ADT 2011 Annual Report Download - page 69

Fiscal 2012 Annual Equity Award
For fiscal 2012, the Compensation Committee retained the same mix of performance share units
and stock options for the Chief Executive Officer, and performance share units, stock options and
restricted stock units for our other named executive officers. With respect to the 2012 performance
share units, the Compensation Committee replaced the cumulative earnings per share metric with a
return on invested capital (‘‘ROIC’’) measure, so that the performance shares units are 50% weighted
on TSR and 50% weighted on ROIC. The ROIC metric is designed to reward executives for efficiently
allocating capital and generating profitable growth. The TSR measure for the fiscal 2012 award is
consistent with the TSR measure for the fiscal 2011 award. Additionally, due to the pending
Separation, the performance period for the fiscal 2012 award has been shortened to one year to
coincide with the expected closing date of the Separation. We anticipate that the performance period
for the fiscal 2011 awards will also be shortened (to two years) to coincide with the expected closing
date. The vesting period for these awards will remain three years.
In addition, in fiscal 2012, the Compensation Committee decided to end the cash perquisite
allowance program for all officers of the Company that received the benefit, including the named
executive officers. This program, which was instituted in 2003 to eliminate costly and administratively
burdensome perquisites such as company cars, club dues, and tax preparation services, provided for a
cash payment equal to 10% of the officers base salary (up to a maximum of $70,000) that the officer
could use without limitation. The Compensation Committee determined that, in light of current market
practices at the Company’s peers and in the broader market, the program’s benefits—in attracting and
retaining talented executives—were outweighed by its costs. In connection with the discontinuance of
this plan, existing officers who were receiving the benefit at the time of termination received a one-time
grant of restricted stock units. The fair value of the grant was equal to two times the annual value of
the cash allowance for such officer, and the restricted stock units have a pro-rata vesting schedule of
two years.
Executive Benefit Plans and Other Elements of Compensation
All of our named executive officers are eligible to participate in the benefit plans that are available
to substantially all of our other U.S. employees. These benefit programs include Tyco’s tax-qualified
401(k) Retirement Savings and Investment Plans (‘‘RSIPs’’) and its medical insurance, dental insurance,
life insurance, long-term disability and long-term care plans. The retirement programs at Tyco do not
include active defined benefit plans for our named executive officers or for other U.S. executives,
except that Mr. Breen is entitled to pension benefits under his employment agreement.
Our named executive officers are eligible to participate in the Tyco Supplemental Savings and
Retirement Plan, which is a deferred compensation plan that permits the elective deferral of base
salary and performance-based bonus for executives earning more than $110,000 per year. The SSRP
provides our executives with the opportunity to:
• contribute retirement savings in addition to amounts permitted under the RSIPs;
• defer compensation on a tax-deferred basis and receive tax-deferred market-based growth; and
• receive any Company contributions that were reduced under the RSIPs due to IRS
compensation limits.
In recent years, the Committee has reviewed the other elements of compensation that were
historically part of the named executive officers’ total compensation and has taken steps to phase-out
programs that it believes are not in line with best practices. The limited perquisites and other benefits
that Tyco has provided to its named executive officers and certain other senior executives consist of the
following:
Supplemental insurance benefits (executive life, disability and long-term care). These programs
provide life insurance, long-term disability insurance and long-term care insurance to certain executives.
2012 Proxy Statement 55