ADT 2005 Annual Report Download - page 56

BOARD COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Committee Membership and Duties
The Compensation and Human Resources Committee of the Board of Directors (the
‘‘Committee’’) is responsible for the Company’s executive compensation strategies, structure, policies
and programs. It reviews, analyzes and approves the design of executive compensation programs and
the compensation of Tyco’s senior executives, including officers subject to the reporting requirements of
Section 16 of the Securities Exchange Act of 1934 (‘‘Section 16 Officers’’). The Committee submits its
decisions regarding compensation for Section 16 Officers to the independent directors of the Board for
approval. The Committee annually prepares this report on executive compensation for inclusion in the
proxy statement.
The Committee’s charter reflects these responsibilities, and the Committee and the Board review
the charter at least annually, making revisions as appropriate. Pursuant to its charter, the Committee’s
duties and responsibilities also include evaluation of the performance of the Chief Executive Officer
and review of individual performance of other Section 16 Officers and senior executives; establishment
and oversight of officer stock retention and ownership guidelines; and review of management
succession planning and of issues related to the Company’s human resources strategies. As part of its
regular oversight of compensation policies and practices, the Committee periodically reviews existing
executive contracts, change in control arrangements, severance plans and potential severance
obligations, and executive retirement benefit obligations.
The Committee’s membership is determined by the Board and is composed entirely of
independent directors. For fiscal 2005, its members were Mackey J. McDonald (Chair), Dennis C.
Blair, George W. Buckley, and Rajiv L. Gupta (who joined the Committee in March 2005). There were
nine meetings of the Committee in fiscal 2005.
Overview of Compensation Philosophy and Programs
Our compensation philosophy and strategy is intended to attract and retain the most talented
employees and management, to reward achievement of sustained, measurable results and behaviors that
exemplify Tyco’s values and to enhance our corporate governance processes. The key objectives of the
Company’s compensation philosophy are to:
• Reward superior performance at competitive levels;
• Be simple, transparent and easy to communicate;
• Support our talent strategy by permitting the flexibility required to differentiate based on
individual performance and potential; and
• Provide a fair balance of risk and reward.
We expect the design and implementation of compensation programs to support the corporate
values that have been broadly communicated by the Chief Executive Officer throughout the Company:
Integrity, Excellence, Teamwork and Accountability.
The Committee has engaged an independent compensation consultant to advise the Committee in
the development of its compensation programs and practices, and in addition, as appropriate, looks to
the Executive Compensation group in Tyco’s Human Resources Department to support the Committee
in its work. We are cognizant of the competitive environment in which we must compete for superior
executive talent and seek to maintain a compensation strategy that is competitive in the industries in
which we do business. The Committee reviews recommendations provided by its outside consultant to
assist in determining competitive levels of compensation for Section 16 Officers and other executives.
38 2006 Proxy Statement