ADT 2005 Annual Report Download - page 24

CORPORATE GOVERNANCE
Corporate Governance Principles
The Board of Directors has adopted governance principles to provide guidelines for the Company
and the Board to ensure effective corporate governance. The governance principles are summarized
below, and the full text of the governance principles is posted on the Company’s website at
www.tyco.com. We will also provide a copy of the governance principles to shareholders upon request.
Mission of the Board of Directors
The mission of the Board is to promote the long-term health and growth of Tyco in the interest of
its shareholders and to set an ethical ‘‘tone at the top.’’ To this end, the Board provides management
with strategic guidance, and also ensures that management adopts and implements procedures designed
to promote both legal compliance and the highest standards of honesty, integrity and ethics throughout
the organization.
Board Responsibilities
The Board’s responsibilities include:
• Determining the Chairman and Chief Executive Officer’s compensation, and approving senior
executives’ compensation, based on performance in meeting pre-determined standards and
objectives;
• Recommending director candidates for election by shareholders;
• Selecting, monitoring, evaluating, compensating and, if necessary, replacing, the Chairman and
Chief Executive Officer and other senior executives, and seeing that management development
and succession plans are maintained;
• Determining that procedures are in place designed to promote compliance with laws and
regulations and setting an ethical ‘‘tone at the top’’;
• Appraising the Company’s major risks and overseeing that appropriate risk management and
control procedures are in place;
• Determining that procedures are in place to promote integrity and candor in the audit of Tyco’s
financial statements and operations, and in all financial reporting and disclosure;
• Reviewing and approving management’s strategic and business plans;
• Reviewing and approving financial plans, objectives and actions, including significant capital
allocations and expenditures;
• Monitoring management’s execution of corporate plans and objectives;
• Advising management on significant decisions and reviewing and approving major transactions;
and
• Designing and assessing the effectiveness of its own governance practices and procedures.
Board Organization
The business of the Company is managed under the direction of the Board, in the interest of the
shareholders. The Board delegates its authority to management for managing the everyday affairs of
the Company. The Board requires that senior management review major actions and initiatives with the
Board prior to implementation.
6 2006 Proxy Statement