Pizza Hut 2013 Annual Report Download - page 61

YUM! BRANDS, INC.-2014Proxy Statement 39
Proxy Statement
EXECUTIVE COMPENSATION
Summary of Earned Annual Incentives for 2013
The table below summarizes how the formula was applied and the actual amounts earned for 2013 performance.
NEO
Base Salary
Year End 2013
Annual
Target Bonus
Percentage
Team
Performance
Individual
Performance
Bonus Paid
for 2013 Performance
Novak $ 1,450,000 X 160% X 45% X 90% = $ 939,600
Grismer $ 650,000 X 100% X 45% X 95% = $ 277,875
Su $ 1,100,000 X 115% X 54% X 90% = $ 614,790
Creed $ 750,000 X 100% X 139% X 145% = $ 1,511,625
Pant $ 750,000 X 100% X 91% X 115% = $ 784,875
Long-Term Equity Performance-Based Incentives
We provide performance-based long-term equity compensation to our NEOs to encourage long-term decision making
that creates shareholder value. To that end, we use vehicles that motivate and balance the tradeoffs between short-term
and long-term performance. Performance-based long-term equity compensation also serves as a retention tool.
Our NEOs are awarded long-term incentives annually based on the Committee’s subjective assessment of the following
items for each NEO (without assigning weight to any particular item):
•Prior year individual and team performance
•Expected contribution in future years
•
Consideration of the market value of the executive’s role
compared with similar roles in our Executive Peer Group
•Achievement of stock ownership guidelines
Stock Appreciation Rights/Stock Options
In general, our SARs have ten-year terms and vest 25%per
year over four years. Each stock option and SAR award was
granted with an exercise price based on the closing market
price of the underlying YUM common stock on the date of
grant.
Each year, the Committee reviews the mix of long-term
incentives to determine if it is appropriate to continue
predominantly using stock options and SARs as the long-term
incentive vehicle. The Committee continues to choose stock
options and SARs because they emphasize the Company’s
focus on long-term growth and they reward employees only
if YUM’s stock price increases. For each NEO, the breakdown
between SARs/stock option award and PSU award values
can be found under the Summary Compensation Table,
page 44 at columns d and e.
Performance Share Plan
The Committee changed the design of the PSU awards granted in 2013, as discussed at page 30. The PSU awards
granted in 2013 can be earned based on 3-year average TSR relative to the companies in the S&P 500. The target,
threshold and maximum shares that may be paid out under these awards for each NEO are described at page 47.
The target grant value for the CEO is 25% of his total LTI award value and for the other NEOs is 20% of their total
LTI award value.
For the performance period covering 2013-2015 calendar years, each NEO will earn a percentage of their target PSU
award based on the achieved TSR percentile ranking as set forth in the chart below:
TSR Percentile Ranking <40% 40% 50% 70% 90%
Payout as % of Target 0% 50% 100% 150% 200%
Dividend equivalents will accrue during the performance
period and will be distributed as incremental shares but only
in the same proportion and at the same time as the original
awards are earned. If no awards are earned, no dividend
equivalents will be paid. The awards are eligible for deferral under
the Company’s Executive Income Deferral Program. As discussed
on page 32, PSU awards that were granted in 2011 were
not paid out since YUM’s average earnings per share during
the 2011-2013 performance cycle did not reach the required
minimum average growth threshold of seven percent.