YUM Yum Brands Inc

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.)

 

Filed by the Registrant		Filed by a Party other than the Registrant

 

Check the appropriate box:
		Preliminary Proxy Statement
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		Definitive Proxy Statement
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		Soliciting Material under §240.14a-12

YUM! BRANDS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

YUM! Brands, Inc.

1441 Gardiner Lane

Louisville, Kentucky 40213

April 3, 2020

Dear Fellow Shareholders:

On behalf of your Board of Directors, we are pleased to invite you to attend the 2020 Annual Meeting of Shareholders of YUM! Brands, Inc. The Annual Meeting will be held Thursday, May 14, 2020, at 9:00 a.m., local time, in the YUM! Conference Center at 1900 Colonel Sanders Lane in Louisville, Kentucky or via live webcast at www.virtualshareholdermeeting.com/YUM2020.

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 this e-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 16, 2020 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,

David Gibbs

Chief Executive Officer

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on May 14, 2020—this notice and the proxy statement are available at https://investors.yum.com/governance/governance-documents. The Annual Report on Form 10-K is available at www.investors.yum.com/annual-reports.

YUM! Brands, Inc.

1441 Gardiner Lane

Louisville, Kentucky 40213

Thursday, May 14, 2020 9:00 a.m.

YUM! Conference Center, 1900 Colonel Sanders Lane, Louisville, Kentucky 40213 or via live webcast at www.virtualshareholdermeeting.com/YUM2020.

You can vote if you were a shareholder of record as of the close of business on March 16, 2020.

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.

YUM! Brands, Inc.

1441 Gardiner Lane

Louisville, Kentucky 40213

Why did I receive a one-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 3, 2020, 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.

Who may attend the Annual Meeting?

The Annual Meeting is open to all shareholders of record as of close of business on March 16, 2020, or their duly appointed proxies.

What do I need to bring to attend the Annual Meeting In-Person?

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. Seating is limited and admission is on a first-come, first-served basis.

What will I need in order to attend the Annual Meeting Online?

You may also attend the Annual Meeting, vote and submit a question during the Annual Meeting by visiting www.virtualshareholdermeeting.com/YUM2020 and using your 16-digit control number (included on your Notice Regarding the Availability of Proxy Materials, Proxy Card, or Voter Instruction Form) to enter the meeting. If you are not a stockholder of record by holding shares as a beneficial owner in street name, you may be required to provide proof of beneficial ownership, such as your most recent account statement as of the Record Date, a copy of the voting instruction form provided by your broker, bank, trustee, or nominee, or other similar evidence of ownership. If you do not comply with the procedures outlined above, you will not be admitted to the virtual Annual Meeting. Online access will begin at 8:45 a.m. Eastern Time, and we encourage you to access the meeting prior to the start time. The meeting webcast will begin promptly at 9:00 a.m. Eastern Time on May 14, 2020.

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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 or follow-up questions will be permitted. If you choose to attend the online meeting, you may submit a question during the Annual Meeting by visiting www.virtualshareholdermeeting.com/YUM2020 and using your 16-digit control number to enter the meeting.

Who may vote?

You may vote if you owned YUM common stock as of the close of business on the record date, March 16, 2020. Each share of YUM common stock is entitled to one vote. As of March 16, 2020, YUM had 300.9 million shares of common stock outstanding.

What am I voting on?

You will be voting on the following four (4) items of business at the Annual Meeting:

We will also consider other business that properly comes before the meeting.

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How does the Board of Directors recommend that I vote?

Our Board of Directors recommends that you vote your shares:

How do I vote before the Annual Meeting?

There are three ways to vote before the meeting:

If you are a participant in the 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 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 13, 2020. 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 12, 2020.

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. 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 13, 2020.

Can I vote at the Annual Meeting?

Shares registered directly in your name as the shareholder of record may be voted in person or online 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.

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:

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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 Computershare, 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:

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 Computershare, Inc., which may be reached at 1 (888) 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 2020 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 “broker non-vote.”

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 online 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 16, 2020, must be present or represented by proxy at the Annual Meeting. This is referred to as a quorum. Abstentions and broker non-votes will be counted for purposes of establishing a quorum at the Annual Meeting.

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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 broker non-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 at https://investors.yum.com/governance/governance-documents/ and at page 20 under “What other significant Board practices does the Company have? — Majority Voting Policy.”

How many votes are needed to approve the other proposals?

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. Broker non-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, broker non-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 Form 8-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.

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GOVERNANCE OF THE COMPANY

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 Global 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 “Governance Documents”.

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What is the composition of the Board of Directors and how often are members elected?

Our Board of Directors presently consists of 14 directors whose terms expire at this Annual Meeting. Messrs. Creed and Walter will be retiring and are not standing for reelection at the Annual Meeting. Our directors are elected annually. The average director tenure is 5 years, with our longest- and shortest-tenured directors having served for 14 years (Mr. Nelson) and for three months, respectively (Ms. Young-Scrivner and Mr. Barr).

As discussed in more detail later in this section, the Board has determined that 11 of the 12 individuals standing for election are independent under the rules of the New York Stock Exchange (“NYSE”). The director tenure of the 12 individuals standing for election is reflected in the following:

How often did the Board meet in fiscal 2019?

The Board of Directors met 5 times during fiscal 2019. Each of the directors who served in 2019 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 persons then serving as directors attended the 2019 Annual 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 and

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are selected based upon contributions they can make to the Board and management. The committee’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 committee 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 committee 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 committee member will interview the prospective nominee before the prospective nominee is presented to the full Board for consideration. After completing this evaluation and interview process, the committee 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.

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 and net-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:

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.

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:

In addition to our Recipe for Growth, in 2020 we launched our “Recipe for Good”, which focuses on three primary pillars: Food, Planet and People. Guided by these pillars, we will strive to unlock potential in people and communities, grow sustainably and continue to serve delicious food that people trust. By combining the guiding principles that underlie our

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Recipe for Growth and our Recipe for Good into our “Recipe for Growth and Good”, we are confident that we will be even more successful in unlocking our potential.

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.

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 76.

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If elected, we expect that all of the aforementioned nominees will serve as directors and hold office until the 2021 Annual Meeting of Shareholders and until their respective successors have been elected and qualified.

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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 be pre-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 each non-management director is a personal decision; however, the Board strongly supports the position that non-management directors should own a meaningful number of shares in the Company and expects that each non-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 34.

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 53.

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.

How Can Shareholders Nominate for the Board?

Director nominations for inclusion in YUM’s proxy materials (Proxy Access). Our bylaws permit a shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of YUM stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in YUM’s proxy materials director nominees constituting up to 20% of YUM’s Board, provided that the shareholder(s) and nominee(s) satisfy the requirements in YUM’s bylaws. Notice of proxy access director nominees for the 2021 Annual Meeting of Shareholders must be received by us no earlier than November 4, 2020, and no later than December 4, 2020.

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Director nominations to be brought before the 2021 Annual Meeting of Shareholders. Director nominations that a shareholder intends to present at the 2021 Annual Meeting of Shareholders, other than through the proxy access procedures described above, must have been received no later than February 13, 2021. These nominations must be submitted by a shareholder in accordance with the requirements specified in YUM’s bylaws.

Where to send director nominations for the 2021 Annual Meeting of Shareholders. Director nominations brought by shareholders must be delivered to YUM’s Corporate Secretary by mail at YUM! Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213 and received by YUM’s Corporate Secretary by the dates set forth above.

What is the Board’s leadership structure?

On November 16, 2018, Brian C. Cornell assumed the position of Non-Executive Chairman of the Board. He was preceded in that position by Robert D. Walter, who had held that position since May 20, 2016. Applying our Corporate Governance Principles, the Board determined that based on Mr. Cornell’s independence, it would not appoint a Lead Director when Mr. Cornell became Non-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 stay 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 Chief Executive Officer (“CEO”) may serve as Chairman of the Board. These Principles also provide for an independent Lead Director, when the CEO is serving as Chairman. During 2019, our CEO did not serve as 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 of non-employee directors, all of which are discussed below. As Non-Executive Chairman, Mr. Cornell is responsible for supporting the CEO on corporate strategy along with leadership development. Mr. Cornell also works with the CEO in setting the agenda and schedule for meetings of the Board, in addition to performing the duties that would otherwise be performed by a Lead Director, as described below.

As CEO, Mr. Gibbs is responsible for leading the Company’s strategies, organization design, people development and culture, and for providing the day-to-day leadership over operations.

To ensure effective independent oversight, the Board has adopted a number of governance practices discussed below.

What are the Company’s governance policies and ethical guidelines?

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What other significant Board practices does the Company have?

The Board currently does not have a Lead Director, and the duties of the Lead Director are fulfilled by Mr. Cornell as Non-Executive Chairman. Since Mr. Cornell is independent, the Board determined that it would not appoint a separate Lead Director upon Mr. Cornell’s appointment as Non-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:

What access do the Board and Board committees have to management and to outside advisors?

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What is the Board’s role in risk oversight?

The Board maintains overall responsibility for overseeing the Company’s risk management, including succession 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 General Counsel and the Vice President, Internal Audit. Our Vice President, Internal Audit reports directly to the Chairman of the Audit Committee and our Chief Financial 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 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.

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 35, the philosophy of our compensation programs is to reward performance by designing pay programs that incorporate team and individual performance, and shareholder return; emphasize long-term incentives; drive ownership mentality; and require executives to personally invest in Company stock.

In 2019, the Committee examined our compensation programs for all employees to determine whether they encourage unnecessary 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 on this review, the Committee concluded our compensation policies and practices do not encourage our employees to take unreasonable 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:

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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 (https://investors.yum.com/governance/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.

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 Gibbs and Greg Creed, who are not considered independent directors because of their employment by the Company.

In determining that the other directors did not have a material relationship with the Company, the Board determined that Messrs. Alves, Barr, Connor, Nelson, Skala and Walter and Mmes. Domier, Graddick-Weir, Stock and Young-Scrivner had no other relationship with the Company other than their relationship as a director. The Board did note as discussed in the next two paragraphs that Comcast Corporation and Target Corporation, which employ Mr. Cavanagh and Mr. Cornell, respectively, each have a business relationship with the Company; however, as noted below, the Board determined that these relationships were not material to either director, Comcast Corporation or Target Corporation, and therefore determined that Mr. Cavanagh and Mr. Cornell were independent.

Brian C. Cornell is the Chairman and Chief Executive Officer of Target Corporation. During 2019, the Company received approximately $10 million in license fees from Target Corporation in the normal course of business. Divisions of the Company paid Target Corporation approximately $2 million in rebates 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 Corporation as the payments represent far less than 2% of Target Corporation’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 Corporation.

Michael J. Cavanagh is the Senior Executive Vice President and Chief Financial Officer of Comcast Corporation. During 2019, the Company, its affiliates and their respective franchisees collectively paid approximately $42 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 $72 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 far less than 2% of Comcast Corporation’s revenues.

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How do shareholders communicate with the Board?

Shareholders and other parties interested in communicating directly with individual directors, the non-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.

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 our non-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, 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 (844) 418-4423. 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 at https://investors.yum.com/governance/governance-documents/.

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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 is financially literate within the meaning of the listing standards of the NYSE.

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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.

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.

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MATTERS REQUIRING SHAREHOLDER ACTION

What is the Company’s policy regarding the approval of audit and non-audit services?

The Audit Committee has implemented a policy for the pre-approval of all audit and permitted non-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 a case-by-case basis or pre-approve engagements pursuant to the Audit Committee’s pre-approval policy. The Audit Committee may delegate pre-approval authority to one of its independent members and has currently delegated pre-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 permitted non-audit services which are expected to exceed the relevant budgetary guideline must subsequently be pre-approved. In considering pre-approvals, the Audit Committee reviews a description of the scope of services falling within pre-designated services and imposes specific budgetary guidelines. Pre-approvals of designated services are generally effective for the succeeding 12 months.

The Corporate Controller monitors services provided by the independent auditors and overall compliance with the pre-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 any non-compliance with the pre-approval policy to the Chair of the Audit Committee. The complete policy is available on the Company’s website at https://investors.yum.com/governance/committee-composition-and-charters/.

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 and non-binding on the Company, the Board of Directors and the Management Planning and Development Committee will review the voting results and consider 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 2021 Annual Meeting of Shareholders.

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR approval of this proposal.

Proponents believe meaningful indicators in a report like the one we request could include:

We urge shareholders to support this proposal.

(1) https://www.ipcc.ch/2019/08/08/land-is-a-critical-resource_srccl/

(2) https://stories.mightyearth.org/amazonfires/index.html

(3) https://ec.europa.eu/environment/forests/eu_comm_2019.htm

(4) https://www.script.finance/tool/portfolio-risk/companies/973

What is the Company’s position regarding this proposal?

informed consent. The Company’s Global Forest Stewardship Policy also reiterates the Company’s adoption of the New York Declaration on Forests (“NYDF”) as a central component of its forest policy (discussed below).

• Paper-Based Packaging Sourcing Policy - provides the following sustainable sourcing principles designed to guide packaging procurement decisions: (i) the Company does not purchase products made with fiber from illegal or unwanted sources, including wood harvested from forests that have been converted to plantations or non-forest use, wood from High Conservation Value forests (unless those forests are credibly certified), wood where the source forest and species are unknown, wood harvested in a manner that violates human rights, and wood harvested in a way that violates local or international laws; (ii) the Company gives preference to suppliers that are certified by the Forest Stewardship Council (FSC), the Programme for the Endorsement of Forestry Certification (PEFC), or the Sustainable Forestry Initiative (SFI); (iii) the Company will increase the amount of recycled content used in its paper-based packaging; and (iv) the Company will work to ensure compliance with its policies. Collectively, these principles guide the Company in prioritizing sustainable packaging.

• Disclosed Goals - The 2018 Global Citizenship & Sustainability Progress Update sets forth various Company supply chain goals and progress made towards achieving those goals, which include quantitative metrics. The Company disclosed the following goals related to reducing the impact its supply chain has with respect to each of the four commodities identified in the Proposal as the leading drivers of deforestation: beef, soy, palm oil and pulp/paper:

(i) source 100% of palm oil used for cooking from responsible and sustainable sources by the end of 2018;

(ii) purchase 100% of paper-based packaging with fiber from responsibly managed forests and recycled sources by the end of 2020;

(iii) eliminate deforestation from the production of agriculture commodities such as palm oil, soy, paper and beef products no later than 2020;

(iv) halve the rate of loss of natural forest globally by 2020; and

(v) end natural forest loss by 2030.

• 2018 Global Citizenship & Sustainability Progress Update - A full-year sustainability report that discloses annual progress, with indications throughout that decreasing the impact of deforestation in the Company’s supply chain is recognized as a key priority for the Company. The update discloses that the Company participates in comprehensive voluntary annual disclosures including CDP Climate, Forests, and Water (discussed in more detail below), the Dow Jones Sustainability Index and the Roundtable on Sustainable Palm Oil (“RSPO”) Annual Communication of Progress, and also that the Company continues to address the United Nations Sustainable Development Goals including those on Responsible Consumption and Production and Climate Action. The most recent Report disclosed that the Company increased its engagement in several key commodities and expanded its deforestation commitments beyond palm and timber, to now include beef and soy. The report also highlighted that in 2018 the Company endorsed the NYDF, which sets the private sector goals of (i) eliminating deforestation from the production of agriculture commodities such as palm oil, soy, paper and beef products no later than 2020, (ii) halving the rate of loss of natural forest globally by 2020, and (iii) ending natural forest loss by 2030. Within the Company’s four primary supply chains, palm oil has a time-bound goal of 2018, while paper packaging, beef, and soy all align with time-bound goals of 2020. The Company reports on its progress towards meeting these goals annually in its CDP Forests Responses as well as in its annual Global Citizenship and Sustainability Progress Report or Update.

• CDP Reporting on the topics of Forests, Water, and Climate – This contains detailed responses to CDP’s annual questionnaires. The 2019 Forests CDP Response provides quantitative metrics specifically relating to the procurement and use of timber and palm oil in the Company’s supply chain, including percentage of procurement spend, percentage of revenue dependent on commodity, and consumption data. The Company disclosed in its response that sustainable sourcing is one of the Company’s top material issues. In its 2019 Forests CDP Response, the Company also disclosed two of its long-term sustainability objectives: (i) to design, build and operate restaurants to be measurably more sustainable using green building standards to drive reductions in energy, GHG emissions,

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waste and water use and to report progress annually through CDP disclosures, and (ii) to reduce supply chain impact on deforestation though objectives including the sourcing 100% of palm oil used for cooking and paper-based packaging from responsible and sustainable sources.

Given the extensive efforts the Company is already making in reporting on its deforestation policy, additional reporting is not prudent and would divert time, effort and resources that away from the our deforestation strategy. For this reason, and other reasons outlined above, 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.

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.

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STOCK OWNERSHIP INFORMATION

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, 2019, and is based on a stock ownership report on Schedule 13G filed by such shareholders with the SEC and provided to us.

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, 2019 by

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. Please see table above setting forth information concerning beneficial ownership by holders of five percent or more of YUM’s common stock. Directors and executive officers as a group, beneficially own approximately 0.72%.

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The table shows the number of shares of common stock and common stock equivalents beneficially owned as of December 31, 2019. Included are shares that could have been acquired within 60 days of December 31, 2019 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.

• Ms. Skeans, 2,542

• Mr. Lowings 1,034

• all executive officers as a group, 3,576 shares

DELINQUENT SECTION 16(a) REPORTS

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 and greater-than-ten percent shareholders are also required to furnish YUM with copies of all ownership reports they file with the SEC. To our knowledge,

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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 2019.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy and program, the compensation decisions of the Management Planning and Development Committee (the “Committee”) for our named executive officers (“NEOs”) and factors considered in making those decisions.

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In 2016 we launched a series of initiatives to transform the Company, centering on a new multi-year strategy to accelerate growth, reduce volatility and increase capital returns to shareholders. As part of this strategy, we intended to own fewer than 1,000 restaurants (to become at least 98% franchised), reduce annual capital expenditures and to improve our efficiency by lowering general and administrative expenses as a percentage of system sales to 1.7%. As of the end of 2019, we have successfully achieved each of these transformation goals. In doing so, we have become a more focused, more franchised and more efficient business, which we believe will allow us to accelerate growth and create significant long-term value for our stakeholders. The completion of the transformation of Yum resulted in 2019 being a truly historic year for our Company, as we generated over $50 billion in system sales and crossed the 50,000 restaurant mark.

Our successes in 2019 were possible because of our focus on four growth drivers, each a part of our “Recipe for Growth”, which form the basis of the Company’s strategic plans to accelerate same-store sales growth and net-new restaurant development around the world. The Company remains focused on building the world’s most loved, trusted and fastest growing restaurant brands by: (i) growing Unrivaled Culture and Talent to leverage our culture and people capability to fuel brand performance and franchise success; (ii) developing Unmatched Operating Capability, by recruiting and equipping the best restaurant operators in the world to deliver great customer experiences; (iii) building Relevant, Easy and Distinctive Brands, by innovating and elevating iconic restaurant brands people trust and champion; and (iv) achieving Bold Restaurant Development, by driving market and franchise expansion with strong economics and value.

In 2019, in addition to accomplishing each of our transformation goals, our system sales grew 8% (excluding a 53rd week in 2019), including same-store sales growth of 3%. We achieved net-new unit growth of 4%, increasing our system restaurant count by 2,040 units. Our core operating profit (excluding a 53rd week in 2019) also increased approximately 11% during 2019 (see pages 27 and 31 in Item 7 of YUM’s Form 10-K for the fiscal year ended on December 31, 2019 for a discussion of System Sales and Core Operating Profit excluding the impact of a 53rd week in 2019). These results provide us with confidence that we are making meaningful progress towards our goal of building and strengthening our global KFC, Pizza Hut and Taco Bell brands. The following performance highlights illustrate the Company’s success in 2019:

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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 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:

2019 Compensation Highlights

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Compensation Changes for 2020

To focus on both the short-term and long-term success of the Company, approximately 90% of our CEO’s target compensation is “at-risk” pay, with the compensation paid 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 our CEO emphasizes our commitment to “at-risk” pay in order to tie pay to performance. For purposes of this section, our discussion is limited to our CEO for 2019, Mr. Creed. Our other NEOs’ target compensation is subject to a substantially similar set of considerations, which are discussed in Section III, 2019 Named Executive Officer Total Direct Compensation and Performance Summary, found at pages 35 to 48 of this CD&A.

CEO Total Direct Compensation

The Committee sets the CEO’s target for total direct compensation (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 other job-related factors. For 2016 and 2017, the Committee set the

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CEO’s total compensation below the 50th percentile and for 2018, at the 50th percentile. In 2019 the Committee set the CEO’s total compensation at approximately the 60th percentile. The progression in target total compensation reflects the CEO’s growth in role and ongoing continued strong performance, as determined by the Committee. As demonstrated below, the CEO’s actual total direct compensation was above target for the last three years, reflecting the Company’s above target performance. For 2019, 63% of our CEO’s pay was in the form of long-term equity incentive compensation.

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Our annual executive compensation program has three primary pay components: base salary; annual performance-based cash bonuses; and long-term equity performance-based incentives. We also offer retirement and other benefits.

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 salary varies based on the role, level of responsibility, experience, individual performance, potential and market value. Specific salary increases take into account these factors. The Committee reviews each NEO’s salary and performance annually.

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.

The formula for calculating the performance-based annual bonus under the YUM Leaders’ Bonus Program is the product of the following:

Team Performance

In light of the Company’s transformation, which began in 2016 and continued throughout 2017, 2018 and 2019, the Committee carefully considered our strategic direction to become a pure-play franchisor and established team performance measures, targets and weights in January 2019 after receiving input and recommendations from management. The team performance targets were also reviewed by the Committee to ensure that the goals support the Company’s overall strategic objectives.

The performance targets were developed through the Company’s annual financial planning process, which takes into account KFC, Pizza Hut and Taco Bell (each, a “Division”) growth strategies, historical performance, and the expected future operating 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 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 Committee may approve adjustments to Division targets or may exclude certain pre-established items from the financial 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 in order to focus executives on the fundamentals of the Company’s underlying business performance.

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As part of the 2019 target-setting process the Committee decided that KFC, Pizza Hut, Taco Bell and/or YUM Operating Profit growth performance for 2019 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 10-K at page 30), the impacts of foreign currency translation and the benefit of a 53rd week in 2019.

Detailed Breakdown of 2019 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 approved these performance measures for the Company’s annual incentive plan and these measures 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.

(1) See pages 27 and 31 in Item 7 of YUM’s Form 10-K for the fiscal year ended on December 31, 2019 for a discussion of Core Operating Profit excluding the impact of a 53rd week in 2019.

(2) Adjusted to reflect closures of 151 PH US units related to strategic franchisee workout agreements.

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.

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):

Equity Mix

Each year, the Committee reviews the mix of long-term incentives. For 2019, the Committee continued to choose SARs and PSU awards because these equity vehicles focus and reward management for enhancing long-term shareholder value, thereby aligning our NEOs with the interests of our shareholders.

At the beginning of 2019, the Committee determined a target grant value for each NEO and the split of that value between SARs and PSU grants. For each NEO, the target grant value was split 50% SARs and 50% PSUs. For each NEO, the breakdown between SARs award values and PSU award values can be found under the Summary Compensation Table, page 56 at columns e and f.

Stock Appreciation Rights Awards

The Committee believes that SARs reward value-creation generated from sustained results. In 2019, we granted to each of our NEOs (other than Messrs. Turner and King, who assumed their positions in August, after annual awards had been made) SARs which have ten-year terms and vest over four years. The exercise price of each SAR award was based on the closing market price of the underlying YUM common stock on the date of grant. Therefore, SAR awards will only have value if our NEOs are successful in increasing the share price above the awards’ exercise price.

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Performance Share Awards

Pursuant to the Performance Share Plan under our Long Term Incentive Plan (“LTIP”), we granted our NEOs (other than Messrs. Turner and King, who assumed their positions in August, after annual awards had been made) PSU awards in 2019. PSU awards are earned equally based on the Company’s 3-year average TSR relative to the companies in the S&P 500 Consumer Discretionary Index and on compound annual 3-year growth of the Company’s Earnings Per Share (“EPS”). Incorporating TSR and EPS supports the Company’s pay-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. If TSR is negative, payouts 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 under these awards for each NEO are described at page 58.

For the performance period covering 2019 – 2021, each NEO (other than Messrs. Turner and King) 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 table below:

Dividend equivalents will accrue during the performance period and will be distributed as additional shares but only in the same proportion and at the same time as the original awards are earned. If no shares are earned, no dividend equivalents will be paid. The awards are eligible for deferral under the Company’s Executive Income Deferral (“EID”) Program.

Below is a summary of each of our NEOs’ total direct compensation – which includes base salary, annual cash bonus, and long-term incentive awards – and an overview of their 2019 performance relative to our annual and long-term incentive performance goals. The process the Committee used to determine each officer’s 2019 compensation is described more fully in “How Compensation Decisions Are Made” beginning on page 49.

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CEO Compensation

2019 Performance Summary

Our Board, under the leadership of the Committee Chair, approved Mr. Creed’s goals at the beginning of the year and conducted a mid-year and year-end evaluation of his performance. These evaluations included a review of his leadership pertaining to the achievement of his goals which 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 2019 merited an individual factor of 130. This individual factor was combined with YUM’s team factor of 142 (discussed at page 46) to calculate his annual 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):

2019 Committee Decisions

In January, Mr. Creed’s compensation was adjusted as follows:

These decisions positioned Mr. Creed’s total target compensation at approximately the 60th percentile of the Company’s Executive Peer Group.

2020 Committee Decisions

In November 2019, the Committee approved that following his retirement as CEO, Mr. Creed will provide ongoing services to the Company throughout 2020, on a part-time basis. Mr. Creed will focus his efforts on educating our executives on leading culture, mentoring senior leaders and advising Mr. Gibbs as he takes over the CEO role. In exchange for performing these services, the Committee approved a base salary of $500,000 for 2020 and continued administrative support through 2022.

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The graphics below illustrate Mr. Creed’s direct compensation:

Other NEO 2019 Total Direct Compensation

2019 Performance Summary

The Committee determined Mr. Gibbs’ performance for the year merited a 130 individual performance factor. The Committee recognized Mr. Gibbs’ performance as President, Chief Operating Officer and CFO of the Company, including, driving YUM’s Core Operating Profit Growth (excluding a 53rd week in 2019) of 11%, worldwide system sales growth of 8% (excluding a 53rd week in 2019), above target net-new unit growth of 4%, working with brand marketing teams to improve brand building efforts, and in leading the achievement of the Company’s transformation strategy. Mr. Gibbs’ individual performance factor was combined with a team factor of 142 (discussed at page 40) to calculate his annual cash bonus.

Effective January 1, 2020, the Board promoted Mr. Gibbs to Chief Executive Officer.

2019 Committee Decisions

In January, Mr. Gibbs’ compensation was adjusted as follows:

These decisions positioned Mr. Gibbs’ total direct compensation between the 50th and 75th percentile of the Executive Peer Group (defined at page 51) for his position.

In addition, in connection with his appointment to the additional role of Chief Operating Officer, effective January 25, 2019, Mr. Gibbs received a restricted stock unit grant with a grant date value of $5,000,000 and a scheduled vesting date of February 11, 2024.

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2020 Committee Decisions

In November 2019, the Committee approved the following adjustments to Mr. Gibbs’ compensation for 2020, reflecting his elevation to CEO effective January 1, 2020:

These decisions positioned Mr. Gibbs’ total 2020 direct compensation below the 50th percentile of the Company’s updated 2019 Executive Peer Group (defined at page 51) for the CEO position, to reflect his newness in role.

2019 Performance Summary

Mr. Turner became the Company’s Chief Financial Officer effective August 8, 2019. The Committee determined that Mr. Turner’s performance merited a 120 individual performance factor. The Committee recognized Mr. Turner’s leadership in driving YUM’s Core Operating Profit Growth (excluding a 53rd week in 2019) of 11%, worldwide system sales growth of 8% (excluding a 53rd week in 2019) and above target net-new unit growth of 4%. Mr. Turner’s individual factor was combined with a team factor of 142 (discussed at page 40) to calculate his annual cash bonus.

2019 Committee Decisions

The Committee did not set Mr. Turner’s compensation in January, as he did not become the Company’s CFO until August. Pursuant to the terms of an offer letter dated June 19, 2019, Mr. Turner’s 2019 compensation was set as follows:

Mr. Turner also received a $500,000 cash payment, a RSU award with a grant value of $1,500,000 (vesting 33% per year over 3 years) in order to offset compensation earned by him and forfeited when he left his prior employer to join the Company.

Mr. Turner’s 2019 total direct compensation was below the 25th percentile of the Executive Peer Group (defined at page 51) for his position.

2020 Committee Decisions

In November, the Committee approved adjustments to Mr. Turner’s compensation for 2020 to better align with market compensation norms and internal peer equity, as well as to reflect performance and time in role. The adjustments are as follows:

These adjustments positioned Mr. Turner’s total 2020 direct compensation at between the 25th and 50th percentile of the Company’s updated 2019 Executive Peer Group (defined at page 51) for his position.

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2019 Performance Summary

The Committee determined that Mr. Lowings’ performance merited a 140 individual performance factor. The Committee recognized Mr. Lowings’ leadership in driving KFC’s worldwide system sales growth of 9% (excluding a 53rd week in 2019), above target same-store sales growth of 4% and above target net-new unit growth of 7%. Mr. Lowings’ individual factor was combined with a team factor of 166 (discussed at page 40) to calculate his annual cash bonus.

2019 Committee Decisions

In January, Mr. Lowings’ compensation was adjusted as follows:

These decisions positioned Mr. Lowings’ total direct compensation at between the 25th and 50th percentile of the Executive Peer Group (defined at page 51) for his position.

Mr. Lowings also received a CEO Award SARs grant with an economic value of $1,000,000, recognizing his promotion to CEO of the KFC Division and his successful performance in his prior role.

2019 Performance Summary

Mr. King became the Chief Executive Officer of the Company’s Taco Bell Division effective August 5, 2019. The Committee determined that Mr. King’s performance merited a 120 individual performance factor. The Committee recognized Mr. King’s leadership in driving Taco Bell’s worldwide system sales growth of 8% (excluding a 53rd week in 2019), above target same-store sales growth of 5% and net-new unit growth of 4%. Mr. King’s individual factor was combined with a team factor of 135 (discussed at page 40) to calculate his annual cash bonus.

2019 Committee Decisions

The Committee did not set Mr. King’s compensation in January, as he did not become the CEO of the Taco Bell Division until August. Pursuant to the terms of an offer letter dated July 8, 2019, Mr. King’s 2019 compensation was set as follows:

Mr. King also received the right to $1,500,000 in cash bonuses payable in equal installments of $500,000 upon completion of 30-day, one-year and two-year service requirements, respectively. The first installment was earned during 2019. Mr. King also received a RSU grant with a grant value of $2,500,000 (vesting 33% per year over 3 years) in order to offset compensation earned by him at his prior employer and forfeited when he joined the Company.

Mr. King’s 2019 total direct compensation was between the 50th and 75th percentile of the Executive Peer Group (defined at page 51) for his position.

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