ADT 2013 Annual Report Download - page 37

COMPENSATION OF EXECUTIVE OFFICERS—CONTINUED
of the Securities Exchange Act of 1934, as amended, and “senior
executives” (those executives who are not senior officers, but who
have a base salary of $350,000 or greater). The Compensation
Committee also reviews CEO performance and makes
recommendations regarding his compensation to our Board of
Directors. To assist in these processes, the Compensation
Committee reviews tally sheets to understand how each element of
compensation relates to other elements and to the compensation
package as a whole. These tally sheets summarize the executive’s
total compensation opportunity, as well as a summary of historical
compensation.
Role of Independent Compensation Consultant
In carrying out its role in establishing executive compensation plans,
the Compensation Committee has the sole authority to retain,
compensate and terminate the independent compensation consultant
and any other advisors necessary to assist it in its evaluation of non-
management director, chief executive officer or other senior executive
compensation. The Compensation Committee receives advice from
Farient Advisors LLC (“Farient”), its independent compensation
consultant. Farient provides no services to the Company other than
consulting services provided to the Compensation Committee. In
fulfilling its duties to the Compensation Committee, Farient often
works directly with management of the Company to prepare materials
for the Committee’s review. Farient regularly attends Compensation
Committee meetings and in fiscal year 2013 advised the Committee
on matters including, among others, incentive plan design, peer
group composition and the compensation offered to our new Chief
Financial Officer.
Role of Management
The Company’s Human Resources department supports the
Compensation Committee in the execution of its responsibilities. The
Company’s Chief Human Resources and Administrative Officer
supervises the development of materials for each Compensation
Committee meeting, including individual and Company performance
metrics, tally sheets, market data and, in conjunction with the CEO,
individual compensation recommendations for the Company’s
executives. No member of management, including the CEO, has a
role in determining his or her own compensation.
Benchmarking
The Compensation Committee considers a number of factors in
determining target total compensation for each of the Company’s
Executive Officers. These factors include, but are not limited to,
position specific market data, the executive’s experience and
performance, and internal pay equity. While the Compensation
Committee strives to generally target executive compensation at the
median of the Company’s competitive market (including both
selected peer companies and the broader competitive market), they
also apply discretion based upon their review of the factors noted
above to make individual compensation decisions for the Company’s
Executive Officers.
Peer company data were utilized to benchmark pay levels for the
CEO and CFO positions and to provide insights on pay practices at
the executive level. We also used general industry data from third
party providers as secondary data sources for the CEO and CFO
positions and as a primary source for the other executive positions.
The survey-sourced data was adjusted for size, and in some cases
an implied telecom premium was applied to the general industry data
to reflect (1) the fact that the telecom industry has increasingly
become a source of executive talent for the Company, and (2) the
similarities between the residential consumer-focused, recurring
monthly revenue-based industries. Neither the Compensation
Committee nor management has any input into the companies
included in these general industry surveys.
Peer Group Development
In conjunction with the Company’s separation into a stand-alone
public company, the Compensation Committee, with the assistance
of our external advisor, Farient, developed a peer group for
compensation purposes that would align with the Company’s
business model and size characteristics. Public companies were
screened 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. The
Compensation Committee also reviews the peer group periodically to
determine whether any significant changes to the business condition
of the Company or any of its peers would warrant any changes to the
peer group.
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