Pizza Hut 2008 Annual Report Download - page 62

23MAR200920294881
For the CEO, the Committee targets 75th percentile salary and target total cash compensation as well
as 75th percentile total compensation. These benchmark values are based on target annual incentives and
the grant date fair value (i.e., Black-Scholes) of long-term incentives.
2008 Executive Compensation Decisions
Base Salary
Base salary is designed to compensate our executive officers for their primary roles and
responsibilities and to provide a stable level of annual compensation. Market data from the survey group
was considered in determining base salary targets for named executive officers based on each executive
officer’s position and responsibility. An executive officer’s actual salary relative to this competitive salary
range varies based on the level of his or her responsibility, experience, individual performance and future
potential. Specific salary increases take into account these factors and the current market for management
talent. Our Compensation Committee reviews each executive officer’s salary and performance annually.
The Committee does not measure or review the percentile ranking of actual salary decisions.
Messrs. Su’s and Allan’s 2008 salary increase placed their base salaries significantly above the
75th percentile. The Committee chose to pay these two executives at this level based on the Committee’s
subjective assessment of the current and sustained, long-term results they have produced for the Company
and the importance of their leadership in running the China and International divisions, respectively.
Mr. Creed’s salary was set at the 75th percentile and Mr. Carucci’s salary was set near the 75th percentile for
2008.
Performance-Based Annual Incentive Compensation
Our performance-based annual incentive compensation program (‘‘YUM Leaders’ Bonus Program’’)
is a cash-based, pay-for-performance plan that applies to over 1,200 above restaurant leaders in the
Company. The principal purpose of our annual incentive compensation is to encourage and reward strong
individual and team performance that drives shareholder value.
Annual incentive payments are based on the achievement of certain Company-wide or business unit
Proxy Statement
financial objectives, other corporate objectives, as well as the achievement of individual performance
objectives. These objectives are established, reviewed and approved by the Compensation Committee
during the compensation planning period to ensure that the goals are in concert with the unique strategic
issues facing the Company. The Compensation Committee reviews the objectives with the Board of
Directors.
In 2008, incentive opportunities were designed to reward superior performance by providing for
payments above target for superior performance, with no payment unless a threshold percentage of the
goal was achieved. Each executive officer’s annual incentive compensation depends on the degree to which
the company achieves its business and financial goals and the degree to which each executive officer meets
his or her individual goals. We believe this aligns our executive officers’ interests with the Company’s
interests, and motivates our executive officers to meet their goals and ensure that the Company meets its
financial, operational and strategic objectives.
The formula for our annual incentive compensation is as follows:
Base Salary ǂAnnual Target Bonus ǂTeam ǂIndividual = Bonus Payout
Percentage Performance Factor Performance Factor Award
The minimum team performance factor is 0% and the maximum is 200%. The minimum individual
performance factor is 0% and the maximum is 150%. The combined impact of the team performance
factor and individual performance factor produces a potential range for total annual bonus of 0 - 300% of
the target award. Applying these ranges under the YUM! Leaders’ Bonus Program to the named executive
44