Pizza Hut 2013 Annual Report Download - page 65

YUM! BRANDS, INC.-2014Proxy Statement 43
Proxy Statement
EXECUTIVE COMPENSATION
Compensation Recovery Policy
The Committee has adopted a Compensation Recovery
Policy (i.e., “clawback”) for stock awards and annual bonuses
awarded after 2008. Pursuant to this policy, executive
officers (including the NEOs) may be required to return
compensation paid based on financial results that were
later restated. This policy applies only if the executive officers
engaged in knowing misconduct that contributed to the
need for a material restatement, or contributed to the use
of inaccurate metrics in the calculation of incentive
compensation. Under this policy, when the Board determines
in its sole discretion that recovery of compensation is
appropriate, the Company could require repayment of all
or a portion of any bonus, incentive payment, equity-based
award or other compensation, to the fullest extent permitted
by law.
Hedging and Pledging of Company Stock
Under our Code of Conduct, no employee or director is
permitted to engage in securities transactions that would
allow them either to insulate themselves from, or profit from,
a decline in the Company stock price. Similarly, no employee
or director may enter into hedging transactions in the
Company’s stock. Such transactions include (without
limitation) short sales as well as any hedging transactions
in derivative securities (e.g. puts, calls, swaps, or collars)
or other speculative transactions related to YUM’s stock.
Pledging of Company stock is also prohibited.
Deductibility of Executive Compensation
The provisions of Section 162(m) of the Internal Revenue
Code limit the tax deduction for compensation in excess
of $1 million dollars paid to certain NEOs. Performance-
based compensation is excluded from the limit, however,
so long as it meets certain requirements. The Committee
intends that the annual bonus, stock option, SAR, RSU
and PSU awards satisfy the requirements for exemption
under Internal Revenue Code Section 162(m).
For 2013, the annual salary paid to Mr. Novak exceeded
$1 million. The Committee sets Mr. Novak’s salary as
described under “Base Salary” above. The other NEOs
were in each case paid salaries of $1 million or less, except
for Mr. Su whose salary exceeded $1 million;·however, the
Committee noted that Mr.Su’s compensation is not subject
to United States tax rules and, therefore, the one million dollar
limitation does not apply in his case. The 2013 annual
bonuses were all paid pursuant to our annual bonus program
and, therefore, we expect will be deductible, except in one
case described below. For 2013, the Committee set the
maximum individual award opportunity between $1 million
and $10 million based on the Company’s 2013 EPS growth
(adjusted to exclude special items believed to be distortive
of consolidated results on a year-over-year basis-these are
the same items excluded in the Company’s annual earnings
releases). Based on the Company’s EPS decline of 9%, the
maximum 2013 award opportunity for each executive officer
was $1 million. The Committee then exercised its negative
discretion in determining actual incentive awards based on
team performance and individual performance measures
as described above. Except for Mr. Creed, the 2013 annual
bonus awarded to the other NEOs was less than $1 million.
The Committee elected to pay Mr. Creed a bonus exceeding
$1 million based on strong performance in leading Taco
Bell (see page 38 for a discussion of Mr. Creed’s performance.)
Due to the Company’s focus on performance-based
compensation plans, we expect most compensation paid
to the NEOs to continue to qualify as tax deductible.
Management Planning and Development Committee Report
The Management Planning and Development Committee
of the Board of Directors reports that it has reviewed and
discussed with management the section of this proxy
statement headed “Compensation Discussion and Analysis”
and, on the basis of that review and discussion, recommended
to the Board that the section be incorporated by reference
into the Company’s Annual Report on Form 10-K and
included in this proxy statement.
THE MANAGEMENT PLANNING AND DEVELOPMENT COMMITTEE
Robert D. Walter, Chair
David W. Dorman
Massimo Ferragamo
Thomas M. Ryan