Pizza Hut 2014 Annual Report Download - page 53

13MAR201517061556
Compensation Changes for 2015
The Committee did not make any significant changes to its compensation policies to take effect in 2014; however, in May 2014 as
discussed at page 7, the Company announced that effective January 1, 2015, Mr. Novak would retire as the Company’s CEO. As a
result, Mr. Creed became the Company’s new CEO and Mr. Novak became the Company’s Executive Chairman. Thus, the
Committee made significant compensation changes for 2015, including changes to CEO pay. These changes, described below,
continue to reinforce the pay-for-performance objective that our compensation programs have demonstrated for many years.
CEO pay will be consistent with our executive compensation philosophy for our other NEOs. The Committee has
determined that Mr. Creed’s compensation as CEO beginning in 2015 will target the 50th percentile for base salary, 75th percentile
for annual bonus and 50th percentile for long-term incentive compensation, which is consistent with our philosophy for our other
NEOs. Because Mr. Creed is new to his role, for 2015 the Committee set Mr. Creed’s total direct compensation below the median
of our Executive Peer Group, as shown in the chart set forth below.
Long-Term
Incentive
Base
Target Bonus
2015
Benchmarking
Philosophy
50th percentile
50th percentile
75th percentile
2015 CEO Pay
$4,300,000
$1,100,000
$1,650,000
2015 CEO Pay
vs. Peer Group
<50th percentile
<50th percentile
50th percentile
Executive Chairman pay will target median compensation philosophy. Based on the Committee’s review of a variety of
external and internal factors, the Committee will target total compensation and set pay at the 50th percentile for Mr. Novak in his
new role as Executive Chairman. His pay will align with benchmarking data for the Executive Chairman position, which was based
on executive chairs in the Fortune 250 who were not founders of their companies. Based on this philosophy, the Committee set
Mr. Novak’s total target compensation for 2015 at $5 million, setting his salary at $1 million, bonus target at 100% of salary and
long-term incentive pay (split 75% SARs and 25% PSUs) at an economic value of $3 million. In making this decision, the
Committee took into consideration Mr. Novak’s responsibilities as described at page 7 and his expected substantial contribution
to the Company in 2015 including supporting Mr. Creed, as the Company’s new CEO.
Updated the Company’s Executive Peer Group. The Committee removed Office Max, Darden and JC Penney and added
Starwood, Hilton, Office Depot and Kraft to the Executive Peer Group (as defined on page 35) in order to better align the size of
the peer group companies with YUM.
Reduced ownership guidelines to align with market best practice. Our ownership guidelines in effect for 2014 are described
at page 43. The Committee determined it was appropriate to lower the guidelines beginning in 2015 to be more in line with market
practice. The guidelines in effect prior to 2015 had been in place for many years and based on the Company’s stock price increase
over these years had resulted in the guidelines exceeding market practice by quite a wide margin. For 2015, Mr. Creed and
Mr. Novak will each be required to own 100,000 shares and our Chief Financial Officer and division presidents will each be
required to own 30,000 shares. As a multiple of salary, this represents over six times for Mr. Creed and Mr. Novak and over three
times for the Chief Financial Officer and division presidents. At these multiples of salary, the new guidelines are above the median
for the Company’s peer group.
2015 Proxy Statement YUM! BRANDS, INC. 31
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EXECUTIVE COMPENSATION
Proxy Statement