ADT 2012 Annual Report Download - page 55

Going forward, our Compensation Committee will consider the compensation data from the peer group that
relates to similarly positioned executives within the peer group when it sets the compensation levels of our
named executive officers, as well as other factors including the relative complexity and importance of the
executive’s role within the organization, the executive’s experience, record of performance and potential, general
industry compensation data and internal pay equity considerations. Our Compensation Committee will also
review tally sheets for each of our named executive officers to better understand the effect that changing any
discrete pay element would have on the total compensation provided and reveal how well each pay element
aligns with our compensation philosophy and objectives.
As previously noted, the Tyco Compensation Committee was actively involved in the design of our post-
Separation compensation programs. In making its recommendation to our Compensation Committee and our
Board of Directors regarding post-Separation pay for our named executive officers, including the compensation
approved for Ms. Mikells upon her hiring in April 2012, the Tyco Compensation Committee considered general
industry data (excluding financial service companies) adjusted for the approximate size of the post-Separation
ADT, and other benchmark data obtained from broad surveys prepared by third party providers. As demonstrated
by the constitution of the Company’s post-Separation senior leadership team, the Company’s talent strategy
called for both the development of internal leadership and the recruitment of highly experienced leaders from
outside the Company. In developing post-Separation executive compensation levels, Tyco’s Compensation
Committee broadly targeted total direct compensation at the 50th percentile of the benchmark data. Although
these benchmarks represented useful guidelines, the Tyco Compensation Committee exercised discretion in
making recommendations of individual executive compensation packages so that they appropriately reflected the
value and expected contributions of each executive to the Company, as well as the executive’s leadership,
commitment to our values, and potential for advancement.
Tyco Programs. In past years, the Tyco Compensation Committee considered the compensation levels and
compensation program design of a peer group when designing and establishing executive compensation plans
and targets and setting compensation levels for its executives and officers, including Mr. Gursahaney. However,
due to the anticipated Separation at the end of fiscal year 2012, Tyco management determined that fiscal year
2012 compensation for our named executive officers (other than Ms. Mikells) should be equal to the
compensation levels for fiscal year 2011, and any adjustments to compensation resulting from anticipated
changes to their roles would be made concurrent with the Separation.
Elements of Compensation—Post-Separation Programs
Our executive compensation program following the Separation, as designed by Tyco’s Compensation
Committee and ratified by our Compensation Committee, incorporates four primary elements of compensation,
which are described below:
Base salary: Base salary provides a fixed amount of cash
compensation to our executives. We provide base
salaries that are competitive in the market for
talent, but base salaries are generally not the
largest element of targeted compensation for our
named executive officers.
Annual incentive compensation: Annual incentives are paid in cash based on the
achievement of short-term performance goals of
the Company. Annual incentive compensation
rewards employees for their execution of the
operating plan and other strategic initiatives, as
well as for financial performance that benefits the
Company’s business and drives long-term
shareholder value creation. It places a meaningful
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