Pizza Hut 2012 Annual Report Download - page 60

YUM! BRANDS, INC.-2013Proxy Statement42
Proxy Statement
EXECUTIVE COMPENSATION
Payments Upon Termination of Employment
The Company does not have agreements with its executives
concerning payments upon termination of employment except in the
case of a change in control of the Company. The Committee believes
these are appropriate agreements for retaining Named Executive
Offi cers and other executive offi cers to preserve shareholder value
in case of a potential change in control. The Committee periodically
reviews these agreements and other aspects of the Company’s
change in control program.
The Company’s change in control agreements, in general, entitle
Named Executive Offi cers terminated other than for cause within
two years of the change in control, to receive a benefi t of two
times salary and bonus and provide for a tax gross-up in case of
any excise tax. The terms of these change in control agreements
are described beginning on page 56 .
Effective March15,2013, the Company eliminated tax gross-ups
for executives, including the Named Executive Offi cers, for any
excise tax due under Section 4999 of the Internal Revenue Code
and implemented a “best net after-tax” approach to address any
potential excise tax imposed on executives. If any excise tax is
due, the Company will not make a gross-up payment, and instead
will reduce payments to an executive only if the reduction will
provide the Named Executive Offi cer the best net after-tax result.
If full payment to a Named Executive Offi cer will result in the best
net after-tax result, the Named Executive Offi cer will be solely
responsible for any potential excise tax payment. Also, effective
for equity awards made in 2013 and beyond, outstanding awards
will fully and immediately vest if the executive is employed on the
date of a change in control of the Company and is involuntarily
terminated (other than by the Company for cause) on or within
two years following the change in control (“double trigger” vesting).
In case of retirement, t he Company does provide pension and life
insurance benefi ts , the continued ability to exercise vested stock
appreciation rights and stock options and the ability to vest in
performance share units on a pro-rata basis .
With respect to consideration of how these benefi ts fi t into the
overall compensation policy, the change-in-control benefi ts are
reviewed from time to time by the Committee for competitiveness.
The Committee believes the benefi ts provided in case of a change
in control are appropriate, support shareholder interests and
are consistent with the policy of attracting and retaining highly
qualifi ed employees.
YUM’s Stock Option and SARS Granting Practices
Historically, we have awarded non-qualifi ed stock option and
stock appreciation rights grants annually at the Committee’s
Januarymeeting. This meeting date is set by the Board of Directors
more than sixmonths prior to the actual meeting. The Committee
sets the annual grant date as the second business day after our
fourth quarter earnings release. The exercise price of awards
granted under our LTIP is set as the closing price on the date
of grants. We make grants at the same time other elements of
annual compensation are determined so that we can consider
all elements of compensation in making the grants. We do not
backdate or make grants retroactively. In addition, we do not
time such grants in coordination with our possession or release
of material, non-public or other information.
Grants may also be made on other dates the Board of Directors
meets. These grants generally are Chairman’s Awards, which are
made in recognition of superlative performance and extraordinary
impact on business results. Over the last fouryears, we have
averaged four Chairman’s Award grants per year outside of
the Januarytime frame. In 2012, we made four Chairman’s
Awards grants on Board of Director meeting dates other than
the Januarymeeting. No Named Executive Offi cers received
Chairman’s Award grants during 2012.
Management recommends the awards be made pursuant to our
LTI P to the Committee, however, the Committee determines whether
and to whom it will issue grants and determines the amount of
the grant. The Board of Directors has delegated to Mr.Novak and
Anne Byerlein, our Chief People Offi cer, the ability to make grants
to employees who are not executive offi cers and whose grant is
less than approximately 17,000options or stock appreciation
rights annually. In the case of these grants, the Committee sets
all the terms of each award, except the actual number of stock
appreciation rights or options, which is determined by Mr.Novak
and Ms.Byerlein pursuant to guidelines approved by the Committee
in Januaryof each year.
Limits on Future Severance Agreement Policy
The Committee has adopted a policy to limit future severance
agreements with Named Executive Offi cers or our other executives.
The policy requires the Company to seek shareholder approval for
future severance payments to a Named Executive Offi cer if such
payments would exceed 2.99 times the sum of (a)the Named
Executive Offi cer’s annual base salary as in effect immediately prior
to termination o f employment; and (b)the highest annual bonus
awarded to the Named Executive Offi cer by the Company in any of
the Company’s three full fi scal years immediately preceding the fi scal
year in which termination of employment occurs or, if higher, the
executive’s target bonus. Certain types of payments are excluded
from this policy, such as amounts payable under arrangements that
apply to classes of employees other than the Named Executive
Offi cers or that predate the implementation of the policy, as well as
any payment the Committee determines is a reasonable settlement
of a claim that could be made by the Named Executive Offi cer.