ADT 2006 Annual Report Download - page 21

Human Resources Committee provides advice and benchmarking data regarding director compensation
for the Board’s ultimate consideration. To promote alignment of the Board with 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 cash retainer within three years of joining the Board.
Once a director satisfies the minimum stock ownership amount, the director will remain qualified,
regardless of market fluctuations, under the governance principles as long as the director does not sell
any stock. As of October 2, 2006, all of the non-employee directors have met the Company’s stock
ownership guidelines. Directors who are also Tyco employees receive no additional compensation for
serving as a director.
Director Service
Directors are elected by an affirmative vote of a majority of the votes cast by shareholders at the
annual meeting and serve for one-year terms. Any nominee for director who does not receive a
majority of votes cast from the shareholders is not elected to the Board.
Directors must resign from the Board at the Annual General Meeting following their 72nd
birthday. The Nominating and Governance Committee is responsible for coordinating the annual board
self-evaluation process which leads to a review of all directors. Where necessary, the Nominating and
Governance Committee will take action to remove a director for poor performance. Removal of a
director requires unanimous Board approval, but does not require the approval of the director whose
removal is sought. Directors must inform the Nominating and Governance Committee of any significant
change in their employment or professional responsibilities. In the event of a significant change,
directors must offer to resign from the Board. This allows for discussion with the Nominating and
Governance Committee to determine if it is in the Company’s interest for the director to continue on
the Board.
The Board’s governance principles limit committee chairs and Lead Director to service in their
respective roles for no more than five years. When the Chairman/CEO steps down, he simultaneously
will resign from the Board, unless the Board decides that his continued service on the Board is in the
best interests of the Company.
Director Orientation and Education
Tyco has a formal orientation program for new directors, which includes information on Tyco’s
mission, values, governance, compliance, and business operations. An annual continuing education
program is provided to incumbent directors, which includes a review of Tyco’s Guide to Ethical
Conduct. Directors are also encouraged to take advantage of outside continuing education relating to
their duties as a director and to subscribe to appropriate professional publications at the Company’s
expense.
Other Directorships and Conflicts
In order to provide sufficient time for informed participation in Board activities, non-executive
directors, who are employed as the CEO of a publicly traded company, are required to limit their
external directorships of other public companies to not more than two. Non-executive directors, who
are otherwise fully employed, are required to limit their external directorships of other public
companies to three; and non-executive directors, who are not fully employed, are required to limit their
external directorships of other public companies to five. Current positions in excess of these limits may
be maintained if the Board determines that continued service would not impair the director’s service on
the Company’s Board. Furthermore, the Chairman/CEO may serve on no more than two other public
company boards.
The Nominating and Governance Committee must be notified of any invitations extended to
directors, the Chairman/CEO and other Company senior executives to serve on an outside board of
directors and assess the potential conflicts of interest and impact on the Company.
2007 Proxy Statement 9