ADT 2012 Annual Report Download - page 54

goals and objectives relevant to the Chief Executive Officer’s compensation, evaluates his performance in light
of those goals and objectives and, based upon this evaluation, recommends his compensation for approval by the
independent members of the Board of Directors.
With respect to our other named executive officers and senior officers, the Chief Executive Officer and the
Chief Human Resources and Administrative Officer develop the pay strategies and recommendations, which our
Compensation Committee then reviews and approves.
Tyco Programs. With respect to the pre-Separation compensation of our named executive officers, the Tyco
Compensation Committee received advice from an independent compensation consultant and considered pay
strategies and recommendations prepared by Tyco’s management. From fiscal year 2007 until fiscal year 2012,
the Tyco Compensation Committee retained Exequity LLP (“Exequity”) as its independent compensation
consultant to provide services exclusively to the Tyco Compensation Committee.
In general, the independent compensation consultant developed pay strategies and recommendations relating
to the Chief Executive Officer of Tyco, which the consultant provided to the Tyco Compensation Committee,
and also reviewed and critiqued Tyco’s director and executive compensation programs, strategies and
philosophy. During fiscal year 2012, Exequity also assisted the Tyco Compensation Committee in developing its
recommendations to our Board of Directors regarding post-Separation executive compensation.
With respect to our named executive officers, the Chief Executive Officer of Tyco and Tyco’s Senior Vice
President, Human Resources and Internal Communications developed the pay strategies and recommendations,
which the Tyco Compensation Committee then reviewed. However, the authority to approve those strategies and
recommendations resided with different parties according to the employee’s level within Tyco. For
Mr. Gursahaney, decisions were required to be approved by the independent members of the Tyco Board of
Directors, subject to the Tyco Compensation Committee’s authority regarding performance measures. For
Messrs. Boerema and Edoff and Mses. Mikells and Graham, Tyco’s Board of Directors granted Tyco’s Chief
Executive Officer and his designees the authority to approve pay actions. However, the Tyco Compensation
Committee was responsible for approving actions related to other aspects of the compensation of these
employees, such as the size of bonus pools, annual incentive plan performance goals, equity award design, equity
value ranges and share pools and compensation packages for highly compensated employees who were not senior
officers.
Process Overview: How the Compensation Committee Designs and Establishes Executive Compensation
Post-Separation Programs. Following the Separation, our Compensation Committee authorized Farient,
with the assistance of management, to develop a peer group that would fit with the Company’s business model
and size characteristics. In doing so, Farient screened public companies based on whether they have a similar
range of revenues and are generally focused on generating subscription-based recurring revenue, primarily in the
business-to-consumer (B2C) arena. This process resulted in a peer group, which our Compensation Committee
approved, consisting of the following companies:
• The Brink’s Co. • Liberty Media Corp. • Telephone & Data Systems, Inc.
• Cablevision Systems Corp. • MetroPCS Communications, Inc. • Tyco International Ltd.
• CenturyLink, Inc. • Netflix, Inc. • Windstream Corp.
• Charter Communications, Inc. • Rollins, Inc. • DIRECTV *
• Equinix, Inc. • SIRIUS XM Radio Inc. • Ascent Capital Group, Inc. *
• Frontier Communications Corp. • Stanley Black & Decker, Inc.
* These companies are included only as “reference peers”, as their business model is similar to ADT’s, but
their size is considerably different than ADT. Reference peers are utilized only for purposes of analyzing
pay practices and relative performance and are not used to benchmark the pay levels for our named
executive officers.
-28-