Pizza Hut 2009 Annual Report Download - page 52

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• Long-term incentives—50th percentile
For the CEO, the Committee targets 75th percentile for salary and target total cash compensation as
well as 75th percentile for target total compensation. These benchmark values are based on target annual
incentives and the grant date fair value of long-term incentives.
2009 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 peer group was
considered in determining base salary targets for NEOs based on each NEO’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. The Committee reviews
each executive officer’s salary and performance annually.
While the Committee’s use of market data for the peer group did not focus on a precise percentile
ranking they noted the following general relationships:
• Messrs. Su’s and Allan’s 2009 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.
• Similarly, Mr. Creed’s salary was set above the 75th percentile and Mr. Carucci’s salary was set
above the 50th percentile for 2009 because of the value of their contributions to the company.
Performance-Based Annual Incentive Compensation
Our performance-based annual incentive compensation program (‘‘YUM Leaders’ Bonus Program’’)
Proxy Statement
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 and/or division
financial objectives, other strategic objectives, as well as the achievement of individual performance
objectives. These objectives are established, reviewed and approved by the Committee, and reviewed with
the Board, during the compensation planning period to ensure that the goals are in concert with the
unique strategic issues facing the Company.
Incentive opportunities are designed to reward superior performance by providing for payments above
target for superior performance, but correspondingly 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
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