ADT 2011 Annual Report Download - page 79

serve as significant risk mitigators. Finally, the Compensation Committee’s authority to approve
performance metrics, targets, minimum thresholds and maximum award caps provide discipline and
help eliminate the incentive for excessive risk-taking behavior.
Based on the foregoing, we believe that our compensation policies and practices do not create
inappropriate or unintended material risk to the company as a whole. We also believe that our
incentive compensation arrangements provide incentives that do not encourage inappropriate
risk-taking; are compatible with effective internal controls and the risk management policies; and are
supported by the oversight and administration of the Compensation Committee with regard to
executive compensation programs.
Stock Ownership Guidelines
In 2003, the Board established stock ownership and share retention guidelines for all Senior
Officers. The Board believes that executives who own and hold a significant amount of Company stock
are aligned with long-term shareholder interests. The guidelines apply to all of our named executive
officers and certain additional senior executives. The Compensation Committee reviews compliance
with our stock ownership guidelines annually.
The current stock ownership requirement for our named executive officers is five times base salary
for Messrs. Gursahaney and Oliver, six times for Mr. Sklarsky and Ms. Reinsdorf and ten times for
Mr. Breen. Tyco shares that count towards meeting the stock ownership requirement include restricted
stock, RSUs, DSUs, performance share units, shares acquired through our 401(k) plan or the Employee
Stock Purchase Program, and shares otherwise beneficially owned by the executive. We do not require
that the stock ownership guidelines be attained within a certain period of time. Instead, the
Compensation Committee reviews executive stock ownership regularly to ensure that our senior
executives are making progress towards meeting their goals or maintaining their requisite ownership.
Tyco’s stock retention guidelines require that our named executive officers and other senior
executives retain 75% of net (after-tax) shares acquired from the exercise of stock options or the
vesting of restricted shares until they attain their target stock ownership goal. Once that goal is
attained, they cannot sell shares if it would result in the executive owning fewer shares than the target
multiple applicable to him or her. When a named executive officer reaches the age of 62, the target
multiple is reduced by 50%. Except for Mr. Sklarsky, who was hired in December 2010, all of the
named executive officers met or exceeded the applicable stock ownership multiple guideline in fiscal
2011.
Pay Recoupment Policy
Tyco’s pay recoupment policy currently provides that, in addition to any other remedies available
to it and subject to applicable law, if the Board or any Compensation Committee of the Board
determines that any annual or other incentive payment, equity award or other compensation received
by a Senior Officer resulted from any financial result or operating metric that was impacted by the
Senior Officer’s fraudulent or illegal conduct, the Board or a Board Committee may recover from the
Senior Officer that compensation it considers appropriate under the circumstances. The Board has the
sole discretion to make any and all determinations under this policy. The Board expects to update the
pay recoupment policy when the regulations mandated by the Dodd-Frank Act are implemented by the
Securities and Exchange Commission. At a minimum, the policy will comply with the Dodd-Frank Act
and related regulations, but will likely retain features of the existing policy that are more expansive
than the requirements of the Act.
2012 Proxy Statement 65