Pizza Hut 2008 Annual Report Download - page 42

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We believe that a company that has a clearly explained compensation philosophy and metrics,
reasonably links pay to performance, and communicates effectively to investors would find a management
sponsored Advisory Vote a helpful tool.
We urge our board to allow shareholders to express their opinion about senior executive
compensation through an Advisory Vote.
MANAGEMENT STATEMENT IN OPPOSITION
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?
This proposal seeks to solicit a non-binding vote from shareholders regarding the compensation
provided to the executives named in the Company’s Summary Compensation Table. For the reasons
explained below, the Board of Directors does not believe the proposal is in the best interest of YUM or
our shareholders.
Why does the Company oppose this proposal?
The Board of Directors reached its decision to oppose this proposal after careful consideration of the
Compensation Committee’s in-depth study of the pros and cons of adopting the advisory vote, which was
completed in early 2008, and after discussing this issue with a number of our largest shareholders. As
further explained below, our primary reasons for opposing the proposal include:
• We believe shareholders play an important role in corporate governance through the election of
directors, but direct engagement and dialogue is more effective than a ‘‘yes’’ or ‘‘no’’ vote with
respect to executive compensation;
• We do not believe that reducing the complex decisions that go into designing and administering a
successful compensation program to a ‘‘yes’’ or ‘‘no’’ vote is an effective or efficient way to obtain
Proxy Statement
shareholder input;
• We believe that YUM’s executive pay program has driven strong company performance and
shareholder returns, and it would not benefit YUM or our shareholders to alter this successful
program; and
• We believe that implementing an advisory vote at YUM while not implementing the same vote at
YUM’s competitors and peers would put YUM at a competitive disadvantage in attracting and
retaining executive talent, thereby negatively affecting YUM’s performance and our shareholders.
Although our Articles of Incorporation grant exclusive authority to fix executive compensation to the
Board of Directors, the Board believes that both transparency and shareholder input on the subject are
important. In fact, in each of the past two years we have reached out to a number of our largest
shareholders to understand their perspective on this issue. We will continue to closely monitor
developments on this issue and discuss the advisory vote with our large shareholders and other
shareholders who wish to engage us. While we believe that this direct engagement has further enhanced
communication with our shareholders, YUM has always maintained an open door policy. We encourage
shareholders to express their opinions on all matters of interest to them, including executive compensation,
by contacting members of the Board, including members of the Compensation Committee, as described on
page 10 regarding ‘‘How do shareholders communicate with the Board?’’ This direct engagement allows
shareholders to clearly and specifically share their opinions on our executive compensation program
directly with us. A simple ‘‘yes’’ or ‘‘no’’ vote on compensation does not provide that level of
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