Pizza Hut 2013 Annual Report Download - page 44

YUM! BRANDS, INC.-2014Proxy Statement22
Proxy Statement
ITEM4 Re-Approval of YUM! Brands, Inc. Executive
Incentive Compensation Plan Performance
Measures (Item4ontheProxyCard)
What am I voting on?
A proposal to re-approve the material terms of the performance
measures available under the YUM! Brands, Inc� Executive
Incentive Compensation Plan (“Incentive Plan”), as required
by the performance-based compensation rules under
Section162(m) of the Internal Revenue Code (“Section
162(m)”). The Incentive Plan was previously approved by
shareholders on May 21, 2009 and has not been amended
since the last approval.
Why am I voting on this?
In order for the Company to continue to make awards under
the Incentive Plan that will qualify as “performance-based
compensation” that is exempt from the $1 million deduction
limit (as described below) imposed by Section162(m), the
Incentive Plan (and in particular, the material terms thereof,
including the employees who are eligible to receive Awards
under the Incentive Plan, the performance measures on
which performance goals may be based and the individual
dollar limitations on payments in any calendar year) must be
approved by the Company’s shareholders. Approval of the
Incentive Plan will constitute approval of the material terms.
What are the material terms that must be approved?
A summary of the most significant provisions of the Incentive
Plan is set forth below and is qualified in its entirety by
reference to the Incentive Plan, set forth in Appendix A hereto.
If the Incentive Plan is not so approved, incentive payments
under the Incentive Plan will not qualify as “performance-
based compensation”.
Purpose. The purpose of the Incentive Plan is to promote the
interests of the Company and its shareholders by (i) motivating
executives, by means of performance-related incentives, to
achieve financial goals; (ii) attracting and retaining executives
of outstanding ability; (iii) strengthening the Company’s
capability to develop, maintain and direct a competent
executive staff; (iv) providing annual incentive compensation
opportunities which are competitive with those of other major
corporations; and (v) enabling executives to participate in
the growth and financial success of theCompany.
Eligibility and Grant of Awards. Under the Incentive Plan,
the Committee (defined below) may grant cash incentives
(“Awards”) to Executive Officers or other members of senior
management of the Company (“Eligible Employees”). The
recipient of an Award (a “Participant”) will become entitled
to a cash payment if certain performance goals (described
below) for the Performance Period, as established by the
Committee, are satisfied. The amount of the cash payment
is to be based on the extent to which the performance
goals are achieved. At the time an Award is granted to a
Participant, the Committee will establish, with respect to the
Award, (i) a target amount, expressed as a percentage of
the Participant’s base salary for such Performance Period;
(ii) the performance goal(s) for the Performance Period with
respect to the Award, which goals will be based on one
or more of the performance measures described below);
(iii) the maximum payments to be made with respect to
various levels of achievement of the performance goal(s)
for the Performance Period; and (iv) whether the Award is
intended to satisfy the requirements for performance-based
compensation (as described below).
Performance Measures. Awards under the Plan may be
based on one or more of the following performance measures:
cash flow, earnings per share, return on operating assets,
return on equity, operating profit, net income, revenue growth,
Company or system sales, shareholder return, gross margin
management, market share improvement, market value added,
restaurant development, customer satisfaction, economic
value added, operating income, earnings before interest
and taxes, earnings before interest, taxes, depreciation and
amortization, return on invested capital and operating income
margin percentage. Such goals may be particular to a line of