ADT 2015 Annual Report Download - page 44

COMPENSATION OF EXECUTIVE OFFICERS—CONTINUED
Awards of equity under the annual LTIP process are delivered to
employees utilizing a mix of PSUs, Stock Options and RSUs. The
weighting of the different components of the awards varies by
employee level. The target value of awards granted to the CEO and
the other NEOs during the annual LTIP process are based upon the
following mix of equity:
Grant Type Weighting
PSUs 50%
Stock Options 25%
RSUs 25%
For fiscal year 2015, the Compensation Committee approved a
change to the design of the LTIP similar to the change made in the
AIP. The SSFCF metric, which was one of the metrics for determining
the PSU performance for grants made in fiscal year 2014, was
replaced with an EBITDA metric. The EBITDA measure provides a
more accurate indication of the overall performance of the business
and is better aligned with stockholder interests over the long-term.
In light of its decision not to provide merit increases for fiscal year 2015
for the Executive Officers, the Compensation Committee elected to
provide annual equity awards for fiscal year 2015 at a level 10% above
each Executive Officers’ annual long-term incentive target.
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 •On the 3rd anniversary of the grant date, subject to
satisfaction of performance conditions.
•Vesting subject to performance against EBITDA (75%
weighting) and TSR (25% weighting).
•The performance range for PSUs subject to TSR is set
with a threshold of the 25th percentile (representing a 40%
payout) and maximum of the 75th percentile (representing
a 200% payout).
•PSUs accumulate dividend equivalent units with respect
to dividends, which vest in accordance with (and only to
the extent of) the vesting of the underlying PSU award.
Stock Options •25% per year over 4 years •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 over 4 years •RSUs accumulate dividend equivalent units with respect
to dividends, which vest in accordance with the vesting
of the underlying RSU award.
The Compensation Committee has reviewed the design of the
Company’s current LTIP in order to determine whether any changes
are warranted for fiscal year 2016. Based upon its review, the
Compensation Committee has made no changes to the LTIP and will
utilize the current design for fiscal year 2016.
Process for Determining Executive Officer
Compensation (including NEOs)
Role of Compensation Committee
The Compensation Committee consists exclusively of independent
directors who satisfy the requirements of which are set forth in the
NYSE listing rules, and who are also considered “outside directors”
as defined in Section 162(m) of the Internal Revenue 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 officer and senior
executive compensation. The Compensation Committee has, since
fiscal year 2013, engaged Farient to provide advice to it regarding
compensation practices for the Company’s Executive Officers. 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 2015 advised the Committee
on matters including, among others:
•an evaluation of our Executive Officers’ compensation relative to
the Company’s peer group and the broader market;
•insight and advice in connection with the design of the
Company’s incentive plans, including the measures, goals, and
leverage inherent in the performance plans;
•the composition of the Company’s peer group;
•feedback regarding the total targeted compensation for the CEO;
34 The ADT Corporation 2016 Proxy Statement
PROXY STATEMENT