ADT 2014 Annual Report Download - page 39

COMPENSATION OF EXECUTIVE OFFICERS—CONTINUED
The following table describes the general terms and conditions applicable to each of the equity-based grant type:
Grant Type Vesting Other Terms & Conditions
PSUs 100% on the 3rd anniversary of the grant date, subject to
satisfaction of performance conditions
•Vesting subject to performance against Relative Total
Shareholder Return (50% weighting) and Steady State
Free Cash Flow Growth (50% weighting).
•Accumulate dividend equivalent units with respect to
dividends, which vest only to the extent of vesting of the
underlying PSU award.
Stock Options 25% per year •Granted with an exercise price equal to the closing
price of the Company’s common stock on the date of
grant.
•Expire on the 10th anniversary of the grant date unless
forfeited earlier.
RSUs 25% per year •Accumulate dividend equivalent units with respect to
dividends, which vest in accordance with the vesting of
the underlying RSU award.
We modified the PSU metrics for fiscal year 2014 in order to
strengthen the alignment of our executives’ interests and efforts with
the interests of our stockholders. We implemented a TSR metric in
order to capture our performance relative to the broader market.
Additionally, we chose to focus on the importance of generating
increased cash flows by utilizing a SSFCF metric.
In certain unusual circumstances, we make equity grants in addition
to our normal annual grants and awards for new hires in order to
recognize an individual’s extraordinary contributions to the Company.
In December 2013, we made a one-time RSU grant to Mr. Bleisch to
recognize his extraordinary efforts in supporting our special
governance needs in fiscal years 2013 and 2014. These RSUs vest
in equal amounts on each of the first two anniversaries of the date of
grant.
Fiscal Year 2015 Compensation Decisions
Base Salary
At the end of fiscal year 2014 we made the decision to postpone
base salary increases for our Executive Officers for fiscal year 2015.
Executive Officer compensation is generally reviewed on an annual
basis near the end of the fiscal year, with recommendations for
increases taking effect at the beginning of the next fiscal year. Based
upon our overall performance in fiscal year 2014, the CEO elected
not to recommend compensation increases for the Executive Officers
(other than himself) effective at the beginning of fiscal year 2015. The
Compensation Committee agreed with this recommendation and, in
the case of the CEO, the independent members of the Board of
Directors agreed not to increase the CEO’s base salary. The
Compensation Committee will review Executive Officer compensation
during fiscal year 2015 and will determine whether to make any
changes at such time.
Incentive Plan Design Changes
For fiscal year 2015, the Compensation Committee approved
changes to the design of our AIP program. These changes were
implemented in order to continue strengthening the alignment
between our stockholders’ interests and those of our executives and
to further improve the line-of-sight for our employees. Among the plan
design changes for fiscal year 2015:
•Replaced the SSFCF metric with an EBITDA metric for the AIP.
We believe that EBITDA, as a measure of earnings, captures a
greater level of impact of the value drivers of our business than
SSFCF. Additionally, EBITDA is also a more commonly utilized
metric in incentive plans in our peer group and the broader
market, and is more easily understood by both investors and plan
participants.
•Renamed the Net Attrition metric utilized in the AIP as Customer
Retention. Customer Retention, which is the inverse of Net
Attrition, provides our employees with a stronger positive focus of
increasing the number of customers we retain, as opposed to the
Net Attrition metric, which is focused on reducing the number of
customers we lose.
•For those employees who support one of our Business Units
(including certain of our Executive Officers), we introduced AIP
metrics at the Business Unit level. Employees supporting the
Business Units will have 50% of their incentive award funded by
the performance of the Business Unit, with the other 50% of the
award funded by the performance of the Company as a whole.
This change will provide greater focus for those employees
supporting Business Units toward driving the results which they
are better able to impact, while still maintaining the focus on the
results of the Company as a whole.
•Recurring Revenue and Customer Retention will be utilized as
metrics for each of the Company’s Business Units, as well as at
the corporate level.
•A third Business Unit-specific metric will be utilized to focus the
efforts of the employees supporting those Business Units on the
specific priorities of those businesses.
The ADT Corporation 2015 Proxy Statement 31
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