Pizza Hut 2008 Annual Report Download - page 60

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officer at other companies and assist the Committee in its determination of the annual
compensation package for our CEO,
• they were to review management’s compensation recommendations for the Senior Leadership Team
for reasonableness, and
• for 2009 pay actions, they were to provide compensation comparisons based on information that is
derived from comparable businesses of a similar size to us with respect to compensation of the
leadership teams (including the other NEOs) at other companies to assist management in its
determination of the annual compensation package for our brand/division leadership teams.
Hewitt does not provide any other services to us, although, we do purchase Hewitt survey data for
benchmarking executive and manager compensation, as described below.
Role of Comparative Compensation Data
One of the factors used by our Committee in setting executive compensation is an evaluation of how
our compensation levels compare to compensation levels for similarly situated executives at companies
considered to be our peers. To conduct these comparisons, on-line compensation data is obtained from two
consulting firms, Towers Perrin and Hewitt Associates. This data is used as a frame of reference for
establishing compensation targets for base salary, annual incentives and long-term incentives for the Senior
Leadership Team below our CEO. This method is often referred to as ‘‘benchmarking.’’
On-line benchmarking data from the consulting firms’ surveys (‘‘survey data’’) reflect compensation
practices of general industry companies with annual revenues which are similar to ours for our executives
with Company-wide responsibilities and general industry companies with annual revenues similar in size to
the relevant brand or division, for our executives with single brand or division responsibilities. The
Committee believes this approach appropriately reflects the labor market for our executives.
The Committee uses a benchmark as a point of reference for measurement. Benchmarks, however,
are not the determinative factor for our executives’ compensation, and they do not supplant the analyses of
the individual performance of the executive officers. Because the comparative compensation information is
one of several factors used in the setting of executive compensation, the Committee has discretion in
Proxy Statement
determining the nature and extent of its use. Further, given the limitations associated with comparative pay
information for setting individual executive compensation, the Committee may elect not to use the
comparative compensation information at all in the course of making specific compensation decisions.
For our named executive officers, other than our CEO, the Committee has set target percentiles for
base salary, performance-based annual incentives and long-term incentives as discussed at page 43. The
Committee does not set target percentiles with respect to target total compensation for our named
executive officers other than our CEO (see page 50 for a discussion of Mr. Novak’s target total
compensation). With the exception of our CEO’s compensation, we do not measure the percentile ranking
of compensation actually earned since these amounts are designed, consistent with our
pay-for-performance approach, to be a function of results.
Our objective is to provide pay opportunities to our named executive officers consistent with our pay
philosophy and, correspondingly, with the market compensation for comparable positions at the
benchmark companies. This is an important distinction from actual pay. Accordingly, to the extent the
amount of any actual or earned element of compensation, in the case of our named executive officers other
than our CEO, and the amount of the actual or earned total compensation, in the case of our CEO, varies
from its targeted compensation percentile, this will be a function of performance of the individual and/or
the Company.
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