Pizza Hut 2008 Annual Report Download - page 72

23MAR200920294881
Review of Total Compensation
We intend to continue our strategy of compensating our executives through programs that emphasize
performance-based compensation. To that end, executive compensation through annual incentives and
stock appreciation rights/stock option grants is tied directly to our performance and is structured to ensure
that there is an appropriate balance between our financial performance and shareholder return. The
Compensation Committee reviewed each element of compensation and believes that the compensation
was reasonable in its totality. In addition, the Committee believes that various elements of this program
effectively achieve the objective of aligning compensation with performance measures that are directly
related to the Company’s financial goals and creation of shareholder value without encouraging executives
to take unnecessary and excessive risks.
Before finalizing compensation actions with regard to our CEO, the Compensation Committee took
into consideration all elements of compensation accruing to Mr. Novak in 2008. These elements included
salary, annual incentive award, and long-term incentive awards. Total compensation for each of the named
executive officers was reviewed by the Compensation Committee for 2008. Before finalizing compensation
for 2008, the Compensation Committee considered each named executive officer’s salary, annual incentive
award, stock appreciation rights awards, value of outstanding equity awards (vested and unvested), lump
sum value of pension at retirement and gains realized from exercising stock options. The Compensation
Committee will continue to review total compensation at least once a year.
YUM’s Executive Stock Ownership Guidelines
The Committee has established stock ownership guidelines for our top 600 employees. Our Chief
Executive Officer is required to own 336,000 shares of YUM stock or stock equivalents (approximately
seven times his base salary). Senior Leadership Team members (other than Mr. Novak) are expected to
attain their ownership targets, equivalent in value to two to three times their current annual base salary
depending upon their positions, within five years from the time the established targets become applicable.
Each named executive officer’s ownership requirement was increased from 24,000 to 50,000 shares for
2008. If an executive does not meet his or her ownership guideline, he or she is not eligible for a grant
under the LTI Plan. In 2008, all Senior Leadership Team members and all other employees subject to
Proxy Statement
guidelines met or exceeded their ownership guidelines.
Shares and RSUs Value of Shares/RSUs
Ownership Owned by Owned as Multiple
Guidelines NEO(1) of Salary(2)
Novak 336,000 2,030,190 43
Carucci 50,000 123,389 5
Allan 50,000 334,214 13
Su 50,000 290,358 11
Creed 50,000 71,046 3
(1) Calculated as of December 31, 2008 and represents shares owned outright by the NEO and RSUs
acquired under the Company’s executive income deferral program.
(2) Assumes Yum stock price of $30.00.
YUM’s Stock Option and Stock Appreciation Rights Granting Practices
Historically, we have always awarded non-qualified stock option and stock appreciation rights grants
annually at the Compensation Committee’s January meeting. This meeting date is set by the Board of
Directors more than 6 months prior to the actual meeting. Beginning with the 2009 grant, the Committee
54