UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)
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YUM! BRANDS, INC.
(Name of Registrant as Specified In Its Charter)
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YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213
April 8, 2016
5, 2019
Dear Fellow Shareholders:
On behalf of your Board of Directors, we are pleased to invite you to attend the 20162019 Annual Meeting of Shareholders of YUM! Brands, Inc. The Annual Meeting will be held Friday,Thursday, May 20, 2016,16, 2019, at 9:00 a.m., local time, in the YUM!Yum! Conference Center at 1900 Colonel Sanders Lane in Louisville, Kentucky.
Once again, we encourage you to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their shareholders over the Internet. We believe that thise-proxy process expedites shareholders’ receipt of proxy materials, lowers the costs of delivery and helps reduce the Company’s environmental impact.
Your vote is important. We encourage you to vote promptly whether or not you plan to attend the meeting. You may vote your shares via a toll-free telephone number or over the Internet. If you received a paper copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. Instructions regarding the three methods of voting prior to the meeting are contained on the notice or proxy card.
If you plan to attend the meeting, please bring your notice, admission ticket from your proxy card or proof of your ownership of YUM common stock as of March 22, 201618, 2019 as well as a valid picture identification. Whether or not you attend the meeting, we encourage you to consider the matters presented in the proxy statement and vote as soon as possible.
Sincerely,
Greg Creed
Chief Executive Officer
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on May 20, 2016—16, 2019—this notice and the proxy statement are available atwww.yum.com/investors/investor_materials.asp.www.investors.yum.com/governance-documents. The Annual Report on Form10-K is available atwww.yum.com/annualreport.www.investors.yum.com/annual-reports.
YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213
Notice of Annual Meeting of Shareholders |
Friday,Thursday, May 20, 201616, 2019 9:00 a.m.
YUM!Yum! Conference Center, 1900 Colonel Sanders Lane, Louisville, Kentucky 40213
ITEMS OF BUSINESS:
(1) | To elect | |
(2) | To ratify the selection of KPMG LLP as our independent auditors for the fiscal year ending December 31, | |
(3) | To consider and hold an advisory vote on executive compensation. | |
(4)-(6) | ||
To consider and vote on |
(7) | ||
To transact such other business as may properly come before the meeting. |
WHO CAN VOTE:VOTE?:
You can vote if you were a shareholder of record as of the close of business on March 22, 2016.18, 2019.
ANNUAL REPORT:
A copy of our 20152018 Annual Report on Form10-K is included with this proxy statement.
WEBSITE:
You may also read the Company’s Annual Report and this Notice and proxy statement on our website atwww.yum.com/annualreport and www.yum.com/investors/investor_materials.asp. www.investors.yum.com/annual-reports.
DATE OF MAILING:
This Notice, the proxy statement and the form of proxy are first being mailed to shareholders on or about April 8, 2016.5, 2019.
By Order of the Board of Directors
Marc L. Kesselman
Scott A. Catlett
General Counsel and Corporate Secretary
YOUR VOTE IS IMPORTANT
Under securities exchange rules, brokers cannot vote on your behalf for the election of directors or on executive compensation related matters without your instructions. Whether or not you plan to attend the Annual Meeting, please provide your proxy by following the instructions on your Notice or proxy card. On or about April 8, 2016,5, 2019, we mailed to our shareholders a Notice containing instructions on how to access the proxy statement and our Annual Report and vote online.
If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, you should follow the instructions included in the Notice on how to access and review the proxy statement and Annual Report. The Notice also instructs you on how you may submit your vote by proxy over the Internet.
If you received the proxy statement and Annual Report in the mail, please submit your proxy by marking, dating and signing the proxy card included and returning it promptly in the envelope enclosed. If you are able to attend the Annual Meeting and wish to vote your shares personally, you may do so at any time before the proxy is exercised.
PROXY STATEMENT | 1 | |||||
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING | 1 | |||||
GOVERNANCE OF THE COMPANY | 6 | |||||
10 | ||||||
15 | ||||||
MATTERS REQUIRING SHAREHOLDER ACTION |
YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213
For Annual Meeting of Shareholders To Be Held On
May 20, 2016
16, 2019
The Board of Directors (the “Board of Directors” or the “Board”) of YUM! Brands, Inc., a North Carolina corporation (“YUM” or the “Company”), solicits the enclosed proxy for use at the Annual Meeting of Shareholders of the Company to be held at 9:00 a.m. (Eastern Daylight Saving Time), on Friday,Thursday, May 20, 2016,16, 2019, in the YUM!Yum! Conference Center at 1900 Colonel Sanders Lane in Louisville, Kentucky. This proxy statement contains information about the matters to be voted on at the Annual Meeting and the voting process, as well as information about our directors and most highly paid executive officers.
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
What is the purpose of the Annual Meeting?
At our Annual Meeting, shareholders will vote on several important Company matters. In addition, our management will report on the Company’s performance over the last fiscal year and, following the meeting, respond to questions from shareholders.
Why am I receiving these materials?
You received these materials because our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. As a shareholder, you are invited to attend the Annual Meeting and are entitled to vote on the items of business described in this proxy statement.
Why did I receive aone-page Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
As permitted by Securities and Exchange Commission (“SEC”) rules, we are making this proxy statement and our Annual Report available to our shareholders electronically via the Internet. On or about April 8, 2016,5, 2019, we mailed to our shareholders a Notice containing instructions on how to access this proxy statement and our Annual Report and vote online. If you received a Notice by mail you will not receive a printed copy of the proxy materials in the mail unless you request a copy. The Notice instructs you on how to access and review all of the important information
contained in the proxy statement and Annual Report. The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Notice.
We encourage you to take advantage of the availability of the proxy materials on the Internet in order to help lower the costs of delivery and reduce the Company’s environmental impact.
YUM! BRANDS, INC.- 2016 Proxy Statement1
YUM! BRANDS, INC. -2019 Proxy Statement | 1 |
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING |
Who may attend the Annual Meeting?
The Annual Meeting is open to all shareholders of record as of close of business on March 22, 2016,18, 2019, or their duly appointed proxies. Seating is limited and admission is on a first-come, first-served basis.
What do I need to bring to attend the Annual Meeting?
You will need a valid picture identification and either an admission ticket or proof of ownership of YUM’s common stock to enter the Annual Meeting. If you are a registered owner, your Notice will be your admission ticket.
If you received the proxy statement and Annual Report by mail, you will find an admission ticket attached to the proxy card sent to you. If you plan to attend the Annual Meeting, please so indicate when you vote and bring the ticket with you to the Annual Meeting. If your shares are held in the name of a bank or broker, you will need to bring your legal proxy from your bank or broker and your admission ticket. If you do not bring your admission ticket, you will need proof of ownership to be admitted to the Annual Meeting. A recent brokerage statement or letter from a bank or broker is
an example of proof of ownership. If you arrive at the Annual Meeting without an admission ticket, we will admit you only if we are able to verify that you are a YUM shareholder. Your admittance to the Annual Meeting will depend upon availability of seating. All shareholders will be required to present valid picture identification prior to admittance. IF YOU DO NOT HAVE A VALID PICTURE IDENTIFICATION AND EITHER AN ADMISSION TICKET OR PROOF THAT YOU OWN YUM COMMON STOCK, YOU MAY NOT BE ADMITTED INTO THE ANNUAL MEETING.
Please note that computers, cameras, sound or video recording equipment, cellular and smart phones, tablets and other similar devices, large bags, briefcases and packages will not be allowed in the meeting room.
May shareholders ask questions?
Yes. Representatives of the Company will answer shareholders’ questions of general interest following the Annual Meeting. In order to give a greater number of shareholders an opportunity to ask questions, individuals or groups will be allowed to ask only one question and no repetitive orfollow-up questions will be permitted.
Who may vote?
You may vote if you owned YUM common stock as of the close of business on the record date, March 22, 2016.18, 2019. Each share of YUM common stock is entitled to one vote. As of March 22, 2016,18, 2019, YUM had 407,176,521305.9 million shares of common stock outstanding.
What am I voting on?
You will be voting on the following five (5)six (6) items of business at the Annual Meeting:
The election of eleven (11) directors to serve until the next Annual Meeting of Shareholders and until their respective successors are duly elected and qualified;
The ratification of the selection of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2019;
An advisory vote on executive compensation; and
Three (3) shareholder proposals.
We will also consider other business that properly comes before the meeting.
YUM! BRANDS, INC. - 2016 Proxy Statement2
2 | YUM! BRANDS, INC.-2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING |
How does the Board of Directors recommend that I vote?
Our Board of Directors recommends that you vote your shares:
FOR each of the nominees named in this proxy statement for election to the Board;
FOR the ratification of the selection of KPMG LLP as our independent auditors;
FOR the proposal regarding an advisory vote on executive compensation; and
AGAINST each of the three (3) shareholder proposals.
How do I vote before the Annual Meeting?
There are three ways to vote before the meeting:
• | By Internet — If you have Internet access, we encourage you to vote onwww.proxyvote.com by following instructions on the Notice or proxy card; | ||
By telephone — by making a toll-free telephone call from the U.S. or Canada to 1(800)690-6903 (if you have any questions about how to vote over the phone, call 1(888)298-6986); or
By mail — If you received your proxy materials by mail, you can vote by completing, signing and returning the enclosed proxy card in the postage-paid envelope provided.
If you are a participant in the Direct Stock Purchase Plan,direct stock purchase and dividend reinvestment plan (Computer Share CIP), as a registered shareholder, you will receive all proxy materials and may vote your shares according to the administrator of this program, as the shareholder of record, may only vote the shares for which it has received directions to vote from you.
procedures outlined herein.
If you are a participant in the YUM! Brands 401(k) Plan (“401(k) Plan”), the trustee of the 401(k) Plan will only vote the shares for which it has received directions to vote from you.
Proxies submitted through the Internet or by telephone as described above must be received by 11:59 p.m.,
Eastern Daylight Saving Time, on May 19, 2016.15, 2019. Proxies submitted by mail must be received prior to the meeting. Directions submitted by 401(k) Plan participants must be received by 12:00 p.m., Eastern Daylight Saving Time, on May 18, 2016.
14, 2019.
Also, if you hold your shares in the name of a bank or broker, your ability to vote by telephone or the Internet depends on their voting processes. Please follow the directions on your notice carefully.carefully. A number of brokerage firms and banks participate in a program provided through Broadridge Financial Solutions, Inc. (“Broadridge”) that offers telephone and Internet voting options. If your shares are held in an account with a brokerage firm or bank participating in the Broadridge program, you may vote those shares telephonically by calling the telephone number shown on the voting instruction form received from your brokerage firm or bank, or through the Internet at Broadridge’s voting website(www.proxyvote.com). Votes submitted through the Internet or by telephone through the Broadridge program must be received by 11:59 p.m., Eastern Daylight Saving Time, on May 19, 2016.15, 2019.
Can I vote at the Annual Meeting?
Shares registered directly in your name as the shareholder of record may be voted in person at the Annual Meeting. Shares held through a broker or nominee may be voted in person only if you obtain a legal proxy from the broker or nominee that holds your shares giving you the right to vote the shares.
Even if you plan to attend the Annual Meeting, we encourage you to vote your shares by proxy. You may still vote your shares in person at the meeting even if you have previously voted by proxy.
YUM! BRANDS, INC. -2019 Proxy Statement | 3 |
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING |
Can I change my mind after I vote?
You may change your vote at any time before the polls close at the Annual Meeting. You may do this by:
Signing another proxy card with a later date and returning it to us prior to the Annual Meeting;
YUM! BRANDS, INC. - 2016 Proxy Statement3Voting again by telephone or through the Internet prior to 11:59 p.m., Eastern Daylight Saving Time, on May 15, 2019;
Giving written notice to the Corporate Secretary of the Company prior to the Annual Meeting; or
Voting again at the Annual Meeting.
Your attendance at the Annual Meeting will not have the effect of revoking a proxy unless you notify our Corporate Secretary in writing before the polls close that you wish to revoke a previous proxy.
Who will count the votes?
Representatives of American Stock Transfer and Trust Company, LLCComputershare, Inc. will count the votes and will serve as the independent inspector of election.
What if I return my proxy card but do not provide voting instructions?
If you vote by proxy card, your shares will be voted as you instruct by the individuals named on the proxy card. If you sign and return a proxy card but do not specify how your shares are to be voted, the persons named as proxies on the proxy card will vote your shares in accordance with the recommendations of the Board. These recommendations are:
FOR the election of the eleven (11) nominees for director named in this proxy statement (Item 1);
FOR the ratification of the selection of KPMG LLP as our independent auditors for the fiscal year 2019 (Item 2);
FOR the proposal regarding an advisory vote on executive compensation (Item 3); and
AGAINST each Shareholder Proposal (Items4-6).
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts with brokers and/or our transfer agent. Please vote all of these shares. We recommend that you contact your broker and/or our transfer agent to consolidate as many
accounts as possible under the same name and address. Our transfer agent is American Stock Transfer and Trust Company, LLC,Computershare, Inc., which may be reached at 1 (888) 439-4986.439-4986 and internationally at 1 (781)575-2879.
Will my shares be voted if I do not provide my proxy?
Your shares may be voted if they are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under the New York Stock Exchange rules to vote shares for which their customers do not provide voting instructions on certain “routine” matters.
The proposal to ratify the selection of KPMG LLP as our independent auditors for fiscal year 20162019 is considered a routine matter for which brokerage firms
may vote shares for which they have not received voting instructions. The other proposals to be voted on at our Annual Meeting are not considered “routine” under applicable rules. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “brokernon-vote.”
4 | YUM! BRANDS, INC.-2019 Proxy Statement |
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING |
How many votes must be present to hold the Annual Meeting?
Your shares are counted as present at the Annual Meeting if you attend the Annual Meeting in person or if you properly return a proxy by Internet, telephone or mail. In order for us to conduct our Annual Meeting, a majority of the outstanding shares of YUM common
stock, as of March 22, 2016,18, 2019, must be present in person or represented by proxy at the Annual Meeting. This is referred to as a quorum. Abstentions and brokernon-votes will be counted for purposes of establishing a quorum at the Annual Meeting.
YUM! BRANDS, INC. - 2016 Proxy Statement4
How many votes are needed to elect directors?
You may vote “FOR” each nominee or “AGAINST” each nominee, or “ABSTAIN” from voting on one or more nominees. Unless you mark “AGAINST” or “ABSTAIN” with respect to a particular nominee or nominees or for all nominees, your proxy will be voted “FOR” each of the director nominees named in this proxy statement. In an uncontested election, a nominee will be elected as a director if the number of “FOR” votes exceeds the number of “AGAINST” votes.
Abstentions will be counted as present but not voted. Abstentions and brokernon-votes will not affect the outcome of the vote on directors. Full details of the Company’s majority voting policy are set out in our Corporate Governance Principles atwww.yum.com/investors/governance/principles.asp www.investors.yum.com and at page 919 under “What other significant Board practices does the Company have? — Majority Voting Policy.”
How many votes are needed to approve the other proposals?
The
In order to be approved, the other proposals must receive the “FOR” vote of a majority of the shares, present in person or represented by proxy, and entitled to vote at the Annual Meeting. For each of these items, you may vote “FOR”, “AGAINST” or “ABSTAIN.” Abstentions will be counted as shares present and entitled to vote at the Annual Meeting. Accordingly,
abstentions will have the same effect as a vote “AGAINST” the proposals. Brokernon-votes will not be counted as shares present and entitled to vote with respect to the particular matter on which the broker has not voted. Thus, brokernon-votes will not affect the outcome of any of these proposals.
When will the Company announce the voting results?
The Company will announce the voting results of the Annual Meeting on a Current Report on Form8-K filed within four business days of the Annual Meeting.
What if other matters are presented for consideration at the Annual Meeting?
The Company knows of no other matters to be submitted to the shareholders at the Annual Meeting, other than the proposals referred to in this Proxy Statement. If any other matters properly come before the shareholders at the Annual Meeting, it is the intention of the persons named on the proxy to vote the shares represented thereby on such matters in accordance with their best judgment.
YUM! BRANDS, INC. - 2016 Proxy Statement5
YUM! BRANDS, INC. -2019 Proxy Statement | 5 |
The business and affairs of YUM are managed under the direction of the Board of Directors. The Board believes that good corporate governance is a critical factor in achieving business success and in fulfilling the Board’s responsibilities to shareholders. The Board believes that its practices align management and shareholder interests.
The corporate governance section of the Company website makes available the Company’s corporate governance materials, including the Corporate Governance Principles (the “Governance Principles”), the Company’s Articles of Incorporation and Bylaws, the charters for each Board committee, the Company’s Worldwide Code of Conduct, the Company’s Political Contributions and U.S. Government Advocacy Policy, and information about how to report concerns about the Company. To access these documents on the Company’s website,www.yum.com, click on “Investors” and then “Corporate Governance”.
Governance Highlights Corporate Governance 11 Director Nominees 10 Independent Nominees Directors with experience, qualifications and skills across a wide range of our corporate governance practices are described below.public and private companies Board Access to Senior Management and Independent Advisors Independent Non-Executive Chairman Independent Board Committees Executive Sessions of Independent Directors at every regular Board and Committee meeting Risk Oversight by Board and its Committees Annual Board and Committee Self-Evaluations All Directors Attended at least 75% of Meetings Held YUM's Worldwide Code of Conduct Political Contributions and U.S. Government Advocacy Policy Audit Committee Complaint Procedures Policy regarding Accounting Matters No Hedging or Pledging of Company Stock Shareholder Rights Annual Election of Directors Majority Voting of Directors Proxy Access Shareholder Communication Process for communicating with Board Active Shareholder Engagement Program Compensation Independent Management Planning and Development Committee Independent Compensation Consultant Executive Compensation is Highly Performance Based to Align with Shareholder Interests and Promote Company Business Strategy At Risk Pay Tied to Performance Strong Stock Ownership Guidelines No Employment Agreements or Guaranteed Bonuses Compensation Recovery Policy (Clawback) applies to Equity and Bonus Awards Double trigger vesting upon Change in Control No excise tax gross ups
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YUM! BRANDS, INC. - 2016 Proxy Statement6
GOVERNANCE OF THE COMPANY |
What is the composition of the Board of Directors and how often are members elected?
Our Board of Directors presently consists of 1511 directors whose terms expire at this Annual Meeting. Messrs. Ferragamo, NovakOur directors are elected annually. The average director tenure is 5.5 years, with our longest- and Su will be retiringshortest-tenured directors having served for 13 years (Mr. Nelson) and are not standing for re-election at the Annual Meeting.
1 year and 4 months, respectively (Ms. Domier).
As discussed in more detail later in this section, the Board has determined that 1110 of the 12 current directors11 individuals standing for election are independent under the rules of the New York Stock Exchange (“NYSE”).
How often did the Board meet in fiscal 2015?2018?
The Board of Directors met 105 times during fiscal 2015.2018. Each directorof the directors who served in 2018 attended at least 75% of the meetings of the Board and the committees of which he or she was a member and that were held during the period he or she served as a director.
What is the Board’s policy regarding director attendance at the Annual Meeting of Shareholders?
The Board of Director’s policy is that all directors should attend the Annual Meeting and all 12persons then serving as directors onattended the Board during the 20152018 Annual Meeting were in attendance.Meeting.
How does the Board select nominees for the Board?
The Nominating and Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. The Committee’s charter provides that it may retain a third-party executive search firm to identify candidates from time to time.
In accordance with the Governance Principles, our Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated
YUM! BRANDS, INC. -2019 Proxy Statement | 7 |
GOVERNANCE OF THE COMPANY |
and are selected based upon contributions they can make to the Board and management. The Committee’scommittee’s assessment of a proposed candidate will include a review of the person’s judgment, experience, independence, understanding of the Company’s business or other related industries and such other factors as the Nominating and Governance Committee determines are relevant in light of the needs of the Board of Directors. The Committeecommittee believes that its nominees should reflect a diversity of experience, gender, race, ethnicity and age. The Board does not have a specific policy regarding director diversity. The Committeecommittee also considers such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, the need for Audit Committee expertise and the evaluations of other prospective nominees, if any.
In connection with this evaluation, it is expected that each Committeecommittee member will interview the prospective nominee in person or by telephone before the prospective nominee is presented to the full Board for consideration. After completing this evaluation and interview process, the Committeecommittee will make a recommendation to the full Board as to the person(s) who should be nominated by the Board, and the Board determines the nominee(s) after considering the recommendation and report of the Committee.committee.
In 2017 we implemented several initiatives to transform the Company, centering on a new multi-year strategy to accelerate growth, reduce volatility and increase capital returns to shareholders. In connection with this
transformation strategy we developed our “Recipe for Growth,” which focuses on four growth drivers intended to accelerate same-store sales growth andnet-new restaurant development at KFC, Pizza Hut and Taco Bell around the world. The Company remains focused on building the world’s most loved, trusted and fastest growing restaurant brands by:
• | BuildingDistinctive, Relevant and Easy Brands, by increasing investment in consumer insights, core product innovation, digital excellence and initiatives that strengthen the quality, convenience and appeal of the customer experience; |
• | DevelopingUnmatched Franchise Operating Capability, strengthening how we equip and recruit the best restaurant operators to deliver great customer experiences, and build and protect our brands; |
• | DrivingBold Restaurant Development through partnerships with growth-minded franchisees who can expand and penetrate markets with modern restaurants, strong economics and value; and |
• | GrowingUnrivaled Culture and Talent to strengthen the customer experience and franchise success withbest-in-class people capability and culture. |
We look for director candidates that have the skills and experience necessary to help us achieve success with respect to the four growth drivers and the Company’s implementation of its “Recipe for Growth.” As a result, the skills that our directors possess are thoroughly considered to ensure that they align with the Company’s goals.
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GOVERNANCE OF THE COMPANY |
The following table describes key characteristics of the Company’s “Recipe for Growth” and indicates how the skills our Board collectively possesses positively impacts the growth drivers:
Yum!'s Recipe for Growth Building Distinctive, Relevant & Easy Brands, by increasing investment in consumer insights, core product innovation, digital excellence and initiatives that strengthen the quality, convenience and appeal of the customer experience. Developing Unmatched Franchise Operating Capability, by strengthening how we equip and recruit the best restaurant operators to deliver great customer experiences, and build and protect our brands; Driving Bold Restaurant Development through partnerships with growth-minded franchisees who can expand and penetrate markets with modem restaurants, strong economics and value Growing Unrivaled Culture and Talent to strengthen the customer experience and franchise success with best-in-class people capability and culture. We have a large global workforce, which represents one of our primary resources, as well as one of our most significant operating expenses. Relevant Skills our Board Collectively Possesses Marketing/Brand Management. Experience marketing and managing well-known brands or the types of products and experiences we sell. Technology or Digital. Experience in leadership and understanding of technology, digital platforms and new media, data security, and data analytics. Industry/Operations. Experience and understanding of operational and strategic issues facing large restaurant or consumer service driven companies. Global Experience. Experience at multinational companies or in international markets, which provides useful business and cultural perspectives. Finance. Experience in Public company management and financial stewardship. Talent Development . Experience building the knowledge, skills, and abilities of employees and helping them develop and achieve their potential within an organization. leadership Experience. Experience as executive officer level business leader who demonstrates strong abilities to motivate and manage others and to effectively manage organizations.
We believe that each of our directors has met the guidelines set forth in the Governance Principles. As noted in the director biographies that follow in this section, our directors have experience, qualifications and skills across a wide range of public and private companies, possessing a broad spectrum of experience both individually and collectively. In addition to the information provided in the director biographies, our director nominees’ qualifications, experiences and skills are summarized in the following matrix. This matrix is intended to provide a summary of our directors’ qualifications and should not be considered to be a complete list of each nominee’s strengths and contributions to the Board.
Brian C.
Experience/Background Alves Cavanagh Connor Cornell Keith Meister and P. JustinCreed Domier Graddick-Weir Nelson Skala were appointed to the Board effective September 18, 2015, October 15, 2015 and January 28, 2016, respectively. Messrs. Cornell, Meister and Skala will stand for election to the Board by our shareholders for the first time. The full Board is recommending their election as directors. Mr. Cornell was recommended to our Nomination and Governance Committee by our Chief Executive Officer, Mr. Meister was recommended by a shareholder and a non-management member of our Board, and Mr. Skala was recommended by a third party search firm and a non-management member of our Board.
Stock Walter Leadership Experience Global Experience Finance Industry/Operations Marketing/Brand management Talent Development Technology or Digital
For a shareholder to submit a candidate for consideration by the Nominating and Governance Committee, a shareholder must notify YUM’s Corporate Secretary, YUM! Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213. The recommendation must contain the information described on page 82.81.
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GOVERNANCE OF THE COMPANY |
Paget L. Alves served as Chief Sales Officer of Sprint Corporation, a wireless and wireline communications services provider, from January 2012 to September 2013 after serving as President of that company’s Business Markets Group beginning in 2009. Mr. Alves currently serves on the boards of directors of International Game Technology PLC, Synchrony Financial, and Ariel Investments LLC. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Mr. Alves brings to the Board significant corporate leadership, global business, finance, brand management, and technology experience, drawing from his various executive roles at large companies, including his service as the Chief Sales Officer of a large wireless and wireline communications company. Mr. Alves also provides the Board with the benefits of his significant experience in public company directorship and committee membership. •Independent of Company | ||||||
Age 64 Director since 2016 Former Chief Sales Officer, Sprint Corporation |
Michael J. Cavanagh is Senior Executive Vice President and Chief Financial Officer of Comcast Corporation, a global media and technology company. He has held this position since July 2015. From July 2014 to May 2015 he served asCo-President andCo-Chief Operating Officer for The Carlyle Group, a global investment firm, and he was also a member of the Executive Group and Management Committee of The Carlyle Group. Prior to this, Mr. Cavanagh was theCo-Chief Executive Officer of the Corporate & Investment Bank of JPMorgan Chase & Co. from 2012 until 2014. From 2010 to 2012, he was the Chief Executive Officer of JPMorgan Chase & Co.’s Treasury & Securities Services business, one of the world’s largest cash management providers and a leading global custodian. From 2004 to 2010, Mr. Cavanagh was Chief Financial Officer of JPMorgan Chase & Co. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: As Senior Executive Vice President and Chief Financial Officer of a global media and technology company, Mr. Cavanagh brings significant experience to our Board in the areas of corporate leadership, global business, operations and technology. In addition, Mr. Cavanagh provides the Board with the benefits of his significant experience and expertise in finance, having served as Chief Operating Officer of a global investment firm and as Chief Financial Officer of a global media and technology company. •Independent of Company | ||||||
Age 53 Director since 2012 Senior Executive Vice President and Chief Financial Officer, Comcast Corporation |
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Christopher M. Connor served as Chairman and Chief Executive Officer of The Sherwin-Williams Company, a global manufacturer of paint, architectural coatings, industrial finishes and associated supplies, until 2016. Mr. Connor held a number of executive positions at Sherwin-Williams beginning in 1983. He served as Chief Executive Officer from 1999 to 2015 and Chairman from 2000 to 2016. He currently serves on the boards of Eaton Corporation plc and International Paper Company. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Through Mr. Connor’s public company board experience with domestic and international businesses, and his having served as the Chairman and Chief Executive Officer of a Fortune 500 company, he brings to the Board extensive experience in important areas including corporate leadership, global business, operations, talent development, marketing and brand management, and talent development. Mr. Connor also brings with him significant experience in public company board committee membership. •Independent of Company | ||||||
Age 63 Director since 2017 Former Chairman and Chief Executive Officer, Sherwin-Williams Company |
Brian C. Cornell joined the Yum! Brands Board in 2015 and has served asNon-Executive Chairman since November 2018. Mr. Cornell is Chairman and Chief Executive Officer of Target Corporation, a general merchandise retailer. He has held this position since August 2014. Mr. Cornell served as the Chief Executive Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc. from March 2012 to July 2014. From April 2009 to January 2012, Mr. Cornell served as the Chief Executive Officer and President of Sam’s Club, a division ofWal-Mart Stores, Inc. and as an Executive Vice President ofWal-Mart Stores, Inc. He has been a Director of Target Corporation since 2014. He has previously served as a Director of Home Depot, OfficeMax, Polaris Industries Inc., Centerplate, Inc. and Kirin-Tropicana, Inc. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Through Mr. Cornell’s service as Chairman and Chief Executive Officer of a large publicly traded merchandise retailer and his public company board experience with U.S. and international retailers, he brings extensive knowledge in important areas to our Board, including corporate leadership, global business experience, operations expertise, talent development and marketing and brand management experience. Mr. Cornell also provides our Board with expertise in strategic planning. •Independent of Company | ||||||
Age 60 Director since 2015 Chairman and Chief Executive Officer, Target Corporation |
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Greg Creed is Chief Executive Officer of YUM. He has served in this position since January 2015. He served as Chief Executive Officer of Taco Bell Division from January 2014 to December 2014 and as Chief Executive Officer of Taco Bell U.S. from 2011 to December 2013. Prior to this position, Mr. Creed served as President and Chief Concept Officer of Taco Bell U.S., a position he held beginning in December 2006. Mr. Creed served as Chief Operating Officer of YUM from 2005 to 2006. He has served as a director of Whirlpool Corporation since 2017 and previously served as a director of International Games Technology from 2010 until 2015. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Mr. Creed has served as the Company’s Chief Executive Officer since 2015 and he brings significant corporate leadership, global business, talent development, industry and operations and marketing and brand management experience to our Board, from his time in that role, and from his prior years of experience in various other roles within the Company, including as Chief Executive Officer of Taco Bell. Mr. Creed also brings with him significant experience in public company directorship and committee membership. | ||||||
Age 61 Director since 2014 Chief Executive Officer, YUM |
Tanya L. Domieris Chief Executive Officer of Advantage Solutions, Inc., a North American provider of outsourced sales, marketing and business solutions, and has served in that role since January 2013. Prior to serving as Advantage Solutions’ CEO, Ms. Domier served as its president and chief operating officer from 2010 to 2013. Ms. Domier joined Advantage Solutions in 1990 from the J.M. Smucker Company and has held a number of executive level roles in sales, marketing and promotions. Ms. Domier has served as a director of Advantage Solutions since 2006 and currently also serves as a director of Nordstrom, Inc. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Ms. Domier brings to the Board extensive experience in marketing and in developing digital technology solutions, having served as Chief Executive Officer of a major provider of sales, marketing and business solutions. In addition, Ms. Domier also provides the Board with expertise in the areas of corporate leadership, global business and finance from her career as an executive and from her significant experience in public company directorship and committee membership. • Independent of Company | ||||||
Age 53 Director since 2018 Chief Executive Officer, Advantage Solutions, Inc. |
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Mirian M. Graddick-Weir retired as Executive Vice President of Human Resources for Merck & Co., Inc., a pharmaceutical company, in November, 2018. She had held that position since 2008. From 2006 until 2008, she was Senior Vice President of Human Resources of Merck & Co., Inc. Prior to this position, she served as Executive Vice President of Human Resources of AT&T Corp. from 2001 to 2006. Ms. Graddick-Weir served as a director of Harleysville Group Inc. from 2000 until 2012. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Through Ms. Graddick-Weir’s public company board experience and her senior leadership experience as the Executive Vice President of Human Resources for a major pharmaceutical company, she is able to provide our Board extensive knowledge in the areas of talent development and corporate leadership. In addition, Ms. Graddick-Weir also brings expertise in corporate operations to the Board and provides the Board with expertise in public company board committee membership. • Independent of Company | ||||||
Age 64 Director since 2012 Retired Executive Vice President Human Resources, Merck & Co., Inc. |
Thomas C. Nelson is President and Chief Executive Officer of National Gypsum Company, a building products manufacturer, He has held this position since 1999 and was elected Chairman of the Board in January 2005. From 1995 to 1999, Mr. Nelson served as the Vice Chairman and Chief Financial Officer of National Gypsum. Mr. Nelson previously worked for Morgan Stanley & Co. and in the United States Defense Department as Assistant to the Secretary and was a White House Fellow. He serves as Director of Atrium Health and was a director of Belk, Inc. from 2003 to 2015. Since January 2015, Mr. Nelson has served as a director for the Federal Reserve Bank of Richmond. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Through Mr. Nelson’s public company board experience and his service as Chief Executive Officer of a major building products manufacturer, Mr. Nelson brings significant corporate leadership, operations and finance experience to our Board. In addition, Mr. Nelson also provides the Board with the benefits of his experience in government, having served as Assistant to the Secretary of the United States Defense Department and as a White House Fellow. Mr. Nelson also brings with him significant experience in public company board committee membership. • Independent of Company | ||||||
Age 56 Director since 2006 Chairman, Chief Executive Officer and President, National Gypsum Company |
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P. Justin Skala is Executive Vice President, Chief Growth & Strategy Officer of the Colgate-Palmolive Company, a consumer products company. He has held this position since July 2018. From 2016 until 2018 he served as Chief Operating Officer, North America, Europe, Africa/Eurasia and Global Sustainability for Colgate-Palmolive Company. From 2013 to 2016 he was President of Colgate-North America and Global Sustainability for Colgate-Palmolive Company. From 2010 to 2013 he was the President of Colgate - Latin America. From 2007 to 2010, he was president of Colgate - Asia. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Through Mr. Skala’s executive leadership at one of the world’s most renowned consumer products companies, including service in the roles of Chief Operating Officer and as a division President, he is able to bring considerable experience to our Board in the areas of corporate leadership, global business and finance. Mr. Skala also provides our Board with expertise in the areas of operations, brand management and talent development. • Independent of Company | ||||||
Age 59 Director since 2016 Executive Vice President, Chief Growth & Strategy Officer for Colgate – Palmolive Company |
Elane B. Stock served as Group President of Kimberly-Clark International, a division of Kimberly-Clark Corporation, a global consumer products company, from 2014 to 2016. From 2012 to 2014 she was the Group President for Kimberly-Clark Professional. Prior to this role, Ms. Stock was the Chief Strategy Officer of Kimberly-Clark Corporation. Earlier in her career, Ms. Stock was a partner at McKinsey & Company in the U.S. and Ireland, where she was the Managing Director. Ms. Stock currently serves on the Board of Equifax Inc. and Reckitt Benckiser. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Ms. Stock brings significant corporate leadership, global business, operations and finance experience to our Board, having served in numerous corporate leadership positions, including as group President of a large consumer products company. In addition, Ms. Stock provides the Board with her expertise in strategy, marketing and brand management and her significant experience in public company directorship and committee membership. • Independent of Company | ||||||
Age 54 Director since 2014 Former Group President, Kimberly-Clark International |
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Robert D. Walter joined the Yum! Brands Board in 2006 and served asNon-Executive Chairman from May 2016 to November 2018. Mr. Walter is the founder of Cardinal Health, Inc., a company that provides products and services supporting the health care industry. Mr. Walter retired from Cardinal Health in June 2008. Prior to his retirement from Cardinal Health, he served as Executive Director from November 2007 to June 2008. From April 2006 to November 2007, he served as Executive Chairman of the Board of Cardinal Health. From 1979 to April 2006, he served as Chairman and Chief Executive Officer of Cardinal Health. Mr. Walter also served as a director of American Express Company and Nordstrom, Inc., both until May 2018. SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE: Through Mr. Walter’s public company board experience and his prior service as Chief Executive Officer of a global healthcare and service provider business, he is able to provide our Board with significant experience in the areas of corporate leadership, finance and operations. In addition, Mr. Walter brings to our board significant experience in public company board committee membership. • Independent of Company | ||||||
Age 73 Director since 2008 Founder and Retired Chairman/ CEO, Cardinal Health, Inc. |
If elected, we expect that all of the aforementioned nominees will serve as directors and hold office until the 2020 Annual Meeting of Shareholders and until their respective successors have been elected and qualified.
How are directors compensated?
Employee Directors. Employee directors do not receive additional compensation for serving on the Board of Directors.
Non-Employee Directors Annual Compensation. The annual compensation for eachnon-employee Director is summarized in the table below. For 2018, eachnon-employee Director received an annual stock grant retainer with a fair market value of $240,000. Directors may request to receive up toone-half of their stock retainer in cash. The request must be submitted to the Chair of the Management Planning and Development Committee. Directors may also defer payment of their retainers pursuant to the Directors Deferred Compensation Plan. Deferrals are invested in phantom Company stock and paid out in shares of Company stock. Deferrals may not be made for less than two years
Chairman of the Board and Committee Chairperson Retainers. In recognition of their added duties, the Chairman of the Board (Mr. Walter in 2018) receives an additional $150,000 stock retainer annually and the Chairs of the Audit Committee (Mr. Nelson in 2018), Management Planning and Development Committee (Mr. Cornell in 2018) and the Nominating and Governance Committee (Mr. Walter in 2018) each
receive an additional $25,000, $20,000 and $15,000 annual stock retainer, respectively. These committee chairperson retainers were paid in February of 2018.
Initial Stock Grant upon Joining Board.Non-employee directors also receive aone-time stock grant with a fair market value of $25,000 on the date of grant upon joining the Board, distribution of which is deferred until termination from the Board.
Matching Gifts. To further YUM’s support for charities,non-employee directors are able to participate in the YUM! BRANDS, INC. - Brands, Inc. Matching Gifts Program on the same terms as members of YUM’s Global Leadership Team. Under this program, the YUM! Brands Foundation will match up to $10,000 a year in contributions by the director to a charitable institution approved by the YUM! Brands Foundation. At its discretion, the Foundation may match director contributions exceeding $10,000.
2016 Proxy StatementInsurance. 7We also pay the premiums on directors’ and officers’ liability and business travel accident insurance policies. The annual cost of this coverage was approximately $2 million. This is not included in the tables below as it is not considered compensation to the directors.
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In setting director compensation, the Company considers the significant amount of time that directors expend in fulfilling their duties to the Company as well as the skill level required by the Company of members of the Board. The Board reviews each element of director compensation at least every two years.
In November 2018, the Management Planning and Development Committee of the Board (“Committee”) benchmarked the Company’s director compensation against director compensation from the Company’s Executive Peer Group discussed at page 54. Data for this review was prepared for the Committee by its independent consultant, Meridian Compensation Partners LLC. This data revealed that the Company’s
director compensation was approximately $20,000 below the 50th percentile measured against this benchmark, that the retainer paid to ourNon-Executive Chairman is below market and that the retainers paid to the Chairpersons of the Audit Committee, the Management Planning and Development Committee, and the Nominating and Governance Committee were consistent with market practice. Based on this data, the Committee recommended a $20,000 increase to the annual amount paid to the Directors, raising their retainer to $260,000 annually. TheNon-Executive Chairman’s retainer was also increased by $20,000 to $170,000 annually. The retainers paid to committee chairpersons were not increased.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option/SAR Awards ($)(2) | All Other Compensation ($) | Total ($) | |||||||||||||||
(a)
| (b)
| (c)
| (d)
| (e)
| (f)
| |||||||||||||||
Alves, Paget | — | 240,000 | — | — | 240,000 | |||||||||||||||
Cavanagh, Michael | — | 240,000 | — | — | 240,000 | |||||||||||||||
Connor, Christopher | — | 240,000 | — | — | 240,000 | |||||||||||||||
Cornell, Brian | — | 260,000 | — | — | 260,000 | |||||||||||||||
Domier, Tanya | — | 205,000 | — | — | 205,000 | |||||||||||||||
Graddick-Weir, Mirian | — | 240,000 | — | — | 240,000 | |||||||||||||||
Nelson, Thomas | — | 265,000 | — | — | 265,000 | |||||||||||||||
Skala, Justin | — | 240,000 | — | — | 240,000 | |||||||||||||||
Stock, Elane | — | 240,000 | — | — | 240,000 | |||||||||||||||
Walter, Robert | — | 405,000 | — | — | 405,000 | |||||||||||||||
(1) | Amounts in column (c) represent the grant date fair value for annual stock retainer awards, Committee Chairperson retainer awards andNon-Executive Chairman awards granted to directors in 2018. Retainer awards arepro-rated for partial years of service. |
(2) | At December 31, 2018, the aggregate number of stock appreciation rights (“SARs”) awards outstanding for eachnon-employee director was: |
Name | SARs | |||
Alves, Paget | — | |||
Cavanagh, Michael | 18,531 | |||
Connor, Christopher | — | |||
Cornell, Brian | 6,491 | |||
Domier, Tanya | — | |||
Graddick-Weir, Mirian | 22,752 | |||
Nelson, Thomas | 38,208 | |||
Skala, Justin | 4,646 | |||
Stock, Elane | 10,003 | |||
Walter, Robert | 38,208 | |||
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What are the Company’s policies and procedures with respect to related person transactions?
Under the Company’s policies and procedures for the review of related person transactions the Nominating and Governance Committee reviews related person transactions in which we are or will be a participant to determine if they are in the best interests of our shareholders and the Company. Transactions, arrangements, or relationships or any series of similar transactions, arrangements or relationships in which a related person had or will have a material interest and that exceed $100,000 are subject to the Nominating and Governance committee’s review. Any member of the Nominating and Governance Committee who is a related person with respect to a transaction under review may not participate in the deliberation or vote respecting approval or ratification of the transaction.
Related persons are directors, director nominees, executive officers, holders of 5% or more of our voting stock and their immediate family members. Immediate
family members are spouses, parents, stepparents, children, stepchildren, siblings,daughters-in-law,sons-in-law and any person, other than a tenant or domestic employee, who resides in the household of a director, director nominee, executive officer or holder of 5% or more of our voting stock.
After its review, the Nominating and Governance Committee may approve or ratify the transaction. The related person transaction policies and procedures provide that certain transactions are deemed to bepre-approved, even though they exceed $100,000.Pre-approved transactions include employment of executive officers, director compensation, and transactions with other companies if the aggregate amount of the transaction does not exceed the greater of $1 million or 2% of that other company’s total revenues and the related person is not an executive officer of that other company.
Does the Company require stock ownership by directors?
The Board believes that the number of shares of the Company’s common stock owned by eachnon-management director is a personal decision; however, the Board strongly supports the position thatnon-management directors should own a meaningful number of shares in the Company and expects that eachnon-management director will (i) own Company common shares with a value of at least five times the
annual Board retainer; (ii) accumulate those shares during the first five years of the director’s service on the Board; and (iii) hold these shares at least until the director departs the Board. Each director may sell enough shares to pay taxes in connection with the receipt of their retainer or the exercise of stock appreciation rights and the ownership guideline will be adjusted to reflect the sale to pay taxes.
How much YUM stock do the directors own?
Stock ownership information for each director is shown in the table on page 38.
Does the Company have stock ownership guidelines for executives and senior management?
The Committee has adopted formal stock ownership guidelines that set minimum expectations for executive and senior management ownership. These guidelines are discussed on page 55.
The Company has maintained an ownership culture among its executive and senior managers since its formation. Substantially all executive officers and members of senior management hold stock well in excess of the guidelines.
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How Can Shareholders Nominate for the Board?
Director nominations for inclusion in Yum’sYUM’s proxy materials (Proxy Access). During the past year, we reached out to many of our shareholders regarding corporate governance matters, including proxy access for director nominations. Based on these discussions, we amended our bylaws during 2015 to adopt proxy access provisions that we believe serve the interests of our shareholders.
The amended YumOur bylaws permit a shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of YumYUM stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in Yum’sYUM’s proxy materials director nominees constituting up to 20% of Yum’sYUM’s Board, provided that the shareholder(s) and nominee(s) satisfy the requirements in Yum’sYUM’s bylaws. Notice of proxy access director nominees for the 2020 Annual Meeting of Shareholders must be received by us no earlier than November 10, 2016,7, 2019, and no later than December 10, 2016.7, 2019.
Director nominations to be brought before the 20172020 Annual Meeting of Shareholders. Director nominations that a shareholder intends to present at the 20172020 Annual Meeting of Shareholders, other than through the proxy access procedures described above, must behave been received no later than February 20, 2017.16, 2020. These nominations must be submitted by a shareholder in accordance with the requirements specified in the Yum’sYUM’s bylaws.
Where to send director nominations for the 20172020 Annual Meeting of Shareholders. Director nominations brought by shareholders must be delivered to Yum’sYUM’s Corporate Secretary by mail at YUM! Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213 and received by Yum’sYUM’s Corporate Secretary by the dates set forth above.
What is the Board’s leadership structure?
In 2016,
On November 16, 2018, Brian C. Cornell assumed the Board will continue the evolutionposition of its leadership structure. Effective January 1, 2015, the Board appointed Greg Creed as CEO to succeed David C. Novak and contemporaneously appointed Mr. Novak ExecutiveNon-Executive Chairman of the Board. Effective after the upcoming Annual Meeting on May 20, 2016, Mr. Novak will retire as Executive Chairman and step down from the Board.He was preceded in that position by Robert D. Walter, will assume the newwho had held that position of Non-Executive Chairman of the Board.since May 20, 2016. Applying our Corporate Governance Principles, the Board also determined that based on Mr. Walter’sCornell’s independence, it would not appoint a Lead Director when Mr. Walter becomes Cornell becameNon-Executive Chairman.
The Nominating and Governance Committee annually reviews the Board’s leadership structure and evaluates the performance and effectiveness of the Board of Directors. The Board retains the authority to modify its leadership structure in order to addressstay current with our Company’s circumstances and advance the best interests of the Company and its shareholders as and when appropriate. The Board’s annual self-evaluation includes questions regarding the Board’s opportunities for open communication and the effectiveness of executive sessions.
The Company’s Governance Principles provide that the CEOChief Executive Officer (“CEO”) may serve as Chairman of the Board, and up until 2015 Mr. Novak served as our CEO and Chairman.Board. These Principles also provide for an
independent Lead Director, when the CEO is serving as Chairman. During 2015,2018, our CEO did not serve as Chairman, and our Board determined that it was appropriate to have a Lead Director since Mr. Novak was our former CEO.Chairman. Our Board believes that Board independence and oversight of management are effectively maintained through a strong independent Chairman or Lead Director and through the Board’s composition, committee system and policy of having regular executive sessions ofnon-employee directors, all of which are discussed below, this section. Thomas M. Ryan,AsNon-Executive Chairman, Mr. Cornell is responsible for supporting the ChairmanCEO on corporate strategy along with leadership development. Mr. Cornell also works with the CEO in setting the agenda and schedule for meetings of our Nominating and Governance Committee, served asthe Board, in addition to the duties of the Lead Director during 2015.
described below.
As CEO, Mr. Creed is responsible for leading the Company’s strategies, organization design, people development and culture, and for providing theday-to-day leadership over operations. In 2015, while serving as Executive Chairman, Mr. Novak was responsible for supporting the CEO on corporate strategy, innovative business and brand building ideas, and leadership development.
The Board created the Lead Director position in August 2012, after its annual review which included engaging in dialogue and receiving input from a number of major shareholders. During 2015 (and since 2012), the Lead Director position was structured so that one independent Board member is empowered with sufficient authority to ensure independent oversight of the Company and its management. The Lead Director position has no term limit and is subject only to annual approval by the independent members of the Board. Thomas M. Ryan served as the Lead Director during 2015, and the Board concluded that Mr. Ryan provided effective oversight in this role. The Board appointed Robert D. Walter Lead Director effective January 1, 2016.
To assureensure effective independent oversight, the Board has adopted a number of governance practices discussed on the following page.below.
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What are the Company’s governance policies and ethical guidelines?
• | Board Committee Charters. The Audit, Management Planning and Development, and Nominating and Governance Committees of the YUM Board of Directors operate pursuant to written charters. These charters were approved by the Board of Directors and reflect certain best practices in corporate governance. These charters comply with the requirements of the NYSE. Each charter is available on the Company’s website at |
• | Governance Principles. The Board of Directors has documented its corporate governance guidelines in the YUM! Brands, Inc. Corporate Governance Principles. These guidelines are available on the Company’s website at |
• | Ethical Guidelines. YUM’s Worldwide Code of Conduct was adopted to emphasize the Company’s commitment to the highest standards of business conduct. The Code of Conduct also sets forth information and procedures for employees to report misconduct, ethical or accounting concerns, |
What other significant Board practices does the Company have?
Private Executive Sessions. Ournon-management directors meet in executive session at each regular Board meeting. The executive sessions are attended only by thenon-management directors and are presided over by the Lead Director or ourNon-Executive Chairman, as applicable. Our independent directors meet in executive session at least once per year. Role of Lead Director. Our Governance Principles require the election, by the independent directors, of a Lead Director when the CEO is also serving as Chairman. The Board currently does not have a Lead Director, and the duties of the Lead Director are fulfilled by Mr. Cornell asNon-Executive Chairman. Since Mr. Cornell is independent, the Board determined that it would not appoint a separate Lead Director upon Mr. Cornell’s appointment asNon-Executive Chairman. |
The Lead Director position is structured so that one independent Board member is empowered with sufficient authority to ensure independent oversight of the Company and its management. The Lead Director position has no term limit and is subject only to annual approval by the independent members of the Board. Based upon the recommendation of the Nominating
and Governance Committee, the Board has determined that the Lead Director, when appointed, is responsible for:
(a) | Presiding at all executive sessions of the Board and any other meeting of the Board at which the Chairman is not present, and advising the Chairman and CEO of any decisions reached or suggestions made at any executive session, |
(b) | Approving in advance agendas and schedules for Board meetings and the information that is provided to directors, |
(c) | If requested by major shareholders, being available for consultations and direct communication, |
(d) | Serving as a liaison between the Chairman and the independent directors, and |
(e) | Calling special meetings of the independent directors. |
As noted above, Robert D. Walter, our current Lead Director, will become Non-Executive ChairmanAdvance Materials. Information and data important to the directors’ understanding of the business or matters to be considered at a Board upon Mr. Novak’s retirement as Executive Chairman at our Annual Meeting of Shareholders on May 20, 2016. Since Mr. Walter is independent,or Board Committee meeting are, to the Board has determined that it will not appoint a Lead Director once Mr. Walter’s appointment as Non-Executive Director becomes effective. It is expected thatextent practical, distributed to the independent Non-Executive Chairman will preside at all meetingsdirectors sufficiently in advance of the Board, and work withmeeting to allow careful review prior to the CEO to set Board meeting agendas and schedule Board meetings, as well as retain the other responsibilities that the Lead Director currently has.meeting.
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GOVERNANCE OF THE COMPANY |
Board and Committees’ Evaluations. The Board has an annual self-evaluation process that is led by the Nominating and Governance Committee. This assessment focuses on the Board’s contribution to the Company and emphasizes those areas in which the Board believes a better contribution could be made. As a part of this process, each Board member completes an individual written questionnaire and a personal interview, the results of which are summarized and discussed in an executive session. In addition, the Audit, Management Planning and Development and Nominating and Governance Committees also each conduct similar annual self-evaluations.
Majority Voting Policy. Our Articles of Incorporation require majority voting for the election of directors in
uncontested elections. This means that director nominees in an uncontested election for directors must receive a number of votes “for” his or her election in excess of the number of votes “against.” The Company’s Governance Principles further provide that any incumbent director who does not receive a majority of “for” votes will promptly tender to the Board his or her resignation from the Board. The resignation will specify that it is effective upon the Board’s acceptance of the resignation. The Board will, through a process managed by the Nominating and Governance Committee and excluding the nominee in question, accept or reject the resignation within 90 days after the Board receives the resignation. If the Board rejects the resignation, the reason for the Board’s decision will be publicly disclosed. |
The resignation will specify that it is effective upon the Board’s acceptance of the resignation. The Board will, through a process managed by the Nominating and Governance Committee and excluding the nominee in question, accept or reject the resignation within 90 days after the Board receives the resignation. If the Board rejects the resignation, the reason for the Board’s decision will be publicly disclosed.
What access do the Board and Board committees have to management and to outside advisors?
Access to Management and Employees. Directors have full and unrestricted access to the management and employees of the Company. Additionally, key members of management attend Board meetings to present information about the results, plans and operations of the business within their areas of responsibility.
Access to Outside Advisors. The Board and its committees may retain counsel or consultants
without obtaining the approval of any officer of the Company in advance or otherwise. The Audit Committee has the sole authority to retain and terminate the independent auditor. The Nominating and Governance Committee has the sole authority to retain search firms to be used to identify director candidates. The Management Planning and Development Committee has the sole authority to retain compensation consultants for advice on executive compensation matters. |
What is the Board’s role in risk oversight?
The Board maintains overall responsibility for overseeing the Company’s risk management, including succession planning.planning, food safety and cybersecurity. In furtherance of its responsibility, the Board has delegated specific risk-related responsibilities to the Audit Committee and to the Management Planning and Development Committee.
The Audit Committee engages in substantive discussions of risk management at its regular committee meetings held during the year. At these meetings, it receives functional risk review reports covering significant areas of risk from senior managers responsible for these functional areas, as well as receiving reports from the Company’s Chief AuditorGeneral Counsel and the General Counsel.Vice President, Internal Audit. Our Chief AuditorVice President, Internal Audit reports directly to the Chairman of the
Audit Committee and our Chief Financial Officer.Officer (“CFO”). The Audit Committee also receives reports at each meeting regarding legal and regulatory risks from management and meets in separate executive sessions with our independent auditors and our Chief Auditor.Vice President, Internal Audit. The Audit Committee provides a summary to the full Board at each regular Board meeting of the risk area reviewed together with any other risk related subjects discussed at the Audit Committee meeting.
In addition, our Management Planning and Development Committee considers the risks that may be implicated by our compensation programs through a risk assessment conducted by management and reports its conclusions to the full Board.
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What is the Board’s role in the Company’s global sustainability initiatives?
The Company has an integrated, Board and executive-level governance structure to oversee its global sustainability initiatives. Oversight for environmental, social and governance issues ultimately resides with the Board of Directors. The Board receives regular updates on these matters from management through the Audit Committee. At the operational level, the Chief
Communications and Public Affairs Officer is responsible for overseeing the global reputation of YUM and is responsible for shaping the Citizenship and Sustainability Strategy, as approved by the Board, with the Vice President, Government Relations and Citizenship & Sustainability.
Has the Company conducted a risk assessment of its compensation policies and practices?
As stated in the Compensation Discussion and Analysis at page 39, the philosophy of our compensation programs is to reward performance by designing pay programs that incorporate team and individual performance, customer satisfaction and shareholder return; emphasize long-term incentives; drive ownership mentality; and require executives to personally invest in Company stock.
In early 2016,2018, the Management Planning and Development Committee (the “Committee”) oversaw the risk assessment ofexamined our compensation programs for all employees to determine whether they encourage unreasonableunnecessary or excessive risk taking. In conducting this review, each of our compensation practices and programs was reviewed against the key risks facing the Company in the conduct of its business. Based
YUM! BRANDS, INC. -2016 Proxy Statement10
on this review, the Committee concluded our compensation policies and practices do not encourage our employees to take unnecessaryunreasonable or excessive risks.
As part of this assessment, the Committee concluded the following policies and practices of the Company’s cash and equity incentive programs serve to reduce the likelihood of excessive risk taking:
Our Compensation system is balanced, rewarding both short-term and long-term performance
Long-term Company performance is emphasized. The majority of incentive compensation for the top level employees is associated with the long-term performance of the Company
Strong stock ownership guidelines in place for approximately 190 senior employees are enforced
The annual incentive and performance share plans both cap the level of performance over which no additional rewards are paid, thereby mitigating any incentive to take unreasonable risk
The annual incentive target setting process is closely linked to the annual financial planning process and supports the Company’s overall strategic plan, which is reviewed and approved by the Board
Compensation performance measures set for each Division are transparent and tied to multiple measurable factors, none of which exceed a 50% weighting; measures are both apparent to shareholders and drivers of returns
The performance which determines employee rewards is closely monitored by the Audit Committee and the full Board
The Company has a recoupment (clawback) policy
How does the Board determine which directors are considered independent?
The Company’s Governance Principles, adopted by the Board, require that we meet the listing standards of the NYSE. The full text of the Governance Principles can be found on the Company’s website (www.yum.com/investors/governance/principles.asp (www.investors.yum.com/governance-documents).).
Pursuant to the Governance Principles, the Board undertook its annual review of director independence.
During this review, the Board considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. As provided in the Governance Principles, the purpose of this review was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent.
YUM! BRANDS, INC. -2019 Proxy Statement | 21 |
GOVERNANCE OF THE COMPANY |
As a result of this review, the Board affirmatively determined that all of the directors are independent of the Company and its management under NYSE rules, with the exception of David C. Novak, Greg Creed, and Jing-Shyh S. Su. Messrs. Novak, Creed and Su arewho is not considered an independent directorsdirector because of theirhis employment by the Company.
In determining that the other directors did not have a material relationship with the Company, the Board determined that Messrs. Cavanagh, Dorman, Ferragamo, Linen, Meister,Alves, Connor, Nelson, Ryan, Skala, and Walter and Mmes. Domier, Graddick-Weir and Stock had no other relationship with the Company other than their relationship as a director. The Board did note as discussed in the next paragraphtwo paragraphs that Comcast Corporation and Target Corp.,Corporation, which employsemploy Mr. Cavanagh and Mr. Cornell, hasrespectively, each have a business relationship with the Company; however, as noted below, the Board determined that this relationship wasthese relationships were not material to theeither director, Comcast Corporation or Target Corp.Corporation, and therefore determined that Mr. Cavanagh and Mr. Cornell waswere independent.
Brian C. Cornell is the Chairman and Chief Executive Officer of Target Corp.Corporation. During 2015,2018, the Company received approximately $12$10.7 million in license fees from Target Corp.Corporation in the normal course of business. Divisions of the Company paid Target Corp.Corporation approximately $2.5$2.1 million in rebates
in 2015.2018. Divisions of the Company have also offered Target approximately $2 million in additional incentives in 2019. The Board determined that these payments did not create a material relationship between the Company and Mr. Cornell or the Company and Target Corp.Corporation as the payments represent less thanone-tenth of 1% of Target Corp.’sCorporation’s revenues. Furthermore, the licensing relationship between the Company and Target Corporation was initially entered into before Mr. Cornell joined the Board or became employed by Target Corporation. The Board determined that this relationship was not material to Mr. Cornell or Target Corp.Corporation.
Michael J. Cavanagh is the Senior Executive Vice President and Chief Financial Officer of Comcast Corporation. During 2018, the Company, its affiliates and their respective franchisees collectively paid approximately $40 million to affiliates of Comcast for broadband services. In addition, U.S. brand advertising cooperatives, to which each of the Company’s brands and their franchisees contribute funds to purchase media for advertising, purchased approximately $79 million in advertising from affiliates of Comcast. The Board determined that these payments did not create a material relationship between the Company and Mr. Cavanagh or the Company and Comcast Corporation as the payments represent less than 1% of Comcast Corporation’s revenues.
YUM! BRANDS, INC. -2016 Proxy Statement11
How do shareholders communicate with the Board?
Shareholders and other parties interested in communicating directly with individual directors, thenon-management directors as a group or the entire Board may do so by writing to the Nominating and Governance Committee, c/o Corporate Secretary, YUM! Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213. The Nominating and Governance Committee of the Board has approved a process for handling letters received by the Company and addressed to individual directors,non-management members of the Board or the Board. Under that process, the Corporate Secretary of the Company reviews all such correspondence and regularly forwards to a designated individual member of the Nominating and Governance Committee copies of all such correspondence (although we do not forward commercial correspondence and correspondence duplicative in nature; however, we will retain duplicate correspondence and all duplicate correspondence will be available for directors’ review upon their request)
and a summary of all such correspondence. The designated director of the Nominating and Governance Committee will forward correspondence directed to individual directors as he or she deems appropriate. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of any such correspondence. Written correspondence from shareholders relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Company’s Audit Committee Chair and to the internal audit department and handled in accordance with procedures established by the Audit Committee with respect to such matters (described below). Correspondence from shareholders relating to Management Planning and Development Committee matters are referred to the Chair of the Management Planning and Development Committee.
22 | YUM! BRANDS, INC.-2019 Proxy Statement |
GOVERNANCE OF THE COMPANY |
What are the Company’s policies on reporting of concerns regarding accounting?
The Audit Committee has established policies on reporting concerns regarding accounting and other matters in addition to our policy on communicating with ournon-management directors. Any person, whether or not an employee, who has a concern about the conduct of the Company or any of our people, with respect to accounting, internal accounting controls or auditing matters, may, in a confidential or anonymous manner, communicate that concern to our General Counsel, Marc Kesselman.Scott A. Catlett. If any person believes that he or she should communicate with our Audit Committee Chair, Thomas C. Nelson, he or she may do so by writing him at c/o YUM! Brands, Inc.,
1441 Gardiner Lane, Louisville, KY 40213. In addition, a person who has such a concern about the conduct of the Company or any of our employees may discuss that concern on a confidential or anonymous basis by contacting The Network at 1 (800)241-5689. The Network is our designated external contact for these issues and is authorized to contact the appropriate members of management and/or the Board of Directors with respect to all concerns it receives. The full text of our Policy on Reporting of Concerns Regarding Accounting and Other Matters is available on our website atwww.yum.com/investors/governance/complaint.asp.www.investors.yum.com/governance-documents.
YUM! BRANDS, INC. -2016 Proxy Statement12
YUM! BRANDS, INC. -2019 Proxy Statement | 23 |
GOVERNANCE OF THE COMPANY |
What are the Committees of the Board?
The Board of Directors has standing Audit, Management Planning and Development, Nominating and Governance and Executive/Finance Committees.
Name of Committee |
| ||||
and Members | Functions of the Committee | Number of Meetings in Fiscal | |||
Audit: Thomas C. Nelson,Chair Paget L. Alves Tanya L. Domier P. Justin Skala Elane B. Stock | • | Possesses sole authority regarding the selection and retention of independent auditors | |||
• | Reviews and has oversight over the Company’s internal audit function | ||||
• | Reviews and approves the cost and scope of audit andnon-audit services provided by the independent auditors | ||||
• | Reviews the independence, qualification and performance of the independent auditors | ||||
• | Reviews the adequacy of the Company’s internal systems of accounting and financial control | ||||
• | Reviews the annual audited financial statements and results of the audit with management and the independent auditors | ||||
• | Reviews the Company’s accounting and financial reporting principles and practices including any significant changes | ||||
• | Advises the Board with respect to Company policies and procedures regarding compliance with applicable laws and regulations and the Company’s Worldwide Code of Conduct and Policy on Conflicts of Interest | ||||
• | Discusses with management the Company’s policies with respect to risk assessment and risk management. Further detail about the role of the Audit Committee in risk assessment and risk management is included in the section entitled “What is the Board’s role in risk oversight?” set forth on page | 8 |
The Board of Directors has determined that all of the members of the Audit Committee are independent within the meaning of applicable SEC regulations and the listing standards of the NYSE and that Mr. Nelson, the chairChair of the Committee, is qualified as an audit committee financial expert within the meaning of SEC regulations. The Board has also determined that Mr. Nelson has accounting and related financial management expertise within the meaning of the listing standards of the NYSE and that each member is financially literate within the meaning of the listing standards of the NYSE.
*Brian C. Cornell and Michael Cavanagh were each appointed Audit Committee members effective September 18, 2015. Keith Meister and P. Justin Skala were appointed Audit Committee members effective November 19, 2015 and March 4, 2016, respectively.
Name of Committee |
| ||||
and Members | Functions of the Committee | Number of Meetings in Fiscal | |||
Management Planning and Development: Christopher M. Connor,Chair Brian C. Cornell Michael J. Cavanagh Mirian M. Graddick-Weir Robert D. Walter | • | Oversees the Company’s executive compensation plans and programs and reviews and recommends changes to these plans and programs | |||
| Monitors the performance of the chief executive officer and other senior executives in light of corporate goals set by the Committee | ||||
• | Reviews and approves the compensation of the chief executive officer and other senior executive officers | ||||
• | Reviews management succession planning | 4 |
The Board has determined that all of the members of the Management Planning and Development Committee are independent within the meaning of the listing standards of the NYSE.
*Mirian Graddick-Weir and Elane B. Stock were each appointed Management Planning and Development Committee members effective September 18, 2015 and January 28, 2015, respectively.
24 | YUM! BRANDS, INC.-2019 Proxy Statement |
YUM! BRANDS, INC. -2016 Proxy Statement13
|
Name of Committee and Members | Functions of the Committee | Number of Meetings in Fiscal | |||
Nominating and Governance: Mirian M. Graddick-Weir, Chair Michael J. Cavanagh Brian C. Cornell Thomas C. Nelson Robert D. Walter | • | Identifies and proposes to the Board suitable candidates for Board membership | |||
| Advises the Board on matters of corporate governance | ||||
• | Reviews and reassesses from time to time the adequacy of the Company’s Corporate Governance Principles | ||||
• | Receives comments from all directors and reports annually to the Board with assessment of the Board’s performance | ||||
• | Prepares and supervises the Board’s annual review of director independence | 4 |
The Board has determined that all of the members of the Nominating and Governance Committee are independent within the meaning of the listing standards of the NYSE.
Name of Committee |
| ||||
and Members | Functions of the Committee | ||||
Executive/Finance: Brian C. Christopher M. Connor Greg Creed Mirian M. Graddick-Weir Thomas C. Nelson | • | Exercises all of the powers of the Board in the management of the business and affairs of the Company consistent with applicable law while the Board is not in session |
How are directors compensated?
YUM! BRANDS, INC. -2019 Proxy Statement | 25 |
Employee Directors. Employee directors do not receive additional compensation for serving on the Board of Directors.
Non-Employee Directors Annual Compensation.The annual compensation for each director who is not an employee of YUM is discussed under “Director Compensation” beginning on page 75.
What are the Company’s policies and procedures with respect to related person transactions?
Under the Company’s policies and procedures for the review of related person transactions the Nominating and Governance Committee reviews related person transactions in which we are or will be a participant to determine if they are in the best interests of our shareholders and the Company. Transactions, arrangements, or relationships or any series of similar transactions, arrangements or relationships in which a related person had or will have a material interest and that exceed $100,000 are subject to the Committee’s review. Any member of the Nominating and Governance Committee who is a related person with respect to a transaction under review may not participate in the deliberation or vote respecting approval or ratification of the transaction.
Related persons are directors, director nominees, executive officers, holders of 5% or more of our voting stock and their immediate family members. Immediate family members are spouses, parents, stepparents, children, stepchildren, siblings, daughters-in-law, sons-in-law and any person, other than a tenant or domestic employee, who resides in the household of a director, director nominee, executive officer or holder of 5% or more of our voting stock.
After its review, the Nominating and Governance Committee may approve or ratify the transaction. The policies and procedures provide that certain transactions are deemed to be pre-approved even if they will exceed $100,000. These transactions include employment of executive officers, director compensation, and transactions with other companies if the aggregate amount of the transaction does not exceed the greater of $1 million or 2% of that company’s total revenues and the related person is not an executive officer of the other company.
YUM! BRANDS, INC. -2016 Proxy Statement14
Does the Company require stock ownership by directors?
Yes, the Company requires stock ownership by directors. The Board of Directors expects non-management directors to hold a meaningful number of shares of Company common stock and expects non-management directors to retain shares acquired as compensation as a director until at least 12 months following their departure from the Board.
YUM directors receive a significant portion of their annual compensation in stock. The Company believes that the emphasis on the equity component of director compensation serves to further align the interests of directors with those of our shareholders.
How much YUM stock do the directors own?
Stock ownership information for each director is shown in the table on page 38.
Does the Company have stock ownership guidelines for executives and senior management?
The Management Planning and Development Committee has adopted formal stock ownership guidelines that set minimum expectations for executive and senior management ownership. These guidelines are discussed on page 58.
The Company has maintained an ownership culture among its executive and senior managers since its formation. Substantially all executive officers and members of senior management hold stock well in excess of the guidelines.
YUM! BRANDS, INC. -2016 Proxy Statement 15
MATTERS REQUIRING SHAREHOLDER ACTION
ITEM 1 | Election of Directors |
Who are this year’s nominees?
The twelve (12)There are eleven (11) nominees recommended by the Nominating and Governance Committee of the Board of Directors for election this year to hold office until the 20172020 Annual Meeting and until their respective successors are elected and qualifiedqualified. Their biographies are provided below.above at pages 10 to 15. The biographies of each of the nominees below contains information regarding the person’s service as a director, business experience, public-company director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating and Governance Committee and the Board to determine that the person should serve as a director for the Company. In addition to the information presented belowabove regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to YUM and our Board. Finally, we value their significant experience on other public company boards of directors and board committees.
There are no family relationships among any of the directors and executive officers of the Company. Director ages are as of the date of this proxy statement.
YUM! BRANDS, INC. -2016 Proxy Statement16
Michael J. Cavanagh is Senior Executive Vice President and Chief Financial Officer of Comcast Corporation, a global media and technology company. He has held this position since July 2015. From July 2014 to May 2015 he served as Co-President and Co-Chief Operating Officer for The Carlyle Group, a global investment firm, and he was also a member of the Executive Group and Management Committee of The Carlyle Group. Prior to this, Mr. Cavanagh was the Co-Chief Executive Officer of the Corporate & Investment Bank of JPMorgan Chase & Co. from 2012 until 2014. From 2010 to 2012, he was the Chief Executive Officer of JPMorgan Chase & Co.’s Treasury & Securities Services business, one of the world’s largest cash management providers and a leading global custodian. From 2004 to 2010, Mr. Cavanagh was Chief Financial Officer of JPMorgan Chase & Co. Mr. Cavanagh served on the board of The Carlyle Group L.P. in 2014.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
Brian C. Cornell has served as Chairman and Chief Executive Officer of Target Corp., a general merchandise retailer, since August 2014. Mr. Cornell served as the Chief Executive Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc. from March 2012 to July 2014. From April 2009 to January 2012, Mr. Cornell served as the Chief Executive Officer and President of Sam’s Club, a division of Wal-Mart Stores, Inc. and as an Executive Vice President of Wal-Mart Stores, Inc. He has been a Director of Target Corp. since 2014. He has served as a Director of Home Depot, OfficeMax, Polaris Industries Inc., Centerplate, Inc. and Kirin-Tropicana, Inc.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
YUM! BRANDS, INC. -2016 Proxy Statement17
Greg Creed is Chief Executive Officer of YUM. He has served in this position since January 2015. He served as Chief Executive Officer of Taco Bell Division from January 2014 to December 2014 and as Chief Executive Officer of Taco Bell U.S. from 2011 to December 2013. Prior to this position, Mr. Creed served as President and Chief Concept Officer of Taco Bell U.S., a position he held beginning in December 2006. Mr. Creed served as Chief Operating Officer of YUM from 2005 to 2006. He has served as a director of International Games Technology since 2010.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
David W. Dorman is the Non-Executive Chairman of the Board of CVS Health Corporation (formerly known as CVS Caremark Corporation), a pharmacy healthcare provider. He has held this position since May 2011. He is also a Founding Partner of Centerview Capital, a private investment firm, since July 2013. From 2008 until 2011, he was the Non-Executive Chairman of Motorola Solutions, Inc. (formerly known as Motorola Inc.), a leading provider of business and mission critical communication products and services for enterprise and government customers. From October 2006 through April 2008, he was a Managing Director and Senior Advisor with Warburg Pincus LLC, a global private equity firm. From November 2005 until January 2006, Mr. Dorman served as President and a director of AT&T Inc., a telecommunications company (formerly known as SBC Communications). From November 2002 until November 2005, Mr. Dorman was Chairman of the Board and Chief Executive Officer of AT&T Corporation. Mr. Dorman currently serves on the board of Georgia Tech Foundation and Paypal Holdings, Inc. Mr. Dorman served on the board of Motorola Solutions, Inc. from 2006 to 2015 and on eBay Inc. from 2014 to 2015.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
YUM! BRANDS, INC. -2016 Proxy Statement18
Mirian M. Graddick-Weir serves as Executive Vice President of Human Resources for Merck & Co., Inc., a pharmaceutical company. She has held this position since 2008. From 2006 until 2008, she was Senior Vice President of Human Resources of Merck & Co., Inc. Prior to this position, she served as Executive Vice President of Human Resources of AT&T Corp. from 2001 to 2006. Ms. Graddick-Weir served as a director of Harleysville Group Inc. from 2000 until 2012.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
Jonathan S. Linen has been an advisor to the Chairman of American Express Company, a diversified worldwide travel and financial services company, since January 2006. From August 1993 until December 2005, he served as Vice Chairman of American Express Company. Mr. Linen is a director of Modern Bank, N.A. Mr. Linen served on the board of The Intercontinental Hotels Group from 2005 to 2014.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
YUM! BRANDS, INC. -2016 Proxy Statement19
Keith Meister has been the Managing Partner of Corvex Management LP, a New York based investment firm, since 2011. From 2003 to August 2010, Mr. Meister served as Chief Executive Officer and then Principal Executive Officer and Vice Chairman of the Board of Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises L.P., a diversified holding company. Mr. Meister currently serves on the board of directors of The Williams Company, Inc. Mr. Meister previously served on the board of directors of several public companies, including The ADT Corporation, Ralcorp Holdings, Inc., XO Holdings, Motorola Mobility and Motorola, Inc., Federal Mogul, American Railcar Industries and American Casino & Entertainment Properties LLC.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
Thomas C. Nelson has served as the President and Chief Executive Officer of National Gypsum Company, a building products manufacturer, since 1999 and was elected Chairman of the Board in January 2005. Mr. Nelson previously worked for Morgan Stanley & Co. and in the United States Defense Department as Assistant to the Secretary and was a White House Fellow. He serves as Director of Carolinas Healthcare System and was a director of Belk, Inc. from 2003 to 2015. Since January 2015, Mr. Nelson has served as a director for the Federal Reserve Bank of Richmond.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
YUM! BRANDS, INC. -2016 Proxy Statement20
Thomas M. Ryan is the former Chairman and Chief Executive Officer of the Board of CVS Health Corporation, formerly known as CVS Caremark Corporation (“CVS”), a pharmacy healthcare provider. He served as Chairman from April 1999 to May 2011. He was Chief Executive Officer of CVS from May 1998 to February 2011 and also served as President from May 1998 to May 2010. Mr. Ryan serves on the boards of Five Below, Inc. and PJT Partners, Inc., and is an Operating Partner of Advent International. Mr. Ryan was a director of Bank of America Corporation from 2004 to 2010 and Vantiv Inc. from 2012 to 2016.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
P. Justin Skala is Chief Operating Officer, North America, Europe, Africa/Eurasia and Global Sustainability, of the Colgate-Palmolive Company, a leading consumer products company. He has held this position since 2013. From 2010 to 2013 he was the President of Colgate - Latin America. From 2007 to 2010, he was president of Colgate - Asia.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
YUM! BRANDS, INC. -2016 Proxy Statement21
Elane B. Stock is Group President of Kimberly-Clark International, a division of Kimberly-Clark Corporation, a leading global consumer products company. She has held this position since 2014. From 2012 to 2014 she was the Group President for Kimberly-Clark Professional. Prior to this role, Ms. Stock was the Chief Strategy Officer from 2010, when she first joined Kimberly-Clark, to 2012. Ms. Stock was the National Vice President of Strategy for the American Cancer Society from 2008 to 2010.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
Robert D. Walter is the founder of Cardinal Health, Inc., a company that provides products and services supporting the health care industry. Mr. Walter retired from Cardinal Health in June 2008. Prior to his retirement from Cardinal Health, he served as Executive Director from November 2007 to June 2008. From April 2006 to November 2007, he served as Executive Chairman of the Board of Cardinal Health. From 1979 to April 2006, he served as Chairman and Chief Executive Officer of Cardinal Health. Mr. Walter also serves as a director of American Express Company and Nordstrom, Inc. From 2000 to 2007, he was a director of CBS Corporation and its predecessor, Viacom, Inc.
SPECIFIC QUALIFICATIONS, EXPERIENCE, SKILLS AND EXPERTISE:
YUM! BRANDS, INC. -2016 Proxy Statement22
If elected, we expect that all of the aforementioned nominees will serve as directors and hold office until the 2017 Annual Meeting of Shareholders and until their respective successors have been elected and qualified.
What is the recommendation of the Board of Directors?
The Board of Directors recommends that you vote FOR the election of these nominees.
What if a nominee is unwilling or unable to serve?
That is not expected to occur. If it does, proxies may be voted for a substitute nominated by the Board of Directors.
What vote is required to elect directors?
A nominee will be elected as a director if the number of “FOR” votes exceeds the number of “AGAINST” votes with respect to his or her election.
Our policy regarding the election of directors can be found in our Governance Principles atwww.yum.com/investors/governance/principles.aspwww.investors.yum.com/governance-documents and at page 919 under “What other significant Board practices does the Company have? — Majority Voting Policy.”
YUM! BRANDS, INC. -2016 Proxy Statement23
26 | YUM! BRANDS, INC.-2019 Proxy Statement |
MATTERS REQUIRING SHAREHOLDER ACTION |
ITEM 2 | Ratification of Independent Auditors (Item 2 on the Proxy Card) |
What am I voting on?
A proposal to ratify the selection of KPMG LLP (“KPMG”) as our independent auditors for fiscal year 2016.2019. The Audit Committee of the Board of Directors has selected KPMG to audit our consolidated financial statements. During fiscal 2015,2018, KPMG served as our independent auditors and also provided other audit-related andnon-audit services.
Will a representative of KPMG be present at the meeting?
Representatives of KPMG will be present at the Annual Meeting and will have the opportunity to make a statement if they desire and will be available to respond to appropriate questions from shareholders.
What vote is required to approve this proposal?
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting. If the selection of KPMG is not ratified, the Audit Committee will reconsider the selection of independent auditors.
What is the recommendation of the Board of Directors?
The Board of Directors recommends that you vote FOR approval of this proposal.
What were KPMG’s fees for audit and other services for fiscal years 20152018 and 2014?2017?
The following table presents fees for professional services rendered by KPMG for the audit of the Company’s annual financial statements for 20152018 and 2014,2017, and fees billed for audit-related services, tax services and all other services rendered by KPMG for 20152018 and 2014.2017.
2015 | 2014 | 2018 | 2017 | |||||||||||||
Audit fees(1) | $ | 6,233,000 | $ | 6,904,000 |
|
5,477,000
|
|
$
|
6,406,000
|
| ||||||
Audit-related fees(2) | 558,000 | 615,000 |
|
310,000
|
|
|
326,000
|
| ||||||||
Audit and audit-related fees | 6,791,000 | 7,519,000 | ||||||||||||||
Tax fees(3) | 304,000 | 438,000 |
|
563,000
|
|
|
482,000
|
| ||||||||
All other fees | — | — |
|
0
|
|
|
0
|
| ||||||||
TOTAL FEES | $ | 7,095,000 | $ | 7,957,000 |
|
6,350,000
|
|
$
|
7,214,000
|
|
(1) | Audit fees include fees for the audit of the annual consolidated financial statements, reviews of the interim condensed consolidated financial statements included in the Company’s quarterly reports, audits of the effectiveness of the Company’s internal controls over financial reporting, statutory audits and services rendered in connection with the Company’s securities |
(2) | Audit-related fees include fees associated with audits of financial statements |
(3) | Tax fees consist principally of fees for international tax compliance, tax audit assistance, |
YUM! BRANDS, INC. -2016 Proxy Statement24
YUM! BRANDS, INC. -2019 Proxy Statement | 27 |
MATTERS REQUIRING SHAREHOLDER ACTION |
What is the Company’s policy regarding the approval of audit and non-audit services?
What is the Company’s policy regarding the approval of audit andnon-audit services? |
The Audit Committee has implemented a policy for thepre-approval of all audit and permittednon-audit services, including tax services, proposed to be provided to the Company by its independent auditors. Under the policy, the Audit Committee may approve engagements on acase-by-case basis orpre-approve engagements pursuant to the Audit Committee’spre-approval policy. The Audit Committee may delegatepre-approval authority to one of its independent members and has currently delegatedpre-approval authority up to certain amounts to its Chair.
Pre-approvals for services are granted at the January Audit Committee meeting each year. Any incremental audit or permittednon-audit services which are expected to exceed the relevant budgetary guideline must subsequently bepre-approved.In considering
pre-approvals, the Audit Committee reviews a description of the scope of services falling withinpre-designated services and imposes specific budgetary guidelines.Pre-approvals of designated services are generally effective for the succeeding 12 months. Any incremental audit or permitted non-audit services which are expected to exceed the relevant budgetary guideline must be pre-approved.
The Corporate Controller monitors services provided by the independent auditors and overall compliance with thepre-approval policy. The Corporate Controller reports periodically to the Audit Committee about the status of outstanding engagements, including actual services provided and associated fees, and must promptly report anynon-compliance with thepre-approval policy to the Chair of the Audit Committee.
The complete policy is available on the Company’s website atwww.yum.com/investors/governance/media/gov_auditpolicy.pdfwww.investors.yum.com/committee-composition-and-charters.
ITEM 3 | Advisory Vote on Executive Compensation |
(Item 3 on the Proxy Card) |
What am I voting on?
In accordance with SEC rules, we are asking shareholders to approve, on anon-binding basis, the compensation of the Company’s Named Executive Officers as disclosed in this proxy statement.
Our Performance-Based Executive Compensation Program Attracts and Retains Strong Leaders and Closely Aligns with Our Shareholders’ Interests
Our performance-based executive compensation program is designed to attract, reward and retain the talented leaders necessary for our Company to succeed in the highly competitive market for talent, while maximizing shareholder returns. This approach has made our management team a key driver in the Company’s strong performance over both the longlong- and short term.short-term. We believe that our compensation program has attracted and retained strong leaders, and is closely aligned with the interests of our shareholders.
In deciding how to vote on this proposal, we urge you to read the Compensation Discussion and Analysis section of this proxy statement, beginning on page 39,
which discusses in detail how our compensation policies and procedures operate and are designed to meet our compensation goals and how our Management Planning and Development Committee makes compensation decisions under our programs.
Accordingly, we ask our shareholders to vote in favor of the following resolution at the Annual Meeting:
RESOLVED, that the shareholders approve, on an advisory basis, the compensation awarded to our Named Executive Officers, as disclosed pursuant to SEC rules, including the Compensation Discussion and Analysis, the compensation tables and related materials included in this proxy statement.
What vote is required to approve this proposal?
28 | YUM! BRANDS, INC.-2019 Proxy Statement |
MATTERS REQUIRING SHAREHOLDER ACTION |
What vote is required to approve this proposal? |
Approval of this proposal requires the affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote at the Annual Meeting. While this vote is advisory andnon-binding on the Company, the Board of Directors and the Management Planning and Development Committee will review the voting results and consider shareholder
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shareholder concerns in their continuing evaluation of the Company’s compensation program. Unless the Board of Directors modifies its policy on the frequency of this advisory vote, the next advisory vote on executive compensation will be held at the 20172020 Annual Meeting of Shareholders.
What is the recommendation of the Board of Directors?
What is the recommendation of the Board of Directors? |
The Board of Directors recommends that you vote FOR approval of this proposal.
ITEM 4 | Shareholder Proposal |
What am I voting on?
The Sisters of Charity of the Blessed Virgin Mary, have advised us that it intends to present the following shareholder proposal at the Annual Meeting. We will furnish the address and share ownership of the proponent upon request. In accordance with federal securities regulations, we have included the text of the proposal and supporting statement exactly as submitted by the proponent. We are requestingnot responsible for the content of the proposal or any inaccuracies it may contain.
Resolved:Shareholders request that shareholders approveYum! Brands senior management, with oversight from the Long Term Incentive Plan as amended (the “Plan”). We establishedBoard of Directors, issue a report on climate change mitigation strategies, assessing the Planfeasibility of adopting quantitative, company-wide goals for increasing Yum! Brands’ use of renewable energy and any other measures deemed prudent by company management, to attractsubstantially reduce the company’s greenhouse gas emissions and retain persons who are eligible to participate inclimate change risks associated with the Plan, to motivate the Plan participants, by meansuse of appropriate incentives, to achieve long-rangefossil fuel-based energy.
The report should be issued within one year of this filing at reasonable cost and omit proprietary information.
Supporting Statement:
By assessing goals to provide incentive compensation opportunitiesincrease renewable energy as a share of total energy consumed, and other such measures to reduce greenhouse gas emissions that the company deems feasible, our company could prepare to take concrete, practical steps to reduce our emissions of greenhouse gases (GHGs) that contribute to climate change.
In order to mitigate the worst impacts of climate change, the Intergovernmental Panel on Climate Change estimates that a 45% reduction in anthropogenic GHG emissions globally is needed (from 2010 levels) by 2030 to stabilize global temperatures(Global Warming of 1.5 degreesC,IPCC,Oct 2018).
Assessing the feasibility of goals for renewable energy procurement and other greenhouse gas reducing measures could contribute to this end and serve as a practical step towards aligning our business operations with global efforts to limit climate change. This could help insulate our company from regulatory uncertainty and position Yum! Brands as contributing to climate solutions and produce reputational benefits.
Fortuitously, many major companies are competitive with those of other similar companies, and to align the interests of the Plan participants with our shareholders.finding that greenhouse gas reducing measures such as adopting
Key Changes to the Plan
The Board approved an amendment and restatement of the Plan on March 4, 2016. The following are the most significant changes to the Plan included in the amendment and restatement:
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Selected Plan Data
renewable energy are practical, and often also benefit their bottom line. Nationally, the US Energy Information Association reports the average cost of electricity at $0.1068/kWh for commercial customers in 2017, up from $0.1043 in 2016. By contrast, according to Bloomberg New Energy Finance’s 2018 SustainableEnergy in America Factbook“the most competitive power purchase agreements (PPAs) came in at just over $20/MWh for solar [$0.02/kWh], while wind PPAs ... averaged an estimated $17/MWh in 2017 [$0.017/kWh].”
Unfortunately, Yum! Brands website is silent on specific goals to reduce the company’s greenhouse gas emissions. As such, Yum! lags behind its peers in in
the restaurant industry including McDonalds, which has recently adopted an approved Science-Based Target for GHG emissions reductions across their operations and supply chain. Many other leading food companies, including Kellogg, Grupo Bimbo, Mars, Nestle, and Starbucks are among the 154 RE100 member companies who have committed to going 100% renewable.
Accordingly, we urge Yum! Brands to emulate the best climate risk mitigation practices among its corporate peers and to study the feasibility of adopting goals for measures such as renewable energy sourcing, that can substantially reduce greenhouse gas emissions.
The following table includes information regarding outstanding equity awards and shares available for future awards under the Company’s equity plans as of December 31, 2015 (and without giving effect to approval of the amended Plan under this Proposal):
The Plan | Other Plans(1) | |||||||
Total shares underlying outstanding options and SARs(2) | 8,278,913 | 413,909 | ||||||
Weighted average exercise price of outstanding options and SARs | 50.91 | 61.09 | ||||||
Weighted average remaining contractual life of outstanding options and SARs | 5.30 | 6.37 | ||||||
Total shares underlying outstanding unvested time-based RSUs | 469,429 | 0 | ||||||
Total shares underlying outstanding performance-based RSUs | 169,194 | 0 | ||||||
Total shares underlying outstanding deferral shares | 4,500,989 | 0 | ||||||
Total shares currently available for grant(3) | 3,204,537 | 9,348,882 | (4) |
Year | Options/SARs Granted | Time-Based RSUs Granted | Performance- Based RSUs Earned | Total Granted | Weighted Average Number of Common Shares Outstanding | Burn Rate = Total Granted / Common Shares Outstanding | ||||||||||||||||||
2015 | 3,811,598 | 205,581 | 0 | 4,017,179 | 436,000,000 | 0.92% | ||||||||||||||||||
2014 | 3,619,536 | 204,687 | 0 | 3,824,223 | 444,000,000 | 0.86% | ||||||||||||||||||
2013 | 3,767,552 | 562,339 | 0 | 4,329,891 | 452,000,000 | 0.96% |
Overview of Plan Awards
The Plan authorizes the award of stock options (including ISOs and non-qualified stock options (“NQOs”)), SARs, and “Full Value Awards” (including restricted stock awards, restricted stock unit awards, performance shares, and performance unit awards), each as described below.
Prohibition on Repricing
The Plan provides that, except for adjustments in connection with corporate transactions (discussed below) or as approved by our shareholders, the exercise price of an outstanding stock option or SAR may not be decreased after the date of grant, nor may an outstanding stock option or SAR be surrendered to us in consideration for the grant of a replacement stock option or SAR with a lower exercise price or a Full Value Award. Except as approved by our shareholders, in no event may any stock option or SAR granted under the Plan be surrendered to us in consideration for a cash payment if, at the time of such surrender, the exercise price of the stock option or SAR is greater than the then current fair market value of a share of our common stock.
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Description of the Plan
The following is a brief description of the material features of the Plan. This description, including information summarized above, is qualified in its entirety by reference to the full text of the Plan, a copy of which is attached to this proxy statement as Appendix A.
Eligibility
Any officer, director or other employee of us or one of our subsidiaries, consultants, independent contractors or agents of us or one of our subsidiaries, and persons who are expected to become officers, employees, directors, consultants, independent contractors or agents of us or one of our subsidiaries (but effective no earlier than the date on which such individual begins to provide services to us or one of our subsidiaries), including in any case, Outside Directors. Upon receiving a grant of an award under the Plan, an eligible individual shall be a “participant” in the Plan.
Approximately 505,000 individuals were eligible on an annual basis to receive awards under the Plan and in 2015, we granted equity awards of the type authorized in the Plan to approximately 800 persons.
Administration of the Plan
The Plan is administered by the Management Planning and Development Committee (the “Committee”). For purposes of the Plan and subject to the terms and conditions of the Plan, the Committee has the authority and discretion (a) to select from among the eligible individuals those persons who shall receive awards under the Plan, (b) to determine the time or times of receipt, (c) to determine the types of awards and the number of shares covered by the awards, (d) to establish the terms, conditions, performance criteria, restrictions, and other provisions of such awards, and, subject to the terms and conditions of the Plan, to cancel or suspend awards, (e) to the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the awards in jurisdictions outside the United States, to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States, (f) to conclusively interpret the Plan, (g) to establish, amend, and rescind any rules and regulations relating to the Plan, (h) to determine the terms and provisions of any award agreement made pursuant to the Plan, and (i) to make all other determinations that may be necessary or advisable for the administration of the Plan. In addition, the Committee also has the authority to determine the extent to which awards under the Plan will be structured as Performance-Based Compensation and to take such action, establish such procedures, and impose such restrictions at the time such awards are granted as the Committee determines to be necessary or appropriate to conform to the requirements of Code Section 162(m). Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
Except as prohibited by applicable law or as necessary to preserve exemptions under the securities laws, the Committee may delegate any of its duties under the Plan to such agents as it determines from time to time (which delegation can be revoked at any time). Unless action to the contrary has been taken by the Board or the Committee, the Committee’s authority with respect to awards and other matters concerning participants below the Executive Officer level is delegated to our Chief Executive Officer.
Shares Available Under the Plan
We have reserved for issuance under the Plan 92,600,000 shares. As noted above, this represents an increase of 22 million shares available for issuance. Also as noted above, we will cancel shares available for issuance under the YumBucks Plan, the SharePower Plan and the 1997 Plan as of the date that the Plan is approved by our shareholders (referred to as the “Approval Date”) (and immediately prior to approval). This will represent the cancellation of approximately 9 million shares.
The number of shares available for grants of ISOs under the Plan is equal to 92,600,000. The number of shares available for grants of Full Value Awards under the Plan is equal to approximately 12,000,000 except that shares subject to Full Value Awards granted with respect to the deferral of annual cash incentive awards under a deferred compensation plan maintained by us or our subsidiaries will not count towards this maximum.
Shares available under the Plan may be authorized but unissued or shares currently held or subsequently acquired by us as treasury shares (to the extent permitted by law), including shares purchased in the open market or in private transactions.
Each share delivered in respect of a Full Value Award is counted as covering 2 shares except that, in the case of restricted stock or restricted stock units delivered pursuant to the settlement of earned annual incentives, each share shall be counted as covering 1 share. To the extent any shares of stock covered by an award are not delivered to a participant or beneficiary because the award is forfeited or canceled, or used to satisfy the applicable tax withholding obligation, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of stock available for delivery under the Plan. If the exercise price of any stock option granted under the Plan is satisfied by tendering shares of our common stock (by either actual delivery or by attestation, including net exercise),
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only the number of shares of stock issued net of the shares tendered shall be deemed delivered for purposes of the Plan.
After the Approval Date, no awards may be granted under the YumBucks Plan, the 1997 Plan or the SharePower Plan.
On March 30, 2016, the last reported sale price of our common stock on the New York Stock Exchange was $82.25 per share.
Other Share Limitations
The following limitations shall apply under the Plan: (a) the maximum number of shares that may be covered by stock options or SARs granted to any one individual during any five calendar-year period shall be 9,000,000; (b) in the case of Full Value Awards that are intended to be Performance-Based Compensation, no more than 3,000,000 shares of common stock may be subject to such awards granted to any one individual during any five-calendar-year period (regardless of when such shares are deliverable); provided, however, that, in the case of any Full Value Award that is a performance unit award that is intended to be Performance-Based Compensation, no more than $10,000,000 may be subject to any such awards granted to any one individual during any one-calendar-year period (regardless of when such amounts are deliverable); and (c) no Outside Director may be granted during any calendar year an award or awards having a value determined on the grant date in excess of $750,000.
Adjustments
If (1) any change in corporate capitalization, such as a stock split, reverse stock split, or stock dividend, or (2) any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off, or sale or other disposition by us of all or a portion of our assets, (3) any other change in our corporate structure, or (4) any distribution to shareholders (other than a cash dividend that is not an extraordinary cash dividend) results in (x) the outstanding shares of our common stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of us or for shares of stock or other securities of any other corporation (or new, different or additional shares or other securities of us or of any other corporation being received by the holders of outstanding shares of our common stock), or (y) a material change in the market value of the outstanding shares of our common stock as a result of the change, transaction or distribution, then equitable adjustments shall be made by the Committee, as it determines are necessary and appropriate, in: (a) the number and type of shares (or other property) with respect to which awards may be granted under the Plan; (b) the number and type of shares (or other property) subject to outstanding awards; (c) the grant or exercise price with respect to outstanding awards; (d) the limitations on shares reserved for issuance under the Plan and the limitations on the number of shares (or dollar amount) that can be subject to awards granted to certain individuals or within a specified time period; and (e) the terms, conditions or restrictions of outstanding awards and/or award agreements. In the case of any stock option that is an ISO, any adjustments in accordance with the foregoing shall be accomplished so that such stock option shall continue to be an ISO and there are restrictions on the type and manner of adjustment to awards to ensure compliance with Code Section 409A (relating to nonqualified deferred compensation).
Awards under the Plan
Agreements
An award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any award to any participant shall be reflected in such form of written document as is determined by the Committee. A copy of such document shall be provided to the participant, and the Committee may, but need not, require that the participant sign a copy of such document.
Stock Options and SARs
The grant of a stock option under the Plan entitles the participant to purchase shares of our common stock at an exercise price and during a specified time established by the Committee. Any stock option may be either an ISO or an NQO, as determined in the discretion of the Committee. An “ISO” is a stock option that is intended to satisfy the requirements applicable to an “incentive stock option” described in Code Section 422(b) and may only be granted to employees of us or our eligible subsidiaries. An “NQO” is a stock option that is not intended to be an ISO. A stock option will be deemed to be an NQO unless it is specifically designated by the Committee as an ISO and/or to the extent that it does not meet the requirements of an ISO. Any stock option that is intended to constitute an ISO shall satisfy any other requirements of Code Section 422 and, to the extent such stock option does not satisfy such requirements, the stock option shall be treated as a NQO.
A SAR entitles the participant to receive, in cash or stock, value equal to (or otherwise based on) the excess of: (a) the fair market value of a specified number of shares of our common stock at the time of exercise; over (b) an exercise price established by the Committee.
The Committee shall designate the participants to whom stock options or SARs are to be granted and shall determine
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the number of shares of stock subject to each such stock option or SAR and the other terms and conditions thereof, not inconsistent with the Plan. The Committee may not, however, grant dividends or dividend equivalents (current or deferred) with respect to any stock option or SAR granted under the Plan. In no event shall a stock option or SAR be exercisable later than the ten-year anniversary of the date on which the stock option or SAR is granted (or such shorter period required by law or the rules of any stock exchange on which the stock is listed).
The “exercise price” of each stock option or SAR granted shall be established by the Committee or shall be determined by a method established by the Committee at the time the stock option or SAR is granted, except that the exercise price shall not be less than the fair market value of a share of stock on the date of grant. Stock options and SARs granted under the Plan in replacement for awards under plans and arrangements of us or one of our subsidiaries that are assumed in business combinations may provide for exercise prices that are less than the fair market value of the stock at the time of the replacement grants, if the Committee determines that such exercise price is appropriate to preserve the economic benefit of the award.
The exercise price of a stock option shall be payable in cash or by tendering (including by way of a net exercise), by either actual delivery of shares or by attestation, shares of stock acceptable to the Committee, and valued at fair market value as of the day of exercise, or in any combination thereof, as determined by the Committee. The Committee may permit a participant to elect to pay the exercise price upon the exercise of a stock option by irrevocably authorizing a third party to sell shares of stock (or a sufficient portion of the shares) acquired upon exercise of the stock option and remit to us a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise. Generally, the full exercise price for shares of common stock purchased upon the exercise shall be paid at the time of such exercise (except that, in the case of a third party exercise arrangement described above, payment may be made as soon as practicable after the exercise).
Full Value Awards
A Full Value Award is a grant of one or more shares of our common stock or a right to receive one or more shares of our common stock in the future (including restricted stock, restricted stock units, performance shares, and performance units) that is contingent on continuing service, the achievement of performance objectives during a specified period performance, or other restrictions as determined by the Committee. The grant of Full Value Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement; provided, however, that no dividends or dividend equivalent rights will be paid or settled on Full Value Awards that have not been earned or vested.
Except for Full Value Awards that are granted (a) in lieu of other compensation, (b) as a form of payment of earned performance awards or other incentive compensation, (c) to new hires, or (d) as retention awards outside the United States, if the right to become vested in a Full Value Award granted to an employee is conditioned on the completion of a specified period of service with us and our subsidiaries, without achievement of performance measures or performance objectives being required as a condition of vesting, then the required period of service for full vesting of the Full Value Award shall be not less than three years (provided that the required period for full vesting shall, instead, not be less than two years in the case of annual incentive deferrals payable in restricted shares), subject to pro rated vesting over the applicable minimum service period and to acceleration of vesting, to the extent permitted by the Committee, in the event of the participant’s death, disability, retirement, change in control or involuntary termination). Awards to Outside Directors are not subject to these restrictions.
Settlement and Payment of Awards
Awards may be settled through the delivery of shares of our common stock, the granting of replacement awards, or combination thereof as the Committee shall determine. Any award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any award payment (other than a stock option or SAR other than to the extent permitted by Code Section 409A), subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Stock equivalents.
Performance-Based Compensation
In general, Code Section 162(m) limits our compensation deduction to $1,000,000 paid in any tax year to any “covered employee” as defined under Code Section 162(m). This deduction limitation does not apply to certain types of compensation, including Performance-Based Compensation. The terms of the Plan permit, but do not require, us to issue awards under the Plan that meet the requirements of Performance-Based Compensation so that such awards will be deductible by us for federal income tax purposes.
We anticipate that any compensation paid in connection with exercises of stock options or the exercise or settlement of SARs under the Plan will qualify as Performance-Based Compensation.
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Full Value Awards granted under the Plan may be designated and structured as Performance-Based Compensation. To the extent required by Code Section 162(m), any Full Value Award so designated will be conditioned on the achievement of one or more performance targets as determined by the Committee, which performance targets will be based on one or more of the following performance measures: cash flow; earnings; earnings per share; market value added or economic value added; profits; return on assets; return on equity; return on investment; revenues; stock price; total shareholder return; customer satisfaction metrics; or restaurant unit development. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of us and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, shareholders’ equity and/or shares outstanding, investments or to assets or net assets. The performance targets established by the Committee may be with respect to us, a subsidiary, operating unit, division, or group or individual performance (or any combination thereof).
If a Full Value Award is intended to constitute Performance-Based Compensation, the participant will not receive a settlement or payment of the award until the Committee has determined that the applicable performance target(s) have been attained. To the extent that the Committee exercises discretion in making the foregoing determination, such exercise of discretion may not result in an increase in the amount of the payment.
Nothing in the Plan precludes the Committee from granting Full Value Awards or other awards under the Plan that are not intended to constitute Performance-Based Compensation.
Change in Control
Subject to the provisions relating to adjustments in the context of corporate transactions and except as otherwise provided in the Plan or the award agreement reflecting the applicable award, if a Change in Control (as defined in the Plan) occurs prior to the date on which an award is vested and prior to the participant’s separation from service and if the participant’s employment is involuntarily terminated by the Company (other than for cause) on or within two years following the Change in Control (referred to as “double trigger” vesting), then (a) all outstanding Options and SARs (regardless of whether in tandem with a SAR or Option, as applicable) shall become fully exercisable and (b) all Full Value Awards (including any award payable in shares of our common stock which is granted in conjunction with a Company deferral program) shall become fully vested and the Committee shall determine the extent to which performance conditions are met in accordance with the terms of the Plan and the applicable award agreement.
Transferability
Unless otherwise determined by the Committee and expressly provided for in an award agreement, no award or any other benefit under the Plan shall be assignable or otherwise transferable except by will or the laws of descent and distribution.
Withholding
All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the participant, through the surrender of shares of stock which the participant already owns, or through the surrender of shares of stock to which the participant is otherwise entitled under the Plan; provided, however, previously-owned stock that has been held by the participant or stock to which the participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law (or other rates that will not have a negative accounting impact).
Participants Outside the United States
The Committee may grant awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan. In furtherance of such purposes, the Committee may make such modifications, amendments, procedures and subplans as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which we or any of our subsidiaries operates or has employees. The foregoing provisions may not be applied to increase the share limitations of the Plan or to otherwise change any provision of the Plan that would otherwise require the approval of our shareholders.
Miscellaneous
Limitation of Implied Rights
Neither a participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of us or any of our subsidiaries whatsoever, including, without limitation, any specific funds, assets, or other property which may be set aside in anticipation of a liability under the Plan. A participant shall have only a contractual right to the stock or amounts, if any, payable under the Plan, unsecured by any assets of us or our subsidiaries, and nothing contained in the Plan shall constitute a guarantee that the assets of us or any of our subsidiaries shall be sufficient to pay any benefits to any person.
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The Plan does not constitute a contract of employment or continued service, and selection as a participant will not give any participating employee or other individual the right to be retained in the employ of us or a subsidiary or the right to continue to provide services to us or a subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.
Delivery of Stock Under the Plan
We shall have no liability to deliver any shares of stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity. To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
Misconduct and Recoupment
The Committee, in its discretion, may impose such restrictions on shares of stock acquired pursuant to the Plan, whether pursuant to the exercise of a stock option or SAR, settlement of a Full Value Award or otherwise, as it determines to be desirable, including, without limitation, restrictions relating to disposition of the shares and forfeiture restrictions based on service, performance, stock ownership by the participant, conformity with our recoupment, compensation recovery, or clawback policies and such other factors as the Committee determines to be appropriate. Unless otherwise specified by the Committee, any awards under the Plan and any shares of stock issued pursuant to the Plan shall be subject to our compensation recovery, clawback, and recoupment policies as in effect from time to time.
If the Committee determines that a present or former employee has (a) used for profit or disclosed to unauthorized persons, confidential or trade secrets of us or (b) breached any contract with or violated any fiduciary obligation to us, the Committee may cause that employee to forfeit his or her outstanding awards under the Plan. This provision does not apply during any period where there is a potential change in control in effect or following a change in control.
Amendment and Termination of the Plan
The Board may, at any time, amend or terminate the Plan (and the Committee may amend any award agreement); provided, however, that no amendment or termination of the Plan or amendment of any award agreement may, in the absence of written consent to the change by the affected participant (or, if the participant is not then living, the affected beneficiary), adversely affect the rights of any participant or beneficiary under any award granted under the Plan prior to the date such amendment is adopted. Adjustments pursuant to corporate transactions and restructurings are not subject to the foregoing limitations. In addition, amendments to the provisions of the Plan that prohibit the repricing of stock options and SARS, amendments expanding the group of eligible individuals, or amendments increases in the aggregate number of shares reserved under the Plan, the shares that may be issued in the form of ISOs, limitations on certain types of Full Value Awards and amendments of the individual limits on awards and the limitations on awards to Outside Directors will not be effective unless approved by our shareholders. No amendment shall be made to the Plan without the approval of our shareholders if such approval is required by law or the rules of any stock exchange on which the common stock is listed.
The Plan will continue in effect, until terminated by the Board; provided, however, that no award may be granted under the Plan on or after May 20, 2026, which is the ten-year anniversary of May 20, 2016, the date shareholders will vote whether to approve the Plan as amended. However, any awards that are outstanding on or after the date of Plan termination will remain subject to the terms of the Plan. If shareholders do not approve the Plan as amended, no awards may be granted under the Plan after May 15, 2018.
It is our intention that, to the extent that any provisions of the Plan or any awards granted under the Plan are subject to Code Section 409A, the Plan and the awards comply with the requirements of Code Section 409A and that the Board shall have the authority to amend the Plan as it deems necessary or desirable to conform to Code Section 409A. Notwithstanding the foregoing, neither we nor our Subsidiaries guarantee that awards under the Plan will comply with Code Section 409A and the Committee is under no obligation to make any changes to any award to cause such compliance.
U.S. Federal Income Tax Implications of the Plan
The discussion that follows is a summary, based on U.S. federal tax laws and regulations presently in effect, of some significant U.S. federal income tax considerations relating to awards under the Plan. The applicable laws and regulations are subject to change, and the discussion does not purport to be a complete description of the federal income tax aspects of the Plan. This summary does not discuss state, local or foreign laws.
Stock Options. The tax treatment of a stock option depends on whether the option is a NQO or an ISO.
The grant of an NQO will not result in taxable income to the participant. Except as described below, the participant will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares of stock acquired over the exercise price for those shares of common stock, and we will be entitled to a corresponding deduction.
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The grant of an ISO will not result in taxable income to the participant. The exercise of an ISO will not result in taxable income to the participant provided that the participant was, without a break in service, an employee of us and our eligible subsidiaries (determined under tax rules) during the period beginning on the date of the grant of the ISO and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant is disabled, as that term is defined in the Code).
The excess of the fair market value of the shares of common stock at the time of the exercise of an ISO over the exercise price is an adjustment that is included in the calculation of the participant’s alternative minimum taxable income for the tax year in which the ISO is exercised. For purposes of determining the participant’s alternative minimum tax liability for the year of disposition of the shares of common stock acquired pursuant to the ISO exercise, the participant will have a basis in those shares of common stock equal to the fair market value of the shares of common stock at the time of exercise.
If the participant does not sell or otherwise dispose of the shares of common stock within two years from the date of the grant of the ISO or within one year after receiving the transfer of such shares of common stock, then, upon disposition of such shares of common stock, any amount realized in excess of the exercise price will be taxed to the participant as capital gain, and we will not be entitled to any deduction for Federal income tax purposes.
If the foregoing holding period requirements are not met, the participant will generally realize ordinary income, and a corresponding deduction will be allowed to us, at the time of the disposition of the shares of common stock, in an amount equal to the lesser of (a) the excess of the fair market value of the shares of common stock on the date of exercise over the exercise price, or (b) the excess, if any, of the amount realized upon disposition of the shares of common stock over the exercise price.
Special rules apply if an option is exercised through the exchange of previously acquired stock.
SARs. A participant will not be deemed to have received any income upon the grant of a SAR. Generally, when a SAR is exercised, the excess of the market price of common stock on the date of exercise over the exercise price will be taxable to a participant as ordinary income. We are entitled to a deduction in the year of exercise equal to the amount of income taxable to the individual.
Full Value Awards. The federal income tax consequences of a Full Value Award will depend on the type of award. The tax treatment of the grant of shares of common stock depends on whether the shares are subject to a substantial risk of forfeiture (determined under Code rules) at the time of the grant. If the shares are subject to a substantial risk of forfeiture, the participant will not recognize taxable income at the time of the grant and when the restrictions on the shares lapse (that is, when the shares are no longer subject to a substantial risk of forfeiture), the participant will recognize ordinary taxable income in an amount equal to the fair market value of the shares at that time. If the shares are not subject to a substantial risk of forfeiture or if the participant elects to be taxed at the time of the grant of such shares under Code Section 83(b), the participant will recognize taxable income at the time of the grant of shares in an amount equal to the fair market value of such shares at that time, determined without regard to any of the restrictions. If the shares are forfeited before the restrictions lapse, the participant will be entitled to no deduction on account thereof. The participant’s tax basis in the shares is the amount recognized by him or her as income attributable to such shares. Gain or loss recognized by the participant on a subsequent disposition of any such shares is capital gain or loss if the shares are otherwise capital assets.
In the case of other Full Value Awards, such as restricted stock units or performance stock units, the participant generally will not have taxable income upon the grant of the award provided that there are restrictions on such awards that constitute a substantial risk of forfeiture under applicable Code rules. Participants will generally recognize ordinary income when the restrictions on awards lapse, on the date of grant if there are no such restrictions or, in certain cases, when the award is settled. At that time, the participant will recognize taxable income equal to the cash or the then fair market value of the shares issuable in payment of such award, and such amount will be the tax basis for any shares received. In the case of an award which does not constitute property at the time of grant (such as an award of units), participants will generally recognize ordinary income when the award is paid or settled.
We generally will be entitled to a tax deduction in the same amount, and at the same time, as the income is recognized by the participant.
Section 162(m). Compensation that qualifies as Performance-Based Compensation is excluded from the $1 million deductibility cap of Code Section 162(m), and therefore remains fully deductible by the company paying it. Generally, stock options and SARs granted with an exercise price at least equal to 100% of fair market value of the underlying stock at the date of grant and performance awards to employees that the Committee designates as Performance-Based Compensation are intended to qualify as such “performance-based compensation”. A number of requirements must be met in order for particular compensation to so qualify, however, so there can be no assurance that such compensation under the Plan will be fully deductible under all circumstances. In addition, other awards under the Plan, such as non-performance-based awards, generally
YUM! BRANDS, INC. -2016 Proxy Statement33
will not so qualify, so that compensation paid to certain executives in connection with such awards may, to the extent it and other compensation subject to the limitations of Code Section 162(m) in a given year, not be deductible by us as a result of Code Section 162(m). Compensation to certain employees resulting from the earning or vesting of awards in connection with a change in control or termination following a change in control also may be non-deductible under Code Sections 4999 and 280G.
The foregoing provides only a general description of the application of federal income tax laws to certain awards under the Plan. This discussion is intended for the information of stockholders considering how to vote at the Annual Meeting and not as tax guidance to participants in the Plan, as the consequences may vary with the types of awards made, the identity of the recipients and the method of payment or settlement.
New Plan Benefits
The benefits that will be awarded or paid under the Plan are not currently determinable. Awards granted under the Plan are within the discretion of the Committee, and the Committee has not determined future awards or who might receive them.
Existing Plan Benefits
The following table sets forth information with respect to options, SARs and full value awards (other than shares attributable to salary or bonus deferrals) previously granted under the Plan as of December 26, 2015.
What is the Company’s position regarding this proposal?
Management Statement in Opposition to Shareholder Proposal
Our Board of Directors unanimously recommends that stockholders vote AGAINST this proposal, as it would divert time and resources that the Company has determined would be better used to support our strategy to target our sustainability efforts on areas that will provide the most meaningful impact, without providing a significant corresponding benefit to the Company.
Climate change mitigation strategies, including our use of renewable energy and any other measures to reduce the Company’s greenhouse gas emissions, have been a priority for the Company for the last several years as our sustainability strategy has evolved. Our approach to sustainability initiatives is guided by impact: we focus our efforts where we have the ability to influence meaningful outcomes.
With that principle in mind, our focus has been on reducing our energy consumption and the associated greenhouse gas emissions. In 2017 we achieved our 22% reduction target in energy consumption, as compared to our 2005 baseline, for company-owned and reporting franchise groups. The 2017 target followed up on our successful achievement of our 15% reduction goal in 2015.
The Company currently has a publicly stated goal to reduce average restaurant energy and greenhouse gas emissions by an additional 10 percent by the end of 2025. These initiatives to reduce our energy consumption are those that the Company has determined are best targeted to have the most direct impact. Moreover, the Company currently has in place procedures designed to mitigate risks involving greenhouse gas emissions and climate change, while ensuring that issues are surfaced and addressed in a timely manner.
Implementation of a broader reporting on our greenhouse gas emissions strategy is not necessary and would divert time, effort and resources, thereby limiting our ability to target our efforts on areas that will provide the most meaningful impact. For this reason, and other reasons outlined below, we believe that the request by the proponent is unnecessary, and has the potential to divert our resources with no corresponding benefit to the Company, our customers, or our shareholders.
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Why does the Company oppose the proposal?
Specifically related to the identification and communication of potential climate change mitigation strategies and use of renewable energy, the Company has in place the following:
Public statements, policies and goals on Greenhouse Gas Emissions/Renewable Energy.The Company maintains a public website with policy statements representing our informed views and opinions on industry-related issues. Our fundamental, long-term strategy is twofold: First, it is to design, build and operate restaurants to be measurably more sustainable using green building standards to drive reductions in energy, GHG emissions, waste and water use and to report progress annually through CDP disclosures. Second, it is to work to elevate the supply chain to reduce deforestation though objectives including sourcing 100% of palm oil used for cooking and paper-based packaging from responsible and sustainable sources. Notably, we have a track record of setting and achieving goals for reducing our restaurant energy use and greenhouse gas emissions. The Company currently has a publicly stated goal to reduce average restaurant energy use and greenhouse gas emissions by an additional 10 percent by the end of 2025. This follows on our achievement in 2017 of our 22% reduction target in energy consumption, as compared to our 2005 baseline, for company-owned and reporting franchise groups. Further, the Company has conducted testing of onsite renewable energy applications, as well as Renewable Energy Credits. We continue to evaluate the feasibility of adoption of renewable energy measures.
Comprehensive voluntary disclosure on environmental sustainability issues.On a biennial basis, with updates during intervening years, the Company publishes its Global Citizenship & Sustainability Report at http://citizenship.yum.com/. Included in the Report are the Company’s commitments in the material sustainability areas of food, planet and people. Progress updates for these commitments, including goals related to energy consumption and greenhouse gas, are included in the Report. In addition, the Company discloses its climate, water and forests practices through CDP on an annual basis.
Collaboration with industry groups.The Company’s approach to GHG reduction through energy conservation has been informed by the Unites States Green Building Council’s (USGBC) LEED rating system. We have learned from having designed and built over 30 LEED certified buildings across the globe. We have been members of the USGBC since 2008. The Company’s palm oil and fiber policies and goals were developed in partnership with the World Wildlife Fund (WWF).
Integrated, executive-level governance structure to oversee the Company’s global sustainability initiatives.Oversight for environmental, social and governance (ESG) issues ultimately resides with the Yum! Brands Board of Directors, briefed through its Audit Committee on a regular basis. At the operational level, the Chief Communications and Public Affairs Officer oversees the global reputation of Yum! and is responsible for shaping the Citizenship and Sustainability Strategy with the Vice President, Government Relations and Citizenship & Sustainability.
What vote is required to approve this proposal? |
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.
What is the recommendation of the Board of Directors?
The Board of Directors recommends approvalthat you vote AGAINST this proposal.
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ITEM 5 | Shareholder Proposal Regarding Issuance of Annual Reports on Efforts to Reduce Deforestation (Item 5 on the Proxy Card) |
What am I voting on?
SumOfUs on behalf of Mr. Keith Schnip, has advised us that it intends to present the following shareholder proposal at the Annual Meeting. We will furnish the address and share ownership of the Company’s Long Term Incentive Plan,proponent upon request. In accordance with federal securities regulations, we have included the text of the proposal and supporting statement exactly as amended and restated effective as of May, 20, 2016.submitted by the proponent. We are submittingnot responsible for the Plan to our shareholders for approval in order to satisfy (i) applicable listing rules of New York Stock Exchange and (ii) the stockholder approval requirements under Section 162(m)content of the Internal Revenue Codeproposal or any inaccuracies it may contain.
Resolved:Shareholders request that Yum’ Brands. Inc. (YUM) issue annual reports to investors, at reasonable expense and excluding proprietary information, on how the company is curtailing the impact on the Earth’s climate caused by deforestation in YUM’s supply chain. The reports should include quantitative metrics on supply chain impacts on deforestation and progress on goals for reducing such impacts.
Supporting Statement:
YUM utilizes beef, soy, palm oil, and pulp/paper in its business. These commodities are the leading drivers of 1986,deforestation globally. YUM’s limited action on deforestation sets the company behind its peers and exposes the company to significant business and market risks that deforestation may pose, given the link between deforestation and climate change, including supply chain unreliability, damage to the company’s brand value, and failure to meet shifting consumer and market expectations. The SCRIPT Soft Commodity Risk Platform scored YUM at 26 out of 100 due to lack of risk awareness, board oversight, overarching policies addressing deforestation risk, traceability, and timebound targets.
Deforestation has attracted significant attention from civil society, business and governments. It accounts for over 10% of global greenhouse gas emissions and contributes to climate change, biodiversity loss, soil
erosion, disrupted rainfall patterns, community land conflicts and forced labor. Commercial agriculture accounted for over 70% of tropical deforestation, 49% of which was illegal, between 2000 and 2012. (https://www.theguardian.com/global-development/ 2014/sep/11/tropical-forests-illegally-destroyed-commercial-agriculture)
According to the 2018 report of the Intergovernmental Panel on Climate Change (IPCC), restoring landscapes and forests is one of the best, most cost-effective options available to combat impacts of climate change. (http://www.ipcc.ch/report/sr15/) Value chains that are illegally engaged in deforestation are vulnerable to interruption with new regulations and enforcement, to which companies must adapt.
Companies that have failed to mitigate the impacts of their supply chain may face reputational damage. In recent years, major media outlets have reported on specific companies’ failure to adequately implement policies that address deforestation. This publicity, along with increased consumer awareness and concern about deforestation and climate change, poses a significant reputational risk.
Proponents believe meaningful indicators in a report like the one we request could include:
For key commodities that YUM sources such as amended.palm oil, soy, beef, and pulp/paper, the proportion that can be traced back to its source and the proportion verified as not contributing to physical expansion into peatlands or forests, and including the supply chain across all geographies; and
Tracking these figures against an anticipated timeframe (as established by management) for meeting its sourcing goals for each commodity consistent with the criteria above, including processes for verification, suppliernon-compliance protocols, and grievance processes.
We urge shareholders to support this proposal.
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What is the Company’s position regarding this proposal?
Management Statement in Opposition to Shareholder Proposal
Our Board of Directors unanimously recommends that stockholders vote AGAINST this proposal, as it would divert time and resources that the Company has determined would be better used to support our strategy to target our sustainability efforts on areas that will provide the most meaningful impact, without providing a significant corresponding benefit to the Company.
Sustainable sourcing, including minimizing deforestation risk, has been a priority for the Company for the last several years as our sustainability strategy has evolved. Our approach to sustainability initiatives is guided by impact: we focus our efforts where we have the ability to influence meaningful outcomes. With that principle in mind, we have established and disclosed policies and
time-bound, measurable goals for sourcing sustainable palm oil and fiber for paper packaging, where our sourcing decisions have the most direct impact. Moreover, the Company currently has in place procedures designed to mitigate deforestation risk and ensure that issues are surfaced and addressed in a timely manner.
Additional reporting on our deforestation policy is not feasible and would divert time, effort and resources to commodities (e.g., soy) where Yum can have a less direct or meaningful impact. For this reason, and other reasons outlined below, we believe that the request by the proponent is unnecessary, and has the potential to divert resources with no corresponding benefit to the Company, our customers, or our shareholders.
Why does the Company oppose the proposal?
Specifically related to the identification and communication of potential climate impact caused by deforestation, the Company has in place the following:
Public statements, polices and goals on deforestation issues.The Company maintains a public website with policy statements representing our informed views and opinions on industry-related issues. Notably, we have implemented policies and set goals for sourcing sustainable palm oil and fiber for paper packaging that seek to mitigate the impact of deforestation. Frying oil and packaging represent a significant procurement expenditure for the primary forest-related commodities, and thus they represent areas where our sourcing decisions may have material impact.
• | Regarding packaging, the Company has implemented a policy and associated goal for sourcing sustainable fiber for paper-based packaging. Policy details can be reviewed athttp://citizenship.yum.com/pdf/Paper-based-Packaging-Sourcing-Policy.pdf. As part of the policy, we give preference to suppliers that provide paper packaging certified by third parties such as the Forest Stewardship Council (FSC). The Company’s goal is to purchase 100% of paper-based packaging with fiber sourced from responsibly managed forests and recycled sources by the end of 2020. |
Regarding frying oil, the Company has implemented a policy and associated goal for sourcing sustainable palm oil for cooking. Policy details can be reviewed at
http://citizenship.yum.com/pdf/Palm-Oil-Policy.pdf. As part of that policy, we give preference to suppliers that are certified by the Roundtable on Sustainable Palm Oil (“RSPO”). The company’s goal is to source 100% of our palm oil used for cooking from responsible and sustainable sources. In 2017, approximately 80% of our cooking palm oil was derived from sustainable palm. We will be reporting on our 2018 progress toward that goal later this year. |
• | Comprehensive voluntary disclosure on environmental sustainability issues.On a biennial basis, with updates during intervening years, the Company publishes its Global Citizenship & Sustainability Report athttp://citizenship.yum.com/. Included in the Report are the Company’s commitments in the material sustainability areas of food, planet and people. Progress updates for these commitments, including goals related to the minimization of forest risks, are included in the Report. In addition, the Company discloses its climate, water and forests practices through CDP on an annual basis. |
Collaboration with industry groups.The Company’s palm oil and fiber policies and goals were developed in partnership with the World Wildlife Fund (WWF), which provides companies with practical counsel around sustainable food sourcing. In the area of sustainable palm oil sourcing specifically, the Company is a member of RSPO and in 2019 will be reporting its progress through that organization for the first time.
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Integrated, executive-level governance structure to oversee the Company’s global sustainability initiatives.Oversight for environmental, social and governance (ESG) issues ultimately resides with the Yum! Brands Board of Directors, briefed through its Audit Committee on a regular basis. At the
operational level, the Chief Communications and Public Affairs Officer oversees the global reputation of Yum! and is responsible for shaping the Citizenship and Sustainability Strategy with the Vice President, Government Relations and Citizenship & Sustainability. |
What vote is required to approve this proposal?
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.
What is the recommendation of the Board of Directors?
The Board of Directors recommends that you vote FORAGAINST this proposal.
YUM! BRANDS, INC. -2016 Proxy Statement34
ITEM | Shareholder Proposal |
What am I voting on?
William C. Fleming and Jacquelyn Howard have
As You Sow, on behalf of the Wynnette M. LaBrosse Trust, has advised us that they intendit intends to present the following shareholder proposal at the Annual Meeting. We will furnish the address and share ownership of the proponent upon request. In accordance with federal securities regulations, we have included the text of the proposal and supporting statement exactly as submitted by the proponent. We are not responsible for the content of the proposal or any inaccuracies it may contain.
WHEREASwaste and recycling issues were ranked among the 10 most important issues to stakeholders in a Yum Brands 2017 materiality assessment, yet the company lags competitors by lacking a commitment to phase out plastic straws, uses harmful polystyrene foam beverage cups in some markets, and lacks a commitment to front of houseon-site container recycling.
The ocean contains an estimated 150 million tons of plastic, with about 8 million tons added annually, equivalent to a garbage truck load every minute. Experts predict there will be more plastic than fish by weight in oceans by 2050. Company straws, cups, and
lids are found in street and marine litter. 500 million plastic straws are used by Americans daily, which are not recycled. Polystyrene foam used for beverage cups, is rarely recycled.Non-recyclable plastic packaging is more likely to be littered and carried into waterways. In the marine environment, plastic straws, cups, and cup lids break down into small indigestible particles that birds and marine animals mistake for food, resulting in entanglement, suffocation, and drowning. More than 250 species have been impacted. Plastic does $13 billion in damage to marine ecosystems annually.
Company packaging that degrades in waterways can also transfer hazardous chemicals to animals and potentially to humans. Plastics absorb toxics like PCBs, pesticides, and metals from water, transferring them to the marine food web and potentially to human diets, increasing risk of adverse effects to wildlife and humans. Polystyrene foam may pose a higher risk to marine animals than other plastics due to its hazardous constituent chemicals and research showing it can accumulate high concentrations of water borne toxins in a short time frame. Polystyrene has caused
RESOLVED: The Corporation shall expand its current labeling policy on all of its food products to acknowledge the use or absence of genetically modified organisms (GMOs).
There are four reasons supporting the passage of this resolution:
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decreased reproduction in laboratory populations of oysters and fish.
Antigua and Barbuda, Bangladesh, Barbados, France, Guyana, Haiti, Rwanda, Taiwan and states in India and Malaysia have enacted bans on foam packaging. More than 100 U.S. cities or counties have banned or restricted foam packaging. The problem can be exacerbated in developing countries with less sophisticated solid waste management systems. Recent scientific research estimates that one half of ocean plastic deposition comes from several rapidly developing Asian countries where our company does substantial business.
Competitor McDonald’s announced that it would phase out use of polystyrene foam packaging globally at the end of 2018. Competitor Starbucks has agreed to phase out plastic straws by 2020. The company
also lacks a commitment to recycle front of houseon-site post-consumer packaging. McDonald’s has committed to recycle post-consumer packaging in all restaurants globally by 2025.
BE IT RESOLVED Shareholders request that YUM Brands issue a report to shareholders, to be prepared at reasonable cost and omitting proprietary information, detailing efforts to achieve environmental leadership through a comprehensive policy on sustainable packaging.
Supporting statement:
Proponent believes that a comprehensive policy on sustainable packaging should, for example, address plastic straws, polystyrene beverage and food containers, and policies for front of house recycling. We urge shareholders to support this proposal.
What is the Company’s position regarding this proposal?
Management Statement in Opposition to Shareholder Proposal
What is the Company’s position regarding this proposal?
Our Board of Directors unanimously recommends that stockholders vote AGAINST this proposal.proposal, as it would divert time and resources that the Company has determined would be better used to support our strategy to target our sustainability efforts on areas that will provide the most meaningful impact, without providing a significant corresponding benefit to the Company.
Sustainable packaging has been a priority for the Company for the last several years as our sustainability strategy has evolved. Our approach to sustainability initiatives is guided by impact: we focus our efforts where we have the ability to influence meaningful outcomes. With that principle in mind, our focus has been on our existing goal of diverting 50 percent ofback-of-house operational waste from landfills, measured by weight, generated in our U.S. restaurants by the end of 2020. In addition, we have focused on our goal of purchasing 100 percent of our paper-based packaging from responsibly managed forests and
recycled sources by the end of 2020. In January 2019, our KFC Division announced a significant new global sustainability commitment that all plastic-based, consumer-facing packaging will be recoverable or reusable by 2025. These initiatives are those that the Company has determined are best targeted to have the most direct impact. Moreover, the Company currently has in place procedures designed to mitigate packaging risks and ensure that issues are surfaced and addressed in a timely manner.
Mandatory labeling for foods developed through bio-technology (also knownAs the above highlights, implementation of broader reporting on our sustainable packaging policy, as “genetically modified” foods) risks creating anrequested by the proposal, is not necessary and would divert time, effort and resources, thereby limiting our ability to target our efforts on areas that will provide the most meaningful impact. For this reason, and other reasons outlined below, we believe that the request by the proponent is unnecessary, stigma for foods that leading authorities have deemed safe and not materially different from those not developed through biotechnology.
Genetically modified organisms (“GMOs”) are commonly used in crop production and have been grown commercially since 1996. The U.S. Food & Drug Administration (“FDA”) estimates that approximately 90% of corn and soybeans planted inhas the U.S. contain GMOs. Farmers use this technology to produce higher crop yields, improve farming sustainability, use less pesticides and water, and reduce greenhouse gas emissions.
Health officials at the FDA, the U.S. Department of Agriculture, the U.N. World Health Organization, the U.N. Food and Agriculture Organization, Health Canada, and numerous other government health authorities have found GMOs to be safe and have found no negative health effects associated with their use. These conclusions are based on hundreds of studies that have concluded that GMOs do not pose a threat to human or animal health. Experts at the American Medical Association, the National Academy of Sciences, and the British Royal Society concur that there are no health risks associated with GMO foods or ingredients. Indeed, many of these organizations strongly support the further development and adoption of foods developed through biotechnology due to their potential to increase agricultural productivity and improvedivert resources with no corresponding benefit to the nutritional value of foods.Company, our customers, or our shareholders.
YUM! BRANDS, INC. -2016 Proxy Statement35
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MATTERS REQUIRING SHAREHOLDER ACTION |
Why does the Company oppose the proposal?
Specifically related to the identification and communication of a potential report on efforts to achieve environmental leadership through a comprehensive policy on sustainable packaging, the Company has in place the following:
Public statements, policies and goals on sustainable packaging issues.The Company maintains a public website with policy statements representing our informed views and opinions on industry-related issues. Notably, we have implemented policies for more sustainable packaging and waste handling. Given that packaging is an important part of our waste equation, we have done the following:
We are actively pursuing our goal of purchasing 100 percent of our paper-based packaging with fiber from responsibly managed forests and recycled sources by the end of 2020;
We have focused on our goal of diverting 50 percent ofback-of-house operational waste from landfills, measured by weight, generated in our U.S. restaurants by the end of 2020;
KFC has made a global sustainability commitment that all plastic-based, consumer-facing packaging will be recoverable or reusable by 2025; and
Taco Bell has replaced its cold drink cups with fully recyclable cold cups across 7,000 of its US restaurants, representing more than 95% of its drinks sold.
These policies and goals reflect our long-term intention to develop and implement more sustainable packaging and waste handling in our restaurants – by building on progress already made and industry innovations and infrastructure developments.
Comprehensive voluntary disclosure on environmental sustainability issues.On a biennial basis, with updates during intervening years, the Company publishes its Global Citizenship & Sustainability Report at http://citizenship.yum.com/. Included in the Report are the Company’s commitments in the material sustainability areas of food, planet and people, which includes sustainable packaging. Progress updates for these commitments, including packaging goals, are included in the Report. In addition, the Company discloses its climate, water and forests practices through CDP on an annual basis.
Collaboration with industry groups.We understand that the journey to more sustainable packaging includes innovation.The Company has joined the NextGen Cup Challenge, an initiative by the NextGen Consortium, a multi-year partnership of food-service industry leaders, to addresssingle-use food packaging waste globally. In its initial phase, the project hopes to advance recoverable solutions for a fiber, hot and cold,to-go cup system. The Company believes that this initiative can be an important step toward unlocking wider innovations and in overcoming the global infrastructure challenges ofsingle-use packaging.
Integrated, executive-level governance structure to oversee the Company’s global sustainability initiatives.Oversight for environmental, social and governance (ESG) issues ultimately resides with the Yum! Brands compliesBoard of Directors, briefed through its Audit Committee on a regular basis. At the operational level, the Chief Communications and Public Affairs Officer oversees the global reputation of Yum! and is responsible for shaping the Citizenship and Sustainability Strategy with the food safetyVice President, Government Relations and labeling laws in every market in which it operates, and is committed to ensuring that our products adhere to the highest standards of food safety and quality. We fully believe that our current efforts regarding foods developed through biotechnology are appropriate for our circumstances.Citizenship & Sustainability.
Rather than diverting attention to GMO issues, our brands are already addressing more material aspects of transparency and clean labeling. We are leaders in our industry in providing more choice for consumers, more transparency about product nutrition, and more nutritional improvement in our ingredients. For example, Taco Bell and Pizza Hut have removed or have plans to remove artificial flavors and colors. Taco Bell is working on additional ingredient simplification by removing artificial preservatives and additives, where possible, and was one of the first quick service restaurants to post ingredient statements and full nutrition information online. To understand our strategies in these areas, we invite all stakeholders to visitwww.yumcsr.com/food/.
With respect to GMOs, we do not believe our shareholders would benefit if mandatory labeling applied to our company, but not to others in our industry. Assuming it was even feasible, GMO labeling would inevitably drive higher costs throughout our system and result in higher prices for our consumers. As a result of the widespread use of GMOs, it would be overly burdensome, if not impossible, to identify every GMO ingredient in every source of food products. Worse yet, this shareholder proposal inappropriately attempts to conflate the issues of GMOs and consumer health. Given the prevalence of GMOs and the determinations of safety made by leading authorities, labeling GMOs could risk creating substantial consumer confusion.
While approaches to mandate GMO labeling are problematic, we do support federal legislation in the United States to establish a national uniform standard for labeling products that are GMO-free, in order to ensure that consumers are not misled. Such an approach would ensure that when consumers wish to purchase products made without GMOs, they are able to do so with confidence. We also support organics labeling regimes, such as the U.S. Department of Agriculture’s current system of certifying products that meet the standards of its National Organics Program. For consumers seeking products that do not intentionally contain GMOs, they already have the option to purchase foods bearing the organic label. As a leading restaurant company, Yum! Brands will continue to evaluate its policies regarding the labeling of GMO ingredients in light of any changes in the scientific and regulatory environments, as well as consumer preferences.
What vote is required to approve this proposal?
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.
What is the recommendation of the Board of Directors?
The Board of Directors recommends that you vote AGAINST this proposal.
YUM! BRANDS, INC. -2016 Proxy Statement36
36 | YUM! BRANDS, INC.-2019 Proxy Statement |
Who are our largest shareholders?
This table shows ownership information for each YUM shareholder known to us to be the owner of 5% or more of YUM common stock. This information is presented as of December 31, 2015,2018, and is based on a stock ownership report on Schedule 13G filed by such shareholders with the SEC and provided to us.
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class | ||||||
Vanguard | 27,226,598 | (1) | 6.31% | |||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355 | ||||||||
Blackrock Inc. | 22,171,722 | (2) | 5.1% | |||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
Corvex Management, LP (and Keith Meister in his capacity as the control | 21,040,195 | (3) | 5.0% | |||||
person of the general partner of Corvex Management, LP) | ||||||||
667 Madison Ave. | ||||||||
New York, NY 10065 |
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class
| ||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355
|
|
23,089,447 |
(1) |
| 7.39% |
| ||
Blackrock Inc. 55 East 52nd Street New York, NY 10055
|
|
21,595,217 |
(2) |
|
6.90% |
|
(1) | The filing indicates sole voting power for |
(2) | The filing indicates sole voting power for | |
How much YUM common stock is owned by our directors and executive officers?
This table shows the beneficial ownership of YUM common stock as of December 31, 20152018 by
each of our directors,
each of the executive officers named in the Summary Compensation Table on page 59, and
all directors and executive officers as a group.
Unless we note otherwise, each of the following persons and their family members have sole voting and investment power with respect to the shares of common stock beneficially owned by him or her. None of the persons in this table (nor the Directors and executive officers as a group) holds in excess of one percent of the outstanding YUM common stock, except Mr. Meister.stock. Please see table above setting forth information concerning beneficial ownership by holders of five percent or more of Yum!’sYUM’s common stock and Mr. Meister’s ownership.stock. Directors
and executive officers as a group, beneficially own approximately 7%0.67%.
The table shows the number of shares of common stock and common stock equivalents beneficially owned as of December 31, 2015.2018. Included are shares that could have been acquired within 60 days of December 31, 20152018 through the exercise of stock options, stock appreciation rights (“SARs”) or distributions from the Company’s deferred compensation plans, together with additional underlying stock units as described in footnote (4) to the table. Under SEC rules, beneficial ownership includes any shares as to which the individual has either sole or shared voting power or investment power and also any shares that the individual has the right to acquire within 60 days through the exercise of any stock option or other right.
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Beneficial Ownership | ||||||||||||||||||||||||
Name | Number of Shares Beneficially Owned(1) | Options/ SARs Exercisable within 60 Days(2) | Deferral Plans Stock Units(3) | Total Beneficial Ownership | Additional Underlying Stock Units(4) | Total | ||||||||||||||||||
Greg Creed(5) | 163,283 | 582,546 | 97,270 | 843,099 | 45,590 | 888,689 | ||||||||||||||||||
Paget Alves | 3,235 | — | — | 3,235 | 3,485 | 6,720 | ||||||||||||||||||
Michael J. Cavanagh | 10,000 | 4,167 | — | 14,167 | 20,938 | 35,105 | ||||||||||||||||||
Christopher Connor | — | — | — | — | 4,857 | 4,857 | ||||||||||||||||||
Brian C. Cornell | 452 | 1,474 | — | 1,926 | 11,297 | 13,223 | ||||||||||||||||||
Tanya Domier | — | — | — | — | 2,611 | 2,611 | ||||||||||||||||||
Mirian M. Graddick-Weir | — | 5,216 | — | 5,216 | 24,158 | 29,374 | ||||||||||||||||||
Thomas C. Nelson | 10,506 | 10,531 | — | 21,037 | 62,142 | 83,179 | ||||||||||||||||||
Justin Skala | 2,150 | 1,064 | — | 3,214 | 7,104 | 10,318 | ||||||||||||||||||
Elane B. Stock | 4,019 | 2,205 | — | 6,224 | 10,575 | 16,799 | ||||||||||||||||||
Robert D Walter(5) | 112,284 | 10,531 | — | 122,815 | 50,438 | 173,253 | ||||||||||||||||||
David Gibbs | 39,266 | 223,900 | 16,439 | 279,605 | 21,589 | 301,194 | ||||||||||||||||||
Tracy Skeans | 6,459 | 58,521 | 9,487 | 74,467 | 1,147 | 75,614 | ||||||||||||||||||
Roger Eaton | 40,162 | 167,075 | 15,878 | 223,115 | 62,910 | 286,025 | ||||||||||||||||||
David Russell | 11,794 | 62,455 | 324 | 74,573 | 14,029 | 88,602 | ||||||||||||||||||
Marc Kesselman | — | 15,360 | 17,739 | 33,099 | 4,953 | 38,052 | ||||||||||||||||||
All Directors and Executive Officers as a Group (17 persons) | 406,593 | 1,154,910 | 157,137 | 1,718,640 | 347,823 | 2,066,463 |
Beneficial Ownership | ||||||||||||||||||||||||
Name | Number of Shares Beneficially Owned(1) | Options/ SARS Exercisable within 60 Days(2) | Deferral Plans Stock Units(3) | Total Beneficial Ownership | Additional Underlying Stock Units(4) | Total | ||||||||||||||||||
Greg Creed | 38,681 | 310,939 | 9,775 | 359,395 | 69,807 | 429,202 | ||||||||||||||||||
Michael J. Cavanagh | 10,000 | 177 | — | 10,177 | 7,379 | 17,556 | ||||||||||||||||||
Brian C. Cornell | — | — | — | — | 487 | 487 | ||||||||||||||||||
David W. Dorman | 56,901 | 10,618 | — | 67,519 | 5,254 | 72,773 | ||||||||||||||||||
Massimo Ferragamo | 53,429 | 10,618 | 43,130 | 107,177 | 34,532 | 141,709 | ||||||||||||||||||
Mirian M. Graddick-Weir | — | 431 | — | 431 | 9,681 | 10,112 | ||||||||||||||||||
Jonathan S. Linen | 33,110 | (5) | 10,618 | — | 43,728 | 35,641 | 79,369 | |||||||||||||||||
Keith Meister | 21,040,195 | (6) | — | — | 21,040,195 | 346 | 21,040,541 | |||||||||||||||||
Thomas C. Nelson | 8,288 | 5,646 | — | 13,934 | 36,051 | 49,985 | ||||||||||||||||||
Thomas M. Ryan | 45,174 | (7) | 10,618 | 9,400 | 65,192 | 22,599 | 87,791 | |||||||||||||||||
Elane B. Stock | — | — | — | — | 2,494 | 2,494 | ||||||||||||||||||
Robert D. Walter | 108,301 | 6,951 | — | 115,252 | 23,586 | 138,838 | ||||||||||||||||||
Patrick J. Grismer | 20,212 | (8) | 135,247 | — | 155,459 | 25,082 | 180,541 | |||||||||||||||||
David C. Novak | 337,650 | 1,447,823 | 1,334,279 | 3,119,752 | 1,088,257 | 4,208,009 | ||||||||||||||||||
Micky Pant | 15,403 | 325,765 | — | 341,168 | 92,189 | 433,357 | ||||||||||||||||||
Brian Niccol | 6,664 | 50,544 | 13,891 | 71,099 | 29,241 | 100,340 | ||||||||||||||||||
Jing-Shyh S. Su | 380,437 | (9) | 1,311,666 | — | 1,692,103 | 194,595 | 1,886,698 | |||||||||||||||||
All Directors and Executive Officers as a Group (23 persons) | 22,267,328 | 4,321,067 | 1,503,675 | 28,092,070 | 1,947,556 | 30,039,626 |
(1) | Shares owned outright. These amounts include the following shares held pursuant to YUM’s 401(k) Plan as to which each named person has sole voting power: |
• Ms. Skeans, 4,927
• Mr. Russell, 1,017
• all executive officers as a group, 5,944 shares
(2) | The amounts shown include beneficial ownership of shares that may be acquired within 60 days pursuant to |
(3) | These amounts shown reflect units denominated as common stock equivalents held in deferred compensation accounts for each of the named persons under our Director Deferred Compensation Plan or our Executive Income Deferral |
(4) | The amounts shown include units denominated as common stock equivalents held in deferred compensation accounts which become payable in shares of YUM common stock at a time (a) other than at termination of directorship/employment or (b) after 60 days. |
(5) |
| |
YUM! BRANDS, INC. -2016 Proxy Statement38
38 | YUM! BRANDS, INC.-2019 Proxy Statement |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons who own more than 10% of the outstanding shares of YUM common stock to file with the SEC reports of their ownership and changes in their ownership of YUM common stock. Directors, executive officers andgreater-than-ten percent shareholders are also required to furnish YUM with copies of all ownership reports they file with the SEC. To our knowledge, based solely on a review of the copies of such reports furnished to YUM and representations that no other reports were required, all of our directors and executive officers complied with all Section 16(a) filing requirements during fiscal 2015,2018, except that theMs. Skeans had one late Form 4 filed on October 9, 2015 by Mr. Novakreport that reported one3 late transaction.transactions (the exercise of a SAR and two sales transactions) due to the broker’s failure to notify the executive officer or Company of the transactions.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”&A”) describes our executive compensation philosophy and program, the compensation decisions of the Management Planning and Development Committee (the “Committee”“Committee”), for our named executive officers (“NEOs”) and factors considered in making those decisions.
YUM! BRANDS, INC. -2016 Proxy Statement39
In 2015 YUM’s overall performance was below expectations. Although our three global brand Divisions (excluding the China and India Divisions) collectively grew operating profit 8% which is in-line with our ongoing growth model target, our China Division’s results did not meet our expectations. As a result, total operating profit grew 7%. These results, combined with the negative impact of foreign currency, resulted in earnings per share (“EPS”) growth of 3% in 2015.
While these overall results were disappointing, YUM delivered the following results, which will help build long-term shareholder value and enhanced shareholder returns:
39 |
EXECUTIVE COMPENSATION |
In October, 20152016 we announced our intentlaunched a series of initiatives to separate YUM’s China business from YUM into an independent, publicly-traded company bytransform the Company, centering on a new multi-year strategy to accelerate growth, reduce volatility and increase capital returns to shareholders. By the end of 2016. This transaction, which is expected2018, we intended to beown less than 1,000 restaurants (at least 98% franchised) and, in 2019, intend to have reduced annual run rate net capital expenditures to approximately $100 million and to have improved our efficiency by lowering general and administrative expenses as a tax-free spin-offpercentage of system sales to 1.7%. The transformation strategy builds upon the principle that a more focused, more franchised and more efficient company will accelerate growth and create significant long-term value for all of our China business, will create two powerful, independent, focusedstakeholders. Our four key growth companies with distinct strategies, financial profilesdrivers, discussed below, are the principal drivers of the Company’s strategic plans to accelerate same-store sales and investment characteristics. The new China entity will become a licensee of YUM in mainland China, with exclusive rights to thenet-new unit growth and serve as our guiding principles for strengthening and growing our KFC, Pizza Hut and Taco Bell conceptsbrands around the world. In 2018, we achieved our goal of becoming at least 98% franchised and 90% company-owned restaurants currently. Upon completioncontinued to make significant progress towards our 2019 goals.
Our successes in 2018 were possible because of our focus on four growth drivers, each a part of our “Recipe for Growth”, which form the basis of the planned spin-off, YUM will become moreCompany’s strategic plans to accelerate same-store sales growth andnet-new restaurant development at KFC, Pizza Hut and Taco Bell around the world. The Company remains focused on building the world’s most loved, trusted and fastest growing restaurant brands by: (i) buildingDistinctive, Relevant and Easy Brands, by increasing investment in consumer insights, core product innovation, digital excellence and initiatives that strengthen the quality, convenience and appeal of the customer
experience; (ii) developingUnmatched Franchise Operating Capability, strengthening how we equip and recruit the best restaurant operators to deliver great customer experiences, and build and protect our brands; (iii) drivingBold Restaurant Development through partnerships with growth-minded franchisees who can expand and penetrate markets with modern restaurants, strong economics and value; and (iv) growingUnrivaled Culture and Talent to strengthen the customer experience and franchise success withbest-in-class people capability and culture.
Strong brands are critical to our ability to deliver sustained growth and to create long-term shareholder value. As a “pure play” franchisorpart of strategic efforts to improve franchise unit level economics, the Company made an investment in Grubhub Inc., partnered with more stable earnings, higherTelepizza and acquired QuikOrder, Inc. during 2018. These actions are designed to expand our delivery capabilities, increase our footprint and scale and enhance our technology capabilities going forward.
2018 was a successful year for the Company and its progress towards the transformation initiative. System sales grew 5%, with same store sales growth of 2%. We achieved net unit growth of 7%, as a result of an increase in our system restaurant count by 3,039 units. Our adjusted operating profit margins, lower capital requirementsalso increased approximately 11% during 2018(see Appendix A: Reconciliation of Adjusted Operating Profit Growth to GAAP Operating Profit Growth). These results provide us with confidence that we are making meaningful progress towards our goal of building and stronger cash flow conversion. Consistent with this strategy YUM is targeting 96% franchisee ownership of its restaurants bystrengthening our global KFC, Pizza Hut and Taco Bell brands. The following performance highlights illustrate the end of 2017.Company’s success in 2018
40 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
Greg Creed became the Company’s new CEO on January 1, 2015, succeeding David C. Novak. The named executive officers (“NEOs”) for 2015 discussed in this CD&A are as follows:
Although Mr. Su retired as Vice Chairman and as Chairman and Chief Executive Officer of YUM Restaurants China on August 18, 2015, he is included because his 2015 total compensation would have placed him among the three most highly-compensated executive officers after the CEO and CFO.
(1) | Note: All comparisons are versus the same period a year |
YUM! BRANDS, INC. -2016 Proxy Statement40
The Company’s NEOs for 2018 are as follows:
Name | Title | |
Greg Creed | Chief Executive Officer | |
David W. Gibbs(1) | President, Chief Operating Officer and Chief Financial Officer | |
Roger G. Eaton(2) | Retired Chief Executive Officer of KFC Division | |
Tracy L. Skeans | Chief Transformation and People Officer | |
David E. Russell | Senior Vice President, Finance and Corporate Controller | |
Marc. L. Kesselman(3) | Former General Counsel, Corporate Secretary and Chief Government Affairs Officer |
(1) | Effective January 25, 2019, Mr. Gibbs was appointed as the Chief Operating Officer of the Company, in addition to his roles as President and Chief Financial Officer. |
(2) | Mr. Eaton retired as Chief Executive Officer of KFC Division, effective January 1, 2019. |
(3) | Mr. Kesselman ceased to be the Company’s General Counsel, Corporate Secretary and Chief Government Affairs Officer, effective June 30, 2018. |
The business performance of the Company is of the utmost importance in how our executives are compensated. Our compensation program is designed to both support our long-term growth model while holding and hold
our executives accountable to achieve key annual results year after year. YUM’s compensation philosophy for the NEOs is reviewed annually by the Committee and has the following objectives:
Pay Element | |||||||||||||||
Objective | |||||||||||||||
Annual Performance-Based Cash Bonuses | Long-Term Equity Performance- Based Incentives | ||||||||||||||
| ✓ | ✓ | ✓ | ||||||||||||
Reward | ✓ | ✓ | |||||||||||||
Emphasize long-term value | ✓ | ||||||||||||||
Drive ownership |
We employ compensation and governance best practices that provide a foundation for our pay-for-performance program and align Company and shareholder interests.
YUM! BRANDS, INC.-2016 Proxy Statement41
The Committee made significant compensation changes for 2015, including changes to CEO pay:
YUM! BRANDS, INC. -2019 Proxy Statement | 41 |
|
Note:2018 Compensation Highlights
In January of 2018, the Committee made the following decisions and took the following actions:
• The Long-Term Incentive value does not matchCommittee set our CEO target compensation levels at the Summary Compensation Table due tomedian of our Executive Peer Group (defined at page 54) for the valueCEO role;
• The Committee set the equity mix for our Global Leadership Team’s long-term incentive awards at 50% stock appreciation rights (“SARs”) and 50% performance share units (“PSUs”); and
• The Committee certified that our 2015 PSU awards under our Performance Share Plan paid out at 172% of SARs/Options for this table being determinedtarget in 2018 based on the full 10-year termCompany’s Total Shareholder Return (“TSR”) at the 79 percentile, compared to the S&P 500, for the CEO rather than2015- 2017 performance cycle (see discussion of PSUs at page 46).
At our May 2018 Annual Meeting of Shareholders, shareholders approved our “Say on Pay” proposal in support of our executive compensation program, with 95% of votes cast in favor of the expected termproposal.
We continued our shareholder outreach program to better understand our investors’ opinions on our compensation practices and respond to their questions. Committee and management team members from compensation, investor relations and legal continued to be directly involved in engagement efforts during 2018 that served to reinforce our open door policy. The efforts included contacting our largest 35 shareholders, representing ownership of all SARs/Options granted by the Company.approximately 50% of our shares (discussed further on page 52).
E. Relationship between Company Pay and Performance
YUM! BRANDS, INC. -2016 Proxy Statement42
To focus on both the shortshort-term and long-term success of the Company, approximately 90% of our NEOs’CEO’s target compensation includes a significant portion, approximately 80%, that is “at-risk”“at-risk” pay, wherewith the compensation paid is determined based on Company results. If short-term and long-term financial and operational target goals are not achieved, then performance-related compensation will decrease. If target goals are exceeded, then performance-related compensation will increase. As demonstrated below, our target pay mix
for NEOsour CEO emphasizes our commitment to “at-risk”“at-risk” pay in order to tie pay to performance. For purposes of this section, our discussion is limited to our CEO, Mr. Creed. Our other NEOs’ target compensation is subject to a substantially similar set of considerations, which are discussed in Section III, 2018 Named Executive Officer Total Direct Compensation and Performance Summary, found at pages 47 to 51 of this CD&A.
42 |
EXECUTIVE COMPENSATION |
Annual Bonus reflects 2015 Performance
The NEOs annual performance reflects the results of the business that the NEO was leading. For Messrs. Creed, Grismer and Novak, annual performance is tied to that of YUM. For the other NEOs, annual performance is weighted 75% for the business that each NEO was leading and 25% for YUM performance. Therefore, bonus payouts for Messrs. Creed, Grismer, Novak and Su were all below target. Two NEOs received above target bonuses: Mr. Pant, whose compensation reflects the strong performance of the KFC Division where he was the CEO for over half the year and Mr. Niccol, who led the Taco Bell Division to perform significantly above target on all performance metrics.
NEO ACTUAL BONUS VS. TARGET
PSU Awards did not Pay Out in 2015
Long-term incentive grants are valued based on grant date value and are meant to be incentive opportunities based on future performance. Therefore, values in the Summary Compensation Table do not represent the value that may ultimately be realized by the executive. Realized value will be determined by actual performance over succeeding years. This means that, consistent with our pay-for performance philosophy, in the case of SARs/Options, our stock price must increase and, in the case of PSUs, we must attain certain performance thresholds before our executives realize any value. As shown below, our 2012 PSU award under our Performance Share Plan did not pay out to our NEOs in 2015 since the Company’s
YUM! BRANDS, INC. -2016 Proxy Statement43
EPS growth during the 2012 - 2014 performance cycle did not reach the required minimum threshold of seven percent (see discussion of PSUs at page 48).
ALL NEO PSU VALUE FOR 2012 – 2014 PERFORMANCE CYCLE
CEO Cash Compensation was Below Target
Our CEO’s cash compensation tracks EPS growth, which is our primary business performance metric. As demonstrated below, our EPS growth in each of the last three years was below our targets of 10%, 20%, and 10% and resulted in our CEO’s actual cash compensation being below target.
CEO CASH COMPENSATION VS. EPS GROWTH
CEO Total Direct Compensation reflects Performance
Similarly with cash compensation, ourThe Committee sets the CEO’s actualtarget for total direct compensation (comprised of base(base salary, annual cash bonus and annual long-term incentive award value at grant date) every year to align appropriately with market data for our Executive Peer Group, taking into account the CEO’s performance, time in role and otherjob-related factors. For 2016 and 2017, the Committee set the CEO’s total compensation below the 50th percentile and for 2018, at the 50th percentile. The progression in
target total compensation reflects the CEO’s growth in role and ongoing continued strong performance.
As demonstrated below, the CEO’s actual total direct compensation was above target for the last three years, was below target reflecting the belowCompany’s above target performanceperformance. For 2018, 67% of our CEO’s pay was in the Company. The SARs award will only provide value to Mr. Novak and Mr. Creed if shareholders receive value through stock price appreciation, and PSU’s will only pay out if our three-year Total Shareholder Return (“TSR”) hits threshold performance.form of long-term equity incentive compensation.
YUM! BRANDS, INC. -2016 Proxy Statement44
CEO TOTAL DIRECT COMPENSATION VS. EPS GROWTH
(1) | The |
(2) | System sales growth excludes the impact of foreign currency translation and, for 2017 and 2016, the impact of a 53rd week in 2016. |
(3) | Total shareholder return is calculated as the growth in YUM share price from the beginning of the respective year until theyear-end, and includes assumed reinvestment of dividends. |
43 |
EXECUTIVE COMPENSATION |
II. Elements of Executive Compensation Program
Our annual executive compensation program has three primary pay components: base salary,salary; annual performance-based cash bonusesbonuses; and long-term equity performance-based incentives. We also offer retirement and other benefits.
Element | Objective | Form | ||
Base salary | Attract and retain high-caliber talent and provide a fixed level of cash compensation. | Cash | ||
Annual Performance-Based Cash Bonuses | Motivate high performance and reward short-term Company, team and individual performance. | Cash | ||
Long-Term Equity Performance-Based Incentives | Align the interests of executives with shareholders and emphasize long-term results. | SARs & PSUs | ||
Retirement and Additional Benefits | Provide for long-term retirement income and basic health and welfare coverage. | Various |
Details on each program element follow.A. Base Salary
We provide base salary to compensate our NEOs for their primary roles and responsibilities and to provide a stable level of annual compensation. A NEO’s actual salary varies based on the role, level of responsibility,
experience, individual performance, future potential and market value. Specific salary increases take into account these factors. The Committee reviews the NEOs’each NEO’s salary and performance annually.
B. Annual Performance-Based Cash Bonuses
Our performance-based annual bonus program, the YUM Leaders’ Bonus Program, is a cash-based plan. The principal purpose of the YUM Leaders’ Bonus
Program is to motivate and reward short-term team and individual performance that drives shareholder value.
YUM! BRANDS, INC. -2016 Proxy Statement45
The formula for calculating the performance-based annual bonus under the YUM Leaders’ Bonus Program is the product of the following:
Base Salary | X | Target Bonus Percentage | X | Team Performance (0 – 200%) | X | Individual Performance (0 – 150%) | = | Bonus Payout (0 – 300%) |
Team Performance
TheIn light of the Company’s transformation, which began in 2016 and continued throughout 2017 and 2018, the Committee carefully considered our strategic direction to become a pure-play franchisor and established team performance measures, targets and weights in January 20152018 after receiving input and recommendations from management. The objectivesteam performance targets were also reviewed by the Board to ensure that the goals support the Company’s overall strategic objectives.
The performance objectivestargets were developed through the Company’s annual financial planning process, which takes into account DivisionKFC, Pizza Hut and Taco Bell (each, a “Division”) growth strategies, historical performance, and the expected future operating environment. These projections included profit growth to achieve our EPS growth target.environment for each Division.
When setting targets for each specific team performance measure, the Company takes into account overall business goals and structures the target to motivate achievement of desired performance consistent with our growth commitment to shareholders.
The performance targets are comparable to those we disclose to our investors and, when determined to be appropriate by our Committee, may be slightly above or below disclosed guidance.
A leverage formula for each team performance measure magnifies the potential impact that performance above or below the performance target will have on the calculation of the annual bonus. This leverage increases the payouts when targets are exceeded and reduces payouts when performance is below target. There is a threshold level of performance
44 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
for all measures that must be met in order for any bonus to be paid. Additionally, all measures have a cap on the level of performance over which no additional bonus will be paid regardless of performance above the cap.
The performance targets are comparable to those we disclose to our investors and, when determined to be appropriate by our Committee may be slightly above or below disclosed guidance.approve adjustments to Division targets or may be adjusted duringexclude certainpre-established items from the yearfinancial results used to determine the annual bonus when doing so is consistent with the objectives and intent at the time the targets were originally set.set in order to focus executives on the fundamentals of the Company’s underlying business performance.
As part of the 2018 target-setting process the Committee decided that KFC and/or YUM Operating Profit growth performance for 2018 annual incentive
purposes should be measured adjusting for certain factors that were not considered indicative of underlying business performance for the year. These factors included amounts associated with Special Items (as defined in our Form 10K), the impacts of foreign currency translation, the profit dilution resulting from the refranchising of company-owned stores, general and administrative reductions, incremental Pizza Hut US system advertising expense we agreed to as part of the Pizza Hut Transformation Agreement and the impact of a 2018 required change in the accounting standards for revenue recognition. For further details, refer to Appendix A: Reconciliation of Adjusted Operating Profit Growth.
YUM! BRANDS, INC. -2016 Proxy Statement46
Detailed Breakdown of 20152018 Team Performance
The team performance targets, actual results, weights and overall performance for each measure for our NEOs are outlined below. The long-term drivers of value for YUM are profit growth, same-store sales growth and new store development. Accordingly, the Committee selected these performance measures because they are key drivers of long-term value creation.for
the Company’s annual incentive plan and were included at both the corporate and divisional levels. For Divisions, the team performances are weighted 75% on Division operating measures and 25% on YUM team performance.
TEAM PERFORMANCE | ||||||||||||
Earned Award | Final Team | |||||||||||
NEO | Measures | Target | Actual | as % of Target | Weighting | Performance | ||||||
Creed | Weighted Average Divisions’ Team Performances(1) | 106 | 50% | 53 | ||||||||
Grismer | Earnings Per Share Growth | 10% | 3% | 0 | 50% | 0 | ||||||
Novak | (excluding special items) | |||||||||||
FINAL YUM TEAM FACTOR | 53 | |||||||||||
Pant | Operating Profit Growth(2,7) | 8% | 9% | 115 | 50% | 57 | ||||||
System Same-Store Sales Growth | 3% | 3% | 110 | 20% | 22 | |||||||
System Net Builds(5) | 425 | 500 | 200 | 20% | 40 | |||||||
System Customer Satisfaction | Weighted Average(4) | 137 | 10% | 14 | ||||||||
Total Weighted Team Performance — KFC (75%) | 133 | |||||||||||
Total Weighted Team Performance — YUM (25%) | 53 | |||||||||||
FINAL KFC TEAM FACTOR(3) | 113 | |||||||||||
Niccol | Operating Profit Growth(2) | 6% | 12% | 200 | 50% | 100 | ||||||
System Same-Store Sales Growth | 3% | 5% | 190 | 20% | 38 | |||||||
System Net Builds | 125 | 192 | 200 | 20% | 40 | |||||||
System Customer Satisfaction | 68% | 70% | 177 | 10% | 18 | |||||||
Total Weighted Team Performance — Taco Bell (75%) | 196 | |||||||||||
Total Weighted Team Performance — YUM (25%) | 53 | |||||||||||
FINAL TACO BELL TEAM FACTOR(3) | 160 | |||||||||||
Su | Operating Profit Growth(2) | 27% | 8% | 0 | 50% | 0 | ||||||
Same Store Sales Growth | 7% | (4)% | 0 | 20% | 0 | |||||||
System Gross New Builds | 650 | 743 | 200 | 20% | 40 | |||||||
System Customer Satisfaction | Weighted Average(6) | 183 | 10% | 18 | ||||||||
Total Weighted Team Performance — China (75%) | 58 | |||||||||||
Total Weighted Team Performance — YUM (25%) | 53 | |||||||||||
FINAL CHINA TEAM FACTOR(3) | 57 |
Team Performance | ||||||||||||||||||||||
NEO | Measures | Target | Actual | Earned Award as % of Target | Weighting | Final Team Performance | ||||||||||||||||
Creed
|
Adjusted Operating Profit Growth1
|
|
12%
|
|
|
11.4%
|
|
|
92
|
|
|
50%
|
|
|
46
|
| ||||||
Gibbs
|
System Same-Store Sales Growth
|
|
3.0%
|
|
|
2.0%
|
|
|
75
|
|
|
25%
|
|
|
19
|
| ||||||
Skeans
Russell(2)
Kesselman(2) |
System Net New Units
|
|
1,645
|
|
|
3,039
|
|
|
200
|
|
|
25%
|
|
|
50
|
| ||||||
FINAL YUM TEAM FACTOR | 115 | |||||||||||||||||||||
Eaton
|
Adjusted Operating Profit Growth1
|
|
12%
|
|
|
12.8%
|
|
|
115
|
|
|
50%
|
|
|
58
|
| ||||||
System Same-Store Sales Growth
|
|
3.0%
|
|
|
2.4%
|
|
|
84
|
|
|
25%
|
|
| 21
|
| |||||||
System Net New Units
|
|
850
|
|
|
1,134
|
|
|
200
|
|
|
25%
|
|
|
50
|
| |||||||
Total Weighted Team
|
|
129
|
| |||||||||||||||||||
Total Weighted Team
|
|
115
|
| |||||||||||||||||||
FINAL KFC TEAM FACTOR
|
|
126
|
|
(1) | Refer to Appendix A: Reconciliation of Adjusted Operating Profit Growth, as shown above, to GAAP Operating Profit Growth. |
(2) |
|
YUM! BRANDS, INC. -2016 Proxy Statement47
YUM! BRANDS, INC. -2019 Proxy Statement | 45 |
EXECUTIVE COMPENSATION |
Individual Performance
Each NEO’s Individual Performance Factor is determined by the Committee based upon its subjective determination of the NEO’s individual performance for the year, including consideration of specific objective individual performance goals set at the beginning of the year.
C. 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
Equity Mix
Each year, the Committee reviews the mix of long-term incentives to determine if it is appropriate to continue predominantly using SARs/Options as the long-term incentive vehicle.incentives. For 2015,2018, the Committee continued to choose SARs/OptionsSARs and PSU awards because these equity vehicles focus and reward management to enhancefor enhancing long-term shareholder value, thereby aligning our NEOs with the interests of our shareholders.
At the beginning of 2015,2018, the Committee determined each NEO’sa target grant value for each member of the Global
Leadership Team and the split of that value between SARs/OptionsSARs and PSU grants. For each NEO (other than Mr. Russell), the CEO, his target grant value was split 75% SARs/Options50% SARs and 25%50% PSUs. For the other NEOs, their target grant values were split 80% SARs/Options and 20% PSUs. The Committee awarded predominantly SARs/OptionsMr. Russell received 100% SARs because it believed it aligns executives and incentives themPSUs are not granted to drive a long-term growth in the business.Company employees at his level. For each NEO, the breakdown between SARs/OptionsSARs award values and PSU award values can be found under the Summary Compensation Table, page 6259 at columns e and f.
Stock Appreciation Rights/Stock OptionsRights Awards
The Committee believes that SARs reward value creation generated from sustained results. In 2015,2018, we granted to each of our NEOs SARs/OptionsSARs which haveten-year terms and vest over at least four years. The exercise price of each SARs/Options grantSAR award was based on the closing market price of the underlying YUM common stock on the date of grant. Therefore, SARs/OptionsSAR awards will only have value if our NEOs are successful in increasing the share price above the awards’ exercise price.
Performance Share PlanAwards
UnderPursuant to the Company’s Performance Share Plan under our Long Term Incentive Plan (“LTIP”), we granted to each of our NEOs (other than Mr. Russell) PSU awards in 2015.2018. PSU awards are earned equally based on the Company’s3-year average TSR relative to the companies in the S&P 500.500 Consumer Discretionary Index and on compound annual3-year growth of the Company’s Earnings Per Share (“EPS”). Incorporating TSR and EPS supports the Company’spay-for-performance philosophy while diversifying performance criteria by using measures not used in the annual bonus plan and aligning our NEOs’ reward with the creation of shareholder value.
The threshold and maximum share If TSR is negative, payouts are aggressively set, exceeding market best practice.may not exceed the target irrespective of the actual TSR percentile ranking of the Company. The target, threshold and maximum number of shares that may be paid out under these awards for each NEO are described at page 64.61.
For the performance period covering the 20152018 – 2017 calendar years,2020, each NEO (other than Mr. Russell) will earn a percentage of his or her target PSU award, with 50% of the payout based on the achieved TSR percentile ranking and the other 50% based on EPS growth. Indicative payouts as a percentage of target are as set forth in the charttable below:
Threshold | Target | Max. | Threshold | Target | Maximum | |||||||||||||||||
TSR Percentile Ranking | <40% | 40% | 50% | 90% | <30% | 30 | % | 50 | % | 75 | % | |||||||||||
Payout as % of Target | 0% | 50% | 100% | 200% | 0% | 35 | % | 100 | % | 200 | % | |||||||||||
EPS Growth(3-year CAGR, ex foreign currency translation) | <7% | 7 | % | 12 | % | 17 | % | |||||||||||||||
Payout as % of Target | 0% | 35 | % | 100 | % | 200 | % |
We set target long-term incentive pay at the 50thpercentile. Therefore, for on-target performance we pay at the median, which is consistent with market practice.
46 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
Dividend equivalents will accrue during the performance period and will be distributed as incrementaladditional shares but only in the same proportion and at the same time as the original awards are earned. If no awardsshares are earned, no dividend equivalents will be paid. The awards are eligible for deferral under the Company’s Executive Income Deferral (“EID”) Program. As discussed on page 43, PSU awards granted in 2012 did not pay out since YUM did not attain the minimum performance threshold. (These awards would have paid out during 2015 had the Company’s average earnings per share during the 2012 – 2014 performance period reached the required minimum average growth threshold of seven percent.)
YUM! BRANDS, INC. -2016 Proxy Statement48
Below is a summary of each of our named executive officers’NEOs’ total direct compensation – which includes base salary, annual cash bonus, PSUs and SARslong-term incentive awards – and an overview of their 20152018 performance relative to our annual and long termlong-term incentive performance goals. The
process the Committee used to determine each officer’s 20152018 compensation is described more fully in “How Compensation Decisions Are Made” beginning on page 56.52.
CEO Compensation
CEO Compensation
Greg Creed |
Chief Executive Officer |
20152018 Performance Summary
Our Board, under the leadership of the Committee Chair, approved Mr. Creed’s goals at the beginning of the year and conducted amid-year andyear-end evaluation of his performance. These evaluations included a review of his leadership pertaining to the achievement of his goals that included business results, leadership in the development and implementation of Company strategies, and development of Company culture and talent.
The Committee determined that Mr. Creed’s overall performance for 2015 was below target, and awarded him2018 merited an individual factor of 90.125. This individual factor was combined with YUM’s team factor of 53115 (discussed at page 47), resulted in Mr. Creed receiving 48% of44) to calculate his 2015 targetannual cash bonus. This determination was based on the Committee’s subjective assessment of Mr. Creed’s performance against his goals which included the following items (without assigning a weight to any particular item):
YUM Adjusted Operating Profit Growth of approximately 11%
2015Worldwide system sales growth of 5%
Net new restaurant openings of 3,039; net unit growth of 7%
KFC’s and Taco Bell’s above target performance for Adjusted Operating Profit Growth
KFC’s, and Pizza Hut International’s above target performance for System Net New Units
Management of the Company during the second year of its transformation into a pure-play franchisor
Leadership during the strategic transactions involving Grubhub Inc., Telepizza and QuikOrder, Inc.
Development of leadership and leadership bench, and fostering customer-focused employee culture
2018 Committee Decisions
Mr. Creed was promoted to Chief Executive Officer onIn January, 1, 2015. The Committee set Mr. Creed’s compensation taking into account this promotion noting that all elementswas adjusted as follows:
Base salary was increased 3%;
Annual cash bonus target was increased to 175% of base salary; and
Grant value of long-term incentive equity awards were at or belowincreased by 33% recognizing his performance in leading the 50thCompany in implementing its Recipe for Growth, time in role and impact on the business.
These decisions positioned Mr. Creed’s total target compensation to approximately the 50th percentile of the Company’s Executive Peer Group.
YUM! BRANDS, INC. -2019 Proxy Statement | 47 |
EXECUTIVE COMPENSATION |
The graphics below illustrate Mr. Creed’s annual cash bonus target was set at 150% of his base salary.
The table below summarizes how the annual performance-based incentive award was calculated based on the formula described above at page 46 for Mr. Creed:
2015 BONUS AWARDdirect compensation:
Other NEO 2018 Total Direct Compensation
| President, Chief Operating Officer and Chief Financial Officer |
The graphic below illustrates Mr. Creed’s 2015 direct compensation:
2015 TOTAL DIRECT COMPENSATION
YUM! BRANDS, INC. -2016 Proxy Statement49
Other NEO 2015 Total Direct Compensation
20152018 Performance Summary
The Committee determined that Mr. Grismer’sGibbs’ performance asfor the Chief Financial Officer was on target and approvedyear merited a 100 individual performance factor. Despite below target financial performance, the Committee determined that Mr. Grismer positively impacted the Company’s long-term opportunities by driving Company-wide strategic growth priorities and Division initiatives, and also by his leadership in the review of strategic options that led to the Company’s announcement to separate the Company into two independent publicly-traded companies. Mr. Grismer’s individual performance factor, combined with a team factor of 53, resulted in him receiving 53% of his target bonus.
2015 Committee Decisions
The Committee approved the foregoing increases in Mr. Grismer’s compensation in recognition of his sustained performance and several years in the role of CFO. These increases brought Mr. Grismer’s total direct compensation to between the 50thand 75thpercentile of the Executive Peer Group for his position.
On December 5, 2015, Mr. Grismer notified the Company that he intended to resign from the Company on February 19, 2016. The Company and Mr. Grismer executed a letter of understanding at that time in which the Company agreed to accelerate a portion of Mr. Grismer’s unvested SARs having an intrinsic fair value of $500,000 on February 19, 2016, Mr. Grismer’s departure date from the Company.
The table below summarizes how the annual performance-based incentive award was calculated based on the formula described above at page 46 for Mr. Grismer:
2015 BONUS AWARD
The graphic below illustrates Mr. Grismer’s 2015 direct compensation:
2015 TOTAL DIRECT COMPENSATION
YUM! BRANDS, INC. -2016 Proxy Statement50
2015 Performance Summary
Mr. Novak retired as Chief Executive Officer of the Company and was appointed Executive Chairman effective January 1, 2015. For 2015, the Committee awarded Mr. Novak a bonus based on the Company’s team factor of 53.
2015 Committee Decisions
As discussed at page 42 the Committee reviewed a variety of external and internal factors, targeting total compensation and setting pay at the 50th percentile for Mr. Novak in his new role as Executive Chairman. Applying this philosophy, the Committee set Mr. Novak’s total target compensation for 2015 at $5 million as described below. In making this decision, the Committee took into consideration Mr. Novak’s responsibilities as Executive Chairman and his expected substantial contribution to the Company in 2015 including supporting Mr. Creed, as the Company’s new CEO.
The table below summarizes how the annual performance-based incentive award was calculated based on the formula described above at page 46 for Mr. Novak:
2015 BONUS AWARD
The graphic below illustrates Mr. Novak’s 2015 direct compensation:
2015 TOTAL DIRECT COMPENSATION
YUM! BRANDS, INC. - 2016 Proxy Statement51
2015 Performance Summary
Mr. Pant was Chief Executive Officer of the Company’s KFC Division prior to being named Chief Executive Officer of the China Division on August 18, 2015. The Committee determined Mr. Pant’s performance was above target and approved a 130135 individual performance factor. The Committee recognized Mr. Pant forGibbs’ performance in the strong resultsposition of President and CFO of the KFC Division, especially unit expansionCompany, including driving shareholder value creation and strong same store sales results. The Committeereturns through optimization of our capital structure, increasing restaurant development, driving YUM’s Adjusted Operating Profit Growth of 11%, leading the effort to refranchise a significant number of Company-owned restaurants, and in leading the continued implementation of the Company’s transformation strategy. Mr. Gibbs was also acknowledgedrecognized for his leadership in taking over asduring the China Division CEOstrategic transactions involving Grubhub Inc., Telepizza and reinvigorating the brand culture and planning the China separation.QuikOrder, Inc. Mr. Pant’sGibbs’ individual performance factor was combined with a team factor of 113115 (discussed at page 47), resulted in him receiving 147% of44) to calculate his targetannual cash bonus.
Effective January 25, 2019, Mr. Pant’s team factor for 2015Gibbs was based solely on KFC Division results – which were driven by his leadership priorpromoted to his assignment to China – as agreed to by Mr. PantPresident, Chief Operating Officer and the Committee at the time of his promotion to CEO of the China Division.Chief Financial Officer.
20152018 Committee Decisions
In January, Mr. Pant’sGibbs’ compensation was adjusted as follows:
Base salary was increased 7%;
In connectionAnnual cash bonus target remained unchanged at 105% of base salary; and
Grant value of long-term incentive equity awards were increased by 25% to better align with his mid-year promotionmarket compensation norms and internal peer equity, as well as to CEO of the China Division,reflect performance and time in role.
These decisions positioned Mr. Pant’s compensation was further adjusted as follows:
These increases brought Mr. Pant’sGibbs’ total direct compensation to between the 50th50th and 75th75th percentile of the Executive Peer Group.
The table below summarizes how the annual performance-based incentive award was calculated based on the formula described aboveGroup (defined at page 4654) for Mr. Pant:his position.
2015 BONUS AWARD
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EXECUTIVE COMPENSATION | ||||||||
The graphic below Mr. Pant’s 2015 direct compensation:
2015 TOTAL DIRECT COMPENSATION
YUM! BRANDS, INC. - 2016 Proxy Statement52
Roger G. Eaton Retired Chief Executive Officer of |
20152018 Performance Summary
The Committee determined Mr. Niccol’sEaton’s performance as the Chief Executive Officer, Taco BellCEO, KFC Division, was significantly above target and approvedmerited a 150125 individual performance factor. Under Mr. Niccol’sEaton’s leadership, Taco Bell Division’s operating performanceKFC achieved significantly above-target net new unit growth, as well as above-target Adjusted Operating Profit Growth. Mr. Eaton was very strongalso recognized for increasing KFC delivery capabilities to over 10,000 restaurants, driving compliance with 5% same-store sales growthfood safety, information security and operating profit growthForeign Corrupt Practices Act (“FCPA”) standards, and providing leadership in the refranchising of 12%.a significant number of restaurants. Mr. Niccol’sEaton’s individual performance factor was combined with a team factor of 160126 (discussed at page 47), resulted in him receiving 240% of44) to calculate his targetannual cash bonus.
20152018 Committee Decisions
In January, Mr. NiccolEaton’s compensation was promoted to CEO of the Taco Bell Division, effective, January 1, 2015. In recognition of this promotion, the Committee made the following changes to Mr. Niccol’s target compensation for 2015:adjusted as follows:
Base salary was increased 3% percent;
Annual cash bonus target remained unchanged at 100% of base salary; and
Grant value of long-term incentive equity awards remained unchanged from previous year.
These increases broughtdecisions positioned Mr. Niccol’sEaton’s total direct compensation to between the 50th50th and 75th75th percentile of the Executive Peer Group (defined at page 54) for his position.
The table below summarizes how the annual performance-based incentive award was calculated based on the formula described above at page 46 for Mr. Niccol:
2015 BONUS AWARD
| Chief Transformation and People Officer |
The graphic below illustrates Mr. Niccol’s 2015 direct compensation:
2015 TOTAL DIRECT COMPENSATION
YUM! BRANDS, INC. - 2016 Proxy Statement53
20152018 Performance Summary
Mr. Su was Chairman and Chief Executive Officer of the China Division prior to his retirement on August 18, 2015. Following his retirement, Mr. Su served as Executive Advisor to the Chief Executive Officer of Yum! Restaurants China until February 15, 2016.
The Committee determined his overall individualthat Ms. Skeans’ performance for 2015 was below target and approvedmerited a 65125 individual performance factor. ThisThe Committee recognized Ms. Skeans for providing strategic leadership in the organizational transformation of the Company, as well as her efforts in cultivating the Company’s culture and talent. Ms. Skeans was based upon the China Division not achieving operating profit or system sales growth targets. Mr. Su’salso recognized for driving compliance with food safety, information security and FCPA standards and improving brand protection and crisis communications protocols. Ms. Skeans’ individual performance factor was combined with a team factor of 57, resulted115 (discussed at page 44) to calculate her annual cash bonus.
2018 Committee Decisions
In January, Ms. Skeans’ compensation was adjusted as follows:
Base salary was increased 12%;
Annual cash bonus target remained unchanged at 85% of base salary; and
Grant value of long-term incentive equity awards was increased by 14% to better align with market compensation norms and internal peer equity, as well as to reflect performance and her time in him receiving 37%the role.
Ms. Skeans also received a CEO Award SARs grant of $1,000,000, recognizing her leadership for accelerating diversity & inclusion initiatives, championing the use of repeatable models around the globe, and developing and implementing talent and leadership programs that drove attraction, retention andbest-in-class engagement scores.
These decisions positioned Ms. Skeans’ total direct compensation at slightly above the 50th percentile of the Executive Peer Group (defined at page 54) for her position.
YUM! BRANDS, INC. -2019 Proxy Statement | 49 |
EXECUTIVE COMPENSATION |
David E. Russell Senior Vice President, Finance and Corporate Controller |
2018 Performance Summary
The Committee determined Mr. Russell’s performance for the year merited a 140 individual performance factor. The Committee recognized Mr. Russell’s performance in leading the effort to implement a new financial management system and in supporting the Company’s transformation strategy. Mr. Russell was also recognized for his targetleadership during the strategic transactions involving Grubhub Inc., Telepizza and QuikOrder, Inc. Mr. Russell’s individual performance factor was combined with a team factor of 120 (discussed at page 44) to calculate his annual cash bonus.
20152018 Committee Decisions
In January, Mr. Russell’s compensation was adjusted as follows:
Base salary was increased 3%;
Annual cash bonus target remained unchanged at 65% of base salary; and
Target grant value of long-term incentive equity awards remained unchanged.
These decisions positioned Mr. Russell’s total direct compensation between the 50th and 75th percentile of the Executive Peer Group (defined at page 54) for his position.
Marc L. Kesselman Former General Counsel, Corporate Secretary and Chief Government Affairs Officer |
2018 Performance Summary
Mr. Su retiredKesselman was the Company’s General Counsel, Corporate Secretary and Chief Government Affairs Officer through June 30, 2018, and is no longer an employee of YUM. He is included in the Summary Compensation Table as Chairmanrequired by SEC rules because his compensation while an employee of YUM was at a level that would have required disclosure had he been an executive officer at the end of 2018.
The Committee approved a 100 individual performance factor for Mr. Kesselman, in connection with his departure from the Company.
2018 Committee Decisions
In January, Mr. Kesselman’s compensation was adjusted as follows:
Base salary was increased 2%;
Annual cash bonus target remained unchanged at 85% of base salary; and CEO
Grant value of long-term incentive equity awards remained unchanged from previous year.
These decisions positioned Mr. Kesselman’s total direct compensation at approximately the 50th percentile of the China Division on August 19, 2015. As part of Mr. Su’s agreement with the Company, the Company entered into a retirement agreement with Mr. Su and agreed to make tax equalization payments to Mr. Su (as if he were a resident of Hong Kong) for China income tax which exceeds the marginal Hong Kong tax rate incurred by him with respect to his stock option and SAR exercises and deferral plan payouts up to a maximum benefit of $5 million. During 2015 and after his retirement, Mr. Su had received $3.2 million of this tax equalization benefit under this agreement (in addition to approximately $1.9 million in tax equalization benefits received prior to his retirement during 2015).
The table below summarizes how the annual performance-based incentive award was calculated based on the formula described aboveExecutive Peer Group (defined at page 4654) for Mr. Suhis position.
2015 BONUS AWARD
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EXECUTIVE COMPENSATION | ||||||||
The graphic below illustrates the 2018 total direct compensation of our Named Executive Officers, other than Mr. Su’s 2015 direct compensation:Creed and Mr. Kesselman:
2015 TOTAL DIRECT COMPENSATION
Neo Compensation Summary
YUM! BRANDS, INC. - 2016 Proxy Statement54
IV. Retirement and Other Benefits |
Retirement Benefits
We offer several types of competitive retirement benefits.
The YUM! Brands Retirement Plan (“Retirement Plan”) is a broad-based qualified plan designed to provide a retirement income based on years of service with the Company and average annual earnings. Mr. Novak is the only NEO who actively participates in the Retirement Plan (theThe plan is US basedU.S.-based and was closed to new entrants in 2001). Messrs. Creed, Grismer, Pant, Su2001. Mr. Gibbs, Ms. Skeans and NiccolMr. Russell are not active participants in the Retirement Plan; however,Plan and Mr. Creed maintains a balance in the Retirement Plan from the years that he was a participant.
For executives hired orre-hired after September 30, 2001, the Company implemented the Leadership Retirement Plan (“LRP”). This is an unfunded, unsecured account-based retirement plan which allocates a percentage of pay to an account payable to the executive following the later to occur of the executive’s separation of employment from the Company or attainment of age 55. Beginning in 2013,For 2018, Mr. Novak started receivingKesselman was eligible for the LRP. Under the
LRP, Mr. Kesselman received an annual allocation to his LRP account equal to 9.5%8% of his base salary and target bonus, and will receive an annual earnings credit on his account balance equal to 120% of the applicable federal rate. For 2015, Messrs. Grismer, Pant and Niccol were also eligible for the LRP. Under the LRP, they receive an annual allocation to their accounts equal to a percentage of their base salary and target bonus (9.5% for Mr. Grismer, 20% for Mr. Pant and 9.5% for Mr. Niccol) and an annual earnings credit of 5%.
on the balance.
The Company provides retirement benefits for certain international employees through the YUM! Brands International Retirement Plan (“YIRP”) and the Third Country National Plan (“TCN”). The YIRP is an unfunded, non-qualified plan that provides benefits similar to, and pursuant to the same terms and conditions as, the Retirement Plan without regard to Internal Revenue Service limitations on amounts of includible compensation and maximum benefits. The TCN is an unfunded, unsecured account-based retirement plan that provides an annual contribution floor ofbetween 7.5% and 15% of salary and target bonus and an annual earnings credit of 5% on the balance. The Company can add an additional 7.5%, for a maximum totallevel of contribution of 15% annually. Mr. Su is based on the participants’ role and their home country retirement plan. Messrs. Creed and Eaton are the only NEONEOs who participates in the YIRP. Mr. Creed is the only NEO who participatesparticipate in the TCN. Under this plan, Mr.Messrs. Creed receivesand Eaton each receive an annual contribution equal to 15% of his base salary and target bonus and an annual earnings credit of 5%.
Benefits payable under these plans are described in more detail beginning on page 68.66.
YUM! BRANDS, INC. -2019 Proxy Statement | 51 |
EXECUTIVE COMPENSATION |
Medical, Dental, Life Insurance and Disability Coverage
We also provide other benefits such as medical, dental, life insurance and disability coverage to each NEO through benefit plans, which are also provided to all eligible U.S.-based salaried employees. Eligible employees can purchase additional life, dependent life
and accidental death and dismemberment coverage as part of their employee benefits package. Our broad-based employee disability plan limits the annual benefit coverage to $300,000.
Perquisites
Mr. CreedThe Company provides very limited number of perquisites. The CEO and Mr. Novak arehis spouse were required to use the Companycharter or approved commercial aircraft for personal as well as business travel pursuant to the Company’s executive security program established by the Board of Directors. The Board’s securityOur program also covers Mrs. Creed and Mrs. Novak. The Board has considered past instances of potential safety concerns for the CEO and their spouses and based on a security study completed by a security expert and the expert’s advice decided to require Mr. Creed and Mr. Novak to use the corporate aircraft for personal travel. We do not provide tax gross-ups on the personal use of the Company aircraft. In 2015, the Committee approved timeshare arrangements beginning in 2015 for Mr. Creed and Mr. Novak with respect to their personal use of aircraft. The arrangement provides that upon the executiveCEO reaching $200,000 in incremental costs for his personal use, the executive’s timeshare agreements will be triggered and any incremental costs for personal aircraft use of corporate aircraft
above $200,000 will be reimbursed to the Company in accordance with the requirements of the Federal Aviation Administration regulations andregulations. We do not provide taxgross-ups on the time share agreements.
The Company pays forpersonal use of the charter or approved commercial aircraft. For 2018, the incremental cost of the transmissionMr. Creed’s personal use of home security information from Mr. Novak’s home to our security department.charter or commercial aircraft was $134,043.
Mr. Su, who retired as Chairman and CEO of the China Division in August of 2015, receives perquisites related to his overseas assignment which were part of his original compensation package and ratified by the Committee. The Committee reviewed these benefits during 2015 and has
YUM! BRANDS, INC. - 2016 Proxy Statement55
elected to continue to provide them, noting that this practice is consistent with how we treat other executives on foreign assignment. Mr. Su’s agreement stipulates that the following will be provided:
On August 19, 2015, Mr. Su retired as Chairman and CEO of the China Division and assumed the role of Executive Advisor to the new CEO of the China Division, Micky Pant. Mr. Su retired as an employee of the Company on February 15, 2016. At the time of his retirement as Chairman and CEO of the China Division, the Company agreed to make tax equalization payments to Mr. Su (as if he were a resident of Hong Kong) for China income tax incurred by him with respect to his stock option and SAR exercises and deferral plan payouts up to a maximum of $5 million. At the end of 2015, Mr. Su had benefitted from approximately $3.2 million in tax equalization payments under the agreement as reported at page 54.
V. How Compensation Decisions Are Made |
Shareholder Outreach, Engagement and 20152018 Vote on NEO Compensation
At our 20152018 Annual Meeting of Shareholders, 65%95% of votes cast on our annual advisory vote on NEO compensation were in favor of our NEOs’ compensation program, as disclosed in our 20152018 proxy statement. During 2015,2018, we continued our shareholder outreach program to better understand our investors’ opinions on our compensation practices and respond to their questions. Committee members and management team members from compensation, investor relations and legal continued to be directly involved in engagement efforts during 2015 that served to reinforce our open door policy. The efforts included:
Contacting our largest 35 shareholders, representing ownership of approximately 50% of our shares
Dialogue with proxy advisory firms
Investor road shows and conferences
Presenting shareholder feedback to the Committee
Considering letters from shareholders
Our annual engagement efforts allow many shareholders the opportunity to provide feedback. The Committee carefully considers shareholder and advisor
feedback, among other factors discussed in this CD&A, in making its compensation decisions. Shareholder feedback, including the 20152018 voting results on NEO compensation, has influenced and reinforced a number of compensation design changes over the years, including:
Continued benchmarking of CEO compensation at market median.
Shareholder feedback further influencedContinued adjustment of CEO long-term equity incentive mix from a mix comprised of 75% SARs and 25% PSUs in 2016 to a mix comprised of 50% SARs and 50% PSUs in 2017 and 2018.
Moving to two performance metrics under our PSUs – TSR and EPS, beginning with PSU grants in 2017.
Changed PSU award metrics to include the changesCompany’s3-year average TSR relative to our compensation program for 2015 described above. the companies in the S&P 500 Consumer Discretionary Index, rather than the average relative to the entire S&P 500.
The Company and the Committee appreciate the feedback from our shareholders and plan to continue these engagement efforts.
52 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
Role of the Committee
Compensation decisions are ultimately made by the Committee using its judgment, focusing primarily on each NEO’s performance against his financial and strategic objectives, qualitative factors and the Company’s overall performance. The Committee considers the total compensation of each NEO and
retains discretion to make decisions that are reflective of overall business performance and each executive’s strategic contributions to the business. In making its compensation decisions, the Committee typically follows the annual process described below:
YUM! BRANDS, INC. - 2016 Proxy Statement56
COMMITTEE ANNUAL COMPENSATION PROCESS
COMMITTEE ANNUAL COMPENSATION PROCESS NOVEMBER JANUARY MARCH AUGESTReviews competitive analysis/benchmarking for CEO and direct reports Reviews bonus and performance share plan metrics, targets, and leverage recommendations for the following year Reviews market recommendations to Board Reviews Compensation trends Mid-Year update to full Board on CEOs progress against goalsEvaluates feedback from shareholders and proxy advisors Evaluates and approves CEO and direct reports performance against pre-established goals and compensation decisions Approves bonus and performance share plan results for the prior year Approves bonus and performance share plan metrics, targets and leverage for the current year Reviews tally sheets Confirms CEO and CEOs direct reports meet ownership guidelines Completes compensation risk assessment Conducts independence analysis of compensation consultant retaining sole authority to continue or terminate its relationship with outside advisors, including consultant Review and approves inclusion of CD&A in proxy statement
Role of the Independent Consultant
The Committee’s charter states the Committee may retain outside compensation consultants, lawyers or other advisors. The Committee retains an independent consultant, Meridian Compensation Partners, LLC (“Meridian”), to advise it on certain compensation matters. The Committee has instructed Meridian that:
it is to act independently of management and at the direction of the Committee;
its ongoing engagement will be determined by the Committee;
it is to inform the Committee of relevant trends and regulatory developments;
it is to provide compensation comparisons based on information that is derived from comparable businesses of a similar size to the Company for the NEOs; and
it is to assist the Committee in its determination of the annual compensation package for our CEO and other NEOs.
The Committee considered the following factors, among others, in determining that Meridian is independent of management and its provision of services to the Committee did not give rise to a conflict of interest:
Meridian did not provide any services to the Company unrelated to executive compensation. Meridian has no business or personal relationship with any member of the Committee or management. Meridian’s partners and employees who provide services to the Committee are prohibited from owning YUM stock per Meridian’s firm policy.
EXECUTIVE COMPENSATION |
Comparator Compensation Data
Our Committee uses an evaluation of how our NEO target compensation levels compare to those of similarly situated executives at companies that comprise our executive peer group (“Executive Peer Group”)Group (defined below) as one of the factors in setting executive compensation. The Executive Peer Group is made up of retail, hospitality, food, nondurable consumer goods companies, specialspecialty eatery and quick service
restaurants, as these represent the sectors with which the Company is most likely to compete for executive talent. The companies selected from these sectors must also be reflective of the overall market characteristics of our executive talent market, relative leadership position in their sector, size as measured by revenues, complexity of their business, and in some cases global reach.
Executive Peer Group
The Committee established the current peer group of companies (the “Executive Peer Group”) for all NEOs at the end of 20142016 for pay determinations beginning in 2015.2017. The 2015composition of the Executive Peer Group was updated at that time to allow for more relevant comparisons following the separation of Yum China Holdings, Inc. in October 2016, given the reduced size of the Company and the current complexities of its business. This Executive Peer Group is comprised of the following companies:
YUM! BRANDS, INC. -2016 Proxy Statement57
AutoZone Inc. Domino's Pizza, Inc. General Mills, Inc. L Brands Inc. Sherwin-William Co. Dr. Pepper Snapple Bloom1n' Brands, Inc. Hershey Co. Marriott lnt'l, Inc. VF Corp. Group, Inc. Hilton Worldwide Brinker Int'l. Inc. Estee Lauder Cos. Inc McDonald's Corporation Wendy's Co Holdings Colgate Palmolive Wyndham Worldwide Foot Locker, Inc. Hyatt Hotels Corp. Mondelez lnt'l., Inc. Company Corp. Penske Automotive Darden Restaurants, Inc. Gap, Inc. Kimberly-Clark Corp. Group, Inc.
At the time the benchmarking analysis was prepared, the Executive Peer Group’s median annual revenues were $17.6$9.3 billion, while YUM annual revenues were estimated at $19.2$14.4 billion (calculated as described below).
For companies with significant franchise operations, measuring size can be complex. Management responsibilities encompass more than just the revenues and operations directly owned and operated by the company. There are added complexities and responsibilities for managing the relationships, arrangements, and overall scope of the franchising enterprise, in particular, managing product introductions, marketing, promoting new unit development, and customer satisfaction and overall operations improvements across the entire franchise system. Accordingly, in calibrating size-adjusted values,the size of our
organization and underlying operating divisions during the 2017 benchmarking process, our philosophy iswas to add 25% of franchisee and licensee sales to the Company’s sales to establish an appropriate revenue benchmark. The reason for this approach is based on our belief that the correct calibrationwas twofold:
• | Market-competitive compensation opportunities are related to scope of responsibility, often measured by company size,i.e., revenues; and |
Scope of complexity and responsibility for a franchising organization lies between corporate-reported revenues and system-widesystem wide sales.
We believe this approach is measured and reasoned in its approach to calibrating market competitive compensation opportunities without using organizations unduly larger than the Company.
Competitive Positioning and Setting Compensation
At the beginning of 2015,2018, the Committee considered Executive Peer Group compensation data as a frame of reference for establishing compensation targets for
base salary, annual bonus and long-term incentives for each NEO. In particular,making compensation decisions, the Committee generally targetedconsiders market data for comparable
54 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
positions to each NEO’sof our NEO roles. The Committee reviews market data and makes a decision for each NEO, most often in a range around market median for each element of compensation, including base salary, target bonus and long-term incentive compensation attarget. In addition
to the 50thpercentilemarket data, the Committee takes into account the role, level of the Executive Peer Groupresponsibility, experience, individual performance and target bonus opportunity at the 75thpercentilepotential of the Executive Peer Group. During 2015,each NEO. The Committee changed this approach as described at 56.reviews the NEOs’ compensation and performance annually.
VI. | Compensation Policies and Practices |
In setting NEOBelow are compensation the Committee considers this competitive market data but does not rely on it exclusively. It also considers additional factors in setting each element of NEO compensation, including individual performance, experience, time in role and expected contributions.governance best practices we employ that provide a foundation for ourpay-for-performance program and align our program with Company and shareholder interests.
When benchmarking and making decisions about the CEO’s SARs/Options, we use a grant date fair value based on the full 10-year term rather than the expected term of all SARs/Options granted by the Company. This methodology is a more appropriate method to determine the award amount as it better reflects the actual historical holding pattern for SARs/Options granted to our CEO. Our CEO receives fewer shares under this practice than if we used the expected term of all SARs/Options granted by the Company.
VII. Compensation Policies and Practices
We Do | We Don’t Do | |||||
✓ | Have an independent compensation committee (Management Planning & Development Committee), which oversees the Company’s compensation policies and strategic direction | ✗ | Employment agreements | |||
✓ | Directly link Company performance to pay outcomes | ✗ | Re-pricing of SARs | |||
✓ | Have executive ownership guidelines that are reviewed annually against Company guidelines | ✗ | Grants of SARs with exercise price less than fair market value of common stock on date of grant | |||
✓ | Have a “clawback” policy under which the Company may recoup compensation if executive’s conduct results in significant financial or reputational harm to Company | ✗ | Permit executives to hedge or pledge Company stock | |||
✓ | Make a substantial portion of NEO target pay “at risk” | ✗ | Payment of dividends or dividend equivalents on PSUs unless or until they vest | |||
✓ | Have double-trigger vesting of equity awards upon a change in control | ✗ | Excise taxgross-ups upon change in control | |||
✓ | Utilize an independent Compensation Consultant | ✗ | Excessive executive perquisites, such as country club memberships | |||
✓ | Incorporate comprehensive risk mitigation into plan design | |||||
✓ | Periodically review our Executive Peer Group to align appropriately with Company size and complexity | |||||
✓ | Evaluate CEO and executive succession plans | |||||
✓ | Conduct annual shareholder engagement program to obtain feedback from shareholders for consideration in annual compensation program design |
YUM’s Executive Stock Ownership Guidelines
The Committee has established stock ownership guidelines for approximately 400190 of our senior employees, including the NEOs. If a NEO or other executive does not meet his or her ownership guidelines, he or she is not eligible for a long-term equity incentive award. In 2015,2018, all NEOs and all other employees subject to guidelines met or exceeded their ownership guidelines.
NEO | Ownership Guidelines | Shares Owned(1) | Value of Shares(2) | Multiple of Salary | |||||
Creed | 100,000 | 118,263 | 8,639,112 | 8 | |||||
Grismer | 30,000 | 45,294 | 3,308,727 | 4 | |||||
Novak | 100,000 | 2,760,186 | 201,631,587 | 202 | |||||
Pant | 30,000 | 107,592 | 7,859,596 | 8 | |||||
Niccol | 30,000 | 49,796 | 3,637,598 | 5 | |||||
Su | 30,000 | 575,032 | 42,006,088 | 38 |
YUM! BRANDS, INC. -2019 Proxy Statement | 55 |
EXECUTIVE COMPENSATION |
NEO | Ownership Guidelines | Shares Owned(1) | Value of Shares(2) | Multiple of Salary | ||||||||||||
Creed
|
|
7x base salary
|
|
|
825,179
|
|
|
$75,850,454
|
|
|
60.7
|
| ||||
Gibbs
|
|
3x base salary
|
|
|
285,316
|
|
|
$26,226,247
|
|
|
29.1
|
| ||||
Eaton
|
|
3x base salary
|
|
|
270,147
|
|
|
$24,831,912
|
|
|
29.2
|
| ||||
Skeans
|
|
2x base salary
|
|
|
67,655
|
|
|
$ 6,218,848
|
|
|
9.2
|
| ||||
Russell
|
|
1x base salary
|
|
|
88,602
|
|
|
$ 8,144,296
|
|
|
19.8
|
| ||||
Kesselman |
|
2x base salary |
|
|
15,360 |
|
|
$ 1,411,891 |
|
|
2.3 |
|
(1) | Calculated as of December 31, |
(2) | Based on YUM closing stock price of |
YUM! BRANDS, INC. -2016 Proxy Statement58
Payments upon Termination of Employment
The Company does not have agreements with its executives concerning payments upon termination of employment except in the case of a change in control of the Company. The Committee believes these are appropriate agreements for retaining NEOs and other executive officers to preserve shareholder value in case of a potential change in control. The Committee periodically reviews these agreements and other aspects of the Company’schange-in-control program.
The Company’schange-in-control agreements, in general, entitle NEOsexecutives who are direct reports to our CEO and are 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 thesechange-in-control agreements are described beginning on page 72.71.
In 2013, theThe Company eliminateddoes not provide taxgross-ups for executives, including the NEOs, for any excise tax due under Section 4999 of the Internal Revenue Code and has implemented a “best netafter-tax” approach to address any potential excise tax imposed on executives. If any excise tax is due, the Company will not make agross-up payment, but instead will reduce payments to an executive if the reduction will provide the NEO the best netafter-tax result. If full payment to
a NEO will result in the best netafter-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, the Company has implemented “double trigger” vesting for equity awards, pursuant to which outstanding awards will fully and immediately vest only 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.
In case of retirement, the Company provides retirement benefits described above, life insurance benefits (to employees eligible under the Retirement Plan), the continued ability to exercise vested SARs/OptionsSARs and the ability to vest in performance share awards on apro-rata basis.
With respect to consideration of how these benefits fit into the overall compensation policy, thechange-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 SARSARs Granting Practices
Historically, we have awarded non-qualified SARs/Optionsmade SARs 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 these awards granted under our Long-Term Incentive Plan (“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.
All equity awards are granted under our shareholder approved LTIP.
Grants may also be made on other dates the Board of Directors meets. These grants generally are CEO Awards, which are awarded by our CEO (and approved by the Committee),awards to individual employees (subject to Committee approval) in recognition of superlative performance and extraordinary impact on business results.
56 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
Management recommends the awards be made pursuant to our LTIP 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 our CEO and our Chief People Officer, the ability to make grants to
employees who are not executive officers and whose
grant is less than approximately 15,000 SARs/Options30,000 SARs annually. In the case of these grants, the Committee sets all the terms of each award, except the actual number of SARs/Options,SARs, which is determined by our CEO and our Chief People Officer 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 our NEOs and 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.
YUM! BRANDS, INC. -2016 Proxy Statement59
Compensation Recovery Policy
Pursuant to the Company’s Compensation Recovery Policy (i.e., “clawback”), the Committee may require executive officers (including the NEOs) to return compensation paid or may cancel any award or bonuses not yet vested or earned if the executive officers engaged in misconduct or violation of Company policy that resulted in significant financial or reputational harm or violation of Company policy, or
contributed to the use of inaccurate metrics in the calculation of incentive compensation. Under this policy, when the Board determines 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, and cancellation of an award or bonus 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 paid to certain NEOs. Performance-based compensation is excluded from the limit, however, so long as it meets certain requirements. The Committee intendsbelieves that the annual bonus, SARs/Options,pre-2018 SARs, RSU and PSU awards satisfy the requirements for exemption under Internal Revenue Code Section 162(m).
For 2015,The provisions of Section 162(m) of the Internal Revenue code limit the deductibility of all annual salary paid to Mr. Creed exceeded $1 million. The other NEOs werecompensation in each case paid salariesexcess of $1 million or less,paid to certain
executive officers. The exception for performance-based compensation does not apply, except for Mr. Su whose salary exceeded $1 million; however, thewith respect to compensation that is subject to a transition rule because it is paid pursuant to a binding contract that was in place on November 2, 2017 and not materially modified after that date. The Committee notedbelieves that Mr. Su’sshareholder interests are best served if its discretion and flexibility in awarding compensation is not subject to United States tax rules and, therefore, the $1 million limitation does not applyrestricted, even though some compensation awards will result in his case. The 2015 annual bonuses were all paid pursuant to our annual bonus program and, therefore, we expect will be deductible. For 2015,non-deductible compensation
YUM! BRANDS, INC. -2019 Proxy Statement | 57 |
EXECUTIVE COMPENSATION |
expenses. Therefore, the Committee set the maximum individual award opportunity based on a bonus poolhas approved salaries and other awards for the CEO and the next two highest paid executive officers other than Messrs. Creed, Suthat were not fully deductible because of Section 162(m) and, Grismer. (Mr. Grismer is not included for purposesin light of our pool since under IRS rules the Chief Financial Officer is not subjectrepeal of the performance-based
compensation exception to these limits.) The bonus pool for 2015 was equal to 1.5% of operating profit (adjusted to exclude special items believed to be distortive of consolidated results on a year-over-year basis — these are the same items excludedSection 162(m), expects in the Company’s annual earnings releases). The maximum payout opportunity for each executive was set at a fixed percentage of the pool. Based on the Company’s operating profit, before special items of $2.0 billion, the bonus pool was set at approximately $30 million and the maximum 2015 award opportunity for each NEO was based on their applicable percentage of the pool (Mr. Creed=30%, Mr. Novak=20%, Mr. Pant=20% and Mr. Niccol=10% and Mr. Su=10%), (Under the terms of the shareholder approved plan no executive may earn a bonus in excess of $10 million for any year.) The Committee then exercised its discretion in determining actual incentive awards based on team performance and individual performance measures as described above.
Duefuture 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, but the Committee may approve additional compensation that is not deductible under 162(m).for income tax purposes.
YUM! BRANDS, INC. -2016 Proxy Statement60
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 titled “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 onForm 10-K and included in this proxy statement.
THE MANAGEMENT PLANNING AND DEVELOPMENT COMMITTEE
Christopher M. Connor,Chair
Brian C. Cornell
Michael J. Cavanagh
Mirian M. Graddick-Weir
Robert D. WalterChairDavid W. DormanMassimo FerragamoMirian M. Graddick-WeirThomas M. RyanElane B. Stock
YUM! BRANDS, INC. -2016 Proxy Statement61
58 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
The following tables provide information on the compensation of the Named Executive Officers (“NEOs”) for our 20152018 fiscal year. The Company’s NEOs are our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers for our 20152018 fiscal year determined in accordance with SEC rules and one former executive officer who was no longer serving as an executive officer as of the end of the year.
Change in | ||||||||||||||||||
Pension | ||||||||||||||||||
Value and | ||||||||||||||||||
Nonqualified | ||||||||||||||||||
Option/ | Non-Equity | Deferred | ||||||||||||||||
Stock | SAR | Incentive Plan | Compensation | All Other | ||||||||||||||
Name and | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||
Principal Position | Year | ($)(1) | ($) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($)(6) | ($) | |||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||
Greg Creed | 2015 | 1,104,615 | — | 1,075,016 | 3,108,013 | 787,050 | 25,294 | 1,393,388 | 7,493,376 | |||||||||
Chief Executive | 2014 | 750,000 | — | 325,048 | 2,561,957 | 945,750 | 45,680 | 345,068 | 4,973,503 | |||||||||
Officer of YUM | 2013 | 750,000 | — | 203,735 | 1,323,839 | 1,511,625 | 7,348 | 238,737 | 4,035,284 | |||||||||
Patrick J. Grismer | 2015 | 790,192 | — | 420,070 | 1,680,012 | 445,200 | 12,861 | 162,132 | 3,510,467 | |||||||||
Chief Financial | 2014 | 707,500 | — | 350,019 | 1,475,973 | 267,410 | 9,087 | 142,114 | 2,952,103 | |||||||||
Officer of YUM | 2013 | 638,462 | — | 114,098 | 1,765,138 | 277,875 | 3,977 | 179,480 | 2,979,030 | |||||||||
David C. Novak | 2015 | 1,005,192 | — | 750,020 | 2,168,382 | 530,000 | — | 409,290 | 4,862,884 | |||||||||
Executive Chairman | 2014 | 1,450,000 | — | 1,925,037 | 5,228,142 | 512,720 | 202,360 | 689,028 | 10,007,287 | |||||||||
of YUM | 2013 | 1,450,000 | — | 1,568,655 | 5,255,519 | 939,600 | 17,351 | 776,268 | 10,007,393 | |||||||||
Micky Pant | 2015 | 849,038 | — | 355,012 | 1,419,011 | 1,473,548 | 42,979 | 950,622 | 5,090,210 | |||||||||
Chief Executive | 2014 | 750,000 | — | 350,019 | 1,475,973 | 799,500 | 32,735 | 313,356 | 3,721,583 | |||||||||
Officer of YUM | 2013 | 750,000 | — | 203,735 | 1,323,839 | 784,875 | 15,640 | 309,198 | 3,387,287 | |||||||||
Restaurants China | ||||||||||||||||||
Brian Niccol | 2015 | 697,688 | — | 250,031 | 2,091,503 | 1,512,000 | 8,123 | 180,361 | 4,739,706 | |||||||||
Chief Executive | ||||||||||||||||||
Officer of Taco Bell | ||||||||||||||||||
Division(7) | ||||||||||||||||||
Jing-Shyh S. Su | 2015 | 1,100,000 | — | 459,031 | 1,834,009 | 468,683 | — | 5,455,648 | 9,317,371 | |||||||||
Vice Chairman of the | ||||||||||||||||||
Board of YUM and | 2014 | 1,100,000 | — | 450,045 | 1,907,966 | 378,235 | 1,956,023 | 5,035,711 | 10,827,980 | |||||||||
Chief Executive | 2013 | 1,100,000 | — | 342,294 | 1,765,123 | 614,790 | 727,430 | 5,768,264 | 10,317,901 | |||||||||
Officer of YUM | ||||||||||||||||||
Restaurants China(8) |
Name and
| Year
| Salary ($)(1)
| Bonus ($)
| Stock Awards ($)(2)
| Option/ SAR Awards ($)(3)
| Non-Equity Incentive Plan Compensation ($)(4)
| Change in Value and Nonqualified Deferred Compensation Earnings ($)(5)
| All Other Compensation ($)(6)
| Total ($)
| |||||||||||||||||||||||||||
(a)
| (b)
| (c)
| (d)
| (e)
| (f)
| (g)
| (h)
| (i)
| ||||||||||||||||||||||||||||
Greg Creed | 2018 | 1,244,615 | — | 4,450,008 | 4,450,009 | 3,144,531 | 21,348 | 696,527 | 14,007,038 | |||||||||||||||||||||||||||
Chief Executive Officer of YUM
| 2017 | 1,208,846 | — | 3,350,020 | 3,350,007 | 3,814,493 | 66,286 | 578,955 | 12,368,607 | |||||||||||||||||||||||||||
2016 | 1,188,942 | — | 5,500,066 | 4,500,008 | 3,591,094 | 56,100 | 544,472 | 15,380,682 | ||||||||||||||||||||||||||||
David W. Gibbs | 2018 | 890,769 | — | 1,375,001 | 1,375,009 | 1,467,113 | 1,870,004 | 19,101 | 6,996,997 | |||||||||||||||||||||||||||
President and Chief Financial Officer of YUM
| 2017 | 833,846 | — | 1,100,036 | 1,100,003 | 1,917,027 | 2,564,062 | 19,346 | 7,534,320 | |||||||||||||||||||||||||||
2016 | 792,115 | — | 1,875,052 | 1,625,020 | 1,751,680 | 577,153 | 6,969 | 6,627,989 | ||||||||||||||||||||||||||||
Roger G. Eaton | 2018 | 846,154 | — | 1,000,008 | 1,000,006 | 1,338,750 | 20,114 | 320,433 | 4,525,465 | |||||||||||||||||||||||||||
Retired Chief Executive Officer of KFC Division
| 2017 | 821,154 | — | 1,000,008 | 1,000,007 | 1,986,600 | 30,388 | 301,007 | 5,139,164 | |||||||||||||||||||||||||||
2016 | 812,500 | — | 1,875,052 | 1,125,009 | 1,113,600 | 30,853 | 288,290 | 5,245,304 | ||||||||||||||||||||||||||||
Tracy L. Skeans | 2018 | 664,231 | — | 625,015 | 1,625,010 | 824,766 | 325,022 | 8,665 | 4,072,709 | |||||||||||||||||||||||||||
Chief Transformation and People Officer of YUM(7)
| 2017 | 600,385 | — | 550,052 | 550,009 | 1,076,325 | 776,398 | 8,413 | 3,561,582 | |||||||||||||||||||||||||||
David E. Russell | 2018 | 410,154 | — | 449,904 | 297,644 | 112,476 | 93,860 | 37,676 | 1,701,714 | |||||||||||||||||||||||||||
Senior Vice President, Finance and Corporate Controller of YUM | | 2017 2016 |
| | 396,154 476,867 | | | — 180,000 |
| | 544,180 397,313 |
| | 328,915 496,870 |
| | 136,045 297,984 |
| | 494,542 162,407 |
| | 32,838 33,236 |
| | 1,932,674 2,044,677 |
| |||||||||
Marc L. Kesselman | 2018 | 603,462 | — | 625,015 | 625,004 | 514,250 | 1,734 | 560,623 | 2,930,088 | |||||||||||||||||||||||||||
Former General Counsel, Corporate Secretary and Chief Government Affairs Officer | 2017 | 591,923 | — | 625,056 | 625,013 | 814,258 | 1,435 | 91,304 | 2,748,989 | |||||||||||||||||||||||||||
2016 | 530,769 | 500,000 | 2,300,083 | 1,400,006 | 916,162 | — | 83,606 | 5,730,626 | ||||||||||||||||||||||||||||
�� |
(1) | Amounts shown are not reduced to reflect the NEOs’ elections, if any, to defer receipt of salary into the Executive Income Deferral (“EID”) Program or into the Company’s 401(k) Plan. |
(2) | Amounts shown in this column, except for Mr. Russell, represent the grant date fair values for performance share units (PSUs) granted in |
YUM! BRANDS, INC. -2019 Proxy Statement | 59 |
EXECUTIVE COMPENSATION |
represents the deferral of 75% of his annual incentive award ($337,428) for 2018, plus his matching contribution ($112,476). The other NEOs are not eligible to participate in this program, as NEOs who receive PSUs are not eligible for the EID matching stock program. |
(3) | The amounts shown in this column represent the grant date fair values of the stock |
(4) | Amounts in this column reflect the annual incentive awards earned for the |
YUM! BRANDS, INC. -2016 Proxy Statement62
(5) | Amounts in this column |
Also listed in this column for |
(6) | Amounts in this column are explained in the All Other Compensation Table and footnotes to that table, which follows. |
(7) |
| |
The following table contains a breakdown of the compensation and benefits included under All Other Compensation in the Summary Compensation Table above for 2015.2018.
Perquisites and | ||||||||||||
other personal | Tax | Insurance | LRP/TCN | |||||||||
benefits | Reimbursements | premiums | Contributions | Other | Total | |||||||
Name | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($) | ||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||
Creed | 598,881 | 364,951 | 17,056 | 412,500 | — | 1,393,388 | ||||||
Grismer | — | — | 6,332 | 155,800 | — | 162,132 | ||||||
Novak | 197,807 | — | 18,293 | 190,000 | 3,190 | 409,290 | ||||||
Pant | 376,431 | 114,028 | 14,913 | 408,500 | 36,750 | 950,622 | ||||||
Niccol | 47,718 | 2,215 | 3,172 | 126,350 | 906 | 180,361 | ||||||
Su | — | 5,190,420 | 21,286 | — | 243,942 | 5,455,648 |
Name
| Perquisites and other personal benefits ($)(1)
| Tax Reimbursements ($)(2)
| Insurance premiums
| LRP/TCN Contributions ($)(4)
| Total ($)
| |||||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
| |||||||||||||||||||
Creed |
| 153,794 |
|
| — |
|
| 27,108 |
|
| 515,625 |
|
| 696,527 |
| |||||||||
Gibbs |
| 7,657 |
|
| — |
|
| 11,444 |
|
| — |
|
| 19,101 |
| |||||||||
Eaton |
| 34,555 |
|
| 20,292 |
|
| 10,586 |
|
| 255,000 |
|
| 320,433 |
| |||||||||
Skeans |
| 5,009 |
|
| — |
|
| 3,656 |
|
| — |
|
| 8,665 |
| |||||||||
Russell |
| 35,705 |
|
| — |
|
| 1,971 |
|
| — |
|
| 37,676 |
| |||||||||
Kesselman |
| 467,768 |
|
| — |
|
| 3,315 |
|
| 89,540 |
|
| 560,623 |
|
(1) | Amounts in this column include |
60 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
(2) | Amounts in this column reflect payments to the executive of tax reimbursements. For Mr. |
(3) | These amounts reflect the income each executive was deemed to receive from IRS tables related to Company-provided life insurance in excess of $50,000. The Company provides every salaried employee with life insurance coverage up to one times the employee’s salary plus target bonus. |
(4) | For Messrs. | |
YUM! BRANDS, INC. -2016 Proxy Statement63
The following table provides information on stock options, SARs, RSUs and PSUs granted in 20152018 to each of the Company’s NEOs. The full grant date fair value of these awards is shown in the Summary Compensation Table at page 62.59.
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Option/ SAR Awards; Number of | Exercise or Base Price | |||||||||||||||||
Securities | of Option/ | |||||||||||||||||||
Underlying | SAR | Grant | ||||||||||||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Options | Awards | Date Fair | |||||||||||
Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#)(3) | ($/Sh)(4) | Value($)(5) | ||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | ||||||||||
Creed | 2/6/2015 | 0 | 1,650,000 | 4,950,000 | ||||||||||||||||
2/6/2015 | 194,982 | 73.93 | 3,108,013 | |||||||||||||||||
2/6/2015 | — | 14,541 | 29,082 | 1,075,016 | ||||||||||||||||
Grismer | 2/6/2015 | 0 | 840,000 | 2,520,000 | ||||||||||||||||
2/6/2015 | 105,396 | 73.93 | 1,680,012 | |||||||||||||||||
2/6/2015 | — | 5,682 | 11,364 | 420,070 | ||||||||||||||||
Novak | 2/6/2015 | 0 | 1,000,000 | 3,000,000 | ||||||||||||||||
2/6/2015 | 136,034 | 73.93 | 2,168,382 | |||||||||||||||||
2/6/2015 | — | 10,145 | 20,290 | 750,020 | ||||||||||||||||
Pant | 2/6/2015 | 0 | 1,003,096 | 3,009,288 | ||||||||||||||||
2/6/2015 | 89,022 | 73.93 | 1,419,011 | |||||||||||||||||
2/6/2015 | — | 4,802 | 9,604 | 355,012 | ||||||||||||||||
Niccol | 2/6/2015 | 0 | 630,000 | 1,890,000 | ||||||||||||||||
2/6/2015 | 62,736 | 73.93 | 1,000,012 | |||||||||||||||||
2/6/2015 | 68,475 | 73.93 | 1,091,491 | |||||||||||||||||
2/6/2015 | — | 3,382 | 6,764 | 250,031 | ||||||||||||||||
Su | 2/6/2015 | 0 | 1,265,000 | 3,795,000 | ||||||||||||||||
2/6/2015 | 115,057 | 73.93 | 1,834,009 | |||||||||||||||||
2/6/2015 | — | 6,209 | 12,418 | 459,031 |
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Number (#) | All Other SAR Number of Securities Underlying Options (#)(3) | Exercise SAR Awards ($/Sh)(4) | Grant Date Fair Value ($)(5) | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date |
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||
(a)
| (b)
| (c)
| (d)
| (e)
| (f)
| (g)
| (h)
| (i)
| (j)
| (k)
| (l)
| |||||||||||||||||||||||||||||||||
Creed |
| 2/12/2018 |
|
| 0 |
|
| 2,187,500 |
|
| 6,562,500 |
|
|
|
| |||||||||||||||||||||||||||||
| 2/12/2018 |
|
| 271,342 |
|
| 78.07 |
|
| 4,450,009 |
| |||||||||||||||||||||||||||||||||
| 3/23/2018 |
|
| — |
|
| 54,481 |
|
| 108,962 |
|
| 81.68 |
|
| 4,450,008 |
| |||||||||||||||||||||||||||
Gibbs |
| 2/12/2018 |
|
| 0 |
|
| 945,000 |
|
| 2,835,000 |
|
|
|
| |||||||||||||||||||||||||||||
| 2/12/2018 |
|
| 83,842 |
|
| 78.07 |
|
| 1,375,009 |
| |||||||||||||||||||||||||||||||||
| 3/23/2018 |
|
| — |
|
| 16,834 |
|
| 33,668 |
|
| 81.68 |
|
| 1,375,001 |
| |||||||||||||||||||||||||||
Eaton |
| 2/12/2018 |
|
| 0 |
|
| 850,000 |
|
| 2,550,000 |
|
|
|
| |||||||||||||||||||||||||||||
| 2/12/2018 |
|
| 60,976 |
|
| 78.07 |
|
| 1,000,006 |
| |||||||||||||||||||||||||||||||||
| 3/23/2018 |
|
| — |
|
| 12,243 |
|
| 24,486 |
|
| 81.68 |
|
| 1,000,008 |
| |||||||||||||||||||||||||||
Skeans |
| 2/12/2018 |
|
| 0 |
|
| 573,750 |
|
| 1,721,250 |
|
|
|
| |||||||||||||||||||||||||||||
| 2/12/2018 |
|
| 38,110 |
|
| 78.07 |
|
| 625,004 |
| |||||||||||||||||||||||||||||||||
| 2/12/2018 |
|
| 60,976 |
|
| 78.07 |
|
| 1,000,006 |
| |||||||||||||||||||||||||||||||||
| 3/23/2018 |
|
| — |
|
| 7,652 |
|
| 15,304 |
|
| 81.68 |
|
| 625,015 |
| |||||||||||||||||||||||||||
Russell |
| 2/12/2018 |
|
| 0 |
|
| 267,800 |
|
| 803,400 |
|
|
|
| |||||||||||||||||||||||||||||
| 2/12/2018 |
|
| 18,149 |
|
| 78.07 |
|
| 297,644 |
| |||||||||||||||||||||||||||||||||
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||
Kesselman |
| 2/12/2018 |
|
| 0 |
|
| 514,250 |
|
| 1,542,750 |
|
|
|
| |||||||||||||||||||||||||||||
| 2/12/2018 |
|
| 38,110 |
|
| 78.07 |
|
| 625,004 |
| |||||||||||||||||||||||||||||||||
| 3/23/2018 |
|
| — |
|
| 7,652 |
|
| 15,304 |
|
| 81.68 |
|
| 625,015 |
|
(1) | Amounts in columns (c), (d) and (e) provide the minimum amount, target amount and maximum amount payable as annual incentive compensation under the Yum Leaders’ Bonus Program based on the Company’s performance and on each executive’s individual performance during |
(2) | Reflects grants of PSU awards subject to performance-based vesting conditions in |
YUM! BRANDS, INC. -2019 Proxy Statement | 61 |
EXECUTIVE COMPENSATION |
for 100% |
(3) | Amounts in this column reflect the number of SARs |
The terms of each |
Executives who have attained age 55 with 10 years of service who |
(4) | The exercise price of the |
YUM! BRANDS, INC. -2016 Proxy Statement64
(5) | Amounts in this column reflect the full grant date fair value of the PSU awards shown in column (g) and the |
62 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
Outstanding Equity Awards atYear-End
The following table shows the number of shares covered by exercisable and unexercisable stock options, SARs, and unvested RSUs and PSUs held by the Company’s NEOs on December 31, 2015.2018.
Option/SAR Awards(1) | Stock Awards | Equity | Equity incentive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
incentive | plan awards: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number | Market | plan awards: | market or | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | of Shares | Value of | Number of | payout value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities | Securities | or Units | Shares or | unearned | of unearned | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underlying | Underlying | Option/ | of Stock | Units of | shares, units | shares, units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unexercised | Unexercised | SAR | Option/ | That | Stock That | or other rights | or other rights | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options/ | Options/ | Exercise | SAR | Have Not | Have Not | that have not | that have not | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SARs (#) | SARs (#) | Price | Expiration | Vested | Vested | vested | vested | Option/SAR Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Exercisable | Unexercisable | ($) | Date | (#)(2) | ($)(3) | (#)(4) | ($)(3) | Grant Date | Number of Securities Underlying Unexercised Options/ SARs (#) Exercisable | Number of Securities Underlying Unexercised Options/ SARs (#) Unexercisable | Option/ SAR Exercise Price ($) | Option/ SAR Expiration Date | Number Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity incentive plan awards: Number of unearned shares, or other that vested(4) | Equity plan market or payout shares, or other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Creed | 1/24/2008 | 107,085 | — | $37.30 | 1/24/2018 | 2/5/2010 | * | 169,793 | — | $ | 23.48 | 2/5/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2009 | 169,148 | — | $29.29 | 2/5/2019 | 2/4/2011 | * | 120,564 | — | $ | 35.10 | 2/4/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2010 | 172,118 | — | $32.98 | 2/5/2020 | 2/8/2012 | * | 81,670 | — | $ | 45.88 | 2/8/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/4/2011 | 122,200 | — | $49.30 | 2/4/2021 | 2/6/2013 | * | 89,755 | — | $ | 44.81 | 2/6/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/8/2012 | 62,066 | 20,689 | (i) | $64.44 | 2/8/2022 | 2/5/2014 | * | 77,025 | — | $ | 50.22 | 2/5/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2013 | 45,461 | 45,462 | (ii) | $62.93 | 2/6/2023 | 2/5/2014 | * | — | 67,864 | (i) | $ | 50.22 | 2/5/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2014 | 19,512 | 58,538 | (iii) | $70.54 | 2/5/2024 | 2/6/2015 | * | 144,447 | 48,150 | (ii) | $ | 52.64 | 2/6/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2014 | — | 68,767 | (vi) | $70.54 | 2/5/2024 | 2/5/2016 | * | 155,755 | 155,756 | (iii) | $ | 49.66 | 2/5/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2015 | — | 194,982 | (iv) | $73.93 | 2/6/2025 | 2/10/2017 | * | 58,979 | 176,937 | (iv) | $ | 68.00 | 2/10/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | 38,298 | 2,797,669 | 2/12/2018 | * | — | 271,342 | (v) | $ | 78.07 | 2/12/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grismer | 1/19/2007 | 19,938 | — | $29.61 | 1/19/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2014 | ** | — | 67,972 | (i) | $ | 21.30 | 2/5/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2015 | ** | — | 48,165 | (ii) | $ | 22.32 | 2/6/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2016 | ** | — | 155,912 | (iii) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| —
|
|
| —
|
|
| 239,745
|
|
| 22,037,360
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gibbs | 2/5/2009 | * | 8,343 | — | $ | 20.85 | 2/5/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/17/2007 | 16,262 | — | $33.20 | 5/17/2017 | 2/5/2010 | * | 31,128 | — | $ | 23.48 | 2/5/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2008 | 20,079 | — | $37.30 | 1/24/2018 | 5/20/2010 | * | 24,161 | — | $ | 28.22 | 5/20/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2009 | 33,830 | — | $29.29 | 2/5/2019 | 2/4/2011 | * | 30,141 | — | $ | 35.10 | 2/4/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/21/2009 | 15,853 | — | $33.21 | 5/21/2019 | 2/8/2012 | * | 24,501 | — | $ | 45.88 | 2/8/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2010 | 34,424 | — | $32.98 | 2/5/2020 | 2/6/2013 | * | 37,398 | — | $ | 44.81 | 2/6/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2010 | 43,030 | — | $32.98 | 2/5/2020 | 2/6/2013 | * | 37,398 | — | $ | 44.81 | 2/6/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/4/2011 | 24,440 | — | $49.30 | 2/4/2021 | 2/5/2014 | * | 40,718 | — | $ | 50.22 | 2/5/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/8/2012 | 24,826 | 8,276 | (i) | $64.44 | 2/8/2022 | 2/5/2014 | * | — | 33,932 | (i) | $ | 50.22 | 2/5/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2013 | 37,885 | 37,885 | (ii)(xi) | $62.93 | 2/6/2023 | 2/6/2015 | * | 46,476 | 15,492 | (ii) | $ | 52.64 | 2/6/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2013 | — | 45,462 | (v)(xi) | $62.93 | 2/6/2023 | 2/5/2016 | * | 38,938 | 38,940 | (iii) | $ | 49.66 | 2/5/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2014 | 21,145 | 63,438 | (iii)(xi) | $70.54 | 2/5/2024 | 5/20/2016 | * | 15,918 | 15,920 | (vi) | $ | 56.67 | 5/20/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2015 | — | 105,396 | (iv)(xi) | $73.93 | 2/6/2025 | 2/10/2017 | * | 19,366 | 58,099 | (iv) | $ | 68.00 | 2/10/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | 21,288 | 1,555,088 | 2/12/2018 | * | — | 83,842 | (v) | $ | 78.07 | 2/12/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Novak | 1/19/2007 | 490,960 | — | $29.61 | 1/19/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/24/2008 | 428,339 | — | $37.30 | 1/24/2018 | 2/5/2010 | ** | 31,143 | — | $ | 9.96 | 2/5/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2009 | 575,102 | — | $29.29 | 2/5/2019 | 5/20/2010 | ** | 24,174 | — | $ | 11.97 | 5/20/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2010 | 623,925 | — | $32.98 | 2/5/2020 | 2/4/2011 | ** | 30,140 | — | $ | 14.88 | 2/4/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/4/2011 | 496,254 | — | $49.30 | 2/4/2021 | 2/8/2012 | ** | 24,531 | — | $ | 19.46 | 2/8/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/8/2012 | 282,996 | 94,332 | (i) | $64.44 | 2/8/2022 | 2/6/2013 | ** | 37,408 | — | $ | 19.00 | 2/6/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2013 | 180,478 | 180,478 | (ii) | $62.93 | 2/6/2023 | 2/6/2013 | ** | 37,408 | — | $ | 19.00 | 2/6/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2014 | 74,901 | 224,706 | (iii) | $70.54 | 2/5/2024 | 2/5/2014 | ** | 40,783 | — | $ | 21.30 | 2/5/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2015 | — | 136,034 | (x) | $73.93 | 2/6/2025 | 2/5/2014 | ** | — | 33,986 | (i) | $ | 21.30 | 2/5/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | 74,870 | 5,469,254 | 2/6/2015 | ** | 46,491 | 15,497 | (ii) | $ | 22.32 | 2/6/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2016 | ** | 38,978 | 38,978 | (iii) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/20/2016 | ** | 15,935 | 15,936 | (vi) | $ | 24.03 | 5/20/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| —
|
|
| —
|
|
| 78,117
|
|
| 7,180,515
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Eaton | 2/8/2012 | * | 73,503 | — | $ | 45.88 | 2/8/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2013 | * | 67,317 | — | $ | 44.81 | 2/6/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2014 | * | 64,132 | — | $ | 50.22 | 2/5/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2015 | * | 50,751 | 16,918 | (ii) | $ | 52.64 | 2/6/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2016 | * | 38,938 | 38,940 | (iii) | $ | 49.66 | 2/5/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/10/2017 | * | 17,605 | 52,818 | (iv) | $ | 68.00 | 2/10/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/12/2018 | * | — | 60,976 | (v) | $ | 78.07 | 2/12/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/8/2012 | ** | 73,593 | — | $ | 19.46 | 2/8/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2013 | ** | 67,335 | — | $ | 19.00 | 2/6/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2014 | ** | 64,233 | — | $ | 21.30 | 2/5/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/6/2015 | ** | 50,767 | 16,923 | (ii) | $ | 22.32 | 2/6/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/5/2016 | ** | 38,978 | 38,978 | (iii) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| —
|
|
| —
|
|
| 65,993
|
|
| 6,066,077
|
|
YUM! BRANDS, INC.- 2016 Proxy Statement65
Option/SAR Awards(1) | Stock Awards | Equity | Equity incentive | |||||||||||||||||||||||||||||||
incentive | plan awards: | |||||||||||||||||||||||||||||||||
Number | Market | plan awards: | market or | |||||||||||||||||||||||||||||||
Number of | Number of | of Shares | Value of | Number of | payout value | |||||||||||||||||||||||||||||
Securities | Securities | or Units | Shares or | unearned | of unearned | |||||||||||||||||||||||||||||
Underlying | Underlying | Option/ | of Stock | Units of | shares, units | shares, units | ||||||||||||||||||||||||||||
Unexercised | Unexercised | SAR | Option/ | That | Stock That | or other rights | or other rights | |||||||||||||||||||||||||||
Options/ | Options/ | Exercise | SAR | Have Not | Have Not | that have not | that have not | |||||||||||||||||||||||||||
SARs (#) | SARs (#) | Price | Expiration | Vested | Vested | vested | vested | |||||||||||||||||||||||||||
Name | Grant Date | Exercisable | Unexercisable | ($) | Date | (#)(2) | ($)(3) | (#)(4) | ($)(3) | |||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||||
Pant | 1/19/2007 | 49,844 | — | $29.61 | 1/19/2017 | |||||||||||||||||||||||||||||
1/24/2008 | 133,856 | — | $37.30 | 1/24/2018 | ||||||||||||||||||||||||||||||
1/24/2008 | 53,543 | — | $37.30 | 1/24/2018 | ||||||||||||||||||||||||||||||
2/5/2009 | 135,318 | — | $29.29 | 2/5/2019 | ||||||||||||||||||||||||||||||
2/5/2010 | 114,745 | — | $32.98 | 2/5/2020 | ||||||||||||||||||||||||||||||
2/4/2011 | 101,833 | — | $49.30 | 2/4/2021 | ||||||||||||||||||||||||||||||
11/18/2011 | — | 94,949 | (vii) | $53.84 | 11/18/2021 | |||||||||||||||||||||||||||||
2/8/2012 | 86,892 | 28,964 | (i) | $64.44 | 2/8/2022 | |||||||||||||||||||||||||||||
2/6/2013 | 45,461 | 45,462 | (ii) | $62.93 | 2/6/2023 | |||||||||||||||||||||||||||||
2/5/2014 | 21,145 | 63,438 | (iii) | $70.54 | 2/5/2024 | |||||||||||||||||||||||||||||
2/6/2015 | — | 89,022 | (iv) | $73.93 | 2/6/2025 | |||||||||||||||||||||||||||||
— | — | 19,528 | 1,426,520 | |||||||||||||||||||||||||||||||
Niccol | 5/20/2010 | 61,232 | — | $39.64 | 5/20/2020 | |||||||||||||||||||||||||||||
2/4/2011 | 40,734 | — | $49.30 | 2/4/2021 | ||||||||||||||||||||||||||||||
2/8/2012 | 24,826 | 8,276 | (i) | $64.44 | 2/8/2022 | |||||||||||||||||||||||||||||
2/6/2013 | 18,942 | 18,943 | (ii) | $62.93 | 2/6/2023 | |||||||||||||||||||||||||||||
5/15/2013 | — | 36,561 | (viii) | $69.92 | 5/15/2023 | |||||||||||||||||||||||||||||
2/5/2014 | 10,315 | 30,945 | (iii) | $70.54 | 2/5/2024 | |||||||||||||||||||||||||||||
2/6/2015 | — | 62,736 | (iv) | $73.93 | 2/6/2025 | |||||||||||||||||||||||||||||
2/6/2015 | — | 68,475 | (ix) | $73.93 | 2/6/2025 | |||||||||||||||||||||||||||||
29,241 | 2,136,055 | 6,764 | 494,110 | |||||||||||||||||||||||||||||||
Su | 1/19/2007 | 132,918 | — | $29.61 | 1/19/2017 | |||||||||||||||||||||||||||||
1/24/2008 | 107,085 | — | $37.30 | �� | 1/24/2018 | |||||||||||||||||||||||||||||
1/24/2008 | 267,712 | — | $37.30 | 1/24/2018 | ||||||||||||||||||||||||||||||
2/5/2009 | 202,977 | — | $29.29 | 2/5/2019 | ||||||||||||||||||||||||||||||
2/5/2010 | 172,118 | — | $32.98 | 2/5/2020 | ||||||||||||||||||||||||||||||
2/4/2011 | 142,567 | — | $49.30 | 2/4/2021 | ||||||||||||||||||||||||||||||
2/8/2012 | 124,131 | 41,378 | (i) | $64.44 | 2/8/2022 | |||||||||||||||||||||||||||||
2/6/2013 | 60,615 | 60,616 | (ii) | $62.93 | 2/6/2023 | |||||||||||||||||||||||||||||
2/5/2014 | 27,334 | 82,005 | (iii) | $70.54 | 2/5/2024 | |||||||||||||||||||||||||||||
2/6/2015 | — | 115,057 | (iv) | $73.93 | 2/6/2025 | |||||||||||||||||||||||||||||
— | — | 25,178 | 1,839,253 |
YUM! BRANDS, INC. -2019 Proxy Statement | 63 |
EXECUTIVE COMPENSATION |
Option/SAR Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options/ SARs (#) Exercisable | Number of Securities Underlying Unexercised Options/ SARs (#) Unexercisable | Option/ SAR Exercise Price ($) | Option/ SAR Expiration Date | Number Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity incentive plan awards: Number of unearned shares, or other that vested(4) | Equity plan market or payout shares, or other | |||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||||||
Skeans | 2/5/2010 | * | 1,627 | — | $ | 23.48 | 2/5/2020 | |||||||||||||||||||||||||||||||||
2/5/2010 | * | 6,068 | — | $ | 23.48 | 2/5/2020 | ||||||||||||||||||||||||||||||||||
2/4/2011 | * | 6,732 | — | $ | 35.10 | 2/4/2021 | ||||||||||||||||||||||||||||||||||
2/8/2012 | * | 9,065 | — | $ | 45.88 | 2/8/2022 | ||||||||||||||||||||||||||||||||||
2/6/2013 | * | 11,295 | — | $ | 44.81 | 2/6/2023 | ||||||||||||||||||||||||||||||||||
2/5/2014 | * | 11,537 | — | $ | 50.22 | 2/5/2024 | ||||||||||||||||||||||||||||||||||
2/5/2014 | * | 13,573 | — | $ | 50.22 | 2/5/2024 | ||||||||||||||||||||||||||||||||||
2/6/2015 | * | 12,681 | 4,228 | (ii) | $ | 52.64 | 2/6/2025 | |||||||||||||||||||||||||||||||||
2/5/2016 | * | 19,452 | 19,452 | (iii) | $ | 49.66 | 2/5/2026 | |||||||||||||||||||||||||||||||||
2/5/2016 | * | — | 17,306 | (vii) | $ | 49.66 | 2/5/2026 | |||||||||||||||||||||||||||||||||
2/10/2017 | * | 9,683 | 29,050 | (iv) | $ | 68.00 | 2/10/2027 | |||||||||||||||||||||||||||||||||
2/12/2018 | * | — | 38,110 | (v) | $ | 78.07 | 2/12/2028 | |||||||||||||||||||||||||||||||||
2/12/2018 | * | — | 60,976 | (viii) | $ | 78.07 | 2/12/2028 | |||||||||||||||||||||||||||||||||
2/5/2014 | ** | 2,889 | — | $ | 21.30 | 2/5/2024 | ||||||||||||||||||||||||||||||||||
2/5/2014 | ** | 13,595 | — | $ | 21.30 | 2/5/2024 | ||||||||||||||||||||||||||||||||||
2/6/2015 | ** | 4,229 | 4,229 | (ii) | $ | 22.32 | 2/6/2025 | |||||||||||||||||||||||||||||||||
2/5/2016 | ** | 9,736 | 19,472 | (iii) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||
2/5/2016 | ** | — | 17,323 | ((vii) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||
| —
|
|
| —
|
|
| 39,546
|
|
| 3,635,068
|
| |||||||||||||||||||||||||||||
Russell | 2/5/2010 | * | 12,876 | — | $ | 23.48 | 2/5/2020 | |||||||||||||||||||||||||||||||||
2/4/2011 | * | 12,961 | — | $ | 35.10 | 2/4/2021 | ||||||||||||||||||||||||||||||||||
2/4/2011 | * | 10,047 | — | $ | 35.10 | 2/4/2021 | ||||||||||||||||||||||||||||||||||
2/8/2012 | * | 11,434 | — | $ | 45.88 | 2/8/2022 | ||||||||||||||||||||||||||||||||||
2/6/2013 | * | 11,220 | — | $ | 44.81 | 2/6/2023 | ||||||||||||||||||||||||||||||||||
2/5/2014 | * | 13,573 | — | $ | 50.22 | 2/5/2024 | ||||||||||||||||||||||||||||||||||
2/6/2015 | * | 10,145 | 3,382 | (ii) | $ | 52.64 | 2/6/2025 | |||||||||||||||||||||||||||||||||
2/6/2015 | * | — | 13,527 | (ix) | $ | 52.64 | 2/6/2025 | |||||||||||||||||||||||||||||||||
2/5/2016 | * | 8,598 | 8,599 | (iii) | $ | 49.66 | 2/5/2026 | |||||||||||||||||||||||||||||||||
2/5/2016 | * | — | 17,197 | (x) | $ | 49.66 | 2/5/2026 | |||||||||||||||||||||||||||||||||
2/10/2017 | * | 5,790 | 17,373 | (iv) | $ | 68.00 | 2/10/2027 | |||||||||||||||||||||||||||||||||
2/12/2018 | * | — | 18,149 | (v) | $ | 78.07 | 2/12/2028 | |||||||||||||||||||||||||||||||||
2/5/2010 | ** | 12,882 | — | $ | 9.96 | 2/5/2020 | ||||||||||||||||||||||||||||||||||
2/4/2011 | ** | 12,960 | — | $ | 14.88 | 2/4/2021 | ||||||||||||||||||||||||||||||||||
2/4/2011 | ** | 10,047 | — | $ | 14.88 | 2/4/2021 | ||||||||||||||||||||||||||||||||||
2/8/2012 | ** | 11,448 | — | $ | 19.46 | 2/8/2022 | ||||||||||||||||||||||||||||||||||
2/6/2013 | ** | 11,223 | — | $ | 19.00 | 2/6/2023 | ||||||||||||||||||||||||||||||||||
2/5/2014 | ** | 13,595 | — | $ | 21.30 | 2/5/2024 | ||||||||||||||||||||||||||||||||||
2/6/2015 | ** | 10,148 | 3,383 | (ii) | $ | 22.32 | 2/6/2025 | |||||||||||||||||||||||||||||||||
2/6/2015 | ** | — | 13,531 | (ix) | $ | 22.32 | 2/6/2025 | |||||||||||||||||||||||||||||||||
2/5/2016 | ** | 8,607 | 8,608 | (iii) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||
2/5/2016 | ** | — | 17,215 | (x) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||
| 12,811
|
|
| 1,177,587
|
|
| —
|
|
| —
|
| |||||||||||||||||||||||||||||
Kesselman | 2/5/2016 | * | — | 48,458 | (iii) | $ | 49.66 | 2/5/2026 | ||||||||||||||||||||||||||||||||
2/10/2017 | * | — | 33,012 | (iv) | $ | 68.00 | 2/10/2027 | |||||||||||||||||||||||||||||||||
2/12/2018 | * | — | 38,110 | (v) | $ | 78.07 | 2/12/2028 | |||||||||||||||||||||||||||||||||
2/5/2016 | ** | 48,505 | 48,506 | (iii) | $ | 21.06 | 2/5/2026 | |||||||||||||||||||||||||||||||||
5,036 | * | 462,941 | * | 41,752 | 3,837,844 | |||||||||||||||||||||||||||||||||||
4,898 | ** | 164,216 | ** |
* | YUM Awards |
** | YUM China Awards |
(1) | The actual vesting dates for unexercisable awards are as follows: |
(i) |
|
(ii) |
|
(iii) |
|
(iv) |
|
(v) | One-fourth of the unexercisable award will vest on each of February 12, 2019, 2020, 2021 and 2022. |
(vi) | One-half of the unexercisable award will vest on each of May 20, 2019 and 2020. |
(vii) | Unexercisable award will vest on February 5, 2020. |
(viii) | Unexercisable award will vest on February 12, 2022. |
64 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
Unexercisable award will vest on February 6, |
Unexercisable award will vest on February |
(2) | ||
For Mr. | ||
(3) | The market value of |
(4) | The awards reflected in this column are unvested performance-based PSU awards with three-year performance periods that are scheduled to vest on December 31, |
YUM! BRANDS, INC. -2016 Proxy Statement66
Option Exercises and Stock Vested
The table below shows the number of shares of YUM and Yum China common stock acquired during 20152018 upon exercise of stock option and SAR awards and vesting of stock awards in the form of RSUs and PSUs, each including accumulated dividends and before payment of applicable withholding taxes and broker commissions. There was no payout with respect to the 2012 PSU awards for the 2012-2014 performance cycle because the average earnings per share during the performance cycle did not reach the required minimum average growth threshold. Therefore, there is nothing to report for the NEOs in columns (d) and (e) for PSUs.
Option/SAR Awards | Stock Awards | |||||||||||||||
Number | Number | |||||||||||||||
of Shares | Value | of Shares | Value | |||||||||||||
Acquired on | Realized on | Acquired on | realized on | |||||||||||||
Exercise | Exercise | Vesting | Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Creed | — | — | — | — | ||||||||||||
Grismer | — | — | 16,118 | (1) | 1,191,604 | |||||||||||
Novak | — | — | — | — | ||||||||||||
Pant | 63,282 | 5,062,676 | — | — | ||||||||||||
Niccol | — | — | 16,512 | (1) | 1,220,732 | |||||||||||
Su | 147,170 | 9,299,137 | — | — |
Option/SAR Awards
| Stock Awards
| |||||||||||||||||||
Name
| Number of Shares Acquired on Exercise (#)
| Value Realized on Exercise ($)
| Number of Shares Acquired on Vesting (#)
| Value realized on Vesting ($)
| ||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
| ||||||||||||||||
Creed |
| 547,080 |
|
| 24,895,096 |
|
| 96,849 | (1) |
| 8,902,360 |
| ||||||||
Gibbs |
| 57,565 |
|
| 3,499,064 |
|
| 28,380 | (1) |
| 2,608,690 |
| ||||||||
Eaton |
| 355,462 |
|
| 22,324,918 |
|
| 28,380 | (1) |
| 2,608,690 |
| ||||||||
Skeans |
| 636 |
|
| 55,961 |
|
| 20,454 | (1)(2) |
| 1,829,621 |
| ||||||||
Russell |
| 11,665 |
|
| 1,049,904 |
|
| 1,349 | (2) |
| 107,650 |
| ||||||||
Kesselman |
| 24,188 |
|
| 2,167,204 |
|
| 30,829 | (1)(3) |
| 2,543,403 |
|
(1) | For each of Messrs. |
(2) | For Messrs. Russell and Ms. Skeans, this amount includes the deferral of the |
(3) | For Mr. Kesselman, this amount includes asign-on RSU that vested in 2018. |
YUM! BRANDS, INC. -2019 Proxy Statement | 65 |
EXECUTIVE COMPENSATION |
The table below shows the present value of accumulated benefits payable to each of the NEOs, including the number of years of service credited to each NEO, under the YUM! Brands Retirement Plan (“Retirement Plan”), and the YUM! Brands International RetirementPension Equalization Plan (“YIRP”PEP”) determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements.
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During ($) | ||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Creed(i) |
| Qualified Retirement Plan |
|
| 2 |
|
| 193,610 |
|
| — |
| ||||
|
| PEP |
|
| — |
|
| — |
|
| — |
| ||||
Gibbs |
| Qualified Retirement Plan |
|
| 30 |
|
| 1,220,964 |
|
| — |
| ||||
|
| PEP |
|
| 30 |
|
| 7,076,064 |
|
| — |
| ||||
Russell |
| Qualified Retirement Plan |
|
| 20 |
|
| 568,314 |
|
| — |
| ||||
|
| PEP |
|
| 20 |
|
| 973,426 |
|
| — |
| ||||
Skeans |
| Qualified Retirement Plan |
|
| 18 |
|
| 446,922 |
|
| — |
| ||||
|
| PEP |
|
| 18 |
|
| 1,450,049 |
| |||||||
Kesselman(ii) |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Eaton(ii) |
| — |
|
| — |
|
| — |
|
| — |
|
2015 FISCAL YEAR PENSION BENEFITS TABLE
Number of Years of Credited Service | Present Value of Accumulated Benefit(4) | Payments During Last Fiscal Year | ||||||||||||||
Name | Plan Name | (#) | ($) | ($) | ||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Creed(i) | Retirement Plan(1) | 2 | 157,033 | — | ||||||||||||
Grismer(ii) | — | — | — | — | ||||||||||||
Novak | Retirement Plan(1) | 29 | 1,578,656 | — | ||||||||||||
Pant(ii) | — | — | — | — | ||||||||||||
Niccol(ii) | — | — | — | — | ||||||||||||
Su | International Retirement Plan(2) | 26 | 20,135,280 | — |
(i) | Mr. Creed is not an active participant in the Retirement Plan but maintains a balance in the Retirement Plan for the two years (2002 and 2003) during which he was a participant in the plan. As discussed at page |
(ii) | Messrs. |
YUM! BRANDS, INC. -2016 Proxy Statement 67
(1) YUM! Brands Retirement Plan |
The Retirement Plan provides an integrated program of retirement benefits for salaried employees who were hired by the Company prior to October 1, 2001. The Retirement Plan replaces the same level ofpre-retirement pensionable earnings for all similarly situated participants. The Retirement Plan is a tax qualified plan, and it is designed to provide the maximum possible portion of this integrated benefit on a tax qualified and funded basis.
Benefit Formula
Benefits under the Retirement Plan are based on a participant’s final average earnings (subject to the limits under Internal Revenue Code Section 401(a)(17)) and service under the plan. Upon termination of employment, a participant’s normal retirement benefit from the plan is equal to
A. | 3% of Final Average Earnings times Projected Service up to 10 years of service, plus |
B. | 1% of Final Average Earnings times Projected Service in excess of 10 years of service, minus |
C. | 0.43% of Final Average Earnings up to Social Security covered compensation multiplied by Projected Service up to 35 years of service |
the result of which is multiplied by a fraction, the numerator of which is actual service as of date of termination, and the denominator of which is the participant’s Projected Service.
Projected Service is the service that the participant would have earned if he had remained employed with the Company until his normal retirement age (generally age 65).
If a participant leaves employment after becoming eligible for early or normal retirement, benefits are calculated using the formula above except that actual service attained at the participant’s retirement date is used in place of Projected Service.
66 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
Final Average Earnings
A participant’s final average earnings is determined based on his highest five consecutive years of pensionable earnings. Pensionable earnings is the sum of the participant’s base pay and annual incentive compensation from the Company, including amounts under the Yum Leaders’ Bonus Program. In general, base pay includes salary, vacation pay, sick pay and short termshort-term disability payments. Extraordinary bonuses and lump sum payments made in connection with a participant’s termination of employment are not included.
Vesting
A participant receives a year of vesting service for each year of employment with the Company. A participant is 0% vested until he has been credited with at least five
years of vesting service. Upon attaining five years of vesting service, a participant becomes 100% vested. All NEOs eligible for the Retirement Plan or YIRP are 100% vested.
Normal Retirement Eligibility
A participant is eligible for normal retirement following the later of age 65 or 5 years of vesting service.
Early Retirement Eligibility and Reductions
A participant is eligible for early retirement upon reaching age 55 with 10 years of vesting service. A participant who has met the requirements for early retirement and who elects to begin receiving payments from the plan prior to age 62 will receive a reduction of 1/12 of 4% for each month benefits begin before age 62. Benefits are unreduced at age 62.
YUM! BRANDS, INC.-2016 Proxy Statement68
The table below shows when each of the NEOs becamebecomes eligible for early retirement and the estimated lump sum value of the benefit each participant would receive from YUM plans (both qualified andnon-qualified) if he or she retired from the Company on December 31, 20152018 and received a lump sum payment.
Estimated Lump | Estimated Lump | |||||||||||||||||||||||
Earliest Retirement | Sum from a | Sum from a Non- | Total Estimated | |||||||||||||||||||||
Name | Date | Qualified Plan(1) | Qualified Plan(2) | Lump Sum | Earliest Retirement Date | Estimated Lump Sum from a Qualified Plan(1) | Estimated Lump Sum from a Non- Qualified Plan(2) | Total Estimated Lump Sums | ||||||||||||||||
Greg Creed | August 1, 2012 | 186,755 | — | 186,755 |
| January 1, 2019 |
| $ | 206,406 |
|
| — |
| $ | 206,406 |
| ||||||||
David C. Novak | November 1, 2007 | 1,592,609 | — | 1,592,609 | ||||||||||||||||||||
Jing-Shyh S. Su | May 1, 2007 | — | 20,275,018 | 20,275,018 | ||||||||||||||||||||
David W. Gibbs |
| January 1, 2019 |
| $ | 1,466,770 |
| $ | 8,577,230 |
| $ | 10,044,000 |
| ||||||||||||
Tracy L. Skeans
|
|
February 1, 2028
|
|
$
|
1,409,109
|
|
$
|
4,289,618
|
|
$
|
5,698,727
|
| ||||||||||||
David E. Russell
|
|
September 1, 2024
|
|
$
|
1,137,849
|
|
$
|
2,133,953
|
|
$
|
3,501,802
|
|
(1) | The Retirement Plan |
(2) |
|
The estimated lump sum values in the table above are calculated assuming no increase in the participant’s Final Average Earnings. The lump sums are estimated using the mortality table and interest rate assumptions in the Retirement Plan for participants who would actually commence benefits on January 1, 2016.2019. Actual lump sums may be higher or lower depending on the mortality table and interest rate in effect at the time of distribution and the participant’s Final Average Earnings at his date of retirement.
Lump Sum Availability
Lump sum payments are available to participants who meet the requirements for early or normal retirement. Participants who leave the Company prior to meeting the requirements for Early or Normal Retirement must
take their benefits in the form of a monthly annuity and no lump sum is available. When a lump sum is paid from the plan, it is calculated based on actuarial assumptions for lump sums required by Internal Revenue Code Section 417(e)(3).
(2) PEP
The PEP is an unfunded,non-qualified plan that complements the Retirement Plan by providing benefits that federal tax law bars providing under the Retirement Plan. Benefits are generally determined and payable under the same terms and conditions as the Retirement Plan (except as noted below) without regard to federal tax limitations on amounts of includible compensation and maximum benefits. Benefits paid are reduced by the value of benefits
YUM! | 67 |
EXECUTIVE COMPENSATION |
The YIRP is an unfunded, non-qualified defined
payable under the Retirement Plan. Participants who earned at least $75,000 during calendar year 1989 are eligible to receive benefits calculated under the Retirement Plan’spre-1989 formula, if this calculation results in a larger benefit plan that covers certain international employees who are designated byfrom the Company as third country nationals.PEP. Mr. Su is eligibleGibbs qualifies for benefits under this plan. The YIRP provides a retirement benefitformula. This formula is similar to the formula described above under the Retirement Plan except that part C of the formula is calculated as follows:
1-2/3% of an estimated primary Social Security amount multiplied by Projected Service up to 30 years
PEP retirement distributions are always paid in the sum of:
Benefits are payable underbased on the same terms and conditionspre-1989 formula, the lump sum value is calculated as the actuarial equivalent to the participant’s 50% Joint and Survivor Annuity with no reduction for survivor coverage. In all
other cases, lump sums are calculated as the actuarial equivalent of the participant’s life only annuity. Participants who terminate employment prior to meeting eligibility for Early or Normal Retirement Plan without regard to Internal Revenue Service limitations on amountsmust take their benefits from this plan in the form of includible compensation and maximum benefits.a monthly annuity.
(3) Present Value of Accumulated Benefits
For all plans, the Present Value of Accumulated Benefits (determined as of December 31, 2015)2018) is calculated assuming that each participant is eligible to receive an unreduced benefit payable in the form of a single lump sum at age 62. This is consistent with the methodologies used in financial accounting calculations. In addition, the economic assumptions for the lump sum interest rate, post retirement mortality, and discount rate are also consistent with those used in financial accounting calculations at each measurement date.
Nonqualified Deferred Compensation
Amounts reflected in the Nonqualified Deferred Compensation table below are provided for under the Company’s Executive Income Deferral (“EID”) Program, Leadership Retirement Plan (“LRP”)EID, LRP and Third Country National Plan (“TCN”).TCN plans. These plans are unfunded, unsecured deferred, account-based compensation plans. For each calendar year, participants are permitted under the EID Program to defer up to 85% of their base pay and up to 100% of their annual incentive award. As discussed beginning at page 55, Messrs. Novak, Grismer, Pant and Niccol are eligible to participate in the LRP. The LRP provides an annual allocation to the accounts of Messrs. Novak, Niccol and Grismer equal to 9.5% of each of his salary plus target bonus and to Mr. Pant equal to 20% of his salary plus target bonus. As discussed beginning at page 55, Mr. Creed is eligible to participate in the TCN. The TCN provides for an annual allocation to Mr. Creed’s account equal to 15% of his salary plus target bonus.
YUM! BRANDS, INC. -2016 Proxy Statement69
EID Program
Deferred Investments under theEID Program. Amounts deferred under the EID Program may be invested in the following phantom investment alternatives (12 month investment returns, as of December 31, 2018, are shown in parentheses)parentheses, except for the YUM China Stock Fund, which was removed as an investment option as of October 31, 2018, and thus a 10 month investment return is shown):
YUM! Stock Fund (14.60%*)
YUM! Matching Stock Fund (14.60%*)
S&P 500 Index Fund(-4.46%)
Bond Market Index Fund(-0.04%)
Stable Value Fund (2.20%)
• | YUM China Stock Fund | ||
All of the phantom investment alternatives offered under the EID Program are designed to match the performance of actual investments; that is, they provide market rate returns and do not provide for preferential earnings. The S&P 500 index fund, bond market index fund and stable value fund are designed to track the investment return of like-named funds offered under the Company’s 401(k) Plan. The YUM! Stock Fund and YUM! Matching Stock Fund track the investment return of the Company’s common stock. Participants may transfer funds between the investment alternatives on a quarterly basis except (1) funds invested in the YUM! Stock Fund or YUM! Matching Stock Fund may not be transferred once invested in these funds and (2) a participant may only elect to invest into the YUM! Matching Stock Fund at the time the annual incentive deferral election is made. In the case of the Matching Stock Fund, participants
* | Assumes dividends are reinvested. |
68 | YUM! BRANDS, INC.-2019 Proxy Statement |
EXECUTIVE COMPENSATION |
who defer their annual incentive into this fund acquire additional phantom shares (called restricted stock units (“RSUs”))(RSUs) equal to 33% of the RSUs received with respect to the deferral of their annual incentive into the YUM! Matching Stock Fund (the additional RSUs are referred to as “matching contributions”). The RSUs attributable to the matching contributions are allocated on the same day the RSUs attributable to the annual incentive are allocated, which is the same day we make our annual stock appreciation right grants. Eligible amounts attributable to the matching contribution under the YUM! Matching Stock Fund are included in column (c) below as contributions by the Company (and represent amounts actually credited to the NEO’s account during 2015)2018).
Beginning with their 2009 annual incentive award, those who are eligible for PSU awards are no longer eligible to participate in the Matching Stock Fund.
Following the separation of Yum China Holdings, Inc., in October of 2016, the Yum China Stock Fund was made available as an investment option under the EID Program, but only with respect to invested amounts that resulted from the conversion of YUM shares into Yum China shares at separation. Funds could be transferred out of this fund, but the fund did not allow for additional investment. The Yum China Stock Fund was removed as an investment option as of October 31, 2018.
RSUs attributable to annual incentive deferrals into the YUM! Matching Stock Fund and matching contributions vest on the second anniversary of the grant (or upon a change of control of the Company, if earlier) and are payable as shares of YUM common stock pursuant to the participant’s deferral election. Unvested RSUs held in a participant’s YUM! Matching Stock Fund account are forfeited if the participant voluntarily terminates employment with the Company within two years of the deferral date. If a participant terminates employment involuntarily, the portion of the account attributable to the matching contributions is forfeited and the participant will receive an amount equal to the amount of the original amount deferred. If a participant dies or becomes disabled during the restricted period, the participant fully vests in the RSUs. Dividend equivalents are accrued during the restricted period but are only paid if the RSUs vest. RSUs held by a participant who has attained age 65 with five years of service vest immediately. In the case of a participant who has attained age 55 with 10 years of service, or age 65 with five years of service, RSUs attributable to bonus deferrals into the YUM! Matching Stock Fund vest immediately and RSUs
attributable to the matching contribution vest on a pro rata basis during the period beginning on the first anniversary of the grant and ending on the second anniversary of the grant and are fully vested on the second anniversary.deferral date.
Distributions under EID Program. When participants elect to defer amounts into the EID Program, they also select when the amounts ultimately will be distributed to them. Distributions may either be made in a specific year — whether–whether or not employment has then ended —– or at a time that begins at or after the executive’s retirement, separation or termination of employment.
Distributions can be made in a lump sum or quarterly or annual installments for up to 20 years. Initial deferrals are subject to a minimum two year deferral. In general, with respect to amounts deferred after 2005 or not fully vested as of January 1, 2005, participants may change their distribution schedule, provided the new elections satisfy the requirements of Section 409A of the Internal Revenue Code. In general, Section 409A requires that:
Distribution schedules cannot be accelerated (other than for a hardship) To delay a previously scheduled distribution,
With respect to amounts deferred prior to 2005, to delay a distribution the new distribution cannot begin until two years after it would have begun without the election tore-defer. Investments in the YUM! Stock Fund and YUM! Matching Stock Fund are only distributed in shares of Company stock.
LRP LRP Account Returns. The LRP provides an annual earnings credit to each participant’s account based on the value of participant’s account at the end of each year. Under the LRP, Mr. Kesselman. Distributions under LRP. Under the LRP, participants age 55 or older are entitled to a lump sum distribution
of their account balance in the quarter following their separation of employment. Participants under age 55 with a vested LRP benefit that, combined with any other deferred compensation benefits covered under Code Section 409A exceeds $15,000, will not receive a distribution until the calendar quarter that follows the participant’s TCN TCN Account Returns. The TCN provides an annual earnings credit to each participant’s account based on the value of each participant’s account at the end of each year. Under the TCN, bonuses. Distributions under TCN. Under the TCN, participants age 55 or older with a balance of $15,000 or more, are entitled to a lump sum distribution of their account balance in the quarter following their separation of employment. Participants under age 55 who separate employment with the Company will receive interest annually and their account balance will be distributed in the quarter following their
Potential Payments Upon Termination or Change in Control
The information below describes and quantifies certain compensation that would become payable under existing plans and arrangements if the NEO’s employment had terminated on December 31, Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event, the Company’s stock price and the executive’s age.
Executive Income Deferral Program. As described in more detail beginning at page 70. In the case of an involuntary termination of employment as of December 31, Leadership Retirement
Third Country National
of employment. Participants under age 55 who terminate will receive interest annually and their account balance will be distributed in the quarter following their 55th birthday. In case of termination of employment as of December 31, $3,383,245 and Mr. Eaton would have received $2,316,046. Performance Share Unit Pension Life Insurance Benefits. For a description of the supplemental life insurance plans that provide coverage to the NEOs, see the All Other Compensation Table on page subsidized by the Company and, therefore, is not shown here. Change in
a proportionate annual incentive assuming achievement of target performance goals under the bonus plan or, if higher, assuming continued achievement of actual Company performance until date of termination,
a severance payment equal to two times the sum of the executive’s base salary and the target bonus or, if higher, the actual bonus for the year preceding the change in control of the Company, and outplacement services for up to one year following termination. In March 2013, the Company eliminated excise taxgross-ups and implemented a best netafter-tax method. See the Company’s CD&A on page The change in control severance agreements have a three-year term and are automatically renewable each January 1 for another three-year term. An executive whose employment is not terminated within two years of a change in control will not be entitled to receive any severance payments under the change in control severance agreements. Generally, pursuant to the agreements, a change in control is deemed to occur:
In addition to the payments described above, upon a change in control:
All All RSUs under the Company’s EID Program held by the executive will automatically vest.
If a change in control and each NEO’s involuntary termination had occurred as of December 31,
In connection with his departure from the Company, Mr. Kesselman received payments from the Company totaling $442,768.
Company-owned restaurant general managers located in the
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Creed, our Chief Executive Officer (our “CEO”). To identify the median employee, we used the December 2018 base wages or base salary information for all employees who were employed by us on December 31, 2018, excluding our CEO. We included all full-time and part-time employees and annualized the employees’ base salary or base wages to reflect their compensation for 2018. We believe the use of base wages or base salary for all employees is a consistently applied compensation measure. As of December 31, 2018, our global workforce used for determining the pay ratio was estimated to be 32,076 employees (16,480 in the U.S. and 15,596 internationally). After calculating employee compensation, our median employee was identified as a part-time Taco Bell restaurant employee in the United States. After identifying the median employee, we calculated total annual compensation in accordance with the requirements of the Summary Compensation Table. For 2018, the total compensation of our CEO, as reported in the Summary Compensation Table at page 59, was $14,007,038. The total compensation of our median employee was estimated to be $11,865. As a result, we estimate that our CEO to median employee pay ratio is 1181:1. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
EQUITY COMPENSATION PLAN INFORMATION The following table summarizes, as of December 31,
What are the key features of the
The “Committee”). The exercise price of a stock option grant or SAR under the
What are the key features of the RGM Plan?
Effective May 20, 2016, we canceled the remaining shares available for issuance under the RGM Plan, except for the approximately 220,000 shares necessary to satisfy then outstanding awards. No future awards will be made under the RGM Plan. The RGM Plan common stock at a price equal to or greater than the closing price of our stock on the date of grant. The RGM Plan
the RGM Plan non-executive officer employees
Who serves on the Audit Committee of the Board of Directors?
The members of the Audit Committee are The Board of Directors has determined that all of the members of the Audit Committee are independent within the meaning of applicable SEC regulations and the listing standards of the NYSE and that Mr. Nelson, the chair of the Committee, is qualified as an audit committee financial expert within the meaning of SEC regulations. The Board has also determined that Mr. Nelson has accounting and related financial management expertise within the meaning of the listing standards of the NYSE and that each member of the Committee is financially literate within the meaning of the NYSE listing standards.
What document governs the activities of the Audit Committee?
The Audit Committee operates under a written charter adopted by the Board of Directors. The Committee’s responsibilities are set forth in this charter, which was amended and restated effective November 22, 2013. The charter is reviewed by management at least annually, and any recommended changes are presented to the Audit Committee for review and approval. The charter is available on our Web site at
What are the responsibilities of the Audit Committee?
The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of the Company’s financial statements, the adequacy of the Company’s system of internal controls and procedures and disclosure controls and procedures, the Company’s risk management, the Company’s compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence and the performance of the Company’s internal audit function and independent auditors. The Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Committee deems necessary to carry out its duties and receive appropriate funding, as determined by the Committee, from the Company for such advice and assistance. The Committee has sole authority over the selection of the Company’s independent auditors and manages the Company’s relationship with its independent auditors (who report directly to the Committee). KPMG LLP has served as the Company’s independent auditors since in the selection of the lead audit partner. In The Committee met Management is responsible for the Company’s financial reporting process, including its system of internal control over financial reporting, and for the preparation of
consolidated financial statements in accordance with accounting principles generally accepted in the U.S. The Company’s independent auditors are responsible for auditing those financial statements in accordance with professional standards and expressing an opinion as to their material conformity with U.S. generally accepted accounting principles and for auditing the effectiveness of the Company’s internal control over financial reporting. The Committee’s responsibility is to monitor and review the Company’s financial reporting
process and discuss management’s report on the Company’s internal control over financial reporting. It is not the Committee’s duty or responsibility to conduct audits or accounting reviews or procedures. The Committee has relied, without independent verification, on management’s representations that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the U.S. and that the Company’s internal control over financial reporting is effective. The Committee has also relied, without independent verification, on the opinion of the independent auditors included in their report regarding the Company’s financial statements and effectiveness of internal control over financial reporting.
What matters have members of the Audit Committee discussed with management and the independent auditors?
As part of its oversight of the Company’s financial statements, the Committee reviews and discusses with both management and the Company’s independent auditors all annual and quarterly financial statements prior to their issuance. requirements of the PCAOB regarding KPMG LLP’s communications with the Committee concerning independence. The Committee also considered whethernon-audit services provided by the independent auditors are compatible with the independent auditors’ independence. The Committee also received regular updates, and written summaries as required by the PCAOB rules (for tax and other services), on the amount of fees and scope of audit, audit-related, tax and other services provided. In addition, the Committee reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company’s internal and disclosure control structure. As part of this process, the Committee continued to monitor the scope and adequacy of the Company’s internal auditing program, reviewing staffing levels and steps taken to implement recommended improvements in internal procedures and controls. The Committee also reviews and discusses legal and compliance matters with management, and, as necessary or advisable, the Company’s independent auditors.
Has the Audit Committee made a recommendation regarding the audited financial statements for fiscal
Based on the Committee’s discussions with management and the independent auditors and the Committee’s review of the representations of management and the report of the independent auditors to the Board of Directors and shareholders, and subject to the limitations on the Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Committee recommended to the Board of Directors that it include the audited consolidated financial statements in the Company’s Annual Report onForm 10-K for the fiscal year ended December
Who prepared this report?
This report has been furnished by the members of the Audit Committee: Thomas C. Nelson,Chair Paget L. Alves Tanya L. Domier P. Justin Skala Elane B. Stock
Who pays the expenses incurred in connection with the solicitation of proxies?
Expenses in connection with the solicitation of proxies will be paid by us. Proxies are being solicited principally by mail, by telephone and through the Internet. In addition, our directors, officers and regular employees, without additional compensation, may solicit proxies personally, bye-mail, telephone, fax or special letter. We will reimburse brokerage firms and others for their expenses in forwarding proxy materials to the beneficial owners of our shares.
How may I elect to receive shareholder materials electronically and discontinue my receipt of paper copies?
YUM shareholders with shares registered directly in their name who received shareholder materials in the mail may elect to receive future annual reports and proxy statements from us and to vote their shares through the Internet instead of receiving copies through the mail. We are offering this service to provide shareholders with added convenience, to reduce our environmental impact and to reduce Annual Report printing and mailing costs. To take advantage of this option, shareholders must subscribe to one of the various commercial services that offer access to the Internet. Costs normally associated with electronic access, such as usage and telephone charges, will be borne by the shareholder. To elect this option, go to the option to receive Company mailing viae-mail. Shareholders who elect this option will be notified by mail how to access the proxy materials and how to vote their shares on the Internet or by phone. If you consent to receive future proxy materials electronically, your consent will remain in effect unless it is withdrawn by writing our Transfer Agent,
I share an address with another shareholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
The Company has adopted a procedure called “householding” which has been approved by the SEC. The Company and some brokers household proxy materials, delivering a single Notice and, if applicable, this proxy statement and Annual Report, to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders or they participate in electronic delivery of proxy materials. Shareholders who participate in householding will continue to access and receive separate proxy cards. This process will help reduce our printing and postage fees, as well as save natural resources. If at any time you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares. You can notify us by sending a written request to YUM! Brands, Inc., Investor Relations, 1441 Gardiner Lane, Louisville, KY 40213 or by calling Investor Relations at1 (888) 298-6986 or by sending an
May I propose actions for consideration at next year’s Annual Meeting of Shareholders or nominate individuals to serve as directors?
Under the rules of the SEC, if a shareholder wants us to include a proposal in our proxy statement and proxy card for presentation at our Under our bylaws, certain procedures are provided that a shareholder must follow to nominate persons for election as directors or to introduce an item of business at an Annual Meeting of Shareholders that is not included in our proxy statement. These procedures provide that nominations for director nominees and/or an item of business to be introduced at an Annual Meeting of Shareholders must be submitted in writing to our Corporate Secretary at our principal executive offices and you must include information set forth in our bylaws. We must receive the notice of your intention to introduce a nomination or to propose an item of business at our In addition, 7, 2019. The Board is not aware of any matters that are expected to come before the The chairman of the Annual Meeting may refuse to allow the transaction of any business, or to acknowledge the nomination of any person, not made in compliance with the foregoing procedures. Bylaw
The Company usesnon-GAAP Adjusted Operating Profit Growth as a key performance measure of results of operations for the purpose of evaluating performance against targets set under our YUM Leaders’ Bonus Program. Adjusted Operating Profit Growth is the calculated growth rate from our prior year’snon-GAAP Adjusted Base Operating Profit to the current fiscal year’snon-GAAP Adjusted Base Operating Profit. Adjusted Operating Profit Growth includes adjustments to our GAAP Operating Profit that we believe are necessary to ensure that growth rates for bonus purposes are indicative of underlying business performance. General and administrative expense reductions expected to be realized in 2018 related to YUM’s Strategic Transformation Initiatives were incorporated into our targets for KFC and YUM Adjusted Operating Profit Growth during the target-setting process and are thus not included in the reconciliation below. Reconciliation of GAAP Operating Profit to Adjusted Base Operating Profit
YUM! BRANDS, INC. 1441 GARDINER LANE LOUISVILLE, KY 40213 ADMISSION TICKET Your Vote is important. Please vote immediately. VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Daylight Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE -1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Daylight Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, Yum! Brands, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you are voting by Internet or telephone, please DO NOT mail your proxy card. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E72135-P19158 KEEP THIS PORTION FOR YOUR RECORDS — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
YUM! BRANDS, INC. ANNUAL MEETING May 16, 2019 9:00 A.M., EDT YUM! Brands, Inc. Yum! Conference Center 1900 Colonel Sanders Lane Louisville, Kentucky 40213 ADMISSION TICKET YUM! BRANDS, INC.’S 2019 ANNUAL SHAREHOLDERS MEETING WILL BE HELD AT 9:00 A.M. (EASTERN DAYLIGHT TIME) ON THURSDAY, MAY 16, 2019, at the Yum! Conference Center at 1900 Colonel Sanders Lane in Louisville, Kentucky. If you plan to attend the Annual Shareholders Meeting, please tear off and keep the upper portion of this form as your ticket for admission to the Meeting. YOUR VOTE IS IMPORTANT. The proxy voting instruction card on the reverse side covers the voting of all shares of Common Stock of YUM! Brands, Inc., which you are entitled to vote or to direct the voting of, including those shares in the YUM! Brands 401(k) Plan. If you plan to vote by mail, please date and sign the proxy card and return it promptly in the enclosed business reply envelope. If you plan to vote by mail and do not sign and return a proxy, the shares cannot be voted. You may also vote by Internet or phone as described on the reverse side or by attending the Annual Meeting. Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The Notice, Proxy Statement and Annual Report are available at www.proxyvote.com (PLEASE DETACH PROXY CARD AT PERFORATION) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — E72136-P19158
(CONTINUEDand To Be Signed and Dated onREVERSE SIDE)
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