ADT 2013 Annual Report Download - page 35

COMPENSATION OF EXECUTIVE OFFICERS—CONTINUED
The chart below, which summarizes the distribution of targeted total
direct pay for our NEOs in fiscal year 2013, highlights that over 80%
of CEO target annual compensation and, on average, nearly 70% of
other NEO target annual compensation, is variable with performance,
including stock price performance.
CEO Other NEOs
Base Salary Annual Incentive Long-Term Incentives Base Salary
66%
17%
17%
Annual Incentive Long-Term Incentives
49%
20%
31%
Fiscal Year 2013 Compensation and
Decisions
In fiscal year 2013, we made a number of decisions regarding the
design of our compensation programs, as well as specific decisions
regarding the compensation of several of our Executive Officers.
Although our initial compensation programs generally were based on
the compensation programs designed by Tyco when the Company
operated as a Tyco subsidiary, we established our programs
following our separation from Tyco to reflect our focus as a
subscriber-based business with significant recurring monthly revenue.
Among the changes we made were:
•The introduction of a Recurring Revenue Growth measure to the
Company’s Annual Incentive Plan (“AIP”) to support our strategy to
increase revenues through both net customer additions and
increased Average Revenue Per User (“ARPU”);
•Increased the weighting of Net Attrition in the AIP to reflect the
importance of maintaining and growing our customer base;
•Added a Strategic Modifier to focus on selected strategic
initiatives to drive profitable growth. We chose to focus on
increasing the Pulse Take Rate and on growing our Small
Business unit recurring revenues; and
•The modification of the Company’s Long-Term Incentive Plan
(“LTIP”) with the focus on growing the business and generating
increased cash flows by utilizing Recurring Revenue Growth and
Adjusted Free Cash Flow Growth metrics.
In addition to the changes we made in our compensation programs,
we made specific individual compensation decisions in fiscal year
2013 for certain of our NEOs to reflect their assumption of additional
responsibilities:
•Mr. Gursahaney’s base salary increased by 48% to reflect his new
role as CEO. Mr. Gursahaney’s annual incentive target remained
at 100% of base salary, resulting in a corresponding increase to
his annual incentive target. Prior to his appointment as CEO upon
the Company’s separation from Tyco, Mr. Gursahaney served as
President of Tyco Security Solutions.
•Mr. Bleisch and Ms. Graham received an increase in base salary
(which resulted in a corresponding increase in annual incentive
target) of 19% and 8%, respectively, in recognition of their new
roles in the stand-alone public company. In August 2013,
Mr. Bleisch received an additional 10% increase in base salary
(which resulted in a corresponding increase in annual incentive
target) based upon a review of his compensation in relation to
similarly situated roles in the broader market. Prior to their
appointments to their respective positions upon the Company’s
separation from Tyco, Mr. Bleisch served as General Counsel and
Ms. Graham served as Vice President of Human Resources, each
of Tyco Security Solutions.
We also made several key executive hires during fiscal year 2013 in
order to better position the Company for future success, among them
Alan Ferber, the President of our Residential Business unit and one of
our NEOs. In addition, subsequent to the end of the fiscal year, we
hired Michael Geltzeiler as our Chief Financial Officer. Mr. Geltzeiler’s
target compensation for fiscal year 2014 is as follows:
Base Salary $ 750,000
Annual Incentive Target $ 750,000
Target Long-Term Incentive Award $1,875,000
Total $3,375,000
Pay for Performance
We strongly believe that a significant portion of our executives’
compensation opportunity should be fulfilled only when supported by
our performance. Currently, all of our executives’ annual incentive
compensation and a portion of their long-term equity incentive
compensation is payable only if we attain certain specified goals
(including, for our NEOs other than the CEO, certain individual
objectives included as part of our annual incentive program), thereby
placing a substantial portion of executive compensation at risk. The
remainder of our executives’ long-term equity incentive compensation
is awarded in stock options and time-vested restricted stock units,
the value of each of which is dependent on our performance over an
extended vesting period. This pay element is designed to create
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