Pizza Hut 2011 Annual Report Download - page 58

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Key Elements of Compensation
The following table lists the key elements that generally comprise our 2011 executive compensation.
Element Purpose Form
Base Salary ............ Provide compensation for performance of Cash
primary roles and responsibilities
Performance-based annual
bonus ................ Provide incentive to drive company performance Cash
with payout based on achievement of YUM’s
and its divisions’ short-term goals and strategic
objectives
Long-term incentive
compensation .......... Motivate our NEOs to help us achieve our Stock Appreciation
long-range performance goals that will enhance Rights/Stock Options,
our value and, as a result, enhance our and Performance
shareholders’ returns on their investments Share Units
Retirement benefits ....... Provide tax-advantaged means to accumulate Defined Benefit Plan,
retirement benefits Defined Contribution
Plan
We determine all elements of compensation annually at the same time, currently in January, to allow
us to take into consideration all of the elements when decisions are made.
How Compensation Decisions Are Made
In January of each year, the Committee reviews the performance and total compensation of our CEO
and the other NEOs. The Committee reviews and establishes each NEO’s total compensation target for
the current year which includes base salary, annual bonus opportunities and long-term incentive awards.
The Committee’s decisions impacting our CEO are also reviewed and ratified by the independent
members of the Board.
Proxy Statement
In making these compensation decisions, the Committee relies on the CEO’s in-depth review of the
performance of the other NEOs as well as competitive market information. Compensation decisions are
ultimately made by the Committee using its judgment, focusing primarily on each NEO’s performance
against his or her financial and strategic objectives, qualitative factors and YUM’s overall performance.
Alignment between Compensation and Company Performance
As noted above, a key objective of our compensation program is to maximize shareholder returns.
Our incentive programs are designed to reinforce our pay-for-performance philosophy by aligning the
payouts with the results of the Company’s business and financial performance. These incentives, which
constitute a significant portion of total compensation, consist of an annual bonus, which is short-term in
nature, and stock option/stock appreciation rights and PSUs, which have a longer-term focus. These pay
elements are discussed in more detail below.
Compensation Allocation
The Committee reviews information provided by the Committee’s consultant (see below) for our
CEO and other NEOs, to determine the appropriate level and mix of incentive compensation. However,
there is no pre-established policy or target for the allocation between either cash and non-cash or
short-term and long-term incentive compensation.
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