ADT 2006 Annual Report Download - page 46

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 (as defined herein), including officers subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, and executive officers
reporting directly to the CEO (‘‘Senior Officers’’). The Committee submits its recommendations
regarding compensation for Senior Officers to the independent directors of the Board for review and
approval.
The Committee annually prepares this report on executive compensation for inclusion in the proxy
statement. The recently amended SEC executive compensation disclosure requirements will be
incorporated in the 2008 Annual General Meeting’s proxy statement, the year in which the new rules
become effective with respect to the Company. Nevertheless, we have endeavored to reflect many of
the principles of the amended rules in this report.
The Committee’s charter reflects its responsibilities for executive compensation strategies,
programs and decisions. 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 Senior Officers and senior executives; establishment and oversight of officer stock
retention and ownership guidelines; and review of management succession planning and of the
Company’s human resources strategies. As part of its regular oversight of compensation policies and
practices, the Committee periodically reviews any contractual commitments or plans which may result
in payments to executives, including existing executive contracts, change in control arrangements,
severance plans and potential severance obligations, and executive retirement benefit obligations, as
discussed below.
During fiscal 2006, the Committee has also been closely involved in review and oversight of human
resources issues, strategies and decisions related to the Proposed Separation.
The Committee’s membership is determined by the Board and is composed entirely of
independent directors. During fiscal 2006, its members were Mackey J. McDonald (Chair), Dennis C.
Blair, George W. Buckley, and Rajiv L. Gupta. George W. Buckley resigned from the Board on
December 7, 2005 after assuming a new CEO role. There were seven formal meetings of the
Committee in fiscal 2006. In addition, Committee action was required regularly during the course of
the year to review and approve compensation actions in connection with staffing the senior leadership
teams of each of the new public companies being formed as a result of the Proposed Separation.
Overview of Compensation Philosophy and Programs
Our compensation philosophy and strategy is intended to align reward levels closely with
achievement of business performance objectives and creation of shareholder value, to attract and retain
the most talented and effective employees and management, and to enhance our corporate governance
processes. Accordingly, 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
34 2007 Proxy Statement