Summary
This 8-K filing from Tyco International Ltd. (not Johnson Controls International plc as initially stated in the prompt) on November 23, 2005, details significant compensation decisions made by the Compensation & Human Resources Committee of the Board of Directors. The report outlines the framework for annual incentive compensation for fiscal year 2006 for executive officers and also discloses grants of restricted stock units under the Performance Share Program. These compensation structures are designed to align executive pay with the achievement of specific financial performance metrics, aiming for tax deductibility under IRC Section 162(m) and to reward performance at both the corporate and segment levels.
Key Highlights
- 1Tyco International Ltd. established performance criteria for fiscal year 2006 annual incentive compensation for Section 16 Officers, tied to net income, earnings per share, and free cash flow.
- 2Executive bonus targets generally range from 65% to 100% of base salary, with potential payouts from 0% to 200% of target based on performance.
- 3Awards can be adjusted up or down by up to 25% based on company values and individual performance.
- 4Restricted stock units were granted under the Performance Share Program, with payouts determined by achieving return on invested capital and organic revenue growth targets over a three-year period (Oct 1, 2005 - Sep 30, 2008).
- 5Performance Share Program awards are weighted 75% towards return on invested capital and 25% towards organic revenue growth.
- 6The Compensation Committee approved target grants of restricted stock units for several key executives, including Edward D. Breen (120,000 units) and Christopher J. Coughlin (55,000 units).
Frequently Asked Questions
For fiscal year 2006, executive bonuses are tied to the achievement of specific financial performance measures. For corporate headquarters executives, these include overall company earnings per share and total company free cash flow. Segment presidents' awards are based on segment operating income and free cash flow, with a portion also linked to company-wide earnings per share and free cash flow.
The annual incentive program allows for payouts to range from 0% to 200% of the target award, depending on the achievement of pre-established performance measures. Additionally, awards can be adjusted by up to 25% based on behaviors aligned with company values and individual performance.
The restricted stock units granted under the Performance Share Program will be paid out based on achieving specific targets for return on invested capital (weighted at 75%) and organic revenue growth (weighted at 25%) over a three-year performance cycle from October 1, 2005, to September 30, 2008. A minimum net income threshold must also be met for any awards to be paid.
Edward D. Breen received the largest grant of restricted units under the Performance Share Program, with 120,000 units, followed by Christopher J. Coughlin with 55,000 units.