Pizza Hut 2008 Annual Report Download - page 41

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ITEM 5: SHAREHOLDER PROPOSAL
RELATING TO AN ADVISORY SHAREHOLDER VOTE TO RATIFY EXECUTIVE COMPENSATION
(Item 5 on the Proxy Card)
What am I voting on?
Home Missioners of America has advised us that they intend to present the following shareholder
proposal at the Annual Meeting. We will furnish the address and share ownership of the proponent upon
request.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
RESOLVED, that shareholders of YUM! Brands request the board of directors to adopt a policy that
provides shareholders the opportunity at each annual shareholder meeting to vote on an advisory
resolution, proposed by management, to ratify the compensation of the named executive officers
(‘‘NEOs’’) set forth in the proxy statement’s Summary Compensation Table (the ‘‘SCT’’) and the
accompanying narrative disclosure of material factors provided to understand the SCT (but not the
Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that
the vote is non-binding and would not affect any compensation paid or awarded to any NEO.
SUPPORTING STATEMENT
Investors are increasingly concerned about mushrooming executive compensation especially when it is
insufficiently linked to performance. In 2008, shareholders filed close to 100 ‘‘Say on Pay’’ resolutions.
Votes on these resolutions have averaged 43% in favor, including 41.7% at YUM! Brands, with ten votes
over 50%, demonstrating strong shareholder support for this reform.
An Advisory Vote establishes an annual referendum process for shareholders about senior executive
compensation. We believe the results of this vote would provide the board and management useful
information about shareholder views on the company’s senior executive compensation.
In its 2008 proxy Aflac submitted an Advisory Vote resulting in a 93% vote in favor, indicating strong
investor support for good disclosure and a reasonable compensation package. Daniel Amos, Chairman and
Proxy Statement
CEO said, ‘‘An advisory vote on our compensation report is a helpful avenue for our shareholders to
provide feedback on our pay-for-performance compensation philosophy and pay package.’’
To date eight other companies have also agreed to an Advisory Vote, including Verizon, MBIA, H&R
Block, Blockbuster, and Tech Data. TIAA-CREF, the country’s largest pension fund, has successfully
utilized the Advisory Vote twice.
Influential proxy voting service RiskMetrics Group, recommends votes in favor, noting: ‘‘RiskMetrics
encourages companies to allow shareholders to express their opinions of executive compensation practices
by establishing an annual referendum process. An advisory vote on executive compensation is another step
forward in enhancing board accountability.’’
The Council of Institutional Investors endorsed advisory votes and a bill to allow annual advisory
votes passed the House of Representatives by a 2-to-l margin. As presidential candidates, Senators Obama
and McCain supported the Advisory Vote.
We believe that existing U.S. Securities and Exchange Commission rules and stock exchange listing
standards do not provide shareholders with sufficient mechanisms for providing input to boards on senior
executive compensation. In contrast, in the United Kingdom, public companies allow shareholders to cast a
vote on the ‘‘directors’ remuneration report,’’ which discloses executive compensation. Such a vote isn’t
binding, but gives shareholders a clear voice that could help shape senior executive compensation.
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