ADT 2015 Annual Report Download - page 41

COMPENSATION OF EXECUTIVE OFFICERS—CONTINUED
For fiscal year 2016, the Compensation Committee approved base salary increases for two of the NEO’s based upon its review of each of the
NEO’s performance, as well as other factors such as the NEOs’ experience, compensation benchmark market data and relative internal pay
positioning. Effective October 1, 2015, the increases to base salaries approved by the Compensation Committee are as follows:
Name Prior Base Salary New Base Salary Increase %
Mr. Ferber $500,000 $520,000 4.0%
Mr. Bleisch $480,000 $490,000 2.1%
Annual Incentive Compensation
Executive Officers of the Company, including each of the NEOs, are eligible to earn annual incentives under the Officer Short-Term Bonus Plan
(“Officer Bonus Plan”). Under the Officer Bonus Plan, which is intended to comply with Section 162(m) of the Internal Revenue Code, funding of
annual incentives is based upon Company achievement against an annual Operating Income target, which is determined annually by the
Compensation Committee. This funding of annual incentives represents the maximum bonus any individual Executive Officer may earn under the
Officer Bonus Plan. For fiscal year 2015, each of the Company’s Executive Officers was eligible for a maximum bonus under the Officer Bonus
Plan equal to 0.5% of the Company’s Operating Income.
After determining the Company’s performance against the Operating Income criterion and the maximum bonus any individual Executive Officer
may earn under the Officer Bonus Plan, the Compensation Committee may apply negative discretion to the calculated maximum incentive
amount to determine the bonus to be paid to each individual Executive Officer. In exercising its negative discretion, the Compensation
Committee generally utilizes a guideline formula which is based upon the Company’s AIP, which is the plan upon which a majority of incentive-
eligible employees’ annual incentives are based.
The design of the Company’s AIP, and the guideline formula under the Officer Bonus Plan, reflects the Company’s focus as a subscriber-based
business with significant recurring monthly revenues, and the metrics utilized have been selected to drive results in those categories which have
the most significant impact on the success of our business. The AIP design is reviewed annually by both management and the Compensation
Committee, along with input from the Compensation Committee’s independent compensation consultant (see page 34 for a detailed description
of the role of the Compensation Committee’s independent compensation consultant) to determine whether any changes are warranted. Based
upon this annual review, the Company adjusted the fiscal year 2015 AIP and guideline formula to incorporate several changes which were
intended to strengthen the alignment between the Company’s stockholders’ interests and those of its executives, as well as further improve the
line-of-sight for its employees.
Changes to AIP and Guideline Formula for Fiscal Year 2015
For fiscal year 2015, the Company made several changes to the AIP, which are described below in the charts comparing the design changes in
the AIP for fiscal year 2015 to the design in place in fiscal year 2014, as well as the rationale for the changes made to the plan design:
Fiscal Year 2014 Plan Design Fiscal Year 2015 Plan Design
Weighting
Category Metrics Weighting Alignment Metrics Corporate Participants
Business
Unit
Participants
Financial
(measured at
Corporate level)
Recurring Revenue Growth 30% Results measured
at Corporate level
Recurring Revenue 33
1
⁄ 3 %16
2
⁄ 3 %
Net Attrition 20% Customer Retention 33
1
⁄ 3 %16
2
⁄ 3 %
Steady State Free Cash Flow 30% EBITDA before special items 33
1
⁄ 3 %16
2
⁄ 3 %
Strategic
Modifiers
Small Business Recurring
Revenue Growth +/-20% Adjustment
to Overall Financial
Results
Results measured
at Business Unit
level
Recurring Revenue 16
2
⁄ 3 %
Corporate Recurring Revenue
Margin Customer Retention 16
2
⁄ 3 %
Individual Individual Objectives 20% Business Unit-specific metric 16
2
⁄ 3 %
The ADT Corporation 2016 Proxy Statement 31
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