Pizza Hut 2008 Annual Report Download - page 27

23MAR200920295069
What are the Company’s policies and procedures with respect to related person transactions?
The Board of Directors has adopted policies and procedures for the review of related person
transactions.
Under these policies and procedures, the Nominating and Governance Committee reviews related
person transactions in which we are or will be a participant to determine if they are in the best interests of
our shareholders and the Company. Transactions, arrangements, or relationships or any series of similar
transactions, arrangements or relationships in which a related person had or will have a material interest
and that exceed $100,000 are subject to the Committee’s review. Any member of the Nominating and
Governance Committee who is a related person with respect to a transaction under review may not
participate in the deliberation or vote respecting approval or ratification of the transaction.
Related persons are directors, director nominees, executive officers, holders of 5% or more of our
voting stock and their immediate family members. Immediate family members are spouses, parents,
stepparents, children, stepchildren, siblings, daughters-in-law, sons-in-law and any person, other than a
tenant or domestic employee, who resides in the household of a director, director nominee, executive
officer or holder of 5% or more of our voting stock.
After its review, the Nominating and Governance Committee may approve or ratify the transaction.
The policies and procedures provide that certain transactions are deemed to be pre-approved even if they
will exceed $100,000. These transactions include employment of executive officers, director compensation,
and transactions with other companies if the aggregate amount of the transaction does not exceed the
greater of $1 million or 2% of that company’s total revenues and the related person is not an executive
officer of the other company.
During fiscal 2008, affiliates of Harman Management Corporation (‘‘Harman’’), as KFC, Taco Bell,
Pizza Hut, Long John Silver’s and A&W All American Food franchisees, paid royalties of approximately
$15 million and contingent store opening fees of approximately $181,000 to subsidiaries of YUM. The
store opening fees are held in escrow and may be returned to Harman if the related new restaurant units
are not opened within 18 months of payment. Jackie Trujillo, Chairman Emeritus of the Board of Harman,
is a director of YUM. Ms. Trujillo retired from Harman as its Chairman on June 30, 2004. Ms. Trujillo has
Proxy Statement
a direct financial interest in Harman but does not control Harman and does not have any management
responsibility at Harman. The Nominating and Governance Committee ratified these transactions with
Harman.
How does the Board select nominees for the Board?
The Nominating and Governance Committee considers candidates for Board membership suggested
by its members and other Board members, as well as management and shareholders. The Committee’s
charter provides that it may retain a third-party executive search firm to identify candidates from time to
time. Currently, the Committee has not retained a search firm.
The Committee’s assessment of a proposed candidate will include a review of the person’s judgment,
experience, independence, understanding of the Company’s business or other related industries and such
other factors as the Nominating and Governance Committee determines are relevant in light of the needs
of the Board of Directors. The Committee believes that its nominees should reflect a diversity of
experience, gender, race, ethnicity and age. The Committee also considers such other relevant factors as it
deems appropriate, including the current composition of the Board, the balance of management and
independent directors, the need for Audit Committee expertise and the evaluations of other prospective
nominees, if any. In connection with this evaluation, it is expected that each committee member will
interview the prospective nominee in person or by telephone before the prospective nominee is presented
to the full Board for consideration. After completing this evaluation and interview process, the Committee
will make a recommendation to the full Board as to the person(s) who should be nominated by the Board,
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