Pizza Hut 2011 Annual Report Download - page 41

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ITEM 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
(Item 3 on the Proxy Card)
What am I voting on?
As required by SEC rules, we are asking shareholders to approve the 2011 compensation to the
Company’s named executive officers as described in the ‘‘Executive Compensation’’ section of this proxy
statement beginning on page 34.
Shareholders are urged to read the Compensation Discussion and Analysis (‘‘CD&A’’) as well as the
Summary Compensation Table and related compensation tables and narratives, which discuss how our
compensation policies are designed to support our business objectives. In deciding how to vote on this
proposal, the Board urges you to consider the following:
•Shareholders Overwhelmingly Approved Our Executive Compensation Program Last Year. Over 94% of
shareholder votes were cast in favor of our executive compensation program last year. This support
and our strong shareholder returns confirm the effectiveness of our compensation program.
•Same Compensation Program for over 10 Years. The executive compensation program embraced by
YUM has largely been in place for over 10 years. Sometimes our programs have been in vogue with
prevailing market practices, sometimes not. We have stayed the course because it has worked for
our shareholders and has enabled us to effectively compete for the best talent.
•Our Goal. To provide an executive compensation program that attracts, rewards and retains the
talented leaders necessary to enable our Company to succeed in the highly competitive markets in
which we operate, while maximizing shareholder returns.
•Our Program is Strongly Aligned with Shareholders Interests. A majority of total compensation is based
on performance and, in particular, the creation of shareholder value.
•Performance-Based Compensation Elements
•Annual Bonus. The annual bonus program is tied to key financial metrics that are long-term
drivers of shareholder value—growth in EPS, operating profit at the business unit level, same
Proxy Statement
store sales and new store growth.
•Long Term Incentives. In 2011, 63% of our CEO’s targeted pay and 47% of our other NEOs
targeted pay was in the form of long term incentives that is predominantly denominated in
stock appreciation rights (‘‘SARs’’)/stock options These percentages are consistent with prior
years. SARs/stock options are a critical performance-based tool and the rationale for granting them is
simple—management is motivated to create value for shareholders because they stand to share in
that value creation; alternatively and just as importantly, if value is not created, then there is nothing
to share. These awards combined with our stock ownership requirements emphasize alignment
with the long term interests of our shareholders and we believe, therefore, are highly
performance based.
•Our Peer Group. We benchmark compensation against a peer group made up of a robust cross-
section of retail, hospitality and nondurable consumer product companies many with a global
presence similar to YUM (see page 43). The selection of companies for the peer group is made by our
Management Planning and Development Committee with the assistance of their independent consultant and
is reflective of the market in which we compete for executive talent.
•Strong Shareholder Return. We believe our approach is not only aligned with but has been a driver of
superior total shareholder return over the short term and long term. The graph below illustrates the
Company’s total shareholder return as compared to our peer group at the median and the top 25%
of our peer group as well as the S&P 500 Stock Index for the 10 year period ending December 31,
2011.
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