ADT 2010 Annual Report Download - page 57

Base Salary
Base salary recognizes the value of an individual to Tyco based on his/her role, skill, performance,
contribution, leadership and potential. It is critical in attracting and retaining executive talent in the
markets in which we compete for talent. Base salaries are reviewed annually by both the Compensation
Committee and the Board. During fiscal 2010 there were no salary increases for our named executive
officers.
Annual Incentive Compensation
Annual incentive compensation for our named executive officers is paid in the form of an annual
performance bonus under the Company’s 2004 Stock and Incentive Plan (the ‘‘2004 SIP’’). Annual
incentive compensation rewards the named executive officers for their execution of the operating plan
and other strategic initiatives, as well as for financial performance that benefits the Company’s business
and drives long-term shareholder value creation. It places a meaningful proportion of total cash
compensation at risk, thereby aligning executive rewards with the Company’s financial results. It also
offers an opportunity for meaningful pay differentiation tied to the performance of individuals and
groups.
In the first quarter of fiscal 2010, the Compensation Committee established performance measures
and targets for the Company (and for each group, division and business segment), and they set a
minimum performance threshold of $450 million in net income (adjusted for (i) business acquisitions
and disposals, (ii) debt refinancing, (iii) legacy legal and tax matters, (iv) goodwill and intangible asset
impairments, (v) tax law changes, (vi) discontinued operations and (vii) changes in accounting) that had
to be met for named executive officers to receive any bonuses for the year. The impact of these
adjustments was not significant to the determination of whether the minimum threshold was met. These
metrics were also approved by the independent members of the Board. The Compensation Committee
also approved individual maximum bonus amounts for each Senior Officer of 0.5% of adjusted net
income for Mr. Breen, subject to a cap of $5.0 million and 0.25% of adjusted net income for
Messrs. Coughlin, Gursahaney and Oliver, and Ms. Reinsdorf, subject to a cap of $2.5 million. The
Compensation Committee further established target and maximum values as a percentage of base
salary. Target incentive opportunities ranged from 80% to 125% of base salary for fiscal 2010. Potential
payouts ranged from 0% to 200% of the target incentive opportunity. The performance measures
approved for the corporate and group levels of the organization were also established in the first
quarter of fiscal 2010 and were used by the Compensation Committee and the Board as a guideline in
exercising negative discretion to determine final bonuses for named executive officers. These measures
are described in the table below.
2011 Proxy Statement 49