Pizza Hut 2014 Annual Report Download - page 66

15MAR201511093851
and Ms. Byerlein pursuant to guidelines approved by the limitation) short sales as well as any hedging transactions in
Committee in January of each year. derivative securities (e.g. puts, calls, swaps, or collars) or
other speculative transactions related to YUM’s stock.
Limits on Future Severance Agreement Policy Pledging of Company stock is also prohibited.
The Committee has adopted a policy to limit future Deductibility of Executive Compensation
severance agreements with NEOs or our other executives.
The policy requires the Company to seek shareholder The provisions of Section 162(m) of the Internal Revenue
approval for future severance payments to a NEO if such Code limit the tax deduction for compensation in excess of
payments would exceed 2.99 times the sum of (a) the $1 million paid to certain NEOs. Performance-based
NEO’s annual base salary as in effect immediately prior to compensation is excluded from the limit, however, so long
termination of employment; and (b) the highest annual as it meets certain requirements. The Committee intends
bonus awarded to the NEO by the Company in any of the that the annual bonus, SARs/Options, RSU and PSU
Company’s three full fiscal years immediately preceding the awards satisfy the requirements for exemption under
fiscal year in which termination of employment occurs or, if Internal Revenue Code Section 162(m).
higher, the executive’s target bonus. Certain types of For 2014, the annual salary paid to Mr. Novak exceeded
payments are excluded from this policy, such as amounts $1 million. The Committee sets Mr. Novak’s salary as
payable under arrangements that apply to classes of described under ‘‘Base Salary’’ above. The other NEOs were
employees other than the NEOs or that predate the in each case paid salaries of $1 million or less, except for
implementation of the policy, as well as any payment the Mr. Su whose salary exceeded $1 million; however, the
Committee determines is a reasonable settlement of a claim Committee noted that Mr. Su’s compensation is not subject to
that could be made by the NEO. United States tax rules and, therefore, the $1 million limitation
does not apply in his case. The 2014 annual bonuses were all
Compensation Recovery Policy paid pursuant to our annual bonus program and, therefore,
The Committee has amended and restated the Company’s we expect will be deductible. For 2014, the Committee set the
Compensation Recovery Policy (i.e., ‘‘clawback’’) for stock maximum individual award opportunity based on a bonus
awards beginning in 2015 and annual bonuses awarded for pool for the NEOs and the next two highest paid executive
calendar years after 2014. Pursuant to this amended and officers (Mr. Grismer is not included for purposes of our pool
restated policy, the Committee may require executive officers since under IRS rules the Chief Financial Officer pay is not
(including the NEOs) to return compensation paid or may subject to these limits.) The bonus pool for 2014 is equal to
cancel any award or bonuses not yet vested or earned if the 1.5% of operating profit (adjusted to exclude special items
executive officers engaged in misconduct or violation of believed to be distortive of consolidated results on a year-
Company policy that resulted in significant financial or over-year basis — these are the same items excluded in the
reputational harm or violation of Company policy, or Company’s annual earnings releases). The maximum payout
contributed to the use of inaccurate metrics in the calculation opportunity for each executive was set at a fixed percentage
of incentive compensation. Under this policy, when the Board of the pool. Based on the Company’s operating profit of
determines in its sole discretion that recovery of $1.577 billion, the bonus pool was set at approximately
compensation is appropriate, the Company could require $23 million and the maximum 2014 award opportunity for
repayment of all or a portion of any bonus, incentive payment, each NEO was based on their applicable percentage of the
equity-based award or other compensation, and cancellation pool (Mr. Novak⳱30%, Mr. Su⳱20%, Mr. Creed⳱20% and
of an award or bonus to the fullest extent permitted by law. Mr. Bergren⳱10%) (under the terms of the shareholder
approved plan no executive may earn a bonus in excess of
Hedging and Pledging of Company Stock $10 million for any year). The Committee then exercised its
negative discretion in determining actual incentive awards
Under our Code of Conduct, no employee or director is based on team performance and individual performance
permitted to engage in securities transactions that would measures as described above.
allow them either to insulate themselves from, or profit from,
a decline in the Company stock price. Similarly, no Due to the Company’s focus on performance-based
employee or director may enter into hedging transactions in compensation plans, we expect most compensation paid to
the Company’s stock. Such transactions include (without the NEOs to continue to qualify as tax deductible.
44 YUM! BRANDS, INC. 2015 Proxy Statement
EXECUTIVE COMPENSATION
Proxy Statement