Pizza Hut 2008 Annual Report Download - page 39

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ITEM 4: SHAREHOLDER PROPOSAL RELATING TO SHAREHOLDER RIGHTS PLAN
(Item 4 on the Proxy Card)
What am I voting on?
The Trowel Trades S&P 500 Index Fund has advised us that they intend to present the following
shareholder proposal at the Annual Meeting. We will furnish the addresses and the share ownership of the
proponent upon request.
RESOLVED, That the shareholders of YUM! Brands, Inc. (hereinafter ‘‘the Company’’) request that
our Directors submit the adoption, maintenance or extension of any poison pill to a shareholder vote as a
separate ballot item at the earliest next shareholder election.
SUPPORTING STATEMENT
The Company’s Board of Directors adopted a shareholder rights plan, commonly known as a ‘‘poison
pill’’, without shareholder approval. This plan is an anti-takeover device that can adversely affect
shareholder value by discouraging takeovers that could be beneficial to shareholders.
Poison pills, according to the book ‘‘Power and Accountability’’ by Nell Minow and Robert Monks:
‘‘amount to major de facto shifts of voting rights away from shareholders to management on matters
pertaining to the sale of the corporation. They give target boards of directors absolute veto power over any
proposed business combination, no matter how beneficial it might be for the shareholders.’’
Thus it is no surprise that the Shareholder Bill of Rights adopted by the Council of Institutional
Investors, whose members represent nearly $3 trillion in benefit fund assets, calls for poison pills to be
approved by shareholders before they take effect.
At a minimum, the shareholders of our Company should have the right to vote on the necessity of
adopting such a powerful anti-takeover weapon. Therefore, your support for this proposal is respectfully
sought.
MANAGEMENT STATEMENT IN OPPOSITION
Proxy Statement
TO SHAREHOLDER PROPOSAL
What is the recommendation of the Board of Directors?
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
What is the Company’s position regarding this proposal?
Adoption of this proposal would require the Board of Directors to submit any shareholder rights plan
to a shareholder vote at the earliest next shareholder meeting.
Contrary to the shareholder supporting statement to their proposal, the company currently has no
shareholder rights plan (or poison pill) in place and, while the Board may in the future determine it is in
the best interest of shareholders and the Company to put a shareholder rights plan in place, the Board of
Directors has no plans to adopt one. In fact, the Board took affirmative steps to eliminate the Company’s
poison pill in 2007 prior to its scheduled expiration date. The Board is required at all times to act in the
best interests of shareholders, including in any decision to adopt, maintain, amend or terminate a poison
pill. The Board believes that shareholder rights plans can be a useful tool in some circumstances to protect
the best interest of its shareholders. At other companies, potential purchasers have made offers in the face
of such plans but the existence of the plans allows boards to protect strategies for realizing long-term value
and to maximize the value of the shareholders’ investment by encouraging potential purchasers to
negotiate directly with the board. The Board, therefore, believes it is important to maintain flexibility to
adopt plans with terms appropriate to a variety of circumstances.
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