ADT 2011 Annual Report Download - page 64

•The Company maintains an expansive pay recoupment policy to claw back compensation earned
as a result of fraudulent or illegal conduct. We expect to modify the policy upon implementation
of the Dodd-Frank Act to comply with applicable regulations.
• Under the Company’s insider trading policy, employees, including named executive officers, are
prohibited from speculating in Company securities or engaging in transactions designed to hedge
their ownership interests.
The features described above are important components of the Company’s executive compensation
governance framework. The sections that follow provide more detailed information regarding the
governance framework, as well as more information regarding the pay elements used in the
compensation of our named executive officers.
Process Overview: How the Compensation Committee Designs and Establishes Executive Compensation
The Compensation Committee evaluates many factors when designing and establishing executive
compensation plans and targets. In determining the appropriate compensation of individual named
executive officers, the Compensation Committee considers critical data including the relative complexity
and importance of the executive’s role within the organization, the executive’s experience, record of
performance and potential, the compensation levels paid to similarly positioned executives at our peer
group companies, and internal pay equity considerations.
Each year, the Compensation Committee reviews the composition of the Company’s peer group
with the assistance of its independent compensation consultant to ensure that it aligns with the
Company’s size and lines of businesses. Any change to the peer group is subject to the Compensation
Committee’s approval. The peer group is drawn from companies in the S&P 500 Index, and the
Compensation Committee analyzes up to 17 factors in determining inclusion, including rank within the
S&P 500 Index, overlapping business lines, number of employees, and various performance and
financial measures. The Compensation Committee did not make any changes to the peer group in fiscal
2011 after updating the peer group in fiscal 2010. The peer group consists of 17 industrial and service
companies that reflect the competitive landscape in which Tyco operates. It also takes into account the
diverse nature of the Company’s operations, which are a blend of world-class manufacturing capabilities
and premier service delivery.
• 3M Co. • General Dynamics Corp. • Raytheon Co.
• Danaher Corp. • Honeywell International, Inc. •Sprint Nextel Corp.
• Deere & Co. • Illinois Tool Works, Inc. • Time Warner Cable Inc.
• DirecTV Group, Inc. • Ingersoll-Rand PLC • United Technologies Corp.
• Eaton Corp. • ITT Corp. • Waste Management, Inc.
• Emerson Electric Co. • Johnson Controls Inc.
In addition to the peer group, the Committee considers general industry data (excluding financial
service companies) that is regressed to approximate the size and complexity of Tyco as a secondary
source. The Company’s talent strategy calls for both the development of internal leadership and the
recruitment of highly experienced leaders from outside the Company. Tyco does not position executive
pay to reflect a single percentile within the peer group, but broadly targets the 50th percentile for base
salaries and performance-based pay at or slightly above the 50th percentile. Although these benchmarks
represent useful guidelines, the Compensation Committee exercises discretion in setting individual
executive compensation packages so that they appropriately reflect the value and expected contributions
of each executive to the Company, as well as the executive’s leadership, commitment to our values, and
potential for advancement.
50 2012 Proxy Statement