ADT 2014 Annual Report Download - page 34

COMPENSATION OF EXECUTIVE OFFICERS—CONTINUED
value in the form of PSUs, whose vesting is contingent upon
achieving TSR and SSFCF goals over a three-year performance
period. An additional 25% of long-term incentive value for our CEO
and other Executive Officers was delivered in the form of Stock
Options, which deliver value only when long-term stock price
appreciation is achieved. The remaining 25% of long-term incentive
value delivered to our CEO and other Executive Officers was awarded
in the form of RSUs, which deliver higher value when there is long-
term stock price appreciation.
The following graph provides a comparison of the cumulative TSR on
the Company’s common stock to the returns of the S&P 500 Index
and the S&P 500 Industrial Index from October 1, 2012 (the first day
of fiscal year 2013 and the inception of trading of ADT common stock
as an independent, publicly traded company) through September 26,
2014 (the end of fiscal year 2014). From inception through the end of
fiscal year 2014, our TSR is 2.2%. As an indicator of the solid
sequential improvements in our operational performance during the
last three quarters of fiscal year 2014, however, our TSR between
January 30, 2014 (the date of release of the 10-Q for first fiscal
quarter) and September 26, 2014 is approximately 15%. The graph is
not, and is not intended to be, indicative of future performance of our
common stock.
150%
160%
140%
120%
130%
110%
90%
100%
80%
70%
Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14
ADT
S&P500
S&P 500 Industrials (S5INDU)
The above graph assumes the following:
(1) $100 invested at the close of business on October 1, 2012, in
ADT common stock, S&P 500 Index, and the S&P 500 Industrial
Index.
(2) The cumulative total return assumes reinvestment of dividends.
The Compensation Committee believes that the annual incentive
awards earned by the NEOs, in comparison to the performance of
the Company’s stock relative to the S&P 500 Index and the S&P 500
Industrial Index, reflect a proper alignment of pay and performance.
Process for Determining Executive Officer
Compensation (including NEOs)
Role of the Compensation Committee
The Compensation Committee consists exclusively of independent
directors, the requirements of which are set forth in the NYSE listing
rules, who are also considered “outside directors” as defined in
Section 162(m) of the Code. The Compensation Committee is
responsible for, among other things, reviewing the performance of
and approving the compensation awarded to our Executive Officers,
other “senior officers” subject to the filing requirements of Section 16
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 the independent
members of the Board of Directors.
Role of Independent Compensation Consultant
The Compensation Committee regularly works with an independent
compensation consultant in carrying out its duties. 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, CEO or other senior executive compensation.
The Compensation Committee has engaged Farient Advisors LLC
(“Farient”) to provide advice regarding compensation practices for our
executives. 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 2014 advised
the Committee on matters including, among others:
•an evaluation of our executives’ base salaries and short- and long-
term target incentive compensation relative to the Company’s peer
group and the broader market;
•insight and advice in connection with the design of our incentive
plans, including the measures, goals, and leverage inherent in the
performance plans;
26 The ADT Corporation 2015 Proxy Statement
PROXY STATEMENT