ADT 2007 Annual Report Download - page 31

Board Evaluation
The Nominating and Governance Committee coordinates an annual evaluation process by the
Directors of the Board’s performance and procedures, as well as that of each committee. This
evaluation leads to a full Board discussion of the results. In connection with the evaluation process:
• the lead Director informally consults with each of the Directors;
• the qualifications and performance of all Board members are reviewed in connection with their
re-nomination to the Board;
• the Nominating and Governance Committee, the Audit Committee and the Compensation
Committee each conduct an annual self-evaluation of their performance and procedures,
including the adequacy of their charters.
Board Compensation and Stock Ownership
The Compensation Committee, in collaboration with the Nominating and Governance Committee,
periodically reviews the Directors’ compensation and recommends changes in the level and mix of
compensation to the full Board. See the Compensation Discussion and Analysis for a detailed
discussion of the Compensation Committee’s role in determining executive compensation.
To help align Board and shareholder interests, Directors are encouraged to own, at a minimum,
Tyco stock or stock units equal to three times their annual retainer (a total of $240,000, based on the
current $80,000 annual cash retainer) within three years of joining the Board. Once a Director satisfies
the minimum stock ownership recommendation, the Director will remain qualified, regardless of market
fluctuations, under the guidelines as long as the Director does not sell any stock. A majority of the
Directors’ annual compensation is provided as equity, and because such equity is in the form of
deferred stock units (which cannot be transferred until the Director leaves the Board), Directors will
normally obtain the minimum guideline after two years. Directors who are Company officers receive no
additional compensation for service as Directors.
Director Independence
To maintain its objective oversight of management, the Board consists of a substantial majority of
independent Directors. Directors meet stringent definitions of independence and for those Directors
that meet this definition, the Board will make an affirmative determination that a Director is
independent. Independent Directors:
• are not former officers or employees of the Company or its subsidiaries or affiliates, nor have
they served in that capacity within the last five years;
• have no current or prior material relationships with Tyco aside from their Directorship that
could affect their judgment;
• have not worked for, or have any immediate family member work for, been retained by, or
received anything of substantial value from the Company aside from his or her compensation as
Directors;
• have no immediate family member who is an officer of the Company or its subsidiaries or has
any current or past material relationship with the Company;
2008 Proxy Statement 11