Pizza Hut 2011 Annual Report Download - page 63

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The minimum team performance factor is 0% and the maximum is 200%. The minimum individual
performance factor is 0% and the maximum is 150%. The combined impact of the team performance
factor and individual performance factor produces a potential range for total annual bonus of 0 - 300% of
the target award. Applying these ranges under the YUM Leaders’ Bonus Program to the NEOs’ 2011
salaries determined the threshold, target and maximum awards potential under the program for 2011,
which are reported in dollars in the Grants of Plan-Based Awards table on page 60.
A detailed description of how team and individual performance factors are determined and measured
can be found below under the heading ‘‘Performance Factors.’’
Annual Target Bonus Percentage. The ‘‘Annual Target Bonus Percentage’’ for each NEO for 2011 was:
Novak Carucci Su Allan Pant
160% 100% 115% 115% 86.25%*
* As a result of Mr. Pant’s promotion in December of 2011, his percentage calculated at 85%
for 11 months and 100% for 1 month. This results in an annual percentage of 86.25%.
The Committee noted the 2011 target bonus opportunities, when compared to the market data, were
above the 75th percentile for Messrs. Su, Allan and Pant and at the 75th percentile for Mr. Carucci.
Consistent with prior years, the Committee did not consider the actual percentile above or below the
75th percentile when making its final bonus decisions. Rather, it considered the overall strong performance
of the Company and the current and expected performance of each of these NEOs in the growth of the
Company and it determined that it was appropriate to continue target bonuses at or above the
75th percentile. Mr. Novak’s performance is discussed beginning on page 48.
Performance Factors. To determine the performance factors for each NEO, the Committee reviews
actual performance against pre-established consolidated operating Company measures and targets (‘‘Team
Performance Factor’’) and individual performance measures and targets (‘‘Individual Performance
Factor’’).
Team Performance Factor. For 2011, the Committee determined each NEO’s team performance
measures and team performance targets, based on recommendations from management. Consistent with
prior years, the Committee established the business team performance measures, targets and relative
weights in January 2011 and reviewed actual performance against these measures and targets as set forth in
the chart below for the NEOs. The targets were developed through the Company’s annual financial
Proxy Statement
planning process, in which we assessed historical performance, the future operating environment and
profit growth initiatives and built projections of anticipated results. These projections include profit growth
to achieve our EPS growth target of at least 10%. Division targets may be adjusted during the year when
doing so is consistent with the objectives and intent at the time the targets were originally set. In 2011,
some division operating profit growth targets were adjusted to reflect certain YUM-approved investments
and restaurant divestitures not reflective of annual operating performance.
We believe these performance measures and targets are key factors that drive individual and team
performance, which will result in increased shareholder value over the long term. These measures are
designed to align employee goals with the Company’s and individual Divisions’ current-year objectives to
grow earnings and sales, develop new restaurants, improve margins and increase customer satisfaction and
in the case of our CEO and CFO align them with the Company-wide EPS target and all Divisions’
objectives and performance. The measures also serve as effective motivation because they are easy to track
and clearly understood by employees. When setting targets for each specific team performance measure,
the Company takes into account overall business goals and structures the target to motivate achievement
of desired performance consistent with broader shareholder commitments such as EPS growth, ROIC and
cash flow. The targets are the same as those that we disclose from time to time to our investors and may be
slightly above or below disclosed guidance when determined by our Committee to be appropriate. A
leverage formula for each team performance measure magnifies the potential impact that performance
above or below the target will have on the calculation of annual bonus. This leverage increases the
financial incentive for employees to exceed their targets and reduces payouts when the team performance
target is not reached.
The team performance targets, actual team performance, team performance weights and team
performance factor for each measure are set forth below for the NEOs.
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