ADT 2012 Annual Report Download - page 52

In connection with the Separation, the Board of Directors of the Company formed its own Compensation
Committee. In this Compensation Discussion and Analysis, we refer to ADT’s Compensation Committee as “our
Compensation Committee.” Our Compensation Committee determines the Company’s executive compensation
for fiscal year 2013 and beyond.
Compensation Overview and Philosophy
Post-Separation Programs. As a newly independent public company, ADT has designed and will continue
to refine and further develop its executive compensation objectives, policies, practices and programs to support
its strategic mission and business objectives.
The objectives of the compensation plans of the Company are to support its overall strategy and objectives,
including the alignment of management’s interests with stockholders; linking total compensation to defined
performance goals; balancing the need to motivate appropriate risk taking without encouraging or rewarding
excessive risk; attracting and retaining key executives; and providing competitive total compensation
opportunities.
The compensation philosophy of the Company for purposes of the development and design of ADT’s
executive compensation programs includes, among others, the following concepts:
• Rewarding executives for achieving strong operating performance and delivering on the Company’s
strategic initiatives.
• Targeting base salary and performance-based pay, on average, at the 50th percentile of the Company’s
competitive market, including select peer companies and the broader competitive talent market.
• Applying limited discretion, as appropriate, in setting individual compensation packages which reflect
the value and expected contributions of each executive.
Tyco Programs. The compensation philosophy of Tyco’s Compensation Committee guided its
compensation decisions with respect to ADT’s named executive officers during the period prior to the
Separation, including all of fiscal year 2012, and also during the period directly following the Separation. In
designing ADT’s executive compensation programs, the Tyco Compensation Committee was guided by its
philosophy that executive compensation programs should:
• Reinforce Tyco’s business objectives and the creation of long-term shareholder value.
• Provide for performance-based reward opportunities that support growth and innovation without
encouraging or rewarding excessive risk.
• Align the interests of executives with those of shareholders by weighting a significant portion of
compensation on sustained shareholder returns through long-term performance programs.
• Attract, retain and motivate key executives by providing competitive compensation with an appropriate
mix of fixed and variable compensation, short-term and long-term incentives and cash- and equity-
based pay.
• Recognize and support outstanding individual performance and behaviors that demonstrate Tyco’s core
values—Integrity, Excellence, Teamwork and Accountability.
Role of the Compensation Committee
Post-Separation Programs. Following the Separation, our Compensation Committee adopted a charter that
is similar to the charter of the Tyco Compensation Committee. ADT’s Compensation Committee, which consists
exclusively of independent directors also considered “outside directors” as defined in Section 162(m) of the
Internal Revenue Code (the “Code”), is responsible for, among other things: (1) reviewing and approving
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