Pizza Hut 2010 Annual Report Download - page 89

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Non-Employee Directors Annual Compensation. Each director who is not an employee of YUM
receives an annual stock grant retainer with a fair market value of $170,000 and an annual grant of vested
SARs with respect to $150,000 worth of YUM common stock (‘‘face value’’) with an exercise price equal to
the fair market value of Company stock on the date of grant. (Prior to 2006, directors received an annual
grant of vested stock options.) Directors may request to receive up to one-half of their stock retainer in
cash. The request must be submitted to the Chair of the Management Planning and Development
Committee. For 2010, Bonnie Hill requested and received approval by the Committee chair for a cash
payment equal to one-half of her stock retainer. Directors may also defer payment of their retainers
pursuant to the Directors Deferred Compensation Plan. Deferrals are invested in phantom Company stock
and paid out in shares of Company stock. Deferrals may not be made for less than two years. In
recognition of the added duties of these chairs, the Chairperson of the Audit Committee (Mr. Grissom in
2010) receives an additional $20,000 stock retainer annually and the Chairpersons of the Management
Planning and Development Committee (Mr. Ryan in 2010) and Nominating and Governance Committee
(Mr. Walter in 2010) each receive an additional $10,000 stock retainer annually.
In September 2010, the Management Planning and Development Committee of the Board of
Directors completed a review of compensation for non-employee directors, noting that director
compensation had not increased since 2006. The review included an analysis of directors’ compensation for
the peer group of companies used to benchmark executive compensation (discussed at page 38) and
consideration of Fortune 500 survey data. Based on the analysis which showed director compensation
below the peer group median by 7%, the Board approved the Management Planning and Development
Committee’s recommendation to revise the compensation of non-employee directors by increasing the
stock grant retainer by $35,000 to $170,000 and the annual grant of vested SARs from $125,000 to $150,000
face value.
With respect to stock retainers paid to each committee chair, review of the peer group data revealed
each committee chair retainer below the peer group by more than 15%. Based on the analysis, the Board
approved the Committee’s recommendation to revise the stock retainer paid to each committee chair as
follows: Audit Committee Chair increase to $20,000 from $15,000; Management Planning and
Development Committee Chair increase to $10,000 from $5,000; and Nominating and Governance
Committee Chair increase to $10,000 from $0.
Proxy Statement
Initial Stock Grant upon Joining Board. Non-employee directors also receive a one-time stock grant
with a fair market value of $25,000 on the date of grant upon joining the Board, distribution of which is
deferred until termination from the Board.
Stock Ownership Requirements. Similar to executive officers, directors are subject to share ownership
requirements. The directors’ requirements provide that directors will not sell any of the Company’s
common stock received as compensation for service on the Board until the director has ceased being a
member of the Board for one year (sales are permitted to cover income taxes attributable to any stock
retainer payment or exercise of a stock option or SAR).
Matching Gifts. To further YUM’s support for charities, non-employee directors are able to
participate in the YUM! Brands, Inc. Matching Gifts Program on the same terms as YUM’s employees.
Under this program, the YUM! Brands Foundation will match up to $10,000 a year in contributions by the
director to a charitable institution approved by the YUM! Brands Foundation. At its discretion, the
Foundation may match director contributions exceeding $10,000.
Insurance. We also pay the premiums on directors’ and officers’ liability and business travel accident
insurance policies. The annual cost of this coverage is approximately $2.5 million. This is not included in
the tables above as it is not considered compensation to the directors.
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