Pizza Hut 2012 Annual Report Download - page 53

YUM! BRANDS, INC.-2013Proxy Statement 35
Proxy Statement
EXECUTIVE COMPENSATION
Role of the Independent Consultant
The Committee’s charter states the Committee may retain outside
compensation consultants, lawyers or other advisors. The Committee
retains an independent consultant, Meridian Compensation
Partners,LLC, to advise it on certain compensation matters. The
Committee has instructed Meridian that:
• they are to act independently of management and at the direction
of the Committee
• their ongoing engagement will be determined by the Committee
• they are to inform the Committee of relevant trends and regulatory
developments
• they are to provide compensation comparisons based on
information that is derived from comparable businesses of a
similar size to the Company for the Named Executive Offi cers
• they are to assist the Committee in its determination of the
annual compensation package for our Chief Executive Offi cer
and our Named Executive Offi cers
The Company considered the following factors, among others, in
determining that Meridian meets the criteria to serve as the Committee’s
independent compensation consultant:
• Meridian did not provide any services to the Company unrelated
to executive compensation
• Meridian has no business or personal relationship with any
member of the Management Planning and Development
Committee or management
• Meridian’s partners and employees who provide services to
the Committee are prohibited from owning YUM stock per
Meridian’s fi rm policy
Use of Comparator Compensation Peer Group
Companies Included in the Executive Peer Group
The Executive Peer Group for all Named Executive Offi cers is
made up of retail, hospitality and nondurable consumer product
companies. The Committee established the current Executive Peer
Group for the Chief Executive Offi cer and other Named Executive
Offi cer compensation at the end of 2011 for pay actions in 2012.
The group was chosen because the companies are refl ective of the
market in which we compete for executive talent, based on each
company’s relative leadership position in their sector, relative size
as measured by revenues, relative complexity of their business,
and in some cases their global reach.
The peer group used for executive benchmarking is comprised of
companies from the retail, food, beverage, nondurable consumer
goods and quick service restaurant sectors as these represent
the sectors with which the Company is most likely to compete
for executive talent.
Company Name
2010 Revenues
($billions) Company Name
2010 Revenues
($billions)
Autozone Inc. $ 7.4 Kimberly-Clark Corporation $ 19.1
Avon Products Inc. $ 10.4 Kraft Foods Inc. $ 40.4
Campbell Soup Company $ 7.7 Macy’s Inc. $ 23.5
Coca-Cola Company $ 31.0 Marriott International $ 10.9
Colgate Palmolive Company $ 15.3 McDonald’s Corporation $ 22.7
Darden Restaurants Inc. $ 7.1 Nike Inc. $ 19.0
Gap Inc. $ 14.2 Offi cemax Inc. $ 7.2
General Mills Inc. $ 14.8 PepsiCo Inc. $ 43.2
H.J. Heinz Company $ 10.5 Staples Inc. $ 24.3
J C Penney Company Inc. $ 17.6 Starbucks Corporation $ 9.8
Kellogg Company $ 12.6 Unilever USA data not publicly available
Kohl’s Corporation $ 17.2 YUM ! Brands,Inc. $ 18.3(1)
(1) 2011 estimated Company sales + 25% of estimated franchisee and licensee sales
Periodically the Committee, with Meridian’s assistance, reviews the
composition of the Executive Peer Group to ensure the companies
remain relevant for comparative purposes. For 2013 benchmarking,
the Committee removed Coca-Cola, PepsiCo and Kraft from the
Executive Peer Group in order to better align the size of the peer
group companies with YUM.
Revenue size often correlates with the market value of compensation
for senior executive positions. For companies with signifi cant
franchise operations, measuring size is a more involved undertaking.
This is because there are added complexities and responsibilities
for managing the relationships, arrangements, and overall scope
of the enterprise franchising introduces, in particular, managing
product introductions, marketing, driving new unit development, and
driving customer satisfaction and overall operations improvements
across the entire franchise system. Accordingly, in calibrating
size-adjusted market values, our philosophy is to add 25% of
estimated franchisee and licensee sales to the Company’s estimated
sales in any particular year to establish an appropriate revenue
benchmark to determine the market value of various components of
compensation for the following year. The reason for this approach