Pizza Hut 2011 Annual Report Download - page 52

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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis (‘‘CD&A’’) describes the principles of our executive
compensation program, how we applied those principles in compensating our Named Executive Officers
(‘‘NEOs’’) for fiscal year 2011, and how our compensation program drives performance.
In this CD&A, we first provide an executive summary of our program for fiscal 2011. We then
describe our compensation philosophy and objectives of our executive compensation program and how the
Management Planning and Development Committee (the ‘‘Committee’’) of our Board oversees our
compensation program. We discuss the roles of the Committee’s independent compensation consultant
and management in the compensation process and describe how we determine each element of
compensation. This CD&A also discusses how we set the challenging performance goals for our annual
bonuses. We believe that our compensation program in 2011 and in prior years shows that we have closely
linked pay to performance.
Executive Summary
Overview of 2011 Performance
As we stated last year, the power of YUM is in our ability to deliver consistently strong results. That is
why we are pleased to report that for 2011 we:
• Achieved strong year-over-year growth in Earnings Per Share (excluding special items) (‘‘EPS’’) of
14%—marking the tenth consecutive year that we exceeded our annual target of at least 10%
• Grew worldwide system sales by 7% (prior to foreign currency translation)
• Opened a record 1,561 new restaurants outside the United States—the eleventh straight year we
have opened more than 1,000 new units
• Grew operating profits by 4% (prior to special items and foreign currency translation)
Proxy Statement
• Generated $1.32 billion in net income—a new high
• Generated over $2.1 billion of cash from operations
• Remained an industry leader with Return on Invested Capital of over 22%
• Increased our annual dividend by 14%, marking the seventh consecutive year we increased our
dividend at a double-digit rate since we initiated a dividend in 2004.
Once again the overall performance of our global portfolio of leading brands delivered consistent
double-digit EPS growth. Our shareholders also benefited from our strong year as our stock price
increased from $49.66 to $59.01 during fiscal 2011—a return of 18.8%, excluding dividends.
Overview of Our Compensation Program and Consideration of Last Year’s Shareholder Vote on Executive
Compensation
For 2011, the compensation program for the Company’s NEOs is essentially the same program that
has been in place for over 10 years. The program is highly performance based and the compensation of our
NEOs reflects the Company’s performance. We believe our programs are effectively designed, are in
alignment with the interests of our shareholders and are instrumental to achieving our business strategy. In
determining executive compensation for 2011, the Committee considered the overwhelming shareholder
support that the ‘‘Say-on-Pay’’ resolution received at our May 19, 2011 annual meeting of shareholders—
over 94% of votes cast in favor of the advisory proposal to approve the compensation paid to our NEOs.
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