Pizza Hut 2011 Annual Report Download - page 56

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As shown above, the percentile ranking of our performance measured by TSR is in the top quartile for
each of the three time periods as compared to our compensation peer group. A substantial reason for this
superior performance is our track record of consistency in delivering strong, year-over-year growth in EPS.
In light of the Company’s strong performance during 2011, as well as its sustained performance over the
years, the Committee believes that the program’s stated objective of paying our Chief Executive Officer at
the 75th percentile for target total compensation (see ‘‘How We Compensate our Chief Executive Officer’’,
beginning on page 48 for detail) and our other NEOs at the 75th percentile for salary and bonus and above
the 50th percentile for equity-based compensation has helped attract and retain top talent and has
incentivized that talent to achieve a high level of performance.
In line with our pay-for-performance policy, we took the following 2011 compensation actions:
•Adjustments to Base Salary: Provided merit-based salary increases to each of our NEOs;
•Pay-for-Performance Annual Bonus: Based on our strong 2011 performance, we paid bonuses for
2011 recognizing our strong system sales growth, continued operating profit growth (prior to special
items and foreign currency translation) and strong EPS growth and for meeting the other division
and individual performance goals set by the Committee for fiscal 2011; and
•Equity-based Compensation: In line with our growth strategy and to align NEOs with shareholder
interests, we granted SARs or stock options to our NEOs based on each NEO’s performance. We
also granted PSUs that will vest only if we achieve pre-established 3-year EPS growth goals.
In the remainder of the CD&A, we discuss in more detail our 2011 executive compensation program.
Among other topics, we address the following:
• The philosophy underlying our executive compensation program (page 39)
• The objectives of our executive compensation program (page 39)
• An overview of the key elements of our executive compensation program (page 40)
• The process the Management Planning and Development Committee (‘‘Committee’’) uses to set
and review executive compensation (page 40)
Proxy Statement
• The alignment of our executive compensation with the Company’s business and financial
performance (page 40)
• The allocation between fixed and variable compensation (page 40)
• The role of our independent compensation consultant (page 41)
• The role of comparative compensation data and how we select the companies that are used to
generate the comparative data (page 41)
• Compensation decisions for NEOs other than our CEO (beginning at page 43) including:
• Team performance measures, which are used in the calculation of the annual bonus (page 46)
• Individual performance measures, which are also used in the calculation of the annual bonus
(page 46)
• Our CEO’s compensation (page 48)
• Our stock ownership guidelines (page 52)
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