ADT 2006 Annual Report Download - page 19

• Appraising the Company’s major risks and overseeing that appropriate risk management and
control procedures are in place;
• Selecting, monitoring, evaluating, compensating and, if necessary, replacing, the Chief Executive
Officer and other senior executives, and maintaining management development and succession
plans;
• Determining the Chief Executive Officer’s compensation, and approving senior executives’
compensation, based on performance in meeting pre-determined standards and objectives;
• Determining that procedures are implemented to promote compliance with laws and regulations,
and setting an ethical ‘‘tone at the top’’;
• 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 activities; and
• Designing and assessing the effectiveness of its own governance practices and procedures.
Board Risk Management
The Board is responsible for appraising the company’s major risks, for determining that
appropriate risk management and control procedures are in place, and for overseeing that senior
executives take appropriate steps to manage or mitigate all major risks. Members of the Board conduct
regular site visits to business locations to assess risks and evaluate the Company’s control procedures.
Board Organization
The business of the Company is managed under the direction of the Board for the benefit 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.
The Board consists of a substantial majority of independent directors who meet a stringent
definition of independence. The independent directors of the Board, acting in executive session,
annually elect a Lead Director to serve as chair of the Nominating and Governance Committee. The
Lead Director, among other things, sets the Board agendas with Board and management input,
facilitates communications among directors, works with the Chief Executive Officer to provide an
appropriate information flow to the Board and chairs an executive session of the independent directors
at each formal Board meeting. The Board also maintains two other standing committees—the Audit
Committee and the Compensation and Human Resources Committee. All three committees are entirely
composed of independent directors. Assignments to, and chairs of, the committees are recommended
by the Nominating and Governance Committee and selected by the Board. All committees report on
their activities to the Board at each regular Board meeting.
To ensure effective discussion and decision making, while at the same time having a sufficient
number of independent directors for its three committees, between ten and thirteen directors generally
serve for annual terms. Shareholders have the authority to set the number of directors at the annual
general meeting, and the directors have the authority to fill any vacancy that may arise between Annual
General Meetings. The Nominating and Governance Committee reviews the Board’s organization
annually and recommends appropriate changes to the Board.
The Company believes the positions of Chairman of the Board and Chief Executive Officer
(‘‘Chairman/CEO’’) should be held by the same person, unless circumstances dictate otherwise. The
Company has adopted a counterbalancing governance structure, including:
• A designated Lead Director;
• A substantial majority of independent directors;
• Annual election of directors by a majority of votes cast at the Annual General Meeting;
• Committees entirely composed of independent directors; and
2007 Proxy Statement 7