ADT 2005 Annual Report Download - page 26

•The qualifications and performance of all Board members are reviewed in connection with their
renomination to the Board.
• The Nominating and Governance Committee, the Audit Committee, and the Compensation and
Human Resources Committee each conduct an annual self-evaluation of their performance and
procedures, including the adequacy of their charters.
Board Compensation and Share Ownership
Non-employee director compensation consists of cash and an award of stock units. The stock unit
component reflects the Board’s belief that director compensation should be tied to the performance of
Tyco’s common shares. The Compensation and Human Resources Committee, in collaboration with the
Nominating and Governance Committee, periodically reviews the directors’ compensation and
recommends changes as appropriate. To help align Board and shareholder interests, the Board’s
governance principles provide that directors are required to own, at a minimum, Tyco stock or stock
units equal to three times their annual retainer ($240,000) within three years of joining the Board.
Once a director satisfies the minimum stock ownership recommendation, the director will remain
qualified, regardless of market fluctuations, under the guidelines as long as the director does not sell
any stock. As of October 3, 2005, all of the non-employee directors have met the Company’s stock
ownership guidelines. A majority of the directors’ annual compensation is provided as equity. Directors
who are also Tyco employees receive no additional compensation for serving as a director. (For more
information about director compensation, see ‘‘Compensation of Non-Employee Directors’’ below.)
Charitable Contributions
Our governance principles require that the Board approve all charitable donations by Tyco to
organizations associated with a director. The amount of any such donation is limited to an amount that
is less than one percent of that organization’s annual charitable receipts and is less than one percent of
Tyco’s total annual charitable contributions. Any matching donation by Tyco to organizations associated
with a director is limited to an amount that is no greater than the amount contributed by the director
and is required to be made in a manner consistent with Tyco’s employee matching gift program.
Independence of Nominees for Director
The Board has determined that all of the nominees standing for election at the 2006 Annual
General Meeting, other than the Chief Executive Officer, are independent of the Company in that such
nominees have no material relationship with the Company either directly or as a partner, shareholder
or affiliate of an organization that has a relationship with the Company. The Board has made this
determination based on the following:
• Other than Edward D. Breen, no nominee for director is a current or former officer or
employee of the Company or its subsidiaries or affiliates, who served in that capacity within the
last five years;
• Other than Edward D. Breen, due solely to the fact that he is an employee of the Company, no
nominee for director has any current or prior material relationships with the Company aside
from his or her directorship that could affect his or her judgment;
• No nominee for director has an immediate family member who is an officer of the Company or
its subsidiaries or has any current or past material relationship with the Company;
• No nominee for director, other than Mr. Breen, has worked for, consulted with, been retained
by, or received anything of substantial value from the Company aside from his or her
compensation as a director;
8 2006 Proxy Statement