ADT 2010 Annual Report Download - page 59

Fiscal 2010 Performance Bonus Summary
Named executive officer Maximum(1) Target Actual
Edward Breen ..................................... $4,062,500 $2,031,250 $4,062,500
Christopher Coughlin ................................ $1,600,000 $ 800,000 $1,600,000
George Oliver ..................................... $1,200,000 $ 600,000 $1,200,000
Naren Gursahaney .................................. $1,120,000 $ 560,000 $1,080,800
Judith Reinsdorf ................................... $ 840,000 $ 420,000 $ 840,000
(1) In December 2009, the Compensation Committee established and the Board approved potential
maximum annual incentive compensation payouts of 0.50% of adjusted net income for Mr. Breen,
subject to a cap of $5.0 million imposed by the 2004 SIP, and 0.25% for the other named executive
officers, subject to a cap of $2.5 million. The Compensation Committee further established a
maximum payout of 200% of target incentive opportunity.
The Board approved award payouts for each of our named executive officers in November 2010.
The Board approved the payments based on the achievement of the minimum adjusted net income
performance threshold of $450 million, and the achievement of the quantitative performance measures
shown in the ‘‘Fiscal 2010 Annual Incentive Compensation Design Summary’’ table above.
Long-Term Incentive Awards
As discussed above, a key element in the compensation of our named executive officers is
long-term equity incentive awards (‘‘LTI compensation’’), which tie a significant portion of
compensation to Company performance. The Compensation Committee believes that LTI compensation
serves the Company’s executive compensation philosophy in several ways. It helps attract, retain and
motivate talent. It aligns the interests of the named executive officers with the interests of shareholders
by linking a significant portion of the officer’s total pay opportunity to share price. It provides
long-term accountability for named executive officers, and it offers the incentive of performance-based
opportunities for capital accumulation in lieu of a pension plan for most of the Company’s executive
management. For a description of the material terms of stock options and performance share units
granted for fiscal 2010 under the 2004 SIP, see the narrative following the ‘‘Grants of Plan-Based
Awards’’ table.
Fiscal 2010 Annual Equity Award
Since the Company separated its healthcare (Covidien) and electronics (Tyco Electronics)
businesses in 2007 (the ‘‘Separation’’), the Compensation Committee has implemented a multi-year
plan to better align the compensation of the Company’s executives with the post-Separation peer group.
From fiscal 2008 to fiscal 2010, the Compensation Committee reduced LTI award levels for named
executive officers by an average of approximately 25% on an annualized basis, based on grant date fair
value. In fiscal 2010, our named executive officers and other key leaders received one-half of their
long-term equity awards in stock options and the other half in performance share units. These awards
are 100% linked to shareholder value creation. The stock options will vest ratably over a four-year
period and will only return value if the Company’s stock price appreciates. Performance share units will
pay out at the end of their three-year performance period only if Tyco’s total shareholder return is
within the upper 65% of the S&P 500 Industrials Index.
Fiscal 2011 Annual Equity Award
For fiscal 2011, the Compensation Committee retained the same mix of performance share units
and stock options for the Chief Executive Officer and added restricted stock units as a component of
LTI compensation for our other named executive officers (other than Mr. Coughlin, who did not
receive a grant for fiscal 2011). After careful consideration of industry trends and the performance of
2011 Proxy Statement 51