Pizza Hut 2008 Annual Report Download - page 69

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Mr. Novak’s Team Performance Factor measures and targets as set forth on page 45. The Compensation
Committee determined that the Company’s actual performance against these criteria and goals produced a
Team Performance Factor of 138. Refer to page 46 for information on how this Team Performance Factor
was determined.
For purposes of determining Mr. Novak’s Individual Performance Factor, the Compensation
Committee considered the following pre-established individual criteria:
• Earnings Per Share Growth
• Return on Invested Capital
• Development of Permanent Sales Layers
• International Restaurant Development
• Restaurant Operations and Marketing Improvements
• Same Store Sales Growth
• U.S. Profit Growth
• Customer Satisfaction
• Diversity and Talent Management
The Compensation Committee determined that Mr. Novak attained or exceeded all goals within each
of these criteria, except for overall U.S profit growth. In addition, the Compensation Committee noted
that that the Company’s EPS growth exceeded its target of 10% for seven straight years, that the
Company’s total shareholder return ranked in the top quartile of its peer group for 2 of the last 3 years,
and that the new sales layers at the Pizza Hut and Taco Bell brands had performed well. The Committee
also noted that development targets were exceeded in the China and International Divisions and that the
Company continued to drive the culture and develop leaders. Based on this individual performance, the
Committee awarded Mr. Novak an Individual Performance Factor of 140.
After determination of the Team Performance Factor and Individual Performance Factor, Mr. Novak’s
Proxy Statement
annual incentive was calculated as shown on page 48.
The Committee noted that over the last ten years Mr. Novak has accumulated approximately 2 million
RSUs solely through the voluntary deferral of his annual incentives totaling approximately $24 million and
that these RSUs had an aggregate value in excess of $60 million as of the end of 2008. These RSUs are
payable only in YUM common stock and are not payable until after Mr. Novak leaves the Company.
Through the deferral program, Mr. Novak’s ownership of these RSUs aligns his compensation with
achievement of YUM’s long-term financial and strategic objectives and the creation of shareholder value.
Mr. Novak’s deferral of his annual incentives, which will not be distributed until after he retires, drives
long-term decision making, further aligning his interests with those of the shareholders.
During 2004, the Compensation Committee approved an employment agreement for Mr. Novak that
expired on October 31, 2007. In January of 2008, the Committee approved a retention award based on
Mr. Novak’s strong leadership over the preceding ten years, the Company’s performance during that time
period, and to help ensure his continued leadership over at least the following four years. The retention
award was a grant of 187,398 restricted stock units. The award vests after four years and has an economic
value of $7 million. The award will be paid to Mr. Novak in shares of YUM common stock six months
following his retirement provided that he does not leave the Company before the award vests. Since this
award was intended as an incentive to retain Mr. Novak for at least four more years and as special
recognition for the Company’s superior performance under his leadership, it was not considered by the
Committee in determining Mr. Novak’s 2008 compensation.
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