ADT 2008 Annual Report Download - page 45

Officers’’). The Compensation Committee submits the recommendations it develops to the full Board
for review and/or approval.
Since the beginning of fiscal 2008, the Compensation Committee has addressed a number of
additional items, including:
• the continuing refinement of the executive compensation philosophy to reflect the Company’s
transformation following spin-off of its electronics and healthcare businesses in fiscal 2007 (the
‘‘Separation’’);
• the reconfiguration of the peer group of companies against which the Company’s executive
compensation plan is benchmarked;
• the ongoing consideration of whether shareholders should play an advisory role in executive
compensation via a ‘‘say on pay’’ process, in which shareholders can cast an annual, nonbinding
vote regarding a company’s compensation philosophy and programs;
• the application to the fiscal 2009 annual and long-term incentive plans of the results of a study
intended to determine the most appropriate performance metrics for the Company’s various
businesses;
• the review of the design of the fiscal 2009 equity award program to better align Senior Officer
compensation with shareholder returns; and
• the negotiation of an amended employment agreement with Mr. Breen that includes reductions
and/or phase-downs of severance and change-in-control benefits, among other modifications.
Tools Utilized by the Compensation Committee
Independent Compensation Consultant
Under its charter, the Compensation Committee has the sole authority to retain, compensate and
terminate the independent compensation consultants and any other advisors necessary to assist it in its
evaluation of director, CEO or other senior executive compensation. In fiscal 2007, after a competitive
review, the Compensation Committee engaged ExeQuity LLP (‘‘ExeQuity’’) as its independent
consultant. ExeQuity continued to advise the Compensation Committee in fiscal 2008. Among the
responsibilities of ExeQuity are the following:
• conducting an ongoing review and critique of Tyco’s director compensation programs;
• providing an ongoing review and critique of Tyco’s executive compensation philosophy, the
strategies associated with it, and the composition of the peer group of companies;
• preparing periodic analyses of data, including data on competitive executive compensation;
• presenting updates on market trends;
• attending all regular and special meetings of the Compensation Committee; and
• regularly conducting private meetings with the Board without management representatives.
Benchmarking
The Compensation Committee evaluates many factors when designing and establishing executive
compensation plans and targets. Tyco typically does not position executive pay to reflect a single
percentile within the peer group for each executive. Rather, in determining the compensation level for
each executive, it looks at factors such as the executive’s location on our Career Band (see ‘‘Elements
of Compensation’’ below), the relative complexity of the executive’s role within the organization, the
executive’s performance and potential for future advancement, the compensation paid by our peer
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