Pizza Hut 2008 Annual Report Download - page 26

23MAR200920294881
How are directors compensated?
Employee Directors. Employee directors do not receive additional compensation for serving on the
Board of Directors.
Non-Employee Directors Annual Compensation. The annual compensation for each director who is
not an employee of YUM is discussed under ‘‘Director Compensation’’ beginning on page 76.
How much YUM stock do the directors own?
Stock ownership information for each director nominee is shown in the table on page 37.
How does the Board determine which directors are considered independent?
The Company’s Corporate Governance Principles, adopted by the Board, require that we meet the
listing standards of the NYSE. The full text of the Principles can be found on the Company’s Web site
(www.yum.com/governance/principles.asp). A copy may also be obtained upon request from the Company’s
Corporate Secretary.
Pursuant to the Principles, the Board undertook its annual review of director independence in January
2009. During this review, the Board considered transactions and relationships between each director or any
member of his or her immediate family and the Company and its subsidiaries and affiliates. As provided in
the Principles, the purpose of this review was to determine whether any such relationships or transactions
were inconsistent with a determination that the director is independent.
As a result of this review, the Board affirmatively determined that all of the directors are independent
of the Company and its management under the rules of the NYSE, with the exception of David Novak,
Jing-Shyh S. Su and Jackie Trujillo. Mr. Novak and Mr. Su are not considered independent directors
because of their employment by the Company. Mrs. Trujillo is considered a non-independent outside
director because the Board determined that, under the NYSE independence standards, Mrs. Trujillo has a
material relationship with YUM by virtue of her employment during 2004 as Chairman of Harman
Management Corporation (‘‘Harman’’), one of YUM’s largest franchisees, and her continued relationship
Proxy Statement
with Harman as Chairman Emeritus. We provide additional information regarding royalties and other
amounts paid by Harman to YUM on page 9.
In determining that the other directors did not have a material relationship with the Company, the
Board determined that Messrs. Dorman, Ferragamo, Grissom, Holland, Langone, Linen, Nelson and
Walter and Ms. Hill had no other relationship with the Company other than their relationship as director.
The Board did note, as discussed in the next paragraph, that CVS Caremark Corporation (‘‘CVS’’), which
employs Thomas Ryan, had a business relationship with the Company; however, as noted below, the Board
determined that this relationship was not material to Mr. Ryan or CVS.
Mr. Ryan is the Chairman, Chief Executive Officer and President of CVS. In 2007, YUM entered into
a transaction with CVS to sublease a long range aircraft through the Fall of 2010. At that time, YUM will
have an option to purchase the aircraft from CVS. After reviewing the terms of the transaction, including
the lease payments and option purchase price, the Board determined that the transaction did not create a
material relationship between YUM and Mr. Ryan or YUM and CVS as the total payments represent less
than 1⁄10 of 1% of CVS’s revenues. The Board determined that this relationship was not material to
Mr. Ryan or CVS and concluded that it does not affect the independence of Mr. Ryan. In particular, the
Board noted that the overall purchase price, including consideration of the lease payments, was at market
value (as verified by two independent appraisals).
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