ADT 2011 Annual Report Download - page 65

13DEC201119501267
The Company believes that one of the most important features of a compensation program that
pays for performance is an appropriate weighting of pay elements that align management’s interest with
those of shareholders. As a result, the Compensation Committee places the greatest proportion of
executive pay in long-term equity compensation for named executive officers, with the aim of tying the
executive’s realized pay to sustained shareholder returns. It also places a significant portion of cash
compensation in the form of performance bonuses. In fiscal 2011, approximately 72% of targeted direct
pay for our Chief Executive Officer, and approximately 65% for the rest of our named executive
officers, was in the form of long term equity awards. Additionally, over 48% of targeted cash
compensation for our Chief Executive Officer and the rest of our named executive officers was in the
form of an annual performance bonus.
The chart below summarizes with respect to our named executive officers the distribution of total
compensation by pay element for fiscal 2011. The information summarized shows all elements of
compensation, including elements that do not comprise targeted direct pay, and consists of each named
executive officer’s base salary and target bonus opportunity during the fiscal year; the grant date fair
value of stock options and performance share units; the value of Mr. Breen’s change in pension
benefits from September 2009 to September 2010, the value of Mr. Sklarsky’s sign-on bonus and equity
grant, and the value of all other compensation provided to the executive at the end of the preceding
fiscal year. The value of the change in Mr. Breen’s pension benefit is included for completeness. It
does not represent a targeted element of direct pay because the actuarial value of the benefit is based
on market factors beyond the control of Mr. Breen or the Compensation Committee. In the case of all
other compensation and pension benefit changes, the previous year’s value is used because the final
value is not determined until after the end of the fiscal year during which the compensation is paid.
Pay Mix for Named Executive Officers
Breen Sklarsky Oliver Gursahaney Reinsdorf
FY11 Share-based
Compensation,
52%
FY11 Share-based
Compensation,
68%
FY11 Share-based
Compensation,
60%
FY11 Share-based
Compensation,
60%
FY11 Share-based
Compensation,
61%
FY11 Target Bonus,
11%
FY11 Target Bonus,
17%
FY11 Target Bonus,
17%
FY11 Target Bonus
& Sign-on Bonus,
20%
FY11 Target Bonus,
15%
FY11 Base Salary,
9% FY11 Base Salary,
12% FY11 Base Salary,
17%
FY11 Base Salary,
17%
FY11 Base Salary,
18%
FY10 Change in
Pension Value,
21%
FY10 All Other Comp,
7%
FY10 All Other Comp,
6% FY10 All Other Comp,
6%
FY10 All Other Comp,
6%
Elements of Compensation
When determining executive compensation, the Compensation Committee focuses on four primary
categories of compensation, which are described in more detail below. Each year, the Compensation
Committee completes a comprehensive review of these elements utilizing tally sheets prepared by
company management for each named executive officer. Tally sheets identify the value of each pay
element, including base salary, annual bonus, sign-on or other cash payments, long-term incentives, and
benefit and perquisite payments, and help the Compensation Committee to better understand the effect
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