Pizza Hut 2013 Annual Report Download - page 51

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YUM! BRANDS, INC.-2014Proxy Statement 29
Proxy Statement
EXECUTIVE COMPENSATION
YUM’s Compensation Philosophy
Our compensation program is designed to support our long-
term growth model, while holding our executives accountable
to achieve key annual results year over year�
YUM’s compensation philosophy for the NEOs is reviewed
annually by the Committee, and has the following key objectives:
•
Reward performance – The majority of NEO pay is
performance based and therefore at-risk� We design pay
programs that incorporate team and individual performance,
customer satisfaction and shareholder return�
•Emphasize long-term incentive compensation – Our
belief is simple, if we create value for shareholders, then
we share a portion of that value with those responsible
for the results� We believe that all of our long-term incentive
compensation is performance based� Stock Appreciation
Rights (“SARs”) reward for value creation which over time
is a function of our results and the favorable expectations
of our shareholders� Performance Share Unit (“PSU”)
awards reward for superior relative performance as
compared to the S&P 500� Both vehicles encourage
executives to grow the value of the Company with a
long-term perspective in mind�
•
Drive ownership mentality – We require executives to
personally invest in the Company’s success by owning
Company stock�
•
Retain and reward the best talent to achieve superior
shareholder results – To be consistently better than our
competitors, we need to recruit and retain superior talent
who are able to drive superior results� We have structured
our compensation programs to motivate and reward these
results�
Relationship Between Company Pay and Performance
To focus on both the short and long-term success of the
Company, our NEOs’ compensation includes a significant portion,
approximately 80%, that is “at-risk”, where the compensation
paid is determined based on the achievement of specified
results. If short-term and long-term financial and operational
goals are not achieved, then performance-related compensation
will decrease. If goals are exceeded, then performance-related
compensation will increase. As demonstrated below, our target
pay mix for NEOs emphasizes our commitment to “at-risk” pay
in order to tie pay to performance.
11%
19%
CEO TARGET PAY MIX—2013
At-Risk At-Risk
70%
50%
25%
25%
ALL OTHER NEO TARGET PAY MIX—2013
Base Salary Annual Bonus
Long-Term Equity Incentive
Base Salary Annual Bonus Long-Term Equity Incentive
Based on the Company’s 2013 performance, compensation
fell considerably versus the prior year, specifically:
•
Cash compensation (base salary and annual bonus)
decreased by 60% for the Chief Executive Officer (“CEO”)
and 33% for the other NEOs.
•
Direct compensation (base salary, annual bonus and
long-term equity incentive) decreased by 26% for the
CEO and 19% for the other NEOs.
•
A reduction in annual bonus contributed significantly to
the year over year decline in direct compensation, as
bonus payouts reflected our failure to achieve key
performance metrics in 2013. Annual bonus decreased
by 80% for the CEO and 51% for the other NEOs combined
year over year.