ADT 2008 Annual Report Download - page 62

Pay Recoupment Policy
Tyco has a successful track record of recouping pay it considers wrongfully earned by executives.
To demonstrate our full commitment to shareholders on this issue, the Board approved a Pay
Recoupment Policy for Tyco. The policy provides that:
In addition to any other remedies available to the Company and subject to the applicable law, if the
Board or any Compensation Committee of the Board determines that any Annual Incentive Plan (‘‘AIP’’)
payment, incentive payment, equity award or other compensation received by a Senior Officer resulted from
any financial result or operating metric that was impacted by the Senior Officer’s fraudulent or illegal
conduct, the Board or a Board Committee may recover from the Senior Officer that compensation it
considers appropriate under the circumstances. The Board has the sole discretion to make any and all
determinations under this policy.
Stock Ownership Guidelines
In 2003, the Board established stock ownership and share retention guidelines for all Senior
Officers. The Board believes that executives who own and hold a significant amount of Company stock
are aligned with long-term shareholder interests. Currently, 12 Senior Officers, including our five
current named executive officers, are covered by the stock ownership and retention guidelines. The
Compensation Committee reviews our Senior Officers’ compliance with our stock ownership guidelines
annually.
The stock ownership requirement for our Senior Officers ranges from two times base salary for
our corporate Senior Vice Presidents to 10 times base salary for our Chief Executive Officer. Tyco
shares that count towards meeting the stock ownership requirement include restricted stock, RSUs,
DSUs, performance shares, shares acquired through our 401(k) plan or the Employee Stock Purchase
Program, and shares otherwise owned by the executive. We do not require that the stock ownership
guidelines be attained within a certain period of time. Instead, the Compensation Committee reviews
executive stock ownership regularly to ensure that our Senior Officers are making progress towards
meeting their goals or maintaining their requisite ownership.
Tyco’s stock retention guidelines require that the Senior Officers retain a specified percentage of
net (after-tax) shares acquired from the exercise of stock options or the vesting of restricted shares.
Specifically, our Senior Officers must retain 75% of all net shares until they attain their target stock
ownership goal. Once that goal is attained, they must retain at least 25% of subsequently acquired net
shares received upon exercise or vesting for a minimum period of three years. Senior Officers who are
62 or older may dispose of 50% of their accumulated holdings. All of the named executive officers
remained in compliance with the stock ownership guidelines in fiscal 2008.
Compensation and Human Resources Committee Report on Executive Compensation
The Compensation Committee has reviewed and discussed with management this Compensation
Discussion and Analysis and, based on such review and discussions, has recommended to the Board of
Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report
on Form 10-K and this Proxy Statement.
Submitted by the Compensation and Human Resources Committee:
Rajiv L. Gupta, Chair
Dennis C. Blair
Timothy M. Donahue
2009 Proxy Statement 45