Pizza Hut 2008 Annual Report Download - page 70

23MAR200920294881
While the Compensation Committee did not specifically discuss why Mr. Novak’s compensation
exceeds that of other named executive officers, it does review every year, as part of its process for setting
compensation described beginning on page 41, data from consultants which substantiates on a comparative
basis this difference in target compensation. This comparative market data analyzed over several years
supports the differences in salary, long term incentive and annual incentive payment.
Other Benefits
Deferral of Annual Incentive into LTI
In keeping with the Company’s emphasis on executive stock ownership, executives have the
opportunity to defer all or a portion of their annual incentive compensation and acquire phantom shares
(referred to as restricted stock units or ‘‘RSUs’’) of YUM common stock under the Company’s Executive
Income Deferral (‘‘EID’’) Program. Executives deferring their annual incentive receive an additional
number of RSUs (‘‘matching RSUs’’) equal to 33% of the RSUs received at the time of deferral. All RSUs
received will be forfeited if the participating executive voluntarily leaves the Company within two years
following the deferral. Under the EID Program, once an employee reaches age 55 with 10 years of service,
the forfeiture provisions are less onerous: (1) the employee is not subject to a two year risk of forfeiture
with respect to any annual incentive deferred and (2) the portion of the deferral attributable to the
matching RSUs vests ratably over one year. In 2008, Messrs. Novak and Su attained age 55 with 10 years of
service, and their deferrals became subject to these forfeiture rules. This and other features of the EID
Program are described in more detail beginning at page 71.
The number of RSUs that each named executive officer received by deferring his 2008 annual
incentive is set forth on page 63 under the Grants of Plan-Based Awards table. The value of these RSUs
(including the matching RSUs portion) is also included in footnote 4 under the Summary Compensation
Table on page 59. The value of 2008 annual incentive deferred into the Company’s EID Program is not
included in the Nonqualified Deferred Compensation Table on page 73. This is because that table reports
deferred compensation as of December 31, 2008 and the 2008 annual incentive is not awarded (and
therefore deferred) until January 2009.
Beginning with the 2009 bonus deferrals, the two year risk of forfeiture guidelines will apply to all
Proxy Statement
executives regardless of age and years of service. Additionally, the CEO, CFO and Brand/Division
Presidents will no longer be eligible to receive the 33% match in Yum stock on their bonus deferrals. For
these executives, the Committee approved a Performance Share Plan that will payout shares of Company
stock based on the 3 year compound annual growth rate of the Company’s earnings per share.
Retirement Benefits
We offer competitive retirement benefits through the YUM! Brands Retirement Plan and the YUM!
Brands, Inc. Pension Equalization Plan for employees at all levels who meet the eligibility requirements.
These are broad-based plans designed to provide a retirement benefit based on years of service with the
Company and average annual earnings. The annual benefit payable under these plans to U.S.-based
employees hired prior to October 1, 2001 is discussed following the Pension Benefits Table on page 67.
This benefit is designed to provide income replacement of approximately 40% of salary and annual
incentive compensation (less the company’s contribution to social security on behalf of the employee) for
employees with 20 years of service who retire after age 62.
The annual accrual for each NEO is set forth on page 59, under the Summary Compensation Table,
and the actual projected benefit at termination is set forth on page 67, under the Pension Benefits Table.
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