ADT 2013 Annual Report Download - page 25

CORPORATE GOVERNANCE OF THE COMPANY—CONTINUED
Director Independence
To maintain its objective oversight of management, the Board of Directors consists of a majority of independent directors. The Board of Directors
has adopted categorical standards designed to assist the Board in assessing director independence (the “Independence Standards”). The
Independence Standards are included in our Board Governance Principles which can be found on our website at www.adt.com/about-adt/
corporate-governance/. The Independence Standards have been designed to comply with the standards required by the NYSE. In addition,
committee members are subject to any additional independence requirements that may be required by law, regulation or NYSE listing standards.
Based on an annual evaluation performed by, and recommendations made by, the Nominating and Governance Committee, our Board of
Directors annually determines the independence of each director. Under our Board Governance Principles, a director is not independent unless
the Board of Directors makes an affirmative determination that such director has no material relationships with the Company (either directly or as
a partner, stockholder or officer of an organization that has a relationship with the Company).
Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among
others.
On July 30, 2013, the Nominating and Governance Committee was informed that ADT Security Services Canada, Inc., a subsidiary of the
Company (“ADTSS Canada”) would be entering into a service contract for equipment, materials and services for approximately $16 million per
year (the “Contract”) with Tech Data Canada Corporation, a subsidiary of Tech Data Corporation (“Tech Data Canada”). The Contract was
entered into on August 5, 2013. As stated in his biography on page 16, Mr. Dutkowsky is the Chief Executive Officer and a member of the board
of directors of Tech Data Corporation. The Contract, including the payment for services, was analyzed under the Independence Standards and
ADT’s Guidelines for Related Party Transactions and determined to be a Type 1 matter since it is an arms-length transaction involving the
purchase of products and services by ADTSS Canada from Tech Data Canada in the ordinary course of business for ADT’s Canadian business
operations. Pursuant to the analysis, the total annual amount of the Contract fell below the applicable thresholds and is deemed to be pre-
approved by the Nominating and Governance Committee in accordance with the Independence Standards and the Guidelines for Related Party
Transactions.
In connection with its recommendation to the Board of Directors to appoint Richard Daly to the Board, the Nominating and Governance
Committee considered Mr. Daly’s current position with Broadridge and the amounts paid by the Company or Tyco International Ltd. (“Tyco”), the
Company’s former parent company, during each of the last three fiscal years for proxy processing and mailing services, including conduit
payments to banks and brokers (collectively, the “ADT Proxy Payments”), provided by Broadridge to the Company. Since the ADT Proxy
Payments were less than the greater of $1 million or 2% of Broadridge’s consolidated gross revenues in any of the last three fiscal years, the
Nominating and Governance Committee determined that Mr. Daly satisfied the Independence Standards as well as the independence
requirements of the NYSE.
Our Board of Directors has affirmatively determined that each of Mr. Colligan, Mr. Daly, Mr. Donahue, Mr. Dutkowsky, Mr. Gordon, Ms. Heller
and Ms. Hyle has satisfied the Independence Standards as well as the independence requirements of the NYSE. Mr. Gursahaney, the current
Chief Executive Officer, is not independent, because of his role as an executive officer of the Company.
Guidelines for Related Party Transactions
The Board of Directors has adopted certain Guidelines for Related Party Transactions. These Guidelines provide a process for compliance with
the related party provisions of the Board Governance Principles, the Company’s Code of Conduct, and the Company’s Amended and Restated
By-laws, as well as the disclosure obligations under the SEC rules. The Nominating and Governance Committee monitors, reviews and
approves, if necessary, any material related party transactions between ADT and its subsidiaries (collectively, the “Company”) and its senior
officers and directors. ADT’s Guidelines for Related Party Transactions state that on an annual basis, the Nominating and Governance
Committee will receive a list of related parties (the “Related Party List”) for each senior officer and director and such list will include any entity that
employs a director, any entity (including charitable organizations) for which the director or executive officer serves on the board of directors, and
any entity in which the senior officer or director owns more than a 10% interest. There are three types of material related party transactions
covered by the Guidelines for Related Party Transactions with specific review procedures:
•Type 1—transactions involving the purchase by or from the Company of products or services in the ordinary course of business in arms-
length transactions.
•Type 2—transactions involving the provision of consulting, legal, accounting or financial advisory services to the Company that could
compromise a director’s independence.
•Type 3—transactions in which a director or officer has a direct or indirect personal interest or that create a conflict of interest for the director
or officer.
Ordinary course of business, arms-length transactions with entities on the Related Party List are deemed pre-approved by the Nominating and
Governance Committee, in amounts in the aggregate for each such entity of less than 1% of the revenue of such entity or the Company. For
Type 1, the Guidelines for Related Party Transactions provide that the Nominating and Governance Committee, prior to filing the Company’s
The ADT Corporation 2014 Proxy Statement 13
PROXY STATEMENT