Pizza Hut 2010 Annual Report Download - page 58

9MAR201101381779
2010 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 salaries 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. Based on the economic environment in 2009, the
Committee determined not to increase salaries for 2010.
While the Committee did not approve salary increases for 2010, the Committee as part of its annual
review of salary did review market data for the peer group. As in prior years, the Committee did not focus
on a precise percentile ranking of each NEO’s salary; however, they noted the following general
relationships:
• Messrs. Su’s and Allan’s 2010 salary 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. Carucci’s salary was slightly below the 75th percentile and Mr. Bergren’s salary was slightly
above the 75th percentile.
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.
Proxy Statement
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
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 NEOs’ 2010
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