In good times or bad, it’s good to be Tyco’s CEO…

Tyco International Ltd.’s (TYC) stock is up 20.5% from mid-January, 2010. Tyco also completed some strategic acquisitions and divestitures last year, and – according to its 2011 proxy – made progress on managing costs, generating cash flow, and increasing its presence in emerging markets. So what impact do those accomplishments have on Chairman/CEO Edward Breen’s compensation? We took a look and compared it to what he got in FY 2009, which Tyco described (in last year’s proxy) as “a challenging year for the company.”

The proxy that Tyco filed Jan. 14 disclosed that Breen’s compensation rose nearly $2.07 million from the last fiscal year, giving him a total compensation figure of more than $19.86 million. His base salary remained at $1.625 million, but he got increased stock awards worth nearly $4.42 million, option awards worth more than $4.5 million, and the maximum bonus possible – more than $4.06 million.

We were especially interested in the impact of a change that Tyco made last year, ostensibly to bring its executive compensation practices more in line with current best practices. Last year,

“…Mr. Breen, our CEO, agreed to waive the benefits available to him under his employment agreement for New York City/State tax gross-up payments for compensation that is awarded to him after January 1, 2009….”

Based on that section, we expected the $478,964 in tax gross-ups that Tyco paid on Breen’s behalf in FY 2009 to go down; but the number actually went up to $841,566 for FY 2010 – an increase of $362,602. The proxy explained that the number includes the tax gross-ups owed on Breen’s insurance benefits, as well as the “reimbursement of state taxes owed by him to New York for Tyco work performed in that State.” After qualifying that the amount for 2010 is still an estimate that can’t be ascertained for sure until Breen gets his 2010 tax return in order, the filing then disclosed:

“This estimate is based primarily on compensation deemed by New York State to be earned by Mr. Breen in fiscal 2010 in respect of equity granted prior to 2009. Mr. Breen has waived the New York tax gross-up with respect to compensation awarded after January 1, 2009.”

So – in other words – even though FY 2009 is long gone, shareholders are still footing the bill for Breen’s tax gross-ups if the compensation is arguably related to that year or before.

Those tax gross-ups fall into the category of “Other” compensation, which rose more than $271,000 to reach approximately $1.4 million in fiscal 2010. Breen also got an unrestricted cash perquisite allowance of $70,000 that he can spend on anything, and Tyco paid more than $100,000 for his various insurance policy premiums. And Breen racked up $213,151 worth of personal flying time on jets that Tyco either owns or leases.

For Breen’s total compensation to go from $17.79 million in a “challenging” year to $19.86 million in a year in which Tyco explained that it “exceed[ed] expectations in some areas and [met] them in others,” shows – once again – that executives are still playing by a different set of rules that largely protect them from the economic swings that have a more pronounced effect on Tyco’s employees and shareholders.

Image source: Tom Jervis via flickr


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