Kentucky Fried Chicken 2012 Annual Report Download - page 61

YUM! BRANDS, INC.-2013Proxy Statement 43
Proxy Statement
EXECUTIVE COMPENSATION
Compensation Recovery Policy
The Committee has adopted a Compensation Recovery Policy
(i.e., “clawback”) for stock awards and annual bonuses awarded
after 2008. Pursuant to this policy, executive offi cers (including the
Named Executive Offi cers) may be required to return compensation
paid based on fi nancial results that were later restated. This
policy applies only if the executive offi cers engaged in knowing
misconduct that contributed to the need for a material restatement,
or contributed to the use of inaccurate metrics in the calculation
of incentive compensation. Under this policy, when the Board
determines in its sole discretion that recovery of compensation
is appropriate, the Company could require repayment of all or a
portion of any bonus, incentive payment, equity-based award or
other compensation, to the fullest extent permitted by law.
Hedging and Pledging of Company Stock
Under our Code of Conduct, no employee or director is permitted
to engage in securities transactions that would allow them either to
insulate themselves from, or profi t from, a decline in the Company
stock price. Similarly, no employee or director may enter into
hedging transactions in the Company’s stock. Such transactions
include (without limitation) short sales as well as any hedging
transactions in derivative securities (e.g. puts, calls, swaps, or
collars) or other speculative transactions related to YUM’ s stock.
Pledging of Company stock is also prohibited.
Deductibility of Executive Compensation
The provisions of Section 162(m) of the Internal Revenue Code
limit the tax deduction for compensation in excess of one million
dollars paid to certain Named Executive Offi cers. However,
performance-based compensation is excluded from the limit so
long as it meets certain requirements. The Committee believes
that the annual bonus, stock option, SAR, RSU and PSU grants
satisfy the requirements for exemption under Internal Revenue
Code Section 162(m). Payments made under these plans qualify
as performance-based compensation.
For 2012, the annual salary paid to Mr. Novak exceeded one million
dollars. The Committee sets Mr. Novak’ s salary as described under
“Base Salary” above. The other Named Executive Offi cers were
in each case paid salaries of one million dollars or less, except for
Mr. Su whose salary exceeded $1 million; however, the Committee
noted that Mr. Su’ s compensation is not subject to United States
tax rules and, therefore, the one million dollar limitation does
not apply in his case. The 2012 annual bonuses were all paid
pursuant to our annual bonus program and, therefore, we expect
will be deductible. In this regard, the Committee set the maximum
2012 individual annual bonus for all executives based on 2012
EPS (adjusted as described above) growth of up to 10%, which
would produce an award opportunity up to $10 million. Based on
2012 EPS growth of 13%, the maximum 2012 award opportunity
for each executive offi cer was $10 million. The Committee then
exercised its negative discretion in determining actual incentive
awards based on team performance and individual performance
measures as described above.
Due to the Company’ s focus on performance-based compensation
plans and the deferral of compensation by certain executive offi cers,
we expect to continue to qualify most compensation paid to the
Named Executive Offi cers as tax deductible.
Management Planning and Development Committee Report
The Management Planning and Development Committee of the
Board of Directors reports that it has reviewed and discussed
with management the section of this proxy statement headed
“Compensation Discussion and Analysis,” and, on the basis of that
review and discussion, recommended that section be incorporated
by reference into our Annual Report on Form10-K and included
in this proxy statement.
THE MANAGEMENT PLANNING AND DEVELOPMENT COMMITTEE
Robert D. Walter, Chair
David W. Dorman
Massimo Ferragamo
Thomas M. Ryan