Pizza Hut 2013 Annual Report Download - page 64

YUM! BRANDS, INC.-2014Proxy Statement42
Proxy Statement
EXECUTIVE COMPENSATION
The Company’s change in control agreements, in general,
entitle NEOs terminated other than for cause within two
years of the change in control, to receive a benefit of two
times salary and bonus. The terms of these change in
control agreements are described beginning on page 57.
In 2013, the Company eliminated tax gross-ups for
executives, including the NEOs, 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,
but instead will reduce payments to an executive if the
reduction will provide the NEO the best net after-tax result.
If full payment to a NEO will result in the best net after-tax
result, the full amount will be paid, but the NEO 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, the Company provides pension and
life insurance benefits, the continued ability to exercise
vested SARs and stock options and the ability to vest in
performance share awards on a pro-rata basis.
With respect to consideration of how these benefits fit into
the overall compensation policy, the change-in-control
benefits are reviewed from time to time by the Committee
for competitiveness. The Committee believes the benefits
provided in case of a change in control are appropriate,
support shareholder interests and are consistent with the
policy of attracting and retaining highly qualified employees.
YUM’s Stock Option and SAR Granting Practices
Historically, we have awarded non-qualified stock option
and SAR 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.
Management recommends the awards be made pursuant
to our Long Term Incentive Plan 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 Officer, the ability to make grants
to employees who are not executive officers and whose
grant is less than approximately 13,000 options or SARs
annually. In the case of these grants, the Committee sets
all the terms of each award, except the actual number of
SARs 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 NEOs or our other executives. The policy
requires the Company to seek shareholder approval for future
severance payments to a NEO if such payments would
exceed 2.99 times the sum of (a) the NEO’s annual base
salary as in effect immediately prior to termination of
employment; and (b) the highest annual bonus awarded to
the NEO by the Company in any of the Company’s three full
fiscal years immediately preceding the fiscal 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 NEOs 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 NEO.