers of U.S. Cellular other than himself, consider risks relating to compensation of executive officers, as discussed below in the Compensation Discussion and Analysis, and risks relating to compensation policies and procedures for all employees, as discussed below under “Risks from Compensation Policies and Practices”.   

Furthermore, TDS has established a Technology Advisory Group for TDS and its business units, including U.S. Cellular.  The functions of the Technology Advisory Group include, inter alia, to review, monitor and inform the board of directors on technology matters, including spectrum, radio transmission, end user equipment, network technology, information technology, security, data storage, retrieval, and handling, and other matters relating to technology used or proposed to be used by TDS’ business units and by their customers and by competitors of TDS’ business units and by their customers, as well as developments and trends in the communication industry related to technology.  This includes reviewing matters relating to technology security, threats, risks and internal controls, including safeguards, vulnerabilities, preparedness, disaster recovery plans, cybersecurity-insurance and similar matters.  Related to this, the U.S. Cellular board of directors established a Technology Advisory Group Committee of the board of directors that will consist of directors who will participate in the Technology Advisory Group.  See below for further information on the U.S. Cellular Technology Advisory Group Committee and the Technology Advisory Group. 

U.S. Cellular believes that the leadership structure described above facilitates risk oversight because the role of the President and Chief Executive Officer, who has primary responsibility to assess and manage U.S. Cellular’s exposure to risk, is separated from the role of the Chairman, who sets the agenda for and presides over board of directors meetings at which the U.S. Cellular board exercises its oversight function with respect to risk.

Board Oversight of Cybersecurity

U.S. Cellular believes oversight of cybersecurity risks is the responsibility of the full board of directors and receives annual updates regarding U.S. Cellular’s assessment of threats and mitigation plans.  The Audit Committee also exercises oversight for the control-related cybersecurity risks and mitigation plans and receives updates bi-annually.  The Technology Advisory Group, as described above, also reviews cybersecurity topics bi-annually. 

Director Independence and New York Stock Exchange Listing Standards

U.S. Cellular Common Shares are listed on the NYSE.  Accordingly, U.S. Cellular is subject to the listing standards applicable to companies that have equity securities listed on the NYSE.

Under the listing standards of the NYSE, U.S. Cellular is a "controlled company" as such term is defined by the NYSE. U.S. Cellular is a controlled company because over 50% of the voting power for the election of directors of U.S. Cellular is held by TDS (i.e., because TDS holds 100% of the Series A Common Shares and a majority of the Common Shares, it has the voting power to elect all of the directors of U.S. Cellular).  Accordingly, U.S. Cellular is exempt from certain listing standards that require listed companies that are not controlled companies to (i) have a board composed of a majority of directors who qualify as independent under the rules of the NYSE, (ii) have a compensation committee composed entirely of directors who qualify as independent under the rules of the NYSE, and (iii) have a nominating/corporate governance committee composed entirely of directors who qualify as independent under the rules of the NYSE.

Meetings of Board of Directors

Our board of directors held four meetings during 2015. Each incumbent director attended at least 75% of the total number of meetings of the board of directors held during 2015 (during the period that such person was a director) and at least 75% of the total number of meetings held by each committee of the board on which such person served (during the period that such person served).

Corporate Governance

U.S. Cellular endeavors to follow good corporate governance practices and other best practices.  For instance, U.S. Cellular has established a Long-Term Incentive Compensation Committee with authority over long-term incentive compensation, even though it is not required to do so under law, SEC regulations or NYSE listing requirements because it is controlled by TDS.  Other executive compensation is approved by U.S. Cellular’s Chairman, LeRoy T. Carlson, Jr., who is also a director and President and Chief Executive Officer of TDS, the largest shareholder of U.S. Cellular.  Mr. Carlson’s position with TDS permits him to represent the interests of all shareholders of U.S. Cellular in his compensation decisions.  U.S. Cellular, and TDS in its capacity as U.S. Cellular’s parent and controlling shareholder, are committed to good corporate governance. 

Corporate Governance Guidelines

Under NYSE listing standards, U.S. Cellular is required to adopt and disclose corporate governance guidelines that address certain specified matters.  U.S. Cellular has adopted Corporate Governance Guidelines that address (i) board of directors structure, (ii) director qualification standards, (iii) director responsibilities, orientation and continuing education, (iv) director compensation, (v) board resources and access to management and independent advisors, (vi) annual performance evaluation of the board and committees, (vii) board committees, (viii) management succession and (ix) periodic review of the guidelines.  A copy of such guidelines is available on U.S. Cellular’s website, www.uscellular.com, under About Us—Investor Relations—Corporate Governance—Governance Guidelines.

These Guidelines provide that, once each year, the board of directors will meet to discuss corporate governance generally, including the allocation of seats between independent and non-independent directors. 

Board Self-Assessment.  Pursuant to these Guidelines, under the leadership of the Chairman, the board of directors performed a self-assessment and evaluated its performance and effectiveness as a board in 2015.  This self-assessment covered matters relating to board meetings, board composition, committees, board oversight, and other matters.  Similarly, each committee of the board of directors evaluated its performance and effectiveness in 2015.

Audit Committee

The purpose and primary functions of the Audit Committee are to (a) assist the board of directors of U.S. Cellular in its oversight of (1) the integrity of U.S. Cellular’s financial statements, (2) U.S. Cellular’s compliance with legal and regulatory requirements, (3) the qualifications and independence of U.S. Cellular’s registered public accounting firm, and (4) the performance of U.S. Cellular’s internal audit function and registered public accounting firm; (b) prepare an audit committee report as required by the rules of the SEC to be included in U.S. Cellular’s annual proxy statement; and (c) perform such other functions as set forth in the U.S. Cellular Audit Committee charter, which shall be deemed to include the duties and responsibilities set forth in Section 10A-3.  A copy of U.S. Cellular’s Audit Committee charter is available on U.S. Cellular's website, www.uscellular.com, under About Us—Investor Relations—Corporate Governance—Audit Committee Charter.

In addition, the Audit Committee has certain responsibilities relating to risk management as discussed above under “Board Role in Risk Oversight.” 

As a controlled company, U.S. Cellular is required to have at least three directors who qualify as independent to serve on the Audit Committee. The U.S. Cellular Audit Committee has four members: James Barr III, J. Samuel Crowley, Paul-Henri Denuit and Harry J. Harczak, Jr.  Such directors must qualify as independent under the NYSE Listed Company Manual, including Section 303A.02(a) and Section 303A.02(b). Such directors must also qualify as independent under Section 303A.06, which incorporates the independence requirements of Rule 10A-3 under Section 10A-3 of the Securities Exchange Act of 1934, as amended (collectively, “Section 10A-3”).  Except as required by listing standards or SEC rule, U.S. Cellular does not have any categorical standards of independence that must be satisfied.

The board of directors has determined that each of the members of the Audit Committee is financially literate and has “accounting or related financial management expertise” pursuant to listing standards of the NYSE. 

Pursuant to the requirements of the NYSE Listed Company Manual, the U.S. Cellular board of directors affirmatively determined that each member of the Audit Committee has no material relationship with U.S. Cellular, either directly or as a partner, shareholder or officer of an organization that has a relationship with U.S. Cellular, and that each of such persons is independent (pursuant to Section 303A.02(a), Section 303A.02(b) and Section 10A-3) considering all relevant facts and circumstances, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, if any. 

Such relevant facts and circumstances included the following:  None of such persons is, or has been within the last three years, an employee or officer of U.S. Cellular, TDS or any other member of the TDS consolidated group (“TDS Consolidated Group”).  None of such persons has any direct or indirect business relationships and/or fee arrangements with the TDS Consolidated Group.  None of such persons receives, or has received within the last three years, any compensation from the TDS Consolidated Group, except compensation for his services as a director and member of board committees of U.S. Cellular and except for post-retirement benefits and payments as permitted under Section 303A.02(b) of the NYSE Listed Company Manual and Section 10A-3.  None of such persons has any other relationship or arrangement with the TDS Consolidated Group except in his or her capacity as a director and member of board committees of U.S. Cellular.  Each of such persons qualifies as independent under each of the categorical standards in Section 303A.02(b) of the NYSE Listed Company Manual.  Each of such persons qualifies as independent under Section 10A-3 because (i) none of such persons receives any compensatory fee from any member of the TDS Consolidated Group (not including permitted compensation for his services as a director and member of board committees of U.S. Cellular or permitted post-retirement benefits and payments); and (ii) none of such persons is an “affiliated person” (as defined by the SEC) with respect to any member of the TDS Consolidated Group (because none of such persons is an executive officer, or the beneficial owner of more than 10% of any class of voting equity security, of any member of the TDS Consolidated Group).  None of such persons is an “immediate family member” (as defined by Section 303A.02(b)) of any person who is not independent under Section 303A.02 of the NYSE Listed Company Manual.  None of the relationships and/or fee arrangements which such persons have with the TDS Consolidated Group impair the independence of such persons for service on the Audit Committee under Section 303A.02(b) of the NYSE Listed Company Manual or Section 10A-3. 

In addition, Ronald E. Daly, Gregory P. Josefowicz and Cecelia D. Stewart would qualify as independent directors under the listing standards of the NYSE.  As a result, seven of the fourteen incumbent directors, or 50% of the directors, have been determined to qualify or would qualify as independent under the listing standards of the NYSE.

  The board determined that Harry J. Harczak, Jr. is an "audit committee financial expert" as such term is defined by the SEC.

In accordance with the SEC's safe harbor rule for "audit committee financial experts," no member designated as an audit committee financial expert shall (i) be deemed an "expert" for any other purpose or (ii) have any duty, obligation or liability that is greater than the duties, obligations and liability imposed on a member of the board or the audit committee not so designated. Additionally, the designation of a member or members as an "audit committee financial expert" shall in no way affect the duties, obligations or liability of any member of the audit committee, or the board, not so designated.

The Audit Committee held eight meetings during 2015.  Certain of these meetings were joint meetings with the TDS audit committee, which regularly meets with the U.S. Cellular Audit Committee.

Pre-Approval Procedures

The Audit Committee has adopted a policy pursuant to which all audit and non-audit services provided by U.S. Cellular’s principal independent registered public accounting firm must be pre-approved by the Audit Committee. Under no circumstances may U.S. Cellular's principal independent registered public accounting firm provide services that are prohibited by the Sarbanes Oxley Act of 2002 or rules issued thereunder.  Non-prohibited audit related services and certain tax and other services may be provided to U.S. Cellular, subject to such pre-approval process and prohibitions.  The Audit Committee has delegated to the chairperson of the Audit Committee the authority to pre-approve specific services by the independent registered public accounting firm.  In addition, specified services have been pre-approved in detail up to specified dollar limits pursuant to the policy.  All services are required to be reported to the full Audit Committee at each of its regularly scheduled meetings. 

Review, Approval or Ratification of Transactions with Related Persons

The Audit Committee charter provides that the Audit Committee has responsibilities with respect to related‑party transactions, as such term is defined by the rules of the NYSE.   Related party transactions are addressed in Section 314.00 of the NYSE Listed Company Manual.

Section 314.00 of the NYSE Listed Company Manual states that “Related party transactions normally include transactions between officers, directors, and principal shareholders and the company.” In general, “related party transactions'' would include transactions required to be disclosed in U.S. Cellular’s 2016 Proxy Statement pursuant to Item 404 of Regulation S-K of the SEC.  Pursuant to Item 404, U.S. Cellular is required to disclose any transaction, which includes any financial transaction, arrangement, or relationship (including any indebtedness or guarantee of indebtedness) or a series of transactions, that has taken place since the beginning of U.S. Cellular’s last fiscal year or any currently proposed transaction in which: (1) U.S. Cellular was or is to be a participant, (2) the amount involved exceeds $120,000 and (3) any “related person” had or will have a direct or indirect material interest in the transaction during any part of the fiscal year.  For this purpose, in general, the term “related person” includes any director or executive officer of U.S. Cellular, any nominee for director, any beneficial owner of more than five percent of any class of U.S. Cellular’s voting securities and any “immediate family member” of such persons, within the meaning of Item 404.

Section 314.00 of the NYSE Listed Company Manual provides that “Each related party transaction is to be reviewed and evaluated by an appropriate group within the listed company involved. While the NYSE does not specify who should review related party transactions, the NYSE believes that the Audit Committee or another comparable body might be considered as an appropriate forum for this task. Following the review, the company should determine whether or not a particular relationship serves the best interest of the company and its shareholders and whether the relationship should be continued or eliminated.”

Accordingly, pursuant to such provisions, the U.S. Cellular Audit Committee has responsibilities over transactions that are deemed to be related-party transactions under Section 314.00 of the NYSE Listed Company Manual.  Other than the foregoing, U.S. Cellular has no related party policies and procedures relating to (i) the types of transactions that are covered by such policies and procedures; (ii) the standards to be applied pursuant to such policies and procedures; or (iii) the persons or groups of persons on the board of directors or otherwise who are responsible for applying such policies and procedures.

See Executive and Director Compensation – Compensation Committee Interlocks and Insider Participation – Certain Relationships and Related Transactions for a discussion of any related party transactions since the beginning of the last fiscal year.   

Compensation Committee

U.S. Cellular does not have a formal standing compensation committee for executive compensation, except that long-term equity compensation of executive officers is approved by the Long-Term Incentive Compensation Committee, as discussed below.   LeRoy T. Carlson, Jr., Chairman of U.S. Cellular, functions as the compensation committee for all matters not within the authority of the Long-Term Incentive Compensation Committee, but does not do so pursuant to a charter.  LeRoy T. Carlson, Jr. does not approve any compensation to himself as Chairman.  Mr. Carlson receives no compensation directly from U.S. Cellular.  Mr. Carlson is compensated by TDS in connection with his services for TDS and TDS subsidiaries, including U.S. Cellular.  A portion of Mr. Carlson's compensation paid by TDS is allocated to U.S. Cellular by TDS, along with other expenses of TDS.  This allocation by TDS to U.S. Cellular is done in the form of a single allocation of cost pursuant to the Intercompany Agreement discussed below under "Intercompany Agreement."  Kenneth R. Meyers, President and Chief Executive Officer of U.S. Cellular, makes recommendations with respect to compensation for the named executive officers other than himself.  For further information, see “Compensation Discussion and Analysis” below.

The basis for the view of the board of directors that a formal independent compensation committee for all executive compensation is unnecessary is that U.S. Cellular is controlled by TDS.  As a controlled company, U.S. Cellular is not required to have an independent compensation committee under listing standards of the NYSE.  As a controlled company, except with respect to matters within the authority of the Long-Term Incentive Compensation Committee, U.S. Cellular considers it sufficient and appropriate that its Chairman, LeRoy T. Carlson, Jr., who is a director and president and chief executive officer of TDS, approves compensation decisions for U.S. Cellular.  As a result of Mr. Carlson’s position with TDS, which is the majority shareholder of U.S. Cellular, Mr. Carlson represents the interests of all shareholders of U.S. Cellular in his compensation decisions.  In addition, Mr. Carlson is compensated by TDS and does not receive any compensation directly from U.S. Cellular.

Long-Term Incentive Compensation Committee

Although it is not required to do so under NYSE listing standards, U.S. Cellular has a Long-Term Incentive Compensation Committee comprised solely of directors who qualify as independent under the rules of the NYSE.  In addition, the Long-Term Incentive Compensation Committee comprises at least two non-employee members of the U.S. Cellular board of directors, each of whom is an "outside director" within the meaning of section 162(m) of the Internal Revenue Code of 1986, as amended, and a "Non-Employee Director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended.

Under the Dodd-Frank Act, the SEC directed the NYSE to adopt listing standards prohibiting the listing of any equity security of an issuer that does not comply with specified listing requirements, including with respect to the independence of members of the compensation committee of the board of directors of such issuer, except that the Dodd-Frank Act expressly provides that this requirement does not apply to an issuer that is a controlled company.  In 2013, the NYSE adopted listing standards as required pursuant to such SEC direction.  Although such listing standards are not applicable to U.S. Cellular because it is a controlled company, the members of the Long-Term Incentive Compensation Committee would qualify as independent under these listing standards of the NYSE.  In particular, each member of the Long-Term Incentive Compensation Committee is independent under the general NYSE listing standards as noted under “Director Independence and New York Stock Exchange Listing Standards” above, none of such members receives any compensation from the TDS Consolidated Group except permitted compensation for services as a U.S. Cellular director and committee member, and none of such members is affiliated with the TDS Consolidated Group by reason of being an executive officer, or the beneficial owner of more than 10% of any class of voting equity security, of any member of the TDS Consolidated Group.

A copy of the Long-Term Incentive Compensation Committee charter is available on U.S. Cellular's website, www.uscellular.com, under About Us—Investor Relations—Corporate Governance—Long-Term Incentive Compensation Committee Charter.

The members of the Long-Term Incentive Compensation Committee currently are Paul-Henri Denuit (chairperson), J. Samuel Crowley, Ronald E. Daly, Gregory P. Josefowicz and Cecelia D. Stewart.

The Long-Term Incentive Compensation Committee held three meetings during 2015. 

The primary functions of the Long-Term Incentive Compensation Committee are: to discharge the board of directors’ responsibilities relating to the long-term equity-based compensation of the executive officers and other key employees of U.S. Cellular; to perform all functions designated to be performed by a committee of the board of directors under U.S. Cellular’s long-term equity-based  plans and programs; to review and recommend to the board of directors the long-term equity-based  plans and programs for employees of U.S. Cellular (including changes thereto); and to report on long-term equity-based compensation in U.S. Cellular’s annual proxy statement or otherwise to the extent required under any applicable rules and regulations.

The charter of the Long-Term Incentive Compensation Committee provides that the committee will interpret and administer U.S. Cellular’s long-term incentive plans and programs, including designating which affiliates of U.S. Cellular may have employees eligible to receive grants thereunder, establishing rules and regulations relating thereto, determining if someone is disabled for purposes thereof, approving persons to whom an award may be transferred, selecting employees who will be granted awards, establishing performance measures and restriction periods, and determining the form, amount and timing of each grant of an award, the number of shares of stock subject to an award, the purchase price or base price per share of stock associated with an award, the exercise price of an option award, the time and conditions of exercise or settlement of an award and all other terms and conditions of an award, including, without limitation, the form and terms of the agreement evidencing an award.

The Long-Term Incentive Compensation Committee may delegate some or all of its responsibilities and duties with respect to U.S. Cellular’s long-term incentive plans and programs under the foregoing paragraph to the Chairman of U.S. Cellular or any executive officer of U.S. Cellular as the committee deems appropriate, to the extent permitted by law and applicable listing standards and the applicable long-term incentive plan or program, but not regarding any award to officers of U.S. Cellular who are subject to the requirements of Section 16 of the Securities Exchange Act of 1934, as amended. 

The officers who are subject to the Section 16 requirements are set forth under the caption “Executive Officers” below in this 2016 Proxy Statement.  Except with respect to such persons, U.S. Cellular’s long-term incentive plan does not currently restrict the ability of the Long-Term Incentive Compensation Committee to delegate its power and authority.  As a result, currently the Long-Term Incentive Compensation Committee may delegate its power and authority to the Chairman or any executive officer of U.S. Cellular except with respect to the long-term equity compensation of the persons identified below under the caption “Executive Officers”.

The Long-Term Incentive Compensation Committee has not delegated any authority with respect to the executive officers identified in this 2016 Proxy Statement.

U.S. Cellular’s Human Resources Department supports the Chairman and the Long-Term Incentive Compensation Committee in their functions.  In connection therewith, U.S. Cellular utilizes the services of a compensation consultant.  See Compensation Discussion and Analysis below for information about U.S. Cellular’s compensation consultant, which information is incorporated by reference herein.

Director Compensation

It is the view of the U.S. Cellular board of directors that director compensation should be the responsibility of the full board of directors.  Therefore, this is approved by the full board of directors rather than by a committee of the board of directors.  U.S. Cellular does not have any stock ownership guidelines for directors.

Pricing Committee

U.S. Cellular has a Pricing Committee, consisting of LeRoy T. Carlson, Jr. as Chairman, and Kenneth R. Meyers as the other regular member.  In addition, each of Steven T. Campbell, Walter C. D. Carlson and Peter L. Sereda are alternate members.  The Pricing Committee does not have a charter.  Pursuant to resolutions of the U.S. Cellular board of directors, the Pricing Committee is authorized to take certain action with respect to financing and capital transactions of U.S. Cellular, such as the issuance, redemption or repurchase of debt or the repurchase of shares of capital stock of U.S. Cellular.

Technology Advisory Group Committee

In March 2015, the board of directors established the Technology Advisory Group Committee of the board of directors, to consist of directors who will participate in the Technology Advisory Group. 

The members of the U.S. Cellular Technology Advisory Group Committee are LeRoy T. Carlson, Jr. (chairman), Ronald E. Daly and Cecelia D. Stewart.  The members of the Technology Advisory Group Committee are also members of the Technology Advisory Group, the purpose of which is to review, monitor and inform the board of directors on technology matters, including spectrum, radio transmission, end user equipment, network technology, information technology, security, data storage, retrieval, and handling, and other matters relating to technology used or proposed to be used by TDS’ business units (including U.S. Cellular) and by their customers and by competitors of TDS’ business units and by their customers, as well as developments and trends in the communications industry relating to technology.  The Technology Advisory Group does not have authority to take action with respect to any technology matter, but serves solely in an informational and advisory role.  The U.S. Cellular Technology Advisory Group Committee and the Technology Advisory Group will report to the board of directors with respect to U.S. Cellular technology matters.

The Technology Advisory Group Committee held two meetings during 2015.

Director Nomination Process

U.S. Cellular does not have a corporate governance/nominating committee and does not have a corporate governance/nominating committee charter.  Under listing standards of the NYSE, U.S. Cellular is exempt from the requirement to have a corporate governance/nominating committee comprised solely of independent directors because it is a controlled company as such term is defined by the NYSE.  Instead, the entire board of directors participates in the consideration of director nominees.

As noted above, pursuant to the Corporate Governance Guidelines, once each year, the board of directors meets to discuss corporate governance generally, including the allocation of seats between independent and non-independent directors.  In addition, each year, the board of directors identifies and reviews the desired skills, backgrounds, and characteristics for potential new board members.  In its annual board assessments, the full board of directors also considers its composition and discusses expertise that may be needed in the future.  In connection with the nominations of directors for election, the board of directors considers the tenure, qualifications and expertise of all of the incumbent directors. The board of directors also considers the appropriate composition of each of the committees of the board of directors on an annual basis.

U.S. Cellular may use various sources to identify potential candidates for the board of directors, including an executive search firm.  The U.S. Cellular board of directors does not have a formal policy with regard to the consideration of director candidates recommended by shareholders.  Because TDS has sole voting power in the election of directors elected by the holder of Series A Common Shares and a majority of the voting power in the election of directors elected by holders of Common Shares, nominations of directors for election by the holders of Series A Common Shares and Common Shares are generally based on the recommendation of TDS.  With respect to candidates for director to be elected by the holders of Common Shares, the U.S. Cellular board may from time to time informally consider candidates recommended by shareholders who hold a significant number of Common Shares, in addition to the recommendation of TDS.  Although the U.S. Cellular board has no formal procedures to be followed by shareholders to recommend candidates to be nominated as directors, shareholders who desire to nominate directors must follow the procedures set forth in U.S. Cellular’s Bylaws.

Except to the extent provided in the next two paragraphs, the U.S. Cellular board of directors does not have any specific, minimum qualifications that the board believes must be met by a nominee for a position on the U.S. Cellular board of directors, or any specific qualities or skills that the board believes are necessary for one or more of the U.S. Cellular directors to possess.  The U.S. Cellular board believes that substantial judgment, diligence and care are required to identify and select qualified persons as directors and does not believe that it would be appropriate to place limitations on its own discretion.  The U.S. Cellular board of directors has consistently sought to nominate to the board of directors eminently qualified individuals whom the board believes would provide substantial benefit and guidance to U.S. Cellular. 

Considering the importance of Federal Communications Commission (“FCC”) licenses to U.S. Cellular, the U.S. Cellular Bylaws provide that a candidate will not be eligible for election or continued service as a director unless he or she is eligible to serve as a director of a company that controls licenses granted by the FCC, as determined by the board of directors with the advice of counsel.  Another qualification requirement provides that a candidate will not be eligible for election or continued service as a director if he or she is or becomes affiliated with, employed by or a representative of, or has or acquires a material personal involvement with, or material financial interest in, a Business Competitor (as defined in the U.S. Cellular Bylaws), as determined by the board of directors.  Another qualification requirement provides that a candidate will not be eligible for election or continued service as a director if, as determined by the board of directors with the advice of counsel, (i) such candidate’s election as a director would violate federal, state or foreign law or applicable stock exchange requirements (other than those related to independence) or (ii) such candidate has been convicted, including a plea of guilty or nolo contendere, of any felony, or of any misdemeanor involving moral turpitude.

Section 1.15 of the U.S. Cellular Bylaws provides that a person properly nominated by a shareholder for election as a director shall not be eligible for election as a director unless he or she signs and returns to the Secretary of U.S. Cellular, within fifteen days of a request therefor, written responses to any questions posed by the Secretary, that are intended to (i) determine whether such person may qualify as independent and would qualify to serve as a director of U.S. Cellular under rules of the FCC, and (ii) obtain information that would be disclosed in a proxy statement with respect to such person as a nominee for election as a director and other material information about such person.

The U.S. Cellular board of directors does not have a policy with regard to the consideration of diversity in identifying director nominees.  However, as reflected in its Code of Business Conduct, U.S. Cellular values diversity and does not discriminate on the basis of gender, age, race, color, sexual orientation, religion, ancestry, national origin, marital status, disability, military or veteran status or citizenship status.  In addition, in considering whether to nominate individuals as director candidates, the U.S. Cellular board of directors takes into account all facts and circumstances, including diversity.  For this purpose, diversity broadly means a variety of backgrounds, experience, skills, education, attributes, perspectives and other differentiating characteristics.  U.S. Cellular believes that it is desirable for a board to have directors who can bring the benefit of diverse backgrounds, experience, skills and other characteristics to permit the board to have a variety of views and insights.  Accordingly, the U.S. Cellular board of directors considers how director candidates can contribute to board diversity as one of the many factors it considers in identifying nominees for director.

In general, in determining whether to nominate incumbent directors for re-election, the U.S. Cellular board of directors considers all facts and circumstances, including the board of directors’ view of how each director has performed his or her duties. In the event of a vacancy on the board of a director elected by TDS as the sole holder of Series A Common Shares, nominations are based on the recommendation of TDS.  In the event of a vacancy on the board of a director elected by holders of Common Shares, U.S. Cellular may use various sources to identify potential candidates, including an executive search firm.  In addition, the U.S. Cellular board of directors may consider recommendations by TDS and other shareholders who hold a significant number of Common Shares.   Potential candidates are initially screened by the Chairman and by other persons as the Chairman designates.  Following this process, when appropriate, information about the candidate is presented to and discussed by the full board of directors.

There are currently fourteen directors.  Each of the nominees approved by the U.S. Cellular board for election at the 2016 Annual Meeting is an incumbent director who is standing for re-election and is being recommended for election by the full board of directors.

From time to time, U.S. Cellular may pay a fee to an executive search firm to identify and evaluate or assist in identifying and evaluating potential candidates for election as directors.  U.S. Cellular did not pay a fee in 2015 to a search firm relating to potential candidates for election as directors.      

Shareholder Communication with Directors

Shareholders or other interested parties may send communications to the U.S. Cellular board of directors, to the non-management directors, to the independent directors or to specified individual directors of U.S. Cellular at any time.  Shareholders or other interested parties should direct their communication to such persons or group in care of the Secretary of U.S. Cellular, c/o Telephone and Data Systems, Inc., 30 N. LaSalle St., Chicago IL 60602.  Any shareholder or other communications that are addressed to the board of directors, the non-management directors, the independent directors or specified individual directors will be delivered by the Secretary to such persons or group.

Information on communicating with directors is available on U.S. Cellular's website, www.uscellular.com, under About Us—Investor Relations—Corporate Governance—Contact the Board.

Non-Management Directors

As required by NYSE listing standards, the non-management directors of U.S. Cellular meet at regularly scheduled executive sessions without management.  Walter C. D. Carlson, who is a non-management director, presides at all meetings of the non-management directors of U.S. Cellular.  In addition, as required by NYSE listing standards, the independent directors of U.S. Cellular meet at least once per year in an executive session without management or directors who are not independent.

U.S. Cellular Policy on Attendance of Directors at Annual Meeting of Shareholders

All directors are invited and encouraged to attend each annual meeting of shareholders, which is normally followed by the annual meeting of the board of directors. In general, all directors attend each annual meeting of shareholders unless they are unable to do so because of unavoidable commitments or intervening events.  All of the persons serving as directors at the time attended the 2015 annual meeting.

Code of Ethics for Directors

As required by Section 303A.10 of the NYSE Listed Company Manual, U.S. Cellular has adopted a Code of Business Conduct and Ethics for Officers and Directors.  This code has been posted to U.S. Cellular's website, www.uscellular.com, under About Us—Investor Relations—Corporate Governance—Officer & Director Code of Conduct.

EXECUTIVE OFFICERS

The following executive officers of U.S. Cellular were identified in the above tables under “Election of Directors” :  LeRoy T. Carlson, Jr., Chairman; Kenneth R. Meyers, President and Chief Executive Officer; Steven T. Campbell, Executive Vice President – Finance, Chief Financial Officer and Treasurer; and Douglas D. Shuma, Chief Accounting Officer.  The following table identifies the other executive officers who are currently serving but are not identified in the above tables regarding the election of directors.  The age of the following persons is as of the date of this 2016 Proxy Statement.

Jay M. Ellison. Jay M. Ellison was appointed Executive Vice President – Operations in 2014. Prior to that, he was Executive Vice President – Sales and Customer Service since 2013.  Prior to that, he had been retired since 2010.  Prior to his retirement, he had been Executive Vice President and Chief Operating Officer of U.S. Cellular from 2005 through 2009. He first joined U.S. Cellular in 2000 as Executive Vice President—Operations.

Michael S. Irizarry.  Michael S. Irizarry was appointed Executive Vice President and Chief Technology Officer - Engineering and Information Services in 2011.  Prior to that, he was Executive Vice President - Engineering and Chief Technology Officer since 2003.  He joined U.S. Cellular as Executive Vice President and Chief Technology Officer in 2002.

Deirdre C. Drake.  Deirdre C. Drake was appointed Senior Vice President – Chief Human Resources Officer in 2014.  Prior to that, she was managing director and chief human resources officer for Bank of Montreal Capital Markets between 2012 and 2014.  Prior to that, she was senior vice president, human resources, of BMO Harris Bank, N.A., for more than five years. 

Edward C. Perez.  Edward C. Perez was appointed Senior Vice President – Sales in 2014.  Prior to that, he was Vice President – Business Strategy since 2013.  Prior to that, he served in several leadership roles since joining U.S. Cellular in 1997, most recently as Vice President of Marketing and Sales Operations.

All of our executive officers devote all of their employment time to the affairs of U.S. Cellular, except as follows: LeRoy T. Carlson, Jr., Chairman and Douglas D. Shuma, Chief Accounting Officer.  LeRoy T. Carlson, Jr., who is employed by TDS as its President and Chief Executive Officer and Douglas D. Shuma, who is employed by TDS as its Senior Vice President-Finance and Chief Accounting Officer, devote a portion of their employment time to the affairs of U.S. Cellular. 

Codes of Business Conduct and Ethics Applicable to Officers

As required by Section 303A.10 of the NYSE Listed Company Manual, U.S. Cellular has adopted a Code of Business Conduct and Ethics for Officers and Directors that also complies with the definition of a “code of ethics” as set forth in Item 406 of Regulation S-K of the SEC.  The foregoing code has been posted to U.S. Cellular’s website, www.uscellular.com, under About Us—Investor Relations—Corporate Governance—Officer & Director Code of Conduct.

In addition, U.S. Cellular has adopted a broad Code of Business Conduct that is applicable to all officers and employees of U.S. Cellular and its subsidiaries.  The foregoing code has been posted to U.S. Cellular's website, www.uscellular.com, under About Us—Investor Relations—Corporate Governance—Code of Conduct. 

U.S. Cellular intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to any of the foregoing codes by posting such information to U.S. Cellular’s website.  Any waivers of any of the foregoing codes for directors or executive officers will be approved by U.S. Cellular’s board of directors or an authorized committee thereof, as applicable, and disclosed in a Form 8-K that is filed with the SEC within four business days of such waiver.  There were no such waivers in 2015.

FEES PAID TO PRINCIPAL ACCOUNTANTS

The following sets forth the aggregate fees (including expenses) billed by U.S. Cellular's principal accountants, PricewaterhouseCoopers LLP, for 2015 and 2014:

See “Corporate Governance – Audit Committee – Pre-Approval Procedures” above for a description of the Audit Committee’s pre-approval policies and procedures with respect to U.S. Cellular’s independent registered public accounting firm.

EXECUTIVE AND DIRECTOR COMPENSATION

The following discussion and analysis of our compensation practices and related compensation information should be read in conjunction with the Summary Compensation Table and other tables included below, as well as our financial statements and management’s discussion and analysis of financial condition and results of operations included in our Form 10-K for the year ended December 31, 2015.

Compensation Discussion and Analysis

This Compensation Discussion and Analysis discusses the compensation awarded to, earned by, or paid to the executive officers identified in the below Summary Compensation Table. 

At December 31, 2015, U.S. Cellular’s consolidated operating markets covered approximately 4.9 million customers in 23 states. U.S. Cellular operates in the highly competitive wireless telecommunications industry. 

Executive Compensation Highlights

Executive Compensation Program Supports U.S. Cellular Goals and Objectives

U.S. Cellular is committed to providing the very best in customer satisfaction, achieving long-term profitable growth, and building the high-quality teams required to make this possible.  As such, we focus on operating in a fiscally responsible manner, and on recruiting and retaining talented employees who believe in the company’s values and long-term perspective.

The objectives of U.S. Cellular’s compensation programs for its executive officers generally are to:

• support U.S. Cellular's overall business strategy and objectives;
• attract and retain high quality management;
• link individual compensation with attainment of U.S. Cellular objectives and with attainment of individual performance goals; and
• provide competitive compensation opportunities consistent with the financial performance of U.S. Cellular.

The primary financial focus of U.S. Cellular is the increase of long-term shareholder value through growth, measured in such terms as revenues, adjusted earnings before interest, taxes, depreciation and amortization, and capital expenditures.  Compensation decisions are made considering these performance measures, as well as all other appropriate facts and circumstances, including factors such as customer growth and employee engagement.

U.S. Cellular’s compensation policies for executive officers are intended to provide incentives for the achievement of corporate and individual performance goals and to provide compensation consistent with the performance of U.S. Cellular, utilizing good governance practices and other best practices.  U.S. Cellular’s compensation programs are designed to reward for the performance of U.S. Cellular on both a short-term and long-term basis. 

U.S. Cellular’s policies establish incentive compensation performance goals for executive officers based on factors over which such officers have substantial control and which are important to U.S. Cellular’s long-term success.  U.S. Cellular believes compensation should be related to the performance of U.S. Cellular and should be sufficient to enable U.S. Cellular to attract and retain individuals possessing the talents required for long-term successful performance.  Nevertheless, although performance driven metrics are key inputs to compensation and awards, technically all elements of compensation are discretionary, allowing the Chairman and Long-Term Incentive Compensation Committee to consider other facts to ensure alignment with U.S. Cellular’s goals.  Officers do not become entitled to any compensation or awards solely as a result of the achievement of performance levels. 

The non-equity compensation of the President and CEO of U.S. Cellular is approved by the Chairman, LeRoy T. Carlson, Jr., functioning as the compensation committee.  The Chairman evaluates the performance of the President and CEO of U.S. Cellular in light of the annual and ongoing objectives for U.S. Cellular and the attainment of those objectives, and sets the annual base salary and bonus compensation levels for the President and CEO, and recommends long-term equity compensation to the Long-Term Incentive Compensation Committee for the President and CEO, based on such performance evaluation and compensation principles, as discussed below.

With respect to the executive officers identified in the Summary Compensation Table other than the President and CEO, the Chairman reviews the President and CEO's evaluation of the performance of such executive officers and sets the annual base salary and bonus compensation levels for such executive officers, and recommends long-term equity compensation to the Long-Term Incentive Compensation Committee, based on such performance evaluations and compensation principles, as discussed below.

As a controlled corporation, U.S. Cellular is not required to have an independent compensation committee under listing standards of the NYSE or otherwise.  Although U.S. Cellular does not have an independent compensation committee for all executive compensation, long-term equity compensation of executive officers is approved by the fully independent Long-Term Incentive Compensation Committee, as discussed below. 

LeRoy T. Carlson, Jr., Chairman and a director of U.S. Cellular, functions as the compensation committee for all matters not within the authority of the Long-Term Incentive Compensation Committee, but does not do so pursuant to a charter.    As a controlled company, except with respect to matters within the authority of the Long-Term Incentive Compensation Committee, U.S. Cellular considers it sufficient and appropriate that LeRoy T. Carlson, Jr., as Chairman of U.S. Cellular, who receives no compensation directly from U.S. Cellular and who is a director and president and chief executive officer of TDS, approves compensation decisions for U.S. Cellular.  As a result of Mr. Carlson’s position with TDS, the majority shareholder of U.S. Cellular, he represents the interests of all shareholders of U.S. Cellular in his compensation decisions with respect to U.S. Cellular.

Elements of Compensation

U.S. Cellular chooses to pay or provide these elements of compensation, considering common compensation practices of peers and other companies with similar characteristics, in order to support U.S. Cellular's overall business strategy and objectives.  U.S. Cellular recognizes that it must compensate its executive officers in a competitive manner comparable to other similar companies in order to attract and retain high quality management, attain business objectives and financial performance and increase shareholder value.  Our executive compensation strategy is intended to provide an appropriate linkage between the long-term and short-term performance of U.S. Cellular, as measured by U.S. Cellular’s financial performance and shareholder returns, and executive compensation.

As noted above, the elements of executive compensation consist of both annual cash and long-term equity compensation.  Annual cash compensation consists of base salary and an annual bonus. Annual cash compensation decisions are based partly on individual and corporate short-term performance and partly on individual and corporate cumulative long-term performance during the executive’s tenure in his or her position, particularly with regard to the President and CEO.  Long-term equity compensation is intended to compensate executives primarily for their contributions to long-term increases in shareholder value and is primarily provided through the grant of stock options and restricted stock units. 

Executive Compensation Process

The process of approving or recommending the elements of compensation begins with an evaluation of the appropriate compensation elements for each officer, based on the particular duties and responsibilities of the officer, as well as compensation elements for comparable positions at other companies in the telecommunications industry and other industries. 

The Chairman and Long-Term Incentive Compensation Committee also have access to numerous performance measures and financial statistics prepared by U.S. Cellular. The financial information includes the audited financial statements of U.S. Cellular, as well as internal financial reports such as budgets and actual results, operating statistics and other analyses.  The Chairman and Long-Term Incentive Compensation Committee also may consider such other factors that they deem appropriate in making their compensation recommendations or decisions.  Ultimately, it is the informed judgment of the Chairman and/or the Long-Term Incentive Compensation Committee, after considering all of the foregoing factors, and considering the recommendation of the President and CEO and/or Chairman, that determines the elements of compensation for executive officers.

Annually, the President and CEO recommends the base salaries for the named executive officers other than the President and CEO, and the Chairman approves such base salaries and determines the base salary of the President and CEO.  The 2015 rows under column (c), “Salary,” in the below Summary Compensation Table include the dollar value of base salary (cash and non-cash) earned by the named executive officers during 2015, whether or not paid in such year.

In addition, the President and CEO recommends the annual bonuses for the named executive officers other than the President and CEO, and the Chairman approves such bonuses and determines the bonus of the President and CEO.  The 2015 rows under column (d), “Bonus” or column (g), “Non-Equity Incentive Plan Compensation,” in the below Summary Compensation Table include the dollar value of bonus (cash and non-cash) earned by the named executive officers during 2015, whether or not paid in such year. 

The Long-Term Incentive Compensation Committee annually determines long-term equity compensation awards to the named executive officers under the U.S. Cellular long-term incentive plan, which awards generally have included stock options and restricted stock units.  In addition, named executive officers may receive bonus match units as discussed below. 

The named executive officers received an award of restricted stock units in 2015 based in part on the achievement of certain levels of corporate and individual performance in 2014, as discussed below.  The named executive officers may also receive bonus match units, as discussed below.  Column (e), “Stock Awards,” of the Summary Compensation Table includes the aggregate grant date fair value of the restricted stock unit awards and bonus match unit awards computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation (“FASB ASC 718”).  The grant date fair value of restricted stock units or bonus match units is calculated as the product of the number of shares underlying the award and the closing price of the underlying shares on the date of grant. 

The named executive officers also received an award of stock options in 2015 based in part on the achievement of certain levels of individual performance in 2014, as discussed below.  Column (f), “Option Awards,” of the Summary Compensation Table includes the aggregate grant date fair value of the stock option awards computed in accordance with FASB ASC 718.  The grant date fair value of stock options is calculated using the Black-Scholes valuation model.

Grants of equity awards to the President and CEO and the other executive officers are generally made at the same time each year.  U.S. Cellular generally grants equity awards other than bonus match units on the first business day in April each year.  U.S. Cellular grants bonus match units on the date that annual bonus amounts are paid each year.  U.S. Cellular may also grant equity awards during other times of the year as it deems appropriate, such as in connection with new hires or promotions.  U.S. Cellular does not backdate stock options and does not have any program, plan or practice to time the grant of awards in coordination with the release of material non-public information.  The exercise price of stock options is based on the closing price of a U.S. Cellular Common Share on the date of grant. 

The Chairman and the Long-Term Incentive Compensation Committee do not consider an officer’s outstanding equity awards or stock ownership levels when determining such officer’s compensation.    The Chairman and Long-Term Incentive Compensation Committee evaluate compensation based on performance for a particular year and other considerations as described herein and do not consider stock ownership to be relevant in connection therewith.

Long Term Incentive Compensation Committee

U.S. Cellular has a Long-Term Incentive Compensation Committee comprised solely of directors who qualify as independent under the rules of the NYSE.  The members of the Long-Term Incentive Compensation Committee currently are J. Samuel Crowley, Ronald E. Daly, Paul-Henri Denuit, Gregory P. Josefowicz and Cecelia D. Stewart.  The principal functions of the Long-Term Incentive Compensation Committee are to discharge the board of directors’ responsibilities relating to the long-term equity-based compensation of the executive officers and other key employees of U.S. Cellular; to perform all functions designated to be performed by a committee of the board of directors under U.S. Cellular’s long-term incentive plans and programs; to review and recommend to the board of directors the long-term incentive plans and programs for employees of U.S. Cellular (including changes thereto); and to report on long-term equity-based compensation in U.S. Cellular’s annual proxy statement or otherwise to the extent required under any applicable rules and regulations.

The charter for the Long-Term Incentive Compensation Committee provides that the committee will interpret and administer U.S. Cellular’s long-term incentive plans and programs, including selecting employees who will be granted awards, establishing performance measures and restriction periods, and determining the form, amount and timing of each grant of an award, the number of shares of stock subject to an award, the purchase price or base price per share of stock associated with an award, the exercise price of an option award, the time and conditions of exercise or settlement of an award and all other terms and conditions of an award. 

Under its charter, the Long-Term Incentive Compensation Committee may delegate some or all of its responsibilities and duties with respect to U.S. Cellular’s long-term incentive plans and programs to the Chairman of U.S. Cellular or any executive officer of U.S. Cellular as the committee deems appropriate, to the extent permitted by law and applicable listing standards and the applicable long-term incentive plan or program, but not regarding any award to officers of U.S. Cellular who are subject to the requirements of Section 16 of the Securities Exchange Act of 1934, as amended.  The Long-Term Incentive Compensation Committee has not delegated any authority with respect to the officers identified in the below Summary Compensation Table or any other executive officers identified in this 2016 Proxy Statement.  The Long-Term Incentive Compensation Committee has delegated authority to the Chairman or an executive officer of U.S. Cellular only with respect to persons who are not officers.

As discussed below, the Chairman and Long-Term Incentive Compensation Committee may rely on the services of U.S. Cellular’s compensation and employee benefits consultant, Willis Towers Watson.

Unrealized Components of Compensation

The compensation reported under "Stock Awards" and “Option Awards” in the Summary Compensation Table represents grant date accounting values as required by SEC rules, and does not represent currently realized or realizable compensation. The named executive officers will not realize cash from such awards unless and until any stock awards are vested and the shares received upon vesting are sold for cash, or unless and until any stock options become exercisable, are exercised and the shares received upon exercise are sold for cash.   There is no assurance that this will occur.  In general, awards are subject to a risk of forfeiture and the options will expire if not exercised during their term, which may occur if the stock price does not appreciate and/or remain above the exercise price during the option’s term.  The compensation actually realized by a named executive officer may be more or less than the amount reported in the Summary Compensation Table below depending on the performance of the U.S. Cellular stock price and other factors.  With respect to 2015, the amount of compensation realized by each named executive officer can be approximated by (i) deducting from the “Total” column in the 2015 Summary Compensation Table the amounts reported in the "Stock Awards" and “Option Awards” columns for such officer, and (ii) adding the values realized in 2015 by such officer from the 2015 Option Exercises and Stock Vested table below. However, other unrealized components of compensation may be included in the Summary Compensation Table, such as retirement plan contributions that are subject to a vesting schedule.

Say-on-Pay Vote

SEC rules require U.S. Cellular to disclose whether and, if so, how it considered the results of the most recent Say-on-Pay vote in determining compensation policies and decisions and how that consideration has affected its executive compensation decisions and policies.

Responsive to the foregoing requirement, the Chairman and the Long-Term Incentive Compensation Committee considered the fact that over 99% of the votes represented at the 2015 annual meeting that could be cast were cast FOR the Say-on-Pay proposal at the 2015 annual meeting with respect to 2014 named executive officer compensation, as disclosed in the 2015 proxy statement.  Because of the substantial support from shareholders, the Chairman and the Long-Term Incentive Compensation Committee did not make any changes to U.S. Cellular’s executive compensation decisions and policies as a result of the Say-on-Pay vote in 2015.  (However, as described in “Changes to Compensation Policies” hereafter, certain changes were made to the 2015 executive compensation programs unrelated to the Say-on-Pay vote.)  The Chairman and the Long-Term Incentive Compensation Committee will continue to consider the results of the annual Say-on-Pay votes in their future compensation policies and decisions.

Changes to Compensation Policies

Certain changes were made to executive compensation policies in 2015 compared to prior years.

The performance measures considered in evaluating U.S. Cellular quantitative performance under the 2015 Executive Bonus Plan included Adjusted EBITDA, which is adjusted earnings before interest, taxes, depreciation and amortization.  The similar bonus plan for 2014 included Adjusted income before income taxes (AIBIT).  AIBIT is similar to Adjusted EBITDA with the exception that AIBIT does not exclude the impact of (Gain)/loss on (normal) asset disposals.  This was done because U.S. Cellular changed its primary measure of operating profitability from AIBIT to Adjusted EBITDA beginning in 2015. 

Corporate Governance and Best Practices

The following identifies a number of the good corporate governance and other best practices adopted and followed by U.S. Cellular, even though it may not be required to do so under law, SEC rules or NYSE listing requirements as a controlled company:

• In 2014, U.S. Cellular declassified its board of directors so that, effective with the 2015 Annual Meeting, all directors are now elected annually and serve one year terms. 
• Seven of the fourteen directors, or 50%, are independent.
• U.S. Cellular has adopted Corporate Governance Guidelines that are intended to reflect good corporate governance and other best practices.
• The positions of (i) Chairman of the Board and (ii) President and Chief Executive Officer are separated.
• The Audit Committee, which is comprised entirely of independent directors as required, operates under a charter and in a manner that is intended to reflect good corporate governance and other best practices.
• Although the U.S. Cellular Chairman approves executive compensation other than long-term equity-based compensation, his position as the President and Chief Executive Officer of TDS, the majority shareholder of U.S. Cellular, permits him to represent the interests of shareholders of U.S. Cellular in compensation matters other than long-term equity-based compensation.  The Chairman does not receive any compensation directly from U.S. Cellular.
• Although not required to do so, U.S. Cellular has established a Long-Term Incentive Compensation Committee, comprised solely of independent directors, with responsibility for long-term equity-based compensation.
• The Long-Term Incentive Compensation Committee operates under a charter and in a manner that is intended to reflect good corporate governance and other best practices.
• The Long-Term Incentive Compensation Committee uses market compensation information supplied by Willis Towers Watson as one factor in making executive officer long-term equity-based compensation decisions.
• Once each year, the board of directors meets to discuss corporate governance generally, including the allocation of seats between independent and non-independent directors.
• U.S. Cellular holds an annual “Say-on-Pay” vote.
• Executive sessions are held with only independent directors present.
• U.S. Cellular has a policy prohibiting pledging and hedging of company shares.
• The U.S. Cellular Charter and Bylaws can be amended by a simple majority vote.

Risks Relating to Compensation to Executive Officers

U.S. Cellular does not believe that incentives in the compensation arrangements maintained by U.S. Cellular encourage executive officers to take unnecessary, excessive or inappropriate risks that could threaten the value of U.S. Cellular, or that risks arising from U.S. Cellular’s compensation policies and practices for executive officers are reasonably likely to have a material adverse effect on U.S. Cellular. 

Also, U.S. Cellular does not believe that risks arising from U.S. Cellular’s compensation policies and practices for its employees, including non-executive officers, are reasonably likely to have a material adverse effect on U.S. Cellular.  See discussion under “Risks from Compensation Policies and Practices” below.

Compensation Consultant

Willis Towers Watson is U.S. Cellular’s compensation consultant and is engaged by U.S. Cellular management.  Although Willis Towers Watson is engaged by U.S. Cellular management, it also assists the Long-Term Incentive Compensation Committee with respect to long-term equity-based compensation, and the Chairman, who in effect functions as the compensation committee for executive compensation other than long-term incentive compensation. 

As required by SEC rules, the following discloses the role of Willis Towers Watson in determining or recommending the amount or form of executive officer compensation, the nature and scope of the assignment, and the material elements of the instructions or directions given to Willis Towers Watson with respect to the performance of its duties under its engagement. Willis Towers Watson provides external market compensation data to U.S. Cellular from its executive compensation survey database and, as requested, provides recommendations on the type and amount of compensation to be granted to officers.  Willis Towers Watson generally does not provide other services to U.S. Cellular, except as may be requested from time to time with respect to specific matters.  Willis Towers Watson did not provide any meaningful amount of other services to U.S. Cellular in 2015.  The amount paid by U.S. Cellular to Willis Towers Watson for all services in 2015 was less than $120,000. 

Willis Towers Watson also provides compensation consulting and other services to U.S. Cellular’s parent company, TDS, which are described in the TDS proxy statement.  The Long-Term Incentive Compensation Committee has no involvement in these services.

Compensation Consultant Conflicts of Interest

As required by SEC and NYSE rules, the Chairman and Long-Term Incentive Compensation Committee of U.S. Cellular considered if the work of Willis Towers Watson raised any conflict of interest. 

As indicated above under “Compensation Consultant,” U.S. Cellular management retained Willis Towers Watson for compensation matters.  Neither the U.S. Cellular Long-Term Incentive Compensation Committee nor the Chairman retained any compensation consultant, but did receive advice from Willis Towers Watson.  

With regard to Willis Towers Watson, each of the Long-Term Incentive Compensation Committee and Chairman considered if its work raised any conflict of interest.  Based on their review, the Long-Term Incentive Compensation Committee and Chairman determined that the work did not raise any conflict of interest considering the factors identified in Rule 10C-1 under the Securities Exchange Act of 1934, as amended. 

Willis Towers Watson does not provide any advice as to director compensation.

Benchmarking/Market Compensation Data

U.S. Cellular does not engage in “benchmarking” as defined by the SEC, which would entail using compensation data about other companies as a reference point — either wholly or in part — to base, justify or provide a framework for a compensation decision.   Although U.S. Cellular does obtain, review and consider a broad-based third-party survey of market compensation data from Willis Towers Watson, this is used more generally as described below.

For the named executive officers other than the President and CEO, in 2015, Willis Towers Watson completed a job specific market analysis with respect to base pay.  Executive officer positions were compared and matched to survey positions based on current role responsibilities.  The source of market data was a Willis Towers Watson database of 900 companies.  Competitive cash compensation data were from general industry (not industry specific) data, and represented data for stand-alone companies of U.S. Cellular’s revenue size.  Although no similar analysis was prepared for the President and CEO, the information from this database was also considered in determining the annual cash compensation of the President and CEO.

U.S. Cellular, the Chairman and the Long-Term Incentive Compensation Committee use market compensation data provided by Willis Towers Watson for long-term incentive awards as follows.  The multiples used to calculate the long-term incentive awards in 2015 for 2014 performance were determined using a weighting of 50% of the total based on data from a peer group of telecom and customer focused companies (as identified below) and 50% of the total based on data from general industry companies (with revenue of $3 billion to $6 billion) from a Willis Towers Watson database.  The multiples were generally intended to provide awards at the 60th percentile, considering a historical three-year average multiple.  However, an officer’s multiple could be increased by 0 – 15% upon recommendation by the President and CEO and approvals by the Chairman and Long-Term Incentive Compensation Committee, after their consideration of individual performance and other relevant factors.  The multiples that were approved for the named executive officers based on the foregoing procedures are set forth below under “Long-Term Equity Compensation.”

U.S. Cellular, the Chairman and the Long-Term Incentive Compensation Committee review or consider the Willis Towers Watson broad-based third-party survey data with respect to the general industry companies only for general purposes, and to obtain a general understanding of current compensation practices.  U.S. Cellular, the Chairman and the Long-Term Incentive Compensation Committee rely upon and consider to be material only the aggregated survey data prepared by Willis Towers Watson, such as median levels of compensation and market compensation data used for long-term incentive awards. The identities of the individual companies included in the survey are not considered in connection with any individual compensation decisions because this information is not considered to be material.

In addition, in 2015, the following custom peer group of telecom and customer focused companies was used to help determine and set our long-term incentive awards.  This peer group was selected by the LTICC with the assistance of Willis Towers Watson based on the following criteria: each company (i) has revenues in a range that is reasonably comparable to U.S. Cellular, (ii) has customer satisfaction/service as part of its core business strategy and (iii) has a high level score in terms of customer satisfaction as measured by the American Customer Satisfaction Index.

Custom Peer Group:  Avis Budget Group, Inc., Columbia Sportswear Co., Crown Castle International Corp., Darden Restaurants, Inc., Dr. Pepper Snapple Group, Inc., Frontier Communications Corp., Hanes Brands, Inc., Harley Davidson, Inc., Hershey Co., Hertz Global Holdings, Inc., Hillshire Brands Co., Hyatt Hotels Corp., J.C. Penny Co., Level 3 Communications, Inc., Levi Strauss & Co., Marriott International, Inc., NII Holdings, Inc., Nordstrom, Inc., Starwood Hotels & Resorts Worldwide, Inc., TW Telecom, Inc., Whole Foods Market, Inc., Williams-Sonoma Inc. and Wyndham Worldwide Corp.   Compared to the peer group used in 2014, J.C. Penny Co., Level 3 Communications, Inc. and Williams-Sonoma Inc. were added.  

U.S. Cellular also considered compensation arrangements at the companies in the peer group index included in the “Stock Performance Graph” that is included in the accompanying 2015 Annual Report, as discussed below, as well as other companies in the telecommunications industry and other industries, to the extent considered appropriate, based on similar size, function, geography or otherwise.  This information was used to understand the market for general compensation arrangements for executives, but was not used for benchmarking purposes.

U.S. Cellular selected the Dow Jones U.S. Telecommunications Index, a published industry index, for purposes of the Stock Performance Graph in the 2015 Annual Report.  As of December 31, 2015, the Dow Jones U.S. Telecommunications Index had been composed of the following companies:  8X8 Inc., AT&T Inc., CenturyLink Inc., Frontier Communications Corp.,  Level 3 Communications Inc.,  SBA Communications Corp., Sprint Corp., T-Mobile US Inc., Telephone and Data Systems, Inc. (TDS) and  Verizon Communications Inc.  

Company Performance

The degrees to which company performance measures and objectives were achieved in 2015 are discussed below separately for those that are stated in quantitative terms and for those that are stated in non-quantitative terms.

For purposes of evaluating and determining compensation levels each year, U.S. Cellular calculates an overall percentage of U.S. Cellular performance based on performance measures set forth in its Executive Bonus Plan.  The following shows the level of achievement with respect to 2015.

The following performance measures were considered in evaluating U.S. Cellular quantitative performance for purposes of the 2015 Executive Bonus Plan: Consolidated Total Revenues (40%); Consolidated Adjusted EBITDA (35%); and Consolidated Capital Expenditures (25%).  On a weighted basis, U.S. Cellular achieved 100.3% of its targets which produced a payout of 129% of target for that portion of the bonus plan.

Such quantitative company performance measures comprised 60% of the bonus opportunity under the 2015 Executive Bonus Plan.  

The below table shows the calculation of the overall quantitative company performance percentage for 2015 based on the 2015 Executive Bonus Plan.  The below amounts are based on the performance metrics established specifically for bonus purposes and may not agree with U.S. Cellular’s financial statements, which are based on accounting principles generally accepted in the United States of America (“GAAP”), or with other publicly disclosed measures.  As compared to GAAP, the below bonus results and targets may be adjusted for amounts relating to items such as acquisitions and divestitures and other non-operating or non-core items (the “Bonus Metric Amounts”).  The below bonus results and targets are intended to reflect the core operating results over which U.S. Cellular officers have significant influence.

If a metric does not meet the minimum threshold performance level, no bonus will be paid with respect to such metric.  If maximum performance or greater is achieved, 225% of the bonus opportunity for that metric will be funded.  As shown above, the minimum threshold was achieved for two of the three targets for 2015, but performance was less than maximum performance in the case of Consolidated Capital Expenditures.  As a result, the payout level was interpolated for such target as indicated above based on the formula included in the bonus plan.

As shown above, the quantitative company performance percentage for U.S. Cellular for 2015 was determined to be 129%.

The assessment of strategic initiatives as determined in the subjective judgment of the Chairman was 137%.  In arriving at this percentage, the Chairman considered the following accomplishments of U.S. Cellular during 2015:

• launch of 4G roaming with one national carrier as well as significant progress made in negotiations with other national carriers;
• successful launch of the VoLTE user trial;
• completed rollout of LTE;           
• successful cooperation with regulators toward continued ETC support and the 2016 spectrum auction design;
• reduction in the upgrade rate in 2015, down from 2014;
• reduction of the Loss on Equipment rate per unit in 2015 from 2014; and

• favorable system operations, selling and marketing, and general and administrative expense management.

Performance Objectives and Accomplishments

In addition to U.S. Cellular performance, the Chairman, President and CEO and members of the Long-Term Incentive Compensation Committee consider individual objectives and performance in determining executive compensation.  The individual objectives considered by such persons in their evaluation of each of the named executive officers other than the President and CEO are almost entirely team objectives of the management group.  There was no minimum level of achievement of any of those objectives before salary or other compensation could be increased or provided.  The assessment of the achievement of such objectives is not formulaic, objective or quantifiable.  Instead, individual performance considerations are factors, among others, that are generally taken into account in the course of making subjective judgments in connection with compensation decisions. 

U.S. Cellular Corporate Objectives and Accomplishments

The following summarizes the U.S. Cellular team objectives and accomplishments in 2015.  In addition to achieving 100.3% of its weighted company performance targets which produced a payout of 129% of target for that portion of the bonus plan, as discussed above, U.S. Cellular took actions in furtherance of the following objectives:

• growing U.S. Cellular’s net postpaid customer base;
• increasing revenues and adjusted income before income taxes;
• managing capital investment levels;
• reigniting associate engagement;
• completing 4G LTE roll out;
• launching 4G roaming agreement;
• launching VoLTE user trial;
• rolling out equipment installment plans to the agent channel;
• working with trade groups and regulators to obtain fair rules for future FCC auctions; and

• working to maximize the value of non-strategic assets.

Mr. Meyers was the principal executive officer of U.S. Cellular and supervised and guided all of the business and affairs of U.S. Cellular in 2015.  As a result, Mr. Meyers is primarily responsible for the performance of U.S. Cellular.  Each of the other executive officers was also considered to have made a significant contribution to the aforementioned performance achievements.  The portion of the bonus for individual performance is based on an individual performance assessment approved by the Chairman in his subjective judgment which, in the case of officers other than the President and CEO, considers the recommendation of the President and CEO, in his subjective judgment.  This individual performance assessment for 2015 is used as a factor in determining the amount of the cash bonus for 2015 performance paid in 2016 and the stock option awards and restricted stock unit awards granted in 2016 with respect to 2015 performance.

The following shows certain considerations relating to compensation paid in 2015 to the named executive officers:

Agreements with Executive Officers

U.S. Cellular and Kenneth R. Meyers are parties to a letter agreement dated July 25, 2013 relating to his appointment as President and CEO effective June 22, 2013 (the “Meyers Letter Agreement”). In general, this addressed compensation to Mr. Meyers for 2013, and includes provisions relating to annual equity awards in subsequent years, retiree medical/life insurance benefits and a related tax gross-up, and severance (pursuant to which Mr. Meyers would be entitled to his then current annual base salary in the event that U.S. Cellular terminates Mr. Meyers’ employment involuntarily without cause prior to June 22, 2019). See Footnote (1) to the Summary Compensation Table below for further details.

U.S. Cellular and Jay M. Ellison are parties to a letter agreement dated October 30, 2013 relating to his employment with U.S. Cellular beginning November 1, 2013 (the “Ellison Letter Agreement”).  In general, this addressed compensation to Mr. Ellison for 2013, and includes provisions relating to future equity awards.  See Footnote (3) to the Summary Compensation Table below for further details.

U.S. Cellular and Deirdre C. Drake entered into a letter agreement dated March 14, 2014 relating to her employment with U.S. Cellular beginning April 15, 2014 (the “Drake Letter Agreement”).  In general, this provides for an annualized starting salary in 2014 of $375,000, a target bonus opportunity for 2014 equal to 45% of her 2014 annual salary, and includes provisions relating to future equity awards.  See Footnote (5) to the Summary Compensation Table below for further details.

Annual Cash Compensation

The following discusses annual cash compensation, which consists of base salary and bonus.

Base Salary

Annually, the Chairman determines the President and CEO's base salary.  With respect to the other executive officers, the President and CEO recommends and the Chairman approves annually each such executive officer's base salary.  Base salary is determined based on an evaluation of the performance of U.S. Cellular and each executive officer and such other facts and circumstances as the Chairman and/or President and CEO may deem relevant, as discussed below.

Significant facts and circumstances that the Chairman considered in approving the base salaries of the named executive officers, and that the President and CEO considered in recommending the base salaries of the named executive officers other than the President and CEO, are as follows:  U.S. Cellular’s status as a public company and controlled company; the fact that U.S. Cellular is primarily a regional competitor and that some of its competitors are national or global telecommunications companies that are much larger than U.S. Cellular, possess greater resources, possess more extensive coverage areas and more spectrum within some coverage areas, and market other services with their communications services that U.S. Cellular does not offer; U.S. Cellular’s performance, as discussed above; and market compensation information, as discussed above.  In addition, the Chairman and President and CEO considered additional facts and circumstances specific to each of the named executive officers, as discussed below.

The Chairman considers the above facts and circumstances and makes a determination of ranges of base salary for each named executive officer, based on the recommendations of the President and CEO with respect to all named executive officers other than the President and CEO. The base salary of each executive officer is set at a level considered to be appropriate in the subjective judgment of the Chairman based on an assessment of the responsibilities and performance of such executive officer, taking into account the facts and circumstances discussed above.  No specific performance measures are determinative in the base salary compensation decisions for executive officers. Ultimately, it is the informed judgment of the Chairman based on the recommendation of the President and CEO that determines an executive officer's base salary based on the total mix of information rather than on any specific measures of performance.

The following shows certain information relating to base salary in 2015 for Kenneth R. Meyers.

Effective January 1, 2014, Mr. Meyers’ base salary was set at $865,300 for 2014.  Effective January 1, 2015, Mr. Meyers’ base salary was increased to $905,300, which is above the median, representing the 50th percentile of the range  but less than the 75th percentile of $980,000.  This was the level considered to be appropriate in the subjective judgment of the Chairman. The population of comparable base salaries was comprised one-half of the base salaries of the chief executive officers of companies and one-half of the base salaries of sector heads of a major segment of a company's operations, similar in size to U.S. Cellular, recognizing the fact that U.S. Cellular is both a public company as well as a subsidiary of a public company. See "Benchmarking/Market Compensation Data" above.

The following shows certain information relating to base salary in 2015 compared to 2014 for the other named executive officers:

The Chairman and President and CEO review the base salary and bonus of the executive officers on an aggregate basis as described below under “Total Cash Compensation.”

Bonus

Executive Bonus Plan.  The 2015 Executive Bonus Plan was approved by the Chairman and by the President and CEO in 2015.  This 2015 Executive Bonus Plan measured performance with respect to 2015, relating to bonuses paid in 2016.  A copy of this plan was filed with the SEC on a Form 8-K dated April 17, 2015.  The Chairman does not participate in any U.S. Cellular bonus plan and the President and CEO did not participate in the Executive Bonus Plan.  U.S. Cellular has separate guidelines for awarding bonuses to the President and CEO, as described below.

The purposes of the 2015 Executive Bonus Plan were: to provide incentive for the officers of U.S. Cellular to extend their best efforts toward achieving superior results in relation to key business targets; to reward U.S. Cellular’s officers in relation to their success in meeting and exceeding the performance targets; and to help U.S. Cellular attract and retain talented leaders in positions of critical importance to the success of U.S. Cellular.  Eligible participants in the 2015 Executive Bonus Plan were all Executive Vice Presidents and the Senior Vice President - Chief Human Resources Officer of U.S. Cellular.  As discussed above, the President and CEO did not participate in this plan.  In determining the bonus of the President and CEO, in addition to considering performance under the 2015 Executive Bonus Plan, the Chairman also considered other U.S. Cellular metrics and various other performance measures as he determined in his discretion.

The following performance measures were considered for the purposes of the 2015 Executive Bonus Plan:

U.S. Cellular sets target levels for the company performance measures at levels that it believes are achievable with above average performance.  U.S. Cellular believes it would require outstanding performance to achieve 200% of the overall maximum target opportunity. 

The amount of the bonus is not determined and cannot be calculated in advance of, and does not vest until, approval and payment to the officer. 

The Chairman determined the actual payout that each officer received under the 2015 Executive Bonus Plan.

The Chairman determined the bonus to the President and CEO for 2015 that was paid in 2016 as follows.

U.S. Cellular established guidelines and procedures for awarding bonuses to the President and CEO. These guidelines and procedures were filed by U.S. Cellular as Exhibit 10.2 to U.S. Cellular's Form 8-K dated August 19, 2014.  These guidelines and procedures provide that the Chairman in his sole discretion determines whether an annual bonus will be payable to the President and CEO for a performance year and, if so, the amount of such bonus, and describe factors that may be considered by the Chairman in making such determination, including any factors that the Chairman in the exercise of his judgment and discretion determines relevant. The guidelines and procedures provide that no single factor will be determinative and no factor will be applied mechanically to calculate any portion of the bonus of the President and CEO. The entire amount of the bonus is discretionary.

Mr. Meyers’ informal target bonus was 80% of his base salary of $905,300. The Chairman approved a bonus to Mr. Meyers of $964,000 with respect to 2015 performance that was paid in March 2016. This was approximately 133% of the informal target bonus amount reflecting U.S. Cellular's overall company performance of 129% and the Chairman's subjective views regarding Mr. Meyers’ contributions to such performance and achievements in 2015.

Unlike the bonus plan for the executive officers other than Mr. Meyers, which provide that a specified percentage of an officer's bonus will be determined based on quantitative financial performance (as described above) and that the remaining percentage will be discretionary based on overall company performance and individual performance, the bonus guidelines for the President and CEO do not provide such specificity and provide that the entire amount of the bonus is discretionary.   The determination of the bonus payable to the President and CEO was not formulaic.  In addition to considering the performance under the 2015 Executive Bonus Plan, in determining the bonus of the President and the CEO, the Chairman also considered other U.S. Cellular metrics and various other performance measures as he determined in his discretion.  Accordingly, the entire amount of the bonus for Mr. Meyers is reported under the "Bonus" column of the Summary Compensation Table.

Summary of Bonus Payments

The following shows the calculation of bonuses with respect to 2015 performance.

As noted above under “Company Performance,” the overall percentage achieved with respect to quantitative company performance under the 2015 Executive Bonus Plan was determined to be 129.0% of target.  The assessment of strategic initiatives as determined in the subjective judgment of the Chairman was 137% of target. 

The following shows information with respect to each named executive officer that received a bonus for 2015 performance (paid in 2016) showing the amount of bonus awarded as a result of the achievement of the above quantitative company performance measures and the amount awarded based on the assessment of strategic initiatives and on individual performance (the below amounts may be rounded):