ADT 2006 Annual Report Download - page 18

OVERVIEW
On January 13, 2006, the Company announced that its Board of Directors approved a plan to
separate the Company into three separate, publicly traded companies: Tyco Healthcare, one of the
world’s leading diversified healthcare companies; Tyco Electronics, the world’s largest passive electronic
components manufacturer; and a combination of Tyco Fire and Security and Engineered Products and
Services, a global business with leading positions in residential and commercial security, fire protection
and industrial products and services (the ‘‘Proposed Separation’’). After thorough reviews of strategic
options, the Board of Directors believes that this strategy is the best way to position our market-leading
companies for sustained growth and value creation.
Consummation of the Proposed Separation is subject to certain conditions, including final approval
by the Tyco Board of Directors, receipt of necessary tax rulings, required opinions of counsel, the filing
and effectiveness of registration statements with the Securities and Exchange Commission (‘‘SEC’’) and
the completion of any necessary debt refinancings. Approval by the company’s shareholders is not
required as a condition to the consummation of the Proposed Separation. Tyco has received a private
letter ruling from the Internal Revenue Service (‘‘IRS’’) regarding the U.S. federal income tax
consequences of the Proposed Separation, noting it will qualify as tax-free. Tyco expects to file
registration statements in connection with the Proposed Separation during January 2007. Following the
Proposed Separation, Tyco’s shareholders will own 100% of the equity in all three companies through
tax-free stock dividends.
In 2006, corporate governance in the area of executive compensation has received greater
attention, both by governmental regulators and shareholders. Even though the changes to disclosure
rules relating to executive compensation policies, practices and procedures will be effective for the
Company’s 2008 Annual General Meeting, the Compensation and Human Resources Committee
Report in this year’s proxy statement incorporates many of the principles of the recently amended
rules.
CORPORATE GOVERNANCE
Corporate Governance Principles
The Board of Directors (the ‘‘Board’’) has adopted governance principles to provide guidelines for
Tyco (or the ‘‘Company’’) and the Board to implement effective corporate governance practices. 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:
• Reviewing and approving management’s strategic business plans and operating performance;
• 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;
• Recommending director candidates for election to shareholders;
6 2007 Proxy Statement